judgement stringlengths 9.47k 397k | summary stringlengths 1.96k 22.5k |
|---|---|
This case is about a credit reference negligently supplied by a bank for a person who subsequently defaulted.
The facts are to that extent similar to those of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.
But there is a critical difference.
The reference was relied upon not by the party to whom it was addressed but by that partys undisclosed principal.
The question at issue on this appeal is whether the bank is liable to the latter.
In October 2010 Hassan Barakat wished to gamble at the London Playboy Club.
He visited the club and applied for a cheque cashing facility for up to 800,000.
Mr Barakat was a Lebanese resident and a well known figure at a casino in Lebanon.
But he had only once played at the London club.
Playboy Clubs policy for gamblers like him was to require a credit reference from his bankers for twice the amount of the facility, ie 1.6m.
But in order to avoid disclosing the purpose of the credit facility, the Clubs practice was not itself to ask its customers bank for the reference.
Instead, it arranged for an associated company called Burlington Street Services Ltd to do so without disclosing the purpose of the inquiry or the fact that the reference was required for the benefit of another company.
Mr Barakat completed a written application for the cheque cashing facility, naming his bankers as Banca Nazionale del Lavoro in Reggio Emilia, Italy (BNL).
A Status Enquiry Request was completed.
It was written on Burlingtons printed letterhead and addressed to the relevant branch of BNL.
The operative part of the request read: We request your opinion as to the means and standing of Hassan Barakat [details follow] and his/her trustworthiness to meet a financial commitment to the extent of 1,600,000 at any one time.
Mr Barakat signed the form of authority at the foot of the printed form.
The operative part of the authority was in the following terms: I, Hassan Barakat, hereby consent to BNL BNP Paribas Bank providing a reference on me to Burlington Services Ltd. The request was then sent to the Clubs bankers, National Westminster Bank, who forwarded it to BNL under cover of a letter beginning: We enclose a request on behalf of Burlington Street Services Ltd, who would be glad of your opinion on the character and standing of Hassan Barakat.
The reply from BNL, faxed on 13 October 2010, was addressed to Burlington c/o National Westminster Bank.
It confirmed that Mr Barakat had an account with them and that he was trustworthy up to 1,600,000 in any one week.
It added: This information is given in strict confidential (sic).
In reliance on the reference, the Club granted the cheque cashing facility on 13 October 2010 and shortly afterwards increased it to 1.25m.
Over four days from 15 to 18 October Mr Barakat played at the club.
He drew two cheques on BNL for a total of 1.25m in return for gaming chips of the same amount.
His net winnings were 427,400, which the Club paid out to him.
He then returned to Lebanon and was not seen again at the Club.
Both cheques were returned unpaid.
Including gaming duty, the Club suffered a total net loss of 802,940.
It is common ground that BNL had no reasonable basis for their reference.
It held no account for Mr Barakat until two days after the reference was sent, when an account was opened in his name which had a nil balance until it was closed on 14 December 2010.
The Playboy Club, Burlington and another associated company subsequently began these proceedings against BNL.
It is common ground that of the three claimants the Club is the only party with an interest, neither of the others having suffered any loss.
The trial judge (His Honour Judge Mackie QC) said that BNL owed a duty of care in relation to its reference to the Club [2014] EWHC 2613 (QB).
The Court of Appeal disagreed.
They held that the only duty was owed to Burlington, to whom the reference was addressed [2016] 1 WLR 3169.
The decision of the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd was a landmark in the development of the law of tort.
Contrary to the ordinary rule as it had previously been understood, it allowed the recovery of a purely economic loss in negligence where the existence of a special relationship between claimant and defendant made this appropriate.
The facts were that Hedley Byrne asked its bank, National Provincial Bank, to obtain a credit reference for a company wishing to place advertising contracts through it.
The companys bank, Heller & Partners, supplied the reference to National Provincial.
The Appellate Committee inferred as a matter of fact that Heller & Partners must have appreciated that National Provincial was not acting for its own account but wanted the reference for a client intending to do business with Hellers client, even though they did not know who that client was: see, in particular, pp 482 (Lord Reid), 493 494 (Lord Morris of Borth y Gest), 530 (Lord Devlin).
The ratio of the decision was that the reasonable reliance of Hedley Byrne on the reference, combined with Heller & Partners appreciation of the fact that they would reasonably rely on it, gave rise to a direct relationship between them involving a duty of care.
All five members of the Appellate Committee gave reasoned judgments, but Lord Devlins analysis has generally been treated in the subsequent case law as most clearly expressing the reasoning.
At pp 529 530, Lord Devlin, said this: I have had the advantage of reading all the opinions prepared by your Lordships and of studying the terms which your Lordships have framed by way of definition of the sort of relationship which gives rise to a responsibility towards those who act upon information or advice and so creates a duty of care towards them It is a responsibility that is voluntarily accepted or undertaken, either generally where a general relationship, such as that of solicitor and client or banker and customer, is created, or specifically in relation to a particular transaction.
Responsibility can attach only to the single act, that is, the giving of the reference, and only if the doing of that act implied a voluntary undertaking to assume responsibility.
This is a point of great importance because it is, as I understand it, the foundation for the ground on which in the end the House dismisses the appeal .
I do not go further than this for two reasons.
The first is that I have found in the speech of Lord Shaw in Nocton v Lord Ashburton and in the idea of a relationship that is equivalent to contract all that is necessary to cover the situation that arises in this case All that was lacking was formal consideration I shall therefore content myself with the proposition that wherever there is a relationship equivalent to contract, there is a duty of care.
Such a relationship may be either general or particular.
Examples of a general relationship are those of solicitor and client and of banker and customer There may well be others yet to be established.
Where there is a general relationship of this sort, it is unnecessary to do more than prove its existence and the duty follows.
Where, as in the present case, what is relied on is a particular relationship created ad hoc, it will be necessary to examine the particular facts to see whether there is an express or implied undertaking of responsibility.
The principle thus established is capable of development.
Indeed it has undergone considerable development since 1964, for example to cover omissions and the negligent performance of services.
But these have been incremental changes within a consistent framework of principle.
One area in which the courts have resisted expanding the scope of liability concerns the person or category of persons to whom the duty is owed.
The defendants voluntary assumption of responsibility remains the foundation of this area of law, as this court recently confirmed after a full review of the later authorities in NRAM Ltd (formerly NRAM plc) v Steel [2018] 1 WLR 1190, paras 18 24 (Lord Wilson JSC).
It is fundamental to this way of analysing the duty that the defendant is assuming a responsibility to an identifiable (although not necessarily identified) person or group of persons, and not to the world at large or to a wholly indeterminate group.
In Caparo Industries plc v Dickman [1990] 2 AC 605, the Appellate Committee held that foreseeability, although it was a necessary condition for liability, was not necessarily a sufficient one.
The foundation of the duty is proximity, which may require more than the mere foreseeability of reliance.
The problem before the Appellate Committee was to identify the outer limits of the class of persons whose reliance on a statement could properly be said to give rise to a sufficiently proximate relationship.
They found the relevant limiting factors in the defendants knowledge of (i) the person known to be likely to rely on the statement, and (ii) the transaction in respect of which he was known to be likely to rely on.
After reviewing the authorities supporting a duty of care for negligent statements, both before and after Hedley Byrne, Lord Bridge (with whom Lord Roskill, Lord Ackner and Lord Oliver agreed), summarised the position as follows at pp 620 621: The salient feature of all these cases is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation.
In these circumstances the defendant could clearly be expected, subject always to the effect of any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it.
So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it.
The situation is entirely different where a statement is put into more or less general circulation and may foreseeably be relied on by strangers to the maker of the statement for any one of a variety of different purposes which the maker of the statement has no specific reason to anticipate.
To hold the maker of the statement to be under a duty of care in respect of the accuracy of the statement to all and sundry for any purpose for which they may choose to rely on it is not only to subject him, in the classic words of Cardozo CJ to liability in an indeterminate amount for an indeterminate time to an indeterminate class: see Ultramares Corpn v Touche (1931) 174 N.E. 441, 444; it is also to confer on the world at large a quite unwarranted entitlement to appropriate for their own purposes the benefit of the expert knowledge or professional expertise attributed to the maker of the statement.
Hence, looking only at the circumstances of these decided cases where a duty of care in respect of negligent statements has been held to exist, I should expect to find that the limit or control mechanism imposed upon the liability of a wrongdoer towards those who have suffered economic damage in consequence of his negligence rested in the necessity to prove, in this category of the tort of negligence, as an essential ingredient of the proximity between the plaintiff and the defendant, that the defendant knew that his statement would be communicated to the plaintiff, either as an individual or as a member of an identifiable class, specifically in connection with a particular transaction or transactions of a particular kind (eg in a prospectus inviting investment) and that the plaintiff would be very likely to rely on it for the purpose of deciding whether or not to enter upon that transaction or upon a transaction of that kind.
In support of that analysis, Lord Bridge adopted the celebrated dissenting judgment of Denning LJ in Candler v Crane, Christmas & Co [1951] 2 KB 164 on the persons to whom an auditor owed a duty of care in respect of his audit report.
At pp 180, 182, 184, Denning LJ had said: To whom do these professional people owe this duty? I will take accountants, but the same reasoning applies to the others.
They owe the duty, of course, to their employer or client; and also I think to any third person to whom they themselves show the accounts, or to whom they know their employer is going to show the accounts, so as to induce him to invest money or take some other action on them.
But I do not think the duty can be extended still further so as to include strangers of whom they have heard nothing and to whom their employer without their knowledge may choose to show their accounts.
Once the accountants have handed their accounts to their employer they are not, as a rule, responsible for what he does with them without their knowledge or consent The test of proximity in these cases is: did the accountants know that the accounts were required for submission to the plaintiff and use by him? To what transactions does the duty of care extend? It extends, I think, only to those transactions for which the accountants knew their accounts were required My conclusion is that a duty to use care in statement is recognised by English law, and that its recognition does not create any dangerous precedent when it is remembered that it is limited in respect of the persons by whom and to whom it is owed and the transactions to which it applies.
In his concurring judgment, Lord Oliver, at p 638, identified the circumstances in which a duty of care may typically be held to exist as follows: (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given; (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry, and (4) it is so acted upon by the advisee to his detriment.
The defendants knowledge of the transaction in respect of which the statement is made is potentially relevant for three purposes: (i) to identify some specific person or group of persons to whom he can be said to assume responsibility; (ii) to demonstrate that the claimants reliance on the statement will be financially significant; and (iii) to limit the degree of responsibility which the defendant is taken to assume if no financial limit is expressly mentioned.
We are presently concerned with its significance for the first of these purposes, which will vary according to what is known about the person or group expected to rely on the statement.
Thus in Hedley Byrne itself, the defendant understood that the statement would be relied on by the unidentified, but readily identifiable, client on whose behalf National Provincial Bank was known to be making the inquiry.
It was enough that the proposed transaction was said to be an advertising contract for 8,000 to 9,000.
It would probably have been enough even if the transaction had not been identified as an advertising contract but simply as some kind of business transaction.
For Lord Morris, for example, it was enough that the person contemplated was some one who was contemplating doing business with Easipower Ltd: see pp 493 494.
In Caparo on the other hand, where the persons said to have been entitled to rely on the defendants audit report were any potential bidder for the auditors client, the absence of a specific transaction in the defendants contemplation assumed decisive significance.
Mr Salzedo QC, who appeared for the Playboy Club, accepted that there was no evidence that BNL knew that its reference would be communicated to or relied on by anyone other than Burlington.
He also accepted that in the ordinary course where a statement is relied upon by B to whom A has passed it on, the representor owes no duty to B unless he knew that the statement was likely to be communicated to B.
That concession was plainly justified.
I would go further and say that the representor must not only know that the statement is likely to be communicated to and relied upon by B. It must also be part of the statements known purpose that it should be communicated and relied upon by B, if the representor is to be taken to assume responsibility to B. Mr Salzedos submission was that the present case was different because the Club was Burlingtons undisclosed principal.
He submitted that the relationship between BNL and the Club was, in Lord Devlins phrase, equivalent to contract because in contract the Club would have been entitled to declare itself and assume the benefit of the contract.
This is an ingenious argument, but in my opinion it is fallacious.
The rule of English law that an undisclosed principal may declare himself and enter upon a contract is an anomalous legacy of eighteenth and nineteenth century jurisprudence, which survives in the modern law on account of its antiquity rather than its coherence.
The law on the point was summarised by Lord Lloyd of Berwick in Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199, 207: (1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principals behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principals right to sue, and his liability to be sued.
To this I would add that the third party must irrevocably elect whether to sue the agent or the undisclosed principal.
The first problem about the appellants argument is that it assumes that because a relationship equivalent to contract is generally sufficiently proximate to found a duty of care, it must follow that the legal incidents of a contractual relationship are imported into it.
This is a non sequitur.
The expression equivalent to contract originates in the speech of Lord Shaw in Nocton v Lord Ashburton [1914] AC 932, 971 972.
He used it to describe any kind of relationship which gave rise to a duty to give information or advice, and hence to liability for giving it negligently.
The phrase was adopted by Lord Devlin in Hedley Byrne, at pp 528 529, and has passed into common currency: see in particular Smith v Bush [1990] 1 AC 831, 846 (Lord Templeman), Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 181 (Lord Goff), Spring v Guardian Assurance plc [1995] 2 AC 296, 324 (Lord Goff).
It serves (i) as an allegory of proximity, to describe a case where a service is performed for a person pursuant to a relationship which would be contractual if there were consideration passing from that person; and (ii) as an explanation of why it is appropriate to award a purely economic loss as damages for negligence in the course of such a relationship.
But it does not follow from the fact that a non contractual relationship between two parties is as proximate as a contractual relationship, that it is legally the same as a contractual relationship or involves all of the same legal incidents.
Secondly, the relationship between a person dealing with another and the latters undisclosed principal is not at all analogous to the kind of relationship which will give rise to a duty of care.
Whether a relationship is sufficiently proximate to give rise to a duty of care is essentially a question of fact from which the law draws certain conclusions.
The liability of a contracting party to his counterpartys undisclosed principal, however, is not a legal conclusion from any factual relationship between them.
It is a purely legal construct.
The whole point about the law relating to undisclosed principals is that a person may be brought into contractual relations with some one with whom he has no factual relationship at all.
As Lord Lloyd of Berwick observed in Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199, 207F G, the doctrine runs counter to fundamental principles of privity of contract.
Such a relationship is by definition not proximate.
Nor is it in any relevant sense voluntary or consensual so as to give rise to an assumption of responsibility.
It has none of the features which were held in Caparo to be necessary to bring the claimant into proximity with the defendant.
Thirdly, the appellants submission would require one to import into the law of tort just one aspect of the law relating to undisclosed principals.
But in fact the law in this area is a complex bundle of interrelated rights and liabilities most of which are entirely inapposite to the law of tort.
The relationship between A and Bs undisclosed principal may not be consensual, but it is at least mutual.
The I would dismiss the appeal. undisclosed principal may not only sue but be sued on the contract.
A may elect to sue the agent.
If A is sued by the undisclosed principal, he may take any defences which would have been available to him as against B. But in the absence of a true contract there would be no corresponding mutuality in tort.
It is impossible to feel much sympathy for BNL given the circumstances in which they came to give a favourable credit reference for some one with whom they appear to have had no relevant dealings.
But they had no reason to suppose that Burlington was acting for some one else, and they knew nothing of the Playboy Club.
In those circumstances, it is plain that they did not voluntarily assume any responsibility to the Club.
It may well be, since they knew nothing of Burlington either, that they were indifferent to whom they were dealing with.
But the fact that a representor may have been equally willing to assume a duty to some one else does not mean that he can be treated as if he had done so.
LORD MANCE:
I agree with the judgment which has been prepared by Lord Sumption.
But one can, as he observes in para 16, have little sympathy for BNL; and the Club has suffered significant loss in undoubted reliance on BNLs negligent misrepresentation of Mr Barakats trustworthiness.
In these circumstances, I think that there are one or two points worth examining further in order to identify precisely why the Clubs claim nevertheless fails.
BNL was prepared to make an unconditional representation of credit worthiness without knowing anything about Burlington Street Services Ltd (Burlington).
And all it knew about the context was, in Burlingtons words, that Burlington was seeking its opinion as to the means and standing of Hassan Barakat and his trustworthiness to meet a financial commitment to the extent of [1.6m] at any one time, or, in the words of NatWest, passing on Burlingtons request, its opinion of the character and standing of Hassan Barakat and trustworthiness in the way of business to the extent of [1.6m] at any one time.
In response, BNL, without further enquiry, represented that Mr Barakat was trustworthy to the extent of 1.6m in any one week, adding This information is given in strict confidential [sic].
Passages can be found in authority where courts have used language suggesting that, for a duty of care to arise in tort in respect of a representation, (a) not only must the claimant be a specific person or within a group to whom responsibility may be said to have been undertaken, but (b) the purpose for which the representation is required must be specifically in connection with a particular transaction or transactions of a particular kind or must, whether particularly specified or generally described, be made known, either actually or inferentially, to the representor: see eg per Lord Bridge and Lord Oliver in Caparo Industries plc v Dickman [1990] 2 AC 605, 620 621 and 638, cited by Lord Sumption in his paras 8 and 9.
BNL has argued that the Clubs claim must fail because it satisfies neither of the elements (a) and (b) suggested by these passages.
The Court of Appeal [2016] 1 WLR 3169 focused on element (a), although two sentences in para 19 of Longmore LJs judgment may also indicate that the Court saw the claim as failing because neither element was satisfied.
Longmore LJ said in particular: In the present case the customer was identified by name as Burlington and the true purpose of the reference (for a gambling club) was not revealed.
In these circumstances there cannot, to my mind, be an assumption of responsibility to the Club (rather than to Burlington) or indeed a responsibility for its use by the Club in trusting Mr Barakat in his gambling activities (a purpose of which the Bank was unaware).
I do not consider that this claim should fail for want of communication of the purpose or kind of purpose for which an assessment of trustworthiness was required.
Had Burlington been the operator of the gambling club and suffered the loss, it should have succeeded.
On the face of it, BNL was prepared, without further enquiry, to take the open risk of exposure to the tune of up to 1.6m in any one week whatever financial commitment or business to that tune was intended.
There is no reason in principle why a duty of care should not arise in relation to so unspecific a purpose, provided (as is here clear) that the representation was requested and given in terms showing that it was intended to be and would be relied on.
The decision in Caparo does not exclude liability on this basis.
Caparo turned on the statutory purpose of an audit being to enable shareholders to exercise their class rights in general meeting, rather than to enable individual shareholders to buy more shares in the company (unless of course the auditors specifically agreed to extend the use of their audit report to such a use).
The only contrary argument regarding purpose has to be that gambling is so unusual and risky a financial commitment in Burlingtons terms, or business in NatWests terms, that it must be excluded from what was objectively and reasonably covered by the representation sought and made.
But many other high risk businesses other than gambling can be contemplated, eg trading in derivatives or on margin.
BNL was evidently prepared to take the risk of all or any of these.
So I would not be inclined to accept that argument, in a context where the bank showed absolutely no interest in the nature of the proposed commitment(s) or the level of risk involved.
I would therefore dismiss the claim only because element (a) is not satisfied.
The representation was directed simply and solely to Burlington.
It is true that, so far as appears, BNL was probably as uninterested in Burlington and its identity as it was in the nature and purpose of the intended financial commitment.
But the representation was, objectively, requested by Burlington alone and, objectively, confined in its making to Burlington.
To my mind, this consideration is strengthened by the notation This information is given in strict confidential in BNLs representation mail.
Had the representation been made, expressly or impliedly, for the benefit of an unnamed (rather than an entirely undisclosed) principal or client of Burlington, the case would have paralleled Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, and the claim should then have succeeded.
Had it been made, expressly or impliedly, for the benefit of any principal or client of Burlington, to which Burlington might make it available, the same would have applied.
BNL would then have undertaken an open exposure, as it did in my view in relation to the purpose for which the representation as to trustworthiness was sought.
I agree with Lord Sumptions disposal of the ingenious and well presented submission that, as the Club could have intervened to rely on the representation had consideration been furnished for it to BNL, so the Court should recognise the existence for tortious purposes of a relationship akin to contract, in the absence of any consideration.
The right of an undisclosed principal to intervene in contract is not easy to rationalise, but it does not rest or bear on proximity for tortious purposes.
It is true that it follows from this that contributory fault will not be available as a response to a claim by an undisclosed principal relying on a representation for which consideration has been given since there will be no concurrency of contractual and tortious liability: see Vesta v Butcher [1989] AC 852, CA.
But the oddity here is again, if anything, the existence of the right to intervene, or the limitations of the Law Reform (Contributory Negligence) Act 1945, not the absence of a relationship of duty of care.
For these reasons, additional to those given by Lord Sumption, and tempting though the thought is that BNL is very lucky to avoid liability to the Club, I agree that the appeal falls to be dismissed.
| In October 2010 Hassan Barakat, a Lebanese resident, wished to gamble at the London Playboy Club and applied at the club for a cheque cashing facility for up to 800,000.
Playboy Clubs policy for gamblers like Mr Barakat was to require a credit reference from his bankers for twice the amount.
To avoid disclosing the purpose of the credit facility, Playboy Clubs practice was to arrange for an associated company, Burlington Street Services Ltd (Burlington), to ask the customers bank for the reference.
Mr Barakat gave as his bankers Banca Nazionale del Lavoro (BNL) in Reggio Emilia, Italy.
Burlington sent a Status Entry Request on Burlingtons headed paper to BNL.
BNL stated that Mr Barakat had an account with them and that he was trustworthy up to 1,600,000 in any one week.
Playboy Club granted the cheque cashing facility and increased it to 1.25m.
Mr Barakat drew two cheques totalling 1.25m, made net winnings of 427,400 which were paid out to him by Playboy Club, returned to Lebanon, and was not seen again at the club.
Both cheques were returned, and the club suffered a total net loss of 802,940 (including gaming duty).
It was common ground between the parties that BNL had no reasonable basis for their reference.
BNL held no account for Mr Barakat until two days after the reference was sent and that account had a nil balance until its closure on 14 December 2010.
In the High Court, the trial judge held that BNL owed a duty of care to Playboy Club in relation to its reference.
The Court of Appeal disagreed holding that the only duty BNL owed was to Burlington, to whom the reference was addressed.
The Supreme Court unanimously dismisses the appeal.
Lord Sumption gives the lead judgment with which Lady Hale and Lords Reed and Briggs agree.
Lord Mance gives a concurring judgment.
The principle espoused in Hedley Byrne & Co Ltd v Heller & Partners Ltd, which permits recovery of pure economic loss for a negligent misstatement where a special relationship exists, is capable of further development.
However, voluntary assumption of responsibility remains the foundation of this area of law [7].
The defendants knowledge of the transaction, in respect of which the statement is made, is potentially relevant for several reasons.
It identifies by name or description the person or group of persons to whom the defendant can be said to assume responsibility [10].
The representor must not only know that the statement is likely to be communicated to and relied upon by someone, it must also be part of the statements known purpose that it should be communicated and relied upon by that person if the representor is to be taken to assume responsibility to them [11].
Playboy Club argued that the relationship between BNL and the Club was equivalent to contract due to Playboy Clubs status as Burlingtons undisclosed principal.
The rule of English law that an undisclosed principal may declare himself and enter upon a contract is an anomaly that survives in modern law due to its antiquity rather than its coherence [12].
It does not follow that simply because a relationship is treated in law as a contractual relationship that it is legally the same as a contractual relationship or involves all the same legal incidents [13].
Whether a relationship is sufficiently proximate to create a duty of care is a question of fact from which the law draws certain conclusions.
The liability of a contracting party to an undisclosed principal is a legal, as opposed to factual, construct.
It creates contractual relations between parties who do not have a factual relationship with each other.
Such a relationship is not necessarily proximate and lacks the element of mutual consent required to give rise to an assumption of responsibility [14].
The majority of the principles governing undisclosed principals are entirely inapposite to the law of tort.
In particular, while the relationship between a contracting party and an undisclosed principal may be mutual in a contractual sense it lacks mutuality in tort [15].
BNL had no reason to suppose that Burlington was acting for someone else, and they knew nothing of the Playboy Club.
It is plain that they did not voluntarily assume any responsibility to the Club [16].
Lord Mance writes a concurring judgment.
There are passages in some authorities which suggest that there are two requirements for a duty of care to arise in respect of a representation: (a) the claimant must be a specific person or group to whom the responsibility may be said to have been undertaken, and (b) the representation must be made specifically in connection with a particular transaction or transactions of a particular kind made known to the representor [20].
Lord Mance does not consider that this claim should fail for want of communication of the purpose or kind of purpose for which an assessment of trustworthiness was required [22].
The claim fails in this case because BNLs representation was directed simply and solely to Burlington, who alone objectively requested the representation, and not to Playboy Club [24].
|
Widowed parents allowance is a contributory social security benefit payable to men and women who are widowed with dependent children.
It is non-means- tested, so it is particularly valuable to parents who are in work, although it is taxable.
The widowed parents entitlement depends upon the contribution record of the deceased partner.
Currently, the widowed parent can only claim the allowance if he or she was married to, or the civil partner of, the deceased.
The issue in this case is whether this requirement unjustifiably discriminates against the survivor and/or the children on the basis of their marital or birth status, contrary to article 14 of the European Convention on Human Rights (ECHR) when read with either article 8 of the Convention or Article 1 of the First Protocol to the Convention (A1P1).
The facts
Ms McLaughlin and her partner, John Adams, lived together (apart from two short periods of separation) for 23 years until he died on 28 January 2014.
They did not marry because Mr Adams had promised his first wife that he would never remarry.
They had four children, aged 19 years, 17 years, 13 years and 11 years when their father died.
He had made sufficient National Insurance contributions for Ms McLaughlin to be able to claim a bereavement payment and widowed parents allowance had she been married to him.
Ms McLaughlins claims for both bereavement payment and widowed parents allowance were refused by the Northern Ireland Department for Communities.
She applied for judicial review of that decision on the ground that the relevant legislation was incompatible with the ECHR.
That claim succeeded in part before Treacy J in the High Court: In the matter of an application by Siobhan McLaughlin for Judicial Review: [2016] NIQB 11.
He made a declaration of incompatibility under section 4(2) of the Human Rights Act 1998, that section 39A(1) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 is incompatible with article 8 of the ECHR in conjunction with article 14 insofar as it restricts eligibility for Widowed Parents Allowance by reference to the marital status of the applicant and the deceased.
He rejected the claim in relation to the bereavement payment.
The Court of Appeal unanimously held that the legislation was not incompatible with article 14, read either with article 8 or with A1P1: [2016] NICA 53.
Ms McLaughlin now appeals to this Court.
The Evolution of Bereavement Benefits
National Insurance pensions for widows were first introduced under the Widows, Orphans and Old Age Contributory Pensions Act 1925.
They provided a pension for all widows whose husbands fulfilled the contribution conditions, at a very modest flat rate with extra allowances for children.
It was part of the piece- meal development of a National Insurance scheme, whereby people in work would pay into a National Insurance fund which would provide benefits if they were deprived of earnings through the ordinary vicissitudes of life: old age, invalidity, unemployment and, in the social conditions of the time, widowhood.
The assumption - and at least among the middle classes the reality - was that women would not work after marriage, so that for them the loss of a breadwinning husband was the equivalent of the loss of a job through old age, invalidity or unemployment for people in work.
The National Insurance scheme was quite separate from the relief of the destitute under the old Poor Law and its later replacements, beginning with the National Assistance Act 1948.
Those were strictly means-tested benefits, whereas National Insurance benefits, having been paid for by contributions, were not.
The National Insurance scheme was systematised and rationalised as a result of the Beveridge Report on Social Insurance and Allied Services (Cmd 6404, 1942).
Beveridge proposed the replacement of unconditional inadequate widows pensions by a short-term widows benefit, payable for 13 weeks, to allow time for readjustment and a longer term guardian benefit for those with dependent children.
Childless widows should be expected to work (para 153).
However, the Report acknowledged the difficulties of women who were widowed, or whose children grew up, when they had reached an age at which it would be difficult to find work (para 156).
This concern was reflected in the eventual legislation, the National Insurance Act 1946, which introduced three benefits: a widows allowance, a widowed mothers allowance and a widows pension where the claimant was widowed over 50 or over 40 when widowed mothers allowance ceased.
In 1954, the United Kingdom ratified the ILO Social Security (Minimum Standards) Convention 1952 (No 102), which provided that The contingency covered shall include the loss of support suffered by the widow or child as the result of the death of the breadwinner (article 60).
This structure remained broadly unchanged until the Social Security Act 1986, which replaced the short-term widows allowance with a one-off lump sum widows payment.
It also increased the age threshold for full widows pension to 55 (a reduced rate pension was payable to those widowed, or whose widowed mothers allowance had ended, between 45 and 54).
But the numbers of recipients had fallen, from an average of almost 600,000 in the 1960s to an average of around 500,000 in the 1970s.
Social trends, including falling marriage rates, rising divorce rates and increased male life expectancy, reduced the numbers of widows under pensionable age, from over 600,000 in 1951 to under 300,000 in 1995 (ONS/OPCS Marriage and Divorce Statistics, FM2, nos 16, 23).
By then, of course, there had been many other profound social changes.
Women were no longer required or expected to give up work on marriage.
Married womens participation in the labour force had grown dramatically, although their working patterns were not identical to those of men, with many more leaving the workforce or working part time, especially while children were young.
Thus it is not surprising that by the next wave of reform, most widows eligible for the benefits were in work, although those with young children were far less likely than married or cohabiting women to be working at all and less likely than other types of lone mother to be working full-time (ONS, Living in Britain: Results from the General Household Survey 1996, tables 5.23, 5.24).
The availability of a non-means-tested benefit may have played a part in this; but so may the greatly increased prevalence of survivors benefits in occupational pension schemes in both the public and private sectors.
The next wave of reform came about as part of a general package of welfare and pension reforms introduced by the 1997 Labour Government.
But a major spur to their changes to bereavement benefits was that it had become inevitable that widows benefits would be successfully challenged for discriminating against men.
Mr Willis had already begun his case in the European Court of Human Rights; although judgment was not given until 2002, it was a reasonable prediction that he would succeed in challenging his non-entitlement to both widows payment and widowed mothers allowance as incompatible with article 14 taken with A1P1: see Willis v United Kingdom (2002) 35 EHRR 21 (he failed in relation to widows pension because he did not then and might not ever meet the eligibility requirements).
One solution might have been to abolish widows benefits altogether, save perhaps for the one-off payment, as being based on anachronistic assumptions about the major vicissitudes in life, but to do so was seen as removing help for many people in real need.
Instead, there was a major re-focus, based on the defects identified in the governments green paper, A new contract for welfare: Support in Bereavement (Cm 4104, November 1998): the then scheme did not give enough help at the point of bereavement; gave most help to people who did not need widows benefits because they were earning a decent living or had large occupational pensions or life insurance; gave least help to the poorest widows on income support, who saw nothing of their widows benefits; and discriminated against men (para 4).
The essential features of the new scheme were: first, it would apply equally to widows and widowers; second, the one-off bereavement payment would be increased from 1,000 to 2,000; third, there would be a widowed parents allowance equivalent to the current widowed mothers allowance; and fourth, there would no longer be a widows pension, but a short-term bereavement allowance for six months, for widows and widowers aged 45 or over with no dependent children.
A disregard of 10 of the widowed parents allowance would be introduced into means-tested benefits.
That was the scheme inserted into the Social Security Contributions and Benefits Act 1992 for Great Britain by the Welfare Reform and Pensions Act 1999.
It was also the scheme inserted by statutory instrument (1999/3147 (NI 11)) into the Social Security Contributions and Benefits (Northern Ireland) Act 1992, with which this case is concerned.
It was amended to take account of civil partnerships by the Civil Partnerships Act 2004.
Since then, the scheme has been radically changed yet again, by the Pensions Act 2014 and the Pensions Act (Northern Ireland) 2015, in respect of deaths taking place after their implementation in March 2017.
Bereavement payment and widowed parents allowance have been abolished and replaced with a single bereavement support payment available to all bereaved spouses and civil partners irrespective of age.
This is paid as an initial lump sum followed by monthly instalments for up to 18 months.
The rates are higher if the bereaved person is pregnant or entitled to child benefit.
The object is to focus support on the period immediately after bereavement, it being very common for bereavement to have a large short-term impact on the finances of the surviving partner (Government Response to the public consultation: Bereavement Benefit for the 21st Century, Cm 8371, July 2012, p 16).
As before, entitlement depends on the (simplified) contribution record of the deceased and is not means-tested.
Longer term impacts are left to means-tested benefits with some transitional cushioning.
In essence, therefore, what began as a long-term replacement of a wifes and childrens loss of a breadwinning husbands income, moved to a long-term replacement of a breadwinners income while children were growing up, and is now a transitional compensation for the immediate financial loss suffered by the survivor and children on bereavement.
The contribution conditions are now less onerous.
In none of these waves of reform was consideration given to extending the scheme to unmarried partners.
The Beveridge Report did briefly discuss Unmarried person living as a Wife, pointing out that treatment of the problem was complicated by the possibility that either or both parties might have a legal spouse.
It recommended that Widows and guardian benefits should not be paid except to a woman who was the legal wife of the dead man.
Retirement pension should not be paid in respect of contributions other than the womans own contributions, except to the legal wife of the retired man (para 348(ii)).
That principle has not been officially questioned since.
The most recent government publication, on Bereavement Benefit for the 21st Century (above), simply reports that some consultation respondents took the opportunity to raise wider issues outside the scope of the consultation, including the extension of bereavement benefit entitlement to cohabitees (p 15).
The legislation in question
We need only consider section 39A of the Social Security Contributions and Benefits (Northern Ireland) Act 1992, in the version in force when Mr Adams died: Widowed parents allowance.
(1) This section applies where - a person whose spouse or civil partner dies on or (a) after the appointed day is under pensionable age at the time of the spouses or civil partners death, or (b) - a man whose wife died before the appointed day (i) (ii) has not remarried before that day, and is under pensionable age on that day.
(2) The surviving spouse or civil partner shall be entitled to a widowed parents allowance at the rate determined in accordance with section 39C below if the deceased spouse or civil partner satisfied the contribution conditions for a widowed parents allowance specified in Schedule 3, Part I, paragraph 5 and - (a) the surviving spouse or civil partner is entitled to child benefit in respect of a child or qualifying young person falling within subsection (3) below; or (b) the surviving spouse is a woman who either - is pregnant by her late husband, or (i) (ii) if she and he were residing together immediately before the time of his death, is (c) pregnant in circumstances falling within section 37(1)(c) above; or the surviving civil partner is a woman who - (i) was residing together with the deceased civil partner immediately before the time of the death, and (ii) is pregnant as the result of being artificially inseminated before that time with the semen of some person, or as a result of the placing in her before that time of an embryo, of an egg in the process of fertilisation, or of sperm and eggs.
(3) A child or qualifying young person falls within this subsection if the child or qualifying young person is either - (a) a son or daughter of the surviving spouse or civil partner and the deceased spouse or civil partner; or (b) a child or qualifying young person in respect of whom the deceased spouse or civil partner was immediately before his or her death entitled to child benefit; or (c) if the surviving spouse or civil partner and the deceased spouse or civil partner were residing together immediately before his or her death, a child or qualifying young person in respect of whom the surviving spouse or civil partner was then entitled to child benefit.
(4) The surviving spouse shall not be entitled to the allowance for any period after she or he remarries or forms a civil partnership, but, subject to that, the surviving spouse shall continue to be entitled to it for any period throughout which she or he - satisfies the requirements of subsection (2)(a) or (a) (b) above; and (b) is under pensionable age.
(4A) The surviving civil partner shall not be entitled to the allowance for any period after she or he forms a subsequent civil partnership or marries, but, subject to that, the surviving civil partner shall continue to be entitled to it for any period throughout which she or he - satisfies the requirements of subsection (2)(a) or (b) (a) above; and (b) is under pensionable age.
(5) A widowed parents allowance shall not be payable - (a) for any period falling before the day on which the surviving spouses or civil partners entitlement is to be regarded as commencing by virtue of section 5(1)(1) of the Administration Act; or (b) for any period during which the surviving spouse or civil partner and a person of the opposite sex to whom she or he is not married are living together as husband and wife; or (c) for any period during which the surviving spouse or civil partner and a person of the same sex who is not his or her civil partner are living together as if they were civil partners.
Thus the key features are: the claimant must be under pensionable age at the date of death and the allowance ceases once he or she reaches that age; the deceased spouse or civil partner must have satisfied the prescribed contribution conditions (the details need not concern us); the surviving spouse or civil partner must either be pregnant (in the prescribed circumstances) or be entitled to child benefit in respect of at least one child or qualifying young person who is either (a) the son or daughter of them both, or (b) a child or qualifying young person in respect of whom the deceased was entitled to child benefit immediately before his or her death, or (c) a child or qualifying young person in respect of whom the survivor was entitled to child benefit, provided that the deceased and the survivor were living together immediately before the death; and entitlement is lost if the survivor marries, forms a civil partnership or when he or she cohabits as if married or in a civil partnership.
The ECHR
Article 14 of the ECHR provides that: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
As is now well-known, this raises four questions, although these are not rigidly compartmentalised: (1) Do the circumstances fall within the ambit of one or more of the Convention rights? (2) Has there been a difference of treatment between two persons who are in an analogous situation? (3) characteristics listed or other status? (4) Is that difference of treatment on the ground of one of the Is there an objective justification for that difference in treatment? Within the ambit?
Article 14 does not presuppose that there has been a breach of one of the substantive Convention rights, for otherwise it would add nothing to their protection, but it is necessary that the facts fall within the ambit of one or more of those: see eg Inze v Austria (1987) 10 EHRR 394, para 36.
In this case, it is clear that the denial of a contributory social security benefit falls within the ambit of the protection of property in A1P1: see Willis v United Kingdom (2002) 35 EHRR 21, in relation to the denial of widows payment and widowed mothers allowance to widowers.
The Court did not there find it necessary to consider whether the facts also fell within the ambit of the right to respect for family life protected by article 8 of the Convention.
But this could matter, in relation both to whether the claimant and her children are in an analogous situation to a surviving spouse or civil partner and their children and to the justification for the difference in treatment between them.
Another way of putting the relationship between article 14 and the substantive Convention rights is that article 14 comes into play whenever the subject matter of the disadvantage constitutes one of the modalities of the exercise of the right guaranteed: see eg Petrovic v Austria (1998) 33 EHRR 307, para 28.
In that case a father complained that a non-contributory parental leave allowance was only available to mothers and not to fathers.
At that date, it had not yet been decided that non-contributory state benefits were covered by A1P1, so the question was whether the allowance fell within the ambit of article 8.
There was no violation of article 8, because the state is under no obligation to provide such an allowance.
But this allowance paid by the state is intended to promote family life and necessarily affects the way in which the latter is organised as, in conjunction with parental leave, it enables one of the parents to stay at home to look after the children (para 27).
By granting such an allowance states are able to demonstrate their respect for family life within the meaning of article 8 (para 29).
Thus article 14 was applicable (although not violated in that case).
It could be said that the connection between the organisation of family life and the parental leave allowance was closer in Petrovic than the connection between the organisation of family life and the widowed parents allowance.
However, to the same effect is Okpisz v Germany (2005) 42 EHRR 32, where the refusal of child benefit to certain migrants was held to violate article 14 taken with article 8: By granting child benefit, states are able to demonstrate their respect for family life within the meaning of article 8; the benefits therefore come within the scope of that provision.
(para 32).
Most recently, in Aldeguer Toms v Spain (2017) 65 EHRR 24, the court considered a claim for survivors benefits, brought by an unmarried same sex partner before the introduction of same sex marriage in Spain, under article 14 read with both article 8 and A1P1: it reiterated that the notion of family life not only includes dimensions of a purely social, moral or cultural nature but also encompasses material interests (para 72).
Judge Keller, the Swiss Judge, considered that the claim should only have been considered under A1P1, because financial support from the state primarily falls within A1P1; only some additional element, such as a clear legislative intent to provide an incentive for the organisation of family life, could bring it within article 8 (para O-I2).
In this case, as in Petrovic and Okpisz, such an element clearly exists.
In M v Secretary of State for Work and Pensions [2006] 2 AC 91, Lord Nicholls of Birkenhead accepted that the Child Support Act 1991 was one of the ways the United Kingdom evinces respect for children and the life of the family of which the child is part (para 17).
Widowed parents allowance is only payable if there are children or young people for whose care and support either the deceased or the survivor or both were responsible: it is conditional on the survivor receiving child benefit and thus being a primary carer for such a child.
It is, as Lord Bingham put it, one of the ways in which the state evinces respect for children and the life of the family of which they are part.
Indeed, it is a stronger case than child support, which is simply a mechanism for enforcing the parents obligation to maintain ones children (and interestingly, when M got to Strasbourg, the court found a violation of article 14 read with A1P1 and did not find it necessary to consider article 8: JM v United Kingdom [2011] 1 FLR 491).
It is fair to say that the English courts have made rather heavy weather of the ambit point, particularly in connection with article 8, because of its broad and ill- defined scope.
In M v Secretary of State for Work and Pensions, Lord Bingham also said this (para 4): It is not difficult, when considering any provision of the Convention, including article 8 and article 1 of the First Protocol (article 1P1), to identify the core values which the provision is intended to protect.
But the further a situation is removed from one infringing those core values, the weaker the connection becomes, until a point is reached when there is no meaningful connection at all.
At the inner extremity a situation may properly be said to be within the ambit or scope of the right, nebulous though those expressions necessarily are.
At the outer extremity, it may not.
This is a difficult passage, because it is accepted that there is no need for the substantive article to be infringed in order for article 14 to be engaged.
But it does suggest that the closer the facts come to the protection of the core values of the substantive article, the more likely it is that they fall within its ambit.
Our attention was drawn to a number of other English authorities in which the connection of article 14 with article 8 is discussed, but most of those are under appeal and so it would be unwise to comment upon them.
In Smith v Lancashire Teaching Hospitals NHS Foundation Trust [2017] EWCA Civ 1916; [2018] 2 WLR 1063, Sir Terence Etherton MR agreed with counsel that the only sure common thread running through the various descriptions of the ambit test, for the purposes of article 14, in the several speeches in M [2006] 2 AC 91 is that the connection or link between the facts and the provisions of the Convention conferring substantive rights must be more than merely tenuous (para 48).
Having quoted the relevant paragraphs from Petrovic and reviewed the domestic authorities, including M, he summarised the position thus (para 55): The claim is capable of falling within article 14 even though there has been no infringement of article 8.
If the state has brought into existence a positive measure which, even though not required by article 8, is a modality of the exercise of the rights guaranteed by article 8, the state will be in breach of article 14 if the measure has more than a tenuous connection with the core values protected by article 8 and is discriminatory and not justified.
It is not necessary that the measure has any adverse impact on the complainant in a positive modality case other than the fact that the complainant is not entitled to the benefit of the positive measure in question.
It may turn out that this is too restrictive a test: for example, core values is a concept derived from the domestic rather than the Strasbourg jurisprudence.
But there is no problem applying it to the facts of this case.
Widowed parents allowance is a positive measure which, though not required by article 8, is a modality of the exercise of the rights guaranteed by article 8.
It has a more than tenuous connection with the core values protected by article 8: securing the life of children within their families is among the principal values contained in respect for family life.
There is no need for any adverse impact other than the denial of the benefit in question.
The fact that it also falls within the ambit of A1P1 is not a problem.
The two articles are safeguarding different rights - respect for family life and respect for property.
There is no reason to regard the latter as a lex specialis excluding the former in those cases, such as this, where it applies.
I therefore conclude that the facts fall within the ambit, not only of A1P1, but also of article 8.
Analogous situation?
Unlike domestic anti-discrimination law, article 14 does not require the identification of an exact comparator, real or hypothetical, with whom the complainant has been treated less favourably.
Instead it requires a difference in treatment between two persons in an analogous situation.
However, as Lord Nicholls explained in R (Carson) v Secretary of State for Work and Pensions [2005] UKHL 37; [2006] AC 173, the essential question for the court is whether the alleged discrimination, that is, the difference in treatment of which complaint is made, can withstand scrutiny.
Sometimes the answer to this question will be plain.
There may be such an obvious, relevant difference between the claimant and those with whom he seeks to compare himself that their situations cannot be regarded as analogous.
Sometimes, where the position is not so clear, a different approach is called for.
Then the courts scrutiny may best be directed at considering whether the differentiation has a legitimate aim and whether the means chosen to achieve the aim is appropriate and not disproportionate in its adverse impact.
(para 3) As was pointed out in AL (Serbia) v Secretary of State for the Home Department [2008] UKHL 42; [2008] 1 WLR 1434, there are few Strasbourg cases which have been decided on the basis that the situations are not analogous, rather than on the basis that the difference was justifiable.
Often the two cannot be disentangled.
However, in Shackell v United Kingdom (Application No 45851/99, decision of 27 April 2000), the European Court of Human Rights declared inadmissible a complaint that denying widows benefits to unmarried surviving partners discriminated against the survivor and her children on the ground of her unmarried status and the childrens illegitimacy.
The court accepted that this fell within the ambit of A1P1, so found it unnecessary to consider whether it also fell within the ambit of article 8.
However, relying on the Commissions view in Lindsay v United Kingdom (1987) 9 EHRR CD 555, that marriage is different from cohabitation, it held that the applicants situation was not comparable to that of a widow, although it also went on to hold that in any event the difference in treatment was justified, and hence by a majority that the application was inadmissible.
In Burden v United Kingdom (2008) 47 EHRR 38 the Grand Chamber agreed with Shackell that marriage conferred a special status, but that was for the purpose of holding that sisters who had lived together all their adult lives were not in an analogous situation to married couples or civil partners for the purpose of inheritance tax relief (paras 62, 63).
It is always necessary to look at the question of comparability in the context of the measure in question and its purpose, in order to ask whether there is such an obvious difference between the two persons that they are not in an analogous situation.
The factors linking the claim to article 8 are also relevant to this question.
It was for this reason that Treacy J was able to distinguish between Ms McLaughlins claim for the bereavement payment and her claim for widowed parents allowance.
In the case of the former, he held that the lack of a public contract between Ms McLaughlin and Mr Adams meant that her situation was not comparable with that of a widow and her claim must fail (paras 66, 67).
That decision has not been appealed.
In the case of the latter, he held that the relevant facet of the relationship was not their public commitment but the co-raising of children.
For that purpose marriage and cohabitation were analogous (para 68).
In my view, that analysis is correct.
Widowed parents allowance is only paid because the survivor is responsible for the care of children who were at the date of death the responsibility of one or both of them.
Its purpose must be to benefit the children.
The situation of the children is thus an essential part of the comparison.
And that situation is the same whether or not the couple were married to one another.
It makes no difference to the children.
But had the couple been married, their treatment would be very different: their household would have significantly more to live on while their carer is in work.
I cannot regard Shackell as conclusively against the conclusion that for this purpose the situations are analogous.
Unlike Treacy J, the court did not examine the purpose of each benefit separately and ask whether they should be distinguished when it came to the justification for excluding unmarried parents and their children.
It is also worth noting that in Sahin v Germany [2003] 2 FLR 671, the Grand Chamber concluded that, because children of married and unmarried parents should not be treated differently, neither should the unmarried parents - in that case an unmarried father for the purpose of contact with his children.
It is also instructive that in Yiit v Turkey (2011) 53 EHRR 25, the Grand Chamber was faced with a difference in treatment for the purpose of survivors benefits between people who had only religious marriages and people who had civil marriages.
The court began its discussion by pointing out that According to the courts settled case law, discrimination means treating differently, without an objective and reasonable justification, persons in relevantly similar situations (para 67, citing DH v Czech Republic (2007) 47 EHRR 3, para 175).
It noted the Governments argument that civil and religious marriages were not similar for this purpose (para 75).
But it did not answer this question directly.
Rather, it considered whether religious marriage was a status within the meaning of article 14 and concluded that it was (paras 79, 80).
It then went straight on to consider whether the difference in treatment was justified, thus implying that the situations were relevantly similar, and held that it was (paras 82, 87).
Notably, Yiit involved only the mother.
It did not involve any of her children, who were entitled to bereavement benefits in their own right.
As shown by the helpful intervention of the National Childrens Bureau, which hosts the Childhood Bereavement Network, in the great majority of Council of Europe states children of the deceased are directly eligible for bereavement benefits up to a certain age.
The United Kingdom is unusual in channelling benefits for children through their parents.
Other status?
It is well established both in Strasbourg and domestically that not being married can be a status just as being married can be.
In Yiit v Turkey, for example, the Grand Chamber held that the absence of a marriage tie between two parents is one of the aspects of personal status which may be a source of discrimination prohibited by article 14 (para 79).
In In re G (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] 1 AC 173, the House of Lords held that being unmarried was a status for the purpose of deciding whether their inability to adopt was unjustified discrimination under article 14.
Justification?
It follows, therefore, that the situation in this case is sufficiently comparable to that of a widow or widower with children for the difference in treatment based on the lack of a marriage tie to require justification.
This in turn depends upon whether it pursues a legitimate aim and whether there is a reasonable relationship of proportionality between the means employed and the aim sought to be realised: see, eg, Yiit v Turkey, para 67, citing Larkos v Cyprus (1999) 30 EHRR 597, para 29).
Further, to quote Yiit again, at para 70: The contracting states enjoy a certain margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment in law.
The margin of appreciation is the latitude which the Strasbourg court will allow to member states, which is wider in some contexts and narrower in others.
As the Grand Chamber explained, in a much-quoted passage in Stec v United Kingdom (2006) 43 EHRR 47, para 52: The scope of this margin will vary according to the circumstances, the subject matter and the background.
As a general rule, very weighty reasons would have to be put forward before the court could regard a difference in treatment based exclusively on the ground of sex as compatible with the Convention.
On the other hand, a wide margin is usually allowed to the State under the Convention when it comes to general measures of economic or social strategy.
Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation.
In Willis v United Kingdom, although it concerned social security benefits where normally a wide measure would be allowed, the court held, at para 39, that very weighty reasons were required to justify a difference of treatment based exclusively on the ground of sex, and no such reasons existed.
On the other hand, in Stec, which also concerned the benefits system, although the difference in treatment was based on sex, it was inextricably linked to the difference in retirement ages between men and women, which had historically been justified.
It was a matter for member states to determine when and how to phase that out.
Strictly speaking, the margin of appreciation has no application in domestic law.
Nevertheless, when considering whether a measure does fall within the margin, it is necessary to consider what test would be applied in Strasbourg - that is why the manifestly without reasonable foundation test has generally been applied domestically in benefit cases.
In cases which do fall within the margin which Strasbourg will allow to member states, the domestic courts will then have to consider which among the domestic institutions is most competent and appropriate to strike the necessary balance between the individual and the public interest.
In a discrimination case such as In re G, it may be the courts.
In other cases, it may be the Government or Parliament.
The appellant, supported by the Child Poverty Action Group, argues that the difference in treatment is based, or largely based, on the birth status of the children, which is a suspect ground, requiring particularly careful scrutiny.
Thus, it is argued, the marriage condition has the effect that all, or almost all, the children adversely affected are illegitimate - ie born to parents who are not married to each other - and all, or almost all, the children positively affected will be legitimate - ie born to parents who are married to one another.
In fact, this will be so in a situation like this case, when the parents cohabited for a long period and all the children who fall within section 39A(3) are the children of both the deceased and the survivor.
It may very well not be so in other situations, where there are children of either the deceased or the survivor from other relationships, marital or non-marital.
It is therefore only the situation covered by section 39A(3)(a) which deserves particularly careful scrutiny.
The legitimate aim put forward by the respondent is to promote the institutions of marriage and civil partnership by conferring eligibility to claim only on the spouse or civil partner of the person who made the contributions.
There is no doubt that the promotion of marriage, and now civil partnership, is a legitimate aim: this was the reason why the denial of widows benefits to an unmarried partner was held justified in Shackell; and why the preference given to civil over religious marriage was held justified in Yiit.
The mere existence of a legitimate aim is not enough: there has to be a rational connection between the aim pursued and the means employed.
Although this is not spelled out in the Strasbourg case law, it follows from the fact that the measure must pursue a legitimate aim.
Whether there is a rational connection between the aim in this case and the measure in question is more debateable.
It seems doubtful in the extreme that any couple is prompted to marry - save perhaps when death is very near - by the prospect of bereavement benefits.
But they are part of a (small) package of social security measures in which it pays to be married rather than to cohabit.
Ms McLaughlin, like many cohabitants, complains that the social security system is happy to recognise their relationship for some purposes but not for this one.
We have not gone into the detail of this.
But the general picture is that unmarried cohabitants are treated as a couple for the purpose of means-tested benefits: they will get the benefits applicable to a couple rather than the benefits applicable to two single people.
This may sometimes be to their advantage: the benefit cap is higher for couples and lone parents than it is for single adult households.
But it is often to their disadvantage, as the system assumes that two can live together more cheaply than can two single households.
The fact remains that the social security system does privilege marriage and civil partnership in a few ways: principally by permitting one partner to benefit from the contributions made by the other, not only for bereavement but also for retirement pension purposes.
This, as it seems to me, is the nub of the matter.
Where means-tested benefits are concerned, it is difficult indeed to see the justification for denying people and their children benefits, or paying them a lower rate of benefit, simply because the adults are not married to one another.
Their needs, and more importantly their childrens needs, are the same.
But we are concerned here with a non-means-tested benefit earned by way of the deceaseds contributions.
And the allowance is a valuable addition to the household income if the survivor is in work.
Is it a proportionate means of achieving the legitimate aim of privileging marriage to deny Ms McLaughlin and her children the benefit of Mr Adams contributions because they were not married to one another?
In my view, the answer to that question is manifestly no, at least on the facts of this case.
The allowance exists because of the responsibilities of the deceased and the survivor towards their children.
Those responsibilities are the same whether or not they are married to or in a civil partnership with one another.
The purpose of the allowance is to diminish the financial loss caused to families with children by the death of a parent.
That loss is the same whether or not the parents are married to or in a civil partnership with one another.
That view is reinforced by the international obligations to which the United Kingdom is party and which inform the interpretation of the guarantees contained in the ECHR even though they have not been directly incorporated into United Kingdom law: see eg ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4; [2011] 2 AC 166.
Principal amongst these is article 3 of the United Nations Convention on the Rights of the Child (UNCRC), which states that in all actions concerning children the best interests of the child shall be a primary consideration.
Given the direct link with children, there cannot be much doubt that the provision of widowed parents allowance is an action concerning children.
Article 26 requires State parties to recognise for every child the right to benefit from social security, including social insurance .
Article 2 of the UNCRC requires state parties to respect and ensure the rights set forth in the present Convention to each child within their jurisdiction without discrimination of any kind, irrespective of the childs or his or her parents birth or other status.
To like effect is article 10 of the International Covenant on Economic Social and Cultural Rights 1966.
Denying children the benefit of social insurance simply because their parents were not married to one another is inconsistent with that obligation.
It is also noteworthy that the great majority of member states of the Council of Europe provide survivors pensions directly to the children irrespective of birth status and in every other member state for which evidence is available, apart from Malta, where a pension is not paid directly to the child a pension can be paid to the surviving parent whether or not they were married to the deceased parent.
This is evidence of a European consensus which is always relevant to the width of the margin of appreciation which Strasbourg will allow.
This is not a difficult conclusion to reach on the facts of this case, where the couple lived together for many years, were recognised as doing so for other purposes by the Department for Communities and were parents of all the children involved.
Their children should not suffer this disadvantage because their parents chose not to marry - as it happens for a commendable reason, but it might not always be so.
This unjustified discrimination in the enjoyment of a Convention right is enough to ground a declaration of incompatibility under section 4(2) of the Human Rights Act.
It does not follow that the operation of the exclusion of all unmarried couples will always be incompatible.
It is not easy to imagine all the possible permutations of parentage which might result in an entitlement to widowed parents allowance.
The recent introduction into the household of a child for whom only the surviving spouse is responsible is one example.
Whether it would be disproportionate to deny that child the benefit of the deceaseds contributions would be a fact specific question.
But the test is not that the legislation must operate incompatibly in all or even nearly all cases.
It is enough that it will inevitably operate incompatibly in a legally significant number of cases: see Christian Institute v Lord Advocate [2016] UKSC 51; 2016 SLT 805, para 88.
A declaration of incompatibility does not change the law: it is then for the relevant legislature to decide whether or how it should be changed.
It also does not follow that the new law is incompatible.
Although we have been advised of its existence, we have not heard argument about it, and the argument would no doubt be very different from the argument we have heard in this case.
But I do not see the fact that the law has now changed as a reason for not making a declaration of incompatibility: the old law will remain relevant for deaths taking place before March 2017 for a very long time.
I would therefore allow the appeal and make a declaration that section 39A of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 is incompatible with article 14 of the ECHR, read with article 8, insofar as it precludes any entitlement to widowed parents allowance by a surviving unmarried partner of the deceased.
LORD MANCE: (with whom Lady Hale, Lord Kerr and Lady Black agree)
This appeal had led to disagreement between a majority view contained in the judgment prepared by Lady Hale and a minority view expressed by Lord Hodge.
While I come down in favour of the former view, I recognise the force of a number of points made by Lord Hodge.
The majority view faces the difficulty that the European Court of Human Rights declared inadmissible all aspects of the complaint made by Joanna Shackell in Shackell v United Kingdom (Application No 45851/99).
That complaint included as one element the refusal to an unmarried mother of a widowed mothers allowance following the death of her partner in 1995.
The Welfare Reform and Pensions Act 1999 replaced that allowance with widowed parents allowance, to cater for the death of either member of a married couple, but nothing in that change affects the reasoning in Shackell.
Equally, I do not think that it is possible to treat Shackell as a case where the court failed to distinguish between the benefits there claimed or to ask whether they should be treated separately or to focus on the children.
Ms Shackell, represented by a welfare rights worker, made a distinct claim that her children were discriminated against by reason of their illegitimate status, arguing that the refusal to pay her widows benefits in respect of her children had a direct financial consequence on her family life: violation of article 8 taken in conjunction with article 14 of the Convention.
The court dealt with this specifically as a complaint about non-payment of widowed mothers allowance, to which it gave a distinct response as follows: whilst it is true that the applicant does not receive Widowed Mothers Allowance, the reason for her not being eligible is that she and her late partner were not married.
It is not related to the status of the children The court added that it followed that the applicants ineligibility for widowed mothers allowance was compatible with the Convention for the same reasons as those which it had already set out in rejecting the claim so far as it related to widows benefits simpliciter.
We are therefore squarely confronted with a need to consider whether the Courts approach in Shackell, set out in para 48 above, should now be regarded as wrong or should not be followed, at least domestically.
In my opinion, that is indeed the position.
The existence of marriage was of course a condition of eligibility for widowed mothers allowance in Shackell; that was the very basis of complaint there - just as the requirement of marriage or a civil partnership is on this appeal the basis of complaint in relation to widowed parents allowance.
But the reasoning in Shackell fails to address what I regard as the clear purpose of this allowance, namely to continue to cater, however broadly, for the interests of any relevant child.
Refusal of the allowance to the survivor of a couple who are neither married nor civil partners cannot simply be regarded as a detriment to the survivor of the couple.
Refusal would inevitably operate in a significant number of cases to the detriment of the child.
There is common ground between the majority and the minority that the widowed parents allowance falls within the ambit of article 8 (see Lord Hodge, para 70).
In my opinion, its refusal was and is prima facie a violation of article 14 read with article 8, as well as of article 14 read with A1P1.
Bearing in mind that the main purpose of widowed parent allowance is to secure the continuing well-being of any child of a survivor, there seems in this context to be no tenable distinction, and indeed manifest incongruity in the difference in treatment, between a child of a couple who are married or civil partners and the child of a couple who are not.
In a large number of cases the effect would also be to discriminate against a child who was illegitimate.
Indirect discrimination does not depend on the reason for or purpose of the conduct complained of, but on its effect.
The European Court of Human Rights does not appear to have addressed this aspect in its brief reasoning set out in para 48 above.
And legitimacy or illegitimacy is a status.
As Lady Hale points out in paras 42-43, we do not need to consider other situations on this appeal.
A policy in favour of marriage or civil partnership may constitute justification for differential treatment, when children are not involved.
But it cannot do so in relation to a benefit targeted at the needs and well-being of children.
The fact that the widowed parents allowance may cease or be suspended in some situations is no answer to this.
The underlying thinking is no doubt that adequate support will be or is likely to be derived from another source in such situations.
The provisions for cessation or suspension may not be entirely logical or reflect entirely accurately the circumstances in which adequate alternative support may be expected.
But, if so, that does not appear to me to affect the analysis that widowed parents allowance is fundamentally aimed at securing the needs and well-being of children.
I take the points made by Lord Hodge (paras 85-87) that it is not always easy to judge how different benefits interact and how easy they may be to administer.
But the position of couples who are neither married nor civil partners is already catered for in other situations known to the law.
The starting point is surely that, where children are for relevant purposes in a similar situation, the law would be expected to deal with them in the same way.
I am not persuaded that any substantial grounds exist for thinking that this was not and is not feasible, as well as just, in the present context.
For these reasons, and for the additional reasoning on further points mentioned in Lady Hales judgment, I join with the majority in allowing this appeal relating to widowed parents allowance.
LORD HODGE: (dissenting)
I regret that I find myself in disagreement with the majority on this appeal.
In my view the widowed parents allowance (the WPA) is not incompatible with article 14 of the European Convention on Human Rights (the ECHR) when taken with either article 8 of the ECHR or article 1 of the First Protocol to the ECHR (A1P1).
I am very grateful to Lady Hale for setting out the facts, the evolution of bereavement benefits and the legislation, which I do not have to repeat.
In explaining my disagreement, I will draw attention to certain features of the legislation which are to my mind of greater importance than the majority acknowledges.
We are concerned with the version of section 39A of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (the 1992 Act) which was in force when Mr Adams died on 28 January 2014 and which Lady Hale has set out in para 13 of her judgment.
The discrimination which the majority sees as incompatible with the ECHR is the exclusion of the survivor of a couple who were not married or in a civil partnership from the benefit of the WPA because, it is reasoned, the discrimination, which that exclusion entails, has not been justified and so is contrary to article 14 when read with article 8 of the ECHR.
The legislation
There are a number of features of the WPA which are material to my analysis.
First, the WPA is a contributory benefit.
The deceased spouse or civil partner (the Deceased) must have satisfied the prescribed contribution conditions (section 39A(2) and Schedule 3 Part I, paragraph 5).
The benefit which becomes available to the surviving spouse or civil partner (the Survivor) is thus the result of the Deceaseds contributions.
Secondly, the WPA is not means-tested but is payable even if the Survivor earns a substantial income through work, and it is subject to income tax as part of the Survivors income (formerly under section 617 of the Income and Corporation Taxes Act 1988 (ICTA) and now under Part 9, chapter 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)).
As discussed below, the WPA is treated as pension income of the Survivor.
Thirdly, the WPA is payable not only when the Survivor has a responsibility for children (section 39A(3)) but also if the Survivor is a woman and is pregnant in specified circumstances (section 39A(2)(b) & (c)).
Fourthly, the WPA ceases to be payable (a) when the Survivor reaches pensionable age (section 39A(4A)(ii)) and (b) if the Survivor marries or enters into a civil partnership (section 39A(4) and (4A)), and is not payable so long as the Survivor cohabits with a person of the opposite sex as if they were married or with a person of the same sex as if they were civil partners (section 39A(5)(b) & (c)).
The first and second features - that the Survivors entitlement is dependent on the Deceaseds contributions and is not means-tested - point to the importance of the nexus between the Survivor and the Deceased.
It is the nature of that relationship which gives the Survivor the right to benefit from the deceaseds contributions.
The WPA is payable not only if there is a child of the Deceased and the Survivor or a child in respect of whom the Deceased had been entitled to child benefit immediately before his or her death (section 39A(3)(a) & (b)) but also if the Deceased and the Survivor had been living together immediately before the death and there was a child in respect of whom the Survivor was then entitled to child benefit (section 39A(3)(c)).
Thus, the WPA is made available to the Survivor if he or she is responsible for a child for whom the Deceased was not responsible.
The third and fourth features - the availability of the WPA to a pregnant woman and especially the circumstances in which WPA ceases to be payable or is suspended, point to the focus of the benefit on the provision of assistance to the bereaved Survivor: WPA, by replacing income earned by the Deceased, gives the Survivor the options of not working or of working for less hours after bereavement, notwithstanding his or her current or future financial responsibility for children.
That replacement income is ended or suspended when the Survivor enters into a relationship with another which may be expected to yield alternative financial support.
In the public consultation document, Bereavement Benefit for the 21st century, (Cm 8221) which the Secretary of State for Work and Pensions presented to Parliament in December 2011, it was recognised that the bereavement benefits were not affected by paid employment and that the majority of people who applied for those benefits were likely to be in work.
In that document the WPA was described as providing support towards the additional costs of raising children (p 14) and the function of it and other bereavement benefits was described in these terms: a key function of bereavement benefits is to provide some financial security in the period immediately after spousal bereavement to allow people to take time away from work should they need this.
(p 16) This latter description is not wholly accurate as the WPA, unlike the short-term bereavement allowance, is not confined to the 52 weeks immediately after the bereavement.
But the focus on the financial security of the Survivor applies to each of the bereavement benefits.
This focus on the position and welfare of the Survivor is consistent with the evolution of bereavement benefits which Lady Hale has summarised in paras 4 to 12 of her judgment.
The initial aim of bereavement benefits was to relieve the plight of the widow under pensionable age who lost the support of a bread-winning husband at a time when many married women did not work.
Social change, including the increase in the number of married women and widows who engage in paid work, led to the demise of the widows pension, which was payable to a widow aged over 45 when widowed and continued to be paid until she drew her retirement pension, and its replacement with a bereavement allowance for up to 52 weeks, while the WPA provided longer-term income substitution to the Survivor, in recognition of her responsibility for children.
The WPA, as a contributory benefit, stands in contrast to means-tested benefits for the support of children such a child tax credit, which now is being replaced by universal credit.
Such means-tested benefits do not require a nexus between a deceased contributor and a surviving claimant but are payable because of the need to provide for the welfare of children.
The WPA counts as income in relation to means-tested benefits but 10 of the WPA is disregarded when calculating entitlement to means-tested benefits: Regulation 104 of and paragraph 16 of Schedule 8 to the Employment and Support Allowance Regulations (Northern Ireland) 2008 (SI 2008/280).
Accordingly, a person in receipt of means tested benefits will often obtain only limited assistance from an entitlement to WPA.
Securing ECHR rights without discrimination
Lady Hale has set out article 14 of the ECHR and the four questions which it raises in para 15 of her judgment.
In relation to the first question (do the circumstances fall within the ambit of one or more of the Convention rights?), it has been established in Willis v United Kingdom (2002) 35 EHRR 21 that the denial of a contributory social security benefit falls within the ambit of the A1P1 right.
I therefore postpone my consideration of the concept of the ambit of a Convention right until I consider article 14 taken with article 8 below.
In Willis the challenge to the denial of a widows payment and a widowed mothers allowance (the precursor of the WPA) to widowers succeeded under article 14 taken in conjunction with A1P1 and the Strasbourg court (the ECtHR) did not have to consider the complaint under article 14 in conjunction with article 8.
A similar challenge under article 14 taken in conjunction with A1P1 was made by an unmarried mother of three children who had had a long-term relationship with a man who was the childrens father in the case of Shackell v United Kingdom (Application No 45851/99) decision of 27 April 2000.
She complained that the United Kingdoms social security legislation discriminated against her because she was an unmarried surviving partner by denying her a right to the widows benefits available to married women (including the widowed mothers allowance).
The ECtHR treated the right to widows benefits as a pecuniary right for the purposes of A1P1 and saw no need to determine whether the facts also fell within the ambit of article 8.
The court by majority declared the application inadmissible because it was manifestly ill-founded within the meaning of article 35 of the ECHR.
In reaching that conclusion the ECtHR considered not only the applicants claim to widows benefits generally but also the childrens claim that they were discriminated against in relation to widowed mothers allowance.
The ECtHR referred to the decision of the European Commission of Human Rights in Lindsay v United Kingdom (1987) 9 EHRR CD 555 in which the Commission rejected a comparison between unmarried cohabitees and a married couple in relation to the incidence of income tax on the basis that they were not in analogous situations.
The Commission stated: Though in some fields the de facto relationship of cohabitees is now recognised, there still exist differences between married and unmarried couples, in particular, differences in legal status and legal effects.
Marriage continues to be characterised by a corpus of rights and obligations which differentiate it markedly from the situation of a man and woman who cohabit.
The court, while recognising that since 1986 there had been increased social acceptance of stable personal relationships outside marriage, stated: However, marriage remains an institution which is widely accepted as conferring a particular status on those who enter into it.
The situation of the applicant is therefore not comparable to that of a widow.
Recognising that the ECHR gives States a certain margin of appreciation in the assessment of the extent to which differences in otherwise similar situations justify a different treatment in law, the court held that the promotion of marriage, by conferring limited benefits for surviving spouses, could not be said to exceed the margin of appreciation afforded to the UK Government.
Shackell was decided in 2000; and in 2008 the Grand Chamber of the ECtHR confirmed that approach in Burden v United Kingdom (2008) 47 EHRR 38.
In that case two unmarried sisters, who had lived together all their lives and who for 31 years had jointly owned the house in which they lived, complained under article 14 taken with A1P1 that it was unjustified discrimination for the UK tax system to deny them the exemption from inheritance tax which was available to property passing between spouses or civil partners.
In holding that there was no discrimination and therefore no violation of article 14 taken with A1P1, the Grand Chamber stated (para 63): Moreover, the Grand Chamber notes that it has already held that marriage confers a special status on those who enter into it.
The exercise of the right to marry is protected by article 12 of the Convention and gives rise to social, personal and legal consequences.
In Shackell, the court found that the situations of married and unmarried heterosexual cohabiting couples were not analogous for the purposes of survivors benefits, since marriage remains an institution which is widely accepted as conferring a particular status on those who enter it.
The Grand Chamber considers that this view still holds true.
(Emphasis added) The Grand Chamber went on to state (para 65) that what set marriage and civil partnership apart from other forms of cohabitation was the express public undertaking of a body of rights and obligations of a contractual nature.
The legally binding agreement which marriage or civil partnership entailed rendered those relationships fundamentally different from the relationship of cohabitation, regardless of its long duration.
See also, more recently albeit in the different context of testimonial privilege, Van der Heijden v Netherlands (2012) 57 EHRR 13, paras 69 and 84.
Thus in Yiit v Turkey (2011) 53 EHRR 25, the Grand Chamber expressed the view (in para 72) that marriage is characterised by a corpus of rights and obligations that differentiated it materially from other situations of a man and a woman who cohabit and stated: States have a certain margin of appreciation to treat differently married and unmarried couples, particularly in matters falling within the realm of social and fiscal policy such as taxation, pensions and social security.
I am not persuaded that this court has grounds for departing from this consistent line of authority from the ECtHR which the Grand Chamber has recently endorsed in Burden and Yiit.
It provides a clear answer to a complaint based on article 14 taken with A1P1.
There is no suggestion that Strasbourg jurisprudence is evolving on this issue in the context with which this appeal is concerned, namely the entitlement of a surviving partner to state benefits arising out of the deceaseds contributions.
Further, the ECtHR has not suggested that an analysis of those complaints in the context of article 14 taken with article 8 would have caused it to have reached a different decision in Shackell.
In my view, the ECtHRs treatment of marriage and civil partnership as conferring a status which distinguishes them from cohabitation, while not binding on this court, is a very important component of any analysis of a challenge under article 14 taken together with article 8, to which I will turn.
But it is necessary to consider first whether the present case falls within the ambit of article 8.
The ambit of article 8
It has long been established in the jurisprudence of the ECtHR that article 14, which seeks to secure without discrimination the enjoyment of the rights and freedoms contained in the substantive provisions of the ECHR and its protocols, does not require any breach of those substantive provisions.
It is sufficient for article 14 to apply that the facts of the case fall within the ambit of one or more of those substantive provisions: Abdulaziz Cabales and Balkandali v United Kingdom (1985) 7 EHRR 471, para 71; Inze v Austria (1987) 10 EHRR 394, para 36; Petrovic v Austria (1998) 33 EHRR 357, para 22; and, more recently, Aldeguer Toms v Spain (2017) 65 EHRR 24, para 74.
In the latter case (para 74) the ECtHR continued: The prohibition of discrimination enshrined in article 14 applies to those additional rights, falling within the general scope of any Convention article, for which the state has voluntarily decided to provide.
While article 8 does not require the state to provide financial support to a family in the form of state benefits, such support as the state choses to provide must be provided without discrimination.
For the ECtHR has held that family life in article 8 includes not only dimensions of a purely social, moral or cultural nature but also encompasses material interests: Merger v France (2004) 43 EHRR 51, para 46; Aldeguer Toms (above) para 72.
Thus, for example, the provision of child benefits to the parents of a child has been characterised as a way by which states are able to demonstrate their respect for family life: Okpisz v Germany (2005) 42 EHRR 32, para 32.
Article 8 confers a right that the state will show respect for private and family life.
The provision of financial support is one of the modalities of the exercise of a right guaranteed: Petrovic (above), para 28.
I interpret modality as a particular mode in which something is done or expressed; in relation to article 8, it is a way in which the state expresses its support for family life.
position thus: In our domestic jurisprudence, Lord Nicholls of Birkenhead summarised the Article 14 is engaged whenever the subject matter of the disadvantage comprises one of the ways a state gives effect to a Convention right (one of the modalities of the exercise of a right guaranteed).
For instance, article 8 does not require a state to grant a parental leave allowance.
But if a state chooses to grant a parental leave allowance it thereby demonstrates its respect for family life.
The allowance is intended to promote family life.
Accordingly the allowance comes within the scope of article 8, and article 14 read with article 8 is engaged: Petrovic v Austria (2001) 33 EHRR 307, paras 27-30.
(M v Secretary of State for Work and Pensions [2006] 2 AC 91, para 16)
More recently, in R (Steinfield) v Secretary of State for International Development [2018] UKSC 32; [2018] 3 WLR 415, in which the appellants successfully challenged as discriminatory the Civil Partnership Act 2004 because it did not make civil partnerships available to different-sex couples, Lord Kerr of Tonaghmore said this (para 18): Before Andrews J and the Court of Appeal it had been submitted that an adverse effect in relation to article 8 had to be demonstrated in order for an avowed infringement to come within its scope or ambit.
Counsel for the respondent did not seek so to argue before this court.
They were right not to do so.
Recent case law from the European Court of Human Rights (ECtHR) makes it clear that no detrimental effect need be established.
In particular, in Vallianatos [v Greece (2013) 59 EHRR 12] ECtHR found that the introduction of registered partnerships only for different sex couples, to exist alongside marriage which was also only open to different sex couples, constituted a breach of article 14 read with article 8 of the Convention: paras 80-92.
As a result, in order to avoid a finding of an infringement of article 14, the Secretary of State had to show the unequal treatment of different sex couples was justified.
Like Lady Hale, I see no basis for the assertion that A1P1 is a lex specialis which excludes consideration of article 8.
When the ECtHR has decided cases under article 14 taken with A1P1 and found it unnecessary to consider a claim relating to the same facts under article 14 taken with article 8, it has not suggested that A1P1 has excluded consideration of article 8.
When the ECtHR has dismissed a challenge under article 14 taken with A1P1 and has then declined to consider article 14 taken with article 8 (as it did in Shackell), one may readily infer that the ECtHR does not see a different result arising from the latter assessment.
Indeed, it is questionable whether one can avoid such an inference.
But I see no justification for inferring more than that.
In my view A1P1 is a more natural home for social security benefits such as the WPA than article 8 because it is a benefit which is directed to assist the bereaved widow/widower or civil partner who has lost the financial support of the deceased.
But it is payable if and only if the Survivor has responsibility for children and it thereby can be seen as a means, albeit indirectly, by which the state shows respect for family life.
I agree therefore that the WPA falls within the ambit of article 8.
It is the positive act of providing the WPA, which provides assistance to the Survivor who is responsible for children and thereby promotes family life, that brings the benefit within the ambit of article 8.
The remaining questions
As a result, it is necessary to consider the other three questions which Lady Hale has set out in para 15 of her judgment.
They are: Is that difference of treatment on the ground of one of the (1) Has there been a difference of treatment between two persons who are in an analogous situation? (2) characteristics listed or other status? (3) Is there an objective justification for that difference in treatment?
I agree with Lady Hale that not being married can be a status: Yiit v Turkey (2011) 53 EHRR 25, paras 79-80; In re G (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] AC 173, paras 8 (Lord Hoffmann), 107 (Lady Hale) and 132-133 (Lord Mance).
Different treatment in the field of state benefits based on a person not being married would not however be a suspect ground which requires the court to exercise closer scrutiny: see, by analogy, Swift v Secretary of State for Justice [2013] EWCA Civ 193; [2014] QB 373, Lord Dyson MR at paras 24-25.
Where I differ from the majority is on the first and third questions above, to which I now turn.
Those questions are not rigidly compartmentalised.
The ECtHR often addresses the third question without conducting a separate analysis of the first question.
This is unsurprising because there is a considerable overlap between the two questions in the assessment as to whether there has been unjustifiable discrimination.
Was there unjustifiable discrimination?
The first question is whether an unmarried bereaved cohabitee is in an analogous situation to a bereaved survivor who had been married to or in a civil partnership with the deceased.
In my view he or she is not.
As the appellant is a woman, I will refer to the survivor as she in the discussion which follows.
The majority suggests that they are in an analogous situation because it accepts Treacy Js analysis that the relevant facet of the relationship between the deceased and the survivor was the co-raising of children (emphasis added).
It is stated that the WPA is payable only if the survivor is responsible for the care of children who were at the date of death the responsibility of one or both of them (para 27).
That statement is correct.
But it does not follow, as the majority asserts, that the purpose of the WPA is to benefit the children.
There are a number of important characteristics of the WPA which show that it is a benefit to assist the bereaved Survivor rather than a benefit for bereaved children, although I recognise that it would benefit the children by providing additional income to the family unit.
First, as I have said, the WPA is a benefit which replaces the lost income of the deceased and thereby gives the Survivor the opportunity not to work or to work reduced hours while she is responsible for children.
Unlike benefits which are paid to meet a specific need of the claimant, the WPA, as an income replacing benefit, is taxable as pensions income in the hands of the Survivor: see formerly section 617 of ICTA and now sections 565, 566 and 577 of ITEPA.
Secondly, the WPA ceases to be payable while the Survivor remains responsible for relevant children in several circumstances which are the personal circumstances of the Survivor.
If she reaches retirement age, if she remarries or enters into a civil partnership, so long as she cohabits with a partner of either gender, or if she dies, the WPA ceases to be payable.
It is to my mind striking that the WPA ceases to be paid as soon as the Survivor enters into one of the specified relationships, regardless of whether the Survivors new partner undertakes any responsibility for the children.
If the WPA were properly characterised as a benefit for the bereaved children, it might be difficult to defend the rationality of these rules.
Thirdly, the WPA is a contributory benefit.
In most circumstances it is payable only if the Deceased has made sufficient National Insurance contributions.
The Survivors benefits, which are treated in UK tax law as a pension, are the product of the Deceaseds contributions.
Thus the nature of the nexus between the Deceased and the Survivor takes on a particular importance.
Fourthly, the sums payable to the Survivor are not related to the childrens needs or increased by reference to the number of children for whom she is responsible.
Instead, the rate of the WPA is calculated in a way similar to that of a Category A retirement pension.
The Survivor receives a basic pension at a weekly rate and an additional pension calculated by reference to a surplus created by the Deceaseds earnings or deemed earnings during his working life: the 1992 Act sections 39C, 44-45A and 46(2) and Schedule 4A. It is unsurprising that the rules governing the WPA focus on the nature of the relationship between the Deceased and the Survivor in determining the Survivors entitlement to this contributory pension.
When one pays due regard to these characteristics of the WPA, the reasoning of the ECtHR in Shackell, which recognises the importance of the status of the Survivor, is directly relevant and strongly supports the conclusion that the cohabiting survivor is not analogous to the Survivor who was married to or in a civil partnership with the Deceased.
I see no basis for reaching a different view in relation to article 14 taken with article 8 than that which the ECtHR has reached in relation to article 14 taken with A1P1.
On a strict analysis the question whether discrimination is objectively justified does not need to be addressed if one concludes, as I have, that the persons are not in an analogous situation.
Nonetheless, in view of my disagreement with my colleagues, it is appropriate to address this question.
In so doing, I observe that considerations which point against the persons being in an analogous situation also have a bearing on the justification of their being treated differently by the state.
It is usual, when addressing justification, to ask whether the difference in treatment pursues a legitimate aim and whether, in relation to the difference in treatment, there is a reasonable relationship of proportionality between the means employed and the aim sought to be realised: see for example Yiit v Turkey (above) para 67, Stec v United Kingdom (2006) 43 EHRR 47, para 51.
The contracting states are given a certain margin of appreciation in their assessment of whether differences in otherwise similar situations justify a different treatment in law.
In Stec at para 52, which Lady Hale quotes more fully at para 33, the Grand Chamber stated: The scope of this margin will vary according to the circumstances, the subject matter and the background.
It is not disputed that the promotion of marriage or civil partnerships, by means of which parties undertake binding legal obligations which may tend to support the long-term stability of their relationships, is a legitimate aim for the state to pursue.
In the United Kingdom there are a range of measures in the fields of taxation and social security benefits which promote such legal relationships.
These include the marriage allowance in the context of income tax, the ability of a couple to transfer assets between each other without a charge to tax in order to take advantage of income tax and capital gains tax allowances, and the ability of spouses and civil partners to transfer assets to each other free of inheritance tax and the entitlement of the surviving spouse or civil partner to inherit the deceased partners inheritance tax allowance if it has not been used.
In the field of social security benefits, entitlement to a survivors retirement pension and entitlement to the WPA depend on the existence of a marriage or a civil partnership.
There is thus a range of rules which confer financial benefits on persons who are or were married or in a civil partnership.
In this context it is of no real significance that the average informed citizen may not have been aware of the WPA when entering into the legal obligations which marriage or civil partnership entails.
Such a person is likely to have been aware that there were fiscal and other benefits to such relationships even if unaware of their details.
I am unpersuaded that any ignorance of the WPA calls into question the rational connection between the measure in question and the undisputed legitimate aim or the proportionality of the difference of treatment.
In this appeal the majority has referred to the test which the ECtHR applies in social security benefit cases and asked whether the difference in treatment is manifestly without reasonable foundation.
I agree that that is the test which should be applied: R (MA) v Secretary of State for Work and Pensions [2016] UKSC 58; [2016] 1 WLR 4550.
The majority concludes that the difference in treatment is manifestly disproportionate.
I cannot agree.
In considering, as did the Grand Chamber in Stec, the circumstances, the subject matter and background, the matters which I have discussed in paras 65-70 above demonstrate that the target of the contributory benefit, which is the WPA, is the Survivor, if she has responsibility for children, and if she has not obtained access to an alternative source of income by marriage, civil partnership or cohabitation, or by means of a retirement pension.
The children benefit only indirectly from the WPA which may terminate while the Survivor remains responsible for them.
The appellant and the Child Poverty Action Group seek to shift the focus from the Survivor onto the children and argue that the difference in treatment is largely based on the birth status of the children.
This is not so: the WPA is the Survivors benefit.
It is of note that the ECtHR rejected a similar argument in Shackell (in para 2), in which the applicant had argued that her lack of an entitlement to the WPA discriminated against children because of their illegitimate status.
While there may be good policy reasons for a benefit which is directed at bereaved children, as the Child Poverty Group submits and commentators in the press have argued when this appeal was heard, that is not the nature of the WPA.
Such questions of social and economic policy fall within the remit of the democratically elected legislature and are beyond the remit of the courts.
The references to the international obligations of the United Kingdom in relation to children (para 40 of the majority judgment) lose their force when attention is paid to the characteristics of the WPA.
In my opinion there is no disproportionality in treating a cohabitee survivor differently from a surviving spouse or civil partner.
The WPA falls clearly within the ambit of A1P1.
It falls within the ambit of article 8 only indirectly: by giving the Survivor a pension, to which the Deceased and not she has contributed, it enables her not to work or to work fewer hours than she might otherwise have to.
The WPA should not be equated with means-tested benefits which are directed to peoples needs and are not entitlements resulting from contributions.
It does not address hardship.
If the Survivor is in work, the WPA gives her additional income, albeit subject to taxation.
If she is in receipt of means-tested benefits, the payment of the WPA provides only limited extra income.
It will be set against her entitlement to such benefits, except for the disregard of 10 to which I referred in para 51 above.
The provision of the WPA should be seen in the wider context of the United Kingdom social security system which gives benefits, which, unlike the WPA, are directed at children.
Should the children be in need, there are benefits to support them.
Thus, if the survivor died, the person who took responsibility for the child would be entitled to child benefit, guardians allowance and, depending on his or her means, child tax credit.
The respondent also founds on the difficulty of administering the WPA if the officials charged with its administration had to investigate whether or not the deceased and the survivor had been cohabiting.
This, it was suggested, could also involve intrusive questioning of a survivor shortly after a bereavement.
By contrast marriage or civil partnership can readily be established by certificates from a public register.
Problems in the administration of the WPA may also arise if a parent, who has made the necessary contributions, dies leaving children in the care of more than one former partner.
Such difficulty in administration as there may be is a relevant consideration which can be placed in the balance when the court assesses proportionality.
But the respondent does not need to rely on this additional consideration as I am satisfied that without it the difference in treatment about which the appellant complains is proportionate and thus objectively justified.
Conclusion
| Widowed parents allowance (WPA) is a contributory, non means tested, social security benefit payable to men and women with dependent children, who were widowed before March 2017.
Under s 39A Social Security Contributions and Benefits (Northern Ireland) Act 1992 (s 39A) the widowed parent can only claim the allowance if he or she was married to or the civil partner of the deceased.
The issue in this appeal is whether this requirement unjustifiably discriminates against the survivor and/or the children on the basis of their marital or birth status, contrary to article 14 of the European Convention on Human Rights (ECHR) when read with either the right to respect for family life under article 8, or the protection of property rights in Article 1 of the First Protocol (A1P1).
Ms McLaughlins partner, John Adams, died on 28 January 2014.
They were not married but had lived together for 23 years.
They had four children, aged 19, 17, 13 and 11 years when their father died.
He had made sufficient contributions for Ms McLaughlin to be able to claim WPA, had she been married to him.
Her claims were refused by the Northern Ireland Department of Communities.
She applied for judicial review of that decision on the ground that s 39A was incompatible with the ECHR.
The judge in the High Court agreed and made a declaration that s 39A was incompatible with article 14 read with article 8.
The Court of Appeal, however, unanimously held that the legislation was not incompatible with article 14, read with either article 8 or A1P1.
Ms McLaughlin therefore appealed to the Supreme Court.
The Supreme Court by a majority of 4 to 1 (Lord Hodge dissenting) allows the appeal and makes a declaration that s 39A is incompatible with article 14 of the ECHR read with article 8, insofar as it precludes any entitlement to WPA by a surviving unmarried partner of the deceased.
Lady Hale, with whom Lord Mance, Lord Kerr and Lady Black agree, gives the substantive judgment of the majority.
Lord Mance, with whom Lady Hale, Lord Kerr and Lady Black agree, gives a short concurring judgment.
Lord Hodge gives a dissenting judgment.
Article 14 secures the rights and freedoms of the ECHR without discrimination.
It raises four, somewhat overlapping, questions: Do the circumstances fall within the ambit of one or more of the Convention rights?
A breach of a right is not necessary, but the facts must fall within the ambit of one or more of them.
It is clear that denial of social security benefits falls within the ambit of A1P1 [16].
WPA also falls within article 8 as it is a positive measure by the state demonstrating its respect for family life [19].
Has there been a difference in treatment between two persons in analogous situations? In a decision in 2000, Shackell v United Kingdom (App 45851/99), the European Court of Human Rights (ECtHR) ruled inadmissible a complaint that a denial of widows benefits to unmarried surviving partners was discriminatory, holding that marriage conferred a special status and was different from cohabitation.
In the present case, however the relevant facet of the relationship is not the public commitment but the co raising of children [26].
The purpose of WPA is to benefit the children.
It makes no difference to the children whether or not the couple were married to one another, but their treatment is very different [27].
Lord Mance considers that the reasoning of the ECtHR in Shackell failed to address the clear purpose of the widows benefits in that case, namely to cater for the interests of any relevant child, and Shackell should not therefore be followed by the Supreme Court [49].
Is that difference of treatment on the ground of a relevant status? It is well established that being unmarried is a status for the purpose of Article 14, just as being married can be [31].
Is there objective justification for that difference in treatment? This question depends on whether it pursues a legitimate aim and whether there is a reasonable relationship of proportionality between the means employed and the aim sought to be achieved [32].
The promotion of marriage and civil partnership is a legitimate aim [36], and WPA is part of a (small) package of social security measures which privileges marriage and civil partnership [37].
However, it was not a proportionate means of achieving this legitimate aim to deny Ms McLaughlin and her children the benefit of Mr Adams contributions because they were not married to each other.
WPA exists because of the responsibilities of the deceased and the survivor towards the children, and its purpose is to diminish the financial loss caused to families with children by the death of a parent [39].
This conclusion is reinforced by the international obligations to safeguard childrens rights, to which the UK is party, which inform the interpretation of the ECHR rights; and it is noteworthy that in most other member states survivors pensions are paid directly to the children irrespective of birth status [41].
Remedy The exclusion of all unmarried couples from receipt of WPA will not always amount to unjustified discrimination, but it will inevitably do so in a legally significant number of cases, which is sufficient to require the court to make a declaration of incompatibility under s 4(2) of the Human Rights Act 1998.
It will be for the relevant legislature to decide whether or how the law should be changed [43].
Lord Hodge, dissenting, would have held that the purpose of the provision of WPA is to assist the survivor rather than a benefit for bereaved children [58, 73 78].
The circumstances did not justify departing from the consistent line of authority from the ECtHR confirming the difference of status between marriage/civil partnership and cohabitation [64], so the situations were not analogous [79].
Even had they been, the difference in treatment in the provision of a contributory rather than means tested benefit, not directed to need, was not manifestly disproportionate, but objectively justified [85 87].
|
Although the British Broadcasting Corporation (the BBC) is listed as a public authority in the Freedom of Information Act 2000, the Act, as I will call it, applies to the BBC only to a limited extent.
The words of limitation are found in Part VI of Schedule 1 to the Act: they provide that the Act applies only in respect of information held for purposes other than those of journalism, art or literature.
I will describe these words of limitation as the designation.
This appeal requires the court to consider the meaning of the designation.
The focus of the debate is on the word journalism rather than on the words art or literature.
How widely or narrowly should the phrase purposes other than those of journalism be construed?
The answer of course lies in the narrowness or width of the concept of the purposes ... of journalism in the context of the Act.
But the appeal also presents a more particular conundrum.
It proceeds, albeit not on foundations as solid as one might wish, upon the premise that the information in issue was held by the BBC partly for purposes of journalism and partly for purposes other than those of journalism (or, for that matter, of art or literature).
In a situation in which information is held for such dual and opposite purposes, does the information fall within the designation and thus within the scope of the Act?
The primary contention made on behalf of the BBC is that, where it is held by the BBC even only partly for purposes of journalism, information is beyond the scope of the Act; and thus that, provided that the purposes of journalism are significant (i.e. more than minimal), they leave the information beyond the scope of the Act even though it is also held perhaps even predominantly held for purposes other than those of journalism.
I will describe this as the BBCs polarised construction; and it was approved by the Court of Appeal (Lord Neuberger MR, Moses and Munby LJJ) on 23 June 2010, [2010] EWCA Civ 715, [2010] 1 WLR 2278, when making the order against which this appeal is brought.
The Court of Appeal, however, approved the construction only on the basis that the phrase purposes ... of journalism should be construed in a relatively narrow...way: see para 55, per Lord Neuberger.
Sadly the appellant, Mr Steven Sugar, is deceased.
His death occurred in January 2011, after he had filed Notice of Appeal to this court; and, by consent, the court appointed Ms Fiona Paveley to represent his estate in the appeal.
The contention made on behalf of Mr Sugar is precisely the opposite of the primary contention made on behalf of the BBC.
It is that, where it is held by the BBC even only partly for purposes other than those of journalism, information is within the scope of the Act; and thus that, provided that the purposes other than those of journalism are significant (i.e. more than minimal), they draw the information within the scope of the Act even though it is also held perhaps even predominantly held for purposes of journalism.
I will describe this as Mr Sugars polarised construction.
But the very expression of these polarities foreshadows a middle way, which represents the secondary contention made on behalf of the BBC.
It is that, in circumstances in which it holds information partly for purposes of journalism and partly for purposes other than those of journalism, the designation should be so construed as to draw the information within the scope of the Act only if the purposes other than those of journalism are the dominant purposes for which it is held.
I will describe this as the dominant purpose construction.
B: THE FACTS
By October 2003 the BBCs coverage of the Israeli-Palestinian conflict had come under close scrutiny from pressure groups both pro-Israeli and pro-Arab.
There were complaints, particularly from pro-Israeli groups, that its coverage was not impartial.
Mr Richard Sambrook, then the BBCs Director of News, decided to commission a senior journalist to analyse the BBCs domestic Middle Eastern coverage, to survey the views and analyse the complaints of the pressure groups and to suggest whether and if so how it might be improved.
Following discussion with Mr Mark Byford, then the Director of the BBCs World Service, Mr Sambrook caused Mr Malcolm Balen to be appointed to conduct the exercise.
Mr Balen had at one time been editor of the BBCs Nine OClock News but, by 2003, he had ceased to be employed by the BBC and was working as Head of News for a commercial television channel.
So Mr Sambrook caused Mr Balen to rejoin the BBC under a one-year contract, which took effect on 1 November 2003.
It was unusual to bring someone into the BBC from outside to make a report for internal use.
The contract described Mr Balen as a Middle Eastern Consultant in News but he and Mr Sambrook regarded his position more as that of a senior editorial adviser.
The contract did not specify his duties; but what was clear was that he was to have no line-management responsibilities.
For the first three months Mr Balen discussed the BBCs Middle Eastern coverage with journalists and editors, considered some of the complaints about it and gave regular oral reports to Mr Sambrook.
Then in about February 2004, in response to a request by Mr Sambrook, he began to compose a full, written, report.
It was to be a broad survey both of the quality (including the impartiality) of the BBCs coverage of Middle Eastern affairs in recent years and of the validity or otherwise of the complaints about it, taken as a whole; and it was to include practical suggestions, perhaps only tentative, for improvement of the quality of its coverage including of its impartiality.
In July 2004 Mr Balen sent the final version of the report to Mr Sambrook and Mr Byford.
The Balen report, as I will describe it, was an internal briefing document for the use of the BBCs top management and reflected only Mr Balens personal views.
Meanwhile, in the wake of the publication in January 2004 of Lord Huttons Report of the Inquiry into the Circumstances Surrounding the Death of Dr David Kelly CMG HC 247, there had been several changes in the top management of the BBC.
Mr Byford had become Deputy Director-General.
In August 2004 Mr Sambrook became Director of the Global News division and Ms Helen Boaden took his place as Director of News.
Mr Mark Thompson, the new Director-General, set up three new boards, including a Journalism Board (the Board), of which Mr Byford was the chair and Mr Sambrook, Ms Boaden and other senior managers were members.
The Board was to be responsible for setting the strategy which would direct, and for defining the values which would inform, journalism across all areas of the BBCs output.
At its meeting on 9 November 2004 the Board considered the Balen report.
It considered it as part of its review of strategy in relation to its coverage of conflict in the Middle East.
In response to the report the Board commissioned a paper, to be entitled Taking Forward BBC Coverage of the Middle East, which was intended to ensure that the BBC both met the highest standards of impartiality and honesty in its journalism and implemented recommendations in relation to training, editorial control and the handling of complaints, and which could be placed before even more senior bodies at the BBC.
The Taking Forward paper, which in effect took forward the Balen report, was first presented to the Board in February 2005.
Perhaps in part as a result of the consideration afforded to it in the Taking Forward paper, the Balen report had a number of practical consequences.
The most obvious to the ordinary viewer of BBC television was the establishment in 2005 of the post of Middle East Editor, to which Mr Jeremy Bowen was soon appointed.
There were also internal changes in the BBC in relation to its analysis of capability, its compilation of a Key Facts Guide, its audit of the use on air of Middle Eastern experts and its development of training.
In 2005 the Board of Governors of the BBC appointed Sir Quentin Thomas to chair a panel which was charged with undertaking an external, independent, review of the impartiality of the BBCs reporting of the Israeli- Palestinian conflict.
In his report, published in May 2006, Sir Quentin recorded that his panel had been supplied with the Balen report albeit on a confidential basis in that it had been only an unpublished report prepared internally for BBC management; that the report had been helpful; and that a number of its recommendations had already been implemented.
C: THE FORENSIC HISTORY
Mr Sugar was a respected solicitor and a supporter of the State of Israel; he considered that the BBCs coverage of Israels conflict with the Palestinians had been seriously biased against it.
By letter dated 8 January 2005 he made a request to the BBC for disclosure to him of a copy of the Balen report pursuant to the Act.
The BBC refused the request on the basis that it held the report or, more strictly, the information in the report for purposes of journalism and thus that it lay beyond the scope of the Act.
In March 2005 Mr Sugar applied to the Information Commissioner (the Commissioner) pursuant to section 50 (1) of the Act for a decision whether the BBC had determined his request in accordance with the requirements of the Act.
By letters to Mr Sugar dated 24 October and 2 December 2005 the Commissioner, who had privately read the Balen report, communicated his decision, which was to the effect that the BBC had lawfully rejected his request.
The Commissioner observed that: (a) the purpose of the designation was to protect journalistic, artistic and literary integrity by carving out a creative and journalistic space for programme-makers to produce programmes free from the interference and scrutiny of the public; information held by the BBC fell beyond the scope of the Act only if there was a direct and creative journalistic relationship between it and programme content; there was such a relationship between the Balen report and programme content; in this regard it was relevant that those mainly likely to be affected by the report were journalists and editors rather than managers and business advisers; (c) (d) (b) (e) if, which he did not accept, the report was held for any non-journalistic purpose, it continued to lie beyond the scope of the Act because the journalistic purpose was manifestly dominant; and (f) had it been impossible to discern which of two such opposite purposes was dominant, he would have applied a rebuttable presumption that the information lay within the scope of the Act.
Had the Commissioners observations stopped at that point, the issue about the disclosure of the Balen report to Mr Sugar would have been resolved long ago.
But, by a postscript, the Commissioner proceeded to set a hare running and, although he soon repented of what he had done and sought to recapture it, the hare remained at large and was chased all the way up to the Appellate Committee of the House of Lords.
It was to prove a most unfortunate distraction.
With respect to certain eminent judges with whom it was later to find favour, the postscript which the Commissioner appended to his decision was entirely misconceived.
It was that, because the Balen report was outside the designation and thus beyond the scope of the Act, the BBC was not a public authority for the purposes of the Act in relation to Mr Sugars request.
The consequence was, according to the Commissioner, that Mr Sugar had no right of appeal against his decision to the Information Tribunal (the Tribunal) under section 57 of the Act.
This consequence was said to flow from the conjunction of section 57 itself, which provided that an appeal to the Tribunal lay from the Commissioners decision notice, and of section 50, which provided that a decision notice related to a decision whether a request for information had been lawfully determined by a public authority.
At first, therefore, the Commissioner took the view that his letters to Mr Sugar could not represent a decision notice; and he advised Mr Sugar that, if he wished to challenge his decision, he should seek a judicial review of it rather than appeal to the Tribunal.
On 30 December 2005, undeterred, Mr Sugar appealed to the Tribunal under section 57 of the Act.
The Commissioner and the BBC entered a preliminary objection that the Tribunal lacked jurisdiction for the reasons set out above.
By the time when, in June 2006, the Tribunal heard argument about the preliminary objection, the Commissioner had changed his mind and was supporting Mr Sugars rebuttal of it.
But the BBC energetically pursued the objection.
The Tribunal overruled it (the jurisdiction decision) and proceeded to consider the merits of Mr Sugars appeal.
Its decision dated 29 August 2006, by which it upheld Mr Sugars contention that the Balen report was within the scope of the Act (the journalism decision), will require study.
But it is convenient first to chart the development of the argument on jurisdiction to its quietus.
The BBC appealed on points of law to the High Court under section 59 of the Act against the Tribunals jurisdiction decision as well as against its journalism decision.
Mr Sugar and the Commissioner opposed the appeal.
The BBC also issued an application for judicial review of the Tribunals jurisdiction decision, to which, in that no order was to be made on it, there is no need again to refer.
In order to protect himself against the risk that the High Court would set aside the Tribunals jurisdiction decision, Mr Sugar issued an application for judicial review of the Commissioners decision.
These proceedings came before Davis J. By a judgment delivered on 27 April 2007, [2007] EWHC 905 (Admin), [2007] 1 WLR 2583, he: (a) allowed the BBCs appeal against the Tribunals jurisdiction decision; (b) accordingly set aside its journalism decision; and (c) dismissed Mr Sugars protective application for judicial review on the ground that the Commissioners decision had been rational and therefore lawful.
Supported by the Commissioner, Mr Sugar appealed to the Court of Appeal against the decision of Davis J to allow the BBCs appeal against the Tribunals jurisdiction decision.
At this stage he ceased to appear in person and began to enjoy the benefit of representation by Mr Tim Eicke QC pro bono.
By order dated 25 January 2008, [2008] EWCA Civ 191, [2008] 1 WLR 2289, the Court of Appeal (Buxton and Lloyd LJJ and Sir Paul Kennedy) dismissed the appeal.
Mr Sugar appealed to the House of Lords against the dismissal of his appeal by the Court of Appeal.
By order dated 11 February 2009, [2009] UKHL 9, [2009] 1 WLR 430, the House (Lord Phillips, Lord Hope and Lord Neuberger, Lord Hoffmann and Baroness Hale dissenting) allowed the appeal.
Thus, at last, the effect of the BBCs inclusion in the Act became clear.
Even in relation to a request to the BBC for information which lay outside the designation and thus beyond the scope of the Act, the BBC remained a public authority for the purposes of the Act: see, in particular, paras 26 to 36 per Lord Phillips and para 54 per Lord Hope.
A decision by the Commissioner that a request was of such a character should therefore be, and in this case had been, set in a decision notice under section 50 of the Act and the proper avenue of challenge to it was by appeal to the Tribunal under section 57: see paras 37 and 38, per Lord Phillips.
The House therefore remitted to the High Court the BBCs appeal against the Tribunals journalism decision, which Davis J had found it unnecessary to consider.
For, from his further conclusion that the Commissioners decision had been lawful, it in no way followed that the BBCs appeal against the Tribunals journalism decision was entitled to succeed: see para 38, per Lord Phillips.
In reaching its journalism decision the Tribunal, which had privately read the Balen report, had addressed the application of the designation to a situation in which the requested information was held for dual and opposite purposes.
It had noted the polarised constructions advanced by Mr Sugar and by the BBC to which I have referred but had preferred the BBCs secondary contention, which accorded with the Commissioners approach, that in such a situation the Act required reference to the dominant purpose for which the information was held.
The Tribunal found that the BBC had originally held the Balen report predominantly for purposes of journalism; that, however, once the report had been placed before the Journalism Board on 9 November 2004, the BBC had begun to hold it predominantly for purposes other than those of journalism, namely for purposes of strategic policy and resource allocation; and thus that, at the date of its receipt of Mr Sugars request in January 2005, the information was within the scope of the Act.
The Tribunal did not find and Mr Sugar does not appear to have asked it to find that, at the date of its receipt of his request, the BBC held the report solely for purposes other than those of journalism.
The BBCs remitted appeal against the Tribunals journalism decision came to be determined by Irwin J. By order dated 2 October 2009, [2009] EWHC 2349 (Admin), [2010] 1 WLR 2278, he allowed the appeal.
Although Mr Sugar reserved the right to advance his polarised construction in the event of a further appeal, all three parties i.e. including the Commissioner, who in the further appeals has ceased to play an active part in the proceedings accepted before Irwin J that the Tribunal had been correct to adopt the dominant purpose construction; the issue between them related to its application of that test to the facts.
But at this point the litigation took another unexpected turn.
Concerned that he was being invited to determine the appeal on a false legal basis, the judge invited the parties to address him on the polarised constructions which the Tribunal had rejected.
In the event he adopted the BBCs polarised construction.
My conclusion is said the judge, at para 65, that the words in the Schedule mean the BBC has no obligation to disclose information which they hold to any significant extent for the purposes of journalism, art or literature, whether or not the information is also held for other purposes.
Not even Mr Sugar was disputing that, at the date of its receipt of his request, the BBC was continuing to hold the report to some (other than minimal) extent for purposes of journalism; so it followed that the appeal should be allowed.
The judge added that, had it been appropriate to determine the appeal by reference to the dominant purpose for which, at the date of its receipt of Mr Sugars request (or, rather, which the judge considered would be less arbitrary, in the period during which the request was made), the BBC held the report, he would, again, have allowed the appeal: for he considered that the Tribunal had erred in law, presumably in finding that, once it had been placed before the Journalism Board, the purposes for which the BBC held the report had become predominantly other than those of journalism.
It is against the dismissal by the Court of Appeal of Mr Sugars appeal against the order of Irwin J that the present appeal is brought.
In that court, and in the light of Irwin Js judgment, the BBC reverted to casting its polarised construction as its primary contention; and the dominant purpose construction once more became only its secondary contention.
In delivering the leading judgment, with which both Moses LJ (who delivered a concurring judgment) and Munby LJ agreed, Lord Neuberger rejected the dominant purpose construction and, although he described each of the polarised constructions as arguable, he agreed with Irwin J that that put forward by the BBC was preferable.
Since on any view the purposes for which the BBC held the report at the date of its receipt of Mr Sugars request to some extent included those of journalism, his appeal therefore failed.
But a question arises whether the Court of Appeal approached the case on the basis that the purposes for which the BBC held the report at the relevant date were solely those of journalism.
Observations which tend in that direction are to be found in the judgments both of Lord Neuberger at para 65 and of Moses LJ at para 83.
Nevertheless, had such been its conclusion, it would have been unnecessary for the Court of Appeal to address at length the application of the designation to a situation in which information is held for purposes partly of journalism and partly otherwise.
In considering it necessary to address the same point Irwin J must have held that, as the expert fact-finder, the Tribunal had been entitled at any rate to find that the purposes for which the BBC held the report had been to some extent for purposes other than those of journalism; and the Court of Appeal did not dissent from Irwin Js analysis in any way.
At all events the BBC positively invites this court to proceed on the premise that it held the report for purposes partly of journalism and partly otherwise: it seeks a definitive ruling on the application of the designation to such a situation.
D: THE SCHEME OF THE ACT
The purpose of the Act is stated at its outset to be to make provision for the disclosure of information held by public authorities or by persons providing services for them...
Section 1, described in the side-note as providing a General right of access to information held by public authorities, provides by subsection (1) that, subject to other specified provisions, any person making a request for information to a public authority is entitled (a) to be informed by the authority whether it holds information of the description specified in the request (described as the duty to confirm or deny) and (b), if so, to have the information communicated to him.
Subsection (4) provides that, for the purposes of the section, the information is that held at the time when the request is received.
Section 2 (2) is important for present purposes.
It provides: In respect of any information which is exempt information by virtue of any provision of Part II, section 1 (1) (b) does not apply if or to the extent that (a) the information is exempt information by virtue of a provision conferring absolute exemption, or (b) in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.
As the subsection foreshadows, Part II of the Act provides for the exemption of certain categories of information from disclosure.
Section 2(3) confers absolute exemption upon various of the categories.
The other categories enjoy only qualified exemption: information in such categories is not required to be disclosed only if the test in subsection (2)(b) is satisfied; and the bias of the Act in favour of disclosure is visible in the requirement that the public interest in maintaining the exemption should outweigh the public interest in disclosing the information.
Among the categories upon which the Act confers absolute exemption is information which relates in specified respects to national security (section 23), to court proceedings (section 32) or to personal data of which the applicant is the subject (section 40(1)), or the disclosure of which would constitute an actionable breach of confidence (section 41) or be unlawful in other specified respects (section 44).
Among the categories upon which the Act confers qualified exemption is information the disclosure of which would be likely to prejudice the defence of the British Islands and colonies (section 26) or the UKs international relations (section 27) or its economy (section 29) or law enforcement (section 31) or which relates to the formulation of government policy (section 35).
But, in the context of the present appeal, it is worth noting, in particular, two further categories of information upon which the Act confers qualified exemption.
The first is information the disclosure of which would be likely to prejudice the commercial interests of the public authority (section 43(2)).
The second is information the disclosure of which, in the reasonable opinion of a qualified person (which in the case of the BBC is the corporation itself, acting by its governors) would, or would be likely to, inhibit (i) the free and frank provision of advice, or (ii) the free and frank exchange of views for the purposes of deliberation (section 36(2)(b)).
One might have expected that, in the event that the Balen report were to be held to fall within the scope of the Act, the BBC would wish to seek exemption from its disclosure under section 36(2)(b).
By letter to Mr Sugar dated 10 June 2009, however, the BBC confirmed that, in that event, it would not claim any exemption under the Act.
Perhaps its stance was tactical, designed to sharpen the edge of the current issue.
Section 3 of the Act defines a public authority as any body, person or office-holder listed in Schedule 1 (or designated by future order of the Secretary of State) and any publicly-owned company, as defined.
Schedule 1 contains a long list of bodies, persons and office-holders, some defined generically and others specifically.
The schedule is divided into seven parts, namely I General, II Local Government, III The National Health Service, IV Maintained Schools and Other Educational Institutions, V Police, VI Other Public Bodies and Offices: General and VII Other Public Bodies and Offices: Northern Ireland The BBC (together with the designation) is placed into Part VI.
In para 56 of his judgment on the jurisdiction issue Lord Hope explained that the length of the list in Schedule 1 was testament to Parliaments wish to obviate dispute about the identity of the public authorities who were subject to the Act.
Section 7(1) of the Act provides: Where a public authority is listed in Schedule 1 only in relation to information of a specified description, nothing in Parts 1 to V of this Act applies to any other information held by the authority.
Four public authorities are listed in Schedule 1 in terms of the designation, i.e. in respect of information held for purposes other than those of journalism, art or literature; they are the BBC, the Channel Four Television Corporation, the Gaelic Media Service and Sianel Pedwar Cymru (being the Welsh television channel known as S4C).
Other authorities are listed only in relation to information of other specified descriptions.
For example the House of Commons, the House of Lords and the National Assembly for Wales are listed in respect of information other than of a specified sort which might serve to identify the residential addresses of their members (Part I, paras 2, 3 and 5, as amended by article 2 of the Freedom of Information (Parliament and National Assembly for Wales) Order 2008 (SI 2008/1967)).
The Sub-Treasurer of the Inner Temple and the Under- Treasurer of the Middle Temple are listed in respect of information held in their capacities as a local authority (Part II, para 10).
Those providing medical, dental and ophthalmic services are listed in respect of information relating to their provision of services under the NHS (Part III, paras 43A, 44 and 51).
Six bodies for example the Pharmaceutical Society of Northern Ireland are listed in respect of information held by them otherwise than as a tribunal (Parts VI and VII, as amended by articles 3 and 5 of, and Schedules 2 and 4 to, the Freedom of Information (Additional Public Authorities) Order 2005 (SI 2005/3593)).
And the Bank of England is listed in respect of information held for purposes other than those of its functions with respect to (a) monetary policy, (b) financial operations intended to support financial institutions for the purposes of maintaining stability, and (c) the provision of private banking services and related services.
PURPOSES ... OF JOURNALISM, ART OR LITERATURE E:
Although they also to some extent reflect the terms of section 12(4) of the Human Rights Act 1998 (to which I will refer in para 58), the words of the designation are essentially derived from the Data Protection Act 1998 (the DPA).
The DPA was passed pursuant to Directive 95/46/EC of the European Parliament and of the Council, dated 24 October 1995, on the protection of individuals with regard to the processing of personal data and on the free movement of such data.
Article 1(1) of the Directive declared its object to be the protection of a natural persons fundamental right to privacy with respect to the processing of personal data.
By recital 37, however, the European Parliament and the Council recognised that the processing of personal data for purposes of journalism or for purposes of literary or artistic expression also engaged the right to receive and impart information, as guaranteed in particular in article 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms 1950 (the ECHR) and should therefore be exempt from the Directives requirements to the extent necessary for the reconciliation of such conflicting rights.
Article 9 of the Directive therefore mandated exemption for the processing of personal data carried out solely for journalistic purposes or the purpose of artistic or literary expression only if they are necessary to reconcile the right to privacy with the rules governing freedom of expression.
The UKs response to article 9 lies in sections 3 and 32 of the DPA.
The former defines the purposes of journalism and artistic and literary purposes as the special purposes.
The latter provides that personal data processed only for the special purposes are exempt from most of the provisions of the Act, in particular the individuals central right of access under section 7 to data of which he is the subject, if the processing is undertaken with a view to the publication of any journalistic, literary or artistic material and if the data controller reasonably believes both that, having regard in particular to the special importance of the public interest in freedom of expression, publication would be in the public interest and that compliance with the relevant provision would be incompatible with the special purposes.
The government had initially entertained doubts about the inclusion of the BBC in the Freedom of Information Bill.
In a published paper setting out background material relevant to the publication on 11 December 1997 of its White Paper entitled Your Right to Know (Cm 3818) about the proposed Bill, the government wrote, at para 23: the BBC, Channel 4 and S4C are public corporations that operate to a defined remit specified in the Royal Charter (BBC) and legislation (Channel 4 and S4C).
All three operate independently of Government editorially and to the greatest extent possible in economic and regulatory terms.
It might be regarded as anomalous for them to be within the scope of the FOI legislation when the private media (Channels 3 and 5, cable and satellite channels, the Internet, the press and freelances of all sorts) would not.
In the event the public service broadcasters were included in the Bill.
But, in the course of the passage of the Bill through Parliament and following representations to the Home Office both by the BBC and by Channel 4, their inclusion was made subject to the designation.
The designation had two, linked, purposes.
Its general purpose, reflective of the genesis of its three specified concepts in the EU Directive dated 24 October 1995 in relation to access to personal data, was to protect the right of the public service broadcasters to freedom of expression, in particular under article 10 of the ECHR.
Its particular purpose, foreshadowed in the background material quoted above, was (as confirmed in a letter dated 13 January 2000 from an officer in the Home Office, which had responsibility for the Bill, to an officer in another department) that the public service broadcasters should not be placed at a disadvantage in relation to their commercial rivals.
Before I turn to purposes, let me reflect on the meaning, in the context of the Act, of the words journalism, art and literature.
I suggest that the key to it lies in the omnibus word output.
Article 5 of the BBCs Royal Charter (Cm 6925), presented to Parliament in October 2006, provides, at para (1), that the BBCs main activities should be the promotion of its six Public Purposes, specified in article 4, through the provision of output which consists of information, education and entertainment supplied by means of television, radio, online and similar services; and the Charter provides, at article 5(2), that the BBC may carry out other activities, subordinate to its main activities, provided that they promote the Public Purposes.
In his letter to Mr Sugar dated 24 October 2005 the Commissioner, echoing the word in the Charter, wrote that he interpreted the three words in the designation broadly so as to include all types of the BBCs output.
In this respect I discern no dissent from his view in any of the three subsequent decisions in these proceedings; and in my opinion he was right.
I would be surprised if any later set of facts was to yield a conclusion that something which the BBC put out, or considered putting out, to the public or to a section of the public did not fall within the rubric either of journalism or of art or of literature.
So, although one might have an interesting debate whether nowadays the word journalism encompasses more than news and current affairs, the debate is likely in this context to be sterile.
For any output which did not obviously qualify as journalism would be likely to qualify either as literature or in particular, in that its meaning has a striking elasticity as article
On any view the subject of this appeal leads us to forsake art and literature and even output itself and to revert to journalism.
In what circumstances will the BBC hold information for the purposes of journalism?
The Tribunal attempted to answer that abstract question; and the substantial criticism of its decision has been directed not at its analysis but at its application of its analysis to the circumstances in which the BBC held the Balen report.
Within the word journalism in the designation (which it described as functional journalism a puzzling qualification in that, without elaboration, it implied the existence of other areas of journalism) the Tribunal identified three types of activity: first, the collecting, writing and verifying of material for publication; second, the editing of the material, including its selection and arrangement, the provision of context for it and the determination of when and how it should be broadcast; and third, the maintenance and enhancement of the standards of the output by reviews of its quality, in terms in particular of accuracy, balance and completeness, and the supervision and training of journalists.
In relation to this third type, the Tribunal added, at para 116: Self-critical review and analysis of output is a necessary part of safeguarding and enhancing quality.
The necessary frankness of such internal analysis would be damaged if it were to be written in an anodyne fashion, as would be likely to be the case if it were potentially disclosable to a rival broadcaster.
The Tribunal contrasted the three suggested types of journalistic activity with the direction of policy, strategy and resources which provides the framework within which a public service broadcaster conducts its operations.
In the Court of Appeal Lord Neuberger said, at para 53, that, at any rate in the present context, he could not improve upon the Tribunals general analysis.
Apart from pointing out that its tripartite classification does not readily encompass the actual exercise of broadcasting or publishing the material, the BBC does not quarrel with the Tribunals analysis of what falls within and without the concept of journalism for the purposes of the Act.
In my view, and subject to that point, this court should endorse the Tribunals analysis but should decline the BBCs invitation to clothe it with greater specificity.
It is important to note, however, that not all financial information will be held by the BBC for purposes other than those of journalism.
If financial information is directly related to the making of a particular programme, or group of programmes, it is likely to be held for purposes of journalism.
On the same day, namely 2 October 2009, as that on which he handed down his judgment in the present proceedings, Irwin J handed down his judgment in BBC v The Information Commissioner [2009] EWHC 2348 (Admin), [2010] EMLR 121.
He held that information about (among other things) costs referable to its broadcast of EastEnders, about its annual budget for Newsnight and about the price paid for its right to cover the winter Olympics in Turin in 2005/06, was held at an operational level in order to assist in the making of editorial and creative choices and so was held partly (and, if relevant, predominantly) for purposes of journalism.
The application of Irelands Freedom of Information Act 1997 to its public service broadcasters is worthy of note.
By regulations made in 2000, SI No 115 of 2000, Radio Telefis ireann and other broadcasters were made subject to the Irish Act in relation only to their functions of management, administration, finance, commerce, communications and entry into contracts of service; but the regulations provide that such functions are to be deemed not to include the gathering and recording of material for journalistic purposes, the consideration of programme content, the editing and storing of such material, the making of editorial decisions about programmes and the process of post-transmission internal review.
There is a close parallel between the effect of the express provisions made in Ireland and the meaning to be attributed to the bare words of the designation in our Act.
There was also an interesting application of the Irish Act in the decision of the Irish High Court in Radio Telefis ireann v The Information Commissioner [2004] IEHC 113.
RTE is under a statutory obligation to ensure that its broadcasts of current affairs are impartial.
To that end it collected data as to the amount of broadcast time which it had afforded to each political party during the general election campaign in 2002.
Caoimh J held that the data related to editorial decisions and to post-transmission internal review and so did not fall to be disclosed under the Irish Act.
The BBC has an obligation to seek to ensure that its broadcasting of news is impartial as well as accurate: see clause 6(1) of the Framework Agreement between the Secretary of State for Culture, Media and Sport and the BBC made on 30 June 2006 (Cm 6872) for the purposes of the BBCs Charter.
Inevitably the Tribunal found that, when it first came into existence, the Balen report into the impartiality or otherwise of the BBCs coverage of the Israeli/Palestinian conflict was held (or, as it preferred to say, was predominantly held) for purposes of journalism.
Its error, as correctly identified by Irwin J and the Court of Appeal, was to conclude that, once the report had been placed before the Journalism Board, it came predominantly to be held for purposes other than those of journalism, namely for those of strategic policy and resource allocation.
Irrespective of the level at which, within the BBC, it was appraised, the purpose for which the report was held remained the same: it was to enable the BBC to monitor its coverage of the conflict with a view to its making any and all such changes as might further secure its impartiality.
At all material times the BBC held the report at least predominantly for purposes of journalism.
But, since the appeal proceeds upon the premise that, at the date of its receipt of Mr Sugars request, the BBC also held the report for purposes other than journalism, I turn finally to address the application of the designation to a situation in which the information is held for such dual and opposite purposes.
Had I considered that the court was required to choose between the two polarised constructions of the designation in its application to a situation of dual and opposite purposes, I would on balance have chosen that advanced on behalf of Mr Sugar.
First, his contention should probably prevail at a purely literal level: if the purposes for which the BBC holds information comprise even only to a minor extent purposes other than those of journalism, then, so I would conclude, the BBC holds it for purposes other than those of journalism...; and in my view there is probably no scope for altering the conclusion by reference to the fact that it also holds the information for purposes of journalism.
But, were one to rearrange the terminology of the designation only marginally, so that it became in respect of information otherwise than held for purposes of journalism..., then the literal construction would probably yield the opposite conclusion.
These semantic reflections with which others might reasonably disagree in any event represent far too slender a thread upon which to hang any overall conclusion.
Second, however, and more importantly, the designation falls to be construed in the context of the Act as a whole, and thus, in particular of Part II.
The beauty (says Mr Eicke) of construing the situation of dual purposes as falling within the scope of the Act is that the focussed exemptions in Part II then become available so as to winnow the information which should not be disclosed from that which should be disclosed; by contrast, were such a situation to be drawn, as if on a blanket, beyond the scope of the Act, the focussed exercise would have no place.
Third, there is the bias of the Act in favour of disclosure and, in the resolution of any issue of construction, it would be permissible, as a last resort, to have regard to it.
The BBC strongly argues that the designation defines the extent to which its information is included within the scope of the Act, as opposed to the extent to which it is excluded from it.
But the distinction, though theoretically valid, is practically elusive: in reality the designation defines an exception, albeit very important, from the subjection of the BBC to the Act and should be construed accordingly.
In the Court of Appeal Lord Neuberger suggested, at para 55, that the question whether information is held for purposes... of journalism should be considered in a relatively narrow way.
With respect, his suggested departure from the natural construction of the word purposes raises in my mind a question-mark against his overall conclusion about the Acts application to a situation of dual and opposite purposes.
No doubt his suggestion flowed from his concern, expressed at para 48, that the effect of his overall conclusion would be that relatively little information held by the BBC fell within the scope of the Act; for a relatively narrow construction of the word purposes would mitigate such an effect.
There is in my respectful view a loose analogy here with the driver who, in proceeding down a straight road, nevertheless steers to the left and then has to rectify his position by steering to the right: he would have done better to keep straight.
So is it necessary to choose between the two polarised constructions?
G: THE DOMINANT PURPOSE
Sometimes Parliament specifically refers to the .... principal purpose (section 678 (2)(a) Companies Act 2006) or to the reason (or, if more than one, the principal reason) (section 103A Employment Rights Act 1996, as inserted by section 5 of the Public Interest Disclosure Act 1998).
Does Parliaments failure to make such a reference in the designation betoken its rejection of an approach that the purposes to which it there refers should be the dominant (or principal) purposes? We may confidently answer that question in the negative.
Everything points to a conclusion that Parliament failed to consider the application of the designation to a situation in which the BBC holds the information for purposes partly of journalism and partly otherwise.
Had it considered such a situation, it would have spelt out in one way or another how the designation should then operate.
Bennion on Statutory Interpretation, 5th ed (2008) states at p 1268: Similarly, an enactment may lay down a qualifying condition in terms of the purpose of some person in doing an act as if it were the only purpose possible, whereas it may in the instant case, be in fact, one of several purposes.
Here the court will construe the enactment as requiring the main or dominant purpose to be the one specified.
It has to be acknowledged that the two authorities cited in support of the statement represent a slender foundation for the bold and unequivocal terms in which it is couched.
The first authority is Chohan v Saggar [1992] BCC 306.
There the High Court held that the power under section 423 of the Insolvency Act 1986 to set aside a transaction entered into by a person at an undervalue for the purpose of putting assets beyond the reach of his creditor was exercisable if such was his dominant, even if not his sole, purpose.
As it happens, the decision was overruled by the Court of Appeal in Commissioners of Inland Revenue v Hashmi [2002] EWCA Civ 981, [2002] BCC 943, on the basis that, in the context of the 1986 Act, it sufficed that the statutory purpose should have been a substantial, even if not the dominant, purpose.
Laws LJ observed, at para 32, that to qualify the word purpose by the word dominant was not required in order to make sense of that Act or to give it pragmatic efficacy.
The second authority is Peach v Commissioner of Police of the Metropolis [1986] QB 1064.
There the Court of Appeal held that statements made to the police about the death of Mr Blair Peach should be disclosed to his mother in her action against the police because, although they were made partly for the purpose of a complaint against the police and so would to that extent, in principle, attract public interest immunity from disclosure, they were made predominantly for the purpose of the investigation by the police of a violent death, to which no such immunity attached.
The court applied the decision in Waugh v British Railways Board [1980] AC 521.
There the House of Lords held that a report into a fatal accident made for two purposes namely for the purpose of the operation and safety of the railway (in which respect it would fall to be disclosed) and for the purpose of obtaining legal advice (in which respect it would fall, in principle, not to be disclosed) should be disclosed because the former was the dominant purpose.
The decisions in Waugh and Peach thus both relate to the resolution of conflict between two principles of law which require the existence of different purposes and both of which are engaged by the facts of the case.
No doubt the decisions demonstrate in general terms the common sense which may lie behind resort to the dominant purpose but neither represents authority upon statutory construction.
But while therefore the statement in Bennion, set out above, is in my view expressed too strongly, I consider that, as it suggests, it may well be appropriate for the court to construe a statutory requirement of a specified purpose as mandating, in the case of dual purposes, examination of whether the specified purpose is dominant.
All will depend upon the objective meaning of the words in the statute when appraised in its context as a whole, including by reference to the purpose of the particular provision: see R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349, 396 G-H, per Lord Nicholls.
In ordinary conversation we frequently no doubt unconsciously refine our reference to purpose to a reference to dominant purpose.
You ask me why I went out last night.
I tell you that I went out in order to visit a friend in hospital.
I do not add that I did so in order also to catch the post, to buy sausages and to fill my petrol tank significant though those subsidiary purposes may have been for me.
In the Court of Appeal Lord Neuberger identified three objections to adoption of the dominant purpose test when applying the designation to a situation in which information is held for dual and opposite purposes.
First, he said, at para 40, that the test defied the natural meaning of the words of the designation and that Parliament had not spoken, yet could have spoken, of information predominantly held for purposes other than those of journalism....
Yet the Court of Appeals preferred solution also fails that test for its reading is of information solely held for purposes other than those of journalism....
Second, Lord Neuberger said, at para 41, that identification of the dominant purpose would be a subjective and often speculative exercise.
I respectfully disagree.
In the case of Waugh, in the course of explaining why they favoured a test of dominant purpose in the different context to which I have referred, both Lord Simon, at p 537G, and Lord Russell, at p 545E, observed that the test would not be difficult to apply.
In BBC v The Information Commissioner, cited above, Irwin J appears to have had no difficulty in concluding that the dominant purpose for which the BBC held the financial information was that of journalism.
Indeed in my opinion it is easier for the Commissioner and the Tribunal to identify the dominant purpose than to conduct an inquiry into the existence of any purpose of journalism in accordance with the various pieces of guidance given first by Lord Neuberger at para 55 (namely to consider it in a relatively narrow rather than a relatively wide way), then by Lord Phillips at para 67 below (namely to ask whether an immediate object of holding the information is to use it for that purpose) and finally by Lord Walker at para 83 below (namely to have some regard to the directness of the purpose).
And, third, Lord Neuberger drew attention, at para 42, to the fact that, if the word purposes in the designation referable to the BBC was, in the case of dual purposes, to be construed as a reference to the dominant purpose, the same word in the designations referable to the Bank of England and to the Competition Commission would need to be construed in the same way.
Lord Neuberger suggested that Parliament was unlikely to have intended that, to take the case of the Bank of England, information which it held for dual purposes would be within the scope of the Act unless the purposes of its functions with respect to monetary policy etc were dominant.
But Lord Neubergers point fails to take account of the exemptions in Part II of the Act which might in that event be available, particularly exemptions from disclosure likely to prejudice either the economic interests of the UK (section 29) or the effective conduct of public affairs (section 36(2) (b) and/or (c)).
So I find myself unable to subscribe to Lord Neubergers concerns about the dominant purpose test.
I am convinced that, had Parliament actively considered the situation of information held by the BBC for purposes partly of journalism and partly otherwise, it would expressly have provided that the information was within the scope of the Act if it was held predominantly for the other purposes; that, however, the words which in the event Parliament favoured, namely the words of the designation, are in themselves apt to permit such a construction; and that, since in my view it is more consonant with the Act as a whole than either of the polarities, this court should therefore proceed to endorse it.
The further submission on behalf of Mr Sugar is that his request for disclosure of the Balen report engaged his right to receive information under para 1 of article 10 of the ECHR and that such restrictions on the exercise of his right as are permitted by para 2 of the article extend no further than is reflected by the designation (when read in accordance with his polarised construction), together with the exemptions in Part II of the Act.
To this submission Lord Brown devotes paras 86 to 102 of his judgment below; with the essence of them I respectfully agree.
In short article 10 carries Mr Sugars case no further.
Even if (being a possibility which I would countenance somewhat more readily than does Lord Brown) the refusal to disclose the report did interfere with the freedom of Mr Sugar to receive information under the article, the words of the designation, when given the balanced interpretation which I favour, represent a restriction upon it which is legitimate under para 2 of the article in that it is necessary in a democratic society for the protection of the freedom to impart information enjoyed by the BBC under the same article.
This conclusion becomes all the stronger when the court obeys the injunction cast upon it by section 12(4) of the Human Rights Act 1998 to have particular regard to the importance of freedom of expression and, in particular, to the extent to which it would be in the public interest for journalistic, literary or artistic material...to be published.
In urging this court not to take an extravagant view of any rights of Mr Sugar under article 10 Miss Monica Carss-Frisk QC on behalf of the BBC cites the decision of the House of Lords in R (Al-Skeini) v Secretary of State for Defence [2007] UKHL 26, [2008] AC 153 and, by reference, its earlier decision in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323.
It was in Ullah that, in para 20, Lord Bingham suggested that it was the duty of the House to keep pace with the evolving jurisprudence of the European Court of Human Rights (the ECtHR) no more, but certainly no less.
It was in Al Skeini that, in para 106, Lord Brown suggested that its duty was to keep pace with it no less, but certainly no more.
I would welcome an appeal, unlike the present, in which it was appropriate for this court to consider whether, of course without acting extravagantly, it might now usefully do more than to shadow the ECtHR in the manner hitherto suggested no doubt sometimes in aid of the further development of human rights and sometimes in aid of their containment within proper bounds.
It is, therefore, my view a solitary view that, after six years, the case returns, in a full circle, to where it began; and that it was the Commissioner who both adopted the correct test and properly applied it.
The Balen report was held for purposes of journalism.
On the premise that it was also held for purposes other than those of journalism, it was not predominantly so held.
That is why I consider that the report lay beyond the scope of the Act; and why I agree that the appeal should be dismissed.
The effect of the relevant provision of Part VI of Schedule 1, when read with section 7, to the Freedom of Information Act 2000 (the Act), is that Parts I to V of the Act apply in the case of the BBC only to information held for purposes other than those of journalism, art or literature (the definition).
I agree with the other members of the Court on the following matters that are sufficient to resolve this appeal in favour of the BBC: i) At all material times the Balen report was held by the BBC predominantly for the purposes of journalism; ii) On the true construction of Part VI of Schedule 1 to the Act information held predominantly for the purposes of journalism does not fall within the definition, even if the information is held for other purposes as well.
It follows that the BBC is under no duty to disclose the Balen report and that this appeal must be dismissed.
The judgments of Lord Wilson and Lord Walker have, however, disclosed an issue that is academic but is none the less of importance.
Does the definition mean information held solely for purposes other than journalism, art or literature or information held predominantly for purposes other than journalism, art or literature?
A similar issue arises in relation to the Bank of England, where the relevant definition is information held for purposes other than those of its functions with respect to- (a) monetary policy, (b) financial operations intended to support financial institutions for the purposes of maintaining stability, and (c) the provision of private banking services and related services.
I am not able to find an answer to the issue in the language of the definition itself.
It is capable of bearing either meaning.
The answer to the issue must lie in adopting a purposive approach to the definition.
We are concerned with a provision that provides protection against the disclosure obligations that are the object of the Act.
What is the purpose of that protection? It is not, as is the protection against disclosure of documents protected by legal professional privilege, designed to remove inhibition on the free exchange of information.
Were that the case the protection would focus on the purpose for which the information was obtained.
The protection is designed to prevent interference with the performance of the functions of the BBC in broadcasting journalism, art and literature.
That is why it focuses on the purpose for which the information is held.
The same is true of the information provided to the Bank of England.
The object of the protection is to prevent interference with the performance of the specified functions of the Bank.
A purposive construction of the definition will prevent disclosure of information when this would risk interference with the broadcasting function of the BBC.
This will not depend upon the predominant purpose of holding the information.
It will depend upon the likelihood that if the information is disclosed the broadcasting function will be affected.
The same is true in the case of the Bank of England.
For this reason I do not agree with the approach of Lord Wilson to this issue.
Lord Neuberger of Abbotsbury MR at para 53 remarked that todays journalism is tomorrows archive and at para 58 In the case of journalism, above all news journalism, information held for purposes of journalism may soon stop being held for that purpose and be held, instead, for historical or archival purposes.
I imagine that the Bank of England also archives information initially used for the purposes of carrying out its functions.
No doubt the BBC has recourse to its archives for journalistic purposes from time to time and, if held for purposes of journalism is given a broad meaning it could be said in relation to the BBC that one of the purposes of holding archived material is journalism, albeit a relatively remote purpose.
However, Lord Neuberger accepted that archived material would not, as such, fall within the protection afforded by the definition.
I consider that he was right to do so.
Disclosure of material that is held only in the archives will not be likely to interfere with or inhibit the BBCs broadcasting functions.
It ought to be susceptible to disclosure under the Act.
If possible information held for purposes other than those of journalism, art or literature should be given an interpretation that brings archived material within that phrase.
Can this be achieved?
I believe that Lord Walker has the answer.
He has concluded, as have I, that the protection is aimed at work in progress and BBCs broadcasting output.
He suggests that the Tribunal should have regard to the directness of the purpose of holding the information and the BBCs journalistic activities.
I agree.
Information should only be found to be held for purposes of journalism, art or literature if an immediate object of holding the information is to use it for one of those purposes.
If that test is satisfied the information will fall outside the definition, even if there is also some other purpose for holding the information and even if that is the predominant purpose.
If it is not, the information will fall within the definition and be subject to disclosure in accordance with the provisions of Parts I to V of the Act.
This appeal requires the Supreme Court to focus closely on the language and legislative purpose of the provisions of the Freedom of Information Act 2000 (FOIA) dealing with public authorities to which that statute has limited application.
Without that focus, a long trawl through the Strasbourg jurisprudence on article 10 of the European Convention on Human Rights is of little assistance.
The relevant provisions are in section 7 of and Schedule 1 to FOIA.
Section 7(1) provides that where a public authority is listed in Schedule 1 only in relation to information of a specified description, nothing in Parts I to V of the Act is to apply to any other information held by the authority.
Schedule 1, Part VI lists the British Broadcasting Corporation (BBC) in respect of information held for purposes other than those of journalism, art or literature.
A similar form of words appears (in adjectival form) in section 3 of the Data Protection Act 1998, which defines the special purposes as meaning any one or more of the following (a) the purposes of journalism, (b) artistic purposes, and (c) literary purposes.
Section 32 of the Data Protection Act gives a limited exemption where personal data is processed with a view to the publication by any person of any journalistic, literary or artistic material, and the data controller reasonably believes that, having regard in particular to the special importance of the public interest in freedom of expression, publication would be in the public interest, and that compliance with some specified provisions of the Data Protection Act would be incompatible with the special purposes.
Both sets of statutory provisions are evidently aimed at promoting freedom of expression, the value embodied in article 10 of the European Convention on Human Rights.
There is no relevant definition of journalism, art or literature in either statute.
The three words are abstract nouns which can be used to describe either an activity or the product of that activity.
Journalism is a word introduced into the English language from French in the 19th century.
The Oxford English Dictionary gives its primary meaning (by reference to journalist) as the occupation of editing or writing for a public journal.
In a loose sense it can cover the production of just about anything published in a newspaper (or, today, broadcast on sound radio or television).
But in the context of FOIA, its collocation with art and literature suggests that journalism is used to refer primarily to output on news and current affairs (no doubt including sport, an important part of the BBCs output); and the composite expression journalism, art or literature seems to be intended to cover the whole of the BBCs output in its mission (under article 5 of its Royal Charter) to inform, educate and entertain the public.
On that comprehensive approach the purposes of journalism, art or literature would be, quite simply, the purposes of the BBCs entire output to the public.
Mr Jeremy Clarkson must, it seems, have moved from the pigeonhole of journalism to that of literature when, as Irwin J recorded in British Broadcasting Corporation v Information Commissioner [2009] EWHC 2348 (Admin), [2010] EMLR 121, para 36, it was decided for editorial reasons to change the format of Top Gear so that it became primarily an entertainment programme rather than a consumer programme, [which] increased the production costs to an important degree.
British Broadcasting Corporation v Information Commissioner [2009] EWHC 2348 (Admin) (the financial information case) was heard by Irwin J immediately after he heard the case [2009] EWHC 2349 (Admin) in which this appeal is brought, and he handed down his judgment in the two cases on the same day, 2 October 2009.
Important parts of the two judgments are, as Irwin J noted in the first paragraph of each judgment, expressed in identical or very similar terms.
There is also one other first-instance judgment calling for mention, that is the judgment of Davis J in the first round of Mr Sugars litigation, British Broadcasting Corporation v Sugar [2007] EWHC 905 (Admin), [2007] 1 WLR 2583.
The judgment of Davis J contains a valuable discussion of the relevant provisions of FOIA but proceeds on the footing that the Information Tribunal (the Tribunal) had no jurisdiction, in the circumstances, to hear an appeal from the Information Commissioner (the Commissioner).
That premise was later shown by the decision of a bare majority of the House of Lords to be erroneous: [2009] UKHL 9, [2009] 1 WLR 430.
One of the most important issues of law considered by Irwin J in his twin judgments is whether, as a matter of construction, the word predominantly should in effect be inserted in Schedule 1, Part VI before the phrase for purposes other than those of journalism, art or literature).
Irwin J described this (in para 3 of each judgment) as a concession made by the BBC before the Tribunal, but that description depends on the spectators viewpoint.
The Court of Appeal (Lord Neuberger MR, para 36) described it as a successful argument.
So it is worth looking at how this point developed.
Apart from any de minimis principle, which the Court of Appeal (Lord Neuberger MR, para 59) rightly regarded as unhelpful in this context, there are four possible categories of information held by the BBC that need to be considered: (1) information held exclusively for non-journalistic purposes; (2) information held predominantly, but not exclusively, for non-journalistic purposes (the other purposes being those of journalism); (3) information held predominantly, but not exclusively, for journalistic purposes (the other purposes being non-journalistic); and (4) information held exclusively for journalistic purposes.
Before the Tribunal Mr Sugar argued that the BBCs immunity under Schedule 1 Part VI (as opposed to its possible exemption under other particular provisions of FOIA) was limited to information in category (4).
In other words he was insisting on disclosure (apart from particular exemptions) of categories (1), (2) and (3).
The BBC did not oppose categories (1) and (2) (so that category (2) could be termed a concession) but opposed disclosure of category (3), and was successful in that argument.
Irwin J felt unable to accept the concession, either in the Sugar appeal or in the appeal in the financial information case.
He held that category (1) was the only category of information that the BBC had to disclose (again, subject to particular exemptions).
His reasons are at paras 44 to 66 of his judgment in the Sugar case and at paras 53 to 73 of his judgment in the financial information case, which are in almost identical terms.
The Court of Appeal agreed with his reasoning and conclusions (Lord Neuberger MR, paras 39 to 52).
I respectfully agree.
In my judgment the correct view is that (as Lord Neuberger MR put it at para 44): once it is established that the information sought is held by the BBC for the purposes of journalism, it is effectively exempt from production under the Act, even if the information is also held by the BBC for other purposes.
So in effect there are only two categories: one is information held for purposes that are in no way those of journalism, and the other is information held for the purposes of journalism, even if it is also held for other (possibly more important) purposes.
That conclusion follows both from FOIAs legislative purpose and from its language.
First, legislative purpose.
It is common ground that FOIA was enacted in order to promote an important public interest in access to information about public bodies.
There are (as Schedule 1 to FOIA reveals) thousands of public authorities, large and small, which are paid for out of public funds, and whose actions or omissions may have a profound effect on citizens and residents of the United Kingdom.
There is a strong public interest in the press and the general public having the right, subject to appropriate safeguards, to require public authorities to provide information about their activities.
It adds to parliamentary scrutiny a further and more direct route to a measure of public accountability.
There is therefore force, in relation to FOIA as well as in relation to the Freedom of Information (Scotland) Act 2002, in the proposition that, as the whole purpose of the 2002 Act is the release of information, it should be construed in as liberal a manner as possible.
That is how it was put by Lord Marnoch in Common Services Agency v Scottish Information Commissioner [2006] CSIH 58, 2007 SC 231, para 32, approved by Lord Hope in the House of Lords [2008] UKHL 47, [2008] 1 WLR 1550, para 4.
But Lord Hope continued: But that proposition must not be applied too widely, without regard to the way the Act was designed to operate in conjunction with the [Data Protection Act 1998].
It is obvious that not all government can be completely open, and special consideration also had to be given to the release of personal information relating to individuals.
So while the entitlement to information is expressed initially in the broadest terms that are imaginable, it is qualified in respects that are equally significant and to which appropriate weight must also be given.
The scope and nature of the various exemptions plays a key role within the Acts complex analytical framework.
(The Commons Services Agency case serves to explain the position on freedom of information in Scotland, which is not immediately apparent from FOIA itself.
FOIA extends to Scotland and so applies to operations in Scotland of public authorities which operate throughout the United Kingdom; but Scotland also has its own statute applying to Scottish public authorities.)
In this case, there is a powerful public interest pulling in the opposite direction.
It is that public service broadcasters, no less than the commercial media, should be free to gather, edit and publish news and comment on current affairs without the inhibition of an obligation to make public disclosure of or about their work in progress.
They should also be free of inhibition in monitoring and reviewing their output in order to maintain standards and rectify lapses.
A measure of protection might have been available under some of the qualified exemptions in Part II of FOIA, in particular those in sections 36 (Prejudice to effective conduct of public affairs), 41 (Information provided in confidence) and 43 (Commercial interests).
But Parliament evidently decided that the BBCs important right to freedom of expression warranted a more general and unqualified protection for information held for the purposes of the BBCs journalistic, artistic and literary output.
That being the purpose of the immunity, section 7 and Schedule 1 Part VI, as they apply to the BBC, would have failed to achieve their purpose if the coexistence of other non-journalistic purposes resulted in the loss of immunity.
That is confirmed by the language of these statutory provisions.
The disclosable material is defined in terms (held for purposes other than those of journalism, art or literature) which are positive in form but negative in substance.
The real emphasis is on what is not disclosable that is material held for the purposes of the BBCs broadcasting output.
It is the most natural construction, which does not depend on reading in any words.
That was the view formed both by Irwin J (see especially paras 55 to 58 and 63 to 65 of his Sugar judgment) and by Lord Neuberger MR (see especially paras 40 to 42, 44 to 46, and 49 of his judgment).
Mr Eicke QC was critical of para 49, submitting that it assumed the very answer that the Court of Appeal was seeking to justify.
I consider that criticism to be unjustified, though the reasoning was perhaps rather compressed.
The unspoken premise is that Parliament must have intended to lay down a workable test, and both an exclusively and a predominantly test would raise almost insoluble problems in their practical application.
That is not to say that the test approved by Irwin J and the Court of Appeal is without its difficulties.
Parliament has, in trying to provide machinery for determining where the stronger public interest lies, placed a heavy burden on the Tribunal as an expert decision-maker.
Davis J cited the well-known speech of Lord Mustill in R v Monopolies and Mergers Commission, Ex p South Yorkshire Transport Ltd [1993] 1 WLR 23, 32-33 (where the relevant statute referred to a substantial part of the United Kingdom): But this clear-cut approach cannot be applied to every case, for the criterion so established may itself be so imprecise that different decision-makers, each acting rationally, might reach differing conclusions when applying it to the facts of a given case.
In such a case the court is entitled to substitute its own opinion for that of the person to whom the decision has been entrusted only if the decision is so aberrant that it cannot be classed as rational: Edwards v Bairstow [1956] AC 14.
The present is such a case.
Even after eliminating inappropriate senses of substantial one is still left with a meaning broad enough to call for the exercise of judgment rather than an exact quantitative measurement.
I consider that Davis J was right to regard the present case as falling within that category.
He was however mistaken in supposing that the Tribunal had no jurisdiction to hear an appeal, and so he should have treated the Tribunal, and not the Commissioner, as the crucial decision-maker.
Irwin J concluded (para 66 of his Sugar judgment) that the Tribunal had erred in law in applying the predominant purpose test.
So did Lord Neuberger MR (para 62).
So did Moses LJ (para 73), though I have some difficulty with the way his reasoning is expressed on this point, as it seems to come close to conflicting with the reasoning of the majority of the House of Lords in the first round of litigation, [2009] 1 WLR 430.
Munby LJ agreed with both judgments.
I would therefore dismiss this appeal, but for reasons different from those set out in the judgment of Lord Wilson.
I would add that I am conscious that this interpretation of the limitation may be seen as conferring on the BBC an immunity so wide as to make the particular statutory redemptions redundant, and leave the BBC almost free of obligations under FOIA.
As the Tribunal observed (paras 96 and 102): On a broad definition, it could be argued that all of the activities of the BBC are for the purposes of journalism, art and literature, as these are broad descriptions of a substantial part of its broadcast output . . .
However, if a very broad definition was intended, there would be little point in including the BBC in Schedule 1, Part VI of FOIA.
The BBC could have been omitted altogether from the scope of the Act.
The same point was made by Davis J [2007] 1 WLR 2583, para 55.
In my view the correct approach is for the Tribunal, while eschewing the predominance of purpose as a test, to have some regard to the directness of the purpose.
That is not a distinction without a difference.
It is not weighing one purpose against another, but considering the proximity between the subject-matter of the request and the BBCs journalistic activities and end-product.
As Irwin J observed in the financial information case, para 87, in the context of a critique of what was operational: The cost of cleaning the BBC Boardroom is only remotely linked to the product of the BBC.
I respectfully agree with the measured comments of Lord Neuberger MR (para 55): In my view, whatever meaning is given to journalism I would not be sympathetic to the notion that information about, for instance, advertising revenue, property ownership or outgoings, financial debt, and the like would normally be held for purposes . . . of journalism.
No doubt there can be said to be a link between such information and journalism: the more that is spent on wages, rent or interest payments, the less there is for programmes.
However, on that basis, literally every piece of information held by the BBC could be said to be held for the purposes of journalism.
In my view, save on particular facts, such information, although it may well affect journalism-related issues and decisions, would not normally be held for purposes . . .
of journalism.
The question whether information is held for the purposes of journalism should thus be considered in a relatively narrow rather than a relatively wide way.
That is the best way forward in order to strike the difficult balance of competing interests for which Parliament must be taken to have been aiming.
But it will still leave some difficult decisions for the Commissioner and, on appeal, the Tribunal.
There cannot be (in the words of Davis J, para 57) any unequivocal, bright-line test.
All of us agree that on any conventional approach to the construction of the Freedom of Information Act 2000 (the Act) and in particular the expression information held for purposes . . .
of journalism within the meaning of Schedule 1 to the Act, it clearly encompasses the Balen Report (the Report) throughout the whole period that the BBC has held it.
It is the appellants contention, however, that this approach to the construction of the Act and the consequent non-disclosure of the Report would violate article 10 of the European Convention on Human Rights and that the Court is accordingly bound, consistently with section 3 of the Human Rights Act 1998, to read and give effect to the Act so as to require the Reports disclosure.
It is this contention that I am here principally concerned to address.
Given, however, that a disagreement exists within the Court as to whether information held for the purposes of journalism but held also for other purposes must be subjected to a test as to which purpose is predominant and disclosed if the predominant purpose is non-journalistic, I shall in conclusion briefly address this issue too, irrelevant though it is to the outcome of this particular appeal.
The appellants article 10 contention is not one that appears to have been advanced before Irwin J at first instance (certainly there is no mention of article 10 in his judgment).
Article 10 was, however, invoked in the Court of Appeal, indeed by both sides.
The BBC submitted that disclosure of the Report (and any other information held for the purposes of journalism) would have a chilling effect upon their right to freedom of expression; the appellant submitted that, subject only to narrow exceptions (none being applicable here), article 10 gives him a right of access to all such information.
The Court of Appeal, however, derived no assistance from article 10 either way, Moses LJ (at para 77) finding it impossible to identify within the jurisprudence any pointer for or against the rival contentions.
Before this Court Mr Eicke QC has vigorously returned to article 10 and advances what is essentially a two stage argument.
First, he contends, in reliance principally upon a trilogy of Strasbourg decisions Matky v Czech Republic (Application No 19101/03) (unreported) 10 July 2006, (Matky), Tarsasag A Szabadsagjogokert v Hungary (2009) 53 EHRR 130 (14 April 2009) (Tarsasag), and Kenedi v Hungary (Application No 31475/05) (unreported) 26 August 2009 (Kenedi) that the ECtHR has recently moved towards the recognition of a right of access to information and that in the particular circumstances of the present case an interpretation of the Act which withholds from disclosure a document such as the Report interferes with the right of access to information protected by article 10(1).
Secondly he submits that such interference is not necessary in a democratic society so as to be justified under article 10(2).
He not only disputes that the release of the Report would have a chilling effect on freedom of expression but submits that only the need to protect journalistic sources or perhaps, indeed, more narrowly still, the need to protect sources who might otherwise be deterred from assisting journalists would constitute an overriding requirement of the public interest sufficient to justify this interference with the citizens article 10(1) right of access to information.
Before turning to the trilogy of decisions upon which the appellant mainly relies it is helpful first to note the well-established body of Strasbourg jurisprudence which is recognised to define, generally speaking, the nature and extent of the right under article 10(1) to receive . . .
information and ideas without interference by public authority.
It is sufficient for present purposes to cite a short passage from the unanimous Grand Chamber decision in Roche v United Kingdom (2005) 42 EHRR 599 at para 172: The Court reiterates its conclusion in Leander v Sweden (1987) 9 EHRR 433 and in Gaskin v United Kingdom (1989) 12 EHRR 36 and, more recently, confirmed in Guerra v Italy (1998) 26 EHRR 357, that the freedom to receive information prohibits a Government from restricting a person from receiving information that others wish or may be willing to impart to him and that that freedom cannot be construed as imposing on a State, in circumstances such as those of the present case, positive obligations to . . .
disseminate information of its own motion.
It is right to observe, before moving on, that the circumstances of those particular cases were that the applicants were attempting to obtain information respectively about their being regarded as a security risk (Leander), about their childhood (Gaskin), about a chemical factory (Guerra) and about long-past Porton Down tests in which they had participated (Roche).
I come then to the first of the trilogy of cases on which the appellant so strongly relies: Matky.
The complainant there was seeking, against the background of a general right to information under the Czech legal system, access to documentation concerning the construction of a new nuclear power station and in particular was challenging a requirement of the domestic legislation (article 133 of the Building Act) that a request for information had to be justified.
The Court accepted that the rejection of his request constituted an interference with the complainants right to receive information.
But it held that the decision could not be considered arbitrary, recognised that Contracting States enjoy a certain margin of appreciation in this area and unanimously rejected the complaint as manifestly ill-founded.
Matky seems accordingly an unpromising foundation upon which to build any significant departure from what may be called the Roche approach to the freedom to receive information protected by article 10.
Nevertheless, in Tarsasag (the second in the appellants trilogy of cases) it was to Matky that the Second Section of the Court referred as (the sole) authority for the proposition that, the Leander line of authority notwithstanding, the Court has recently advanced towards a broader interpretation of the notion of freedom to receive information and thereby towards the recognition of a right of access to information.
In Tarsasag the court upheld a complaint by the Hungarian Civil Liberties Union that a refusal by the Constitutional Court to grant them access to an MPs pending complaint as to the constitutionality of certain proposed amendments to the Criminal Code breached its article 10 right to receive information.
The Government having accepted that there had been an interference with the applicants article 10 rights, Mr Eicke relies in particular upon the following passage in the Courts judgment: [The Court] considers that the present case essentially concerns an interference by virtue of the censorial power of an information monopoly with the exercise of the functions of a social watchdog, like the press, rather than a denial of a general right of access to official documents. . . .
Moreover, the states obligations in matters of freedom of the press include the elimination of barriers to the exercise of press functions where, in issues of public interest, such barriers exist solely because of an information monopoly held by the authorities.
(para 36)
Kenedi, the third in the trilogy of cases, was decided just four months after Tarsasag, also by the Second Section of the Court (including six of the same seven judges who had decided Tarsasag).
The applicant there was a historian specialising in the functioning of the secret services of dictatorships.
Although a succession of domestic court judgments had held him to be entitled to access to various documents for research purposes, the Ministry had refused to disclose them.
Once again, hardly surprisingly in this case, the government conceded that there had been an interference with the applicants article 10 rights.
The Court had no difficulty in finding in the result a violation of article 10: the Court cannot but conclude that the obstinate reluctance of the respondent States authorities to comply with the execution orders was in defiance of domestic law and tantamount to arbitrariness.
In my judgment these three cases fall far short of establishing that an individuals article 10(1) freedom to receive information is interfered with whenever, as in the present case, a public authority, acting consistently with the domestic legislation governing the nature and extent of its obligations to disclose information, refuses access to documents.
Of course, every public authority has in one sense the censorial power of an information monopoly in respect of its own internal documents.
But that consideration alone cannot give rise to a prima facie interference with article 10 rights whenever the disclosure of such documents is refused.
Such a view would conflict squarely with the Roche approach.
The appellants difficulty here is not that Mr Sugar was not exercising the functions of a social watchdog, like the press.
(Perhaps he was.) The Jewish Chronicle would be in no different or better position.
The appellants difficulty to my mind is rather that article 10 creates no general right to freedom of information and where, as here, the legislation expressly limits such right to information held otherwise than for the purposes of journalism, it is not interfered with when access is refused to documents which are held for journalistic purposes.
True it is, as Lord Judge CJ noted when giving the judgment of the Court in Independent News and Media Ltd v A [2010] 1 WLR 2262 (para 42), that the Venice Commission has described Tarsasag as a landmark decision on the relation between freedom of information and the . . .
Convention.
Whatever else might be said about Mr Eickes trilogy of cases, however, they cannot to my mind be said to support his first proposition having regard to the particular relationship between the parties in this case.
I should perhaps add for the sake of completeness that there is absolutely nothing in Independent News and Media Ltd v A, still less in R (Mohamed) v Secretary of State for Foreign Affairs (No 2) [2011] QB 218, to support Mr Eickes reliance on article 10 in the present context.
It follows that for my part I would hold that the appellants article 10 case fails at the first stage.
There was no interference here with Mr Sugars freedom to receive information.
The Act not having conferred upon him any relevant right of access to information, he had no such freedom.
Even were that not so, however, I would reject the second stage of Mr Eickes argument too.
Even were one to start with the supposition that any refusal by a public authority to disclose information involves a prima facie interference with a persons freedom to receive that information, it seems to me open to the State to legislate, as here, a blanket exclusion of any requirement to disclose information held (whether predominantly or not) for the purposes of journalism.
The appellants contrary argument fixes in particular upon a line of Strasbourg cases concerned essentially with journalistic sources: Goodwin v United Kingdom (1996) 22 EHRR 123, Nordisk Film and TV A/S v Denmark (Application No 40485/02) (8 December 2005) and Sanoma Uitgevers BV v The Netherlands (Application No 38224/03) (14 September 2010).
What must be recognised, however, is that in each of these cases it was the journalists who were the complainants, that what they were complaining about were domestic court orders requiring disclosure of their sources or research material, and that the starting point for the Strasbourg Courts consideration of these complaints was, as the Grand Chamber noted at paragraph 59 of its judgment in Sanoma: In its earlier case-law the Court has found various acts of the authorities compelling journalists to give up their privilege and provide information on their sources or to obtain access to journalistic information to constitute interferences with journalistic freedom of expression.
The applicant in Goodwin succeeded on the basis that he had been ordered to reveal the identity of a person who had provided him with information on an unattributable basis.
The applicant in Nordisk failed because on the particular facts of that case (which it is not here necessary to rehearse) the applicant was not being ordered to disclose its journalistic source of information but rather part of its research material and that, even though the latter may have a chilling effect on the exercise of journalistic freedom of expression, there it was justified by an overriding requirement in the public interest: assisting in the prosecution of paedophiles.
The applicant company in Sanoma succeeded because there was an order for the compulsory surrender of journalistic material containing information capable of identifying journalistic sources, an interference with its article 10 rights which the Court there held was not prescribed by law: the quality of the law was deficient in that there was no procedure attended by adequate legal safeguards for the applicant company in order to enable an independent assessment as to whether the interest of the criminal investigation overrode the public interest in the protection of journalistic sources.
(para 100)
Helpful though these cases may be, however, in explaining the limitations placed upon a journalists prima facie right to protect both his sources and his research material from compulsory court orders for their disclosure, they say little if anything about what other interests and concerns may properly be invoked by journalists in resisting the disclosure to others (whether or not themselves journalists) of other information held for journalistic purposes (ie information apart from that necessary to protect confidential sources and research material, including for example the Balen Report).
To my mind it stands to reason that the disclosure of a document such as the Report would be likely to affect the candour of any similar future report.
As the Information Tribunal itself found in the present case (at para 116): Self-critical review and analysis of output is a necessary part of safeguarding and enhancing quality.
The necessary frankness of such internal analysis would be damaged if it were to be written in an anodyne fashion, as would be likely to be the case if it were potentially disclosable to a rival broadcaster.
(Or, one may add, to anyone else.) In short I would reject also the second stage of the appellants argument: the contention that section 3 of the Human Rights Act should be invoked here to limit the information stipulated by the Act to be undisclosable through being held for the purposes of journalism merely to that held for the purpose of safeguarding the BBCs confidential sources.
I turn then briefly to the question whether, in a case where information is held partly for journalistic and partly for non-journalistic purposes, it is necessary to ask which purpose is predominant and to disclose any information held predominantly for non-journalistic purposes.
I conclude, in common with Lord Phillips and Lord Walker (and, indeed, with the Court of Appeal), but in respectful disagreement with Lord Wilson, that the answer is No. My reasons being essentially the same as those given by both Lord Phillips and Lord Walker (although perhaps more particularly those of Lord Walker), I can explain my concurrence very shortly indeed.
Really it comes to this.
With regard both to the BBC (together with the three other listed broadcasters) and the Bank of England, Parliament, for differing but in each case compelling reasons of national interest, was concerned not to subject these institutions to the operation of the Act including, for example, the need to resort to Part II of the Act to justify any reluctance to withhold some particular information from disclosure save only in strictly limited circumstances.
In the case of the BBC and other broadcasters it is only in respect of information held for purposes other than those of journalism, art or literature.
In the event that information is held to any significant degree (and we are all agreed that the de minimis principle would otherwise apply) for the purposes of journalism, then to my mind it would seem artificial and impermissible to construe the Act as applying to that information.
Quite simply, it remains information held for the purposes of journalism and therefore constitutes (within the meaning of section 7) other information than information held for purposes other than those of journalism.
The mere fact that it may be held (even perhaps to a predominant extent) also for purposes other than those of journalism cannot sensibly serve to enlarge the basic category of information in respect of which the BBC is listed and with regard to which, therefore, the Act is not disapplied by section 7.
In short, like Lord Walker, I find that the natural construction of the Act, and Parliaments evident concern to ensure that the interests of free expression trump without more those of freedom of information, supports the BBCs case on this issue.
As for the point at which information will cease to be held to any significant degree for the purposes of journalism and become held instead, say, solely for archival purposes, that necessarily will depend on the facts of any particular case and involve a question of judgment.
I too agree with Lord Walker that the central question to be asked in such a context will be, not which purpose is predominant, but rather whether there remains any sufficiently direct link between the BBCs continuing holding of the information and the achievement of its journalistic purposes.
I too would dismiss this appeal.
The question on this appeal is whether the Balen Report commissioned by the BBC in relation to its Middle Eastern coverage and completed in July 2004 constituted information held for purposes other than those of journalism, art or literature (within Part VI of Schedule 1 to the Freedom of Information Act 2000).
The appeal falls to be approached on the basis that the Report was at the material time held predominantly for journalistic but partly also for other purposes.
The material time was in 2005, when Mr Sugar first requested disclosure of the Report.
I agree with the other members of the Court that this appeal should be dismissed.
However, there is a difference in the basis upon which different members of the Court would dismiss it.
Lord Wilson would only dismiss it on the basis that the critical test is whether the BBC held the Report predominantly for the purposes of journalism.
Were this not the test, he would have regarded the existence of other not insignificant purposes as sufficient to mean that the Report was held for purposes other than those of journalism, art or literature, and so disclosable.
The other members of the Court take an opposite view: once it is established that the BBC held the Report for purposes of journalism, art or literature, the Report was exempt from disclosure, and would have been even had these not been the predominant purposes for which it was held.
The rival arguments on this point are finely balanced, and its resolution in the present appeal on the basis of sparse facts causes me a certain concern.
However, after some hesitation, I have come to the conclusion that the test applied by Lords Phillips, Walker and Brown is to be preferred.
The Freedom of Information Act 2000 reflects the value to be attached to transparency and openness in the workings of public authorities in modern society, and its provisions should be construed in as liberal a manner as possible: Common Services Agency v Scottish Information Commissioner [2008] UKHL 47, [2008] 1 WLR 1550, para 4 per Lord Hope.
But, as Lord Walker notes (para 77), Lord Hope went on to add that that proposition must not be applied too widely, and special considerations may lead to restrictions.
In the present case, the special consideration to which the legislator gave effect was the freedom of the BBC as a public service broadcaster in relation to its journalistic, artistic and literary output.
Information held for any such purposes of journalism, art or literature was absolutely exempt from disclosure.
The legislator was not content with the more qualified protection from disclosure, often depending on a balancing exercise or evaluation, which would anyway have been available under section 2, read with sections 28, 29, 36, 41 and 43.
To read into the words information held for purposes other than those of journalism, art or literature a need to evaluate whether such purposes were dominant seems to me unjustified.
I share Lord Walkers view (para 79) that the real emphasis of the words is on what is not disclosable, so that the exemption applies, without more, if the information is held for any journalistic, artistic or literary purpose.
That conclusion is to my mind also fortified by consideration of the exemption relating to certain functions of the Bank of England.
Lord Phillips discusses the position regarding archived material.
We were not given any clear picture when or on what basis archiving might occur.
I assume that the reference is to material not envisaged as having any current purpose, but stored for historical purposes or against the possibility of some unforeseen need to revisit, or produce evidence of, past events.
A library maintained for current reference would in contrast contain material held for the purposes of journalism, art or literature.
I agree with Lord Browns analysis of the current state of Strasbourg authority, and also with Lord Wilsons comment in para 59 on the decisions (or dicta) in Ullah and Al-Skeini.
Nothing in the Strasbourg jurisprudence calls us to do anything but give effect in this case to what we consider to be the proper construction of the 2000 Act under ordinary domestic principles.
It is unnecessary to say more, or to add to recent debate about the nature of the Convention rights in the United Kingdom or the domestic courts role in interpreting and applying them taking into account any relevant Strasbourg case-law.
I agree with Lord Browns analysis of the current state of Strasbourg authority, and also with Lord Wilsons comment in para 59 on the decisions (or dicta) in Ullah and Al-Skeini.
Nothing in the Strasbourg jurisprudence calls us to do anything but give effect in this case to what we consider to be the proper construction of the 2000 Act under ordinary domestic principles.
It is unnecessary to say more, or to add to recent debate about the nature of the Convention rights in the United Kingdom or the domestic courts role in interpreting and applying them taking into account any relevant Strasbourg case-law.
| By October 2003 pressure groups had complained that coverage by the British Broadcasting Corporation [BBC] of the Israeli Palestinian conflict was not impartial [6].
In November 2003 Mr Malcolm Balen was appointed by the BBC to produce a report on the quality and impartiality of its coverage of Middle Eastern affairs [the Balen Report], which was intended to be an internal briefing document [6 7].
In November 2004 the Balen Report was considered by the BBCs Journalism Board, which consequently commissioned a paper called Taking Forward BBC Coverage of the Middle East [9].
A number of internal changes resulted, including development of training, auditing of on air use of experts and the creation of a post of Middle East Editor [10].
On 8 January 2005, the Appellant, Mr Steven Sugar, made a request pursuant to s.1 of the Freedom of Information Act 2000 [FOIA] for disclosure of the Balen Report [12].
The BBC is designated as a public authority in FOIA only to a limited extent, namely in respect of information held for purposes other than those of journalism, art or literature [1].
The BBC refused the request on the basis that it held the Balen Report for purposes of journalism and thus it lay beyond the scope of FOIA [12].
In March 2005 Mr Sugar applied to the Information Commissioner pursuant to s.50(1) of FOIA for a decision whether the BBC had determined his request within the terms of FOIA.
The Commissioner concluded that the BBC had lawfully rejected his request as, even if the Balen Report had also been held for non journalistic purposes, it continued to lie beyond the scope of FOIA because the journalistic purpose was manifestly dominant [13].
The Commissioner also observed that BBC was not a public authority for the purposes of FOIA and thus Mr Sugar had no right of appeal under s.57 of FOIA to the Information Tribunal [15].
On 30 December 2005 Mr Sugar nevertheless appealed to the Tribunal, which determined it had jurisdiction.
The House of Lords upheld its jurisdiction decision (in Sugar v BBC [2009] UKHL 9) since, even in relation to a request for information which was held to lie outside the designation, the BBC remained a public authority for the purposes of FOIA [20].
Before the Tribunal, Mr Sugar contended that even if the information is held only partly for purposes other than those of journalism, the information is within the scope of FOIA [4].
The BBCs primary contention was that where information is held for the purposes of journalism, that information is beyond the scope of FOIA even if it is also held even predominantly held for purposes other than journalism [3].
The BBCs secondary contention was that the information is within the scope of FOIA only if the purposes other than journalism are the dominant purpose for which it is held [5].
On 29 August 2006 the Tribunal accepted the BBCs secondary contention but held that the Balen Report was within the scope of FOIA as, once the report had been placed before the Journalism Board, it was held predominantly for purposes other than journalism [21].
On 2 October 2009 Mr Justice Irwin allowed the BBCs appeal on the basis that the BBC had no obligation to disclose information that the BBC held to any significant extent for the purposes of journalism and further that, even if the test was one of dominant purpose, the Tribunal had erred in finding that the Balen Report had been held predominantly for purposes other than those of journalism [22].
The Court of Appeal dismissed Mr Sugars appeal, rejecting the dominant purpose construction and approving the BBCs primary construction of the designation [23].
Sadly Mr Sugar died in January 2011.
The court appointed his widow, Ms Fiona Paveley, to represent his estate in this appeal [4].
The Supreme Court unanimously dismisses the appeal.
Lord Phillips, Lord Walker, Lord Brown and Lord Mance dismiss the appeal on the basis that, even if information is held only partly for the purposes of journalism, art or literature, it is outside the scope of FOIA.
Lord Wilson would have dismissed it on the basis that, if
information is held predominantly for the purposes of journalism, art or literature, it is outside the scope of FOIA and that the Balen Report was held predominantly for those purposes [57].
Section 7(1) of FOIA provides that, where a public authority is listed in Schedule 1 of FOIA only in relation to information of a specified description, nothing in Parts I to V of FOIA is to apply to any other information held by the authority [31; 69].
Under Part VI of Schedule I to FOIA the BBC is designated as a public authority only in respect of information held for purposes other than those of journalism, art or literature [1].
At the material time BBC held the Balen Report for the purposes of journalism.
The issue is therefore how the phrase purposes other than those of journalism should be construed [2].
Four possible categories of information held by the BBC exist: (1) information held exclusively for purposes other than those of journalism [or art or literature]; (2) information held predominantly, but not exclusively, for non journalistic purposes; (3) information held predominantly, but not exclusively, for journalistic purposes and (4) information held exclusively for journalistic purposes [73].
The Appellant argued that the BBCs immunity under Part VI of Schedule I to FOIA was limited to information in category (4).
The BBCs primary contention, upheld by Irwin J and the Court of Appeal, was that the BBC had to disclose information only in category (1) subject to particular exemptions under other provisions of FOIA [73].
The BBCs secondary contention, adopting a dominant purpose construction, was that only information in categories (1) and (2) had to be disclosed, subject to the exemptions.
The court holds that the Court of Appeal was correct in deciding that once it is established that the information sought is held by the BBC to any significant degree for the purposes of journalism, it is exempt from production under FOIA, even if the information is also held for other purposes [67; 75; 104; 111].
The legislative purpose of FOIA is to promote an important public interest in access to information about public bodies [76]; but in this case there is a powerful public interest that the public service broadcasters, no less than the commercial media, should be free to gather, edit and publish news and comment on current affairs without the inhibition of an obligation to make public disclosure of or about their work [78].
The purpose of the designation would have failed if the coexistence of other non journalistic purposes resulted in the loss of immunity [78].
The real emphasis of the words is on what is not disclosable, namely material held for the purposes of the BBCs broadcasting output [79].
The Tribunal should have some regard to the directness of purpose, considering the proximity between the subject matter of the request and the BBCs journalistic activities and output [83].
The purpose of the designation is to protect the BBC from interference with its functions in broadcasting journalism, art and literature [64] and consequently a purposive construction of it would prevent disclosure that would risk such interference [65].
Information should be found to be held for the purposes of journalism, art or literature only if an immediate object of holding the information is to use it for one of those purposes [67].
As to the contention on behalf of the Appellant that this approach would violate Article 10 of the European Convention on Human Rights [ECHR], the Court noted the well established body of jurisprudence of the European Court of Human Rights that defines the nature of the right under Article 10(1) as prohibiting a government from restricting a person from receiving information that others are willing to impart to him but does not construe the article as imposing positive obligations on a State to disseminate information of its own motion [89].
The jurisprudence relied upon by the Appellant falls far short of establishing that an individuals freedom to receive information is interfered with whenever a public authority acting consistently with domestic legislation refuses access to documents [94].
Article 10 creates no general right to freedom of information [94] and consequently no interference with Mr Sugars ECHR rights [97].
Even if there had been such a right, it would be open to the State to legislate a blanket exclusion of any requirement to disclose information held for the purposes of journalism [98].
|
In May 2010, Mr Mark Irvine made a number of requests under the Freedom of Information (Scotland) Act 2002 (FOISA) for information from South Lanarkshire Council.
He wanted to know how many of their employees in a particular post were placed at 10 particular points on the Councils pay scales.
His underlying purpose was to find out whether the Councils pay gradings favoured work traditionally done by men.
He did not want to know the names of the employees concerned.
The Council refused his request on the ground that to comply with it would contravene the Data Protection Act 1998 (DPA).
Mr Irvine complained to the Scottish Information Commissioner who investigated and decided that the information should be disclosed.
The Council appealed unsuccessfully to the Inner House of the Court of Session and now appeals to this Court.
There are two issues before this Court.
First and most important is the proper interpretation of condition 6 in Schedule 2 to the 1998 Act.
It is common ground for the purpose of this case that the information requested is personal data in the hands of the Council as data controller.
Personal data may only be processed if one of the conditions in Schedule 2 is met and condition 6 is the only relevant condition: The processing is necessary for the purposes of legitimate interests pursued by the data controller or by the third party or parties to whom the data are disclosed, except where the processing is unwarranted in any particular case by reason of prejudice to the rights and freedoms or legitimate interests of the data subject.
The second issue is whether the Commissioner acted in breach of natural justice by failing to disclose to the Council all of the communications passing between the Commissioner and Mr Irvine and two Members of the Scottish Parliament in the course of his investigations.
The legislation
The inter relationship between the DPA 1998 and the FOISA 2002 is uncontroversial in these proceedings.
Information is absolutely exempt from disclosure under the FOISA if it constitutes personal data under the DPA and disclosure to a member of the public would contravene any of the data protection principles in that Act (FOISA, s 38(1)(b) and (3)).
The first data protection principle is that personal data shall be processed fairly and lawfully and, in particular, shall not be processed unless (a) at least one of the conditions in Schedule 2 is met (DPA, Sched 1, para 1).
As Lord Rodger of Earlsferry pointed out in Common Services Agency v Scottish Information Commissioner [2008] UKHL 47, 2008 SC (HL) 184, this means that the safeguards against the disclosure of personal data which applied before the enactment of the FOISA continue to apply.
He went on: Where the legislature has thus worked out the way that the requirements of data protection and freedom of information are to be reconciled, the role of the court is just to apply the compromise to be found in the legislation.
There is, however, no reason why courts should favour the right to freedom of information over the rights of data subjects. (para 68) Lord Hope of Craighead was of the same view: In my opinion there is no presumption in favour of the release of personal data under the general obligation that FOISA lays down.
The references which that Act makes to provisions of DPA 1998 must be understood in the light of the legislative purpose of that Act, which was to implement Council Directive 95/46/EC.
The guiding principle is the protection of the fundamental rights and freedoms of persons, and in particular their right to privacy with respect to the processing of personal data. (para 7)
What the FOISA does, therefore, is give the person who requests the information a right to have that information disclosed to him (s 1(1)) provided that this does not contravene the DPA.
This is, of course, a right which he did not have before the FOISA was passed, but it is not a right which trumps the provisions of the DPA.
The DPA is the means whereby the United Kingdom has translated Council Directive 95/46/EC (1995) on the protection of individuals with regard to the processing of personal data and on the free movement of such data into UK law and must therefore be interpreted in conformity with that Directive.
Article 1(1) requires that Member States shall protect the fundamental rights and freedoms of natural persons and in particular their right to privacy with respect to the processing of personal data.
Article 7 requires Member States to provide that personal data may be processed only if one or more of six paragraphs applies.
It is worth setting out those paragraphs in full, because they correspond (although not always in exactly the same terms) with conditions 1 to 6 in Schedule 2 to the DPA: (a) the data subject has unambiguously given his consent; or (b) processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract; or (c) processing is necessary for compliance with a legal obligation to which the controller is subject; or (d) processing is necessary in order to protect the vital interests of the data subject; or (e) processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller or in a third party to whom the data are disclosed; or (f) processing is necessary for the purposes of the legitimate interests pursued by the controller or by the third party or parties to whom the data are disclosed, except where such interests are overridden by the interests for fundamental rights and freedoms of the data subject which require protection under article 1(1).
Several points are worth noticing.
First, these paragraphs apply to all kinds of processing, not just to disclosure under the FOISA, which in practice may mean disclosure to the whole wide world.
Processing means any kind of operation performed on the data, such as collecting, recording, organising, storing, adapting or altering, retrieving, consulting, using, disclosing or otherwise making available, aligning or combining, blocking, erasing or destroying (article 2(b); see DPA s 1(1) and (2)).
Second, therefore, any interpretation of the conditions under which processing is permitted must be capable of being applied to all those many different ways in which data may be processed.
Third, it would be surprising if the word necessary, which appears in all the conditions except the first, were to have a different meaning in different conditions.
Mrs Wolffe QC, who appears for the Council, correctly points out that article 7 is derived from the first part of Recital (30), which lists the substance of paragraphs (b) to (f) after a single necessary.
Fourth, therefore, any interpretation given to the word necessary must be capable of applying equally well to each of those situations, some of which involve compliance with legal obligations.
Fifth, the only paragraph which contains a built in balance between the rights of the data subject and the need to process the data is paragraph (f) and condition 6.
The proceedings
request for information under the FOISA: On 10 May 2010, Mr Irvine wrote to the Council making the following I am seeking information about the basic hourly rate of pay for the council job category Land Service Operative 3.
How many of the total number of LSO 3 posts are placed at Spinal Column Point 25? Over the next ten days he wrote nine more times making the same request in respect of spinal column points 26 to 34.
Placement on a spinal column point determines the hourly rate of pay for all employees placed at that point.
On 1 June 2010, the Council refused all ten requests on the ground that it considered them vexatious, principally because of Mr Irvines blog for Action4Equality Scotland and his connections with the solicitor representing equal pay claimants against the Council.
It later withdrew its reliance on that ground for refusal.
On 1 September 2010, it refused all ten requests on the ground that the information requested was personal data and disclosure would contravene the data protection principles.
Mr Irvine requested a review, stating that there is a clear public interest in releasing this pay information because this will demonstrate how South Lanarkshire Council has been using public funds to meet its obligations under the 1999 Single Status (Equal Pay) Agreement.
All other councils in Scotland have already done so freely without any fuss and bother and without the need for a formal FOISA request.
The Council maintained its position.
On 11 October, Mr Irvine wrote to the Scottish Information Commissioner asking for a decision.
He stated: 4.
My request focuses on the way South Lanarkshire Council uses public money to treat traditional male council jobs more favourably than their female colleagues. 5.
I believe there is a serious public interest in this matter because gender equality is a fundamental human right.
A corner stone of exercising this right effectively is the need for transparency in pay arrangements a requirement that other councils in Scotland are happy to observe. 6.
In my view, South Lanarkshire council is trying to keep its pay arrangements secret, both to conceal the truth from its largely female workforce and as a means of avoiding public scrutiny 7.
South Lanarkshire is effectively saying that while the public is entitled to know the level of remuneration paid to the councils chief executive (146,502) it should somehow be prevented from knowing what a council refuse worker or gardener gets paid.
On 21 October, the Commissioner notified the Council that he was investigating the application and provided the Council with a copy of it (as required by FOISA, s 49(3)).
On 18 November, he wrote asking the Council to explain why it considered that the information was exempt from disclosure under the FOISA (as also required by s 49(3)).
The Council replied on 1 December, arguing that Mr Irvine had no legitimate interest in disclosure of the information and that disclosure was not necessary for the purpose of his legitimate interests.
Thus the Council was fully aware that the relevant condition was condition 6.
Meanwhile, the Commissioner had received a letter from Alex Neil MSP, supporting Mr Irvines request.
On 19 November the Commissioner emailed Mr Irvine drawing attention to condition 6 as being the only condition which he thought might apply and requesting Mr Irvines submissions upon it.
On 26 November, Mr Irvine replied stating, inter alia: 1.
I work with Action 4 Equality Scotland, which was pursuing a large number of equal pay claims on behalf of 2000+ employees of [the Council] 3.
The pay information requested . is necessary to determine whether there is pay discrimination against female dominated jobs. 4.
Every other council in Scotland is happy to provide such information without the need for a FOISA request and such information is routinely gathered, by councils and other employers, for equality monitoring purposes 7.
The current dispute stems from the 1999 Single Status (Equal Pay) Agreement which was designed to eliminate pay discrimination in Scottish local government. 8.
I was heavily involved in the negotiations which led up to [that agreement] as Unisons Head of Local Government in Scotland at that time. 9.
I also write a blog site in my capacity as a freelance writer, which deals with a wide range of issues including equal pay .
That same day, the Commissioner emailed Mr Irvine, asking for examples of where similar requests had been fully answered by other councils or where such information is actually published.
Again that day, Mr Irvine replied naming six councils which had disclosed their pay arrangements some time ago.
On 9 December, the Commissioner wrote again to Mr Irvine asking for clarification of what the Council had in fact told him about the pay scales of their LSO 3 employees and for any further comments he might have as to why he (or the general public) had a legitimate interest in obtaining the information.
Mr Irvine replied on 10 December that Scotlands Single Status (Equal Pay) was hailed as a major landmark agreement in 1999: The declared intention of the new agreement was to introduce new and fairer arrangements for around 250,000 council workers based on a non discriminatory, equality proofed approach to job evaluation.
Openness and transparency are at the heart of any equality proofed job evaluation scheme so that employees can understand not only the basis on which their own jobs are paid, but the jobs of other council employees as well.
The Commissioner also received a letter from Hugh ODonnell MSP referring to his constituents frustration at the Councils failure to provide information and asking that the matter be brought to a conclusion.
None of the correspondence referred to in the previous paragraph was disclosed to the Council, nor was the Council asked to provide any further comments or representations to the Commissioner.
The Commissioner issued his decision on 17 March 2011: Decision 056/2011.
He considered it arguable that the data requested were not personal data, but went on to consider whether disclosure would breach the data protection principles (para 27).
He directed himself (para 34) that there were three tests to be satisfied before condition 6 could be met: (a) Does Mr Irvine have a legitimate interest in obtaining the personal data? (b) If yes, is the disclosure necessary to achieve those legitimate aims? In other words, is the disclosure proportionate as a means and fairly balanced as to ends, or could these legitimate aims be achieved by means which interfere less with the privacy of the data subject? (c) Even if the processing is necessary for Mr Irvines legitimate purposes, would the disclosure nevertheless cause unwarranted prejudice to the rights and freedoms or legitimate interests of the data subjects? .
The Commissioner concluded (para 44) that Mr Irvine did have a legitimate interest in obtaining the information requested.
He has a serious, ongoing interest in equal pay matters.
These were also matters of legitimate wider interest, both to employees of the Council and the wider public: Given the considerable sums of public money involved and the fundamental issues of fair and equal treatment which require to be addressed, it is important that (subject to there being in place adequate safeguards for individuals . ) a local authoritys arrangements for securing equal pay are open to adequate public scrutiny.
Having considered that legitimate interest along with the nature of the information requested, he could identify no means of meeting the interest which would interfere less with the privacy of the data subject than disclosure of the requested information.
He did not consider this an intrusion of any significance on the privacy of the individuals concerned.
So disclosure was necessary to achieve Mr Irvines legitimate interests (para 51).
When considering the interests of the data subjects in more detail, he was unable to identify how Mr Irvine or anyone else might be able to identify the data subjects (para 62); he did not think that disclosure would be contrary to their legitimate expectations or likely to cause them distress (para 67).
On balance, therefore, condition 6 was met (para 68).
Disclosure would also be fair and lawful (para 69).
The Commissioner therefore required the Council to disclose the information requested.
Before the Inner House, as in this Court, the principal argument focussed on the meaning of necessary in condition 6.
As is clear from paragraph 34 of his Decision (quoted at para 14 above), the Commissioner had adopted a proportionality approach.
Counsel for the Commissioner argued that this was correct in the light of the decision of the Information Tribunal and the Divisional Court in the English case of Corporate Officer of the House of Commons v The Information Commissioner [2008] EWHC 1084 (Admin), [2009] 3 All ER 403 (the House of Commons case).
Mrs Wolffe, for the Council, submitted that it should be given its natural and ordinary meaning.
The Inner House saw the force of that and, but for the authority just cited, we would have had little hesitation in giving effect to it.
But they found it unnecessary to form a concluded view as to the correct approach, because they were satisfied that even applying the stricter test the Commissioner could only have concluded that necessity was made out (para 10).
The Inner House also held that there was no breach of natural justice in failing to disclose the matters referred to in para 12 above, because many, if not all, were previously within the knowledge of the Council and, insofar as relevant, they could be made the subject of legal submissions to the court (para 5).
The proper interpretation and application of condition 6
It is obvious that condition 6 requires three questions to be answered: (i) Is the data controller or the third party or parties to whom the data are disclosed pursuing a legitimate interest or interests? (ii) Is the processing involved necessary for the purposes of those interests? (iii) Is the processing unwarranted in this case by reason of prejudice to the rights and freedoms or legitimate interests of the data subject?
It is not obvious why any further exegesis of those questions is required.
However, in the House of Commons case, the Information Tribunal (unreported) 26 February 2008 accepted that necessary carries with it connotations from the European Convention on Human Rights, including the proposition that a pressing social need is involved and that the measure employed is proportionate to a legitimate aim being pursued (para 59).
By the time the case reached the Divisional Court, It was common ground that necessary within para 6 of Sched 2 to the DPA should reflect the meaning attributed to it by the European Court of Human Rights when justifying an interference with a recognised right, namely that there should be a pressing social need and that the interference was both proportionate as to means and fairly balanced as to ends (para 43).
That this was common ground is not surprising, in view of the decision of the European Court of Justice in Rechnungshof v sterreichischer Rundfunk (Joined Cases C 465/00, C 138/01 and C 139/01) [2003] 3 CMLR 265 (the Austrian Radio case).
Austrian law required public bodies subject to control by the Court of Auditors to report to it the names, salaries and pensions above a certain level paid to their employees and pensioners.
The Court of Auditors would then make a report to Parliament which would be made public, the object being to exert pressure on public bodies to keep remuneration within reasonable limits.
The Court of Auditors brought proceedings against Austrian radio and other bodies who refused to provide the information and some of the individuals involved brought proceedings contesting the compatibility of the legislation with their fundamental rights and with the Directive.
A principal issue was whether publishing these data fell within article 7(c) or (e) (see para 7 above).
The European Court of Justice stated that the provisions of Directive 95/46, in so far as they govern the processing of personal data likely to infringe fundamental freedoms, in particular the right to privacy, must necessarily be interpreted in the light of fundamental rights, which, according to settled case law, form an integral part of the general principles of law whose observance the Court ensures (para 68).
It went on to hold that for an employer to publish the names and incomes of employees to a third party was an interference with the right to respect for private life, protected by article 8 of the European Convention on Human Rights (para 74), but that it might be justified if it was both necessary for and appropriate to the aim of keeping salaries within reasonable limits, that being for the national courts to determine (para 90).
But if the national legislation was incompatible with article 8, then it was also incapable of satisfying the requirements of proportionality in article 7(c) or (e) of Directive 95/46.
In Huber v Bundesrepublik Deutschland (Case C 524/06) [2009] 1 CMLR 1360, an Austrian businessman who had moved to Germany complained that storing data relating to him in a central register of foreign nationals discriminated against him as there was no such database for German nationals.
Advocate General Poiares Maduro pointed out that The concept of necessity has a long history in Community law and is well established as part of the proportionality test.
It means that the authority adopting a measure which interferes with a right protected by Community law in order to achieve a legitimate aim must demonstrate that the measure is the least restrictive for the achievement of this aim. (para AG27) He went on to say that if the processing might be liable to infringe the fundamental right to privacy, article 8 became relevant, and the Court had held in the Austrian Radio case that if a national measure was incompatible with article 8, then it also failed to pass the threshold of article 7(e) of the Directive (para AG27).
The European Court of Justice did not refer to this paragraph in its judgment and contented itself with saying that the concept of necessity laid down by article 7(e) of Directive 95/46 . cannot have a meaning which varies between member states.
It therefore follows that what is at issue is a concept which has its own independent meaning in Community law and which must be interpreted in a manner which fully reflects the objective of that directive, as laid down in article 1(1) thereof. (para 52) The central register would only comply with article 7(e) if it contained only the data necessary for the authorities to apply the law relating to rights of residence and its centralised nature enabled that legislation to be more effectively applied (para 66).
The Court did not, however, supply its own definition of necessary, nor has it done so in later cases (such as Volker und Marcus Schecke GbR v Land Hessen; Eifert v Land Hessen (Joined Cases C 92/09 and 93/09, [2012] All ER (EC) 127).
Nevertheless, Mrs Wolffe contends that Huber imports a stricter test of necessity into article 7 and that while proportionality may come into other aspects of the conditions it does not come into necessary.
She points out that the Court in Huber did not adopt the Advocate Generals formulation and although it referred to the Austrian Radio case it did not refer to the passages cited above.
She does, however, stop short of arguing that necessary means absolutely necessary or even strictly necessary.
She has also to accept that something may be necessary if it makes furthering the purposes of a legitimate interest more effective.
I confess to having had some difficulty in understanding how that argument,
skilfully and attractively advanced though it was, can help the Councils case.
One might have thought it to its advantage to import the requirement of a pressing social need from the article 8 jurisprudence into condition 6.
This might be thought a stricter test than that of a legitimate interest, which may be a purely private interest, in condition 6 and thus make the related test of necessity more difficult to fulfil.
I agree with Mrs Wolffe to this extent: the word necessary has to be considered in relation to the processing to which it relates.
If that processing would involve an interference with the data subjects right to respect for his private life, then the Austrian Radio case is clear authority for the proposition that the requirements of article 8(2) of the European Convention on Human Rights must be fulfilled.
However, that was a case about article 7(e), where there is no express counterbalancing of the necessary processing against the rights and interests of the data subject.
In a case such as this, where that balance is built into article 7(f) and condition 6, it may not matter so much where the requirements of article 8(2) are considered, as long as the overall result is compliant with them.
In this particular case, however, as the processing requested would not enable Mr Irvine or anyone else to discover the identity of the data subjects, it is quite difficult to see why there is any interference with their right to respect for their private lives.
It is enough to apply article 7(f) and condition 6 in their own terms.
I disagree with Mrs Wolffe, however, about the meaning of necessary.
It might be thought that, if there is no interference with article 8 rights involved, then all that has to be asked is whether the requester is pursuing a legitimate interest in seeking the information (which is not at issue in this case) and whether he needs that information in order to pursue it.
It is well established in community law that, at least in the context of justification rather than derogation, necessary means reasonably rather than absolutely or strictly necessary (see, for example, R v Secretary of State for Employment, Ex p Seymour Smith (No 2) [2000] 1 WLR 435; Chief Constable of West Yorkshire Police v Homer [2012] UKSC 15, [2012] ICR 704).
The proposition advanced by Advocate General Poiares Maduro in Huber is uncontroversial: necessity is well established in community law as part of the proportionality test.
A measure which interferes with a right protected by community law must be the least restrictive for the achievement of a legitimate aim.
Indeed, in ordinary language we would understand that a measure would not be necessary if the legitimate aim could be achieved by something less.
Thus, for example, if Mr Irvine had asked for the names and addresses of the employees concerned, not only would article 8 have clearly been engaged, but the Commissioner would have had to ask himself whether his legitimate interests could have been served by a lesser degree of disclosure.
My conclusion is, therefore, that the Commissioner adopted a test which was probably more favourable to the Council than was required and certainly no less favourable.
In any event it is quite clear that he was entitled to reach the conclusion that he did.
Natural Justice
It is, of course, common ground that the Commissioner has a duty to act fairly.
In Glasgow City Council v Scottish Information Commissioner [2009] CSIH 73, 2010 SC 125, Lord Reed, delivering the opinion of the Inner House, cited (at para 81) the well known words of Lord Mustill in R v Secretary of State for the Home Department, Ex p Doody [1994] 1 AC 531 at 560, on the essentials of fairness involved in administrative decision making.
Lord Reed continued (para 82): As Lord Mustill made clear, what fairness demands is dependent on the context; and an essential feature of the context is the statute under which the decision maker is acting.
The principle of audi alteram partem is . written into the Act.
We do not doubt that it is open to the commissioner to go beyond the procedural steps required by section 49, and in particular, as in the present case, to consider additional submissions by the applicant and to carry out his own investigations.
Having regard however to section 49(3) in particular, we consider that if the commissioner proposes to consider additional submissions by the applicanthe must give the authority notice of any relevant material adverse to their position and invite their comments.
Compliance with such an obligation will not impose an unreasonable burden on the commissioner, and is liable to improve the quality of his decisions as well as ensuring their fairness.
There are some important messages to be derived from that passage.
The Commissioner receives applications from ordinary members of the public.
They cannot be expected to have the expert knowledge of the FOISA and the DPA that he must have, nor should they be expected to instruct lawyers in order to exercise their rights.
So the Commissioner must be entitled, as are ombudsmen, to formulate the case on behalf of applicants.
He must also be entitled to make his own inquiries.
He is required by statute to seek the public authoritys observations upon the application.
The public authority are, however, much more likely to be aware of the legislation than is the applicant, so it is unlikely that the Commissioner will have to formulate their case for them.
But he must, of course, give them notice of any new material which his inquiries have elicited and which is adverse to their interests.
I would add that the Commissioner is fulfilling more than an administrative
function.
He is adjudicating upon competing claims.
And in Scotland, unlike England and Wales, there is no appeal to a tribunal which can decide questions of both fact and law.
The Commissioner is the sole finder of facts, with a right of appeal to the Inner House on a point of law only.
These factors clearly enhance his duty to be fair.
If wrong findings of fact are made as a result of an unfair process, the Inner House will not be able to correct them.
However, it does not follow that every communication passing between the Commissioner and the applicant, or between the Commissioner and third parties such as Members of the Scottish Parliament, has to be copied to the public authority.
I have set out the substance of the communications which were not copied to the Council in some detail in para 12 above.
It is clear that the Council was fully aware that the principal questions were whether these were personal data and, if so, whether condition 6 was made out.
It is also clear from the exchanges between Mr Irvine and the Council when Mr Irvine first made and renewed his request, that the Council was fully aware of the reasons why Mr Irvine wanted this information and the nature of his interest in it.
They knew all about his connection with Action4Equality, his blog, and the equal pay litigation.
They knew that this concerned the implementation of the Single Status (Equal Pay) Agreement.
They knew that he was alleging that other local authorities had made this information available without question.
The letters from the two MSPs added nothing to the argument.
In the circumstances, therefore, it was not a breach of the rules of natural justice for the Commissioner to refrain from copying the correspondence to the Council.
Conclusion
I would therefore dismiss this appeal.
| In May 2010 Mr Mark Irvine made requests under the Freedom of Information (Scotland) Act 2002 (FOISA) to the appellant, South Lanarkshire Council (the Council), for information about the number (but not the identity) of its employees in a particular post at particular points on the Councils pay scales.
His purpose was to investigate whether the appellants pay gradings favoured work traditionally done by men.
The Council refused his request on the ground that to comply with it would contravene the Data Protection Act 1998 (DPA).
Information is exempt from disclosure under the FOISA if it constitutes personal data under the DPA and disclosure would contravene any of the data protection principles in that act.
The DPA provides that personal data should not be processed unless at least one of the conditions set out in Schedule 2 is met.
The relevant condition, condition 6, would be satisfied if disclosure were necessary for the purposes of legitimate interests pursued by Mr Irvine, except where it would be unwarranted by reason of prejudice to the rights and freedoms of the data subjects.
Mr Irvine complained to the respondent, the Scottish Information Commissioner (the Commissioner), who investigated and then held that the Council should disclose the information Mr Irvine sought.
The Council appealed against this ruling to the Inner House of the Court of Session, alleging in addition that the Commissioner acted in breach of natural justice by failing to disclose to the Council certain communications sought and received by him in the course of his investigation.
The appeal was dismissed and the Council pursued a further appeal on both issues to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
It holds that the Commissioner was entitled to reach his conclusion that disclosure of the information should be given by the Council to Mr Irvine, and that there had been no breach of the rules of natural justice when the Commissioner did not copy the correspondence to the Council.
Lady Hale gives the only judgment.
The right to the disclosure of information under the FOISA did not trump the provisions of the DPA, which continued to protect the right to privacy with respect to the processing of personal data [6 7].
The conditions in Schedule 2 of the DPA applied to any kind of operation performed on personal
The word necessary was used in several of the conditions and likely to have the same meaning throughout.
Interpretation of this word had to be capable of applying equally well with each of the situations envisaged in the conditions, some of which involved compliance with legal obligations [8].
Condition 6 required three questions to be answered in relation to Mr Irvines request [18]: (i) Was Mr Irvine pursuing a legitimate interest or interests? (ii) Was the processing of the personal data necessary for the purposes of those interests? (iii) Was the processing unwarranted in this case by reason of prejudice to the rights and freedoms or legitimate interests of the employees? The European Court of Justice (ECJ) had confirmed that Council Directive 95/46/EC (to which the DPA gives effect in the United Kingdom), insofar as it governs the processing of personal data which is likely to infringe fundamental freedoms, in particular the right to privacy, should be interpreted in the light of fundamental rights.
National legislation which was incompatible with the right to privacy secured by Article 8 of the European Convention on Human Rights would not satisfy the requirements of the Directive [20 22].
The concept of necessity had its own independent meaning, although the ECJ had not supplied a definition.
The Council argued on the appeal that there was a strict test of necessity and that questions of proportionality only came into other aspects of the conditions [23].
The Supreme Court agreed that the word necessary had to be considered in relation to the processing to which it relates, but condition 6 had a counterbalance with the rights and interests of the data subjects built into it and it might not matter where the proportionality requirements of Article 8(2) were considered as long as the overall result was compliant with them [25].
In this case, where the identity of the employees would not be revealed, it was difficult to see how there would be any interference with their rights to privacy and it was enough to apply condition 6 in its own terms [26].
It was well established in community law that, in the context of justification, necessary meant reasonably rather than absolutely or strictly necessary.
It formed part of the proportionality test and any measure which interfered with a right protected by community law must be the least restrictive for the achievement of a legitimate aim [27].
The Commissioner, in applying a proportionality approach to the meaning of necessary in condition 6, had adopted a test which was probably more favourable to the Council than was required and certainly no less favourable.
It was quite clear that he was entitled to reach the conclusion that he did [28].
On the second aspect of the appeal, it was common ground that the Commissioner had a duty to act fairly, especially as the sole finder of facts.
He was entitled to make his own inquiries and obliged to give notice to the public authority from which disclosure of information was being sought under the FOISA of any new material elicited by his inquiries which was adverse to its interests [29 31].
In this case the material contained in the correspondence generated by the Commissioners enquiries was already known to the Council and it was not a breach of the rules of natural justice for the Commissioner to refrain from copying it to the Council [32 33].
|
This appeal is about an alleged corporate raid.
According to the judgment of Mann J, at para 224, this expression is a loose, convenient and pejorative shorthand which can be applied to a variety of situations, but in this case means an attempt to exploit a minority shareholding in a company to obtain effective management or voting control without paying what other shareholders would regard as a proper price.
I shall use the expression in that sense in spite of its pejorative overtones, but only because it is convenient.
One of the tools available to a public company seeking to resist the covert acquisition of control by raiders is a statutory disclosure notice calling for information about persons interested in its shares.
There are statutory provisions empowering the court to restrict the exercise of rights attaching to shares if those interested in them fail to comply with a disclosure notice.
But it is common for the articles of a public company to empower the board to impose such restrictions.
The questions at issue on this appeal affect companies which have adopted powers of this kind in their articles.
They are, in bald summary, what are the proper purposes for which the board may restrict the exercise of rights attaching to shares, and in what circumstances can the restrictions be challenged on the ground that they were imposed for a collateral purpose?
JKX Oil & Gas Plc is an English company listed on the London Stock Exchange.
It is the parent company of a group whose business consists in the development and exploitation of oil and gas reserves, primarily in Russia and the Ukraine.
For reasons which are disputed, and for present purposes irrelevant, the company has not prospered of late.
Its difficulties have been reflected in its share price which has fallen to historically low levels.
In 2013, the directors of JKX perceived that it had become the target of a raid by two companies, Eclairs and Glengary, both incorporated in the British Virgin Islands.
Eclairs is a company controlled by trusts associated with Mr Igor Kolomoisky and Mr Gennadiy Bogolyubov.
Mr Kolomoisky is a prominent Ukrainian businessman and politician and Mr Bogolyubov is his business associate.
Eclairs beneficially owns some 47m shares amounting to 27.55% of the issued share capital of JKX.
Glengary is a company controlled by Mr Alexander Zhukov in which his right hand man Mr Ratskevych also has a small holding.
The company beneficially owns 19m shares amounting to 11.45% of the issued share capital of JKX.
The judge found that Mr Kolomoisky and Mr Bogolyubov had a reputation as corporate raiders.
Rather less is known about Mr Zhukov, but the directors of JKX believed him to have had business dealings with Mr Kolomisky in the past.
Between 2010 and 2012, JKX was trying to raise capital.
It encountered some difficulty in raising it from banks and other financial institutions, partly because of the risks associated with investment in the Ukraine, and partly because Mr Kolomoiskys substantial stake in the company proved to be a deterrent.
A number of proposals were made for raising capital by the issue and allotment of new shares, but these failed because Mr Kolomoisky opposed them.
They would have required shareholders special resolutions, and Eclairs holding constituted a blocking minority.
On 7 March 2013, Eclairs wrote to JKX calling upon it to convene an extraordinary general meeting to consider ordinary resolutions for the removal of the Chief Executive Dr Davies and the Commercial Director Mr Dixon from the board, and the appointment of three new directors.
Enquiries suggested that this move had been concerted between Mr Kolomoisky and Mr Zhukov, and that the proposed new directors were associates of theirs.
Newspapers in the Ukraine reported that Mr Kolomoisky was trying to take control of JKXs principal Ukrainian subsidiary.
The company received Eclairs request on 15 March 2013.
Its response was to issue five disclosure notices between 20 and 26 March.
On the Eclairs side, they were addressed to Eclairs and Mr Bogolyubov, and on the Glengary side to Glengarry, Mr Zhukov and Mr Ratskevych.
On 13 May 2013, further disclosure notices were issued to the same addressees as the March notices plus, on the Eclairs side, Mr Kolomoisky.
The notices requested information about the number of shares held, their beneficial ownership and any agreements or arrangements between the various persons interested in them.
The responses, which were received promptly, admitted the existence of interests in JKX shares, but denied that the addressees were party to any agreement or arrangement among themselves.
On 23 April 2013, the company convened an AGM for 5 June 2013.
The business included the re election of Dr Davies, the approval of the directors remuneration report and three resolutions empowering the board to allot shares for cash, to disapply statutory pre emption rights upon the allotment of shares, and to make market purchases of the companys shares.
On 23 May 2013, Eclairs published an advertisement in the Financial Times and an open letter to shareholders.
In these documents, shareholders were invited to oppose the above five proposed resolutions.
Since the resolutions to authorise market purchases and to disapply pre emption rights required a special resolution, this meant that as matters stood they were certain to fail.
The other resolutions required only an ordinary resolution but would be difficult to get through in the face of opposition from two blocks together controlling 39% of the company.
The responses to the second batch of disclosure notices were received on 27 and 28 May 2013.
On 30 May, a board meeting was held.
One director (Mr Miller) was absent, but had given instructions to the chairman as to how he wished to vote, and two others (Dr Davies and Mr Dixon) recused themselves and took no part in the proceedings.
The remaining directors considered that the responses to the notices were inadequate because they believed that there were agreements or arrangements between the addressees which they had not disclosed.
They resolved to issue restriction notices under powers conferred on the board by the companys articles on the 47m shares in which Eclairs was interested and the 19m shares in which Glengary was interested.
The effect of the restriction notices was to suspend the right to vote at general meetings attaching to these shares and to restrict the right of transfer.
On 4 June 2013, the day before the AGM, Eclairs and Glengary began separate proceedings in the Chancery Division challenging the restriction notices.
A number of grounds were advanced, most of which were rejected by Mann J and have now fallen away.
The one ground which subsists and is now before this court is that the board acted for a collateral, and therefore improper, purpose.
It was contended that the only proper purpose for which the power could be exercised was to extract the information, and that the real purpose of the board had been to ensure that the resolutions at the forthcoming AGM would be passed.
In the event, the company gave undertakings to David Richards J on the day that the proceedings were commenced, the effect of which was to allow the votes attaching to the 47m and 19m shares to be cast on the resolutions without prejudice to their validity.
Disclosure notices
The power to issue a statutory disclosure notice originates in section 27 of the Companies Act 1976.
That provision was subsequently replaced by section 74 of the Companies Act 1981, and then by section 212 of the Act of 1985.
It is now contained in section 793 of the Companies Act 2006.
Section 793 empowers a public company to issue a disclosure notice to any person whom it knows or reasonably believes to be interested in its shares.
The notice may require that person to disclose (among other things) whether or not it is interested in shares, the nature of that interest if there is one, and whether any persons interested are party to any agreement for the acquisition of interests in shares or the exercise of any rights conferred by the holding of shares.
Sections 820 825 of the 2006 Act contain very broadly framed provisions for determining when a person is to be regarded as interested in shares for these purposes.
It extends to any legal or equitable interest, or any right to exercise or control the exercise of any right attaching to shares, or any such right or interest vested in a company under a persons control or in specified categories of close relative, or any control or influence arising from an agreement for the acquisition of shares.
Under the statute, the failure of a person interested in shares to comply with a disclosure notice may result in the restriction of the rights conferred by those shares.
Section 794(1) provides: 794 Notice requiring information: order imposing restrictions on shares Where a notice under section 793 (notice requiring (a) information about interests in companys shares) is served by a company on a person who is or was interested in shares in the company, and (b) that person fails to give the company the information required by the notice within the time specified in it, the company may apply to the court for an order directing that the shares in question be subject to restrictions.
For the effect of such an order see section 797.
Section 797 identifies the restrictions as being that any transfer of the shares is void, no voting rights are exercisable, no further shares may be issued in right of the shares or pursuant to an offer made to their holder, and except in a liquidation no payment of capital or income may be made on the shares.
In the case of JKX, corresponding powers were conferred on the board by article 42, which empowered the board to issue a restriction notice whenever a statutory disclosure notice had been issued under section 793 and had not been complied with.
It provided (so far as relevant): (2) Notwithstanding anything in these articles to the contrary, if (a) a disclosure notice has been served on a member or any other person appearing to be interested in the specified shares, and (b) the Company has not received (in accordance with the terms of such disclosure notice) the information required therein in respect of any of the specified shares within 14 days after the service of such disclosure notice, then the board may (subject to para 7 below) determine that the member holding the specified shares shall, upon the issue of a restriction notice referring to those specified shares in respect of which information has not been received, be subject to the restrictions referred to in such restriction notice, and upon the issue of such restriction notice such member shall be so subject.
As soon as practicable after the issue of a restriction notice the Company shall serve a copy of the notice on the member holding the specified shares. (3) The restrictions which the board may determine shall apply to restricted shares pursuant to this article shall be one or more, as determined by the board, of the following: that no transfer of the restricted shares shall be (a) that the member holding the restricted shares shall not be entitled, in respect of the restricted shares, to attend or be counted in the quorum or vote either personally or by proxy at any general meeting or at any separate meeting of the holders of any class of shares or upon any poll or to exercise any other right or privilege in relation to any general meeting or any meeting of the holders of any class of shares, (b) effective or shall be registered by the Company, (c) that no dividend (or other moneys payable) shall be paid in respect of the restricted shares and that, in circumstances where an offer of the right to elect to receive shares instead of cash in respect of any dividend is or has been made, any election made thereunder in respect of such specified shares shall not be effective. (4) The board may determine that one or more of the restrictions imposed on restricted shares shall cease to apply at any time.
If the Company receives in accordance with the terms of the relevant disclosure notice the information required therein in respect of the restricted shares all restrictions imposed on the restricted shares shall cease to apply seven days after receipt of the information.
Article 42 differs in a number of respects from sections 794 800 of the Companies Act 2006, notably in vesting the power to impose restrictions on the board instead of the court.
It also contains a definition section which specifies the circumstances in which the board is entitled to treat a response to the notice as non compliant.
Article 42(1)(j) provides: (j) for the purposes of paragraphs (2)(b) and (4) of this article the Company shall not be treated as having received the information required by the disclosure notice in accordance with the terms of such disclosure notice in circumstances where the board knows or has reasonable cause to believe that the information provided is false or materially incorrect.
These were the powers which the board of JKX purported to exercise at their meeting on 30 May 2013 and which are now challenged.
The proper purpose rule
Part 10, Chapter 2 of the Companies Act 2006 codified for the first time the general duties of directors.
The proper purpose rule is stated in section 171(b) of the 2006 Act, which provides that a director of a company must only exercise powers for the purposes for which they are conferred.
The rule thus stated substantially corresponds to the equitable rule which had for many years been applied to the exercise of discretionary powers by trustees.
It is a principle in this court, Sir James Wigram V C had observed in Balls v Strutt (1841) 1 Hare 146, that a trustee shall not be permitted to use the powers which the trust may confer upon him at law, except for the legitimate purposes of the trust.
Like other general duties laid down in the Companies Act 2006, this one was declared to be based on certain common law rules and equitable principles as they apply in relation to directors and have effect in place of those rules and principles as regards the duties owed to a company by a director: section 170(3).
Section 170(4) accordingly provides that the general duties are to be interpreted and applied in the same way as common law rules or equitable principles, and regard shall be had to the corresponding rules and equitable principles in interpreting and applying the general duties.
The proper purpose rule has its origin in the equitable doctrine which is known, rather inappropriately, as the doctrine of fraud on a power.
For a number of purposes, the early Court of Chancery attached the consequences of fraud to acts which were honest and unexceptionable at common law but unconscionable according to equitable principles.
In particular, it set aside dispositions under powers conferred by trust deeds if, although within the language conferring the power, they were outside the purpose for which it was conferred.
So far as the reported cases show the doctrine dates back to Lane v Page (1754) Amb 233 and Aleyn v Belchier (1758) 1 Eden 132, 138, but it was clearly already familiar to equity lawyers by the time that those cases were decided.
In Aleyns Case, Lord Northington could say in the emphatic way of 18th century judges that no point was better established.
In Duke of Portland v Topham (1864) 11 HLC 32, 54 Lord Westbury LC stated the rule in these terms: that the donee, the appointor under the power, shall, at the time of the exercise of that power, and for any purpose for which it is used, act with good faith and sincerity, and with an entire and single view to the real purpose and object of the power, and not for the purpose of accomplishing or carrying into effect any bye or sinister object (I mean sinister in the sense of its being beyond the purpose and intent of the power) which he may desire to effect in the exercise of the power.
The principle has nothing to do with fraud.
As Lord Parker of Waddington observed in delivering the advice of the Privy Council in Vatcher v Paull [1915] AC 372, 378, it does not necessarily denote any conduct on the part of the appointor amounting to fraud in the common law meaning of the term or any conduct which could be properly termed dishonest or immoral.
It merely means that the power has been exercised for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power.
The important point for present purposes is that the proper purpose rule is not concerned with excess of power by doing an act which is beyond the scope of the instrument creating it as a matter of construction or implication.
It is concerned with abuse of power, by doing acts which are within its scope but done for an improper reason.
It follows that the test is necessarily subjective.
Where the question is one of abuse of powers, said Viscount Finlay in Hindle v John Cotton Ltd (1919) 56 Sc LR 625, 630, the state of mind of those who acted, and the motive on which they acted, are all important.
A company director differs from an express trustee in having no title to the companys assets.
But he is unquestionably a fiduciary and has always been treated as a trustee for the company of his powers.
Their exercise is limited to the purpose for which they were conferred.
One of the commonest applications of the principle in company law is to prevent the use of the directors powers for the purpose of influencing the outcome of a general meeting.
This is not only an abuse of a power for a collateral purpose.
It also offends the constitutional distribution of powers between the different organs of the company, because it involves the use of the boards powers to control or influence a decision which the companys constitution assigns to the general body of shareholders.
Thus in Fraser v Whalley (1864) 2 H & M 10, the directors of a statutory railway company were restrained from exercising a power to issue shares for the purpose of defeating a shareholders resolution for their removal.
In Cannon v Trask (1875) LR 20 Eq 669, which concerned the directors powers to fix a time for the general meeting, Sir James Bacon VC held that it was improper to fix a general meeting at a time when hostile shareholders were known to be unable to attend.
In Anglo Universal Bank v Baragnon (1881) 45 LT 362, Sir George Jessel MR held that if it had been proved that the power to make calls was being exercised for the purpose of disqualifying hostile shareholders at a general meeting, that would be an improper exercise of the directors powers.
In Hogg v Cramphorn Ltd [1967] 1 Ch 254, Buckley J held that the directors powers to issue shares could not properly be exercised for the purpose of defeating an unwelcome takeover bid, even if the board was genuinely convinced, as the current management of a company commonly is, that the continuance of its own stewardship was in the companys interest.
The companys interest was an additional and not an alternative test for the propriety of a board resolution.
In all of these cases, either there was no dispute about the directors purpose or else the only purpose which could plausibly be ascribed to them was an improper one.
But what if there are multiple purposes, all influential in different degrees but some proper and others not? An analogy with public law might suggest that a decision which has been materially influenced by a legally irrelevant consideration should generally be set aside, even if legally relevant considerations were more significant: R(FDA) v Secretary of State for Work and Pensions [2013] 1 WLR 444, at paras 67 69 (per Lord Neuberger of Abbotsbury MR).
In some contexts, such as rescission for deceit or breach of the rules relating to self dealing, equity is at least as exacting.
But the proper purpose rule, at any rate as applied in company law, has developed in a different direction.
Save perhaps in cases where the decision was influenced by dishonest considerations or by the personal interest of the decision maker, the directors decision will be set aside only if the primary or dominant purpose for which it was made was improper.
To some extent this is a pragmatic response to the range of a directors functions and the conflicts which are sometimes inseparable from his position.
The main reason, however, is a principled concern of courts of equity not just to uphold the integrity of the decision making process, but to limit its intervention in the conduct of a companys affairs to cases in which an injustice has resulted from the directors having taken irrelevant considerations into account.
In his seminal judgment in the High Court of Australia in Mills v Mills (1938) 60 CLR 150, 185 186, Dixon J pointed out the difficulties associated with too rigorous an application of the public law test to the decisions of directors: it may be thought that a question arises whether there must be an entire exclusion of all reasons, motives or aims on the part of the directors, and all of them, which are not relevant to the purpose of a particular power.
When the law makes the object, view or purpose of a man, or of a body of men, the test of the validity of their acts, it necessarily opens up the possibility of an almost infinite analysis of the fears and desires, proximate and remote, which, in truth, form the compound motives usually animating human conduct.
But logically possible as such an analysis may seem, it would be impracticable to adopt it as a means of determining the validity of the resolutions arrived at by a body of directors, resolutions which otherwise are ostensibly within their powers.
The application of the general equitable principle to the acts of directors managing the affairs of a company cannot be as nice as it is in the case of a trustee exercising a special power of appointment.
It must, as it seems to me, take the substantial object the accomplishment of which formed the real ground of the boards action.
If this is within the scope of the power, then the power has been validly exercised.
Once one accepts the need to compare the relative significance of different considerations which influenced the directors, the question inevitably arises what is the primary or dominant purpose, and how is it to be identified.
One possibility is that it is the weightiest purpose, ie the one about which the directors felt most strongly.
The other is that it is the purpose which caused the decision to be made as it was.
Of course, the two things are connected.
The ordinary inference is that the weightiest purpose (in this sense) will also have been causative, and that minor purposes will not have been.
In most cases the two tests will in practice lead to the same result.
But that will not always be so and, as will be seen, it is not necessarily the case here.
The first test seems to me to be difficult to justify, for reasons of both practicality and principle.
The practical difficulty was pointed out by Dixon J in the passage which I have quoted.
It would involve a forensic enquiry into the relative intensity of the directors feelings about the various considerations that influenced them.
A director may have been influenced by a number of factors, but if they all point in the same direction he will have had no reason at the time to arrange them in order of importance.
The attempt to do so later in the course of the dispute is likely to be both artificial and defensive.
Moreover, a realistic appreciation of the directors position will show that it is liable to lead to the wrong answer.
Directors of companies cannot be expected to maintain an unworldly ignorance of the consequences of their acts or a lofty indifference to their implications.
A director may be perfectly conscious of the collateral advantages of the course of action that he proposes, while appreciating that they are not legitimate reasons for adopting it.
He may even enthusiastically welcome them.
It does not follow without more that the pursuit of those advantages was his purpose in supporting the decision.
All of these problems are aggravated where there are several directors, each with his own point of view.
The fundamental point, however, is one of principle.
The statutory duty of the directors is to exercise their powers only for the purposes for which they are conferred.
That duty is broken if they allow themselves to be influence by any improper purpose.
If equity nevertheless allows the decision to stand in some cases, it is not because it condones a minor improper purpose where it would condemn a major one.
It is because the law distinguishes between some consequences of a breach of duty and others.
The only rational basis for such a distinction is that some improprieties may not have resulted in an injustice to the interests which equity seeks to protect.
Here, we are necessarily in the realm of causation.
The question is which considerations led the directors to act as they did.
In Hindle v John Cotton Ltd (1919) 56 Sc LR 625, 631, Lord Shaw referred to the moving cause of the decision, a phrase taken up by Latham CJ in Mills v Mills, supra, at p 165.
But this cryptic formula does not help much in a case where the board was concurrently moved by multiple causes, some proper and some improper.
One has to focus on the improper purpose and ask whether the decision would have been made if the directors had not been moved by it.
If the answer is that without the improper purpose(s) the decision impugned would never have been made, then it would be irrational to allow it to stand simply because the directors had other, proper considerations in mind as well, to which perhaps they attached greater importance.
This was the point made by Dixon J in the passage immediately following the one which I have cited from his judgment in Mills v Mills But if, except for some ulterior and illegitimate object, the power would not have been exercised, that which has been attempted as an ostensible exercise of the power will be void, notwithstanding that the directors may incidentally bring about a result which is within the purpose of the power and which they consider desirable.
Correspondingly, if there were proper reasons for exercising the power and it would still have been exercised for those reasons even in the absence of improper ones, it is difficult to see why justice should require the decision to be set aside.
Dixon Js formulation has proved influential in the courts of Australia.
As the majority (Mason, Deane and Dawson JJ) pointed out in the High Court of Australia in Whitehouse v Carlton House Pty (1987) 162 CLR 285, 294: As a matter of logic and principle, the preferable view would seem to be that, regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes, the allotment will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, the power would not have been exercised.
I thing that this is right.
It is consistent with the rationale of the proper purpose rule.
It also corresponds to the view which courts of equity have always taken about the exercise of powers of appointment by trustees: see Birley v Birley (1858) 25 Beav 299, 307 (Sir John Romilly MR), Pryor v Pryor (1864) 2 De G J & S 205, 210 (Knight Bruce LJ), Re Turners Settled Estates (1884) 28 Ch D 205, 217, 219, Roadchef (Employee Benefits Trustees) Ltd v Hill [2014] EWHC 109 (Ch), para 130, and generally Thomas on Powers, 2nd ed (2012), paras 9.85 9.89.
The leading modern case is Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821, a decision of the Privy Council on appeal from New South Wales, which proceeded on the basis that the law was the same in England and in New South Wales.
It was another case of a board decision to issue and allot new shares against the background of a takeover bid, although rather unusually it was the directors who wanted the bid to succeed over the opposition of two existing shareholders who together held a majority of the shares.
Delivering the advice of the Privy Council, Lord Wilberforce observed at p 834: The directors, in deciding to issue shares, forming part of Millers unissued capital, to Howard Smith acted under clause 8 of the companys articles of association.
This provides, subject to certain qualifications which have not been invoked, that the shares shall be under the control of the directors, who may allot or otherwise dispose of the same to such persons on such terms and conditions and either at a premium or otherwise and at such time as the directors may think fit.
Thus, and this is not disputed, the issue was clearly intra vires the directors.
But, intra vires though the issue may have been, the directors power under this article is a fiduciary power: and it remains the case that an exercise of such a power though formally valid, may be attacked on the ground that it was not exercised for the purpose for which it was granted.
The main interest of the decision for present purposes lies in the fact that it was a case of multiple concurrent purposes.
The company was genuinely in need of fresh capital, and the directors had received legal advice that this was the only ground on which they could properly authorise an issue of shares.
The number of shares to be issued and the amount of the subscription had been carefully calculated to match the companys capital requirements.
After a trial lasting 28 days in which the four directors supporting the share issue gave evidence, Street J had found that the companys need for capital, although urgent, was not yet critical and that its normal practice had been to meet its capital requirements by borrowing rather than issuing shares.
For this reason he rejected the evidence of the four directors that their sole purpose was to meet the companys shortage of capital and found that their primary purpose was in fact to dilute the shareholdings of those who opposed the bid.
Lord Wilberforce adopted the primary purpose test which had been applied by the judge (p 832B C) and affirmed his decision (p 832F H): when a dispute arises whether directors of a company made a particular decision for one purpose or for another, or whether, there being more than one purpose, one or another purpose was the substantial or primary purpose, the court, in their Lordships opinion, is entitled to look at the situation objectively in order to estimate how critical or pressing, or substantial or, per contra, insubstantial an alleged requirement may have been.
If it finds that a particular requirement, though real, was not urgent, or critical, at the relevant time, it may have reason to doubt, or discount, the assertions of individuals that they acted solely in order to deal with it, particularly when the action they took was unusual or even extreme.
Lord Wilberforce did not express the point in terms of causation, but it is I think clear that by the substantial or primary purpose, he meant the purpose which accounted for the boards decision.
He approved the judges adoption of Dixon Js test (pp 831 832), and went on to adopt an analysis of the facts based on that test.
Although the directors were influenced by the companys need for capital, the decisive factor in Howard Smith Ltd v Ampol Petroleum Ltd was that but for their desire to convert the majority shareholders into a minority, the directors would not have sought to raise capital by means of a share issue, nor at that point of time.
The judgment of Mann J
In Mann Js view, the only purpose for which the power to impose restrictions was conferred by article 42 was to provide a sanction or an incentive to remedy the default (para 206).
In a meticulous judgment he went on to make the following findings of fact, at paras 168 79 and 183 200: (1) He expressed no view of his own on the merits of the dispute between the company and Messrs Kolomoisky and Bogolyubov and their associates.
But he found that the board had reasonable cause to believe (whether or not it was right) that they were parties to an agreement or arrangement relating to shares in JKX with a view to carrying out a raid on the company.
The board believed that the objective of the raiders was to depress the value of the shares so as to enable them to buy other shares more cheaply and eventually to take control of the companys Ukrainian subsidiary.
They regarded the removal of Dr Davies and Mr Dixon and their replacement by inexperienced associates of the raiders as part of that plan.
They therefore had reasonable cause to believe that the answers to the disclosure notices had been false. (2) Of the seven directors who took part in the decision, six gave evidence and were cross examined.
The seventh was not cross examined in relation to purpose for want of time, and no point was taken on that.
Of the six, one was found to have had the primary purpose of extracting the information from the addressees of the disclosure notices.
Another took a balanced view which attached substantially the same importance to extracting the information and preventing the raiders from voting against the resolutions at the AGM.
The judge summarised the motives of the other four as follows (para. 189): While they may (and in all probability actually did) appreciate that the restrictions would have to be lifted if the information was provided, they did not regard the ability to impose restrictions as being one designed to protect the company pending the provision of information; they regarded it as one which they could use, and did actually use, to get an advantage (the opportunity to pass the resolutions) for its own sake, not linked to the extraction of information.
Putting the matter another way, they did not regard the opportunity to get special resolutions passed which would otherwise not be passed (and the increased chance of getting the ordinary ones passed too) as an incidental benefit of imposing restrictions as an incentive to provide information; they elevated it in their minds, and in their purposes, to something with its own independent merit as a way of doing down the raiders for the benefit of the shareholders. (3) The judge concluded (para. 200): The differences between relevant states of mind can be quite subtle in this situation, but I find that the evidence demonstrates that the following purposes, beliefs and states of mind existed among the voting directors: (a) They all knew that the purpose of the notices was to get information. (b) They all appreciated that the effect of restrictions would be (unless the information was provided before the AGM) that Eclairs/Glengary would be prevented from voting, with the effect that all the resolutions would be likely to be passed, or that there was a very enhanced prospect of that happening. (c) They all saw that as operating for the benefit of the company as a whole, and as hindering the cause of the raiders. (d) The majority of the voting directors (Mrs Dubin, Mr Moore, Mr Miller and Lord Oxford) saw that as a sort of standalone proper and useful objective, and achieving it was a substantial purpose of voting for the restrictions, separate from the need to have information.
Those directors did not have in mind the protection of the company pending the provision of the information; they had in mind protecting the company full stop.
The restrictions were thus a useful weapon the raiders.
The disenfranchisement of the raiders at the AGM was not just an incidental effect of the imposition of restrictions; it was the positively desired effect, seen as beneficial to the company in the long term. (e) The bona fides of those directors, and the genuineness of their desire to benefit the company as a whole, was not challenged, and in my view cannot be challenged. to be used against (4) It followed that the primary purpose of the board in issuing the restriction notices was to influence or determine the fate of the resolutions before the AGM.
The directors took the opportunity of using the power to alter the potential votes at the forthcoming AGM in order to maximise the chances of the resolutions being passed in a manner which they thought was in the best interests of the Company (para 227).
Since this was beyond the purpose for which the power to impose restrictions was conferred, he set aside the restriction notices and the board resolutions authorising them with effect from the time that they were made.
In the course of final speeches, the judge raised with the parties the question whether the board would have reached the same decision even if they had not taken account of the impact of the restriction notices on the resolutions at the AGM.
On the basis of what I heard, and the shape of the case before me he said, he thought it likely, and to be frank virtually inevitable that the board would have reached the same conclusion and imposed the same restrictions even if they had confined themselves to the proper purpose of inducing the addressees of the disclosure notices to comply with them and imposing sanctions for their failure to do so to date.
He provisionally concluded that on this alternative factual hypothesis the court would have had a discretion whether to set aside the board resolution and restriction notices, which it might have exercised in favour of the company.
The alternative factual hypothesis had not, however, been pleaded or addressed by the relevant witnesses and had formed no part of the companys case.
For this reason the judge, having raised the point, refused to allow the company to take it at that late stage.
He put the position as follows (para 232): on the evidence that I have heard, I find it very hard indeed to believe that the directors would have come to any different conclusion.
I deal with this in a short section below in which I consider the facts.
However, in circumstances in which the directors have not made such a case in their own evidence in chief (or in the pleadings of the company), it would, in the end, be a step too far to allow them to say my purpose was X, but if I had been told that that was an improper purpose and I had to consider a legitimate purpose Y, I would have arrived at the same decision.
If that were to be their case then it should have been positively advanced at some stage during the hearing.
Although on the evidence I heard I find it difficult to see that the directors would have come to a different decision, none the less I can see that the claimants might have wished to have advanced their case differently, perhaps devoting more attention to the earlier events leading up to the service of the notices and what happened, and what the thinking was, between then and the board meeting.
The short section below was paras 235 237.
In these paragraphs, the judge summarised what he would have found if he had allowed the company to advance the alternative factual hypothesis and had been obliged to deal with it on the basis of the existing evidence.
He appears to have done this in case there was an appeal against his refusal to allow the point to be taken.
In the event, however, there was no appeal on that point.
The judgments of the Court of appeal
The appeals were heard by Longmore and Briggs LJJ and Sir Robin Jacob.
There was no challenge to the judges findings of fact.
The appeal revolved entirely around their legal significance.
By a majority, the court allowed the appeal.
The majority (Longmore LJ and Sir Robin Jacob) considered that the proper purpose doctrine had no significant place in the operation of article 42 or Part 22 of the 2006 Act (para 138).
They appear to have reached this conclusion for three overlapping reasons.
The first was that restrictions arising from a shareholders failure to comply with a disclosure notice did not reflect a unilateral exercise of power by the board.
By this they meant that the shareholder could avoid the restrictions by complying with the disclosure notice.
Why should the law protect him when all he had to do was tell the truth? (para 136).
Their second reason was that the restrictions on the voting and other rights attaching to the shares was the very thing that article 42 was designed to permit if the directors reasonably considered that the disclosure notices had not been complied with.
So once the board had reached that conclusion, there was no further limitation on their power to issue a restriction notice.
The majoritys third reason was that no limitation on the proper purpose of a restriction notice was expressed, either in Part 22 of the 2006 Act or in article 42 of JKXs articles.
In their view there was no room for the implication of such a purpose, because in the nature of things the statutory disclosure procedure was most likely to be operated at a time of controversy in the companys affairs.
They thought, at para 141, that the draftsman was unlikely to have intended a detailed enquiry into the minds of directors in what may often be a rapidly changing scene; and, at para 142, that in a battle for control against predators who were up to something subversive but secret the directors would naturally want to see them disenfranchised.
In their view, the result of applying the proper purpose rule would be to emasculate the statutory scheme and the corresponding provisions of article 42.
Underlying much of this reasoning was the view expressed in their peroration, that any other view would only be an encouragement to deceitful conduct and not something which English company law should countenance (para 143).
In a formidable dissent, Briggs LJ set out the rationale for the proper purpose test and the authorities for its application to the exercise of discretionary powers by companies.
He accepted the view of Mann J that the purpose of article 42 was to encourage or coerce the provision of information which had been requested under section 793, with the rider that it was also to prevent the accrual of any unfair advantage to any person as a result of the failure to comply with such a request.
Even with that limited expansion, on the judges findings of fact the directors decision to impose restrictions under article 42 was improper, and there were no satisfactory reasons why the rule should not be applied to the draconian powers conferred by article 42 of JKXs articles.
He added (para 122): Furthermore, I consider it important that the court should uphold the proper purpose principle in relation to the exercise of fiduciary powers by directors, all the more so where the power is capable of affecting, or interfering with, the constitutional balance between shareholders and directors, and between particular groups of shareholders.
The temptation on directors, anxious to protect their company from what they regard as the adverse consequences of a course of action proposed by shareholders, to interfere in that way, whether by the issue of shares to their supporters, or by disenfranchisement of their opponents shares, may be very hard to resist, unless the consequences of improprieties of that kind are clearly laid down and adhered to by the court.
The proper purpose of article 42
The submission of Mr Swainston QC, who appeared for the company, was that where the purpose of a power was not expressed by the instrument creating it, there was no limitation on its exercise save such as could be implied on the principles which would justify the implication of a term.
In particular, the implication would have to be necessary to its efficacy.
In my view, this submission misunderstands the way in which purpose comes into questions of this kind.
It is true that a companys articles are part of the contract of association, to which successive shareholders accede on becoming members of the company.
I do not doubt that a term limiting the exercise of powers conferred on the directors to their proper purpose may sometimes be implied on the ordinary principles of the law of contract governing the implication of terms.
But that is not the basis of the proper purpose rule.
The rule is not a term of the contract and does not necessarily depend on any limitation on the scope of the power as a matter of construction.
The proper purpose rule is a principle by which equity controls the exercise of a fiduciarys powers in respects which are not, or not necessarily, determined by the instrument.
Ascertaining the purpose of a power where the instrument is silent depends on an inference from the mischief of the provision conferring it, which is itself deduced from its express terms, from an analysis of their effect, and from the courts understanding of the business context.
The purpose of a power conferred by a companys articles is rarely expressed in the instrument itself.
It was not expressed in the instrument in any of the leading cases about the application of the proper purpose rule to the powers of directors which I have summarised.
But it is usually obvious from its context and effect why a power has been conferred, and so it is with article 42.
Article 42(2) authorises the issue of a restriction notice only in the event that a disclosure notice has been issued under section 793 of the 2006 Act and the company has received either no response or a response which it knows or has reasonable cause to believe is false or materially incorrect.
Under article 42(4) in the event that the information is supplied after the restrictions have been imposed (ie that a response has been received which the directors have no reasonable cause to regard as wrong), they are automatically lifted seven days thereafter.
Any dividends or other payments in respect of the shares which were withheld while the restrictions were in force will then become payable under article 42(6).
As Millett J observed in In re Ricardo Group Plc [1989] BCLC 566, 572 about the corresponding power of the court to impose restrictions under what was then section 216 and Part XV of the Companies Act 1985, these restrictions are granted as a sanction to compel the provision of information to which the company is entitled.
It follows, in my judgment, that once the information is supplied, any further justification for the continuance of the sanction disappears.
The inescapable inference is that the power to restrict the rights attaching to shares is wholly ancillary to the statutory power to call for information under section 793.
It follows that I accept the view of Mann J that the purpose of article 42 is to provide a sanction or incentive to remedy a failure to comply with the disclosure notice.
But I would not limit it to inducing the defaulter to comply, any more than I believe Mann J to have done in this case or Millett J in In re Ricardo Group.
Otherwise the board would be disabled from imposing restrictions in a case where the defiant obduracy of the defaulter made it obvious that the restrictions would not produce compliance.
I would therefore identify the purpose in slightly different terms.
In my view article 42 has three closely related purposes.
The first is to induce the shareholder to comply with a disclosure notice.
This is the purpose which Millett J and Mann J regarded the restrictions as serving, and it is the least that they can have been intended to achieve.
Secondly, the article is intended to protect the company and its shareholders against having to make decisions about their respective interests in ignorance of relevant information.
As Hoffmann J observed in In re TR Technology Investment Trust Plc [1988] BCLC 256, 276, the company, through its existing board, is given the unqualified right to insist that contests for the hearts and minds of shareholders are conducted with cards on the table.
Thirdly, the restrictions have a punitive purpose.
They are imposed as sanctions on account of the failure or refusal of the addressee of a disclosure notice to provide the information for as long as it persists, on the footing that a person interested in shares who has not complied with obligations attaching to that status should not be entitled to the benefits attaching to the shares.
That is the natural inference from the range and character of restrictions envisaged in article 42(3), which affect not only the right to participate in the companys affairs by voting at general meetings, but the right to receive dividends.
These three purposes are all directly related to the non provision of information requisitioned by a disclosure notice.
None of them extends to influencing the outcome of resolutions at a general meeting.
That may well be a consequence of a restriction notice.
But it is no part of its proper purpose.
It is not itself a legitimate weapon of defence against a corporate raider, which the board is at liberty to take up independently of its interest in getting the information.
Basing himself on the observation of Hoffmann J in In re TR Technology Investment Trust Plc, Mr Swainston argued that the purpose of a restriction notice was related to the non provision of the information in a broader sense.
The argument was that for as long as the addressee of a disclosure notice failed to put his cards on the table, the directors were justified in treating the restrictions as a free standing technique for frustrating the raiders plans.
In my view this extends the purpose of a restriction notice beyond its proper limits.
It treats failure to comply with a disclosure notice as no more than a gateway or condition precedent to the directors right to impose and maintain the restrictions for any purpose which they bona fide conceived to be in the interests of the company, including securing their preferred outcome at the AGM.
But as the judge put it, at para 206, the non provision of information is not to be taken as a justification for opening up a new front against the predator with the benefit of a new weapon.
Otherwise, directors would be entitled to impose restrictions in a case where they attached no importance to the information requisitioned in the disclosure notice.
However difficult it may be to draw in practice, there is in principle a clear line between protecting the company and its shareholders against the consequences of non provision of the information, and seeking to manipulate the fate of particular shareholders resolutions or to alter the balance of forces at the companys general meetings.
The latter are no part of the purpose of article 42.
They are matters for the shareholders, not for the board.
We were pressed with a number of arguments about the purpose of article 42 based on an analogy with Part 22 of the Companies Act 2006.
I did not find these arguments helpful.
The two schemes are both directed at an assumed failure to comply with a statutory disclosure notice, and have a number of other points in common.
But they differ in a number of respects, some of them significant.
Arguments based on language which is to be found in the statute but not in the articles are unlikely to throw any light on the purpose of the latter.
Does the proper purpose rule apply?
At this stage, two preliminary observations are called for.
The first is that the imposition of restrictions under article 42 is a serious interference with financial and constitutional rights which exist for the benefit of the shareholder and not the company.
In the case of listed companies such as JKX a restriction notice is also an interference with the proper operation of the market in its shares, in which there is not only a private but a significant public interest.
One would expect such a draconian power to be circumscribed by something more than the directors duty to act in the companys interest as they may in good faith perceive it.
The second preliminary observation concerns the role of the proper purpose rule in the governance of companies.
The rule that the fiduciary powers of directors may be exercised only for the purposes for which they were conferred is one of the main means by which equity enforces the proper conduct of directors.
It is also fundamental to the constitutional distinction between the respective domains of the board and the shareholders.
These considerations are particularly important when the company is in play between competing groups seeking to control or influence its affairs.
The majority of the Court of Appeal were right to identify this as the background against which disclosure notices are commonly issued.
But they drew the opposite conclusion from the one which I would draw.
They seem to have thought it unrealistic, indeed undesirable, against that background to expect directors to distinguish between the proper purpose of enforcing the disclosure notice and the improper purpose of defeating the ambitions of one group of shareholders.
I find this surprising.
The decision to impose restrictions under article 42 requires the directors to recognise the difference between the purpose of a decision and its incidental consequence.
That certainly calls for care on their part and possibly for legal advice.
But there is nothing particularly special in this context about a decision to issue a restriction notice under a provision such as article 42.
The directors task is no more difficult than it was in the many cases like Howard Smith Ltd v Ampol Petroleum Ltd in which other fiduciary powers, such as the power to issue shares, have been held improperly exercised because in the face of pressures arising from a battle for control the directors succumbed to the temptation to use their powers to favour their allies.
I would agree with the majority of the Court of Appeal that in that situation the board would naturally wish to have the predators disenfranchised.
That is precisely why it is important to confine them to the more limited purpose for which their powers exist.
Of all the situations in which directors may be called upon to exercise fiduciary powers with incidental implications for the balance of forces among shareholders, a battle for control of the company is probably the one in which the proper purpose rule has the most valuable part to play.
I therefore approach with some scepticism the suggestion that in this of all contexts the proper purpose rule has no application.
Of the three reasons given by the majority of the Court of Appeal, I have already dealt with their second reason, which was essentially a slightly repackaged version of Mr Swainstons gateway argument, and with their third, which is that no limiting purpose can be implied in a case where the directors are likely to exercise their powers for the purpose of disenfranchising a predator.
I reject both of them as contrary to principle.
I would add that I am unimpressed by the suggestion that it is impractical to examine the state of mind of the directors in a rapidly changing situation such as a takeover bid or an attempted raid.
The present proceedings were begun on the day before the AGM.
The interests of both parties were sufficiently protected pending the decision by the orders made on the same day by David Richards J, and the dispute was heard by Mann J within seven weeks and decided within three months.
In some cases, for example where a tight timetable is imposed under the City Code on Takeovers and Mergers, it may be necessary to accelerate the procedure even more drastically, but the judges of the Chancery Division are perfectly capable of responding to these exigencies as they arise.
That brings me to the majoritys first and, I think, main reason, which was that the power to impose restrictions under article 42 was not a unilateral power.
The addressees of the disclosure notices had only to answer the questions fully and truthfully to bring the restrictions to an end.
I reject this also.
The short and principled objection to it was given by Briggs LJ.
The limitation of the power to its proper purpose derives from its fiduciary character.
If its exercise would otherwise be an abuse, it cannot be an answer to say that the person against whom it is directed had only himself to blame.
Moreover, the majoritys proposition assumes that that person is the only one whose interests are adversely affected.
But that is not right.
Other shareholders who agreed with them would be deprived of their support.
In Anglo Universal Bank v Baragnon, supra, Sir George Jessel MR considered that the proper purpose rule would apply to a board decision to make calls on shareholders if the object was to prevent particular shareholders from voting at general meetings, although any shareholder could remove the disability by paying.
There is no trace in this or any other authority of a distinction between unilateral and non unilateral powers.
Moreover, I reject the majoritys premise.
The problem cannot always be resolved by unilaterally complying with the disclosure notice.
Under a provision in the form of article 42 there may be a deemed non compliance with a disclosure notice even in a case where the answers are prompt, complete and accurate.
This is because the directors may reasonably though erroneously conclude that the answers are defective.
This is not a fanciful hypothesis.
The interest in shares about which information may be sought under section 793 of the 2006 Act is very broadly defined.
It will often be a highly debatable question whether it exists.
An alleged omission to disclose a relevant agreement or arrangement between persons with a relevant interest may be just as debatable.
An agreement sufficient to give rise to a concert party may be informal.
An arrangement may be no more than a nod and a wink or a tacit understanding.
Reasonableness in these circumstances is very much in the eye of the decision maker.
It will depend on what other facts or inferences are available to him.
With the best will in the world, things may look very different on the other side of the partition.
The weapon which the majoritys analysis puts into the hands of the board is a blunderbuss whose shot is liable to injure the just and the unjust alike.
That is part of the reason why I am unable to accept the majoritys parting assertion, at para 143, that the application of the proper purpose rule would be an encouragement to deceitful conduct by predators with subversive but secret projects.
There is, however, a more fundamental objection to it, which is that it is incoherent once the operation of the rule is properly understood.
If the deceit consists simply in the secrecy, ie in the withholding or deemed withholding of the information, a decision to impose restrictions which is based simply on that fact will be entirely consistent with the proper purpose of the power.
But secrecy is one thing, subversion another.
If the real objection is to the subversion, it is nothing to do with the issue or enforcement of disclosure notices.
Directors owe a duty of loyalty to the company, but shareholders owe no loyalty either to the company or its board.
Within broad limits, derived for the most part from Part 30 of the Companies Act 2006 (Protection of Members against Unfair Prejudice) and the City Code on Takeovers and Mergers, they are entitled to exercise their rights in their own interest as they see it and to challenge the existing management for good reasons or bad.
The present case
What the judges findings amount to is that although at the critical board meeting the majority genuinely wanted to receive the information which they had requisitioned, once they were satisfied that it had not been provided and turned to consider the issue of restriction notices, they were interested only in the effect that this would have on the outcome of the forthcoming general meeting.
They did not have in mind the protection of the company pending the provision of the information; they had in mind protecting the company full stop (para 200(d)).
In any case where concurrent purposes are being considered, they must have been actual purposes in the minds of the directors, not merely possible or hypothetical ones.
If the only consideration which actually influenced the decision was an improper one, it is difficult to envisage any basis on which their decision could have been sustained.
I have drawn attention earlier in this judgment to the relevance of causation in this field.
The judge posed the question (para 228) whether the notices could be saved on the footing that although the directors purpose was improper, they would have acted in the same way if the improper considerations had been ignored and they had applied their minds to proper ones.
Suppose that the directors had decided to issue the restriction notices as a sanction for the non provision of the information and to protect the company from the consequences of its non disclosure pending its provision.
Suppose that they also made the decision in order to secure the passing of the resolutions, but would have done the same thing even if that had never entered their minds.
On that hypothesis, it would be difficult to regard the impact on the resolutions as a primary consideration.
The want of the information would have been a sufficient justification of the restrictions and the resolutions would have been irrelevant, in fact no more than a welcome incidental consequence.
That, however, was not the companys case.
As summarised by the judge (paras 181, 207 208), their case was that once the raiders had failed to provide the information, the power to make a restriction order could properly be exercised for the purpose of defeating their attempt to influence or control the companys affairs, provided that this was conceived in good faith to be in the companys interests.
Indeed it could properly be exercised for the purpose of ensuring the passage of the resolutions at the general meeting in the face of their objections.
There was no attempt to justify the decision on some narrower basis if these purposes were found to be improper.
Forensic judgments of this kind are often required and they are not easy.
This one was no doubt a realistic approach in the face of the facts.
But for whatever reason, none of the parties focused on the possibility that the same decision might have been reached without reference to the desire to defeat the raiders, until the judge drew their attention to its possible relevance.
By that time it was too late to explore the point with the witnesses.
In his judgment (paras 235 237), the judge summarised the findings of fact which he would have made if he had allowed the company to rely on the alternative hypothesis that the directors had disregarded their desire to defeat the raiders.
He thought that they would have applied their minds to the right point and made the same decision.
But the judge did not allow the company to take the point and there has been no appeal against that refusal.
Since his reason for refusing was that the claimants had not had a proper opportunity to challenge the alternative hypothesis in the course of the evidence, it seems to me that the judges hypothetical alternative findings are not properly before this court.
I would allow the appeal and restore the decision of Mann J.
In the light of the observations of other members of the court, I should record that while we received no oral argument on the role of causation in identifying the relevant purpose(s) of a board decision, full and helpful written submissions on the point were delivered after the hearing, at the invitation of the court.
LORD CLARKE: (with whom Lord Neuberger agrees)
I initially intended simply to agree with Lord Sumptions judgment.
Like Lord Mance (and Lord Neuberger), I agree with Lord Sumption that the appeal should be allowed for the reasons given in his paras 27 to 43.
I am inclined to agree with the other views expressed by Lord Sumption but there does seem to me to be force in Lord Mances reservation that not all the points were the subject of full argument and consideration below.
In these circumstances I would prefer to defer reaching a final conclusion on the other points identified by Lord Mance until they arise for decision and have been the subject of such argument.
LORD MANCE: (with whom Lord Neuberger agrees)
I gratefully adopt Lord Sumptions summary of the relevant facts in paras 1 to 13 and of the judgments of Mann J and the Court of Appeal in paras 25 to 29.
I also agree with his reasons for allowing this appeal in paras 30 to 44.
I have read with interest the discussion of the proper purpose rule in paras 14 to 24.
It accepts an analysis which was suggested in general terms by the judge at first instance, but which became immaterial in the light of his refusal to allow any point on causation to be raised.
It was not in those circumstances advanced by any party during the oral hearing before the Supreme Court.
The analysis was first revived by the Supreme Court in a draft judgment handed down, but then withdrawn before delivery in the light of the parties representations.
Thereafter, both appellants confirmed that they had argued the case before the Supreme Court on the basis that, if the proper purpose rule applied, the restriction notices fell to be set aside, since the judge had found the notices to have been issued for the principal purpose of improving the prospects of passing at the forthcoming AGM two special resolutions to authorise market purchases and to disapply pre emption rights as well as of passing three ordinary resolutions.
Eclairs submitted that any issue as to whether a but for test should be applied should in these circumstances await a case where it arose squarely.
Eclairs and Glengary each supplied a copy of its submissions to the judge at the trial in 2013, which had suggested a two pronged alternative analysis, according to which the notices would be set aside if a court concluded either that (a) the principal purpose was to ensure the passing of the resolutions or (b) even if that was not the principal purpose, the notices would not have been issued but for the wish to ensure the passing of the resolutions.
JKX on the other hand sought to use the Supreme Courts new development in the law as a springboard to argue that the appeals should not be allowed and/or that there should be a further hearing on the issue of causation.
I readily accept my part in agreeing to the original draft judgment.
But I am now satisfied, having considered the authorities without the benefit of oral or written submissions other than those dating from 2013 submitted by Eclairs and Glengary, that we should not express any firm or concluded views on points which do not arise for decision on this appeal.
I will summarise my reasons.
First, it would be helpful to clarify the meaning of section 171(b) of the Companies Act 2006, providing that directors may use their powers only for the purposes for which they were conferred.
On the face of it this is clear.
All purposes in mind must be legitimate.
But Buckley on the Companies Act (looseleaf ed) suggests that it itself involves a primary purpose test, commenting at 3[869]: What if a power were used for mixed purposes, some good and some bad? According to the old law the exercise would be good if its primary purpose were proper.
By virtue of CA 2006, section 170(4), this law should inform the construction of CA 2006, section 171(b).
Thus, a director who has exercised powers for mixed purposes has still only exercised them primarily, if not exclusively, for the purposes for which they are conferred and this should be within CA 2006, section 171(b).
CA 2006, section 171(b) can be construed (as it should be), in accordance with CA 2006, section 170(4) to mean that a director must exercise his powers primarily (or substantially) only for the purposes for which they are conferred.
Buckley cites for the old law Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821.
Lord Sumption at paras 14 and 21 treats section 171(b) as requiring a directors power to be used with an entire and single view to the real purpose and object of the power, assimilating a directors power in this respect with the exercise of discretionary powers by trustees.
But Dixon J in the judgment in Mills v Mills (1938) 60 CLR 150, 185 186, which Lord Sumption commends at para 18, expressly noted that The application of the general equitable principle to the acts of directors managing the affairs of a company cannot be as nice as it is in the case of a trustee exercising a special power of appointment.
It must, as it seems to me, take the substantial object the accomplishment of which formed the real ground of the boards action.
If this is within the scope of the power, then the power has been validly exercised.
I would therefore wish to have submissions on the scope of the duty under section 171(b).
Second, whatever the scope of the duty, I understand Lord Sumptions point that the granting of relief in the event of a breach of section 171(b) is a different matter.
But here too I think it would both assist and be wise to hear submissions.
I do not for my part think that the interpretation which Lord Sumption puts in para 24 on Lord Wilberforces speech in Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 is necessarily or clearly what Lord Wilberforce meant.
Equally, the passage already quoted from Dixon Js judgment in Mills v Mills appears to me far from conclusive, while its later explanation in the High Court in Whitehouse v Carlton House Pty (1987) 162 CLR 285, 294 (quoted by Lord Sumption at para 22) is, at least arguably, consistent with but for causation being viewed either as the only test or as affording an extended basis for the grant of relief, even where the principal purpose was legitimate, as Eclairs and Glengary submitted to the judge.
In these circumstances, although I have sympathy with Lord Sumptions view that but for causation offers a single, simple test, which it might be possible or even preferable to substitute for references to the principal or primary purpose, I am not persuaded that we can or should safely undertake what all parties consider would be a new development of company law, without having heard argument.
Third, Lord Sumption expresses the view in para 20 that identification of the principal or primary purpose for which directors exercised a power would involve a forensic enquiry into the relative intensity of the directors feelings about the various considerations that influenced them, in relation to which directors evidence would be likely to be both artificial and defensive.
To the extent that that is a difficulty, I cannot see that it exists any the less in relation to a test based on but for causation.
Human nature being what it is, that is just as likely to give rise to artificial and defensive attempts to justify what was done.
If anything, I would have thought that the principal or primary purpose in mind would be likely to be easier to identify, since it is likely to be reflected in directors exchanges before and/or at the time of the decisions under examination, than the answer to a question whether they would have acted as they did without taking into account their main expressed purpose.
They will have been less likely to have directed express attention to this: that is, unless well advised by their lawyers, in which case further caution might be necessary about accepting their assertions at face value.
Fourth, if a but for test were to be adopted, attention should I think be given to the standard to which the directors, on whom the onus would presumably lie, would have to show that they would have reached the same decision, even if they had not had the illegitimate purpose in mind.
Would probability be enough? Or would the test be whether their decision would inevitably have been the same? See eg by analogy the public law test, as stated by May LJ in Smith v North East Derbyshire Primary Care Trust [2006] 1 WLR 3315, and quoted by Lord Neuberger in R (FDA) v Secretary of State for Work and Pensions [2012] EWCA Civ 332; [2013] 1 WLR 444, para 68.
| Under sections 793 797 of the Companies Act 2006 (the Act), a company can issue a statutory disclosure notice calling for information about persons interested in its shares.
The court can restrict the exercise of rights attaching to shares in the event of non compliance.
JKX Oil & Gas plc, like many companies, has a provision in its company articles (article 42) empowering the board to impose such restrictions where a statutory disclosure notice has not been complied with.
Article 42 provides that the board is entitled to treat a response to a disclosure notice as non compliant where it knows or has reasonable cause to believe that the information provided is false or materially incorrect.
In 2013, the directors of JKX perceived that it had become the target of a so called corporate raid by two minority shareholders, Eclairs (controlled by trusts associated with Igor Kolomoisky and by Gennadiy Bogolyubov) and Glengary (controlled by Alexander Zhukov and Mr Ratskevyich).
JKX issued disclosure notices between 20 26 March and on 13 May, requesting information from Eclairs, Glengary and Messrs. Kolomoisky, Bogolyubov, Zhukov, and Ratskevyich about the number of shares held, their beneficial ownership, and any agreements or arrangements between the persons interested in them.
The responses admitted the existence of interests in the shares but denied that there was any agreement or arrangement.
On 23 May, Eclairs publicly invited shareholders to oppose the resolutions proposed at the forthcoming AGM on 5 June, including resolutions for the re election of certain directors.
At a meeting on 30 May, the JKX board considered that there were agreements or arrangements between the addressees of the disclosure notices which had not been disclosed in the responses.
It resolved to exercise the powers under article 42 to issue restriction notices in relation to the shares held by Eclairs and Glengary, suspending their right to vote at general meetings and restricting the right of transfer.
Eclairs and Glengary challenged the restriction notices, relying on the proper purpose rule at s171(b) of the Act (a director must only exercise powers for the purposes for which they are conferred).
Mann J held that the boards decision was invalid.
The article 42 power could be exercised only to provide an incentive to remedy the default or a sanction for failing to do so.
The board had reasonable cause to believe that there was an agreement or arrangement between the addressees.
But the boards purpose was to influence the fate of the resolutions at the AGM.
The Court of Appeal allowed the appeal by a majority, holding that the proper purpose rule did not apply to article 42 because the shareholders only had to answer the questions more fully in order to avoid the imposition of restrictions on the exercise of their rights, and because the application of the rule was inappropriate in the course of a battle for control.
The Supreme Court allows the appeals by Eclairs and Glengary, holding that the proper purpose rule applies to the exercise of the power under article 42, and that the directors of JKX acted for an improper purpose.
The judgment is given by Lord Sumption, with whom Lord Hodge agrees.
Lord Mance (with whom Lord Neuberger agrees) agrees that the appeals should be allowed, but prefers to express no view on aspects of the reasoning.
Lord Clarke agrees, but prefers to defer a final conclusion on those aspects until they arise for decision and have been the subject of full argument.
The proper purpose rule is concerned with abuse of power: a company director must not, subjectively, act for an improper reason. [14 16] Where the instrument conferring a power is silent as to its purpose, this can be deduced from the mischief of the provision, its express terms and their effect, and the courts understanding of the business context. [30] Under article 42 in this case, the power to restrict the rights attaching to shares is ancillary to the statutory power to call for information under s 793.
Article 42 has three closely related purposes: (i) to induce a shareholder to comply with a disclosure notice; (ii) to protect the company and its shareholders against having to make decisions about their respective interests in ignorance of relevant information; and (iii) as a punitive sanction for a failure to comply with a disclosure notice.
Seeking to influence the outcome of shareholders resolutions or the companys general meetings is no part of those proper purposes. [31 33] The proper purpose rule applies to article 42.
It is irrelevant whether Eclairs and Glengary could have averted the imposition of restrictions on their rights as shareholders by giving different answers to the questions.
The proper purpose rule is the principal means by which equity enforces directors proper conduct, and is fundamental to the constitutional distinction between board and shareholder.
A battle for control of the company is probably the context where the proper purpose rule has the most valuable part to play. [35 40] Lord Sumption and Lord Hodge consider that where the directors have multiple concurrent purposes, the relevant purpose or purposes are those without which the decision would not have been made.
If that purpose or those purposes are improper, the decision is ineffective. [17 24] Mann J found that four of the six directors were concerned only with the effect of the restriction notices on the outcome of the general meeting.
They acted for an improper purpose. [41, 25] Lord Neuberger, Lord Mance and Lord Clarke agree that the appeals should be allowed, but decline to express a concluded view on the application of a but for test to the proper purpose rule. [46 55]
|
The decision of the Supreme Court in Patel v Mirza [2016] UKSC 42; [2017] AC 467 is a significant development in the law relating to illegality at common law.
It has resolved a period of considerable uncertainty during which conflicting views have been expressed in the Supreme Court as to the appropriate approach and the direction the law on the subject should take (Hounga v Allen (Anti Slavery International intervening) [2014] UKSC 47; [2014] 1 WLR 2889; Les Laboratoires Servier v Apotex Inc [2014] UKSC 55; [2015] AC 430; Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23; [2016] AC 1).
In Patel v Mirza a majority of the Supreme Court rejected the reliance principle as applied in Tinsley v Milligan [1994] 1 AC 340, whereby relief was refused to parties who had to rely on their own illegality to establish their case.
In its place, the majority adopted a more flexible approach which openly addresses the underlying policy considerations involved and reaches a balanced judgment in each case, and which also permits account to be taken of the proportionality of the outcome.
The present appeal raises issues as to the application of the new policy based approach outlined in Patel v Mirza in the context of a claim for negligent breach by a solicitor of his retainer, a concurrent claim in breach of contract and in tort.
Factual background
On or about 1 March 2000, Ms Maria Grondona (the respondent) entered into an agreement (the 2000 agreement) with Mr C L Mitchell (Mitchell), with whom she had a business relationship, relating to four properties: 73b Beulah Road; 362 High Road, Tottingham (sic); and 12 and 12A Cator Road.
The 2000 agreement provided: I Maria Grondona agree to have in my name mortgage loans in the above mentioned properties with the understanding and agreement that Mr CL Mitchell of Flat 2, 2 Silverdale, London SE26 4SZ will carry out the following tasks: (1) To pay all monthly mortgages on each of the properties as and when they become due (2) Receives from the tenants in these properties the due rents (3) Carry out all repair work on the properties (4) Deals with all the financial matters on these properties (5) Decides when to sell all or any of these properties (6) Mr Mitchell to pay to me 50% of the net profit when any of the above properties are sold.
This is a binding agreement enforceable by law between Mr Mitchell and myself.
On 27 November 2001 the freehold of 73 Beulah Road, Thornton Heath was purchased by Ms Loretta Hedley for 82,000 with the assistance of finance from BM Samuels Finance Group plc (BM Samuels) which obtained a registered charge in its favour.
There was apparently also a subsidiary restriction in favour of Moneypenny Investments Ltd and Gemforce Investments Ltd.
In or about July 2002 Mitchell paid the sum of 30,000 to Ms Hedley, for the grant of a 125 year lease of part of the freehold of 73 Beulah Road, which comprised a rear ground floor flat, No 73b (the property).
The commencement date for the lease was 24 June 1990.
On 26 July 2002 Mitchell entered into a loan facility of 45,000 for a period of six months secured by a legal charge over the property with BM Samuels to enable him to purchase it (the BM Samuels charge).
On the same date a leasehold interest in the property was registered in the name of Mitchell at the Land Registry under title number SGL 638702.
The BM Samuels charge was also duly registered at the Land Registry.
In October 2002 the respondent entered into a form of purchase of the leasehold interest in the property from Mitchell for the sum of 90,000 (ie three times the price paid when the leasehold had been created a few months earlier).
She did so with the assistance of a mortgage advance from Birmingham Midshires in the sum of 76,475 with the intention that the advance would be secured by a charge over the property entered into by the respondent on 31 October 2002 (the Birmingham Midshires charge).
The mortgage advance was procured by fraud.
The respondent dishonestly misrepresented on the mortgage application form that the sale from Mitchell to the respondent was not a private sale, that the deposit moneys were from her own resources and that she was managing the property.
The purpose of the fraud, as found by the trial judge, was to raise capital finance for Mitchell from a high street lender which he would not otherwise have been able to obtain, rather than to fund the purchase of the property by the respondent.
Stoffel & Co, solicitors, (the appellants) acted for the respondent, for
Mitchell and for the chargee, Birmingham Midshires, in connection with the transaction.
On or about 31 October 2002 Mr Mitchell executed in favour of the respondent and delivered to the appellants the HM Land Registry Transfer of Whole of Registered Title(s) Form TR1 in relation to the property.
On 1 November 2002 the appellants paid the sum of 76,475 received by way of mortgage advance from Birmingham Midshires to BM Samuels, as the existing chargee of the property, in order for the BM Samuels charge to be discharged.
BM Samuels duly provided a Form DS1 releasing the BM Samuels charge.
However, the appellants failed to register at the Land Registry the Form TR1 transferring the property from Mitchell to the respondent, the Form DS1 releasing the BM Samuels charge or the Birmingham Midshires charge granted by the respondent.
The trial judge found that this failure to register was because the Form TR1 submitted by the appellants had not been impressed with stamp duty and the procedural stamp and that it was therefore returned by Croydon District Land Registry on 28 November 2002.
The Land Registry wrote again to the appellants on 7 and 13 April 2003.
On 14 April 2003 it wrote to the appellants to notify them that the application for registration had been cancelled.
A further application for registration was rejected on 2 July 2003 due to errors on the transfer and that application was cancelled on 5 August 2003.
As a result of the appellants failure to register the relevant forms, Mitchell remained the registered proprietor of the property and BM Samuels remained the registered proprietor of the BM Samuels charge.
On the basis of that charge, further advances were made to Mitchell following the transactions in 2002.
The legal proceedings
In 2006 the respondent defaulted on payments under the Birmingham Midshires charge and Birmingham Midshires brought proceedings against her in order to obtain a money judgment.
The respondent defended the claim and brought proceedings against the appellants by a CPR Part 20 claim for an indemnity and/or a contribution and/or damages for breach of duty and/or breach of contract.
The appellants defended the Part 20 claim.
Although by the date of trial they admitted that the failure to register the TR1 Form, the DS1 Form and the Birmingham Midshires charge constituted negligence or breach of duty, they contended that damages were not recoverable by the respondent because the purpose of putting the property into her name and obtaining a mortgage from Birmingham Midshires was illegal, in that it was a conspiracy to obtain finance for Mitchell by misrepresentation.
They maintained that the purpose of instructing the appellants could only have been to further that fraud and that, accordingly, they were entitled to rely on the defence of illegality.
In the alternative, the defendant raised defences relating to quantum.
Birmingham Midshires amended its claim in order to claim directly against the appellants, against BM Samuels, the prior chargee, and against Mitchell.
The claims brought by Birmingham Midshires against BM Samuels and against the appellants were settled.
Summary judgment was obtained by Birmingham Midshires against the respondent on 29 May 2014.
That judgment was for 70,000 with the balance to be subject to an account.
By the time of the trial before Her Honour Judge Walden Smith in the Central London County Court, which began on 5 January 2016, it appeared that Mitchell had died, although the judge did not see any documentary evidence to that effect.
On 22 April 2014 the leasehold interest in 73b Beulah Road was sold by BM Samuels for 110,000 in order to satisfy the sum owed by Mitchell under the BM Samuels charge.
In a judgment dated 11 April 2016 the judge held as follows. (1) The respondent had participated with Mitchell in a mortgage fraud to deceive Birmingham Midshires into making an advance to her to purchase the property. (2) The respondent was a knowing and dishonest participant in the mortgage fraud perpetrated to obtain moneys from Birmingham Midshires for Mitchell which he could not obtain himself. (3) The following dishonest misrepresentations had been made by the respondent in the mortgage application form: that the sale from Mitchell to the respondent was not a private a) sale, when in fact it was a private sale; b) the deposit moneys were from her own resources, when in fact they came from the proceeds of a loan to the respondent from BM Samuels; that she was managing the property (and the other properties c) referred to in the mortgage application) herself, when in fact Mitchell was doing so pursuant to the terms of the 2000 agreement and the respondent had had no involvement whatsoever in the collection of rents or any other aspect of the management of the properties. (4) The effect of the 2000 agreement was that Mitchell retained complete control over the properties.
Mitchell remained de facto owner of the property.
The respondent was not and never was the de facto owner of the property.
She had agreed to act as Mitchells nominee and the provision in the agreement that she recover 50% of the net profits from any sale was her payment for having obtained the mortgage advance. (5) The mortgage application was a sham arrangement whereby the respondent lent her good credit history to Mitchell to enable him to obtain finance behind the scenes and out of sight of the potential lender. (6) The respondent had little or no actual involvement in the alleged purchase and it was not a bona fide purchase of a proprietary interest for value. (7) The respondent did, however, undertake legal responsibility for the Birmingham Midshires mortgage which was to be charged over the property.
In addressing the defence of illegality, the judge applied the reliance test as she was required to do by Tinsley v Milligan.
She concluded that the illegality defence did not apply.
She held that the claim against the appellants for failing to register the forms was conceptually separate from the fraud.
The claim did not rely on the allegations of illegality and the reason for the conveyance was irrelevant to it.
Following a further hearing on quantum, in a further judgment dated 11 May 2016 the judge awarded the respondent damages of 78,000, the value of the property as at November 2009, with interest thereon.
The appellants appealed to the Court of Appeal ([2018] EWCA Civ 2031; [2018] PNLR 36).
In her judgment with which Flaux LJ agreed, the Vice President Gloster LJ held that the judge had erred in law in concluding that the mortgage transaction was a sham, because as between Birmingham Midshires and the respondent the mortgage was clearly intended to take effect.
The respondent had intended to borrow the money secured by way of a legal charge on her registered title and Birmingham Midshires likewise intended to lend the money secured in such a way.
Gloster LJ held, further, that the judge had erred in law in holding that there was no intention to transfer the legal title in the property to the respondent because that was the very essence of the transaction between her and Mitchell, the whole purpose of the arrangement between them being, whatever the position in relation to retention of beneficial ownership, that she should be clothed with legal title so as to be able to obtain finance from Birmingham Midshires and grant a charge to secure such finance.
The Court of Appeal held, on the basis of the decision of the Supreme Court in Patel v Mirza, which had been handed down since the first instance decision, that the illegality defence did not bar the respondents claim.
Gloster LJ considered that, although mortgage fraud was a canker on society, barring the claim against the negligent appellants would not enhance the fight against mortgage fraud.
There was a public interest in ensuring that clients who use the services of solicitors are entitled to seek civil remedies for negligence or breach of contract against their solicitors arising from a legitimate and lawful retainer between them, in circumstances where the client was not seeking to profit or gain from her mortgage fraud but merely to ensure that the chargees security was adequately protected by registration.
In the view of the Court of Appeal, to deny the claim would also be disproportionate to the wrongdoing involved.
It dismissed the appeal and also dismissed a cross appeal on quantum.
The appellants sought permission to appeal to the Supreme Court on the following four grounds. (1) The Court of Appeal erred in overturning the finding of the judge that the sale between Mitchell and the respondent was a sham. (2) The Court of Appeal wrongly held that there was an intention to transfer legal title in the property. (3) The Court of Appeal failed to analyse adequately or at all the relevance of the transfer of legal title. (4) The Court of Appeal erred fundamentally in its application of the Patel v Mirza guidelines.
On 18 March 2019 the Supreme Court (Lady Hale, Lord Hodge and Lord Briggs) gave permission to appeal, limited to Ground 4 only.
The issues on appeal to the Supreme Court It was common ground between the parties to the appeal before us that,
subject to the defence of illegality, the respondent had a complete cause of action against the appellants.
In particular: (1) Negligence and/or breach of retainer had been conceded by the appellants; (2) The judge held that the loss sustained by the respondent was caused by the negligence and/or breach of duty of the appellants; (3) The parties agreed that loss was to be calculated by reference to the fact that the respondent did not have an unencumbered property which was available to her as the security for the moneys advanced to her by Birmingham Midshires.
Had the appellants fulfilled their obligations to her, she would have had an otherwise unencumbered property in about November 2009, when the property would have been sold to meet her arrears.
The value of that property was 78,000, so the loss was that sum plus interest from November 2009.
On behalf of the appellants Mr Michael Pooles QC submits that the Court of Appeal erred in its analysis and application of the Patel v Mirza guidelines.
He submits that the present case is a paradigm case for the refusal of relief on the grounds of illegality.
The respondent utilised the services of the appellants in the context of and in order to execute a mortgage fraud which she and Mitchell were practising on Birmingham Midshires.
The appellants acted innocently but incompetently in carrying out their instructions and left the respondent without registered title to a property which was only to be transferred to her for the purpose of the mortgage fraud.
He submits that if the illegality defence operates to leave the loss to lie where it falls, then the respondent can complain of no injustice.
The new approach to the illegality defence: Patel v Mirza
It is necessary to examine in a little detail Lord Toulsons exposition in Patel v Mirza of the new approach to the illegality defence at common law.
Having referred to the maxims ex turpi causa non oritur actio (no action arises from a disgraceful cause) and in pari delicto potior est conditio defendentis (where both parties are equally in the wrong the position of the defendant is the stronger), Lord Toulson observed: 99.
Looking behind the maxims, there are two broad discernible policy reasons for the common law doctrine of illegality as a defence to a civil claim.
One is that a person should not be allowed to profit from his own wrongdoing.
The other, linked, consideration is that the law should be coherent and not self defeating, condoning illegality by giving with the left hand what it takes with the right hand. 100.
Lord Goff observed in the Spycatcher case, Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 286, that the statement that a man shall not be allowed to profit from his own wrong is in very general terms, and does not of itself provide any sure guidance to the solution of a problem in any particular case.
In Hall v Hebert [1993] 2 SCR 159 McLachlin J favoured giving a narrow meaning to profit but, more fundamentally, she expressed the view, at pp 175 176, that, as a rationale, the statement that a plaintiff will not be allowed to profit from his or her own wrongdoing does not fully explain why particular claims have been rejected, and that it may have the undesirable effect of tempting judges to focus on whether the plaintiff is getting something out of the wrongdoing, rather than on the question whether allowing recovery for something which was illegal would produce inconsistency and disharmony in the law, and so cause damage to the integrity of the legal system. 101.
That is a valuable insight, with which I agree.
I agree also with Professor Burrows observation that this expression leaves open what is meant by inconsistency (or disharmony) in a particular case, but I do not see this as a weakness.
It is not a matter which can be determined mechanistically.
So how is the court to determine the matter if not by some mechanistic process? In answer to that question I would say that one cannot judge whether allowing a claim which is in some way tainted by illegality would be contrary to the public interest, because it would be harmful to the integrity of the legal system, without (a) considering the underlying purpose of the prohibition which has been transgressed, (b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and (c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality.
We are, after all, in the area of public policy.
That trio of necessary considerations can be found in the case law.
This passage makes clear that the evaluation of the factors described in para 101 is directed specifically at determining whether there might be inconsistency damaging to the integrity of the legal system.
This is confirmed later in Lord Toulsons judgment where he refers (at para 109) to the need when considering the application of the common law doctrine of illegality to have regard to the policy factors involved and to the nature and circumstances of the illegal conduct in determining whether the public interest in preserving the integrity of the justice system should result in denial of the relief claimed and in the following passage at para 120: The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system (or, possibly, certain aspects of public morality, the boundaries of which have never been made entirely clear and which do not arise for consideration in this case).
In assessing whether the public interest would be harmed in that way, it is necessary (a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, (b) to consider any other relevant public policy on which the denial of the claim may have an impact and (c) to consider whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts.
Within that framework, various factors may be relevant, but it would be a mistake to suggest that the court is free to decide a case in an undisciplined way.
The public interest is best served by a principled and transparent assessment of the considerations identified, rather by than the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate.
Earlier in his judgment in Patel (at para 76) Lord Toulson had drawn support from the approach of Lord Wilson in Hounga v Allen [2014] 1 WLR 2889 at para 42 where Lord Wilson had observed that the defence of illegality rests on the foundation of public policy and continued: So it is necessary, first, to ask What is the aspect of public policy which founds the defence? and, second, to ask But is there another aspect of public policy to which the application of the defence would run counter.
Lord Wilson had weighed the policy considerations in that case and concluded that in so far as any public policy existed in favour of applying the illegality defence, it should give way to the public policy to which its application would be an affront.
A balancing of the policy considerations in either direction is, therefore, an important element of the decision making process.
With regard to the third stage of the process, namely the assessment of proportionality, Lord Toulson observed (at para 107): In considering whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant.
Professor Burrows list [set out at para 93 of Lord Toulsons judgment] is helpful but I would not attempt to lay down a prescriptive or definitive list because of the infinite possible variety of cases.
Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties respective culpability.
It is important to bear in mind when applying the trio of necessary
considerations described by Lord Toulson in Patel that they are relevant not because it may be considered desirable that a given policy should be promoted but because of their bearing on determining whether to allow a claim would damage the integrity of the law by permitting incoherent contradictions.
Equally such an evaluation of policy considerations, while necessarily structured, must not be permitted to become another mechanistic process.
In the application of stages (a) and (b) of this trio a court will be concerned to identify the relevant policy considerations at a relatively high level of generality before considering their application to the situation before the court.
In particular, I would not normally expect a court to admit or to address evidence on matters such as the effectiveness of the criminal law in particular situations or the likely social consequences of permitting a claim in specified circumstances.
The essential question is whether to allow the claim would damage the integrity of the legal system.
The answer will depend on whether it would be inconsistent with the policies to which the legal system gives effect.
The court is not concerned here to evaluate the policies in play or to carry out a policy based evaluation of the relevant laws.
It is simply seeking to identify the policies to which the law gives effect which are engaged by the question whether to allow the claim, to ascertain whether to allow it would be inconsistent with those policies or, where the policies compete, where the overall balance lies.
In considering proportionality at stage (c), by contrast, it is likely that the court will have to give close scrutiny to the detail of the case in hand.
Finally, in this regard, since the overriding consideration is the damage that might be done to the integrity of the legal system by its adopting contradictory positions, it may not be necessary in every case to complete an exhaustive examination of all stages of the trio of considerations.
If, on an examination of the relevant policy considerations, the clear conclusion emerges that the defence should not be allowed, there will be no need to go on to consider proportionality, because there is no risk of disproportionate harm to the claimant by refusing relief to which he or she would otherwise be entitled.
If, on the other hand, a balancing of the policy considerations suggests a denial of the claim, it will be necessary to go on to consider proportionality. (a) Would the underlying purpose of the prohibition which has been transgressed be enhanced by a denial of the claim?
On behalf of the appellants, Mr Michael Pooles QC is able to point to the fact that the respondent was knowingly and dishonestly involved in a mortgage fraud to deceive Birmingham Midshires into making the advance to the respondent to purchase the property.
She made dishonest misrepresentations to Birmingham Midshires that the sale was not a private sale, that the deposit moneys were from her own resources and that she was managing the property herself.
The sale between Mitchell and the respondent was tainted with illegality because it was entered into with the object of deceiving an institutional lender into thinking that the respondent was both the legal and beneficial owner of the property and required mortgage finance for her own business purposes.
The respondents conduct would, at that time, have constituted an offence contrary to section 15, Theft Act 1968.
The background to the respondents claim against her solicitors is undoubtedly a serious fraud.
Moreover, the appellants, who were not a party to and knew nothing about the illegality, were retained by the respondent in order that the mortgage fraud might be facilitated.
With regard to the first of the trio of considerations identified by Lord Toulson in Patel, Mr Pooles submits that it is trite that the underlying purpose of the criminalisation and penalisation of mortgage fraud and conspiracies to defraud is to deter such fraud.
He submits further that it is equally notorious that mortgage fraud prosecutions are difficult and that therefore the deterrent effect of the prohibition must be seen as limited.
In these circumstances, he says, the refusal of relief to someone closely involved in mortgage fraud would enhance the deterrent effect of the prohibition.
The operation of the illegality defence would prevent the respondent from recovering damages from her solicitors who were instructed for the purpose of the fraud.
It would or should, he submits, deter the use of solicitors as catspaws in mortgage frauds.
There clearly exists an important policy that the law should condemn mortgage frauds which are serious criminal offences.
The appellants correctly identify deterrence as one underlying policy of the criminal law against fraud.
I doubt, however, that permitting a civil remedy to persons in the position of the respondent would undermine that policy to any significant extent.
The risk that they may be left without a remedy if their solicitor should prove negligent in registering the transaction is most unlikely to feature in their thinking.
A further underlying purpose of the prohibition against mortgage fraud is correctly identified by Mr Andrew Warnock QC on behalf of the respondent as the protection of the public, and in particular mortgagees, from suffering loss.
Viewed from this perspective, it is difficult to see how refusing the respondent a civil remedy against her solicitors for their negligence in failing to register the transfer would enhance that protection.
Registration of the transactions could only take place after the completion of the conveyance.
By the time of the negligent breach of duty the loan had already been advanced by Birmingham Midshires and received by the respondent.
The required registration was not a necessary step in perpetrating the fraud and, by the time of the negligent failure to register the transfer, the fraud was complete.
In these circumstances, denying a remedy to the respondent in respect of negligence in what occurred subsequently would not afford any protection to Birmingham Midshires.
On the contrary, as the respondent points out, not only was the required registration of the transfer to the respondent in the interests of the respondent, but it was also in the interests of the mortgagee, Birmingham Midshires, both during the currency of the mortgage and following its discharge, that the transfer should be registered in addition to the mortgagees charge.
The registration of the transfer was necessary in order that Birmingham Midshires charge could be registered.
In addition, it was in Birmingham Midshires interest that the respondent should have assets with which to meet her liability if sued on her personal covenant.
As matters turned out, the failure to register the transfer to the respondent meant that the property was not available to meet any part of the respondents liability on the discharge of the mortgage.
When sued by Birmingham Midshires the respondent, having discovered that she had no registered title, brought Part 20 proceedings against the appellants seeking damages for the loss of her proprietary interest.
Were she to recover compensation from the appellants, that could be applied to meet or reduce her liability to Birmingham Midshires on her personal covenant.
While Birmingham Midshires had, in these circumstances, an independent claim for negligent breach of duty against the appellants, it can at the very least be said that the denial of such a claim by the respondent against the appellants would not enhance the protection afforded by the law to mortgagees.
It was, therefore, in the interests not only of the respondent but also of Birmingham Midshires for the appellants to have complied with their duties to the respondent.
I will return to the relationship of the negligent conduct to the mortgage fraud itself when considering centrality in the context of proportionality.
Is there any other relevant public policy on which the denial of the claim may (b) have an impact?
Important countervailing public policies in play in the present case are that conveyancing solicitors should perform their duties to their clients diligently and without negligence and that, in the event of a negligent breach of duty, those who use their services should be entitled to seek a civil remedy for the loss they have suffered.
To permit solicitors to escape liability for negligence in the conduct of their clients affairs when they discover after the event that a misrepresentation was made to a mortgagee would run entirely counter to these policies.
While denial of a remedy may sometimes be justified in such circumstances, this should only be on the basis that to afford a remedy would be legally incoherent.
Moreover, I agree with the observation of Gloster LJ in the Court of Appeal (at para 37) that there is more likelihood that mortgage fraud would be prevented if solicitors appreciate that they should be alive to, and question, potential irregularities in any particular transaction.
In this regard, descending to the facts of the present case, I am unable to accept the submission on behalf of the appellants that there were here no potential irregularities which could have put them on notice of the possibility of fraud.
First, it is a striking feature of this case that the appellants acted for both Mitchell and the respondent, in addition to the mortgagee, Birmingham Midshires.
Secondly, Mitchell had purchased the property in July 2002 and purported to sell it to the respondent in October 2002.
Thirdly, the claimed value of the property had increased greatly over a short period of time.
The purchase price on the sale to the respondent was 90,000, three times the price paid when the leasehold had been created three months earlier. (See generally, The Law Society, Practice Note on Mortgage Fraud, 13 January 2020.)
A further countervailing public policy which arises here relates to the effect of the transaction on property rights.
It is now established that, unless a statute provides otherwise expressly or by necessary implication, property can pass under a contract which is illegal as a contract.
Where property is transferred for an illegal purpose the transferee obtains good title both in law and in equity, notwithstanding that the transaction being illegal it would not have been specifically enforced (Tinsley v Milligan per Lord Browne Wilkinson pp 369 371; Patel v Mirza per Lord Toulson at para 110).
In the present case the Court of Appeal reversed the conclusions of the trial judge that the mortgage application and agreement constituted a sham and that there was no intention that the respondent would become the legal owner of the property.
First, the Court of Appeal considered that the fact that, so far as the respondent and Mitchell were concerned, the mortgage application was fraudulent in that it contained misrepresentations did not as a matter of law result in its being a sham transaction as between the respondent and Birmingham Midshires, the mortgagee.
She and Birmingham Midshires intended that the money should be borrowed and secured on her registered legal title to the property.
Furthermore, Birmingham Midshires had no knowledge of the misrepresentations or the true intentions of the respondent and Mitchell.
Accordingly, the transaction was intended to take effect between the respondent and Birmingham Midshires and was not a sham. (Cf Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802 per Diplock LJ.) Secondly, the fact that the sale agreement between Mitchell and the respondent was tainted with illegality because it was entered into with the object of deceiving Birmingham Midshires, did not mean that Mitchell and the respondent did not intend legal title to pass to her.
On the contrary, the whole purpose of the arrangement between them (whatever the position in relation to retention of beneficial ownership might be) was that legal title should vest in the respondent so that she could obtain a loan from Birmingham Midshires and grant a charge in favour of Birmingham Midshires to secure the loan.
The Supreme Court refused an application by the appellants for permission to appeal on the grounds that the Court of Appeal erred in (1) overturning the judges conclusion that the sale between Mitchell and the respondent was a sham; (2) holding that there was an intention to transfer legal title in the property; and (3) failing to analyse adequately the relevance of the transfer of legal title.
Permission to appeal was limited to the issue of the application of the Patel v Mirza guidelines.
In my view, this reasoning of the Court of Appeal is clearly correct.
The intention of Mitchell and the respondent was that the appellants should register the Form TR1 executed by Mitchell at the Land Registry.
Had the appellants done so, in accordance with their retainer, legal title in the property would have passed to the respondent under section 27(1), Land Registration Act 2002.
In the event, no legal title passed to the respondent but, as Mitchell had executed and delivered the Form TR1 and had done everything which he could do to effect the legal transfer, the respondent was entitled to an equitable interest in the property, namely an equitable right to be registered as proprietor of the registered legal title. (See section 24(b), Land Registration Act 2002; Mortgage Business plc v OShaughnessy [2012] 1 WLR 1521 per Etherton LJ at para 58.) The fact that the law recognises this equitable property right vested in the respondent gives rise to an important countervailing policy which requires to be brought into consideration.
Once an equitable interest in the property has passed to the respondent, she should have available to her as the holder of that interest the remedies provided by law for its protection.
It would, in my view, be incoherent for the law to accept on the one hand that an equitable interest in the property passed to the respondent, notwithstanding that the agreement for sale was tainted with illegality, while on the other refusing, on the basis of the same illegality, to permit proceedings against a third party in respect of their failure to protect that equitable interest by registering the Form TR1 at the Land Registry.
I pause at this point in the process of addressing Lord Toulsons trio of relevant considerations.
To permit the respondents claim in the particular circumstances of this case would not undermine the public policies underlying the criminalisation of mortgage fraud and could, indeed, operate in a way which would protect the interests of the victim of the fraud, ie the mortgagee.
Furthermore, to deny the respondents claim would run counter to other important public policies.
It would be inconsistent with the policy that the victims of solicitors negligence should be compensated for their loss.
It would be a disincentive to the diligent performance by solicitors of their duties.
It would also result in an incoherent contradiction given the laws acknowledgment that an equitable property right vested in the respondent.
In these circumstances, it is not strictly necessary to go on to consider the third of the trio of considerations, namely whether denial of the claim would be a proportionate response to the illegality, but I shall nevertheless do so.
(c) Proportionality of the response to the illegality
On behalf of the respondent Mr Warnock draws attention to a series of features of the present case which the Court of Appeal (at para 39) considered represented the reality of the situation and which it accepted would make it entirely disproportionate to deny the respondents claim.
First, it is submitted that, while the victim of the fraudulent misrepresentations was Birmingham Midshires and not the appellants, Birmingham Midshires has made no complaint of this against the respondent in its recovery proceedings or otherwise.
In the view of the Court of Appeal, Birmingham Midshires adopted the transaction.
It is, however, difficult to attach any significant weight to this consideration.
Even if it was aware of the fraud at any material time, which is unclear, Birmingham Midshires had no need to complain of the fraud in order to recover its money as it could simply rely on its entitlement to arrears and its right to payment under the respondents personal covenant.
To have pleaded fraud in its claim against the respondent would have been an unnecessary complication.
In any event, the respondents central role in the fraud was clearly established.
Secondly, it is submitted that it is surprising that the conveyancing solicitor who acted for Mitchell and the respondent did not address the issue of fraud at all in any statement of evidence, given that the appellants now maintain that his role was essential to the fraud and that his retainer was not legitimate and proper.
In my view, Mr Warnock was right not to press this point.
It was accepted by the respondent and the Court of Appeal that the solicitor was not aware of the fraud at the time of the transaction.
Moreover, the respondents part in the fraud was established on the objective evidence at the trial.
Thirdly, Mr Warnock submits that this was not a case where, money having been obtained by fraud, there was never any intention to repay it.
On the contrary, payments were made under the mortgage for some years.
Once again, this submission does not assist the respondent because this does not detract from the fraudulent nature of the mortgage transaction.
There is, however, much more substance in Mr Warnocks fourth submission which relates to the centrality of the respondents illegal conduct.
It is undoubtedly the case that it was necessary to retain a solicitor in order to maintain the dishonest pretence that the respondent was borrowing to purchase the property and in order to obtain a loan secured by a mortgage.
However, this simply provides the background to the claim by the respondent against her solicitors for negligent breach of their retainer.
The appellants breach of duty related to the registration of title and the way in which the respondent had procured the finance to obtain that title was irrelevant to the appellants obligation to register the title.
Two features of the present case, to which reference has already been made, demonstrate the lack of centrality of the illegality to the breach of duty of which the respondent complains.
First, by the time the appellants were required to register the transactions the loan had been advanced and used to discharge the pre existing BM Samuels charge.
The defrauding of Birmingham Midshires had been achieved.
Secondly, by that time equitable title to the property had already passed to the respondent.
Although legal title could pass to her only on registration of the transfer, she was already the owner in equity because once Mitchell had executed and delivered the Form TR1 he had done everything which he could do in order to effect the transfer of legal title.
These matters serve to distance the appellants negligence from the respondents fraud.
Some light is cast on the issue of centrality by the decision of the Court of Appeal (Schiemann, Waller and Dyson LJJ) in Sweetman v Nathan [2003] EWCA Civ 1115; [2004] PNLR 7.
For present purposes the facts may be summarised as follows.
Sweetman borrowed 1.6m from Coutts Bank in order to purchase property.
He subsequently induced Coutts Bank to make a second loan to him by a fraudulent misrepresentation that the full amount of the second loan was needed to discharge an existing claim against the property which Sweetman proposed to sell to an identified purchaser.
In fact, only a smaller sum was required for that purpose.
Sweetman instructed his solicitor, Nathan, to carry out the necessary conveyancing on the sale of the property.
The purchaser proved to be a worthless shell company with the result that Sweetman could not repay either of the loans to the bank.
Sweetman sued Nathan and his firm for their negligence in failing to discover this.
Sweetman contended that if Nathan had not been negligent Sweetman would not have taken out the second loan because he would have known that there was no genuine purchaser.
Moreover, he had been prevented from repaying the second loan with the purchase price from the resale of the land and had made payments which were irrecoverable.
Nathan contended that all of the losses claimed had been caused by the deception of the bank by Sweetman, alternatively that he was a party to a deliberate deception and that the claim was barred by illegality.
The Court of Appeal declined to strike out the claim on this ground.
In its view the claim by Sweetman against Nathan was conceptually entirely separate from the fraud against the bank.
Schiemann LJ asked (at para 60) whether Sweetman would have any prospect of successfully suing Nathan for his assumed negligence in carrying out the conveyancing.
Proceeding on the assumptions that Nathan and Sweetman were jointly engaged in falsely representing to the bank that Sweetman was going to use the second loan to pay off a prior interest in the property and that there was some prospect of Sweetman showing that he had suffered substantial damage as a result of the negligence, Schiemann LJ observed: What remains is a pure question of public policy.
Should the courts refuse in principle to lend Mr Sweetman their assistance in suing Nathan when they were jointly engaged on a fraud? If Mr Sweetman were suing Coutts for, say, failing to transfer the money to him, one could see a strong case for refusing him the courts aid.
However he is suing his fellow fraudster.
If he were suing him for writing such an incompetent letter that Coutts had grasped in time that there was a fraud going on and had therefore refused to lend the money and that therefore a profitable deal had fallen through, again one could see a strong case for refusing him the courts aid.
He is however not doing this.
He is suing his solicitor for negligence which is conceptually entirely separate from the fraud upon which both of them are engaged. (paras 62 63)
As an authority Sweetman v Nathan has its shortcomings.
It concerned an application to strike out the claim and the decision was that the claim should not be struck out as it could not be said that it had no serious prospect of success.
Furthermore, it was decided on the basis of the law as it existed before Patel with its emphasis on reliance on illegality.
Nevertheless, the factual situation addressed is very much in point as is the following situation posited by counsel for the defendants in that case to which Schiemann LJ referred (at paras 42 and 65).
A purchaser of a house instructs a solicitor who negligently fails to discover a covenant which renders it worthless.
The purchaser, in ignorance of this, obtains a mortgage by false representations as to the level of his income.
Before the fraud comes to light the mortgagee is repaid.
Counsel submitted that these facts would not prevent the purchaser from suing his solicitor, as the loss was properly described as flowing from the solicitors negligence and not from the purchasers fraud.
Schiemann LJ found that this analogy had force.
I respectfully agree and find his reasoning on this point convincing.
The purchaser had suffered a genuine wrong to which the allegedly unlawful conduct was incidental.
As a result of the change in the law brought about by Patel v Mirza, the question whether a claimant must rely upon illegal conduct to establish a cause of action is no longer determinative of an illegality defence.
Nevertheless, the question of reliance may have a bearing on the issue of centrality.
In the present case it is significant that, as the decision at first instance on the basis of Tinsley v Milligan demonstrates, the essential facts founding the claim can be established without reference to the illegality.
The respondents claim for breach of duty against her solicitors is conceptually entirely separate from her fraud on the mortgagee.
Profiting from ones own wrongdoing
For one branch of the law to enable a person to profit from behaviour which another branch of the law treats as criminal or otherwise unlawful would tend to produce inconsistency and disharmony in the law and so cause damage to the integrity of the legal system.
In the present case it is not suggested by either party that by suing the appellants the respondent is seeking to profit from her wrongdoing.
The parties, as I understand them, here use profit in the narrow sense of a direct pecuniary reward for an act of wrongdoing. (See Hall v Hebert, supra, per McLachlin J at p 172.) In their application for permission to appeal the appellants expressly accepted that the respondents claim was in respect of losses suffered rather than to enforce an illegitimate gain.
In May 2014 the Bank of Scotland (as successor to Birmingham Midshires) obtained summary judgment against the respondent for 70,000 with the balance subject to an account.
The Bank of Scotland also settled claims against BM Samuels and the appellants, but the amount of the settlements is not known.
At the trial of the present action the respondent was awarded damages of 78,000 plus interest and that award was upheld by the Court of Appeal.
The sum of 78,000 represented the value of the property at November 2009.
In her judgment, the trial judge noted that it was impossible to say what, beyond the 70,000, the Bank of Scotland was seeking against the respondent and noted that the amount outstanding to the Bank of Scotland included a large amount by way of legal fees.
The Court of Appeal proceeded on the basis that the respondents intention in pursuing the claim was not to profit but to obtain funds to reduce or discharge her liability under the Birmingham Midshires charge.
In their written cases and in their oral submissions in the present appeal, both parties proceeded on this basis.
Mr Pooles, on behalf of the appellants, makes a rather different point, however.
He submits that, while the claim is to reduce or avoid a loss rather than to enforce an illegitimate gain, there is no difference as to the intention and that underlying the fraud into which the respondent willingly entered was the prospect of recovering 50% of the net profits on the sale of the property.
He submits that the loss results from the respondents wrongdoing and that the policy consideration that a person should not be allowed to profit from her own wrongdoing applies equally in these circumstances.
No doubt, the respondents motive in entering into the illegal transaction was to make a profit.
That is likely to be the motive behind most illegal agreements and the same could be said of many such claimants including Mr Patel and Miss Milligan.
The motive for the wrongdoing which forms the background to this claim must, however, be distinguished from enlisting the courts assistance to make a profit from that wrongdoing.
The relief sought from the court will be important here. (See Patel v Mirza per Lord Toulson at para 109.) Clearly, it would be objectionable for the court to lend its processes to recovery of an award calculated by reference to the profits which would have been obtained had the illegal scheme succeeded.
This, however, is not a claim to recover a profit but a claim for compensation for property lost by the negligence of the appellants.
The award of damages made by the trial judge and upheld by the Court of Appeal was the value of the property as at November 2009 with interest thereon until the date of payment.
This represented the loss to the respondent arising from the fact that at the date of default she was, as a result of the appellants negligence, unable to provide Birmingham Midshires with an unencumbered registered title to the property in reduction or discharge of the loan to her.
This is not a case of the court assisting a wrongdoer to profit from her own wrongdoing.
There is, however, a more fundamental answer to Mr Pooles submission.
The respondent can indeed be considered to have got something out of her fraudulent transaction; she has an equity of redemption in the property of uncertain value and, if her claim is permitted to succeed, she will acquire the means of meeting a substantial judgment against her.
However, even if this could properly be considered profiting from ones own wrong, which in my view it cannot, while profiting from ones own wrong remains a relevant consideration it is no longer the true focus of the inquiry.
As Lord Toulson explained in Patel at paras 99 101 (cited at para 22 above), adopting the reasoning of McLachlin J in Hall v Hebert supra, at pp 175 176, the notion that persons should not be permitted to profit from their own wrongdoing is unsatisfactory as a rationale of the illegality defence.
It does not fully explain why particular claims have been rejected and it leads judges to focus on the question whether a claimant is getting something out of the wrongdoing, rather than on the question whether to permit recovery would produce inconsistency damaging to the integrity of the legal system.
The true rationale of the illegality defence, as explained in Patel and in the judgment of McLachlin J in Hall v Hebert, is that recovery should not be permitted where to do so would result in an incoherent contradiction damaging to the integrity of the legal system.
In the present case, to allow the respondents claim to proceed would not involve any such contradiction, for the reasons I have given.
Conclusion
For these reasons, I consider that the Court of Appeal correctly followed the policy based approach adopted by the Supreme Court in Patel v Mirza and was correct in its conclusion that a defence of illegality should not bar the present claim.
I would, accordingly, dismiss the appeal.
| This appeal concerns the defence of illegality.
The Supreme Court is asked to decide whether a firm of solicitors, Stoffel & Co, can escape liability to Ms Grondona for their negligent failure to register documents effecting a transfer of property because the transfer formed part of an illegal mortgage fraud.
Ms Grondona had a business relationship with Mr Mitchell.
In or about July 2002, Mr Mitchell purchased a 125 year lease of the rear ground floor flat at 73b Beulah Rd, Thornton Heath (the property).
Shortly afterwards, he borrowed 45,000 from BM Samuels Finance Group Plc.
The loan was secured by a legal charge over the property (the BM Samuels charge).
In October 2002, Ms Grondona bought the property from Mr Mitchell, with the assistance of a mortgage advance of 76,475 from Birmingham Midshires.
The plan was that the mortgage advance would be secured by a charge over the property, which Ms Grondona entered into on 31 October 2002 (the Birmingham Midshires charge).
Ms Grondona procured the mortgage advance by fraud.
According to the trial judge, the purpose of the fraud was to raise capital for Mr Mitchell from a high street lender, which he would not otherwise have been able to obtain.
Ms Grondona and Mr Mitchell had previously entered into an agreement which confirmed that Mr Mitchell would be responsible for the mortgage payments.
Stoffel & Co solicitors acted for Ms Grondona, Mr Mitchell and Birmingham Midshires in connection with the transaction.
Stoffel & Co negligently failed to register at the Land Registry the form TR1 transferring the property from Mr Mitchell to Ms Grondona, the form DS1 releasing the BM Samuels charge, and the Birmingham Midshires charge.
This meant that Mr Mitchell remained the registered owner of the property, which continued to be subject to the BM Samuels charge.
Mr Mitchell subsequently received further advances from BM Samuels on the basis of that charge.
In 2006, Ms Grondona defaulted on payments under the Birmingham Midshires charge.
Birmingham Midshires brought proceedings against her.
Ms Grondona, in turn, sought damages from Stoffel & Co. Stoffel & Co admitted that their failure to register the forms with the Land Registry constituted negligence or a breach of retainer.
However, they argued that they were entitled to rely on the illegality defence, because Ms Grondona had only instructed them to further the illegal mortgage fraud.
The trial judge held that Ms Grondonas claim was not barred by the illegality defence.
The Court of Appeal dismissed Stoffel & Cos appeal.
Stoffel & Co appealed to the Supreme Court.
The Supreme Court unanimously dismisses Stoffel & Cos appeal, and holds that Ms Grondonas claim is not barred by the illegality defence.
Lord Lloyd Jones gives the judgment, with which all members of the Court agree.
The Supreme Court decision in Patel v Mirza [2016] UKSC 42 set out a new policy based approach to the illegality defence at common law.
In that case, the majority held that, when a claim is tainted by illegality, the court should ask itself whether enforcing the claim would lead to inconsistency that is damaging to the integrity of the legal system.
In making this assessment, the court should consider: (a) the underlying purpose of the illegality in question, and whether that purpose would be enhanced by denying the claim; (b) any other relevant public policy on which denying the claim may have an impact; and (c) whether denying the claim would be a proportionate response to the illegality [22 23].
The application of this trio of considerations should not be a mechanistic process.
Accordingly, the court will identify the policy considerations at stages (a) and (b) of the trio at a relatively general level.
The courts task is to establish whether enforcing a claim that is tainted with illegality would be inconsistent with the policies to which the law gives effect or, where the policies compete, to decide where the balance lies.
The court is not required to evaluate the underlying policies themselves.
In contrast, when considering proportionality at stage (c), it is likely that the court will need to look closely at the case before it.
However, it is not necessary for the court to consider proportionality in every case.
If, after it has examined the policy considerations at stages (a) and (b), the court determines that the claim should not be barred by the illegality defence, there will be no need for it to go on to consider proportionality.
This is because the claim will be allowed, so there is no risk of disproportionate harm to the claimant by refusing relief to which he or she would otherwise be entitled [26].
In considering stage (a), Lord Lloyd Jones observes that Ms Grondona was engaged in mortgage fraud, which is a serious criminal offence.
However, denying her claim would not enhance the underlying purpose of the prohibition on mortgage fraud.
Fraudsters are unlikely to be deterred by the risk that they will be left without a civil remedy if their solicitors prove to be negligent [29].
On the other hand, allowing Ms Grondonas claim would enhance the protection that the law provides to mortgagees and other members of the public, which is a further underlying purpose of the prohibition on mortgage fraud.
By the time of Stoffel & Cos negligence, it was in the interests of both Ms Grondona and Birmingham Midshires that the transfer should be registered [30 31].
Turning to stage (b), denying Ms Grondonas claim would run counter to a number of important public policies.
In particular, it would be inconsistent with the policy that solicitors should perform their duties to their clients diligently and without negligence, as well as with the policy that the victims of solicitors negligence should be compensated for the loss they have suffered [32].
Denying the claim would also result in an incoherent contradiction in the law, because the law accepts that an equitable interest in the property passed to Ms Grondona, even though she was engaged in mortgage fraud [33 34].
The balancing of the policy considerations at stages (a) and (b) indicate that Ms Grondonas claim should not be barred by the illegality defence.
There is, consequently, no need to consider proportionality, but Lord Lloyd Jones does so nevertheless [35].
He concludes that it would not be proportionate to deny Ms Grondonas claim because it is conceptually entirely separate from the mortgage fraud [43].
Enforcing the claim would not allow Ms Grondona to profit from her wrongdoing [44 45].
In any case, following Patel v Mirza, the courts focus should be on the need to avoid inconsistency that is damaging to the integrity of the legal system.
The question of whether the claimant will profit from the illegality remains a relevant consideration, but it is no longer the true focus of the courts inquiry [46].
|
This appeal raises significant issues regarding the procedures whereby, firstly, magistrates may issue warrants to enter and search premises and seize property under section 8 of the Police and Criminal Evidence Act 1984 (PACE), secondly, Crown courts may, under section 59 of the Criminal Justice and Police Act 2001 (CJPA), order the retention by the police of unlawfully seized material on the grounds that, if returned, the material would be immediately susceptible to lawful seizure and, thirdly persons affected may challenge such decisions by judicial review.
Central to the issues is whether the relevant judicial authorities are, under the principle in Al Rawi v Security Service [2011] UKSC 34; [2012] 1 AC 531 and in the absence of express Parliamentary authorisation to conduct a closed material procedure, precluded at each or any of these stages from having regard to information which, on public interest grounds, cannot be disclosed to any person affected who wishes to challenge the warrant or any seizure or order for retention under section 59.
warrant: Section 8 of PACE sets out conditions for obtaining a search and seizure that an indictable offence has been committed; (1) If on an application made by a constable a justice of the peace is satisfied that there are reasonable grounds for believing (a) and (b) that there is material on premises which is likely to be of substantial value (whether by itself or together with other material) to the investigation of the offence; and (c) and that the material is likely to be relevant evidence; (d) that it does not consist of or include items subject to legal privilege, excluded material or special procedure material; and (e) (3) below applies, that any of the conditions specified in subsection he may issue a warrant authorising a constable to enter and search the premises . (3) The conditions mentioned in subsection (1)(e) above are that it is not practicable to communicate with any (a) person entitled to grant entry to the premises; (b) that it is practicable to communicate with a person entitled to grant entry to the premises but it is not practicable to communicate with any person entitled to grant access to the evidence; (c) unless a warrant is produced; that the purpose of a search may be frustrated or (d) seriously prejudiced unless a constable arriving at the premises can secure immediate entry to them. that entry to the premises will not be granted (1) This section and section 16 below have effect in relation to the issue to constables under any enactment, including an enactment contained in an Act passed after this Act, of warrants to enter and search premises; and an entry on or search of premises under a warrant is unlawful unless it complies with this section and section 16 below.
Section 15 of PACE contains safeguards relating to the procedure for
obtaining such a warrant: (2) Where a constable applies for any such warrant, it shall be his duty (a) the ground on which he makes the the enactment under which the warrant to state (i) application; (ii) would be issued; and (iii) if the application is for a warrant authorising entry and search on more than one occasion, the ground on which he applies for such a warrant, and whether he seeks a warrant authorising an unlimited number of entries, or (if not) the maximum number of entries desired; to specify the matters set out in subsection (2A) to identify, so far as is practicable, the articles or (b) below; and (c) persons to be sought. (2A) The matters which must be specified pursuant to subsection (2)(b) above are (a) if the application relates to one or more sets of premises specified in the application, each set of premises which it is desired to enter and search; (b) if the application relates to any premises occupied or controlled by a person specified in the application as many sets of premises which it is (i) desired to enter and search as it is reasonably practicable to specify; (ii) the person who is in occupation or control of those premises and any others which it is desired to enter and search; (iii) why it is necessary to search more premises than those specified under sub paragraph (i); and (iv) why it is not reasonably practicable to specify all the premises which it is desired to enter and search. (3) An application for such a warrant shall be made ex parte and supported by an information in writing. (4) The constable shall answer on oath any question that the justice of the peace or judge hearing the application asks him. (5) A warrant shall authorise an entry on one occasion only unless it specifies that it authorises multiple entries.
Section 59 of the CJPA provides for circumstances where property seized under a warrant or purported warrant would otherwise fall to be returned as for example where the search and seizure warrant was for some reason invalid but where, if the property were returned, it would immediately become appropriate to issue a fresh warrant in pursuance of which it would be lawful to seize the property.
Section 59 provides that in such circumstances the court may order the retention of the property seized.
Factual background
The appeal arises from the issue on 16 June 2014 by St Albans Magistrates Court (JL Grimsey JP) of two search and seizure warrants in respect of London addresses at 22 Leys Gardens, Barnet and Unit 5, Island Blue Ltd, Overbury Road, Harringay (said to be addresses at which the appellant Mr John Haralambous respectively lived and was suspected to have a business interest) and from their execution on 26 June 2014 by entry and seizure of a number of items.
The warrants were issued following an ex parte application by the second respondent, the Chief Constable of the Hertfordshire Constabulary, under section 8 of PACE.
The appellant was also arrested on 26 June 2014 and bailed.
Any further investigation by the police of any matter to which such warrants and arrest related has been suspended pending the outcome of these proceedings.
The appellant sought disclosure of, inter alia, the written application for the warrants, and was on 16 September 2014 provided with what the second respondent informed him on 17 September 2014 was a redacted copy.
On 18 September 2014 the appellant applied to the St Albans Magistrates Court for an unredacted version, relying on the procedure in Commissioner of Police of the Metropolis v Bangs [2014] EWHC 546 (Admin).
The application was heard in the Luton Magistrates Court on 23 September by District Judge Mellanby.
The appellant was provided from the courts file with JL Grimseys written statement dated 16 June 2014 of reasons for issuing the warrants, namely because of the substantial evidence that linked all the subjects together and the addresses, and was informed that the evidence, which was being withheld, consisted of two closely typed pages.
On 25 September 2014 District Judge Mellanby issued her open reasons for refusing the application for disclosure of the redacted and withheld information, and on the next day she handed the second respondent a closed judgment.
By a first judicial review claim issued on 26 September 2014 (CO/4505/2014), the appellant sought return of the material seized on 26 June 2014 on the basis that the warrants, entries, searches and seizures, were unlawful for a range of reasons.
These included alleged deficiencies in the terms in which the application could be seen to have been expressed.
They also included the appellants central contention that the information disclosed to him showed no basis on which lawful search warrants could have been issued, and that it had not been and was not permissible for reliance to be placed on the withheld information.
By a consent order signed on 27 March and sealed on 6 May 2015, the second respondent agreed that the warrants should be quashed.
Prior to so doing the second respondent on 23 March 2015 served a protective application for retention of the seized material under section 59 of the CJPA.
On 9 June 2015 HHJ Bright QC sitting in the St Albans Crown Court ruled that the second respondent was entitled to rely on the withheld information in support of its section 59 application, and on 11 June 2015, in the light of this ruling, the parties agreed and HHJ Bright QC made an order authorising retention of the seized material under section 59.
By a second judicial review claim issued on 26 June 2015 (CO/3114/2015), the appellant sought the return of the seized material on the grounds that the section 59 order should be quashed, since it was impermissible to rely on the withheld information in its support.
In response to an application by the second respondent for directions to allow the Divisional Court, should it wish, to see the withheld information in an ex parte hearing, the appellant accepted that, if HHJ Bright QC had been entitled to have regard to the withheld information, then the lawfulness of his ruling was not in issue; the only issue was whether he was so entitled; and only if he was not, did the section 59 order fall to be quashed.
Collins J on 20 January 2016 left it to the Divisional Court to decide at the hearing whether it should see the withheld information.
The Divisional Court decided not to hold an ex parte hearing and that it did not need to consider the withheld information.
It gave judgment on 22 April 2016 dismissing the appellants claim for judicial review: [2016] 1 WLR 3073.
It held that it was open to a magistrate issuing a search and seizure warrant and a court deciding an application under section 59 to consider material which had in the public interest to be withheld from disclosure.
It evidently took the same view in relation to a magistrates court hearing an application for disclosure pursuant to the procedure indicated in Bangs (para 6 above), although it wrongly referred to that procedure as one for challenging the issue or execution of a warrant.
It is common ground between the parties before the Supreme Court that magistrates court decisions to issue a search and seizure warrant and Crown Court orders under section 59 are challengeable only by judicial review, which is the means the appellant correctly adopted.
Finally, the Divisional Court noted that it had been no part of the argument before it that, if HHJ Bright QC had been correct to decide that the appellant should be denied access to the withheld information, his decision should still be quashed.
It referred to R (AHK) v Secretary of State for the Home Department [2012] EWHC 1117 (Admin); [2013] EWHC 1426 (Admin) (Ouseley J) as providing possible support by analogy for a rejection of any such argument.
The issues
should address five issues, which I can slightly rephrase as follows: In the light of the above, the parties have agreed that the Supreme Court (i) How far can a magistrates court, on an ex parte application for a search and seizure warrant under sections 8 and 15(3) of PACE, rely on information which in the public interest cannot be disclosed to the subject of the warrant? (ii) issued ex parte under sections 8 and 15(3) of PACE: In proceedings for judicial review of the legality of a search warrant, (a) is it permissible for the High Court to have regard to evidence (upon which the warrant was issued) which is not disclosed to the subject of the warrant? (b) If a magistrates court is permitted to consider evidence not disclosable to the subject of the warrant, but the High Court is not, does it follow that the warrant must be quashed in circumstances where the disclosable evidence is insufficient, on its own, to justify the warrant? (iii) Is there jurisdiction in a Crown Court to rely on evidence not disclosable to the subject of the warrant in an application made inter partes to retain unlawfully seized material under section 59 of the CJPA? (iv) In proceedings for judicial review of an order, made inter partes, for retention of unlawfully seized material under section 59 of the CJPA, is it permissible for the High Court to have regard to evidence (upon which the warrant was issued) which is not disclosed to the subject of the warrant? (v) Do the principles concerning irreducible minimum disclosure apply to proceedings concerning search warrants? The assumption behind these questions is that no express Parliamentary authorisation exists for the operation of a closed material procedure at any stage.
The appellants case was that the Justice and Security Act 2013 has no application, because proceedings relating to a search warrant or under section 59 of the CJPA are criminal in nature, not civil.
The second respondent took no issue with this, but the Secretary of State for the Home Department as intervener suggested an alternative basis on which the 2013 Act would not apply (namely that it applies only where disclosure would be damaging to the interests of national security).
No detailed submissions were addressed to these points, and the Court is content simply to proceed on the basis of the common ground that, for one reason or another, the 2013 Act does not apply.
In the absence of any such express statutory authorisation, the appellants submission is that the common law principle in Al Rawi applies to preclude any form of closed material procedure.
Although the agreed issues refer to the person who is the subject of the warrant, this does not reflect the actual language or effect of sections 8 and 15 of PACE.
The subject of any warrant under those sections is premises, falling into one of two categories.
The first category consists of specific premises, specified in the application.
The present warrants fall into that category.
The second category consists of any premises occupied or controlled by a person specified in the application.
The pre conditions to issue of a warrant set out in section 8(3) also refer to any person entitled to grant entry to the premises as well as to any person entitled to grant access to the evidence who may or may not be the same or different persons.
Again that does not mean that the warrant is addressed to any such person.
There are, of course, likely to be persons whose interests are affected by the operation of a search and seizure order.
Very often they will be persons occupying the relevant premises and in possession of the property seized.
Sometimes there may be persons with privacy or confidentiality rights in respect of property seized.
But this will not necessarily be the case.
A search and seizure warrant may have as its aim and effect to obtain material relating to some third person with no proprietary, possessory or other interest in the material seized at all.
The material may assist the investigation, and very possibly provide evidence against the third person.
The occupier of the premises or person in possession of the material before its seizure may not make any challenge to the warrant or its execution.
It is not clear that the third person would necessarily have any basis for doing so.
The appellants primary case, advanced by Mr Mark Summers QC, is that it is not permissible for a magistrate or court, at any of the stages identified in issues (i) to (iv), to have regard to or rely on material which will on public interest grounds have to be withheld from a person affected by the order made.
Alternatively, if it is legitimate for a magistrate on a section 8 application and/or a Crown Court judge on a section 59 application to have regard to and rely on material so withheld, there is no basis on which a court can, consistently with Al Rawi, do so on a judicial review challenge to the warrant or the section 59 order.
Mr Summers invites the Supreme Court, when considering these issues, to start with the end position as it exists on an application for judicial review.
If material has on public interest grounds to be withheld from the applicant then, it cannot, he submits, have been legitimate for it to be deployed at any earlier stage.
Finally, if these submissions are not accepted, Mr Summers submits that neither a section 8 nor a section 59 order can withstand challenge by a person affected, unless that person has been supplied with the gist of the information relied upon to obtain it.
Mr Martin Chamberlain QC for the second respondent and Mr James Eadie QC for the Secretary of State for the Home Department, as intervener, advance a contrary case at each stage.
In their submission, both the magistrate under section 8 and a court under section 59 are entitled to rely on material which will have to be withheld from disclosure to a person affected.
A court on judicial review is either entitled to adopt a similar procedure or, if it cannot, must simply assume that the material withheld justified the orders made under section 8 and/or 59.
Further, although a search and seizure warrant involves an invasion of private property, the invasion does not, in their submission, equate with the infringements of liberty involved in previous cases, involving for example detention or a control or asset freezing order, where gisting of the substance of the material relied on has been regarded as essential.
In considering the issues, Mr Chamberlain and Mr Eadie invite the Court to start with the initial application for a warrant and follow the process through each of the potential subsequent stages.
There is in my opinion a logic in this last submission, since it means considering the statutory scheme from the ground up.
It also takes the same starting point as the agreed issues.
But I agree that it is important to review any conclusions reached about the earlier stages of the process in the light of whatever analysis is adopted of its later stages.
Issue (i) the issue of a warrant
In order for a magistrate to be able to issue a warrant under section 8(1) read with section 15(3) and (4), all that is required is that he or she be satisfied, from the information contained in the constables application and from the constables answers on oath to any questions put, that there are reasonable grounds for believing the matters set out in section 8(1)(a) to (e).
Nothing in the language of these sections suggests that the material giving rise to such grounds must be of any particular nature, or take any particular form, or itself be admissible in evidence at any trial that might be envisaged.
In the context of a procedure designed to be operated speedily by a constable at an early stage in a police investigation, that is unsurprising.
It is also clear, and common ground, that the statutory scheme of sections 8 and 15 of PACE is designed to operate ex parte.
Section 15(3) makes express provision to that effect, and the pre conditions to the operation of the scheme, set out in section 8(3), underline the point.
The execution of the warrant for search and seizure may lead to the obtaining of material that may itself either be, or lead in due course to the obtaining of, evidence.
Such evidence will only be capable of being deployed at any trial of any person who may be charged with any offence if it is disclosed: R v Davis [2008] AC 1128.
But the statutory scheme of sections 8 and 15 operates at a stage preliminary to any trial and before any issue of guilt or innocence is joined with any particular person.
The issue and execution of a search and seizure warrant does involve a statutorily authorised invasion and taking by the state of private property.
Again not surprisingly, the courts have developed ancillary principles and protections.
In R (Cronin) v Sheffield Justices [2002] EWHC 2568 (Admin); [2003] 1 WLR 752, the court addressed a number of issues that had been raised with reference to article 8 of the European Convention on Human Rights, and then noted that a question had also arisen as to whether there was any lawful justification for supplying to a citizen whose home had been entered pursuant to a search warrant a copy of the relevant information on which the warrant was based.
As to this, Lord Woolf CJ said (para 29): Information may contain details of an informer which it would be contrary to the public interest to reveal.
The information may also contain other statements to which public interest immunity might apply.
But, subject to that, if a person who is in the position of this claimant asks perfectly sensibly for a copy of the information, then speaking for myself I can see no objection to a copy of that information being provided.
The citizen, in my judgment, should be entitled to be able to assess whether an information contains the material which justifies the issue of a warrant.
This information contained the necessary evidence to justify issuing the warrant.
In R (Energy Financing Team Ltd) v Bow Street Magistrates Court [2005] EWHC 1626 (Admin); [2006] 1 WLR 1316 (EFT), the court set out ten general conclusions regarding warrants.
It described the grant and execution of a search and seizure warrant as a serious infringement of the liberty of the subject, which needs to be clearly justified (para 24(1)).
Its last two conclusions were as follows: (9) The remedy which is available to a person or persons affected by a warrant is to seek judicial review.
It is an adequate remedy because the statutory provisions have to be read in the light of those articles of the European Convention which are now part of English law.
In fact, . if the statutory provisions are satisfied the requirements of article 8 of the Convention will also be satisfied, and at least since the implementation of the Human Rights Act an application for judicial review is not bound to fail if, for example, the applicant cannot show that the Directors decision to seek a warrant in a particular form was irrational, but in deciding whether to grant permission to apply for judicial review the High Court will always bear in mind that the seizure of documents pursuant to a warrant is an investigative step, perhaps best reconsidered either at or even after the trial. (10) Often it may not be appropriate, even after the warrant has been executed, to disclose to the person affected or his legal representatives all of the material laid before the district judge because to do so might alert others or frustrate the purposes of the overall inquiry, but the person affected has a right to be satisfied as to the legality of the procedure which led to the execution of the warrant, and if he or his representatives do ask to see what was laid before the district judge and to be told about what happened at the hearing, there should, so far as possible, be an accommodating response to that request.
It is not sufficient to say that the applicant has been adequately protected because discretion has been exercised first by the Director and then by the district judge.
In order to respond to the request of an applicant it may be that permission for disclosure has to be sought from an investigating authority abroad, and/or that what was produced or said to the district judge can only be disclosed in an edited form, but judicial control by way of judicial review cannot operate effectively unless the person or persons affected are put in a position to take meaningful advice, and if so advised to seek relief from the court.
Furthermore it is no answer to say that there is no general duty of disclosure in proceedings for judicial review.
In Gittins v Central Criminal Court [2011] EWHC 131 (Admin), the court had before it claims judicially to review two warrants issued by HHJ Stephens QC on an ex parte application under section 9, read with Schedule 1 paragraph 12 to PACE.
The warrants authorised HMRC to search premises occupied by the two claimants and seize documents there.
Until the morning of the hearing, HMRC maintained that it could not disclose the information on the basis of which the warrants had been issued, for fear of prejudicing the continuing investigation which was not confined to the claimants.
However, on the morning of the hearing HMRC provided a document giving the gist of its case, and a redacted transcript of the hearing before HHJ Stephens QC.
Gross LJ made five numbered observations, including these: 27.(2) When an application for judicial review is launched seeking to quash the grant of a search warrant, it is, again, in some respects, akin to the return date for Marevas, Anton Pillers and Restraint Orders.
Ordinarily, the expectation will be that the party challenging the grant of the warrant must be entitled to know the basis upon which the warrant was obtained. 28.(3) By their nature, criminal investigations are such that there will be occasions when, for good reason, HMRC (or other authorities as the case may be) will not be able to divulge the full information or the full contents of the discussion before the judge who granted the warrant.
There is an important public interest in combating economic crime, and HMRCs proper efforts to do so should not be undermined. 30.(5) Where full disclosure cannot be given (and there will be cases where it cannot be), HMRC should, if at all possible, and again unless there is good reason for not doing so, make available, and in a timely fashion, a redacted copy or at least a note or summary of the information and the hearing before the judge, where appropriate, backed by an affidavit.
Davis J addressed the same subject, saying: 77.
It must not be overlooked that an order issuing a warrant of the kind sought and granted in this case is, by its very nature, highly intrusive.
Hence indeed the stringent pre conditions under the 1984 Act Parliament has stipulated should be fulfilled before such an order may be made.
Further, such orders are ordinarily, as here, sought on an ex parte basis: a reversal of course (albeit on well established grounds) of the usual rule that a party is entitled to be heard before any order is granted against him.
Those two considerations seem to me to indicate that the prima facie starting point should be for HMRC to give, where requested, to the person who may be aggrieved at the issuing of the warrant and who may wish to challenge it, as much relevant information as practicable, provided it is not prejudicial to the investigation, as to the basis on which the warrant was obtained from the Crown Court. 78.
It is of course relatively easy to envisage that there may be many cases where it could indeed be prejudicial to the investigation, prior to any charging decision, to disclose parts of the information and other materials deployed before the Crown Court judge in seeking the warrant.
Non disclosure in such circumstances can be justified.
In the present case for example, we are told that a 59 page information and three supporting folders of materials were placed before the judge.
Those have not thus far, in their full terms, been disclosed to Mr Gittins, and indeed Mr Jones QC did not seek to say they should have been, at all events at this stage.
But, to repeat, it is not legitimate to move, without additional justification, from a position whereby it can properly be said that not all the materials placed before the Crown Court judge should be disclosed, to a position whereby it can be said that the recipient of the warrant is to be told nothing at all as to the basis on which the warrant was sought.
In my view, therefore, in each case where a request for 79. such information is made by the person the subject of a warrant of the kind made here, HMRC should consider such requests on a individuated basis.
Specifically, HMRC should assess what materials and information relied on before the Crown Court can properly be disclosed, with or without editing, and whether by way of summary or otherwise, without prejudicing the criminal investigation.
It would be wrong simply to hide behind an asserted general policy as a justification in itself for declining to give any information.
Indeed, I suspect that, while there perhaps may be cases where declining to give any information at all may be justified in particular circumstances, such a situation is likely to be an exception.
Certainly it should not be taken as a norm.
Where such a situation is said by HMRC to arise, then HMRC should be prepared to justify it.
It is indeed, as I see it, salutary that that should be so.
It is clear (from paras 78 and 79 in particular of his judgment) that Davis J contemplated that there could be put before, and relied on by, the circuit judge information, some or even all of which would have to be withheld on public interest grounds from a person affected by, and wishing by judicial review to challenge, the warrants.
In R (Golfrate Property Management Ltd) v Southwark Crown Court [2014] EWHC 840 (Admin); [2014] 2 Cr App R 12, paras 17 18, the court emphasised that a decision to claim on public interest grounds to withhold information placed before a magistrate to obtain a warrant should be taken by a Chief Constable and was required to be sanctioned by the court.
Finally, in Bangs (para 6 above), the court held that, where the police were objecting to the disclosure to a person affected of information relied upon before a magistrate to obtain a search and seizure warrant, the magistrates court was not functus officio, and any challenge to the withholding was an issue for the magistrates court (para 28).
The court acknowledged that the public interest might demand that some or all of the material relied on to obtain the warrant not be disclosed (para 25).
Referring to Bank Mellat v HM Treasury (No 2) [2013] UKSC 38; [2014] AC 700, it also noted that the applicant might have to be excluded from parts, in some cases substantial parts, of the hearing and reasoning given on the disclosure application (para 35).
In the authorities cited in paras 15 to 21 above, the procedure, whereby information put before and used by the magistrate is withheld from any person affected, is frequently referred to as a PII (public interest immunity) procedure.
Conventionally, a PII procedure exists when a court assesses whether material should be disclosed to the other party, in which case it will be known on all sides, or should in the public interest be withheld from use by anyone, including the court: see Al Rawi v Security Service (para 1 above), paras 100 104; R (British Sky Broadcasting Ltd) v Central Criminal Court [2014] UKSC 17; [2014] AC 885, para 32.
The procedure will then include an assessment of the significance of the material in the context of whatever decision is in issue (here, the issue of the warrant) and any challenge to it.
However, I understand some of the dicta in the above authorities in a different sense.
They contemplate that the magistrate in the case of an ex parte application for a warrant under section 8 of PACE, or the Crown Court judge, in the case of such an ex parte application under section 9 of PACE, will or may have been persuaded by material some, or even all, of which will at the later stage of a claim for disclosure under the principle in Bangs or for judicial review of the issue of the warrant, have to be withheld from the applicant on public interest grounds: see eg EFT, para 10, Gittins, paras 65 66 and Bangs, para 25.
The authorities do not directly address the question of what a court hearing a judicial review application can or should do if it appears that the material withheld is likely to be decisive for a consideration of the legitimacy or otherwise of the issue of the warrant.
That question was however considered in Competition and Markets Authority v Concordia International RX (UK) Ltd [2017] EWHC 2911 (Ch), in a judgment handed down by Marcus Smith J shortly after the hearing of this appeal in the Supreme Court.
The judgment was helpfully sent by him to the Supreme Court, and we invited and received the parties submissions on it.
The issue arose in Concordia in the context of a search warrant issued ex parte under section 28 of the Competition Act 1998.
Section 28 can itself be regarded for present purposes as broadly paralleling section 8 of PACE.
But the relevant Practice Directions provide not only that a warrant under section 28 must be served as soon as possible on the occupier or person appearing to be in charge of the premises (PD paras 7.3 and 8.1), but also that such occupier or person may apply to vary or discharge the warrant to the judge who issued the warrant or, if he is not available, another High Court judge (para 9).
Concordia applied accordingly, but the Competition and Markets Authority (CMA) maintained that it could not, for public interest reasons, disclose all the information on the basis of which it had persuaded the judge to issue the warrant in its final form.
In the course of a careful analysis of the possibilities, Marcus Smith J: (i) rejected a submission that, if the CMA was to be permitted to resist the challenge, it must disclose the full material; (ii) considered that the Supreme Courts judgment in Al Rawi precluded a closed material procedure, whereby the material withheld could be seen by the court, but not by Concordia; (iii) rejected the CMAs case that some form of confidentiality ring could be established, to allow disclosure to Concordias counsel, without disclosure to Concordia; and (iv) in these circumstances held that Concordias application to vary or partially revoke the warrant must be determined on the basis of such material as is not protected by public interest immunity (para 71).
In so concluding, Marcus Smith J recognised that the excluded material may constitute the difference between the section 28 warrant being upheld or varied/revoked (para 70).
The question on this appeal is whether the conclusions he reached are correct, at least in the context of a search and seize warrant issued under section 8 of PACE.
The current Criminal Procedure Rules, as amended since the events giving rise to the present proceedings, contain provisions reflecting and regulating the procedure contemplated in the authorities discussed in paras 15 to 21 above.
They expressly permit information to be placed before a magistrate under section 8 of PACE (rule 47.26(4)), in circumstances to which rule 5.7 (see below) applies, marked to show that it is only for the magistrate or court and not to be supplied to anyone else, and accompanied with an explanation as to why it is withheld.
They go on to provide a number of safeguards.
An application for a search warrant cannot be dealt with without a hearing (rule 47.25(1)).
The applicant officer must confirm on oath or affirmation that the application discloses all information material to the decision the court must make, that the contents of the application are true, and that he has disclosed anything known or reported to him which might reasonably be considered capable of undermining any of the grounds (rules 47.25(4) and (5) and 47.26(3) and (5)).
He must also answer any questions on oath or affirmation (rule 47.25(5)).
An application must also include a declaration by an officer senior to the applicant that the senior has reviewed and authorised it (rule 47.26(5)(b)).
The hearing, however, is required to be in private unless the court otherwise determines, and in the absence of any person affected by the warrant, including any person in occupation or control of the premises (rule 47.25(1)).
Rule 5.7 makes detailed provision for circumstances in which information is sought by a party or person about the grounds on which an order was made, or a warrant issued, in his absence, and the person who applied for the order or warrant objects to the supply of the information requested.
The notice of objection must in this situation mark the material to the disclosure of which the objection relates to show it is only for the court and give an explanation why it has been withheld (rule 5.7(8)).
The hearing which follows may take place, wholly or in part, in the absence of the party or person applying for information, and in the event the general rule (though the court may direct other arrangements) is that the court will consider representations first by the party or person applying for information and then by the objector in the presence of both, and then further representations by the objector, in the absence of that party or person (rule 5.7(9)).
Rule 47.39 (introduced by SI 2017/144) also contains in relation to applications under section 59 of the CJPA provisions regarding the marking of information to show that, unless the court otherwise directs, it is only for the court, accompanied with an explanation as to why it has been withheld, together with provisions mirroring those in rule 5.7(9).
These provisions contemplate that the magistrate on an application for a warrant under section 8 or for disclosure, or the Crown Court under section 59 of the CJPA, will be able to see and rely on information which in the public interest cannot be disclosed to a person affected by the relevant order who would otherwise be entitled to disclosure of the information.
Mr Summers submits that these provisions were in that respect ultra vires.
One may surmise that this submission is made on the basis that the general power under section 69 of the Courts Act 2003 to make rules of procedure governing the practice and procedure in the criminal courts cannot tacitly authorise a departure from so fundamental a principle as the administration of open, inter partes justice.
I express no view on that submission.
It falls away if the statutory scheme of PACE and the CJPA itself permits the relevant magistrate or court to have regard to material which cannot on public interest grounds be disclosed to a person affected by a warrant or order.
In my opinion, the statutory scheme of sections 8 and 15 of PACE does so permit.
Read in terms, it involves, as indicated in paras 12 and 15 above, a purely ex parte process, directed to premises, rather than any particular person.
It is a process designed to be operated speedily and simply, on the basis of information provided by a constable satisfying a magistrate that there are reasonable grounds for believing the matters stated in section 8(1).
There is nothing in the statutory scheme which expressly restricts the information on which the magistrate may act.
Parliament made no express provision for the information on which the warrant was sought to take any particular form or to be disclosed, even after the issue of the warrant, to any person affected.
It would in many cases clearly be impracticable to expect such disclosure, for example where the information came from an informer, and in particular where it came from an informer whose identity could readily be identified from the nature of the information.
I note, in parenthesis, that the police may well be under a duty, for example under articles 2 and 3 of the Human Rights Convention, to protect the safety of such an informer.
Another area where disclosure to a person affected would clearly be impracticable would be where it would reveal the particular lines or methods of investigation being or proposed to be followed, in a way which would or could undermine their continuing usefulness in relation to other aspects of, or other persons potentially involved in, the investigation.
The rules which I have summarised in para 25 above make very clear that the police owe a duty of candour towards the magistrate when seeking a warrant, and may well have to disclose such information, eg because it is material, or if asked by the magistrate.
The suggestion that the police should in such a case simply refrain from seeking or further seeking a warrant would limit use by the police of important sources of information and the efficacy of police investigations.
It is no doubt sensible practice for applicant officers to adopt, where practicable and where time permits, the permissive rule 47.26(4) procedure and to identify information which they contend ought not to be supplied to anyone but the court.
That may reduce the risk of accidental disclosure, and no doubt a magistrate considering an application would, where this is done, bear in mind that there is information which a person affected might never be able to test.
But there is no suggestion, or I think likelihood, that the scheme intended the constable or magistrate at this early stage, when speed is often of the essence, to try to form a definitive view as to what the public interest might ultimately prove to require.
That is an exercise which in accordance with the rules falls to be undertaken at a later stage by a magistrate under the procedure in Bangs and/or a Crown Court under section 59 of the CJPA.
The effect of the statutory scheme and the rules is that an application for a warrant under section 8 can be made and granted on the basis of all the relevant information available to the applicant, even though some of it may not at any stage be capable of being disclosed to a person affected.
The courts and the rule makers, in developing ancillary principles and protections for persons affected, have been careful to qualify them, by reference to the public interest, so as not to undermine the efficacy of the scheme.
That would be the effect of the appellants case.
This conclusion is also consistent with and in my view supported by consideration of authority, decided before PACE, on the operation of a search and seizure warrant issued under section 20C of the Taxes Management Act 1970: Inland Revenue Comrs v Rossminster Ltd [1980] AC 952.
Section 20C enabled the appropriate judicial officer (in casu, the Common Serjeant) to issue such a warrant: [i]f satisfied on information on oath given by an officer of the board that there is reasonable ground for suspecting that an offence involving any form of fraud in connection with, or in relation to, tax has been committed and that evidence of it is to be found on premises specified in the information .
A warrant was issued and executed in relation to specified premises, including those of Rossminster Ltd, a banking company.
No information was given to Rossminster Ltd about the precise nature of the alleged fraud, or when or by whom it was committed.
Rossminster Ltd applied for judicial review to have the warrant quashed and the documents which had been seized delivered up.
The House recognised the invasive nature of the warrant.
Lord Wilberforce said that he could understand very well the perplexity, and indeed indignation, of those present on the premises, when they were searched (p 998H), and suggested that the statutory scheme called for a fresh look by Parliament.
But, as the majority pointed out, the House was not concerned with unauthorised executive action, as in Entick v Carrington (1765) 2 Wils 275, but with an issue involving the construction and application of a statutory scheme.
As to this, the majority members were agreed that there was no basis either for reading into section 20C or for deriving from the general law any requirement to give particulars of the offences suspected: see eg p 999A C, per Lord Wilberforce, p 1005E, per Viscount Dilhorne, p 1010B C, per Lord Diplock and p 1024A B, per Lord Scarman. (Lord Salmon dissented.)
In this connection, Lord Wilberforce said (p 999A C) that: on the plain words of the enactment, the officers are entitled if they can persuade the board and the judge, to enter and search premises regardless of whom they belong to: a warrant which confers this power is strictly and exactly within the parliamentary authority, and the occupier has no answer to it.
I accept that some information as regards the person(s) who are alleged to have committed an offence and possibly as to the approximate dates of the offences must almost certainly have been laid before the board and the judge.
But the occupier has no right to be told of this at this stage, nor has he the right to be informed of the reasonable grounds of which the judge was satisfied.
Both courts agree as to this: all this information is clearly protected by the public interest immunity which covers investigations into possible criminal offences.
The reference to a general public interest immunity covering investigations into possible criminal offences may need qualification.
Indeed, in the judgment of the Divisional Court in Rossminster, which was approved by the House of Lords, Eveleigh LJ suggested a more focused approach, depending on the particular circumstances: [1980] AC 952, 961D E. A specific public interest is however accepted or assumed to exist in relation to withholding of the material not disclosed to the appellant in this case.
As to the words in the passage cited at this stage, Lord Wilberforce went on to note, with reference to a statement by Lord Reid in Conway v Rimmer [1968] AC 910, 953 954, that, after a verdict or a decision not to take proceedings, there is not the same need for secrecy (p 999D E) and the immunity which exists at the stage of initial investigation will lapse (p 1001A).
However, where, at the stage which the present investigation has reached (pending the outcome of the present appeal), it is accepted that there is a current and continuing public interest in withholding information relied on for the issue of the warrant, that qualification has no application.
The interests of other investigations, current or future, may also require the withholding of information in some circumstances.
The analogy between a section 20C warrant and a warrant to search premises and seize stolen goods at common law (later the subject of section 42 of the Larceny Act 1916) was referred to by Lord Diplock and Lord Scarman at pp 1010H and 1023H 1024A in the Rossminster case.
The approach to a section 20C warrant can fairly be assumed to have been in the mind of those drafting and enacting section 8 of PACE to crystallise the statutory position relating to ordinary search and seizure warrants.
Mr Summers submits that the Rossminster case is the product of an earlier era.
It is true that it was decided both before the Convention rights were domesticated by the Human Rights Act 1998 and before the decision in Al Rawi.
But PACE itself was also enacted in the same era, not long after the decision in Rossminster.
There may be other aspects of the decision in Rossminster which require reconsideration in the light of subsequent developments.
But on the present issue whether the scheme of PACE contemplates that a magistrate on an application for a warrant under section 8 or for disclosure under Bangs, or the Crown Court on an application under section 59 of the CJPA, may rely on material which will have to be withheld from a person affected the judgment in Rossminster is in my view very relevant background to a proper understanding of the scheme.
As in Rossminster, so under section 8, it must have been envisaged that the warrant might be issued on the basis of information which could not in the public interest be disclosed to persons affected at least until some future date after the investigation was over, or perhaps (as when it relates to an informer) for ever.
It is of course the case that the issue and execution of a search and seizure warrant may, to a greater or lesser degree, involve interference with someones real or personal property, possessory or other interests.
But there is no change in substantive property or possessory rights and any invasion of privacy interests is limited and in the general public interest; such interference as there is only occurs in the interests of the investigation of serious (indictable) offending.
It is also relevant that the statutory procedure under section 8 is subject to a number of protections, expressed or inherent in the statutory language and in the current rules summarised in para 25 above.
It only applies when a magistrate is on reasonable grounds satisfied by a constable that an indictable offence has been committed.
A constable, when seeking ex parte to satisfy the magistrate that the requirements of section 8 are met, owes a duty of candour, meaning that the information on which he or she relies must constitute a fair and balanced presentation of the circumstances on the basis of which a warrant is sought: compare for example In re Stanford International Bank Ltd [2010] EWCA Civ 137; [2011] Ch 33, esp at paras 82 83 and 88, per Morritt C and para 191, per Hughes LJ.
A further point is that the material sought must not consist of or include items subject to legal privilege, excluded material or special procedure material (section 8(1)(d)).
Excluded material refers, in summary, to personal records which a person has acquired or created in the course of any trade, business, profession or other occupation or for the purpose of any paid or unpaid office and which he holds in confidence, as well as human tissue taken in a medical context and held in confidence and journalistic material held in confidence (section 11 of PACE).
Special procedure material includes other journalistic material (section 14(1)), as well as material in the possession of a person who acquired or created it in the course of any trade, business, profession or other occupation or for the purpose of any paid or unpaid office (section 14(2)).
Under Schedule 1 to PACE, only a Crown Court judge can make an order relating to special procedure material.
There are two possibilities.
One involves seeking a production order under Schedule 1 paragraph 4; such an order can under paragraph 2 be obtained under conditions which include conditions broadly mirroring those applicable under section 8(1)(a) to (d) (Schedule 1 paragraphs 2 and 3); but Schedule 1 paragraph 7 provides that: An application for an order under paragraph 4 above that relates to material that consists of or includes journalistic material shall be made inter partes.
The other possibility is to seek a search and seizure warrant, which may be sought ex parte, again under conditions mirroring section 8(1)(a) to (d), provided that one of certain further conditions is satisfied (Schedule 1, paragraphs 12(a)(ii) and 14), namely: that it is not practicable to communicate with any person (a) entitled to grant entry to the premises ; (b) that it is practicable to communicate with a person entitled to grant entry to the premises but it is not practicable to communicate with any person entitled to grant access to the material; [presently irrelevant]; (c) (d) that service of notice of an application for an order under paragraph 4 above may seriously prejudice the investigation.
The Supreme Court has determined that, on an inter partes application for a production order in relation to journalistic material under Schedule 1 paragraph 4, a Crown Court judge is not entitled to conduct part of the proceedings ex parte and to hear during that part, and to have regard in his decision to, information withheld from the other party to the application: R (British Sky Broadcasting Ltd) v Central Criminal Court [2014] UKSC 17; [2014] AC 885.
But, in the course of a judgment with which the whole Court agreed, Lord Toulson contrasted the case before the Court there with the general position when use is made ex parte of the courts procedural powers to obtain evidence.
He said: 28.
As a general proposition, I would agree with the Commissioners argument that the court should not apply the Al Rawi principle to an application made by a party to litigation (or prospective litigation) to use the procedural powers of the court to obtain evidence for the purposes of the litigation from somebody who is not a party or intended party to the litigation.
This is because such an application will not ordinarily involve the court deciding any question of substantive legal rights as between the applicant and the respondent.
Rather it is an ancillary procedure designed to facilitate the attempt of one or other party to see that relevant evidence is made available to the court in determining the substantive dispute.
Applications of this kind, such as an application for a witness summons in civil or criminal proceedings, are typically made ex parte. 29.
However, the present situation is different.
Compulsory disclosure of journalistic material is a highly sensitive and potentially difficult area.
It is likely to involve questions of the journalists substantive rights.
Parliament has recognised this by establishing the special, indeed unique procedure under section 9 and Schedule 1 for resolving such questions. 30.
Ultimately the issue in this appeal is a short one.
It turns on the meaning and effect of paragraph 7 of Schedule 1.
Parliament recognised the tension between the conflicting public interests in requiring that an application for a production order shall be made inter partes.
The Government had originally proposed that a production order might be made ex parte, but that proposal met opposition and was dropped.
When an application for a production order is made, there is a lis between the person making the application and the person against whom it is made, which may later arise between the police and the suspected person through a criminal charge.
Equal treatment of the parties requires that each should know what material the other is asking the court to take into account in making its decision and should have a fair opportunity to respond to it.
That is inherent in the concept of an inter partes hearing.
In these paragraphs, Lord Toulson identified two categories of situation.
The first, addressed in para 28, was focused on use of the courts procedural powers, typically on an ex parte basis, to obtain evidence for the purposes of the litigation from somebody who is not a party or intended party to the litigation.
The second, contrasted in paras 29 and 30, concerned the inter partes procedure which applies under Schedule 1 paragraph 7 when journalistic material is sought.
Lord Toulson noted that it had been a deliberate decision by the Government to drop its original proposal for an ex parte procedure, after this had met opposition.
In the result there was a lis between the person making the application and the person against whom it is made ie typically the journalist, which may later arise between the police and the suspected person through a criminal charge.
An ex parte application for a search warrant under section 8 of PACE falls naturally into an extended conception of the former category, rather than into the second category.
There is no necessary proprietary or personal link between premises sought to be searched or material sought to be seized by a warrant under section 8 and any particular individual who may be being investigated.
In the present case, there was a factual link, in that the underlying investigation related to, amongst others, the appellant.
But the warrant was directed to the premises and material on it, not to the appellant.
The procedure did not create any lis between the police or prosecution service and him, even if such a lis might later arise.
The search warrant was, in Lord Toulsons terms, an ancillary procedure designed to enable the police to fulfil their role of investigating suspected criminality.
For all these reasons, and subject to review in the light of the answers to subsequent issues, the answer to issue (i) is in my opinion that the statutory scheme entitles a magistrates court, on an ex parte application for a search and seizure warrant under sections 8 and 15(3) of PACE, to rely on information which in the public interest cannot be disclosed to the subject of the warrant.
Issue (iii) the position under section 59
It is convenient to take issue (iii) before issue (ii).
The question under issue (iii) is in substance whether a Crown Court, on an application made inter partes under section 59 of the CJPA to retain unlawfully seized material, can operate a closed procedure to have regard to information which for public interest reasons is not disclosable.
This issue involves consideration of the interplay between the ex parte procedure for issue of a search and seizure warrant under section 8 and the inter partes procedure for authorising retention under section 59 of property seized but otherwise falling to be returned.
Section 59(7) provides that retention may be authorised on the grounds that: (if the property were returned) it would immediately become appropriate to issue, on the application of the person who is in possession of the property at the time of the application under this section, a warrant in pursuance of which, or of the exercise of which, it would be lawful to seize the property .
Section 59(7) accordingly requires the Crown Court, when deciding whether to authorise retention, to put itself in the shoes of a hypothetical magistrates court being asked, immediately after the return of the property, to issue a fresh warrant with a view to seizure of the property.
In the light of the answer given to issue (i), such a magistrates court would have been entitled on the hypothetical ex parte application made to it for such seizure to have regard to information placed before it by the constable which on public interest grounds could not be disclosed to others.
The Crown Court could not fulfil its role without having regard to such information.
But if it did so inter partes that would involve disclosing the information in a way which the public interest would preclude (and which the hypothetical magistrate would not do).
The statutory scheme of PACE and the CJPA must have been intended to be coherent, and Parliament must be taken in these circumstances to have contemplated that the Crown Court would, so far as necessary, be able to operate a closed material procedure, to ensure that it could have regard to material which would have been put before the hypothetical magistrates court and withheld from disclosure there, without contravening the public interest by disclosing such material on the section 59 application.
In Bank Mellat v HM Treasury (No 2) this court was faced with a situation where there was no express provision for it to operate a closed material procedure on an appeal, although such a procedure had been provided for and applied in the courts below.
The Supreme Court, by a majority, held a power to hold a closed material procedure to be implicit in the statutory provisions.
These gave it a power to hear appeals against any order or judgment of the Court of Appeal (section 40(2) of the Constitutional Reform Act 2005 CRA) and a power to determine any question necessary for the purposes of doing justice in an appeal to it under any enactment (section 40(5) CRA).
The Court also took into account that an appeal to it against a wholly or partially closed judgment could not otherwise be effective.
The situation now before the Court presents an analogy.
Section 59 postulates that the Crown Court will be able to put itself into the shoes of a hypothetical magistrates court.
This will not work, unless the Crown Court can operate, so far as necessary, the same closed procedure as the magistrates court could and would have done.
For these reasons, the answer I would, subject to review in the light of the answers to issues (ii) and (iv), give to issue (iii) is that a Crown Court, on an application made inter partes under section 59 of the CJPA to retain unlawfully seized material, can operate a closed procedure to have regard to information which for public interest reasons is not disclosable.
Issues (ii) and (iv) the position regarding closed material on judicial review
It is convenient to take these two issues together, as they raise essentially the same point.
Judicial review is the means by which a person affected may challenge either the issue of a search and seizure warrant or an order under section 59 authorising the retention by the police of property seized which would otherwise fall to be returned.
In the light of the conclusions already provisionally reached, the magistrate may issue such a warrant and the Crown Court may make an order under section 59 taking into account material which is closed, ie withheld from by any person affected.
What is the position on a judicial review of the magistrates or Crown Courts decision?
Mr Summerss answer to this question is that judicial review must on any view be subject to the principle in Al Rawi, that the court on judicial review cannot adopt a closed procedure and, further, that this undermines the conclusions already expressed in respect of issues (i) and (iii) above about the permissibility of a closed procedure by a magistrate issuing a warrant or a Crown Court considering a section 59 application.
He also submits that, even if he is wrong on this last point, the inability of the court on judicial review to conduct a closed material procedure and to look at material withheld from the claimant must mean that the warrant or section 59 order is set aside, if the material disclosed does not itself justify the warrant or order.
The commencement of judicial review proceedings would, in that situation, ensure the setting aside of a warrant or order which had itself been properly issued.
In this connection, Mr Summers relies on and maintains the correctness of the fourth pillar of Marcus Smith Js reasoning in Concordia, set out in para 24(iv) above.
Mr Chamberlains and Mr Eadies answers are to the opposite effect.
They submit that, whatever the position regarding judicial review, there is no reason to disturb the scheme as it was in their submission intended to operate before a magistrate and the Crown Court.
If the court on judicial review is required under Al Rawi to forego any sort of closed material procedure, there will be no basis upon which any person affected can complain that the issue of the warrant, or the making of the section 59 order, was not justified by material before the magistrate or Crown Court.
However, their primary case in this situation is that, if the magistrate or Crown Court can rely on material withheld from a person affected, the court on a judicial review can and should fashion its procedures to be able to do so also.
The Rossminster case is of relevance to these issues.
In Rossminster, the material which had been before the judge when he issued the warrant was not before the courts on judicial review.
The Divisional Court held that in these circumstances there was simply not the evidence to enable this court to say that the judge exercised his discretion improperly: p 961F.
That conclusion was upheld by the House: see per Lord Wilberforce, p 998F G, Viscount Dilhorne, p 1006H, applying the maxim omnia praesumuntur rite esse acta and Lord Diplock, p 1013F G, stating that: Where Parliament has designated a public officer as decision maker for a particular class of decisions the High Court, acting as a reviewing court under Order 53, is not a court of appeal.
It must proceed on the presumption omnia praesumuntur rite esse acta until that presumption can be displaced by the applicant for review upon whom the onus lies of doing so.
Since no reasons have been given by the decision maker and no unfavourable inference can be drawn for this fact because there is obvious justification for his failure to do so, the presumption that he acted intra vires can only be displaced by evidence of facts which cannot be reconciled with there having been reasonable cause for his belief that the documents might be required as evidence or alternatively which cannot be reconciled with his having held such belief at all.
Lord Scarman also said that there was no reason to suggest, nor was it possible to suggest, that the Common Serjeant had failed in his judicial duty and it was therefore necessary to approach the case on the basis that he did satisfy himself upon the relevant matters: pp 1022H 1023C D.
All the members of the majority in the House emphasised the importance attaching to the Common Serjeants fulfilment of this judicial duty, but their decision meant that the prospects of a successful judicial review were much reduced.
The approach taken in Rossminster was therefore (i) to treat the onus as being on the applicant for judicial review to establish that the warrant should be quashed and (ii) to treat the applicant as unable to satisfy this onus, in circumstances where the original decision maker had access to material withheld on public interest grounds from the person affected seeking judicial review; (iii) this result followed from the application of the maxim omnia praesumuntur rite esse acta.
The same approach was followed and applied by the House in R v Inland Revenue Comrs, Ex p T C Coombs & Co [1991] 2 AC 283, in an application judicially to review a notice served by an inspector of taxes under section 20 of the Taxes Management Act 1970, requiring T C Coombs & Co to deliver or make available for inspection documents in their possession relevant to the tax liability of the taxpayer, their former employee.
The notice was given with the consent of a commissioner, who, under section 20(7), was to give such consent only upon being satisfied in all the circumstances that the inspector was justified in proceeding under the section.
The Revenue deposed that the information, which had led it to believe that documents in T C Coombs possession might contain information relevant to the taxpayers tax liability, could not be disclosed on grounds of confidentiality, but had been fully laid before the commissioner.
The House, taking its guidance from Lord Diplocks approach in Rossminster, held that, as Parliament designated the inspector as the decision maker and the commissioner as the monitor of the decision [a] presumption of regularity applied to both (p 302).
The same approach was taken by the Privy Council in Attorney General of Jamaica v Williams [1998] AC 351.
The case involved the issue by a magistrate of a search and seizure warrant under a statutory power in section 203 of the Customs Act, where any officer had reasonable cause to suspect that any uncustomed or prohibited goods, or any books or documents relating [thereto] are harboured, kept or concealed in any house or other place in the island.
The context was a customs investigation into possible fraudulent importation of motor vehicles by the applicants, a company and its majority shareholder.
On the applicants constitutional challenge to the issue of the warrant, no evidence was put before the court showing any such reasonable cause, on the basis that it would have been contrary to the public interest to disclose such evidence to the applicants at that time.
Applying the approach in Rossminster, the Board said that it cannot be assumed against the Crown that they did not have reasonable grounds for taking the documents which they did (p 363F G), and that (p 365E F): Although the courts may sometimes feel frustrated by their inability to go behind the curtain of the recital that the justice was duly satisfied and to examine the substance of whether reasonable grounds for suspicion existed (a frustration articulated by Lord Scarman in R v Inland Revenue Comrs, Ex p Rossminster Ltd [1980] AC 952, 1022) their Lordships think that it would be wrong to try to compensate by creating formal requirements for the validity of a warrant which the statute itself does not impose.
In so doing, there is a risk of having the worst of both worlds: the intention of the legislature to promote the investigation of crime may be frustrated on technical and arbitrary grounds, while the courts, in cases in which the outward formalities have been observed, remain incapable of protecting the substance of the individual right conferred by the Constitution.
Rossminster dates from a period when the principles governing judicial review were at a relatively early stage of development.
The line of authority discussed in paras 47 to 49 dates from a period prior to the domestication of the Convention rights and prior to the emergence of the line of cases on disclosure discussed in paras 15 to 20 above.
It is clear from the judgment in the first of such later cases, Cronin, that the recently domesticated Convention rights were very much in Lord Woolfs mind.
Mr Summers submits that the Supreme Court should now therefore take a very different approach.
As noted already, and although this is not their preferred solution, Mr Chamberlain and Mr Eadie invite the Court, if necessary, to follow and apply the Rossminster line of authority under section 8 of PACE.
There are also two later decisions which could be said to lend support to its continuing existence.
First, in Carnduff v Rock [2001] EWCA Civ 680; [2001] 1 WLR 1786, the Court of Appeal held that a claim by a police informer for payment for information and assistance to the police was un triable because a fair trial of the issues would require the police to disclose, and the court to investigate and adjudicate upon, sensitive information which should in the public interest remain confidential to the police.
The public interest in withholding the evidence outweighed the countervailing public interest in having the claim litigated.
Although this conclusion was reached on the basis that the case was un triable, rather than on the basis of any assumption as to the correctness of the polices defence, the effect, that the claim failed, was the same.
Second, in AHK v Secretary of State for the Home Department [2012] EWHC 1117 (Admin), claims were made against the Home Secretary for refusal to grant the applicants naturalisation on the grounds that they were not of good character.
The Home Secretary declined to give further reasons or disclose documents on which she had relied, explaining that to do so would be harmful to national security.
Ouseley J held, on applications for judicial review of the refusals, that it was not open to the court to hold a closed material procedure, and that, if the Home Secretary gave evidence that, having considered the applicants representations, there were good reasons and a sound basis for her decision, which she could not disclose, it would be impossible for the court to say that she was wrong on that, and the claims would fail.
There was no second possibility that the Home Secretary must lose, or that the court should assume what it knew to be false, viz that no relevant evidence was being withheld.
This is an approach effectively identical to that taken in the Rossminster line of authority.
On the other hand, in the still more recent judgment in Concordia, para 70, Marcus Smith J considered that the exclusion from consideration by the court of material which had properly been considered ex parte when the warrant was granted, but which had on public interest grounds to be withheld on an inter partes challenge, could well lead to a validly issued warrant being quashed.
While the CMA is recorded as having argued to the contrary by reference to the presumption of regularity (para 43), and the Supreme Court is informed that its written case referred to both Rossminster and Ex p T C Coombs, Marcus Smith Js judgment does not specifically address the Rossminster line of authority.
The result reached in the Rossminster line of authority is unattractive, in that it is in some circumstances capable of depriving judicial review of any real teeth.
For this reason, Mr Chamberlain and Mr Eadie make their primary submission that the court on judicial review of a warrant under section 8 of PACE or of an order under section 59 of the CJPA can adopt a closed material procedure.
Such a review would mirror that which, as I have already provisionally concluded, is open to the magistrate for a warrant under section 8 or for disclosure under Bangs or to the Crown Court on an application under section 59 of the CJPA.
That is its attraction.
Judicial review should be effective and able to address the decision under review on the same basis that the decision was taken.
The Rossminster line of authority involves an awkward mismatch between the bases of the original and reviewing decisions.
So too does the reverse approach taken by Marcus Smith J in Concordia.
However, in Al Rawi the Supreme Court said that a closed material procedure is inadmissible, without Parliamentary authorisation, in judicial review as it is in any ordinary civil claim: see eg paras 39 and 62, per Lord Dyson.
The two narrowly defined exceptions which it recognised as existing related to: (i) cases where the whole object of the proceedings is to protect and promote the best interests of a child [and] disclosure of some of the evidence would be so detrimental to the childs welfare as to defeat the whole object of the exercise (para 63, quoting Lady Hale in Secretary of State for the Home Department v MB [2008] 1 AC 440, para 58); and (ii) cases where the whole object of the proceedings is to protect a commercial interest, and where full disclosure would render the proceedings futile (cases in which a confidentiality ring is commonplace) (para 64).
The situation in which a court is placed on a claim for judicial review in the present context can be compared with that which the Supreme Court faced in Bank Mellat.
In that case, the courts below had express power to conduct a closed material procedure, under Part 6 of the Counter Terrorism Act 2008 (the 2008 Act).
The Supreme Court had none.
But the majority derived from the statutory language governing appeals to it and a close consideration of the consequences of the various alternative analyses a conclusion that the Supreme Court was also able to conduct a closed material procedure (paras 37 to 44).
The statutory language governing appeals consisted of section 40(2) of the CRA, stating that an appeal lies to the court from any order or judgment of the Court of Appeal in England and Wales in civil proceedings, read with section 40(5), giving the Supreme Court power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
If a closed material procedure was not permissible, the alternative analyses were that (a) the appeal could not be entertained (compare Carnduff v Rock) or (b) the Supreme Court could consider the closed material in open court, or (c) the Court could determine the appeal without looking at the closed material (compare Concordia), or (d) the Court would be bound to allow the appeal or (e) the Court would be bound to dismiss the appeal (compare Rossminster).
Lord Neuberger, speaking for the majority, said that analysis (a) ran contrary to section 40(2), analysis (b) would wholly undermine Part 6 of the 2008 Act, analysis (c) would be self evidently unsatisfactory and would seriously risk injustice, and in some cases it would be absurd and each of analyses (d) and (e) was self evidently equally unsatisfactory.
Each of the alternative possibilities to a closed material procedure identified by Lord Neuberger in Bank Mellat exists by analogy in relation to judicial review (as Marcus Smith Js judgment in Concordia illustrates); and, when so applied, each can be seen to be as unsatisfactory in relation to judicial review as in relation to an appeal in Bank Mellat.
Judicial review is not generally an appeal, certainly not in terms or under conditions making it a precise homologue of an appeal to the Supreme Court under section 40(2) of the CRA: see eg the discussion, albeit in a very different context, in General Medical Council v Michalak [2017] UKSC 71; [2017] 1 WLR 4193.
It is in origin a development of the common law, to ensure regularity in executive and subordinate legislative activity and so compliance with the rule of law, but it is regulated now by the Senior Courts Act 1981.
Section 31(1) of the 1981 Act defines an application for judicial review as an application for a mandatory, prohibiting or quashing order (or for a declaration or injunction in some public law contexts), and section 31 also provides: (5) If, on an application for judicial review, the High Court quashes the decision to which the application relates, it may in addition (a) remit the matter to the court, tribunal or authority which made the decision, with a direction to reconsider the matter and reach a decision in accordance with the findings of the High Court, or (b) substitute its own decision for the decision in question. (5A) But the power conferred by subsection (5)(b) is exercisable only if the decision in question was made by a court or (a) tribunal, (b) has been an error of law, and the decision is quashed on the ground that there (c) without the error, there would have been only one decision which the court or tribunal could have reached.
Although there are differences between judicial review and an appeal in the normal sense of that word, many of the considerations which were of weight in Bank Mellat on an appeal from lower courts conducting closed material procedures are also of weight in relation to judicial review of lower courts conducting such procedures.
In Bank Mellat, a determination by the Supreme Court on a basis different from that required and adopted in the courts below would have been self evidently unsatisfactory, risk injustice and in some cases be absurd.
So too in the present context it would be self evidently unsatisfactory, and productive potentially of injustice and absurdity, if the High Court on judicial review were bound to address the matter on a different basis from the magistrate or Crown Court, and, if it quashed the order, to remit the matter for determination by the lower court on a basis different from that which the lower court had quite rightly adopted and been required to adopt when first considering the matter.
Moreover, subsections (5) and (5A), read together, only work on the basis that it is open to the High Court to consider and, where appropriate, itself give effect to the decision which the lower court or tribunal should have reached, if there is only one such decision which it could have reached.
If the High Court cannot by a closed material procedure have regard to closed material, those subsections will not work.
Since the events giving rise to the present litigation, section 31 has also been amended by the introduction of subsections (2A) and (3C) by section 84(1) and (2) of the Criminal Justice and Courts Act 2015.
Subsection (2A) provides that the High Court must refuse relief on an application for judicial review if it appears to the court to be highly likely that the outcome for the applicant would not have been substantially different if the conduct complained of had not occurred (unless the court considers under subsection (2B) that it is appropriate to disregard this requirement for reasons of exceptional public interest).
Subsection (3C) provides that, when considering whether to grant leave for judicial review, the High Court may of its own motion consider whether the outcome for the applicant would have been substantially different if the conduct complained of had not occurred.
These subsections again postulate that the High Court will be considering the outcome on the same basis as the lower court or tribunal.
In the light of these statutory provisions and of an analysis of the alternative possibilities paralleling that undertaken in Bank Mellat, I consider that the only sensible conclusion is that judicial review can and must accommodate a closed material procedure, where that is the procedure which Parliament has authorised in the lower court or tribunal whose decision is under review.
The Supreme Court, when it referred in passing to judicial review in Al Rawi, was not directing its attention to this very special situation.
If it had done so, it might also have seen a similarity between this situation and the two exceptions which it did identify, where inability to adopt a closed material procedure would render the whole object of the proceedings futile and where the interests of third parties (such as informers) are potentially engaged.
Be that as it may be, I consider that the scheme authorised by Parliament for use in the magistrates court and Crown Court, combined with Parliaments evident understanding and intention as to the basis on which judicial review should operate, lead to a conclusion that the High Court can conduct a closed material procedure on judicial review of a magistrates order for a warrant under section 8 PACE or a magistrates order for disclosure, or a Crown Court judges order under section 59 of the CJPA.
I add, for completeness, that, even before judicial review was regulated by statutory underpinning, I would also have considered that parallel considerations pointed strongly to a conclusion that the present situation falls outside the scope of the principle in Al Rawi and that a closed material procedure would have been permissible on a purely common law judicial review.
Issue (v) minimum disclosure and gisting
Issue (v) is whether the principles concerning minimum disclosure, if necessary by gisting, apply to proceedings concerning search warrants.
It is clear that the use of a closed material procedure is not itself contrary to Convention rights: see Tariq v Home Office [2011] UKSC 35; [2012] 1 AC 452.
The contrary has not been suggested on the present appeal.
The authorities also include dicta suggesting that in some, rare cases no disclosure at all of the relevant closed information may be required at common law (see Gittins, para 79, per Davis J).
Is this the case, or does article 6 of the Convention apply to require a person affected by a search warrant or order under section 59 to know at least the gist of the case made out to justify the relevant order?
As a matter of principle, open justice should prevail to the maximum extent possible.
Any closed material procedure should only ever be contemplated or permitted by a court if satisfied, after inspection and full consideration of the relevant material as well as after hearing the submissions of the special advocate, that it is essential in the particular case: Tariq v Home Office, para 67; and should, of course, be restricted as far as possible.
Further, the nature of the issue may require, as a minimum, disclosure of the gist of the closed material, to enable the person from whom it is withheld to address the essence of the case against him: A v United Kingdom (2009) 49 EHRR 625, Secretary of State for the Home Department v AF (No 3) [2010] 2 AC 269 (a control order case).
This will be so, where the issue affects the liberty of the person (A v United Kingdom, and Sher v United Kingdom (2015) 63 EHRR 24, para 149) or has an equivalent effect, as a control order or freezing order can do (AF (No 3); Tariq v Home Office, paras 26 27; and see, in the European Court of Justice, Kadi v Commission of the European Communities (Case T 85/09) [2011] 1 CMLR 24, paras 129 177).
On the other hand, it is established by decisions of both the European Court of Human Rights and the Supreme Court that there are circumstances where it may in the public interest be legitimate to withhold even the gist of the material relied on for a decision which a person affected wishes to challenge.
The relevant caselaw is analysed in Tariq v Home Office, paras 27 37.
This approach has been applied in the European Court of Human Rights to material allegedly making a person a security risk unsuitable for permanent employment which would entail him having access to a naval base (Leander v Sweden (1987) 9 EHRR 433), to security material allegedly making a person unsuitable for employment with the central office of information (Esbester v United Kingdom (1994) 18 EHRR CD72), and to material explaining the meaning of a statement by the Investigatory Powers Tribunal that no determination had been made in his favour in relation to a complainant in respect of complaints that his communications were being wrongly intercepted a statement which could mean either that there had been no interceptions or that any interceptions taking place had been lawful (Kennedy v United Kingdom (2010) 52 EHRR 4).
The approach in these cases was applied domestically by the Supreme Court in Tariq v Home Office.
The complainants security clearance was withdrawn and he was suspended from his work as a Home Office immigration officer, after the arrest of close family members in the course of a suspected terrorism investigation.
A closed material procedure was held, with a special advocate, under rule 54 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI 2004/1861).
The majority concluded that there was no invariable rule that gisting must always occur.
It depended on balancing the nature and weight of the circumstances on each side: see in particular para 25.
In the cases mentioned in para 62, the courts were well aware that the complaints made involved significant personal interests.
Employment and citizenship are undoubtedly important to personal identity and well being; and the withholding of information had a continuing effect on the complainants substantive position.
Nonetheless, the circumstances did not give rise to a right to gisting, when important countervailing interests of state security made it impossible to disclose the information without undue prejudice.
The circumstances were not regarded as impacting the person affected to the same extent as loss of personal freedom, or a control or freezing order.
The issue of a warrant authorising a search of premises and seizure of documents involves a short term invasion of property.
Such a warrant is, as I have pointed out, not specifically directed at, or necessarily even linked with, anyone occupying the premises or having any proprietary or possessory interest in the documents.
Save that the taking of documents for so long as is required for the limited purposes of an investigation necessarily affects possession, such a warrant does not affect the substantive position of anyone who does occupy the premises or have any proprietary, possessory or other interest in any documents found therein.
All it may do is provide information, and maybe direct evidence, of potential use in a current investigation into an indictable offence which the magistrate or Crown Court is satisfied that there are reasonable grounds for believing has been committed.
If the investigation leads to criminal proceedings, any person affected will enjoy all the normal safeguards.
Subject to any PII ruling in the conventional sense (in which case the material will not be disclosed or used at trial), there will be full disclosure.
All material evidence relied on to establish guilt will be before the court openly, without any form of anonymity attaching to the witness or any restriction on questioning which might lead to a witnesss identification, unless under the strict statutory conditions of court ordered anonymity pursuant to Part 3 of the Coroners and Justice Act 2009 introduced subsequent to the House of Lords decision in R v Davis [2008] AC 1128.
Any complaint about the propriety of use of any material seized will be capable of being raised and submitted to the courts decision under section 78 PACE.
In my judgment, it cannot be axiomatic in this context that even the gist of the relevant information must be supplied to any person (such as the occupier or some other person claiming some proprietary, possessory or other interest in the documents) claiming to be affected by, and wishing to object to, the warrant or the search and seizure.
Every case must of course be considered in the light of its particular circumstances.
But, as a general proposition, I answer issue (v) in the negative.
Conclusions
Having addressed the individual issues in turn, I have also stepped back to consider whether the discussion in respect of the issues considered later (particularly (ii) and (iv)) necessitates or gives reason to revise the answers reached in respect of the issues considered earlier.
In my opinion it does not.
On the contrary, the answers which I reached in respect of each of the issues in turn appear to me to lead to a scheme which is both coherent and workable, as well as corresponding with Parliaments presumed intentions.
The issues put before the Supreme Court have ranged wider than those argued or decided below.
But it follows from the answers that I have reached that the appellants appeal should be dismissed.
| This appeal concerns the extent to which courts can rely on information which, in the public interest, cannot be disclosed to a person affected by a search and seizure warrant.
In this case, search and seizure warrants were issued under s.8 of the Police and Criminal Evidence Act 1984 (PACE) by the St. Albans Magistrates Court in the absence of the Appellant (ex parte) on 16 June 2014, and executed on 26 June 2014.
The Appellant was provided with a redacted version of the written application for the warrants on 16 September 2014.
He applied for disclosure of the unredacted materials which was refused on grounds of public interest immunity (PII) on 25 September 2014.
On 26 September 2014 the Appellant sought return of the material seized by a judicial review claim on the basis that the warrants, entries, searches and seizures were unlawful.
By a consent order signed on 27 March and sealed on 6 May 2015 the Second Respondent agreed that the warrants should be quashed.
Prior to consenting, on 23 March 2015, the Second Respondent made a protective application under s.59 of the Criminal Justice and Police Act 2001 (CJPA) for continued retention of the seized materials.
That application was granted on 11 June 2015.
The Appellant sought a further judicial review of that decision.
This was dismissed by the Divisional Court which held that it was open to a magistrate issuing a search and seizure warrant and a court deciding an application under s.59 of CJPA to consider material which was withheld from disclosure on PII grounds.
The Supreme Court addressed five issues on appeal: (i) how far a Magistrates Court, on an ex parte application for a search and seizure warrant under ss.8 and 15(3) of PACE, can rely on information which in the public interest cannot be disclosed to the subject of the warrant; (ii) whether in proceedings for judicial review of the legality of a search warrant, issued ex parte under sections 8 and 15(3) of PACE (a) it is permissible for the High Court to have regard to evidence upon which the warrant was issued which is not disclosed to the subject of the warrant and (b) whether, where a Magistrates Court is permitted to consider evidence not disclosable to the subject of the warrant, but the High Court is not, it follows that the warrant must be quashed if the disclosable material is insufficient on its own to justify the warrant; (iii) whether there is jurisdiction in a Crown Court to rely on evidence not disclosable to the subject of the warrant in an application made in the presence of both parties (inter partes) to retain unlawfully seized material under s.59 of CJPA; (iv) whether in proceedings for judicial review of an order made inter partes for retention of unlawfully seized material under s.59 of CJPA it is permissible for the High Court to have regard to evidence (upon which the warrant was issued) which is not disclosed to the subject of the warrant; and (v) whether the principles concerning irreducible minimum disclosure apply to proceedings concerning search warrants.
The Supreme Court unanimously dismisses the appeal.
Lord Mance writes the judgment of the court.
The background to the appeal is that no express Parliamentary authorisation exists for the operation of a closed material procedure in any of the contexts outlined in the issues [11].
Under ss.8 and 15 of PACE premises, not a person, is the subject of a warrant [12].
Any analysis should start from the initial application for a warrant, rather than the end position of the application for judicial review but any conclusions reached about earlier stages will be reviewed in light of the analysis of later stages [14].
Issue (i) The statutory scheme of ss.8 and 15 of PACE permits a Magistrates Court in an ex parte application for a search and seizure warrant to have regard to material which cannot on public interest grounds be disclosed to a person affected by the warrant or order, even where this material is decisive for the legitimacy of the warrant [22, 37].
The statutory scheme of ss.8 and 15 of PACE is intended to be ex parte.
It is a process designed to be operated speedily and simply on the basis of information provided by a constable satisfying a magistrate that there are reasonable grounds for believing the matters set out in s.8(1) of PACE.
There is nothing in the statutory scheme which expressly restricts the information on which the magistrate may act [27].
The statutory procedure under s.8 and the Criminal Procedure Rules also provide protections to persons affected by a warrant and the Rules themselves contemplate that the magistrate or Crown Court will see and rely on information not disclosable for PII reasons [25 27, 34].
Requiring the police in these cases to refrain from seeking a warrant would limit important sources of information and the efficacy of police investigations [27].
A statutory ex parte procedure of this nature to secure evidence on premises is not within the general prohibition on closed procedures without express statutory authorisation recognised in Al Rawi v Security Service [2012] 1 AC 531.
Issue (iii) The Crown Court can on an inter partes application under s.59(7) of CJPA operate a closed material procedure on PII grounds [43].
The Crown Court is required to put itself in the shoes of a hypothetical Magistrates Court being asked, immediately after the return of the property, to issue a fresh warrant with a view to seizure of that property [40].
In view of the answer to issue (i), that Magistrates Court is entitled in an ex parte application to have regard to information which cannot be disclosed for PII reasons [40].
Parliament must have intended PACE and CJPA to operate coherently and contemplated the Crown Court being able to operate a closed material procedure under s.59 [41].
An analogy is drawn with Bank Mellat v HM Treasury (No 2) [2014] AC 700 where there was no express provision enabling the Supreme Court to operate a closed material procedure on appeal, but without such a power an appeal to it against a wholly or partially closed judgment could not be effective [42].
Issues (ii) and (iv) are considered together as they raise essentially the same point The High Court can conduct a closed material procedure on judicial review of a magistrates order for a warrant under s.8 of PACE or a magistrates order for disclosure or a Crown Courts order under s.59 of CJPA [59].
The reference to judicial review in Al Rawi, was not directed to this situation [59].
An alternative analysis whereby, in the absence of a closed material procedure, a court must presume that a public authority has acted properly, depriving judicial review of any real teeth, is unacceptable [46 52].
Although judicial review and an appeal are not precisely equivalent, many of the considerations identified in Bank Mellat as favouring a closed material procedure in the context of an appeal also militate in favour of a similar result in the context of judicial review [54 57].
It would be unjust and potentially absurd if the High Court on judicial review had to address a case on a different basis from the magistrate or Crown Court or quashed the order and remitted it to the lower court on a basis different from that which the lower court originally adopted.
The High Court would also be unable to give effect to the decision which the lower court or tribunal should have reached or to consider an outcome on the same basis as the lower court as may be required under s.31 of the Senior Courts Act 1981 unless it can operate a closed material procedure when necessary [57 58].
Issue (v) Open justice should prevail to the maximum extent possible [61].
However, it cannot be axiomatic that even the gist of the relevant information must be supplied to any person claiming to be affected and seeking to object to the warrant, search or seizure.
Each case must be considered in the light of the particular circumstances.
In general terms, issue (v) should be answered in the negative [65].
|
140 years after the Judicature Act 1873, the stitching together of equity and the common law continues to cause problems at the seams.
The present appeal concerns the remedy available to the appellant bank against the respondent, a firm of solicitors, for breach of the solicitors custodial duties in respect of money entrusted to them for the purpose of completing a loan which was to be secured by a first charge over the borrowers property.
As is customary in such transactions, the solicitors acted for both the bank and the borrowers.
In June 2006 Mr and Mrs Sondhi applied to borrow 3.3m from the appellant (the bank).
The loan was to be secured by a first legal charge over the borrowers home, which had been valued at 4.25m.
The property was at that time the subject of a first legal charge in favour of Barclays Bank plc (Barclays).
The Barclays charge secured borrowings on two accounts amounting to about 1.5m.
The bank agreed to the borrowers proposal and made a formal offer on terms which included a condition that the existing mortgage was to be redeemed on or before completion of the mortgage advance.
The bank retained the respondents (the solicitors) to act for it by a letter of instruction dated 5 July 2006.
The letter of instruction stated that the solicitors were instructed in accordance with Council of Mortgage Lenders (CML) Handbook for England and Wales, 2nd edition.
The handbook stated among other things that on completion the mortgage lender required a fully enforceable first charge over the property by way of legal mortgage, and that all existing charges must be redeemed on or before completion.
The handbook also stated: You must hold the loan on trust for us until completion.
If completion is delayed, you must return it to us when and how we tell you.
The letter of instruction included copies of the banks offer to the borrowers and its conditions of offer.
The solicitors were told by the borrowers that the property was mortgaged to Barclays.
On 31 July Barclays provided them with information about the two accounts, which showed the total balance due as a little over 1.5m, but this was not a redemption statement.
Meanwhile the solicitors asked the bank to forward the funds because completion was imminent.
The bank did so on 1 August, and the solicitors telephoned Barclays for a redemption figure.
Unfortunately there was then a misunderstanding.
The solicitors were given a redemption figure for one of the two Barclays accounts which they mistakenly took to be the total figure.
They were at fault because they should have realised from the information supplied by Barclays that the figure related only to one account.
However, on 1 August the solicitors remitted to Barclays the figure which they wrongly believed was the total necessary to redeem the Barclays mortgage and remitted the balance of the 3.3m less expenses to the borrowers.
The borrowers had executed what was intended to be a first charge over the property in favour of the bank, but there remained due to Barclays a debt of approximately 309,000 secured by the prior Barclays charge.
Barclays naturally refused to release its charge unless the outstanding debt was paid in full.
At first the borrowers promised to pay the necessary sum to Barclays but they failed to keep their word.
The solicitors did not immediately tell the bank of their error, as they should, because they hoped to be able to resolve it.
When eventually they informed the bank there were negotiations between the bank and Barclays with the result that the bank executed a deed of postponement acknowledging the primacy of the Barclays charge and Barclays consented to the registration of the appellant banks charge as a second charge.
Subsequently the borrowers defaulted, and the property was repossessed and sold by Barclays in February 2011 for 1.2m, of which the bank received 867,697.
The issue is how much the bank is entitled to recover from the solicitors.
The bank claims that it is entitled to the full amount of its loan less the amount recovered by it.
The solicitors contend that their liability is limited to the amount by which the bank suffered loss by comparison with its position if the solicitors had done as they should, which was to have paid Barclays the full amount of the Barclays debt so as to redeem the Barclays charge.
The difference, leaving interest aside, is between 2.5m and 275,000 in round figures.
The action
The bank alleged that the solicitors acted in breach of trust, breach of fiduciary duty, breach of contract and negligence.
It claimed relief in the forms of (i) reconstitution of the fund paid away in breach of trust and in breach of fiduciary duty, (ii) equitable compensation for breach of trust and breach of fiduciary duty, and (iii) damages for breach of contract and negligence, in each case with interest.
The solicitors admitted that they acted negligently and in breach of contract but denied the other allegations and they claimed relief under section 61 of the Trustee Act 1925 if found to have acted in breach of trust.
At the trial, before His Honour Judge Cooke, the bank accepted that the solicitors had acted in good faith.
The judge found that the solicitors acted in breach of trust, which he analysed as follows: 23.
In the present case, . what the defendants instructions authorised them to do with the funds paid to them was to pay to Barclays (or to its account) such sum as was required to procure a release of its charge, and pay the balance to the borrowers or to their order.
Had they complied with their instructions they would have paid (taking all the figures in round terms) 1.5m to Barclays and 1.8m to the borrowers.
In the event they paid 1.2m to Barclays and 2.1m to the borrowers.
In my judgment, in so doing they committed a breach of trust in so far as payment was made contrary to the authority they had been given. 24.
It does not however in my judgment necessarily follow that the whole of the payment of 3.3m was made in breach of trust.
The difference between what the defendant did and what it ought to have done if it had complied with its instructions was the 300,000 that should have been paid to Barclays but was instead paid to the borrowers.
That in my judgment was the extent of the breach of trust committed.
It was not a breach of trust to pay 1.2m to Barclays; that payment was made as partial performance of the authority and obligation to discharge Barclays secured debt.
It was not a breach of trust to pay 1.8m to the borrowers, as that was the sum to which they were entitled.
The breach consisted of the failure to retain an additional 300,000 and apply that to the discharge of the Barclays debt.
As to the remedy, the judge held that prima facie the bank was entitled to reconstitution of the trust fund by repayment of the amount wrongly paid away.
As to the banks alternative claim for equitable compensation or damages, he said that where the breach consisted of failure to discharge a prior mortgage, with the result that the banks interest had been postponed to the Barclays charge, the bank was entitled to equitable compensation for the additional amounts due to Barclays for which Barclays had security in priority to the bank.
The solicitors were therefore liable to the bank for the additional amount ultimately obtained by Barclays by reason of its prior security.
The judge added that in those circumstances he did not intend to venture into the argument as to the appropriate remedy if the solicitors committed a breach of trust in paying out any part of the advance, except to find as a fact what would have happened but for the breach of trust.
That question, he said, could be approached on one of two bases, namely what would the outcome have been if the solicitors had either (i) dealt with the funds held in the manner they were authorised to do or (ii) instead of making the unauthorised payment they did, had asked the bank for instructions at that point, disclosing the reasons why the payment was outside their existing authority.
He concluded that on either approach the answer would be the same on the facts of the case.
There would have been a short delay while the solicitors obtained a redemption figure in a form that bound Barclays to release its charge; they would then have paid that amount to Barclays; they would in due course have received a release and they would have registered the banks charge as a first charge.
He added that, on the implausible scenario that the solicitors realising that they did not have a valid redemption quotation had approached the bank for further instructions, the bank would not have withdrawn from the transaction but would have instructed the solicitors to carry on with it, complying with their existing instructions.
The judge added that it was clear from the evidence that the bank was anxious to lend to the borrowers and that the domestic re mortgage was driven by the need to facilitate business lending which the bank was very keen to make.
The judge therefore gave judgment for the bank in the sum of 273,777 plus interest.
It was not necessary in the circumstances for him to deal with the issue of relief under section 61 of the Trustee Act, which would have arisen if he had held that the bank was prima facie entitled to recover the entire amount of the loan.
The Court of Appeal (Arden, Sullivan and Patten LJJ) held that the judge was wrong to treat the breach of trust as limited to that part of the mortgage advance which was paid to the borrowers instead of being used to discharge their liability to Barclays on the second account.
The judgment of the court was given by Patten LJ.
Citing earlier authorities and the provisions of the CML Handbook, he held that the solicitors had no authority to release any part of the funds advanced by the bank unless and until they had a redemption statement from Barclays coupled with an appropriate undertaking which enabled them to be sure that they would be able on completion to register the banks charge as a first charge over the property.
The solicitors have not challenged the Court of Appeals reasoning on that point.
However, the Court of Appeal upheld the judges decision regarding the relief to which the bank was entitled and dismissed the banks appeal.
In reaching its conclusion the Court of Appeal applied what it understood to be the reasoning of the House of Lords in Target Holdings Ltd v Redferns [1996] AC 421.
It held that where the breach of trust occurred in the context of a commercial transaction such as the present, Target Holdings established that equitable principles of compensation although not employing precisely the same rules of causation and remoteness as the common law, do have the capacity to recognise what loss the beneficiary has actually suffered from the breach of trust and to base the compensation recoverable on a proper causal connection between the breach and the eventual loss (per Patten LJ at para 47).
Applying that principle to the facts found by the judge, Patten LJ said at para 49: If one asks as at the date of trial and with the benefit of hindsight what loss AIB has suffered then the answer is that it has enjoyed less security for its loan than would have been the case had there been no breach of trust.
If [the solicitors] had obtained from Barclays a proper redemption statement, coupled with an undertaking to apply the sums specified in the statement in satisfaction of the existing mortgage, then the transaction would have proceeded to complete and AIB could have obtained a first legal mortgage over the Sondhis property.
But although that did not happen, AIB did obtain a valid mortgage from the Sondhis which they were eventually able to register as a second charge and use to recover part of their loan from the proceeds of the security in priority to the Sondhis other creditors.
Even had there been no such mortgage they would have been subrogated to Barclays first charge insofar as they discharged part of the Sondhis indebtedness by the payment of the 1.2m.
In my view all of these are matters to be taken into account in considering what loss has ultimately been caused by the solicitors breach of trust.
In the light of the judges findings it is not open to AIB to contend that but for the breach of trust it simply would have asked for its money back.
As to the point made by the bank that in the present case the breach of trust was never made good because the bank never obtained a first charge over the intended security (by contrast with the position in Target Holdings), Patten LJ considered this irrelevant to the question of principle about how the banks equitable compensation was to be calculated.
Target Holdings stood as authority for the broad principle identified by Lord Browne Wilkinson as follows: Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach.
Like the trial judge, the Court of Appeal did not find it necessary to express any views about section 61 of the Trustee Act.
Target Holdings
The present case bears a close similarity to Target Holdings, but there is one factual difference which the bank submits is of critical importance.
Both parties rely on Target Holdings in support of their respective cases.
Neither party has expressly asked this court to depart from its reasoning, but part of the banks argument involves a re interpretation of the reasoning in Target Holdings which is in truth a dressed up attack on it.
The reasoning in Target Holdings has attracted a considerable amount of commentary, partly supportive but mostly critical.
There was only one speech, given by Lord Browne Wilkinson.
In view of the arguments to which it has led, it is necessary to look at his speech in some detail.
The facts of Target Holdings were described by Lord Browne Wilkinson as redolent of fraud, but the murky aspects did not affect the decision of the House of Lords.
The matter reached the House of Lords on an appeal by the defendant solicitors against an order for summary judgment.
The undisputed facts were that the plaintiff finance company agreed to make loans to a company called Crowngate on the security of commercial property, for which Crowngate provided a professional valuation at 2m.
The solicitors acted both for the finance company and for Crowngate.
For the purposes of the transaction the finance company transferred about 1.5m to the solicitors without any express instructions as to its release.
It was common ground that the solicitors had implied authority to pay the money to or to the order of Crowngate on completion of the conveyance of the land to Crowngate, provided that Crowngate had executed a charge in favour of the finance company.
The solicitors wrongly released the bulk of the money to Crowngate before completion of the conveyance or the execution of a charge by Crowngate.
The conveyance of the property to Crowngate and its execution of a legal charge in favour of the finance company took place some days later.
Crowngate later defaulted on repayment of the loans and was wound up as insolvent.
The finance company sold the property as mortgagee for 500,000.
The finance company sued the solicitors for breach of trust and negligence in releasing funds to Crowngate at a time when they had no authority to do so.
On an application for summary judgment, the judge at first instance gave the solicitors unconditional leave to defend the claim in negligence, and there was no appeal against that part of his order.
On the claim for breach of trust he gave the solicitors conditional leave to defend, but the Court of Appeal by a majority gave summary judgment to the finance company for the amount which the solicitors had advanced prematurely to Crowngate, less the amount recovered by the finance company.
Peter Gibson LJ (with whom Hirst LJ agreed) held that the basic liability of a trustee in breach of trust was not to pay damages, but to restore to the trust fund that which had been lost to it or to pay compensation to the beneficiary for what he had lost.
If a trustee wrongly paid away trust monies to a stranger, there was an immediate loss to the trust fund and the trustee came under an immediate duty to restore the monies to the trust fund.
The remedies of equity were sufficiently flexible to require the finance company to give credit for monies received on the subsequent realisation of its security, but otherwise the solicitors liability was to pay the whole of the monies wrongly paid away.
In a dissenting judgment Ralph Gibson LJ held that it was necessary for the
court to examine the nature of the relationship between the parties out of
which the solicitors equitable duty arose.
If, having regard to the relationship and its purpose, the obligations of the parties, its purpose and the obligations of the parties within it, it appeared just to regard the breaches as having caused no loss, because the loss would have happened if there had been no breach, the court should so hold.
Lord Browne Wilkinson began his speech by saying that the appeal raised a novel point on the liability of a trustee who commits a breach of trust to compensate beneficiaries for such breach.
He framed the issue in this way: Is the trustee liable to compensate the beneficiary not only for losses caused by the breach but also for losses which the beneficiary would, in any event, have suffered even if there had been no such breach?
He observed that at common law there are two principles fundamental to an award of damages.
First, the defendants wrongful act must cause the damage of which complaint is made.
Second, the plaintiff is to be put in the same position as he would have been in if he had not suffered the wrong for which he is now getting his compensation or reparation (Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, 39, per Lord Blackburn).
Equity, he said, approaches liability for making good a breach of trust from a different starting point, but the same two principles are applicable as much in equity as at common law.
Under both systems liability is fault based: the defendant is only liable for the consequences of the legal wrong he has done to the plaintiff and to make good the damage caused by such wrong.
He therefore approached the consideration of the rules of equity relevant to the appeal with a strong predisposition against holding that Redferns should be held liable to compensate Target for a loss caused otherwise than by the breach of trust.
Lord Browne Wilkinson examined two arguments made on behalf of the finance company.
First, he considered whether Redferns were under a continuing duty to reconstitute the trust fund by paying back into client account the monies paid away in breach of trust (argument A).
Secondly, he considered the argument accepted by the majority of the Court of Appeal that there was an immediate right to have the trust fund reconstituted at the moment of the breach of trust, which gave rise to a cause of action regardless of later events (argument B).
Lord Browne Wilkinson prefaced his consideration of the arguments by some important observations about the nature of a beneficiarys rights under a trust.
His starting point was that the basic right of a beneficiary is to have the trust duly administered in accordance with the provisions of the trust instrument, if any, and the general law.
It followed that in relation to a traditional trust where a fund is held in trust for a number of beneficiaries having different, usually successive equitable interests, the right of each beneficiary is to have the whole fund vested in the trustees so as to be able to satisfy his equitable interest.
The equitable rules of compensation for breach of trust, he said, have been largely developed in relation to such traditional trusts, where the only way in which all the beneficiaries rights can be protected is to restore to the trust fund what ought to be there. (As will be seen, some commentators have criticised his use of the term compensation for breach of trust in this context.
They say that it confuses compensation with the primary accounting responsibility of a trustee.) In such a case, according to Lord Browne Wilkinson, the basic rule is that a trustee in breach of trust must either restore to the trust the assets which have been lost by reason of the breach of trust or pay monetary compensation to the trust estate.
In so doing, courts of equity did not award damages but would make an in personam order for the payment of equitable compensation: Nocton v Lord Ashburton [1914] AC 932, at paras 952, 958, per Viscount Haldane LC.
Having thus considered how courts of equity would enforce the basic right of a beneficiary to have the trust duly administered in a case where the trust was subsisting and where the only right of each beneficiary was to have the trust fund reconstituted as it should be, Lord Browne Wilkinson went on to consider the position if at the time of the action the trust had come to an end, for example by the beneficiary becoming absolutely entitled to the trust fund.
In such a case, there was no need for restitution to the trust fund in order to protect other beneficiaries.
The normal order would therefore be for the payment of compensation directly to the beneficiary.
The measure of compensation would be the difference between what the beneficiary had in fact received and the amount which he would have received but for the breach of trust.
That analysis (which I will refer to as Lord Browne Wilkinsons fundamental analysis) provided the foundation for all that followed.
Lord Browne Wilkinson rejected the argument that a beneficiary had automatically a continuing right to the reconstitution of the trust fund (argument A).
He repeated that in relation to a traditional trust, a beneficiary who was absolutely entitled to a trust fund had no automatic right to have the fund reconstituted.
Moreover, while the fundamental principles of equity apply to all trusts, certain detailed rules applicable to one form of trust (a traditional trust) do not necessarily have to be applied to other forms of trust (a commercial trust) if the rationale does not sensibly apply to the latter.
The House of Lords was concerned with a bare trust.
Bare trusts may arise in a number of different contexts.
In the case under consideration, it was one incident of a commercial transaction involving agency.
The purpose of the solicitors retainer was to achieve the banks commercial objective.
It was one aspect of arrangements between the parties which were mostly contractual.
He said at p 436: I do not intend to cast any doubt on the fact that monies held by solicitors on client account are trust monies or that the basic equitable principles apply to any breach of such trust by solicitors.
But the basic equitable principle applicable to breach of trust is that the beneficiary is entitled to be compensated for any loss he would not have suffered but for the breach.
I have no doubt that, until the underlying commercial transaction has been completed, the solicitor can be required to restore to client account monies wrongly paid away.
But to import into such trust an obligation to restore the trust fund once the transaction has been completed would be entirely artificial. (My emphasis).
He added that, once a conveyancing transaction has been completed, the client has no right to have the solicitors client account reconstituted as a trust fund.
To anticipate the argument discussed below, the bank relied on the second italicised sentence in this passage.
It was submitted that in this case, in contrast with Target Holdings, the underlying commercial transaction was never completed because the shortfall in the payment needed to redeem the Barclays charge was never paid.
To return to Lord Browne Wilkinsons analysis, argument B was the rationale of the judgments of the majority in the Court of Appeal.
In rejecting it Lord Browne Wilkinson cited the (dissenting) judgment of McLachlin J in Canson Enterprises Ltd v Boughton & Co. (1991) 85 DLR (4th) 129 and, in particular, the following passage at p 163: In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and account are not appropriate.
By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, ie, the plaintiffs loss of opportunity.
The plaintiffs actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight.
Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach.
Lord Browne Wilkinson added: In my view this is good law.
Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach.
On that approach Lord Browne Wilkinson held that Target was not entitled to the summary judgment which the Court of Appeal had ordered.
The arguments
There were two branches to the arguments advanced on behalf of the bank by Mr Jeremy Cousins QC and Mr Nicholas Davidson QC.
I have referred to the first in para 35.
The second was advanced partly by Mr Cousins but in greater detail by Mr Davidson, who reinforced his argument by reference to the Solicitors Accounts Rules.
Mr Davidson adopted in his argument the views expressed by Lord Millett (then Sir Peter Millett) in his article Equitys Place in The Law of Commerce (1998) 114 LQR 214 and more recently in his judgment in Libertarian Investments Ltd v Hall [2013] HKCFA 93; [2014] 1 HKC 368.
A trustee owes a duty to hold trust funds and apply them for the purposes of the trust (a stewardship or custodial duty).
He is bound to answer for his stewardship when called on by the beneficiary to do so.
If for any reason he misapplies the trust fund, or part of it, he must immediately reconstitute the trust fund in full.
If he fails to do so, the court will order him to reconstitute the fund in specie, if that is possible, or pay the equivalent sum in money so as to produce the same result in financial terms.
So in Target Holdings, where the solicitor wrongly paid out the funds before obtaining an executed mortgage, he remained liable to restore the fund; but he was deemed notionally to have done so and to have paid out the money properly at the moment when the preconditions for an authorised disposal of the fund were met.
The present case is different, it was submitted, because the solicitors failed on discovering their mistake to pay Barclays the additional sum necessary to redeem its charge.
They could and should have done so, in which case their position would have been indistinguishable from that of Redferns.
But it was now too late.
This, Mr Davidson submitted, is the correct analysis of Target Holdings.
Solicitors Accounts Rules are made under section 32 of the Solicitors Act 1974 (amended by the Legal Services Act 2007).
At the material time the relevant Rules were the 1998 Rules. (On 6 October 2011 the Solicitors Regulation Authority made the SRA Accounts Rules 2011, which replaced the 1998 Rules.)
The payment out of the banks money to the borrowers on 1 August 2006 was unauthorised by the bank and so was a breach of rule 22 of the 1998 Rules regarding the operation of a solicitors client account.
Rule 7 obliged the solicitors to remedy the breach on its discovery.
The rule provided: (1) Any breach of the rules must be remedied promptly upon discovery.
This includes the replacement of any money improperly withheld or withdrawn from a client account. (2) In a private practice, the duty to remedy breaches rests not only on the person causing the breach, but also on all the principals in the practice.
This duty extends to replacing missing client money or controlled trust money from the principals own resources, even if the money has been misappropriated by an employee or fellow principal, and whether or not a claim is subsequently made on the Solicitors Indemnity or Compensation Funds.
Mr Graeme McPherson QC submitted on behalf of the solicitors that the Court of Appeal was right to see the case in terms of causation of loss, and it was also right in concluding that the proper measure of the banks loss was the difference between its actual financial position and the position in which it would have been if the solicitors had not acted in breach of trust.
On the findings of the trial judge, the loss to the bank (excluding interest) was the amount by which the value of its security was less than it should have been, which was the same as the amount of the overpayment to the borrowers and underpayment to Barclays.
Mr McPherson submitted that the Court of Appeal correctly applied the fundamental principles stated by Lord Browne Wilkinson.
The commercial transaction in which the solicitors were instructed was completed in the sense that Lord Browne Wilkinson used that expression when the loan monies were advanced to the borrowers, thereby creating the relationship of lender and borrower between the bank and the borrowers, notwithstanding that the solicitors had wrongly failed to see that a sufficient part of the loan money was paid to Barclays on completion of the loan for the redemption of the Barclays mortgage.
The bank was entitled to have the solicitors breach of trust remedied, but the appropriate remedy was for the solicitors to make good the shortfall.
That remedy was provided by the judgment of Judge Cooke.
The bank was right, he submitted, to concede that if the shortfall had been made good before Barclays enforced its charge by selling the land, the bank would not have been entitled to recover the additional amount claimed by it.
The argument that since the solicitors failed to do so, they were liable additionally for the loss which the bank would still have suffered if the shortfall had been made good, lacked justice or common sense.
Whether the amount for which Barclays had superior security was paid by the solicitors before or after the sale of land made no difference to the banks financial position and ought not to affect the legal result.
As to the Solicitors Accounts Rules, rule 7 was not prescriptive about the form of remedy or how money improperly withdrawn from a client account should be replaced.
In this case, Mr McPherson submitted, a proper form of replacement would have been to pay to Barclays the amount which had been wrongly paid to the borrowers rather than to Barclays.
The solicitors failure to do so promptly might expose them to a risk of disciplinary proceedings, but did not affect the legal analysis.
Discussion
The debate which has followed Target Holdings is part of a wider debate, or series of debates, about equitable doctrines and remedies and their inter relationship with common law principles and remedies, particularly in a commercial context.
The parties have provided the court with nearly 900 pages of academic writing.
Much of it has been helpful, but to attempt even to summarise the many threads of argument which run through it, acknowledging the individual authors, would be a lengthy task and, more importantly, would not improve the clarity of the judgment.
Nor is it necessary to set out a full historical account of all the case law cited in the literature reaching back to Caffrey v Darby (1801) 6 Ves Jun 488.
In the present case the solicitors owed a compendium of duties to the bank.
Their relationship was governed by a contract but they held the money advanced by the bank on trust for the purpose of performing their contractual obligations.
They broke their contract and acted in breach of trust when they released to the borrowers the money advanced by the bank, less a part of the sum required to redeem the Barclays mortgage, when they should have paid to Barclays the full amount required for that purpose, in return for an undertaking to issue a redemption certificate, and should have released the diminished balance to the borrowers.
The determination of this appeal involves two essential questions.
The more important question in the appeal is whether Lord Browne Wilkinsons statement in Target Holdings of the fundamental principles which guided him in that case should be affirmed, qualified or (as the bank would put it) reinterpreted.
Depending on the answer to that question, the second is whether the Court of Appeal properly applied the correct principles to the facts of the case.
Two main criticisms have been made of Lord Browne Wilkinsons approach.
They have been made by a number of scholars, most recently by Professor Charles Mitchell in a lecture on Stewardship of Property and Liability to Account delivered to the Chancery Bar Association on 17 January 2014, in which he described the Court of Appeals reasoning in this case as incoherent.
He expressed the hope that if the case reaches the Supreme Court their Lordships will recognise that Lord Browne Wilkinson took a false step in Target when he introduced an inapt causation requirement into the law governing substitutive performance claims.
He added that if it is thought too harsh to fix the solicitors in this case with liability to restore the full amount of the loan (subject only to a deduction for the amount received by the sale of the property), the best way to achieve this is not to bend the rules governing substitutive performance claims out of shape, but to use the Trustee Act 1925, section 61, to relieve them from some or all of their liability.
The primary criticism is that Lord Browne Wilkinson failed to recognise the proper distinctions between different obligations owed by a trustee and the remedies available in respect of them.
The range of duties owed by a trustee include: (1) a custodial stewardship duty, that is, a duty to preserve the assets of the trust except insofar as the terms of the trust permit the trustee to do otherwise; (2) a management stewardship duty, that is, a duty to manage the trust property with proper care; (3) a duty of undivided loyalty, which prohibits the trustee from taking any advantage from his position without the fully informed consent of the beneficiary or beneficiaries.
Historically the remedies took the form of orders made after a process of accounting.
The basis of the accounting would reflect the nature of the obligation.
The operation of the process involved the court having a power, where appropriate, to falsify and to surcharge.
According to legal scholars whose scholarship I have no reason to doubt, in the case of a breach of the custodial stewardship duty, through the process of an account of administration in common form, the court would disallow (or falsify) the unauthorised disposal and either require the trust fund to be reconstituted in specie or order the trustee to make good the loss in monetary terms.
The term substitutive compensation has come to be used by some to refer to a claim for the value of a trust asset dissipated without authority. (See the erudite judgment in Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102 of Edelman J, who attributes authorship of the term to Dr Steven Elliott.) In a case of breach of a trustees management stewardship duty, through the process of an action on the basis of wilful default, a court could similarly falsify or surcharge so as to require the trustee to make good the loss resulting from the breach.
The phrase wilful default is misleading because, as Brightman LJ explained in Bartlett v Barclays Bank Trust Co Ltd (Nos 1 and 2) [1980] Ch 515, 546, conscious wrongdoing is not required.
In this type of case the order for payment by the trustee of the amount of loss is referred to
by some as reparative compensation, to differentiate it from substitutive
compensation, although in a practical sense both are reparative compensation.
In a case of breach of the duty of undivided loyalty, there are possible alternative remedies.
If the trustee has benefited from it, the court will order him to account for it on the application of the beneficiary.
In Bristol and West Building Society v Mothew [1998] Ch 1 Millett LJ described such relief as primarily restitutionary or restorative rather than compensatory.
Alternatively, the beneficiary may seek compensation in respect of his loss.
The history of the account of profits is more complex than this summary might suggest, and the whole concept of equitable compensation has developed and become far more prominent in the law since Nocton v Lord Ashburton.
However, what I have said is sufficient to identify the main criticism advanced against Lord Browne Wilkinsons approach in Target Holdings.
It is said that he treated equitable compensation in too broad brush a fashion, muddling claims for restitutive compensation with claims for reparative compensation.
The relevant principle, it is suggested, in a case of unauthorised dissipation of trust funds is that the amount of the award is measured by the objective value of the property lost, determined at the date when the account is taken and with the benefit of hindsight, per Millett NPJ in Libertarian Investments Ltd v Hall [2014] 1 HKC 368, para 168.
In determining the value of what has been lost, the court must take into account any offsetting benefits received, but it is not relevant to consider what the trustee ought to have done.
The court is concerned only with the net value of the lost asset.
This argument has the approval of Edelman J in Agricultural Land Management Ltd v Jackson (No2), and there are statements in the authorities cited by him which support that approach, for example, by Lord Halsbury LC in Magnus v Queensland National Bank (1888) 37 Ch D, at paras 466, 472, although the issue in that case was different.
The defendant advanced an argument which Bowen LJ, at para 480, likened to a case where A man knocks me down in Pall Mall, and when I complain that my purse has been taken, the man says, Oh, but if I had handed it back again, you would have been robbed over again by somebody else in the adjoining street.
It is good sense and good law that if a trustee makes an unauthorised disbursement of trust funds, it is no defence to a claim by the beneficiary for the trustee to say that if he had not misapplied the funds they would have been stolen by a stranger.
In such a case the actual loss has been caused by the trustee.
The hypothetical loss which would have otherwise have occurred through the strangers intervention would have been a differently caused loss, for which that other person would have been liable.
Bowen LJs example is far removed in terms of causation of loss from the present case, where the loan agreement involved the bank taking the risk of the borrowers defaulting, and the fault of the solicitors lay in releasing the funds without ensuring that the bank received the full security which it required, with the consequence that the amount of the banks exposure was greater than it should have been.
In Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 Tipping J rightly observed that while historically the law has tended to place emphasis on the legal characterisation of the relationship between the parties in delineating the remedies available for breach of an obligation, the nature of the duty which has been breached can often be more important, when considering issues of causation and remoteness, than the classification or historical source of the obligation.
Tipping J identified three broad categories of breach by a trustee.
First, there are breaches of duty leading directly to damage or to loss of trust property.
Secondly, there are breaches involving an element of infidelity.
Thirdly, there are breaches involving a lack of appropriate skill and care.
He continued at para 687: In the first kind of case the allegation is that a breach of duty by a trustee has directly caused loss of or damage to the trust property.
The relief sought by the beneficiary is usually in such circumstances of a restitutionary kind.
The trustee is asked to restore the trust estate, either in specie or by value.
The policy of the law in these circumstances is generally to hold the trustee responsible if, but for the breach, the loss or damage would not have occurred.
This approach is designed to encourage trustees to observe to the full their duties in relation to trust property by imposing on them a stringent concept of causation [ie a test by which a but for connection is sufficient].
Questions of foreseeability and remoteness do not come into such an assessment.
According to the banks argument, the responsibility of the solicitors is still more stringent.
It seeks to hold them responsible for loss which it would have suffered on the judges findings if they had done what they were instructed to do.
This involves effectively treating the unauthorised application of trust funds as creating an immediate debt between the trustee and the beneficiary, rather than conduct meriting equitable compensation for any loss thereby caused.
I recognise that there are statements in the authorities which use that language to describe the trustees liability.
For example, in Ex p Adamson; In re Collie (1878) 8 Ch D, at paras 807, 819, James and Baggallay LJJ said that the Court of Chancery never entertained a suit for damages occasioned by fraudulent conduct or for breach of trust, and that the suit was always for an equitable debt, or liability in the nature of a debt.
This was long before the expression equitable compensation entered the vocabulary.
Equitable monetary compensation for what in that case was straightforward fraud was clothed by the court in the literary costume of equitable debt, the debt being for the amount of the loss caused by the fraud.
Whatever label is used, the question of substance is what gives rise to or is the measure of the equitable debt or liability in the nature of a debt, or entitlement to monetary compensation, and what kind of but for test is involved.
It is one thing to speak of an equitable debt or liability in the nature of a debt in a case where a breach of trust has caused a loss; it is another thing for equity to impose or recognise an equitable debt in circumstances where the financial position of the beneficiaries, actual or potential, would have been the same if the trustee had properly performed its duties.
Conclusion
There are arguments to be made both ways, as the continuing debate among scholars has shown, but absent fraud, which might give rise to other public policy considerations that are not present in this case, it would not in my opinion be right to impose or maintain a rule that gives redress to a beneficiary for loss which would have been suffered if the trustee had properly performed its duties.
The same view was expressed by Professor Andrew Burrows in Burrows and Peel (eds.), Commercial Remedies, 2003, pp 46 47, where he applauded Target Holdings for impliedly rejecting older cases that may have supported the view that the accounting remedy can operate differently from the remedy of equitable compensation.
Despite the powerful arguments advanced by Lord Millett and others, I consider that it would be a backward step for this court to depart from Lord Browne Wilkinsons fundamental analysis in Target Holdings or to re interpret the decision in the manner for which the bank contends.
All agree that the basic right of a beneficiary is to have the trust duly administered in accordance with the provisions of the trust instrument, if any, and the general law.
Where there has been a breach of that duty, the basic purpose of any remedy will be either to put the beneficiary in the same position as if the breach had not occurred or to vest in the beneficiary any profit which the trustee may have made by reason of the breach (and which ought therefore properly to be held on behalf of the beneficiary).
Placing the beneficiary in the same position as he would have been in but for the breach may involve restoring the value of something lost by the breach or making good financial damage caused by the breach.
But a monetary award which reflected neither loss caused nor profit gained by the wrongdoer would be penal.
The purpose of a restitutionary order is to replace a loss to the trust fund which the trustee has brought about.
To say that there has been a loss to the trust fund in the present case of 2.5m by reason of the solicitors conduct, when most of that sum would have been lost if the solicitors had applied the trust fund in the way that the bank had instructed them to do, is to adopt an artificial and unrealistic view of the facts.
I would reiterate Lord Browne Wilkinsons statement, echoing McLachlin Js judgment in Canson, about the object of an equitable monetary remedy for breach of trust, whether it be sub classified as substitutive or reparative.
As the beneficiary is entitled to have the trust properly administered, so he is entitled to have made good any loss suffered by reason of a breach of the duty.
A traditional trust will typically govern the ownership management of property for a group of potential beneficiaries over a lengthy number of years.
If the trustee makes an unauthorised disposal of the trust property, the obvious remedy is to require him to restore the assets or their monetary value.
It is likely to be the only way to put the beneficiaries in the same position as if the breach had not occurred.
It is a real loss which is being made good.
By contrast, in Target Holdings the finance company was seeking to be put in a better position on the facts (as agreed or assumed for the purposes of the summary judgment claim) than if the solicitors had done as they ought to have done.
Other considerations reinforce my view that the House of Lords did not take a wrong step in Target Holdings.
Most critics accept that on the assumed facts of Target Holdings the solicitors should have escaped liability.
But if causation of loss was not required for them to be liable, some other way had to be found for exonerating them from liability (unless the court was to use section 61 of the 1925 Act as a deus ex machina).
The solution suggested by the bank is that the solicitors in Target Holdings should be treated as if the moneys which had been wrongly paid out had remained in or been restored to the solicitors client account and had then been properly applied after the solicitors had obtained the necessary paperwork.
There is something wrong with a state of the law which makes it necessary to create fairy tales.
As to the criticism of the passage in Target Holdings where Lord Browne Wilkinson said that it would be wrong to lift wholesale the detailed rules developed in the context of traditional trusts and apply them to a bare trust which was but one incident of a wider commercial transaction involving agency, it is a fact that a commercial trust differs from a typical traditional trust in that it arises out of a contract rather than the transfer of property by way of gift.
The contract defines the parameters of the trust.
Trusts are now commonly part of the machinery used in many commercial transactions, for example across the spectrum of wholesale financial markets, where they serve a useful bridging role between the parties involved.
Commercial trusts may differ widely in their purpose and content, but they have in common that the trustees duties are likely to be closely defined and may be of limited duration.
Lord Browne Wilkinson did not suggest that the principles of equity differ according to the nature of the trust, but rather that the scope and purpose of the trust may vary, and this may have a bearing on the appropriate relief in the event of a breach.
Specifically, Lord Browne Wilkinson stated that he did not cast doubt on the fact that monies held by solicitors on client account are trust monies, or that basic equitable principles apply to any breach of such trust by solicitors.
What he did was to identify the basic equitable principles.
In their application, the terms of the contract may be highly relevant to the question of fact whether there has been a loss applying a but for test, that is, by reference to what the solicitors were instructed to do.
If the answer is negative, the solicitors should not be required to pay restitutive monetary compensation when there has in fact been no loss resulting from their breach.
That is not because special rules apply to solicitors, but because proper performance of the trustees obligations to the beneficiary would have produced the same end result.
I agree with the view of Professor David Hayton, in his chapter Unique Rules for the Unique Institution, the Trust in Degeling & Edelman (eds), Equity in Commercial Law (2005), pp 279 308, that in circumstances such as those in Target Holdings the extent of equitable compensation should be the same as if damages for breach of contract were sought at common law.
That is not because there should be a departure in such a case from the basic equitable principles applicable to a breach of trust, whether by a solicitor or anyone else. (If there were a conflict between the rules of equity and the rules of the common law, the rules of equity would prevail by reason of section 49(1) of the Senior Courts Act 1981, derived from the provisions of the Judicature Act 1875.) Rather, the fact that the trust was part of the machinery for the performance of a contract is relevant as a fact in looking at what loss
the bank suffered by reason of the breach of trust, because it would be
artificial and unreal to look at the trust in isolation from the obligations for which it was brought into being.
I do not believe that this requires any departure from proper principles.
There remains the question whether the Court of Appeal properly applied the reasoning in Target Holdings to the facts of the present case.
It was argued on behalf of the bank that this case falls within Lord Browne Wilkinsons statement that [u]ntil the underlying commercial transaction has been completed, the solicitor can be required to restore to the client account monies wrongly paid away.
This argument constricts too narrowly Lord Browne Wilkinsons essential reasoning.
Monetary compensation, whether classified as restitutive or reparative, is intended to make good a loss.
The basic equitable principle applicable to breach of trust, as Lord Browne Wilkinson stated, is that the beneficiary is entitled to be compensated for any loss he would not have suffered but for the breach.
In this case, proper performance of the obligations of which the trust formed part would have resulted in the solicitors paying to Barclays the full amount required to redeem the Barclays mortgage, and, as Patten LJ said, the bank would have had security for an extra 300,000 or thereabouts of its loan.
When Lord Browne Wilkinson spoke of completion he was talking about a commercial transaction.
The solicitors did not complete the transaction in compliance with the requirements of the CML Handbook.
But as a commercial matter the transaction was executed or completed when the loan monies were released to the borrowers.
At that moment the relationship between the borrowers and the bank became one of contractual borrower and lender, and that was a fait accompli.
The Court of Appeal was right in the present case to understand and apply the reasoning in Target Holdings as it did.
The further argument advanced on behalf of the bank in this court about the Solicitors Accounts Rules takes matters no further, for the reasons which Mr McPherson gave in his response to it.
The solicitors were at fault in not reporting to the bank what they had done and in failing at that stage to remedy their breach of trust by ensuring that the shortfall was paid to Barclays.
Their failure to do so was a breach of the rules, which could have disciplinary consequences but it does not affect the outcome in the present appeal.
There is, as Mr McPherson submitted, no satisfactory logical reason why the question of the solicitors liability to provide redress to the bank for a loss which it would have suffered in any event should turn on their compliance or non compliance with their obligations under rule 7.
My analysis accords with the reasoning of Lord Reed and with his general conclusions at paragraphs 133 to 138.
Equitable compensation and common law damages are remedies based on separate legal obligations.
What has to be identified in each case is the content of any relevant obligation and the consequences of its breach.
On the facts of the present case, the cost of restoring what the bank lost as a result of the solicitors breach of trust comes to the same as the loss caused by the solicitors breach of contract and negligence.
For those reasons I would dismiss the appeal.
LORD REED
I agree that this appeal should be dismissed.
I have reached that conclusion for reasons which are substantially the same as those of Lord Toulson.
Given the importance of the case, I have thought it right to set out my own reasoning, which considers the relationship between equitable compensation and common law damages on a somewhat broader basis.
In his speech in Target Holdings Ltd v Redferns [1996] AC 421, Lord Browne Wilkinson drew upon the minority judgment of McLachlin J in Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129.
It may be helpful to begin by considering that case before turning to Target Holdings itself, not only because of the influence of McLachlin Js judgment upon the reasoning in that case, and in other cases in common law jurisdictions around the world, but also because the judgments in the case illustrate two approaches to equitable compensation: approaches which differ in respect of the relationship which they postulate between equitable compensation and common law damages.
That issue lies at the heart of the arguments in this appeal.
Canson Enterprises Ltd v Boughton & Co 80.
The Canson Enterprises case was not concerned with a breach of trust, but with a breach of fiduciary duty by an agent.
The claim was brought by developers of land against the lawyers who had acted for them in the purchase of the land.
The lawyers acted in breach of their fiduciary duty by failing to disclose their knowledge that a third party was making a secret profit from the purchase.
The development proved to be a failure as a result of the negligence of the engineers and contractors involved.
The appellants sought
to recover the loss incurred on the development from the lawyers, on the basis
that they would not have proceeded with the purchase if they had known of the secret profit.
Recognising that the loss would not be recoverable in an action founded on breach of contract, negligence or deceit, the appellants instead sought equitable compensation for breach of fiduciary duty, arguing that such compensation was unlimited by principles of causation, remoteness or intervening acts. 81.
La Forest J, giving the judgment of the majority of the Supreme Court of Canada, distinguished at p 146 between the breach of a trustees obligation to hold the object of the trust, where on breach the concern of equity is that it be restored or, if that cannot be done, to afford compensation for what the object would be worth, and on the other hand a mere breach of duty, where the concern of equity is to ascertain the loss resulting from the particular breach of duty.
In the former situation the difference between restoration and damages was abundantly clear, but in the latter situation the difference in practical result between compensation and damages is by no means as clear (p 145).
La Forest J went on to observe at p 148, in relation to claims of the latter kind: The truth is that barring different policy considerations underlying one action or the other, I see no reason why the same basic claim, whether framed in terms of a common law action or an equitable remedy, should give rise to different levels of redress.
On that footing (and subject to the proviso contained in the first part of that sentence), principles developed in the common law, such as the mitigation of damages and contributory negligence, could also be applied to analogous claims brought in an equitable context.
In the instant case, damages equivalent to those for deceit were appropriate, and the appellants claim was therefore rejected.
La Forest J acknowledged that the same result could have been produced using equitable principles alone. 82.
McLachlin J agreed in the result, but based her analysis entirely on equitable principles.
Her judgment, with which Lamer CJC and LHeureux Dub J concurred, merits detailed consideration. 83.
First, she rejected the argument that the starting point, when quantifying compensation for breach of fiduciary duty, should be an analogy with tort or contract.
In her view, that approach overlooked the unique foundation and goals of equity.
In negligence and contract the parties were taken to be independent and equal actors, concerned primarily with their own self 84. interest.
Consequently, the law sought a balance between enforcing obligations by awarding compensation, and preserving optimum freedom for those involved in the relationship.
The essence of a fiduciary relationship, by contrast, was that one party pledged herself to act in the best interests of the other.
The freedom of the fiduciary was diminished by the nature of the obligation she had undertaken.
The fiduciary relationship had trust, not self interest, at its core.
It therefore could not be assumed that an analogy with tortious damages was appropriate.
Such an analogy would also have suggested that some well established equitable principles should not operate, such as the presumption that trust funds would be put to the most profitable use, and the requirement to disgorge profits gained through a breach of duty, even though such profits were not made at the expense of the person to whom the duty was owed.
An analogy with tort would not be of great assistance in any event, since tort offered different measures of compensation, depending on the nature of the wrong.
Rather than attempt to decide which tort was the closest analogy, the better approach was to look at the policy behind compensation for breach of fiduciary duty and determine how best to further that policy.
In so far as shared concerns made it helpful, insights might be accepted from the law of tort. 85.
Furthermore, an analogy with tort would require an artificial distinction to be drawn between a breach of trust involving the misapplication of property, where the tort analogy was on any view inapplicable, and other breaches of trust or of fiduciary obligations.
In the former case, equity required property wrongfully appropriated to be restored together with an account of profits.
Where there was no property which could be restored, the court could award compensation in lieu, with the ideal of restoring that which was lost through the breach of duty.
That distinction should not obscure the fact that the measure of compensation was restitutionary in both cases.
Any further distinction was difficult to support.
It followed that equitable compensation was assessed at a different time from damages in tort or contract, and that the foreseeability of loss was not relevant.
In a passage cited with approval in Target Holdings, McLachlin J said: 86.
In this area tort and contract law are of little help.
There, the general rule is that damages are assessed as at the time of the wrongful act, in view of what was then foreseeable, either by a reasonable person, or in the particular expectation of the parties.
The basis of compensation at equity, by contrast, is the restoration of the actual value of the thing lost through the breach.
The foreseeable value of the items is not in issue.
As a result, the losses are to be assessed as at the time of trial, using the full benefit of hindsight. (p 162) That result reflected the nature of fiduciary obligations.
In negligence, the law protected reasonable freedom of action of the defendant, and the reasonableness of his or her action could be judged by what consequences could be foreseen.
In the case of a breach of fiduciary duty, as in deceit, there was no need to look to the consequences to judge the reasonableness of the actions.
A breach of fiduciary duty was a wrong in itself, regardless of whether a loss could be foreseen. 87.
Liability was however not unlimited.
There was in the first place a requirement of causation: Just as restitution in specie is limited to the property under the trustee's control, so equitable compensation must be limited to loss flowing from the trustee's acts in relation to the interest he undertook to protect. (p 160) A further limitation arose from the plaintiffs responsibility not to act unreasonably.
When the plaintiff, after due notice and opportunity, failed to take the most obvious steps to alleviate his or her losses, then it could rightly be said that the plaintiff had been the author of his own misfortune.
I would comment that, rather than being a distinct principle, this might be regarded as following from the requirement of a direct causal connection. 88.
A further potential limitation related to the interventions of third parties.
McLachlin J distinguished between cases such as Caffrey v Darby (1801) 6 Ves Jun 488, where the failure of the trustees to take reasonable steps to recover payments owed to the trust had enabled a third party to default, and cases such as the instant case, where the plaintiff suffered loss as a result of the act of a third party after the fiduciarys obligation had terminated and the plaintiff had taken control of the property.
These cases illustrate how the intervention of a third party may, or may not, interrupt the causal connection between a breach of trust and subsequent loss. 89.
McLachlin J summarised her conclusions in another passage which was cited with approval in Target Holdings: In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and account are not appropriate.
By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, ie the plaintiff's lost opportunity.
The plaintiff's actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight.
Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach.
The plaintiff will not be required to mitigate, as the term is used in law, but losses resulting from clearly unreasonable behaviour on the part of the plaintiff will be adjudged to flow from that behaviour, and not from the breach.
Where the trustee's breach permits the wrongful or negligent acts of third parties, thus establishing a direct link between the breach and the loss, the resulting loss will be recoverable.
Where there is no such link, the loss must be recovered from the third parties. (p 163) Discussion 90.
It may be helpful at this stage to discuss three important points which can be derived from this illuminating judgment, and to which I shall return after considering other relevant authorities.
The first is the distinction between liability and remedy.
A breach of trust involving the misapplication of trust property can be remedied by means of proceedings designed to secure the performance of the trust.
Such proceedings can include the drawing up of an account as a preliminary to the distribution of the trust fund.
If property has been misapplied, the relevant entry in the account will be disallowed and the property must be restored by the trustee.
If the property cannot be restored in specie, the trustee must restore the trust fund to the position it would have been in but for the breach, by paying into the fund sufficient pecuniary compensation to meet that objective.
The compensation then forms part of the trust fund and is held on the same terms as the remainder of the fund.
Alternatively, and more commonly in practice, proceedings may be brought directly for such a monetary remedy. 91.
As I shall explain, another remedy can be sought where the trust is no longer subsisting, namely the payment of compensation directly to the beneficiary absolutely entitled to the trust fund.
The liability, in that situation, is to compensate the beneficiary for the diminution in the value of the trust fund which was caused by the breach of trust, to the extent of the beneficiarys interest.
The measure of compensation is therefore the same as would be payable on an accounting, although the procedure is different. 92.
The second point is that the loss resulting from a breach of duty has to be measured according to legal rules, and that different rules apply to the breach of different obligations.
The rules applicable to the tort of negligence, for example, have a rationale related to the nature of that tort.
In general, and subject to special rules applicable to particular situations, which have their own rationale, the liability resulting from a failure to take reasonable care to guard against a reasonably foreseeable risk is limited to such consequences as are reasonably foreseeable at the time of the negligent act.
The different rule applicable to the tort of deceit has a different rationale, related to the different nature of that tort: the liability of a person who intentionally deceives another is to compensate for all the loss which that person suffers in consequence, whether it is foreseeable or not.
In that situation, foreseeability does not enter into the wrongfulness of the defendants conduct, and there is no reason why it should limit the extent of his responsibility.
The tort of conversion has a different rule again: the defendant is liable to pay the value of the asset in question, measured as at the date when it was converted.
And so, mutatis mutandis, for other breaches of duty, whether in tort, contract or equity. 93.
The rules appropriate to a breach of duty by a trustee similarly have to be determined in the light of the characteristics of the obligation in question.
This focus upon the trustees obligations is the third and most important point.
Putting the matter very broadly, compensation for the breach of an obligation generally seeks to place the claimant in the position he would have been in if the obligation had been performed.
Equitable compensation for breach of trust is no different in principle: again putting the matter broadly, it aims to provide the pecuniary equivalent of performance of the trust. 94.
Some of the typical obligations of the trustee of a fund are strict: for example, the duty to distribute the fund in accordance with the purposes of the trust.
Others are obligations of reasonable care: for example, the duty to exercise reasonable care and skill in the management of the fund.
Since these equitable obligations relate to a fund held for trust purposes, the trustees liability for a breach of trust will, again putting the matter broadly, depend upon its effect upon the fund: the measure of compensation will generally be based upon the diminution in the value of the fund caused by the trustees default. 95.
The only other observation I need make in relation to the judgment of McLachlin J concerns the statement that causation should be assessed on a common sense view.
In its context, that statement served to emphasise that principles of causation developed in other contexts cannot be applied automatically in an equitable setting.
Difficult questions of causation do not however always have an intuitively obvious answer.
Legal analysis is as important in equity as in the common law.
Target Holdings Ltd v Redferns 96.
The facts of Target Holdings Ltd v Redferns are well known.
The case concerned a claim against a firm of solicitors, sued for its involvement in a mortgage fraud.
Fraud as well as negligence was pleaded.
The solicitors had parted with the mortgage advance to the wrong person, prior to the completion of the transaction and without obtaining the security.
The transaction was however subsequently completed and the security was obtained.
It later proved hopelessly inadequate.
The claimant sought summary judgment on the basis of the unauthorised payment.
They argued that the solicitors came under an immediate duty to restore the money paid away in breach of trust, and that it was irrelevant that the claimant had subsequently received exactly the security that it was intending to obtain.
This was described by Lord Browne Wilkinson as argument (B).
Before the House of Lords, it was also argued that the claimant remained entitled at the date of judgment to have the solicitors reconstitute the trust fund (argument (A)). 97.
The Court of Appeal gave judgment in favour of the claimant.
An appeal was allowed by the House of Lords, for reasons given by Lord Browne Wilkinson.
The reasoning has been much debated, and in view of the invitation to review it in the present appeal it is necessary to consider it in some detail. 98.
His Lordship began by noting that the case was concerned with the rights of a beneficiary, and summarised the nature of such rights: The basic right of a beneficiary is to have the trust duly administered in accordance with the provisions of the trust instrument The equitable rules of compensation for breach of trust have been largely developed in relation to traditional trusts, where the only way in which all the beneficiaries rights can be protected is to restore to the trust fund what ought to be there.
In such a case the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss.
If specific restitution of the trust property is not possible, then the liability of the trustee is to pay sufficient compensation to the trust estate to put it back to what it would have been had the breach not been committed Even if the immediate cause of the loss is the dishonesty or failure of a third party, the trustee is liable to make good that loss to the trust estate if, but for the breach, such loss would not have occurred.
Thus the common law rules of remoteness of damage and causation do not apply.
However there does have to be some causal connection between the breach of trust and the loss to the trust estate for which compensation is recoverable, viz the fact that the loss would not have occurred but for the breach. (p 434) 99.
Where the trust was still subsisting, the only right of each beneficiary was to have the trust fund reconstituted as it should be.
Where however the trust had come to an end, and the beneficiary had become absolutely entitled, it was normally inappropriate to order the reconstitution of the trust fund and its subsequent distribution: instead, the court ordered the payment of compensation directly to the beneficiary: The measure of such compensation is the same, ie the difference between what the beneficiary has in fact received and the amount he would have received but for the breach of trust.
Accordingly, in traditional trusts for persons by way of succession, once those trusts had been exhausted and the fund had become absolutely vested in possession, the beneficiary was not normally entitled to have the exhausted trust reconstituted: his right was to be compensated for the loss he had suffered by reason of the breach. 100.
What Lord Browne Wilkinson was discussing at this point was a question of remedy.
The pecuniary remedy for a breach of trust affecting the trust fund cannot involve a payment to a particular beneficiary, unless the beneficiary is absolutely entitled to the fund.
Absent such entitlement, the only way to ensure that each beneficiary is appropriately compensated is for the payment to be made into the trust fund, to be held in accordance with the terms of the trust.
This is accomplished by adding the appropriate amount to the fund, so that the fund is restored or replenished.
Where, on the other hand, the trust is no longer subsisting, compensation for the breach of trust can be paid directly to the beneficiary absolutely entitled.
As Lord Browne Wilkinson explained, the measure of compensation is the same as if there had been an accounting and execution of the trust: in other words, the difference between what the beneficiary ought to have received and what he has in fact received as a result of the diminution in the trust fund. 101.
His Lordship then turned to argument (A).
He began by stating that even if the equitable rules developed in relation to traditional trusts were directly applicable to such a case as this, a beneficiary absolutely entitled to a trust fund had no automatic right to have the trust fund reconstituted.
He had already explained why that was so, but had also explained the corollary, namely that the beneficiary would in that event be entitled to compensation in the same measure (unless the trustee was under no liability, for example by reason of acquiescence by the beneficiary in the breach of trust).
His Lordships focus was again on the question of the appropriate remedy, rather than the measure of liability.
He continued: But in my judgment it is in any event wrong to lift wholesale the detailed rules developed in the context of traditional trusts and then seek to apply them to trusts of quite a different kind.
In the modern world the trust has become a valuable device in commercial and financial dealings.
The fundamental principles of equity apply as much to such trusts as they do to the traditional trusts in relation to which those principles were originally formulated.
But in my judgment it is important, if the trust is not to be rendered commercially useless, to distinguish between the basic principles of trust law and those specialist rules developed in relation to traditional trusts which are applicable only to such trusts and the rationale of which has no application to trusts of quite a different kind. (p 435) 102.
This is one of a number of passages in the speech which have given rise to debate.
The point that there are different types of trust, and that it would be mistaken to think that they must all be governed in every respect by identical rules, had also been made by McLachlin J in Canson Enterprises at pp 156 157.
In particular, as Lord Browne Wilkinson pointed out, commercial trusts, usually arising out of contractual relationships rather than the transfer of property by way of gift, differ in a number of respects from the more traditional trust.
That is not to say that there is a categorical distinction between trusts in commercial and non commercial relationships, or to assert that there are trusts to which the fundamental principles of equity do not apply.
It is, on the other hand, to recognise that the duties and liabilities of trustees may depend, in some respects, upon the terms of the trust in question and the relationship between the relevant parties (cf Kelly v Cooper [1993] AC 205, 214 215). 103.
Lord Browne Wilkinson then considered the particular type of trust with which the appeal was concerned.
He began by identifying the relevant characteristics of the trust: 104.
Lord Browne Wilkinson continued: This case is concerned with a trust which has at all times been a bare trust.
Bare trusts arise in a number of different contexts: eg by the ultimate vesting of the property under a traditional trust, nominee shareholdings and, as in the present case, as but one incident of a wider commercial transaction involving agency.
In the case of moneys paid to a solicitor by a client as part of a conveyancing transaction, the purpose of that transaction is to achieve the commercial objective of the client, be it the acquisition of property or the lending of money on security.
The depositing of money with the solicitor is but one aspect of the arrangements between the parties, such arrangements being for the most part contractual. (p 436) I do not intend to cast any doubt on the fact that moneys held by solicitors on client account are trust moneys or that the basic equitable principles apply to any breach of such trust by solicitors.
But the basic equitable principle applicable to breach of trust is that the beneficiary is entitled to be compensated for any loss he would not have suffered but for the breach.
I have no doubt that, until the underlying commercial transaction has been completed, the solicitor can be required to restore to client account moneys wrongly paid away.
But to import into such trust an obligation to restore the trust fund once the transaction has been completed would be entirely artificial.
The obligation to reconstitute the trust fund applicable in the case of traditional trusts reflects the fact that no one beneficiary is entitled to the trust property and the need to compensate all beneficiaries for the breach.
That rationale has no application to a case such as the present.
To impose such an obligation in order to enable the beneficiary solely entitled (ie the client) to recover from the solicitor more than the client has in fact lost flies in the face of common sense and is in direct conflict with the basic principles of equitable compensation.
In my judgment, once a conveyancing transaction has been completed the client has no right to have the solicitor's client account reconstituted as a trust fund. (p 436) 105.
This passage contains a number of ideas.
The first is that the basic equitable principle applicable to breach of trust is that the beneficiary is entitled to be compensated for any loss he would not have suffered but for the breach.
That is a broad proposition, which leaves open what precisely is meant by loss, and how it is assessed.
As McLachlin J explained in Canson Enterprises, the basic obligation of a defaulting trustee is to restore the trust fund to the position it would have been in but for the default.
In relation to the breach of a fiduciary duty, her Ladyship said (in the passage cited at para 89, also cited by Lord Browne Wilkinson with approval at a later point in his speech) that, by analogy, compensation for breach of such a duty attempts to restore to the plaintiff what has been lost as a result of the breach.
Lord Browne Wilkinsons dictum should in my view be understood in that sense: the loss is what the beneficiary has been deprived of as a result of the breach. 106.
The second idea is that, where a solicitor holds money on trust as an incident of a commercial transaction, he can be required to restore moneys paid away until the commercial transaction has been completed, but not after that point, since it would be artificial to impose the same obligation once the transaction has been completed.
Lord Browne Wilkinson is again focusing on procedure: as he had previously explained, the appropriate remedy where the trust is no longer in subsistence is the payment of compensation directly to the beneficiary.
Consistently with that general approach, it would be inappropriate to require a trustee to reconstitute the trust fund (such as a solicitors client account) in a case where a bare trust had come into being for the purpose of a commercial transaction which had in practical terms been completed, leaving no active obligations for the trustee to perform.
As he had previously explained, the measure of compensation would be the same as the loss to the trust fund. 107.
The third idea, expressed in the penultimate sentence of the passage I have cited, is that to impose an obligation to reconstitute the trust fund, in order to enable the client to recover more than he has in fact lost, flies in the face and is in direct conflict with the basic principles of equitable compensation.
That is clearly correct.
As Lord Browne Wilkinson went on to explain, an obligation to reconstitute the trust fund does not inexorably require a payment into the fund of the value of misapplied property: for example, where the consequences of the breach of trust have been mitigated by subsequent events. 108.
Lord Browne Wilkinson might however be understood, from the juxtaposition of the two final sentences (the last sentence stating a conclusion which might be read as being based on his rejection of the idea postulated in the preceding sentence), to be envisaging that the remedy of an accounting might result in the trustees paying more into the trust fund than had actually been lost by the beneficiary entitled to the fund.
I doubt however whether that was what Lord Browne Wilkinson meant.
The direct payment of equitable compensation to the beneficiary is procedurally different from the reconstitution and distribution of the trust fund, but the end result should not be different: otherwise, the beneficiary would receive something other than his entitlement under the trust.
Equally, the remedy of an accounting and execution of the trust cannot require more to be paid into the trust fund than is missing from it. 109.
Argument (A) was thus dismissed on a procedural ground: the wrong remedy had been sought.
Lord Browne Wilkinson then turned to argument (B).
He noted that the Court of Appeal had drawn a distinction between the case in which the breach of trust consisted of some failure in the administration of the trust, and the case where a trustee wrongfully paid away trust moneys.
There was, he said, no doubt that in the former case, the restitution or compensation payable was assessed at the date of trial, not of breach.
In the latter case, however, the Court of Appeal considered that events between the date of breach and the date of trial were irrelevant in assessing the loss suffered by reason of the breach. 110.
As Lord Browne Wilkinson remarked, the fact that there was an accrued cause of action as soon as the breach was committed did not mean that the quantum of the compensation payable was fixed on that date.
The quantum was fixed at the date of judgment, as the figure then necessary to put the trust fund or the beneficiary back into the position it would have been in had there been no breach. 111.
In that regard, Lord Browne Wilkinson cited the judgment of McLachlin J in Canson Enterprises, which he described as containing an illuminating exposition of the rules applicable to equitable compensation for breach of trust.
In particular, he cited passages from the judgment which I also have cited at paras 86, 87 and 89, in which her Ladyship discussed causation, foreseeability and the time of assessment.
He commented: In my view this is good law.
Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach. (p 439) In the instant case, the claimant obtained exactly what it ought to have obtained, namely a valid security for the sum advanced, and therefore suffered no compensatable loss. 112.
Finally, there was accepted to be a triable issue as to whether the premature payment of the mortgage advance to its recipients had been essential to enable the entire transaction to proceed.
Lord Browne Wilkinson commented that if that was established, the loss suffered by the claimant by reason of the breach of trust would be the total sum advanced less the proceeds of the security.
That comment is consistent with the approach to foreseeability, and to interventions by third parties, adopted by McLachlin J. 113.
Although the passages which I have discussed in paras 102 and 105 108 may be capable of a different interpretation, at least if read in isolation, it appears therefore that Lord Browne Wilkinson intended his approach to be consistent with that of McLachlin J in Canson Enterprises. 114.
The result of the appeal was undoubtedly correct.
The mortgage advance had been paid out prematurely and to the wrong person, with the consequence that at that point the trustee did not have the charges which he ought to have had.
That deficiency was however remedied when the charges were obtained some weeks later.
The assets under the control of the trustee were then exactly what they ought to have been.
There was nothing missing from the trust fund, and therefore no basis for a claim for restoration.
For the same reason, there was no basis for a claim to compensation by the mortgagee. 115.
Lord Browne Wilkinsons judgment has been interpreted by some academic lawyers as adopting a reparative measure of compensation, as distinct from McLachlin Js substitutive analysis.
That interpretation is based primarily on Lord Browne Wilkinsons statement that the beneficiary is entitled to be compensated for any loss he would not have suffered but for the breach.
That dictum has been interpreted as meaning that equitable compensation is to be assessed in the same way as common law damages, either generally or at least in circumstances such as those with which the case was concerned. 116.
I do not understand that to have been Lord Browne Wilkinsons meaning.
As I have explained at paras 99 100, 105 108 and 110 111, and particularly in view of his endorsement of the passages cited from McLachlin Js judgment, which I discussed at paras 86 and 87 89, I am not persuaded that Lord Browne Wilkinson intended to depart from the orthodox view that the equitable obligation arising from a breach of trust affecting the trust fund is to restore the fund to the position it would have been in but for the breach, and that the measure of compensation, whether it is payable into the trust fund or directly to a beneficiary, should be assessed on that basis.
Furthermore, as I shall shortly explain, Target Holdings has not been understood in other leading common law jurisdictions as having established that the basis upon which equitable compensation is assessed is the same as the basis upon which common law damages are calculated.
If that were its effect, the development of equity in English law would be at odds with its development in those jurisdictions.
The case law since Target Holdings 117.
It remains to consider, prior to turning to the present case, some of the most significant cases in this area since Target Holdings. 118.
In Bristol and West Building Society v Mothew [1998] Ch 1, a case concerned with a negligent misrepresentation made by a solicitor to his client, Millett LJ drew a distinction at pp 16 17 between a duty which is special to fiduciaries, such as the fiduciary duty of loyalty, and a duty which is incumbent upon a fiduciary but is not peculiar to a person in that position, such as the duty of care imposed on those who have assumed responsibility for the property or affairs of others.
Millett LJ commented: Although the remedy which equity makes available for breach of the equitable duty of skill and care is equitable compensation rather than damages, this is merely the product of history and in this context is in my opinion a distinction without a difference.
Equitable compensation for breach of the duty of skill and care resembles common law damages in that it is awarded by way of compensation to the plaintiff for his loss.
There is no reason in principle why the common law rules of causation, remoteness of damage and measure of damages should not be applied by analogy in such a case. (p 17) 119.
As I shall explain, that dictum has been questioned, or given a restrictive application, in a number of other jurisdictions.
It is unnecessary to consider it in detail in the present appeal.
It may however be helpful to make two observations.
First, Millett LJ was not considering the liability of a trustee.
Secondly, as McLachlin J pointed out in Canson Enterprises, the application by analogy of the common law rules is complicated by the fact that there is no single set of common law rules.
It is necessary to consider the specific characteristics of the obligation in question (such as the duty to exercise care in the management of a trust fund), and the respects in which it resembles or differs from obligations arising in other areas of the law (such as duties of care in contract or in tort), in order for the law governing liability for the breach of these various obligations to be coherent. 120.
The only other decision in this jurisdiction which need be mentioned is FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45; [2014] 3 WLR 535.
The case concerned the question whether a principal had a proprietary claim to a secret profit received by his agent in breach of his fiduciary duty.
I note in passing that the alternative remedy, a personal claim to payment of the amount brought out by an account of profits, was described by the court as equitable compensation.
In order to avoid confusion, it is necessary to note that the expression was being used in a different sense from the one that it bears in the present context. 121.
In reaching its conclusion in the FHR case, the court was influenced by the case law of other common law jurisdictions, remarking at para 45 that it seemed highly desirable for all those jurisdictions to learn from each other, and at least to lean in favour of harmonising the development of the common law round the world.
With that observation in mind, I turn to the more recent case law of Canada, Australia, New Zealand and Hong Kong. 122.
In Canada, the argument in Canson Enterprises has been carried forward in a number of cases.
In M(K) v M(H) [1992] 3 SCR 6, 80 81, 86 it was agreed that where the same policy objectives underlie two different causes of action similar measures of compensation may be appropriate; and the same approach can be seen in Cadbury Schweppes v FBI Foods [1999] 1 SCR 142.
In Hodgkinson v Simms [1994] 3 SCR 377 La Forest J, giving the judgment of the majority, drew the same distinction as had been drawn by McLachlin J in Canson Enterprises between fiduciary relationships and commercial interactions governed by the common law, the former being characterised by one partys duty to act in the others best interests, and often by power on the one hand and dependency on the other, whereas the common law generally respected the pursuit of self interest.
The proper approach to damages for breach of a fiduciary duty was said to be restitutionary.
On that basis, the majority of the court concluded that the claimant was entitled to be compensated for the loss sustained on investments which he had made on the advice of a fiduciary who had failed to disclose a conflict of interest, notwithstanding that the loss had resulted from an unforeseen general economic downturn.
The decision of the majority in Canson Enterprises was explained as holding that a court exercising equitable jurisdiction was not precluded from considering the principles of remoteness, causation and intervening act where necessary to reach a just result. 123.
In Australia, McLachlin Js analysis of the distinction between fiduciary relationships and those regulated by tort and contract has been accepted by the High Court: Pilmer v Duke Group Ltd [2001] HCA 31; (2001) 207 CLR 165, para 71.
The court has consequently questioned the view, based on the dictum of Millett LJ in Bristol and West Building Society v Mothew, that equitable compensation for breach of the duty of skill and care in the administration of a trust should be governed by common law rules: Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484, paras 39 40.
The Australian cases proceed on the basis that liability in respect of losses sustained by reason of a breach of duty by a trustee or other fiduciary is determined by equitable principles, and that these may require different rules from those which govern the assessment of damages in tort or contract: see for example Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, which concerned causation, and Pilmer v Duke Group Ltd, which concerned contributory negligence.
In the latter case, McHugh, Gummow, Hayne and Callinan JJ said at para 85: In Australia, the measure of compensation in respect of losses sustained by reason of breach of duty by a trustee or other fiduciary is determined by equitable principles and these do not necessarily reflect the rules for assessment of damages in tort or contract. 124.
Target Holdings was considered by the High Court of Australia in Youyang Pty Ltd v Minter Ellison Morris Fletcher, a case on broadly analogous facts, with the important distinction that the security which would have been good was never provided (in addition, the plaintiff investor was not the client of the solicitor trustee).
The court distinguished Target Holdings on the basis that it was a case where, ultimately, the property was conveyed to the mortgagor and the charges were executed.
That element being absent in Youyang, the defendant solicitors were ordered to repay the monies which they had paid out in breach of trust.
The court regarded it as beside the point that, after the money had been disbursed in breach of trust, there was also conduct by third parties which resulted in the loss of the unsecured funds.
In those respects the decision appears to me to be consistent with the approach adopted in Target Holdings. 125.
As in Target Holdings, the court observed that the nature of the remedy for breach of trust could vary to reflect the terms of the trust and the breach of which complaint was made.
In particular, as in Target Holdings, the solicitors did not hold the moneys for indeterminate or contingent beneficial interests, and the case was not one where the appropriate remedy was to have duly administered a restored trust fund. 126.
McLachlin Js approach in Canson Enterprises to the assessment of compensation for the breach of a fiduciary duty, as set out in the passage which I have cited at para 89, was also accepted by Elias CJ in the Supreme Court of New Zealand: Premium Real Estate Ltd v Stevens [2009] NZSC 15; [2009] 2 NZLR 384, paras 34 36.
In relation to remoteness of damage, it was observed that the question of foreseeability in common law claims was effectively overtaken by the relationships out of which fiduciary duties arose, and that different policy considerations might affect remoteness of damage in cases of breach of fiduciary duty than in common law claims.
But the necessity of demonstrating that a loss was caused by the claimed breach of fiduciary duty followed from the compensatory justification for the remedy. 127.
In the earlier case of Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664, Millett LJs dictum in Bristol and West Building Society v Mothew [1998] Ch 1, 17 was cited with approval by the Court of Appeal.
The case was not concerned with the duty of a trustee to exercise reasonable care and skill in the management of a trust fund, but, like Mothew, with a duty of care relating to the provision of information.
The trustee was required, under a debenture deed securing advances by banks to a property investment company, to take care to detect breaches of the deed by the company.
The plaintiff bank claimed to have suffered loss as a consequence of the trustees negligent failure to detect and report breaches by the company, notwithstanding the absence of any diminution in the value of the security.
The case illustrates how the obligations of a trustee under a commercial trust can differ from those typically imposed by more traditional trusts: as Tipping J observed, the relationship of trustee and beneficiary was in a sense, incidental (p 688). 128.
This rapid, and inevitably somewhat superficial and selective, tour dhorizon can be completed by considering two decisions of the Hong Kong Final Court of Appeal.
First, in Akai Holdings Ltd v Kasikornbank PCL [2011] 1 HKC 357, it was said, under reference to Target Holdings and the Australian case of Maguire v Makaronis, that the notion that equitable compensation is assessed on a somewhat different basis from common law damages is clearly right (albeit that the difference can be overstated) (para 131).
It was also accepted, under reference to those cases and to the judgment of McLachlin J in Canson Enterprises, that the losses made good are only those which, on a common sense view of causation, were caused by the breach (para 152). 129.
Secondly, in Libertarian Investments Ltd v Hall [2014] 1 HKC 368 Ribeiro PJ carried out a valuable review of the authorities concerned with equitable compensation in the context of a commercial relationship.
He noted that where a relationship was fiduciary, there might be obligations which were not fiduciary in nature; and, equally, even in a commercial relationship, there might be aspects which engaged fiduciary obligations.
As Blanchard J had stated in Amaltal Corpn Ltd v Maruha Corpn [2007] NZSC 40; [2007] 3 NZLR 192, para 21: That is because in the nature of that particular aspect of the relationship one party is entitled to rely upon the other, not just for adherence to contractual arrangements between them, but also for loyal performance of some function.
Hence the important focus was on the nature of the obligation in question. 130.
Ribeiro PJ accepted the suggestion made by Brennan CJ in Breen v Williams (1996) 186 CLR 71 that fiduciary duties could arise either from agency or from a relationship of ascendancy or influence by one party over another, or dependence or trust on the part of that other.
An obvious example of the agency type of situation was the case where a person received money or other property for and on behalf of or as trustee of another person.
Accordingly: It is plain that fiduciary duties may well arise as aspects of a commercial relationship.
Moreover, it is clear that legal and equitable rights and remedies are capable of co existence, even in a single transaction. (para 70) 131.
Ribeiro PJ accepted McLachlin Js explanation of the distinction between fiduciary and common law relationships in a commercial context, and its reflection in the differences between equitable compensation and common law damages in relation to causation, foreseeability, mitigation of loss and the time of assessment (at paras 72, 80 81, 90 92 and 96). 132.
Ribeiro PJ also considered the distinction drawn by Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1, 17, between the breach of a duty of skill and care within a fiduciary relationship and the breach of a duty which is fiduciary in nature.
He accepted the view expressed by Tipping J in Bank of New Zealand v New Zealand Guardian Trust Co Ltd that, where there was a breach of a duty of care by a trustee which did not result in any loss to the trust fund, any liability in damages which might arise would be assessed by applying common law rules (para 77).
On the other hand, where loss was caused by the fiduciary to trust property, strict rules on causation applied.
Those were rules borrowed from those developed in relation to traditional trusts, requiring the trustee to restore to the trust fund what he had caused it to lose as a result of his breach of trust.
In support of that restitutionary theory of equitable compensation, Ribeiro PJ cited Lord Browne Wilkinsons dictum in Target Holdings at p 434: If specific restitution of the trust property is not possible, then the liability of the trustee is to pay sufficient compensation to the trust estate to put it back to what it would have been had the breach not been committed.
Causation was established on a but for basis, without the constraints of common law rules on remoteness and foreseeability.
General conclusions 133.
Notwithstanding some differences, there appears to be a broad measure of consensus across a number of common law jurisdictions that the correct general approach to the assessment of equitable compensation for breach of trust is that described by McLachlin J in Canson Enterprises and endorsed by Lord Browne Wilkinson in Target Holdings.
In Canada itself, McLachin Js approach appears to have gained greater acceptance in the more recent case law, and it is common ground that equitable compensation and damages for tort or breach of contract may differ where different policy objectives are applicable. 134.
Following that approach, which I have discussed more fully at paras 90 94, the model of equitable compensation, where trust property has been misapplied, is to require the trustee to restore the trust fund to the position it would have been in if the trustee had performed his obligation.
If the trust has come to an end, the trustee can be ordered to compensate the beneficiary directly.
In that situation the compensation is assessed on the same basis, since it is equivalent in substance to a distribution of the trust fund.
If the trust fund has been diminished as a result of some other breach of trust, the same approach ordinarily applies, mutatis mutandis. 135.
The measure of compensation should therefore normally be assessed at the date of trial, with the benefit of hindsight.
The foreseeability of loss is generally irrelevant, but the loss must be caused by the breach of trust, in the sense that it must flow directly from it.
Losses resulting from unreasonable behaviour on the part of the claimant will be adjudged to flow from that behaviour, and not from the breach.
The requirement that the loss should flow directly from the breach is also the key to determining whether causation has been interrupted by the acts of third parties.
The point is illustrated by the contrast between Caffrey v Darby, where the trustees neglect enabled a third party to default on payments due to the trust, and Canson Enterprises, where the wrongful conduct by the third parties occurred after the plaintiff had taken control of the property, and was unrelated to the defendants earlier breach of fiduciary duty. 136.
It follows that the liability of a trustee for breach of trust, even where the trust arises in the context of a commercial transaction which is otherwise regulated by contract, is not generally the same as a liability in damages for tort or breach of contract.
Of course, the aim of equitable compensation is to compensate: that is to say, to provide a monetary equivalent of what has been lost as a result of a breach of duty.
At that level of generality, it has the same aim as most awards of damages for tort or breach of contract.
Equally, since the concept of loss necessarily involves the concept of causation, and that concept in turn inevitably involves a consideration of the necessary connection between the breach of duty and a postulated consequence (and therefore of such questions as whether a consequence flows directly from the breach of duty, and whether loss should be attributed to the conduct of third parties, or to the conduct of the person to whom the duty was owed), there are some structural similarities between the assessment of equitable compensation and the assessment of common law damages. 137.
Those structural similarities do not however entail that the relevant rules are identical: as in mathematics, isomorphism is not the same as equality.
As courts around the world have accepted, a trust imposes different obligations from a contractual or tortious relationship, in the setting of a different kind of relationship.
The law responds to those differences by allowing a measure of compensation for breach of trust causing loss to the trust fund which reflects the nature of the obligation breached and the relationship between the parties.
In particular, as Lord Toulson explains at para 71, where a trust is part of the machinery for the performance of a contract, that fact will be relevant in considering what loss has been suffered by reason of a breach of the trust. 138.
This does not mean that the law is clinging atavistically to differences which are explicable only in terms of the historical origin of the relevant rules.
The classification of claims as arising in equity or at common law generally reflects the nature of the relationship between the parties and their respective rights and obligations, and is therefore of more than merely historical significance.
As the case law on equitable compensation develops, however, the reasoning supporting the assessment of compensation can be seen more clearly to reflect an analysis of the characteristics of the particular obligation breached.
This increase in transparency permits greater scope for developing rules which are coherent with those adopted in the common law.
To the extent that the same underlying principles apply, the rules should be consistent.
To the extent that the underlying principles are different, the rules should be understandably different.
The present case 139.
In the present case, AIB transmitted 3.3m to Redler for the purpose of discharging the Sondhis debt to Barclays, discharging the related charge which Barclays held over their property, paying the balance of the money to the Sondhis and obtaining a first charge over the property.
If Redler had performed their trust, they would on completion have held a registrable first charge which secured a debt of 3.3m.
In the event, on completion they held a second charge in respect of that debt; but Barclays continued to hold a first charge in respect of an undischarged debt of 309,000, and AIBs charge could not be registered because Barclays charge included a covenant against the registration of other charges.
Following negotiations between AIB and Barclays, it was agreed during 2008 that AIBs charge could be registered and that Barclays priority would be limited to 273,777.42, with the consequence that AIBs interest was worth 273,777.42 less than it should have been.
That proved to be the position in 2011, when the security was enforced and these proceedings were begun: the proceeds of sale were insufficient to meet the Sondhis liabilities to both Barclays and AIB, and in consequence AIB received 273,777.42 less than they would have done if Redler had fulfilled their instructions. 140.
AIB argue that they are entitled to payment of the entire 3.3m, less the 867,697.78 which they received on the sale of the property, on the basis that Redlers liability for their breach of trust is unlimited by causation or remoteness.
In my opinion that argument is based on three fallacies, each of which is fatal to AIBs claim.
First, it assumes that Redler misapplied the entire 3.3m, whereas in my opinion all that was misapplied was the 309,000 which was paid to the Sondhis rather than Barclays.
Since the Court of Appeals decision to the contrary was not challenged, however, it is necessary to consider the appeal on the basis on which it was argued by both parties, namely that the breach of trust involved the misapplication of the entire 3.3m.
On that premise, the appeal fails because it rests on the remaining fallacies.
The second fallacy in AIBs argument is that it assumes that the measure of Redlers liability was fixed as at the date of the breach of trust: a proposition which was rejected in Target Holdings and in the Commonwealth authorities which I have cited.
The third fallacy is that the argument assumes that liability does not depend on a causal link between the breach of trust and the loss: Redler is sought to be made liable for the consequences of the hopeless inadequacy of the security accepted by AIB before Redlers involvement, despite the fact that Redlers breach of trust did not affect that security except to the extent, initially, of 309,000, and finally of 273,777.42.
That proposition also was rejected in Target Holdings and in the Commonwealth cases. 141.
In these circumstances, applying the approach to the assessment of equitable compensation which I have explained, it appears to me that the loss to the trust estate as a result of Redlers breach of trust proved to be 273,777.42: that amount proved to be the pecuniary value of the difference between a first ranking security and one which was postponed to Barclays.
That was also the loss to AIB, who were absolutely entitled to the trust estate.
The trust no longer being on foot, the appropriate order is for Redler to pay AIB 273,777.42 plus interest from 2011. 142.
Since AIB have already been awarded 273,777.42 plus interest against Redler (and no issue being raised in relation to the interest), it follows that they are not entitled to anything more.
Their appeal should therefore be dismissed.
LORD NEUBERGER, LADY HALE AND LORD WILSON 143.
We agree that this appeal should be dismissed for the reasons given by Lord Toulson and Lord Reed.
| In 2006, AIB Group (UK) plc (the Bank) agreed to lend Mr and Mrs Sondhi 3.3m to be secured by a first legal charge over their home, valued at 4.25m.
This was on the condition that the existing first legal charge in favour of Barclays Bank plc (Barclays) (borrowings on Barclays accounts amounting to 1.5m) was to be redeemed on or before completion of the Banks mortgage advance.
Mark Redler & Co Solicitors (the Solicitors), also acting for Mr and Mrs Sondhi, were instructed on this basis and retained to act on the Banks behalf.
Having requested the Bank to forward the funds because completion was imminent, the Solicitors: (i) remitted to Barclays an amount they thought was the total necessary to redeem the Barclays mortgage; and (ii) remitted the balance of the 3.3m less expenses to Mr and Mrs Sondhi.
In fact, the Solicitors mistakenly remitted to Barclays an amount which was approximately 300,000 less than was necessary to redeem the Barclays mortgage.
As a result, the Bank did not obtain a fully enforceable first charge over the property.
When the Bank found out about this, there were negotiations between the Bank and Barclays.
As a consequence, the Bank executed a deed of postponement acknowledging the primacy of Barclays charge and Barclays consented to the registration of the Banks charge as a second charge.
Subsequently, Mr and Mrs Sondhi defaulted and their property was repossessed and sold by Barclays in February 2011 for 1.2m.
The Bank received 867,697, approximately 300,000 less than it should have done if the Solicitors had remitted the correct amount to Barclays.
The Bank brought proceedings against the Solicitors claiming, amongst other things, breach of trust.
In terms of relief, the Bank argued that it was entitled to recover the full amount of its loan less the 867,697 recovered (approximately 2.5m).
HHJ Cooke, at first instance, found that although the Solicitors had acted in breach of trust, the Bank could only recover the amount the Solicitors in fact paid to Mr and Mrs Sondhi but which should have been paid to Barclays (approximately 300,000).
The Court of Appeal agreed with HHJ Cookes decision on the relief to which the Bank was entitled.
In doing so, it applied what it understood to be the reasoning of Target Holdings Ltd v Redferns [1996] AC 412 (Target Holdings) in relation to equitable principles of compensation.
The Supreme Court unanimously dismisses the appeal.
Lord Toulson finds that the Bank is only entitled to the amount by which it suffered loss (approx. 300,000).
Lord Reed writes a separate judgment coming to the same conclusion and with reasons which are substantially the same.
Lord Neuberger, Lady Hale and Lord Wilson agree with both Lord Toulson and Lord Reed.
Having considered the House of Lords judgment in Target Holdings [21] [36], Lord Toulson finds that it would be a backward step to depart from, or re interpret, Lord Browne Wilkinsons fundamental analysis of the principles of equitable compensation in that case [63].
A monetary award which reflects neither loss caused nor profit gained by the wrongdoer, such as the one argued for by the Bank, would be penal [64].
Moreover, to argue that the Bank has suffered a loss of 2.5m in this case is to adopt an artificial and unrealistic view of the facts [65].
Rather, one must look at the rationale of the monetary remedy for breach of trust; given that the beneficiary of a trust is entitled to have it properly administered, he is entitled to recover losses suffered by reason of the breach of duty [66].
Here, that loss was approximately 300,000 of the Banks loan which it failed to obtain security over.
In Target Holdings, Lord Browne Wilkinson stated that, [u]ntil the underlying commercial transaction has been completed, the solicitors can be required to restore the client account monies wrongly paid away [72].
In the current case, although the Solicitors did not complete the transaction in the manner in which it was required, the transaction was, nevertheless, completed as a commercial matter when the loan monies were released to Mr and Mrs Sondhi [74].
The fact that the Solicitors may also have breached the Solicitors Accounts Rules does not affect the analysis [75].
Lord Reed undertakes a broader analysis of the relationship between equitable compensation and common law damages.
He considers, first, the Canadian Supreme Court case of Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 (Canson Enterprises), focusing mainly on the judgment of McLachlin J [80] [89].
Lord Reed then considers Target Holdings [96] [116].
In that case, Lord Browne Wilkinson did not intend to say that equitable compensation is to be assessed in the same way as common law damages [115].
He was not departing from the orthodox view that where a breach of trust occurs, an equitable obligation arises to restore the trust fund to the position it would have been in but for the breach and that the measure of compensation should be assessed on that basis [116].
A number of common law jurisdictions have subsequently followed the general approach of McLachlin J in Canson Enterprises and Lord Browne Wilkinson in Target Holdings [121] [133].
This is that where trust property has been misapplied, the doctrine of equitable compensation requires the trustee to restore the trust fund, or to pay the beneficiary where the trust has ended, to the position it would have been in if the trustee had performed his obligation [134].
Despite structural similarities when assessing equitable compensation and common law damages, liability of a trustee for breach of trust is not generally the same as liability in damages for tort or breach of contract [136].
The nature of the obligation breached and the relationship between the parties affect the measure of compensation [137].
In the present case, the Banks argument is based on three fallacies: (i) it assumes that the Solicitors misapplied the entire 3.3m as opposed to approximately 300,000 (however, the Court of Appeals decision to the contrary was not challenged before the Supreme Court); (ii) it assumes that the measure of the Solicitors liability was fixed at the date of the breach of trust; and, (iii) it assumes that liability does not depend on a causal link between breach of trust and loss. (ii) and (iii) were rightly rejected in Target Holdings [140].
The Bank should recover its loss, which was approximately 300,000 [141].
|
This is an appeal about an extradition order.
The Lord Advocate appeals under paragraph 13 of Schedule 6 to the Scotland Act 1998 against the determination of a devolution issue by the Appeal Court of the High Court of Justiciary (the Appeal Court) on 23 September 2016.
That court, by majority, quashed an order for the extradition of the respondent (Mr Dean) to Taiwan.
The underlying question is whether his extradition to serve the residue of a prison sentence there would be compatible with his right under article 3 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention), which, as is well known, provides: No one shall be subjected to torture or to inhuman or degrading treatment or punishment.
The Appeal Court held that his extradition would not be compatible with that article of the Convention.
The appeal raises two principal questions, namely (a) the competence of the appeal and (b) whether the Appeal Court applied the correct legal test in assessing the risk of harm which Mr Dean might face in the requesting state from non state actors.
If the Appeal Court did not apply the correct legal test, it is for this court to apply that test to the factual findings of the Appeal Court.
It is important to make clear at the outset that the Lord Advocate argued the Crowns case in a way in which the solicitor advocate who appeared for him in the courts below had not.
The Lord Advocate frankly conceded that his argument on what was the correct legal test had not been presented before the Appeal Court.
It therefore involved criticising the judges of the Appeal Court for not giving effect to an argument which they did not hear.
Background facts
Mr Dean, a citizen of the United Kingdom, was born in Manchester.
He grew up in Edinburgh but had lived and worked in Taiwan for about 19 years before he was involved in a road traffic accident on 25 March 2010.
Following that accident, he was convicted after trial in the District Court of Taipei on 15 March 2011 of driving while under the influence of alcohol, negligent manslaughter and leaving the scene of an accident.
The basis of his conviction was that, while under the influence of alcohol, he drove into and killed a man who was driving a motorcycle on a newspaper delivery round, that he did not stop, and that he did not report the accident.
He was sentenced to imprisonment for two years and six months.
He appealed against his conviction and sentence to the High Court in Taipei, which, having heard further evidence, refused his appeal and increased his sentence of imprisonment to four years.
He then appealed to the Supreme Court of Taiwan.
He remained on bail before and during his trial and while his appeals were pending.
Before the Supreme Court of Taiwan had heard his appeal, he fled Taiwan, using a friends passport, and came to Scotland.
The Supreme Court of Taiwan confirmed his conviction and sentence in his absence.
The authorities in Taiwan then applied for his extradition.
On 9 October 2013 the Ministry of Justice of Taiwan sought a provisional arrest warrant under section 73 of the Extradition Act 2003 (the 2003 Act), which is available if a person is accused in a category 2 territory of the commission of an offence and he is alleged to be unlawfully at large after his conviction.
Because there is no extradition treaty between the UK and Taiwan, the Home Office on behalf of the United Kingdom and the judicial authorities in Taiwan entered into a memorandum of understanding in relation to Mr Dean under section 194 of the 2003 Act dated 16 October 2013.
This had the result that a certificate by the Scottish Ministers enabled the 2003 Act to apply in relation to Mr Deans extradition as if Taiwan were a category 2 territory under that Act.
Mr Dean was arrested in Scotland on 17 October 2013 and remained in custody for almost three years.
On 28 October 2013 the Ministry of Justice of Taiwan delivered a written request for Mr Deans extradition to the Secretary of State for the Home Department.
The Cabinet Secretary for Justice, Mr Kenny MacAskill, certified the request under section 70(1) of 2003 Act on 18 November 2013 and sent the request to Edinburgh Sheriff Court.
An extradition hearing before Sheriff Kenneth Maciver was scheduled to commence in January 2014.
Mr Dean mounted numerous challenges and lodged two devolution minutes.
The completion of the hearing was delayed by his withdrawal of instructions from his legal representatives, the obtaining of an expert report and the engagement of replacement legal representatives.
By Note of Decision dated 11 June 2014, the sheriff decided under section 87(1) of the 2003 Act that Mr Deans extradition would be compatible with his Convention rights within the meaning of Human Rights Act 1998, and refused the two devolution minutes.
The Scottish Ministers made the extradition order on 1 August 2014.
Mr Dean appealed under section 103 of the 2003 Act against Sheriff Macivers decision and under section 108 of that Act against the extradition order of the Scottish Ministers.
The Appeal Court (Lady Paton, Lord Drummond Young and Lady Clark of Calton) heard challenges as to whether Taiwan was a territory within the meaning of the 2003 Act, whether Mr Deans article 6 right to a fair trial had been infringed, and whether, under section 81 of the 2003 Act, extraneous considerations barred extradition in this case whether there was a serious possibility that the request to extradite was for the purpose of punishing him by reason of his race or nationality.
In its unanimous opinion dated 24 June 2015, the Appeal Court rejected those challenges.
This appeal is not concerned with those issues.
On the issue with which this court is concerned, namely the challenge under article 3 of the Convention concerning prison conditions in Taiwan, the Appeal Court ordered an evidential hearing.
It reserved its opinion on the section 108 appeal until it had dealt with the article 3 challenge.
After hearing evidence on the article 3 challenge, the Appeal Court on 23 September 2016 by a majority (Lord Drummond Young dissenting) held that Mr Deans extradition to Taiwan would not be compatible with his article 3 right and ordered his discharge.
The Appeal Court, in assessing the compatibility of the extradition, applied the test set out in Saadi v Italy (2009) 49 EHRR 30, namely whether substantial grounds have been shown for believing that there is a real risk of treatment incompatible with article 3.
The majority (Lady Paton and Lady Clark of Calton) concluded that there was such a risk.
Because I am satisfied that the Appeal Court applied the wrong legal test and that this court must therefore make its own assessment of the facts found by the Appeal Court, I mean no discourtesy in summarising the majoritys reasoning briefly.
The Appeal Court heard evidence from Mr Dean and also two legal academics, Professor Mong Hwa Chin and Dr James McManus, who had been instructed on behalf of the Lord Advocate.
That evidence vouched the conclusion that Taiwanese prisons were seriously overcrowded and that Taipei prison, where the Taiwanese authorities proposed to keep Mr Dean, was both overcrowded and understaffed.
The Taiwanese authorities had given written assurances to the Lord Advocate in which they undertook that Mr Dean would not be housed in the overcrowded cells in the main prison block but would be housed in a separate building in an adequately sized cell, which had a lavatory and a shower and which he would share with only one other foreign prisoner.
The majority of the Appeal Court held that, if the Taiwanese authorities fulfilled their undertakings to the letter, there was still a real risk of ill treatment in accordance with the Saadi test because (a) Mr Dean suffered from some notoriety in Taiwan, the other inmates and prison staff would view the arrangements made for him as wholly exceptional, and this would give rise to animosity from other prisoners, (b) the staffing levels were not sufficient to protect Mr Dean if he were to mix with other prisoners, (c) therefore he was likely to choose to stay in his cell for most of the time and would not be able to work to earn parole, (d) he would also have only limited opportunity for outdoor exercise or interaction with others and solitary confinement was generally harmful to health, (e) the ratio of medical and pharmaceutical staff to prisoners was too low and prisoners had to pay for non emergency medical treatment and non standard drugs, (f) there was no formal system for a UK body or an international body to inspect the prison, (g) United Kingdom consular staff, who visited UK prisoners in Taiwanese prisons, did not assess prison standards, and (h) there were no established procedures by which prisoners could enforce their rights in the Taiwanese courts.
Lady Clark also commented on the ad hoc nature of the assurances which the Taiwanese authorities had given and doubted the ability of the British consular staff to monitor those assurances.
Lord Drummond Young in his dissenting opinion emphasised the contribution which extradition makes to the rule of law both nationally and internationally.
He pointed out that the European Court of Human Rights (ECtHR) had held that article 3 was not a means by which contracting states might impose their own standards on other states: Ahmad v United Kingdom (2012) 56 EHRR 1, para 177.
He argued that the court must proceed on the assumption that the Taiwanese authorities would observe in good faith the assurances they had given and he assessed the quality of those assurances against the criteria which the ECtHR set out in Othman v United Kingdom (2012) 55 EHRR 1, paras 177 190.
Having assessed the evidence, Lord Drummond Young concluded that Mr Dean had failed to establish that there was any real risk of his being subject to treatment that would infringe article 3 of the Convention.
After the Appeal Court (again by majority) refused to give leave to appeal, a panel of this court granted the Lord Advocate permission to appeal on 21 December 2016.
Discussion
I consider, first, the challenge to the competency of this appeal before discussing the correct legal test for compatibility with article 3 of the ECHR when the threat comes from the acts of third parties and applying that test to the findings of the Appeal Court.
The competence of this appeal
Mr Bovey, who appears for Mr Dean, challenges the competence of this appeal on the ground that the Appeal Court has not determined a devolution issue.
For the reasons set out below I consider that challenge to be misconceived.
The decision of the Appeal Court which the Lord Advocate has appealed is a decision whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998 (c 42): section 87(1) of the 2003 Act.
The decision was made in the context of an appeal under section 103 of the 2003 Act.
There is no appeal to this court from a decision of a Scottish court under section 103 because the provision authorising an appeal to this court from decisions made under sections 103 and 108 (among others) does not apply to Scotland: section 114(13) of the 2003 Act.
But that is not the end of the matter because an appeal from a decision under section 87(1) of the 2003 Act, which was the subject of this part of Mr Deans section 103 appeal, raises a question of the legal competence of the Scottish Government.
Section 57(2) of the Scotland Act 1998 provides A member of the Scottish Government has no power to make any subordinate legislation, or to do any other act, so far as the legislation or act is incompatible with any of the Convention
rights
The functions carried out by the Lord Advocate and the Scottish Ministers under Part 2 of the 2003 Act are acts that they perform as members of the Scottish Government: BH v Lord Advocate 2012 SC (UKSC) 308, paras 33 34 per Lord Hope, and Kapri v Lord Advocate 2013 SC (UKSC) 311, paras 18 23 per Lord Hope.
In Schedule 6 to the Scotland Act 1998 paragraph 1(d) includes within the definition of a devolution issue: a question whether a purported or proposed exercise of a function by a member of the Scottish Executive is, or would be,
incompatible with any of the Convention rights
The question as to whether the Scottish Governments acts in seeking to extradite Mr Dean to Taiwan are compatible with Convention rights is thus a devolution issue: BH (above), para 34, Kapri (above), para 22.
Section 116(1) of the 2003 Act provides the general rule that a decision under Part 2 of the Act by a judge or the Scottish Ministers may be questioned in legal proceedings only by means of an appeal under that Part, but subsection (2) to that section excludes from that limitation an appeal against the determination of a devolution issue.
When pursuing his appeal before the Appeal Court to challenge the sheriffs decision under section 87 of the 2003 Act Mr Dean had the option of proceeding either under section 103 of the 2003 Act or by means of raising a devolution issue under the Scotland Act 1998: BH (above), para 26; Kapri (above), para 19.
He chose to proceed under section 103 of the 2003 Act and did not raise a devolution minute in relation to his challenge concerning prison conditions in the Appeal Court.
The Lord Advocate was the respondent to Mr Deans appeal before the Appeal Court.
He therefore did not need to exercise his right under paragraph 4 of Schedule 6 to the Scotland Act 1998 to institute proceedings to determine the devolution issue raised by Mr Deans appeal.
Where a devolution issue arises in proceedings, intimation of the issue should be given to the Advocate General for Scotland and the Lord Advocate, unless they are already parties to the proceedings: paragraph 5 of Schedule 6 to the Scotland Act 1998.
Neither Mr Deans legal advisers nor the Lord Advocate intimated the issue to the Advocate General for Scotland in relation to the proceedings before the Appeal Court.
The Advocate General was thus deprived of his right under paragraph 6 of Schedule 6 to take part in the proceedings in the Appeal Court.
That omission, however, does not affect the competence of any appeal to this court.
Paragraph 13(a) of Schedule 6 to the Scotland Act 1998 confers a right of appeal to the Supreme Court against a determination of a devolution issue by a court of two or more judges of the High Court of Justiciary.
The decision of the Appeal Court is such a determination.
The Lord Advocate has informed this court that he had intimated the devolution issue, which he seeks to argue in this court, to the Advocate General for Scotland, who has indicated that he does not intend to take part in the proceedings.
There is therefore no bar to this appeal.
It may be that the Appeal Court would have determined the other devolution issues, which Mr Dean has raised, if it had been aware that the Lord Advocate might seek to appeal its determination of the article 3 devolution issue to this court.
It did not do so.
That is unfortunate because it may cause further delay, but that cannot affect the competence of this appeal.
The merits of the appeal
Article 3 of the Convention: summary
The Lord Advocate concedes that, on the findings of fact by the Appeal Court, there are substantial grounds for believing that there is a risk that Mr Dean would suffer harm from other prisoners in Taipei prison if protective measures were not put in place.
But, he submits, the ECtHR laid down the appropriate legal test in such a circumstance in HLR v France (1997) 26 EHRR 29, which the House of Lords applied in R (Bagdanavicius) v Secretary of State for the Home Department [2005] 2 AC 668 (Bagdanavicius).
As I set out below, the test is whether the state has failed to provide reasonable protection against harm inflicted by non state agents.
Mr Bovey acknowledges that test but submits that in substance the Appeal Court has addressed it.
I do not accept that submission.
In my view, the Appeal Court did not address that test.
This is unsurprising, because, as Lady Paton recorded at para 8 of her opinion, counsel were agreed that the correct test was set out in Saadi, to which I have referred in para 9 above.
As a result no clear distinction was drawn in her opinion (paras 8, 45, and 50 58) between the underlying threat from other prisoners, which the Appeal Court found to exist, and conduct for which the state was responsible.
It is therefore incumbent on this court to apply the correct legal test to the findings of fact of the Appeal Court.
In short, the court must assess, first, whether the Taiwanese authorities are undertaking to provide Mr Dean with reasonable protection against violence by third parties while he is in prison, and, secondly, if they are, whether the conditions in which he is to have such protection themselves entail an infringement of article 3.
The correct legal test
Article 3 of the Convention enshrines one of the fundamental values of a democratic society.
It is therefore incumbent on the court to be assiduous in its assessment of a challenge on this ground.
A person asserting a breach of this article must show that there are substantial grounds for believing that he faces a real risk of being subjected to treatment contrary to article 3 if he is extradited: Saadi v Italy (above), para 125.
In addressing that challenge, the court can have regard to assurances given by the receiving state: Othman v United Kingdom (above), paras 187 189.
In particular, the court must assess not only the quality of the assurances given but also whether they can be relied on, having regard to the general situation in that country with regard to respect for human rights.
In Othman (para 189) the ECtHR set out eleven factors which, among others, a court could take into account in making that assessment.
I discuss several of those factors in para 38 below.
In Bagdanavicius, Lord Brown of Eaton under Heywood, who gave the leading speech in the House of Lords, observed (para 7) that it has long been established that article 3 imposes an obligation on the part of a contracting state not to expel someone from its territory where substantial grounds are shown for believing that he will face in the receiving country a real risk of being subjected to treatment contrary to that article.
He cited Soering v United Kingdom (1989) 11 EHRR 439 as the initial authority for the principle that the act of expulsion in such a circumstance constitutes the proscribed ill treatment.
The expulsion itself breaches article 3 if such risk in the receiving country emanates either from acts of the public authorities of that state or from persons or groups of persons who are not public officials.
In the latter circumstance, it is not sufficient to show that there is a real risk of suffering serious harm at the hands of non state agents.
In para 24 Lord Brown deprecated a failure in such cases to distinguish between the risk of serious harm on the one hand and the risk of treatment contrary to article 3 on the other.
He said: In cases where the risk emanates from intentionally inflicted acts of the public authorities in the receiving country (the language of D v United Kingdom (1997) 24 EHRR 423, 447, para 49) one can use those terms interchangeably: the intentionally inflicted acts would without more constitute the proscribed treatment.
Where, however, the risk emanates from non state bodies, that is not so: any harm inflicted by non state agents will not constitute article 3 ill treatment unless in addition the state has failed to provide reasonable protection.
Non state agents do not subject people to torture or to the other proscribed forms of ill treatment, however violently they treat them: what, however, would transform such violent treatment into article 3 ill treatment would be the states failure to provide reasonable protection against it.
It is this test that the court must apply to the facts of this case in relation to the harm which non state actors might inflict, before asking whether the circumstances of such protection are themselves compatible with article 3.
Applying the tests
The Appeal Court made findings that there were problems of over crowding and under staffing in the main detention building in Taipei prison which gave rise to uncontrolled bullying of weaker prisoners.
There was also evidence, which the Appeal Court accepted, of inadequate ventilation and lavatory facilities which exacerbated the discomfort caused by the over crowding, and inadequate opportunities for the prisoners to exercise in the open air (para 44).
There was also a finding that Mr Dean was at particular risk of being the focus of hostility from prisoners within the prison (para 47).
As against those findings, it is necessary to assess the undertakings which the Taiwanese authorities have made in support of their application for Mr Deans extradition.
Lady Paton in para 10 of her opinion recorded in summary the various undertakings which the Taiwanese authorities have given.
I summarise those which are most relevant to prison conditions.
First, in a letter dated 25 February 2014, Mrs Chen Wen chi, the Director General of the Department of International and Cross Strait Legal Affairs in the Ministry of Justice of Taiwan and signatory of the memorandum of understanding (para 6 above), undertook that Mr Dean would be supervised by English speaking officers and that he would be housed in an appropriate cell with persons selected from among non violent foreign inmates, to avoid bullying.
The authorities would treat Mr Dean as a special assignment, take account of his concerns for his safety, and assess the level of protection which he needed.
They would pre screen inmates with ill intent towards him to prevent them having contact with him.
If necessary, they would separate Mr Dean from group activities and restrict his interaction with other inmates.
By letter dated 14 November 2014, Mr Luo Ying shay, the Minister of Justice of Taiwan, confirmed Mrs Chen Wen chis authority to give undertakings on behalf of his ministry, which supervised the Agency of Corrections which was responsible for managing prisons in Taiwan.
Secondly, on 19 August 2015 Mrs Chen Wen chi described and sent photographs of the cell which she undertook to prepare for Mr Dean and which he would share with one other foreign prisoner.
The cell was located on the second floor of the 11th disciplinary area in Taipei prison and had an area of 13.76 square metres.
The cell was equipped with a desk, a chair, a four shelf cupboard, a bunk bed, and a bathroom with a toilet, a sink, a shower and a shower curtain.
There was good natural lighting through a large window, electric lighting, an exhaust fan and an electric fan on the ceiling.
Prisoners had the opportunity to spend about nine hours per day out of their cells, which included working, exercise time, rests and meals.
Assurances were also given about the quality of drinking water and diet.
By letter of the same date Mr Wu Man Ying, the Director General of the Agency of Corrections, confirmed that his agency would abide by those assurances.
He confirmed this a second time in a letter dated 2 June 2016.
Thirdly, Mrs Chen Wen chi by letter dated 25 December 2015 confirmed that if the United Kingdom consular staff raised an issue concerning a breach of an assurance about prison conditions, the Taiwanese authorities would respond to remedy any breach.
Finally, on 31 May 2016, the new Minister of Justice, Mr Chui Tai san, re affirmed Mrs Chen Wen chis authority to provide the assurances and to undertake to put them into practice.
Dr McManuss visit to Taipei prison in August 2015 provided further insight into the undertakings.
The proposed cell measured 11.05 square metres, excluding the toilet and shower annex, giving 5.5 square metres to each of the proposed occupants.
It was on the second floor of a reception area, where there were classrooms for the assessment of new arrivals.
On the same floor there was an observation office and a 50 bed convalescent cell.
The cell, which was proposed for Mr Dean, had been created in 2013 as a protected cell but had never been used.
The proposed exercise area for Mr Dean was a tarmac basketball court adjacent to the building.
The basketball court offered ample space for exercise and could be cleared of other prisoners when Mr Dean was using it.
Dr McManus concluded that the accommodation met all the standards set by the Committee for the Prevention of Torture (CPT) and the ECtHR in terms of space per prisoner, light, ventilation and toilet facilities.
He also recorded that assurances had been given that Mr Dean could have a minimum of one hours outdoor exercise per day and that he would be entitled to access to newspapers, radio and television.
There was a work regime in the prison which, if Mr Dean engaged with it, would allow him to mix with other prisoners and to be out of his cell from 8.30 am to 5.30 pm.
Understandably, it was not suggested on Mr Deans behalf that the cell accommodation was inadequate or exposed him to overcrowding if he were to share it with one non violent foreign prisoner.
Nor was it suggested that he would not be reasonably safe when in that cell.
In agreement with the judges of the Appeal Court, I proceed on the basis that the judicial authorities of Taiwan are acting in good faith in entering into the memorandum of understanding and in giving the assurances which they have.
I also agree with the judges of the Appeal Court in so far as they proceeded on the assumption that the Taiwanese authorities responsible for the management of Taipei prison would make every effort to fulfil those undertakings.
As Lord Drummond Young observed in his dissenting opinion, extradition assists in maintaining the rule of law both nationally and internationally.
The United Kingdom Government has chosen to enter into extradition treaties with friendly foreign states or territories giving rise to mutual obligations in international law.
In Gomes v Government of Trinidad and Tobago [2009] 1 WLR 1038, Lord Brown stated (para 36): The extradition process, it must be remembered, is only available for returning suspects to friendly foreign states with whom this country has entered into multilateral or bilateral treaty obligations involving mutually agreed and reciprocal commitments.
The arrangements are founded on mutual trust and respect.
There is a strong public interest in respecting such treaty obligations.
The Lord Advocate acknowledges that the memorandum of understanding does not have the status of a treaty enforceable in international law.
That notwithstanding, there remains a strong public interest in promoting and maintaining the rule of law by means of extradition.
But that strong public interest, while carrying great weight, has no paramountcy in the face of an article 3 challenge.
In Othman v United Kingdom (above) the ECtHR stated how it would assess the quality of the assurances given by a receiving country in the context of deportation.
The existence of an extradition agreement whether a treaty or a memorandum of understanding does not obviate the need for such an assessment in the context of a human rights challenge.
It is possible, for example, that adverse political developments in a friendly foreign state might reduce the confidence which our courts could reasonably have about an extradited persons treatment in that country, notwithstanding the continued existence of an extradition treaty.
In my view, it is incumbent on a court, which is addressing an article 3 challenge, to make such an assessment in the context of an extradition; and the existence of the extradition agreement is a factor in that assessment.
This is consistent with the ECtHRs guidance in Othman which identified as relevant the length and strength of bilateral relations between the sending and receiving states.
In this case the assurances are given on behalf of the central government of Taiwan, which is a developed society with a tradition of respect for the rule of law.
There is no suggestion that the Taiwanese authorities ill treated Mr Dean before he fled the country.
The assurances are given by a senior responsible official and have been confirmed by two Ministers of Justice and by the Director General of the agency with responsibility for managing prisons.
The assurances, and in particular those about his accommodation and separating him from group activities with other prisoners if that is necessary for his safety, are specific rather than general.
The assurances envisage that United Kingdom consular staff will have access to Mr Dean in prison and include an undertaking to remedy any breach of the assurances which the consular staff raise with the prison authorities.
The memorandum of understanding and the assurances have given a role to the consular staff which they have not had in the past in relation to United Kingdom citizens imprisoned in Taiwan.
There is no reason to think that the consular staff would not perform their obligations to monitor the assurances if Mr Dean were to request their help.
While there appears to have been no examination of the access which Mr Dean might have to legal advice, Dr McManus recorded the apparently successful operation of a complaints system in the prison and that some prisoners had obtained access to the domestic courts.
This is the first occasion on which Taiwan has sought to extradite a United Kingdom citizen and the memorandum of understanding and the assurances are therefore untested; but that novelty is significantly outweighed by the other factors which I have mentioned in this paragraph.
Mr Deans case is both that he has gained notoriety in Taiwan as a foreign businessman who was convicted of killing a local man through driving while drunk and also that other prisoners would resent his privileged status in the prison and wish to harm him.
As a result, he may not be able to mix with other prisoners and work to earn parole, which in Taiwan depends in part upon a prisoners taking part in work activities in the prison.
I cannot judge in advance the extent to which Mr Deans fear of being harmed by other prisoners will prevent him from mixing with them.
But there is no evidence to support an inference that the Taiwanese authorities will not give him reasonable protection against harm at the hands of other prisoners: the undertakings would allow him to elect to remain in his cell and exercise outdoors by himself.
There is nothing to suggest that such a regime would fail to prevent third parties from harming him.
I turn then to the second question, which is whether the confinement which such a regime would entail would risk a breach of article 3.
There is no issue about the quality of the cell accommodation or the fact that Mr Dean would share the cell with a non violent foreign prisoner.
But the majority of the Appeal Court expressed concern that Mr Dean might have to elect to stay in his cell and thus be subjected to a form of solitary confinement, which might be harmful to his health.
In Mr Deans case we are not concerned with complete sensory isolation and total social isolation which the ECtHR has recognised as constituting a form of inhuman treatment.
But the Convention looks beyond such isolation.
In Ahmad at paras 207 210 the ECtHR stated: 207.
Other forms of solitary confinement which fall short of complete sensory isolation may violate article 3.
Solitary confinement is one of the most serious measures which can be imposed within a prison and, as the Committee for the Prevention of Torture has stated, all forms of solitary confinement without appropriate mental and physical stimulation are likely, in the long term, to have damaging effects, resulting in deterioration of mental faculties and social abilities.
Indeed, as the Committees most recent report makes clear, the damaging effect of solitary confinement can be immediate and increases the longer the measure lasts and the more indeterminate it is. 208.
At the same time, however, the Court has found that the prohibition of contact with other prisoners for security, disciplinary or protective reasons does not itself amount to inhuman treatment or punishment.
In many states parties to the Convention more stringent security measures, which are intended to prevent the risk of escape, attack or disturbance of the prison community, exist for dangerous prisoners. 209.
Thus, whilst prolonged removal from association with others is undesirable, whether such a measure falls within the ambit of article 3 of the Convention depends on the particular conditions, the stringency of the measure, its duration, the objective pursued and its effects on the person concerned. 210.
In applying these criteria, the Court has never laid down precise rules governing the operation of solitary confinement.
For example, it has never specified a period of time, beyond which solitary confinement will attain the minimum level of severity required for article 3.
The Court has, however, emphasised that solitary confinement, even in cases entailing relative isolation, cannot be imposed on a prisoner indefinitely.
In Mr Deans case, we are concerned with what the ECtHR has described as relative isolation as he would share his cell with a non violent foreign prisoner and would have access to newspapers, radio and television.
There would also be opportunities for people to visit him.
That relative isolation would not be imposed on him by the prison authorities but would be at his option, if he were to take the view that the risk of harm at the hands of other prisoners required him to dissociate himself from contact with them.
Thus, the objective which might give rise to his relative isolation would be his own protection.
Further, the period of Mr Deans imprisonment resulting from his conviction is unlikely to exceed approximately 13 months because the Taiwanese authorities have undertaken to give him credit towards his four year sentence for the period of almost three years which he has spent in prison in Scotland.
When one has regard to the decisions of the ECtHR in other cases concerning solitary confinement, such as calan v Turkey (2004) 41 EHRR 45, Ramirez Sanchez v France (2007) 45 EHRR 49 and Ahmad v United Kingdom (above), and the decision of this court in Shahid v Scottish Ministers [2015] UKSC 58; 2016 SC (UKSC) 1; [2016] AC 429, the circumstances of Mr Deans possible relative isolation do not come close to a breach of article 3 of the Convention and do not contribute significantly to his assertion of such a breach when other circumstances are considered.
It is necessary, of course, to take a holistic view of the circumstances of his detention in reaching a view as to whether there is a real risk of his being subject to treatment that infringes article 3 of the Convention.
But the other factors which influenced the majority of the Appeal Court do not materially advance his case.
First, the ratio of medical staff to prisoners, to which Lady Paton referred in para 33 of her opinion, was well below the standard advocated by the CPT, which is one doctor per 350 prisoners.
But, as she also recorded, Dr McManus concluded that there appeared to be no great problem for prisoners obtaining medical attention when needed.
The fact that prisoners have to pay for non emergency medical and dental treatment and also for non generic drugs is of little significance.
It is important to recall that the ECtHR has repeatedly stated that the Convention does not purport to be a means of requiring the Contracting States to impose Convention standards on other states: Al Skeini v United Kingdom (2011) 53 EHRR 18, para 141; Ahmad v United Kingdom (above), para 177.
Secondly, I do not infer from the past practice of United Kingdom consular staff of not pressing for the improvement of prison conditions for United Kingdom prisoners that they would not act to protect Mr Dean.
As I have said, the existence of the memorandum of understanding and also the assurances by which the Taiwanese authorities have recognised the role of the consular staff in protecting Mr Deans interests have given the consular staff a role which to date they have not had.
Thirdly, the majority of the Appeal Court was concerned both by the absence of an international system by which prison conditions in Taiwan were monitored and that there is no established route within the Taiwanese courts whereby a prisoner can seek a remedy in respect of prison conditions (paras 56 and 57).
Those are among the factors which the ECtHR has identified as relevant considerations in assessing the quality of the assurances of the receiving state: Othman v United Kingdom (above) para 189.
But in my view, those considerations do not outweigh the other factors which point towards accepting the assurances (para 38 above) and the role which the United Kingdom consular staff will undertake in monitoring the assurances.
I am therefore satisfied (a) that the assurances of the Taiwanese authorities offer Mr Dean reasonable protection against violence by non state actors and (b) that the circumstances of his confinement, should he be unable to mix with the wider prison population, do not entail a real risk of his being subject to treatment that infringes article 3 of the Convention.
Articles 5 and 8 of the Convention
Mr Bovey also advances separate challenges under articles 5 and 8 of the Convention, which the Appeal Court did not need to decide.
I am satisfied that those challenges are without substance and can deal with them briefly.
Article 5: Mr Bovey submits that Mr Deans detention in prison would involve arbitrariness because the Taiwanese authorities would not give him credit for the time spent in custody in Scotland in the calculation of his entitlement to parole.
One of the assurances which Mrs Chen Wen chi gave (in a letter dated 23 December 2013) was that all periods of detention in Scotland arising from the extradition request would be deducted from the total period which he would have to serve in Taiwan.
That undertaking did not include any reference to entitlement to parole and, contrary to counsels submission, I detect nothing in it that was objectively misleading.
In a later letter, dated 1 June 2016, Mrs Chen Wen chi explained that only periods of imprisonment in Taiwan would count towards the service of a minimum part of the sentence for entitlement to parole.
It appears therefore that Mr Dean would have to serve two thirds of the residue of his sentence in Taiwan before he would be eligible to be considered for parole.
I detect nothing arbitrary in this regime.
The Convention does not require United Kingdom courts to expect foreign states to have similar sentencing practices to ours or a particular form of parole system.
Article 3 would be breached by extradition to serve a sentence, which the receiving state imposed, only if the sentence was grossly disproportionate: Willcox v United Kingdom (2013) 57 EHRR SE 16, para 74.
Mr Deans inability to obtain credit towards parole for the time he has spent in custody in Scotland is the result of his flight from justice in Taiwan.
This involves no injustice.
Article 8: Counsel also argues that Mr Deans extradition to and imprisonment in Taiwan would interfere with his right to respect for his private life.
I agree that there would be such interference but am satisfied that it is justified because it is necessary in a democratic society both for the prevention of crime and for the protection of the rights and freedoms of others (article 8(2)).
This court has recognised the strength of the public interest in extradition in the context of an article 8 challenge: Norris v Government of the United States of America (No 2) [2010] 2 AC 487; H (H) v Deputy Prosecutor of the Italian Republic (Official Solicitor intervening) [2013] 1 AC 338.
Mr Dean has been convicted of a serious offence committed in Taiwan where he had resided for 19 years.
A term of imprisonment for such an offence was clearly justified both as a punishment and to deter such behaviour by others.
It may be that the special protective measures which are proposed will prevent Mr Dean from earning credit towards parole while serving the residue of his sentence.
But that does not undermine the justification of the extradition.
Conclusion
I would allow the appeal on the devolution issue and remit the case to the Appeal Court to deal with Mr Deans appeal under section 108 of the 2003 Act and his devolution minute in that appeal.
| The respondent was born in the United Kingdom.
He had lived in Taiwan for about 19 years when he was involved in road traffic accident there which killed a man in 2010.
He was convicted by the District Court of Taipei of driving under the influence of alcohol, negligent manslaughter and leaving the scene of an accident.
He was sentenced to four years imprisonment.
While his appeal was pending, he fled Taiwan and came to Scotland.
In his absence his conviction was confirmed and the Taiwanese authorities applied for his extradition.
The Ministry of Justice of Taiwan obtained a provisional arrest warrant for the respondent under the Extradition Act 2003 (the 2003 Act).
The respondent was arrested in Scotland on 17 October 2013 and remained in custody for almost three years.
An extradition hearing commenced in January 2014, following which the sheriff decided that the respondents extradition would be compatible with his Convention rights and refused the respondents devolution minutes.
The Scottish Ministers made an extradition order on 1 August 2014.
The respondent appealed against the sheriffs decision and against the extradition order of the Scottish Ministers.
The Appeal Court of the High Court of Justiciary (the Appeal Court), ordered an evidential hearing to determine whether prison conditions in Taiwan were such that to extradite the respondent would breach his right under article 3 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) not to be subjected to torture or to inhuman or degrading treatment or punishment.
It reserved its opinion on the extradition order appeal until it had dealt with the article 3 challenge.
The Appeal Court, by majority, found that even if the written assurances given by the Taiwanese authorities to the Lord Advocate in respect of the conditions in which the respondent would be held were fulfilled, a real risk of ill treatment would remain and thus the respondents extradition to Taiwan would be incompatible with article 3 ECHR.
The Lord Advocate appeals the judgment of the Appeal Court, on the ground that it had not applied the correct legal test in assessing the risk of harm which the respondent might face in Taiwan from non state actors.
The respondent raises a separate issue: whether the Appeal Court determined a devolution issue and, therefore, whether the Supreme Court has jurisdiction to hear the Lord Advocates appeal.
The respondent also advanced challenges under articles 5 and 8 ECHR.
The Supreme Court unanimously rejects the respondents challenge to the competency of the appeal and allows the Lord Advocates appeal on the devolution issue.
The Court remits the case to the Appeal Court to deal with the respondents appeal against the extradition order of the Scottish
Ministers and his devolution minute in that appeal.
Lord Hodge gives the judgment, with which the other Justices agree.
The competency of the appeal to the Supreme Court The challenge to the competency of the appeal is misconceived [14].
An appeal from the sheriffs decision under section 87(1) of the 2003 Act as to whether extradition would be compatible with the respondents Convention rights raises a question of the legal competence of the Scottish Government [15].
Schedule 6 to the Scotland Act 1998 paragraph 1(d) includes within the definition of a devolution issue a question whether a [] proposed exercise of a function of the Scottish Executive [] would be, incompatible with any of the Convention rights [18].
Therefore, the question whether the Scottish Governments acts in seeking to extradite the respondent are compatible with Convention rights is a devolution issue which was determined by the Appeal Court [19, 22].
Neither party to the appeal intimated the devolution issue to the Advocate General for Scotland thus depriving him of his right to take part in the Appeal Court proceedings.
That omission, however, does not affect the competence of any appeal of the determination of the devolution issue to this court [21].
The correct legal test The Appeal Court, in assessing the compatibility of the extradition with article 3 ECHR, applied the wrong legal test [9].
The correct legal test when the threat comes from the acts of third parties is whether the state has failed to provide reasonable protection against harm inflicted by non state agents.
The Appeal Court did not address that test and no clear distinction was drawn between the threat from other prisoners, and the conduct for which the state was responsible.
The court must assess, first, whether the Taiwanese authorities are undertaking to provide the respondent with reasonable protection against violence by third parties while in prison, and, secondly, if they are, whether the conditions in which he is to have such protection would infringe article 3 [24].
There is no evidence that the Taiwanese authorities will not give the respondent reasonable protection against harm at the hands of other prisoners: the undertakings would allow him to elect to remain in his cell and exercise outdoors alone [39].
As to whether the confinement which such a regime would entail would risk a breach of article 3, the relative isolation which the respondent may elect for his own protection does not come close to a breach of article 3.
Further, the other factors which influenced the majority of the Appeal Court, including the ratio of medical staff to prisoners and the monitoring of the assurances by UK consular staff, do not outweigh the other factors which point towards accepting the assurances [40 47].
The assurances offer the respondent reasonable protection against violence by non state actors and the circumstances of his confinement, should he be unable to mix with the wider prison population, do not entail a real risk of his being subject to treatment that infringes article 3 [48].
Article 5 and Article 8 The article 5 and article 8 challenges are without substance [49].
There is nothing arbitrary for the purposes of article 5 in the respondent serving two thirds of the remainder of his sentence in Taiwan before he would be eligible for parole.
The respondents inability to obtain credit toward parole in Taiwan for the time spent in custody in Scotland is the result of his flight from justice in Taiwan.
This involves no injustice [50].
The interference with the respondents article 8 right to private life which arises from his extradition and imprisonment in Taiwan is justified because it is necessary for both the prevention of crime and for the protection of the rights and freedoms of others [51].
|
The Political Parties, Elections and Referendums Act 2000 (the Act) introduced, for the first time in this country, restrictions on the donations that can be made to registered political parties.
All statutory references in this judgment are to the Act.
Part IV of the Act specifies those from whom it is permissible for political parties to accept donations.
Donations from an individual may only be accepted if the donor is on an electoral register.
The Act confers on a magistrates court the power, at the instigation of the Electoral Commission (the Commission), to forfeit from party funds a sum equal to a donation that has been accepted from an impermissible source.
This appeal raises the question of the criteria that should properly be applied by a magistrates court when exercising this power.
This question is of particular interest to the United Kingdom Independence Party (UKIP), a small registered political party which has yet to succeed in returning a member to Westminster.
UKIP has relied for the majority of its funding on a single supporter, Mr Alan Bown.
Since 2003 Mr Bown has made donations to the party, in one form or another, amounting to over 1 million.
By inadvertence, between 1 December 2004 and 2 February 2006, he ceased to be on any electoral register.
During this period his donations to UKIP amounted to 349,216.
On 16 March 2007 the Commission made an application to the Senior District Judge in the City of Westminster Magistrates Court for an order forfeiting the whole of this sum.
The Senior District Judge ordered the forfeiture of only a small proportion of this sum.
The Act gives a political party a right to appeal to the Crown Court against a forfeiture order but no right of appeal is given to the Commission.
UKIP did not appeal against the order of the Senior District Judge, but the Commission challenged his decision by an application for judicial review.
In a judgment delivered on 22 January 2009 [2009] EWHC 78 (Admin) Walker J identified a wide range of matters to which the Senior District Judge should have had regard when considering the forfeiture application.
He held that the Senior District Judge had failed to give adequate reasons for his decision and ordered that the case should be remitted to the magistrates court for further consideration.
The Commission appealed to the Court of Appeal, and was successful [2009] EWCA Civ 1078.
On 19 October 2009, giving the only reasoned judgment, Sir Paul Kennedy held that, on a true construction of the relevant provisions of the Act, the discretion of the Senior District Judge was very tightly circumscribed.
There was a strong presumption in favour of forfeiture.
Where a donation was received by a political party from an impermissible source a forfeiture order should follow as a matter of course in the absence of exceptional circumstances.
The magistrates court should, on remission, reconsider the matter in accordance with this approach.
Before this Court Mr Patrick Lawrence QC for UKIP has sought to uphold the approach of Walker J, whereas Mr Michael Beloff QC for the Commission has urged that the analysis of the Court of Appeal was correct.
The difference between the two has been described as the presumption issue.
The relevant provisions of the Act
Part I of the Act establishes the Commission which is given a wide range of regulatory powers and duties in relation to elections and political parties, including keeping under review the registration of political parties and the regulation of their income and expenditure (section 6(1)(e)).
Part IV deals with Control of Donations to Registered Parties and their Members etc.
Chapter II imposes restrictions on the receipt of donations.
Section 54(1) provides that a donation must not be accepted if the person seeking to make it is not, at the time of its receipt, a permissible donor, or if his identity cannot be ascertained.
Section 54(2) identifies those who are permissible donors.
These include an individual registered in an electoral register and a company registered under the Companies Act 2006, incorporated within the United Kingdom or another member state, and carrying on business in the United Kingdom.
Section 54(3) provides that a donation made in the form of a bequest will have been made by a permissible donor provided that he was registered in an electoral register at any time within the five year period that terminated with his death.
Section 56 imposes duties in relation to the acceptance or return of donations and imposes criminal sanctions for breach of those duties.
Where section 54 prohibits acceptance of a donation it must be returned within 30 days of receipt.
If it is not, both the party and the treasurer of the party are guilty of an offence, albeit that it is a defence to prove that all reasonable steps were taken to verify or ascertain whether the donor was a permissible donor and that, as a result, the treasurer believed that he was a permissible donor.
The effect of section 56(5) is that a donation will be deemed to have been accepted, even if it is returned within 30 days, unless a record can be produced of its receipt and its return.
Section 58 contains the provision that has given rise to this appeal.
It deals with forfeiture of donations that have been made by impermissible or unidentifiable donors.
Where these have been accepted, notwithstanding that their acceptance was prohibited, section 58(2) provides: The court may, on an application made by the Commission, order the forfeiture by the party of an amount equal to the value of the donation.
Section 58(4) makes it plain that such an order may be made whether or not proceedings are brought against any person for an offence connected with the donation.
Section 58(5) provides that in England and Wales the court is a magistrates court.
Section 60 provides that proceedings under section 58 shall be brought against the party in its own name and not in the name of any of its members and that any amount forfeited is to be paid out of the funds of the party.
It is notable that section 58 does not provide for the automatic forfeiture of any donation that is accepted from an impermissible source.
The provision that the court may order its forfeiture confers a discretion on the court.
Furthermore it has been common ground, rightly in my view, that the Commission also enjoys a discretion whether or not to make an application for forfeiture to the court.
The Act itself gives no indication of the criteria that should govern the exercise of either discretion.
It is the former discretion that is critical, but it would be strange if the courts discretion was narrower than that of the Commission.
The second issue of interpretation
The primary issue is the presumption issue.
Does section 58(2) confer a broad discretion on the court whether or not to make a forfeiture order, or is there a strong presumption in favour of forfeiture? But section 58(2) raises a secondary issue of interpretation.
It confers on the court a power to order forfeiture of an amount equal to the value of the donation.
Where the court exercises this power, does it have to order forfeiture of an amount equal to the total value of the donation, or is it implicit that the court has a discretion to order forfeiture of a lesser sum if it considers this appropriate? This has been described as the all or nothing issue.
There is a potential interrelationship between the presumption issue and the all or nothing issue.
The Commission argues that Parliament has deliberately chosen a stringent regime in order to ensure that political donations come from acceptable sources.
There is no half-way house.
Similar policy considerations support both a strong presumption in favour of forfeiture and a requirement that forfeiture should be total.
Conversely a wide discretion whether to forfeit or not sits better with a power to order partial forfeiture, so that the court has the flexibility to tailor its order to the particular facts.
The approach to interpretation
The answer to the all or nothing issue will not, however, determine the presumption issue.
This is demonstrated by the fact that both Walker J and the Court of Appeal held that the power conferred on the magistrates court by section 58(2) was an all or nothing power.
In these circumstances I have not found it helpful to try to answer the all or nothing issue first.
The more helpful approach is to consider the interpretation of section 58(2) having regard to the mischief at which it is aimed.
The parties are agreed that the discretion conferred by section 58(2) should be used to promote the policy and objects of the statute.
This proposition is supported by high authority see Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997 at 1030 per Lord Reid.
This principle led Lord Bridge to observe in R v Tower Hamlets London Borough Council, Ex p Chetnik Developments Ltd [1988] AC 858, at p 873: Thus, before deciding whether a discretion has been exercised for good or bad reasons, the court must first construe the enactment by which the discretion is conferred.
Some statutory discretions may be so wide that they can, for practical purposes, only be challenged if shown to have been exercised irrationally or in bad faith.
But if the purpose for which the discretion is intended to serve is clear, the discretion can only be validly exercised for reasons relevant to the achievement of that purpose.
In applying the Padfield principle in this case there are two questions to be asked.
The first is: what are the objects of the forfeiture permitted by section 58(2)? The second is: why has Parliament chosen to give the court a discretion whether or not to order forfeiture of a donation that has come from an impermissible source rather than to make such forfeiture automatic? To answer these questions it is necessary to look at the legislative history, which I believe provides the answer to each question.
The legislative history
The Labour Partys 1997 Election Manifesto announced the following intention: We will oblige parties to declare the source of all donations above a minimum figureForeign funding will be banned.
On 12 November 1997, shortly after taking up office, the Prime Minister extended the terms of reference of the Committee on Standards in Public Life to add: To review issues in relation to the funding of political parties, and to make recommendations as to any changes in present arrangements.
This led to the Fifth Report of the Committee, under the chair of Lord Neill of Bladen QC, on the Funding of Political Parties in the United Kingdom (the Neill Report), which was published in October 1998.
Chapter 4 of the Neill Report dealt with Donations: Transparency and Reporting.
It recommended the imposition on political parties of a duty to report the sources of donations, backed by criminal sanctions: 4.61 The reporting obligations of the political parties should be backed by criminal sanctions.
These should be so drafted as to distinguish between inadvertent and deliberate failure to report a disclosable donation.
In the latter case those responsible could be fined or imprisoned.
In both cases the court would have power to order the defaulting political party to forfeit a sum not exceeding the unreported donation.
Knowingly to make a false return should also be an offence.
Prosecutions would be put in the hands of the Director of Public Prosecutions and should not be the concern of the Election Commission.
Private prosecutions should be allowable.
Chapter 5 of the Neill Report dealt with Foreign Donations.
After setting out the arguments for and against a ban on foreign donations, the Committee reached the following conclusion: 5.16We have, therefore, concluded that, at a time when the whole question of the funding of political parties is being re-examined, it is right to take the opportunity to lay down the principle that those who live, work and carry on business in the United Kingdom should be the persons exclusively entitled to support financially the operation of the political process here.
The Report explained that the Committee had found it difficult to produce a definition of foreign donations for the purpose of banning these.
Accordingly they decided to approach the problem from the opposite direction by defining permissible sources from which alone donations could be received.
The Report explained: 5.20 We begin by considering those individuals from whom the political parties should be able to receive donations.
We believe that they come under two headings: those who are registered voters in the United (1) Kingdom; and (2) those who are eligible to be put on an electoral register in the United Kingdom.
5.21 As to the distinction between (1) and (2) above, we think that a donation could be properly received from a person who was eligible to be put on the electoral register because such a person already has, under existing legislation, the right to participate in the electoral process subject to taking the additional step of securing registration.
5.22 Categories (1) and (2) cover not only British subjects resident here, but extend to Commonwealth citizens resident here, citizens of the Republic of Ireland resident here, and citizens of the European Union resident here.
The categories also include persons known as overseas voters.
The test of entitlement to be entered on an electoral register was a rational basis for discriminating between donors with adequate connections with the United Kingdom and foreign donors.
British, Republic of Ireland, Commonwealth and European Union citizens are entitled to register on an electoral register in the electoral area in which they reside section 4 of the Representation of the People Act 1983.
If a donor is not qualified to be entered on an electoral register in the United Kingdom it is not unrealistic to treat that donor as lacking sufficient connection with the United Kingdom to be a desirable source of party funding.
The following paragraph of the Report dealt with enforcement and penalties in relation to the ban on foreign donations: 5.42 In essence, what we said in Chapter 4 at paras 4.60 and 4.61 should apply here too with necessary modifications.
Thus, the Election Commission will have statutory powers to call for information and to institute an investigation into any donation which it suspects has not come from a permissible source.
If a party were to be guilty of a deliberate acceptance of a donation from a source outside the definition of a permissible source, criminal sanctions should attach to all responsible, and a sum not less than the donation should be liable to forfeiture from the partys funds; in significant cases of attempted evasion of the rules a penalty of up to ten times the overspend might be levied.
A forfeiture power should also apply even if the receipt were innocent or inadvertent, although the courts would clearly take into account the degree of culpability in setting the level of forfeiture.
R30 The Election Commission should have wide powers to call for information and to institute investigations into any suspect foreign donations received by a political party or a sub-unit.
R31 Criminal sanctions should attach to a deliberate acceptance of a donation from a source falling outside the definition of a permissible source.
There should be a power for the court to order a defaulting political party to forfeit a sum of up to ten times the donation wrongfully accepted.
There is a contrast between the power of forfeiture recommended in para 4.61, a sum not exceeding the unreported donation, and that in para 5.42, a sum not less than the donation.
The reason for this contrast seems likely to be the following.
Para 4.61 was providing for a sanction for failure to report a donation from a permissible source.
Para 5.42 was dealing with the receipt of a donation from an impermissible and, under the Neill Committees scheme, a foreign source.
In the latter case the forfeiture of the entire donation was likely to be desirable, regardless of whether or not the breach of the regulations had been deliberate.
It is noteworthy that the Committee recommended that, where acceptance of an impermissible donation was innocent or inadvertent, there should still be a power of forfeiture but that the courts would take into account the degree of culpability when setting the level of forfeiture.
The Government published a White Paper (Cm 4413) to which was annexed a draft Bill dealing with the funding of political parties.
Clause 51 of the Bill does not differ significantly from section 58 of the Act.
At the beginning of Chapter 4, which dealt with the sources of funding, the Government welcomed the Neill Committees endorsement of the manifesto commitment to ban the foreign funding of political parties.
Dealing with permissible sources of funding the White Paper commented as follows: Individuals 4.5 The Neill Committee recommended (R26) that political parties should be able to receive donations both from those who are registered voters in the United Kingdom and from those who are entitled to register to vote in the United Kingdom.
Clause 50(2)(a) departs from this recommendation by providing that registered political parties may accept donations only from those individuals whose names appear on the electoral register.
Entitlement to register, whether as a resident or overseas elector, will not qualify an individual as a permissible source.
4.6 Checking that a particular donor appears on the electoral register offers a test that is both conclusive and simple to administer.
It would be far less straightforward for political parties to verify that a donor not appearing on the register was nevertheless entitled to do so.
It is in the interests of the parties to have available a test which offers certainty as to the eligibility of a donor.
With the introduction of rolling registration it would be open to anyone who was entitled to be registered as an elector, but was not on the register for whatever reason, to take the necessary steps at any time to secure his or her registration.
Once registered, it would then be open to a political party to accept a donation from such a person.
In practice, therefore, little is lost by the proposed departure from the Neill Committees recommendation.
The objects of the legislation
The legislative history provides a particularly clear picture of the objects of Chapter II of Part IV of the Act.
The primary object is to prevent donations to political parties from foreign sources.
From the Labour Party manifesto in 1997 the concern in relation to the source of funds has focussed exclusively on foreign donors.
The Neill Committee recommended that the exclusion of foreign funding should, in the case of individual donors, be achieved by prohibiting donations from anyone who was not a registered voter in the United Kingdom or eligible to be put on an electoral register in the United Kingdom.
As I have observed this test drew a realistic line between domestic and foreign donors.
Eligibility to be placed on an electoral register demonstrated a sufficient connection with the United Kingdom.
Ineligibility demonstrated a lack of such connection.
Parliament made a significant change in restricting permissible donors to those on an electoral register, excluding those eligible to be put on one.
This change was made not because there is anything intrinsically undesirable about parties being funded by those who are not on an electoral register, provided that they are eligible to be placed on one.
So far as connection with the United Kingdom is concerned there is no distinction between a person who is on an electoral register and one who is entitled to be placed on an electoral register.
The change was made for purely pragmatic reasons.
It is much easier to demonstrate that a person is not on an electoral register than it is to demonstrate that he is not entitled to be placed on an electoral register.
Two facts demonstrate that Parliament did not consider that entitlement to vote was, of itself, an essential quality in a donor, rather than a convenient test of the donors connection with the United Kingdom.
The first is that section 54 permits donations from corporations, trade unions, building societies, limited liability partnerships, friendly societies and unincorporated associations, provided that they have sufficient presence in the United Kingdom, notwithstanding that none of them can vote.
The second is that donations by bequest are permissible from anyone who was on an electoral register at any time during the period of five years before his death.
Such a person cannot, of course, cast a vote posthumously, but it is significant that it is permissible for his bequest to have been made at a time when he was not on the register, provided that he was registered to vote at some point during the five years before his death.
Had Mr Bown bequeathed, rather than bestowed, his donations during the period that he was off the electoral register, and then died, there would have been no objection to UKIP receiving the bequests.
The White Papers comments that I have quoted at para 24 above underline the fact that entry on an electoral register is not per se an essential attribute of a donor.
The comment that little is lost by the proposed departure from the Neill recommendations appears to recognise that depriving parties of donations from those entitled to be on an electoral register, but not actually registered, involves a degree of sacrifice, albeit one that is justified on grounds of practicality.
The secondary object of Chapter II of Part IV of the Act is to provide a scheme for achieving the primary object that is easy to apply, easy to police and that contains adequate sanctions for non-compliance.
The purposes of the power to forfeit
Mr Beloff submitted in his written case that there were three purposes of the power to forfeit.
The first was to deprive a political party of the wrongful gain acquired by accepting a donation from an impermissible source.
The second was to deter breaches of the Act.
The third was to provide simple and effective sanctions in the form of a rigorous civil enforcement scheme to enforce the prohibition on acceptance of impermissible donations.
The third object is, in fact, no more than a more detailed way of describing the second object.
I agree that there are two distinct objects of the power to forfeit.
As to the first, I do not find the description wrongful gain helpful.
The primary object of forfeiture is the direct prevention of the mischief that the legislation is designed to prevent the receipt by a political party of foreign funding.
This would normally dictate the forfeiture of the acceptance of any donation received by a party from a foreign source, regardless of whether or not that acceptance had come about as a result of a culpable fault on the part of the party.
As I have said, that is probably why the Neill Committee recommended that where a donation was received from a person who was not entitled to be placed on an electoral register, forfeiture from the party funds should be of not less than the amount of the donation.
The fact that the donor was not entitled to be placed on the register demonstrated that he had insufficient connection to the United Kingdom to be an acceptable source of funding.
The Act has radically changed the Neill Committees scheme.
A donor whose connection with the United Kingdom would entitle him to be placed on the electoral register and thus to vote is rendered an impermissible donor by reason of the simple fact that he is not on the register.
Under this scheme an unregistered donor may or may not be foreign.
If he is foreign, or if he is unable to prove that he is not foreign, then his donation is intrinsically undesirable.
It is the type of funding that the Act was designed to prevent.
His donation should, barring exceptional circumstances, be automatically subject to forfeiture in its entirety.
If it is not forfeited, the very mischief that the Act was designed to prevent will have occurred.
Whether or not the party accepting the donation exercised due care should not normally be relevant.
This may well be why the Act expressly provides that a forfeiture order may be made, whether or not proceedings have been brought against any person for an offence in connection with the donation.
I agree with Mr Beloff that the second object of the power to forfeit is to provide a deterrent or sanction against failure to comply with the requirements of the Act that are designed to make sure that donations are not received from an impermissible donor.
Thus the power to forfeit is intended to further both the primary and the secondary object of the legislation.
The nature and purpose of the discretion
I now come to the interrelated questions of whether the power to forfeit is all or nothing and how the discretion whether or not to exercise that power should be exercised.
If Parliament had enacted the Neill Committee scheme there would have been a strong presumption in favour of forfeiting the whole of a donation from an impermissible source.
It would, or would be likely to, be a foreign donation and objectionable as such.
Indeed there would have been a case for making forfeiture of such donations automatic.
But Parliament adopted a scheme under which impermissible donations may or may not be foreign.
Under this scheme the significance of an individual impermissible donation may vary widely.
At one extreme it may be a donation from a foreign source, accepted by a political party with full knowledge of its provenance.
At the other extreme it may be a donation from an individual who is entitled to be on an electoral register and has in the past been on an electoral register, been believed to be on an electoral register, but who, because of some administrative error for which he is not responsible, has been removed from the register at the time when he made his donation.
Parliament plainly made the power to forfeit discretionary with the intention that the magistrates court should discriminate between cases where forfeiture was warranted and cases where it was not.
It seems to me natural to assume that Parliament intended the court to consider whether forfeiture was a proportionate response to the facts of the particular case.
This involves considering whether forfeiture is necessary to achieve either the primary or the secondary object of the Act.
The most relevant consideration is whether forfeiture is necessary to prevent the retention of a foreign donation in the individual case.
Proof of acceptance of a donation from an impermissible source should raise a presumption that the donation is foreign.
If the party cannot rebut that presumption, forfeiture should follow.
If the party succeeds in demonstrating that the donor was entitled to be placed on an electoral register, forfeiture should then depend on whether it is an appropriate sanction for such shortcomings as led to the acceptance of the donation.
This will require consideration of culpability, the size of the donation and the effect that forfeiture will be likely to have on the political party.
Partial forfeiture, if permitted (as to which see below), will enable the court to impose an appropriate sanction where total forfeiture would be disproportionate.
The Court of Appeal held that the power to forfeit was all or nothing and that there was a presumption that it should be exercised in the absence of exceptional circumstances.
The Courts reasons for holding that there was a strong presumption that the power to forfeit should be exercised were as follows: i) Unless forfeiture was the normal consequence of the acceptance of an impermissible donation, parties would be free to disregard with impunity the obligations not to accept or to return impermissible donations.
ii) Forfeiture would never be disproportionate if it was limited to a donation which should never have been accepted.
iii) It was irrelevant whether or not the impermissible donor was a foreign donor, because Parliament had not made that the test.
Parliament had made being on an electoral register the test.
The Court should not re-introduce the Neill Committee test by the back door.
iv) The fact that a party might not know that the donation was impermissible was irrelevant.
Parliament had not made that a bar to forfeiture.
v) The fact that the state of the partys finances might make forfeiture particularly onerous was irrelevant.
The receipt of the donation was illegal and the full extent of the donation was an advantage that the party should not have had.
vi) Furthermore, if it was necessary to investigate a partys finances before making a forfeiture order, the sanction would be unwieldy.
Mr Beloff expanded this to a more general point.
If there was a wide discretion, this would give rise to complex factual inquiries that the simple scheme of the Act was designed to avoid.
I will deal with each of these points in turn.
I do not accept that almost automatic forfeiture of the totality of an impermissible donation is necessary to provide a realistic sanction against non- compliance with the requirements of the Act.
In the first place there are criminal sanctions for non-compliance.
In the second place, the mere risk of forfeiture of the entirety of a donation might be thought a sufficient incentive to carry out the relatively simple check that a donor is on an electoral register.
A party should not need much incentive to check that the position of anyone who wishes to make a donation is regularised.
The suggestion that forfeiture of a sum limited to the impermissible donation can never be disproportionate is founded on the premise that the party should never have received the donation in the first place.
But where a person within the United Kingdom wishes to make a donation to a party, there is nothing intrinsically wrong about the party receiving that donation.
Of course the party and the donor should make sure that the donor complies with the statutory requirement of being placed on an electoral register.
But if, by inadvertence, or even negligence, they fail to do so, it does not follow that it cannot be disproportionate for the donation to be forfeited.
Proportionality will depend on the degree of culpability, the size of the donation and its importance to the party.
I disagree that it is irrelevant whether or not the donor is a foreign donor.
If he is, then forfeiture is clearly appropriate.
Parliament has made electoral registration the test, but Parliament has also made forfeiture discretionary.
To allow the party to show that the donor could have been registered to vote is not to introduce the Neill test by the back door.
Parliaments scheme usefully transfers the burden of showing that the donation is not a foreign donation onto the donor and the party.
If this burden can be discharged, the primary object of the legislation has not been defeated, and this fact is highly relevant to the issue of whether the power to forfeit should be exercised.
The fact that Parliament has not made ignorance of the impermissibility of the donation a defence is no reason why it should not be a relevant extenuating circumstance when considering whether or not to forfeit the donation.
Once again the Court of Appeal has ignored the fact that Parliament has chosen to make forfeiture of the donation discretionary.
The argument that the effect of forfeiture on a party is irrelevant turns on the proposition that the party should never have had the donation in the first place.
This ignores the fact that where the impermissibility of the donation results simply from an inadvertent, or even negligent, failure to register there is nothing intrinsically undesirable about the source of the funding.
Finally I must deal with the point that, if there is a general discretion whether or not to forfeit, forfeiture proceedings will involve a lengthy investigation of all the material circumstances.
In the first place, this will not normally be true where the donor is, in fact a foreign donor.
The party will not be in a position to show that the donor was entitled to be placed on an electoral register.
If, where this is the case, forfeiture is virtually automatic, forfeiture proceedings are unlikely to be protracted in those cases where forfeiture is most readily justified.
Where, however, the donor is not a foreign donor, the fact that forfeiture is discretionary is likely to involve a significant investigation of the facts, whether the discretion is broad or narrow.
However narrow the discretion it will surely be necessary for the party or the donor to show that the donor was not a foreign donor and to demonstrate, insofar as steps were taken to comply with the statutory requirements, what was in fact done.
None of these arguments persuades me that where the donor is not foreign, but has for some reason failed to exercise his right to be placed on an electoral register, Parliament intended that forfeiture of the entire donation should be virtually automatic.
On the contrary, where the donor is shown not to be foreign, I consider that Parliament would have intended, by conferring a discretion whether or not to forfeit, that there would be a careful evaluation of all the circumstances in order to decide whether the draconian step of forfeiture was justified.
The Commissions approach to its discretion
My conclusions receive some, if modest, support from the Commissions own approach to the exercise of its discretion.
If Parliament had intended that a donation from an impermissible source should be forfeited unless there were exceptional circumstances, the Commission might have been expected automatically to make an application for forfeiture once satisfied that a donation was from an impermissible source.
There would seem to be no basis upon which the Commission could properly decide not to make an application in circumstances where Parliament intended that forfeiture should occur.
In the course of the hearing the Commission provided the Court with internal guidelines drawn up by the Commission in February 2007 in relation to the forfeiture of impermissible donations.
These included the following: 3.1 . . .
In all cases where the Commission is clear that section 58 applies the Commission will apply for a forfeiture order, unless there are reasons to conclude that on balance, the public interest is such that would lead us to exercise our discretion in favour of not seeking forfeiture.
3.2 The Commission will have regard to all relevant considerations, which may include: Steps taken by the regulated organisation or individual for the verification of permissibility Steps taken by the regulated organisation or individual in relation to acceptance or return of donations Any other extenuating circumstances that may be relevant.
These guidelines do not suggest that the Commission itself applies a strong presumption in favour of forfeiture where a party has accepted a donation from an impermissible source.
Conclusions
Where it is shown that a political party has accepted a donation from an impermissible source, there should be an initial presumption in favour of forfeiting the donation.
In order to prevent parties receiving funding from individuals who have insufficient connection with the United Kingdom, Parliament has chosen to lay down a simple test.
Donations must only be accepted from those who are on an electoral register.
The onus should be on the party concerned to show why a donation that has been received from an impermissible source should not be forfeited.
A first step in discharging this onus will normally be to show that the mischief against which the relevant part of the Act is directed did not occur that the donation in question was not, in fact, a foreign donation.
Where an individual is concerned this should require demonstration that the individual was entitled to be entered on an electoral register.
If this cannot be demonstrated, forfeiture should normally follow.
In such circumstances it can properly be assumed that retention of the funding would defeat the policy underlying the legislation.
If it is shown that the donor was in a position to qualify as a permissible donor by registering on an electoral register, the initial presumption in favour of forfeiture will have been rebutted.
The question will then be whether there have been failures to comply with those requirements of the Act that are designed to ensure that such donations are not accepted, and the nature of those failures.
Once again the onus will be on the party to explain how it was that the donation came to be accepted.
If the donation is large, and if the power to forfeit is an all or nothing power, significant shortcomings are likely to be required to make forfeiture of the donation a proportionate response.
It is in the light of that conclusion that I turn to consider whether the power to forfeit is all or nothing.
Is the power to forfeit all or nothing?
Both Walker J and the Court of Appeal concluded that the power to forfeit was an all or nothing power.
Walker J concluded that this was the only meaning that could properly be given to a power to forfeit an amount equal to the value of the donation (para 117).
This finding was not challenged in the Court of Appeal and was accepted by Sir Paul Kennedy as correct (para 49).
My initial inclination was to agree.
The language of section 58(2) suggests that there is only one amount that can be forfeited.
Furthermore, forfeiture normally relates to a specific fund, or right, not part of one.
But in this case, forfeit is used in an unusual way.
It was the Neill Committee that first used the word, in recommending that a sum not less than the donation should be liable to forfeiture from the partys funds.
It has been common ground that a forfeiture order will create a debt to be met from UKIPs funds, as and when monies are paid into them.
So the forfeiture in this case is more akin to a fine.
Furthermore, the Neill Committee contemplated that the amount to be forfeited would be variable when commenting that where the receipt was innocent or inadvertent the courts would clearly take into account the degree of culpability in setting the level of forfeiture.
Having regard to these considerations I have reached the conclusion that the better interpretation is to treat the power to order forfeiture of an amount equal to the value of an impermissible donation as implicitly including the power to order forfeiture of a lesser sum.
Such an interpretation is desirable to cope with the situation where the magistrates court is persuaded that the donor is not foreign.
In those circumstances, total forfeiture of the donation may be disproportionate.
If so, it should not be ordered, both under the ordinary principles that apply to the imposition of sanctions and having regard to the requirements of article 1 of the First Protocol to the European Convention on Human Rights.
The magistrates court should have the power to make a partial forfeiture order that reflects the facts of the particular case.
I would interpret section 58(2) as conferring that power.
Disposal
Walker J rightly held that the reasons given by the Senior District Judge were too brief.
He reached, however, decisions on the issues of principle which this Court has endorsed.
He concluded that, in circumstances where the donor was entitled to be on the electoral register, no presumption of total forfeiture should be applied, but forfeiture should reflect fault on the part of the party accepting the donation or donations.
As to the application of that principle to the facts of this case, he applied a very broad brush that effaced most of the detail of communications between the Commission and UKIP.
He allowed UKIP to retain all donations up to the point at which they learned that Mr Bown was not on the electoral register, and ordered forfeiture of all donations from that moment until Mr Bown was again on the register.
He erred however in stating that it was on 19 June 2005 that UKIP learned that Mr Bown was not on the register.
In fact they did not learn this until 13 December 2005.
On this erroneous basis he ordered forfeiture of donations totalling 14,481.
The parties were anxious, if possible, to avoid a further hearing before the Senior District Judge.
I have reached the conclusion that the amount of the forfeiture that was ordered adequately reflected the facts of this case and, accordingly, I would restore the order of the Senior District Judge.
In the 1990s there was considerable public unease about the funding of political parties.
The Committee on Standards in Public Life under the chairmanship of Lord Neill of Bladen QC looked into the matter and in 1998 they produced a report (Cm 4057) which contained many recommendations.
In particular, they formulated a principle to the effect that those who live, work and carry on business in the United Kingdom should be the persons exclusively entitled to give financial support to the operation of the political process here (para 5.16).
In order to create a workable system, they recommended that political parties should be able to receive donations from (1) people who are registered voters in the United Kingdom and (2) those who are eligible to be put on an electoral register in the United Kingdom (para 5.20).
In due course the government issued a White Paper giving their considered response to the Neill Committees recommendations (Cm 4413).
The government accepted the thrust of the committees recommendation on foreign donors, but they introduced a significant modification: only individuals who were registered voters should be permitted to make donations to political parties.
As the White Paper explained in para 4.6, in a very real sense this was in the parties interest: checking whether a particular donor appeared on the electoral register would offer a test of acceptability that was both conclusive and simple for the parties to operate.
It would be much less straightforward for parties to verify that a donor who did not appear on the register was nevertheless entitled to be registered.
Of course, the downside was that the new test excluded more potential donors than the Neill Committee test: those who were eligible to be registered, but who were not registered.
The White Paper pointed out, however, that, with the introduction of rolling registration, people in that position could readily apply to be registered and it would then be open to a political party to accept a donation from them.
In practice, therefore, little is lost by the proposed departure from the Neill Committees recommendation.
This was the scheme which was encapsulated in clause 50 of the draft Bill and was given effect in section 54 of the Political Parties, Elections and Referendums Act 2000 (the Act).
So far as relevant, that section provides: (1) A donation received by a registered party must not be accepted by the party if (a) the person by whom the donation would be made is not, at the time of its receipt by the party, a permissible donor.
(2) For the purposes of this Part the following are permissible donors (a) an individual registered in an electoral register.
Nothing could be clearer than the language used by Parliament and nothing could be clearer than the intention behind the language: political parties were not to accept donations from any individual who was not registered in an electoral register.
In particular, parties were not to accept donations from individuals who were entitled to be registered, but who were not on the register.
That situation would be adequately catered for by the simple expedient of the individual concerned getting himself registered: the party could then accept a donation from him.
Obviously, the Act envisages that, when they receive a donation, a political party must check the electoral register to ensure that the individual is registered.
If, as a result of that check, it appears that he is not on the register, then he is not a permissible donor and the party must return the donation, or a payment of an equivalent amount, within thirty days: section 56(2)(a).
The party must keep a record of the receipt of the donation and of its return within the thirty-day period.
In addition, the party must include a report of the receipt and return of the impermissible donation in their donation report to the Electoral Commission for the relevant period: section 62(9).
If they fail to do so, section 65(6) comes into play: Where the court is satisfied, on an application made by the Commission, that any failure to comply with any such requirements in relation to any donation to a registered party was attributable to an intention on the part of any person to conceal the existence or true amount of the donation, the court may order the forfeiture by the party of an amount equal to the value of the donation.
The present case concerns exactly the situation of a donor who was entitled to be registered but was not actually on the register.
Although he had previously been registered, Mr Alan Bown was not registered in any electoral register between 1 December 2004 and 2 February 2006.
During that period he made a number of donations to UKIP which amounted in total to almost 350,000.
Since Mr Bown was not registered to vote, by virtue of section 54(1)(a), UKIP were bound not to accept the donations.
In terms of section 56(2)(a), the party should therefore have returned them to Mr Bown within thirty days and pointed out to him that they could not accept the donations until he was on the register again.
When the party duly reported the donations to the Electoral Commission, the Commission drew their attention to the fact that Mr Bown did not appear to be on the register.
The party none the less retained the donations.
So they have made a gain of roughly 350,000 by accepting donations which they were prohibited from accepting under section 54(1)(a).
Lord Phillips deprecates the use of the phrase wrongful gain to describe this type of gain.
He would apparently confine any such description to gains made from donations by foreign donors who are not entitled to be on the electoral register in this country because the true object of section 54(1)(a) is to prevent parties receiving donations from such persons.
But that is to substitute the ultimate aim of the legislation for the means by which the legislation seeks to achieve that aim.
The ultimate aim is indeed to catch foreign donors.
But the legislature has chosen to pursue that aim by prohibiting parties from accepting donations from all except a narrowly defined class of permissible donors.
That class excludes foreign donors who are not entitled to be registered, but quite deliberately it also excludes donors, like Mr Bown, who are entitled to be, but are not, registered.
As the White Paper explained, there were good practical reasons for adopting that legislative approach.
In these circumstances it is not open to the courts to second- guess Parliament and to proceed on the footing that some impermissible donors are less impermissible than others.
Since UKIP kept the donations from Mr Bown which they were prohibited from accepting, the Electoral Commission eventually applied to the City of Westminster Magistrates Court in terms of section 58(1) and (2): (1) This section applies to any donation received by a registered party (a) which, by virtue of section 54(1)(a) or (b), the party are prohibited from accepting, but (b) which has been accepted by the party.
(2) The court may, on an application made by the Commission, order the forfeiture by the party of an amount equal to the value of the donation.
In the case of England and Wales the court in question is a magistrates court.
Where a party have accepted a donation which they are prohibited from accepting and they show no sign of being willing to return it, the starting point must surely be that the court will take steps to ensure that the party are deprived of the gain which they are determined to keep in defiance of the law.
In other words, an order will be made for the forfeiture of the whole value of the unlawful donation.
And that is exactly what section 58(2) says: the court may order the forfeiture of an amount equal to the value of the donation.
Had parliamentary counsel intended to give the court power to order the forfeiture of a lesser sum, as Lord Brown points out, there is a variety of other phrases which could have been used to embody that intention.
The same words are to be found in section 65(6) (quoted at para 59 above) and in para 12(4) of Schedule 7 to the Act.
Both of these provisions deal with a situation where there has been a deliberate failure to comply with the relevant reporting requirements in order to conceal the existence, or true amount, of a donation.
In such a situation, also, it is hard to see why forfeiture of a sum which is less than the donation would be appropriate.
So these provisions tend to confirm the straightforward interpretation of the equivalent words in section 58(2).
Like Lord Brown, I have no hesitation in agreeing with Walker Js conclusion on this issue.
Lord Phillips takes a different view.
He goes back to the report of the Neill Committee who first suggested the idea of forfeiture, but described the sum to be forfeited in various ways (a sum not exceeding the unreported donation and a sum not less than the donation).
The committee may well have envisaged the court selecting what it regarded as the appropriate sum to be forfeited in the particular circumstances.
On this basis, Lord Phillips considers that the better interpretation is to treat the words in section 58(2) as implicitly including the power to order forfeiture of a lesser sum.
The Neill Committee report stands, however, at two removes from the text of section 58(2) which embodies the law enacted by Parliament.
Moreover, as Lord Phillips himself points out, the Act radically changed the scheme envisaged by the committee.
In these circumstances their report cannot displace the plain meaning of Parliaments words.
The system is all or nothing: either the court orders the forfeiture of the value of the donation or it makes no order.
Having armed the court with a discretion to award a lesser sum, Lord Phillips proceeds to construct an elaborate scheme for the exercise of this discretion.
If the donation is not from a permissible donor, the onus will be on the party to show why it should not be forfeited.
If the donation is from a foreign donor, then the party will not normally be able to show this, since it can properly be assumed that retention of the funding would defeat the policy underlying the legislation.
But if the party can show that the donor was in a position to qualify as a permissible donor by registering on an electoral register, the initial presumption in favour of forfeiture will have been rebutted.
In that situation the court will have to see whether there have been failures to comply with the requirements of the Act that are designed to ensure that impermissible donations are not accepted and, if so, the nature of those failures.
If the donation is large, significant shortcomings are likely to be required to make forfeiture of the donation a proportionate response.
In other words apparently the larger the impermissible donation, the less likely it is that the party will have to give it up.
It seems to me unlikely to say the least that Parliament would have intended that a provision, which is designed to ensure compliance with the statutory scheme, should operate so as to make large impermissible donations harder to forfeit than small impermissible donations.
That apart, many may admire the scheme outlined by Lord Phillips which might have commended itself to the Neill Committee.
Indeed, had it been proposed to Parliament, it might well have been enacted.
But there is not the slightest hint of such a scheme in the wording of the provision which Parliament did enact and, in fact, as I have already explained, the wording of section 58(2) is inconsistent with a scheme of that kind.
Moreover, it would have been surprising if such a nuanced decision had been left to the magistrates court.
For these reasons I would respectfully reject Lord Phillips construction of the subsection.
If a party return an impermissible donation after the end of the thirty-day period, under section 56(5) they are treated as having accepted it for the purposes of section 58(2).
It might well be, however, that the Electoral Commission would often not make an application to the court in such a case.
And if it did, the context for the exercise of the courts discretion would be significantly different from the situation where the party had kept a donation.
Similarly, the rationale of any forfeiture order would be to mark some blameworthy failure to comply with the regulations and pour encourager les autres.
I would therefore reserve my opinion on whether there is room for the court to exercise its discretion differently in such cases.
In a case, like the present, however, where the party have held on to the donations, the real difficulty, as Lord Brown points out, is to see how the court could properly do other than make an order for forfeiture, since forfeiture so clearly promotes the statutory object of preventing parties from accepting donations from individuals who are not permissible donors.
Moreover, since the party had no right to the donations in the first place, there is no room for an argument that taking them away infringes article 1 of the First Protocol to the European Convention on Human Rights.
Consideration of the exact scope of the courts discretion is not made any easier by the lack of any real indication in the Act of how the forfeiture order takes effect.
As Lord Phillips points out, the discussion at the hearing proceeded on the (unexamined) premise that it would create a debt to be met out of the partys funds, as and when monies are paid into them.
Although it is tempting to think of the Act as concerned with the major parties, it actually applies to a large number of political parties, many of them very small.
Some may well have shaky finances.
It is therefore quite conceivable that a forfeiture order would tip a party into insolvency and so cause at least as much prejudice to the partys unsecured creditors as to the party.
So the creditors might argue that, for this reason, the court should exercise its discretion not to make an order.
In that connexion it may be worth noting that section 60(1)(b) and (c) envisage that rules of court may allow persons affected by any possible forfeiture order to be joined as parties to the proceedings in the magistrates court.
Since, however, the point does not arise for decision and was not argued in this case, I merely raise the possibility that such circumstances might have a bearing on the way that the court exercised its discretion under section 58(2).
For these reasons, and for those given by Lord Brown, with which I agree, I would dismiss the appeal.
I agree with the judgments of Lord Rodger and Lord Brown, and for the reasons which they give I would dismiss this appeal.
The funding of political parties has long been the subject of public and parliamentary concern.
In October 1998 the Commission on Standards in Public Life under the chairmanship of Lord Neill of Bladen QC reported on the matter to the Prime Minister.
The Governments response by way of a White Paper was presented to Parliament in July 1999 with a Draft Bill annexed.
There followed the Political Parties, Elections and Referendums Act 2000 (the Act), Part I of which provided for the establishment of the Electoral Commission (the Commission), Part IV for the control of donations to political parties.
This appeal centres on Chapter II of Part IV under the heading, Restrictions on Donations to Registered Parties, and more particularly on donations from people not permitted to donate which a party nevertheless accepts (impermissible donations as I shall henceforth refer to them).
Section 58 of the Act applies to such donations and by subsection (2) provides: The court may, on an application made by the Commission, order the forfeiture by the party of an amount equal to the value of the donation.
At the heart of this appeal is the proper construction and application of that provision.
Everyone agrees that it invests the court with a discretion: no one contends that may here means must.
There are, however, two core questions arising.
First, whether the court has power to forfeit part only rather than the whole of the value of any impermissible donation, i.e. can equal to be construed as up to? Secondly, how wide is the discretion conferred? Is there a presumption that impermissible donations will be forfeited and, if so, how strong is that presumption?
I put the two questions in that order because to my mind they are closely related: if the court has no option but to forfeit all or nothing, that seems to me to strengthen the argument for a presumption in favour of forfeiture.
That said, it may be noted that Walker J at first instance, despite holding that the courts power is to forfeit all or nothing, nevertheless decided that the discretion whether to order forfeiture is a wide one.
Walker Js holding that this is an all or nothing power was not contested before the Court of Appeal.
That Court, however, reversed his decision on the width of the discretion to exercise the power, holding that, for the legislative purpose to be served, the power should be exercised to order forfeiture of impermissible donations in all save truly exceptional cases.
It is against that decision that UKIP now appeal.
With those few introductory paragraphs let me turn next to the other provisions of the Act dealing most directly with impermissible donations received from known individual donors (as opposed to impermissible donations from corporate donors, unidentified donors or, indeed, by way of bequest).
Section 54, under the heading Permissible donors, provides that for the purposes of Part IV of the Act an individual registered in an electoral register is a permissible donor (section 54(2)(a)) and that: A donation received by a registered party must not be accepted by the party if - (a) the person by whom the donation would be made is not, at the time of its receipt by the party, a permissible donor (section 54(1)(a)).
In short, so far as identified individual donors are concerned, the party is prohibited from accepting any donation unless that donor is registered in an electoral register.
Section 56(1), under the heading Acceptance or return of donations: general, provides that where a donation is received and not immediately refused the party must forthwith take all reasonable steps to verify the donors identity and whether he is a permissible donor (and certain other details as to his address for the purpose of providing quarterly reports on donations under section 62).
Section 56(2) provides that if the party receives a donation which it is prohibited from accepting, it (or a payment of an equivalent amount) must be sent back to the donor within 30 days of when it was received.
(The mention of an equivalent amount is explicable by reference to the wide definition of donation in section 50 to include a variety of benefits such as the provision of property, services or facilities.) Section 56(3) provides that if a party fails to return an impermissible donation within 30 days (as required by section 56(2)) the party and its treasurer are each guilty of an offence.
Indeed, until the Act was amended by the Political Parties and Elections Act 2009, this was an absolute offence.
Now, by a freshly inserted subsection (3A), it is a defence to prove that (a) all reasonable steps were taken by or on behalf of the party to verify (or ascertain) whether the donor was a permissible donor, and (b) as a result, the treasurer believed the donor to be a permissible donor.
Although I have already (at para 74 above) summarised the effect of section 58 of the Act, the provision at the core of this appeal, I should perhaps set out subsection (1): This section applies to any donation received by a registered party - (a) which, by virtue of section 54(1)(a) .
.
.
, the party are prohibited from accepting, but (b) which has been accepted by the party.
And I should note that by section 56(5) For the purposes of this Part a donation received by a registered party shall be taken to have been accepted by the party unless - (a) the steps mentioned in paragraph (a) . . .
of subsection (2) are taken in relation to the donation within the period of 30 days mentioned in that subsection.
Section 58(4) provides that a forfeiture order can be made whether or not criminal proceedings are brought (most obviously under section 56(3)).
The one other provision of the Act which I would notice at this stage is section 65(6) which states: Where the court is satisfied, on an application made by the Commission, that any failure to comply with any such requirements in relation to any donation to a registered party was attributable to an intention on the part of any person to conceal the existence or true amount of the donation, the court may order the forfeiture by the party of an amount equal to the value of the donation.
The requirements here in question are those placed upon the party by section 62 to prepare quarterly donation reports (or under section 63 to prepare weekly such reports during general election periods) in respect of all relevant donations and benefits, and by section 65 to deliver such reports to the Commission within 30 days of the end of such reporting periods (7 days in the case of section 63 reports).
What, then, in the context of these legislative provisions is the nature of the discretion conferred upon the Court by section 58(2)? It is recognised by both parties that it is a discretion which the Court is bound to exercise having proper regard to the policy and objects of the Act.
This principle is, of course, established by high authority, most notably the judgments of the House of Lords in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997.
A later illustration of the principle to my mind of some assistance in the present context is the Houses decision in R v Tower Hamlets London Borough Council, Ex p Chetnik Developments Ltd [1988] AC 858 (Chetnik) where (at 873G) Lord Bridge said: . . .
before deciding whether a discretion has been exercised for good or bad reasons, the court must first construe the enactment by which the discretion is conferred.
Some statutory discretions may be so wide that they can, for practical purposes, only be challenged if shown to have been exercised irrationally or in bad faith.
But if the purpose which the discretion is intended to serve is clear, the discretion can only be validly exercised for reasons relevant to the achievement of that purpose.
It is necessary, therefore, to consider what is the statutory purpose of Part IV of the Act and more particularly whether there is a clear purpose to be served by conferring on the court a power under section 58(2) to order the forfeiture of impermissible donations.
In large measure this purpose is to be discerned from the statutory provisions themselves.
To a limited extent, however, I would accept that some light may be thrown upon these by their legislative history, namely the Neill Report and the White Paper which followed it.
But it is unnecessary to spend much time on these.
So far as individual donations are concerned, the Neill Report recommended and the White Paper agreed that the underlying principle should be that only those with a stake in the United Kingdom should be permitted to donate; foreign donations were to be outlawed.
How then should that be achieved? Again, both agreed that this should be done by defining the permissible source of donations.
At that point, however, the two documents diverged.
Whereas the Neill Report recommended that the permissible source of individual donations should be defined to include not merely registered UK voters but also those who are eligible to be put on an electoral register in the United Kingdom, the White Paper proposed instead what is now section 54(2)(a) of the Act.
This provision, the White Paper noted (para 4.5), departs from [the Neill Reports] recommendation by providing that registered political parties may accept donations only from those individuals whose names appear on the electoral register.
Entitlement to register, whether as a resident or overseas elector, will not qualify an individual as a permissible source.
The White Paper then continued (para 4.6): Checking that a particular donor appears on the electoral register offers a test that is both conclusive and simple to administer.
It would be far less straightforward for political parties to verify that a donor not appearing on the register was nevertheless entitled to do so.
It is in the interests of the parties to have available a test which offers certainty as to the eligibility of a donor.
As for the section 58 forfeiture order itself, the White Paper said this (para 4.15): Clause 51 [enacted as section 58] provides a power for a magistrates court . . .
to order the forfeiture of a sum equal to the value of a donation received from other than a permissible source.
This will apply whether such a donation was accepted knowingly or not.
Under clause 51(2) [section 58(2)] it will be for the Electoral Commission to make an application to the court for a civil forfeiture order.
It will readily be seen that the forfeiture power exists in respect of an impermissible donation once the 30 days allowed for its return by section 56(2) are up even, indeed, if the donation was subsequently returned to the donor.
This is so, moreover, whether or not the donation was accepted knowingly there is no precondition of forfeiture (as under section 65(6)) that the party intended to conceal something, nor any defence (as now under section 56(3A)) that all reasonable steps were taken to verify that it came from a permissible donor.
It will also readily be seen that, unless by the time the court is called upon to exercise its section 58(2) discretion the donation has in fact been returned to the donor, it necessarily follows that the party will have received a donation which by virtue of section 54 it was prohibited from accepting, that it failed to return it within 30 days as section 56 required it to do, and that it continues to retain a benefit to which it is manifestly not entitled.
In these circumstances, the sole effect of a forfeiture order in respect of the whole of the donation is no more and no less than to require the party to disgorge that which the law plainly forbids it to have retained.
By the same token, were the court to refuse such an order, it would be allowing the party to retain that to which it is plainly not entitled and which the law long since required it to have surrendered.
With these considerations in mind let me return to Chetnik for the assistance it seems to me to provide.
Chetnik concerned the proper construction and application of section 9 of the General Rate Act 1967 which so far as material provides: . . .
where it is shown to the satisfaction of a rating authority that any amount paid in respect of rates . . .
could properly be refunded on the ground that . . .
(e) the person who made a payment in respect of rates was not liable to make that payment, the rating authority may refund that amount or a part thereof.
The Court of Appeal had said of that power ([1987] 1 WLR 593, 602): We think it clear that, in broad terms, the purpose of section 9 and its predecessor was to enable rating authorities to give redress and to remedy the injustice that would (at least prima facie) otherwise ordinarily arise, if they were to retain sums to which they had no right, in cases where persons had paid rates which they were not liable to pay.
Holding in the light of that purpose that the discretion to withhold repayment in such a case could only be exercised for some valid reason, the Court of Appeal had quashed the rating authoritys refusal to repay the overpaid rates and had directed them to reconsider the matter.
Affirming the Court of Appeals approach, Lord Bridge (with whom the other members of the Committee agreed) said: Parliament must have intended rating authorities to act in the same high principled way expected by the court of its own officers and not to retain rates paid under a mistake of law . . .
unless there were, as Parliament must have contemplated there might be in some cases, special circumstances in which a particular overpayment was made such as to justify retention of the whole or part of the amount overpaid.
(877D).
Later in his speech (880G), having said that the most difficult aspect of the problem was to give guidance as to the positive factors relevant to the exercise of the section 9 discretion which might be considered in whole or in part to displace the prima facie justice of refunding overpayments, and that such factors could only arise from the circumstances in which the overpayment had come to be made in any particular case, Lord Bridge suggested three possible (obviously exceptional) situations in which it might be proper to refuse a refund.
He then said (881E-F) that he had not found it an easy case and in particular cannot envisage circumstances which, on the principle I have indicated, would point to a partial refund of overpaid rates as just and appropriate.
On the latter point, however, (the express power of partial refund under section 9) Lord Goff drew on general principles of restitution law and wondered whether the fact that the rating authority will have, for example, employed a substantial part of its rate income to meet precepts by other authorities, would provide a good reason for denying, at least in part, a ratepayers claim for refund under section 9.
(882G).
Let me come, then, to the first of the two questions I posed at the outset: Has the court power under section 58(2) to order forfeiture of part only of an impermissible donation? UKIP contends that it does, essentially on the basis that the greater impliedly includes the lesser unless the context compels a different conclusion.
With the best will in the world, this seems to me an impossible contention.
Where, as here, the draftsman has explicitly chosen the words an amount equal to the value of the donation (words he then repeats in section 65(6)), it can hardly be thought he intended them to mean an amount up to that value, or an amount not exceeding that value, or (the words used by the draftsman of section 9 of the General Rate Act 1967) that amount or a part thereof.
Why would he not have used one of these expressions had he intended to provide a power of partial forfeiture? The words of section 58(2) seem to me clear and unambiguous.
I agree with Walker Js conclusion on this issue at first instance and am unsurprised that in the Court of Appeal counsel then appearing for UKIP did not seek to challenge that conclusion.
With regard to Mr Lawrence QCs subsidiary submission that such a construction amounts to an impermissible interference with article 1 of the First Protocol to the European Convention on Human Rights (para 69 of his case) I am at a loss to see how the forfeiture of a donation which by definition the party should never have accepted or kept could be said to violate that partys human rights.
Even assuming, however, that in certain circumstances it could, the court always has the option and on that hypothesis would be bound to make no forfeiture order at all.
These considerations apart, I find myself sharing Lord Bridges difficulty in Chetnik (although there, of course, the power to make partial refund was expressly provided for) in envisaging circumstances which would point to such an order as being just and appropriate at any rate where the party still retains the benefit of the impermissible donation.
Recognising, therefore, that the forfeiture power is an all or nothing power, I pass to the second core issue arising: Is there a presumption that impermissible donations should be forfeited and, if so, how strong is that presumption?
The Court of Appeal concluded (at para 50) that there was only a narrow discretion not to order forfeiture.
As Sir Paul Kennedy put it in the Courts only reasoned judgment: . . .
it might assist a party which, for reasons beyond its control, such as illness of staff, was unable to complete its inquiries within 30 days, or a party which was misled by an inaccurate entry in an electoral register [that perhaps refers to a fraudulent entry or an erroneous statement from some apparently responsible authority that the donor was on the register].
Maybe there would also be room for the exercise of discretion if a donation or its value were to be returned to the donor out of time but before any forfeiture was sought, because Parliament clearly did not intend a party to surrender the value of a donation more than once.
That essentially is my view too.
In most cases, certainly in any case where neither the benefit nor its value has ever been returned, it is difficult to see how the discretion could properly be exercised other than by an order for forfeiture.
How, in those circumstances, could a court properly allow a party to retain the value of a donation which Parliament has plainly ordained that it should never have accepted? How could this be thought consistent with the policy of the legislation? To my mind, indeed, given the ease with which electoral registers can be accessed and inspected the whole point of registration as the sole source of permissible individual donations being, as the White Paper said, to create a scheme both conclusive and simple to administer I question whether even staff illness could provide a proper basis for not forfeiting a donation.
If on account of staff illness a donation was returned late (after the 30 day limit), that no doubt could justify not making a forfeiture order.
But I am here considering cases like that presently before the Court where the donation has never been returned.
For my part I would accept that the discretion not to award forfeiture would arise altogether more readily in the final situation envisaged by Sir Paul, where a donation or its value is returned to the donor out of time but before any forfeiture was sought.
By the time forfeiture is sought, of course, it is almost inevitable that the party will have had ample opportunity (on the facts of the present case more than a year since the final impermissible donation was accepted) to discover its mistake (here, indeed, it had been several times alerted to it) and return the benefit.
Return after that time, therefore, might suggest no more than a naked attempt to escape the forfeiture provision.
One should note in this regard an obvious further purpose underlying the forfeiture power (besides its principal purpose of confiscating unlawfully retained benefits), namely as part of the mechanism for policing the control of political donations.
To allow the return of the benefit after forfeiture has been sought to save a party from an order, would, except perhaps in very special circumstances, more likely thwart than promote that additional purpose.
That question is, however, academic in the present case: quite simply UKIP still retains donations which it should never have accepted.
On the Commissions forfeiture application the Senior District Judge allowed UKIP to keep almost all of the 350,000 odd total of impermissible donations it had accepted from Mr Bown.
In common with the Court of Appeal although not, as now appears, with the majority of this Court I find that a surprising and unsatisfactory outcome to this regrettable affair.
In agreement with Lord Phillips and Lord Kerr, I consider that the appeal should be allowed.
Their reasoning and conclusions are broadly consistent, although, like Lord Kerr, I would be inclined to regard the question, whether forfeiture is possible of a sum less than the full amount of a donation, as central to the enquiry whether the discretion to order forfeiture is broad or narrow.
The discretion introduced by s.58(2) is on its face an open discretion, capable of responding to different circumstances, in particular the difference - important in the light of the mischief to which this Part of the Act was directed - between foreign donations and donations such as the present made irregularly by a person who was entitled to be on a United Kingdom register of electors but by mistake was not.
The words may .
order the forfeiture .
of an amount equal to the value of the donation are in my view capable of implying discretion to order forfeiture of part as well as all or nothing of the donation, rather than compelling a conclusion that the only discretion involved a blunt choice between all or nothing.
The use of the word may in s.58(2) is coupled with provisions in s.59(2) and (3) which permit an appeal by a registered party unhappy with a magistrates court decision under s.58(2) and which provide that any such appeal shall be by way of a rehearing, and the court hearing such an appeal may make such order as it considers appropriate.
These provisions to my mind also suggest a flexible power of appreciation in relation to the order made, according to the circumstances.
The provisions in s.60(1)(b) and (c) for rules to be made for the giving of notice to and joinder of persons affected also tend to suggest that it was understood that the exercise under s.58 and 59 might be a nuanced one, taking account of others interests.
The words any amount in s.60(3) and (5)(c) can of course be read consistently with either partys case.
A conclusion that partial forfeiture is possible and that discretion is broad, is in my view more consistent with the policy of the legislation than that adopted by the Court of Appeal or by Lord Rodger and Lord Brown.
Parliament preferred the simpler test of registration to a test including entitlement to register for pragmatic reasons: it would be simpler for parties to verify actual registration, simple for persons entitled to register to do so and little is lost by the proposed departure from the Neill Committees recommendation.
The underlying aim of the legislation remained to eliminate inappropriate foreign donations.
Lord Phillipss and Lord Kerrs analysis is in this light consistent with the principle that legislation should be construed to serve its statutory purpose: R v Tower Hamlets LBC ex parte Chetnik Developments Ltd. [1988] 1 AC 858.
The different analyses adopted in that case and the present flow from differences in context and in the nature of the issues.
The refunding by a rating authority of overpaid rates to the person paying them and the forfeiture to the state of an irregular donation made by a member of the public, who is eligible for registration but by mistake not registered, do not raise identical considerations.
The Commission submitted that, even if the law was as the majority of the Court now holds, any reasonable judge must inevitably order forfeiture of the whole of these donations.
I do not agree.
In my view and as Lord Phillips explains, it was appropriate for the level of forfeiture to reflect the circumstances.
These include the fact that Mr Bown was entitled to be on the electoral register, and would have corrected the position and made the same donations had he been aware of the mistake which led to him not being on the register (or had the donations, after being made, been returned to him, as should have occurred).
They also include the circumstances that it appears questionable, from what the Court was told, whether UKIP could find the monies to meet any order or survive, if the total sums donated were forfeited.
Walker J observed (in last two sentences of para 121) that the District Judge did not expressly deal with some factual aspects, most significantly for present purposes emails from the Commission dated 19 April and 13 May 2005 asking about Mr Bowns status, following which UKIP did not take steps eliciting and confirming the actual picture.
On the other hand, the picture presented by the correspondence between the Commission and UKIP throughout 2005 and into 2006 is not one suggesting any real urgency, still less a risk of any forfeiture; and it is also common ground that the District Judge erred to UKIPs disadvantage in taking 19 June 2005, instead of 13 December 2005, as the date when UKIP became aware that Mr Bown was not on the electoral register and so in ordering forfeiture of a larger sum than he would have done, but for such error.
UKIP did not appeal in respect of this error.
Both parties agreed before the Supreme Court that there should be no re-hearing of any save the most formal sort before the District Judge, and that the Court should if necessary make up its own mind.
On that basis, I agree with Lord Phillipss proposal that the order made by the District Judge should simply be restored.
There are three possible outcomes to the debate about the correct interpretation of section 58(2) of the Political Parties, Elections and Referendums Act 2000.
The first is that the discretion given to the court as to whether to order forfeiture is wide and that it is open to the court to make an order for forfeiture of less than the full amount of the donation.
The second is that the discretion is narrow and that an order of forfeiture, if made, should be for the entire amount of the donation.
The third is that the discretion is wide but if an order of forfeiture is made it must be for the total sum.
Of these three possible interpretations, the third seems to me to be the least likely.
A wide discretion to permit the making of an order that there should be no forfeiture of any sum whatever does not sit comfortably with what can be discerned to be the purpose of the legislation viz to eliminate the receipt by political parties of donations from sources considered to be unsuitable.
The debate must focus, therefore, I believe, on the first and second of the mooted interpretations outlined above.
Lord Phillips considered that the primary issue was what he described as the presumption issue i.e. whether section 58(2) conferred a broad discretion on the court as to whether it should make a forfeiture order, or whether there was a strong presumption in favour of forfeiture.
Although I agree with the outcome that Lord Phillips proposes, I have some reservations as to whether this is the primary issue in this case.
It appears to me that the matter of critical importance is whether forfeiture of a sum of less than the full amount of the donation is possible.
If it is, it seems to me to follow logically that the discretion should be wide; if it is not, for the reasons that I have given above, it is difficult to see how a broadly based discretion would be appropriate.
If one approaches the question whether it is possible under the legislation to order forfeiture of a lesser sum than the actual donation by concentrating exclusively on the language of section 58(2) (and section 65(6)), the answer given by the Court of Appeal and powerfully endorsed by Lord Rodger and Lord Brown is difficult to resist.
But, as a matter of general principle, the purpose of an item of legislation should inform ones approach to the interpretation of its constituent parts and I therefore believe that this is a case where it is clearly necessary to be guided in the construction of the relevant provisions not only by the language used but also by the underlying aim of the Act.
The central purpose of the legislation was to prohibit donations from those who did not have a stake in this country.
I do not accept Mr Beloff QCs argument that its purpose evolved from a desire to ban foreign donors to one of denying the right to give donations to those who could not vote.
The Act was the result of the governments commitment in its manifesto to ban foreign donors.
An examination of the materials that preceded its enactment reveal, I believe, that this was always the driver for the legislation.
Paras 4.5 and 4.6 of the White Paper (on which Mr Beloff relied to advance his evolution thesis) are concerned with devising a convenient and easy-to-apply means of enforcement.
They do not represent a change of direction in government thinking on the target for the restriction.
The means chosen to achieve the aim of banning foreign donors obviously has the potential to catch more than that category of persons.
Individual permissible donors are confined under section 54 to those who are registered in an electoral register and quite clearly this can include persons who have a stake in the country and people such as Mr Bown who are not registered in an electoral register possibly because of an administrative error.
A critical issue, therefore, is whether the fact that someone such as he is caught by the breadth of section 54 can affect the way in which section 58 is to be construed.
At first sight it does not appear that this should influence the interpretation of section 58(2).
The court is given the power to order the forfeiture of an amount equal to the value of the donation.
It is not empowered at least not on the face of the subsection to order that an amount up to the value of the donation be forfeit.
And Lord Brown has articulated a strong argument to the effect that if this was the intention of Parliament, it could easily have been achieved.
One might also recognise that the notion of forfeiture is traditionally the deprivation of a specific amount or object.
Forfeiture is defined in the Oxford English Dictionary as the fact of losing or becoming liable to deprivation of (an estate, goods, life, an office, right, etc) in consequence of a crime, offence, or breach of engagement or that which is forfeited; a pecuniary penalty, a fine.
One of the definitions of forfeit is something to which the right is lost by the commission of a crime or fault.
These definitions indicate, I think, that the use of the word forfeiture is commonly associated with the deprivation of a defined thing.
There are strong policy reasons for interpreting section 58(2) in the manner that the appellant contends for, however.
The culpability of the offender is more easily reflected in the penalty if one has a calibrated reaction to the gradations of impermissibility that will arise; the impact on the party of the proposed forfeiture order can be assessed; whether it is a foreign donation can be taken into account; and the inaction of the Electoral Commission after it has discovered the impermissible donation can also weigh in the balance.
But the strongest and, ultimately, for me, the most convincing - argument in favour of the interpretation advanced by the appellant is that it was never intended that there be forfeiture in the true sense of that term where the donor was someone who was entitled to be on the electoral register but who was not registered because of an administrative error.
The sense that one gets from the Neill Report is that what was intended was the devising of a range of penalties to deal with the various types of impermissible donation and that the word forfeiture was not used in the report in its conventional connotation.
This much is, I think, clear from para 5.42 of the report where it was proposed that a sum not less than the donation should be liable to forfeiture from the partys funds and that in significant cases a penalty of up to ten times the donation might be levied.
Notably, this paragraph also contained the suggestion that, while a forfeiture power should also apply even if the receipt were innocent or inadvertent, the courts would clearly take into account the degree of culpability in setting the level of forfeiture (emphasis added).
The use of the phrase level of forfeiture clearly contemplates, in my opinion, a sanction involving the payment of a sum less than the full amount of the donation.
There is nothing in the White Paper that signals a movement by the government away from the essential purpose identified by the Neill Report and the reasoning that underlay its recommendations.
The changes to the Neill proposals came about as a matter of administrative expediency rather than for reasons of principle.
It is therefore possible to hold that, since the primary function of the Act was to ban foreign donors, the legislature must have intended that where others were caught because of the simplicity and breadth of the provision that was actually adopted to achieve that aim, they would not be subject to the same draconian penalty as those to whom the legislation was principally directed.
Lord Diplock, in commenting on the decision of the House of Lords in Inland Revenue Comrs v Ayrshire Employers Mutual Insurance Association Ltd [1946] 1 All ER 637, said that if the courts can identify the target of legislation, their proper function is to see that it is hit; not merely to record that it has been missed (Courts and Legislators, Holdsworth Club Presidential Address 1965, referred to in the second footnote on p 955 of Bennion on Statutory Interpretation, 5th ed (2008)).
One might adapt that statement slightly to meet the circumstances of the present case by saying that courts should ensure that the target is not subject to greater fire than was intended.
Concluding, as I therefore do, that the court has power to make an order of forfeiture for less than the full amount of the donation, I am of the view that the discretion of the court as to the level at which to fix the sanction at less than full forfeiture must be wide.
But I agree with Lord Phillips that where it is shown that a donation has come from an impermissible source it should be presumed that this is a foreign donation and that if the presumption is not rebutted, forfeiture should follow.
If, however, it can be shown that the donation was not from a foreign donor but came from someone who was entitled to be in an electoral register, the level of forfeiture should reflect the particular circumstances of the case.
I would therefore allow the appeal.
As to disposal, I agree with the order that Lord Phillips proposes should be made.
| The appeal concerns an order made by City of Westminster Magistrates Court for forfeiture of donations made to the United Kingdom Independence Party (UKIP), a registered political party.
Restrictions on donations to political parties are set out in Chapter II of Part IV of the Political Parties, Elections and Referendums Act 2000 ("PPERA").
Section 54 PPERA provides that a donation must not be accepted by a political party if the donor is not a permissible donor at the time of receipt.
Permissible donors are defined in section 54(2)(a) as individuals registered in an electoral register.
Under section 56(1) PPERA, a political party which receives a donation must take all reasonable steps to verify the identity of the donor and whether he is a permissible donor.
Under the terms of the statute, if a party is not satisfied that a donation is made by a permissible donor it can return the donation within thirty days.
Only if it fails to do so will it be regarded as having accepted the donation.
Sections 58 60 of PPERA provide for forfeiture in relation to donations made by impermissible donors.
In particular, section 58(2) provides that where a political party has accepted a donation which it is prohibited from accepting, the Electoral Commission may apply to a Magistrates Court for an order of forfeiture by the party of an amount equal to the value of the donation.
Mr Alan Bown, a member of UKIP, was entitled to be registered as an elector but, for the period 1 December 2004 2 February 2006, his name was not on any electoral register.
During that period Mr Bown made donations to UKIP amounting to 349,216.
UKIP did not return any of the donations within thirty days, or at all.
On 16 March 2007, the Electoral Commission applied to the City of Westminster Magistrates Court for an order of forfeiture of an amount equal to the donations.
The judge ordered the forfeiture of only 14,481, being the value of donations received by UKIP after the date of a meeting between the Electoral Commission and the party at which UKIP was aware that Mr Bown was not on the electoral roll.
Following judicial review proceedings challenging the decision of the Magistrates Court brought by the Electoral Commission, the Court of Appeal held that the Magistrates Court had erred in its construction of PPERA and had not made a valid exercise of discretion under s58(2): its decision was irrational and inadequately reasoned.
The Court held that (1) s.58(2) of PPERA required that an order for forfeiture of an unlawful donation must reflect the full sum of the donation, and (2) on the exercise of the discretion by the Magistrates Court, there is a strong presumption in favour of forfeiture.
UKIP appealed to the Supreme Court.
The appeal was allowed and the order of the Magistrates Court restored.
The majority of the Court (Lords Phillips, Mance, Kerr and Clarke) held that section 58(2) permitted the forfeiture of a sum less than the total donation and that the presumption in favour of forfeiture was displaced in the present case where the donor was eligible to be on the UK electoral register but had not been registered by reason of administrative oversight.
UKIP would be required to forfeit 14,481.
Three dissenting Justices (Lords Rodger, Brown and Walker) would have held that the full donation must be forfeited.
Lord Phillips, with whom Lords Mance, Kerr and Clarke agreed, decided that the appeal should be allowed.
Lord Phillips stated that the primary issue is whether section 58(2) confers a broad discretion on the court to choose to make an order for forfeiture or whether there is a strong presumption in favour of forfeiture (the presumption issue).
Related to the presumption issue is the issue of whether section 58(2) PPERA permits the court to make an order for partial forfeiture (the all or nothing issue).
In order to answer the questions raised in the appeal, it was necessary to look at the legislative history of PPERA, in particular the Fifth Report of the Committee on Standards in Public Life on the Funding of Political Parties in the United Kingdom, published in October 1998 (the Neill Report), and White Paper Cm4413.
That history provided a clear picture of the objects of Chapter II of Part IV of PPERA.
The primary object is to prevent donations to political parties from foreign sources.
Parliament made a significant change to the test proposed in the Neill Report in restricting permissible donors to those actually on an electoral register, excluding those eligible to be put on one.
The change was not due to the fact that there is anything undesirable about parties being funded by those who are not on an electoral register; rather, it was made for pragmatic reasons.
The secondary object of the Chapter II of Part IV of PPERA is to provide a scheme for achieving the primary object that is easy to apply, easy to police and that contains adequate sanctions for non compliance (paras [25] [26]).
There are two distinct objects of the power to forfeit in section 58(2).
The primary object of forfeiture is the direct prevention of the mischief that the legislation is designed to prevent the receipt by a political party of foreign funding.
The second object of the power to forfeit is to provide a deterrent or sanction against failure to comply with the requirements of the Act that are designed to make sure that donations are not received from an impermissible donor (paras [31] [35]).
Rather than following the eligibility test proposed by the Neill Report, Parliament chose to adopt a different scheme under which impermissible donations may or may not be foreign.
Under this scheme, the significance of an individual impermissible donation may vary widely.
It was clear that in making the power to forfeit discretionary, Parliament intended that the Magistrates Court should discriminate between cases where forfeiture was warranted and cases where it was not.
Parliament intended the court to consider whether forfeiture was a proportionate response to the facts of the particular case (paras [35] [36]).
Where a political party has accepted a donation from an impermissible source, there should be an initial presumption in favour of forfeiting the donation.
If the donor was eligible to be registered on the electoral roll, the initial presumption in favour of forfeiture will have been rebutted and the question will then be whether there have been failures to comply with those requirements of the Act that are designed to ensure that such donations are not accepted, and the nature of those failures (paras [47] [49]).
On the all or nothing issue, Lord Phillips noted that the language of section 58(2) suggests that there is only one amount that can be forfeited.
However, the word forfeit is used in an unusual way in the context of the statute, in a manner which is more akin to a fine.
Considering the context, the preferable interpretation is to treat the power to order forfeiture of an amount equal to the value of an impermissible donation as implicitly including the power to order forfeiture of a lesser sum (paras [50] [51]).
Lord Kerr (with whom Lord Mance agreed), whilst agreeing with the outcome proposed by Lord Phillips, held that the critical issue was the all or nothing issue.
If partial forfeiture is possible it follows that the courts discretion as to whether or not to order forfeiture should be wide; if not, a broad discretion is not likely to be appropriate.
As the primary aim of PPERA was to ban foreign donors, it was possible to hold that Parliament did not intend that where other donors were caught because of the simplicity and breadth of the provision that was adopted to achieve that aim, they would be subject to the same draconian penalty as those to whom the legislation was principally directed (para [114]).
The court has the power to make an order of forfeiture for less than the full amount of the donation, and its discretion as to the level at which to fix the sanction at less than full forfeiture must be wide.
Agreeing with Lord Phillips, where it is shown that a donation has come from an impermissible source it should be presumed that it is a foreign donation and, if that presumption is not rebutted, forfeiture should follow.
If, however, it can be shown that the donation came from someone who was entitled to be on an electoral register, the level of forfeiture should reflect the particular circumstances of the case (para [116]).
The dissenting judgments of Lord Rodger and Lord Brown (with whom Lord Walker agreed) held that the language of PPERA was clear.
UKIP was not permitted to retain money that it had not lawfully been entitled to receive.
Section 58(2) does not permit the forfeiture of a sum less than the donation.
In most cases, and certainly in this case where neither the benefit nor its value has ever been returned, it is difficult to see how the discretion could properly be exercised other than by order for forfeiture (paras [63] [64], [90] [95]).
|
Section 82(1) of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act) provides that where an immigration decision is made in respect of a person he may appeal to the Asylum and Immigration Tribunal, now the First Tier Tribunal (Immigration and Asylum) (the Tribunal).
Section 82(2) and (3A) define the meaning of an immigration decision and include at section 82(2)(h): a decision that an illegal entrant is to be removed from the United Kingdom by way of directions under paragraphs 8 to 10 of Schedule 2 to the Immigration Act 1971 (c77) (control of entry: removal).
We shall refer to the Immigration Act 1971 as the 1971 Act.
The issue that arises on this appeal is whether it is possible to challenge by way of an appeal an immigration decision within the meaning of section 82(2)(h) on the ground that the country or territory of destination stated in the notice of the decision is not one that would satisfy the requirements of para 8(1)(c) of Schedule 2 to the 1971 Act should removal directions to that country or territory in fact be given.
The facts
The appellant was born in Gaza in 1985.
In 1990, he left Gaza and went to Libya where he lived until about 2002.
He then spent time first in Italy and then in France before arriving clandestinely in a lorry in the United Kingdom in April 2007.
Some time after his arrival in the United Kingdom, he claimed asylum and humanitarian protection.
On 25 April 2007, he was served with a notice of illegal entry and of his liability to be detained under para 16(2) of Schedule 2 to the 1971 Act pending a decision whether or not he was to be given removal directions and be removed in pursuance of such directions.
By a letter dated 24 May 2007, the Secretary of State rejected the appellants asylum and human rights claims.
The letter was accompanied by a Form IS151B entitled Decision to remove an illegal entrant/person subject to administrative removal under section 10 of the Immigration and Asylum Act 1999 [the 1999 Act]Asylum/Human Rights Claim refused.
The notice said: a decision has now been taken to remove you from the United Kingdom.
It gave details about the appellants right of appeal.
Against the rubric REMOVAL DIRECTIONS appeared the following: If you do not appeal, or you appeal and the appeal is unsuccessful, you must leave the United Kingdom.
If you do not leave voluntarily, directions will be given for your removal from the United Kingdom to Palestine National Authority.
The appellant appealed.
By a determination promulgated on 19 July 2007, Immigration Judge Lloyd dismissed his appeal on both the asylum and human rights issues that he had raised.
She also dismissed his appeal in so far as it was based on the contention that the immigration decision made on 24 May was not in accordance with the law within the meaning of section 84(1)(e) of the 2002 Act.
The argument advanced was that the decision was not in accordance with the law because removal directions could not lawfully be given to remove the appellant to the Palestinian Territories pursuant to Schedule 2 to the 1971 Act, since it was not a country or territory to which there was reason to believe that he would be admitted within the meaning of para 8(c)(iv) of Schedule 2 to the 1971 Act.
The immigration judge accepted the evidence given on behalf of the appellant by Elizabeth Griffith, a case worker with the Refugee Legal Centre (as it then was).
Her evidence was that she had been told by a Mr Sumara at the Palestine General Delegate Office that a Palestinian could not return to the Palestinian Territories without an ID card.
An ID card was proof that the bearer was resident in either Gaza or West Bank.
Once in possession of an ID card, a Palestinian could apply for a passport/travel document.
She said that she explained the appellants circumstances to Mr Sumara.
These were that upon leaving Gaza, the appellant had lost contact with his family and that to the best of his knowledge, he did not have a birth certificate and had no other Palestinian identity papers.
Based on this information, Mr Sumara said that it was very unlikely that the appellant would be able to return to the Palestinian Territories.
Mr Sumara later said that it would be impossible for the appellant to return in view of the fact that he had no birth certificate, no living parents and no ID.
The appellant sought a reconsideration of the immigration judges determination by the Tribunal under section 103A of the 2002 Act.
He did not challenge the immigration judges findings in relation to his appeal on asylum or human rights grounds.
The sole basis for his challenge was that the immigration judge had materially erred in law in failing to accept his argument that the immigration decision was not in accordance with the law within the meaning of section 84(1)(e) of the 2002 Act.
On 17 August 2007, Senior Immigration Judge Jordan made an order for reconsideration.
On the reconsideration, the Tribunal (Mr Ockelton, Deputy President, Designated Immigration Judge OMalley and Immigration Judge Parkes) concluded that the immigration judge had not made any material error of law and ordered her decision to stand.
The appellants appeal against this decision was dismissed by the Court of Appeal (Rix, Scott Baker and Jacob LJJ): [2009] EWCA Civ 17; [2009] Imm AR 3.
The statutory framework
Section 82(1) of the 2002 Act provides that where an immigration decision is made in respect of a person, he may appeal to the Tribunal.
Section 82(2) defines immigration decision as meaning: (a) refusal of leave to enter the United Kingdom. (b) refusal of entry clearance, (c) refusal of a certificate of entitlement under section 10 of this Act, (d) refusal to vary a persons leave to enter or remain in the United Kingdom if the result of the refusal is that the person has no leave to enter or remain, (e) variation of a persons leave to enter or remain in the United Kingdom if when the variation takes effect the person has no leave to enter or remain, (f) revocation under section 76 of this Act of indefinite leave to enter or remain in the United Kingdom, (g) a decision that a person is to be removed from the United Kingdom by way of directions under section 10(1)(a), (b), (ba) or (c) of the Immigration and Asylum Act 1999 (c33) (removal of person unlawfully in United Kingdom), (h) a decision that an illegal entrant is to be removed from the United Kingdom by way of directions under paragraphs 8 to 10 of Schedule 2 to the Immigration Act 1971 (c77) (control of entry: removal), (ha) a decision that a person is to be removed from the United Kingdom by way of directions under section 47 of the Immigration, Asylum and Nationality Act 2006 (removal: persons with statutorily extended leave), (i) a decision that a person is to be removed from the United Kingdom by way of directions given by virtue of paragraph 10A of that Schedule (family), (ia) a decision that a person is to be removed from the United Kingdom by way of directions under paragraph 12(2) of Schedule 2 to the Immigration Act 1971 (c77) (seamen and aircrews), (ib) a decision to make an order under section 2A of that Act (deprivation of right of abode), (j) a decision to make a deportation order under section 5(1) of that Act, and (k) .
Section 84(1) specifies the grounds on which an appeal under section 82(1) against an immigration decision must be brought.
They include: (c) that the decision is unlawful under section 6 of the Human Rights Act 1998 (c42) (public authority not to act contrary to Human Rights Convention) as being incompatible with the appellants Convention rights; (e) that the decision is otherwise not in accordance with the law; . (g) that removal of the appellant from the United Kingdom in consequence of the immigration decision would breach the United Kingdoms obligations under the Refugee Convention or would be unlawful under section 6 of the Human Rights Act 1998 as being incompatible with the appellants Convention rights.
Section 120 provides: (1) This section applies to a person if (a) he has made an application to enter or remain in the United Kingdom, or (b) an immigration decision within the meaning of section 82 has been taken or may be taken in respect of him. (2) The Secretary of State or an immigration officer may by notice in writing require the person to state (a) his reasons for wishing to enter or remain in the United Kingdom, (b) any grounds on which he should be permitted to enter or remain in the United Kingdom, and (c) any grounds on which he should not be removed from or required to leave the United Kingdom.
Schedule 2 to the 1971 Act provides: 8. (1) Where a person arriving in the United Kingdom is refused leave to enter, an immigration officer may, subject to sub paragraph (2) below (a) give the captain of the ship or aircraft in which he arrives directions requiring the captain to remove him from the United Kingdom in that ship or aircraft; or (b) give the owners or agents of that ship or aircraft directions requiring them to remove him from the United Kingdom in any ship or aircraft specified or indicated in the directions, being a ship or aircraft of which they are the owners or agents; or (c) give those owners or agents directions requiring them to make arrangements for his removal from the United Kingdom in any ship or aircraft specified or indicated in the direction to a country or territory so specified being either (i) a country of which he is a national or citizen; or (ii) a country or territory in which he has obtained a passport or other document of identity; or (iii) a country or territory in which he embarked for the United Kingdom; or (iv) a country or territory to which there is reason to believe that he will be admitted. 9. (1) Where an illegal entrant is not given leave to enter or remain in the United Kingdom, an immigration officer may give any such directions in respect of him as in a case within paragraph 8 above are authorised by paragraph 8(1). (2) Any leave to enter the United Kingdom which is obtained by deception shall be disregarded for the purposes of this paragraph. 10. (1) Where it appears to the Secretary of State either that directions might be given in respect of a person under paragraph 8 or 9 above, but that it is not practicable for them to be given or that, if given, they would be ineffective; or (a) (b) that directions might have been given in respect of a person under paragraph 8 above but that the requirements of paragraph 8(2) have not been complied with; then the Secretary of State may give to the owners or agents of any ship or aircraft any such directions in respect of that person as are authorised by paragraph 8(1)(c). (2) Where the Secretary of State may give directions for a persons removal in accordance with sub paragraph (1) above, he may instead give directions for his removal in accordance with arrangements to be made by the Secretary of State to any country or territory to which he could be removed under sub paragraph (1).
The 2002 Act was enacted on 7 November 2002 and the provisions relating to appeals came into force on 1 April 2003.
The Immigration (Notices) Regulations 2003 (SI 2003/658) (the 2003 Regulations) were made on 11 March 2003 and came into force on 1 April 2003.
The 2003 Regulations were made by the Secretary of State in exercise of the powers conferred on him by section 105 and 112(1) to (3) of the 2002 Act.
They were subject to annulment in pursuance of a resolution by either House of Parliament.
Regulation 4(1) provides that: Subject to regulation 6, the decision maker must give written notice to a person of any immigration decisiontaken in respect of him which is appealable.
Regulation 2 provides that an immigration decision has the same meaning as in section 82(2) and (3A) of the 2002 Act.
Regulation 5 provides: (1) A notice given under regulation 4(1) . (b) if it relates to an immigration decision specified in section 82(2)(a), (g), (h), (ha), (i), (ia) (j) or (3A) of the 2002 Act (i) shall state the country or territory to which it is proposed to remove the person; or (ii) may, if it appears to the decision maker that the person to whom the notice is to be given may be removable to more than one country or territory, state such countries or territories
The relevant legislative background to the 2002 Act
The 1971 Act did not create a general right to challenge removal directions, but limited that right to two circumstances.
First, section 16 provided that, where removal directions were given for a persons removal (a) on the ground that he was an illegal entrant or had entered the United Kingdom in breach of a deportation order, or (b) under the special powers conferred by Schedule 2 to the 1971 Act in relation to members of the crew of a ship or aircraft coming to the United Kingdom to join a ship or aircraft as a member of the crew, he could appeal on the ground that on the facts of the case there was no power to give the directions on the ground on which they were given.
Secondly, section 17 of the 1971 Act gave a right of appeal against removal directions on the basis that removal should be to a different country or territory from that specified by the Secretary of State.
That right was only given where directions were given for a persons removal from the United Kingdom (a) on his being refused leave to enter; or (b) on a deportation order being made against him; or (c) on his having entered the United Kingdom in breach of a deportation order.
This position did not change following the introduction of the Asylum and Immigration Act 1993 (the 1993 Act).
Section 8(4) of the 1993 Act did, however, extend the right of illegal entrants to appeal against removal directions on the ground that removal would be contrary to the United Kingdoms obligations under the Refugee Convention.
Section 10(1) of the 1999 Act provided: A person who is not a British citizen may be removed from the United Kingdom, in accordance with directions given by an immigration officer, if (a) having only a limited leave to enter or remain, he does not observe a condition attached to the leave or remains beyond the time limited by the leave; (b) he uses deception in seeking (whether successfully or not) leave to remain; or (ba) his indefinite leave to enter or remain has been revoked under section 76(3) of the Nationality Immigration and Asylum Act 2002 (person ceasing to be refugee); (c) directions have been given for the removal under this section of a person to whose family he belongs.
The 1999 Act repealed Part 2 of the 1971 Act (which included sections 16 and 17), but the restricted right to challenge removal directions provided by the earlier statute was reproduced in sections 66 and 67 of the 1999 Act.
The right of appeal on the ground that on the facts of the case there was no power in law to give removal directions on the ground on which they were given was extended to those who could be removed under section 10 of the 1999 Act.
It was also held by the Court of Appeal in R (Kariharan & Another) v Secretary of State for the Home Department [2002] EWCA Civ 1102, [2003] QB 933 that there was a right of appeal against removal directions under section 65 of the 1999 Act on the ground that removal would be in breach of a persons rights under the European Convention on Human Rights (the ECHR).
The appellants argument
The following is a summary of the submissions of Mr Knafler QC.
An immigration decision may be appealed by an illegal entrant on the ground that it is otherwise not in accordance with the law within the meaning of section 84(1)(e) when the notice of the decision states that he is to be removed to a country or territory to which he contends it is not lawful to give directions to remove him under the 1971 Act.
The decision under section 82(2)(h) is not simply that an illegal entrant is to be removed.
It is that he is to be removed by way of directions under paragraphs 8 to 10 of Schedule 2 to the Immigration Act 1971.
Para 8(1)(c) limits the countries or territories to which removal is legally possible.
Whether it is legal to remove an illegal entrant to a particular country or territory is manifestly relevant to the lawfulness of the decision to remove.
The specifying or proposing of a particular country or territory in a notice of an immigration decision to remove an illegal entrant is an integral part of the decision.
The Secretary of State has to do no more than show that the destination country or territory to which he proposes to remove an illegal entrant is one to which there is reason to believe that the illegal entrant will be admitted within a reasonable time of the making of the immigration decision.
An appeal to the Tribunal is a more effective mechanism than judicial review for resolving disputes as to the lawfulness of removing persons to particular destinations.
To require a challenge to the proposed destination country or territory to be by way of appeal against the immigration decision, rather than by judicial review of the removal directions when given is also more consistent with the one stop policy that is embodied in section 120 of the 2002 Act.
It means that any challenge to the proposed destination stated in the notice of decision can be resolved by an appeal at the decision stage rather than by judicial review at the stage when the removal directions are actually given.
Mr Knafler also says that his interpretation is supported by regulation 5(1)(b)(i) of the 2003 Regulations, which provides that the notice of an immigration decision : shall state the country or territory to which it is proposed to remove the person (emphasis added).
Discussion
Central to this appeal is the question whether the specifying or proposing of a particular country or territory in a notice of an immigration decision to remove an illegal entrant within the meaning of section 82(2)(h) of the 2002 Act is an integral part of the decision.
If it is, then there is a right of appeal under section 84(1)(e) if it is not in accordance with the law to specify the country or territory that has been specified.
We shall use the phrase destination country to denote the country or territory to which the notice proposes to remove the illegal entrant.
The language of the 2002 Act
There are a number of reasons why the language of section 82(2)(h), when read in its statutory context, does not support the argument that the proposing of a destination country is an integral part of an immigration decision.
First, in section 84 a clear distinction is drawn between an immigration decision that a person is to be removed from the United Kingdom and removal pursuant to removal directions in consequence of an immigration decision.
Section 84(1)(g) provides as a ground of appeal that removal of the appellant from the United Kingdom in consequence of the immigration decision would breach the Refugee Convention or be incompatible with the appellants ECHR rights.
The use of the conditional would is to be contrasted with the use of the present tense is in sections 84(1)(a)(c) and (e).
Thus Parliament has provided that in a case where it is alleged that removal in consequence of a decision to remove would involve a breach of the Refugee Convention or the ECHR, there is a right of appeal against the immigration decision itself.
But that is the only case where Parliament has provided a right of appeal against a decision to remove by reference to the potential illegality of a consequent removal.
This is a strong indication that the proposing of a destination country is not an integral part of an immigration decision under section 82(2)(h).
Secondly, the decisions referred to in section 82 that a person is to be removed are all decisions that a person is to be removed from the United Kingdom.
None refers to a destination.
This indicates that a destination is not part of a decision.
That is consistent with the fact that some removal directions are not required to propose a destination at all: see para 8(1)(a) and (b) of Schedule 2 to the 1971 Act.
Thirdly, the words by way of directions under paragraphs 8 to 10 of Schedule 2 to the Immigration Act 1971 Act do not mean that the immigration decision itself must comply with the requirements of paras 8 to 10 of Schedule 2 to the 1971 Act.
Section 82(2) describes one of five types of immigration decision that a person is to be removed from the United Kingdom.
The same formula of by way of directions under is used in each case.
In each case, the words by way of directions etc describe and identify the type of immigration decision that may be the subject of an appeal.
The purpose is not to describe the content of lawful directions under the relevant statutory provision, since that is done by the statutory provision itself.
Fourthly, a person who is not an illegal entrant, but is refused leave to enter, can be the subject of removal directions under para 8 of Schedule 2.
But an immigration decision under section 82(2)(a) (refusal of leave to enter) is not required to say anything about removal, still less specify the destination country to which it is proposed to remove the person.
It follows that a person who is refused leave to enter cannot appeal against the refusal of leave to enter on the ground that removal to the destination country proposed in the notice of decision would not be in accordance with para 8 of Schedule 2 to the 1971 Act.
But if the proposing of a destination country is an integral part of an immigration decision under section 82(2)(h), it is difficult to see why Parliament did not provide that the proposing of a destination country should not also be an integral part of any decision from which removal directions will result.
There is no rational basis for distinguishing between an immigration decision within the meaning of section 82(2)(h) and any other immigration decision from which removal directions will result.
This indicates that Parliament is unlikely to have intended that the proposing of a destination country should be an integral part of any immigration decision.
Fifthly, it is (rightly) common ground that there is no right of appeal against removal directions under the 2002 Act.
The power to give removal directions is given by Schedule 2 to the 1971 Act.
It includes the power to give detailed directions requiring arrangements to be made for the removal of a person in any ship or aircraft specified.
Mr Knafler acknowledges that there is no right of appeal against directions of a technical nature in relation to the removal, such as the specifying of a particular ship or aircraft and other detailed mechanics of return or technical matters: see HH (Somalia) and others v Secretary of State for the Home Department [2010] EWCA Civ 426 at [82] to [84].
But he says that the specifying of a particular destination is of a different character from directions of a technical nature and that there is a right of appeal in respect of that.
We shall deal with his argument based on the 2003 Regulations later.
But it is impossible, as a matter of construction of section 82(2)(h), to make the distinction between the different removal directions that Mr Knafler seeks to make.
Either section 82(2)(h) imports into the immigration decision all future removal directions or it imports none.
There is no warrant in the language of section 82(2)(h) for saying that the only direction that is imported into the decision is that which specifies the country of destination.
The legislative history
When the legislative history is taken into account, it becomes even clearer that Parliament did not intend that any of the removal directions should be treated as an integral part of the immigration decision.
When Parliament provided for a right of appeal against removal directions in previous legislation, it did so in express terms.
The 1971 and 1999 Acts permitted an appeal against the directions.
When the 1999 Act introduced a right to challenge prospective removal to a particular country, it did so in similarly clear terms: see section 67(2).
The 2002 Act does not permit a challenge to removal directions on any grounds.
And yet, if Mr Knafler is right, the effect of sections 82(2)(h) and 84(1)(e) is that an illegal entrant can challenge the lawfulness of future removal directions on grounds which could not have been the subject of challenge under any of the previous legislation.
Under the pre 2002 legislation, those who were refused leave to enter, leave to remain or were the subject of a deportation order could challenge removal directions on the basis that removal should be a different country or territory from that specified by the Secretary of State, but no class of person could challenge removal directions on the ground that there were no grounds for believing that he or she would not be admitted to the destination country.
The declared purpose of the 2002 Act in relation to removal directions was set out in the Explanatory Notes to the statute which at para 220 stated: .
The position relating to removal directions has been clarified.
It is the initial immigration decision which may result in removal which attracts the right of appeal, not any consequential giving of directions to the carrier or re giving of directions following an appeal or temporary suspension.
In the light of this purpose, it would be remarkable if the effect of the 2002 Act were that a person could challenge future removal directions at all, let alone on grounds on which removal directions that had been given could not have been challenged under the previous legislation.
Practical and policy considerations
There are also practical and policy considerations which justify the conclusion that Parliament is unlikely to have intended a scheme such as that for which the appellant contends.
These provide yet further support for the interpretation of section 82(2)(h) which, for the reasons already given, we would adopt.
The controversial issues raised by immigration decisions are usually (i) whether the person is entitled to benefit from the immigration rules (eg whether he is an illegal entrant or entitled to leave to enter or leave to remain) and (ii) whether he is entitled to international protection under the Refugee Convention or the ECHR.
These are suitable for determination at a one stop appeal as envisaged by section 120 of the 2002 Act.
We acknowledge that, if there is a long period between the date of determination and the date when removal directions are given, there may be a change in circumstances which materially affects the decision on asylum and humanitarian issues.
But in many cases a decision on these issues will be determinative of the question whether an immigration decision that a person is to be removed from the United Kingdom is lawful.
On the other hand, the ability of the Secretary of State to give removal directions (whether under Schedule 2 to the 1971 Act or otherwise) will frequently depend on practical and operational issues which are only capable of being addressed shortly before the removal is to take place.
These issues are inherently unsuitable for resolution at the time of an appeal, when the question of entitlement to international protection and/or whether there is a right to leave to enter or remain in the United Kingdom is being determined and at a time which may be long before the Secretary of State is in a position to give removal directions.
As Sedley LJ stated in the Court of Appeal in R (MS, AR and FW) v Secretary of State for the Home Department [2009] EWCA Civ 1310 at [26]: It is also the case that the obstacles to return are commonly an amalgam of fact, governmental practice and policy, international law and local law, often in a form which is impossible to disentangle.
Thus at the stage when no removal directions have yet been given, it may be difficult, if not impossible, for the Secretary of State or the Tribunal to determine when, if at all, it will be practicable to give them.
We take account of the fact that, as Mr Knafler points out, the threshold set by para 8(1)(c)(iv) of Schedule 2 to the 1971 Act is no higher than that the destination country is one to which there is reason to believe that he will be admitted.
But take the present case where the obstacles to the appellants removal are of a practical nature and concern the documentation necessary to secure his admission to the Palestinian Territories.
It may be very difficult for the Secretary of State at the decision stage and the Tribunal at the appeal stage to decide whether, when the removal directions come to be given in the future, the Palestinian Territories will be a country or territory to which there is reason to believe that the appellant will be admitted.
There is no reason to suppose that the Secretary of State will give directions for the removal of the appellant to the Palestinian Territories until he is satisfied that there is reason to believe that he will be admitted.
The Secretary of State may need to engage in a detailed dialogue with the Palestine General Delegates Office about the appellants circumstances and possible methods of re documentation.
The Tribunal would not be in a position to evaluate any of this at an appeal before removal directions have been given.
In the unlikely event that removal directions are given which cannot be implemented and the Secretary of State stands by his directions despite the practical problems identified by the person to be removed, then judicial review is available.
But that should rarely be necessary, because the practical issues of the type that are not susceptible to appeal under section 84 of the 2002 Act are unlikely to be controversial.
On the other hand, the construction advanced on behalf of the appellant is inimical to the finality which the one stop procedure is intended to achieve.
If Mr Knafler is right, in the case of a person who has successfully challenged prospective removal directions, the Secretary of State is required to make a fresh section 82(2)(h) decision before the removal can proceed.
In this way, a further right of appeal may be generated, although it has already been finally determined that the person had no entitlement to remain in the United Kingdom at all, whether under this countrys international obligations or under the immigration rules.
The 2003 Regulations
Is a different conclusion as to the true interpretation of section 82(2)(h) compelled by regulation 5 of the 2003 Regulations? Mr Knafler submits that regulation 5 sheds light on the meaning of section 82(2)(h) of the 2002 Act.
As Lord Lowry said in Hanlon v The Law Society [1981] AC 124, 193H 194C, there are circumstances in which regulations made under a statute and contemporaneously with it may confirm a certain interpretation of the statute or be a reliable guide to its meaning.
But, as he also said, regulations do not decide or control its meaning, since that would be to substitute the rule making authority for the judges as interpreter and would disregard the possibility that the regulation relied on was misconceived or ultra vires.
We doubt whether regulation 5 may be used as an aid to the true construction of section 82(2)(h).
Although the 2003 Regulations and the relevant provisions of the 2002 Act came into force on the same day, the regulations were made on 11 March 2003, some months after the 2002 Act was enacted on 7 November 2002.
As Lord Lowry said, regulations do not decide or control the meaning of the statute under which they are made, since the possibility that the regulations are ultra vires cannot be disregarded.
For the reasons that we have given, we consider that the meaning of section 82(2)(h) is clear and unambiguous and there is no need to seek confirmation or light from the 2003 Regulations as an aid to construction, even if it is a legitimate exercise to do so.
The explanation for the requirement in regulation 5(1)(b)(i) that the notice of decision should state the country or territory to which it is proposed to remove the person is that given by the Court of Appeal in this case and in the other decisions referred to at [28] of Rix LJs judgment.
It is that the proposed country of destination is needed in order to provide a focus for the issues which might arise for the purpose of an applicants asylum and human rights claims.
Indeed, it will usually be necessary for the immigration decision to identify the proposed destination country if the person is to be able to appeal under section 84(1)(c) or (g) at all.
Appeals on the ground that to remove a person would breach his rights under the ECHR or the Refugee Convention usually involve a consideration of whether the conditions in a particular proposed destination country are such that his removal to that country would breach those rights.
In the context of a proposed removal, an appeal on asylum or human rights grounds cannot be made in the abstract.
The purpose of regulation 5, therefore, is to make the right of appeal given by section 84(1)(c) and (g) effective.
We would add that we agree with the further point made by Rix LJ at [29] that: a proposed destination is not the same as a destination to which the Secretary has decided to remove the applicant, and may not even amount to a destination to which the Secretary of State intends to remove the applicant.
Conclusion
Our attention has been drawn to a number of previous decisions, including GH (Iraq) v Secretary of State for the Home Department [2005] EWCA Civ 1182, [2006] INLR 36; AK v Secretary of State for the Home Department [2006] EWCA Civ 1117, [2007] INLR 195; MA (Somalia) v Secretary of State for the Home Department [2009] EWCA Civ 4, [2009] Imm AR 413 and HH (Somalia) (already cited).
We do not consider that anything that we have said in this judgment calls into question the decisions in these cases.
For the reasons that we have given, we would dismiss this appeal.
There is no right of appeal against an immigration decision under section 82(2)(h) on the ground that the country or territory stated in the notice of the decision is not one that would satisfy the requirements of para 8(1)(c) of Schedule 2 to the 1971 Act.
| The appellant was born in Gaza in 1985.
Having lived in Libya until about 2002, he then spent time in mainland Europe before arriving in the UK in April 2007.
He subsequently claimed asylum and humanitarian protection.
On 24 May 2007, the Home Secretary refused the appellants asylum and human rights claims.
The letter sent by the Home Secretary recorded that a decision had been taken to remove the appellant from the UK and stated: If you do not appeal, or you appeal and the appeal is unsuccessful, you must leave the United Kingdom.
If you do not leave voluntarily, directions will be given for your removal from the United Kingdom to Palestine National Authority.
The appellant appealed the decision under section 82 (2) (h) of the Nationality, Immigration and Asylum Act 2002 (the 2002 Act).
He did so on the grounds that the decision was not in accordance with the law within the meaning of section 84 (1) (e) of the 2002 Act.
The appellant argued that this was so because directions for his removal to the Palestinian Territories could not lawfully be given under Schedule 2 of the Immigration Act 1971 (the 1971 Act), since paragraph 8 (1) (c) of Schedule 2 required that there was reason to believe that he would be admitted to the country chosen.
The immigration judge accepted the evidence given in support of the appellant that, owing to his lack of documents and the fact that he did not have any living parents, he would not be admitted to the Palestinian Territories.
However, the immigration judge rejected the appellants argument that this meant that the decision was not in accordance with the law under section 84 of the 2002 Act.
The Immigration Tribunal and the Court of Appeal agreed with the immigration judge.
The appellant appealed to the Supreme Court.
The Supreme Court unanimously dismissed the appeal.
The Court held that there is no right of appeal against an immigration decision under section 82 (2) (h) of the 2002 Act on the ground that the country or territory stated in the notice of the decision is not one that would satisfy the requirements of paragraph 8 (1) (c) of Schedule 2 to the 1971 Act.
Sir John Dyson SCJ gave the courts judgment.
Central to the appeal was the question of whether the proposal, in a notice of an immigration decision, of a particular country to which the appellant was to be removed was an integral part of that decision [para 21].
A clear distinction was drawn in section 84 of the 2002 Act between the decision that a person is to be removed from the United Kingdom and removal under removal directions [22].
This was a strong indication that the proposal of a destination country in an immigration decision was not an integral part of the decision itself.
Section 82 of the 2002 Act referred to decisions that a person is to be removed from the United Kingdom.
None of the decisions referred to mentioned a country of destination [24].
The fact that one type of decision mentioned in section 82 (2) (h) of the 2002 Act referred to a decision that an illegal entrant is to be removed from the United Kingdom by way of directions under paragraphs 8 to 10 of Schedule 2 to the Immigration Act 1971 (emphasis added) did not mean that an immigration decision must comply with Schedule 2 of the 1971 Act.
The reference to the 1971 Act was merely descriptive of the type of decision appealed [25].
Not all of the decisions mentioned in section 82 required a proposed destination to be indicated to an applicant when the decision was communicated to him/her.
If the proposal of a destination was an integral part of an immigration decision under section 82 (2) (h), it was difficult to see why Parliament did not provide that the proposal of a destination country should not also be an integral part of any decision from which removal directions will result [26].
It was acknowledged by both parties that there was no right of appeal against removal directions under the 2002 Act.
The power to make removal directions was granted by Schedule 2 to the 1971 Act.
The Appellant had acknowledged that there was no right of appeal against directions of a technical nature such as the specification of a particular ship or aircraft to be used for removal, but submitted that the specification of a particular destination was of a different character to these types of directions.
It was, however, impossible to make the distinction sought by the Appellant [27].
The legislative background and explanatory notes to the 2002 Act supported the Courts conclusion [28 29].
There were also policy reasons which prevented the kind of challenge put forward by the Appellant [30 34].
The ability of the Secretary of State to give removal directions frequently depended on practical and operational issues that were inherently unsuitable for resolution at the time of the appeal against the decision.
In the unlikely event that removal directions were given which could not be implemented as the person concerned could not enter the country of destination, judicial review was available.
Regulation 5 (1)(b)(i) of the Immigration (Notices) Regulations 2003 (the Regulations), which stated that the notice of an immigration decision should state the country or territory to which it is proposed to remove the person, did not assist the Appellant [35 38].
The Appellant had submitted that the Regulations shed light on the meaning of the 2002 Act.
However, the meaning of section 82 (2) (h) was clear and unambiguous and there was no need to use the Regulations to discern its meaning.
The reason for the requirement in regulation 5 was that the proposed destination was needed in order to provide a focus for the issues which might arise under an applicants asylum and human rights claims.
|
Now that it is clear that the test for determining whether a child was habitually resident in a place is whether there was some degree of integration by her (or him) in a social and family environment there, may the court, in making that determination in relation to an adolescent child who has resided, particularly if only for a short time, in a place under the care of one of her parents, have regard to her own state of mind during her period of residence there in relation to the nature and quality of that residence? In my view this is the principal question raised by these appeals.
The appeals are brought within proceedings issued by a mother against a father for the summary return of their four children from England to Spain pursuant to the Hague Convention on the Civil Aspects of International Child Abduction 1980 (the Convention) and to section 1(2) of the Child Abduction and Custody Act 1985 (the 1985 Act).
The father is a UK national aged 47 and lives in the Thames Valley.
The mother is a Spanish national aged 46 and lives in Madrid.
The four children are T, a girl, who was born in August 2000 and is now aged 13; L, a boy, who was born in December 2002 and is now aged 11; A, a boy, who was born in November 2004 and is now aged 9; and N, a boy, who was born in December 2008 and is now aged 5.
All four children were born in England.
They are Spanish nationals and are presumably also UK nationals.
They currently reside with the father.
At all times until July 2012, when the relationship between the parents broke down, the family had lived in England and had gone for holidays to Spain in order, in particular, to see the maternal grandmother and the other maternal relations.
On 24 July 2012 the mother took the four children to reside in Spain.
They resided in Spain until 23 December 2012, when they returned to England for what was agreed between the parents to be no more than a holiday with the father which was to end on their return to Spain on 5 January 2013.
But the children did not then return to Spain.
They have remained in England ever since.
In the mothers proceedings under the Convention for the summary return of the children to Spain, instituted on 21 January 2013, the father made an interlocutory application under rule 16.2 of the Family Procedure Rules 2010 (SI 2010/2955) for T to be made a second respondent and to be represented by a childrens guardian.
On 12 April 2013 Cobb J dismissed the application.
The same judge heard the mothers substantive application over three days in May 2013 and received oral evidence from the parents and from Ms Vivian, an officer in the High Court team of the Children and Family Court Advisory and Support Service (Cafcass).
By a reserved judgment, [2013] EWHC 1383 (Fam), Cobb J explained his reasons for then ordering that all four children be forthwith returned to Spain.
Four issues were raised for Cobb Js determination.
First, the father disputed that the children had been habitually resident in Spain on the date of his retention of them in England, namely on 5 January 2013, and he therefore contended that the retention was not wrongful under article 3 of the Convention.
He contended that they had not acquired a habitual residence in Spain at any time between 24 July 2012 and 5 January 2013 and, in particular, that he had not consented to their going to Spain for longer than a holiday in the summer 2012.
The result (contended the father) was that they had never lost their habitual residence in England.
Cobb J rejected these contentions.
He found that in July 2012 the father had agreed with the mother that she should take the children to reside in Spain indefinitely and that, partly for that and partly for another reason which I will explain in paras 28 and 29, all four children had lost their habitual residence in England on or shortly after 24 July 2012, had acquired a habitual residence in Spain during the autumn 2012 and had continued to have it on 5 January 2013.
The judge therefore held that the retention was wrongful under article 3.
Second, the father contended, pursuant to article 13 of the Convention, that the three older children objected to being returned to Spain and had attained an age and a degree of maturity at which it was appropriate to take account of their views.
Cobb J upheld the contention that T objected to being returned to Spain and had attained the requisite age (then 12 years and nine months) and degree of maturity.
He found, by contrast, that, although L and A had also attained an age and a degree of maturity at which it was appropriate to take account of their views, their expressed wishes not to return to Spain had the character only of preferences rather than of objections.
Third, the father contended, also pursuant to article 13, that there was a grave risk that the return of the children to Spain would place one or more of them in an intolerable situation.
Cobb J rejected this contention.
Fourth, the father contended that, insofar as Cobb J might have upheld either his second or third contentions in relation to any of the children, he should exercise the discretion thereby conferred on him by article 13 to decline to order the return of that child to Spain.
Notwithstanding that he had indeed upheld the fathers second contention in relation to T, Cobb J decided not to exercise his resultant discretion to decline to order her to return to Spain.
The father appealed to the Court of Appeal against Cobb Js order.
But there were three further appellants, namely, T, L and A. Following Cobb Js order T had consulted a solicitor, who had concluded that she had sufficient understanding to give instructions in the matter; and L and A had consulted another solicitor, who had concluded that they too had sufficient understanding to give instructions.
At an interlocutory hearing a single Lord Justice granted permission to all three of them to appeal against Cobb Js failure to make them parties to the proceedings.
The Court of Appeal was later to express some doubt (which it put to one side) whether it was open to T to appeal against Cobb Js dismissal of an application made by the father rather than by herself.
In fact, since she had been adversely affected by the dismissal, she did have the requisite status to bring an appeal: George Wimpey UK Ltd v Tewkesbury Borough Council [2008] EWCA Civ 12, [2008] 1 WLR 1649.
But, on any view, the permitted appeal of L and A was highly problematic in that no one had suggested to Cobb J that they should become parties.
On 1 August 2013 the Court of Appeal heard the appeals and on 15 August 2013 it handed down its judgments, [2013] EWCA Civ 1058.
Black LJ delivered the substantive judgment and Hallett and Gloster LJJ agreed with it.
It is against two of the orders which the court then made that the present appeals are brought.
The Court of Appeal dismissed the appeals not only of L and A but also of T against Cobb Js failure (or, rather, in Ts case, his refusal) to make them parties to the proceedings.
T now appeals against the dismissal in relation to her.
This is the subsidiary appeal before the court.
There were in effect three grounds of the fathers appeal to the Court of Appeal.
First, he contended that Cobb J had been wrong to hold that the children had been habitually resident in Spain on 5 January 2013.
He argued not only that the judge had been wrong to find that he had consented to their removal to Spain for longer than the summer holiday 2012; but also that, on the evidence, they had never been integrated in the Spanish environment to any significant degree and, more specifically, that the judge had failed to consider Ms Vivians reports of statements by the three older children to her that they had never considered that Spain had become their home.
The Court of Appeal rejected this first ground of appeal.
It is against its refusal to set aside the judges conclusion that the children had become habitually resident in Spain by 5 January 2013 that the father and T appeal.
These are the primary appeals before the court.
In rejecting the first ground the Court of Appeal held that the judge had not been wrong to find that the father had consented to the removal of the children for an indefinite period.
There is no remaining issue in that specific regard: that the father consented to it is therefore now an established fact.
The Court of Appeal also held that the judge had been entitled to find that the children had achieved some degree of integration in Spain; and, more specifically, that, insofar as their perceptions were relevant to their integration (which, without deciding, the court conceded was possible), Cobb J had sufficiently considered them.
Second, the father contended that Cobb J had been wrong to characterise the wishes of L and A not to return to Spain as only preferences rather than as objections.
The Court of Appeal rejected this ground.
Third, the father contended that, having found that T objected to being returned to Spain and had attained the requisite age and degree of maturity, Cobb J had erred in deciding not to exercise his resultant discretion to decline to order her to return to Spain.
The Court of Appeal upheld this ground.
It concluded that, in exercising his discretion, the judge had failed to give sufficient weight either to the robustness of Ts objections or to the fact that until July 2012 she had always lived in England.
The Court of Appeals conclusion that T should not be the subject of an order for return to Spain under the Convention created a new dimension to the inquiry in relation to the three younger children.
For it precipitated a need to inquire whether there was a grave risk that their return to Spain would place them in an intolerable situation in that, for the first time in their lives, they would be separated from T.
The Court of Appeal concluded that the evidence before it was too limited to enable it to determine this issue and that the proceedings should be remitted to a judge of the Family Division for its determination.
All three of the younger children have been joined as parties to the remitted proceedings on the basis that, as are L and A in this court, they will be represented by Ms Vivian as their guardian.
The further hearing is due to begin shortly.
In addressing his application for permission to appeal to this court, Black LJ described the father as having been largely successful in the Court of Appeal.
With respect, I do not accept that description.
The difficulty for the father is that Spain is a fellow state of the European Union and that therefore, in the present proceedings, the provisions of Council Regulation (EC) No 2201/2003, commonly called Brussels II Revised (B2R), are grafted on to the provisions of the Convention and indeed, by article 60 of B2R and section 1(3) of the 1985 Act, take precedence over them.
By recital 12 of B2R the Council observed that the best interests of a child are served by a general rule that the court of the state of her habitual residence should, in the first place, have jurisdiction to determine future arrangements for her.
By recital 17 it accepted that under the Convention a state could decline to order a childs return to the state of her habitual residence in specific, duly justified, cases but then it added however, such a decision could be replaced by a subsequent decision by the court of the member state of habitual residence of the child prior to the wrongful removal or retention.
In the body of B2R this was duly achieved by a combination of article 10, which provides for the continuing jurisdiction of the state of habitual residence following a wrongful removal or retention save in circumstances immaterial to the present case, and of article 11(8) which provides: Notwithstanding a judgment of non return pursuant to article 13 of the 1980 Hague Convention, any subsequent judgment which requires the return of the child issued by a court having jurisdiction under this Regulation shall be enforceable in accordance with section 4 of Chapter III below in order to secure the return of the child.
Section 4 of Chapter III of B2R provides, by article 42(1), that, provided that the judge in the state of habitual residence shall have certified that the parties and, if appropriate, the child were given an opportunity to be heard and that he took account of the reasons for the refusal of the requested court to order the childs return under the Convention, there can be no facility for challenge in the requested state to his order for the childs return.
His order enjoys procedural autonomy: Rinau v Rinau (Case C 195/08PPU) [2009] Fam 51, para 63.
Thus B2R has added a dramatic further dimension to proceedings under the Convention in which the application is for the childs return to a fellow EU state.
When, on whatever basis, it refuses an application under the Convention for return to a non EU state, a court in England and Wales will conventionally embark (or make clear to the unsuccessful applicant that it would be willing to embark) on a merits based inquiry into the arrangements which will best serve the welfare of the child; and it will reasonably anticipate, particularly in the light of the presence of the child here, that its decision will be fully enforceable.
But when, by reference to article 13 of the Convention, it refuses an application for a childs return to an EU state, it is aware that an order for return, immune from challenge, may nevertheless be forthcoming from that state; and that therefore the order for non return may well provide no more than a breathing space.
Prior to making the provision in article 11(8) of B2R, the Council will no doubt have considered the extra difficulty which faces the court of habitual residence in conducting a satisfactory merits based inquiry in circumstances in which the child is held abroad and the abducting parent, being also abroad, may decide not to participate or may be unable to fund participation.
Practical concerns of this character were presumably overridden by the importance attached to the principle of the primacy of the court of habitual residence (recital 12), to the principle of mutual trust between the courts of member states (recital 21) and to the availability of a power in the court of habitual residence, in specified circumstances of fair width, to request another member state to assume jurisdiction if it considers such to be in the best interests of the child (article 15).
What, at all events, prompts the father and T to bring the primary appeals to this court is their aspiration to secure, in relation to all the children, or at least to T, the reversal of the judges ascription to them of a habitual residence in Spain on 5 January 2013.
For that would preclude an order of the Spanish court under article 11(8) of B2R (which, so the court is told, the mother has already evinced an intention to seek) or at any rate its enforceability in England, in relation to the children or at least to T.
Ms Vivian wrote two reports, following two interviews with the three older children in February and April 2013, and she gave oral evidence to Cobb J.
The courts direction to her had been to report on their wishes, feelings and, if any, objections, in relation to a return to Spain, and on their degree of maturity, so that it could better appraise the fathers defence under article 13.
Inevitably, however, she sought to place her report on these matters in the context of what they said to her about the familys recent history.
Ms Vivian reported that T, then aged 12 and a half, was confident and intelligent.
T (so Ms Vivian reported) had a maturity beyond her years, which seemed to reflect her innate personality rather than to have been acquired in order to enable her to cope with recent difficulties.
Ms Vivian reported that L, then aged ten, was bright, thoughtful and seemingly mature for his age and that A, then aged eight, was thoughtful and quite insightful but less confident than L.
According to Ms Vivian, T told her that neither she nor the father had known that the mother was intending to take her and the boys to Spain until days prior to her departure in July 2012 and that it had been only when she started school in Spain that it had become clear to her that the mother intended that they should live there indefinitely.
In her oral evidence the mother disputed Ts account and in my view it is important to note that Cobb J in effect rejected much of what T had said in that regard.
He found that, well prior to the departure, the father, albeit reluctantly, had agreed to it and that, at least a week prior to it, T had known that she and the boys were leaving England indefinitely.
Then, in my view relevantly to this courts despatch of these appeals, T and the older boys made statements to Ms Vivian about their life with the mother in Spain during the following five months.
Ms Vivian reported that T said that: i) ii) iii) iv) v) vi) i) ii) iii) iv) she had hated it in Spain; they had not had a home of their own but only a temporary home in the flat of the maternal grandmother; they had attended poor schools which the mother had chosen only because they had been local and convenient; the mother had been pursuing an affair and had neglected them; Spain has never been home it is a bit unreasonable to say that; and she could not settle in Spain. he had liked Spain but not as much as England; he had really liked his school in Spain but also his school in England; they had not had a home of their own in Spain; the mother had given more attention to her boyfriend than to them; and Ms Vivian reported that L said that: v) life in Spain had felt weird because he had been away from his normal home for so long.
Ms Vivian reported that A said that: i) ii) he had wanted to go to live in Spain but, once there, had realised that he had made the wrong decision; and he had not liked his school in Spain and had made no friends.
Ms Vivians written summary of these statements was: During their time in Spain the children have reported that they have not settled and their mother has not, by their accounts, assisted them to do so.
In her oral evidence she added: it was almost like they gave Spain a go and they didnt feel like it was home to them.
Then Ms Vivian proceeded to address the current wishes and feelings of the three children.
This part of her evidence is not of direct relevance to the present appeals.
It is enough to say that T stated to Ms Vivian that she refused to go back to live in Spain and would physically resist any order that she should do so; and that L and A stated to her that, on 4 January 2013, they had hidden their passports behind a microwave in order to disable the father from sending them back to Spain on the following day and that they continued not to want to go back to Spain.
It was Ms Vivians view, which Cobb J appeared largely to accept, that the father had not sought to manipulate the children into making these statements.
In embarking upon his determination whether the children had become habitually resident in Spain by 5 January 2013, Cobb J suggested that the well known tests propounded in England and Wales (in R v Barnet London Borough Council, Ex p Nilish Shah [1983] 2 AC 309, 343, Lord Scarman) and in the Court of Justice of the European Union (the CJEU) (in Mercredi v Chaffe (Case C 497/10PPU) [2012] Fam 22, para 47) were overlapping and broadly consistent.
Cobb J then proceeded to make a clear demarcation between the two older and the two younger children.
He noted that the parents had never been married; that the father had been registered on the birth certificates of each of the children; but that the amendments made to section 4 of the Children Act 1989, of which the effect was to confer parental responsibility on a father who was thus registered, took effect only in relation to registrations after 1 December 2003.
Cobb J therefore correctly concluded that the father had parental responsibility for A and N but not for T nor for L.
Accordingly (reasoned Cobb J) the mother had the right to determine the habitual residence of T and L but English law required the fathers consent to any change on her part of the habitual residence of A and N.
The judge then set out his reasons for finding that the father had unconditionally consented to the acquisition by A and N of habitual residence in Spain.
In that sense, observed the judge, it is less important for me to look at the integration argument.
He did however proceed to look at it and he concluded that all four children had achieved a significant degree of integration into their social and family environment in Spain.
In particular he found that they had settled reasonably well into the grandmothers flat and had settled into their new schools.
For these reasons he determined that by 5 January 2013 the children had become habitually resident in Spain.
It was a singular misfortune for Cobb J to be required to make his determination of the issue of habitual residence (and for the Court of Appeal to be required to review it) so shortly prior to this courts issue, on 9 September 2013, of its judgments in A v A (Children: Habitual Residence) [2013] UKSC 60, [2013] 3 WLR 761.
The court there held that: i) ii) iii) the test for the determination of habitual residence under the Convention, under B2R and under domestic legislation should be the same (para 35, Lady Hale); the test set out in the Nilish Shah case, cited above, should be abandoned (para 54(v), Lady Hale); and the test should be the one adopted by the CJEU in Proceedings brought by A (Case C 523/07) [2010] Fam 42, and affirmed by it in the Mercredi case, cited above, namely the place which reflects some degree of integration by the child in a social and family environment (para 54(iii) and (v), Lady Hale).
In April 1981 Professor Prez Vera wrote the Explanatory Report referable to the Convention.
In para 11, in a section entitled Object of the Convention, she explained that, whether the child was wrongfully removed from his or her state of habitual residence or was wrongfully retained outside it, the outcome was the same, namely that the child is taken out of the family and social environment in which its life has developed.
It is satisfactory that, 30 years after the Convention was adopted, in a case (Proceedings brought by A, cited above) unrelated to the Convention, the CJEU should have formulated a test for habitual residence, which now falls to be applied as fully to Convention proceedings as to other proceedings, in terms so intriguingly close to what its signatories had in mind.
At last I can begin to address the question set out in para 1.
I doubt whether, even by reference to the former English concept of habitual residence, Cobb J was entitled to have stated so categorically that, having sole parental responsibility for them, the mother in July 2012 had the right to determine the habitual residence of T, then aged almost 12, and of L, then aged nine.
It is true that in In re P (GE) (An Infant) [1965] Ch 568, 585 586, Lord Denning MR had been similarly categorical about the ordinary residence of a child of tender years who cannot decide for himself where to live, let us say under the age of 16.
But in In re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562, 579, Lord Brandon had said that where a child of Js age is in the sole lawful custody of the mother, his situation with regard to habitual residence will necessarily be the same as hers.
J was aged two and in In re M (Minors) (Residence Order: Jurisdiction) [1993] 1 FLR 495, 500, Balcombe LJ therefore took Lord Brandons proposition to apply only to young children.
In my view even our old law left open and ajar the door to a conclusion that, no doubt in rare circumstances and perhaps particularly following the adoption by an older, mature, child of a residence in a different country with one parent, the latters habitual residence there might not necessarily render the childs residence there habitual.
At all events what our courts are now required to do is to search for some integration on the part of the child in a social and family environment in the suggested state of habitual residence.
In the Mercredi case, cited above, the CJEU said: 53 The social and family environment of the child, which is fundamental in determining the place where the child is habitually resident, comprises various factors which vary according to the age of the child.
The factors to be taken into account in the case of a child of school age are thus not the same as those to be considered in the case of a child who has left school and are again not the same as those relevant to an infant. 54 As a general rule, the environment of a young child is essentially a family environment determined by the reference person(s) with whom the child lives, by whom the child is in fact looked after and taken care of. 55 That is even more true where the child concerned is an infant.
An infant necessarily shares the social and family environment of the circle of people on whom he or she is dependent.
In A v A, cited above, this court adopted the propositions in the two latter paragraphs.
Lady Hale said, at para 54: (vi) The social and family environment of an infant or young child is shared with those (whether parents or others) on whom he is dependent.
Hence it is necessary to assess the integration of that person or persons in the social and family environment of the country concerned.
These propositions, which are carefully expressed to apply only to infants and young children, have an echo in observations made by the High Court of Australia in LK v Director General, Department of Community Services (2009) 237 CLR 582, as follows: 27 When speaking of the habitual residence of a child it will usually be very important to examine where the person or persons who are caring for the child live where those persons have their habitual residence.
The younger the child, the less sensible it is to speak of the place of habitual residence of the child as distinct from the place of habitual residence of the person or persons upon whom the child is immediately dependent for care and housing.
But if, as the writings about the Abduction Convention and like instruments repeatedly urge, the question of habitual residence of a child is one of fact, it is important not to elevate the observation that a child looks to others for care and housing to some principle of law like the (former) law of dependent domicile of a married woman.
Where a child of any age goes lawfully to reside with a parent in a state in which that parent is habitually resident, it will no doubt be highly unusual for that child not to acquire habitual residence there too.
The same may be said of a situation in which, perhaps after living with a member of the wider family, a child goes to reside there with both parents.
But in highly unusual cases there must be room for a different conclusion; and the requirement of some integration creates room for it perfectly.
No different conclusion will be reached in the case of a young child.
But, where the child is older, in particular one who is an adolescent or who should be treated as an adolescent because she (or he) has the maturity of an adolescent, and perhaps also where (to take the facts of this case) the older childs residence with the parent proves to be of short duration, the inquiry into her integration in the new environment must encompass more than the surface features of her life there.
I see no justification for a refusal even to consider evidence of her own state of mind during the period of her residence there.
Her mind may possibly have been in a state of rebellious turmoil about the home chosen for her which would be inconsistent with any significant degree of integration on her part.
In the debate in this court about the occasional relevance of this dimension, references have been made to the wishes views intentions and decisions of the child.
But, in my opinion, none of those words is apt.
What can occasionally be relevant to whether an older child shares her parents habitual residence is her state of mind during the period of her residence with that parent.
In the Nilish Shah case, cited above, in which he propounded the test recently abandoned, Lord Scarman observed, at p 344, that proof of ordinary (or habitual) residence was ultimately a question of fact, depending more upon the evidence of matters susceptible of objective proof than upon evidence as to state of mind.
Nowadays some might not accept that evidence of state of mind was not susceptible of objective proof; but, insofar as Lord Scarmans observation might be taken to exclude the relevance of a persons state of mind to her habitual residence, I suggest that this court should consign it to legal history, along with the test which he propounded.
It follows that my answer to the question set out in para 1 is: yes.
In the light of her age and of Ms Vivians assessment of her maturity, Ts assertions to Ms Vivian about her state of mind during her residence in Spain in 2012, set out in para 26 above, have at least some relevance to a determination whether her residence there was habitual.
For they are relevant to whether she was integrated to some degree in a social and family environment there.
But not even when, rather as a cross check against his earlier conclusion, Cobb J turned to consider Ts integration (and that of the boys) in Spain did he address her assertions to Ms Vivian.
Indeed when, in a later section of his judgment, he addressed her assertions, his focus was on her hostility at that time, namely in 2013, towards a return to Spain.
Nowhere did he give separate or any attention to what she had said about her state of mind when in Spain in 2012.
The Court of Appeal was impressed by the fact that, in refusing to grant permission to the father to appeal, Cobb J observed that The stated wishes of the three older children to be in England now. did not affect their integration in Spain at the time.
Cobb Js observation was correct.
But what might have affected the integration at any rate of T was not her wishes when in England in 2013 but what she said about her state of mind when in Spain in 2012.
No significant criticism can be levelled at Cobb J in these respects.
It is true that, in the course of his unsuccessful submission that she should be made a party to the proceedings, the fathers counsel had suggested that T might have a perspective about her habitual residence different from that of the father; the judge had dismissed the suggestion as a purely speculative possibility.
It is also true that, in his opening skeleton argument for the substantive hearing, the fathers counsel had submitted to Cobb J that the childrens own descriptions to Ms Vivian confirmed that they had never achieved integration in Spain.
But no submission was made to the judge that he should scrutinise Ts specific assertions to Ms Vivian about her state of mind during her residence in Spain.
Accordingly I would set aside the judges conclusion that T was habitually resident in Spain on 5 January 2013 and would remit that issue for fresh consideration in the High Court alongside its forthcoming consideration of the issue relating to the boys which was remitted to it by the Court of Appeal.
Counsel for the father and T suggest that the court should go further and, in lieu of the judges conclusion, should substitute a conclusion that T remained habitually resident in England on 5 January 2013.
I cannot accede to the suggestion.
I perceive six objections to it: i) Ts various assertions to Ms Vivian about her state of mind when in Spain were incidental to an inquiry of which the focus was different. ii) Ts assertions were made after she had left Spain and may not deserve the weight which might attach, for example, to any emails or letters which she might have sent, or to any statements which she might have made on social networking sites, while she was there.
Indeed Ts primary purpose was to communicate to Ms Vivian her strong objection to returning to Spain and her purpose may have coloured her descriptions of her state of mind when there. iii) iv) Cobb J has already rejected as inaccurate Ts identification to Ms Vivian of the time when she realised that the familys stay in Spain was intended to be indefinite. v) Since it is only in the proceedings in this court that the searchlight has directly shone on Ts statements to Ms Vivian about her state of mind when in Spain, the mother has had no opportunity to give evidence in response to them or, by counsel, to make detailed submissions about them. vi) Ts statements in that regard require to be weighed against the written and oral evidence which led Cobb J to find that T had achieved some degree of integration in Spain.
In relation to her integration, the mother placed before the judge a substantial amount of evidence, including statements not only by herself but also by her mother, her sister and her two brothers and by Ts school in Spain, to which in these appeals no specific reference has been made; and in relation to it the mother also gave oral evidence, of which this court does not even have a transcript.
Therefore I do not agree that this court is in a position to regard Ts statements to Ms Vivian as determinative of a conclusion that the mother cannot establish that T acquired a habitual residence in Spain.
If the issue of Ts habitual residence in Spain is therefore to be remitted for determination in the High Court, should Cobb Js conclusion that the three boys were habitually resident there also be set aside so that that issue be likewise determined in the High Court? In my view this is the most difficult question posed by these appeals.
When they were in Spain, none of the boys was an adolescent or had the maturity of an adolescent.
It will be clear from my formulation of the question in para 1 above that in my view it is, in principle, the state of mind of adolescent children during their residence in a place that may affect whether it was habitual.
Thus, although when considering the alleged objections of L and A to returning to Spain, Cobb J concluded that they had at least attained an age and a degree of maturity at which it was appropriate to take account of their views and although they made comments to Ms Vivian indicative of lack of integration on their part in Spain, I find it hard to imagine that a judges exploration of their state of mind could, on its own, alter the conclusion about their integration in Spain reached by Cobb J by reference to the other evidence before him.
But there is another feature in play: it is the presence of their older sister, T, in the daily life of all three of the boys.
Ms Vivian described the four children as a very close sibling group.
There was a solidarity in the presentation of the three older children to her.
When Cobb J addressed the integration of the children in Spain, he did so compendiously in relation to all four of them.
In the fuller, more focussed, inquiry into Ts habitual residence, the High Court will no doubt receive evidence about the integration in Spain of the four children as a whole.
Were it to conclude that T never lost her English habitual residence, the court would need at any rate to consider whether its conclusion could sit easily alongside a conclusion that, by contrast, the three boys acquired a habitual residence in Spain.
In relation to their habitual residence, might Ts habitual residence in England (if such it was) be a counterweight to the obvious significance of the mothers habitual residence in Spain? It can be inconvenient for a judge at a remitted hearing to have to note that all options have not been left open to him.
By a narrow margin, I find myself persuaded that the proper course is to set aside the finding of habitual residence in respect also of the three boys so that the issue can be reconsidered in relation to all four children.
to decline to make T a party to the proceedings?
In the Court of Appeal Black LJ observed, at para 36, that welfare considerations were by no means out of place in a determination whether a child should be joined as a party to family proceedings.
But rule 16.2 of the Family Procedure Rules 2010 (the terms of which are in substance identical to those of its predecessor, namely rule 9.5(1) of the Family Proceedings Rules 1991 (S1 1991/1247)) provides that I turn to the subsidiary appeal: did Cobb J err in exercising his discretion (1) The court may make a child a party to proceedings if it considers it is in the best interests of the child to do so.
On any view it is most unusual for the threshold criterion for the making of a case management decision to be a conclusion about a persons best interests.
But the meaning of the rule is plain.
The best interests of the child represent the threshold criterion and are not just a primary consideration as stated in paragraph 7.3 of Practice Direction 16A supplementary to Part 16 of the 2010 Rules.
If, and only if, the court considers that it is in the best interests of the child to make her (or him) a party, the door opens upon a discretion to make her so.
No doubt it is the sort of discretion, occasionally found in procedural rules, which is more theoretical than real: the nature of the threshold conclusion will almost always drive the exercise of the resultant discretion.
Rule 16.2, set out above, governs the grant to a child of party status in family proceedings generally.
There is no special provision in Part 16 of the Rules which governs the grant to a child of party status in proceedings under the Convention.
Rule 16.4(1)(c) proceeds to provide that, without prejudice to other rules, and in particular to rule 16.6, a court which has granted party status to a child pursuant to rule 16.2 must appoint a childrens guardian for her.
Rule 16.6 specifies most types of private law family proceedings in which, if the court so permits or if a solicitor considers that the child is capable of giving instructions, she can be a party without acting by a guardian.
But the types of proceedings there specified do not include proceedings under the Convention.
I cannot discern why, if and to the extent that it is appropriate in Convention proceedings for children to be made parties, the facility for some of them to act without a guardian has been blocked.
In WF v FJ, BF and RF (Abduction: Childs Objections) [2010] EWHC 2909 (Fam), [2011] 1 FLR 1153, Baker J, in paras 21 and 22, described the exclusion of Convention proceedings from the predecessor of rule 16.6 as anomalous and a lacuna.
At all events the result is that, had Cobb J made T a party to the proceedings, she would have been required to act by a guardian.
Such is, however, a status which might have been conferred on her solicitor.
In In re D (A Child) (Abduction: Rights of Custody) [2006] UKHL 51, [2007] 1 AC 619, Lady Hale, with the agreement of all other members of the House, stated at para 59 that children should be heard far more frequently in.
Convention cases than has been the practice hitherto.
It is clear from para 58 that, in so stating, Lady Hale had been influenced in particular by article 11(2) of B2R, which had come into force less than two years earlier and which obliged EU states to ensure that the child is given the opportunity to be heard during [Convention] proceedings unless this appears inappropriate having regard to his or her age or degree of maturity.
In the In re D case Lady Hale proceeded, at para 60, to suggest that the obligation to hear children of an appropriate age would in most cases be satisfied by a report by a Cafcass officer of an interview with them; would sometimes require the judge in person to talk to them; and only in a few cases would require them to be made parties and thus to be legally represented.
Lady Hale added: But whenever it seems likely that the childs views and interests may not be properly presented to the court, and in particular where there are legal arguments which the adult parties are not putting forward, then the child should be separately represented.
In In re M (Children) (Abduction: Rights of Custody) [2007] UKHL 55, [2008] 1 AC 1288, Lady Hale amplified what she had said in the In re D case.
In the In re M case the defendant mother had demonstrated that the children, then aged about 13 and 10, had become settled in [their] new environment in England for the purposes of article 12 of the Convention but the trial judge had nevertheless ordered them to be returned to Zimbabwe.
Lady Hale observed in para 57 that a defence under article 12 that children had become settled in their new environment was rare.
She suggested that it was the most child centric of all child abduction defences; that the separate point of view of the children alleged to have become settled was particularly important; and that (as this court is told has duly occurred) it should become routine for them to be made parties to the proceedings.
One might have held an interesting debate with Lady Hale as to whether such a defence is more child centric than that in which the children are said to object to being returned to the requesting state for the purposes of article 13, being a category of children to whom she also there referred and to whom, she stressed, a grant of party status should not become routine.
Lady Hale concluded: In all other cases [than those of alleged settlement], the question for the directions judge is whether separate representation of the child will add enough to the courts understanding of the issues that arise under the.
Convention to justify the intrusion, the expense and the delay that may result.
I have no difficulty in predicting that in the general run of cases it will not.
When in 2007 Lady Hale identified these factors, the threshold criterion for granting party status to a child in proceedings under the Convention was, as now, whether it was in the childs best interests to do so.
The intrusion of the children into the forensic arena, which enables a number of them to adopt a directly confrontational stance towards the applicant parent, can prove very damaging to family relationships even in the long term and definitely affects their interests.
So does delay in the resolution of the issue whether they should be ordered to return, albeit perhaps only temporarily, to the requesting state.
In what follows I must in no way be understood to suggest that it should become routine to join as parties to Convention proceedings children whose habitual residence in the requesting state is in issue.
Nevertheless, as Thorpe LJ prefigured in Cannon v Cannon [2004] EWCA Civ 1330, [2005] 1 FLR 169, at para 55, there is an analogy between, on the one hand, an inquiry into some degree of integration of a child in the social and family environment of the requesting state during a short period of residence there and, on the other, an inquiry into a childs settlement in the environment of the requested state.
To both inquiries an older child may in particular be able to contribute relevant evidence not easily given by either of the parents, namely about her state of mind during the period in question; see again the Cannon case, at para 61.
When on 6 April 2011 the Rules came into force, the opportunity was taken to supplement Part 16 with Practice Direction 16A. Guidance is there given about the circumstances in which it is appropriate to grant party status to a child in family proceedings.
The reader of it must again bear in mind that it is not focussed on Convention proceedings but much of it is directly apposite to them.
Thus para 7.1 of the Practice Direction makes clear that a grant to a child of party status will be made only in cases which involve an issue of significant difficulty and thus only in a minority of cases.
Consideration, so it suggests, should first be given to whether an alternative course might be preferable; and the suggestion is well reflected by the courts current practice of inviting an officer in the Cafcass High Court team to see the child before it decides whether to make her a party to Convention proceedings.
Para 7.3 of the Practice Direction stresses that a grant to a child of party status may result in delay adverse to her welfare and of which account should therefore be taken.
This factor has a particular relevance to Convention proceedings.
The need for expedition is written into article 11.3 the Convention; and the aspiration, articulated in the same para, for determination within six weeks of issue is, in the case of EU states, stiffened by article 11.3 of B2R, which positively requires determination within that period save in exceptional circumstances.
But it is para 7.2 of the Practice Direction which is of particular significance.
It offers non prescriptive guidance about the circumstances which may justify a grant to a child of party status.
The examples include, at (a) the case where a Cafcass officer favours the grant; at (d) the case where the childs views cannot adequately be communicated by a report; and at (e) the case where an older child is opposing a proposed course of action.
The last example should not in my view be taken to endorse any routine grant of party status to older children objecting to their return to the requesting state in Convention proceedings.
But the example most apt to the present case is at (b), namely where the child has a standpoint incapable of being represented by any of the adult parties.
In my view the proper despatch of the subsidiary appeal follows in the slipstream of the courts despatch of the primary appeals.
What Cobb J failed to address, and what therefore requires his conclusion about Ts habitual residence to be set aside, is her evidence, accurate or inaccurate, about her state of mind when in Spain in 2012.
Such is evidence which, although the mother might have a valuable perspective on it, neither of the parents can give.
In the language of para 7.2(b) of the Practice Direction T has a standpoint incapable of being represented by either of the adult parties.
I conclude that she should have been granted party status and that the Court of Appeal should have allowed her appeal against Cobb Js refusal of it.
A grant of party status to a child leaves the court with a wide discretion to determine the extent of the role which she should play in the proceedings.
Although, unusually in Convention proceedings, Cobb J heard oral evidence from the parents as well as from Ms Vivian, it would surely have been inappropriate for him to receive oral evidence in court from T even if she had been a party to the proceedings.
It is conceivable that, had he considered that her evidence might prove determinative yet needed to be further explored, Cobb J might have invited counsel, particularly counsel for the mother, to ask age appropriate questions of her otherwise than in court and recorded on video tape.
In all probability however, the reasonable course would have been to confine Ts participation in the proceedings to i) the adduction of a witness statement by her, or of a report by her guardian, which was focussed upon her account of her residence in Spain including of her state of mind at that time; ii) her advocates cross examination of the mother; and iii) her advocates closing submissions on her behalf.
Whether it would have been reasonable for Cobb J to have allowed T to be present in court during the hearing I cannot tell.
It would have been for the guardian to decide which of the documents filed in the proceedings should be shown to T.
In conclusion I stress the unusual features which give rise to the present appeals.
In May 2011 Professor Lowe placed before the Hague Conference a document, No 8C, entitled A Statistical Analysis of Applications Made in 2008 Under the [Hague] Convention.
He reported that, of the applications for return made to the Central Authority of England and Wales in 2008, 108 came before the courts, of which 93 resulted in orders for return and 15 resulted in dismissal.
Of the 15 dismissals, only three were founded on a conclusion that the child had not been habitually resident in the requesting state.
Although some of the 93 orders were no doubt made following unsuccessful submissions to the same effect, Reunite International Child Abduction Centre, an Intervener in these appeals, confirms that issues about the childs habitual residence in Convention proceedings are relatively rare.
More importantly, however, the present appeals relate in particular to an older child resident with a parent only for a short time in the suggested state of habitual residence.
These are the two features which, more than any others, have precipitated my various conclusions.
LADY HALE (with whom Lord Sumption agrees)
Lord Wilson has identified the principal question raised by these appeals in relation to an adolescent child: is her state of mind relevant to whether or not she has acquired a habitual residence in the place where she is living? He has answered that question yes and I entirely agree with that answer.
However the question cannot be restricted to adolescent children.
It also arises in relation to the two younger children, L and A.
They are themselves parties to this appeal and are represented by their guardian.
That guardian is the same Cafcass officer, Ms Vivian, who has interviewed the children twice in the proceedings.
Before this court she has argued that they were not habitually resident in Spain on the relevant date.
In my view, the answer to the question of principle has to be the same for all three children: their state of mind is relevant to whether or not they have acquired a habitual residence in the place where they are living.
The logic which makes an adolescents state of mind relevant applies equally to the younger children, although of course the answer to the factual question may be different in their case.
The logic flows from the principles adopted by the Court of Justice of the European Union in Proceedings brought by A (Case C 523/07) and Mercredi v Chaffe (Case C 497/10PPU) and now adopted by this Court in the recent cases of A v A [2013] UKSC 60, [2013] 3 WLR 761 and In re L (A Child) (Habitual Residence) [2013] UKSC 75; [2013] 3 WLR 1597.
The first principle is that habitual residence is a question of fact: has the residence of a particular person in a particular place acquired the necessary degree of stability (permanent is the word used in the English versions of the two CJEU judgments) to become habitual? It is not a matter of intention: one does not acquire a habitual residence merely by intending to do so; nor does one fail to acquire one merely by not intending to do so.
An illegal immigrant may desperately want to become habitually resident in this country, but that does not mean that he does so.
A tax exile may desperately want to lose his habitual residence here, but that does not mean that he does so.
Hence, although much was made of it in argument, the question of whether or not a child is Gillick competent is not the point.
In the case of these three children, as of others, the question is the quality of their residence, in which all sorts of factors may be relevant.
Some of these are objective: how long were they there, what were their living conditions while there, were they at school or at work, and so on? But subjective factors are also relevant: what was the reason for their being there, and what were their perceptions about being there? I agree with Lord Wilson (para 37) that wishes, views, intentions and decisions are not the right words, whether we are considering the habitual residence of a child or indeed an adult.
It is better to think in terms of the reasons why a person is in a particular place and his or her perception of the situation while there their state of mind.
All of these factors feed into the essential question, which is whether the child has achieved a sufficient degree of integration into a social and family environment in the country in question for his or her residence there to be termed habitual.
It would be wrong to overlay these essentially factual questions with a rule that the perceptions of younger children are irrelevant, just as it was to overlay them with a rule (rejected in A v A) that a child automatically shares the habitual residence of the parent with whom he is living.
The age of the child is of course relevant to the factual question being asked.
As the CJEU pointed out in Mercredi v Chaffe, at para 53: The social and family environment of the child, which is fundamental in determining the place where the child is habitually resident, comprises various factors which vary according to the age of the child.
The factors to be taken into account in the case of a child of school age are thus not the same as those to be considered in the case of a child who has left school and are again not the same as those relevant to an infant.
Clearly, therefore, this is a child centred approach.
It is the childs habitual residence which is in question.
It is the childs integration which is under consideration.
Each child is an individual with his own experiences and his own perceptions.
These are not necessarily determined by the decisions of his parents, although sometimes these will leave him with no choice but to buckle down and get on with it.
The tiny baby whose mother took him back to her home country in Mercredi v Chaffe was in a very different situation from any of the three children with whom we are concerned.
The environment of an infant or very young child is (one hopes) a family environment and so determined by reference to the person with whom he lives.
But once a child leaves the family environment and goes to school, his social world widens and there are more factors to be taken into account.
Furthermore, where parents are separated, there may well be two possible homes in which the children can live and the children will be well aware of this.
This may well affect the degree of their integration in a new environment.
The quality of a childs stay in a new environment, in which he has only recently arrived, cannot be assessed without reference to the past.
Some habitual residences may be harder to lose than others and others may be harder to gain.
If a person leaves his home country with the intention of emigrating and having made all the necessary plans to do so, he may lose one habitual residence immediately and acquire a new one very quickly.
If a person leaves his home country for a temporary purpose or in ambiguous circumstances, he may not lose his habitual residence there for some time, if at all, and correspondingly he will not acquire a new habitual residence until then or even later.
Of course there are many permutations in between, where a person may lose one habitual residence without gaining another.
I agree with Lord Wilson that Cobb J did not approach the question in the way in which he no doubt would have done had he had the benefit of this Courts decisions in A v A and In re L.
He approached it very much from the point of view of parental rights.
Under English law, the mother alone has parental responsibility for the two older children (only because the change in the law giving parental responsibility to all fathers named on the birth certificate only came into force later; we have no evidence as to what the position is under Spanish law).
She could therefore change their habitual residence.
The father does have parental responsibility for the two younger children, but Cobb J held that he had (albeit reluctantly) consented to their change in habitual residence.
But it is not a question of the parents determining the habitual residence of their children.
It is a question of the impact of the parental decisions about where they and the children will live upon the factual question of where the children habitually reside.
That being so, I would allow the appeal to the extent of setting aside the judges decision that the three older children were habitually resident in Spain on the relevant date, which is 5 January 2013.
On a different basis, namely that referred to by Lord Wilson in para 43 above, I would also set aside the judges decision in relation to N: that is the need for the judge at any rate to consider whether the four children were a unit with the result that the habitual residence of any or all of the older children might impact on the habitual residence of the others.
The question then arises of whether the case should be sent back to the High Court for the decision to be taken afresh or whether it is open to this Court to take the decision on the basis of the evidence before us.
Decide or remit?
We were invited by both appellants and by the guardian to decide the matter ourselves.
Lord Wilson has pointed to all the reasons why we should not do so (para 42).
He is, of course, right to point out that the focus of Ms Vivians inquiries with the children was on the rather different issue of the childrens objections to return.
But her oral evidence was that what all three of these children did, which is sort of unusual in my experience of doing Hague interviews, is that the children in their own ways were [talking] about Spain not really being their home, not really being their base.
The children were raising the issue even if she was not.
Lord Wilson is also right to point to the various reasons for being sceptical about what T, in particular, said to Ms Vivian.
However, that is something which we too can take into account.
Finally, the mother placed a great deal of evidence before the judge about the childrens lives in Spain (including entries from Ts facebook page).
But while we can take the documentary material into account, we do not have a transcript of the oral evidence which she gave.
My main concern has been that, if the case is sent back to the High Court, there would have to be further inquiries into the childrens states of mind during their time in Spain.
I have grave doubts about whether that would be a fruitful exercise.
What the children spontaneously offered when they were first interviewed by Ms Vivian is much more likely to be reliable than anything they can tell her now.
They have not changed their minds about where they want to be.
They are intelligent and articulate children.
Almost every witness, whether adult or child, engages in a certain amount of (conscious or unconscious) manipulation of their recollection of past events to meet their present interests.
It would be surprising if that did not happen here.
And that would be damaging to the children and to their future relationship with their mother.
It would be even more damaging if they were to be called to give evidence and it is not suggested that they should be.
It was unfortunate that Ms Vivian was asked to interview them a second time and the children (L in particular) were clearly uncomfortable with this.
It would not be in their best interests to be interviewed a third time but it would be wrong to decide the case afresh without doing so.
Remitting the matter will also cause delay and further stress to all the family, which may well put further strain on the childrens relationship with their mother.
If the matter were governed by the best interests of the children, therefore, I would hold that it is not in their best interests for us to remit the question of their habitual residence to be decided afresh in the High Court.
But this matter is governed by the interests of justice, in reaching the right result in a fair manner.
I have therefore carefully considered whether it is necessary, in the interests of justice to all parties, to remit the matter.
Some common ground
The question, it will be recalled, is whether the mother has established that these four children were habitually resident in Spain on 5 January 2013, the date when they were due to fly back there after the Christmas holiday.
There are several factors which are relevant to them all: i) Their mother is Spanish, tri lingual in Spanish, French and English.
Their father is English, but lived in Spain for much of his childhood and is bi lingual in Spanish and English.
The children are also bi lingual.
They have many maternal relatives living in Spain. ii) They are all Spanish citizens.
We have no evidence about whether they are also entitled to British citizenship, although as their father is a British citizen, this seems likely. iii) Their parents met in Oxford in 1995 and soon began living together, originally in Oxford and latterly in a town in Oxfordshire, but they have never married.
The family home is jointly owned by the father and another person. iv) All three children were born here, T on 27 August 2000, L on 4 December 2002, and A on 2 November 2004, as was their younger brother N, who was born on 29 December 2008. v) They lived all their lives here with their mother and father until 24 July 2012, when they flew to Spain with their mother. vi) They all attended school here until the end of the summer term 2012.
The boys were at a Roman Catholic primary school.
T had also attended that school for her primary education but for the past year she attended a distinguished independent secondary school. vii) They were accustomed to going to Spain for summer holidays with their mother and without their father. viii) The parents relationship had been unhappy for many years and finally broke down in the summer of 2012.
The judge found that the father had (albeit reluctantly and in the hope that the situation might change) agreed to the mother taking the children to live in Spain. ix) The mother bought one way tickets for them all in June 2012.
She did not take steps to remove the children from their schools and other activities until July.
She did not enrol them in Spanish schools until September.
They took only two suitcases with them, leaving many possessions behind in England to be sent on later. x) In Spain they lived with their maternal grandmother in a spacious apartment in a gated residential development in a prosperous neighbourhood near Madrid, with many of their maternal relatives near by. xi) They attended schools in the neighbourhood and achieved good results in their first term. xii) They were unsettled after their father visited for three days in early November, coinciding with As birthday. xiii) They came to England with their father for the Christmas holidays on 23 December 2012 and were due to return with him to Spain on 5 January 2013.
They did not do so because the boys hid their passports behind the microwave and the father did not find them until it was too late. xiv) The father applied for a residence order in the Oxford County Court on 10 January 2013.
The mother issued these proceedings on 22 January 2013.
The children were interviewed twice by Ms Vivian, whose reports are dated 28 February 2013 and 7 May 2013.
Against this common background, it is necessary to consider the perceptions of each of the children in turn.
T was 12 years and 5 months old when she first saw Ms Vivian.
She struck Ms Vivian as a confident, intelligent young girl, whose maturity seemed to me to be beyond her years.
I think her mature presentation is a reflection [of] her innate intelligence and personality rather than something she has prematurely had to acquire as a coping strategy .
She is clearly very intelligent, as is evidenced by her winning a bursary to the school which she attended before moving to Spain.
She has wanted to go to Oxford University since the age of eight.
The judge concluded that she objected to returning to Spain, within the meaning of article 13 of the Hague Convention, and the Court of Appeal concluded that he should have exercised his discretion not to order her return.
She told Ms Vivian that she was not sure if the reason they went to Spain was for a holiday or not, because her mother had repeatedly threatened we would stay, always, we didnt believe her, or really know.
She pointed out, correctly, that her mother had contacted her school on the last day of term, 11 July, when she was off ill from school, to tell them that T was not coming back.
The mothers email exchange with the school is proof of that and that the school was unhappy that they had not been given the expected terms notice.
The exchange also shows that the mother had not at that stage arranged an alternative school for T in Spain.
T went on to tell Ms Vivian that when they went to Spain it wasnt clear to me what the plan was.
Her mother had told her they were going to stay although she didnt really accept it, thought it wouldnt happen.
Asked when it became clear that they had been taken to live in Spain, she said when we started school, I guess, not one moment.
She told her solicitor that her mother had sent an email to the school on the last day of term to inform them that they were moving to Spain.
The judge pointed out that T knew that she was leaving to go to Spain at least by 17 July, as is apparent from her facebook page for that day.
The judge also found that her mother organised a party for her it was essentially a farewell party.
T does not agree with that it was four friends round for an early birthday party.
Be that as it may, it was because of the facebook page that the judge commented that this is not consistent entirely with what T told Ms Vivian, which is that she thought she may have been going to Spain for a holiday (para 34(v)(a)).
The facebook page reads: Q to T: Are you leaving???!!! T to Q: Yep x. Q to T, successively: Whn?, Why?, Whn r u GOIN??.
T to Q: on the 24th am leaving 2 spain who told u???.
I would tell u 2 keep it secret but since its on my wall not really any point lol.
Q to T: Gossip spreads fast .
X. T to Q: lol I no bhut who????????? Q to T: Cant remember WE WILL ALL MISS U SO MUCH llxxx Will u come back? No answer is recorded but another friend writes Awww y r u leaving.
Again no answer is recorded.
The objective evidence records an extraordinary state of affairs.
The mother left it until the very last day of term to withdraw her daughter from school.
T was clearly not too happy about her friends knowing that she was leaving.
This is consistent, both with the judges finding that by then, very late in the day, she knew her mothers plan was that they should move, and with her own account to Ms Vivian that she was not sure what the real situation was, partly because her mother had made similar threats before and partly because she herself did not really accept it.
There are, of course, features about their life in Spain, emphasised in the mothers evidence, which point the other way.
She was enrolled in a school, where she did reasonably well, although she herself did not think much of the education she was receiving there compared with her education in England.
She made friends.
She earned pocket money by teaching children English.
But she told Ms Vivian that We have no house presumably because they were living with their grandmother and Spain is her mothers home not our home.
Its not even home.
Spain has never been home, it is a bit unreasonable to say that.
Ms Vivian commented that she sees her home, life and future as being in England, that is where she was born and has lived all her life except for five months .
She concluded: T regards England as her home; it has been her home throughout her childhood and formative years until the move to Spain last year.
She acknowledges that she also has family in Spain and recognises that for her mother Spain is home, but she nonetheless feels that her own roots and those of her immediate family are here in this country.
T said very similar things to her solicitor, that England was her home, that she has friends here and best friends that she has known for five or six years.
Its just home.
L was 10 years and 2 months old when he first saw Ms Vivian.
He struck her as being a bright thoughtful boy; he seems to have carefully considered his situation and his own wishes and feelings.
He seemed mature for his age, but maybe this is because he is a bright boy and is easily able to convey his thoughts.
He missed his mum and wanted his parents to be back together again.
Unlike T, he said that he knew he was going to Spain to live before they left, his mum and dad had told him a month before they left.
Like T, he said that all those years she said that we were going one day.
His view was that his father knew but he didnt agree but didnt want to take the situation to court.
But he, L, had always wanted to stay here with his friends and family.
He had liked it well enough in Spain, he really liked the school, but we dont have a house or anything there.
He also told Ms Chadha, the solicitor who acted for the boys before the guardian took over, that he liked his school in Spain, the teachers and most of the people in his class.
But he told Ms Vivian that he liked England more because this is where we live, our normal place and I want to live my life here.
He was reluctant to come and talk to Ms Vivian a second time, but he was even clearer: In Spain it didnt feel right or like I was at home.
When I got to England it felt cosy.
Where I want to live.
My house.
I find it normal.
A bit weird to go to another country where I have never lived for a long time.
In Spain, it was not normal.
Felt like a holiday really.
Felt weird that I was not at my normal home for such a long time.
When I went to Spain it didnt feel normal.
I wanted to be in my normal house.
L told Ms Chadha that it had been his idea to hide the passports.
A confirmed that it was Ls idea but that he, A, had thought of hiding them behind the microwave.
A was aged eight years and 3 months when he first met Ms Vivian.
He seemed to her a thoughtful boy; he was quieter and less outwardly confident in his presentation than his older siblings but was able to answer my questions with clarity and careful thought.
He used we a lot rather than I, and she wondered whether this was because of his being influenced to a degree by T. She did think, however, that A was reporting his own feelings, but was more conflicted about taking sides with one parent.
He told her that when they went to Spain he knew they were going to live there.
But when they got there he realised my actual life is here, where I was born.
Unlike L, he had not liked his school in Spain, he had not made friends.
He told the solicitor, Ms Chadha, that he had been bullied there, that the boys in his class were hitting him but he did not want to hit the boys back.
L confirmed this.
A told Ms Vivian that he wanted to stay where we live.
Not going to another place where we dont like or feel it.
We want to go where our home is.
Home meant the place where we were born and living in.
Discussion
Ms Vivian did not get any sense that the children had been prevailed upon to remain here by their father.
She thought that T had had a degree of influence on her brothers (in oral evidence she referred to T as a slightly bossy older sister).
But this did not diminish the authenticity of the boys views in her mind.
There seemed to be different accounts of the arrangements when they went to Spain in July 2012, but they felt that the decision had been taken by their mother without taking account of their wishes and feelings.
They reported that they had not settled during their time in Spain and their mother had not helped them to do so.
This had undoubtedly fed into their perception of Spain as not being where their home is.
In her second report, she commented that their views remained consistent, both about England and about Spain: they may well be reporting a different experience to that their mother believes they had in Spain, but that does not invalidate what they have to say about their time in Spain and the sense they have made of that experience in comparison with their lives here in this country.
It is very tempting to conclude from all this material that the children had not become integrated in a social and family environment during the five short months they were in Spain with their mother or (to use the term enracinement used by Professor Perez Vera in para 109 of her explanatory report on the Hague Convention when commenting on article 12) taken root there.
But I have to accept that the question of their habitual residence was not approached in this way by any of the parties to the hearing before Cobb J.
This is scarcely surprising, as this is the first case in which the question of principle has been squarely raised.
There may well be other relevant material that they would wish to put before the court.
In the interests of justice, they should all be given that opportunity.
Policy
It would indeed be a matter of concern if the swift return of children to their home countries could be frustrated by disputes about their habitual residence prompted by the childrens expressed wishes and feelings.
Nor should children interviewed in Hague cases routinely be asked questions about their habitual residence.
But in reality, as Lord Wilson explains, there are very few disputes about habitual residence.
Most applications concern children who have been removed from the country where they have spent all or most of their lives by a parent who is returning to a country which she regards as home but they most definitely do not.
Cases such as this, where children go to live with one parent in a country where they have never lived before and return after a few months to the country where they had always lived, are very rare.
In cases concerning peripatetic families, who move from one country to another, the position may be unclear.
If so, the perception of the children is at least as important as that of the adults in arriving at a correct conclusion as to the stability and degree of their integration.
The relevant reality is that of the child, not the parents.
This approach accords with our increasing recognition of children as people with a part to play in their own lives, rather than as passive recipients of their parents decisions.
Conclusion
The case will therefore be remitted to the High Court to decide whether any or all of the four children were habitually resident in Spain on 5 January 2013.
If it turns out that any or all of the three boys were, it will also have to be decided whether to return them to Spain when their older sister, or any of their brothers, is not to return will place them in an intolerable situation.
| The appeal relates to the Hague Convention on the Civil Aspects of International Child Abduction 1980 (the Convention) and to section 1(2) of the Child Abduction and Custody Act 1985.
It is brought within proceedings issued by a mother (Spanish national living in Spain) against a father (British national living in England) for the summary return of their four children (T (a girl aged 13), L (a boy aged 11), A (a boy aged 9) and N (a boy aged 5)) from England to Spain.
The Convention stipulates that, subject to narrow exceptions, a child wrongfully removed from, or retained outside, his or her place of habitual residence shall promptly be returned to it.
The test for determining whether a child is habitually resident in a place is now whether there is some degree of integration by him or her in a social and family environment there.
The principal question in this appeal is whether the courts may, in making a determination of habitual residence in relation to an adolescent child who has resided for a short time in a place under the care of one of his or her parents, have regard to that childs state of mind during the period of residence there.
A subsidiary question is whether, in this case, the trial judge erred in exercising his discretion to decline to make the eldest child, T, a party to the proceedings.
The parents met in England and lived in this country throughout their relationship, which ended early in 2012.
On 24 July 2012 the mother and the four children, who were all born in the UK, moved to Spain where they then lived with their maternal grandmother.
It was agreed that the children would spend Christmas with their father and on 23 December 2012 they returned to England.
They were due to return to Spain on 5 January 2013.
Shortly before they were due to fly, the two older boys hid the familys passports and they missed the plane.
On 21 January 2013 the mother made an application under the Convention for the childrens return to Spain.
The father applied for T to be joined as a party so that she might be separately represented, which the High Court refused.
The High Court found all four children to be habitually resident in Spain and thus that they had been wrongfully been retained by their father.
The judge acknowledged that the eldest, T, objected to being returned to Spain but determined that she should nonetheless be returned along with the three younger children.
The Court of Appeal dismissed the appeal against the judges finding that the childrens habitual residence was in Spain.
However, the Court of Appeal reversed the judges decision to return T to Spain finding that, so robust and determined were Ts objections, they should be given very considerable weight.
The Court of Appeal concluded that the appropriate course was to remit to the judge the question whether it would be intolerable to return the three younger children to Spain in light of the fact that T was not going to go with them.
The Court of Appeal dismissed the appeals not only of L and A but also of T against the High Courts failure (in Ts case, refusal) to make them parties to the proceedings.
The Supreme Court unanimously finds that Ts assertions about her state of mind during her residence in Spain in 2012 are relevant to a determination whether her residence there was habitual.
The Supreme Court sets aside the conclusion that T was habitually resident in Spain on 5 January 2013 and remits the issue to the High Court
for fresh consideration.
The Supreme Court also sets aside the finding of habitual residence in respect of the three younger children so that the issue can be reconsidered in relation to all four children.
The Supreme Court unanimously also concludes that T should have been granted party status and that the Court of Appeal should have allowed her appeal against the judges refusal of it.
Lord Wilson gives the lead judgment of the Court.
Courts are now required, in analysing the habitual residence of a child, to search for some integration of her in a social and family environment [34].
Where a child goes lawfully to reside with a parent in a state in which that parent is habitually resident it will be highly unusual for that child not to acquire habitual residence there too.
However, in highly unusual cases there must be room for a different conclusion, and the requirement of some degree of integration provides such room [37].
No different conclusion will be reached in the case of a young child.
Where, however, the child is older, particularly where the child is or has the maturity of an adolescent, and the residence has been of a short duration, the inquiry into her integration in the new environment may warrant attention to be given to a different dimension [37].
Lady Hale, with whom Lord Sumption agrees, would hold that the question whether a childs state of mind is relevant to whether that child has acquired habitual residence in the place he or she is living cannot be restricted only to adolescent children [57].
In her view, the logic making an adolescents state of mind relevant applies equally to the younger children, although the answer to the factual question may be different in their case [58].
The Court notes that what can be relevant to whether an older child shares her parents habitual residence is not the childs wishes, views, intentions or decisions but her state of mind during the period of her residence with that parent [37].
The Court rejects the suggestion that it should substitute a conclusion that T remained habitually resident in England on 5 January 2013 [42].
The inquiry into Ts state of mind in the High Court had been in relation to her objections to returning to Spain and was not directly concerned with her state of mind during her time there [42 (i)].
In addition, the mother has not had the opportunity to give evidence, nor to make submissions, in response to Ts statements to the Cafcass (Children and Family Court Advisory and Support Service) officer regarding her state of mind when in Spain [42 (v)].
Lady Hale expresses grave doubts about whether sending the case back to the High Court for further enquiries into the childrens states of mind would be a fruitful exercise [67].
However, in the interest of justice, she concludes that it should nonetheless be sent back [86].
The majority do not think the state of mind of L or A could alone alter the conclusion about their integration in Spain, but note another significant factor, namely the presence of their older sister, T, in their daily lives [43].
In relation to the habitual residence of the three younger children and in the light of their close sibling bond, the majority query whether Ts habitual residence in England (if such it was) might be a counterweight to the significance of the mothers habitual residence in Spain [43].
Lady Hale agrees with this analysis when applied to the youngest child. [65].
With regard to the subsidiary appeal, the Court notes that an older child in particular may be able to contribute relevant evidence, not easily obtainable from either parent, about her state of mind during the period in question [49].
However, it is considered inappropriate to hear oral evidence from T even as a party.
Instead, a witness statement from T; cross examination of the mother by Ts advocate; and the same advocates closing submissions on behalf of T should suffice to represent her contribution as a party [55].
|
This appeal is concerned with the extent and consequences of duties of equal treatment or fairness, said to have been owed by the Office of Fair Trading (OFT) to those subject to investigation under the Competition Act 1998 (the Act).
Since the events in question the OFT has been replaced by the Competition and Markets Authority (CMA), but it will be convenient in this judgment to refer throughout to the OFT.
The facts
The investigation
In March 2003 the OFT began an investigation into alleged price-fixing arrangements in the tobacco market, contrary to section 2(1) of the Act.
On 24 April 2008, it issued a Statement of Objections (SO) under section 31 of the Act, addressed to 13 parties, including two manufacturers and 11 retailers.
The first respondents (Gallaher) were involved as manufacturers; the second respondents (Somerfield) as retailers.
On 15 April 2010 the OFT issued its decision (the Tobacco decision) upholding the finding of infringement against both respondents, and all but one of the other parties.
Six of those affected appealed to the Competition Appeal Tribunal.
The respondents did not appeal, having each reached settlements with the OFT under the so-called Early resolution process (or ER process).
The ER process
The letters accompanying the SOs sent to the parties in April 2008 had offered the possibility of obtaining a reduction in the financial penalty through co- operation with the OFTs investigation.
The parties were invited to indicate by 9 May 2008 whether they wished to enter into without prejudice discussion with the OFT for this purpose.
Both the respondents responded positively within the time- limit.
Following negotiations they, along with four other parties, entered into Early Resolution Agreements (ERAs).
The ERAs required the signatories admission of involvement in the infringements, set out a series of terms for further co-operation, and indicated the penalties to be imposed subject to a possible reduction of up to 20% for procedural co-operation.
Entry into an ERA did not prevent a party from terminating that agreement at any time up to publication of the OFTs final decision.
If a party did terminate an ERA, it would forgo any discounted penalty negotiated as part of the ERA.
In that event, the OFT would continue with its case against that party in accordance with the usual administrative procedure.
A party to an ERA could also, upon receiving the final decision, decide to appeal against it if it wished to do so, notwithstanding the admissions in the ERA.
In that event, the OFT reserved the right to make an application to the Tribunal to increase the penalty and to require the party to the ERA to pay the OFTs full costs of the appeal regardless of the outcome.
The ER process was not subject to any statutory rules, nor at the material time described in any published document.
The clearest contemporary description of the ER process (though not by that name) came in an internal document of the OFT dated 28 January 2008, and entitled A principled approach to Settlements in Competition Act cases.
This paper was designed to draw out a number of principles from the OFTs experience to date, and emerging thinking, on settlements in Competition Act 1998 cases, and to provide a policy framework for teams who may be considering the possibility of settlement.
Ten principles were identified and discussed.
Particular attention in the present case has been directed to Principle Three: Fairness, transparency and consistency are integral to an effective settlements process.
This was explained as follows: 16.
The overriding principles of fairness, transparency and consistency must always be taken into account.
When engaged in settlement discussions, for example, it is important to ensure that the process is consensual and as transparent as possible throughout, in order to avoid any subsequent allegations of undue pressure having been applied to force parties to sign up to settlement.
17.
Consistency is a particularly key consideration, given parties sensitivity to equality of treatment issues.
Whether or not the details of an individual case have been made public, particular approaches in one case will inevitably leak out during the settlement process (and be set out in the infringement decision) and inform parties strategies in others.
Consistency of approach (or, alternatively, the formulation of strong arguments to justify taking a different approach in similar circumstances) is therefore vital.
Although this is useful as indicating the adopted policy approach of the OFT itself, it is not suggested that the contents were known to or in terms relied on by the respondents when entering into their agreements.
However, the OFT had a separate speaking note for use in discussions with parties.
This summarised the main features of the ER process, and ended with the following commitment to equal treatment: Once first party signed up, the OFT will inform other parties of the terms agreed in terms of the Step 1 to 5 penalty calculation - these terms will be the benchmark for dealing with other parties (as the OFT will observe equal treatment principles).
Both the respondents concluded ERAs with the OFT in early July 2008, involving substantial reductions in the anticipated penalties.
In due course, when the OFT decision was issued in April 2010 the respondents did not appeal, but instead elected to pay the penalties imposed in the ERAs, taking the benefit of the reductions.
TMR
Martin McColl Retail Group Ltd and TM Retail Group Ltd (together, TMR) was another party subject to the investigation, which also entered into an ERA.
In the course of the negotiations for the ERA, at a meeting on 8 July 2008, TMRs representatives asked about the OFTs likely attitude to those who entered ERAs in the event of a successful appeal by one of the other parties to the investigation.
The effect of the exchange was recorded in an email from TMR to OFT after the meeting in the following terms (which were not contradicted): Should another manufacturer or retailer appeal any OFT decision against that manufacturer or retailer to the CAT (or subsequently appeal to a higher court) and overturn, on appeal, part or all of the OFTs decision against that manufacturer or retailer in relation to either liability or fines, then, to the extent the principles determined in the appeal decision are contrary to or otherwise undermine the OFT's decision against [TMR], the OFT will apply the same principles to [TMR] (and therefore presumably withdraw or vary its decision against [TMR] as required).
(Emphasis added) In the course of 2009 and 2010, and before the expiry of the time for appealing the OFT decision, two other parties (Party A and Asda) made similar inquiries about the effect of a successful appeal by other parties, but received non-committal answers.
The Tribunals decision and its aftermath
On 12 December 2011 the Tribunal gave judgment allowing all six appeals: [2011] CAT 41.
Following the Tribunals judgment, TMR wrote to the OFT inviting it to withdraw the OFTs decision as against it, and threatening legal action if it failed to do so.
In the course of further discussions TMR relied on the OFTs earlier assurances about its position in the event of a successful appeal by another party, stating that this had been a key factor in its own decision-making.
As to what followed I take the following from the agreed statement of facts (para 50): The OFT considered that the statements which it had made to TMR in 2008 might have given rise to an understanding on the part of TMR that the OFT would withdraw or vary its decision against TMR in the event of a successful third party appeal.
In light of this, the OFT considered that there was a real risk that TMR would, as a result of this reliance on those statements, be permitted to appeal out of time to the Tribunal and would succeed in that appeal.
The OFT reached a settlement agreement with TMR, by which the OFT agreed to pay to TMR an amount equal to the penalty TMR had paid together with a contribution to interest and legal costs.
The Tobacco Decision was not withdrawn against TMR.
The agreed terms were set out in a settlement agreement dated 9 August 2012.
The OFT then published a statement about the TMR settlement on its website, in which it said that in the light of the particular assurances provided to TM Retail it had agreed to pay the amount of its penalty (2,668,991) and a contribution to costs.
In the meantime, following the Tribunals decision, in February 2012 each of the respondents had written to the OFT calling upon it to withdraw the decision as against them, and to refund the penalties.
This was refused.
In August 2012, after the publication of the information about the settlement between the OFT and TMR, they sent the OFT letters before claim, arguing that they also should be given the benefit of the assurances made to TMR.
In October 2012 they issued the present claims for judicial review.
The out-of-time appeals
The claims were initially stayed by consent to allow the respondents to pursue applications, made in July 2012, for permission to appeal the Tobacco Decision out of time.
By rule 8(2) of the Competition Appeal Tribunal Rules 2003 (SI 1372/2003), the Tribunal may not extend the time limit for appeal unless satisfied that the circumstances are exceptional.
The applications succeeded before the Tribunal, but its decision was reversed by the Court of Appeal on 7 April 2014: Office of Fair Trading v Somerfield Stores Ltd [2014] EWCA Civ 400.
The court held that there were no exceptional circumstances.
In the leading judgment Vos LJ referred (paras 35-36) to the principle of finality, exemplified by the CJEUs decision in Commission of the European Communities v AssiDoman Kraft Products AB (Case C-310/97P) [1999] All ER (EC) 737 (the Wood Pulp II case).
That principle was said to be based on the consideration that the purpose of such time-limits is to ensure legal certainty by preventing Community measures which produce legal effects from being called in question indefinitely.
Although the Wood Pulp II decision was no more than analogous, it pointed the way to the need for finality in competition cases.
In the present case, in Vos LJs view, the respondents had entered the ERAs with their eyes open and made a deliberate decision not to appeal.
He added: It is true that the OFT has the role of a prosecutor and has wide powers to impose penalties, and that those powers must be exercised on a proper basis, but that does not stop commercial parties from taking a commercial view as to whether or not to sign up to an ERA after a long investigatory process and the publication of a lengthy Statement of Objections.
The addressee knows precisely the terms that are being offered.
It knows what it has done in relation to the alleged infringements, and what it is being asked to admit, and the terms requiring its co-operation and the fetters on its rights of defence to which it is being asked to agree.
It can take it or leave it (para 45)
The courts below
In a judgment dated 26 January 2015, Collins J rejected the claims: [2015] EWHC 84 (Admin).
He started from the proposition that the OFTs powers in relation to infringement of the 1998 Act were subject to public law requirements of fairness and equal treatment, so that it was essential that in negotiations in relation to ERAs one party is not given an advantage denied to another (para 38).
However, the assurance given to TMR had been given in error, without regard to the finality principle.
Citing Customs and Excise Comrs v National Westminster Bank plc [2003] STC 1072 para 66, he agreed with Jacob J that as a general rule a mistake should not be replicated where public funds are concerned.
That consideration provided an objective justification for the refusal by the OFT to make payment to the claimants (para 50).
The Court of Appeal took a different view [2016] EWCA Civ 719; [2016] Bus LR 1200.
In the leading judgment, Lord Dyson MR (para 34) noted it as common ground that (in the words of Cranston J, Crest Nicholson plc v Office of Fair Trading [2009] EWHC 1875 (Admin)) the OFT must comply with the principle of equal treatment in all steps leading up to the imposition of a penalty.
He agreed that the assurance given to TMR was a mistake: a decision which no- one who had the finality and legal certainty principles in mind could reasonably have taken (para 58).
The failure to offer a similar assurance to the claimants or others in the same position, or even to inform them, involved unequal treatment which was stark and manifest (para 59).
Under the heading Objective justification (paras 53-54), he agreed with counsel for the OFT that a mistake was not a trump card which will always carry the day The question as he saw it was - whether there has been unfairness on the part of the authority having regard to all the circumstances.
The fact that there has been a mistake may be an important circumstance.
It may be decisive.
It all depends.
He found assistance in the law relating to legitimate expectation, citing R v Secretary of State for Education and Employment, Ex p Begbie [2000] 1 WLR 1115, 1127B-D, per Peter Gibson LJ, to the effect that whether an authority should be permitted to resile from a mistaken statement depends on whether that would give rise to unfairness amounting to an abuse of power.
In the same way, as he saw it, the question in the present case was whether the OFT should be permitted to resile from a mistake where to do so results in unfair and unequal treatment of the claimants.
He concluded that it should not.
It is necessary to quote the concluding paragraph in full, to indicate the sequence of events and combination of circumstances, which appear to have led Lord Dyson MR ultimately to the view that the OFTs action was unlawful: 60.
But the real focus must be on the question whether the 2012 Decision was objectively justified.
That is when the OFT decided that it would act on the 2008 decision in relation to TMR and honour the assurances that it had mistakenly given at that time, and to treat the claimants differently.
The result was that it agreed with TMR to repay the whole of its penalty plus a contribution of 250,000 in relation to costs and interest.
But it refused to pay anything to the claimants.
The only difference between the positions of TMR on the one hand and that of the claimants on the other hand was that the OFT had given the assurances to TMR in 2008, but not to the claimants.
The effect of that manifestly unfair and unequal treatment in 2008 could have been reversed after the issue had been raised by Asda and party A and the OFTs eyes had been opened to the significance of its earlier mistake in giving the assurances to TMR.
That would have put all the companies which had been the subject of the Tobacco Decision and to which the [Statement of Objections] has been addressed on an equal footing.
The OFT could have withdrawn the assurances.
It would not have been too late for TMR to appeal at that time.
Even if TMR had been out of time, it would have had a very powerful case for arguing that the withdrawal of the assurances was an exceptional circumstance which justified an extension of time for appealing.
Instead, the OFT acted on the assurances it had given to TMR, made the 2012 decision and repaid the penalty previously levied and made further payments too.
In all the circumstances, this was a plain breach of the principle of equal treatment and unfair.
The Court of Appeals order declared that the OFT had acted unlawfully by - (a) not offering the appellants in 2008 the assurance given to [TMR] that in the event of a successful appeal by other parties, it would benefit from that appeal decision even if it did not appeal; and (b) refusing in 2012 to make payment to the appellants of the amount of the penalty imposed on them even though it had made such a payment to TMR.
It ordered that the respondents should each be entitled to payment of a sum equal to the penalties they had paid to the OFT, together with an amount in interest and costs.
Equal treatment and fairness
The submissions
It was central to the reasoning of both courts below that the OFT was subject (as Collins J put it) to public law requirements of fairness and equal treatment.
That analysis was not seriously challenged by counsel for the appellant in this court.
They accepted that the principle of equal treatment applied to the OFT, but submitted that it did not require it to replicate a mistake, at least in the absence of conspicuous unfairness.
They rely on the approach of Lord Bingham in R (OBrien) v Independent Assessor [2007] 2 AC 312, para 30: It is generally desirable that decision-makers, whether administrative or judicial, should act in a broadly consistent manner.
If they do, reasonable hopes will not be disappointed.
But the assessors task in this case was to assess fair compensation for each of the appellants.
He was not entitled to award more or less than, in his considered judgment, they deserved.
He was not bound, and in my opinion was not entitled, to follow a previous decision which he considered erroneous and which would yield what he judged to be an excessive award.
The respondents similarly adopt the language of equal treatment and fairness.
Thus Miss Jessica Boyd, counsel for the second respondent, formulated the issue in these terms: The issue before the Court is whether it was conspicuously unfair and/or a breach of the principle of equal treatment, amounting to a breach of public law, for the OFT, on the successful appeal of its decision in the Tobacco Decision, to repay one non-appellant addressee of that decision (namely, TM Retail) the penalty it had paid pursuant to that decision, while refusing to do the same for the respondents.
The equal treatment principle was said to be well-established in domestic law, by reference for example to R (Middlebrook Mushrooms Ltd) v Agricultural Wages Board of England and Wales [2004] EWHC 1447 (Admin) at para 74.
The expression conspicuous unfairness was derived from the judgment of Simon Brown LJ in R v Inland Revenue Comrs, Ex p Unilever plc [1996] STC 681, as applied by Richards J in R v National Lottery Commission, Ex p Camelot Group plc [2001] EMLR 3, para 72.
To those authorities Lord Pannick QC for the first respondent added Bank Mellat v HM Treasury (No 2) [2014] AC 700, 773 para 25 per Lord Sumption; and Paponette v Attorney General of Trinidad and Tobago [2012] 1 AC 1, 12 paras 28 and 30 per Lord Dyson.
He relied also on the formulation of the principle of equal treatment in European Union law: The principle of equal treatment, as a general principle of EU law, requires that comparable situations must not be treated differently and that different situations must not be treated in the same way, unless such treatment is objectively justified.
(Case C-510/11, Kone OYJ and others v European Commission (Elevators and Escalators Cartel Appeal) [2014] 4 CMLR 10, para 97).
This was said to apply to the relevant functions of the OFT, by virtue of section 60(1) of the Competition Act 1998, the purpose of which is to ensure that as far as possible questions arising under this Part in relation to competition within the United Kingdom were dealt with in a manner consistent with the treatment of corresponding questions arising in Community law However, I say at once that I find no assistance in this respect in section 60, which seems to me directed to questions arising specifically under the statute, rather than as here under general principles of administrative law.
Notwithstanding the degree of common ground on these points, it is important in this court to be clear as to the precise content and attributes of the relevant legal principles, and their practical consequences in terms of remedies.
Equal treatment
Whatever the position in European law or under other constitutions or jurisdictions, the domestic law of this country does not recognise equal treatment as a distinct principle of administrative law.
Consistency, as Lord Bingham said in the passage relied on by the appellant (para 19 above), is a generally desirable objective, but not an absolute rule.
The need for clear dividing lines in this context has been highlighted in the Privy Councils consideration of various forms of equal treatment clauses in common law constitutions.
Thus for example in Webster v Attorney General of Trinidad and Tobago [2015] UKPC 10; [2015] ICR 1048 the Board was concerned with section 4(d) of the Constitution of that country, which recognises the right of the individual to equality of treatment from any public authority in the exercise of any functions.
Lady Hale commented (para 14) that open-ended constitutional guarantees of equal treatment by public authorities, such as that in section 4(d), are few and far between.
She contrasted such provisions with the Constitution of Mauritius, section 16 of which prohibits discrimination both by the laws and by public authorities, but only on defined grounds, and under which, as the Board had held in Matadeen v Pointu [1999] 1 AC 98 there was no general constitutional right to equal treatment by the law or by the executive.
In the latter case, in an important passage under the heading Democracy and Equality ([1999] AC 98, para 9), Lord Hoffmann had emphasised the need to distinguish between equal treatment as a democratic principle and as a justiciable rule of law: 9.
Their Lordships do not doubt that such a principle is one of the building blocks of democracy and necessarily permeates any democratic constitution.
Indeed, their Lordships would go further and say that treating like cases alike and unlike cases differently is a general axiom of rational behaviour.
It is, for example, frequently invoked by the courts in proceedings for judicial review as a ground for holding some administrative act to have been irrational: see Professor Jeffrey Jowell QC, Is Equality a Constitutional Principle? (1994) 7 CLP 1, 12-14 and de Smith, Woolf and Jowell, Judicial Review of Administrative Action, 5th ed (1995), pp 576-582, paras 13- 036 to 13-045.
Of course persons should be uniformly treated, unless there is some valid reason to treat them differently.
But what counts as a valid reason for treating them differently? And, perhaps more important, who is to decide whether the reason is valid or not? Must it always be the courts? The reasons for not treating people uniformly often involve, as they do in this case, questions of social policy on which views may differ.
These are questions which the elected representatives of the people have some claim to decide for themselves.
The fact that equality of treatment is a general principle of rational behaviour does not entail that it should necessarily be a justiciable principle - that it should always be the judges who have the last word on whether the principle has been observed.
In this, as in other areas of constitutional law, sonorous judicial statements of uncontroversial principle often conceal the real problem, which is to mark out the boundary between the powers of the judiciary, the legislature and the executive in deciding how that principle is to be applied.
(see now the current edition of De Smiths Judicial Review 8th ed (2018) paras 11.061ff) As that passage makes clear, in domestic administrative law issues of consistency may arise, but generally as aspects of rationality, under Lord Diplocks familiar tripartite categorisation.
The authorities cited by the respondents provide illustrations.
The passage cited by Lord Pannick from Lord Sumptions judgment in Bank Mellat (No 2) (above) at para 25 was concerned directly with the question of proportionality under the European Convention on Human Rights, but it was expressed in terms which could be applied equally to common law rationality.
Lord Sumption spoke of a measure which, while responding to a real problem, may nevertheless be irrational or disproportionate by reason of its being discriminatory in some respect that is incapable of objective justification.
He gave as the classic illustration A v Secretary of State for the Home Department [2005] 2 AC 68, in which it was held by the House of Lords that a derogation from the Human Rights Convention permitting the detention of non-nationals considered a risk to national security, was neither a proportionate nor a rational response to the terrorist threat, because it applied only to foreign nationals; it was not explained why, if the threat from UK nationals could be adequately addressed without depriving them of their liberty, the same should not be true of foreign nationals.
He quoted Lord Hope (para 132): the distinction raises an issue of discrimination. ... But, as the distinction is irrational, it goes to the heart of the issue about proportionality also.
At a more mundane level, R (Middlebrook Mushrooms Ltd) v Agricultural Wages Board of England and Wales [2004] EWHC 1447 (Admin) (cited by Miss Boyd) concerned a statutory order under the Agricultural Wages Act 1948, which established a new category of worker, the Manual Harvest Worker (MHW), whose minimum wage was lower than that of a Standard Worker, but the order uniquely excluded mushrooms from the definition of produce the harvesters of which might be paid at the lower rate.
This was challenged successfully by the mushroom growers.
Having rejected as baseless the various reasons put forward for the distinction, the judge (Stanley Burnton J) concluded that there was no lawful justification for the exclusion of mushroom pickers from the lower rate.
He cited inter alia Lord Donaldsons reference to the cardinal principle of public administration that all persons in a similar position should be treated similarly (para 74) (R (Cheung) v Hertfordshire County Council, The Times, 4 April 1986).
He concluded that the exclusion of manual harvesters of mushrooms from the MHW category was Wednesbury unreasonable and unlawful, or in other words irrational.
In the present context, however, it is not necessary in my view to look for some general public law principle of equal treatment.
It is not difficult to hold that the OFT owed a general duty during the negotiations in 2008 to offer equal treatment to those subject to the Tobacco investigation.
There was no logical reason to do otherwise, since it was applying a single set of legal and policy criteria to a limited group of parties within a single area of business activity.
In addition, its commitment to equal treatment had been expressed in terms to those parties (assuming, as I do, that the speaking note fairly reflects what they were told).
To that extent, it may be said, they had in public law terms a legitimate expectation that they would be treated equally.
However, that in itself does not provide an answer to the present problem.
It tells one nothing about the legal consequences of such an expectation, in terms of rights and remedies in public law, in the events as they developed up to 2012.
Before returning to that critical question, it is necessary to consider what if anything is added by the concept of fairness, as invoked by Lord Dyson in his concluding paragraph, albeit without direct reference to authority.
It is that gap which the respondents counsel have sought to fill by the authorities noted above, in particular the Unilever case.
Fairness
Fairness, like equal treatment, can readily be seen as a fundamental principle of democratic society; but not necessarily one directly translatable into a justiciable rule of law.
Addition of the word conspicuous does not obviously improve the precision of the concept.
Legal rights and remedies are not usually defined by reference to the visibility of the misconduct.
Simple unfairness as such is not a ground for judicial review.
This was made clear by Lord Diplock in R v Inland Revenue Comrs, Ex p National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617, 637: judicial review is available only as a remedy for conduct of a public officer or authority which is ultra vires or unlawful, but not for acts done lawfully in the exercise of an administrative discretion which are complained of only as being unfair or unwise, (Emphasis added)
Procedural fairness or propriety is of course well-established within Lord Diplocks trilogy.
R v National Lottery Commission, Ex p Camelot Group plc [2001] EMLR 3, relied on by the respondents, is a good example.
It concerned unequal treatment between two rival bidders for the lottery, one of whom was given an unfair procedural advantage over the other.
That was rightly seen by Richards J as amounting to a breach of procedural fairness (see paras 69-70).
Although he used the judgment to discuss principles of fairness in a wider context, that was not essential to his decision, which ultimately turned on the proposition that the Commission had decided on a procedure that results in conspicuous unfairness to Camelot - such unfairness as to render the decision unlawful (para 84, emphasis added).
A broader concept of unfairness amounting to excess or abuse of power emerged in a series of cases in the 1980s, under the influence principally of Lord Scarman.
In the National Federation case (above at p 652) he had been alone in holding that a legal duty of fairness (was) owed by the revenue to the general body of taxpayers.
However, in R v Inland Revenue Commission, Ex p Preston [1985] AC 835, in which he presided, he was able with the support of Lord Templeman (who gave the leading speech) to develop the same idea in terms of a duty of fairness to an individual taxpayer, arising from a written assurance given by the Revenue as to his tax treatment.
Lord Scarman himself said no more than that unfairness in the purported exercise of a power can be such that it is an abuse or excess of power, but he referred to Lord Templemans speech for illustrations (p 851H-852C).
Lord Templeman dealt with this subject in an extended passage, starting from a citation of various statements in the National Federation case.
In particular he took the words of Lord Scarman about the Revenues general duty of fairness (without noting that it had been a minority view) as supporting a duty of fairness owed to each individual taxpayer; but subject to the caveat that the court could not in the absence of exceptional circumstances decide to be unfair that which the commissioners had determined to be fair.
Judicial review, he said, is only available if the court is satisfied that - the unfairness of which the applicant complains renders the insistence by the commissioners on performing their duties or exercise of powers an abuse of power by the commissioners.
(p 864G)
There followed a passage citing various authorities, in which judicial review was said to have been granted on the grounds of unfairness amounting to abuse of power, either due to some proven element of improper motive (p 864H, citing Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997), or due to an error of law whereby the Price Commission misconstrued the code they were intending to enforce (p 866F, citing HTV Ltd v Price Commission [1976] ICR 170).
These authorities, he thought, supported the suggestion that the commissioners would be guilty of unfairness amounting to an abuse of power if their conduct would in a private context entitle the appellant to an injunction or damages based on breach of contract or estoppel by representation (p 866H-867C).
This part of Lord Templemans speech was obiter, since the claim of abuse of power failed on the facts.
It is not without difficulty.
It seems that in all the examples given by Lord Templeman there was a conventional ground of review, such as improper motive or illegality.
It is not clear what he saw the word unfairness (always in inverted commas) as adding to the legal reasoning.
With hindsight the case is best understood by reference to principles of legitimate expectation derived from an express or implied promise (see de Smith op cit para 12-019; R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213, paras 61ff)).
It had not been argued on that basis, perhaps because of the uncertain application at that time of legitimate expectation to substantive rather than procedural benefits (see United Policyholders Group v Attorney General of Trinidad and Tobago [2016] 1 WLR 3383 at paras 83ff).
The authority is not relied on directly in the present appeal, but is of some relevance as providing the background to the references to unfairness or conspicuous unfairness in the judgments in the Unilever case, on which the respondents rely, and to which I now turn.
In Unilever the Court of Appeal held that the Revenue should not be permitted without warning to apply a strict time-limit for submission of claims to loss relief, when to do so departed from a practice accepted by them without objection for some 20 years.
The judge (Macpherson of Cluny J) had held that the Revenues conduct amounted to a representation in Preston terms, or, if not, had led to unfairness and an abuse of power (p 689f).
In the Court of Appeal the main issue seems to have been whether the taxpayer could succeed in the absence of a representation by the Revenue which was clear, unambiguous, and devoid of relevant qualification, as stated in previous Court of Appeal authority (p 690a).
Sir Thomas Bingham MR held that, on the unique facts of the case, to reject the claims was so unfair as to amount to an abuse of power (p 691h), and so unreasonable as to be, in public law terms, irrational (p 692f).
In a concurring judgment, Simon Brown LJ, under the heading Legitimate expectation or nothing? (pp 693-695), sought to relate the case more directly to Lord Diplocks famous definition of irrationality as a decision so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it (Council of Civil Service Unions v Minister for the Civil Service [1985] 1 AC 374, 410).
It was in that context that he introduced the idea of conspicuous unfairness: He said: Unfairness amounting to an abuse of power as envisaged in Preston and the other Revenue cases is unlawful not because it involves conduct such as would offend some equivalent private law principle, not principally indeed because it breaches a legitimate expectation that some different substantive decision will be taken, but rather because either it is illogical or immoral or both for a public authority to act with conspicuous unfairness and in that sense abuse its power.
In short, he regarded the MFK category of legitimate expectation as essentially but a head of Wednesbury unreasonableness (p 695a-b).
On the facts of the case, he held that the test was satisfied, observing that he could think of no surer guide than Macpherson of Cluny J in determining - the border between on the one hand mere unfairness - conduct which may be characterised as a bit rich but nevertheless understandable - and on the other hand a decision so outrageously unfair that it should not be allowed to stand.
(p 697C)
I have quoted at some length from these judgments to show how misleading it can be to take out of context a single expression, such as conspicuous unfairness, and attempt to elevate it into a free-standing principle of law.
The decision in Unilever was unremarkable on its unusual facts, but the reasoning reflects the case law as it then stood.
Surprisingly, it does not seem to have been strongly argued (as it surely would be today) that a sufficient representation could be implied from the Revenues consistent practice over 20 years (see eg de Smith para 12-021).
It seems clear in any event from the context that Simon Brown LJ was not proposing conspicuous unfairness as a definitive test of illegality, any more than his contrast with conduct characterised as a bit rich.
They were simply expressions used to emphasise the extreme nature of the Revenues conduct, as related to Lord Diplocks test.
In modern terms, and with respect to Lord Diplock, irrationality as a ground of review can surely hold its own without the underpinning of such elusive and subjective concepts as judicial outrage (whether by reference to logical or moral standards).
In summary, procedural unfairness is well-established and well-understood.
Substantive unfairness on the other hand - or, in Lord Dysons words at para 53, whether there has been unfairness on the part of the authority having regard to all the circumstances - is not a distinct legal criterion.
Nor is it made so by the addition of terms such as conspicuous or abuse of power.
Such language adds nothing to the ordinary principles of judicial review, notably in the present context irrationality and legitimate expectation.
It is by reference to those principles that cases such as the present must be judged.
The present case
Against that background I can turn to the analysis of the present case.
The respondents no doubt have grounds to complain of the administrative failure to inform them of the assurance given to TMR in 2008.
Had they known of it, they might have sought similar assurances.
We do not know whether, if the request had been pressed, the assurance would have been replicated, or whether (more probably) the OFT would have reviewed the assurance to TMR in time to leave open the possibility of appeal.
In any event, grounds for administrative complaint do not necessarily add up to a cause of action in law.
Even accepting that there was a breach of a legitimate expectation of equal treatment in the failure to replicate the assurances given to TMR in 2008, that would not in itself provide a basis for financial remedy in relation to the events of 2012, nor the reversal of financial penalties which had by then been lawfully imposed on the respondents and accepted by them.
Lord Dyson identified the critical issue as whether the 2012 decision - that is, to honour the assurances given to TMR but not to do likewise for the respondents - was objectively justified.
In my view it makes no difference to the result whether one applies a test of objective justification or of rationality.
I see this question as depending, not so much on whether the giving of the assurance to TMR had been a mistake, but on the reality of the position as reasonably perceived by the OFT in 2012.
It is not entirely clear what it was about the combination of circumstances, summarised in Lord Dysons concluding paragraph, which led the court to the view that a critical boundary of unfairness had been crossed.
Lord Dyson noted that the only difference between the respective positions of TMR and of the respondents was that the OFT had given the assurances to TMR in 2008, but not to the (respondents).
But that was a potentially crucial difference.
All those who entered ER agreements were aware of the possibility that other parties would appeal and might be successful.
That was a risk the respondents took.
As Vos LJ said, they knew what they were doing and accepted it with their eyes open.
TMR did not.
They sought and obtained an assurance on which they claimed to have relied.
In 2012 the OFT could reasonably take the view that, if the assurance were not honoured, TMR would have had a strong case for permission to appeal out of time, whereas the respondents did not (as the Court of Appeal has since held).
If objective justification were needed for the OFT taking a different approach to TMR, that in my view was sufficient; nor was it irrational for them to do so.
For these reasons, I would allow the appeal and restore the order of Collins J.
Cartel investigations are notoriously difficult without inside information or the active co-operation of at least one participant and are not necessarily straightforward even then.
Early Resolution Agreements are a standard tool at the disposal of competition authorities for settling them by consent at an early stage after the investigation has been notified to those under investigation.
A party under investigation is offered the prospect of settling the allegation on the basis of a negotiated admission and a discount on the penalty which would otherwise have been imposed.
Properly used, they enable an investigation to be conducted expeditiously, economically and fairly and are in principle in the public interest.
The practice, however, raises questions of some delicacy.
A competition authority is not an ordinary litigant, but a public authority charged with enforcing the law.
It therefore has wider responsibilities than the extraction of the maximum of penalties for the minimum of effort.
A party under investigation must not be subjected to undue pressure to make admissions.
Nor can it be deprived of any statutory right of appeal against the ultimate decision.
The terms of the Early Resolution Agreements made with TMR, Gallaher, Somerfield and Asda in this case followed the internal procedures laid down within the OFT.
They sought to balance these considerations by providing (i) that the party under investigation would be entitled to terminate the agreement at any time before receipt of the final decision, in which case it would forgo the discount; and (ii) that notwithstanding its admission it would be entitled to exercise its statutory right of appeal against the decision to the Competition Appeal Tribunal, in which case the OFT would be at liberty to apply to the Tribunal to increase the penalty and order the party under investigation to pay the costs of the appeal in any event.
It is fundamental to the efficacy of such an agreement that subject to its terms it cuts short the investigation of the counterparty by finally resolving the issues as between it and the OFT.
Where an Early Resolution Agreement is made with one party but the investigation proceeds against others, the former is entitled to the benefit of the discount or to the benefit of the continuing investigation and/or an appeal.
He is not entitled to both.
This carefully drawn balance was disturbed by the oral assurance unwisely given by the responsible OFT officer Ms Branch to TMR, but not Gallaher or Somerfield.
The assurance was that a successful appeal by other parties on liability would result in no finding against [TMR] and that in the event of a successful appeal on penalty, then OFT would apply any reduction to TMR.
There was a successful appeal to the CAT by the parties who had not entered into Early Resolution Agreements, and also by Asda, which had entered into one but exercised its right to appeal.
The appeal succeeded on the ground that the OFT decision did not show that there was any anti-competitive object or effect.
That is a ground on which TMR, Gallaher and Somerfield would also have been entitled to succeed if they had appealed.
Therefore the effect of the assurance was that TMR obtained the benefit of a successful appeal without itself having to appeal and therefore without being exposed to the risk of losing the discount if the appeal failed.
The result was to put them in a better position than Gallaher or Somerfield.
Moreover, although Gallaher and Somerfield were notified of the Early Resolution Agreement with TMR they were not told about the oral assurance.
Consequently, they were not prompted to ask for a similar assurance.
The Court of Appeal held that the OFTs failure to repay the penalties to Gallaher and Somerfield, as they had to TMR, was a breach of a public law duty to treat all those under investigation equally in the absence of some objective ground for treating them differently.
They considered that there was no such ground.
I agree with Lord Carnwaths analysis of the relevant legal principles.
In public law, as in most other areas of law, it is important not unnecessarily to multiply categories.
It tends to undermine the coherence of the law by generating a mass of disparate special rules distinct from those applying in public law generally or those which apply to neighbouring categories.
To say that a decision-maker must treat persons equally unless there is a reason for treating them differently begs the question what counts as a valid reason for treating them differently.
Consistency of treatment is, as Lord Hoffmann observed in Matedeen v Pointu [1999] 1 AC 98, at para 9 a general axiom of rational behaviour.
The common law principle of equality is usually no more than a particular application of the ordinary requirement of rationality imposed on public authorities.
Likewise, to say that the result of the decision must be substantively fair, or at least not conspicuously unfair, begs the question by what legal standard the fairness of the decision is to be assessed.
Absent a legitimate expectation of a different result arising from the decision-makers statements or conduct, a decision which is rationally based on relevant considerations is most unlikely to be unfair in any legally cognisable sense.
In the present case nothing that the OFT said or did could have given rise to any other expectation than that it would act rationally.
The questions which this appeal poses are (i) whether the OFT acted rationally in giving the assurance to TMR alone in 2008 and in repaying the penalty to TMR alone in 2012; and (ii) if not what are the consequences for Gallaher and Somerfield.
I start with the decision of 2008.
As a statement of the ordinary legal consequences of a successful appeal by other parties, the assurance given by Ms Branch was wrong.
An appeal by one party from a decision of the OFT on a cartel investigation is a distinct legal proceeding whose outcome affects that party only: Deutsche Bahn AG v Morgan Advanced Materials plc (formerly Morgan Crucible Co plc) (European Commission intervening) [2014] 2 All ER 785, para 21, Commission of the European Communities v Assidomn Kraft Products AB (Case C-310/97P) at paras 2-14, 4 CMLR 10 (Wood Pulp II), para 63.
The assurance could therefore be relevant only as a collateral undertaking to TMR that they would be treated otherwise than in accordance with the general law.
This was a mistake, as both courts below have recognised.
It was a mistake not because Ms Branch did not intend to give the assurance or did not know what she was doing.
It was a mistake because it was inconsistent with the OFTs policy of non-discrimination, as well as with the terms of the Early Resolution Agreement under discussion, and more generally with the purpose of the early resolution procedure.
That, however, cannot affect the position of Gallaher or Somerfield, for substantially the reason given by the Court of Appeal when they held that Gallaher and Somerfield were not entitled to appeal the OFTs decision out of time after the other appeals had succeeded.
Save in exceptional circumstances, such an appeal must be brought within two months of the OFTs final decision.
The Court of Appeal held that there were no exceptional circumstances.
This was because each of them had entered into a distinct agreement which was intended finally to resolve the issues the subject of the appeals, subject only to the right conferred by the agreement to terminate the agreement before a final decision or to appeal afterwards.
They had invoked neither condition, thus accepting the risk that they would not benefit if the appeal succeeded but ensuring that they would retain the benefit of the discount if it failed.
Finality and certainty required that they should live with the consequences: see Office of Fair Trading v Somerfield Stores Ltd [2014] EWCA Civ 400, esp at paras 33, 38, 41 and 45.
The fact that no corresponding assurance was given to Gallaher or Somerfield makes no difference to this analysis.
This was not a zero sum game, like the tender process considered in R v National Lottery Commission, Ex p Camelot Group Plc [2001] EMLR 3.
The benefit to TMR was in no sense given at their expense.
Nor does it make any difference that the oral assurance was not disclosed to them.
If it had been, they might well have asked for a similar assurance for themselves.
But they would have had no right to one.
As a matter of principle, the OFTs mistake was that they gave the assurance to TMR, not that they failed to give it to Gallaher and Somerfield.
As a matter of fact, if Gallaher and Somerfield had asked for a similar assurance, there is no reason to suppose that the OFT would have made the same mistake again.
It is at least as likely that such a request would have provoked a reassessment of the assurance given to TMR, followed by its withdrawal.
Against that background, I turn to the 2012 decision which the Court of Appeal, correctly as I think, regarded as the relevant one.
Was it irrational to repay the penalty to TMR after the appeal but not to Gallaher or Somerfield? In my opinion it was not, because although the decision to repay TMR also was discriminatory, the discrimination was objectively justified.
To see why this is so, it is necessary to look more carefully at the basis on which the OFT agreed to repay the penalty to TMR in 2012.
The OFTs assurance had been that in the event of a successful appeal by another party on liability they would withdraw as against TMR the finding of unlawfulness made in their decision.
However, they refused to do that.
It would have been contrary to the terms of the Early Resolution Agreement.
Instead, they recognised that they had slipped up in giving the assurance.
As a result, first, TMR would be certain to get permission to appeal out of time, because the assurance had made it unnecessary for them to appeal in time; and, secondly, their appeal would have been bound to succeed, because the ground on which the other appeals had succeeded applied equally to them.
Accordingly, the OFT settled with TMR on the only realistic basis.
Gallaher and Somerfield were not in the same position.
The OFT had not slipped up in their case.
They had no basis for a late appeal, as indeed the Court of Appeal subsequently held.
There was nothing as between them and the OFT to be settled.
Because TMR had received the oral assurance and on that basis foregone an appeal which would certainly have succeeded, the repayment of the penalty to them was in no sense a windfall.
But it would be a windfall if a corresponding repayment were now to be made to Gallaher and Somerfield, who forewent their appeal by their own decision on an entirely different basis.
For these reasons, I would allow the appeal.
I agree that this appeal should be allowed, and with Lord Carnwaths analysis of the relevant legal principles.
As he concludes, the OFTs decision to honour the assurance given to TMR, but not to replicate it in favour of the respondents, was both objectively justified and a rational response to the predicament which it faced.
In 2008 the OFT gave an assurance to TMR about extending to it the benefit of any successful appeal by another party which the evidence shows (and the courts below rightly held) was the result of a mistake.
It had been intended as a statement of what the OFT then thought, without proper consideration of the question, and in particular the finality principle, would be the legal consequence for TMR of a successful appeal by another party.
It had not been intended to confer some special benefit upon TMR, and might have been unthinkingly replicated in favour of other parties negotiating ERAs if any had asked the same question, but none did.
In 2012, when the consequences of the mistaken assurance came home to roost, the OFT was faced, at least in theory, with three unpalatable alternatives: It could go back on the assurance to TMR, and refuse any similar It could honour the assurance to TMR, and extend it to the respondents (a) benefit to any other party.
(b) and any other party in a similar position.
(c) to any other party.
It could honour all or part of the assurance to TMR but not extend it.
Option (a) was unsatisfactory because it would almost certainly have led to TMR (but not the respondents) obtaining permission to appeal out of time, and to a wholly successful appeal.
This would have been an even better outcome for TMR than that which the OFT provided by agreement, because the agreement did not abandon the finding of unlawfulness against TMR in the decision.
Furthermore the complaint by the respondents of having been treated differently in 2008 would have remained.
Option (b) would have involved the replication of a mistake at very large cost to the public purse, in favour of parties who neither received nor relied upon a similar assurance.
Option (c) would involve treating the respondents differently, but would at least not involve the replication of a mistake.
These claims seek judicial review of the OFTs choice of option (c).
Where a public authority has a choice of this kind, and one of the options avoids replicating an earlier mistake, but at some cost to equal treatment, the choice is one for the authority, not for the court, for the reasons which Lord Carnwath gives, subject to the usual constraints of lawfulness and rationality.
If, but only if, the authority acts outside those constraints will its choice be subject to judicial review.
In the present case I do not consider that the OFTs response to its predicament transgressed those boundaries.
The fact that the giving of the assurance to TMR in 2008 was a mistake, that its withdrawal in 2012 would be likely to leave TMR even better off than if the assurance was honoured, and that the respondents had neither received or relied upon any similar assurance seem to me, taken in combination, to amount to a powerful objective justification for unequal treatment, as between TMR and the respondents.
On any view the OFT made a rational choice between unpalatable alternatives, with which the court should not interfere.
| The Competition and Markets Authority (CMA) is the successor in title to the Office of Fair Trading (OFT).
In April 2008 the OFT identified 13 parties, including the respondents, as having infringed the Competition Act 1998.
In early June 2008 both respondents, along with four other parties, entered into Early Resolution Agreements (ERAs) with the OFT.
The ERAs involved the parties admitting infringement and co operating with the OFT in exchange for substantial reductions in the anticipated penalties.
A party to an ERA could also appeal against that final decision, notwithstanding the admissions in the ERA, but in that case was liable to have his penalty increased by the Competition Appeal Tribunal (CAT).
The Early Resolution process was neither subject to statutory rules nor, at the material time, described in any published document.
An internal OFT document nonetheless emphasised Fairness, transparency and consistency as integral to an effective settlement process.
An OFT speaking note for use in discussions with parties also included a commitment to equal treatment principles.
TM Retail (TMR) was one of the parties which had entered into an ERA.
In 2008 the OFT responded to a query from TMR with an assurance that, if it did not appeal, it would get the benefit of any successful appeal made by any of the other parties to the decision.
In April 2010 the OFT issued its final decision which made findings of infringement against parties under investigation, including the respondents.
Six of those parties appealed to the CAT.
Neither the respondents not TMR appealed, but instead chose to pay the reduced penalties imposed in the ERAs.
The CAT allowed the appeals of all six appellants.
TMR then wrote to the OFT, citing the 2008 assurance and inviting the OFT to withdraw the decision against it.
The OFT reached a settlement agreement with TMR whereby the penalty which had been imposed on TMR was repaid with a contribution to interest.
The respondents invited the OFT to withdraw the decisions against them, arguing that they should also be given the benefit of the assurances given to TMR.
The OFT refused.
The respondents ultimately brought judicial review claims.
These failed in the High Court but succeeded in the Court of Appeal, which held that the OFTs failure to repay the penalties to the respondents was, in the absence of some objective justification for the difference in treatment compared to TMR, a breach of a public law duty to treat all those under investigation equally.
The CMA appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
Lord Carnwath gives the lead judgment, with which the other Justices agree.
Lord Sumption and Lord Briggs give concurring judgments.
Domestic administrative law does not recognise a distinct principle of equal treatment.
Consistency is a generally desirable objective, but not an absolute rule [24].
In this case the OFT was applying a single
set of legal and policy criteria to a limited group of parties within a single area of business activity, and its commitment to equal treatment had been expressed in terms to those parties.
To that extent, they had a legitimate expectation of equal treatment; but that tells one nothing about the legal consequences of such an expectation [29 30].
Although procedural unfairness or impropriety is a well established ground of judicial review, substantive unfairness as such is not. the case law add nothing to the ordinary principles of judicial review by which this case must be judged [31 42].
Even accepting that there was a breach of a legitimate expectation in the failure to replicate the assurances given to TMR in 2008, that would not in itself provide a basis for financial remedy in relation to the events of 2012, nor the reversal of financial penalties which had by then been lawfully imposed on, and accepted by, the respondents.
It makes no difference to the result whether one applies a test of objective justification or one of rationality [43].
All those who entered ERAs knew of the possibility that other parties would appeal successfully.
That was a risk the respondents took knowingly.
TMR did not.
TMR sought and obtained an assurance on which it claimed to have relied.
In 2012 the OFT could reasonably take the view that, if the assurance were not honoured, TMR would have had a strong case for permission to appeal to the CAT out of time, whereas the respondents did not.
If objective justification were needed for OFT taking a different approach to TMR, that was sufficient. [44 45].
Lord Sumption adds that the assurance given to TMR was a mistake because it was inconsistent with the OFTs policy of non discrimination, the terms of the ERA under discussion, and the purpose of the Early Resolution procedure [51 52].
That, however, cannot affect the position of the respondents, each of whom had entered into a distinct ERA which was intended finally to resolve the issues which were the subject of the CAT appeals, subject only to their right to either (i) terminate the ERA before the final OFT decision or (ii) appeal to the CAT after that decision.
They invoked neither option, thus accepting the risk that they would not benefit from any other partys successful appeal but ensuring that they would retain the benefit of the discounted sanction if the appeals failed.
Finality and certainty required that they should live with the consequences [53].
The assurance to TMR was in no sense given at their expense.
They had no right to such an assurance.
The OFTs mistake was that they gave the assurance to TMR, not that they failed to give it to the respondents.
It was not irrational for the OFT in 2012 to repay the penalty to TMR after the appeal while not repaying the respondents, because having failed to appeal in reliance on the assurance, TMR would otherwise have been entitled to obtain leave to appeal out of time.
Since they were in materially the same position as the six successful appellants, their appeal would have succeeded.
Therefore, while the decision was discriminatory, the discrimination was objectively justified.
Unlike TMR, the respondents had no basis for a late appeal to the CAT [54 56].
Lord Briggs adds that, where a public authority has the option to avoid replicating an earlier mistake but at some cost to equal treatment, the choice is one for the authority rather than the court, subject to the usual constrains of lawfulness and rationality.
The OFTs conduct did not transgress those boundaries.
The circumstances amount to a powerful objective justification for the unequal treatment: (i) the assurance to TMR was a mistake, (ii) its withdrawal in 2012 likely would have left TMR even better off than if the assurance were honoured, and (iii) the respondents had neither received nor relied upon any similar assurance.
On any view the OFT made a rational choice between unpalatable alternatives, with which the court should not interfere [62 63].
|
The appellants, Sustainable Shetland, are an unincorporated association concerned in the protection of the environment of the Shetland Islands.
By these proceedings they challenge a consent granted on 4 April 2012 by the Scottish Ministers for the construction of a windfarm.
The consent was under section 36 of the Electricity Act 1989, and was accompanied by a direction that separate planning permission was not required (Town and Country Planning (Scotland) Act 1997 section 57(2)).
Although the appellants objections in earlier exchanges had related to the impact of the development on the environment generally, the focus of their challenge in the courts has related to the alleged failure of the ministers to take proper account of their obligations under the Birds Directive, in respect of the whimbrel, a protected migratory bird.
Their challenge was upheld by the Lord Ordinary (Lady Clark of Calton) on other grounds which are no longer in issue, but she indicated that she would if necessary have upheld the challenge also under the directive.
The ministers appeal was allowed unanimously by the Inner House.
The proposed windfarm was on a very large scale.
In its amended form it would have had 127 turbines (reduced from 150), located in three areas (Delting, Kergord and Nesting), covering a total area of some 50 square miles, of which some 232 hectares would be physically affected.
Associated infrastructure would include 104 km of access tracks, and anemometer masts, and borrow pits.
The original application was made in May 2009.
It was accompanied by an Environmental Statement, as required by the Electricity Works (Environmental Impact Assessment) (Scotland) Regulations 2000 (SSI 2000/320).
The whimbrel population of the Shetlands is highly significant in national terms, representing (at 290 pairs on the basis of a 2009 survey) around 95% of the total UK population.
Of this some 56 pairs breed in the central mainland area, where the windfarm would be sited, 23 pairs within the development site. 31 pairs breed in the Fetlar Special Protection Area.
Between 72 and 108 adult whimbrel from the Shetlands die annually from existing causes.
The 2009 survey showed a decline in the Shetlands region over the previous 20 years of 39% overall, but with wide variations across the region; the decline in Central Mainland was only 6%, compared to between 54% and 80% in the Fetlar SPA.
The potential impact on the whimbrel population emerged as an important issue in early objections from, among others, Scottish Natural Heritage (SNH).
There followed a series of detailed exchanges between SNH and the developers on both the assessment of the likely impact of the development on the whimbrel population and mitigation measures.
It is unnecessary to do more than summarise some of the main points.
In response to SNH objection, the developers revised their Environmental Statement by submitting a new Addendum, including a chapter A 11 Ornithology, which dealt in detail with the likely effects on whimbrel.
It was said to be based on more than eight years of study, which gave considerable confidence in the robustness of these assessments.
It was acknowledged that the population processes of Shetland whimbrel were poorly understood, and that, in the absence of previous windfarm developments in areas with breeding whimbrel, the likely impact had to be inferred from knowledge of responses of other related wader species, such as the curlew.
It predicted that operational disturbance would result in the long term displacement of 1.8 pairs, which might be able to resettle elsewhere; and a collision mortality rate of 2.1 whimbrel per year.
The Addendum included a Habitat Management Plan (HMP), which contained detailed assessment of the factors affecting the whimbrel population, and proposed habitat management actions.
For example, the single most important action to increase whimbrel breeding success was said to be the control of the likely main nest predator, the hooded crow, over sufficiently large areas during the nesting season.
The HMP was said to have a high likelihood of more than off setting any adverse effects of the windfarm and a reasonable likelihood of causing the Shetland whimbrel population to partially and possibly fully recover over the lifetime of the Viking Wind Farm.
Although the revised proposals led SNH to withdraw some of their objections to the proposals, those in respect of whimbrels were maintained.
In their letter of 11 February 2011 they referred to a high likelihood of a significant adverse impact of national interest .
They made specific reference to the EU Birds Directive: Whimbrel are subject to certain general provisions of the EU Birds Directive which apply to all naturally occurring birds in the wild.
These include articles 2, 3(1), 3(2)(b) and the last sentence of article 4(4).
Achieving and maintaining favourable conservation status of the national population is in line with these provisions and obligations.
In this case our advice is that the proposed Viking wind farm is highly likely to result in a significant adverse impact on the conservation status of the national population of whimbrel.
They expressed doubts as to the likely success of the HMP, given the unproven and experimental nature of some of the proposed mitigation measures, and the scale and location of the project which were not comparable to other mainland restoration sites.
In later correspondence they described the ornithological assessment as associated with a high degree of uncertainty in several critical respects.
They disagreed with the predicted collision mortality rate, which they put at 4.2 for 127 turbines, or 3.7 if the Delting turbines were removed.
They welcomed the HMP as offering the possibility of significant biodiversity benefits and as an excellent opportunity to explore various habitat management methods as yet untested in the Shetlands; but advised that it contained a qualitative assurance which cannot be relied on with certainty to significantly mitigate these impacts.
They regretted that in spite of the significant efforts made in cooperation with the developers they had been unable to resolve all their concerns.
The Scottish Ministers gave their decision by letter dated 4 April 2012.
They recorded the representations of various consultees, statutory and non statutory (including those of SNH and RSPB, relating to effects on birds).
They also noted the receipt of a total of 3881 public representations, of which 2772 were objections and 1109 were in support of the development; the objections raised concerns on a number of subjects including habitat, wildlife, visual impact and infrastructure.
In view of the apparently insurmountable aviation issues associated with the 24 turbines in the Delting area, it would not be appropriate for those to be included in any consent, but there remained the option of granting consent for the remaining 103 turbines.
The letter stated that the ministers had had regard to their obligations under EU environmental legislation and to the potential for impact on the environment, in particular on species of wild birds.
It noted that the peatland ecosystem was in serious decline, and that the restoration proposed by the Habitat Management Plan would offer benefits to a whole range of species and habitats.
It was far more ambitious and expansive than plans accompanying previous windfarm proposals encompassing an area in total of 12,800 hectares, and had been welcomed by SNH as offering the possibility of significant biodiversity benefits.
In a section headed Whimbrel the letter discussed the respective submissions and the supporting evidence on this subject.
The estimate of 3.7 collision deaths per year was regarded as very small when considered in the context of the 72 108 annual deaths from other causes.
Of the view of SNH and others that the development would result in a significant impact of national interest, the letter commented: Ministers are not satisfied that the estimated impact of the development on whimbrel demonstrates such a level of significance.
In addition, Ministers consider that the potential beneficial effects of the Habitat Management Plan (HMP) can reasonably be expected to provide some counterbalancing positive benefits.
It was accepted that the beneficial effects of the HMP could not be predicted with certainty, for the reasons given by SNH, but the letter continued: Ministers note that the HMP will take one third of the UK population of whimbrel under active management, and will target some 100 whimbrel hotspots.
Based on the detailed environmental information provided in the environmental statement and addendum, Ministers are satisfied that the measures proposed by the HMP are likely to have a positive value to the conservation status of the whimbrel.
These measures include a variety of management techniques, including predator control, habitat restoration, protection and management.
Ministers are satisfied that an HMP which includes significant predator control from the outset, as well as ongoing habitat restoration, protection and management, is likely to counteract the relatively small estimated rate of bird mortality.
Further reassurance is gained from the commitment to ongoing development and improvement built into the HMP as understanding of its effect improves, and from the fact that this commitment will be required by condition.
In any case, if, despite the implementation of the HMP, the estimated negative impact on the species were to remain, Ministers consider that the level of impact on the conservation status of the whimbrel is outweighed by the benefits of the project, including the very substantial renewable energy generation the development would bring and the support this offers to tackling climate change and meeting EU Climate Change Targets.
The whimbrel is in decline on Shetland.
Ministers consider that the HMP represents an opportunity currently the sole opportunity to try to improve the conservation status of the species.
Without the Viking Windfarm HMP, there currently appears to be no prospect of any significant work being undertaken to reverse the decline of the whimbrel in the UK.
It was considered that conditions on the consent would ensure comprehensive monitoring of the effects of the development and the success or otherwise of the mitigation measures, which work would also inform ongoing initiatives for the conservation of whimbrel .
The letter went on to consider other issues, under the headings Landscape and visual, Economic and renewable energy benefits, and Other considerations; before concluding that environmental impacts will for the most part be satisfactorily addressed by way of mitigation and conditions, and that the residual impacts are outweighed by the benefits the development will bring, and that consent should therefore be granted.
Statutory requirements and the Birds Directive
By paragraph 1 of Schedule 9 of the Electricity Act 1989, developers are required in formulating their proposals to have regard to the desirability of conserving flora, fauna and geological or physiographical features of special interest , to do what (they) reasonably can to mitigate any effect which the proposals would have on such flora, fauna or features; and, in considering their proposals, the ministers are required to have regard to the extent of compliance with those duties.
There is no allegation in this appeal of non compliance with these duties by the developers or the ministers.
In addition, as is common ground, the ministers were required to take due account so far as relevant of the obligations of the United Kingdom under the Birds Directive.
The directive currently in force, which dates from 2009 (2009/147/EC), was a codification of provisions originally found in the 1979 directive (79/409/EEC) with subsequent amendments.
As such they have been discussed in a number of cases in the European Court of Justice.
Detailed analysis can be found in the opinions of Advocate General Fennelly in C 44/95 R v Secretary of State for the Environment, Ex p Royal Society for the Protection of Birds [1996] ECR I 3805 (the Lappel Bank case) and C 10/96 Ligue Royale Belge pour la Protection des Oiseaux ASBL v Rgion Wallonne [1996] ECR I 6775.
As has been seen, SNH drew particular attention to articles 2, 3(1), 3(2)(b) and the last sentence of article 4(4).
To understand the arguments here and in the courts below, it is necessary to set these in their context.
By article 1 the directive applies to the conservation of all species of naturally occurring birds in the wild state in the European territory of the Member States to which the Treaty applies By article 2 Member States shall take the requisite measures to maintain the population of the species referred to in article 1 at a level which corresponds in particular to ecological, scientific and cultural requirements, while taking account of economic and recreational requirements, or to adapt the population of these species to that level.
Article 3.1 requires member states in the light of the requirements referred to in article 2 to take the requisite measures to preserve, maintain or re establish a sufficient diversity and area of habitats for all the species of birds referred to in article 1; such measures to include (article 3.2(b)): (b) upkeep and management in accordance with the ecological needs of habitats inside and outside the protected zones;
Article 4.1 requires special conservation measures to be taken in respect of the species mentioned in annex I of the directive, in order to ensure their survival and reproduction in their area of distribution, and requires member states to classify in particular the most suitable territories in number and size as special protection areas for the conservation of these species.
Article 4.2 requires similar measures for regularly occurring migratory species not listed in annex I.
It is common ground that whimbrel, though not listed in annex I, are subject to the requirement for similar measures for migratory species under article 4(2).
The Fetlar SPA was designated pursuant to this duty.
It was established by the European Court in the Lappel Bank case that, notwithstanding the reference in article 2 to economic and recreational requirements, such factors were not relevant in choosing or defining special
protection areas under article 4.
The precise relevance of such factors to the
scope of the duties under article 2 is a matter of debate.
In Commission v Belgium C 247/85 [1987] ECR 3029, para 8, the European Court observed: article 2 of the directive requires the Member States to take the requisite measures to maintain the population of all bird species at a level, or to adapt it to a level, which corresponds in particular to ecological, scientific and cultural requirements, while taking account of economic and recreational requirements and from which it is therefore clear that the protection of birds must be balanced against other requirements, such as those of an economic nature . (emphasis added) However, in the later Lappel Bank case, the Advocate General (para 57) took the view that this balance was relevant under article 2, not to the level at which the population of the particular species was to be maintained, but only to the measures required to achieve it.
The court did not express a view on that point, confining itself to ruling on article 4.
Article 4.4, to the last sentence of which SNH referred, provides: 4.
In respect of the protection areas referred to in paragraphs 1 and 2, Member States shall take appropriate steps to avoid pollution or deterioration of habitats or any disturbances affecting the birds, in so far as these would be significant having regard to the objectives of this article.
Outside these protection areas, Member States shall also strive to avoid pollution or deterioration of habitats.
In the same passage SNH made reference to the aim of achieving favourable conservation status for a relevant species.
This expression does not appear in the Birds Directive itself.
The concept is taken from the Habitats Directive (92/43/EEC), and is of direct application to the obligations of states in relation to the European network of special areas of conservation under article 3 of that directive (Natura 2000).
For this purpose, article 1(i) defines the conservation status of a species as the sum of the influences acting on the species concerned that may affect the long term distribution and abundance of its populations within the territory .
Conservation status is taken as favourable when: population dynamics data on the species concerned indicate that it is maintaining itself on a long term basis as a viable component of its natural habitats, and the natural range of the species is neither being reduced nor is likely to be reduced for the foreseeable future, and there is, and will probably continue to be, a sufficiently large habitat to maintain its populations on a long term basis.
There are links between the two directives.
By article 3 of the Habitats Directive, special protection areas designated under article 4 of the Birds Directive were also included in the Natura 2000 network, and (by article 7) such areas were subject to the same obligations in respect of conservation measures as defined by article 6 of the Habitats Directive.
However, there appears to be nothing in either directive to link the concept of favourable conservation status as such to the general obligations under article 2 of the Birds Directive, which apply to all wild birds, not just those defined for special protection under article 4 or otherwise.
The courts below
On 24 September 2013, the Lord Ordinary gave judgment reducing the ministers decision on the grounds (apparently first raised by the court itself) that in the absence of a licence granted under section 6 of the Electricity Act the ministers had no power to grant consent.
That ground of decision was not supported by these appellants or any other party to the present proceedings, and it was not followed by Lord Doherty in a later case: Trump International Golf Club Scotland Ltd v Scottish Ministers [2014] SLT 406.
The Inner House (para 19) agreed with his reasoning.
It is unnecessary to consider the point further.
The Lord Ordinary held in the alternative that the ministers had failed to take proper account of their obligations under the Birds Directive.
She criticised the ministers for failing to address explicitly legal issues arising out of the [directive] and explain their approach to decision making (para 239).
In a long section (paras 245 291) she undertook her own detailed interpretation of provisions of the directive, followed by a discussion of their application to the facts of the case.
Without disrespect, I hope it is sufficient to highlight what appear to be the key points in the discussion.
She identified what she understood to be the respective positions of the parties: [258] In summary, the fundamental dividing line between the interpretation put forward by the petitioners compared with that advanced on behalf of the respondents and interested party is that the petitioners maintain that article 2 sets down a common standard which requires to be met that the population of the species, in this case whimbrel, are to be maintained at a level which corresponds in particular to ecological, scientific and cultural requirements and that obligation rests on the State.
There is discretion in how article 2 is to be implemented but not discretion as to whether it is to be implemented or not. [259] In contrast, the respondents submit that the reference to maintaining the population in article 2 is subject to other considerations (which) at a minimum included economic and recreational requirements.
It is a balancing exercise The final position of the respondents was to say in effect that wind farm energy production contributing to climate change targets out balanced or outweighed the obligation of maintaining the population of whimbrel to the level specified in article 2.
In resolving that issue she attached particular weight to the opinion of Advocate General Fennelly in the Lappel Bank case (see above) as to the limited role of economic and recreational requirements even under article 2 (paras 260 264).
She also attached weight to the obligation of the state in respect of migratory species under article 4(2).
The accepted position was that, despite the existence of the Fetlar SPA, whimbrel were not in favourable conservation status in the Shetlands or the United Kingdom.
This raised the question whether the designation of that area was fulfilling the obligations of the United Kingdom under that article, and if not what the implications of that were for the decision making in this case.
It was necessary for the decision maker to give some indication that they have addressed the issues as envisaged in the Directive.
Taking account of the problems with the existing conservation status of whimbrel, there was no reasoning to explain why the Fetlar SPA site provided sufficient protection and exhausted their obligation under article 4(2) of the directive (para 272).
As to the HMP, there was no explanation as to why the ministers, departing from the view of SNH, and in a situation where it is not disputed that the reasons for the whimbrel decline are not known and the habitat management plan is untried and untested in Shetland in relation to whimbrel, were able to conclude that the HMP would provide some unspecified level of mitigation (para 285).
Further, in her view, there was the fundamental difficulty that the ministers had failed to take the directive as the starting point for consideration of the facts.
Article 2 imposed an obligation to take requisite measures to maintain whimbrel at an appropriate level, which, in her opinion, would involve addressing the issue of what is required by article 2 in respect of whimbrel in this case.
These were not pure questions of fact, but matters of mixed fact and law.
The ministers had failed to address these issues, except by way of a balancing exercise taking account of the benefits of the project in relation to meeting EU climate change targets an exercise which in her view was not permitted by the directive (paras 286 289).
On appeal, the approach of First Division was radically different.
In the single opinion of the court, delivered by Lord Brodie, they criticised the Lord Ordinary for addressing the wrong question: The question which should have been the focus of the Lord Ordinarys attention was whether the grant of consent by the Scottish Ministers had been a lawful decision, once due account was taken of, inter alia, the Wild Birds Directive.
Instead, the Lord Ordinary applied herself to the rather different question as to whether the Scottish Ministers, in their decision letter, had demonstrated that they had fully understood and complied with their on going obligations under the Directive in respect of the United Kingdom population of whimbrel, irrespective of the likely effect on it of a consent to the development. (para 26)
Whether the development was likely to have a materially adverse effect on the bird populations protected by the directive was an entirely factual question for the ministers to determine.
They had concluded that increased mortality was unlikely but in any event were not satisfied that, even without mitigation by virtue of the HMP, the impact was of significance in relation to the conservation of the species.
In the view of the court: Once that conclusion was arrived at, the Wild Birds Directive, and any associated problems of interpretation and application, fell out of the picture as far as this proposal was concerned. (para 27) Although the decision letter had not referred expressly to the directive, it was clear to an informed reader that the decision had been made having regard to
The issues in the appeal
SNHs assessment which referred to specific provisions of the directive (para 29).
The Lord Ordinarys criticism of the ministers reasoning in relation to their duties under article 4(2) reflected the erroneous view that they were required to satisfy themselves as to their performance of those duties as a preamble to consideration of the application (para 30).
Once they had decided that the development would have no significant adverse impact, and might possibly be beneficial, the issue of what was required by article 2 in respect of the whimbrel was one that it was unnecessary to explore. (para 31) In this court, the appellants submit that the ministers approached the whimbrel on the wrong basis in law.
In summary they make the following main points: i) The ministers considered the impact of the development on the whimbrel, but failed to take account of their positive obligations not merely to maintain the current level of the whimbrel population, but to adapt it to the appropriate level under article 2 in effect to bring the whimbrel up to favourable conservation status. ii) More particularly, in the light of the detailed information made available in connection with the application, they should have appreciated that the mainland territory now appeared to be the most suitable territory for classification as a special protection area under article 4(2); and they should have considered what further special conservation measures were required, for example the closing down of the windfarm during whimbrel migratory or breeding months. iii) They acknowledge that SNH had made no reference to article 4(2), but this was an error which could not excuse the ministers failure to have regard to the obligation imposed on them by that provision. iv) In so far as the ministers relied under article 2 on balancing considerations relating to climate change benefits or other economic considerations, these were not relevant in law. v) Any doubts about the interpretation of the directive should be resolved by a reference to the CJEU.
Discussion
The first two points reflect the principal difference between the courts below, which lay in their respective assessments of the role of the ministers in considering a proposal of this kind.
The Lord Ordinary treated it as requiring them in effect to conduct a full review of their functions under the Birds Directive, with a view to considering how the present proposal would contribute to or fit in with those functions, and in particular the objective of bringing the whimbrel up to favourable conservation status.
The Inner House took a more limited view.
The directive was but one of a number of material considerations to be taken into account in reaching a lawful decision whether to grant consent under the Electricity Act 1989.
In principle, in my view, the Inner House were clearly right.
The ministers functions in this case derived, not from the directive, but from their statutory duty to consider a proposal for development under the Electricity Act 1989.
The range of issues potentially relevant was apparent from their summary of the large number of representations for and against the proposal.
As has been seen, the Act contained specific reference to conservation of wildlife (fauna) and mitigation of any adverse effects of a development.
The Ministers were also required by the relevant regulations to take account of the information provided by the environmental assessment.
The directive did not in terms impose any specific requirements in respect of this particular development proposal, but it was rightly accepted as part of the legal background against which its effects needed to be considered.
In considering those matters the ministers would be expected to attach weight to the views of statutory consultees such as SNH, and other expert bodies such as the RSPB, but (as is accepted) they were not bound by their advice.
I agree with the Inner House that although the decision letter did not mention the directive as such, the detailed consideration given to the advice of SNH, with specific reference to its provisions, leaves no serious doubt that it was taken into account, as part of the obligations under EU environmental legislation to which the letter referred.
I would not therefore agree with the Lord Ordinary that the starting point for consideration of this proposal was to establish the precise scope of the duties imposed by article 2, and for that purpose to determine an appropriate level for the whimbrel population.
That was not the issue facing the ministers in the context of their consideration of this proposal under the Electricity Act 1989.
Their duty was to determine whether to grant consent to a particular development proposal, taking account of all material considerations for or against, of which the directive formed part.
On the other hand, it does not follow that, once it had been decided that the impact on whimbrel population was not of significance, the directive (in the words of the Inner House) fell out of the picture.
If there had been evidence that the proposal, while having no significant effect in itself on the whimbrel population, might prejudice the fulfilment of the ministers duties under the directive, that would have been a potential objection which required consideration.
That in effect is the substance of the appellants second point in the summary above, relying on the more specific obligations under article 4(2).
Their difficulty is that their suggestions are unsupported speculation, and were not raised by anyone in the representations on this proposal whether by the expert bodies or anyone else.
As the appellants acknowledge, it was the investigations conducted in connection with this proposal, as reported in the environmental statement and its addendum, which highlighted the present status of the whimbrel in the area of the proposed windfarm and elsewhere in the islands.
It appears to be the case, perhaps paradoxically, that one of the areas which has seen the largest decline has been the Fetlar special protection area itself, as compared to a smaller decline in the mainland area in which the proposal is situated.
The reasons for that may be open to debate, but they were not in issue in this statutory process.
If SNH (or indeed the appellants) had thought it necessary or appropriate to call for designation of further areas or other special measures under article 4(2), they could have raised that as an issue, and the developers would have had an opportunity to address it.
There is no reason to think that SNHs omission to do so reflected, as the appellants imply, any misunderstanding of the law or the material facts.
It is clear in any event that the ministers did have regard to the desirability of improving the conservation status of the whimbrel on the islands in general, rather than simply avoiding significant loss due to this proposal.
They were entitled to attach weight to the fact that the HMP would result in one third of the whimbrel population of the UK being taken under active management, and to regard it as an exceptional opportunity to improve understanding of the species and its habitat and of the measures necessary to conserve it.
This is not, as the appellants submit, to rely on their own failure to fulfil their obligations under the Birds Directive as a reason for allowing the wind farm.
There is no evidence of any allegation, by SNH or any other responsible body, of a failure by the UK to comply in this respect with its obligations under article 4(2).
We have been shown post decision correspondence of the Shetland Bird Club with ministers and with the European Commission, which shows that the status of SPAs in the Shetland Islands is under continuing review, but it contains no suggestion that the present position was or is regarded as having involved any breach of the directive.
In any event,
as I have said, the performance of the UKs duties under the directive was not in issue.
In summary, the ministers were entitled to regard the limited anticipated impact on the whimbrel population, combined with the prospect of the HMP achieving some improvement to their conservation status more generally, as a sufficient answer to the objections under this head.
The fourth point raised by the appellants relates to the ministers reliance on balancing considerations renewable energy and climate change benefits to override any objections under the directive.
The relevance in law of that balance was identified by the Lord Ordinary as a primary issue between the parties, which she determined in favour of the appellants.
Although the parties have maintained their positions in this court, the ministers primary submission, as I understood Mr Thomson, was that it is unnecessary for the court to determine that issue if they succeed on the other issues.
It is clear, he submits, from the context of that passage in the letter that the balancing considerations there referred to represented a fall back position which would only come into play if the primary reasoning were not to be accepted.
As environment related benefits, they in turn were distinguished from the more general economic benefits properly relied on in a later part of the letter as outweighing the remaining landscape and visual impacts of the development.
I agree with this interpretation of the letter, and its consequences for the appeal.
As the Inner House accepted, the interpretation of article 2 raises some difficulties, one of which is the precise role of the economic factors there referred to.
Another is the obligation of member states in relation to setting an appropriate level for the maintenance of different species, which the Lord Ordinary identified as the starting point.
Since article 2 applies to wild birds of all kinds, regardless of their scarcity or vulnerability, it seems unlikely that it was intended to require an equally prescriptive approach in all cases, by contrast for example with the more specific measures required for the particular species protected by article 4.
Although some guidance is provided by the existing European jurisprudence, the need for a further reference may arise in an appropriate case in which the resolution of these issues is necessary for a decision.
This is not such a case.
In those circumstances it is better to leave further discussion in this court until then.
Conclusion
Inner House.
For these reasons I would dismiss the appeal and confirm the order of the
| Sustainable Shetland (SS) challenged a consent for a large windfarm in the Central Mainland of Shetland granted under s.36 of the Electricity Act 1989 on 4 April 2012 by the Scottish Ministers.
SS alleged that the Ministers had failed to take proper account of the Birds Directive (2009/147/EC) (particularly articles 2 and 4(2)) in respect of the whimbrel, a protected migratory bird.
By Article 2 Member States must take measures to maintain the population of wild birds species at a level which corresponds in particular to ecological, scientific and cultural requirements, while taking account of economic and recreational requirements, or adapt them up to that level.
Article 4(1) requires special conservation measures to be taken in respect of species mentioned in Annex I of the Directive and Article 4(2) requires similar measures for regularly occurring migratory species not listed in Annex I, which includes whimbrel.
Pursuant to this duty the Fetlar Special Protection Area (SPA) had been designated.
Under Article 4(4), in respect of SPAs Member States shall take appropriate steps to avoid pollution or deterioration of habitats or disturbances of the birds, and outside SPAs they shall also strive to avoid pollution or deterioration of habitats.
The whimbrel in Shetland represent around 95% of the UK population and a 2009 survey showed they are in decline.
The application was accompanied by an Environmental Statement (ES).
Scottish National Heritage (SNH) made objections, including on impact on the whimbrel.
In response the developers submitted a new Addendum to the ES dealing in detail with likely effects on whimbrel.
It included a Habitat Management Plan (HMP) with proposed habitat management actions e.g. to control predators.
The SNH maintained their objections in respect of whimbrel, specifically referencing the Birds Directive.
In their decision letter the Scottish Ministers considered various representations (including from SNH) and stated that they had had regard to their obligations under EU environmental legislation and to the potential for environmental impact in particular on species of wild birds.
In a section headed Whimbrel the letter discussed the respective submissions on the subject.
The estimate of 3.7 annual collision deaths was regarded as very small in the context of 72 108 annual deaths from other causes.
The Ministers were not satisfied that the estimated impact of the development on whimbrel was significant, and considered that the potential beneficial effects of the HMP could reasonably be expected to provide counterbalancing positive benefits.
In any case if, despite the HMP, the estimated negative impact on the species were to remain, the Ministers considered that the level of impact was outweighed by the benefits of the project, e.g. tackling climate change.
The letter also stated that the HMP represented currently the sole opportunity to try to improve the species conservation status and that without the windfarm there currently appears to be no prospect of any significant work being undertaken to reverse the decline of the whimbrel in the UK.
Conditions on the consent would ensure monitoring of the effects of the development and the success of mitigation measures.
SSs challenge was upheld by the Lord Ordinary on other grounds but she indicated that, if necessary, she would have upheld the challenge under the Directive.
The Inner House unanimously allowed the Ministers appeal.
The Supreme Court unanimously dismisses the appeal.
Lord Carnwath gives the only substantive judgment, with which the other members of the court agree.
The Ministers concluded that even without mitigation the impact on whimbrel was not significant. [27] Although the decision letter did not mention the Directive as such, the detailed consideration given to SNHs advice leaves no serious doubt that it was taken into account.
In the context of this proposal the Ministers duty was not to establish the precise scope of Article 2 duties to determine an appropriate level for the whimbrel but to determine whether to grant consent, taking account of all material considerations, of which the Directive formed part. [30 32] If there had been evidence that the development might prejudice the fulfilment of the Ministers duties under the Directive that would have required consideration.
However, the appellants suggestions were unsupported by the evidence, and had not been raised by anyone (including SNH) in their representations on this proposal.
The investigations conducted in connection with the windfarm proposal had highlighted the present status of the whimbrel.
There was no reason to think that SNHs omission to call for designation of further SPAs or other special measures under article 4(2) reflected any misunderstanding of the law or material facts. [33 35] In any event the Ministers did have regard to improving the conservation status of the whimbrel, and were entitled to have regard to the limited anticipated impact of the proposal, combined with the prospect of the HMP improving their conservation status. [36] It is clear from the context of the relevant passage that reference to the benefits of the project as balancing considerations was a fall back position which would only come into play if the primary reasoning were not accepted.
Interpretation of Article 2 raises some difficulties, one of which is the precise role of the economic factors there referred to.
Another is the obligation of member states in relation to setting an appropriate level for the maintenance of different species.
Since Article 2 applies to wild birds of all kinds it seems unlikely that it was intended to require an equally prescriptive approach in all cases, by contrast with the more specific measures required for the particular species protected by Article 4.
The need for a reference to the CJEU may arise in a case in which the resolution of these issues is necessary for a decision; this is not such a case. [38 39]
|
On 22 November 2007, three brothers, Patrick Mackle, Plunkett Jude Mackle (commonly known as Jude) and Benedict Mackle, all pleaded guilty to the offence of being knowingly concerned in the fraudulent evasion of duty on goods contrary to Section 170(2)(a) of the Customs & Excise Management Act 1979.
In a separate trial, on 18 November 2008, Henry McLaughlin pleaded guilty to a similar offence.
He was also convicted of a second offence, on his plea of guilty, but that is not relevant to this appeal.
On 13 December 2007 Deeny J sentenced Patrick Mackle to three years imprisonment, suspended for a period of five years.
Jude Mackle and Benedict Mackle were sentenced to two and a half years imprisonment.
Again that sentence was suspended for five years.
At a later hearing, on 29 October 2008, confiscation orders were made in respect of each of the defendants as follows: Patrick Mackle 518,387.00; Jude Mackle and Benedict Mackle 259,193.00 each.
The aggregate sum produced by these three amounts was equal to the amount of duty and Value Added Tax which had been evaded.
The confiscation orders were made with the consent of each of the Mackle brothers.
Henry McLaughlin was sentenced by Weatherup J on 19 November 2008 to one years imprisonment suspended for two years.
The judge also imposed a serious crime prevention order for a period of five years.
A confiscation order for 100,000 was made against Mr McLaughlin on the same date.
This sum, taken together with other confiscation orders made against co defendants, represented the total amount of duty and VAT said to have been evaded.
The confiscation order against Mr McLaughlin was also made with his consent.
The facts (the Mackles)
On 16 January 2003 a cargo ship, MV Hyundai Fortune, arrived in Southampton from Malaysia.
Customs officers carried out routine screening of a container on board the ship.
It was found to contain cigarettes. (Subsequently, it transpired that the cigarettes had been manufactured in the United Kingdom.
They had been exported without duty having being paid on them.) The container was not intercepted at this stage.
It was allowed to proceed to its destination.
It was taken first from Southampton to Belfast docks on the MV Celtic King on 25 January 2003.
It was then collected at Belfast by a haulier on 27 January 2003 and taken to premises at Ballynakilly Road, Coalisland, County Tyrone.
On the same date, police and customs officers went to the premises to which the container had been delivered.
There they found Jude Mackle and his brother Benedict unloading boxes from the container.
They were being assisted by two other men.
It was discovered that the boxes which were being unloaded contained cigarettes.
These had been concealed under wooden flooring in the container.
All four men were interviewed by police officers.
They were subsequently charged with revenue offences.
Patrick Mackle was the owner of the premises where the cigarettes were being unloaded.
He was not present when the police were at the premises on 27 January 2003 but he later presented himself to police and on 25 April 2003 he voluntarily attended Musgrave Street Police Station in Belfast for interview.
On that date he was released on bail.
He returned on 3 July 2003 for further interview.
Following this interview he was also charged with revenue offences.
The facts (Mr McLaughlin)
On 16 November 2005 police officers went to premises at 194 Battleford Road, Armagh.
There they discovered 10,434,620 cigarettes stored in two sheds.
They also found 4,999,920 cigarettes loaded on a lorry, hidden amongst a consignment of peat moss.
They arrested three persons who were at the premises.
These persons were subsequently charged with revenue offences in relation to the cigarettes.
Henry McLaughlin was not present when the police were at Battleford Road.
He had no known connection to the premises there.
On 20 July 2006, however, Mr McLaughlins home was searched by police officers.
Large amounts of cash in different currencies were found.
The total value of the cash amounted to something in the order of 65,000.
Various documents including documentation relating to the sale and distribution of cigarettes were found.
Mr McLaughlin was subsequently interviewed and charged in relation to the items that had been found in his house and in relation to the cigarette seizure on 16 November 2005.
It is accepted that the lorry which had been found at Battleford Road loaded with the cigarettes had stopped at the Mr McLaughlin's premises earlier on 16 November 2005.
It is also accepted, however, that he was not present at that time.
The proceedings against the Mackles
(i) The Rooney hearing
Each of the Mackle brothers was prosecuted on a single count to which he pleaded guilty, as described in para 1 above.
That plea was entered after evidence had been given over the course of a number of days.
It also followed what is known as a Rooney hearing (Attorney General's Reference No 1 of 2005; In re Rooney (Bernard Philip Mary) and others [2005] NICA 44; [2006] NI 218).
The purpose of a Rooney hearing is to obtain from the trial judge an indication of the possible sentence in the event that a plea of guilty is entered.
In the course of the Rooney hearing, counsel on behalf of Patrick Mackle asserted that he had not been the organiser of this matter.
Counsel for the Crown submitted that Patrick Mackle had played . a role in the organisation of this operation.
He suggested that conclusions about the extent of the organisational role would depend on the inferences which the court might ultimately draw and on the extent to which primary facts are established.
Understandably, since he did not, in the event, hear all the evidence, the judge did not express a conclusion on the precise role that Patrick Mackle had played.
He did say, however, that he was satisfied that he had played some part in the organisation of the evasion of the duty on the cigarettes.
In giving an indication of the possible sentence to be imposed the judge said that he would propose to sentence Patrick Mackle on the basis that he is not a ringleader but has some limited organising role in the matter.
In relation to Jude and Benedict Mackle, their counsel urged on the judge during the Rooney hearing that they had been merely labourers in the unloading of the cigarettes.
In response to those submissions, counsel for the Crown said this: the prosecution position is that there is no evidence which suggests anything contrary to the submissions made by counsel on their behalf in this application.
So for the purpose of this application I have no contrary submissions.
On the hearing of the appeal before this court, Mr McCollum QC, for the respondent, drew our attention to the fact that in his submissions to the trial judge he had emphasised that the statement that the prosecution had no evidence to counter the claims made by counsel for Jude and Benedict Mackle had been made for the purpose of the Rooney application.
This did not amount to a concession, he said, concerning the value of any benefit which they had received for the purpose of the subsequent confiscation proceedings.
This aspect of the case will be considered in greater detail below.
In giving his indication of sentence in relation to Jude and Benedict Mackle, Deeny J said that he considered there were no aggravating features in their cases.
Since playing a part in the organisation of this type of criminal activity is well recognised as an aggravating feature, it is to be presumed that the judge had accepted that neither of these appellants had performed such a role.
(ii) The sentencing hearing
In opening the case to the trial judge for the purpose of sentencing, Crown counsel said that if all the prosecution evidence had been given, certainly at its height it would have suggested an organisational role by Mr Patrick Mackle.
Counsel who then appeared for Patrick Mackle submitted that there was no suggestion on the evidence of the accused having had any hand, act or part in the financing, funding, importation or other organisational contribution.
The judge concluded that since Patrick Mackle had asked his brothers to carry out the unloading of the cigarettes and since this had taken place at Patrick Mackles yard, he had a limited organising role.
He noted that the prosecution had accepted the appellants plea of guilty on the basis that he was not the ringleader in the enterprise.
He (the judge) considered that it was appropriate to sentence Patrick Mackle on that basis.
In relation to Jude and Benedict Mackle, counsel for the Crown told the judge that the prosecution had no evidence to suggest that they were involved in any capacity other than as assisting in the unloading of the container.
Unsurprisingly, this statement was highlighted by counsel for the two appellants in their pleas in mitigation and appears to have been accepted by the judge in choosing the sentence that should be imposed on them for he distinguished the role that they had played from the more serious part that their brother, Patrick, had had in the enterprise.
(iii) The confiscation proceedings
A prosecutors statement in respect of each of the Mackle brothers was prepared by Roisin McMullan, an officer of HM Revenue and Customs.
In each of the statements Ms McMullan asserted that the benefit obtained by each of the Mackle brothers was the full amount of the duty which had been evaded.
At the confiscation hearing on 29 October 2008 the only evidence as to benefit presented to the court was a witness statement prepared by Ms McMullan dated 14 November 2006.
This was appended to the prosecutors statements.
The witness statement also referred to the total excise duty as constituting the benefit which had been obtained.
At the outset of the confiscation hearing, prosecuting counsel announced that the parties had reached agreement as to the amount of benefit that each defendant had received and that each would consent to a confiscation order for that amount.
In these circumstances no examination was undertaken of the basis of the apportionment of the total sum to be confiscated.
It is quite clear, however, that this was directly related to the duty which Revenue and Customs had calculated to have been evaded.
The proceedings against Mr McLaughlin
There was no Rooney hearing in Mr McLaughlins case.
The sentencing and confiscation hearings took place at the same time.
In his mitigation plea, counsel for Mr McLaughlin suggested that there was no evidence that he had been involved in the actual importation of the cigarettes.
Mr McLaughlin had played, counsel said, what could be described as a supporting role in what happened.
In sentencing Mr McLaughlin, Weatherup J referred to the decision of the Court of Appeal in England and Wales in the case of R v Czyzewski [2003] EWCA Crim 2139; [2004] 1 Cr App R (S) 289 in which a number of possible aggravating features in fraudulent evasion of duty cases were considered.
The first of these was playing an organisational role.
Weatherup J plainly must have accepted counsel for the appellants submission on this aspect because he said that neither this nor, indeed, any other aggravating feature was present.
The amount of duty evaded in the case of Mr McLaughlin and his two co defendants was something just short of 730,000.
The total recoverable amount (i.e. the amount of benefit which the three accused were said to have obtained) was, by agreement, fixed at the same sum.
One co defendants benefit (and therefore the amount recoverable from him) was said to be 500,000; anothers was fixed at 129,968.61 (although in his case since it was agreed that the available amount was nil, the confiscation order was fixed at nil).
The confiscation amount ordered to be recovered from Mr McLaughlin was 100,000, fixed so as to make up the balance of the duty evaded.
All of this was done by agreement and, again, there was no investigation before the judge of the basis on which the total sum was apportioned or how the respective benefits to each of the defendants was estimated.
The only indication of the value of the benefit to the defendants was the amount of the duty evaded.
The Court of Appeals judgment
Appeals by the Mackle brothers and by Mr McLaughlin and one of his co accused, Aidan Grew, against the confiscation orders made in their cases were heard together by the Court of Appeal (Morgan LCJ, Girvan and Coghlin LJJ).
Delivering the judgment of the court, Girvan LJ identified the two principal issues as (i) whether the appellants had consented to the making of the consent orders on an incorrect legal basis (and that therefore the trial judges had likewise wrongly made the orders); and (ii) whether the orders having been made on consent, the appellants were in any event bound by them.
On the first of those issues, Girvan LJ considered the effect of the decision of the Court of Appeal in R v Chambers [2008] EWCA Crim 2467.
He held that, in light of that decision, if the appellants were not participants in the actual importation of the cigarettes, they would not be liable for the duty on them and thus could not be said to have obtained a pecuniary advantage for the purposes of the Tobacco Products Regulations 2001 (para 26).
This was not an end of the matter in Girvan LJs estimation, however, for at para 27 he said this: Where, a defendant is knowingly involved in the evasion of duty on smuggled cigarettes after importation and comes into possession of the smuggled cigarettes with knowledge of the evasion and as part of a joint enterprise to take advantage of the economic advantages flowing from the evasion of the duty at the point of importation he may gain a financial advantage flowing from his participation in the ongoing enterprise.
Girvan LJ observed in para 29 of the judgment that it was not in dispute that the appellants had engaged in criminal conduct.
The critical issue was, therefore, whether they had benefited from that conduct.
He acknowledged that this depended on whether they had obtained property as a result and in connection with the offences.
Drawing on an example that he had earlier given of the pecuniary advantage that could be obtained by a person to whom goods had been passed by the actual importer of the goods, he concluded that the profitability in the criminal enterprise in both cases arose from the evasion of the duty.
He then said (at para 35): This criminal enterprise involved a number of participants acting together playing different roles in the furtherance of the joint enterprise.
The pleas of guilty by the appellants make clear their acceptance of the fact that they played a role in the enterprise, thus evidencing participation in that joint enterprise.
A proper inference that could have been drawn from the pleas is that in playing their different roles the appellants and each of them were involved in the handling and processing of the cigarettes to advance the purposes of the joint enterprise.
To so handle and process them they had to obtain them at different stages of the process.
As R v Green shows receipt of goods by one on behalf of several defendants can be regarded as receipt for all.
The joint actions of the appellants, at least arguably, involved possession and control of the cigarettes by those involved in the participation and the enterprise.
On the basis of this analysis Girvan LJ held that it would have been open to a court to conclude that each of the appellants had obtained property in connection with their admitted criminal conduct or obtained a pecuniary advantage as a result of that conduct.
He considered, however, that it was not only unnecessary for the trial judges in these cases to consider whether the appellants had obtained property or a pecuniary advantage in this way (which was, of course, a different basis from that which the prosecution had proffered), it would have been inappropriate for them to do so.
This was because the appellants had consented to the making of the orders, having received legal advice.
Having reviewed commentary on the effect of consent orders in confiscation proceedings in Millington and Sutherland Williams on the Proceeds of Crime, 3rd ed (2010), at para 11.21 and considered decisions of the Court of Appeal in R v Bailey [2007] EWCA Crim 2873 and R v Hirani [2008] EWCA Crim 1463, Girvan LJ stated that the court had concluded that, even if the appellants were incorrectly advised to consent to the confiscation orders, they were bound by the orders made on consent.
He went on to say, however, that it had not been shown that the sentencing judges made the consent orders on an incorrect legal or factual basis because the factual basis on which the orders were made arose from the admissions made by the appellants that, on the facts, they had received a benefit from their criminal conduct.
The appellants having made those admissions, there was no reason for the judges to go behind them.
The appellants applied for permission to appeal to this court against the decision of the Court of Appeal.
That application was refused but the Court of Appeal certified that the following points of law of general public importance arose from its judgment: 1.
Is a defendant who pleaded guilty to being knowingly concerned in the fraudulent evasion of duty and who consents, with the benefit of legal advice, to the making of a confiscation order in an agreed amount in circumstances which make clear that he does not require the Crown to prove that he obtained property or a pecuniary advantage in connection with the charged criminal conduct bound by the terms of the confiscation order? 2.
Does a defendant who knowingly comes into physical possession of dutiable goods in respect of which he knows the duty has been evaded and plays an active role in the handling of those goods so as to assist in the commercial realisation of the goods benefit from his criminal activity by obtaining those goods for the purposes of section 158 of the Proceeds of Crime Act 2002?
On 30 October 2012 this court gave permission to the appellants to appeal.
The statutory framework
Section 170(2) of the Customs and Excise Management Act 1979 provides: Without prejudice to any other provision of the Customs and Excise Acts 1979, if any person is, in relation to any goods, in any way knowingly concerned in any fraudulent evasion or attempt at evasion (a) of any duty chargeable on the goods; he shall be guilty of an offence under this section and may be detained.
Excise duty on tobacco is payable by virtue of section 2(1) of the Tobacco Products Duty Act 1979 (as amended by Finance Act 1981, Sch 19, Pt III) which provides that tobacco products imported into or manufactured in the United Kingdom are subject to a duty of excise at the rates shown in a table in Schedule 1 to the Act.
Such duty becomes payable at an excise duty point.
Section 1(1) of the Finance (No 2) Act 1992 provides that: the Commissioners may by regulations make provision, in relation to any duties of excise on goods, for fixing the time when the requirement to pay any duty with which goods become chargeable is to take effect (the excise duty point).
By section 1(3) of the 1992 Act, regulations made under the section may provide for the excise duty point for any goods to be at such times as may be prescribed.
Under section 1(4) where regulations prescribe an excise duty point for any goods, they may also make provision (a) specifying the person or persons on whom the liability to pay duty on the goods is to fall at the excise duty point and (b) where more than one person is to be liable to pay the duty, specifying whether the liability is to be both joint and several.
Regulation 12(1) of the Tobacco Products Regulations 2001 (SI 2001/1712) provides that the excise duty point for tobacco products is the time when the tobacco products are charged with duty.
In relation to imported tobacco, therefore, the excise duty point arises at the point of importation into the United Kingdom because, by virtue of section 2(1) of the Tobacco Products Duty Act 1979, that is the point when duty becomes chargeable.
In the case of the Mackles the excise duty point arose when the ship carrying the cigarettes entered the limits of the port at Southampton Docks see section 5(2)(a) of the Customs and Excise Management Act 1979 which provides that, where the goods are brought by sea, the time of their importation shall be deemed to be the time when the ship carrying them comes within the limits of a port; R v White [2010] EWCA Crim 978, [2010] STC 1965 at para 57 and R v Bajwa (Naripdeep) [2011] EWCA Crim 1093, [2012] 1 WLR 601, para 32.
The excise duty point in respect of the cigarettes involved in Mr McLaughlins case is unknown.
By virtue of regulation 13(1) of the 2001 Regulations the person liable to pay the duty is the person holding the tobacco products at the excise duty point.
But regulation 13(2) provides that the persons described in regulation 13(3) are jointly and severally liable to pay the duty with the person holding the tobacco products at the excise duty point (ie, the person specified in regulation 13(1)).
Included in this group are the occupier of the registered premises in which the tobacco products were last situated before the excise duty point (regulation 13(3) (a)); any registered excise dealer (RED) to whom the tobacco products were consigned (regulation 13(3) (b)); and any person who caused the tobacco products to reach an excise duty point (regulation 13(3) (e)).
None of the categories of person described in regulation 13(3) fits the circumstances of the Mackle brothers or Mr McLaughlin.
There is no evidence that they held the tobacco products at the excise duty point.
Nor is there evidence that they caused the tobacco products to reach the excise duty point.
In this connection it should be noted that the Court of Appeal in White held (correctly in my view) that regulation 13(3) (e) must be interpreted in conformity with section 1(4) of the Finance (no. 2) Act 1992, so that a person who has caused the tobacco products to reach an excise duty point is not liable for the duty unless he has retained a connection with the goods at the excise duty point.
As Aikens LJ said at para 39 of Bajwa the upshot of the relevant decisions on regulation 13 is that a person cannot be liable to pay duty on tobacco imported by sea in a ship unless one of two conditions is satisfied.
Either he must be holding the tobacco at the excise duty point, or he must both have caused the tobacco products to reach the excise duty point and he must also have retained a connection with the goods at that point.
The 2001 Regulations provide a sharp and (for the purposes of this case) pertinent contrast with their predecessor, the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 (SI 1992/3135).
The 1992 Regulations provided that a significantly wider number of categories of person were liable for import duty than are liable under the 2001 Regulations.
Firstly, by virtue of regulation 5(1) of the 1992 Regulations, the person liable to pay the duty in the case of an importation of excise goods from another member state was the importer of the excise goods.
More relevantly for this case, however, was the provision in regulation 5(3) of the 1992 Regulations that among the categories of person who would be jointly and severally liable with the importer of the goods for the duty was any consignee of the excise goods.
For a discussion of the constricting of the classes of individual liable for duty on tobacco products which the 2001 Regulations introduced, see R v Khan [2009] EWCA Crim 588, para 2.
Despite the fact that the 1992 Regulations were disapplied in relation to tobacco products by regulation 28 of the 2001 Regulations, the significant narrowing of the categories of person liable for excise duty on imported tobacco which was brought about by the 2001 Regulations was not immediately appreciated by the revenue authorities.
Indeed it was not until a sharp eyed lawyer in the Asset Forfeiture Division of the Revenue and Customs Prosecutions Office, reviewing a draft judgment in the case of R v Chambers [2008] EWCA Crim 2467, noticed that the Crown in that case had relied on the 1992 Regulations which, as she knew, had been superseded by the 2001 Regulations (so far as tobacco products were concerned) that the true picture began to emerge.
A trilogy of decisions of the House of Lords in R v May [2008] UKHL 28, [2008] AC 1028, R v Green [2008] UKHL 30, [2008] AC 1053 and Jennings v Crown Prosecution Service [2008] UKHL 29, [2008] AC 1046, had established that the evasion by a smuggler of duty or VAT constitutes, for the purposes of confiscation proceedings, the obtaining of a pecuniary advantage only if he personally owes that duty or VAT.
Giving effect to those decisions, the Court of Appeal in Chambers held that a day labourer who had merely assisted in unloading contraband tobacco did not obtain a benefit by way of a pecuniary advantage in the form of the evasion of excise duty since he was not himself under a liability for the payment of that duty.
Toulson LJ, delivering the judgment of the court, said at para 52: On the hearing of the appeal Mr Cammerman accepted, in our judgment correctly, that the appellant would only have obtained a benefit by way of a pecuniary advantage in the form of the evasion of excise duty if he was himself under a liability for the payment of that duty which he dishonestly evaded.
To help somebody else to evade the payment of duty payable by that other person, within intent to defraud, is no less criminal, but in confiscation proceedings the focus is on the benefit obtained by the relevant offender.
An offender may derive other benefits from helping a person who is under a liability for the payment of duty to avoid that liability, eg by way of payment for the accessory's services, but that is another matter.
In order to decide whether the offender has obtained a benefit in the form of the evasion of a liability, it is necessary to determine whether the offender had a liability which he avoided.
In the present case that turns on whether the appellant was liable for the payment of excise duty on the relevant goods under the relevant Regulations.
As observed in para 22 above, the Court of Appeal in the present cases accepted that if the appellants were not participants in the actual importation of the cigarettes, they would not be liable for the duty on them and could not therefore be said to have obtained a pecuniary advantage.
Although this was expressed conditionally, it is clear that the Court of Appeal must have proceeded on the basis that the appellants could not have been liable for payment of excise duty under regulation 13 of the 2001 Regulations.
No evidence had ever been presented of the appellants having held the cigarettes at the excise duty point or of their having caused them to reach that point, while retaining a connection with them.
Liability for payment of Value Added Tax is, for present purposes, coterminous with liability to pay customs duty on imported goods from outside the European Union.
Section 1(1) of the Value Added Tax Act 1994 provides that VAT shall be charged (inter alia) on the importation of goods from places outside the member states.
Section 1(4) provides that VAT on the importation of goods from places outside the member states shall be charged and payable as if it were a duty of customs.
Thus, whoever has liability for the payment of customs duty on goods imported from outside the EU also has a liability to pay the VAT arising on their import.
Provisions relating to confiscation in Northern Ireland
The offence to which the Mackles pleaded guilty occurred before 24 March 2003.
The relevant confiscation legislation in their case, therefore, was the Proceeds of Crime (Northern Ireland) Order 1996 (SI 1996/1299).
Article 2(6) of this Order provided that a person who obtains property, or derives a pecuniary advantage, as a result of or in connection with the commission of an offence has benefited from the offence.
Article 2(7) provided that any property obtained and any pecuniary advantage derived by a person as a result of or in connection with the commission of an offence was his benefit from the offence.
Article 2(7)(c) stated that the value of the benefit was the value of the property or a sum of money equal to the value of the pecuniary advantage or the aggregate of the values of the property and money.
Mr McLaughlins offence took place after the coming into force of the Proceeds of Crime Act 2002 (POCA).
Section 156(4)(a) and (c) provides that if a defendant has been convicted of an offence before the Crown Court, it must be determined whether he has a criminal lifestyle.
If it is not concluded that he has such a lifestyle (and that was the position in relation to all the appellants in this appeal) the court must decide whether the convicted person has benefited from his particular criminal conduct.
If it is determined that he has so benefited, the court must decide on the recoverable amount, and make an order (a confiscation order) requiring him to pay that amount.
The recoverable amount for the purposes of section 156 is an amount equal to the defendant's benefit from the conduct concerned: section 157(1).
But by section 157(2), if the defendant shows that the available amount (as defined in section 159) is less than the recoverable benefit, the recoverable amount is the available amount, or a nominal amount, if the available amount is nil.
This is the provision by which one of Mr McLaughlins co accused had the recoverable amount in his case fixed at nil.
Section 224(4) and (5) of POCA are in similar terms to article 2(6) and (7) of the 1996 Order.
The basis on which the appellants were said to have benefited from their offences
The prosecution statements prepared by Ms McMullan in respect of the Mackle brothers were identical in all material respects.
And the basis on which the appellants were said to have benefited from their criminal conduct was likewise identical.
It was also unequivocal.
In respect of each appellant, she asserted that the benefit was 1,036,775.77, a figure made up of evaded tobacco product duty of 845,596.37 and evaded VAT of 191,179.40.
It is clear from Ms McMullans calculations that confiscation was sought against each appellant on the basis that they had derived a pecuniary advantage in the total amount of duty/VAT evaded.
This renders academic Mr McCollums argument (referred to in para 12 above) that he had not made any concession about the value of the benefit to the Mackles so far as concerned the confiscation proceedings.
The plain and inescapable fact is that the case made by the prosecution was that the appellants had obtained a benefit in the form of evasion of the duty.
No other form of benefit was advanced or even mooted.
The same holds true for the case made against Mr McLaughlin.
No suggestion was made that he had derived a benefit from his criminal conduct other than by the evasion of the excise duty and VAT.
Indeed, on the evidence presented, it is difficult to see how any other case could have been made.
Nothing in the prosecution case suggested a physical connection between Mr McLaughlin and the cigarettes.
And, as in the case of the Mackles, the total amount of the benefit that Mr McLaughlin and his co accused were said to have obtained was calculated solely by reference to the amount of the evaded duty.
The respondent in its printed case has asserted that there was no evidence before the Court of Appeal that the appellants had been wrongly advised as to the effect of the 2001 Regulations.
It has also been stated that the respondent has not accepted that incorrect advice was given.
It is claimed that it was incumbent on the appellants to make an application to adduce fresh evidence before the Court of Appeal, or for that court to inquire of trial counsel as to the nature of the advice that was given before any conclusion could be reached about the basis on which the appellants consented to the confiscation orders.
This argument misses the essential point in my view.
This is that the only basis on which the appellants were said to have obtained a benefit was that they had evaded the duty and VAT payable.
No other possible basis of benefit was canvassed.
An acceptance that they had obtained a benefit on that account inevitably involved a mistake of law.
No evidence is needed to establish that proposition.
On the hearing of the appeal Mr McCollum suggested that the benefit which the appellants had obtained was the equivalent of the evaded duty.
The cigarettes had a saleable value which was enhanced, he claimed, by the duty that had been evaded.
Even if it could be established that the saleable value of the cigarettes had been increased by precisely the amount of the evaded duty (and that seems, at best, highly questionable), the important point is that this is not the basis on which the case against the appellants was presented on the confiscation proceedings.
Moreover, the saleable value of the contraband tobacco (as distinct from the alleged pecuniary advantage from evasion of a legal liability, which was the basis of the prosecutions claim in the proceedings) would be a benefit to the appellants only if they obtained the property as a result of or in connection with the commission of the crime.
I return to this point at para 59.
If they did not obtain the property, its value, whether enhanced or not, would not be a benefit to them.
The prosecution had firmly espoused the case that the benefit obtained by the appellants took the form of a pecuniary advantage derived from evasion of the duty on the cigarettes.
This basis of benefit was accepted uncritically by the sentencing judges.
It is not altogether surprising that they should have done so.
The confiscation orders were not only made on consent; they were the product of discussions between the parties.
Unlike the position in Revenue and Customs Prosecutions Office v Mitchell [2009] EWCA Crim 214; [2009] 2 Cr App R (S) 463, (to which reference will be made at para 51 below) the appellants had not indicated disagreement with the amount which the revenue authorities claimed was the benefit that they had obtained.
As the Mitchell case demonstrates, however, sentencing judges should be astute to ensure that they are satisfied that agreements on the amount to be recovered by way of confiscation orders are soundly based.
In any event, it is clear that the basis on which both judges accepted that the appellants had benefited by their criminal conduct was that they had evaded duty on the cigarettes.
As is now apparent, because their liability to pay duty could not be established, this was not a correct legal basis on which to find that the appellants had obtained a benefit.
Is a consent to a confiscation order made under a mistake of law binding?
As noted at para 24 above the Court of Appeal held that, even if the appellants were incorrectly advised to consent to the confiscation orders, they were bound by the orders made on consent.
Unfortunately, it appears that the court was not referred to the decisions of the House of Lords in R v Emmett [1998] AC 773 and the Court of Appeal in R v Bell [2011] EWCA Crim 6 on this question.
In Emmett a confiscation order had been made by consent under the Drug Trafficking Offences Act 1986 following the appellants plea of guilty to being knowingly concerned in the importation of a controlled drug contrary to section 170(2) of the Customs and Excise Management Act 1979.
The Court of Appeal certified the question whether it was open to the defendant to appeal against the order on the ground that his acceptance of the prosecutions case as to his liability was based on either a mistake of law or a mistake of fact.
Section 3 of the 1986 Act provided: Where(a) there is tendered to the Crown Court by the prosecutor a statement as to any matters relevant to the determination whether the defendant has benefited from drug trafficking or to the assessment of the value of his proceeds of drug trafficking; and (b) the defendant accepts to any extent any allegation in the statement, the court may, for the purposes of that determination and assessment, treat his acceptance as conclusive of the matters to which it relates.
It had been argued by the prosecution in Emmett that the effect of this section was that an appeal such as the appellant sought to advance was implicitly excluded.
That argument was rejected by Lord Steyn (with whom the other members of the Appellate Committee agreed).
At pp 782 783 he said: Earlier in this century it may not have been possible to put forward as a ground of appeal that the plea of guilty arose from a mistake of law or fact of the defendant: R v Forde [1923] 2 KB 400, 403, per Avory J.
Nowadays it is clear that as a matter of jurisdiction the Court of Appeal has power in such a case to consider an argument that the plea of guilty was induced by a fundamental mistake of law or fact: see R v Boal [1992] QB 591 (a mistake of law); R v Lee (Bruce) [1984] 1 WLR 578, 583E (a mistake of fact) and Blackstone's Criminal Practice, 7th ed. (1997), pp. 1512 1514, para. D22.12.
Given that the powers of the Court of Appeal extend to cases when a plea was entered on a mistaken view of the law or fact, it is difficult to see what rational basis there could be to exclude such a right of appeal under section 3(1).
Even drug traffickers have rights and they, too, are entitled to justice.
It is to be remembered that under POCA the court must itself decide whether the convicted person has benefited from his particular criminal conduct.
The power to make a confiscation order arises only where the court has made that determination.
A defendants consent cannot confer jurisdiction to make a confiscation order.
This is particularly so where the facts on which such a consent is based cannot as a matter of law support the conclusion that the defendant has benefited.
On the other hand, if it is clear from the terms on which a defendant consents to a confiscation order, that he has accepted facts which would justify the making of an order, a judge, provided he is satisfied that there has been an unambiguous acceptance of those facts from which the defendant should not be permitted to resile, will be entitled to rely on the consent.
This is so not because the defendant has consented to the order.
It is because his acceptance of facts itself constitutes evidence on which the judge is entitled to rely.
Provided the acceptance of the facts is unequivocal, and particularly where it is given after legal advice which proves to be sound, the judge need not mount a further investigation.
It should be emphasised, however, that this is because the judge can in those circumstances himself be satisfied on the evidence that the basis for making a confiscation order has been made out.
The proper discharge by a judge of his statutory duty to satisfy himself that a defendant has benefited by his criminal conduct is well illustrated by the case of Mitchell (referred to above at para 47).
In that case the respondent had pleaded guilty to an offence under section 170(2) of the 1979 Act.
The goods involved were tobacco products.
In subsequent confiscation proceedings the prosecution claimed that the respondent had benefited in respect of the tobacco and had obtained a pecuniary advantage by evading the excise duty payable.
The respondent contended that the only benefit he had received from the offence was 100 paid to him in cash for helping to load the tobacco.
The lawyers acting on behalf of the respondent accepted that, whatever his real benefit might have been as a matter of fact, under the terms of POCA, he obtained the benefit alleged by the prosecution.
Troubled about the correctness of this concession, the sentencing judge, Recorder Males QC, declined to act on it.
After considering the position and hearing argument, he made a confiscation order against the respondent for 100, the amount that he had claimed to have received for his services as a loader.
The Court of Appeal not only endorsed this approach, it paid tribute to the way in which the Recorder had dealt with the case.
In Bell, confiscation orders were made in respect of evaded duty on tobacco products smuggled into the United Kingdom for resale.
The prosecution had wrongly claimed benefit in the sum of the evaded duty as a pecuniary advantage although (it transpired) the defendants could not in law be liable for it.
The defendants had consented to confiscation orders in those sums.
On their appeal against the confiscation orders the prosecution argued that because the defendants had consented to the orders, they were bound by them.
It was submitted that it was for the defendants to spot the error and having not done so, leave to appeal should be refused.
This submission was forthrightly rejected by Hooper LJ, who delivered the judgment of the court.
Stating that the arguments were neither convincing nor attractive, Hooper LJ said at para 14: In our view it would be a grave injustice not to grant leave in cases such as the present cases on the basis that there has been a previous misconception as to the state of the law, there would be a substantial injustice if we did not grant leave.
On the same basis it would be manifestly unfair to require the appellants in this case to be bound by their consent to the confiscation orders when, as pointed out in para 45 above, the only possible explanation for the consent was that it was given under a mistake of law.
The Court of Appeal in para 40 of its judgment had suggested that the appellants were, on advice, prepared to consent to confiscation orders by way of a compromise of the legal issues that arose as between them and the Crown in respect of the confiscation applications and that they knew perfectly well what their respective roles were in the joint enterprises and what was likely to emerge if they contested the applications for the confiscation orders.
This suggests that the court had concluded that there were tactical reasons for consenting to the orders which were not associated with the erroneous belief that the appellants were legally liable to pay the duty and VAT.
But there was no evidence to support such a conclusion.
On the contrary, the court had been told by the legal representatives of the appellants that the lawyers who had appeared for them on the confiscation proceedings had wrongly advised them that they were liable for the duty and VAT.
No challenge to that claim was made by the Crown nor was it contended that evidence was required to show that wrong advice had in fact been given.
Since the only basis on which it had been claimed against the appellants that they had benefited was that they were liable for the duty and VAT, the obvious, indeed the only, inference to be drawn was that they had agreed to the consent orders because they believed that they were indeed liable on that basis.
The prosecution had firmly committed itself to that unique case.
If the appellants had contested the sole basis on which the prosecution claimed that they had benefited viz that they had evaded duty for which they were liable, there is no reason to suppose that this would have exposed them to the risk of disadvantageous evidence which was entirely unconnected with the case that the prosecution had advanced.
A finding that there were reasons for the appellants consenting to the confiscation orders other than that they had been advised that they were liable to pay the duty which had been evaded inevitably involves a measure of speculation.
I would therefore re formulate the first certified question so as to properly reflect the particular circumstances of this case; in its amended form the question reads, Is a defendant precluded from appealing against a confiscation order made by consent on the ground that the consent was based on a mistake of law, as a result of wrong legal advice and I would answer that question, no.
The second certified question
By way of preamble to consideration of the second certified question, it should be noted that the reason the Court of Appeal dismissed the appeals was that, in its estimation, an alternative basis from that advanced by the Crown existed whereby the appellants could be found to have benefited from their admitted criminal conduct.
This circumstance, taken together with the consent to the confiscation orders, was deemed sufficient to refuse to allow the appeals.
Where the original basis on which a confiscation order was made is no longer viable, a decision to confirm the order on different grounds must be made with great care and only when it is clear that the person against whom it is to be made has had ample opportunity to address the altered grounds on which it is proposed to make the order.
Of course, it may be clear on the established or admitted facts that those who were made subject to a confiscation order on the erroneous basis that they were liable to pay the excise duty under regulation 13(1), are in fact liable under regulation 13(2) because they caused the goods to reach the excise duty point or because they had obtained the value of the goods themselves: see, in this context, R v Khan [2009] EWCA Crim 588 at para 8.
In such circumstances it would be wrong to quash the confiscation order if it is plain that the order would have been made if the proper basis of liability had been correctly identified.
It is apparent that the Court of Appeal in the present case did not regard the appellants as having obtained a benefit on either of the two bases considered in Khan.
There was no evidence that they had caused the tobacco to reach the excise duty point and no basis on which it could be said that they had received the benefit of the cigarettes themselves.
The court followed a different route.
It said, firstly, (at para 27) that those who come into possession of goods knowing that duty on them has been evaded and, as part of a joint enterprise, take advantage of the economic advantages flowing from the evasion of the duty may gain a financial advantage flowing from their participation in the ongoing enterprise.
Secondly, the Court of Appeal found that the joint actions of the appellants, at least arguably, involved possession and control of the cigarettes by those involved in the participation and the enterprise. (para 35 emphasis added).
It is to be noted that the Court of Appeal concluded that these were possible alternative bases on which it might be concluded that the appellants had obtained a benefit.
It decided that it was unnecessary and inappropriate for the sentencing judges to examine these alternative bases of liability because of the appellants consent to the making of confiscation orders.
For the reasons given above, I do not consider that the trial judges could in these cases be relieved of their duty to be satisfied that the appellants had in fact obtained a benefit.
It follows that I consider that, if these alternative bases of liability were viable, they would have had to be considered by the judges making the confiscation orders and that it would have been necessary that the appellants have a proper opportunity to address the different foundation on which the confiscation orders might be made against them.
On that account, I do not consider that the Court of Appeals affirmation of the orders made can be upheld.
The second certified question is based on the premise that a defendant has had physical possession of the goods and played an active role in the handling of them.
What is meant by possession of goods for the purpose of confiscation proceedings and the significance of a finding as to the degree of possession involved has exercised the courts in England and Wales on a number of occasions.
It again appears that not all of those cases can have been cited to the Court of Appeal since some of them have not been referred to in the judgment.
In May, dealing with the requirement under the 1986 Drug Trafficking Offences Act that a defendant be shown to have benefited from his criminal conduct, at para 15 Lord Bingham said: under the 1986 Act the first question was always whether, on the facts (and allowing permissible inferences) the defendant had benefited by receipt of any payment or other reward, which a mere intermediary might possibly not.
It does not necessarily follow from the mere possession of drugs that a person is not a mere minder or custodian: see R v J [2001] 1 Cr App R (S) 273; R v Johannes [2002] 2 Cr App R (S) 109.
In other words, it is not to be assumed that because someone has handled contraband, even if that is in the course of a joint criminal enterprise, he has, on that account alone, benefited from that possession.
This reasoning applies to the concept of obtaining benefit in both the 1996 Order and POCA.
At para 48 of May Lord Bingham set out a number of principles to be followed by courts dealing with applications for confiscation orders.
The first of these was that the relevant legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means.
It does not provide for confiscation in the sense understood by schoolchildren and others, but nor does it operate by way of fine.
Later, in the same para, Lord Bingham observed that mere couriers or custodians or other very minor contributors to an offence, rewarded by a specific fee and having no interest in the property or the proceeds of sale, are unlikely to be found to have obtained that property.
The House of Lords returned rather more explicitly to this theme in Jennings.
In that case (as in May) the relevant provision was section 71(4) of the Criminal Justice Act 1988 which, among other things provided that a person benefits from an offence if he obtains property as a result of or in connection with its commission.
At para 13 Lord Bingham said: In its opinion in R v May the committee endeavoured to explore the meaning of section 71(4).
The focus must be and remain on the language of the subsection.
The committee regards the meaning of the subsection as in substance the same as the equivalent provisions of the drug trafficking legislation.
There is a real danger in judicial exegesis of an expression with a plain English meaning, since the exegesis may be substituted for the language of the legislation.
It is, however, relevant to remember that the object of the legislation is to deprive the defendant of the product of his crime or its equivalent, not to operate by way of fine.
The rationale of the confiscation regime is that the defendant is deprived of what he has gained or its equivalent.
He cannot, and should not, be deprived of what he has never obtained or its equivalent, because that is a fine.
This must ordinarily mean that he has obtained property so as to own it, whether alone or jointly, which will ordinarily connote a power of disposition or control, as where a person directs a payment or conveyance of property to someone else. (emphasis added)
At para 14 Lord Bingham dealt with the question of whether a person who contributes to property being obtained by another might be said to have obtained benefit from it.
He said that a persons acts may contribute significantly to property being obtained without his obtaining it. a person benefits from an offence if he obtains property as a result of or in connection with its commission, and his benefit is the value of the property so obtained, which must be read as meaning obtained by him.
The focus must be, as Lord Bingham has said, on what benefit the defendant has actually gained.
Simply because someone has embarked on a joint criminal enterprise, it does not follow that they have obtained an actual benefit.
Being engaged in a conspiracy does not, of itself, establish that each conspirator has obtained the property which is the product of the conspiracy.
Thus in R v Sivaraman [2008] EWCA Crim 1736, [2009] 1 Cr App R (S) 469, at para 12 (6) the Court of Appeal said: Where two or more defendants obtain property jointly, each is to be regarded as obtaining the whole of it.
Where property is received by one conspirator, what matters is the capacity in which he receives it, that is, whether for his own personal benefit, or on behalf of others, or jointly on behalf of himself and others.
This has to be decided on the evidence: Green, para 15.
By parity of reasoning, two or more defendants may or may not obtain a joint pecuniary advantage; it depends on the facts.
In the subsequent case of R v Allpress [2009] EWCA Crim 8, [2009] 2 Cr App R (S) 58, an argument that the judgment in Sivaraman on this point was wrong was firmly rejected: see para 30.
In delivering the judgment of the Court of Appeal (the Vice President, Hughes LJ, Toulson LJ, Rafferty J and Maddison J) Toulson LJ dealt with two misconceptions that had also featured in Sivaraman.
At para 31 he said this: In Sivaraman the court also addressed two misconceptions which subsequent cases suggest may still be common.
One was that in assessing benefit in a conspiracy case each conspirator is to be taken as having jointly obtained the whole benefit obtained by the conspiracy.
A conspiracy is not a legal entity but an agreement or arrangement which people may join or leave at different times.
In confiscation proceedings the court is concerned not with the aggregate benefit obtained by all parties to the conspiracy but with the benefit obtained, whether singly or jointly, by the individual conspirator before the court.
The second misconception is a variant of the first.
It is that anybody who has taken part in a conspiracy in more than a minor way is to be taken as having a joint share in all benefits obtained from the conspiracy.
This is to confuse criminal liability and resulting benefit.
The more heavily involved a defendant is in a conspiracy, the more severe the penalty which may be merited, but in confiscation proceedings the focus of the inquiry is on the benefit gained by the relevant defendant.
In the nature of things there may well be a lack of reliable evidence about the exact benefit obtained by any particular conspirator, and in drawing common sense inferences the role of a particular conspirator may be relevant as a matter of fact, but that is a purely evidential matter.
Two assumptions must be guarded against, therefore.
Firstly, it is not to be assumed that because one has handled contraband one has had possession of it in the manner necessary to meet the requirements of the relevant legislation.
Secondly, participation in a criminal conspiracy does not establish that one has obtained a benefit as Toulson LJ said, this is to confuse criminal liability with resulting benefit.
The Court of Appeal in the present case did not examine the evidence with a view to ascertaining whether the appellants could be shown to have had possession of the cigarettes in such a way as is contemplated by the legislation.
Before a confiscation order could be made in any of the appellants cases, such an examination must take place.
In its absence the Court of Appeals decision cannot be upheld.
Furthermore, the courts conclusion that the appellants could be considered to have obtained a benefit simply because they admitted participation in a joint criminal enterprise cannot, in the light particularly of the decisions in Sivaraman and Allpress, be accepted.
I would therefore answer the second certified question, Not necessarily.
Playing an active part in the handling of goods so as to assist in their commercial realisation does not alone establish that a person has benefited from his criminal activity.
In order to obtain the goods for the purposes of section 156 of POCA 2002 or article 8 of the Proceeds of Crime (Northern Ireland) Order 1996, it must be established by the evidence or reasonable inferences drawn therefrom that such a person has actually obtained a benefit.
On an appeal against sentence the Court of Appeal has power under section 10(3) of the Criminal Appeal (Northern Ireland) Act 1980 to quash the sentence passed by the Crown Court and pass such other sentence as is authorised by law.
Section 10(3A) of the 1980 Act (as inserted by the Coroners and Justice Act 2009, section 141(2)) provides that where the Court of Appeal exercises its power under subsection (3) to quash a confiscation order, the court may, instead of passing a sentence in substitution for that order, direct the Crown Court to proceed afresh under the relevant enactment.
Section 33(3) (as substituted by the Constitutional Reform Act 2005, section 40, Schedule 9, para 33(4)(b)) provides that, for the purpose of disposing of an appeal under this Part of the Act, the Supreme Court may exercise any powers of the Court of Appeal.
I would therefore quash the confiscation orders and remit the cases to the trial courts to proceed afresh in light of this judgment.
| This appeal concerns the validity of confiscation orders made with the appellants consent.
On 23 November 2007, three brothers, Patrick Mackle, Plunkett Jude Mackle (commonly known as Jude) and Benedict Mackle, all pleaded guilty to having been knowingly concerned in the fraudulent evasion of duty on cigarettes, contrary to Section 170(2)(a) of the Customs & Excise Management Act 1979.
In a separate trial, on 18 November 2008, Henry McLaughlin pleaded guilty to a similar offence.
He was also convicted of a second offence, on his plea of guilty, but that is not relevant to this appeal.
On 13 December 2007 Deeny J sentenced Patrick Mackle to three years imprisonment, and Jude Mackle and Benedict Mackle to two and a half years imprisonment.
All three sentences were suspended for five years.
At a later hearing, on 29 October 2008, confiscation orders were made against Patrick Mackle for 518,387.00, and against Jude and Benedict Mackle for 259,193.00 each.
The aggregate sum produced by these three amounts was equal to the amount of duty and Value Added Tax which had been evaded.
The confiscation orders were made with the consent of each of the Mackle brothers.
Henry McLaughlin was sentenced by Weatherup J on 19 November 2008 to one years imprisonment suspended for two years.
The judge also imposed a serious crime prevention order for a period of five years.
A confiscation order for 100,000 was made against Mr McLaughlin on the same date.
This sum, taken together with other confiscation orders made against his co defendants, represented the total amount of duty and VAT said to have been evaded.
The confiscation order against Mr McLaughlin was also made with his consent.
Messrs Mackle and McLaughlin appealed against the consent orders on the grounds that they were made on the wrong legal basis.
Confiscation orders must be made to recover the amount by which a defendant has benefited financially from the offence.
The appellants argued that they could not have benefited financially from the offences if they were not liable to pay the duties they were concerned in avoiding.
While they might have been liable under the previous duty regime, the Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992, they did not fall within any of the categories of persons liable under the present regime, the Tobacco Products Regulations 2001.
The Court of Appeal dismissed their appeals but certified that the following points of law of general public importance arose from its judgment: 1.
Is a defendant who pleaded guilty to being knowingly concerned in the fraudulent evasion of duty and who consents, with the benefit of legal advice, to the making of a confiscation order in an agreed amount in circumstances which make clear that he does not require the Crown to prove that he obtained property or a pecuniary advantage in connection with the charged criminal conduct bound by the terms of the confiscation order? 2.
Does a defendant who knowingly comes into physical possession of dutiable goods in respect of which he knows the duty has been evaded and plays an active role in the handling of those goods so as to assist in
the commercial realisation of the goods benefit from his criminal activity by obtaining those goods for the purposes of section 158 of the Proceeds of Crime Act 2002?
The Supreme Court unanimously allows all four appeals.
Lord Kerr gives the judgment of the Court, with which the other Justices agree.
As to the first question, the prosecution had firmly espoused the case that the benefit obtained by the appellants took the form of a pecuniary advantage derived from evasion of the duty on the cigarettes.
This basis of benefit was, unsurprisingly, accepted uncritically by the sentencing judges.
But since the appellants liability to pay duty could not be established this was not a correct legal basis on which to find that the appellants had obtained a benefit [47].
In holding that they might nonetheless be bound by the orders, since they were made with the appellants consent, it appears that the Court of Appeal had not been referred to decisions of the House of Lords and the Court of Appeal of England and Wales which established that an appeal ought to be available to defendants who had made a plea on a mistaken legal basis [4849].
It is to be remembered that a court must itself decide whether the convicted person has benefited from his particular criminal conduct.
The power to make a confiscation order arises only where the court has made that determination.
A defendants consent cannot confer jurisdiction to make a confiscation order.
This is particularly so where the facts on which such a consent is based cannot as a matter of law support the conclusion that the defendant has benefited.
On the other hand, if it is clear from the terms on which a defendant consents to a confiscation order, that he has accepted facts which would justify the making of an order, a judge, provided he is satisfied that there has been an unambiguous acceptance of those facts from which the defendant should not be permitted to resile, will be entitled to rely on the consent.
This is not because the defendant has consented to the order.
It is because his acceptance of facts itself constitutes evidence on which the judge is entitled to rely [50].
It would be manifestly unfair to require the appellants in this case to be bound by their consent to the confiscation orders when the only possible explanation for the consent was that it was given under a mistake of law.
That was the explanation they had put to the Court of Appeal, and the prosecution had not challenged it [53].
And the confiscated amounts corresponded exactly to the duty and VAT evaded.
Lord Kerr would therefore reframe the first certified question to reflect the circumstances of this case: Is a defendant precluded from appealing against a confiscation order made by consent on the ground that the consent was based on a mistake of law, as a result of wrong legal advice? The answer is, no. [54] As to the second question, the Court of Appeal dismissed the appeals because it considered the appellants could, have been found to have benefited from their admitted criminal conduct.
But it advanced this view only on the basis of findings that might have been made by the trial judge, but were not in fact.
The trial judge would have had to have been satisfied that the appellants had in fact benefited from the offences in such a way, having given them the opportunity of responding to that suggestion [5556].
In any event it was clear from previous House of Lords authority that merely handling goods or being involved in a joint criminal enterprise does not in itself confer a benefit.
Lord Kerr would therefore answer the second question, Not necessarily.
Playing an active part in the handling of goods so as to assist in their commercial realization does not alone establish that a person has benefited from his criminal activity.
In order to obtain the goods for the purposes of section 156 of POCA 2002 or article 8 of the Proceeds of Crime (Northern Ireland) Order 1996, it must be established by the evidence or reasonable inferences drawn therefrom that such a person has actually obtained a benefit. [5768].
The Court therefore quashes the confiscation orders and remits the cases to the trial courts to proceed afresh in light of this judgment [69].
|
This challenge to the making of a care order, made with a view to the childs adoption, requires the court to consider (a) (b) (c) aspects of the threshold to the making of a care order set by section 31(2) of the Children Act 1989; the application to the decision whether to make a care order of the requirement under article 8 of the European Convention on Human Rights 1950, the Convention, that the nature of any interference with the exercise of the right to respect for family life should be proportionate legitimate aim, the proportionality requirement; and, perhaps in particular, the boundaries beyond which it is wrong for this court, or any other appellate court, to set aside the grant or dismissal by a trial judge of a local authoritys application for a care order.
The mother, M, supported by the father, F, with whom she lives, appeals against an order of the Court of Appeal (Rix, Black and Lewison LJJ) dated 14 November 2012.
By its order, the Court of Appeal dismissed Ms appeal against an order made by HHJ Cryan in the Principal Registry of the Family Division dated 14 June 2012.
By his order, the judge made a care order in relation to the daughter of M and F upon the basis of a care plan that she should be placed for adoption.
Amelia (being the name which Lady Hale proposes that we should attribute to the daughter) was born in April 2010 so is now aged three.
At birth she was placed with a foster mother on what was intended to be a short term basis; she remains living with her pending the determination of this appeal.
M is aged 42 and F is aged 45.
The applicants for the care order are the London Borough of Barnet, where the parents were living when Amelia was born.
Since then they have moved to Islington.
M and F each have other children.
M has another daughter, aged 14, whom, in accordance with Lady Hales proposal, I will call Teresa and with whom M has no contact.
F has four other daughters aged between 17 and six.
They live with their mother; F has an amiable relationship with them but, for reasons which I will explain in para 15 below, his has not been a stable or responsible presence in their lives and, on a practical level, his involvement with them has been marginal.
Teresas father is Ms step father, Mr E, with whom M lived for many years.
In 2010, following her separation from him, M applied for a residence order in relation to Teresa.
It was in that application that Judge Cryan first became acquainted with the family.
He conducted a fact finding hearing over 20 days which led in April 2011 to his handing down a judgment of 180 paragraphs.
The relevant local authority, West Sussex, thereupon issued care proceedings in relation to Teresa, in which the judge conducted three further substantial hearings.
With Ms support, he ordered the removal of Teresa from the home of Mr E into foster care, where she remains.
The hearing which led to the making of the care order in relation to Amelia also proceeded for 20 days and led to the judgment under challenge, which extends to 203 paragraphs.
It follows that, in arriving at his conclusion that it was not safe for Amelia to be placed with the parents and that it was necessary in her interests that she should be adopted, Judge Cryan drew on extensive exposure to the problems of the family.
Indeed the extent of it is beyond my own experience of service for 12 years in the Family Division.
M scarcely challenged the judges findings of fact in the Court of Appeal; and her challenge to them in this court is, inevitably, so faint that there is no need to add to the reasons which Black LJ gave for rejecting them in her judgment in the Court of Appeal, [2012] EWCA Civ 1475, at paras 133 to 136.
What follows represents as brief a summary as possible of the facts found by Judge Cryan.
Greater detail is to be found in the judgment of Black LJ.
THE FACTS
M is the victim of grave misfortune.
Her life has been hugely dysfunctional.
In 1975, when she was aged four, the marriage of her parents broke down and, with her sisters, she moved to live with her grandparents.
Several years after her mothers marriage to Mr E in 1977, M and her sisters moved to live with them.
The family was enlarged by the birth of two sons born to Ms mother by Mr E in 1985 and 1986.
Mr Es influence on the family in general, and on M in particular, was malign in almost every sense.
He is egocentric; aggressive; domineering and dishonest.
By 1986, although married to her mother, Mr E was having sexual relations with M, then aged 15; in that year she became pregnant by him and had an abortion.
Prior to 1999, when she gave birth to Teresa, M was to have six further abortions consequent upon her relationship with him.
Mr E also inflicted grave and protracted physical abuse on one of Ms sisters.
When in 1989 the family went to live in Greece, of which Mr E was a citizen, they left the sister behind.
In due course the sister was taken permanently into care.
Meanwhile the family had returned from Greece.
In 1990 Ms mother left Mr E.
For the following 19 years the family in effect comprised Mr E, M, her two half brothers and, once born, Teresa.
On numerous occasions until 2002, when they settled in West Sussex, the family moved home.
In the early years, when the half brothers were still minors and prior to the birth of Teresa, local authorities and police forces became concerned about their safety at the hands of Mr E; and for a month in 1997 they were taken into care.
In 2003 M was found guilty of a series of frauds, which had yielded
30,000 and for which she was sentenced to imprisonment for two years.
Her defence had been that the prosecuting officer had conspired with a man who had allegedly raped one of her half brothers to present a false case against her.
In this regard she was later found guilty of attempting to pervert the course of justice and sentenced to a further term of 27 months.
Judge Cryan found that, in perpetrating the frauds and concocting the false defence, she had been heavily influenced by Mr E.
Nevertheless the convictions, the gravity of which was reflected in the sentences passed upon her in respect of them, represent the first example of conduct on the part of M which, taken together, was to lead the judge to describe her as an habitual and purposeful liar.
For the purposes of her second criminal trial Ms solicitors invited a consultant psychiatrist, Dr Taylor, to assess her fitness to plead.
His conclusion was that she was fit to do so; but, following examination of her extensive medical records, he concluded that she suffered from a somatisation disorder.
This is a chronic psychiatric disorder, of which the main features are multiple complaints about physical symptoms and requests for medical investigations in circumstances in which, if organic disorder is present at all, it fails to account for the symptoms or for the extent of the sufferers pre occupations.
In short it is a condition which drives the sufferer to misuse physical symptoms in order to elicit care from others or for other purposes.
For use in the proceedings before Judge Cryan, another consultant psychiatrist, Dr Bass, was instructed to appraise Ms psychological condition in the light of her more recent medical records.
Dr Bass, who has considerable expertise in this area, confirmed Dr Taylors diagnosis that M suffers a somatisation disorder; and in effect it became an agreed fact.
But, as I will explain in para 17 below, Dr Bass went further.
While investigating the allegations of fraud against M, the police discovered paedophilic images in a computer in the family home.
Mr E contended that the police had planted them there.
In 2004 Mr E complained to the General Medical Council that the family GP had sexually assaulted one of the half brothers, then aged 18.
The complaint was dismissed.
Following her ultimate release from prison in 2004, M made various complaints to probation officers, hospitals and social workers that Mr E was abusing her physically and sexually.
By June 2009 her life in the home had become intolerable and she left.
She did not take Teresa with her; no doubt Mr E would not have allowed her to do so.
In effect it marked the end of her relationship with Teresa who, under Mr Es influence, has refused to have any further dealings with her.
Judge Cryans conclusion was that, within her long relationship with Mr E, M could fairly be regarded as his victim but that her role had not been entirely inert and that she had actively conspired with him in the many lies, deceptions and false accusations which had been generated in the household.
In the summer of 2009 M met F. They began a relationship which continued following Ms move to Barnet late in 2009; but they did not fully cohabit until late in 2011.
F has a long criminal history and has spent about 15 years of his adult life in prison.
He was convicted of 52 offences between 1980 and 2008.
Some related to drugs; some included violence but most were offences of dishonesty.
In the 1990s he sustained three convictions for robbery, for each of which he received sentences of imprisonment of between two and three and a half years.
In 2001 he was sentenced to four years for burglary.
In 2007 he was sentenced to three years for further burglary; and the pre sentence report recorded his admission of a crack cocaine habit and of the occasional use of heroin.
But, following his release on licence in May 2009, F has sustained no further convictions.
For the first year following his release he was subjected to regular drug tests, of which two proved positive.
At a hearing in June 2010 into whether an interim care order in relation to Amelia should be continued, F refused a judges invitation to submit strands of his hair to drug testing; and he later announced that Barnet could kiss [his] arse when they next wanted to test him.
Ultimately, in July 2011, he underwent a test which showed use of cannabis but not of Class A drugs; and there was no evidence before Judge Cryan that, although admitting to the continued use of cannabis, F was then also using Class A drugs.
I turn to an important part of the history which, it is clear, made Judge Cryans decision particularly difficult.
It relates to the amount and quality of the contact which M and F have had with Amelia following her removal, at birth, into care.
From May 2010 until the judges decision in June 2012, contact took place under supervision for one and a half hours on five days a week; since the decision it has taken place for the same duration on three days a week.
M and F have been assiduous in attending, in effect, all the periods of contact; and the supervisors reports of its quality have been uniformly positive.
The judge found that: (a) The most striking feature of the relationship between the parents was the strength of their united wish that Amelia should be placed in their care. (b) They had put a massive effort into making a success of the periods of contact. (c) They were devoted to Amelia. (d) They each had a warm and loving relationship with her. (e) During contact periods they had not put a foot wrong and had given her child centred love and affection in spades.
It was the diagnosis of Dr Bass, which Judge Cryan accepted, that, beyond abnormal personality traits and in addition to, and more significantly than, her somatisation disorder, M suffers a factitious disorder of mild to moderate intensity.
This is a related psychiatric disorder in which the sufferer is driven repeatedly to exaggerate symptoms or altogether to fabricate them and to offer false histories.
There is therefore a deceptive dimension to the disorder which was replicated in a mass of other evidence before the judge, unrelated to Ms medical condition, which raised questions about her ability, and for that matter also the ability of F, to behave honestly with professionals.
Dr Bass stressed that Ms psychiatric disorders required psychotherapy which might last for a year and which could be undertaken only if she were to acknowledge the problems and to engage honestly with the therapist.
THE JUDGES CONCLUSIONS
There was debate before Judge Cryan about the effect on Amelia of being placed in the care of M in the event that she was to continue to suffer somatisation and factitious disorders.
In the event the judge found that there were risks that she would suffer harm in that regard.
They were that M might present Amelia for medical treatment, and, worse, that she might receive medical treatment which was unnecessary; and that in any event Amelia might grow up to believe that the way in which M presented herself for treatment was appropriate and might model herself on it.
But Judge Cryans concerns went far wider than that.
It was his wider concerns which drove him to the key conclusion that it was not safe for Amelia to be placed with the parents.
The wider concerns related to the mass of evidence that each of the parents was fundamentally dishonest, manipulative and antagonistic towards professionals.
The expert evidence before the judge as to whether Amelia could safely be placed with the parents was in conflict: Ms Summer, of Marlborough Family Service, and Dr Bass both agreed with Barnet that she could not safely be so placed.
Dr Dale, who has a background in social work and is not a medical doctor, suggested otherwise; and the Childrens Guardian, whose contribution, constrained by lack of resources at CAFCASS, was described by the judge as superficial and who sadly died within weeks of the hand down of his judgment, agreed with Dr Dale.
But, importantly if inevitably, all the experts agreed that Amelia could not conceivably be placed in the care of the parents other than pursuant to a programme of multi disciplinary monitoring and support, which could be implemented only in the event of honest cooperation on the part of the parents.
It was, in particular, their cooperation with the local authority which was described by Dr Taylor as very important and by Dr Bass as critical.
The judges key conclusion was that their honest co operation with professionals would not be forthcoming; and his subsidiary conclusion was that it might in any event be damaging for a child to grow up in a household permeated by dishonesty and animosity towards professionals in that she would find such attitudes confusing even assuming that she did not find them attractive.
It would not be usual, at this level, to descend into the mass of evidence by reference to which Judge Cryan sought to justify his key conclusion.
But I consider that I need to cite 16 examples of it: Later M successfully claimed housing benefit and child benefit When late in 2009 she moved to London, M told a local authority (i) housing department that her violent step father was responsible for her pregnancy and that he was a solicitor. (ii) on the basis that Amelia was living with her. (iii) In April 2010, when Barnet first became involved with the family, M obstructed their attempts to find out about Teresa by lying about where she lived. (iv) (v) She also falsely told them that her mother was dead.
F, for his part, refused to provide them with his surname.
In November 2010 F told a social worker that, if Amelia died, it In 2011 M falsely told an officer of the Lucy Faithfull Each parent refused to provide them with a genogram.
In August 2010 F refused further to participate in Barnets (vi) (vii) intended assessment of the capacity of the parents to care for Amelia. (viii) would be on her head and he would go to prison. (ix) Foundation that her father had raped her when she was aged 12.
F told Ms Summer that, if he was concerned about Amelia, there (x) was no way in which he would call social services but that he might call the police.
Ultimately both parents withdrew their cooperation with Ms (xi) Summer in the production of a viability assessment; during the final session with Ms Summer M played a game on her mobile telephone. (xii) When he learnt that his half sister had told Barnet that she would try to explain their concerns to him, Fs response was to threaten to punch her. (xiii) When later M learnt that the half sister had withdrawn her candidacy to care for Amelia, she was so angry that she made an anonymous call designed to obstruct the half sisters adoption of a child whom she was fostering. (xiv) 2002.
It was the practice of the parents to wash Amelias laundry but, (xv) when Barnet told her that cigarette butts had been found in the laundry returned to the foster mother, M responded that Barnet had planted them there. (xvi) Between April 2010 and December 2011 M made 23 complaints about professionals attempting to work with her (and about the foster F falsely told Dr Dale that he had ceased to take hard drugs in mother) including to the General Social Care Council, to the Local Authority Ombudsman, to the Patient Advice and Liaison Service of the NHS and to her MP.
In relation to her habitual making of false complaints of a highly unpleasant character about professionals, Judge Cryan described M as an accomplished pupil of Mr E.
He accepted the following evidence of Dr Bass: I have major concerns about the capacity of [M] to protect any child in her care because of ongoing concerns about her capacity for deception because it is such a dominant feature of her personality, allied to this lack of insight and this lack of acknowledgment and evasiveness and inconsistency.
The judge observed: Provided whoever [M] is dealing with appears to be going along with her without challenge, she will cooperate to achieve her ends.
If she is questioned, challenged or thwarted, cooperation is abandoned and entirely unacceptable hostility begins.
The judge concluded: Ultimately, I find that I am persuaded. that what the evidence clearly demonstrates is that these parents do not have the capacity to engage with professionals in such a way that their behaviour will be either controlled or amended to bring about an environment where [Amelia] would be safe.
In short I cannot see that there is any sufficiently reliable way that I can fulfil my duty to [Amelia] to protect her from harm and still place her with her parents.
I appreciate that in so saying I am depriving her of a relationship which, young though she is, is important to her and depriving her and her parents of that family life which this court strives to promote.
The judge ended by stating that in those circumstances adoption was the only viable option for Amelias future care.
THE THRESHOLD SET BY SECTION 31(2)
Judge Cryan was well aware that, before he could even consider whether to make a care order, section 31(2) of the 1989 Act required him to be satisfied (a) that, when she was first taken into care, namely at birth, Amelia had been likely to suffer significant harm and (b) that the likelihood was attributable to the care likely to be given to her if the order were not made not being what it would be reasonable to expect a parent to give to her.
But little separate attention was paid to these threshold requirements in submissions to the judge.
Mr Feehan QC, on behalf of the mother, submitted to him that the evidence barely crosses the threshold.
The guardian presumably considered that the threshold was crossed because at one stage she was advocating a supervision order.
But counsel for the father disputed that it was crossed.
In the event the judge expressed himself satisfied that the threshold has been crossed, not perhaps in the most extreme way that is seen in some cases, but crossed it has been.
And, following brief explanation, he turned to the welfare stage of the inquiry.
But in the Court of Appeal, and in particular in this court, much greater attention has been paid to what the threshold requires.
It is common ground that, as recently reaffirmed by this court in In re J (Children) (Care Proceedings: Threshold Criteria) [2013] UKSC 9, [2013] 2 WLR 649, a likelihood of significant harm means no more than a real possibility that it will occur but a conclusion to that effect must be based upon a fact or facts established on a balance of probabilities.
In the context of the present case it is also noteworthy that, by section 31(9), harm means ill treatment or the impairment of health or development. and development includes emotional. development.
Beyond this, however, the debate surrounds two matters.
The first matter is the meaning of the word significant.
In this regard Parliament chose to help the court to a limited extent by providing in section 31(10) as follows: Where the question of whether harm suffered by a child is significant turns on the childs health or development, his health or development shall be compared with that which could reasonably be expected of a similar child.
When we read this subsection together with the definition of harm in the preceding subsection, we conclude that, whereas the concept of ill treatment is absolute, the concept of impairment of health or development is relative to the health or development which could reasonably be expected of a similar child.
This is helpful but little more than common sense.
In my view this court should avoid attempting to explain the word significant.
It would be a gloss; attention might then turn to the meaning of the gloss and, albeit with the best of intentions, the courts might find in due course that they had travelled far from the word itself.
Nevertheless it might be worthwhile to note that in the White Paper which preceded the 1989 Act, namely The Law on Child Care and Family Services, Cm 62, January 1987, the government stated, at para 60: It is intended that likely harm should cover all cases of unacceptable risk in which it may be necessary to balance the chance of the harm occurring against the magnitude of that harm if it does occur.
It follows that when, in Re C and B (Care Order: Future Harm) [2001] 1 FLR 611, Hale LJ (as my Lady then was) said, at para 28, that a comparatively small risk of really serious harm can justify action, while even the virtual certainty of slight harm might not, she was faithfully expressing the intention behind the subsection.
But the other interesting feature of the sentence in the White Paper is the word unacceptable.
I suggest that it was later realised that whether the risk was unacceptable was a judgement which fell to be made at the welfare stage of the inquiry; and so a different adjective was chosen.
In Re L (Children) (Care Proceedings: Significant Harm) [2006] EWCA
Civ 1282, [2007] 1 FLR 1068, the Court of Appeal allowed an appeal by parents against a judges conclusion that their children had suffered and were likely to suffer significant harm and it remitted the issue for re hearing.
The professional evidence had been that the parents deficiencies had had subtle and ambiguous consequences for the children; and it was not difficult for me, at para 31(a) of my judgment in that court, to conclude that such consequences could not amount to significant harm.
The rehearing was conducted by Hedley J and, by his judgment reported as Re L (Care: Threshold Criteria) [2007] 1 FLR 2050, he declined to hold that the threshold was crossed.
He observed, at para 50, that society must be willing to tolerate very diverse standards of parenting, including the eccentric, the barely adequate and the inconsistent; and, at para 51, that significant harm is fact specific and must retain the breadth of meaning that human fallibility may require of it but that it is clear that it must be something unusual; at least something more than the commonplace human failure or inadequacy.
submits that: In the present case Mr Feehan seeks to develop Hedley Js point.
He many parents are hypochondriacs, many parents are criminals or benefit cheats, many parents discriminate against ethnic or sexual minorities, many parents support vile political parties or belong to unusual or militant religions.
All of these follies are visited upon their children, who may well adopt or model them in their own lives but those children could not be removed for those reasons.
I agree with Mr Feehans submission; but the question arises whether, in the light of the judges key conclusion, it misses the point.
Mr Feehan proceeds to submit that the proportionality requirement under article 8 of the Convention applies, albeit perhaps only very obliquely, to whether harm is significant for the purposes of the subsection; and he cites observations by Ward LJ in Re MA (Care Threshold) [2009] EWCA Civ 853, [2010] 1 FLR 431, at para 54, that, although it has more relevance to the welfare stage of the inquiry, article 8 does, none the less, inform the meaning of significant and serves to emphasise that there must be a relevant and sufficient reason for crossing the threshold.
I consider that, with respect to him, Ward LJ there introduced an inappropriate layer of complexity to the inquiry whether harm is significant.
It is the interference with the exercise of the right to respect for family life which article 8 addresses.
No interference occurs when a judge concludes that the threshold is crossed.
The interference occurs only if, at the welfare stage, the judge proceeds to make a care or supervision order; and it is that order which must therefore not fall foul of article 8.
I regard section 31(2) as an admirable domestic provision which, by setting a threshold, may make it more likely, although far from inevitable, that any care or supervision order will not fall foul of article 8.
But I conclude that the crossing of the threshold does not, of itself, engage the article; and I am fortified in my conclusion by the fact that Lord Neuberger, at para 62, Lady Hale, at para 186, and Lord Clarke at para 134, agree with it and that Lord Kerr, at para 129, tends to agree with it.
The second matter relates to Mr Feehans submission that the threshold set by section 31(2) is not crossed if the deficits relate only to the character of the parents rather than to the quality of their parenting.
His alternative submission is that harm suffered or likely to be suffered by a child as a result of parental action or inaction may cross the threshold only if, in so acting or failing to act, the parent or parents were deliberately or intentionally to have caused or to be likely to cause such harm.
M is, of course, not responsible for her personality traits nor for her psychiatric disorders; and in effect the submission is that the dishonesty, animosities and obstructionism of the parents represent deficits only of character and that, if and insofar as they might cause harm to Amelia, whom they love, the harm is neither deliberate nor intentional.
The first of these alternative submissions represents a false dichotomy: for the character of the parents is relevant to each stage of the inquiry whether to make a care order only to the extent that it affects the quality of their parenting.
The second of them is misconceived: for there is no requisite mental element to accompany the actions or inactions which have caused, or are likely to cause, significant harm to the child.
Section 31(2)(b)(i) requires only that the harm or likelihood of harm should be attributable to the care given or likely to be given to the child not being what it would be reasonable to expect a parent to give to him.
Such is a requirement only of causation as between the care and the harm.
The provision was prefigured in the White Paper, Cm 62, cited above, also at para 60: The court will also have to make a decision as to whether the harm was caused or will in future be caused by the child not receiving a reasonable standard of care or by the absence of adequate parental control.
This is not intended to imply a judgment on the parent who may be doing his best but is still unable to provide a reasonable standard of care.
ARTICLE 8
Judge Cryans care order in relation to Amelia with a view to her adoption represented an interference with the exercise by Amelia, by M and by F of their rights to respect for their family life.
It was therefore lawful only if, within the meaning of article 8(2) of the Convention, it was not only in accordance with the law but also necessary in a democratic society for the protection of the right of A to grow up free from harm.
In Johansen v Norway (1996) 23 EHRR 33 the European Commission of Human Rights observed, at para 83, that the notion of necessity implies that the interference corresponds to a pressing social need and, in particular, that it is proportional to the legitimate aim pursued.
In a number of its judgments the European Court of Human Rights, the ECtHR, has spelt out the stark effects of the proportionality requirement in its application to a determination that a child should be adopted.
Only a year ago, in YC v United Kingdom (2012) 55 EHRR 967, it said: 134 The Court reiterates that in cases concerning the placing of a child for adoption, which entails the permanent severance of family ties, the best interests of the child are paramount.
In identifying the childs best interests in a particular case, two considerations must be borne in mind: first, it is in the childs best interests that his ties with his family be maintained except in cases where the family has proved particularly unfit; and secondly, it is in the childs best interests to ensure his development in a safe and secure environment.
It is clear from the foregoing that family ties may only be severed in very exceptional circumstances and that everything must be done to preserve personal relations and, where appropriate, to rebuild the family.
It is not enough to show that a child could be placed in a more beneficial environment for his upbringing.
However, where the maintenance of family ties would harm the childs health and development, a parent is not entitled under article 8 to insist that such ties be maintained.
Although in that paragraph it did not in terms refer to proportionality, the court had prefaced it with a reference to the need to examine whether the reasons adduced to justify the measures were relevant and sufficient, in other words whether they were proportionate to them.
In my view it is important not to take any one particular sentence out of its
context in the whole of para 134 of the YC case: for each of its propositions is interwoven with the others.
But the paragraph well demonstrates the high degree of justification which article 8 demands of a determination that a child should be adopted or placed in care with a view to adoption.
Yet, while in every such case the trial judge should, as Judge Cryan expressly did, consider the proportionality of adoption to the identified risks, he is likely to find that domestic law runs broadly in parallel with the demands of article 8.
Thus domestic law makes clear that: (a) it is not enough that it would be better for the child to be adopted than to live with his natural family (In re S B (Children) (Care Proceedings: Standard of Proof) [2009] UKSC 17, [2010] 1 AC 678, para 7); and (b) a parents consent to the making of an adoption order can be dispensed with only if the childs welfare so requires (section 52(1)(b) of the Adoption and Children Act 2002); there is therefore no point in making a care order with a view to adoption unless there are good grounds for considering that this statutory test will be satisfied.
The same thread therefore runs through both domestic law and Convention law, namely that the interests of the child must render it necessary to make an adoption order.
The word requires in section 52(1)(b) was plainly chosen as best conveying. the essence of the Strasbourg jurisprudence (Re P (Placement Orders: Parental Consent) [2008] EWCA Civ 535, [2008] 2 FLR 625, para 125).
What is the proper approach of an appellate court to a challenge to the proportionality of a care order made with a view to adoption? Section 6(1) of the Human Rights Act 1998 makes it unlawful for public authorities, which include appellate courts, to act in a way which is incompatible with a Convention right.
So the question becomes whether, as the mother submits, section 6(1) dictates that an appellate court should depart from its normal function of secondary review and instead should make a fresh determination of its own when the allegation is that the order made below has violated a Convention right.
An analogous submission was made in MT (Algeria) v Secretary of State for the Home Department [2009] UKHL 10, [2010] 2 AC 110, in which two Algerian nationals and a Jordanian national appealed to the Court of Appeal, and from there to the House of Lords, against the dismissal by the Special Immigration Appeals Commission of their appeals against orders for deportation.
Their case was that deportation would infringe their rights under article 3 of the Convention; and, by reference to section 6 of the 1998 Act, they claimed to be entitled to a fresh determination of their case both in the Court of Appeal and in the House of Lords.
The appellate committee rejected their claim.
Lord Phillips pointed out, at paras 67 and 69, that, by section 7 of the Special Immigration Appeals Commission Act 1997, appeal lay from the Commission to the Court of Appeal only on a point of law and that, for the purposes of section 6(2)(a) of the 1998 Act, Parliament had therefore precluded the Court of Appeal from conducting any such fresh determination as the appellants sought.
More broadly, however, Lord Hoffmann observed: 190.
There is nothing in the Convention which prevents the United Kingdom from according only a limited right of appeal, even if the issue involves a Convention right.
There is no Convention obligation to have a right of appeal at all.
If there is a right of appeal, then of course it must offer a fair hearing before an independent and impartial tribunal in accordance with article 6.
But there is no obligation to provide an appeal against the determination of a Convention right.
The only concern of the European court with the court structure of the member state is that it should provide a remedy for breach of a Convention right in accordance with article 13.
If a SIAC hearing does so, that is an end of the matter and the extent of the right of appeal, if any, is irrelevant.
It is therefore clear that the Convention itself does not require appellate
courts to address issues arising under it with any particular degree of intensity.
Appellate courts must discharge their domestic duty under section 6(1); but the manner in which they seek to do so is a matter for Parliament or for rules made under its authority.
No one suggests, for example, that the appellate court should itself rehear all the evidence relevant to a Convention issue.
On any view it will adopt much of the relevant material from the survey conducted by the trial judge.
Civil appellate courts other than the Supreme Court operate in accordance with rule 52.11 of the Civil Procedure Rules 1998, made pursuant to the Civil Procedure Act 1997.
Paragraph 1 of the rule provides that every appeal will be limited to a review of the decision of the lower court unless. (b) the court considers that in the circumstances of an individual appeal it would be in the interests of justice to hold a re hearing.
Such courts should in my view seek to discharge their duty under section 6 of the 1998 Act by determining a Convention issue in accordance with this paragraph.
In paras 83 to 90 of his judgment Lord Neuberger provides fuller reasons for concluding that section 6 of the 1998 Act does not mandate fresh appellate determination of a Convention related issue.
Like Lord Clarke, at para 136 of his judgment, I agree with Lord Neubergers reasons as well as with his conclusion; it follows that, with respect, I do not agree with the contrary opinions expressed by Lady Hale at para 205 and by Lord Kerr at paras 116 to 127 of their judgments.
Although the view of the majority is therefore that the requisite appellate exercise is that of conventional review, a question still remains about the criterion for review apt to appeals against determinations made in care proceedings.
APPELLATE REVIEW OF DETERMINATIONS MADE IN CARE
PROCEEDINGS
G v G [1985] 1 WLR 647 was a dispute between parents as to which of them should have residence of the children.
Lord Fraser gave the classic exposition of the role of the appellate court in reviewing a trial judges order in a dispute between members of a family about arrangements for a child.
He described the order, at p 649, as having been made in the exercise of the judges discretion.
This classification, which was not controversial, is hard wired into the mind set of family lawyers in England and Wales; and, although in Kacem v Bashir, [2011] 2 NZLR 1, the Supreme Court of New Zealand made an interesting suggestion, at para 32, that the decision in such a case was evaluative as opposed to discretionary, this is not the moment to consider whether subject to para 45 below to depart from the conventional classification or the consequences, if any, of doing so.
Lord Fraser said at p 651: The Jurisdiction in such cases is one of great difficulty, as every judge who has had to exercise it must be aware.
The main reason is that in most of these cases there is no right answer.
All practicable answers are to some extent unsatisfactory and therefore to some extent wrong, and the best that can be done is to find an answer that is reasonably satisfactory.
It is comparatively seldom that the Court of Appeal, even if it would itself have preferred a different answer, can say that the judges decision was wrong, and unless it can say so, it will leave his decision undisturbed.
He added, at p 652: Certainly it would not be useful to inquire whether different shades of meaning are intended to be conveyed by words such as blatant error used by the President in the present case, and words such as clearly wrong, plainly wrong, or simply wrong used by other judges in other cases.
All these various expressions were used in order to emphasise the point that the appellate court should only interfere when they consider that the judge of first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which a reasonable disagreement is possible.
The concept of the generous ambit of reasonable disagreement was derived from the judgment of Asquith LJ in Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343, at p 345, which Lord Fraser had already quoted.
Lord Fraser proceeded, at p 653, to quote with approval from the judgment of Bridge LJ in In re F (A Minor)(Wardship: Appeal) [1976] Fam 238.
This was a dispute between a father and a grandmother about the residence of a child.
Bridge LJ, at p 266, reminded himself that, in granting residence to the grandmother, the trial judge had been exercising a discretion.
He observed that none of the factors which often vitiate the exercise of a discretion and so require it to be re exercised namely that the judge had considered an irrelevant matter, failed to consider a relevant matter, erred in law or applied a wrong principle was present.
The judges error, according to Bridge LJ, was in the balancing exercise, in other words that he had given too little weight to the factors favourable to the fathers case or too much weight to those adverse to them.
Bridge LJ went on to hold that, where a judges conclusion was not justified by his advantage in seeing and hearing the witnesses and was vitiated by an error in the balancing exercise, an appellate court could set it aside.
It is clear, however, that, in quoting with approval the proposition of Bridge LJ that even only an error in the balancing exercise might justify appellate intervention, Lord Fraser was not intending to redraw any part of his earlier delineation of the boundaries of intervention.
Thus an error in the balancing exercise justifies intervention only if it gives rise to a conclusion that the judges determination was outside the generous ambit of reasonable disagreement or wrong within the meaning of the various expressions to which he had referred.
Into its review of a trial judges determination of a child case an appellate court needs to factor the advantages which the judge had over it in appraising the case.
In Piglowska v Piglowski [1999] 1 WLR 1360 Lord Hoffmann said, at p 1372: The appellate court must bear in mind the advantage which the first instance judge had in seeing the parties and the other witnesses.
This is well understood on questions of credibility and findings of primary fact.
But it goes further than that.
It applies also to the judges evaluation of those facts.
If I may quote what I said in Biogen Inc v Medeva plc [1997] RPC 1, 45: The need for appellate caution in reversing the trial judges evaluation of the facts is based upon much more solid grounds than professional courtesy.
It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence.
His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance. of which time and language do not permit exact expression, but which may play an important part in the judges overall evaluation.
Lord Hoffmanns remarks apply all the more strongly to an appeal against a decision about the future of a child.
In the Biogen case the issue was whether the subject of a claim to a patent was obvious and so did not amount to a patentable invention.
Resolution of the issue required no regard to the future.
The Piglowska case concerned financial remedies following divorce and the issue related to the weight which the district judge had given to the respective needs of the parties for accommodation.
In his assessment of such needs there was no doubt an element of regard to the future.
But it would have been as nothing in comparison with the need for a judge in a child case to look to the future.
The function of the family judge in a child case transcends the need to decide issues of fact; and so his (or her) advantage over the appellate court transcends the conventional advantage of the fact finder who has seen and heard the witnesses of fact.
In a child case the judge develops a face to face, bench to witness box, acquaintanceship with each of the candidates for the care of the child.
Throughout their evidence his function is to ask himself not just is this true? or is this sincere? but what does this evidence tell me about any future parenting of the child by this witness? and, in a public law case, when always hoping to be able to answer his question negatively, to ask are the local authoritys concerns about the future parenting of the child by this witness justified? The function demands a high degree of wisdom on the part of the family judge; focussed training; and the allowance to him by the justice system of time to reflect and to choose the optimum expression of the reasons for his decision.
But the corollary is the difficulty of mounting a successful appeal against a judges decision about the future arrangements for a child.
In In re B (A Minor) (Adoption: Natural Parent) [2001] UKHL 70, [2002] 1 WLR 258, Lord Nicholls said: 16.
There is no objectively certain answer on which of two or more possible courses is in the best interests of a child.
In all save the most straightforward cases, there are competing factors, some pointing one way and some another.
There is no means of demonstrating that one answer is clearly right and another clearly wrong.
There are too many uncertainties involved in what, after all, is an attempt to peer into the future and assess the advantages and disadvantages which this or that course will or may have for the child. 19.
Cases relating to the welfare of children tend to be towards the edge of the spectrum where an appellate court is particularly reluctant to interfere with the judges decision.
In this appeal M challenges both Judge Cryans determination that the
threshold set by section 31(2) was crossed and, alternatively, his ultimate determination that Amelias welfare demanded that he should make the care order.
The time has come for me to address the criterion for appellate review of each of these determinations; but, whatever the criterion, the appellate court will factor into its review the trial judges enjoyment of the advantages to which I have referred.
On any view there is nothing discretionary about a determination of whether the threshold is crossed.
I consider that in the Court of Appeal Black LJ was correct, at para 9, to categorise it as, instead, a value judgement, particularly, but not only, when the court is surveying likelihood.
Black LJ proceeded to adopt the approach of Ward LJ in the Court of Appeal in Re MA (Care Threshold), cited above, at para 56, that the question on an appeal against the refusal of a judge to hold that the threshold had been crossed was whether it exceeded the generous ambit of reasonable disagreement.
In my judgment in that case, from the outcome of which I dissented, I asked, at para 34, whether it had been open to the judge to refuse to do so.
In her judgment Hallett LJ asked, at para 44, whether the judge had been plainly wrong to refuse to do so.
Although these are matters of little more than nuance, I consider in retrospect that in that case none of the three of us afforded sufficient weight to the evaluative, as opposed to the discretionary, nature of a determination whether the threshold is crossed.
Ward LJs reference to the generous ambit of reasonable disagreement seems apt only to the review of an exercise of discretion, as in G v G. My own reference to whether the judges determination had been open to him now seems to me to have been singularly uninformative.
Perhaps Hallett LJ came closest to the appropriate test in her reference to whether the determination had been plainly wrong.
But it is generally better to allow adjectives to speak for themselves without adverbial support.
What does plainly add to wrong? Either the word adds nothing or it serves to treat the determination under challenge with some slight extra level of generosity apt to one which is discretionary but not to one which is evaluative.
Like all other members of the court, I consider that appellate review of a determination whether the threshold is crossed should be conducted by reference simply to whether it was wrong.
I turn to the criterion for appellate review of the ultimate determination of
whether to make a care order.
This is an order which the court may make (section 31(1) of the 1989 Act), albeit that the determination is governed by the paramountcy of the childs welfare (section 1(1)) and can be made only following regard to specified factors (section 1(3) and (4) (b)).
The courts apparent discretion whether to make a care order has led family practitioners readily to assume that the criterion for appellate review is identical to that applicable to review of what are taken to be discretionary determinations relating to children in private law, namely that explained by Lord Fraser in G v G cited above; and it was not controversial when Sir Mark Potter P formally so ruled in Re C (Adoption: Best Interests of Child) [2009] EWHC 499 (Fam), [2009] 2 FLR 1293, at para 33.
But, by contrast with the issue between the members of this court as to the impact of section 6(1) of the 1998 Act upon the role of the appellate judge, there is no issue that, since that Act came into force, the task of the trial judge in applications for care (or supervision) orders and indeed in such applications for private law orders as can sensibly be said to represent a suggested interference with a persons right to respect for his or her family life is more than to exercise a discretion.
His task is to comply with an obligation under the subsection not to determine the application in a way which is incompatible with that right.
It follows therefore that the review which, according to the majority, falls to be conducted by the appellate court must focus not just on the judges exercise of a discretion but on his compliance or otherwise with an obligation.
The criterion enunciated in G v G, in particular the concept of the generous ambit of reasonable disagreement, is in my view inapt to that review (as opposed, for example, to a review of a case management decision made within care proceedings: see Re TG (A Child) [2013] EWCA Civ 5, at para 38).
Lord Neuberger, at paras 90 and 91, and Lord Clarke, at para 139, suggest that the criterion for appellate review of an ultimate determination to make (or to refuse to make) a care order should, as in respect of the threshold, be whether it was wrong (or vitiated by serious irregularity).
Just as in my view rule 52.11(1) of the Civil Procedure Rules helps to identify the role of an appellate court in a challenge to the determination of a Convention related issue, so, as Lord Clarke there suggests, rule 52.11(3) helps to identify the criterion which it should adopt in that it provides: The appeal court will allow an appeal where the decision of the lower court was (a) wrong; or (b) unjust because of a serious procedural or other irregularity.
I agree.
To be driven to jettison the principles in G v G in this context is not to say that the factors which often vitiate the exercise of a discretion namely that the judge considered an irrelevant matter, failed to consider a relevant matter, erred in law or applied a wrong principle become irrelevant.
On the contrary they may well generate a conclusion that the determination was wrong and should be set aside and either that it should be reversed or that the application should be remitted for consideration afresh.
By contrast a judges failure to give adequate reasons for his determination is likely to lead to its being set aside as unjust within the meaning of rule 52.11(3) (b).
There is therefore an attractive symmetry between the criterion for review of a determination of whether the threshold is crossed and that for review of a determination of whether a care order should be made.
In each case it is no more and no less than whether the determination is wrong.
But the simplicity of the criterion should not disguise the difficulty, in some cases, of its application.
CONCLUSION
As Mr Verdan QC on behalf of the new Childrens Guardian submits (in the course of a series of submissions of a quality which partly compensates for the deficiencies of the previous Guardian), Judge Cryan was not wrong to determine that the threshold to the making of a care order in relation to Amelia, set by section 31 of the 1989 Act, was crossed.
Nor in my view was he wrong to proceed to make a care order in relation to her with a view to her adoption.
In the present case the reasons for each of the two determinations can be summarised together.
There were a number of features relative to the personalities of the parents and to the psychiatric conditions of the mother which raised a real possibility that, in their care, Amelia would suffer impairment of her emotional development.
Nor is there anything to suggest that, in principle, emotional harm is less serious than physical harm.
But Barnet realistically concede that, in the absence of one particular feature, the court might not have concluded that the likely harm was significant nor, alternatively, have felt driven to make the care order with a view to adoption.
That one feature relates to the judges key conclusion that the characters of the parents disabled them from offering the elementary cooperation with professionals which Amelias safety in their home would require.
Family courts regularly make allowance for the negative attitude of parents towards the social workers who personify their employers applications for care orders.
But the level of the dishonest, manipulative, antagonistic obstructionism of the parents in this case was of a different order.
Such attributes of course betokened a lack of insight into the needs of Amelia which raised wider concerns; but more immediately, they precluded the success of any rehabilitative programme, whatever its precise composition.
It would have been risking enough in terms of Amelias welfare for the judge to have countenanced any further delay in her long term placement following what by then had already been two years in foster care; but, had there been evidence that a way might be found of lowering the barriers erected by the parents, he might have directed an adjournment, to be measured surely in no more than a few months, in order to explore it.
It might have been the proportionate response to the positive features of the parents case and loyal to the decision of the ECtHR in Kutzner v Germany (2002) 35 EHRR 653, at para 75, that it was questionable whether the domestic administrative and judicial authorities [had] given sufficient consideration to additional measures of support as an alternative to what is by far the most extreme measure, namely separating the children from their parents.
In the present case, however, that avenue was not open to the judge.
In a concluding sentence which correctly reflected both domestic law and the Conventions proportionality requirement, he described adoption as the only viable option for Amelias future care.
There was no halfway house, said Lewison LJ in his reluctant concurrence in the Court of Appeals dismissal of the appeal.
Its dismissal was in my view the disposal which accorded with principle.
This court should uphold it.
LORD NEUBERGER
Introductory
The point which His Honour Judge Cryan ultimately had to decide in this case was whether to make a care order in respect of a child, Amelia, with a view to her being adopted, against the wishes of her natural parents.
To determine this point, the Judge had to resolve two main issues.
The first issue was whether, in the light of the evidence, the threshold in section 31(2) of the Children Act 1989 (the 1989 Act) was satisfied.
If he decided (as he did) that that threshold was crossed, the second main issue for the Judge was whether it was appropriate to make a care order.
The first main issue: the crossing of the section 31(2) threshold
Section 31(2) of the 1989 Act (section 31(2)) is set out in para 177 of Lady Hales judgment.
In order to determine whether it was crossed in this case, the task the Judge faced can be analysed as involving three steps.
He was required (i) to determine the factual issues, which involved resolving a substantial amount of disputed evidence, (ii) to identify the nature of the threshold, which involved construing section 31(2), and (iii) to decide whether on the primary facts he had found and the assessments he had made, that threshold was crossed.
Having resolved the disputed primary facts, he decided that, in the light of those facts and the assessments he had made of the various witnesses (including Amelias mother and father, and a number of other factual and expert witnesses), the threshold had been crossed, without expressly discussing its nature.
The threshold: findings of primary fact
As to the first step, Lady Hale, in paras 146 175, and Lord Wilson, in paras 2 22, have set out the unusual and troubling facts as agreed or as found by the Judge, as well as the procedural history.
There is no question of this court interfering with, or indeed being asked to interfere with, the findings of primary fact made by the Judge.
Bearing in mind that it is a second appeal tribunal, the Supreme Court is virtually never even asked to reconsider findings of primary fact made by the trial judge.
The Court of Appeal, as a first appeal tribunal, will only rarely even contemplate reversing a trial judges findings of primary fact.
As Lady Hale and Lord Kerr explain in para 200 and para 108 respectively, this is traditionally and rightly explained by reference to good sense, namely that the trial judge has the benefit of assessing the witnesses and actually hearing and considering their evidence as it emerges.
Consequently, where a trial judge has reached a conclusion on the primary facts, it is only in a rare case, such as where that conclusion was one (i) which there was no evidence to support, (ii) which was based on a misunderstanding of the evidence, or (iii) which no reasonable judge could have reached, that an appellate tribunal will interfere with it.
This can also be justified on grounds of policy (parties should put forward their best case on the facts at trial and not regard the potential to appeal as a second chance), cost (appeals on fact can be expensive), delay (appeals on fact often take a long time to get on), and practicality (in many cases, it is very hard to ascertain the facts with confidence, so a second, different, opinion is no more likely to be right than the first).
The second and third steps involved in the threshold issue can be combined into the single question of whether the primary facts found and assessments made by the Judge were capable of justifying the conclusion he reached that the threshold contained in section 31(2) was satisfied.
The threshold: the meaning of section 31(2)
The second step is to determine the meaning of section 31(2), which is an issue of pure law.
In relation to such an issue, the function of this Court (like that of the Court of Appeal) is uninhibited by the fact that it is an appellate tribunal.
That is because there is a single right or wrong answer, which an appellate court has to determine for itself, although it often derives assistance from the reasoning of the court or courts below.
As to the meaning of section 31(2), and in particular the meaning of likely to suffer significant harm and care likely to be given, Lord Wilson is rightly anxious not to encumber the comparatively simple wording of section 31(2), as expanded somewhat by section 31(10), with too much judicial encrustation.
However, it seems to me that some authoritative guidance for judges and lawyers in this very important and difficult area is appropriate, in order to ensure as much predictability as possible and to minimise the likelihood of appeals.
In my view, such guidance may be found in the analyses of Lady Hale at paras 179193, Lord Wilson at paras 23 31, and Lord Kerr at para 108.
I would not think it helpful to expand on what constitutes significant harm save to emphasise that it is interrelated with the likelihood of it being suffered, so that, as Lady Hale explains in para 188 and as she said in In re S B (Children) (Care Proceedings: Standard of Proof) [2010] 1 AC 678, para 9, the more significant the harm, the less the required level of likelihood, and vice versa.
The threshold: the Judges decision that it was crossed
The final step in relation to the section 31(2) threshold issue required the Judge to address the question whether, on the primary facts he had found and assessments he had made, the threshold was crossed in this case.
The decision on that question is certainly not one of law, but it is not one of primary fact either.
It is a type of decision which is often described as involving the exercise of judgement, but it may fairly be said that this is not a very illuminating characterisation, because the determination of an issue of law or of an issue of fact also involves the exercise of judgement.
As Lady Hale at para 199 and Lord Wilson at para 44 each say, it can be categorised as a value judgment (as Ward LJ said in In re MA (Care: Threshold) [2010] 1 FLR 431, para 56, and Black LJ said below, [2012] EWCA Civ 1475, para 9).
It can also be said to be an appraisal, as Lord Kerr describes it in para 109, or an evaluation, to use Clarke LJs characterisation in Assicurazioni Generali SpA v Arab Insurance Group [2003] 1 WLR 577, paras 16 and 17, cited with approval by the House of Lords in Datec Electronics Holdings Ltd v United Parcels Service Ltd [2007] 1 WLR 1325, para 46.
In many cases, reversing the trial judges evaluation on an issue such as whether the section 31(2) threshold has been crossed, would involve an appellate court effectively disagreeing with (i) primary findings of fact made by the judge, or (ii) the impressions he obtained from seeing the witnesses (eg in terms of trustworthiness as to future conduct).
In such cases, depending on the precise basis on which the appeal is mounted, the reasons for giving primacy to the trial judges conclusion (good sense, policy, cost, delay, and practicality) will either apply in the same way as, or will apply with somewhat less force than, they do in relation to findings of primary fact.
This point is tellingly made by Lord Hoffmann in Piglowska v Piglowski [1999] 1 WLR 1360, 1372 (citing his earlier remarks in Biogen Inc v Medeva plc [1997] RPC 1, 45), in a passage quoted by Lord Wilson at para 41.
It is perhaps worth adding that, immediately after that passage, Lord Hoffmann observed: The exigencies of daily court room life are such that reasons for judgment will always be capable of having been better expressed.
This is particularly true of an unreserved judgment but also of a reserved judgment based upon notes.
In the following paragraph of his judgment, para 42, Lord Wilson suggests
that Lord Hoffmanns remarks apply all the more strongly to an appeal against a decision involving the future of a child, and that is supported by an observation of Lord Nicholls quoted at the end of the paragraph.
I agree: in a case such as this, the court is concentrating its focus on future multi factorial possibilities, as opposed to present or past questions, such as the present needs of divorcing spouses (as in Piglowska) or past likely opinions which would have been formed by skilled people as in (Biogen).
When it comes to an evaluation, the extent to which the benefit of hearing the witnesses and watching the evidence unfold will result in the trial judge having a particular advantage over an appellate tribunal will vary from case to case.
Accordingly, it is not possible to lay down any single clear general rule as to the proper approach for an appeal court to take where the appeal is against an evaluation (see also in this connection Robert Walker LJ in Bessant v South Cone Inc [2002] EWCA Civ 763, para 26, May LJ in EI du Pont de Nemours & Co v ST Dupont [2003] EWCA Civ 1368, para 94, and Laws LJ in Subesh v Secretary of State for the Home Department [2004] EWCA Civ 56, para 44).
Accordingly, as already explained, even where the issue raised is not one of law, the reasons which justify a very high hurdle for an appeal on an issue of primary fact apply, often with somewhat less force, in relation to an appeal on an issue of evaluation.
I therefore agree with what Lord Wilson and Lord Kerr say about the right approach of an appellate court in relation to a question of evaluation in para 44 and in paras 110 and 113 respectively.
Whether article 8 of the European Convention on Human Rights (the Convention) has a part to play in relation to the threshold seems to me to be rather an arid issue: the important point is that the court acknowledges that no substantive order is made without all Convention rights being taken into account.
Having said that, I consider that article 8 of the Convention (article 8) has no part to play in deciding whether the threshold is crossed, although it obviously comes very much into play when considering the issue of whether to make a care order.
The threshold merely represents a hurdle which has to be crossed before the court can go on to consider whether to make a substantive order i.e. an order which actually has an effect on a child and her parents (and sometimes on others).
It is, of course, common ground that the court must consider any Convention rights before deciding whether to make a substantive order.
In this case, Lady Hale in paras 206 214 considers the evidence and findings in relation to this third step involved in this issue and concludes, albeit, with some hesitation, that the Judge was entitled to reach the conclusion that, on the primary factual findings and assessments of the parties which he had made, the threshold had been crossed.
Lord Wilson in para 48 has less hesitation in reaching the same conclusion, as does Lord Kerr for the reasons he gives at paras 131 132.
In agreement with Lord Wilson and Lord Kerr, I consider that the Judge
was fully justified in coming to the conclusion that the threshold was crossed on the primary facts as he had found them, and in the light of his assessment of the witnesses and of the risks facing Amelia if she remained with her parents.
I have in mind in particular the ultimate views he formed (based on the primary facts he had found and the opportunity he had had to assess the witnesses) which are identified by Lady Hale at paras 169 170 and by Lord Wilson at paras 20 22.
The nature of the harm which concerned Judge Cryan was (i) the emotional harm to [Amelia] likely to be caused by (a) the Mothers somatisation disorder and factitious illness disorder, (b) concerns about the parents personality traits, (c) her mothers lying, (d) her fathers active, but less chronic, tendency to dishonesty and vulnerability to the misuse of drugs, and (ii) physical harm to [Amelia] which cannot be discounted, for example, by over treatment or inappropriate treatment by doctors.
As to the possibility of such harm being prevented or acceptably mitigated, the Judge concluded that Amelias parents did not have the capacity to engage with professionals in such a way that their behaviour will either be controlled or amended to bring about an environment where [Amelia] would be safe.
He explained that the result of this was that he could think of no sufficiently reliable way in which he could fulfil [his] duty to Amelia to protect her from harm and still place her with her parents.
Those conclusions are concerned with what may be characterised as risks, prospects or possible outcomes, and they are not, therefore, findings of primary fact, let alone conclusions of law.
As explained above, they are evaluations based on the findings of primary fact, and on assessments of character and likely behaviour and attitudes, made by the Judge as a result of many days of considering oral and written evidence and also as a result of hearing argument.
They are evaluations which are also plainly dependant on the Judges overall assessment of the witnesses, and in particular on his opinion as to the character and dependability of Amelias mother and father, and as to the reliability of the assessments of the expert witnesses.
His conclusions appear to me to be ones to which, to put it at its lowest, he was fully entitled to come on the evidence he had heard and assessed.
In other words, they were justified in terms of logic and common sense in the light of his findings of primary fact and his assessment of the witnesses, and they were coherently formulated.
There is no basis in my view, for saying that they were wrong.
I understand the concern which Lady Hale expresses in her judgment at paras 208 222, which in many respects reflect the very wise remarks made by Hedley J in Re L (Care: Threshold Criteria) [2007] 1 FLR 2050, 2063.
Although they have been referred to by Lady Hale at paras 181 182 and Lord Wilson at para 27 and were set out in full by Black LJ in the Court of Appeal, [2012] EWCA Civ 1475, para 116, those remarks merit repetition, not least because they have resonance in relation to both main issues in this case: 50.
What about the court's approach, in the light of all that, to the issue of significant harm? In order to understand this concept and the range of harm that it's intended to encompass, it is right to begin with issues of policy.
Basically it is the tradition of the UK, recognised in law, that children are best brought up within natural families.
Lord Templeman, in In re KD (A Minor: Ward) (Termination of Access) [1988] 1 AC 806, 812, said this: The best person to bring up a child is the natural parent.
It matters not whether the parent is wise or foolish, rich or poor, educated or illiterate, provided the child's moral and physical health are not in danger.
Public authorities cannot improve on nature.
It follows inexorably from that, that society must be willing to tolerate very diverse standards of parenting, including the eccentric, the barely adequate and the inconsistent.
It follows too that children will inevitably have both very different experiences of parenting and very unequal consequences flowing from it.
It means that some children will experience disadvantage and harm, while others flourish in atmospheres of loving security and emotional stability.
These are the consequences of our fallible humanity and it is not the provenance of the state to spare children all the consequences of defective parenting.
In any event, it simply could not be done. 51.
That is not, however, to say that the state has no role, as the 1989 Act fully demonstrates.
Nevertheless, the 1989 Act, wide ranging though the courts and social services powers may be, is to be operated in the context of the policy I have sought to describe.
Its essence, in Part III of the 1989 Act, is the concept of working in partnership with families who have children in need.
Only exceptionally should the state intervene with compulsive powers and then only when a court is satisfied that the significant harm criteria in section 31(2) is made out.
It would be unwise to a degree to attempt an all embracing definition of significant harm.
One never ceases to be surprised at the extent of complication and difficulty that human beings manage to introduce into family life.
Significant harm is fact specific and must retain the breadth of meaning that human fallibility may require of it.
Moreover, the court recognises, as Lord Nicholls of Birkenhead pointed out in In re H [1996] AC 563 that the threshold may be comparatively low.
However, it is clear that it must be something unusual; at least something more than the commonplace human failure or inadequacy.
It is true that much of the harm which the Judge considered could befall
Amelia in this case might be said to flow from eccentric, barely adequate [or] inconsistent parenting, and that it can also be said that the harm would result, to an extent at any rate, from her mothers and fathers characteristics rather than from their parenting.
There are, however, two answers to that.
The first is that it is a question of fact and degree whether the defective parenting which Amelia would undergo if she remained with her parents fell outside the wide spectrum of the acceptable very diverse standards (to quote Hedley J) such as would justify the state stepping in.
I agree with Black LJ when she said at para 128 in her judgment in the Court of Appeal, that that was an issue which the Judge was particularly well placed to assess, and, while he could have discussed the issue more fully than he did, it seems to me that, particularly bearing in mind the very unusual facts, the expert evidence, the combination of risks, and the value of seeing the witnesses over a long hearing, it is impossible to fault the Judges conclusion.
The importance of a trial judge giving clear and coherent reasons for his decision carries particular force where the judgment is very likely to result in a child being adopted against her parents wishes.
However, even in such a case, an appellate court must be careful of placing an unrealistically high burden on the trial judge.
As Lord Hoffmann acknowledged in the passage quoted by Lord Wilson from Piglowska (quoting from an earlier judgment he gave), specific findings of fact, even by the most meticulous judge are inherently an incomplete statement of the impression which was made upon him by the primary evidence.
In her recent judgment in In re L and B (Preliminary Findings: Power to Reverse) [2013] 1 WLR 634, para 46, Lady Hale, while emphasising the importance of a fully and properly reasoned judgment, as a means of achieving finality, recognised the vicissitudes which can beset any judge.
Secondly, in so far as it is said that the threatened harm was attributable to the character of Amelias parents rather than to their parenting activities, the parents characteristics which concerned the Judge would inevitably be reflected in the way they looked after, or parented, Amelia.
In particular, it was not merely the potential emotional (and even physical) harm to Amelia owing to her parents deficiencies which worried the Judge.
It is of central importance to understanding his conclusion that he was also concerned by the fact that the parents (especially the mother) would, or at least appeared very likely to, impede the professional people who would need access to Amelia in order to mitigate the risk or effect of any harm she might suffer.
That not only served to reinforce the degree of risk (or at least to remove a way of mitigating the risk); it also amounted to a finding that, by their activities the parents would actively impede an important and beneficial source of mitigating and monitoring the harm which Amelia would face.
That, on any view, must amount to defective parenting, and, in the circumstances of this case in the light of the risks which the Judge thought that Amelia would face, I consider that it amounted to defective parenting which a judge could reasonably conclude satisfied the section 31(2) threshold.
The second main issue: the Judges decision to make a care order
I turn, then, to the second main issue which the Judge had to decide, namely, given his finding that the threshold had been crossed, whether he should make a care order in respect of Amelia.
He decided that he should do so, and, in that connection, it seems to me that three potential questions arise on an appeal against such a decision.
Those questions are: (i) whether the judge applied the right legal test when resolving to make the care order; (ii) if he applied the right test, the correct approach of an appellate court on an appeal against the decision to make a care order; and (iii) whether the judges decision can stand, if the appellate tribunal subjects it to that test.
The care order: the correct legal test
I turn to consider the first question, which involves first identifying the correct test.
The effect of section 1(1) of the 1989 Act is that, when considering whether to make a care order, the court must treat the welfare of the child as the paramount consideration, and this involves taking into account in particular the factors identified in section 1(3), which includes, in para (g), the range of powers available to the court As Lady Hale (who knows more about this than anybody) says in para 194, the 1989 Act was drafted with the Convention in mind; in any event, with the coming into force of the Human Rights Act 1998 (the 1998 Act), the 1989 Act must now, if possible, be construed and applied so as to comply with the Convention.
So too the Adoption and Children Act 2002 (the 2002 Act) must, if possible, be construed and applied so as to comply with the Convention.
It also appears to me that the 2002 Act must be construed and applied bearing in mind the provisions of the UN Convention on the Rights of the Child 1989 (UNCRC).
A care order in a case such as this is a very extreme thing, a last resort, as it would be very likely to result in Amelia being adopted against the wishes of both her parents.
As already mentioned, it is clear that a judge cannot properly decide that a care order should be made in such circumstances, unless the order is proportionate bearing in mind the requirements of article 8.
It appears to me that, given that the Judge concluded that the section 31(2)
threshold was crossed, he should only have made a care order if he had been satisfied that it was necessary to do so in order to protect the interests of the child.
By necessary, I mean, to use Lady Hales phrase in para 198, where nothing else will do.
I consider that this conclusion is clear under the 1989 Act, interpreted in the absence of the Convention, but it is put beyond doubt by article 8.
The conclusion is also consistent with UNCRC.
It seems to me to be inherent in section 1(1) that a care order should be a last resort, because the interests of a child would self evidently require her relationship with her natural parents to be maintained unless no other course was possible in her interests.
That is reinforced by the requirement in section 1(3)(g) that the court must consider all options, which carries with it the clear implication that the most extreme option should only be adopted if others would not be in her interests.
As to article 8, the Strasbourg court decisions cited by Lady Hale in paras 195 198 make it clear that such an order can only be made in exceptional circumstances, and that it could only be justified by overriding requirements pertaining to the childs welfare, or, putting the same point in slightly different words, by the overriding necessity of the interests of the child.
I consider that this is the same as the domestic test (as is evidenced by the remarks of Hale LJ in Re C and B [2001] 1 FLR 611, para 34 quoted by Lady Hale in para 198 above), but it is unnecessary to explore that point further.
The high threshold to be crossed before a court should make an adoption order against the natural parents wishes is also clear from UNCRC.
Thus, Hodgkin and Newell, Implementation Handbook for the Convention on the Rights of the Child, Unicef, 3rd ed (2007), p 296, state that there is a presumption within the Convention that childrens best interests are served by being with their parents wherever possible.
This is reflected in UNCRC, which provides in article 7 that a child has as far as possible, the right to know and be cared for by his or her parents, and in article 9, which requires states to ensure that a child shall not be separated from his or her parents against their will, except when competent authorities subject to judicial review determine, in accordance with applicable law and procedures, that such separation is necessary for the best interests of the child.
Having identified the test, the other aspect of the first question is whether the Judge purported to apply that test in this case.
In my view, he did, or, to put it at its lowest, his conclusions were expressed in a way which makes it clear that he considered that the test was satisfied.
In the passage to which I have already referred, quoted by Lord Wilson in para 22, the Judge said that he could not see any sufficiently reliable way that [he could] fulfil [his] duty to [Amelia] to protect her from harm and still place her with her parents, and he immediately went on to explain that this was despite the fact that this court strives to promote her relationship with her parents and their family life together.
He also described adoption as the only viable option for Amelias future care.
As a matter of ordinary language, it seems to me clear that the Judge was there applying the test laid down by the Strasbourg court, and concluding that it was satisfied.
The care order: the appellate courts approach
It is next necessary to address the question of the approach to be adopted by an appellate court when an appeal is brought against a judges decision to make a care order in a case such as this, and where the judge has applied, or at least has purported to apply, the correct test.
As a matter of pure domestic law, this is an evaluative exercise and therefore it might appear that the approach discussed in paras 57 61 above applies.
However, the issue is potentially complicated by the fact that article 8 is engaged.
There is no doubt but that Judge Cryan, as the trial judge, the first instance tribunal, was required to decide for himself whether the care order which he was proposing to make satisfied the test, which the Strasbourg jurisprudence establishes is required by article 8.
The issue to be addressed concerns the correct approach of an appellate court when confronted by an appeal against the making of such an order.
What the Strasbourg jurisprudence requires (and, I would have thought, what the rule of law in a modern, democratic society would require) is that no child should be adopted, particularly when it is against her parents wishes, without a judge deciding after a proper hearing, with the interests of the parents (where appropriate) and of the child being appropriately advanced, that it is necessary in the interests of the child that she is adopted.
So far as any appeal against such a decision is concerned, as Lord Hoffmann said in a passage quoted by Lord Wilson in para 35, [t]here is no Convention obligation to have a right of appeal at all.
However, to an extent at any rate, that begs the question as to the correct approach for an appellate court to adopt where there is a right of appeal.
In that connection, I respectfully disagree with Lady Hales view as expressed in para 204 that an appellate court is under a positive obligation on every such appeal to assess the question of proportionality for itself, if that means that the Court of Appeal in this case was required to decide for itself, effectively de novo, whether the requirements of article 8, as explained in the cases mentioned in paras 195 198 of Lady Hales judgment, were satisfied so far as the making of a care order in respect of Amelia was concerned.
It is well established that a court entertaining a challenge to an administrative decision, ie a decision of the executive rather than a decision of a judge, must decide the issue of proportionality for itself see the statements of principle in R (SB) v Governors of Denbigh High School [2007] 1 AC 100, paras 29 30 and 63, and in Belfast City Council v Miss Behavin Ltd [2007] 1 WLR 1420, paras 12 14, 24 27, 31, 42 46 and 89 91.
However, this does not mean that an appellate court entertaining a challenge to a judicial decision, as opposed to an executive decision, must similarly decide the issue of proportionality for itself.
If it did, it would mean that (subject to obtaining permission to appeal) litigants would be entitled to (or forced to undergo) two separate sequential judicial assessments of proportionality.
I do not consider that there is anything in the Strasbourg jurisprudence or in the 1998 Act which suggests that such an entitlement should exist, even where there is a right of appeal.
That is not to say that the fact that Convention rights are involved is irrelevant if there is a right of appeal.
The appeal process must offer a fair hearing before an independent and impartial tribunal in accordance with article 6 (to quote again from Lord Hoffmann in MT (Algeria)), and, if the appeal process involves a challenge to the trial judges assessment of proportionality, that challenge would have to be properly and fairly addressed.
But in my view, the fact that a Convention right is involved does not require an appellate domestic court to consider again the issue of proportionality for itself.
What it requires is that a court considers the question of proportionality and that, if there is an appeal, any appeal process involves a proper consideration of the question of proportionality.
In other words, the court system as a whole must fairly determine for itself whether the requirement of proportionality is met, but that does not mean that each court up the appeal chain does so.
I agree with Lord Wilson at para 36 that, subject to the requirements of article 6 of the Convention, it must be a question of domestic law as to how the challenge to proportionality is to be addressed on an appeal.
There is, in my view, no reason why the Court of Appeal in a case such as this should not have followed the normal, almost invariable, approach of an appellate court in the United Kingdom on a first appeal, namely that of reviewing the trial judges conclusion on the issue, rather than that of reconsidering the issue afresh for itself.
That this is the normal function of the Court of Appeal is made clear by CPR 52.11, which states that, save in exceptional cases, every appeal is limited to a review rather than a rehearing and the appeal will be allowed only where the decision of the lower court was wrong or unjust because of a serious procedural or other irregularity in the proceedings in the lower court.
The exceptional cases are, as a matter of principle and experience, almost always limited to those where the Court of Appeal (i) decides that the judge has gone wrong in some way so that his decision cannot stand, and (ii) feels able to reconsider, or rehear, the issue for itself rather than incurring the parties in the cost and delay of a fresh hearing at first instance.
As I see it, this limitation on the function of an appellate court is based on similar grounds as are set out in paras 53 and 57 61 above see per Lord Diplock in Hadmor Productions Ltd v Hamilton [1983] AC 191, 220 and per May LJ in EI du Pont para 94.
If, after reviewing the judges judgment and any relevant evidence, the appellate court considers that the judge approached the question of proportionality correctly as a matter of law and reached a decision which he was entitled to reach, then the appellate court will not interfere.
If, on the other hand, after such a review, the appellate court considers that the judge made a significant error of principle in reaching his conclusion or reached a conclusion he should not have reached, then, and only then, will the appellate court reconsider the issue for itself if it can properly do so (as remitting the issue results in expense and delay, and is often pointless).
Not only is this consistent with the normal practice of an appeal court in this jurisdiction but it is also consistent with good sense.
In many cases, and this is one, the trial judge will have seen the witnesses and had a full opportunity to assess the primary facts and to make relevant assessments (I refer again to what Lord Wilson says at paras 41 42).
Once one accepts that this means that the appellate court should defer to the trial judge at least to some extent (as Lady Hale rightly does in para 205), then, unless the appellate court is confined to a primarily reviewing function, it will have some sort of half way house role between review and reconsideration.
This would seem to me to be unprincipled and to be liable to cause confusion to actual and potential litigants as well as to the judiciary.
Additionally, the introduction of a second layer of judicial assessment of proportionality is likely to lead to increased cost and delay in many cases.
Of course, where the trial judge has not heard oral evidence or where his findings have not depended on his assessment of the witnesses reliability or likely future conduct, then the appellate court will normally be in as good a position as the trial judge to form a view on proportionality.
The argument that the Convention or the 1998 Act requires the Court of Appeal to form its own view in every case where a trial judges decision on proportionality is challenged, appears to me to be wrong in principle and potentially unfair or inconvenient.
The argument is wrong in principle because, if the function of the Court of Appeal is as I have described, then, in my view, there can be no breach of the Convention or the 1998 Act, if it conducts a review of the trial judges decision and only reverses it if satisfied that it was wrong.
The only basis for challenging that view is, on analysis, circular, as it involves assuming that the Court of Appeals primary function is to reconsider not to review.
The argument is potentially unfair or inconvenient, because in cases where the appeal court could not be sure whether the trial judge was right or wrong without hearing the evidence and seeing the witnesses, it would either to have to reach a decision knowing that it was less satisfactorily based than that of the judge, or it would have to hear the evidence and see the witnesses for itself.
That conclusion leaves open the standard which an appellate court should apply when determining whether the trial judge was entitled to reach his conclusion on proportionality, once the appellate court is satisfied that the conclusion was based on justifiable primary facts and assessments.
In my view, an appellate court should not interfere with the trial judges conclusion on proportionality in such a case, unless it decides that that conclusion was wrong.
I do not agree with the view that the appellate court has to consider that judges conclusion was plainly wrong on the issue of proportionality before it can be varied or reversed.
As Lord Wilson says in para 44, either plainly adds nothing, in which case it should be abandoned as it will cause confusion, or it means that an appellate court cannot vary or reverse a judges conclusion on proportionality of it considers it to have been merely wrong.
Whatever view the Strasbourg court may take of such a notion, I cannot accept it, as it appears to me to undermine the role of judges in the field of human rights.
I appreciate that the attachment of adverbs to wrong was impliedly approved by Lord Fraser in the passage cited from G v G (Minors: Custody Appeal) [1985] 1 WLR 647, 652, by Lord Wilson at para 38, and has something of a pedigree see eg per Ward LJ in Assicurazioni [2003] 1 WLR 577, para 195 (although aspects of his approach have been disapproved see Datec [2007] 1 WLR 1325, para 46).
However, at least where Convention questions such as proportionality are being considered on an appeal, I consider that, if after reviewing the trial judges decision, an appeal court considers that he was wrong, then the appeal should be allowed.
Thus, a finding that he was wrong is a sufficient condition for allowing an appeal against the trial judges conclusion on proportionality, and, indeed, it is a necessary condition (save, conceivably, in very rare cases).
There is a danger in over analysis, but I would add this.
An appellate judge may conclude that the trial judges conclusion on proportionality was (i) the only possible view, (ii) a view which she considers was right, (iii) a view on which she has doubts, but on balance considers was right, (iv) a view which she cannot say was right or wrong, (v) a view on which she has doubts, but on balance considers was wrong, (vi) a view which she considers was wrong, or (vii) a view which is unsupportable.
The appeal must be dismissed if the appellate judges view is in category (i) to (iv) and allowed if it is in category (vi) or (vii).
As to category (iv), there will be a number of cases where an appellate court may think that there is no right answer, in the sense that reasonable judges could differ in their conclusions.
As with many evaluative assessments, cases raising an issue on proportionality will include those where the answer is in a grey area, as well as those where the answer is in a black or a white area.
An appellate court is much less likely to conclude that category (iv) applies in cases where the trial judges decision was not based on his assessment of the witnesses reliability or likely future conduct.
So far as category (v) is concerned, the appellate judge should think very carefully about the benefit the trial judge had in seeing the witnesses and hearing the evidence, which are factors whose significance depends on the particular case.
However, if, after such anxious consideration, an appellate judge adheres to her view that the trial judges decision was wrong, then I think that she should allow the appeal.
I am conscious that the analysis in paras 80 90 appears to differ somewhat from that of Lady Hale in paras 204 205 and of Lord Kerr in paras 116 127.
However, at least in my opinion, it would, essentially for two reasons, be a very rare case where their approach would produce a different outcome from mine.
First, it is only my category (iv) which gives rise to disagreement, in that they would not, as I understand it, accept that such types of case exist.
However, many, probably most, cases that on my approach would fall into that category would, on their approach (especially in the light of what they say about the weight to be given to the trial judges assessment) be in category (iii), which would yield the same outcome.
Secondly, the advantage which the trial judge has in hearing the evidence and seeing the witnesses will mainly apply to his findings of primary fact, inferences of fact, and assessment of probable outcomes, which then feed into his assessment of proportionality (and, in this case, necessity).
When those factors come to be weighed on the question of proportionality (or necessity), the advantage the trial judge has will normally be of less significance, and sometimes even of very little, if any, significance.
It is unnecessary to decide whether the approach described in paras 85 90 is appropriate to any appeal concerning an evaluation even where no Convention right is involved, including the sort of issue considered in G v G, in Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343 and in Assicurazioni.
I am not convinced that the approach is necessarily different from that advocated in those cases, although the precise formulation is undoubtedly different.
However, it was not a topic on which we had any argument, as the submissions were limited to the proper approach on an appeal on proportionality, or necessity, under the Convention, and I say no more about it.
The care order: should it be upheld?
So I reach the final question on this second issue, and on this appeal: was the Judges decision to make a care order in this case proportionate, in the light of the conclusions he reached on the primary facts and on the assessments he made, and bearing in mind the strong general desirability of maintaining the family unit, and the possibility of other remedies? In other words, in the light of these factors, was it necessary to make such order to protect Amelia, bearing in mind the overriding necessity of the interests of the child?
In the light of the Judges findings, quoted by Lord Wilson in para 21, when considered against the detailed findings of primary fact and assessment which he made, it seems to me that he directed himself appropriately and came to a decision which I cannot possibly characterise as wrong.
I agree with Lord Wilsons analysis in para 48, as well as with what Lord Kerr says at paras 131 133.
While I understand, and have real sympathy with, the points made by Lady Hale in paras 216 223, I do not view the enquiries she wishes to be made on any remission as realistically open to an appellate court in the light of the various conclusions reached by the Judge.
I take this view above all because of his finding, which is admirably explained by Lord Kerr in para 132 as the inescapable difficulty that the parents have been found to be incapable of co operating to the necessary extent with professionals whose intervention is considered to be indispensable to the safeguarding of Amelias happy and fulfilled future.
That was a finding plainly open to the Judge, not least in the light of all his unchallenged findings of primary fact and his assessment of Amelias parents.
To put the point another way, if we were to remit the case on the basis proposed by Lady Hale, it would be to enable another judge to draw conclusions as to the future behaviour or attitude of Amelias mother and/or father, which were inconsistent with the findings made by Judge Cryan.
He concluded that the parents would not co operate with professionals whose access to Amelia, for whose well being such access would be essential.
But, as I have already said, those findings were ones with which an appellate court had no grounds, in my opinion, for interfering.
It follows that I cannot accept that this case is one which could be properly remitted.
In deference to Lady Hales conclusions, I see how it could be argued that (i) the question of co operation was given too much weight by the Judge or (ii) the possibility of setting up a system whereby co operation was assured could have been more fully explored at the hearing.
However, to allow the appeal on either ground would, I think, be wrong, in principle and in practice.
In principle, because the Judges view was justified in the light of his findings as to the past behaviour of the parents, the impression which he formed of the parents and other important witnesses, and his assessment of the future likelihoods and risk, all of which were open to him.
In practice, it is almost always possible for parties who have lost a case because of the judges assessment of their likely behaviour, to contend that they should be given a second chance to explore matters more fully with a view to achieving a different result.
To allow this appeal on that ground would justify a remittal for fuller consideration in any case where a party was dissatisfied with a trial judges decision based on the assessment of the future.
Of course, the issue in the present case is particularly important and sensitive, but finality is important, not just in the public interest, but for the good of Amelia (and her parents).
Concluding remarks
Having reached this conclusion, it is only right to refer to the very brief, but important judgments of Rix and Lewison LJJ in the Court of Appeal, which proleptically echo the concerns expressed by Lady Hale.
They agreed with Black LJs full and careful reasons for dismissing the appeal, but Lewison LJ, at para 147, was worried that the Judge might have fallen foul of Hedley Js wise remarks quoted in para 67 above, and Rix LJ wondered at para 150: whether this case illustrates a powerful but also troubling example of the state exercising its precautionary responsibilities for a much loved child in the face of parenting whose unsatisfactory nature lies not so much in the area of physical abuse but in the more subjective area of moral and emotional risk.
These observations are also reflected by concerns expressed more broadly by Sloan, Conflicting rights: English adoption law and the implementation of the UN Convention on the Rights of the Child [2013] CFLQ 40.
That Article at pp 49 50, suggests that, whereas UNCRC is neutral about the desirability of adoption (quoting Hodgkin and Newell, op cit p 294), the 2002 Act unashamedly aimed to bring about more adoptions more quickly for children in care (quoting Harris Short, New Legislation: The Adoption and Children Bill A Fast Track to Failure? [2001] CFLQ 405).
More specifically, the Article identifies a suggested inconsistency between the approach of the Court of Appeal in Re C (A Child) (Adoption: Duty of Local Authority), reported as C v XYZ County Council [2008] Fam 54, at para 15, and that of the High Court in Re A (A child) (Disclosure of Childs Existence to Paternal Grandparents, reported as Birmingham City Council v S [2007] 1 FLR 1223, at paras 73 and 76.
In Re C, it was said that the 2002 Act does not privilege the birth family over the adoptive parents simply because they are the birth family.
In the Birmingham case, which Sloan suggests is more in line with the policy of UNCRC, Sumner J described adoption as a last resort for any child to be invoked only when neither of the parents nor the wider family and friends can reasonably be considered as potential carers for the child, and he went on to recognise a childs right to be brought up by her own family.
We were not addressed on this Article or on those two cases.
However, they all give added weight to the importance of emphasising the principle that adoption of a child against her parents wishes should only be contemplated as a last resort when all else fails.
Although the childs interests in an adoption case are paramount (in the UK legislation and under article 21 of UNCRC), a court must never lose sight of the fact that those interests include being brought up by her natural family, ideally her natural parents, or at least one of them.
Hodgkin and Newell, op cit, suggest that, under UNCRC, an adoption can only occur if parents are unwilling or are deemed by judicial process to be unable to discharge their responsibilities towards the child.
The assessment of that ability to discharge their responsibilities must, of course, take into account the assistance and support which the authorities would offer.
That approach is the same as that suggested by Hedley J in the passage quoted in para 67 above, and I agree with it.
It means that, before making an adoption order in such a case, the court must be satisfied that there is no practical way of the authorities (or others) providing the requisite assistance and support.
In this case, I revert to the melancholy fact that the Judge was satisfied that (i) without such assistance and support, the parents would not discharge their responsibilities to Amelia, (ii) that, as a result, there would be a grave risk of harm to her, and, crucially, (iii) that the parents would seriously impede the authorities in providing such essential assistance and support.
There was ample evidence to support that conclusion, and therefore the appeal must be dismissed.
LORD KERR
Three different types of judicial decision in care proceedings have been authoritatively identified by Lady Hale in para 199 of her judgment.
The first concerns factual decisions on the evidence; the second involves consideration of whether the statutory threshold has been crossed; and the third deals with decisions as to the type of order that should be made.
For the reasons that she has given, with which I agree, it is important to recognise the different intellectual exercise which is in play in each of these contexts because that will dictate the proper approach of the appellate court to a challenge about the correctness of a judges decision.
A conclusion by a judge at first instance on which facts have been proved, and which have not been, involves the judge sifting the evidence that has been led, assessing it and then deciding whether it has brought him or her to the necessary point of conviction of its truth and accuracy.
Although an appellate court is competent to hear appeals against the findings of fact that the judge has made, of necessity, its review of those findings is constrained by the circumstance that, usually, the initial fact finder will have been exposed to a wider range of impressions that influence a decision on factual matters than will be available to a court of appeal.
This is not simply a question of assessing the demeanour of the witnesses who gave evidence on factual matters, although that can be important.
It also involves considering the initial impact of the testimony as it unfolds did it appear frank, candid, spontaneous and persuasive or did it seem to be contrived, lacking in conviction or implausible.
These reactions and experiences cannot be confidently replicated by an analysis of a transcript of the evidence.
For this reason a measure of deference to the conclusions reached by the initial fact finder is appropriate.
Unless the finding is insupportable on any objective analysis it will be immune from review.
The second species of decision in care proceedings (whether the threshold has been crossed) is of a plainly different order from that of fact finding.
In deciding whether a child is suffering or is likely to suffer significant harm, a judge must exercise judgment.
There may be factual elements to the decision such as, for instance, whether a particular type of harm occurred.
Ultimately, however, the dominant character of the decision is that of an appraisal by the judge as to whether the harm is significant.
With due respect to Hallett LJs contrary view in Re MA (Care Threshold) [2009] EWCA Civ 853, [2010] 1 FLR 431, para 42, this cannot be characterised as a finding of fact.
It is a judgment made on the import of the facts found, rather than a factual finding.
Given that the determination as to whether the threshold has been crossed is one involving the exercise of judgment, what should the approach of the appellate court be to a review of that decision? Leaving aside for the moment the question of proportionality, there is much to be said for the proposition that the measure of deference that an appellate court should show to this decision approximates to that which is appropriate to a review of factual findings.
Like Lord Neuberger, however, I believe that to cast the test of reviewability in this sphere as an examination of whether the judge was plainly wrong is potentially misleading.
A finding on whether the threshold has been crossed will, in many cases, be a matter for fine judgment, however.
The conclusion on this issue will be informed, at least to some extent, on the judges impression of the evidence.
While the weight to be given to his or her conclusion as to whether the threshold has been crossed operates in a different way from that where the judge reaches a conclusion on disputed facts, since the assessment of the evidence is influential in the threshold decision, a degree of reticence on the part of an appellate court on whether to interfere with the decision is warranted.
If the appellate court considers that the judge was wrong, however, it should not shrink from reversing his or her decision.
The third species of decision in care proceedings (the selection of the appropriate disposal) is, as Lady Hale has said (in para 199), on the face of it, a matter of discretion.
One proceeds on the basis that there is a range of options available to the judge, all of which are defensible, but that one is chosen, in the exercise of the judges discretion, as that considered best to meet the judges perception of what is needed to fulfil the requirements of the particular case.
In truth, of course, this decision partakes of the exercise of judgment as well as discretion.
The distinction (although it cannot be a sharp edged one) between a decision on disposal and the threshold decision is that in the latter case, the judge must arrive at a firm conclusion as to whether the appropriate standard has been met whereas, in the case of disposal, the judge can acknowledge that there is an array of possible disposals from which he or she selects what is considered to be the best.
Where what is under review by an appellate court is a decision based on the exercise of discretion, provided the decision maker has not failed to take into account relevant matters and has not had regard to irrelevant factors and has not reached a decision that is plainly irrational, the review by an appellate court is at its most benign.
Truly, in that instance, an appellate court which disagrees with the challenged decision of the judge will be constrained to say, even though we would have reached a different conclusion, we cannot interfere.
Absent the proportionality dimension, that is probably also true of a review of the decision on whether the threshold has been crossed.
The judgment as to whether there has been or is likely to be significant harm to the child must be influenced to a large extent by what the judge finds to have been proved as a matter of fact.
To reverse a decision on this will almost invariably involve a review of the correctness of the judges conclusion on some of the facts.
For the reasons given earlier, this is potentially perilous territory for the appellate court.
So, even if it feels that it would have reached a different conclusion, it should refrain unless it concludes that the decision of the trial judge is simply insupportable.
Likewise and obviously where what is under challenge is the selection of the order deemed by the judge to be required to meet the particular circumstances of the individual case, the view of the appellate court that it would have reached a different conclusion should not, apart from proportionality, prevail.
Although this decision consists of the exercise of judgment as well as discretion, it is essentially one in which the judge is selecting one of a possible range of options about what is best required to meet the requirements of a particular case.
Because that decision is inevitably influenced by, among other things, the judges impression of the evidence, the appellate court should be slow to substitute its view of what is best required.
Into all of this discussion, however, must come the question of proportionality.
Significantly different considerations are in play when the proportionality of the decision is in issue.
A decision as to whether a particular outcome is proportionate involves asking oneself, is it really necessary.
That question cannot be answered by saying that someone else with whose judgment I am reluctant to interfere, or whose judgment can be defended, has decided that it is necessary.
It requires the decision maker, at whatever level the decision is made, to starkly confront the question, is this necessary.
If an appellate court decides that it would not have concluded that it was necessary, even though it can understand the reasons that the first instance court believed it to be so, or if it considered that the decision of the lower court was perfectly tenable, it cannot say that the decision was proportionate.
Lord Wilson has said in para 36 that the European Convention on Human Rights does not require appellate courts to address issues as to Convention rights with any particular degree of intensity.
He also says that it is not incumbent on appellate courts to re hear all the evidence relevant to a Convention issue.
I agree with both propositions.
But an appellate court which is required to review the proportionality of a decision may not discharge its duty under section 6(1) of the Human Rights Act 1998 by merely saying that the lower court has reached a decision which is not wrong.
The observations of Lord Phillips and Lord Hoffmann in MT (Algeria) v Secretary of State for the Home Department [2009] UKHL 10, [2010] 2 AC 110, which Lord Wilson quotes in para 35 of his judgment, address the argument that an appellate court was required to conduct a full blown investigation of the facts surrounding the question whether a Convention right had been violated.
What was in issue was how an appellate court should inquire into a claim that a Convention right had been breached.
The passages quoted were not concerned with the quite different question as to what the appellate court had to decide.
In the present case both appellate courts, the Court of Appeal and this court, have to decide whether the making of a care order was proportionate.
Neither court is required to conduct a complete re hearing of the evidence.
But both courts must address directly the question whether they have been satisfied that the making of a care order is proportionate.
They may not do so by reference only to the defensibility of Judge Cryans decision.
What the appellate courts are required to decide, therefore, is not whether Judge Cryans conclusion is wrong.
What they must decide is whether the decision was proportionate and that is a matter for their judgment, not one on which they may defer to the judgment of others.
Deferring to the judgment of others is, of course, quite a different thing from taking into account the judgment of others.
An appellate court, tasked with the function of deciding whether a decision is proportionate, may indeed, should take into consideration any properly reasoned conclusion by a judge at first instance as to proportionality.
Each member of the appellate court must ask whether he or she is satisfied that the decision is proportionate but that does not mean that the first instance judges reasoning should be disregarded.
The distinction between examining a first instance judges decision to see whether it falls within the generous ambit of reasonable disagreement and considering it in order to decide what influence it should have on ones own decision may seem somewhat narrow but the two assessments are importantly different from each other.
In the first instance, one is not concerned (or at least not principally concerned) with whether one would have reached a different conclusion.
In the second, that question is of critical importance but it can properly be influenced by an earlier process of reasoning with which one can agree.
Another, perhaps more simple, way of expressing that concept is this: where an appellate court is in the realm of review of a lower court's decision without the dimension of proportionality, if the decision is not one which the appellate court would have reached, it is obliged to consider whether the lower courts conclusion nevertheless falls within the generous ambit of permissible decisions.
If it does, it should not be reversed.
If, on the other hand, the review must comprehend proportionality, that is not the approach.
Generous ambit considerations do not arise.
But that does not mean that the appellate court may completely disregard the reasons given by the first instance judge for his or her conclusion.
These must be taken into account and given such weight as they deserve, bearing in mind that the judge has had the advantage of seeing the witnesses, hearing the evidence given in real time etc.
Ultimately, however, the appellate court must frankly address the question "is the challenged measure proportionate", "is it really necessary".
If the court of appeal concludes that it is not, then, notwithstanding its consideration of the first instance judge's view, the decision must be reversed.
The decision by an appellate court on whether the making of an adoption order is proportionate cannot be determined by an approach which is geared solely to testing the adequacy of the trial judges assessment of the proportionality issue.
In my view this is impermissible because it removes the appellate court from the area of responsibility which it has to ensure that a Convention right is not infringed.
Moreover, an approach that contemplates the endorsement by an appellate court of a decision on proportionality which it does not affirmatively find to be correct involves an abdication of the courts statutory duty as a public authority.
Section 6 of the Human Rights Act makes it unlawful for a public authority, including a court, to act in a way which is incompatible with a Convention right.
The inaptness of review of the trial judges decision on proportionality rather than the appellate court reaching its own conclusion on the issue can, perhaps, be best illustrated by a series of sequential propositions: (a) Where the parents do not consent, a court may only sanction the adoption of a child (and any ancillary or preparatory steps) where that is proportionate (necessary); (b) Parents therefore enjoy a Convention right not to have their child freed for adoption unless that course is proportionate/necessary; (c) No public authority (including a court) may lawfully act in a way which is incompatible with that right; (d) In order to address the question whether it would be acting unlawfully (in breach of section 6 of HRA) a court, at whatever level, which is called on to sanction an adoption must ask itself whether this is a proportionate/necessary interference with the parents Convention right; (e) The question in (d) cannot be answered by saying that another public authority/court has said that the adoption is proportionate.
In my view, an appellate court cannot avoid the imperative of section 6 of HRA by viewing the matter of proportionality through the prism of the defensibility of the trial judges decision.
An appeal in an adoption case requires the appellate court to confront the possibility that its decision could involve the infringement of a Convention right.
The duty not to act in a way which is incompatible with such a right gives rise to an inevitable, concomitant duty to inquire whether the order that the court makes would have that consequence.
That is an inquiry which cannot be satisfactorily answered by the conclusion that another agency has so decided.
The inquiry must require the appellate court to decide for itself if the freeing order is proportionate/necessary.
It is simply not an option for the appellate court to adopt a stance of agnosticism and say, well we have not reached a firm conclusion ourselves but we cannot be sure that the trial judge was wrong and therefore his decision on proportionality holds the field.
That is not to say that the trial judges decision is irrelevant.
It is entirely consistent with the proper discharge of the duty under section 6 of HRA for an appellate court to give considerable weight to the decision of the first instance judge, endowed as he is with the conspicuous advantage of having heard the evidence unfold for the first and most pertinent time.
But giving the trial judges conclusion on the question of proportionality appropriate weight is a crucially different exercise from saying that it withstands review because it is defendable.
Giving it weight because of the benefits it enjoys involves the appellate court reaching its own decision, influenced by the conclusion of the trial judge.
Deferring to the judges decision because it is immune from review does not require (or, indeed, permit) the appellate court to reach its own view except as a test of the viability of the judges view.
Lord Neuberger considers that neither the HRA nor the ECHR requires in terms that an appellate court must decide proportionality for itself.
I agree.
I also agree that ECHR does not require that there be a system of appeals in every case.
What ECHR requires is that, where an appeal is available, it must be conducted in a way which is Convention compliant.
What Convention compliant means in the context of this case is important and I will say something about that presently.
The critical point, it seems to me, is to identify what an appellate court is about in deciding an appeal in a care proceedings case.
Ultimately, its decision comes down to the question whether to allow the parents wishes to be overridden.
It may only do so if that course is proportionate.
The fact that the decision is taken on an appeal from an earlier judicial finding does not detract from that central element of the appellate courts function.
The difficult question of how, in the context of a decision on proportionality, an appeal court should exercise its appellate role must begin at this fundamental starting point.
In the final analysis, the decision to allow the parents wishes to be overborne, by whatever court that decision is taken, must be shown to be necessary.
The statement that an appeal must be conducted in a Convention compliant way is normally made in relation to such issues as equality of arms, access to relevant material, the ability to know the case against one etc.
But it must also mean that the appeal is conducted in a way that will mean that the Convention right is vindicated in a way that is practical and effective.
To have these attributes the right must not be interfered with unless the interference is proportionate and the court (any court) which deals with that question must be satisfied of that.
And satisfied of that for itself.
So, although neither HRA nor ECHR requires in terms that an appellate court has to decide proportionality for itself, the outworking of the courts duty under section 6 of HRA in particular makes a decision on the proportionality of a freeing order unavoidable for any court deciding that question.
This does not mean, however, that the appellate court has to conclude that it is in as good a position as the trial judge or that it has to order that the evidence be heard again.
The appellate court decides whether it is satisfied that the decision is proportionate on the basis of the material that is put before it in accordance with the normal rules that attend the hearing of an appeal.
That material includes the judges rehearsal of the evidence, the factual findings that he has made and the reasoning which underpins his decision on the question of proportionality.
All of these go into the appellate mix.
Ultimately, however, the appellate court has to say to itself, are we persuaded that the decision was proportionate.
I cannot see how that question can be avoided or elided if faith is to be kept with the duty under section 6 of HRA.
A suggested formulation for the test of reviewability in this area has been, was the first instance judge wrong.
As I understand the suggestion, this is something which goes to result as well as process so that the appellate court is not merely inquiring whether the lower court went about it the right way but also whether it arrived at the right outcome.
If that is so, the question arises, how does the appellate court address the question, did the lower court get it right or wrong (as opposed to did it follow the correct route to its conclusion)? It seems to me that it can only do so by asking what is the right result; in other words, by deciding the issue for itself.
Proportionality does not arise in relation to fact finding by the trial judge.
It plainly is relevant to the question of disposal in care proceedings.
Does it arise in relation to the crossing of the threshold? Lord Wilson thinks not.
He considers that proportionality becomes material only when interference with the right to respect for family life under article 8 is in prospect and this only occurs when the threshold has been crossed and the making of a care order is in contemplation.
Ward LJ in Re MA (Care Threshold) [2010] 1 FLR 431, at para 54 thought that, given the underlying philosophy of the Human Rights Act, the requirement in article 8 to have respect for family life informed the meaning of significant harm and emphasised the need for a sufficient reason for crossing the threshold.
I tend to agree with Lord Wilson that this may introduce an unnecessary layer of complexity to the inquiry whether the harm was significant.
The backdrop to the decision whether sufficiently serious harm has occurred or is apprehended in order to hold that the threshold has been crossed is that this opens the gateway to a possible care order.
Recognition that this is a draconian step provides sufficient emphasis on the need for the harm to be significant without adding further colour by recourse to article 8.
Whether or not article 8 has any part to play in the threshold decision, it certainly comes into full flower at the disposal stage.
Lady Hale and Lord Wilson have both referred to emphatic statements by ECtHR in such cases as Johansen v Norway (1996) 23 EHRR 33, K and T v Finland (2001) 36 EHRR 255, R and H v United Kingdom (2011) 54 EHRR 28, [2011] 2 FLR 1236 and YC v United Kingdom (2012) 55 EHRR 967 concerning the stringent requirements of the proportionality doctrine where family ties must be broken in order to allow adoption to take place.
I agree with Lady Hales statement (in para 198 of her judgment) that the test for severing the relationship between parent and child is very strict and that the test will be found to be satisfied only in exceptional circumstances and where nothing else will do.
I also agree with what Lord Wilson has said in para 34 of his judgment, that a high degree of justification is required before an order can properly be made.
Both Lady Hale (with some reluctance) and Lord Wilson (more readily) have accepted that the threshold in this case was crossed.
I am happy to acknowledge the great strength of their combined experience and expertise in this area of the law.
Quite apart from this, however, I am personally satisfied that the threshold was indeed crossed.
The psychiatric conditions from which the mother has suffered and the way in which the parents have reacted in the past must be set against the apparently exemplary care and concern that they have exhibited towards Amelia (to use Lady Hales pseudonym).
But the latter does not, in my estimation, counteract the former factors.
Without rehearsing the facts which have been so extensively reviewed in the judgments of Judge Cryan, Black LJ, Lady Hale and Lord Wilson, it seems to me clear that there is a sufficient likelihood that the way in which, however well intentioned they may be, the parents care for Amelia would be blighted by their well established difficulties and that her emotional well being and development would suffer significantly in consequence.
The inescapable difficulty in this case is that the parents have been found to be incapable of co operating to the necessary extent with professionals whose intervention is considered to be indispensable to the safeguarding of Amelias happy and fulfilled future.
Of course this was not a question to be judged solely by reference to experience in previous relations with social services.
As Lady Hale has pointed out, the evidence in relation to this was not universally adverse.
But the established inability to co operate, combined with the dishonesty and antagonism displayed by the parents, unmistakably presaged the impossibility of ensuring that this child would not suffer significant harm.
My conclusion on the threshold issue leads me inexorably to the same view on the question of disposal.
If the difficulties that the parents presented could not be overcome and, on my analysis of the evidence, there was no prospect of this there really was no alternative to the care order.
While I do not entirely agree with Lord Wilson on what I understand to be his view as to how an appellate court should approach the question of proportionality, I do agree with him as to the outcome of the appeal.
I consider that it should be dismissed.
LORD CLARKE
I agree that this appeal should be dismissed for the reasons given by Lord Wilson, Lord Neuberger and Lord Kerr.
I do not detect any difference between them save as to the correct test to be adopted by an appellate court in a case of this kind.
Which test is adopted does not, as I see it, affect the correct answer to each of the questions for determination in the particular circumstances of this case, namely the correct analysis of the facts, whether the section 31(2) threshold was crossed and whether a care order with a view to adoption should have been made.
However, there is a difference in principle between the approaches of an appellate court to the making of a care order adopted by Lord Wilson and Lord Neuberger on the one hand and Lord Kerr and Lady Hale on the other.
I suspect that in the vast majority of cases that difference would not affect the ultimate disposal of a case of this kind, in which it is agreed on all sides that a care order cannot be made unless it is necessary in the best interests of the child.
Nothing less than necessity will do, either under our domestic law or under the European Convention on Human Rights.
Only in a case of necessity will an adoption order removing a child from his or her parents be proportionate.
The importance of this court addressing the difference is that one of its roles is to give guidance to the courts below and it is, to my mind, critical that there should, at the very least, be a clear majority for one approach.
I agree with Lord Neuberger and Lord Wilson that the correct approach of an appellate court to the making of a care order is to treat the exercise as an appellate exercise and not as a fresh determination of necessity or proportionality.
On that basis the question arises how the exercise should be approached by the appellate court.
In the course of argument there was some debate whether, absent some error of principle, the Court of Appeal could only interfere with the decision of the judge if satisfied that the judge was plainly wrong.
In England and Wales the jurisdiction of the Court of Appeal is set out in CPR 52.11(3), which provides that the appeal court will allow an appeal where the decision of the lower court was (a) wrong; or (b) unjust because of a serous procedural or other irregularity in the proceedings in the lower court.
The rule does not require that the decision be plainly wrong.
However, the courts have traditionally required that the appeal court must hold that the judge was plainly wrong before it can interfere with his or her decision in a number of different classes of case.
I referred to some of them in Assicurazioni Generali SpA v Arab Insurance Group [2003] 1 WLR 577, to which Lord Neuberger refers at para 57, at my paras 9 to 23.
It seemed to me then and it seems to me now that the correct approach of an appellate court in a particular case may depend upon all the circumstances of that case.
So, for example, it has traditionally been held that, absent an error of principle, the Court of Appeal will not interfere with the exercise of a discretion unless the judge was plainly wrong.
On the other hand, where the process involves a consideration of a number of different factors, all will depend on the circumstances.
As Hoffmann LJ put it in In re Grayan Building Services Ltd [1995] Ch 241 at 254, generally speaking, the vaguer the standard and the greater the number of factors which the court has to weigh up in deciding whether or not the standards have been met, the more reluctant an appellate court will be to interfere with the trial judge's decision.
In the present context, it seems to me, in agreement with Lord Neuberger at para 58, that the court should have particular regard to the principles stated by Lord Hoffmann in Piglowska v Piglowski [1999] 1 WLR 1360 at 1372, which are quoted by Lord Wilson at para 41.
As I read their judgments, Lord Neuberger, Lord Kerr and Lord Wilson all conclude that on the question whether the section 31 threshold was crossed the test is whether the judge was wrong, not whether he was plainly wrong.
Lord Neuberger and Lord Wilson have reached the same conclusion on the ultimate question, namely whether a care order should be made.
I agree with them.
CPR 52.11(3) provides that the appeal court will allow an appeal where the decision of the lower court was wrong.
As already indicated, I appreciate that the courts have given the expression wrong a different meaning in different contexts.
However, in the context of care orders, where the court must be satisfied that it is necessary make the order, the better course is to ask whether the judge was wrong to make the order and not to ask whether he was plainly wrong.
In ordinary language there is a difference between wrong and plainly wrong.
If a plainly wrong test is adopted, it will be possible for an appellate court to hold that the judge was wrong to make an adoption order but was not plainly wrong to do so.
How it might then be asked can it be said that it was necessary to make the order? If it was a wrong order how can it have been a necessary order? This consideration seems to me to argue strongly for the approach adopted by Lord Neuberger and Lord Wilson.
For simplicity, I would apply the same test to decisions as to whether or not the threshold is crossed.
For the avoidance of doubt, as I see it, this does not mean that the judge will only be held to be wrong if he or she has made a decision which no reasonable judge could have come to.
It means that the judges decision is wrong if the case is in one of the three categories identified by Lord Neuberger in para 93 as (v), (vi) or (vii).
That is where the view expressed by the judge is one which the appellate court is doubtful about but on balance concludes was wrong, or one which the appellate court concludes was wrong or insupportable.
These categories are to be contrasted with Lord Neubergers categories (i), (ii), (iii) and (iv).
They include category (iv), where the appellate court cannot say whether the judges view was right or wrong.
In short, I agree with the approach proposed by Lord Neuberger in paras 93 and 94.
I would only add that, as I read Lord Kerrs judgment, he is of the opinion that, if (contrary to his view) the exercise is that of an appellate court and not that of a court determining the issue of necessity or proportionality for itself, the correct test (absent an error of principle) is whether the decision of the judge was wrong, not whether it was plainly wrong.
If that is correct, there is a majority in favour of the appellate approach (Lord Neuberger, Lord Wilson and myself) and, on such an approach, a majority in favour of the test being whether the judge was wrong (Lord Neuberger, Lord Kerr, Lord Wilson and myself).
This approach will simply mean that a care order can only be made where a judge has held that such an order was necessary and the Court of Appeal (or this court on appeal from the Court of Appeal) has declined to hold that the judge was wrong.
I would expect appeals to this court in adoption cases to be very rare indeed, since on this approach there will very rarely be any basis for a further appeal to this court, with all the expense and delay such an appeal entails.
LADY HALE
This case raises some profound questions about the scope of courts powers to take away children from their birth families when what is feared is, not physical abuse or neglect, but emotional or psychological harm.
We are all frail human beings, with our fair share of unattractive character traits, which sometimes manifest themselves in bad behaviours which may be copied by our children.
But the State does not and cannot take away the children of all the people who commit crimes, who abuse alcohol or drugs, who suffer from physical or mental illnesses or disabilities, or who espouse anti social political or religious beliefs.
Indeed, in Dickson v United Kingdom (2007) 46 EHRR 937, the Strasbourg court held that the refusal of artificial insemination facilities to a convicted murderer and the wife whom he had met while they were both in prison was a breach of their rights under article 8 of the European Convention.
How is the law to distinguish between emotional or psychological harm, which warrants the compulsory intervention of the State, and the normal and natural tendency of children to grow up to be and behave like their parents?
Added to this is the problem that the harm which is feared may take many years to materialise, if indeed it ever does.
Every child is an individual, with her own character and personality.
Many children are remarkably resilient.
They do not all inherit their parents less attractive characters or copy their less attractive behaviours.
Indeed some will consciously reject them.
They have many other positive influences in their lives which can help them to resist the negative, whether it is their schools, their friends, or other people around them.
How confident do we have to be that a child will indeed suffer harm because of her parents character and behaviour before we separate them for good?
Perhaps above all, however, this case raises the issue of when it is proper for an appellate court to interfere in the decisions of the trial judge who has heard and read all the evidence and reached his conclusions after careful cogitation following many days of hearing in court and face to face contact with the people involved.
We all agree that an appellate court can interfere if satisfied that the judge was wrong.
We also all agree that a court can only separate a child from her parents if satisfied that it is necessary to do so, that nothing else will do.
I have come to the conclusion that the judge was indeed wrong to be so satisfied in this case.
As my fellow Justices have reached a different conclusion, I must explain myself.
The facts
We are concerned with a little girl, whom I shall call Amelia, who was born on 22 April 2010 and is now nearly three years old.
Her mother, Ms M, was born in 1970 and is now 42 years old.
Ms parents separated when she was around five years old and when she was around seven years old her mother remarried Mr E, who thus became Ms step father.
They had two sons, born in February 1985 and 1986, who are Ms half brothers.
In her early teens M, who had been living with her grandparents, moved in with her mother and Mr E.
In 1986, when M was 15 years old, Mr E began a sexual relationship with her, she became pregnant by him and had an abortion.
In 1987, Ms younger sister J, then aged 12, also moved in with them.
Within a remarkably short time J was the subject of care proceedings arising from a major assault upon her in November 1987.
The family left her behind when they moved to Greece for several months in 1989.
While there, M again became pregnant by Mr E and had another abortion (she later had five more).
After the family returned to this country, Ms mother left Mr E and their two sons, then aged five and three and a half, and she began divorce proceedings in 1990.
M (then 20) and the two boys remained living with Mr E.
On 17 March 1999, when M was aged 29, she and Mr E had a daughter, whom I shall call Teresa.
She is now nearly 14 years old.
In 2003, M was convicted of a series of frauds against financial institutions.
She was sentenced to two years imprisonment.
In her defence, she alleged that the proceedings were a conspiracy between a BT engineer and a police officer and that the police officer had indecently assaulted her.
She was prosecuted for and convicted of perverting the course of justice and perjury in respect of the latter allegation and sentenced to a further three years imprisonment, which was reduced to 27 months on appeal because of her serious psychological problems.
M now says that Mr E was the prime mover behind all these offences, telling her how to accomplish the frauds, taking her to the premises and waiting for her outside, and also concocting her defence.
Judge Cryan heard and accepted evidence from the barrister who defended her at the time, to whom it was apparent that M was completely dominated by Mr E. Judge Cryan held that Mr E knew all along the nature of Ms defence and, at least, was in league with her or, perhaps even, was the driving force behind it (Judgment of 27 April 2011, para 101).
But he also held that M was a habitual and purposeful liar and an accomplished fraudster (para 98).
In 2003, in the first criminal proceedings, Dr Spoto, presumably a consultant forensic psychiatrist, prepared a report on M, suggesting a diagnosis of Munchausens syndrome.
We have not seen that report, but we do know from the later reports that M has a long and complicated history of frequent complaints to a large number of hospitals and medical practitioners for which a physical explanation could not always be found.
In 2004, there was a report in the second criminal proceedings from Dr Taylor, who is a consultant forensic psychiatrist.
M complained to him of sexual abuse by her own father but not by Mr E.
His diagnosis was somatisation disorder: that is, the repeated presentation of physical symptoms, together with persistent requests for medical investigations, but where any physical symptoms present do not explain the nature and extent of the symptoms or the distress and preoccupation of the patient.
M had had some real disorders, but these were not such as to explain her repeated presentations with complaints primarily of vaginal bleeding and abdominal pain.
But he disagreed with Dr Spoto: there was no definitive evidence that she had feigned or fabricated symptoms, so he did not then diagnose Munchausens syndrome (or factitious disorder as it is now known) still less Munchausens syndrome by proxy (which is the reporting of feigned or fabricated symptoms in a child in order to secure medical attention for the child).
In June 2009, M was admitted again to hospital for medical investigations and this time she did not return to the family home with Mr E, her half brothers and her daughter, Teresa.
She began to make serious allegations of abuse to the Surrey police against Mr E. Mr E countered these with allegations against her.
He made an ex parte application to the court and obtained an interim residence order in relation to Teresa.
While M was accommodated in a refuge in Eastbourne, Mr E traced her and harassed her by telephone call and text, necessitating her move to a refuge in Hastings.
While there, her younger half brother sought her out and harassed her to come home, which Judge Cryan found highly likely to be a joint exercise involving Mr E.
It was during this period that M met Amelias father, F, in Hastings and soon began a relationship with him.
He has a great many convictions for serious criminal offences and has also used class A drugs.
He has been a somewhat distant father to his four older children.
Amelia must have been conceived in August 2009.
In November 2009, the couple moved with the support of the police to live in the London Borough of Barnet.
The first social work statement to the court reports that M accessed ante natal care appropriately throughout her pregnancy.
In January 2010, a midwife asked her about scarring on her body and M told hospital staff that she was fleeing domestic violence, that she had a ten year old daughter who was still living with her partner, and described 23 years of serious abuse by Mr E.
In March 2010, Barnet midwifery services made a referral to Barnet social services, because of their concerns about the wellbeing of M and the safety of Teresa.
Barnet began an initial assessment but although M gave information over the phone she was reluctant to attend appointments or receive home visits.
On 17 March 2010, West Sussex County Council held an initial child protection case conference about Teresa.
Ms solicitors later sent the Minutes of this case conference to Barnet social services.
From these they learned, not only of the serious allegations which M was making against Mr E, but also of the (less serious) allegations which he was making against her, of her criminal record and reported Munchausens syndrome.
Amelia was born on 22 April 2010 at only 32 weeks gestation and was placed in the special baby care unit.
On 6 May 2010, Barnet began care proceedings in respect of her and asked for an interim care order.
They did not send the parents the usual pre proceedings letter setting out their concerns and asking for the parents response.
But both the parents had been evasive and obstructive with them.
An interim care order was granted on 10 May 2010 and Amelia was placed in foster care immediately on discharge from the hospital.
Greatly to her benefit, to the credit of the local authority and her foster carer, and despite the barrage of complaints from the parents which they had to endure in the early days, she has remained with the same foster carer ever since.
Given the complexity of the situation at that point, and the difficulties they were having with the parents, it is understandable that the local authority applied for an interim care order and that the court granted it.
Their concerns will have become even greater in September 2010, when Dr Bass, a consultant liaison psychiatrist and renowned authority on somatisation and factitious illness disorders, made his first report.
He examined Ms medical history in great detail and agreed with Dr Taylor that she satisfied the diagnostic criteria for somatisation order.
He also concluded from the evidence that she exaggerates and possibly fabricates her biographical history as well as her medical history that she had factitious disorder as well.
So he wished to re interview her after the fact finding hearing.
The fact finding hearing began in March 2011 before Judge Cryan and lasted 20 days.
Technically, it was part of the private law proceedings concerning Teresa, M having made a cross application for a residence order in October 2010.
West Sussex County Council took an active part in the proceedings but Barnet did not.
But it was contemplated that the care proceedings about Amelia would heard together with the residence proceedings about Teresa.
On 27 April 2011, Judge Cryan delivered a long and detailed judgment considering the allegations made by M against Mr E, by Ms mother against Mr E, by J against Mr E, and by Mr E against M. He prefaced this judgment with a comment on the forensic challenge with which we can all sympathise: The history is chaotic and complex, and it is a forensic challenge made all the more difficult by the unreliability of almost all of the main witnesses, particularly [M and Mr E] (para 7).
In general, he concluded that Mr E was a violent, controlling and bullying personality, who used violence from time to time (para 172), and that M finally left home, not for fear of any particular danger or increase in risk, but rather the cumulative effect of highly intolerable conduct (para 175).
His conclusions are summarised in a Scott schedule prepared by the advocates, which the judge confirms is a reasonable reflection of his findings.
Items 1 14 are Ms allegations against Mr E. Items 1 3 are allegations of rape.
The judge found that there was a lengthy sexual relationship which began when M was 15 years old, when she was not able to give her consent, she became pregnant and had an abortion at his instigation to cover up that fact.
After she reached 16, their relationship was not to be characterised as rape but was part of a dysfunctional relationship in which he was the dominant partner.
Items 4 6 are allegations of repeated violence towards her.
No specific findings were made, save where these were corroborated by other evidence (for example, of an assault outside court during the criminal proceedings against her), but Mr E was a domineering, bullying and occasionally violent man who controlled the household by these means.
He did not find that the extensive scarring to Ms body was caused by the offensive actions of Mr E but see above.
He did not find item 8, that Mr E forced M to have sex with other people so that he could watch, proved.
But he did find proved item 7, that Mr E placed undue influence on M in respect of the criminal proceedings; item 9, that Mr E made threats to kill M; item 10, that Mr E would continue his abuse of M regardless of the presence of their child; item 11, that Mr E placed offensive material about M on her Facebook account; item 12, that Mr E constructed or used a website to post offensive photographs of M, and make defamatory claims about her; item 13, that he harassed her after she left, intending to intimidate her into returning to the home of her child [Teresa] in order that he could continue his abuse of her; and item 14, that his actions have caused her physical and emotional injury, whilst living in his home she was in fear for her own safety, and in fleeing from his home she has remained in fear for her own safety as a result of his continuing threatening behaviour.
Items 15 16 concerned his behaviour towards his wife, Ms mother; the judge found that there was domination of and violence towards her, together with some sexually aberrant behaviour.
Items 17 26 concerned his very serious physical and psychological abuse of J, all of which the judge found proved.
In addition the judge found that paedophile pornographic material had twice been found on the familys computer; on the second occasion M could not have been involved as she had already left; on the first, he did not find that she had been involved.
Items 27 to 34 consisted of Mr Es allegations against M. Save for one (that M had alleged that her brother had assaulted her in Hastings which allegation was true), none of these allegations were found to be proved.
Mr E had engaged in seriously dishonest conduct and lied to this and other courts, he had coached [Teresa] into making false allegations against M, and persuaded his sons to give false evidence on his behalf.
The immediate result was that West Sussex County Council issued care proceedings in relation to Teresa, initially seeking an interim supervision order, but changing this to an interim care order in the light of Mr Es attitude towards them.
In a second judgment, dated 24 May 2011, Judge Cryan granted that application.
The care proceedings relating to Teresa had not been completed when the case came before us, but she has maintained the negative view of her mother into which the judge found that she was coached by Mr E, and steadfastly refuses to have anything to do with her.
Dr Bentovim, a well known child psychiatrist, has produced two reports confirming the brainwashing of Teresa and the effect upon her emotional development.
Also in those proceedings there has been a report from the Lucy Faithfull Foundation, dated 2 August 2011, pointing to the possible links between the sexual and other abuse suffered by M and her somatisation disorder, and taking the view that the risks of sexual abuse and of exposure to the effects of the mothers mental ill health were currently low and could be managed.
Meanwhile, the care proceedings relating to Amelia continued.
Dr Bass produced his second report, in the light of the fact finding hearing, on 4 July 2011.
If M had ceased attending doctors with complaints of pelvic pain and vaginal bleeding since September 2009, it did demonstrate an improvement.
He confirmed the diagnosis of somatisation disorder, but it was difficult to be clear about evidence that she habitually exaggerates and lies about symptoms (para 5.2).
His main concern was that she had remained so long with an abusive partner and reared her daughter in this abusive environment, so that he could not be confident that she would keep a child in her care safe.
There was also a risk that she might expose Amelia to unnecessary medical attention and she could present a moral risk to her child as a result of her habitual lying and deception (para 5.3).
Dr Taylor produced a second report on 12 July 2011.
He accepted that there were incidents providing some evidence of co existing factitious disorder, but he thought that her repeated presentations to doctors with unexplained symptoms were predominantly as a result of somatisation disorder rather than factitious disorder (para 7).
He also had some concerns extrapolating the presence of factitious disorder to the risk of fabricated or induced illness in children (para 8).
Dr Bass had said that a parenting assessment might help to identity any abnormalities in Ms parenting style and attachment to her child.
In September 2011, Barnet instructed the Marlborough Family Service to conduct a viability assessment.
Their parenting assessment co ordinator, Ms Summer (a psychologist), produced a report on 4 November 2011 concluding that further assessment of either the mother or the father would not assist the Court, because neither of them can be relied upon to be honest in their reporting of events and to work cooperatively with child protection workers and agencies.
The parents, however, with the support of the childs guardian, sought a further parenting assessment from Dr Dale, an experienced social work consultant and researcher.
He did not form such a negative view of the parents ability to co operate.
His two reports, dated 20 January 2012 and 22 February 2012, concluded that Amelia should be reunified into the care of her parents in the context of a risk management and family support programme without delay (para 9.1).
He commented that this case raises important social policy questions worthy of public debate, about the nature and level of perceived risks of future emotional harm required for a local authority to recommend to a court that an infant be subject to compulsory adoption (para 17.4).
The final hearing of these proceedings began on 5 March 2012.
The guardian, in her report dated 7 March 2012, was unable to make a recommendation to the court.
She understood the local authoritys concerns based upon the reports of Dr Bass and Dr Taylor but she was unsure whether these were enough to warrant permanent removal from the parents.
She felt that Amelia had been lost in the ongoing battle between the local authority and the parents.
In an addendum report after hearing the evidence of the experts and M, but not the father, she concluded that adoption was too draconian and should only be utilised if there was no alternative.
She firmly believed that there was an alternative and recommended a supervision order.
She acknowledged that M and F may not be the very best parents.
However, they had shown 100% commitment to contact, attending assiduously for one and a half hours, five days a week.
The quality of the contact was appropriate and there were no major concerns from the supervisors.
Amelia was clearly attached to her parents and knows them as her mum and dad.
The mother of the fathers four daughters confirmed that he had always been a good, if often absent, father.
When he was with them he was caring, loving and attentive.
There was also nothing to suggest that M had taken Teresa to the doctor excessively.
The judgment
The hearing before Judge Cryan lasted some 15 days.
Once again, his judgment, dated 14 June 2012, is long (203 paragraphs), careful and detailed.
He reviews in detail the evidence about the father, about the relationship between the father and the mother, about the conduct of the mother since Amelias birth, and about the mothers dishonesty.
The most striking feature of the parents relationship was the strength of and consistency of their united wish to have their daughter placed in their care.
They had attended all the court hearings, all the statutory meetings with the local authority, and every contact session.
Throughout the contact they had behaved unimpeachably towards their daughter.
They each have a warm and loving relationship with her.
But M had not lost the tendency, developed when living with Mr E, of seeking to control by complaint and make false allegations as a way of diverting attention.
There were numerous examples of the mothers dishonesty throughout the evidence.
He then reviewed the expert evidence, beginning with that of Dr Bass and Dr Taylor.
Both maintained their diagnosis of somatisation disorder.
Both described the resulting risk to Amelia as the intergenerational transmission of abnormal health behaviour.
Dr Bass also considered that there was an unquantifiable risk of Amelia being subject to excessive medicalisation (para 111).
However, there were no ongoing presentations at hospital or medicalisation of stresses or emotional problems (para 114).
Further, in cross examination, Dr Bass had clearly modified his view of the mothers factitious disorder and reached the conclusion that it was less severe than one normally sees, putting it at mild to moderate (para 117).
But both experts agreed that her somatisation disorder brought future risk and necessitated a plan and strategy for the future to ensure that all health care professionals are aware of [the mothers] past and are able to intervene to protect [Amelia] should the symptoms resurface (para 114).
He next reviewed at length the evidence of risk management from Ms Nabi of the Lucy Faithfull Foundation, Ms Summer of the Marlborough Family Service, Dr Dale, and the guardian.
He shared Ms Summers concerns about how any child would cope with the high levels of dishonesty exercised by her mother (para 155).
He noted that even [Dr Dale] considers that here there is a risk which would require management by a risk management and family support programme (para 177).
The guardian, although firmly of the view that adoption was the wrong order here, had modified her recommendation from a supervision order to placement with the parents under a care order (paras 180, 182).
Overall, he found the guardian an unimpressive witness whose input to this complex case was little short of superficial (para 188).
Turning to his conclusions, he found that the threshold required by section 31(2) of the Children Act 1989 has been crossed, not perhaps in the most extreme way that is seen in some cases, but crossed it has been (para 189).
He did not there spell out the nature and degree of the future harm which Amelia would be likely to suffer if an order were not made, or the degree of likelihood that such harm would materialise, but referred back to the risk identified by Dr Bass and Dr Taylor and to Ms Summers concerns about the mothers willingness to leave Teresa exposed to the risks of living with Mr E and her quite exceptional proneness to lie.
Having found the threshold crossed, he went on to consider Amelias welfare in terms of the checklist of factors set out in section 1(3) of the 1989 Act.
Under her physical, emotional and educational needs he set out the perceived risks in clearer terms than he had done when finding the threshold crossed: The concerns of the local authority focus primarily on the emotional harm to [Amelia] likely to be caused by the Mothers somatisation disorder and the factitious illness disorder.
Those emotional risks are coupled with the concerns expressed by Drs Bass and Taylor and by Ms Summer, which I have accepted, about the parents personality traits, and her mothers vulnerability to accommodation disorder, her mothers lying and her fathers active, but less chronic tendency to dishonesty and vulnerability to the misuse of drugs.
Whilst primarily these are engines for emotional harm, it is submitted, and I accept, that physical harm to [Amelia] cannot be discounted, for example by over treatment or inappropriate treatment by doctors (para 192).
As to what to do about it, he rejected the views of Dr Dale and the guardian.
Dr Dales criticisms of the local authority and Ms Summer had been unfair.
He considered that the parents were controlling and wilful.
Their unacceptable behaviour was not merely reactive to the mishandling of events by others.
He concluded (para 197): Ultimately, I find that I am persuaded by the other group of witnesses that what the evidence clearly demonstrates is that these parents do not have the capacity to engage with professionals in such a way that their behaviour will be either controlled or amended to bring about an environment where [Amelia] would be safe and protected from emotional and/or physical harm identified by Drs Bass and Taylor.
The father would not be able to protect Amelia from the risks because he simply did not accept them.
Amelia could not be placed with her father alone because there was a high probability that the parents would not separate in any meaningful sense.
There would be no way in which the situation could be effectively monitored (para 199).
In any event, he had very serious reservations about the father, who has lived a turbulent life with a very serious history of criminality, imprisonment and drug abuse (para 200).
Adjournment to make further enquiries of the extended paternal family would simply delay the inevitable (para 201).
So he was left with the local authoritys care plan as the only viable option (para 203).
The Court of Appeal
On appeal, it was argued that the risks identified were not sufficient to constitute significant harm, that they were not imminent, and that it was disproportionate to respond to them by permanent removal of the child.
Various criticisms were made of the judges treatment of the evidence, in particular of his failure to deal with the detailed criticisms of Dr Basss diagnosis of factitious illness, with the numerous factual errors and invalid assumptions in Ms Summers evidence, with the detailed rebuttal of and explanation of the allegations in relation to Ms dishonesty and lack of cooperation, and on the other hand to refer to the Lucy Faithfull Foundations view that M did not present a risk or to mention the social workers evidence that there was no physical, sexual or educational risk to the child, and no suggestion that the parents would not offer her adequate physical care and emotional warmth, and that the parents attitude had never prevented her from undertaking her work properly with Amelia.
The father also had a number of criticisms of the judges decision not to allow him to be assessed with a view to caring for Amelia on his own.
It is no doubt an indication of the complex and troubling nature of this case that Black LJ, who delivered the principal judgment, took enormous care in reviewing the evidence and considering the detailed criticisms made by the parents of the judges approach to that evidence: [2012] EWCA Civ 1475.
She reminded herself that the Court of Appeal must avoid approaching the case as if it were making the determination at first instance (para 112).
She took the view that the judge was aware of the need to separate the issue of what harm there actually was from the question of whether the parents would cooperate sufficiently with social services.
He had intervened to explain to the social worker that it did not matter how unco operative parents were with social services if there was no risk against which social services needed to guard (para 121).
The harm was of two kinds: that stemming from the mothers illness related behaviour (para 122) and that stemming from her chronic lying and the fathers dishonesty (para 123).
Black LJ attached particular importance to the mothers position in Mr Es household, where she could not argue that her role had been entirely inert she was a habitual and purposeful liar and an accomplished fraudster and her use of complaining tactics since she left Mr E had shown her to be his accomplished pupil.
Her vindictive behaviour when a relative of the father had withdrawn her offer of help was redolent of the E household (para 125).
Counsel had argued that these non medical risks were not what the Children Act was driving at, but she agreed with the local authority that it was a question of degree which the judge was best placed to assess and make the necessary value judgment (para 128).
She concluded In short, the catalogue of problems identified by the judge went beyond the routine; the problems were undoubtedly more than commonplace human failure or inadequacy (an echo of the words of Hedley J quoted at para 182 below).
The judge was entitled to conclude that any strategy to manage the risks would have to go beyond the watchful eye of the GP and involve social services and that the parents would not be able to engage with professionals to ensure that Amelia was safe from harm (para 130).
She went on to reject the detailed criticisms made of the judges approach to some of the evidence.
Lewison and Rix LJJ were clearly deeply troubled by the case.
Lewison LJ was concerned about proportionality: here was a child who had not suffered any harm, who had a warm and loving relationship with her parents; the threshold had not been crossed in the most extreme way, but the order made was the most extreme that could have been made (para 142).
But their task was not to make the decision but to examine whether it fell outside the generous ambit within which reasonable disagreement is possible so he would not push his doubts to dissent (para 148).
Rix LJ also acknowledged the difficulties in the case, but agreed that one should trust the judge of trial.
Lewison LJ associated himself with Rix LJs concluding sentence: I also wonder whether this case illustrates a powerful but also troubling example of the state exercising its precautionary responsibilities for a much loved child in the face of parenting whose unsatisfactory nature lies not so much in the area of physical abuse but in the more subjective area of moral and emotional risk (para 150).
This appeal
It is not the task of this court to review the factual findings of the judge in order to decide whether he was entitled to make them in the light of the evidence before him.
The Court of Appeal has already performed that task with conspicuous care.
This Court gave permission to appeal because of the general public importance of, and concern about, the point made by Rix LJ.
On giving permission, the Court identified four specific, though inter related, questions of law: (i) the meaning of significant harm; (ii) the relationship between the nature and gravity of the harm which is feared and the degree of likelihood of that harm being suffered in the future; (iii) the proportionality of a care order with a care plan for adoption in a case such as this; and (iv) the proper approach of the Court of Appeal to a finding that the threshold has been crossed, and (although this was not expressly referred to) to the issue of proportionality.
The first two questions relate to the threshold criteria in section 31(2) of the Children Act 1989, the third relates to the approach of the court once the threshold has been crossed, and the fourth to the appellate function.
The threshold
The threshold set by section 31(2) of the Children Act 1989 requires that the court be satisfied: (a) that the child concerned is suffering, or is likely to suffer, significant harm; and (b) that the harm, or likelihood of harm, is attributable to (i) the care given to the child, or likely to be given to him if an order were not made, not being what it would be reasonable to expect a parent to give to him; or (ii) the childs being beyond parental control.
By section 31(9) harm means ill treatment or the impairment of health or development, including, for example, impairment suffered from seeing or hearing the ill treatment of another; ill treatment includes sexual abuse and forms of ill treatment which are not physical; health means physical or mental health; and development means physical, intellectual, emotional, social or behavioural development.
There is no definition of significant, but section 31(10) provides that Where the question of whether harm suffered by a child is significant turns on the childs health or development, his health or development shall be compared with that which could reasonably be expected of a similar child.
Thus, while the standard of parenting expected by section 31(2)(b) is the objective standard of a reasonable parent, the level of development expected of the child is the subjective level to be expected of a child like him.
Furthermore, as Munby J said in In re K, A Local Authority v N and Others [2005] EWHC 2956 (Fam), [2007] 1 FLR 399, at para 26, the court must always be sensitive to the cultural, social and religious circumstances of the particular child and family.
Since well before the Children Act came into force, the courts have recognised that there is a line to be drawn between parents whose personal characteristics mean that they may be less than perfect parents and parents who may cause harm to their children.
Lord Templeman put the point this way in his well known words in In re KD (A Minor)(Ward: Termination of Access) [1988] AC 806, 812: The best person to bring up a child is the natural parent.
It matters not whether the parent is wise or foolish, rich or poor, educated or illiterate, provided the childs moral and physical health are not endangered.
Public authorities cannot improve on nature.
If, by that last sentence, Lord Templeman was making a factual statement, then some might disagree: if local authorities remove children from unsatisfactory parents at birth and swiftly place them with highly satisfactory adoptive parents they can undoubtedly improve on nature.
But in my view Lord Templeman was making a normative statement: public authorities have no right to improve on nature.
That thought has been followed through in numerous cases since.
As Wall LJ pointed out in Re L (Children) (Care Proceedings: Significant Harm) [2006] EWCA Civ 1282, [2007] 1 FLR 1068, at 1084, There are, of course, many statements in the law reports warning of the dangers of social engineering, citing in particular Butler Sloss LJ in Re O (A Minor) (Custody: Adoption) [1992] 1 FLR 77, 79: If it were a choice of balancing the known defects of every parent with some added problems that this father has, against idealised perfect adopters, in a very large number of cases, children would immediately move out of the family circle and towards adopters.
That would be social engineering .
Re L is an important case because it concerned parents with learning difficulties, very considerable in the case of the mother.
The judge had found significant harm on the basis of the report of a psychologist who had not been asked to assess this.
She had acknowledged that there was no obvious harm, no explicit malicious abuse or extreme abuse: On the contrary my concern in this family relates to the more subtle and ambiguous consequences on the children flowing from parental deficiencies.
Wilson LJ commented: So which was it? Significant harm or subtle and ambiguous consequences? Speaking for myself, I regard the two concepts as mutually exclusive (para 31).
For these and many other concerns about the report, the case was sent back to be re heard in the High Court.
In Re L (Care: Threshold Criteria) [2007] 1 FLR 2050, at 2063, Hedley J, having quoted Lord Templeman, continued (para 50): It follows inexorably from that, that society must be willing to tolerate very diverse standards of parenting, including the eccentric, the barely adequate and the inconsistent.
It follows too that children will inevitably have both very different experiences of parenting and very unequal consequences flowing from it.
It means that some children will experience disadvantage and harm, while others flourish in atmospheres of loving security and emotional stability.
These are the consequences of our fallible humanity and it is not the provenance [semble: province] of the state to spare children all the consequences of defective parenting.
But clearly we do remove some of those children.
The difficulty is to identify what it is that tips the case over the threshold.
Although every parent, every child, every family is different, and, as Hedley J put it, significant harm is fact specific and must retain the breadth of meaning that human fallibility may require of it, there must be some consistency in the approach of both local authorities and the courts.
Hedley J went on say that it must be something unusual; at least something more than commonplace human failure or inadequacy.
It does appear that he considered that the children were suffering, and likely to suffer, some harm to their intellectual development as a result of their parents inadequacies, but that it was not of a character or significance to justify the compulsory intervention of the state.
The Court of Appeal wrestled with the problem of separating harm from significant harm in Re MA (Care Threshold) [2009] EWCA Civ 853, [2010] 1 FLR 431.
The trial judge had found that although the parents had ill treated another child, whose presence in their household remained something of a mystery, their own children were well cared for, healthy, well nourished and had strong bonds with their parents.
The eldest child had been slapped, kicked and hit on the head by one or other of her parents.
But that was not significant harm.
Wilson LJ, at para 29, quoted Booth J in Humberside County Council v B [1993] 1 FLR 257, at p 263: Significant harm was defined by Miss Black, in accordance with the dictionary definition, first as being harm that the court should consider was either considerable or noteworthy or important.
Then she expressed it as harm which the court should take into account in considering a childs future.
Wilson LJ went on to comment that while I might not have expressed myself in quite such broad terms, they certainly foreshadow the view of Lord Nicholls, expressed three years later, that, in relation to the likelihood of harm, the threshold is set at a comparatively low level.
At paragraph 51, Ward LJ emphasised, correctly in my view, that Lord Nicholls remark, in In re H [1996] AC 563, was directed, not at the threshold as a whole, nor at the threshold of significant harm, but at the threshold of likelihood of harm in the future.
Lord Nicholls said nothing in that case, or in any later case, to suggest that the threshold of significance was comparatively low.
Ward LJ went on, at para 54, to express the difference between harm and significant harm thus: Given the underlying philosophy of the Act, the harm must, in my judgment, be significant enough to justify the intervention of the state and disturb the autonomy of the parents to bring up their children by themselves in the way they choose.
The point can fairly be made, both of this definition and of the second of the two definitions suggested by Miss Black to Booth J (para 183 above), that they are somewhat circular: the state is justified in intervening if the harm is sufficient to justify the states intervening.
But it serves to make the point that not all harm which children may suffer as a result of their parents care falling short of what it is reasonable to expect is significant for this purpose.
The dictionary definition, considerable, noteworthy or important, is to my mind more helpful.
It chimes with the Guidance given by the Department of Health and Social Security when the Act first came into force: It is additionally necessary to show that the ill treatment is significant, which given its dictionary definition means considerable, noteworthy or important (para 3.19).
There would be no point in the threshold if it could be crossed by trivial or unimportant harm.
As to the suggestion made by Ward LJ (at para 54), that article 8 of the European Convention on Human Rights does inform the meaning of significant, I agree that it is only the courts order, and not its finding that the threshold has been crossed, which constitutes an interference with the article 8 right.
However, the reason why the threshold is crossed forms part of the courts reasons for making the order, and these must be relevant and sufficient.
It is not sufficient that the child would be better off in another family.
That is the reason for the existence of the threshold (which was substituted for the more precise criteria laid down in the Children and Young Persons Act 1969 and the Child Care Act 1980).
Furthermore, there is a relationship between this debate and the approach taken to proportionality, discussed in paragraph 197 below, which I believe to be common ground between us.
If permanent removal is proportionate if it is the only way of avoiding the identified risk of harm, then it is also important that the threshold of harm is not set at too low a level, for otherwise the reasons for removal will not be sufficient: say, for example, that it is highly likely that a child will turn into an unhealthy couch potato like her parents, and only permanent removal could reliably prevent this, it would nevertheless not be a justifiable interference with family life to permit this.
Added to the difficult question of identifying significant harm is the question of identifying the degree of likelihood that such harm will be suffered in the future which is necessary to take the case over the threshold.
It was held, albeit strictly obiter, in In re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 that likely does not mean probable or more likely than not.
It means, in Lord Nicholls well known words, a real possibility, a possibility that cannot sensibly be ignored having regard to the nature and gravity of the feared harm in the particular case (at 585F).
That standard has been adopted or approved in numerous later cases, including recently in this court in In re J (Children) (Care Proceedings: Threshold Criteria) [2013] UKSC 9; [2013] 2 WLR 649.
It is in this respect, and this respect alone, that Lord Nicholls observed that the threshold is comparatively low.
The reason for adopting a comparatively low threshold of likelihood is clear: some harm is so catastrophic that even a relatively small degree of likelihood should be sufficient to justify the state in intervening to protect the child before it happens, for example from death or serious injury or sexual abuse.
But it is clear that Lord Nicholls did not contemplate that a relatively small degree of likelihood would be sufficient in all cases.
The corollary of the more serious the harm, the less likely it has to be is that the less serious the harm, the more likely it has to be.
Of course, another reason for adopting a test of real possibility, rather than more likely than not, is that it is extremely difficult to predict the future and to do so with the sort of accuracy which would enable a court to say that it was more likely than not that a parent would harm a child in the future.
Once again, this is a particular problem with emotional or psychological harm, which may take many years to manifest itself.
The Act does not set limits upon when the harm may be likely to occur and clearly the court is entitled to look to the medium and longer term as well as to the childs immediate future.
However, the longer term the prospect of harm, the greater the degree of uncertainty about whether it will actually happen.
The childs resilience or resistance, and the many protective influences at work in the community, whether from the wider family, their friends, their neighbourhoods, the health and social services and, perhaps above all, their schools, mean that it may never happen.
The degree of likelihood must be such as to justify compulsory intervention now, for there is always the possibility of compulsory intervention later, should the real possibility solidify.
The second element in the threshold sheds some light upon these questions.
The harm, or the likelihood of harm, must be attributable to the care given to the child, or likely to be given to him if an order were not made, not being what it would be reasonable to expect a parent to give to him (s 31(2)(b)).
This reinforces the view that it is a deficiency in parental care, rather than in parental character, which must cause the harm.
It also means that the court should be able to identify what that deficiency in care might be and how likely it is to happen.
Allied to this is the definition of harm itself (see para 178 above).
It is wide, but it is not infinite.
The focus is upon the child suffering that harm, so upon the child suffering ill treatment or suffering the impairment of her health or development.
Ill treatment will generally involve some active conduct, whether physical or sexual abuse, bullying or other forms of active emotional abuse.
Impairment may also be the result of active conduct towards the child, but it could also be the result of neglecting the childs needs, for food, for warmth, for shelter, for love, for education, for health care.
Generally speaking, however, the harm is likely to be the result of some abusive or neglectful behaviour towards the child.
But this is not invariably the case, as is shown by the inclusion, by way of example, impairment suffered from seeing or hearing the ill treatment of another.
We now know that serious harm may be done to the development of children who see or hear domestic violence between their parents.
I agree entirely that it is the statute and the statute alone that the courts have to apply, and that judicial explanation or expansion is at best an imperfect guide.
I agree also that parents, children and families are so infinitely various that the law must be flexible enough to cater for frailties as yet unimagined even by the most experienced family judge.
Nevertheless, where the threshold is in dispute, courts might find it helpful to bear the following in mind: (1) The courts task is not to improve on nature or even to secure that every child has a happy and fulfilled life, but to be satisfied that the statutory threshold has been crossed. (2) When deciding whether the threshold is crossed the court should identify, as precisely as possible, the nature of the harm which the child is suffering or is likely to suffer.
This is particularly important where the child has not yet suffered any, or any significant, harm and where the harm which is feared is the impairment of intellectual, emotional, social or behavioural development. (3) Significant harm is harm which is considerable, noteworthy or important.
The court should identify why and in what respects the harm is significant.
Again, this may be particularly important where the harm in question is the impairment of intellectual, emotional, social or behavioural development which has not yet happened. (4) The harm has to be attributable to a lack, or likely lack, of reasonable parental care, not simply to the characters and personalities of both the child and her parents.
So once again, the court should identify the respects in which parental care is falling, or is likely to fall, short of what it would be reasonable to expect. (5) Finally, where harm has not yet been suffered, the court must consider the degree of likelihood that it will be suffered in the future.
This will entail considering the degree of likelihood that the parents future behaviour will amount to a lack of reasonable parental care.
It will also entail considering the relationship between the significance of the harmed feared and the likelihood that it will occur.
Simply to state that there is a risk is not enough.
The court has to be satisfied, by relevant and sufficient evidence, that the harm is likely: see In re J [2013] 2 WLR 649.
Proportionality
Once the threshold is crossed, section 1(1) of the Children Act requires that the welfare of the child be the courts paramount consideration.
In deciding what will best promote that welfare, the court is required to have regard to the checklist of factors in section 1(3).
These include, at (g), the range of powers available to the court in the proceedings in question.
By section 1(5), the court must not make any order unless it considers that doing so would be better for the child than making no order at all.
The Act itself makes no mention of proportionality, but it was framed with the developing jurisprudence under article 8 of the European Convention on Human Rights very much in mind.
Once the Human Rights Act 1998 came into force, not only the local authority, but also the courts as public authorities, came under a duty to act compatibly with the Convention rights.
It is well established in the case law of the European Court of Human Rights that the mutual enjoyment by parent and child of each others company constitutes a fundamental element of family life, and domestic measures hindering such enjoyment amount to an interference with the right protected by article 8 of the Convention (Johansen v Norway (1996) 23 EHRR 33, among many others).
However, such measures may be justified if aimed at protecting the health or morals and the rights and freedoms of children.
But they must also be necessary in a democratic society.
The court has recently summed up the principles in the context of an order freeing a child for adoption, in R and H v United Kingdom (2011) 54 EHRR 28, [2011] 2 FLR 1236, at para 81: In assessing whether the freeing order was a disproportionate interference with the applicants article 8 rights, the court must consider whether, in the light of the case as a whole, the reasons adduced to justify that measure were relevant and sufficient for the purposes of paragraph 2 of article 8 of the Convention (see, among other authorities, K and T v Finland (2001) 36 EHRR 255, para 154).
The court would also recall that, while national authorities enjoy a wide margin of appreciation in deciding whether a child should be taken into care, stricter scrutiny is called for as regards any further limitations, such as restrictions placed by those authorities on parental rights of access, and as regards any legal safeguards designed to secure the effective protection of the right of parents and children to respect for their family life.
Such further limitations entail the danger that the family relations between a young child and one or both parents would be effectively curtailed (see Elsholz v Germany (2000) 34 EHRR 1412, para 49, and Kutzner v Germany (2002) 35 EHRR 653, para 67).
For these reasons, measures which deprive biological parents of the parental responsibilities and authorise adoption should only be applied in exceptional circumstances and can only be justified if they are motivated by an overriding requirement pertaining to the childs best interests (see Aune v Norway (Application No 52502/07) 28 October 2010, para 66; Johansen v Norway (1996) 23 EHRR 33, para 78; and, mutatis mutandis, P, C and S v United Kingdom (2002) 35 EHRR 31, para 118).
The Strasbourg court itself has consistently applied a stricter standard of scrutiny to the national courts decisions to restrict or curtail contact between parent and child than it has to the decision to take a child into care in the first place.
This is because, as stated, for example, by the Grand Chamber in K and T v Finland (2001) 36 EHRR 255, at para 178, there is: . the guiding principle whereby a care order should in principle be regarded as a temporary measure, to be discontinued as soon as circumstances permit, and that any measures implementing temporary care should be consistent with the ultimate aim of reuniting the natural parents and the child.
The positive duty to take measures to facilitate family reunification as soon as reasonably feasible will begin to weigh on the responsible authorities with progressively increasing force as from the commencement of the period of care, subject always to its being balanced against the duty to consider the best interests of the child.
Thus it is not surprising that Lewison LJ was troubled by the proportionality of planning the most drastic interference possible, which is a closed adoption, in a case where the threshold had not been crossed in the most extreme way (see para 174 above).
However, I would not see proportionality in such a linear fashion, as if the level of interference should be in direct proportion to the level of harm to the child.
There are cases where the harm suffered or feared is very severe, but it would be disproportionate to sever or curtail the family ties because the authorities can protect the child in other ways.
I recall, for example, a case where the mother was slowly starving her baby to death because she could not cope with the colostomy tube through which the baby had to be fed, but solutions were found which enabled the child to stay at home.
Conversely, there may be cases where the level of harm is not so great, but there is no other way in which the child can be properly protected from it.
Nevertheless, it is quite clear that the test for severing the relationship between parent and child is very strict: only in exceptional circumstances and where motivated by overriding requirements pertaining to the childs welfare, in short, where nothing else will do.
In many cases, and particularly where the feared harm has not yet materialised and may never do so, it will be necessary to explore and attempt alternative solutions.
As was said in Re C and B [2001] 1 FLR 611, at para 34, Intervention in the family may be appropriate, but the aim should be to reunite the family when the circumstances enable that, and the effort should be devoted towards that end.
Cutting off all contact and the relationship between the child or children and their family is only justified by the overriding necessity of the interests of the child.
The appellate function
The judgments involved in care proceedings are of (at least) three different types.
First are the decisions on the facts: for example, who did what to whom and in what circumstances.
Second is the decision as to whether the threshold is crossed, which involves the various questions set out in para 193 above.
In In re MA (Care: Threshold) [2010] 1 FLR 431, at para 56, Ward LJ was inclined to think that this was a value judgment rather than a finding of fact; and in the Court of Appeal in this case, Black LJ was also inclined to categorise it as a value judgment rather than as a finding of fact or an exercise of discretion (para 9).
I agree and so, I think, do we all.
It is certainly not a discretion and it will entail prior findings of fact but in the end it is a judgment as to whether those facts meet the criteria laid down in the statute.
Third is the decision what order, if any, should be made.
That is, on the face of it, a discretion.
But it is a discretion in which the requirements, not only of the Children Act 1989, but also of proportionality under the Human Rights Act 1998, must be observed.
What is the role of an appellate court in relation to each of these three decisions?
As to the first, the position is clear.
The Court of Appeal has jurisdiction to hear appeals on questions of fact as well as law.
It can and sometimes does test the judges factual findings against the contemporaneous documentation and inherent probabilities.
But where findings depend upon the reliability and credibility of the witnesses, it will generally defer to the trial judge who has had the great advantage of seeing and hearing the witnesses give their evidence.
The question is whether the findings made were open to him on the evidence.
As Lord Hoffmann explained in Biogen Inc v Medeva plc [1997] RPC 1, the need for appellate caution is based upon much more solid grounds than professional courtesy.
Specific findings of fact are inherently an incomplete statement of the impression which was made upon him by the primary evidence.
His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualifications and nuance .
In child cases, as Lord Wilson points out, there is the additional very important factor that the courts role is as much to make predictions about the future as it is to make findings about the past.
As to the second, in Piglowska v Piglowski [1999] 1 WLR 1360, 1371, Lord Hoffmann cautioned the same appellate restraint in relation to the trial judges evaluation of the facts as to his factual findings themselves.
In In re MA, Wilson LJ would have allowed the appeal on the stark basis that, on the evidence before him, it was not open to Roderic Wood J, of all people, to reach the conclusion which he did (para 34).
Hallett LJ considered the question to be one of fact and was not persuaded that the judge was plainly wrong to decline to find that the threshold has been crossed (para 44).
Ward LJ, having inclined to the view that it was a value judgment rather than a finding of fact, held that it does not matter for the test this court has to apply is essentially similar, namely whether he has exceeded the generous ambit within which there is room for reasonable disagreement (para 56).
In this case, Black LJ adopted the approach of Ward LJ in In re MA (para 9).
In fact, the generous ambit or plainly wrong tests were developed, not in the context of value judgments such as this but in the context of a true discretion.
In G v G (Minors: Custody Appeals) [1985] 1 WLR 647, Lord Fraser of Tullybelton approved the statement of Asquith LJ in Bellenden (formerly Satterthwaite) v Sattherthwaite [1948] 1 All ER 343, at 345: It is, of course, not enough for the wife to establish that this court might, or would, have made a different order.
We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable.
It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.
In relation to evaluating whether the threshold has been crossed, we are all agreed that the proper appellate test is whether the trial judge was wrong to reach the conclusion he did.
This is the test laid down in CPR 52.11(3) and there is no reason why it should not apply in this context.
Plainly adds nothing helpful, unless it is simply to explain that the appellate court must be in one of the three states of mind described by Lord Neuberger at paragraph 93 considering the trial judges decision (v) on balance wrong, (vi) wrong or (vii) insupportable.
Lord Neuberger, Lord Clarke and Lord Wilson would adopt the same approach to the question of proportionality.
The question here is what section 6(1) of the Human Rights Act requires of appellate courts.
This is not a case such as R (Daly) v Secretary of State for the Home Department [2001] 2 AC 532, in which the courts were engaged in the careful scrutiny of the proportionality of a decision which Parliament had given to the executive to make.
The courts are the primary decision makers in care cases.
They are not conducting a judicial review of the local authoritys decisions.
Local authorities have a range of statutory duties to help children in need and their families, to investigate and to take steps to protect children from harm.
It is right, it seems to me, that they should generally follow a precautionary principle.
But they do not have the power to intervene compulsorily between parent and child without the sanction of a court order.
The courts are the guardians of the rights of both the children and their parents.
Hence the courts, as public authorities, have the statutory duty under section 6(1) not to act incompatibly with the Convention rights.
This means that the courts have the duty to assess the proportionality of the proposed interference for themselves.
Does this mean that an appellate court has the same duty to assess the proportionality of the proposed interference as does the court at first instance? This is a difficult question, but it seems to me that if the court has the duty to assess the proportionality of the decisions of a board of school governors, or of the Secretary of State, or of the immigration appellate authorities, it must a fortiori have the duty to assess the proportionality of the decisions of the trial judge in a care case.
It must of course give due weight to the enormous benefit which he has had of reading and hearing all the evidence, of assessing not only the credibility and reliability of the witnesses but also their characters and personalities and the professionalism of the professional witnesses, of living and breathing the case over so many days and weeks.
And it must be alive to the risks of being over critical of the way in which a judge has expressed himself, bearing in mind the wise words of Lord Hoffmann in Biogen quoted earlier.
But the court which makes the final decision is the public authority which is responsible for the invasion of Convention rights.
I agree with Lord Kerr that it must decide for itself whether the order will be compatible with those rights.
But I also agree that this will only make a difference in cases within Lord Neubergers category (iv), where the appellate judge cannot say whether the trial judge was right or wrong.
Application to this case
The judge collected all his self directions on the law at the beginning of his judgment, including references to In re H, Re MA, Re L, Re B, and Re C and B.
In themselves these directions can scarcely be faulted.
But when he gave his reasons for concluding that threshold was crossed he did not clearly spell out (i) what the feared harm was, (ii) whether it was significant, and (iii) how likely it was to happen.
Both in the Court of Appeal and in this court it was necessary for us to try and do so.
(1) The nature of the harm feared
Black LJ was alive to the need to separate the nature of the harm feared from the question of whether the parents would co operate with social services (para 121).
The parents have no legal duty to co operate with social services (as opposed to the health and educational services) unless the threshold is crossed.
She identified two kinds of harm : (i) that Ms medical behaviour would reassert itself and that Amelia would therefore be harmed by the intergenerational transmission of abnormal health behaviour and by excessive medicalisation (para 122); and (ii) that Amelia would be confused and experience conflicting loyalties as a result of her mothers (and to a lesser extent her fathers) chronic lying and dishonesty and her mothers use of complaining tactics learned in the household of Mr E (paras 123 to 125). (2) Is it significant?
Black LJ considered that this was a matter of degree, which the trial judge was best placed to assess (para 128).
For my part, I would draw a distinction between the harm stemming from over medicalisation and the other harms identified.
A child whose mother actively feigns or fabricates symptoms undoubtedly suffers significant harm, but that was not the harm which the judge found here.
A child whose mother exaggerates and sees the worst and thereby exposes her to unnecessary medical investigations and even treatment may well suffer significant harm.
But it will be a question of degree, depending upon its frequency and severity.
Many of us are anxious mothers and take our children to the doctor far more often than we should.
Some of us, of course, are not anxious enough and do not take our children to the doctor when we should.
There was evidence that the mother was over anxious during the early days when Amelia was in foster care and that she over dramatised an occasion when Amelia was taken to hospital with breathing difficulties.
On the other hand, there was no evidence at all that her older daughter had been subject to excessive medicalisation, despite the fact that the mother was then much more actively engaged in her own over medicalisation.
It is clear that the judge did not place a great deal of weight upon this feature, simply commenting that it cannot be discounted (para 192).
The other harms, it seems to me, present much more of a problem.
They are indeed the harms which stem from parental character defects.
In relation to the mothers somatisation disorder, the harm would be the emotional (and possibly also physical) damage which Amelia would suffer from copying her mothers behaviour.
In relation to the parents dishonesty and use of complaining tactics, the harm would be the emotional damage which Amelia would suffer, either from copying this behaviour, or from the confusion and divided loyalties resulting from her growing realisation that her mothers version of the truth differed from her own.
I accept entirely that the significance of such harms must be a question of degree.
I also accept that the mothers problems are indeed out of the ordinary.
But then so were the learning difficulties of the parents in Re L. Put at their highest, these do not seem to me to come very high in the hierarchy of bad behaviours which children may learn from their parents.
The fathers serious criminality, including violence, and drug abuse would come much higher. (3) How likely are they to be suffered?
The issue of significance and the issue of likelihood are inter related.
It is very difficult, reading the judgment of the judge, to get any impression of how likely he thought it was that these harms would materialise.
I have the impression that he did not think it very likely, though he could not discount, that Amelia herself would be subject to over medicalisation.
It is difficult to gauge the likelihood of the other risks materialising, bearing in mind that the mothers behaviour had been different since extricating herself from the household of Mr E, and the other protective factors there might be in play.
It is one thing to say that the father does not take the local authoritys concerns seriously enough.
It is another thing to say that this father, who is a very different person from Mr E, would not be able to counteract some of the prospective harm.
In any event it is clear that these are subtle and slowly developing harms which will only materialise, if they materialise at all, in the longer term.
It is possible to get too close to the trees.
I have the gravest doubts as to whether, properly analysed, the harm which is feared here is of sufficient significance or sufficient likelihood to justify a finding that the threshold has been crossed.
It is difficult to discern whether the judge ever asked himself the question of degree, particularly in relation to the degree of likelihood.
It is one thing to find that there are risks which the professionals have identified.
It is another thing to find that those risks amount to a sufficient likelihood of sufficiently significant harm to meet the statutory threshold for compulsory intervention in the family.
However, I have to bear in mind that this extremely careful and experienced judge spent many weeks with this case.
He will undoubtedly have acquired a feel for those questions of degree which no appellate judge could possibly acquire however close her reading of the appellate papers.
Provided that we can be satisfied that he asked himself the right questions, it would be difficult indeed to interfere with his assessment.
The questions which the judge must ask himself are different from the questions which the professionals must ask themselves.
I would have preferred him to spell out his conclusions more clearly and confronted head on the question posed by Hedley J in Re L.
But it has to be accepted that the behaviours which caused concern were both extremely unusual and unusually persistent.
No one wants to compound the abuse which a parent, often a mother, has suffered in her own childhood by finding that that abuse renders her unable to parent her own children safely.
It would be possible to see this mother wholly as a victim the victim of the abuse which she suffered in childhood, from which her own mother was not able to protect her, and the victim of the relationship with her wicked stepfather which was established while she was still a child and from which she was unable to extricate herself for more than 20 years.
But that is not the whole picture.
As Black LJ identified, although she deserves our sympathy for what she has endured, the judges findings disentitle her from arguing that she was solely a passive victim and that her problematic behaviour will not recur (para 125).
The judge addressed the issue when he commented of the mother: Clearly, she was for many years under the thrall of Mr E, and might fairly be thought of as a victim within that long standing relationship.
However, having seen and heard her over a long period and having regard to her subsequent conduct, I find it difficult to see her role as being entirely inert (para 22).
We are all these days very well aware of how difficult the victims of domestic violence and abuse can find it to escape, because of the variety of subtle and not so subtle ways in which they can be dominated by their oppressors.
But the picture which the judge gained of this mother was more complicated than that and involved a degree of collusion in the abusive environment in which her half brothers and her older daughter Teresa were being brought up.
Not without some hesitation, therefore, I am driven to the conclusion that this court is not in a position to interfere with the judges finding that the threshold was crossed in this case. (4) Was the order proportionate?
But that is not the end of the story.
We all agree that an order compulsorily severing the ties between a child and her parents can only be made if justified by an overriding requirement pertaining to the childs best interests.
In other words, the test is one of necessity.
Nothing else will do.
The judge referred to proportionality when directing himself as to the law at the beginning of his judgment, but he did not remind himself of the test when it came to making his decision.
The basis of his decision was the inability of the parents to work with professionals.
But it must first be asked what work with professionals would be necessary, before asking whether the parents would co operate.
Mr Feehan complains that neither the judge nor the Court of Appeal responded adequately to the detailed criticisms which he had made of the local authoritys case about this.
Dr Bass and Dr Taylor had said that the mothers diagnosis necessitated a plan and strategy for the future to ensure that all health care professionals are aware of Ms past and are able to intervene to protect Amelia should the symptoms resurface (para 114).
What reason was there to suppose that the parents would not co operate with health care professionals? There was no evidence that Teresa had been exposed to inappropriate attention from the medical professions.
The mother had accessed ante natal care appropriately during her pregnancy.
The mother had co operated with the investigations conducted by Dr Bass and Dr Taylor and the father had co operated with Dr Bass.
The mother had been, of course, a frequent user of medical services, and this was the main reason for concern.
But none of this evidence suggests that it would not be possible to devise a plan and strategy to enable the health care professionals to be aware of the situation and take appropriate action should it become necessary.
But what about the need for co operation with the social services? Even Dr Dale, the professional who was most supportive of the parents case, accepted that there would need to be a risk management and family support programme (First report, para 20.1) although details would require clarification.
There was little evidence about what this might entail, other than the brief enquiries made by the guardian during the hearing.
There was conflicting evidence about the parents ability to co operate with such a programme, whatever it might be.
On the one hand, West Sussex social services confirmed that the mother had tried to get them to intervene to protect Teresa after she had left and her solicitors had sent a copy of the case conference minutes about Teresa to Barnet social services while she was pregnant with Amelia.
She had also cooperated with the enquiries by the Lucy Faithfull Foundation and by Dr Dale (as was to be expected).
The parents had been able to co operate with a succession of workers who were supervising their contact with Amelia over the whole of her life.
Their initial relationship with the foster carer was not a happy one, but it had much improved.
And they had been able to co operate with the childs guardian.
On the other hand, they had not been so co operative with Barnet social services.
As the judge found, from the start she has failed to co operate reasonably with the local authority and at times has behaved in a singularly unconstructive way (para 140).
This was, as some of the examples given by Lord Wilson show, putting it mildly.
Perhaps this is not to be wondered at.
Their original contact was in the context of concern about Teresa and the household of Mr E.
The response was to seek an interim care order separating mother and baby without taking the usual step of a pre proceedings letter explaining matters to them.
Anyone who has had to leave a premature baby in a special baby care unit can empathise with the feelings of a mother who is prevented from taking her baby home when, miracle of miracles, that baby is well enough to be discharged from hospital.
Of course, the first social work statement to the court explained why the authority was making the application.
But the scene was set for a rocky relationship.
And this will not have been improved by the parents frequent complaints about Amelias progress in foster care.
The other negative relationship was with Ms Summer of the Marlborough Family Service.
In her oral evidence, Ms Nabi of the Lucy Faithfull Foundation, who was generally supportive of the mother, was surprised and worried by this.
Ms Summer had adopted the method of challenging the parents about the various aspects of their behaviour which were a matter of concern.
This had clearly not gone down well with them, they had been at times dishonest, evasive, petulant and immature.
In effect, the parents were willing to be helpful when they perceived that a professional was helping them but not when they perceived the professional to be the enemy.
But it was essential to set all this evidence against the evidence of the harm which was feared that Amelia might suffer in the future and the sort of programme which might be needed to protect her.
It was not established that the mother was immediately in need of the sort of intensive psychological therapy which would make such challenging demands upon her.
The question was what monitoring and support was an overriding requirement pertaining to the childs best interests.
It must not be forgotten that this is a child who as yet has suffered no harm at all (except possibly the harm of being separated from her mother so soon after birth).
She has had the advantage of remaining with the same foster carer throughout, where she is doing well.
She has also had the enormous advantage of establishing a strong and loving relationship with her parents, who have given her child centred love and affection in spades, as the judge put it.
Their commitment has been excellent and the fact that in all the circumstances their behaviour during contact has attracted so little criticism and so much praise is extraordinary.
She will eventually have to move on from her foster home and the only question is whether she moves to a completely new home with adoptive parents as yet unidentified or whether she moves to live with the parents she knows and loves and who know and love her.
Conclusion
In all the circumstances, I take the view that it has not been sufficiently demonstrated that it is necessary to bring the relationship between Amelia and her parents to an end.
In the circumstances of this case, it cannot be said that nothing else will do when nothing else has been tried.
The harm that is feared is subtle and long term.
It may never happen.
There are numerous possible protective factors in addition to the work of social services.
There is a need for some protective work, but precisely what that might entail, and how the parents might engage with it, has not yet been properly examined.
Accordingly, I would have allowed the appeal and sent the case back for a fresh and in depth enquiry by the childs new guardian (her original guardian having sadly died soon after the judges judgment), who would be able to examine both the necessity for and the viability of the sort of measures which were only beginning to be explored by the previous guardian.
My understanding of the careful submissions made to us on her behalf is that this would have been her preferred solution had we not now been so far down the road.
Of course the safest solution for Amelia now is almost certainly adoption.
But I take the view that the judge was indeed wrong to hold this a proportionate response to the risks which he had identified and that it is my duty to say so.
| The case concerns the application of the criteria for making a care order under section 31 of the Children Act 1989 when the risk is of future psychological or emotional harm and the role of the appellate courts once the trial judge has made an order.
The child concerned was removed from her parents at birth under an interim care order.
The mother was for many years in an abusive relationship with her step father.
She also has criminal convictions for dishonesty and a history of making false allegations.
She has been diagnosed with somatisation disorder, a condition which involves making multiple complaints to medical professionals of symptoms for which no adequate physical explanation can be found.
In the course of the proceedings she was also diagnosed with factitious disorder, a related psychiatric condition involving the deliberate exaggeration or fabrication of symptoms and the recitation of a false medical history.
In 2009 she escaped the abusive relationship with her stepfather, leaving behind their ten year old daughter, and quickly formed a relationship with the father of this child, who has been convicted of many serious offences.
He has four older daughters, with whom he has an amiable relationship but his involvement in their lives has been marginal, not least because of the many years he has spent in prison.
While the child was in interim care, the parents visited frequently and formed a good relationship with their daughter.
They had shown their commitment to her in spades.
The trial judge found that, if placed in her parents care, there was a risk that the child would be presented for and receive unnecessary medical treatment, that she might grow up to copy her mothers behaviour, and at the very least be confused at the difference between the real world and her mothers dishonest presentation of it.
There would have to be a multi disciplinary programme of monitoring and support to avert these risks and the parents would not be able to co operate with such a programme because of their fundamentally dishonest and manipulative approach towards social workers and other professionals whom they perceived to be challenging of their points of view.
Accordingly, there was no other way in which the feared harm to the child could be prevented than by a care order with a view to adoption.
The Court of Appeal upheld that judgment.
Both parents appealed to the Supreme Court.
The Supreme Court by a majority of 4:1 (Lady Hale dissenting) dismisses the appeal.
The High Court judge was entitled to conclude that the threshold conditions for the making of a care order had been satisfied in this case [48, 64, 131]: Before a care order may be made under section 31 of the 1989 Act, the judge has to be satisfied that: (a) the child is suffering or is likely to suffer significant harm; and (b) the harm or likelihood of harm is attributable to the care likely to be given to the child if a care order is not made, not being what it would be reasonable to expect a parent to give to the child, or to the childs being beyond parental control [23, 177].
A likelihood of significant harm means no more than a real possibility that it will occur, but a conclusion to that effect must be based upon a fact or facts established on the balance of probabilities.
Harm means ill treatment or impairment of health or development, and development includes emotional development.
Whereas the concept of ill treatment is absolute, the concept of impairment of health or development is relative to the health or development which could reasonably be expected of a similar child [24, 25, 178].
Courts should avoid seeking to explain the meaning of the word significant.
However, the severity of the harm required is inversely correlated with the likelihood of the harm, i.e. the less likely the harm is to occur the
more serious the harm will need to be [26, 56, 188].
Article 8 of the ECHR is not engaged when a court assesses whether or not harm is significant for these purposes; that provision will only be engaged in a case such as this if there is an interference with the right to respect for family life, which can only occur at the stage of determining whether or not a care or supervision order should be made [29, 62, 189].
The character of the parents is relevant at every stage of the inquiry, including the assessment of whether the threshold conditions set out in section 31(2) of the 1989 Act have been satisfied because the character of the parents may affect the quality of their parenting [31, 71].
The conduct of the parents giving rise to harm or the likelihood of harm is not required to be intentional or deliberate; the harm or likelihood of harm need only be attributable to the care given by the parents or the care likely to be given by them not being what it would be reasonable to expect a parent to give to the child [31].
A determination as to whether the threshold conditions for a care order have been satisfied depends on an evaluation of the facts of the case as found by the judge at first instance; it is not an exercise of discretion.
An appellate court may interfere with such a decision only if it is wrong, but it need not have been plainly wrong [44, 61, 110, 139, 203].
In determining whether the threshold conditions for a care order are satisfied and whether it is appropriate to grant a care order, an appellate court must have regard to the advantages which the judge at first instance had over an appellate court, including the judges ability to assess what may happen to the child in the future on the basis of the oral evidence given by the candidates for the care of the child [40 42, 58 60].
The High Court judge was also entitled to conclude that the making of a care order in relation to Amelia, with a view to her being adopted was necessary and did not violate the rights of Amelia, M, or F to respect for their family life under article 8 of the ECHR [48, 98, 131 133]: A high degree of justification is needed under article 8 if a decision is to be made that a child should be adopted or placed in care with a view to adoption against the wishes of the childs parents.
Domestic law runs broadly in parallel with article 8 in this context: the interests of the child must render it necessary to make an adoption order.
A care order in a case such as this must be a last resort [34, 74 78, 82, 130, 135, 198, 215].
Section 6 of the Human Rights Act 1998 does not require an appellate court to determine afresh issues relating to Convention rights; an appellate court, including the Supreme Court, is required only to conduct a review of the lower courts decision [36 37, 83 90, 136].
The making of a care order, however, is not a purely discretionary decision; a trial judge has an obligation under section 6 of the 1998 Act to ensure that he/she does not violate article 8 of the ECHR.
Accordingly, it is not appropriate for an appellate court reviewing such a decision to apply the test normally used when reviewing a purely discretionary decision, i.e. whether the lower court exceeded the generous ambit within which reasonable disagreement is possible [45].
The appropriate test is whether the lower court was wrong [47, 91 92, 139].
Lady Hale and Lord Kerr disagree with this analysis, taking the view that an appellate court reviewing whether a care order violates article 8 of the ECHR must consider that issue for itself on the basis of the material put before it (whilst attributing appropriate weight to the reasons given by the lower court) [115 120, 204 205].
There are a number of features relative to the personalities of Amelias parents, and to the psychiatric conditions of M, which raised a real possibility that, in their care, Amelia would suffer impairment of her emotional development.
The key feature of this case which justified the judges decision not only that the threshold conditions for making a care order were satisfied but that such an order was appropriate was that Amelias parents were unable to offer the elementary cooperation with professionals that her safety in their home would require.
Adoption was the only viable option for Amelias future [48, 99 100, 132, 106].
Lady Hale takes the view that this was a case based on the mere possibility that the child would suffer psychological harm in the future.
There was no risk that these parents would neglect or abuse their child.
Even if this were sufficient to cross the threshold laid down in section 31(2) of the Children Act 1989, it had not been demonstrated that a care order with a view to adoption was necessary to protect the child that nothing else would do when nothing else had been tried.
The care order was not, therefore, a proportionate response to the harm which is feared.
|
A is a former senior member of the Security Service, B its Director of Establishments.
A wants to publish a book about his work in the Security Service.
For this he needs Bs consent: unsurprisingly, A is bound by strict contractual obligations as well as duties of confidentiality and statutory obligations under the Official Secrets Act 1989.
On 14 August 2007, after lengthy top secret correspondence (and following final consideration by the Director General), B refused to authorise publication of parts of the manuscript.
The correspondence (and annexures) described in detail the Security Servicess national security objections to disclosure.
On 13 November 2007 A commenced judicial review proceedings to challenge Bs decision.
He claims that it was unreasonable, vitiated by bias and contrary to article 10 of the European Convention on Human Rights, the right to freedom of expression.
Is such a challenge, however, one that A can bring in the courts or can it be brought only in the Investigatory Powers Tribunal (the IPT)? That is the issue now before the Court and it is one which depends principally upon the true construction of section 65(2)(a) of the Regulation of Investigatory Powers Act 2000 (RIPA): (a) they are proceedings against any of the intelligence services; (2) The jurisdiction of the Tribunal shall be (a) to be the only appropriate tribunal for the purposes of section 7 of the Human Rights Act 1998 in relation to any proceedings under subsection (1)(a) of that section (proceedings for actions incompatible with Convention rights) which fall within subsection (3) of this section;
Subsection (3) provides that proceedings fall within this section if
Collins J decided that the Administrative Court had jurisdiction to hear As challenge: [2008] 4 All ER 511 (4 July 2008).
The Court of Appeal (Laws and Dyson LJJ, Rix LJ dissenting) reversed that decision, holding that exclusive jurisdiction lies with the IPT: [2009] 3 WLR 717 (18 February 2009).
Before turning to the rival contentions it is convenient to set out the legislative provisions most central to the arguments advanced.
The Human Rights Act 1998 (HRA) by section 7 provides: (1) A person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may (a) bring proceedings against the authority under this Act in the appropriate court or tribunal, or (b) rely on the Convention right or rights concerned in any legal proceedings, but only if he is (or would be) a victim of the unlawful act. (2) In subsection (1) (a) appropriate court or tribunal means such court or tribunal as may be determined in accordance with rules; and proceedings against an authority include a counterclaim or similar proceeding. (9) In this section rules means (a) in relation to proceedings before a court or tribunal outside Scotland, rules made by . the Lord Chancellor or the Secretary of State for the purposes of this section or rules of court.
Pursuant to section 7(9), CPR 7.11 (introduced, like HRA, with effect from 2 October 2000) provides: (1) A claim under section 7(1)(a) of the Human Rights Act 1998 in respect of a judicial act may be brought only in the High Court. (2) Any other claim under section 7(1)(a) of that Act may be brought in any court.
The only tribunals upon whom section 7(1)(a) HRA jurisdiction has been conferred by rules made under section 7(9) are the Special Immigration Appeals Commission (SIAC) and the Proscribed Organisations Appeal Commission (POAC) not, contrary to the Court of Appeals understanding (see paras 20, 33 and 56 of the judgments below), the Employment Tribunal.
I have already set out section 65(2)(a) of RIPA.
Section 65(1) made provision for the establishment of the IPT and schedule 3 to the Act provides for its membership.
Currently its President is Mummery LJ and its Vice President, Burton J. Section 67(2) provides: Where the tribunal hear any proceedings by virtue of section 65(2)(a), they shall apply the same principles for making their determination in those proceedings as would be applied by a court on an application for judicial review.
Section 67(7) empowers the Tribunal to make any such award of compensation or other order as they think fit.
Section 67(8) provides: Except to such extent as the Secretary of State may by order otherwise provide, determinations, awards, orders and other decisions of the Tribunal (including decisions as to whether they have jurisdiction) shall not be subject to appeal or be liable to be questioned in any court.
Subject to any rules made under section 69, the Tribunal shall be entitled to determine their own procedure in relation to any proceedings, complaint or reference brought before or made to them.
Section 68(1) provides: Section 68(4) provides: Where the Tribunal determine any proceedings, complaint or reference brought before or made to them, they shall give notice to the complainant which (subject to any rules made by virtue of section 69(2)(i)) shall be confined, as the case may be, to either (a) a statement that they have made a determination in his favour; or (b) a statement that no determination has been made in his favour.
Section 69 confers on the Secretary of State the rule making power pursuant to which were made the Investigatory Powers Tribunal Rules 2000 (SI No 2000/2665) (the Rules).
Section 69(6) provides: In making rules under this section the Secretary of State shall have regard, in particular, to the need to secure that matters which are the subject of (a) proceedings, complaints or references brought before or made to the Tribunal are properly heard and considered; and (b) the need to secure that information is not disclosed to an extent, or in a manner, that is contrary to the public interest or prejudicial to national security, the prevention or detection of serious crime, the economic well being of the United Kingdom or the continued discharge of the functions of any of the intelligence services.
Rule 13(2) provides that where the Tribunal make a determination in favour of the complainant they shall provide him with a summary of that determination including any findings of fact (to this extent qualifying section 68(4)(a) of the Act).
Rule 6(1) gives effect to section 69(6)(b) by providing that the Tribunal shall carry out their functions in such a way as to meet the stipulated need with regard to the non disclosure of information.
The effect of rules 6(2) and (3) is that, save with the consent of those concerned, the Tribunal may not disclose to the complainant or any other person any information or document disclosed or provided to them in the course of any hearing or the identity of any witness at that hearing.
Rule 9 provides that the Tribunal are under no duty to hold oral hearings and may hold separate oral hearings for the complainant and the public authority against which the proceedings are brought.
Rule 9(6) provides that: The Tribunals proceedings, including any oral hearings, shall be conducted in private.
In Applications Nos.
IPT/01/62 and IPT/01/77 (23 January 2003) the IPT
ruled on various preliminary issues of law regarding the legality of a number of the rules.
They held that rule 9(6) was ultra vires section 69 of RIPA as being incompatible with article 6 of the Convention but that in all other respects the Rules are valid and binding on the Tribunal and are compatible with articles 6, 8 and 10 of the Convention (para 12 of the IPTs 83 page ruling which is itself the subject of a pending application before the European Court of Human Rights (ECtHR)).
Consequent on their ruling on rule 9(b) the IPT published the transcript of the hearing in that case and now hear argument on points of law in open court.
A accepts that the legal challenge he is making to Bs decision is properly to be characterised as proceedings under section 7(1)(a) of HRA within the meaning of section 65(2)(a) of RIPA (and not, as he had argued before the judge at first instance, that he should be regarded merely as relying on his article 10 rights pursuant to section 7(1)(b) HRA), and that these are proceedings against one of the Intelligence Services within the meaning of section 65(3)(a) (and not, as he had argued before the Court of Appeal, against the Crown).
He nevertheless submits that he is not required by section 65(2)(a) to proceed before the IPT.
His first and main argument the argument which prevailed before Collins J and was accepted also by Rix LJ is that he is entitled to proceed either by way of judicial review or before the IPT, entirely at his own choice.
Section 65(2)(a), he submits, excludes the section 7(1)(a) jurisdiction of any other tribunal but not that of the courts.
His second and alternative argument (not advanced in either court below) is that, even if section 65(2)(a) is to be construed as conferring exclusive section 7(1)(a) jurisdiction on the IPT, it does so only in respect of proceedings against the intelligence services arising out of the exercise of one of the investigatory powers regulated by RIPA.
This, of course, would involve narrowing the apparent width of the expression proceedings against any of the intelligence services in section 65(3)(a) and, if correct, means that A here could not proceed before the IPT even if he wished to do so.
Justice have intervened in the appeal in support of As submissions.
Like A, they urge us to adopt as narrow a construction of section 65 as possible, first, so as not to exclude the jurisdiction of the ordinary courts and, secondly, to avoid a construction which they submit will inevitably give rise to breaches of other Convention rights, most notably the article 6 right to a fair hearing.
Argument 1 Section 65(2)(a) excludes only the jurisdiction of other tribunals
This argument focuses principally upon the use of the word tribunal in the expression only appropriate tribunal in section 65(2)(a).
A says it that it means tribunals only and not courts; B says that it encompasses both.
A says that if it was intended to exclude courts as well as tribunals it would have used the same expression, the appropriate forum, as was used in section 65(2)(b), 65(4) and 65(4A) of RIPA.
B points out that those three provisions all deal with complaints, for which provision had originally been made in the Security Service Act 1989 and the Intelligence Services Act 1994 and which are not the same as legal claims, forum being, therefore, a more appropriate term to describe the venue for their resolution.
Plainly the word tribunal, depending on the context, can apply either to tribunals in contradistinction to courts or to both tribunals and courts.
As B points out, section 195(1) of the Extradition Act 2003 describes the appropriate judge (a designated District Judge) as the only appropriate tribunal in relation to section 7(1)(a) HRA proceedings.
So too section 11 of the Prevention of Terrorism Act 2005 describes the court (as thereafter defined) as the appropriate tribunal for the purposes of section 7 of the Human Rights Act.
Section 7(2) of HRA itself appears to require that a court or tribunal is designated as the appropriate court or tribunal, not that both are designated.
Couple with that the use of the word only before the phrase appropriate tribunal in section 65 and it seems to me distinctly unlikely that Parliament was intending to leave it to the complainant to choose for himself whether to bring his proceedings in court or before the IPT.
There are, moreover, powerful other pointers in the same direction.
Principal amongst these is the self evident need to safeguard the secrecy and security of sensitive intelligence material, not least with regard to the working of the intelligence services.
It is to this end, and to protect the neither confirm nor deny policy (equally obviously essential to the effective working of the services), that the Rules are as restrictive as they are regarding the closed nature of the IPTs hearings and the limited disclosure of information to the complainant (both before and after the IPTs determination).
There are, however, a number of counterbalancing provisions both in RIPA and the Rules to ensure that proceedings before the IPT are (in the words of section 69(6)(a)) properly heard and considered.
Section 68(6) imposes on all who hold office under the Crown and many others too the widest possible duties to provide information and documents to the IPT as they may require.
Public interest immunity could never be invoked against such a requirement.
So too sections 57(3) and 59(3) impose respectively upon the Interception of Communications Commissioner and the Intelligence Services Commissioner duties to give the IPT all such assistance as it may require.
Section 18(1)(c) disapplies the otherwise highly restrictive effect of section 17 (regarding the existence and use of intercept material) in the case of IPT proceedings.
And rule 11(1) allows the IPT to receive evidence in any form, and [to] receive evidence that would not be admissible in a court of law.
All these provisions in their various ways are designed to ensure that, even in the most sensitive of intelligence cases, disputes can be properly determined.
None of them are available in the courts.
This was the point that so strongly attracted Dyson LJ in favour of Bs case in the court below.
As he pithily put it at [2009] 3 WLR 717, para 48: It seems to me to be inherently unlikely that Parliament intended to create an elaborate set of rules to govern proceedings against an intelligence service under section 7 of the 1998 Act in the IPT and yet contemplated that such proceedings might be brought before the courts without any rules.
A further telling consideration against the contention that section 65(2)(a) is intended only to exclude other tribunals with jurisdiction to consider section 7(1)(a) HRA claims is that there are in fact none such with section 7(1)(a) jurisdiction over the categories of claim listed in section 65(3).
As stated (at para 4 above), only SIAC and POAC have section 7(1)(a) jurisdiction and in each instance that is with regard to matters outside the scope of section 65.
The Court of Appeal were under the misapprehension that the Employment Tribunal too had section 7(1)(a) jurisdiction and were accordingly mistaken in supposing, as Rix LJ put it at para 33, that [t]herefore, section 65(2)(a) of the 2000 Act has content as referring to the IPT as the only appropriate tribunal.
In the light of these various considerations it is hardly surprising that A himself recognises that this construction produces a slightly unsatisfactory legislative outcome, although he submits that this is a small price to pay for protecting the article 6 rights of claimants and respecting the principle that access to the courts should not be denied save by clear words, a submission to which I shall come after considering As alternative contended for construction.
Argument 2 Section 65(2)(a) confers exclusive jurisdiction on the IPT but only in respect of proceedings arising out of the exercise of one of the RIPA regulated
investigatory powers
Although this was not an argument advanced at any stage below, I confess to having been attracted to it for a while.
After all, in enacting RIPA, Parliament must have had principally in mind the use and abuse of the particular investigatory powers regulated by the Act and there would not appear to be the same need for secrecy, the withholding of information and the neither confirm nor deny policy in the case of an ex officer as in the case of someone outside the intelligence community.
The difficulties of such a construction, however, are obvious and in the end, to my mind, insurmountable.
As already observed, it would involve reading into section 65(3)(a) limiting words which are simply not there.
This would be difficult enough at the best of times.
Given, however, that other paragraphs of section 65(3) are in fact more obviously directed to complaints of abuse of the intelligence services regulatory powers (see particularly section 65(3)(d) read with sections 65(5)(a) and 65(7), none of which I have thought it necessary to set out), it seems to me quite impossible to construe the section as this argument invites us to do.
Nor, indeed, on reflection, does it seem right to regard proceedings of the kind intended here as immune from much the same requirement for non disclosure of information as other proceedings against the intelligence services.
As B points out, it is perfectly possible that the security service will ask the tribunal hearing this dispute to consider additional material of which A may be unaware (and of which the security service is properly concerned that he should remain unaware) which leads it to believe that the publication of As manuscript would be harmful to national security.
On any view, moreover, the proceedings by which any tribunal comes to determine whether the disputed parts of the manuscript can safely be published would have to be heard in secret.
Again, therefore, the existence of the IPT Rules designed to provide for just such proceedings and the lack of any equivalent rules available to the courts points strongly against this alternative construction also.
Are there, however, sufficiently strong arguments available to A (and Justice) to compel the court, with or without resort to section 3 of HRA, to adopt a contrary construction of section 65? It is convenient to consider these arguments under three broad heads.
i. Ouster
A and Justice argue that to construe section 65 as conferring exclusive jurisdiction on the IPT constitutes an ouster of the ordinary jurisdiction of the courts and is constitutionally objectionable on that ground.
They pray in aid two decisions of high authority: Pyx Granite Co Ltd v Ministry of Housing and Local Government [1960] AC 260 and Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147.
To my mind, however, the argument is unsustainable.
In the first place, it is evident, as the majority of the Court of Appeal pointed out, that the relevant provisions of RIPA, HRA and the CPR all came into force at the same time as part of a single legislative scheme.
With effect from 2 October 2000 section 7(1)(a) HRA jurisdiction came into existence (i) in respect of section 65(3) proceedings in the IPT pursuant to section 65(2)(a), and (ii) in respect of any other section 7(1)(a) HRA proceedings in the courts pursuant to section 7(9) and CPR 7.11.
True it is, as Rix LJ observed, that CPR 7.11(2) does not explicitly recognise the exception to its apparent width represented by section 65(2)(a).
But that is not to say that section 65(2)(a) ousts some pre existing right.
This case, in short, falls within the principle recognised by the House of Lords in Barraclough v Brown [1897] AC 615 where, as Lord Watson said at p 622: The right and the remedy are given uno flatu, and the one cannot be dissociated from the other. rather than the principle for which Pyx Granite stands (p 286): It is a principle not by any means to be whittled down that the subjects recourse to Her Majestys courts for the determination of his rights is not to be excluded except by clear words.
Distinguishing Barraclough v Brown, Viscount Simonds pointed out that the statute there in question could be construed as merely providing an alternative means of determining whether or not the company had a pre existing common law right to develop their land; it did not take away the inalienable remedy . to seek redress in [the courts].
Before 2 October 2000 there was, of course, no pre existing common law or statutory right to bring a claim based on an asserted breach of the Convention.
Section 65(2)(a) takes away no inalienable remedy.
Nor does Anisminic assist A.
The ouster clause there under consideration purported to remove any judicial supervision of a determination by an inferior tribunal as to its own jurisdiction.
Section 65(2)(a) does no such thing.
Parliament has not ousted judicial scrutiny of the acts of the intelligence services; it has simply allocated that scrutiny (as to section 7(1)(a) HRA proceedings) to the IPT.
Furthermore, as Laws LJ observed at para 22: [S]tatutory measures which confide the jurisdiction to a judicial body of like standing and authority to that of the High Court, but which operates subject to special procedures apt for the subject matter in hand, may well be constitutionally inoffensive.
The IPT . offers . no cause for concern on this score.
True it is that section 67(8) of RIPA constitutes an ouster (and, indeed, unlike that in Anisminic, an unambiguous ouster) of any jurisdiction of the courts over the IPT.
But that is not the provision in question here and in any event, as A recognises, there is no constitutional (or article 6) requirement for any right of appeal from an appropriate tribunal.
The position here is analogous to that in Farley v Secretary of State for Work and Pensions (no. 2) [2006] 1 WLR 1817 where the statutory provision in question provided that, on an application by the Secretary of State for a liability order in respect of a person liable to pay child support, the court . shall not question the maintenance assesment under which the payments of child support maintenance fall to be made.
Lord Nicholls, with whom the other members of the Committee agreed, observed, at para 18: The need for a strict approach to the interpretation of an ouster provision . was famously confirmed in the leading case of Anisminic .
This strict approach, however, is not appropriate if an effective means of challenging the validity of a maintenance assessment is provided elsewhere.
Then section 33(4) is not an ouster provision.
Rather, it is part of a statutory scheme which allocates jurisdiction to determine the validity of an assessment and decide whether the defendant is a liable person to a court other than the magistrates court.
Convention rights
A and Justice submit that to force this article 10 challenge into the IPT would inevitably result in breaches of article 6.
In support of this submission they rely principally upon the following features of the IPTs procedures: first, that the entire hearing (save for purely legal argument) will be not only private but secret, indeed claimants may not even be told whether a hearing has been or will be held; secondly, that the submissions and evidence relied on respectively by the claimant and the respondent may be considered at separate hearings; thirdly, that only with the respondents consent will the claimant be informed of the opposing case or given access to any of the respondents evidence; fourthly, that no reasons will be given for any adverse determination.
All of this, runs the argument, is flatly contrary to the basic principles of open justice: that there should be a public hearing at which the parties have a proper opportunity to challenge the opposing case and after which they will learn the reasons for an adverse determination.
As, however, already explained (at para 14), claims against the intelligence services inevitably raise special problems and simply cannot be dealt with in the same way as other claims.
This, indeed, has long since been recognised both domestically and in Strasbourg.
It is sufficient for present purposes to cite a single paragraph from the speech of Lord Bingham of Cornhill in R v Shayler [2003] 1 AC 247, para 26 (another case raising article 10 considerations): The need to preserve the secrecy of information relating to intelligence and military operations in order to counter terrorism, criminal activity, hostile activity and subversion has been recognised by the European Commission and the Court in relation to complaints made under article 10 and other articles under the Convention: see Engel v The Netherlands (No 1) (1976) 1 EHRR 647, paras 100 103; Klass v Federal Republic of Germany (1978) 2 EHRR 214, para 48; Leander v Sweden (1987) 9 EHRR 433, para 59; Hadjianastassiou v Greece (1992) 16 EHRR 219, paras 45 47; Esbester v United Kingdom (1993) 18 EHRR CD 72, 74; Brind v United Kingdom (1994) 18 EHRR CD 76, 83 84; Murray v United Kingdom (1994) 19 EHRR 193, para 58; Vereniging Weekblad Bluf! v The Netherlands (1995) 20 EHRR 189, paras 35, 40.
The thrust of these decisions and judgments has not been to discount or disparage the need for strict and enforceable rules but to insist on adequate safeguards to ensure that the restriction does not exceed what is necessary to achieve the end in question.
The acid test is whether, in all the circumstances, the interference with the individuals Convention right prescribed by national law is greater than is required to meet the legitimate object which the state seeks to achieve.
The OSA 1989, as it applies to the appellant, must be considered in that context.
In one of the Strasbourg cases there referred to, Esbester v United Kingdom, and indeed in a series of other cases brought against the UK at about the same time, the Strasbourg Commission rejected complaints as to the form of proceedings adopted by the Security Service Tribunal and the Interception of Communications Tribunal, not least as to the absence of a reasoned determination.
I acknowledge that later in his opinion in Shayler (at para 31) Lord
Bingham, contemplating the possibility that authority to publish might have been refused without adequate justification (or at any rate where the former member firmly believed that no adequate justification existed), said: In this situation the former member is entitled to seek judicial review of the decision to refuse, a course which the OSA 1989 does not seek to inhibit.
In that case, however, the disclosures had been made before the enactment of RIPA and the creation of the IPT and it is plain that the House had not been referred to section 65(2)(a), still less had had occasion to consider its scope.
It cannot sensibly be supposed that the case would have been decided any differently had it been recognised that after 2 October 2000 such a challenge would have had to be brought before the IPT.
Admittedly the Esbester line of cases were decided in the context of article 8 (rather than article 10) and, understandably, Strasbourg attaches particular weight to the right to freedom of expression.
Neither A nor Justice, however, were able to show us any successful article 10 cases involving national security considerations save only for Sunday Times v UK (no. 2) (1991) 14 EHRR 229 (Spycatcher) where, of course, the disputed material was already in the public domain.
For my part I am wholly unpersuaded that the hearing of As complaint in the IPT will necessarily involve a breach of article 6.
There is some measure of flexibility in the IPTs rules such as allows it to adapt its procedures to provide as much information to the complainant as possible consistently with national security interests.
In any event, of course, through his lengthy exchanges with B, A has learned in some detail why objections to publication remain.
Article 6 complaints fall to be judged in the light of all the circumstances of the case.
We would, it seems to me, be going further than the Strasbourg jurisprudence has yet gone were we to hold in the abstract that the IPT procedures are necessarily incompatible with article 6(1).
Consistently with the well known rulings of the House of Lords in R (Ullah) v Special Adjudicator [2004] 2 AC 323 para 20 and R (Al Skeini) v Secretary of State for Defence [2008] 1 AC 153 paras 105, 106, I would decline to do so, particularly since, as already mentioned, the IPTs own decision on its rules is shortly to be considered by the ECtHR.
Over and above all this is the further and fundamental consideration, that even if the IPTs Rules and procedures are in any way incompatible with article 6, the remedy for that lies rather in their modification than in some artificially limited construction of the IPTs jurisdiction.
It is, indeed, difficult to understand which of the appellants contended for constructions is said to be advanced by this submission.
On any view the IPT has some jurisdiction.
Yet the argument involves a root and branch challenge to its procedures in all cases.
Anomalies
The Court of Appeals construction of section 65(2)(a) is said to give rise to a number of anomalies.
Under this head I shall touch too upon certain other points advanced variously by A and Justice.
The first anomaly is said to be that while section 7(1)(a) HRA proceedings have to be brought before the IPT, other causes of action or public law grounds for judicial review need not.
This point troubled Rix LJ who asked ([2009] 3WLR 717, para 39): what is so special about section 7 proceedings under the 1998 Act against the intelligence services . ? The answer surely is that such claims are the most likely to require a penetrating examination of the justification for the intelligence services actions and, therefore, close scrutiny of sensitive material and operational judgment.
But it may well be (as, indeed, Rix LJ foresaw) that section 65(2)(d) of RIPA will be brought into force so that the Secretary of State can allocate other proceedings too exclusively to the IPT.
Meantime, subject always to the courts abuse of process jurisdiction and the exercise of its discretion in public law cases, proceedings outside section 7(1)(a) can still be brought in the courts so that full effect is given to the preservation of such rights by section 11 of HRA.
It is similarly said to be anomalous that whereas A, responsibly seeking prior clearance for the publication of his manuscript, is driven into the IPT, someone in a similar position, although perhaps facing injunctive proceedings for having sought to publish without permission, would be entitled pursuant to section 7(1)(b) HRA to rely in those ordinary court proceedings on their article 10 rights.
Whilst I readily see the force of this, the answer to it may be that defences were not sufficiently thought through at the time of this legislation and that more, rather than fewer, proceedings involving the intelligence services should be allocated exclusively to the IPT.
A further anomaly is said to be that Special Branch police officers and Ministry of Defence special forces may well carry out work of comparable sensitivity to that undertaken by the intelligence services and yet section 7(1)(a) HRA claims brought against them would proceed in the ordinary courts and not in the IPT.
Part of the answer to this is to be found in the special position of those employed in the security and intelligence services, and the special nature of the work they carry out (Lord Binghams opinion in Shayler at para 36); the rest in the same response as to the earlier points: perhaps the IPTs exclusive jurisdiction should be widened.
Sitting a little uneasily alongside the last suggested anomaly is the contention that section 65(2)(a) vests in the IPT exclusive jurisdiction over various kinds of proceedings against people quite other than the intelligence services which may involve little if anything in the way of sensitive material for example, pursuant to section 65(3)(c), proceedings under section 55(4) of RIPA with regard to accessing encrypted data.
Whatever view one takes about this, however, it is impossible to see how it supports either of the alternative constructions of section 65 for which A contends.
In short, none of the suggested anomalies resulting from the Court of Appeals construction seems to me to cast the least doubt on its correctness let alone to compel some strained alternative construction of the section.
I see no reason to doubt that the IPT is well able to give full consideration to this dispute about the publication of As manuscript and, adjusting the procedures as necessary, to resolve it justly.
Quite why A appears more concerned than B about the lack of any subsequent right of appeal is difficult to understand.
Either way, Parliament has dictated that the IPT has exclusive and final jurisdiction in the matter.
I would dismiss the appeal.
I agree with Lord Browns opinion.
I wish only to add a few brief footnotes.
LORD HOPE
The Rules
As Lord Brown has explained (see para 14, above), among the factors that reinforce the conclusion that is to be drawn from the terms of the statute that Parliament did not intend to leave it to the complainant to choose for himself whether to bring his proceedings in a court or before the IPT are the provisions that RIPA contains about the rules that may be made under it.
In Hanlon v The Law Society [1981] AC 124, 193 194 Lord Lowry set out the circumstances in which a regulation made under a statutory power was admissible for the purpose of construing the statute under which it was made.
The use of the rules themselves as an aid to construction, in addition to what RIPA itself says about them, needs however to be treated with some care.
In Deposit Protection Board v Dalia [1994] 2 AC 367 the issue was as to the meaning of the word depositor, and the regulations that were prayed in aid were made four years after the date of the enactment.
At p 397 Lord Browne Wilkinson said that regulations could only be used an aid to construction where the regulations are roughly contemporaneous with the Act being construed.
In Dimond v Lovell [2000] QB 216, para 48 Sir Richard Scott VC said that he did not think that the content of regulations which postdated the Consumer Credit Act 1974 by some nine years could be taken to be a guide to what Parliament intended by the language used in the Act.
One must also bear in mind, as Lord Lowry said in Hanlon at p 193 194, that regulations cannot be said to control the meaning of the Act, as that would be to disregard the role of the court as interpreter.
In this case the statute received the Royal Assent on 28 July 2000.
The Investigatory Powers Tribunal Rules 2000 (SI 2000/2665) were made on 28 September 2000 and laid before Parliament the next day.
The interval was so short that, taken together, they can be regarded as all part of same legislative exercise.
But, as Mr Crow QC for B submitted, it is not the content of the rules as such that matters here.
Rather it is the fact that the Act itself put a specialist regime in place to ensure that the IPT was properly equipped to deal with sensitive intelligence material.
Section 68(4) of RIPA limits the information that the Tribunal may give to a complainant where they determine any complaint brought before them to a statement that a determination either has been or has not been made in the complainants favour.
Section 69(4) states that the Secretary of States power to make rules under that section includes power to make rules that limit the information that is given to the complainant and the extent of his participation in the proceedings.
Section 69(6)(b) states that in making rules under that section the Secretary of State shall have regard in particular to the need to secure that information is not disclosed to an extent that is contrary to the public interest or prejudicial to national security.
The fact that this regime was so carefully designed to protect the public interest by the scheme that is set out in the statute is in itself a strong pointer to the conclusion that Parliament did not intend by section 65(2)(a) that the jurisdiction of the IPT in relation to claims of the kind that A seeks to bring in this case was to be optional.
I do not think that it is necessary to go further and look at the Rules themselves, as the indication that the statute itself gives is so clear on this point.
Anomalies
Although he adopted a different stance before Collins J, as the judge recorded in para 20 of his opinion [2008] EWHC 1512 (Admin), A now accepts that the legal challenge that he is making to Bs decision is properly to be characterised as proceedings under section 7(1)(a) of the Human Rights Act 1998 and not under section 7(1)(b) of that Act.
Section 7(1)(a) of the 1998 Act provides that a person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may bring proceedings against the authority under this Act in the appropriate court of tribunal.
Section 7(1)(b) provides, in the alternative, that he may rely on the Convention right or rights concerned in any legal proceedings.
As Clayton & Tomlinson, The Law of Human Rights, 2nd ed (2009), para 22.03, puts it: This section contemplates two ways in which a person may advance a contention that a public authority has acted in a way which is incompatible with his Convention rights: either by making a free standing claim based on a Convention right in accordance with section 7(1)(a) or by relying on a Convention right in proceedings in accordance with section 7(1)(b).
In R v Kansal (No 2) [2002] 2 AC 69, 105 106 I said that section 7(1)(a) and section 7(1)(b) are designed to provide two quite different remedies.
Section 7(1)(a) enables the victim of the unlawful act to bring proceedings under the Act against the authority.
It is intended to cater for free standing claims made under the Act where there are no other proceedings in which the claim can be made.
It does not apply where the victim wishes to rely on his Convention rights in existing proceedings which have been brought against him by a public authority.
His remedy in those proceedings is that provided by section 7(1)(b), which is not subject to the time limit on proceedings under section 7(1)(a) prescribed by section 7(5); see also Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816, para 90.
The purpose of section 7(1)(b) is to enable persons against whom proceedings have been brought by a public authority to rely on the Convention rights for their protection.
The fact that section 65(2)(a) requires proceedings under section 7(1)(a) to be brought before the IPT, while relying on section 7(1)(b) was not subject to this requirement, was said by Mr Millar QC to be anomalous.
Why, he said, should a claim be so restricted when a defence relying on Convention rights to injunctive proceedings by a public authority, or a counterclaim, was not? I am reluctant to conclude that the omission of a reference to section 7(1)(b) was due to an oversight, and I do not think that when regard is had to the purpose of these provisions there is any anomaly.
I would reject the suggestion that a counterclaim against a public authority on the ground that it has acted (or proposes to act) in a way that is made unlawful under section 6(1) of the 1998 Act should be regarded as having been made under section 7(1)(b).
This issue is not to be resolved by reference to the procedural route by which the claim is made but by reference to the substance of the claim.
A counterclaim against a public authority for a breach of Convention rights is to be treated as a claim for the purposes of section 7(1)(a): see section 7(2) which states that proceedings against an authority include a counterclaim or similar proceedings.
It will be subject to the time limit on proceedings under that provision in section 7(5).
As for defences, the scheme of the 1998 Act is that a person who is (or would be) a victim of an act that it is made unlawful by section 6(1) because the public authority has acted (or proposes to act) in that way is entitled to raise that issue as a defence in any legal proceedings that may be brought against him.
Section 7(1)(b) contemplates proceedings in which it would be open to the court or tribunal to grant relief against the public authority on grounds relating to a breach of the persons Convention rights, such as those guaranteed by article 6.
The scope for inquiry is relatively limited in comparison with that which may be opened up by a claim made under section 7(1)(a).
It is possible, however, to envisage a situation in which a defence to an application for injunctive relief by the intelligence services would open up for inquiry issues of the kind that section 65(2)(a) of RIPA reserves for determination by the IPT if they were to be subject of a claim under section 7(1)(a), the disclosure of which would be contrary to the public interest or prejudicial to national security.
It is true that the legislation does not address this problem, perhaps because it was thought inappropriate to reserve to the IPT proceedings that were initiated by and in the control of the intelligence services or any other person in respect of conduct on their behalf.
But the situation that this reveals is, I think, properly to be regarded as a product of the way the legislative scheme itself was framed.
It does not provide a sound reason for thinking that Parliament intended to leave it to the complainant to choose whether to bring his proceedings in a court rather than before the IPT.
Like Lord Brown, I can find nothing in this alleged anomaly, or in any of the others that have been suggested, that supports the construction of section 65(2)(a) for which A contends.
| A is a former member of the Security Service, B its Director of Establishments.
A wants to publish a book about his work in the Security Service.
A duty of confidentiality binds A and he cannot publish material relating to the Security Service without Bs consent.
B refused As application for consent to publish.
As a result, A began proceedings in the High Court to challenge Bs decision.
He claimed, amongst other things, that his right to freedom of expression under article 10 of the European Convention on Human Rights had been breached.
B argued that section 65(2)(a) of the Regulation of Investigatory Powers Act 2000 (RIPA) provided that the Investigatory Powers Tribunal (the IPT) was the only appropriate tribunal in relation to proceedings under section 7(1)(a) of the Human Rights Act 1998 brought against the intelligence services, such that the High Court did not have jurisdiction to entertain As article 10 claim.
The High Court held that it had jurisdiction to hear As challenge.
The Court of Appeal, by a majority, reversed the High Courts decision, holding that exclusive jurisdiction did lie with the IPT.
A appealed to the Supreme Court.
Justice (an all party law reform and human rights organisation) intervened in the appeal in support of As submissions.
The Supreme Court unanimously dismissed As appeal.
Lord Brown, with whom all the members of the Court agreed, gave the leading judgment.
Lord Hope gave a concurring opinion.
Two alternative arguments were advanced by A: Section 65(2)(a) excludes the section 7(1)(a) jurisdiction of any other tribunal but not that of the courts.
Even if section 65(2)(a) is to be construed as conferring exclusive section 7(1)(a) jurisdiction on the IPT, it does so only in respect of proceedings against the intelligence services arising out of the exercise of one of the investigatory powers regulated by RIPA.
As to the first argument, Lord Brown noted that the language of section 7(2) of the 1998 Act and the use of the word only before appropriate tribunal in section 65(2)(a) indicated that it was unlikely that Parliament was intending to leave it to a complainant to choose for himself whether to bring proceedings in court or before the IPT (Para 13).
Whilst the IPT rules made under RIPA were restrictive (e.g. in relation to the limited disclosure of information to a complainant), there were various provisions in RIPA and the IPT rules which were designed to ensure that, even in the most sensitive cases, disputes could be properly determined.
None of these provisions would be available in the courts (Para 14).
A further telling consideration against As construction was that there were in fact no other tribunals with section 7(1)(a) jurisdiction over the categories of claim listed in section 65(3) of RIPA (Para 15).
As to the second argument, Lord Brown considered that As submission would involve reading into section 65(3)(a) (which contains the phrase proceedings against any of the intelligence services) words which were simply not there.
There were, in addition, other provisions in RIPA which were more obviously directed to complaints of abuse of the intelligence services regulatory power which made it impossible to adopt As construction (Para 18).
It also did not seem right to regard proceedings of the kind intended here as immune from the same requirement for non disclosure of information as other proceedings against the intelligence services (Para 19).
Lord Brown then went on to consider whether there were sufficiently strong arguments available to A which would require the Court to construe section 65 in a way which was contrary to Lord Browns initial conclusions as to its construction.
For the reasons set out below, Lord Brown concluded that there were no such arguments available to A. Lord Brown rejected As argument to the effect that to construe section 65 as conferring exclusive jurisdiction on the IPT would constitute an ouster of the jurisdiction of the courts that would be constitutionally objectionable (Para 21).
RIPA, the 1998 Act and the Civil Procedure Rules all came into force at the same time as part of a single legislative scheme and it could not be said that section 65(2)(a) was ousting some pre existing right (Paras 21 22).
Parliament had not ousted judicial scrutiny of the acts of the intelligence services, but had simply allocated that scrutiny (as to section 7(1)(a) proceedings) to the IPT (Para 23 24).
Lord Brown also rejected the argument that forcing As article 10 challenge into the IPT would result in breaches of article 6 of the Convention.
Claims against intelligence services inevitably raise special problems that cannot be dealt with in the same way as other claims and this was recognised both domestically and by the European Court of Human Rights (Para 26).
The Court would be going further than the Strasbourg jurisprudence if it were to hold that the IPT procedures are necessarily incompatible with article 6(1) and it would decline to do so here (Para 30).
Even if the IPTs rules are in any way incompatible with article 6, the remedy would be to modify them, instead of adopting some artificially limited construction of the IPTs jurisdiction (Para 31).
The anomalies which A alleged would arise if the Court of Appeals construction were to be adopted also did not cast doubt on the correctness of the Court of Appeals decision (Paras 32 37).
|
On 5 September 2004 the appellant Kevin Ruddy was arrested by two officers of Tayside Police in execution of a warrant for his arrest and taken to Perth police station.
The following day he was taken by two officers of Strathclyde Police by car from Perth police station to Partick police station in Glasgow.
He alleges that he was abused, threatened with violence and assaulted by the Strathclyde police officers before, during and after that journey as a result of which he suffered injury.
He decided to take proceedings against the Chief Constable of Strathclyde Police for damages, and he applied for legal aid.
His application for civil legal aid was intimated to the Chief Constable in November 2004.
Strathclyde Police treated this intimation as a complaint and remitted the matter to its Complaints and Discipline Branch (the Complaints Branch).
In December 2004 the Complaints Branch reported receipt of the complaint to the Procurator Fiscal for Glasgow.
On 10 January 2005 the Procurator Fiscal instructed the Complaints Branch to carry out an investigation into the complaint.
On 13 January 2005 Inspector Darroch of the Complaints Branch was appointed to carry out the investigation.
On 14 March 2005, having completed his investigation, he submitted his report to the Procurator Fiscal.
On 10 May 2005 the appellant was interviewed by staff from the Procurator Fiscals office and he was precognosced.
On 6 June 2005, having considered Inspector Darrochs report and a medical report which had been instructed by the appellants solicitor, the Procurator Fiscal wrote to the appellant to inform him that she was satisfied that the available evidence did not justify criminal proceedings against any police officer.
The Complaints Branch then reviewed the complaint.
By letter dated 22 June 2005 the Chief Superintendent of the Complaints Branch wrote to the appellant to inform him that Strathclyde Police did not consider it necessary to take any proceedings for misconduct against the police officers.
The proceedings
In August 2005 the appellant commenced proceedings in the Sheriff Court at Glasgow in which he sought an award of damages.
Two separate craves were set out in the initial writ.
First, there was a claim of damages against the Chief Constable of Strathclyde Police.
This award was sought at common law for loss, injury and damage alleged to have suffered as a result of the actings of the police officers and as just satisfaction under section 8(3) of the Human Rights Act 1998 for a breach of the appellants rights under article 3 of the European Convention on Human Rights, for both of which the Chief Constable was said to be vicariously liable.
Second, there was a claim of damages against the Chief Constable and the Lord Advocate jointly and severally.
This award was sought as just satisfaction under section 8(3) of the Human Rights Act 1998 and section 100(3) of the Scotland Act 1998 for a breach of the appellants right under article 3 of the Convention to an effective investigation into his complaint.
The Chief Constable and the Lord Advocate (the respondents) lodged answers to the initial writ in which they took pleas to the relevancy of the averments that were made against them.
They did not challenge the competency of the action.
On various dates between November 2006 and April 2007 the sheriff heard a debate in which the respondents argued that the claim that was made against them for breach of the procedural obligation under article 3 of the Convention was irrelevant.
On 5 June 2007 the sheriff held that this claim was irrelevant, refused to allow the second crave to go to proof so far as it was directed against the Chief Constable and dismissed the action so far as it was directed against the Lord Advocate.
The appellant appealed to the Sheriff Principal.
On 25 April 2008 the Sheriff Principal refused the appeal.
In the course of the hearing of the appeal the appellant was given leave to amend his pleadings so as to direct the second crave against the respondents severally rather than jointly and severally.
The appellant then appealed to the Inner House of the Court of Session.
A hearing was set down for 7, 8 and 9 December 2010.
When the case called before an Extra Division (Lady Paton, Lord Clarke and Lord Abernethy) on 7 December 2010 the court informed counsel that it seemed to it, having considered the papers before the hearing, that the case raised fundamental questions of competency.
It was suggested that, while it was competent to bring a claim for damages at common law in the sheriff court, the second crave was a distinct and separate claim which raised questions of administrative law that would require to be made the subject of judicial review in the Court of Session.
The court adjourned the hearing to 2.00 pm to allow counsel to consider this issue.
Having heard argument on the point, it discharged the remainder of the appeal hearing and made avizandum.
At advising on 2 March 2011 the Extra Division issued an opinion which had been prepared by Lord Clarke in which he dealt with the point that had been raised at the hearing on 7 December 2010: [2011] CSIH 16, 2011 SC 527.
He said that, on further consideration, the problems appeared to the court to be even greater than had been discussed at that hearing and then set out the courts reasons for holding on other grounds that the action as a whole was incompetent.
As indicated in para 16 of the opinion, the case was put out By Order on 8 March 2011 to allow the parties to make any representations that they wished to make before the court pronounced any further interlocutor.
Counsel for the appellant did not ask for time to make any representations.
On the motion of the respondents the court then pronounced an interlocutor dismissing the action.
The appellant has now appealed to this court.
The issues as to competency
The background to the issues raised by the appeal is provided by the following comments that Lord Clarke made in para 5 of his opinion after he had summarised the appellants pleadings: Any practitioner in the business of civil litigation might, when faced with this omnibus approach to several claims in a single action, query the appropriateness of this approach.
He or she might reflect that in a single sheriff court action a straightforward claim for damages for assault finds itself coupled with (a) a claim for breach of the substantive obligation under article 3 of the Convention and (b) claims against two defenders severally for breaches of the obligation arising under the article as regards investigation and inquiry.
One action is being brought against two separate defenders with three distinctive juristic bases of claim being made.
The objections that the Extra Division took to the competency of the action, on closer examination, were as follows.
First, there was the point that was raised with counsel at the hearing on 7 December 2010.
At that stage it was directed to the subject matter of the second crave, in which damages are claimed for a failure to carry out an investigation which was compliant with article 3.
Second, there was the fact that the proceedings sought to address three distinct issues against two separate defenders.
This appears to have been a new point, as it had not been discussed at the hearing on 7 December 2010.
The first objection was summarised by Lord Clarke in these words in para 6: What the appellants averments in articles 8, 9, 10 and 11 seek, in substance, is to have reviewed the investigatory proceedings that have been carried out so far, to have a finding that these proceedings were incompatible in some way with article 3 of the Convention and consequently that the appellant is entitled to damages for breach of Convention rights, not because of any assault.
That is quite simply a separate and distinct claim in law from a claim based on common law assault and deals with quite distinct subject-matter in fact and law.
This claim, when properly analysed, involves an attack, in administrative law, on administrative acts and decisions, namely the administration of the complaints procedure in the instant case and possibly also an attack on the adequacy or otherwise of established procedures in general.
He said that it raised questions which, normally at least, would require to be made the subject of judicial review in the Court of Session.
Returning to this point in para 14, Lord Clarke indicated that this objection extended to the claim for just satisfaction for breach of the substantive obligation under article 3 that was the subject of the first crave as well that which was the subject of the second crave.
He said that the claims would require to be brought by way of judicial review.
This was because, once unshackled from the claim of damages for assault, the appellants claims involving human rights questions required the procedures in question to be reviewed and tested in accordance with administrative law principles: Clyde and Edwards, Judicial Review (2000), para 8.16; Cocks v Thanet District Council [1983] 2 AC 286.
The second point was summarised by Lord Clarke in these words in para 12: It is a well established principle of our law and procedure that one pursuer cannot sue two or three defenders for separate causes of action, and put into his summons a conclusion for a lump sum, and then by means of putting in the words jointly and severally, or severally, as the case may be, ask the court to split up this lump sum of damages and give a several decree for what the court thinks proper (Ellerman Lines Ltd v Clyde Navigation Trs 1909 SC 690, pp 691,692; see also Barr v Neilson (1868) 6 M 651; Maclaren, Court of Session Practice, p 266; Thomson and Middleton, Manual of Court of Session Practice, pp 56, 57, 65).
The present proceedings seek to address three distinct issues, distinguishable in fact and law, against two separate defenders.
Our system of pleading does not provide, nor should it provide, for such an approach.
To countenance such a procedure would, among other things, fly in the face of the practice in relation to conjunction of processes.
This attempt at an omnibus approach to pleading distinct causes of action against different defenders in the same action also runs counter to the approach of the court in relation to counterclaims.
What the appellant was seeking to do in these proceedings, he said, was to bring an action against two defenders in a case of unconnected wrongs.
This objection was taken to the proceedings as a whole, the question being whether it was competent for the appellant to raise in a single action a common law assault claim against the Chief Constable and a procedural article 3 claim against the Chief Constable and the Lord Advocate.
It was a ground for dismissing the whole case as incompetent.
In para 15 Lord Clarke said that it seemed to the court that another problem of competency was perhaps raised, which was this: can there be two distinct defenders in relation to alleged breaches of the states obligations under article 3 of the Convention? As this matter had not been discussed at all the court expressed no concluded view on it, but said it was an issue that might merit further consideration.
This objection, it seems, was to the fact that the procedural article 3 claim was the subject of a crave directed against the Chief Constable and the Lord Advocate severally.
The issues that are raised by this appeal can therefore be summarised as follows: (1) Was it competent for the appellant to bring his claims for damages in respect of the substantive article 3 claim and the procedural article 3 claim, or either of them, by way of action or did he require to bring them, or either of them, by way of judicial review? (2) Was it competent for the appellant to raise the common law assault claim and the substantive article 3 claim against the Chief Constable and the procedural article 3 claim against the Chief Constable and the Lord Advocate together in the same action?
Mr Anderson QC for the respondents did not seek to support the reasoning of the Extra Division on the first issue.
He said that he was in broad agreement with the way the appellant presented his argument, but he drew attention to the way Lord President Hamilton analysed the case in Docherty v Scottish Ministers [2011] CSIH 58, 2012 SC 150, paras 19-20 which indicated that the courts remarks on this point did not form part of the reasoning which had led to the whole action being dismissed.
He did however seek to support the Extra Divisions conclusion on the second issue, which was that the action as a whole as pled was incompetent.
Discussion
This is a highly unusual case, not only because of the way the claims that the appellant is seeking to make are presented in the pleadings but also because of the way it was dealt with by the Extra Division.
It is, of course, always open to the court to raise question about the competency of proceedings that are brought before it.
And, as the Court of Session is to a large extent the master of its own procedure, the Supreme Court will always be reluctant to interfere with the judgment of the Inner House as to whether proceedings with which it has to deal are competent.
As in so many other matters, this court is guided by the practice of the House of Lords before the appellate jurisdiction of the House was transferred to it in October 2009.
In Cowan & Sons v Duke of Buccleuch (1876) 4 R (HL) 14, 16 Lord Chancellor Cairns said: In matters of procedure and practice, and still more in matters of discretion, and, above all, where the Judges of the Court below are unanimous as to a matter of procedure and practice, the uniform practice of your Lordships House has been not to differ from that opinion unless your Lordships are perfectly satisfied that it is founded upon erroneous principles.
That remains true today, and nothing that I am about to say is intended in any way to depart from it.
Regrettably, however, it is clear that the test which he laid down is entirely satisfied in this case.
(a) the first issue
It is clear from Lord Clarkes opinion, and the narrative of events that the court has been provided with by counsel, that the idea which first attracted the Extra Divisions attention was that the subject matter of the second crave raised issues that ought to have been the subject of proceedings by way of judicial review in the Court of Session.
As thinking on this point developed, however, the way the objection was explained in para 14 of Lord Clarkes opinion seems to have extended to the human rights claim in the first crave as well.
This is because he referred, without distinguishing one crave from the other, to the claims by the appellant involving human rights questions.
In para 20 of Docherty v Scottish Ministers Lord President Hamilton indicated that he found it difficult to accept that this passage should be read as meaning that any claim whatsoever against a public authority alleging an infringement of a Convention right must be brought in Scotland by judicial review: Such a process would be quite inept for certain proceedings, for example, proceedings simply for damages for an infringement of article 3 by reason of isolated physical torture by a public official for whose actings the public authority was vicariously responsible.
Such proceedings could, and should, be initiated by action.
They might be so initiated in the sheriff court.
I agree, but I do not think that these cautiously worded remarks can be said to dispose entirely of the objection which seems to have been taken to the claim for breach of the substantive obligation under article 3.
The appellants claim relates to a course of conduct, not an isolated act of physical torture.
The fallacy which undermines the Extra Divisions whole approach to this issue, however, lies in its assumption that the appellant is seeking an exercise of the courts supervisory jurisdiction.
That is not so.
He is not asking for the review or setting aside of any decision of the Chief Constable or the Lord Advocate.
He is not asking the court to control their actions in that way at all.
His case in regard to both craves is based on averments of things done or omitted to be done and actions that were taken or not taken.
The allegations are of completed acts or failures to act.
He is not seeking to have them corrected in order to provide a foundation for his claim, nor does he need to do so.
What he seeks is just satisfaction for the fact that, on his averments, his article 3 Convention rights have been breached.
The essence of his claim is simply one of damages.
Lord Clarke referred in para 14 of his opinion to Cocks v Thanet District Council [1983] 2 AC 286 where it was held that it would be contrary to public policy and an abuse of process for a person to proceed by way of an ordinary action to establish that a public authoritys decision had infringed rights that were entitled to protection under public law.
Where private rights depended on prior public law decisions, they must ordinarily be litigated by judicial review.
As Lord Clarke saw it, the illegal nature of the respondents actings and decisions that was alleged in this case had first to be established before any question could arise as to whether the appellant was entitled to a remedy.
That had to be done by judicial review, not by an ordinary action in the sheriff court.
But, as Sedley LJ pointed out in Clark v University of Lincolnshire and Humberside [2000] 1 WLR 1988, para 16, the ground has shifted considerably since Cocks v Thanet District Council was decided.
It was established soon afterwards that the requirement for litigation by judicial review could not be a universal rule: Wandsworth London Borough Council v Winder [1985] AC 461.
The fact that a claim that was based on a private right had a public law dimension did not mean that it was an abuse of process to proceed by private action: Roy v Kensington and Chelsea and Westminster Family Practitioner Committee [1992] 1 AC 624.
In para 17 of his judgment in Clark Sedley LJ endorsed the test which was suggested in de Smith, Woolf & Jowells Judicial Review of Administrative Action, 5th ed, (1995) that what should matter was whether the choice of procedure was critical to the outcome.
In D v Home Office [2005] EWCA Civ 38, [2006] 1 WLR 1003, para 105 Brooke LJ said that he had no doubt that, if the proceedings in that case in which damages were claimed for false imprisonment in breach of the claimants Convention rights were viable, they were properly brought as a private law action.
English authority as to practice in this field must be approached with caution, as the distinction between public and private law has never been regarded as determining the scope of the supervisory jurisdiction of the Court of Session.
But the position that has now been reached in England is not difficult to apply in the Scottish context.
The sole purpose for which the supervisory jurisdiction of the Court of Session may be exercised is to ensure that a person to whom a power has been delegated or entrusted does not exceed or abuse that jurisdiction or fail to do what it requires: West v Secretary of State for Scotland 1992 SC 385, 413.
The proceedings which the appellant has raised are not of that character.
As Lord President Hamilton said in Docherty v Scottish Ministers, para 20, the process of judicial review would be quite inept for proceedings in which damages are claimed for an isolated act of physical violence which was in breach of the article 3 Convention right.
But the number of acts or incidents cannot sensibly make any difference.
Judicial review would be just as inept for a claim of damages for injury and damage sustained as the result of a course of such conduct.
On any view the objection that appears to have been taken to the competency of the claim for just satisfaction for breach of the substantive obligation under article 3 must be regarded as misconceived.
The objection to the competency of the claim for just satisfaction for breach of the procedural obligation which is the subject of the second crave is in no better position.
Here too the claim is in essence one of damages, and judicial review for its determination would be just as inappropriate.
The decisions of which the appellant complains do not need to be reviewed and set aside in order to provide him with a basis for his claim.
His position can be compared with that of the widow and daughter of James Dow Mitchell who was attacked and killed by his next door neighbour.
They brought proceedings against Glasgow City Council as the local housing authority by way of an ordinary action in which they claimed damages for negligence at common law and a judicial remedy under section 8(3) of the Human Rights Act 1998 on the ground that, in failing to remove the neighbour from his house next door despite a long history of aggressive behaviour towards Mr Mitchell, the local authority had acted in a way that was incompatible with Mr Mitchells right to life under article 2 of the Convention: Mitchell v Glasgow City Council [2009] UKHL 11, 2009 SC (HL) 21.
It was not suggested at any stage in that case that the claim that was brought under section 8(3) of the Human Rights Act was incompetent.
The facts of that case are, of course, different.
But, just as in this case, the complaint was of a procedural failure to give effect to the Convention right.
And, just as in this case too, it was based on actions taken or not taken and things done or omitted to be done.
No orders were being sought to regulate the local authoritys conduct.
There was no need to bring the decisions complained of under judicial review to provide a basis for the claim.
The decision of the Inner House in Docherty v Scottish Ministers to allow the pursuers claims for just satisfaction for an infringement of their rights under articles 3 and 8 of the Convention to proceed by way of an ordinary action in the sheriff court falls into the same pattern; see also C v Advocate General for Scotland [2011] CSOH 124, 2012 SLT 103.
I would respectfully endorse the reasons which the Lord President gave in paras 22-24 for rejecting the argument, which was prompted by the decision of the Extra Division in this case, that the actions were incompetent.
For these reasons I would hold that, as the objection that was taken to the competency of the second crave in this case was unsound in principle, it is open to this court to differ from the Extra Division and reject the objection.
(b) the second issue
Lord Clarke began his examination of this issue by referring to the well- established principle that one pursuer cannot sue two or three defenders for separate causes of action and put into his summons a conclusion for a lump sum: Ellerman Lines Ltd v Clyde Navigation Trs 1909 SC 690, per Lord President Dunedin at pp 691-692.
As Maclaren, Court of Session Practice (1916), p 266 puts it, where there is a single wrong it is competent for a pursuer to ask for a decree for a lump sum against joint delinquents jointly and severally, but not where there are separate wrongs.
In Liquidators of the Western Bank of Scotland v Douglas (1860) 22 D 447 Lord Justice Clerk Inglis said at p 497 that, if defenders were sought to be subjected in liability on separate and unconnected grounds inferring separate individual liability, the proceeding would be so flagrant a violation of ordinary practice that the summons must at once be dismissed.
On the other hand, it is commonplace to have a joint and several conclusion against two delinquents who have both contributed to the loss and damage which the pursuer has suffered.
That is seen, for this purpose, as a single wrong.
And joint and several liability may follow where two different breaches of contract have produced a common result: see Grunwald v Hughes 1965 SLT 209.
In Barr v Neilson (1868) 6 M 651 the pursuer raised an action against a husband and his wife conjunctly and severally or severally for one sum by way of damages in respect of two acts of slander, one by the wife, the other by the husband, on two different occasions.
It was held that this was incompetent.
Lord President Inglis said at p 654 that it was out of the question that the two parties could be made conjunctly and severally liable for two disconnected wrongs.
Lord Deas said at p 655 that he would not be disposed to understand Lord Justice Clerk Ingliss judgment in the Western Bank case to mean that it was not competent to conclude in one summons against six different defenders for six different debts.
In that case the pursuers sought distinct sums against different individuals in respect of the different periods of time during which the constitution of the board was different, and the action was allowed to proceed.
But it was clear, on looking at the condescendence as explained by the issues in that case, that no joint liability was concluded for in Barr v Neilson at all.
In Ellerman Lines Ltd v Clyde Navigation Trs, on the other hand, there was, as the Lord President said at p 692, a perfectly good averment against the defenders as joint delinquents and it was held that the action, in which an award of a single lump sum was being sought against them both, was competent.
The principle is, as Lord Clarke said, well-established.
But his opinion, in which he said that the court was of the view that the action fell to be dismissed as incompetent, was issued to the parties before they had had an opportunity to address it on the point.
This was unfortunate, as a careful examination of the pleadings and the authorities would have shown that the principle has not been breached.
This is not a case where separate defenders are being sought to be found liable in a single lump sum.
There are two craves in which the appellant is seeking an award of damages.
The first crave, which is based on averments of assault at common law and a breach of the substantive obligation under article 3, is directed against the Chief Constable only.
The second crave, which is based on averments that the procedural obligation under article 3 was breached, is directed against the Chief Constable and the Lord Advocate.
Before the Sheriff Principal the word severally was substituted for the words jointly and severally in the crave as originally drafted, but Mr Wolffe QC said that it was his intention to seek leave to restore those words and I would proceed on the assumption that leave will be given for this to be done.
It is clear that the wrongs which are the subject of these two craves are separate wrongs, committed at different times by different people.
But the appellant is not asking for a decree for the defenders to be found liable in a single lump sum for these separate wrongs.
This objection to the competency of the action was misconceived, and it must be rejected.
Lord Clarke drew attention in para 15 to the fact that the procedural article 3 claim was the subject of a single crave directed against the Chief Constable and the Lord Advocate severally.
He suggested that this perhaps raised another issue about competency.
But, as the matter had not been discussed at all, he expressed no concluded view on it.
The point was not the subject of argument in this court either, so it would not be appropriate for me to make any comment on it.
It is sufficient for present purposes, however, to note that it was not for this reason that the action was held to be incompetent.
It is, of course, the case that the appellant has combined two distinct claims, founded on different grounds, in one single action.
This raises a different point, to which Lord Clarke referred in para 13 when he said that omnibus pleadings of the sort sought to be applied in this case would defeat the ends of avoiding undue complexity and keeping good order in litigation.
If permitted, he said, they would result in litigation bedlam.
It is possible to imagine cases where this objection could properly be taken.
For example, in Treadwells Drifters Inc v RCL Ltd 1996 SLT 1048 Lord Osborne was faced with an action in which the pursuers were seeking different remedies against four defenders on the one hand and a fifth defender on the other.
Although the claims arose from a common sequence of events, the grounds of action against the defenders were different.
One was the delict of passing off, and the other was breach of contract.
The procedure to be followed in an accounting under a passing off claim was quite different from that for a claim of damages for breach of contract: p 1059J-L. Lord Osborne was unable to see how the court could follow these procedures in one action in a manner that was in accordance with the requirements of justice, and he dismissed the action as incompetent: p 1060G-H.
On the other hand the court has permitted actions to proceed against two defenders on separate grounds where considerations of convenience favour letting it proceed to proof as a whole.
In Yoker Housing Association Ltd v McGurn Logan Duncan & Opfer 1998 SLT 1334 the pursuer sought damages in the same action against a firm of architects and a firm of engineers when defects came to light in works for which they had been responsible.
They sued the architects for some of those defects and the architects and engineers jointly and severally for the others.
Lord Maclean rejected the argument that, because the case against the architects was based on one ground and the case that was made against them jointly and severally was based on another, the action was incompetent.
In Toner v Kean Construction (Scotland) Ltd 2009 SLT 1038 an architect raised an action against developers and a firm of architects subsequently employed by them for breach of copyright in drawings that he had prepared for the developers.
His case against the developers was that they had breached his copyright by constructing the development in accordance with his drawings.
His case against the architects was that they had, in breach of copyright, copied substantial parts of drawings which he had prepared for the developers.
Lord Bannatyne rejected the plea that the action was incompetent.
The two claims were intimately connected, the respective cases were factually and legally interlinked, and it was manifestly convenient to have the case against the two defenders in the same action.
If there were to be two separate actions, that would be likely to lead to injustice and manifest inconvenience: para 101.
Mr Anderson QC for the respondents submitted that the test that should be applied was whether the two claims were so essentially different that they ought not to be tried together.
The subject matter of the first crave was in very small compass, while the second crave raised separate and quite distinct issues.
Furthermore the Procurator Fiscal was involved in the second crave but not the first.
He accepted that convenience had a part to play in the assessment, but there was more to it than that.
Regard had to be had to the fundamental principle that one action should not be brought for separate and unconnected wrongs.
An exacting approach was needed where, in such a case, there was more than one defender.
The court had to have regard to the fact that the Procurator Fiscal was not involved in the first crave at all.
The guiding principle, where an objection to competency is taken on these grounds, is whether the way the action is framed is likely to lead to manifest inconvenience and injustice.
The court must, of course, seek to be fair to all parties.
It must take a pragmatic approach to the question whether the way the case is presented is so complex and disconnected that, despite the opportunities that exist for case management, it will not be possible to conduct the case in a way that meets the requirements of justice.
The same is true if a motion is made for two actions to be heard together, or for two actions to be conjoined.
Each case will have to be looked at on its own facts.
There is no absolute rule one way or the other, so long as the rule which says that it is incompetent for a pursuer to ask for a decree in a lump sum for separate wrongs is not broken.
Rules of procedure should, after all, be servants, not masters, in matters of this kind.
An examination of the pleadings in this case shows that the two claims, although separate, are interconnected.
The averments in articles 2 to 6 set out the basis for the claim in the first crave.
Articles 8 to 12 set out the basis for the claim in the second crave.
The basis for each claim is, in that respect, separate from each other.
But article 8 begins by referring to the subject matter of the appellants complaint, which was his treatment by the Strathclyde constables, and in article 10 it is said that the acts and omissions of the Complaints Branch and the Procurator Fiscal were incompatible with the appellants right to an investigation of his complaint.
It is plain that the case made in articles 8 to 12 cannot proceed to proof without leading the appellants evidence about his treatment at the hands of the Strathclyde constables.
He will have to give evidence on that same matter too in support of the first crave.
It would be inconvenient, and quite possibly unjust, to require him to give evidence about it twice over in two separate actions on two separate occasions.
The fact that the Procurator Fiscal is not concerned in the first crave is not likely to lead to any practical difficulties of case management, and certainly not to an injustice.
Lord Clarke was right to refer in para 13 of his opinion to the need to avoid undue complexity and to keep good order in litigation.
But the pleadings in this case are not unduly complex, and good order in litigation favours the two claims being heard together.
They are interconnected both in law and in fact, and it would be in the interests of justice and more convenient for them not to be separated.
For these reasons I would hold that, as the objection that was taken to the competency of the action as a whole was not well founded, it is open to this court to differ from the Extra Division on this issue too and reject the objection.
Conclusion
I would allow the appeal and recall the Extra Divisions interlocutor.
As there is no plea in law directed to this issue, I would find that the action is competent.
The case will be returned to the Inner House for a hearing of the appeal against the Sheriff Principals interlocutor.
| On 6 September 2004 the Appellant, having been arrested the day before and taken to Perth police station, was driven by car to a police station in Glasgow by two officers of Strathclyde Police.
He alleges that he was abused, threatened with violence and assaulted by the Strathclyde police officers before, during and after that journey.
He applied for legal aid in order to take proceedings against the Chief Constable of Strathclyde Police (the Chief Constable).
Strathclyde Police treated the intimation of the legal aid application in November 2004 as a complaint and remitted the matter to its Complaints and Discipline Branch (the Complaints Branch).
The Complaints Branch reported receipt of the complaint to the Procurator Fiscal for Glasgow.
In January 2005, the Procurator Fiscal instructed the Complaints Branch to carry out an investigation into the complaint.
An officer of the Complaints Branch carried out the investigation and submitted his report to the Procurator Fiscal in March 2005.
The Procurator Fiscal took a statement from the Appellant and considered the Complaints Branch report and a medical report submitted by the Appellant.
On 6 June 2005, the Procurator Fiscal informed the Appellant that she was satisfied that the available evidence did not justify criminal proceedings against any police officer.
The Complaints Branch then reviewed the complaint and informed the Appellant on 22 June 2005 that Strathclyde Police did not consider it necessary to take any proceedings for misconduct against the police officers.
The Appellant raised an action in Glasgow Sheriff Court in August 2005.
The first claim in the action was in relation to the alleged assault and was made against the Chief Constable.
The Appellant sought damages at common law and under section 8(3) of the Human Rights Act 1998 for a breach of the substantive obligation under article 3 of the Convention (which prohibits torture and inhuman or degrading treatment or punishment).
The second claim was in relation to an alleged failure to carry out an effective investigation into the Appellants complaint, in breach of the procedural obligation under article 3 of the Convention.
The Appellant sought damages under section 8(3) of the Human Rights Act 1998 and section 100(3) of the Scotland Act 1998 against the Chief Constable and the Lord Advocate jointly and severally for this breach.
The Chief Constable and the Lord Advocate argued that the Appellants second claim was irrelevant.
After a debate, the Sheriff agreed.
The Appellants appeal to the Sheriff Principal was unsuccessful.
The Appellant then appealed to the Inner House of the Court of Session.
At the start of the first day of a three day appeal hearing, the Court informed counsel that it seemed to it that there were fundamental questions about the competency of the action.
The suggestion was that the second claim was distinct and separate and raised questions of administrative law that would require to be made the subject of judicial review in the Court of Session.
Proceedings were adjourned until 2.00 pm that afternoon to allow counsel to consider this issue.
Having heard argument on the point, it discharged the remainder of the hearing and took time to consider its judgment [1 5].
The Court then issued an opinion which dealt with the point raised at the appeal hearing and set out its reasons for holding on another ground, before hearing the parties on the point, that the action as a whole was incompetent.
The parties were given an opportunity to make submissions at a procedural hearing, but no submissions were made.
The Court then dismissed the action.
The Appellant appealed to the Supreme Court.
The issues in the appeal were: (1) whether it was competent for the Appellant to bring his two article 3 claims, or either of them, by way of action; and (2) whether it was competent for the Appellant to raise the first claim against the Chief Constable and the second claim against the Chief Constable and the Lord Advocate together in the same action [6, 7 10 and 12].
The Supreme Court unanimously allows the appeal.
The Appellants action is competent.
The case will be returned to the Inner House for a hearing of the appeal against the decision of the Sheriff Principal.
The judgment is given by Lord Hope with whom all the other Justices agree.
As the Court of Session is to a large extent the master of its own procedure, the Supreme Court will always be reluctant to interfere with the judgment of the Inner House on a question of competency unless the judgment is wrong in principle.
Regrettably, however, that test is satisfied in this case [13].
The objections to the competency of the two article 3 claims are unsound in principle.
The Appellant is not seeking an exercise of the supervisory jurisdiction of the Court of Session in order to have decisions of the Chief Constable or the Lord Advocate reviewed or set aside.
His case in relation to both article 3 claims is based on allegations of acts or omissions.
He is not seeking, and does not need, to have them corrected in order to provide a foundation for his claims.
He seeks just satisfaction for the fact that, as he argues, his Convention rights have been breached.
The claims are in essence simply those of damages.
Judicial review for their determination would be inept [15 and 18 21].
The well established principle that one pursuer cannot sue two or more defenders for separate causes of action and conclude for a lump sum against them jointly and severally has not been breached in this case.
It is clear that the wrongs which are the subject of the Appellants claims are separate and were committed at different times by different people.
But the Appellant is not asking for a decree for the Respondents to be found liable in a single lump sum.
The objection to the competency of the action on this basis is misconceived [22 and 24 25].
It is possible to imagine cases where an objection to competency could be taken on the ground that the pleadings defeat the ends of avoiding undue complexity and keeping good order in litigation.
The guiding principle when such an objection is taken is whether the way the action is framed is likely to lead to manifest inconvenience and injustice.
There is no absolute rule one way or the other, so long as the rule which says that it is incompetent for a pursuer to ask for a decree in a lump sum for separate wrongs is not broken.
In this case the Appellants two claims, although separate, are interconnected in law and in fact, and it would be in the interests of justice and more convenient for them not to be separated.
The pleadings are not unduly complex and good order in litigation favours the two claims being heard together.
The objection to the competency of the action on this basis is also misconceived [27 28 and 32 33].
|
The liability of employers for deaths caused by mesothelioma has pre occupied courts and legislators over recent years.
The present appeals concern claims to pass the burden of this liability on to insurers, made either by employers or in the case of insolvent employers by the personal representatives of former employees using the mechanism of the Third Party (Rights against Insurers) Act 1930.
The appeals concern employers liability insurance.
This is in contrast with Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 where public liability insurance was in issue.
Employers liability focuses necessarily upon the relevant employment relationships and activities.
Public liability relates to any of the insureds relationships and to activities affecting the world at large.
Another feature of employers liability is that, under the Employers Liability (Compulsory Insurance) Act 1969 (the ELCIA), it has since 1 January 1972 been compulsory for every employer other than local authorities carrying on any business in Great Britain to insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great
Britain
The appeals arise because the relevant insurers maintain that the employers liability insurances which they issued respond (or, better, could only have responded) to mesothelioma which developed (or, possibly, manifested itself) as a disease during the relevant insurance periods all long past.
In contrast, the relevant employers and personal representatives maintain that the insurances respond to mesothelioma which develops and manifests itself later; all that is required, they say, is exposure of the victim during the insurance period to asbestos in circumstances where the law attributes responsibility for the mesothelioma to such exposure.
These alternative bases of response (or triggers of liability) have been loosely described as an occurrence (or manifestation) basis and an exposure (or causation) basis.
It is in issue whether the ELCIA, after it came into force, mandated any particular basis of response.
A secondary issue, arising if the insurances only respond on an occurrence basis, is whether the aetiology of mesothelioma justifies a conclusion that there was during the relevant insurance period an occurrence sufficient to trigger liability under the insurances.
Burton J, [2008] EWHC 2692 (QB), concluded that the relevant insurances all responded on an exposure basis.
The Court of Appeal, [2010] EWCA Civ 1096, by a majority (Rix and Stanley Burnton LJJ), upheld the judge in relation to some of the insurances (particularly those covering disease contracted during the relevant insurance period); but they concluded that others (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
Smith LJ would have upheld the judges judgment in its entirety.
The full judgments in both courts repay study.
They have been of great assistance to this court and make it possible to go directly to the heart of the issues.
Mesothelioma is a hideous disease that is inevitably fatal.
In most cases, indeed possibly in all cases, it is caused by the inhalation of asbestos fibres: Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229, para 1, per Lord Phillips.
It is a cancer of the pleura, which are thin linings around the lungs and on the inside of the rib cage.
It is usually undetectable until shortly before death.
Its unusual features include what Burton J in this case at para 30 described as the unknowability and indescribability of its precise pathogenesis.
In particular, it is impossible to know whether any particular inhalation of asbestos (at least any occurring more than ten or so years prior to diagnosability) played any or no part in such development.
Because of this unusual feature, the law has developed a special rule.
The special rule was the product of judicial innovation in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and in Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572.
It was modified by statutory intervention in the form of the Compensation Act 2006, section 3.
Leaving aside exposures occurring within the ten or so years prior to diagnosability, the rule can now be stated as being that when a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a "material increase in risk" of the victim contracting the disease will be held to be jointly and severally liable in respect of the disease.
Burton Js findings in the present case justify certain further propositions, mostly also corresponding with the summary in Lord Phillips judgment in Sienkiewicz (para 19): (i) A significant proportion of those who contract mesothelioma have no record of occupational exposure to asbestos.
The likelihood is that (vi) in their case the disease results from inhalation of asbestos dust that is in the environment.
There is, however, a possibility that some cases of mesothelioma are "idiopathic", i.e. attributable to an unknown cause other than asbestos. (ii) The more fibres that are inhaled, the greater the risk of contracting mesothelioma. (iii) There is usually a very long period between the exposure to asbestos and the development of the first malignant cell.
Typically this can be at least 30 years. (iv) For a lengthy period (perhaps another five years) after the development of the first malignant cell, there remains a possibility of dormancy and reversal, but at a point (Burton J thought a further five years or so before the disease manifested itself, and was thus diagnosable) a process of angiogenesis will occur.
This involves the development by malignant cells of their own independent blood supply, so assuring their continuing growth. (v) The mechanism by which asbestos fibres cause mesothelioma is still not fully understood.
It is believed that a cell has to go through 6 or 7 genetic mutations before it becomes malignant, and asbestos fibres may have causative effect on each of these.
It is also possible that asbestos fibres have a causative effect by inhibiting the activity of natural killer cells that would otherwise destroy a mutating cell before it reaches the stage of becoming malignant.
Mesothelioma currently claims about 3000 lives a year in the United Kingdom.
This speaks to the common use of asbestos materials up to the 1960s and 1970s.
In Annex I to his judgment Rix LJ set out the insuring clauses of the various forms of policy wording in use from time to time.
Subject to re ordering to reflect the development of the language, Annex A to this judgment includes the same and some further wording.
It can be seen that the Excess policies and the first two MMI policies promise to indemnify the insured employer against liability if at any time during the period of insurance (or of any renewal) any employee shall sustain under the earlier policies personal injury by accident or disease or under the later policies [any] bodily injury or disease in the case of the first Excess policy while engaged in the service of the Employer or in other cases arising out of and in the course of [his] employment by the insured employer.
In the case of the Independent policy, the insurer, under the recital, promised to indemnify the employer during the period of insurance or of any renewal.
The insuring clause itself contains no express limitation to any period.
It promises indemnity against all sums for which the employer shall be liable for damages for such injury or disease if any employee shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule.
The third MMI policy and the BAI policies were in more developed form.
The former promises indemnity in respect of legal liability for sums payable as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any employee when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The latter promised indemnity against all sums which the Insured may become liable to pay to any Employee . in respect of any claim for injury sustained or disease contracted by such Employee during the period of insurance or any renewal.
The insurers party to the present appeals have at all times represented only a small part of the employers liability insurance market.
By far the larger part of the market consists of companies who until the late 1960s (when competition rules intervened) operated a tariff system which bound them to adopt a specified policy form and specified rates.
Until 1948 tariff insurance was focused on Workmens Compensation Act claims, but in 1948 legislative changes (in particular the abolition by the Law Reform (Personal Injuries) Act 1948 of the doctrine of common employment) made a common law claim for future accruing causes of action much more attractive.
It may well have been in anticipation of these changes that the tariff companies introduced a new form of policy in May 1948, still in widespread use today, providing indemnity if any employee shall sustain any personal injury by accident or disease caused during the period of insurance.
Under this tariff wording, sustain looks to the occurrence of an accident or development of a disease at any time, while caused makes clear that the trigger to cover is that the accident or disease has been caused during the insurance period.
The present insurers were non tariff companies, and have always been free to set their own wordings.
From dates after the insurances the subject of this appeal, three of the insurers in fact ceased to use the wordings set out in Annex A, and themselves moved expressly to causation based wordings Excess in about 1976, Independent in the mid 1980s, and BAI in 1983.
As a matter of insurance practice, however, until the decision in Bolton in 2006, all these wordings, whether tariff or non tariff and whether using the language caused, sustain or sustained or contracted, paid out on long tail claims (including the mesothelioma claims which became increasingly frequent in the 1980s) by reference to the date(s) of exposure.
Where successive employers with different insurers had exposed a particular employee victim to asbestos, liability was in practice apportioned between the employers, and so insurers, broadly according to the extent of exposure for which each employer was responsible.
The rival cases
Insurers submit that all the wordings in Annex A require the injury or disease to occur during the period of insurance or of any renewal.
In the alternative, if the use of the word contracted in the third MMI policy and the BAI policies or the different formulation of the Independent policy leads to any different conclusion in any of such cases, they submit that this leaves unaffected the clear meaning of the Excess and first two MMI policy wordings.
The employers and interested employees contend that all these policies are to be understood as operating on an exposure or causation basis.
The implications of these alternative interpretations are clear.
On insurers primary contention, the policies set out in Annex A would not respond to current mesothelioma claims.
It is unlikely that most of them would have responded to many, if any, mesothelioma claims, since it was only in the 1980s that such claims began to emerge to any great extent.
Policies written on a causation basis since the dates indicated in paragraph 10 above would also not respond to current mesothelioma claims.
Insurers response is that any insurance must be read according to its terms.
Until 1 January 1972, when the ELCIA came into force, it was not obligatory for employers to have any form of employers liability insurance.
Further, viewed on an occurrence or manifestation basis, the policies would pick up long tail claims arising from exposure occurring at any time in the past.
In this connection, it is to be noted that various long tail diseases were well recognised perils from the era of Workmens Compensation legislation before 1948.
Instances were scrotal cancer, pneumoconiosis and more specifically (from the time of Merewether and Prices 1930 Report on Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry) asbestosis.
All these would only develop over and could manifest themselves after considerable periods of years.
Following upon the 1930 report, The Asbestos Industry Regulations 1931 (SI 1931/1140) were introduced to regulate factories handling and processing raw fibre, and in 1969 The Asbestos Regulations 1969 (SI 1969/690) extended this regulation more widely it appears in the light of an appreciation that mesothelioma could result from exposure to small quantities of asbestos dust (see In re T & N Ltd (No 3) [2006] EWHC 1447 (Ch), [2007] 1 All ER 851, para 118).
The Court of Appeals conclusions
The force of insurers case rests in the use of the word sustain, whether in connection with the phrase personal injury by accident or disease or bodily injury or disease or in the conjunction injury or disease . sustained or contracted or injury sustained or disease contracted.
Rix and Stanley Burnton LJJ concluded that the word sustain looked prima facie at the experience of the suffering employee rather than its cause (paras 232 and 343).
Insurances responding to injury or disease sustained during the insurance period would not, on this basis, cover mesothelioma sustained long afterwards.
Rix LJ had some compunction about the result because of what he (though not Stanley Burnton LJ) felt was a tension with the commercial purpose of employers liability insurance in the extraordinary context of mesothelioma (para 235).
Rix LJ would have liked to hold that mesothelioma sufferers sustained sufficient injury on exposure to asbestos to trigger the insurances in force at the date of such exposure, but felt bound by Bolton to conclude the contrary (paras 277 289).
However, Rix LJ, though not Stanley Burnton LJ, considered that the particular wording of the Independent insurances did not explicitly require the injury or disease to be sustained during the insurance period, and could be read as covering the sustaining of injury at any time arising out of and in the course of employment during the insurance period (paras 300 and 350).
Rix and Stanley Burnton LJJ differed as to the significance of the ELCIA extension provisions included in the Independent wording, the third MMI wording and the second BAI wording, as quoted in Annex A. Rix LJ thought that the ELCIA required employers to insure on a causation basis (paras 184 and 186) although, since he also expressed the view that an insurance arranged and maintained on a sustained basis could comply with the ELCIA, he may perhaps only have meant required in practice.
At all events, he held that the ELCIA extension provisions covered liability incurred to the personal representatives of employees on a causation basis, while enabling insurers to recoup themselves so far as possible from the relevant employers in respect of liability they would not otherwise have had to meet (paras 292, 300 and 302).
Stanley Burnton LJ did not agree that the ELCIA required causation wording (para 342), but considered that it required insurance to be taken out and maintained in respect of ex employees, or at least those who were or had been employed at any time after the coming into force of ELCIA (para 342; and see Rix LJs comments at paras 305 307).
Rix, Smith and Stanley Burnton LJJ were all agreed that, where provision was made for disease contracted, this could and should be construed as introducing cover on a causation basis, even if or though wording such as injury (or disease) sustained could only respond on an occurrence basis.
Analysis
Annex A sets out the insuring clauses.
Insurers case is, as I have said, rooted most strongly in the word sustain, particularly when it is used by itself, rather than in conjunction with a more ambivalent alternative in the phrase sustained or contracted.
The natural meaning of the word sustain, taken in isolation and as defined in the Shorter Oxford English Dictionary from an appropriate date (1965, 3rd ed), is, with respect to injury, undergo, experience, have to submit to, or, possibly, to have inflicted upon one, suffer the infliction of.
But the insurance cover granted (and no doubt required) extended expressly beyond injury by accident to embrace disease.
This was achieved by less natural conjunctions, such as sustain [any] personal injury by accident or disease or sustain [any] bodily injury or disease.
Conscious perhaps that the verb sustain does not fit naturally with the concept of disease, some companies (MMI in its third wording and BAI in its first and second wordings) introduced the different verb contracted in the formulations sustained or contracted or injury sustained or disease contracted.
This use of contracted with respect to disease is considerably more natural, but is clearly open to an interpretation that it looks back to the initiating or causative factor of the disease, and (whatever the answer on that point) highlights a question whether any substantial difference exists in this connection between such wordings and other wordings referring more awkwardly to the sustaining of personal injury by disease or the sustaining simply of disease.
To resolve these questions it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more broadly.
As Lord Mustill observed in Charter Reinsurance Co Ltd v Fagan [1977] AC 313, 384, all such words must be set in the landscape of the instrument as a whole and, at p 381, any instinctive response to their meaning must be verified by studying the other terms of the contract, placed in the context of the factual and commercial background of the transaction.
The present case has given rise to considerable argument about what constitutes and is admissible as part of the commercial background to the insurances, which may shape their meaning.
But in my opinion, considerable insight into the scope, purpose and proper interpretation of each of these insurances is to be gained from a study of its language, read in its entirety.
So, for the moment, I concentrate on the assistance to be gained in that connection.
A first point, made very clearly below by Rix LJ (para 263), is that the wordings on their face require the course of employment to be contemporaneous with the sustaining of injury.
This leaves open what is meant either by sustaining or by injury.
Rix LJ thought that the Independent wording could be understood differently in effect, as if it had expressly read: If any person who is under a contract of service or apprenticeship with the Insured shall at any time sustain bodily injury or disease arising out of and in the course of his employment by the Insured during the policy period in connection with the Contract specified or type of work described in the Schedule .
That interpretation assumes that sustain in this context equates with the occurrence, rather than causation, of the injury or disease, and only arises for consideration if that assumption is correct.
A second point is that the insurance wordings demonstrate a close link between the actual employment undertaken during each insurance period and the premium agreed to be payable for the risks undertaken by insurers in respect of that period.
Premium is linked expressly to actual wages, salaries and earnings during the insurance period under the Excess policies, the first MMI wording and the BAI policies.
The second and third MMI wordings contemplate that premium may be linked to wages, salaries and earnings, and, to the extent that any inference regarding the general nature and scope of cover under these standard wordings can be drawn from such a link, it must be capable of being drawn whether or not premium was actually so linked in any particular case.
As to the Contractors Combined Policy issued by the Independent, it is a probable inference that the estimates which were provided and were to be updated will have included, in respect of the employers liability cover in section 1, wages, salaries and other earnings paid.
Finally, the Independent cover is linked to the actual contract or work which the employer is undertaking during the insurance period.
These links are in my view significant.
True, premium may sometimes be calculated on a rough and ready basis.
Minor discrepancies between the premium calculation and the risk may be understandable: see e.g. Ellerbeck Collieries, Ld v Cornhill Insurance Co [1932] 1 KB 401, 418, per Greer LJ (who pointed out that any such discrepancy there was more apparent than real, since workmen not earning wages because off work would not actually be at risk of any fresh accident, even though they would remain susceptible to certification for disablement).
Here the position is quite different.
Great care is taken in all the policies to tie premium to the actual employment undertaken during the insurance period, and in the case of the Excess, Independent and MMI policies to tie cover to a business, contract or activities described in the schedule.
The natural expectation is that premium is measured by reference to actual employment or work during the insurance period because it is the risks attaching to such employment or work which are being undertaken by insurers.
At the very least, the drawing of this link makes improbable the contention advanced by some of the insurers that the present insurances were apt to pick up liabilities emerging during the insurance period which could be attributable to employment and activities undertaken and negligent conduct committed at times long past.
The number of employees, their employment activities and the risks involved at those times could be very different.
The significance which attaches to the employment current during the insurance period is underlined by legal and practitioner texts.
As long ago as 1912, MacGillivray on Insurance (1st ed), pp 966 wrote: The nature and scope of the employers business must be clearly defined in the insurance policy, and workmen employed outside the scope of the assureds business as described in the policy will not be covered In the section on Employers Liability Insurance in Stone & Coxs Accident, Fire and Marine Year Book (1957), pp 688 689, the authors stressed the importance of identifying any special hazards, such as signs of careless management or lack of control or careless workmen, and observed: The surveying of Employers Liability risks has probably become more general than formerly.
Apart from the question of the possibilities of accident, there is now the serious question of disability due to disease and in particular the disease known as pneumoconiosis.
In 1974 MMI produced a Guide to Insurance Officers in Local Government, which it said that it would like to see on the desk of every insurance officer for ready reference at any time; this, after noting that employers liability was almost invariably dealt with by a separate policy and that its importance had been increased by the ELCIA, went on: "7.
Premiums are usually based on wages and salaries this is not only a convenient yardstick but is logical since loss of earnings usually represents a substantial part of claims.
Rates of premiums vary according to the nature of the work of the labour force, and the claims experience. 8.
A feature of employers liability claims is the length of time which often elapses between the date of the accident and the final settlement, and the cost of servicing claims tends to be high.
Injury caused at work during the period of insurance even though it may not be diagnosed till years afterwards can be a liability under the policy." I note in parenthesis that 1974 was the year in which MMI changed from a pure sustain form of wording to a form covering bodily injury or disease suffered, when sustained or contracted during the currency of the policy.
Yet there is no suggestion in the Guide of any change in substance.
It is in this light improbable that the present insurances can or should be read as offering cover in respect of ancient, as opposed to current, employment and activities.
But there is a third point.
If insurances in the present form only address risks arising from employment during the insurance period, then, on insurers case, there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to injury or disease in another later period.
If the employment relationship spans both insurance periods and the employer remains insured with the same insurers in both periods, there may be no problem.
The employee is employed at all relevant times and the insurance may be viewed as a single continuing contract.
The policy wordings set out in Annex A, with their references to insurance during the period of insurance or during any subsequent renewal period, would support the latter view.
But, even in the days of more stable long term employment and insurance relationships, employees could and would move employment or retire, or employers would cease business, or change insurers.
On the basis that the insurances only cover risks arising from employment during the insurance period, there would be no cover unless the liability arose from and in the course of and involved injury or disease during the currency of the same employment and the same insurance (including any renewal).
Fourthly, on insurers case, employers would as a result be vulnerable to any decision by insurers not to renew; and such a decision might arise from the simple performance by employers of their common law duty to disclose past negligence to insurers upon any renewal.
Employers who discovered or came to appreciate that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease (e.g. by exposing their employees to asbestos) would have such a duty.
Insurers could then, on their own case, simply refuse any renewal or further cover.
Employers could then have to disclose that refusal also to any further insurers to whom they made a proposal for cover.
One response made by insurers to such problems is that they would not arise in the large bulk of cases.
That is no doubt true.
Most employers liability cases involve short tail claims: typically, an accident involving injury.
It is not surprising if the language of the insurances fits more easily with situations in which cause and effect coincide in time.
But, by the same token, this does not mean that the underlying risk being assumed was in either partys mind limited to circumstances in which a cause gave rise to an effect during one and the same insurance period.
Rix LJ, in accepting that cover depended upon injury being sustained in the sense of experienced during the insurance period, was influenced by the thought that this was not an absurd or meaningless interpretation.
The insurance could operate entirely successfully in some 99% of cases (para 235).
In the light of this Courts recent decision in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900, para 30, this, in my view, gives too little weight to the implications of the rival interpretations and to the principle that where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.
The 1% of cases in which there might be no cover could not be regarded as insignificant.
Well before 1948, there was general awareness of the existence of long tail diseases which would only develop and manifest themselves after considerable periods of years (see para 12 above; and see also Cartledge v E Jopling & Sons Ltd [1963] AC 758).
The connection between asbestos exposure and mesothelioma became generally known in the mid 1960s, following the publication in 1965 of Newhouse and Thompsons report on Mesothelioma of pleura and peritoneum following exposure to asbestos in the London area and a Sunday Times article.
Yet on insurers case, the present insurances would not cover any situation where, after the termination of employment or the expiry of an insurance, injury or disease developed from an employers breach of duty to a relevant employee during an insurance period.
A fifth point concerns the way in which the policies deal with the issue of extra territorial scope.
The first Excess wording stands apart from the others in its treatment of that issue.
Cover only exists in respect of any employee in the employers service who shall sustain any personal injury by accident or disease while engaged in the service of the employer in Great Britain, Northern Ireland, the Isle of Man or Channel Islands, in work forming part of the process in the employers business.
As soon as one postulates a delay in time between the causation and experiencing of a disease, it becomes apparent that this wording could operate to very curious effect if sustain looks to the latter rather than the former.
A disease (e.g. a cancer) experienced during employment could be covered although caused by pre employment exposure, while a disease caused by employment would not be covered if only experienced while working abroad.
The natural inference to draw from the references to being engaged in the employers service and in work forming part of the employers business process is that it was envisaged that the accident or disease would and should arise out of such service and work, rather than merely occur during it.
That points to an underlying focus on causation, even if the assumption was that in the majority of cases causation and experiencing of any injury by accident or disease would coincide.
As to the other policies, at the very least, the way they deal with territorial issues throws doubt on any proposition that their wordings are so carefully or well chosen that a court should be careful to stick literally to whatever might be perceived as their natural meaning.
They address territorial scope by specific exclusions, but the cover and the exclusions use different language.
Thus, although the second and third Excess wordings cover liability to employees who sustain personal injury by accident or disease, the territorial exclusion is in respect only of accidents occurring outside Great Britain, etc, leaving it unclear how disease, whether caused or developing outside Great Britain, should be dealt with.
The Independent wording also covers liability to employees who sustain bodily injury or disease, while the territorial exclusion is for injury, illness, loss or damage caused elsewhere than in Great Britain, etc.
While the contrast in language is capable of lending some support to a view that sustain looks to experiencing, rather than to causation, an alternative possibility is that the two words were understood as having the same effect and that the cover was understood as focused on causation.
The language of this exclusion thus cuts both ways, as Rix LJ recognised (para 297).
A similar position applies to the contrast between injury or disease sustained and injury or disease caused outside Great Britain, etc. under the first two MMI wordings.
Under the third wording, the language of the cover and the exclusion have been deliberately matched.
Under the BAI wordings, however, there is an incongruity between cover for injury sustained or disease contracted and the exclusion in respect of liability for accidents . arising outside the United Kingdom.
Again, this leaves the position in respect of disease unclear, and the difference between injury sustained and accidents arising can be read either as deliberate or as suggesting that no significance was attached to the difference or that the real concern was with causation.
The history and Workmens Compensation Acts
Much attention was, both below and before the Supreme Court, paid to the development of employees rights to compensation in respect of personal injury and disease, at common law and under the scheme of the Workmens Compensation Acts (WCAs).
The WCAs were in force from 1897 until replaced in 1948 under the National Insurance (Industrial Injuries) Act 1946.
The history and a number of the decisions under the WCAs were examined by Rix LJ in paras 126 to 165 of his judgment.
He concluded that such an examination yields in the present context not a lot.
To a considerable extent, I agree and I shall not repeat the whole exercise, but identify some potentially relevant aspects.
Etymologically, some of the language presently in issue can be traced back to statutory language found in the Employers Liability Act 1880 and the WCA 1897.
The 1880 Act modified the common law doctrine of common employment, by entitling employees to recover common law compensation for injury caused by specified matters for which employers were responsible, provided that they gave notice, within six weeks of sustaining the injury of its cause and the date at which it was sustained.
The 1897 Act, applying to personal injury by accident arising out of and in the course of employment, also required notice to be given of the accident as soon as it occurred, stating the cause of the injury and the date at which it was sustained.
These Acts therefore distinguished the causation and the sustaining of an injury, but not in any presently relevant context.
Further, any reference to sustaining disappeared from the Workmens Compensation scheme in the 1906 Act, which amended the scheme to require a notice stating the cause of the injury and the date at which the accident happened.
The 1906 WCA also expressly extended the scheme to cover certain diseases specified in section 8.
In that context, it provided that, where a workman was certified as disabled or suspended from employment or died due to a disease and the disease is due to the nature of any employment in which the workman was employed at any time within the twelve months previous the date of the disablement or suspension, whether under one or more employers, then he or his dependants shall be entitled to compensation under this Act as if the disease or such suspension . were a personal injury by accident arising out of and in the course of that employment .
Section 8(a) provided: The disablement or suspension shall be treated as the happening of the accident.
Under section 8(c), the compensation was recoverable from the employer last employing the employee within the previous twelve months, providing the employee furnished that employer with particulars of all his other employers in the employment to the nature of which the disease was due.
It was not necessary to prove that the disease actually arose from the last employment, merely to prove that the relevant employment gave rise to a risk of such a disease: Blatchford v Staddon and Founds [1927] AC 461.
The 1906 Act may be regarded in this respect as involving an early statutory instance of the kind of liability recognised in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22, [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20, [2006] 2 AC 572.
However, failing such particulars, the last employer could excuse himself upon proving that the disease was not contracted whilst the workman was in his employment (section 8(c)(i)).
The last employer might also join any other employer (within the last twelve months) and it was provided that upon proof that the disease was in fact contracted whilst the workman was in the employment of that other employer, that other employer shall be the employer from whom the compensation is to be recoverable (section 8(c)(ii)).
Finally, section 8(c)(iii) provided that: if the disease is of such a nature as to be contracted by a gradual process, any other employer within the last twelve months was liable to make such contributions as might be agreed or determined by arbitration under the Act.
Under this scheme, therefore, compensation for disease was initially based upon the nature of the employment and its potential for causing, rather than upon proof that it caused, such a disease.
The paternal benevolence of the Legislature (as Visc Sumner put it in Blatchford: p 469) is well known, and if the price of that benevolence is paid by the last employer, who thus has to bear others burdens, that is nothing new in this kind of legislation.
However, the last relevant employer could seek, in specified circumstances, to avoid or to pass on to another employer responsibility by proof that the disease was not actually contracted in his employment.
Alternatively, in the case of a disease of such a nature as to be contracted by a gradual process, all relevant employers within the last twelve months would be liable to contribute.
The scheme was, as I see it, concerned with either the risk of or actual causation, and in its use of the word contracted it appears to me to have been directing attention to the causation, rather than the mere experiencing or manifestation, of disease.
The WCA scheme was the subject of further amendment by the 1925 Act.
Section 43 superseded section 8 of the 1906 Act as regards scheduled diseases, while section 47 made specific provision for the introduction of a parallel scheme covering silicosis.
Effect was given to this by inter alia the Metal Grinding Industries (Silicosis) Scheme which came into force in July 1927, making provision for obtaining compensation from the last employer within the previous three years, and giving such employer rights to look to other such employers within the last five years.
An insurance covering employers liability in this connection was considered in Smith & Son v Eagle Star (1933) 47 Ll.
L.R. 88, (1934) 48 Ll.
L.R. 67.
Mr Hill had been employed in processes giving rise to silicosis for some 20 years.
For the last two of these years, from 31 March 1928 to 16 June 1930, he worked for Smith & Son.
From 30 June 1927 to 17 June 1930, Smith & Son had an insurance against WCA liability in respect of any personal injury or disease which at any time during the continuance of this policy shall be sustained or contracted by any workmen .
The policy was expressly extended to cover any liability in connection with any claim made by employees in respect of silicosis, and the decision of the Court of Appeal rested on this ground.
But Scrutton LJ also examined the main policy language, and in particular what was meant by contracted.
He noted that there has been a good deal of discussion in the Courts about a disease which is gradually contracted commencing at some stage and through the process going on increasing the disease until at last it results in total disablement (p 70), and concluded that the word was not to be read as first contracted, but in the sense of influenced or increased until it ultimately comes to total disablement.
This, although not directly focusing on the first development of a disease from some earlier cause, suggests a flexible view of the word contracted, directed once again to the employments responsible for causing the disease.
Confirmation that this was Scrutton LJs view can be found in the earlier case of Ellerbeck Collieries Ltd v Cornhill Insurance Co [1932] 1 KB 401.
Two workmen who had been in the colliery companys service for many years were on respectively 11 and 12 March 1929 (dates they were actually off work) certified as suffering from miners nystagmus.
The Cornhill had on 8 March 1929 issued the colliery company with a three month provisional cover note insuring in terms matching the wording of the insuring clause in the first Excess wording (i.e. against liability in respect of any employee who shall sustain any personal injury by accident or disease while engaged in the service of the employer).
Failing a satisfactory survey, the cover note actually expired on 18 March 1929.
The first point decided was whether the employees had sustained personal injury by accident or disease during the period of validity of the cover note (8 to 18 March 1929).
It was held that they did.
The judgments in the Court of Appeal are of interest for a number of reasons.
First, both Scrutton LJ (p 408) and Greer LJ (p 417) approached the question of construction on the basis that the policy was intended to protect the employers against their liability to their workmen under the WCAs.
Scrutton LJ added that it seems to me that the policy was intended to cover the liability of the employers for the results of industrial diseases caused by the employment (p 409).
His description of the policy, covering in terms any employee sustaining personal injury by accident or disease in service, as intended to cover liability . for the results of diseases caused by the employment fits precisely with the analysis which I consider correct (paragraphs 18 28 above).
Second, Scrutton LJ went on to refer to the difficulties in saying when an industrial disease, such as miners nystagmus or lead poisoning, begins, and in these circumstances the difficulty for an employee to pick the proper employer to sue.
He described the way in which Parliament, by what became section 43 of the WCA 1925, had addressed such difficulties by providing a conventional and artificial means for enabling the workman to get compensation, leaving the various employers to fight out their proportion of the liability between themselves (p 409).
He said that the last employer, liable under the WCA scheme, then claims on the insurance company on the ground that he is liable to make compensation for an injury by disease, and the date of the injury or disablement is by statute and certificate fixed as happening between the dates for which he is provisionally covered (p 411).
On this basis, and in the light of the House of Lords decision in Blatchford, Scrutton LJ concluded that he was bound to hold that an accident has happened within the period of the provisional cover against the consequences of which the insurance company is bound to indemnify the employer (p 413).
In short, the conventional and artificial provisions of the WCA defined what constituted an accident and when personal injury by accident or disease was sustained for the purposes of the insurance.
Greer LJ, more shortly, adopted the same approach (p 418).
Only Slesser LJ (p 421) expressed a reservation about the possibility that the artificial deeming provisions of section 43(a) of the WCA 1925 might only apply as between employee and employer, and that it might have been necessary to consider separately the date of the sustaining of injury as between the employer and the insurer, had there been any admissible evidence that the two employees had actually contracted the scheduled disease before the granting of the statutory medical certificate.
Commercial purpose and practice
Much general evidence was directed or elicited before Burton J in relation to the commercial purpose of the present insurances, and to practice relating to their operation in the years before the present issue arose.
It was argued that there was, prior to the decision in Bolton, a universal usage of the insurance industry to pay out mesothelioma or similar claims under [employers liability] policies by reference to the date of inhalation/exposure whatever the wording, or an estoppel by convention to like effect.
Burton J rejected the argument (paras 180 to 201, esp. para 201), for the reasons that, first, there was no evidence relating to years earlier than the 1980s which could be put down to any kind of arguable usage, second, any usage was not certain, not least because of the multiplicity of approaches to or bases for it and, third, it was not binding.
It was not incorporated into the insurance contracts.
No issue of estoppel by convention was pursued to the Court of Appeal (Rix LJ, para 24, and Stanley Burnton LJ, paras 332 and 335) and the issue of a universal custom was only pursued by Zurich Insurance Company (Rix LJ, para 24).
By a multiplicity of approaches to or bases for insurers practice, Burton J was referring to evidence that insurers followed the practice they did in some cases because they believed that their contracts were to be interpreted on a causation/exposure basis, in others because they believed that the aetiology of diseases such as mesothelioma was such that injury was in fact sustained (in the sense of experienced) at the date of inhalation, while yet others may have failed to realise that their historically relevant wordings had been on a different basis to the causation wordings to which they had since switched or may have failed to address their minds to any relevant issue at all in relation to an insured who was usually a longstanding repeat client.
Rix LJ (para 228) contented himself with agreeing with Burton Js reasoning on this aspect, while Stanley Burnton LJ noted and agreed in particular with Burton Js second reason, relating to the believed aetiology of mesothelioma (para 335).
Smith LJ, on the other hand, treated the commonly held understanding that diseases such as mesothelioma involved injury at the date of inhalation as part of the factual matrix of all the insurance contracts (paras 322 323), and considered against that background that no difference in meaning should be held to exist between policies using sustained and causation wording, until the time when the two sides of the insurance industry should be considered to have appreciated that some diseases, including mesothelioma, do not occur until many years after exposure to the causative agent (para 327).
She put that as around the time of the decision in Bolton, after which parties using a sustained wording must be taken to have meant only to cover injuries actually occurring during the policy period (para 327).
The argument of a binding usage was not pursued before the Supreme Court, rightly so for the reasons given by the judge and the majority in the Court of Appeal.
Equally, there has been no suggestion of estoppel by convention, along the lines recognised as possible in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 47.
However, on the issues of policy interpretation, Mr Stuart Smith QC for Zurich Insurance, maintained before the Supreme Court an argument that there was a consensus based on market practice, whereby, for one reason or another, such policies would respond to long tail diseases by reference to the date of exposure, and that this could constitute relevant background to their construction.
Assuming that, short of a binding usage or estoppel by convention, a practice, if known to or shared by the relevant parties, could in some circumstances be relevant background (see e.g. Reardon Smith Line Ltd v Yngvar Hansen Tangen [1976] 1 WLR 989), still, in my opinion the argument fails in the present case.
It fails in particular in the light of the judges findings, even in relation to policies made in and after the 1980s.
A practice based on a mistaken understanding, by only some insurers, that the policies operated on a causation basis cannot be relevant background to the interpretation of every policy; on the judges findings other insurers do not appear to have understood that the policies operated on that basis.
A practice based on a mistaken understanding by others in the market as to when long tail diseases could be said to have been experienced or to involve injury is likewise an unpromising start for construing all policies; if the understanding were good, it would mean that such diseases fell within the policies, even though the policy cover was restricted to injury or disease experienced during the policy period.
The understanding would not therefore carry any imperative to read a sustained wording as meaning caused.
Before the Supreme Court, both employers and employees continued to rely upon the evidence given at trial regarding the general purpose of employers liability insurance as part of the background to the interpretation of the present insurances.
Rix LJ (paras 223 to 235) gave it some weight as such, but Stanley Burnton LJ thought that there was little if any assistance to be gained by reference to the commercial purpose of EL insurance, as this was simply to provide the cover defined in the policy (para 333).
The Supreme Court was provided with a useful summary of the considerable volume of evidence relied upon in this connection.
It consisted in general of answers given by insurers, two at least of them with experience going back to the 1940s.
They were asked (frequently in response to leading though not inadmissible on that score questions in cross examination) about their or others views, understandings or perceptions as to the purpose of the policies, and the way in which these would or should respond, in relation to injuries arising from exposure in the course of activities during the policy period.
In my judgment, Stanley Burnton LJ was right to reject such evidence as inadmissible.
The parties cannot be asked what they meant by their contract, and, failing any binding usage, it is equally inadmissible to ask other persons operating in the market to give general evidence as to what they would have understood the parties to have meant by the words used in the context in which they were used.
The evidence does not seem to have amounted to more than that.
However, I do not agree with Stanley Burnton LJs suggestion that no useful conclusions can be drawn about the commercial purpose of the policies, save that it was to provide the defined cover.
In my opinion, relevant conclusions about the general nature and purpose of the individual policies can be drawn in this case, just as they could in the case of the different (and wordier) instrument in issue in In re Sigma Finance Corporation [2009] UKSC 2, [2012] 1 All ER 571 (see especially paras 10, 12 and 37).
They can be drawn from an overall consideration of the individual insurance wordings, and particularly from the features which tie cover to the employees and activities during the relevant policy period and the five points considered in paragraphs 18 to 28 above.
Further, if the policies are on any view apt to cover employers liability for long tail diseases which initiate during, but only manifest themselves years after, the original policy period, one may look with scepticism at an interpretation which distinguishes this situation from other situations where a long tail disease is caused but does not strictly begin during the policy period, and only manifests itself years later.
This is particularly so if a conclusion that the latter diseases fell outside the policy cover meant that they would or might well not fall within any subsequent employers liability policy.
ELCIA 1969
Section 1 of the ELCIA provides: 1. (1) Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business, but except in so far as regulations otherwise provide not including injury or disease suffered or contracted outside Great Britain (3) For the purposes of this Act (a) approved policy means a policy of insurance not subject to any conditions or exceptions prohibited for those purposes by regulations. 4. (1) Provision may be made by regulations for securing that certificates of insurance in such form and containing such particulars as may be prescribed by the regulations, are issued by insurers to employers entering into contracts of insurance in accordance with the requirements of this Act . (2) . the employer shall during the currency of the insurance and such further period (if any) as may be provided by regulations (a) comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees; .
The only conditions or exceptions ever prohibited were certain exemptions from liability.
Under section 3, the ELCIA did not however apply to local authority employers, such as most of MMIs insureds.
Under section 4, provision might be made for certificates of insurance to be issued to employers, and in that event the employer was, obliged during the currency of the insurance and such further period (if any) as may be provided by regulations to comply with any regulations requiring him to display copies of the certificate of insurance for the information of his employees.
In reaching his conclusions on the ELCIA (para 16 above), Rix LJ engaged in an impressive analysis, to which I would refer (paras 166 to 186).
The only doubt this leaves is how, if the ELCIA requires a causation wording, an employer could properly insure on a wording which only covered injury sustained in the sense of experienced (see para 186 and paragraph 16 above).
The scope of the ELCIA is, as Rix LJ indicated, open to three alternative analyses: that it requires cover in respect of (i) all future liability incurred during the insurance period, whenever the negligence or injury, or (ii) liability for all future injury or disease sustained (in the sense of experienced) by employees during the insurance period, whenever the negligence, or (iii) liability for all negligence or breach of statutory duty during the insurance period giving rise to liability as in (ii).
The retrospectivity of cover involved in (i) and (ii) is unlikely to have been intended.
The only one of the three possibilities not involving a degree of retrospectivity is (iii).
A duty on every employer to insure, and maintain, insurance is consistent with a requirement to have the insurance in place during, though to maintain it after, the relevant insurance period.
The provision, contemplated by section 4, for copies of insurance certificates to be issued by insurers and to be displayed by any employer for the information of his employees during the currency of the insurance and such further period as may be provided by regulations indicates, first, a desire to assure employees of their insurance protection during the relevant insurance period, and, secondly, an awareness that this assurance might need to remain in place after such insurance period; it is therefore suggestive of (iii), rather than (i) or (ii).
As Rix LJ observed, it is only cover in accordance with (iii) that can give an employee the assurance that any injury or disease suffered as an employee and arising out of and in the course of [his] employment will be covered by insurance, the benefit of which would, if necessary, be available to him at the time under the Third Party (Rights against Insurers) Act 1930.
An obligation to have a policy in force only at or by the time when injury is actually experienced would leave employees or ex employees at the mercy of compliance with the statute by their employers or ex employers at uncertain future dates.
It would also leave such employees or ex employees at the mercy of employers who, for whatever reason, ceased to carry on business either in Great Britain or (for example due to insolvency) at all.
Further, if injury or disease suffered or contracted bears the same meaning as insurers suggest that injury or disease sustained or contracted bears, then an employee, who had the misfortune to succumb to a disease abroad caused by his employment or previous employment in Great Britain, would not be covered (unless regulations intervened to ensure that he was).
Stanley Burnton LJ thought that any issue as to the nature of the insurance required under ELCIA was resolved by its use of the word sustained, rather than caused.
He went on to conclude that the ELCIA covered any injury sustained (in the sense of experienced) during a period of insurance, by anyone who was then or had at any previous time been an employee.
However, that latter conclusion introduces a retrospectivity into the scope of the ELCIA, which, as already indicated, I think unlikely to have been intended.
The statute could have used the tariff wording of causation instead of sustained.
But in the statutory language the word sustained is not coupled with a phrase such as during the period of the insurance.
Even if sustained means experienced in the context of the statute, the statute may require insurance on what is effectively a causation basis; the words sustained by his employees may well mean sustained at any future time by his current employees.
The key to the meaning of the statutory language seems to me the combination of the phrases arising out of and in the course of their employment in Great Britain and not including injury or disease suffered or contracted outside Great Britain.
Together, and for reasons given in the last two paragraphs, they indicate a statutory requirement to insure in respect of activities during the course of employment in Great Britain which may in the future give rise in or out of Great Britain to liability to the employees involved in such activities.
In my judgment, therefore, the conclusion which gives proper effect to the protective purpose of the legislation is that the ELCIA requires insurance on a causation basis.
The ELCIA extension provision to the Independent and second BAI wordings (see Annex A), as well as a similar extension provision to the MMI policy intended for insureds who were not local authorities, achieved this result expressly in relation to policies written subsequent to the coming into force of the ELCIA, at least for the purpose of ensuring that employees claims were covered by insurance.
Any other subsequent insurances not containing that extension provision should, if possible, be read as providing the relevant employers cover required by statute.
This is a powerful tool in the interpretation of such insurances.
Bolton M.B.C. v Municipal Mutual Insurance Ltd
The Court of Appeal in the present case was bound by its previous decision in Bolton MBC v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, [2006] 1 WLR 1492 on public liability policies.
The majority regarded that case as, in effect, determining the meaning which must be put on the word sustained in the present employers liability policies: see paras 284, per Rix LJ, and 339, per Stanley Burnton LJ, who however also found the logic of Longmore LJs judgment convincing in relation to the latter type of policies.
Smith LJ on the other hand considered that public liability and employers liability insurances gave rise to different considerations (para 328).
In my opinion, that is right.
Employers liability policies are subject to particular terms and considerations, analysed above (particularly in paragraphs 18 28 and, in the case of policies effected after the coming into effect of the ELCIA, paragraphs 41 46).
These considerations are not or certainly not necessarily applicable to public liability insurances.
The present case was concerned with employers liability not public liability insurances, and it may well be that not all the relevant facts relating to the latter are before us.
We certainly have not heard full argument on the proper conclusions which may be drawn regarding the basis of liability or trigger generally applicable under the latter.
In these circumstances, I would proceed on the basis that we are not bound by Bolton, that this does not involve any view about the correctness or otherwise of Bolton, but only that it is unnecessary to consider what the position generally may be under public liability policies.
Assuming that, in relation to public liability insurance, the position generally is as stated in Bolton, that does not alter the conclusions which I reach.
It merely means, in their light, that public liability insurance generally and the present employers liability policies operate on different bases, because of their different backgrounds, terms and purposes.
Contracted
There is no difficulty about treating the word contracted as looking to the causation or initiation of a disease, rather than to its development or manifestation.
In relation to the two BAI wordings and the third MMI wording, this interpretation obtains strong support from the general nature and purpose of the relevant policies, derived from their immediate context and terms and analysed in paragraphs 18 to 28 and 41 above.
To the limited extent that the WCA background may assist to inform the meaning of later policies, it can be seen overall as a legislative scheme which was concerned with either the risk of or actual causation (para 32 above).
Even if, in the phrase sustained or contracted or injury sustained or disease contracted, the word sustained is to be understood as meaning experienced, that would reflect no more than the fact that the cause and effect of an injury commonly coincide; I would still unhesitatingly conclude, as did the Court of Appeal, that the word contracted used in conjunction with disease looks to the initiating or causative factor of the disease.
Sustained
The majority of the Court of Appeal considered that it was impossible to view policies with pure sustained wordings as operating by reference to the initiating or causative factor of a disease.
They did so primarily by reference to the wording of the insuring clauses.
In my view, as indicated in paragraphs 18 19 above, a broader approach is necessary.
The general nature and purpose of these policies can be derived from their immediate context and terms, analysed in paragraphs 18 to 28 and 41 above.
It is true, as Rix LJ said, that phrases such as injury sustained by an employee or an employee who shall sustain injury, in either case by accident or disease, appear to address the impact of the accident or disease on the employee.
But the underlying focus of the insurance cover is on the employees and activities current during the insurance period.
The cover would be potentially incomplete, and employers would be potentially exposed to uninsured risks, were sustained to be understood as meaning developed or manifested.
This is so, even before the ELCIA came into force.
Any policies written subsequent to the coming into force of the ELCIA either afford cover consistent with the Acts requirements by virtue of an ELCIA extension provision, or, to the extent that this is not the case, should be construed, if at all possible, as meeting employers obligations under that Act.
In my view, such obligations included taking out insurance in respect of negligence during the insurance period affecting an employee in a manner giving rise to bodily injury or disease then or at any subsequent time.
On this basis, I consider that, although the word sustained may initially appear to refer to the development or manifestation of such an injury or disease as it impacts employees, the only approach, consistent with the nature and underlying purpose of these insurances both before and after the ELCIA, is one which looks to the initiation or causation of the accident or disease which injured the employee.
The disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself subsequently.
Disease sustained, read as meaning experienced or incurred
Rix LJ was attracted by the submission that, even if sustaining disease meant experiencing or incurring it during the period of the insurance, long tail diseases could be said to have been sustained during the period of insurance in this sense.
He asked rhetorically whether an employee who had inhaled asbestos had not sustained an injury in the form of an assault of the fibres, as a result of which he was worse off through having dangerous fibres in his lungs (para 280).
He noted that, although there was at most trivial injury or damage, and nothing that could create actionable damage, nevertheless, when mesothelioma develops, it is the risk of mesothelioma created by the exposure which is the damage (see .
Barker ) and it is the exposure, and the risk of mesothelioma, that is the damage (para 281).
He only felt bound to reject this analysis (para 284) because of the Court of Appeals previous decision in Bolton.
It may be that in the case of some long tail diseases, the victim can be said to have incurred or caught them at the same time as the initial ingestion or scratch giving rise to them.
But it is clear that this is not the position with inhalation of asbestos in relation to either asbestosis or mesothelioma.
No cause of action arises from exposure or inhalation alone: Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281.
Further, for reasons which I develop in paragraphs 64 65 below, the exposure and risk are not by themselves damage in any sense known to the law.
Damage is only incurred when mesothelioma develops.
Only when it develops does the victim incur damage which is legally relevant, and even then this is not because any physical link necessarily exists or can be proved between the mesothelioma and the original exposure.
The rule in Fairchild and Barker imposes liability for the mesothelioma upon persons who have exposed the victim to asbestos, and so created a risk of mesothelioma.
But it is not a rule which, even as between employers and employees, deems the latter to have suffered injury or disease at the time of any exposure.
And, even if it were viewed simply as a rule imposing retrospective liability on employers for exposing their employees to the risk of mesothelioma, the insurance policies do not insure risks of physical injury or disease, but only actual injury or disease.
The application of the insurances in respect of mesothelioma
At the outset of these appeals, the application of the insurances in respect of mesothelioma suffered by employees exposed to asbestos during their employment by an insured employer did not appear controversial.
This changed after a question from Lord Phillips on day 4 of the hearing, followed by a later written note.
All the same, the transcript pages containing any argument on the point numbered only 40 out of a total of some 1140.
So far as Mr Edelman made any submissions on this point, in his written case or orally, they were to this effect: if the correct analysis of the Houses decision in Fairchild be that an employer who exposes an employee to asbestos is deemed to have caused that employees mesothelioma, then employers liability insurances held by the employer on a causation basis should respond; but, if the policies do not respond on a causation basis, there is no justification for treating the employee as having suffered injury or a disease during their currency, because employers cannot prove that any particular inhalation caused any injury.
This led to some discussion, particularly with counsel for employers and employees, of the points which I have already addressed in paragraphs 50 52 above.
The point now expressed forcefully by Lord Phillips in his judgment is that exposure to the risk of mesothelioma is the correct analysis of the Fairchild principle, at least as subsequently interpreted, and that such exposure can satisfy neither the concept of injury nor the concept of causation for the purposes of the policies.
If that is right, then the present insurance claims must all fail.
Indeed, the great bulk of insurance claims settled by other insurers (e.g. former tariff insurers) or by the present insurers under the causation policies they have issued in more recent years (paragraph 10 above) should presumably also have failed.
The only exception may be the case of an employee exposed to asbestos in only one employment by an employer holding insurance throughout with only one insurer.
In such a case it might (perhaps) be said that, whichever particular inhalation(s) may have been responsible for the employees mesothelioma, it (or they) must have been insured.
Even then, the logic of the Supreme Courts reasoning in Fairchild and Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011] 2 AC 229 might lead to the conclusion that causation was still unprovable in the light of the possibilities of environmental or idiopathic causation of mesothelioma.
Rules regarding causation are created by the courts for the purpose of determining when liability arises in particular contexts.
Normally, they reflect a common sense understanding of what is ordinarily understood when we speak of a cause in a particular context.
In their leading work on Causation in the law (Clarendon Press, 2nd ed 1985) Professor H. L. A. Hart and Tony Honor examined both this understanding and its relationship to legal decision making.
Generally, but not always, a cause must involve an act or omission that was at least a sine qua non of the injury in respect of which responsibility attaches (the but for test).
But sometimes two separate acts or omissions may each independently have been sufficient to give rise to that injury (as when A and B simultaneously, but independently shoot C dead), and then we may as a matter of legal policy accept a weaker causal relationship for the imposition of responsibility: see p lxv in the preface to and p 123 of the 2nd edition.
Other cases where causal requirements have been relaxed include Bonnington Castings Ltd v Wardlaw [1956] AC 613; there, materially contributing to part of an accumulation of dust which cumulatively led to pneumoconiosis gave rise to liability for the whole disease (although it has been suggested that some apportionment might now be possible in fact and law).
Another relevant authority is McGhee v National Coal Board [1973] 1 WLR 1; there, liability for dermatitis was held to exist because the defendant had materially contributed to part of the claimants exposure to dirt, any part of which might, independently of any other, have given rise to the abrasion leading to the claimants dermatitis.
It was recognised that this involved liability based on materially contributing to the risk of the injury.
Lord Reid at p.4G H described the result as reached taking a broader view of causation, and Lord Wilberforce at p 5G viewed it as involving a conclusion as to the causal connection that had to exist between the default and the disease complained of.
The contrary view (viz, that proof of risk was insufficient without proof that the risk caused or materially contributed to the disease) had a logic which Lord Wilberforce acknowledged, but rejected for policy and evidential reasons set out at p.6C F.
In Fairchild, McGhee was seen as a precursor of the decision there reached.
Putting aside the possibility of an idiopathic or environmental cause, a Fairchild type situation exists when (a) there are two separate potential causes exposing the claimant to the same risk, one involving an act or omission by the defendant, (b) either one of which causes would have been sufficient to give rise to the injury, and (c) one of which did so, but (d) neither of which can as a matter of probability be shown to have done so.
Taking into account the later decisions in Barker v Corus and Sienkiewicz, the Fairchild principle extends to any case where there has been an act or omission exposing a person to asbestos, which exposure may have caused the mesothelioma, but which cannot be shown as a matter of probability to have done so.
On that basis, the House held in Barker v Corus that each or any persons liability should only be proportionate to the extent that he had exposed another to the risk of mesothelioma.
Parliament by the Compensation Act 2006 reversed that conclusion and made each such person liable in respect of the whole of the damage caused by the mesothelioma.
Lord Phillips in his judgment addresses the basis of Fairchild in the light of Barker v Corus, the 2006 Act and Sienkiewicz.
He accepts that, if Fairchild is now correctly to be understood as a special rule deeming employers who have exposed an employee to asbestos to have caused any subsequently suffered mesothelioma, then the insurance policies should apply (para 109).
But he concludes that Fairchild must be understood as creating liability not for the disease, but for the creation of the risk of causing the disease.
It follows in his view that employers and employees gain no assistance from the special rule in asserting that mesothelioma suffered by any person was caused or initiated in any particular policy period.
On this basis, even though the insurances respond to injuries caused or initiated during their periods, the employers and employees fail for want of proof.
It is not fruitful to repeat the exercise undertaken in Barker v Corus of examining in detail the significance of the speeches in Fairchild.
The House was not agreed about this in Barker, but the majority speeches of Lords Hoffmann, Scott and Walker were at pains to reject any analysis of Fairchild as proceeding upon a fiction that each exposure had caused or materially contributed to the disease: see paras 31, 61 and 104; they each also referred to the liability created by Fairchild as being not for causing the disease, but for materially increasing the risk of the mesothelioma which was in fact suffered: paras 31, 36 and 40, 53, 61 and 113.
Lord Rodger (dissenting) perceived the majority to be misinterpreting Fairchild by failing to acknowledge that it was based on an equation of materially increasing risk with materially contributing to causation, an equation which he thought had been accepted as sufficient causation in Bonnington Castings Ltd v Wardlaw [1956] AC 613 and McGhee v National Coal Board [1973] 1 WLR 1.
It is on the apparently bright line distinction said to have been drawn by the majority in Barker between materially contributing to increasing the risk of, and causing, a disease that Lord Phillips now founds his judgment in these appeals.
The Compensation Act 2006 applies where a person who has exposed someone to asbestos is liable in tort in connection with damage caused to the latter by mesothelioma whether by reason of having materially increased a risk or for any other reason (section 3(1)(d)).
It makes the former person liable in respect of the whole of the damage (section 3(2)(a)).
On its face, the Act assumes rather than creates the liability, and only alters the measure of recovery.
That was the view expressed in Sienkiewicz by Lords Phillips, Rodger and Brown (paras 70, 131 and 183).
However, on further analysis, the distinction identified in paragraphs 58 59 above proves more elusive.
Even in Barker itself, Lord Walker described exposing the employee to the risk of mesothelioma as being equated with causing his injury and the result as an explicit variation of the ordinary requirement as to causation (para 104), and spoke of the rule as one by which exposure to the risk of injury is equated with legal responsibility for that injury (para 109).
However, it is conceivable that he meant that the ordinary requirement of causation of the disease was entirely replaced by another liability creating rule.
It is in the later authority of Sienkiewicz that the difficulty of drawing any clear cut distinction between creating a risk and causation of the disease becomes most apparent.
Lord Phillips there stated that the rule in its current form was that the person responsible for the exposure and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease (para 1).
Later, he said that the law was presently contained in Fairchild and Barker which had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances (para 70).
That was the analysis of Fairchild advanced by Lord Rodger in Barker v Corus (paras 73 and 83) but rejected there by the majority.
Lord Brown in Sienkiewicz spoke of a more relaxed approach to causation (para 178) and flexibility in the approach to causation (para 187).
I referred to Fairchild and Barker as involving a special rule of causation (para 188), and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims (para 196) and to adjustments in the burden of proof (paras 198 and 200).
Lord Rodger was, on the other hand, loyal to the majority view in Barker by referring to liability as based on materially increas[ing] the risk (para 113), and Lord Dyson was cautious in speaking of materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Lord Phillips has in para 123 set out a passage from an extra judicial commentary written by Lord Hoffmann in Perspectives on Causation (2011), p 8.
In it, Lord Hoffmann describes the two ways in which the changes introduced by Fairchild and Barker could be characterised, one as changing the causal requirements for an action for damages for mesothelioma ; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent; the other as creat[ing], exceptionally, a cause of action for the increased risk of mesothelioma, rather than for the disease itself.
Lord Hoffmann notes that the House in Barker (Lord Rodger dissenting) adopted the second explanation of what had happened in Fairchild.
But in the next sentence, not quoted by Lord Phillips, Lord Hoffmann went on: Parliament almost immediately reversed this decision by a statute giving effect to the first explanation, which had been advocated by Lord Rodger in his dissenting speech.
Lord Hoffmanns extra judicial (or judicial) words cannot by themselves alter the true effect of a statute, but his comments do again show that the suggested distinction is more fluid than might at first appear.
It is relevant to look more closely at what Barker decides.
In Barker, Lord Hoffmann spoke of Fairchild as applying an exceptional and less demanding test for the necessary causal link between the defendants conduct and the damage (para 1) and of the requirement of a sufficient causal link between the defendants conduct and the claimants injury (para 17).
In his note in Perspectives on Causation, he picked up this language with references to the causal requirements of the relevant rule and to the issues in cases of mesothelioma and analogous situations as involving the causal requirements for an action for damages for mesothelioma.
Lady Hale in Barker also viewed the common law rules governing the measure of recovery as closely linked to the common laws approach to causation, and said that there was no reason in principle why the former rules should not be modified as the latter approach is courageously developed to meet new situations (para 122).
In paras 123 and 124, she made clear that in her view the issue in Barker could be seen as arising from the expanded perceptions or developed concept of causation which the law had accepted.
These citations all suggest that it is both possible and appropriate to characterise the position achieved by the common law after Barker v Corus as one concerned with the issue of the causal requirements or causal link, as between the defendants conduct and the disease, which the common law requires in order for there to be an action for mesothelioma.
But analysis of the rule arrived at after Fairchild and Barker justifies further propositions.
Despite the apparent clarity of the suggested distinction between liability for a risk and for a disease, no cause of action at all exists unless and until mesothelioma actually develops.
Neither the exposure to asbestos nor the risk that this may one day lead to mesothelioma or some other disease is by itself an injury giving rise to any cause of action: see Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] 1 AC 281; the House there decided that not even the emergence of pleural plaques marking the past exposure to asbestos constituted injury for the purpose of giving a cause of action.
In order to fall within the principle in Fairchild and Barker, the development of mesothelioma is a pre condition: see Barker, per Lord Hoffmann (para 48) and Lord Scott (para 53).
Lady Hale went further, stressing that she in fact agreed with Lord Rodgers view that the damage which is the gist of these actions is the mesothelioma and its physical and financial consequences.
It is not the risk of contracting mesothelioma (para 120).
In reality, it is impossible, or at least inaccurate, to speak of the cause of action recognised in Fairchild and Barker as being simply for the risk created by exposing someone to asbestos.
If it were simply for that risk, then the risk would be the injury; damages would be recoverable for every exposure, without proof by the claimant of any (other) injury at all.
That is emphatically not the law: see Rothwell and the statements in Barker itself, cited above.
The cause of action exists because the defendant has previously exposed the victim to asbestos, because that exposure may have led to the mesothelioma, not because it did, and because mesothelioma has been suffered by the victim.
As to the exposure, all that can be said (leaving aside the remote possibility that mesothelioma may develop idiopathically) is that some exposure to asbestos by someone, something or some event led to the mesothelioma.
In the present state of scientific knowledge and understanding, there is nothing that enables one to know or suggest that the risk to which the defendant exposed the victim actually materialised.
What materialised was at most a risk of the same kind to which someone, who may or may not have been the defendant, or something or some event had exposed the victim.
The actual development of mesothelioma is an essential element of the cause of action.
In ordinary language, the cause of action is for or in respect of the mesothelioma, and in ordinary language a defendant who exposes a victim of mesothelioma to asbestos is, under the rule in Fairchild and Barker, held responsible for and in respect of both that exposure and the mesothelioma.
This legal responsibility may be described in various ways.
For reasons already indicated, it is over simple to describe it as being for the risk.
Another way is to view a defendant responsible under the rule as an insurer, but that too is hardly a natural description of a liability which is firmly based on traditional conceptions of tort liability as rooted in fault.
A third way is to view it as responsibility for the mesothelioma, based on a weak or broad view of the causal requirements or causal link appropriate in the particular context to ground liability for the mesothelioma.
This third way is entirely natural.
It was adopted by Lords Reid and Wilberforce in McGhee, by Lord Hoffmann, Lady Hale and (possibly) Lord Walker in Barker and by Lord Hoffmann in his extra judicial commentary.
It seems to have received the perhaps instinctive endorsement of a number of members of this Court, including myself, in Sienkiewicz.
Ultimately, there is no magic about concepts such as causation or causal requirements, wherever they appear.
They have the meanings assigned to them and understood in ordinary usage in their context.
A logician might disagree with a reference to causation or a causal link in a particular context, but that is not the test of meaning: see Lord Wilberforces words in McGhee, p 6C F (cited in para 56 above).
The present appeals concern the meanings we assign to the concept of causation, first in the context of considering employers liability to their employees and then in considering the scope of employers insurance cover with respect to such liability.
It is instructive in this connection to look more closely at the Compensation Act 2006.
Section 3(3) states that section 3(2) does not prevent (a) one responsible person from claiming a contribution from another, or (b) a finding of contributory negligence.
Section 3(4) goes on to provide that [I]n determining the extent of contributions of different responsible persons in accordance with subsection (3)(a), a court shall have regard to the relative lengths of the periods of exposure for which each was responsible .
Section 3(3) necessarily relates to the legal bases for claiming contribution or asserting contributory negligence, which are to be found in, respectively, the Civil Liability (Contribution) Act 1978 and the Law Reform (Contributory Negligence) Act 1945.
The 1978 Act addresses the situation where two or more persons are liable in respect of the same damage (section 1(1)), while section 2(1) provides for contribution in such situations to be such as may be found by the court to be just and equitable having regard to the extent of that persons responsibility for the damage in question.
Although under section 3(4) of the 2006 Act, the court must have regard to the relative lengths of the exposure for which each was responsible, the same damage which is a pre condition to the application of the 1978 Act must be the mesothelioma.
It cannot be the risk created by the person by or from whom contribution is sought, because each person and exposure creates a separate risk, and no one person or exposure creates the total risk resulting from all exposures.
The 2006 Act, by its reference to the 1978 Act, thus assumes that every person, who has exposed to asbestos a victim who later experiences mesothelioma, incurs responsibility for the mesothelioma.
That language again fits an analysis whereby the rule in Fairchild and Barker identifies the appropriate weak or broad causal link between the exposure and the mesothelioma.
A similar position applies under the 1945 Act.
Under section 1(1), that Act applies [w]here any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons.
In that event, the damages recoverable are to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The application of this section, as contemplated by the 2006 Act, is only possible on the basis that a mesothelioma sufferer may be said to have suffered the mesothelioma partly as the result . of the fault of anyone who has exposed him to asbestos. In other words, the rule in Fairchild and Barker must have been viewed by the drafters in my opinion entirely understandably as establishing a causal link, between the exposure and the mesothelioma, sufficient for it to be said that the mesothelioma was the result of each (and every) exposure.
A similar view is also implicit in the provisions of the Act drafted on the basis that insurers who would commonly of course be employers liability insurers would be among the persons by or for whose benefit or against whom contribution would be sought in cases of multiple responsible persons: see section 3(7)(b) and (10)(a) of the 2006 Act.
Those provisions necessarily assume that employers liability insurances, written generally on a causation basis, would respond to Fairchild/Barker type liability incurred by employers.
Ultimately, the present appeals raise the questions how the present employers liability insurance policies respond as a matter of construction in circumstances within the rule in Fairchild and Barker.
Where two contracts are linked, the law will try to read them consistently with each other.
This is so with language in a bill of lading, incorporated from a charterparty: The Njegos [1936] P 90.
A similar approach applies to language in a reinsurance incorporated from the insurance: Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 and Groupama Navigation et Transports v Catatumbo CA Seguros [2000] 2 Lloyds Reports 350, even though there is no guarantee that a reinsurance will in every possible circumstance that may develop pick up every liability that may be held to exist under an insurance: see Wasa International Insurance Co Ltd v Lexington Insurance Co [2009] UKHC 40, [2010] 1 AC 180.
The intention under the present insurances must be taken to have been that they would respond to whatever liability the insured employers might be held to incur within the scope of the risks insured and within the period in respect of which they were insured.
Thus, as Scrutton and Greer LJJ accepted in the Ellerbeck Collieries case (paragraph 34 above), an employers liability insurance could have been expected to respond to the conventional and artificial definition in the WCAs as to what constituted an accident and when personal injury by accident or disease was sustained for the purposes of employers liability to employees.
Furthermore, if the common law during or even after the currency of an insurance develops in a manner which increases employers liability, compared with previous perceptions as to what the common law was, that is a risk which the insurers must accept, within the limits of the relevant insurance and insurance period.
Eady J correctly identified this in Phillips v Syndicate 992 Gunner [2003] EWHC 1084 (QB), [2004] Lloyds Insurance and Reinsurance Reports 426, 429 (left).
The declaratory theory does not presume the existence of an ideal system of the common law, which the judges from time to time reveal in their decisions.
But it does mean that, when judges state what the law is, their decisions do . have a retrospective effect in the sense that the law as stated will, generally speaking, be applicable not only to the case coming before [them] but, as part of the common law, to other comparable cases which come before the courts, whenever the events which are the subject of those cases: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 378G H, per Lord Goff.
The declaratory theory is a pragmatic tool, essential when cases can only come before the court some time, perhaps some years after the relevant events occurred, and when the law [must] be applied equally to all, and yet be capable of organic change (p 379A).
A similar principle must, generally speaking, apply in relation to a statute such as the Compensation Act 2006, which changes or corrects the common law to what Parliament perceives to be a more appropriate result for the purposes of all future cases coming before the courts, whenever the events giving rise to them.
In the case of that Act, the result was one which the courts might as a matter of common law well have themselves accepted (and which indeed Lord Rodger in his powerful dissent in Barker v Corus believed that the common law had accepted) in Fairchild.
Concluding, as I have done, that the present insurances covered employers liability for injuries or diseases caused during the relevant insurance periods, the question is whether they cover employers liability for mesothelioma arising under the rule in Fairchild and Barker from having exposed employees to asbestos during such periods.
It is not in dispute that, if the rule is characterised as a rule of deemed causation, then the policies must respond.
A parallel example, so familiar that it is easy to overlook, is the vicarious liability to an employee, A, which rests on any employer, B, who has not himself been negligent but must answer vicariously for the negligence of another employee, C.
We have no hesitation in saying that the employer B has in such a case caused the injury or disease suffered by A.
But this is so in reality only because a rule of law requires us to equate the acts or omissions of C with those of B.
The argument, accepted by Lord Phillips, is that the rule in Fairchild and Barker is not one of deemed causation of or, therefore, liability for the disease, but one of liability for the risk created by the exposure.
For reasons which I have set out, I regard this distinction as too simple.
The liability arises only because of the incurring of the disease and is for the disease.
A condition of such liability is that the employer (negligently) exposed the victim to asbestos.
The insurance policies, read as operating on a causation basis, are aimed at covering liability generated by employers activities during their insurance periods: see paragraphs 18 28 and 41 above; unless liability for mesothelioma flowing from negligent exposure during an insurance period is covered by the policies, this aspect of employers activities will not in practice be covered at all.
In my view, these considerations justify a conclusion that, for the purposes of the insurances, liability for mesothelioma following upon exposure to asbestos created during an insurance period involves a sufficient weak or broad causal link for the disease to be regarded as caused within the insurance period.
It would, I think, have been anomalous and unjust if the law by deeming there to have been causation of the disease could have created policy liability (which is common ground), but the law by insisting that the liability in respect of mesothelioma was for the risk of causation achieved a quite different result.
As I have sought to show, it is not in any event accurate to treat the liability as being either solely or strictly for the risk.
The risk is no more than an element or condition necessary to establish liability for the mesothelioma.
The reality, reinforced by provisions in the 2006 Act, is that the employer is being held responsible for the mesothelioma.
For this purpose, the law accepts a weak or broad causal link.
The link is to exposure which may but cannot be shown on the ordinary balance of probabilities to have played a role in the actual occurrence of the disease.
But for the purposes of the policies the negligent exposure of an employee to asbestos can properly be described as having a sufficient causal link or being sufficiently causally connected with subsequently arising mesothelioma for the policies to respond.
The concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the rule in Fairchild and Barker.
Viewing the point slightly more broadly, if (as I have concluded) the fundamental focus of the policies is on the employment relationship and activities during the insurance period and on liability arising out of and in course of them, then the liability for mesothelioma imposed by the rule in my opinion fulfils precisely the conditions under which these policies should and do respond.
Conclusion
I would therefore dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
ANNEX A The policy wordings (dates are approximate) (1) Excess First Wording (late 1940s): Whereas . (hereinafter called The Employer) carrying on the business of . has made a proposal . this Policy witnesseth that in consideration of the payment of . as premium to the Company on the estimated total amount, as set forth in the Schedule hereto, of the wages, salaries, and other earnings of Employees, a description of whom is set forth in the said Schedule (which premium is subject to adjustment as hereinafter provided) the Company agrees to indemnify the Employer in the manner following, namely That if at any time during the period commencing on theday of19 , and ending on theday of19 (both days inclusive) and for such further period or periods as may be mutually agreed upon, any employee in the Employer's immediate service shall sustain any personal injury by accident or disease while engaged in the service of the Employer in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands, in work forming part of or process in the business above mentioned, and in case the Employer shall be liable to damages for such injury, either under or by virtue of the Common Law, the Fatal Accidents Acts 1846 to 1908, or the Law Reform (Miscellaneous Provisions) Act 1934, the Company will indemnify the Employer The Schedule required a description of the insured companys employees and their estimated total wages, salary and other earnings.
Condition 1 of the policy further provided that: the Employer shall truly record in a wages book the name of every employee and the amount of wages, salary and other earnings paid to him.
Second Wording (late 1950s to 1960s): Whereas the Employer . carrying on the business described in the .
Schedule has made . a written proposal and declaration, containing particulars and statements which it is hereby agreed are the basis of this Contract . and has paid the premium mentioned in the Schedule, which premium is subject to adjustment as hereinafter provided, this Policy witnesseth that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in work forming part of the process in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease The policy provided that the Company should not be liable under it in respect of accidents occurring elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
The policy provided that premiums were to be regulated by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with a wages book being kept open to inspection for that purpose and the employer supplying the correct amounts within one month of the expiry of each insurance period.
Condition 1 and the Schedule were in similar form to those in the first wording.
Third Wording (1970 to 1976) After a recital in the same form as the second wording, this wording provided: that if at any time during the period of the indemnity as stated in the Schedule or during any subsequent period for which the Company may accept premium for the renewal of this Policy any person of a description mentioned in the Schedule who is under a contract of service or apprenticeship with the Employer shall sustain personal injury by accident or disease arising out of and in the course of employment by the Employer in the business mentioned in the Schedule, the Company will indemnify the Employer against liability at law for damages in respect of such injury or disease Under the third wording, there was the same territorial limitation as under the second wording in relation to accidents occurring elsewhere than in Great Britain, etc.
Premiums were also regulated by reference to wages, salaries, etc. and condition 1 and the Schedule were in the same terms as in the second wording. (2) Independent Sole wording in Issue (1972 to 1987): This was a Contractors Combined Policy, covering Employers Liability (section 1), Public Liability (section 2) and Loss of or Damage to Contract Works (section 3).
It provided: NOW THIS POLICY WITNESSETH that during the Period of Insurance or during any subsequent period for which the Company may accept payment for the continuance of this Policy and subject to the terms, exceptions and conditions contained herein and or endorsed hereon, the Company will indemnify the Insured as hereinafter specified.
SECTION 1 EMPLOYERS' LIABILITY If any person who is under a contract of service or apprenticeship with the Insured shall sustain bodily injury or disease arising out of and in the course of his employment by the Insured in connection with the Contract specified or type of work described in the Schedule the Company will indemnify the Insured against all sums for which the Insured shall be liable at law for damages for such injury or disease The Policy provided that the Company was not to be liable for injury, illness, loss or damage caused elsewhere than in Great Britain, the Isle of Man or the Channel Islands.
As a result of the ELCIA 1969 making insurance in respect of employers liability compulsory, the Independent wording also contained the further provision (the ELCIA extension provision): "AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY The indemnity granted by section 1 of this Policy is deemed to be in accordance with the provisions of any law relating to compulsory insurance of liability to employees in Great Britain.
It is agreed the Insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the provisions of such law. " The policy Schedule contains spaces for entry of first, annual and minimum premium, as well as of the name of the Principal for whom the insured is undertaking work, the details of the contract or type of work covered by the policy and its situation.
Condition 7 provides that the premium is based on estimates provided by the Insured, for record keeping, for the supply of updated information as required by the Company within one month of the expiry of each insurance period and for adjustment of the premium on that basis. (3) MMI First Wording (1949 to 1958) the Company hereby agrees that if at any time during the period of insurance specified in the schedule or thereafter during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified in the said schedule, or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any personal injury by accident or disease arising out of and in the course of his employment by the Insured in their activities described in the schedule and if the Insured shall be liable to pay damages for such injury or disease then, subject to the terms and conditions contained herein or endorsed hereon, the Company shall indemnify the Insured against all sums for which the Insured shall be so liable The policy was expressed not to apply to or include liability in respect of injury or disease caused elsewhere than in Great Britain, Northern Ireland, the Isle of Man or the Channel Islands.
Condition 5 regulated premiums by reference to wages, salaries, etc, and made provision for a wages book and adjustment to like effect to the Excess second wording.
The policy Schedule provided for the classification of staff and employees according to departments and job description, with corresponding figures for estimated total remuneration.
Second Wording (1958 to 1974) the Company hereby agrees that if at any time during the First Period of Insurance specified in the said Schedule or during any subsequent period for which the Insured shall agree to pay and the Company shall agree to accept a renewal premium of the amount specified as the Renewal Premium in the said Schedule or of such other amount as the Company shall from time to time require, any person under a contract of service with the Insured shall sustain any bodily injury or disease arising out of and in the course of his employment by the Insured in the Insured's activities described in the said Schedule and if the Insured shall be liable to pay damages for such injury or disease or for death resulting from such injury or disease then, subject to the terms, exceptions and conditions contained herein or endorsed hereon or set out in the Schedule to this Policythe Company will indemnity the Insured against all sums for which the Insured shall be so liable.
Like the first wording, this wording contained a territorial exclusion of liability in respect of injury or disease caused elsewhere than in Great Britain, etc.
The policy Schedule provided for the entry of the Estimates (if any) on which the premium is calculated, including in particular any such estimate of wages, salaries, etc. paid to staff, and cross referred to condition 7, which provided that, if the premium had been based on any estimates, an accurate record should be kept (of actual amounts), the insured should provide insurers with such particulars and information as might be required within one month of the expiry of the policy period and the premium adjusted accordingly.
Third Wording (1974 to 1992) The Company agrees to indemnify the Insured in respect of all sums without limit as to amount which the Insured shall be legally liable to pay as compensation for bodily injury or disease (including death resulting from such bodily injury or disease) suffered by any person under a contract of service or apprenticeship with the Insured when such injury or disease arises out of and in the course of employment by the Insured and is sustained or contracted during the currency of this Policy.
The policy Schedule contemplated a premium adjustable in accordance with condition 5, which in turn provided (in like manner to condition 7 of the second wording) for the adjustment of any premium so calculated by reference to actual amounts at the end of the policy period. (4) BAI First Wording (1953 to 1974) . the Company willindemnify the Insured against all sums of money which the Insured may become liable to pay to any Employee engaged in the direct service of the insured or any dependent of such Employee in respect of any claim for injury sustained or disease contracted by such Employee betweenandboth inclusive The policy carried the note: This policy does not cover the insureds liability for accidents to workmen arising outside the United Kingdom.
Conditions 1 and 2 made elaborate provision for the regulation of premiums by the amount of wages, salaries, or other earnings paid to employees by the employer during each period of insurance, with pay sheets and books of account being kept open to inspection for that purpose and the employer making a return, and the premium being adjusted, subject to a minimum, at the end of each insurance period.
Second Wording (1974 to 1983) the Company willindemnify the Insured against all sums of money which the Insured may become legally liable to pay in respect of any claim for injury sustained or disease contracted by any person engaged in and upon the service of the Insured and being in the Insured's direct employment under a Contract of Service or Apprenticeship between theday ofand theday ofboth inclusive This wording also excluded insurers from liability in respect of accidents to employees arising outside the United Kingdom.
Like the Independent and third MMI wordings, the BAI second wording also included the ELCIA extension provision.
Conditions 1 and 2 provided for the regulation and adjustment of premiums by reference to actual wages, salaries, etc. during each insurance period, in like terms to conditions 1 and 2 in the first wording. (5) Zurich The Municipal First Select wording (1993 to 1998) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury sustained during the Period of Insurance by any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The Municipal Second Select wording (1998 ) The INSURER will indemnify the INSURED in respect of all sums which the INSURED may become legally liable to pay as damages and claimants' costs and expenses in respect of Injury caused during the Period of Insurance to any EMPLOYEE arising out of and in the course of employment by the INSURED in the BUSINESS within the Geographical Limits.
The tariff wording (1948 ) if any person under a contract of service or apprenticeship with the Insured shall sustain any personal injury by accident or disease caused during the period of insurance and arising out of and in the course of his employment by the Insured in the business above mentioned and if the Insured shall be liable to pay damages for such injury or disease the Association shall indemnify the Insured against all sums for which the Insured shall be so liable.
LORD CLARKE
Like other members of the Court, I agree with Lord Mance on the construction issue.
Thus I agree that, for the purposes of the EL policies, mesothelioma is sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the asbestos fibre or fibres which cause the disease.
I do not wish to add to Lord Mances reasoning on the construction issue.
I do however wish to add some words of my own on the causation issue which sharply divides Lord Phillips and Lord Mance.
I wish to say shortly why I prefer the conclusion of Lord Mance to that of Lord Phillips.
As I see it, the effect of Fairchild, Barker and Sienkiewicz may be summarised in this way.
An employer who, in breach of duty, has exposed an employee to asbestos is liable in damages if the employee subsequently suffers the disease.
The employees cause of action is not that he was exposed to the risk of mesothelioma.
He has no claim unless he in fact suffers the disease.
It is the disease which represents the damage which completes the cause of action and it is only then that his cause of action accrues and the relevant time limit begins to run.
It is axiomatic that, in order to succeed in tort, the employee must show a sufficient causal link between the breach of duty, namely the exposure to asbestos, and the disease which represents the damage, namely mesothelioma.
The effect of the majority opinion in Barker is that, where there are two or more employers who have exposed the claimant to the risk of mesothelioma, they are not jointly and severally liable to the claimant for the whole of the consequences of the disease but only severally liable for an aliquot part.
That decision was reversed by the Compensation Act 2006, so that such employers are jointly and severally liable for the whole of the consequences.
The question in this appeal is whether the employers liability insurers are liable to indemnify the employers in respect of that liability.
It would in my opinion be a remarkable result if they were not.
Lord Phillips notes at para 109 that Mr Edelman QC accepted that, if the correct analysis of the special rule, which (using Lord Phillips definitions) was the result of the combined effect of the special approach in Fairchild and Barker and the Compensation Act 2006, was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust, the insurers would be liable.
Lord Phillips accepts that that concession was correctly made.
I agree, for the reasons he gives at paras 109 to 114.
The question is therefore whether the correct analysis of the special rule is indeed that the employers were deemed to have caused the mesothelioma.
I accept that in such a case the employee cannot show on the balance of probabilities that the employers negligence caused the disease.
The effect of Fairchild and Sienkiewicz was however that the employer is liable where the exposure contributed to the risk that the employee would suffer the disease and where the employee in fact suffers the disease.
That is not in dispute.
Lord Phillips says at para 124 that the majority in Barker drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease.
He quotes para 2 of Lord Hoffmanns speech as follows: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Phillips further notes that at para 125 Lord Hoffmann advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
See also the passages to like effect referred to by Lord Mance at para 61.
I accept that Lord Hoffmann and others did indeed advance that view of Fairchild but it is I think important to note that it was in the context of the question whether, in a case of two or more employers, each was severally liable for a proportion of the consequences of the mesothelioma or whether each was jointly and severally liable for the whole.
Lord Hoffmann cannot have intended to hold, without more, that the basis of liability was the wrongful creation of the risk or chance of causing the disease because there would be no liability at all but for the subsequent existence of the mesothelioma.
It seems to me that, whether the majority in Barker were correct or not, there is no escape from the conclusion that, in all these cases, where it is not possible to show that the particular employer caused the claimant to suffer mesothelioma, the underlying question is who should be held responsible for causing the mesothelioma which in fact struck down the employee.
None of the cases is authority for the proposition that causation is irrelevant.
On the contrary, the quest is for the employer who can fairly be held liable for the consequences of the disease and therefore for the employer who can fairly be said to have caused the disease.
The courts have embarked on similar quests over the years.
Lord Mance has given a number of examples.
As Lord Mance shows at para 56, they include Bonnington and McGhee, where Lord Reid was prepared to take a broad view of causation and Lord Wilberforce rejected a traditional approach for policy or evidential reasons.
In my opinion the reasoning in Sienkiewicz is of some significance in this context.
Lord Mance has given the relevant references in para 61.
Thus, as Lord Mance observes, at para 61 Lord Phillips said that Fairchild and Barker had developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances.
Lord Mance further refers to Lord Brown speaking of a more relaxed approach to causation and flexibility in the approach to causation at paras 178 and 187.
Lord Mance had himself referred to Fairchild and Barker as involving a special rule of causation at para 188, and Lord Kerr referred to them as involving a modification of the previously applicable legal rules in relation to the causation element in employers liability claims at para 196 and to adjustments in the burden of proof at paras 198 and 200.
Again, as Lord Mance observes at para 61 above, Lord Dyson referred (at para 207) to materially increasing the risk of contracting the disease as sufficient to satisfy the causal requirements for liability (para 207).
Both Mr Beloff QC and Mr Stuart Smith QC addressed these issues in their oral submissions.
They both in effect submitted that the effect of Fairchild, Barker and Sienkiewicz was that the employers were deemed to have caused mesothelioma by exposing the employees to asbestos dust.
They both recognised that the ordinary rule of causation could not apply and that some element of policy or doctrine was required in order to explain Fairchild.
Mr Stuart Smith submitted that the effect of Fairchild was that each material exposure to asbestos dust is doctrinally held responsible for the mesothelioma.
Mr Beloffs submission was to much the same effect.
He relied upon a dictum of Lord Walker in Barker at para 109: A rule of law by which exposure to risk of injury is equated with legal responsibility for that injury entails the possibility that an employer may be held liable for an injury which was not in fact caused by that exposure (though in the present state of medical science, that fact can be neither proved nor disproved).
The injury is of course the mesothelioma, which is necessary to complete the cause of action.
On that basis it seems to me that Lord Walkers statement that the risk of injury is equated with legal responsibility for the injury is in effect to say that, by creating the risk of mesothelioma in the future, the employer is deemed to have caused the mesothelioma, if it should develop in the future.
It appears to me that these conclusions are supported by Lord Mances analysis of section 3 of the Compensation 2006 at paras 67 and 68, with which I agree and to which I do not wish to add anything.
Given Mr Edelmans concession that, if that is correct, the employers are liable under the policies (and this Courts acceptance of it) I would hold that the causation point does not assist the insurers.
I would only add this.
It appears to me that, once it is held that, on these facts, the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies.
Rather as in AXA, the whole purpose of the policies was to insure the employers against liability to their employees.
That purpose would be frustrated if the insurers submissions on this point were accepted.
I agree with Lord Mance, for the reasons he gives at paras 69 73 that these policies respond to these claims.
For these reasons, I too would dismiss the appeals by insurers so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD DYSON
I too agree with Lord Mance on the construction issue.
As to the causation issue, I agree with the reasoning of Lord Mance and Lord Clarke.
Accordingly, I would dismiss the appeals by insurers in so far as they concern the policies with contracted wordings.
I would allow the appeals against insurers, and dismiss the appeal by the Independent, so far as they concern policies with sustained wordings.
LORD PHILLIPS
Introduction
So called long tail industrial diseases have raised peculiar difficulties in the field of tort.
These diseases result from the effect on the body of exposure to noxious substances.
The effect can be long, drawn out and mysterious, in as much as medical science has not yet identified the precise mechanism, or chain of causation, by which the noxious substance causes the disease.
Mesothelioma is a long tail disease in which the problems raised have been particularly acute.
The problems arise in the application of principles of law that do not ordinarily give rise to difficulty.
An employer will be liable in damages if by an act or omission that is negligent or in breach of statutory duty he causes physical harm to an employee.
In the vast majority of cases there will be no difficulty in identifying the moment at which the negligence or breach of duty causes the physical harm, for the harm will take the form of an obvious injury.
This is not the position in respect of mesothelioma.
Asbestos dust, inhaled into the lungs, is the agency that causes mesothelioma, but as long as forty or fifty years may elapse before the effects on the body of dust inhaled culminate in symptoms of mesothelioma.
Once the symptoms are felt, the disease will develop swiftly to bring about an inevitable and extremely unpleasant death.
Where a victim of mesothelioma was exposed to asbestos dust over a period of years it is impossible, even with hindsight, to determine on balance of probabilities whether dust inhaled in a particular year caused or contributed to the development of the mesothelioma.
It follows that, where the victim worked for a series of employers, each of whom exposed him to asbestos dust, it is impossible to prove on balance of probability that any particular employer caused or contributed to the victims mesothelioma.
This means that the normal principles of the law of tort provide no remedy to the employee or his dependants.
The manifest injustice of this position led the House of Lords in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32 and Barker v Corus UK Ltd [2006] UKHL 20; [2006] 2 AC 572 to create what I shall describe as a special approach to causation in respect of mesothelioma, whose effect was immediately varied by Parliament by section 3 of the Compensation Act 2006.
I shall describe the composite result achieved by the House of Lords and Parliament as the special rule.
I shall examine the nature of this special rule in due course.
Its effect was, however, to place each employer in the same position as that employer would have been under at common law if it were proved, on balance of probability, that its negligence or breach of duty in exposing the employee to asbestos dust had contributed to causing the employees mesothelioma.
These developments of the law of tort have formed the backdrop to the issue that has occupied almost all of the eight days that this Court has devoted to this appeal.
I shall call this issue the construction issue.
The construction issue relates to the true construction of a number of policies of insurance against employers liabilities (EL policies) with similar, but not identical, provisions as to the cover provided.
The EL policies provided cover by reference to specific periods usually of a year.
The central issue relates to the event or events that, on true construction of each policy, had to occur within the period of the policy in order to render the insurer liable to indemnify the employer in respect of liability for causing an employees mesothelioma.
The policies provided cover in respect of diseases sustained or contracted during the period of the policy.
The meaning of each of those words, in its context, lies at the heart of the construction issue.
It does not seem that the construction issue initially received a great deal of consideration.
Insurers treated the policies as if they covered an employer whose breach of duty within the period of the policy had contributed to causing the disease and regarded this requirement as satisfied if the employer was held liable because he had exposed the employee to asbestos dust during that period.
Where more than one insurer was liable on this basis, they apportioned liability according to the period of exposure covered by each.
The attitude of four of the five insurers party to this appeal changed as a result of the decision of the Court of Appeal in Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50; [2006] 1 WLR 1492.
Those insurers are MMI, Excess, BAI and Independent, each of which is in run off.
I shall describe them collectively as the insurers.
Their opponents I shall describe collectively as the employers, although they embrace solvent employers, individuals claiming under the Third Party (Rights against Insurers) Act 1930, and Zurich, which has a community of interest with these.
Bolton concerned the scope of cover of a public liability policy (PL policy) in relation to liability for causing mesothelioma.
The policy provided cover in respect of an injury that occurs during the currency of the policy.
The argument proceeded on the premise that the chain of causation of mesothelioma, once it was diagnosed, could be traced back to the initial inhalation of asbestos dust.
The issue was whether the mesothelioma could properly be said to have occurred at the time of the initial inhalation.
The Court of Appeal held that it could not.
The injury only occurred, at earliest, at the stage of development of the disease at which malignancy occurred.
This was, on the evidence, ten years, give or take a year, from the date on which it became possible to diagnose the existence of the tumour but very many years after the initial inhalation of asbestos dust.
This decision led the insurers to take the point that a similar approach should be taken to the interpretation of the cover afforded by the EL policies.
Mesothelioma was not, on true construction of the policies, sustained or contracted at the time of the initial inhalation of asbestos dust.
It was only sustained or contracted at the much later stage when, as a consequence of the process initiated by asbestos dust, an actionable injury in the form of malignancy, developed.
Before Burton J, the Court of Appeal and this Court the construction issue has been argued at great length and in great detail.
I agree, as do the other members of the Court, with the conclusions reached by Lord Mance on the construction issue.
These conclusions have application not merely to mesothelioma but to employers liabilities in relation to other long tail industrial diseases such as asbestosis and pneumoconiosis.
For the purpose of EL policies, these diseases are sustained or contracted when the process that leads to the disease is initiated as a result of the wrongful exposure of the employee to the noxious substance that causes, or contributes to the cause or the extent of, the disease.
Throughout the hearing of this appeal there has lurked a second issue.
It has not been the subject of argument below, nor does it feature in the agreed Statement of Facts and Issues.
This is, perhaps, because it relates to a point that does not arise out of Bolton.
It has always been there for the taking, but insurers have not hitherto chosen to raise it, perhaps because its consequences are unattractive.
It arises out of a problem that is similar to that which led the House of Lords to formulate the special approach in Fairchild and Barker.
It is not possible for an employer to prove that an employees mesothelioma was, in fact, caused in whole or in part by any particular period of exposure to asbestos dust.
Thus the employer cannot prove, on balance of probability, that the mesothelioma for which he has been held liable under the special rule was, in fact, initiated in any particular policy year.
How, then, can he prove that his liability falls within the scope of the cover, even if the policy bears the construction contended for by the employers and upheld by this Court? How can he prove that his liability arises out of disease sustained or contracted within the policy period, giving these words the same meaning as initiated? I shall call this issue the causation issue.
The causation issue and the judgments below
Although the causation issue was not raised in argument below, it was dealt with, at least implicitly, in the judgments of both courts.
Burton J at first instance, and Rix and Stanley Burnton LJJ in the Court of Appeal proceeded on the basis that, in the case of a mesothelioma victim, exposing the victim to asbestos dust could be treated as equivalent to causing his disease.
This approach was based on the special rule.
Thus Burton J at paras 42 to 58 summarised, without significant comment, what he described as the special mesothelioma jurisprudence as it was at the time of his judgment.
This included Fairchild, Barker and the 2006 Compensation Act.
He thereafter proceeded on the basis that exposing a mesothelioma victim to asbestos dust could be treated as having been equivalent to causing the victim to contract the disease.
Thus, when summarising his conclusions at para 243 he said: I conclude, in relation to the policies in issue before me, that they respond, just as would policies with caused wording, to claims against insurers where employers are liable on the basis of inhalation by employees during the policy period.
They respond, consistently with other EL policies, in respect of mesothelioma claims, on an exposure basis.
For the purposes of these policies, injury is sustained when it is caused and disease is contracted when it is caused, and the policies fall to be so construed.
Rix LJ drew a distinction between the meaning of contracted and sustained.
Contracted referred to the time of the diseases causal origins para 245.
He felt constrained by Bolton, however, to hold that no injury was sustained until the disease reached the malignant stage.
Implicit in his judgment was the premise that exposure to asbestos dust during the period of the policy could be treated as the causal origin of the disease see for example his comments at para 244.
A difficult passage in his judgment at paras 280 283, when considering the meaning of injury, suggests that this premise was founded on the special rule.
Thus he was able to conclude that the disease was contracted at the time that the victim was exposed to asbestos dust albeit that injury was not sustained at that point.
In a short judgment Stanley Burnton LJ adopted similar reasoning.
He stated, at para 338: We are agreed that in any year in which there was substantial exposure to asbestos, mesothelioma was caused by that exposure during that year.
The fact that the disease did not develop for some years does not break the chain of causation.
Submissions on the causation issue
The causation issue was not raised by the insurers as a discrete issue.
It none the less surfaced in a passage of the written case for Excess that was addressing the employers case that personal injury by disease was sustained at the moment of inhalation of asbestos dust that triggered the process of sustaining personal injury by disease.
One of the arguments advanced by Excess in answer to this submission read as follows: Medically and empirically, one cannot be said to have suffered an injury on a particular day because it cannot be known in (say) a 10 year occupational exposure period on which of the 3652 days the fatal dose was inhaled (and it may be on more than one).
It is likely that any ingestion on a particular day was irrelevant to the development of the final condition.
There has been a tendency on the part of the claimants to treat inhalation as a single event from which an unbroken line can be drawn to malignancy.
It is not.
Inhalation (and hence on this theory) injury may occur over several thousands of days.
Each day does not bring injury.
Any particular day cannot therefore be selected as injury day.
To overcome problems of medical causation in a personal injury action against an employer, the House of Lords extended the McGhee principle to mesothelioma in Fairchild.
However this was a rule of causation and not definition.
There is no such rule in insurance policies which defines what amounts to an injury.
The Supreme Court in Sienkiewicz stressed the limits of the Fairchild exception in no uncertain terms, and it is submitted that it would be quite wrong for it now to invade the law of contract.
A liability policy responds only to indemnify against a liability (i.e. actionable injury).
There is no such liability on inhalation.
Injury occurs when the claimant has a personal injury by disease.
Thus Excess took the point that the special rule could not properly be invoked to establish that, on true construction of the contracts of insurance, injury was sustained upon inhalation of asbestos dust.
This passage appeared after a submission at para 209 that it was only possible to equate the inhalation of a culpable quantity of asbestos dust with sustaining personal injury by disease by, inter alia, creating a special rule governing the response of EL policies in respect of mesothelioma, and possibly other long tail diseases.
This proved to be what counsel for the employers sought to do when invited by the Court to address the causation issue.
They did so in short oral submissions that cannot, when taken together, have occupied more than half an hour of the eight day hearing.
The relevant submissions made by Mr Beloff QC for Akzo and AMEC and the Local Authorities are reported at pp 120 122 of the transcript for 15 December 2011.
He started by observing that we had to cut the Gordian knot.
He suggested that we should do so by equating creation of a risk with causing bodily injury.
This he submitted was permissible because the object of the policy was to provide cover to an employer who, in breach of duty to employees, caused them compensatable damage.
Were this approach not adopted, it would be impossible to show that any of a number of insurers providing cover over a period of years was liable.
The law should rebel against such a result.
In support of this submission Mr Beloff cited a statement by Lord Walker of Gestingthorpe in Barker at para 109 suggesting that the special approach to mesothelioma equated the exposure to the risk of injury with legal liability for the injury.
Mr Stuart Smith QC for Zurich dealt with the causation issue at rather greater length in a passage reported at pp 126 to 131 of the same transcript.
He started by accepting that it was impossible to know when the metabolic changes that led to the development of mesothelioma in fact occurred.
Fairchild dealt with this problem by creating a doctrinal rule under which each significant exposure to asbestos dust was held to be responsible for the mesothelioma.
Thus doctrinally the process of developing mesothelioma started upon inhalation.
This doctrinal framework for the application of the law of tort was that within which policies of insurance against tortious liability had to operate.
Mr Stuart Smith agreed with this summary of his argument advanced by Lord Mance: If the law of tort treats someone, an employee, as having sustained a personal injury and treats the employer as liable to pay damages for such personal injury, then the policy answers.
These submissions on behalf of the employers raise the following questions: i) Will the policies respond to fictional or doctrinal events that are deemed to have occurred under the special rule? If so: ii) Does the special rule deem that events have occurred to which the policies should respond? If not: iii) Can this Court properly reformulate the special rule in such a way as to require the policies to respond? Will the policies respond to fictional or doctrinal events?
On the premise that he failed on the construction issue, Mr Edelman accepted that, if the correct analysis of the special rule was that the employers were deemed to have caused the mesothelioma by exposing the victims to asbestos dust, then the policies should properly respond.
Because of the view that I take of the next two questions I do not need to decide whether the concession was properly made.
I have, however, concluded that it was.
The policies exist to provide protection against employers liability in tort.
If the law of tort, whether laid down by the courts or by Parliament, resorts to legal or doctrinal fictions, it seems logical that the policies should respond as if the fictions were facts.
A purposive approach to construction of the policies would lead to this result.
Two examples illustrate this approach.
Ellerbeck Collieries Ltd v Cornhill Insurance Co Ltd [1932] 1 KB 401 involved a policy of insurance against liability under the Workmens Compensation Act 1925.
The terms of the policy entitled the employer to indemnity if at any time during the currency of the insurance any employee sustained any personal injury by accident or disease.
The 1925 Act imposed a fictitious test for identifying when an industrial disease was sustained, namely the date on which a certifying surgeon issued a certificate that the employee was suffering from the disease.
On the strength of a certificate issued within the currency of a policy of insurance an employer was held liable to two workmen who had, in fact, sustained the relevant disease before the period of the insurance began.
The Court of Appeal held that this liability fell within the cover of the policy.
The argument for applying the fictional date was a strong one because, as Greer LJ observed at p 417, the policy was intended to cover the employers liability under the Act.
The parallel between Ellerbeck and the present case would have been stronger had the relevant policies been taken out after the special rule had been created.
In Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 the House of Lords held that pleural plaques caused by exposure to asbestos dust did not constitute actionable injury because they produced no adverse physical effects.
The Scottish Parliament responded to this decision by introducing the Damages (Asbestos related Conditions) (Scotland) Act 2009 (the Scottish Act).
That Act provides by section 1 that asbestos related pleural plaques constitute a personal injury which is not negligible and that accordingly they constitute actionable harm for the purpose of an action for damages for personal injury.
In AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2011] 3 WLR 871 the Supreme Court rejected a challenge by insurers to the lawfulness of this Act.
The Scottish Act effected a limited alteration to the common law in decreeing that asymptomatic pleural plaques constituted non negligible personal injury and thus actionable damage.
Lord Mance at para 88 suggested that the main target of the legislation was employers insurers.
He went on at para 89 to consider whether the Act would, in fact, alter the meaning to be given to bodily injury under a policy of insurance: A Scottish Act will not on the face of it change the legal effect of an English insurance contract, even in Scotland.
However, depending upon the particular policy language, the scope of the concept of bodily injury under a worldwide policy may respond to different conceptions of bodily injury in different parts of the world.
Here, the question would be whether it would respond to a development or change, such as that introduced retrospectively by the 2009 Act, in the conception of bodily injury.
I say no more about the answer, which may be elicited in another context or suit.
While Lord Mance left open the effect of the Scottish Act on the construction of policies of liability insurance, Lord Brown was in no doubt that the effect of the Scottish Act was to subject insurers to liabilities to which they would not have been subject prior to that Act.
He referred at para 80 to the undoubted, and deliberate, impact of the legislation upon pending claims.
Earlier, at para 77, he drew an analogy with the effect of the decision in Fairchild on EL insurers liability: Had the House of Lords in Rothwell decided that asymptomatic pleural plaques of themselves constitute a non negligible personal injury and thus actionable damage decided in other words that in this particular context the common law should develop in this admittedly novel way the appellants would doubtless have deplored the decision but they could certainly not have questioned its legitimacy.
No doubt they would have resented the fact that, as a consequence of the decision, they would unexpectedly have had to pay out on claims resulting from the employees exposure to asbestos upwards of 20 years (quite likely up to 40 years) previously.
But they could no more have advanced an [article 1, Protocol 1] challenge to this development of the law than they could have challenged the House of Lords decision some four years earlier in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 to adopt a less stringent than the usual but for test for establishing the necessary causal connection between an employers negligence and a claimants condition in, most notably, mesothelioma cases.
Employers (and their liability insurers) necessarily take the risk of the common law developing in ways which may adversely affect them with regard to personal injury claims.
In this passage Lord Brown assumed that the effect of Fairchild was to bring employers liabilities in respect of mesothelioma within the scope of the cover afforded by EL policies.
I am about to consider whether he was correct in this.
I agree, however, with the general principle expressed in the last sentence of the extract from his judgment that I have just cited.
It is for this reason that I would give an affirmative answer to the first of the three questions posed at para 108 above.
I turn to the second.
What is the special rule?
The employers submissions on the causation issue proceed on the premise that the special rule deems exposure to asbestos dust of an employee who is subsequently diagnosed with mesothelioma to have been a cause of the mesothelioma.
I have reached the conclusion that that premise is unsound.
In Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10; [2011] 2 AC 229 I summarised the special rule as follows at para 1: When a victim contracts mesothelioma each person who has, in breach of duty, been responsible for exposing the victim to a significant quantity of asbestos dust and thus creating a material increase in risk of the victim contracting the disease will be held to be jointly and severally liable for causing the disease.
This is certainly the effect of the special rule, but in order to discover the juridical basis of the rule it is necessary first to identify the basis of the special approach adopted by the House of Lords in Fairchild and Barker and then to consider the effect of section 3 of the Compensation Act, which adapted the special approach into the special rule.
The special approach
In Sienkiewicz, at para 70, I stated that Fairchild and Barker developed the common law by equating materially increasing the risk with contributing to the cause in specified and limited circumstances, which include ignorance of how causation in fact occurs.
As I shall show, this was not an accurate summary of the special approach adopted in those cases.
In Fairchild the House of Lords confronted the position where a mesothelioma victim had worked consecutively for a number of employers, each of which had exposed him to asbestos dust.
One or more of these had caused his mesothelioma, but because of the limits of medical knowledge it was not possible, on balance of probability, to identify which.
In these circumstances their Lordships adopted a special approach that enabled them to find that each of the employers was jointly and severally liable for the mesothelioma.
In doing so they purported to be following a similar approach adopted by the House of Lords in McGhee v National Coal Board [1973] 1 WLR 1.
They were not, however, all agreed as to the basis of that approach.
Lord Hutton, at para 109, held that it was based on the drawing of a factual or legal inference leading to the conclusion that the breach of duty [in exposing the employee to asbestos dust] was a cause of the disease.
The majority of the House did not agree.
Lord Bingham said, at para 35: I prefer to recognise that the ordinary approach to proof of causation is varied than to resort to the drawing of legal inferences inconsistent with the proven facts.
Lord Nicholls of Birkenhead said, at para 42: So long as it was not insignificant, each employer's wrongful exposure of its employee to asbestos dust, and, hence, to the risk of contracting mesothelioma, should be regarded by the law as a sufficient degree of causal connection.
This is sufficient to justify requiring the employer to assume responsibility for causing or materially contributing to the onset of the mesothelioma when, in the present state of medical knowledge, no more exact causal connection is ever capable of being established."
Lord Hoffmann at para 65 rejected the suggestion that the House in McGhee held that materially increasing the risk of the disease should be treated as equivalent to material contributing to the injury.
He concluded: I would respectfully prefer not to resort to legal fictions and to say that the House treated a material increase in risk as sufficient in the circumstances to satisfy the causal requirements for liability.
Lord Rodger of Earlsferry did not agree.
His reasoning was close to that of Lord Hutton.
He held, at para 168: Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness.
What then happened has been summarised by Lord Hoffmann in Perspectives on Causation (2011) at p 8: There are two ways in which one could characterise this change in the substantive law of negligence.
One is to say that the causal requirements for an action for damages for mesothelioma have been changed; all that is necessary is to prove that the risk has been increased and that the specific exposure may have provided the actual agent.
The other is to say that the House created, exceptionally, a cause of action for the increased risk of mesothelioma rather than for the disease itself.
In the former case, satisfying the new causal requirement would entitle the claimant to sue for the whole injury caused by contracting the disease.
In the latter case, he would be able to sue only for the loss caused by the risk of his contracting the disease having been increased.
That would be a proportion of the injury caused by the disease, depending on the extent to which the risk had also been created by other causes.
In Barker v Corus the House of Lords (Lord Rodger of Earlsferry dissenting) adopted the second explanation of what had happened in Fairchild.
I believe that this summary of the position is essentially correct.
The majority in Barker were persuaded that justice would best be served if the special approach adopted in Fairchild were applied in such a way as to render each defendant who had wrongfully exposed the claimant to asbestos dust severally liable for that proportion of the mesothelioma that represented the proportion of the wrongful exposure attributable to that defendant.
This was achieved by holding that the liability of each defendant resulted from adding to the risk that the employee would contract mesothelioma.
It did not result from an implication that each defendant had actually contributed to the cause of the disease.
At the start of his speech at para 2 Lord Hoffmann drew the vital distinction between being liable for contributing to the cause of the disease and being liable for the creation of the risk of causing the disease: Is any defendant who is liable under the exception deemed to have caused the disease? On orthodox principles, all defendants who have actually caused the damage are jointly and severally liable.
Or is the damage caused by a defendant in a Fairchild case the creation of a risk that the claimant will contract the disease? In that case, each defendant will be liable only for his aliquot contribution to the total risk of the claimant contracting the disease a risk which is known to have materialised.
Lord Hoffmann went on to adopt the latter analysis as the basis of liability in Fairchild.
At para 31 he held that the majority in Fairchild had not proceeded upon the fiction that a defendant who had created a material risk of mesothelioma was deemed to have caused or materially contributed to the contraction of the disease.
The creation of a material risk of mesothelioma was sufficient for liability.
At para 35 he advanced the thesis that the basis of liability was the wrongful creation of the risk or chance of causing the disease and that the damage that the defendant should be regarded as having caused was the creation of such risk or chance.
Liability for the mesothelioma that developed should be apportioned according to the contribution that each defendant made to the risk that mesothelioma would be contracted.
Lord Scott of Foscote and Lord Walker of Gestingthorpe expressly agreed with both Lord Hoffmanns conclusion that liability for the mesothelioma fell to be apportioned and with his reasons for so concluding.
Lord Scott held at para 53 that it was essential to keep firmly in mind that liability in Fairchild was not imposed on any of the defendant employers on the ground that the employers breach of contract had caused the mesothelioma.
That causative link had not been proved against any of them.
It was imposed because each, by its breach of duty, had materially contributed to the risk that the employee would contract mesothelioma.
At para 61 he emphasised that the Fairchild principle was not based on the fiction that each defendant had actually caused the eventual outcome.
It was based on subjecting the victim to a material risk.
Lord Walker, having stated that he was in full agreement with Lord Hoffmanns reasons went on at para 104 to make a statement that was inconsistent with them, this being to the same effect as the statement relied on by Mr Beloff see para 106 above.
Lord Walker stated that the decision in Fairchild equated exposing the victim to the risk of injury with causing his injury.
This was the same mistake as I made in Sienkiewicz see para 117 above.
Had this been the case, each defendant would have been jointly and severally liable for the injury.
Lord Walker went on to say, however, that the result in Fairchild was achieved, not by some fiction, but as an explicit variation of the ordinary requirement as to causation.
At para 113 he stated that Fairchild was decided by the majority, not on the fictional basis that the defendants should be treated as having caused the victims damage, but on the factual basis that they had wrongfully exposed him to the risk of damage.
Lady Hale did not adopt Lord Hoffmanns thesis that the creation of risk constituted the damage for which each defendant was liable.
In general, however, she agreed with the majority.
She held that in Fairchild, for the first time in our legal history defendants were made liable for damage even though they might not have caused it at all.
It was not said that the defendants had caused or materially contributed to the harm.
All that could be said was that each had contributed to the risk of harm.
In these circumstances it was sensible and fair to apportion liability for the harm in proportion to the contribution that each had made to the risk of harm.
Lord Rodger of Earlsferry vigorously dissented from the reasoning of the majority and from the result in so far as it apportioned liability.
He observed at para 71 that the majority were not so much reinterpreting as rewriting the key decisions in McGhee and Fairchild.
At para 85 he stated that the new analysis that the House was adopting would tend to maximise the inconsistencies in the law.
I have some sympathy with the observations of Lord Rodger.
It would, I think, have been possible for the House in Barker to have defined the special approach in Fairchild as one that treated contribution to risk as contribution to the causation of damage.
The important fact is, however, that the majority did not do so.
They were at pains to emphasise that the special approach was not based on the fiction that the defendants had contributed to causing the mesothelioma.
Liability for a proportion of the mesothelioma resulted from contribution to the risk that mesothelioma would be caused and reflected the possibility that a defendant might have caused or contributed to the cause of the disease.
This was no obiter expression of opinion.
It formed the basis of the substantive decision that liability was severable and not joint.
The special rule
The special approach rendered each employer who had wrongfully exposed a mesothelioma victim to asbestos dust liable for a proportion of the mesothelioma without creating any inference or legal fiction that the employer in question had actually contributed to causing the disease.
Section 3 of the Compensation Act altered the position by imposing joint and several liability on those who were only severally liable under the special approach.
Did the special rule that resulted involve a different basis of liability to that which formed the basis of the special approach? This question is considered by Jonathan Morgan in his interesting Chapter 4 of Perspectives on Causation headed Causation, Politics and Law: The English and Scottish Asbestos Saga.
At p 79 he poses the following question: Has Parliament, by implication, therefore also reversed Lord Hoffmanns principled reinterpretation of Fairchild? Is the nature of Fairchild liability now after all for causing mesothelioma and not increasing risk?
Mr Morgan gives a negative answer to this question, expressing the view that Barker has altered the jurisprudential basis of the Fairchild liability irrevocably.
I agree that section 3 of the Compensation Act did not alter the jurisprudential basis of the special approach laid down by the House of Lords in Fairchild and Barker.
All that it did was to alter the effect of the special approach by making each defendant jointly and severally liable for the whole of the injury sustained.
Section 3(1) provides that the section applies where (c) because of the nature of mesothelioma and the state of medical science, it is not possible to determine with certainty whether it was the exposure [for which the defendant was responsible]or another exposure which caused the victim to become ill, and (d) the responsible person is liable in tort(whether by reason of having materially increased a risk or for any other reason).
It is not possible to read section 3 as imposing a different basis of liability to that identified by the majority in Barker.
The consequence of the special rule
Having regard to its jurisprudential basis I cannot see how the employers can found upon the special rule as identifying the policy year or years in which a victims mesothelioma is initiated.
The position is that it is impossible to prove on balance of probability when mesothelioma is initiated, or contracted, or sustained, giving each of those words the same meaning.
The special rule does not fill the gap for it raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
Should this Court redefine the special rule in order to engage the EL policies?
The special approach of the majority in Barker had the object of ensuring that employers who had wrongfully subjected their employees to asbestos dust should bear what the majority considered to be a fair share of responsibility for their wrongdoing.
It does not seem likely that the majority gave consideration to the implications for the responsibility of EL insurers of the manner in which this object was achieved.
Should this Court now redefine the special rule with the object of enabling claims to be brought under the EL policies? This would, I think, involve holding that the majority in Barker erred in their analysis and that the true basis of the special approach in Fairchild was that contribution to risk should be deemed to be contribution to causation.
I would give a firm No to this question.
The adoption of the special approach in Fairchild has provoked considerable criticism, both judicial and academic.
An example of the former is to be found in the judgment of Lord Brown in Sienkiewicz.
An example of the latter is Mr Morgans closely reasoned Chapter 4 of Perspectives on Causation.
But the object of the special approach in Fairchild and Barker was at least to ensure that those who had breached the duties that they owed to their employees did not escape liability because of scientific uncertainty.
It would be judicial law making of a different dimension to create a legal fiction as to the policy years in which cases of mesothelioma were initiated in order to render liable insurers who could not otherwise be shown to be liable.
The Secretary of State has intervened in this appeal and has submitted that, should the claims of employees or their dependants not be met by insurers, they are likely to be a burden on the public purse.
It is open to question whether this is a proper consideration, even when considering whether the special rule should be redefined for what are essentially reasons of policy.
In any event it seems to me that the position is somewhat more complex than the Secretary of State suggests.
The burden of claims in respect of mesothelioma on a scale that was never anticipated is reducing both employers and insurers to insolvency.
If this Court were to redefine the special rule so as to impose liability for mesothelioma claims on EL insurers where it could not otherwise be made out, this would in many cases be at the expense of others with claims on the same insurers founded on facts and not legal fictions.
The liabilities in respect of mesothelioma will increase the overall shortfall on the part of insurers and this is also likely to have implications for the public purse.
So far as I am concerned, however, these considerations have little relevance.
Even if there were a compelling case for contending that a means should be found to render EL insurers liable, my reaction would be that this was a matter for Parliament not the courts.
It would be wrong in principle for this Court to depart from the reasoning of the majority in Barker for the sole purpose of imposing liability on EL insurers.
| These appeals concern the obligations of insurance companies under various contracts of employers liability (EL) insurance.
In particular, the appeals concern the scope of the insurers obligations to indemnify employers against their liabilities towards employees who have contracted mesothelioma following exposure to asbestos.
Mesothelioma has an unusually long gestation period, which can be in excess of 40 years between exposure to asbestos and manifestation of the disease.
The insurers maintain that the EL policies only cover mesothelioma which manifested as a disease at some point during the relevant policy period.
In contrast, the employers submit that the insurance policies respond to mesothelioma caused by exposure to asbestos during the relevant policy period but which develops and manifests itself sometime later.
The usual rule in negligence cases is that the claimant must establish on the balance of probabilities that the defendants negligence caused his injury or disease.
In Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22 and Barker v Corus UK Ltd [2006] UKHL 20 the House of Lords developed an exception to this general principle in cases involving mesothelioma caused by exposure to asbestos.
The effect of this special rule is that an employer is liable where exposure to asbestos contributed to the risk that the employee would suffer mesothelioma and where the employee in fact develops the disease.
The insurers submit that the special rule in Fairchild/Barker is not applicable when deciding, for the purposes of an EL insurance policy, whether an employees mesothelioma was caused by exposure to asbestos during a particular policy year.
At first instance Burton J held that the policies should all be interpreted as having a causation wording.
He therefore held that the liability trigger under the EL policy was when the employee inhaled the asbestos and not the date when the malignant lesion developed.
A majority of the Court of Appeal (Rix and Stanley Burnton LJJ) upheld the judge in relation to some of the EL insurance policies (particularly those covering disease contracted during the relevant insurance period); however they concluded that other policies (particularly those covering disease sustained during the insurance period) responded only on an occurrence or manifestation basis.
These appeals to the Supreme Court raise two issues: (i) On the correct construction of the EL policies, is mesothelioma sustained or contracted at the moment when the employee is wrongfully exposed to asbestos or at the moment when the disease subsequently manifests in the employees body? (ii) Does the special rule in Fairchild/Barker apply when determining whether, for the purposes of the EL policies, an employee sustained or contracted mesothelioma during a particular policy period?
The Supreme Court dismisses the insurers appeal by a 4 1 majority; Lord Phillips dissenting on the second issue.
Lord Mance gives the main judgment.
To resolve the meaning of the EL policies it is necessary to avoid over concentration on the meaning of single words or phrases viewed in isolation, and to look at the insurance contracts more generally [19].
Several features point the way to the correct construction.
First, the wordings of the policies on their face require the course of employment to be contemporaneous with the sustaining of the injury [20].
Second, the wordings demonstrate a close link between the actual employment undertaken during each period and the premium agreed by the parties for the risks undertaken by the insurers in respect of that period.
Third, on the insurers case there is a potential gap in cover as regards employers breaches of duty towards employees in one period which only lead to disease or injury in another later period [24].
Fourth, on the insurers case employers would be vulnerable to any decision by the insurers not to renew the policy.
A decision not to renew might arise from the employers complying with their duty to disclose past negligence upon any renewal.
Employers who discovered that they had been negligent in the course of past activities in respects that had not yet led to any manifest disease would have such a duty.
The insurers could then simply refuse any renewal or further cover [25].
Fifth, the way most of the policies deal with extra territorial issues throws doubt on any suggestion that the wordings are so carefully chosen that a court should stick literally to whatever might be perceived as their natural meaning [28].
Section 1 of the Employers Liability Compulsory Insurance Act 1969 also points the way to the correct interpretation.
This states that every employer shall insure, and maintain insuranceagainst liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment.
In order to give proper effect to the protective purpose of that legislation, the Act requires insurance on a causation basis [47].
There is no difficulty in treating the word contracted as looking to the causation of a disease, rather than its development or manifestation.
The word contracted used in conjunction with disease looks to the initiating or causative factor of the disease [49].
While the word sustained may initially appear to refer to the manifestation of an injury, the nature and underlying purpose of the EL insurances is one which looks to the initiation or causation of the accident or disease which injured the employee.
Accordingly a disease may properly be said to have been sustained by an employee in the period when it was caused or initiated, even though it only developed or manifested itself later [50].
In relation to the second issue, the question is whether the EL policies cover employers liability for mesothelioma arising under the special rule in Fairchild/Barker [71].
Under that rule the law accepts a weak or broad causal link between the employers negligence and the employees mesothelioma.
When construing the EL policies the concept of a disease being caused during the policy period must be interpreted sufficiently flexibly to embrace the role assigned to exposure by the Fairchild/Barker rule [74].
The purpose of the EL policies was to insure the employers against liability to their employees.
Once it is held that the employers are liable to the employees, it would be remarkable if the insurers were not liable under the policies [88].
Accordingly, for the purposes of the EL policies, the negligent exposure of an employee to asbestos during the policy period has a sufficient causal link with subsequently arising mesothelioma to trigger the insurers obligation to indemnify the employer [74].
Lord Phillips dissents on the second issue.
The special approach developed in Fairchild/Barker raises no implication or fictional assumption as to when mesothelioma is initiated.
The consequence is that if claimants have to show that mesothelioma was initiated in a particular policy year in order to establish that insurers are liable they are unable to do so.
This conclusion is not affected by section 3 of the Compensation Act 2009, which did not alter the jurisprudential basis of the Fairchild/Barker approach [132] [133].
|
These are three of five conjoined appeals which were heard by the Court of Appeal in Salford City Council v Mullen [2010] EWCA Civ 336, [2010] LGR 559.
They are concerned with possession proceedings brought by a local authority in circumstances where the occupier is not a secure tenant under Part IV of the Housing Act 1985.
Two of them, Leeds City Council v Hall (Hall) and Birmingham City Council v Frisby (Frisby), are cases where the claims for possession were made against tenants occupying under introductory tenancies entered into under Chapter 1 of Part V of the Housing Act 1996.
In the third, London Borough of Hounslow v Powell (Powell), the claim for possession was made against a person who was granted a licence of property under the homelessness regime in Part VII of the 1996 Act.
Permission to appeal was given in a fourth case, Salford City Council v Mullen.
But the proceedings in that case were stayed to await the outcome of these appeals.
Common to all three cases is the claim by each of the appellants that the property which is the subject of the proceedings for possession against them is their home for the purposes of article 8(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, which provides: Everyone has the right to respect for his private and family life, his home and his correspondence.
Their case is that, to avoid a breach of article 8, the interference must be justified under article 8(2) as being necessary in a democratic society and that this means that it must be in accordance with the law, it must be for a legitimate aim and it must be proportionate to the aim that the local housing authority is seeking to achieve.
They maintain that, as the court did not assess the proportionality of making the orders against them, there was a breach of their article 8 rights.
The Court had the opportunity in Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441 (Pinnock) of considering the application of article 8 to a claim for possession brought against a demoted tenant under Chapter 1A of Part V of the 1996 Act (as inserted by paragraph 1 of Schedule 1 to the Anti social Behaviour Act 2003).
It held that article 8 requires a court which is being asked to make an order for possession under section 143D(2) of the Housing Act 1996 against a person occupying premises under a demoted tenancy as his home to have the power to consider whether the order would be necessary in a democratic society: para 2.
Although Mr Arden QC submitted forcefully that it should not apply to introductory tenancies in view of their probationary nature, I would hold that this proposition applies to all cases where a local authority seeks possession in respect of a property that constitutes a persons home for the purposes of article 8.
There is a difference of view between the parties, however, as to its consequences, and in particular as to how cases of this kind should be dealt with in practice by the courts and local authorities.
The Court recognised that cases of the type that was examined in Pinnock arise relatively rarely and that cases of the kind represented by these appeals, which involve possession orders in different and more common circumstances, were likely to provide a more appropriate vehicle for the giving of general guidance: paras 58 59.
It was expected that the lawyers preparing for these appeals would have the opportunity of giving particular attention to the guidance that might usefully be given where possession is sought against introductory tenants and against applicants under the homelessness regime where there is no provision for the kind of procedure envisaged in Chapters 1 and 1A of Part V of the 1996 Act for introductory and demoted tenancies.
I wish to pay tribute to counsel on all sides for the way in which they have taken full and careful advantage of that opportunity.
The issues
The Court of Appeal delivered its judgment in Salford City Council v Mullen [2010] EWCA Civ 336 on 30 March 2010.
As Waller LJ explained in para 4, the court held that it was bound by what was said in Kay v Lambeth London Borough Council [2006] UKHL 10, [2006] 2 AC 465, para 110, as to the circumstances in which a county court might decline to make a possession order.
They were limited to two situations: first, if it was seriously arguable that the law which enables the county court to make the possession order is itself incompatible with article 8 (which the Court of Appeal in Doherty v Birmingham City Council [2006] EWCA Civ 1739, [2007] LGR 165, para 28 called gateway (a)); and second, if it was seriously arguable that the decision of the public authority was (regardless of the tenants Convention rights) an improper exercise of its powers because it was a decision that no reasonable person would consider justifiable (which the Court of Appeal in Doherty called gateway (b)).
So, where the local authority had fulfilled the requirements for the recovery of possession contained in the ordinary domestic law, a defence which did not challenge the law under which the order was sought as being incompatible with article 8 but was based on the proposition that the interference with the persons home was disproportionate should be struck out.
Writing extrajudicially, Lord Bingham of Cornhill said of the Strasbourg jurisprudence that its strength lies in its recognition of the paramount importance to some people, however few, in some circumstances, however rare, of their home, even if their right to live in it has under domestic law come to an end: Widening Horizons, The Hamlyn Lectures (2009), p 80.
There has never been any dispute about gateway (a).
It can be traced back to Kay v Lambeth London Borough Council [2006] 2 AC 465, para 39 where, in head (3)(a) of his summary of the practical position, Lord Bingham described the first of the two grounds on which the court might consider not making a possession order as being that the law which required the court to make the order despite the occupiers personal circumstances was Convention incompatible.
But gateway (b), albeit widened to some degree by what was said in Doherty v Birmingham City Council [2008] UKHL 57, [2009] AC 367, para 55, has always been controversial.
The central issue which divided the parties in Pinnock was whether the proposition which was encapsulated in it should still be applied in the light of subsequent decisions of the European Court of Human Rights in McCann v United Kingdom (2008) 47 EHRR 913, osi v Croatia (Application No 28261/06) (unreported) given 15 January 2009, Zehentner v Austria (Application No 20082/02) (unreported) given 16 July 2009 and Pauli v Croatia (Application No 3572/06) (unreported) given 22 October 2009.
This Court held that those cases, together with Kay v United Kingdom (Application No 37341/06) given 21 September 2010, The Times 18 October 2010, provided a clear and constant line of jurisprudence to the effect that any person at risk of being dispossessed of his home at the suit of a local authority should in principle have the right to question the proportionality of the measure and to have it determined by an independent tribunal in the light of article 8: para 45.
The decision in Doherty v Birmingham City Council had shown that our domestic law was already moving in that direction, and the time had come to accept and apply the jurisprudence of the European court.
So, where a court is asked to make an order for possession of someones home by a local authority, the court must have the power to assess the proportionality of making the order and, in making that assessment, to resolve any relevant dispute of fact: para 49.
It is against the background of that decision that the issues that arise in the present appeals must be considered.
They can be summarised briefly at this stage as follows. (1) What is the form and content of the proportionality review that article 8 requires? (2) What procedural protections are implicit in article 8 in homelessness cases before service of a notice to quit and after service but before possession proceedings are commenced? (3) Can the court defer the delivery of possession for a period in excess of the maximum permitted by section 89 of the Housing Act 1980 if it considers that it would be the proportionate course to do so and, if not, should there be a declaration of incompatibility? (4) Can section 127(2) of the 1996 Act be read compatibly with the introductory tenants article 8 Convention right so as to allow him to defend a claim for possession on the grounds recognised in Pinnock, or must there be a declaration that section 127(2) is incompatible with the Convention right? These issues are dealt with in paras 33 64.
The correct disposal of each appeal will also have to be considered, having regard to the facts of each case.
This is dealt with in paras 65 70.
The statutory background
As was explained in paras 5 7 of Pinnock, most residential occupiers of houses and flats owned by local authorities are secure tenants under Part IV of the Housing Act 1985.
In those cases the tenant must be given a notice setting out the reasons why possession is sought, the tenant cannot be evicted unless the landlord establishes that one of the grounds for possession listed in Schedule 2 to the 1985 Act applies and, except in some specified categories of case where suitable alternative accommodation is available, the court is satisfied that it is reasonable to make the order.
But certain types of tenancy are excluded from this regime.
They are listed in Schedule 1 to the 1985 Act.
They include two types of tenancy that were included in that Schedule by amendment: introductory tenancies referred to in paragraph 1A, added by paragraph 5 of Schedule 14 to the 1996 Act; and demoted tenancies referred to in paragraph 1B, added by paragraph 2(4) of Schedule 1 to the Anti social Behaviour Act 2003.
In addition, paragraph 4 of Schedule 1 to the 1985 Act (as substituted by paragraph 3 of Schedule 17 to the 1996 Act) provides that a tenancy granted in pursuance of any function under Part VII of the 1996 Act, which deals with homelessness, is not a secure tenancy unless the local housing authority concerned has notified the tenant that the tenancy is to be regarded as a secure tenancy.
The legislature has excluded these types of tenancy from the statutory scheme which applies to secure tenancies for very good reasons, which are firmly rooted in social policy.
In seeking democratic solutions to the problems inherent in the allocation of social housing, Parliament has sought to strike a balance between the rights of the occupier and the property rights and public responsibilities of the public authority.
The regimes that apply to introductory tenancies and demoted tenancies have been designed to address the problem of irresponsible or disruptive tenants whose presence in social housing schemes can render life for their neighbours in their own homes intolerable.
The homelessness regime provides the local housing authority with the flexibility in the management of its housing stock that it needs if it is to respond quickly and responsibly to the demands that this pressing social problem gives rise to.
Measures which would have the effect of widening the protections given to the occupiers by the statutes must be carefully tested against Parliaments choice as to who should, and should not, have security of tenure and when it should be given to them, if at all.
Social housing law draws a clear distinction between cases where security of tenure has been given, and those where it has not.
There are clear policy reasons why Parliament has denied security to certain classes of occupier.
It is with this in mind that the homelessness and introductory tenancy regimes must now be described in more detail.
(a) homelessness
The duties of local authorities in relation to homeless persons are set out in Part VII of the 1996 Act.
Ms Powell was provided with accommodation under section 193(2).
That section applies where the local housing authority is satisfied that an applicant is homeless, eligible for assistance and has a priority need, and is not satisfied that he became homeless intentionally.
In these circumstances section 193(2) imposes a duty on the local housing authority to secure that accommodation is available for occupation by the applicant.
The duty ceases in various circumstances, such as if the applicant became homeless intentionally from the accommodation that was made available for his occupation or otherwise voluntarily ceases to occupy that accommodation as his only or principal home.
Where the local housing authority decides that its duty under section 193(2) has ceased, the applicant has the right to request that it reviews its decision: section 202(1)(b).
If the applicant is dissatisfied with the decision on review he may appeal to the county court on any point of law arising from the decision on review or, as the case may be, the original decision: section 204(1).
Where an applicant has been found to be homeless and eligible for assistance but the local housing authority is also satisfied that he became homeless intentionally and has a priority need, it is under a duty to secure that accommodation is available for his occupation for such period as it considers will give him a reasonable opportunity of securing accommodation for his occupation: section 190(2).
As already noted, tenancies granted under Part VII of the 1996 Act are not secure tenancies unless the local housing authority has notified the tenant that the tenancy is to be regarded as a secure tenancy.
So the local authority is not required under domestic law to establish any particular ground for the termination of the tenancy when seeking possession from a tenant on whom it has served a notice to quit who has not been so notified.
The only procedural protections are to be found in the requirement under sections 3 and 5 of the Protection from Eviction Act 1977 that an order of the court must be obtained in order to recover possession and the requirement to give notice to quit in the form stipulated by that Act.
Section 89 of the Housing Act 1980 provides that, when the court makes an order for the possession of any land (except in the circumstances set out in section 89(2)), the giving up of possession may not be postponed for more than 14 days or, in cases of exceptional hardship, to a date no later than six weeks after the making of the order.
(b) introductory tenancies
Mr Hall and Mr Frisby were tenants under introductory tenancies when the possession orders were sought against them.
The regime under which they were granted these tenancies is set out in Chapter 1 of Part V of the 1996 Act.
It was created in response to concerns among social landlords about anti social behaviour among their tenants.
In April 1995 a consultation paper was issued in which views were sought on what were then described as probationary tenancies.
The idea was that, as a probationary tenancy would be converted automatically into a secure tenancy only if it was completed satisfactorily, a clear signal would be given to new tenants that anti social behaviour was unacceptable and would result in the loss of their home: para 3.2.
The White Paper Our Future Homes: Opportunity, Choice, Responsibility (Cm 2901, June 1995) identified the governments aims as being to encourage responsible social tenants and to protect the quality of life for the majority by supporting effective action against the minority of anti social tenants.
Social landlords were to be given the means to act rapidly to remove tenants in the worst cases, as a measure of last resort.
Section 124 of the 1996 Act provides that a local housing authority or a housing action trust may elect to operate an introductory tenancy regime.
Section 124(2), prior to its amendment by the Housing and Regeneration Act 2008 (Consequential Provisions) Order 2010 (SI 2010/866), provided : (2) When such an election is in force, every periodic tenancy of a dwelling house entered into or adopted by the authority or trust shall, if it would otherwise be a secure tenancy, be an introductory tenancy, unless immediately before the tenancy was entered into or adopted the tenant or, in the case of joint tenants, one or more of them was (a) a secure tenant of the same or another dwelling house, or (b) an assured tenant of a registered social landlord (otherwise than under an assured shorthold tenancy) in respect of the same or another dwelling house.
The duration of an introductory tenancy is defined by section 125.
The tenancy remains as an introductory tenancy until the end of the trial period which, unless shortened because the tenant was formerly a tenant under another introductory tenancy, lasts for the period of one year: section 125(2).
It does not become a secure tenancy until the end of the trial period: Housing Act 1985, Schedule 1, paragraph 1A.
The conversion then takes place automatically unless the introductory tenancy has been terminated.
Section 127 deals with proceedings for possession of a property which is subject to an introductory tenancy.
It provided (prior to its amendment by the Housing and Regeneration Act 2008): (1) The landlord may only bring an introductory tenancy to an end by obtaining an order of the court for the possession of the dwelling house. (2) The court shall make such an order unless the provisions of section 128 apply. (3) Where the court makes such an order, the tenancy comes to an end on the date on which the tenant is to give up possession in pursuance of the order.
Section 128(1) provides that the court shall not entertain proceedings for the possession of a dwelling house let under an introductory tenancy unless the landlord has served on the tenant a notice of proceedings complying with that section.
The notice must state that the court will be asked to make an order for possession, set out the reasons for the landlords decision to apply for such an order, specify a date after which proceedings may be begun, inform the tenant of his right to request a review of the landlords decision to seek a possession order and inform him that he can receive help or advice about the notice from a Citizens Advice Bureau, a housing aid centre or a solicitor: subsections (2) (7).
Section 129 provides that a request for a review of the landlords decision to seek an order for possession of the dwelling house must be made within no more than 14 days of service of the notice of proceedings under section 128.
The procedures of the demoted tenancy regime, which is the regime with which the Court was concerned in Pinnock, are closely based on the regime for introductory tenancies.
The procedure governing the landlords right to recover possession during the probationary period is set out in sections 143D, 143E and 143F which, as was noted in Pinnock, para 13, are virtually identical to sections 127, 128 and 129 of the 1996 Act.
But there is one important difference.
A tenant under a demoted tenancy was previously a tenant under a secure tenancy, that tenancy having been brought to an end by a demotion order under section 82A of the Housing Act 1985 (as inserted by section 14 of the Anti social Behaviour Act 2003).
The social purpose of the introductory tenancy regime is to allow local authorities to grant tenancies to new tenants without conferring security of tenure upon them until they have demonstrated that they are responsible tenants during the introductory period.
This is a factor which will always be highly relevant in any assessment of the proportionality of the landlords claim for possession, as the effect of denying the claim will be that an introductory tenant who may not deserve a secure tenancy will automatically obtain one.
The facts
(a) Ms Powell
As already noted, the local housing authority was satisfied that Ms Powell was homeless, eligible for assistance and had a priority need, and was not satisfied that she had become homeless intentionally.
She was given a licence by the London Borough of Hounslow (Hounslow) to occupy a two bedroom ground floor flat at 15 Pine Trees Close, Cranford from 2 April 2007.
She and her two sons Zaid, born on 3 April 2005, and Nour, born on 14 April 2006, were noted on the agreement as the occupiers.
A claim for housing benefit was received by Hounslow on 4 April 2007 in which Ms Powell indicated that she had a partner named Mr Ahmad Sami who normally resided with her.
By letter dated 11 May 2007 Hounslow wrote to Ms Powell stating that there were arrears of rent and warning her that this could lead to termination of her licence to occupy the property.
But on 14 May a credit of housing benefit was received which reduced the arrears to zero.
There was a further period when the payments fell into arrears, but they were fully cleared by a payment of housing benefit on 3 December 2007.
On 5 February 2008 Hounslows housing benefit section wrote to Ms Powell asking her to provide it with information in connection with her claim.
On 7 March 2008 it wrote to her stating that the information which it had asked for had not been provided.
As a result the housing benefit claim was terminated from 23 December 2007.
On 10 March 2008 Hounslows income recovery officer wrote to Ms Powell informing her that there were arrears of licence payments and asking her to attend for an interview on 17 March 2008.
Ms Powell did not attend as she had an interview at about the same time and on the same day with the Department of Work and Pensions.
On 17 March 2008 Hounslow sent a letter to Ms Powell with a notice to quit.
On 20 March 2008 she attended its offices and discussed the arrears with one of its officers.
On the same day a letter was sent to her setting out the possible effect on Hounslows homelessness duty towards her were she to be evicted due to rent arrears.
On 28 April 2008 Hounslows housing benefit section sent Ms Powell a housing benefit form.
It was received on 12 May 2008 and payment of housing benefit was resumed on 26 May 2008.
But there were substantial arrears of rent, represented by some 11 weeks rent, which were not covered by the initial credit of housing benefit and which remained unpaid.
On or about 19 September 2008 Hounslow issued a claim for possession of the premises, relying on the notice to quit dated 17 March 2008.
It was explained that there were arrears as at 30 June 2008 of 3,536.39.
The matter came before Deputy District Judge Shelton on 14 May 2009, who heard evidence from witnesses, including Ms Powell.
He found that the measures that had been taken by Hounslow were reasonable and proportionate (in the Doherty sense), and granted possession of the premises to Hounslow.
Having heard submissions as to her personal circumstances, he required Ms Powell to give possession of the property on or before a date 14 days after the date when the order was made.
Ms Powell was granted permission to appeal against the judges order by Mummery LJ on 2 July 2009, with a stay of execution on condition that Ms Powell paid off the arrears at 5 per week.
Her appeal was heard as one of five appeals by the Court of Appeal in March 2010.
It held that the decision in Ms Powells case was lawful, as the circumstances were not highly exceptional in the context of the homelessness legislation: [2010] EWCA Civ 336, para 76.
Her appeal was dismissed and the judges order was stayed pending the filing of a notice of appeal to this Court.
Ms Powells current position is that she is 23 years old and that her household consists of herself, her partner Mr Ahmad Sami and their four children, Zaid who is now 5, Nour who is now 4, Taysier who was born on 13 July 2007 and is now 3, and Laila who was born in July 2009 and is now 1.
The family is in receipt of various benefits including housing benefit which covers all of the rental liability.
In December 2009 the family was moved from 15 Pine Tree Close so that disrepair within the premises could be dealt with.
Work was completed in April 2010, and the family returned to the premises and has remained in occupation ever since.
(b) Hall
Mr Hall became an introductory tenant of property at 147 Leeds and Bradford Road, Bramley, Leeds of which he was granted a sole tenancy by Leeds City Council (Leeds) on 21 April 2008 and where he lives alone.
Allegations were made of noise nuisance and anti social behaviour by Mr Hall and by visitors to the property.
The behaviour which was complained of was mainly of noise nuisance from loud music and television and the banging and slamming of doors.
Mention was also made of shouting, screaming and arguing, banging on the communal door and ringing a neighbours doorbell at night and in the early hours of the morning.
It was also said that Mr Hall had engaged in threatening and intimidating behaviour and had been verbally abusive towards his neighbours.
On 1 July 2008 a noise abatement notice was served on him.
He did not appeal against this notice, and he appears to have disregarded it as complaints continued to be received.
On 28 November 2008 Leeds served a notice of proceedings for possession on him under section 128 of the 1996 Act.
A review was sought, and the notice was withdrawn following the review.
Leeds continued nevertheless to receive allegations of noise nuisance and anti social behaviour, so on 6 March 2009 it served a further notice of proceedings for possession on Mr Hall.
He again requested a review, but this time the review hearing upheld the service of the notice.
When the claim for possession came before His Honour Judge Spencer QC in the county court on 6 August 2009 the appropriateness of the notice was not challenged, nor was its validity.
Mr Hall accepted in a statement that was produced for the trial that there may have been occasions when he had played loud music and that, when his now ex girlfriend visited him and they drank alcohol together, they would sometimes argue.
He claimed that he had been drinking excessively because he had been suffering from depression and said that he had been receiving support from an organisation which supports vulnerable people who were having difficulty in maintaining their tenancies.
He asked the court to consider whether matters occurring after the review could provide a basis for challenging Leeds decision to seek possession.
The judge held that he could not consider anything occurring after the date of the review because section 127(2) of the 1996 Act provides that when, as happened in this case, the tenant has been served with a notice of proceedings that complies with section 128, the court shall make the order.
He made an order for possession, the effect of which was that Mr Hall was required to give possession of the property on or before a date 28 days after the date when the order was made.
He gave Mr Hall permission to appeal, and stayed execution of the order for possession pending the appeal.
On 21 September 2009 Mr Hall lodged a notice of appeal and his appeal was heard together with that of Ms Powell and Mr Frisby as one of five appeals by the Court of Appeal (Waller, Arden and Patten LJJ) in March 2010.
The court said that the judge ought to have considered whether the facts that had become known after the review made it arguable that the decision to pursue the proceedings was unlawful and in fact held that this was unarguable.
This was because tenants are on probation under the introductory tenancy scheme, because the review was not challenged and because there was no basis for arguing that it was unlawful for a local authority to refuse to change its mind by reference to facts which simply sought to demonstrate that the occupiers behaviour had improved: [2010] EWCA Civ 336, para 79.
The appeal was dismissed and the judges order was stayed for pending the filing of a notice of appeal to this Court.
Mr Hall remains in occupation of the property.
(c) Mr Frisby
Mr Frisby became an introductory tenant of property at 9 Hebden Grove, Hall Green, Birmingham under a tenancy agreement with Birmingham City Council (Birmingham) dated 23 April 2007.
Birmingham received complaints of excessive noise, including singing, music and banging emanating from the property.
It served a noise abatement notice on Mr Frisby on 19 November 2007 which permitted proceedings to be brought for a warrant to confiscate sound producing equipment.
On 4 February 2008 it served a notice under section 125A of the 1996 Act which had the effect of extending the trial period of the tenancy by six months to 22 October 2008.
Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy but he did not do so.
Having received further complaints of noise, Birmingham executed a warrant under the Environmental Protection Act 1990 and seized and removed sound producing equipment from the property.
On 2 May 2008 Birmingham served a notice of proceedings for possession on Mr Frisby under section 128 of the 1996 Act.
He requested a review of the decision to seek the order.
When the review panel convened he raised a number of issues and the panel decided to adjourn the hearing as they needed further information.
He did not attend the resumed hearing which proceeded in his absence, and the decision to commence proceedings was upheld.
On 17 September 2008 Birmingham commenced proceedings for possession in Birmingham County Court.
Mr Frisby filed a defence in which it was averred that Birmingham was amenable to judicial review and that the decision to seek possession was an improper exercise of its common law powers and an interference with his rights under article 8.
The possession claim was heard by District Judge Gailey on 3 July 2009.
He held in favour of Birmingham and struck out Mr Frisbys defence.
But he acceded to an application that he should not make a possession order there and then but should first hear argument as to whether or not he should adjourn the proceedings to enable an application for a judicial review to be brought in the administrative court.
On 27 October 2009 Mr Frisby was given permission to appeal against the judges decision, and the matter was referred to the Court of Appeal under CPR 52.14.
As in the cases of Ms Powell and Mr Hall, his appeal was heard as one of five appeals by the Court of Appeal in March 2010.
Having allowed certain additional expert evidence to be admitted, it dismissed the appeal: [2010] EWCA Civ 336, para 80.
The judges order was stayed pending the filing of a notice of appeal to this Court.
Mr Frisby remains in occupation of the property.
The form and content of the proportionality review
The basic rules are not now in doubt.
The court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and it has crossed the high threshold of being seriously arguable.
The question will then be whether making an order for the occupiers eviction is a proportionate means of achieving a legitimate aim.
But it will, of course, be necessary in each case for the court first to consider whether the property in question constitutes the defendants home for the purposes of article 8.
This is because it is only where a persons home is under threat that article 8 comes into play: Pinnock, para 61.
It is well established in the jurisprudence of the Strasbourg court that an individual has to show sufficient and continuing links with a place to show that it is his home for the purposes of article 8: Gillow v United Kingdom (1986) 11 EHRR 335, para 46; Buckley v United Kingdom (1996) 23 EHRR 101, 115, para 54; see also Harrow London Borough Council v Qazi [2003] UKHL 43, [2004] 1 AC 983, paras 9, 61 68.
In Pauli v Croatia, para 33 the court said: Home is an autonomous concept which does not depend on classification under domestic law.
Whether or not a particular premises constitutes a home which attracts the protection of article 8(1) will depend on the factual circumstances, namely, the existence of sufficient and continuous links with a specific place.
This issue is likely to be of concern only in cases where an order for possession is sought against a defendant who has only recently moved into accommodation on a temporary or precarious basis.
The Leeds appeal in Kay v Lambeth London Borough Council [2006] 2 AC 465, where the defendants had been on the recreation ground in their caravan for only two days without any authority to be there, provides another example of a situation where it was not seriously arguable that article 8 was engaged: see para 48.
In most cases it can be taken for granted that a claim by a person who is in lawful occupation to remain in possession will attract the protection of article 8.
(a) homelessness
The first question is whether in a case where domestic law imposes no requirement of reasonableness and gives an unqualified right to an order for possession, there is a requirement for an independent determination by a court of the issue of proportionality.
In Pinnock it was held that the court must have the ability to assess the article 8 proportionality of making a possession order in respect of a persons home: para 63.
This is so even if the defendants right of occupation has come to an end: Pinnock, para 45, applying McCann v United Kingdom, para 50; osi v Croatia, para 22; Zehentner v Austria, para 59; Pauli v Croatia, para 43; and Kay v United Kingdom, para 68.
But it was also held that, as a general rule, article 8 need only be considered if it is raised by or on behalf of the residential occupier, and that if an article 8 point is raised the court should initially consider it summarily and if it is satisfied that, even if the facts relied on are made out, the point would not succeed it should be dismissed.
Only if it is satisfied that it is seriously arguable that it could affect the order that the court might make should the point be further entertained: para 61.
I would hold that these propositions apply as much in principle to homelessness cases as they do to demoted tenancies.
It follows that in the great majority of cases the local authority need not plead the precise reasons why it seeks possession in the particular case.
But if an article 8 defence is raised it may wish to plead a more precise case in reply.
Mr Luba QC accepted that the threshold for raising an arguable case on proportionality was a high one which would succeed in only a small proportion of cases.
I think that he was right to do so: see also Pinnock, para 54.
Practical considerations indicate that it would be demanding far too much of the judge in the county court, faced with a heavy list of individual cases, to require him to weigh up the personal circumstances of each individual occupier against the landlords public responsibilities.
Local authorities hold their housing stock, as do other social landlords, for the benefit of the whole community.
It is in the interests of the community as a whole that decisions are taken as to how it should best be administered.
The court is not equipped to make those decisions, which are concerned essentially with housing management.
This is a factor to which great weight must always be given, and in the great majority of cases the court can and should proceed on the basis that the landlord has sound management reasons for seeking a possession order.
If the threshold is crossed, the next question is what legitimate aims within the scope of article 8(2) may the claimant authority rely on for the purposes of the determination of proportionality and what types of factual issues will be relevant to its determination.
The aims were identified in Pinnock, para 52.
The proportionality of making the order for possession at the suit of the local authority will be supported by the fact that making the order would (a) serve to vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
Various examples were given of the scope of the duties that the second legitimate aim encompasses the fair allocation of its housing, the redevelopment of the site, the refurbishing of sub standard accommodation, the need to move people who are in accommodation that now exceeds their needs and the need to move vulnerable people into sheltered or warden assisted housing.
In Kryvitska and Kryvitskyy v Ukraine (Application No 30856/03) (unreported) given 2 December 2010, para 46 the Strasbourg court indicated that the first aim on its own will not suffice where the owner is the State itself.
But, taken together, the twin aims will satisfy the legitimate aim requirement.
So, as was made clear in Pinnock, para 53, there will be no need, in the overwhelming majority of cases, for the local authority to explain and justify its reasons for seeking a possession order.
It will be enough that the authority is entitled to possession because the statutory pre requisites have been satisfied and that it is to be assumed to be acting in accordance with its duties in the distribution and management of its housing stock.
The court need be concerned only with the occupiers personal circumstances and any factual objections she may raise and, in the light only of what view it takes of them, with the question whether making the order for possession would be lawful and proportionate.
If it decides to entertain the point because it is seriously arguable, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order that is being sought by the local authority: Kryvitska and Kryvitskyy v Ukraine, para 44.
Mr Underwood QC drew attention to the fact that there was no express provision in Part VII of the 1996 Act which empowers a court to refuse to grant a possession order to the local authority where the occupier is accommodated following an exercise of the authoritys functions under that Part of the Act.
He said that this was because Parliament had taken a positive decision not to provide secure tenancies to persons who were accommodated under the homelessness provisions unless the local authority chooses otherwise.
Part VII was intended to be a life line for those who had nowhere to live; it uses accommodation which may be needed quickly for other cases; an occupier who is evicted through no fault of her own will be accommodated elsewhere; and if there is an issue about fault there is a right of review and of appeal.
The thrust of this part of his argument was that it was not possible under the scheme of Part VII to meet the article 8 procedural requirement in a way that was called for by the decision in Pinnock.
The answer to this argument is to be found in the fact that there is nothing in Part VII of the 1996 Act which either expressly or by necessary implication prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
In contrast to Pinnock, where the court was faced with a direction by the statute that, if the procedural requirements were satisfied, it must grant the order for possession, no equivalent provision is set out anywhere in Part VII.
There is, of course, an important difference between Part VII and the regimes that apply to introductory and demoted tenancies, in that it is likely in homelessness cases that the occupier will be the subject of a continuing duty if she is still homeless, eligible for assistance and has a priority need and will be entitled to contest a finding that she became homeless intentionally.
But the legitimate aims that justify seeking a possession order are just as relevant in homelessness cases.
The question for the court will always be whether the making of an order for possession would be lawful and proportionate.
Mr Luba then said that each of the exceptions to the security of tenure regime was there for a particular social housing reason.
It was material to a consideration of the issue of proportionality, therefore, for the court to know whether the local authoritys reason for seeking a possession order was relevant in that context.
In the case of an occupier who had been provided with accommodation under Part VII, seeking a possession order to enable the local authority to perform its homelessness functions, such as moving a family whose numbers had reduced to smaller accommodation, the case for granting the order would in the overwhelming number of cases be proportionate.
But if the local authoritys decision was based on other factors such as rent arrears which were not related to the performance of its homelessness functions, it was not enough to tell the court that it was the local housing authority and to rely on the two legitimate aims.
He said that a structured approach was required to the issue of proportionality so that the interests of the local authority could be balanced against that of the occupier: Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, paras 19 20.
Support for this was to be found in Zehentner v Austria, para 56 where the court said that, while it was for the national authorities to make the initial assessment of necessity, the final evaluation as to whether the reasons cited for the interference are relevant and sufficient remains subject to its review for conformity with the requirements of the Convention.
A structured approach of the kind that Mr Luba was suggesting may be appropriate, and indeed desirable, in some contexts such as that of immigration control which was the issue under discussion in Huang v Secretary of State for the Home Department.
But in the context of a statutory regime that has been deliberately designed by Parliament, for sound reasons of social policy, so as not to provide the occupier with a secure tenancy it would be wholly inappropriate.
I agree with Mr Stilitz QC for the Secretary of State that to require the local authority to plead its case in this way would largely collapse the distinction between secured and non secure tenancies.
It would give rise to the risk of prolonged and expensive litigation, which would divert funds from the uses to which they should be put to promote social housing in the area.
In the ordinary case the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances.
It is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration of the issues of lawfulness or proportionality.
If this test is not met, the order for possession should be granted.
This is all that is needed to satisfy the procedural imperative that has been laid down by the Strasbourg court.
The decision of the local authority to seek possession in a homelessness case will, of course, have been taken against the background of all the advice and assistance that the provisions of Part VII of the 1996 Act require to be given to the applicant.
It is unlikely, as the course of events in Ms Powells case demonstrates, that the reason why it has decided to take proceedings for eviction will not be known to the tenant.
The right to request a review of the decisions listed in section 202 and the right of appeal under section 204 are further factors to be taken into account.
They provide the tenant with an opportunity to address any errors or misunderstandings that may have arisen and to have them corrected.
She will have a further opportunity to raise such issues as a judicial review challenge by way of a defence in the county court.
But that is a matter for the tenant, not for the local authority.
There is no need for the court to be troubled with these issues unless and until, at the request of the tenant, it has to consider whether it should conduct a proportionality exercise.
There may, as was pointed out in Pinnock, para 53, be cases where the local authority has a particularly strong or unusual reason for wanting to obtain possession of the property.
It may think it desirable to inform the court of this fact so that it can take account of it in addition to the two given legitimate aims when it is determining the issue of proportionality.
There is no reason why it should not ask for this to be done.
But, if it wishes to do so, it must plead the reason that it proposes to found upon and it must adduce evidence to support what it is saying.
The particular grounds on which it relies can then be taken into account in the assessment.
No point can be taken against the local authority, however, if it chooses not to take this course and to leave it to the tenant to raise such points as she wishes by way of a defence.
(b) introductory tenancies
The above analysis applies equally to introductory tenancies.
It cannot be said in their case that there is nothing in the statutory scheme which prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
Section 127(2) is a direction to the contrary.
But, for the reasons set out in paras 50 56 below, that subsection can be read and given effect so as to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
As to what this entails, the twin legitimate aims that were held in Pinnock to justify seeking a possession order in the case of demoted tenancies are just as relevant in the case of introductory tenancies.
The question for the court will always be whether the making of an order for possession in their case too would be lawful and proportionate.
The question as to what the procedural requirements are in the case of introductory tenancies must be judged against the fact that the tenant has a statutory right to request a review of the local authoritys decision to seek possession under section 129 of the 1996 Act.
This strengthens the grounds for rejecting the structured approach to the issue of proportionality contended for by Mr Luba.
As has already been stressed, the regime that applies to introductory tenancies has been deliberately designed by Parliament so as to withhold enjoyment of the right to a secure tenancy until the end of the trial period.
In the ordinary case, as in cases of homelessness, the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances, and it is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration.
If this test is not met, the order for possession should be granted.
Procedural protections
The Court was invited to answer a series of practical questions which were designed to obtain advice as to the course that should be followed in homelessness cases to enable the occupier to make representations before or after service of a notice to quit and to enable the tenant to know the reasons why possession was being sought.
Drawing upon the practice of pre action protocols, Mr Luba said that the procedural dimensions of article 8 could best be satisfied by requiring that, before possession proceedings are begun, the non secure occupier knows why the proceedings are being initiated and has an opportunity to make representations to the official charged with making the decision whether to bring proceedings.
The Court was also invited to answer a series of questions directed to the way claims for possession in the case of introductory tenancies should be dealt with procedurally in the county court.
Detailed questions as to the way claims should be dealt with procedurally are best addressed in the light of facts and circumstances arising from the way proceedings are actually being handled in practice.
Otherwise there is a risk that such guidance as this Court can give will create more problems than it will solve.
The statutory regimes that are in place must also be taken into account.
These are not cases where the defendants were granted secure tenancies.
There is no statutory obligation to give reasons with the notice to quit in homelessness cases, and the local authority does not have to justify its motives for seeking a possession order.
It is not obvious that pre action protocols have a place in proceedings of this kind.
Furthermore, on the facts of the present cases there is no real issue that needs to be addressed.
Ms Powell was given warnings about her rent arrears and an opportunity to attend for interview and she discussed the problem of arrears with one of Hounslows officers.
The notice to quit was accompanied by a letter giving reasons, and the claim for possession explained that there were arrears.
The common law requirement of fair notice was, very properly, observed in her case by Hounslow and none of the steps that they took have been criticised as inadequate.
As for the cases of Mr Hall and Mr Frisby, the local authorities told them that they had received complaints of excessive noise, noise abatement notices were served on them against which they did not appeal and in Mr Frisbys case offending equipment was removed from the property.
The reasons for the decision to apply for a possession order were set out in the notice of proceedings as required by section 128(3) and the tenants were informed of their right to request a review, all as required by section 128(6).
In R (McLellan) v Bracknell Forest Borough Council [2001] EWCA Civ 1510, [2002] QB 1129, para 103 Waller LJ said that where a review has taken place it should be the norm for the local authority to spell out in affidavits before the county court how the procedure was operated, how the hearing was conducted and the reason for taking the decision to continue with the proceedings.
As Mr Luba pointed out, that suggestion was directed at the task of enabling the judge to decide whether to adjourn the claim so that a judicial review of the decision might be sought in the High Court.
He invited the Court to set out a revised list of requirements that had to be satisfied in the context of a case which might raise issues of proportionality.
I would, with respect, decline that invitation.
Matters of that kind are more appropriate for a practice direction.
In any event it is not for this court to give directions on matters of practice where the points at issue in the case do not require this to be done.
Section 127(2) of the 1996 Act
As already noted (see para 17, above), section 127(1) of the 1996 Act provides that the landlord may only bring an introductory tenancy to an end by obtaining an order of the court for possession of the dwelling house.
Section 127(2) provides that the court shall make such an order unless the provisions of section 128 apply.
That section directs the court not to entertain proceedings for possession unless the landlord has served on the tenant a notice complying with its requirements.
One of the things that the notice must do is inform the tenant of his right to request a review of the landlords decision to seek a possession order: section 128(6).
Section 129 provides that, so long as the request for a review is made no later than 14 days after the service of the possession order, the landlord must review its decision and that the review shall be carried out and the tenant notified before the date specified in the notice as the date after which proceedings for the possession of the dwelling house may be begun.
On the face of it, the court has no discretion under section 127(2) as to whether or not it should make the order for possession.
Its ordinary meaning is not in doubt.
If the requirements of section 128 and by implication section 129 (see para 56, below) are met, the court must make the order whether or not it considers it proportionate to do so.
The question that this issue raises is whether section 127(2) can nevertheless be read and given effect under section 3 of the Human Rights Act 1998 so as to permit the tenant to raise his article 8 Convention right by way of a defence to the proceedings in the county court and enable the judge to address the issue of proportionality.
In Pinnock, paras 68 79, the Court addressed the proper interpretation of section 143D(2) of the 1996 Act, as amended, which together with sections 143E and 143F are so similar to those of sections 127 to 129 as to indicate that they were modelled on what those sections provide.
Like section 127(2) in the case of a dwelling house let under an introductory tenancy, section 143D(2) provides when the court is asked to make an order for the possession of a dwelling house let under a demoted tenancy that the court must make the order (the word shall is not used, but the sense is the same) if the notice and review requirements have been complied with.
As the Court noted in para 68, if section 143D was construed in accordance with the traditional approach to interpretation, it was hard to see how the court could have the power either to investigate for itself the facts relied on to justify the decision to seek possession, or to refuse to make an order for possession if it considered that it would be disproportionate to do so.
The same problem arises with regard to section 127(2).
Unless a solution can be found under section 3 of the 1998 Act, the language of that section appears to deprive the court of almost any ability to stand in the way of a landlord who had decided to seek possession against an introductory tenant: see Pinnock, para 69.
In Pinnock it was held that it is open to a tenant under a demoted tenancy to challenge the landlords decision to bring possession proceedings on the ground that it would be disproportionate and therefore contrary to his article 8 Convention rights: para 73.
This finding applies just as much in the case of introductory tenancies, so it must be concluded that, wherever possible, the traditional review powers of the court should be expanded to permit it to carry out that exercise in their case too.
The courts powers of review can, in an appropriate case, extend to reconsidering for itself the facts found by a local authority, or indeed to considering the facts which have arisen since the issue of proceedings, by hearing evidence and forming its own view: Pinnock, para 74.
As was observed in that case, however, much the more difficult question is whether it is possible to read and give effect to section 127(2) in a way that would permit the county court judge to do this.
It is difficult because the wording of the subsection indicates that its purpose is to ensure that the court does nothing more than check whether the procedure has been followed.
An introductory tenancy, after all, has been deliberately deprived of the protections that apply to a secure tenancy.
It could be argued, as it was in Pinnock, that for the court to assess the proportionality of the decision to bring and continue the possession proceedings would go against the whole import of the section.
It would amount to amending it rather than interpreting it: para 75.
The Court decided in Pinnock to reject that argument for the reasons set out in paras 77 81.
The question in this case is whether there is any good reason for not applying that decision to the regime that the 1996 Act has laid down for introductory tenancies.
There are some differences between the two regimes.
There is no demotion stage, as a tenancy becomes an introductory tenancy upon its commencement and it remains an introductory tenancy until the end of the trial period.
And, while the language of sections 127 129 is for the most part reproduced, mutatis mutandis, in sections 147D 147F, there is one difference between them.
Section 127(2) does not refer to section 129, unlike section 143D(2), which states: The court must make an order for possession unless it thinks that the procedure under sections 143E and 143F has not been followed.
Furthermore, as Mr Underwood pointed out, Parliament had made a clear choice that introductory tenants were not to have the protection from eviction that secure tenants have.
He said that there were many ways in which section 127(2) could be made compatible with article 8, and that it should be left to Parliament to choose between them.
The fact that there is no mention in section 127(2) of the review procedure under section 129 can be seen to be of no consequence, in view of the direction in section 128(6) that the tenant must be informed of his right to request a review.
The fact that there is no demotion stage in the case of an introductory tenancy does not affect the reasoning on which the decision in Pinnock was based.
It was that, as lawfulness must be an inherent requirement of the procedure for seeking a possession order, it must equally be open to the court to consider whether that procedure has been lawfully followed having regard to the defendants article 8 Convention rights: para 77.
It was by this route, and by the application of sections 3(1) and 7(1)(b) of the 1998 Act, that the Court held that section 143D(2) could be read and given effect to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
There is a sufficient similarity between section 127(2) and section 143D(2) to apply the reasoning in Pinnock to introductory tenancies also.
Although the word procedure is not used in section 127(2), it does refer to the procedural requirements in section 128.
So it should be read and given effect in the same way, and it is not necessary to resort to the making of a declaration of incompatibility.
Section 89 of the 1980 Act
The question raised by this issue is whether, if the argument is made out that the proportionate course would be to defer the delivery of possession for a period such as three months or to make a suspended order for possession, this can be done in the face of the provisions of section 89(1) of the Housing Act 1980.
That section provides: (1) Where a court makes an order for the possession of any land in a case not falling within the exceptions mentioned in subsection (2) below, the giving up of possession shall not be postponed (whether by the order or any variation, suspension or stay of execution) to a date later than fourteen days after the making of the order, unless it appears to the court that exceptional hardship would be caused by requiring possession to be given up by that date; and shall not in any event be postponed to a date later than six weeks after the making of the order. (2) The restrictions in subsection (1) above do not apply if (a) the order is made in an action by a mortgagee for possession; or (b) the order is made in an action for forfeiture of a lease; or (c) the court had power to make the order only if it considered it reasonable to make it; or (d) the order relates to a dwelling house which is the subject of a restricted contract (within the meaning of section 19 of the [Rent Act 1977]); or (e) the order is made in proceedings brought as mentioned in section 88(1) above [proceedings for possession of a dwelling house let under a rental purchase agreement].
None of the exceptions listed in section 89(2) apply to tenancies which are not secure tenancies.
The effect of subsection (1) of that section is to remove from the court the discretion which it had at common law to select whatever length of postponement it thought fit: see McPhail v Persons Unknown [1973] Ch 447.
In his commentary on this section in Current Law Statutes Mr Andrew Arden (as he then was) suggested that the section did not prevent a greater period being allowed by consent.
But it is difficult to see how the consent of the parties could confer a discretionary power on the court which has been removed from it by the statute.
The question whether the section permits the court to allow a longer period on grounds of article 8 proportionality was left open in Pinnock, para 63.
It did not need to be addressed on the facts of that case.
It does not arise in any of the cases that are before this Court either, as it has not been suggested in any of them that an order postponing possession for a period in excess of six weeks is necessary to meet the requirements of article 8.
In Ms Powells case the giving up of possession was postponed by 14 days.
In Mr Halls case the period allowed was 28 days.
In Mr Frisbys case the judge decided not make a possession order, so that an application could be made to the administrative court.
But as the point was fully argued, and as it is a matter of some importance to know what scope there is for departing from the strict timetable on grounds of proportionality in cases of exceptional hardship, it is appropriate that the Court should deal with it.
Two possible ways of enabling the court to depart from the strict timetable were suggested in argument.
One was to read down the section under the power that the court is given by section 3(1) of the Human Rights Act 1998.
The other was to exercise powers of case management by adjourning the proceedings if the six week period was likely to be insufficient to enable the tenant to remove from the property without incurring exceptional hardship, for such length of time as might be necessary to avoid it.
The timetable is very precise as to the limit to the power to postpone.
The words shall not in any event could hardly be more explicit.
Its language is in sharp contrast to that of section 87 of the 1980 Act (now contained in section 85 of the Housing Act 1985, as amended), the first two subsections of which provided: (1) Where proceedings are brought for possession of a dwelling house let under a secure tenancy on any of grounds 1 to 6 or 10 to 13 in Part I of Schedule 4 to this Act, the court may adjourn the proceedings for such period or periods as it thinks fit. (2) On the making of an order for possession of such a dwelling house on any of those grounds, or at any time before the execution of the order, the court may (a) stay or suspend execution of the order, or (b) postpone the date of possession, for such period or periods as the court may think fit.
The scheme of the 1980 Act, as the contrast between sections 87 and 89 illustrates, was to confer protection on secure tenants but to restrict it in relation to non secure tenants.
Its long title states that among the Acts purposes was to restrict the discretion of the court in making orders for possession.
Section 89 contains an express prohibition against exercising the extended powers given by section 85 in the case of secure tenancies.
In the face of such strong statutory language, any reading down of the section to enable the court to postpone the execution of an order for possession of a dwelling house which was not let on a secure tenancy for a longer period than the statutory maximum would go well beyond what section 3(1) of the 1998 Act permits.
As Lord Nicholls of Birkenhead said in Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, para 33, for the courts to adopt a meaning inconsistent with a fundamental feature of legislation would be to cross the constitutional boundary that section 3 of the 1998 Act seeks to demarcate and preserve.
Section 89 of the 1980 Act does not, of course, take away from the court its ordinary powers of case management.
It would be perfectly proper for it, for example, to defer making the order for possession pending an appeal or to enable proceedings to be brought in the administrative court which might result in a finding that it was not lawful for a possession order to be made, as was contemplated by the judge in the case of Mr Frisby but is now no longer necessary.
An adjournment would also be a permissible exercise of the courts discretion if more information was needed to enable it to decide what order it should make.
But what the court cannot do, if it decides to proceed to make the order, is play for more time by suspending or staying its effect so as to extend the time limit beyond the statutory maximum.
The question then is whether the Court should make a declaration of incompatibility under section 4 of the 1998 Act.
This would be appropriate if there was good reason to believe that the time limit that the section sets is likely in practice to be incompatible with the article 8 Convention right of the person against whom the order for possession is made.
Mr Ardens comment in Current Law Statutes indicates that at the time when section 89 of the 1980 Act was enacted postponements of orders for possession for periods of four to six weeks was normal.
No evidence has been put before the Court to show that in practice the maximum period of six weeks is insufficient to meet the needs of cases of exceptional hardship.
Furthermore, this is an area of law where the judgment of Parliament as to what was necessary to achieve its policy of restricting the discretion of the court in the case of non secure tenancies should be respected, unless it was manifestly without reasonable foundation: Blei v Croatia (2004) 41 EHRR 13, para 65.
In these circumstances, as no obvious need for the section to be revisited has been demonstrated, I would decline to make a declaration of incompatibility.
The disposal of these appeals
(a) Ms Powell
Mr Underwood informed the Court that Hounslow had decided, in the light of the decision in Pinnock, to offer Ms Powell suitable alternative accommodation.
As before, this accommodation was to be provided on a non secure basis.
Her rent arrears would be carried forward to the new tenancy on the basis that she continued to pay off the arrears at 5 per week, subject to any changes in her circumstances which would enable her to pay more.
Mr Luba said that he was grateful for this offer, and he submitted that in any event the order that had been made against his client should not stand.
Evidence had been heard by the district judge in her case.
But this was not a full proportionality hearing of the kind contemplated by Pinnock, and her personal circumstances had not been examined.
He invited the court to allow Ms Powells appeal.
In view of the offer that had been made, Mr Underwood did not oppose this invitation in his oral argument.
But in his written case, in which he invited the court to dismiss the appeal, he pointed out that the judge observed that the action taken by Hounslow was proportionate.
Had it not been for the offer of suitable alternative accommodation, there might have been grounds for remitting Ms Powells case to the county court for consideration of article 8 proportionality.
Giving effect to the order for possession would have the inevitable consequence of making Ms Powell homeless again so that the local authoritys duties to her will continue, unless she were to be found to be intentionally homeless or not to have a priority need.
Had there been a live issue to be examined, it would have been preferable for her to be given an opportunity for the proportionality of the order to be considered in the light of her personal circumstances.
As it is, it is not necessary to reach a view on this point.
An offer of suitable alternative accommodation having been made, no good purpose would be served by maintaining the order for possession or the notice to quit which preceded it.
I would allow this appeal for this reason and set the order and the notice to quit aside.
(b) Mr Hall
Mr Underwood informed the Court that Leeds had decided, in the light of the decision in Pinnock and as there had been no recent reports of his having caused a nuisance, to offer Mr Hall a secure tenancy of his current accommodation.
Mr Luba said that he was grateful for this offer, but he submitted that the order that had been made against his client should not stand in any event as the judge had been wrong to refuse to consider anything occurring after the date of the review.
He invited the court to dispose of the matter by allowing Mr Halls appeal.
Mr Underwood acknowledged that Mr Hall did not have a proportionality hearing.
But he submitted that under the introductory tenancy scheme it had no power to give him one, so the appeal should be dismissed.
Mr Underwoods submission that the county court had no power to consider whether it was proportionate to make the order must be rejected.
For the reasons set out in paras 50 56 above, it has that power.
So, if there were grounds for thinking that it was seriously arguable that the making of the order was disproportionate, I would have remitted his case to the county court to enable him to present that argument.
But the reasons given by the Court of Appeal for holding that it was unarguable that the decision was unlawful apply with equal force to the question whether, on the facts presented by Mr Hall, the decision was disproportionate.
No grounds have been put before this Court for thinking that he could present a case which was seriously arguable.
Had it not been for the offer of a secure tenancy, I would have dismissed his appeal.
As it is, no good purpose would be served by maintaining the order for possession.
I would, for this reason only, allow this appeal.
(c) Mr Frisby
Birmingham has not made any offer of settlement in Mr Frisbys case and Mr Arden indicated that it was not minded to do so.
Mr Luba submitted that, as the district judge had considered only the question of venue and had adjourned the proceedings so that an application could be made for judicial review, the proper course was for this Court to allow the appeal so that proceedings could be resumed in the county court.
Mr Arden, on the other hand, invited the Court to dismiss the appeal as Mr Frisby did not take advantage of the adjournment to take proceedings for judicial review and had given no indication of what the issues were that he wanted to raise.
He said that he had had his chance, and that he should not be given a further opportunity.
He pointed out that Mr Frisby did not appeal against the noise abatement notice, and it appeared that he was not in position to say that the notice of proceedings had not been properly served on him.
In view of the way the case was dealt with in the county court, Mr Frisby did not have an opportunity to present his arguments on proportionality in that court.
But I do not think that there is any reason for thinking that it is seriously arguable that the making of an order for possession in his case was disproportionate.
As already noted (see para 30 and 31, above), when Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy he did not do so and, having requested a review of the decision to seek an order for possession, he did not attend the resumed hearing.
The facts on which that decision was based are compelling, and no notice has been given of any grounds on which it might be suggested that the making of the order was disproportionate.
I would dismiss this appeal.
LORD PHILLIPS
Introduction
I am grateful to Lord Hope for setting out the facts and issues raised by these appeals with such clarity.
I agree with his conclusions, but in relation to some of these I wish to add some comments of my own.
I propose to do this, after an introductory overview, by addressing, in some cases very shortly, the issues set out in the Statements of Facts and Issues agreed by the parties.
Article 8(1) of the Convention confers on everyone a right to respect for his home.
It does not impose on a state, or a public authority within a state, a duty to provide a home or to sort out a persons housing problems see the comment of Lord Bingham in Kay v Lambeth London Borough Council [2006] 2 AC 465, at para 28 and the Strasbourg authorities cited by him.
English law, and public authorities acting pursuant to that law, have gone further than the Convention requires.
The law lays down a complex framework dealing with rights and obligations in relation to housing.
Under this public authorities are under an obligation to provide accommodation for the homeless in the circumstances described by Lord Hope at para 11.
The law also regulates the manner in which public authorities provide housing for those requiring this.
Article 8, together with section 6 of the Human Rights Act 1998 (HRA), imposes on a public authority which has provided a person with a home a duty to have respect for that home.
This imposes a fetter on the right of the authority to dispossess the occupier of his home.
As a matter of substance, article 8(2) requires that dispossession should be pursuant to one or more of the specified legitimate aims and that it should be a proportionate means of achieving that aim.
As a matter of procedure, the occupier is entitled to have any issue as to whether article 8(2) is satisfied determined by an independent tribunal.
Parliament has gone a long way towards satisfying these requirements by express statutory provisions.
It has created a class of secure tenants who cannot be dispossessed unless a court is satisfied, inter alia, that it is reasonable that they should be.
Parliament has also, however, deliberately created classes of tenants who do not have security of tenure (non secure tenants).
Parliament has conferred on some of these a degree of substantive and procedural protection, but has sought to place the decision on whether or not they should be dispossessed fairly and squarely on the local authorities themselves.
It has sought to avoid, in so far as possible, questions of proportionality being pursued before the courts.
The policy behind this approach is not in doubt.
It is to prevent the delay and expense that may occur if those who are not entitled to security of tenure are permitted to resist the grant of possession orders by the courts by attacking the reasons that have led the local authorities to claim possession.
The Strasbourg Court has made it plain that ousting the powers of the court to consider the proportionality of dispossessing a non secure tenant is not compatible with the procedural requirements of article 8.
In Manchester City Council v Pinnock [2010] 3 WLR 1441 this Court held that it was possible to read section 143D(2) of the Housing Act 1996 as permitting a demoted tenant to raise the issue of proportionality by way of defence to an application for a possession order.
These appeals require the Court to decide whether the reasoning in Pinnock applies where a local authority seeks, pursuant to section 127 of that Act, to recover possession of a property occupied by an introductory tenant or where possession is sought of property occupied pursuant to Part VII of the Act after the tenancy, or licence, has been terminated by a notice to quit.
More generally, these appeals raise a number of questions which are not clearly answered by the decision in Pinnock.
Foremost among these is the question of the matters to which the court must pay regard when an issue of proportionality is raised.
INTRODUCTORY TENANCIES
Mr Frisby, which arise in relation to introductory tenancies.
Issue 1: Does article 8 apply at all to a claim for possession of premises held on an introductory tenancy?
All parties were agreed that, in normal circumstances, the premises occupied by an introductory tenant constitute his home for the purposes of article 8.
I endorse that agreement.
When a tenant enters into occupation under an introductory tenancy the common intention is that, provided that the probationary period passes without incident, the tenancy will become secure.
The tenant enters into the premises with the intention of making them his home and, for the purposes of article 8, they normally become his home.
I shall start by considering the issues agreed in the appeals of Mr Hall and Issue 2: Must repossession of property that is occupied under an introductory tenancy be subject to an independent determination of proportionality under article 8(2)?
It might have been thought that an affirmative answer to the first issue would necessarily require a similar answer to this issue.
Counsel for the appellants, for Leeds City Council, and for the Secretary of State were agreed that this was so.
Mr Andrew Arden QC, for Birmingham City Council, submitted to the contrary.
He accepted that the premises occupied by an introductory tenant were his home for the purposes of article 8.
He submitted, however, that the Strasbourg Court had never laid down an absolute requirement for an independent determination of proportionality.
The grant of a non secure tenancy for a probationary period was properly to be considered as part of the process of allocating accommodation, or of the selection of tenants.
This was a matter for the local authority, not for the courts.
The existence of this probationary scheme was plainly in the interest of other tenants.
In these circumstances, and having regard to the requirement that local authorities should be able to act swiftly, economically and decisively in allocating accommodation, there was, exceptionally, no requirement for an independent determination of proportionality.
The exigencies of the introductory tenancy scheme outweighed the need for the tenant to be able to challenge proportionality before an independent tribunal.
Pinnock could be distinguished because it dealt with demoted tenancies, which were not an integral part of the scheme of allocation.
While I was initially attracted by this argument, I have not been persuaded by it.
The provisions of Part V of the 1996 Act that relate to demoted tenancies closely mirror the provisions that relate to introductory tenancies.
Each set of provisions has the effect of placing the tenant on probation, with good behaviour likely to earn the reward of a secure tenancy.
I can see no principled basis for distinguishing between the two so far as concerns the manner of application of article 8.
I would give an affirmative answer to the second issue.
Issue 3: What legitimate aims may the local authority invoke when seeking to justify under article 8(2) the dispossession of an introductory tenant?
This issue, and issue 4 which follows, arise on the premise that an affirmative answer is given to issue 5, a premise which, as I shall explain, I consider to be valid.
I agree with Lord Hope (para 36) that the answer to this issue is provided by para 52 of the judgment of this Court in Pinnock.
The legitimate aims itemised in article 8(2) include the protection of the rights and freedoms of others.
This phrase is wide enough to embrace (i) the vindication of the authoritys ownership rights in the property and (ii) the compliance by the authority with its duties in relation to the distribution and management of the housing stock for the benefit of other tenants.
A public authority can properly seek to justify its actions in dispossessing an introductory tenant by asserting that this was reasonably necessary to achieve these legitimate ends.
I do not understand any of the parties to dissent from this conclusion which reflects the views expressed by the Strasbourg Court in McCann v United Kingdom (2008) 47 EHRR 913, at para 48.
Issue 4: In the light of the legitimate aims, what types of factual issue will be relevant to any proportionality determination?
This substantive question is distinct from the procedural question of how the relevant factual issues are to be brought before the court.
The contentions of the parties.
On this issue there was a wide variety of submissions.
At one extreme was the case advanced by Mr Stilitz QC on behalf of the Secretary of State.
He submitted that each of the two legitimate aims was individually so cogent that the particular reasons that motivated the local authority to seek to recover possession were an irrelevance.
A local authoritys right to recover its own property from a recipient who had no legal right to remain in possession did not require to be supported by reference to the reasons which motivated the authority in seeking to exercise this right.
This is how this proposition was expressed in para 50.1 of the Secretary of States written case in relation to homelessness cases: When assessing proportionality by reference to this legitimate aim, it is not necessary or appropriate for the court to investigate the factual merits of the local authoritys reasons for serving the notice to quit, as the merits of the local authoritys reasons are irrelevant to the assessment of proportionality against this particular legitimate aim.
So far as the second legitimate aim was concerned, the Secretary of State submitted that it should be assumed that possession proceedings were brought in the proper, and (in terms of domestic public law) lawful discharge of the local authoritys housing duties.
Similar submissions were advanced at para 64 of the Secretary of States case in relation to introductory tenancies: Unless the local authority specifically seeks to invoke the particular reasons for seeking possession given to the occupier under the statutory scheme, the factual inquiry on an article 8 challenge in the county court will be confined to the determination of the occupiers personal circumstances.
At the other extreme, Mr Luba QC for Mr Frisby submitted that there was no restriction or inhibition on the factual matters that either party might deploy in relation to an issue of proportionality raised in possession proceedings.
In relation to an introductory tenancy he submitted that the local authority could properly rely on anti social behaviour or rent arrears, indeed on any breach of the terms of the tenancy other than those which had no adverse impact on third parties, such as a modest failure to maintain the garden or the keeping of an innocuous pet.
The tenant could raise any matters that he wished in support of his contention that dispossession was disproportionate.
Mr Arden did not adopt the extreme case of the Secretary of State.
He contended that it was open to the local authority to rely on a presumption that it was acting in proper pursuance of its duties in relation to the management and distribution of housing.
It could, however, if it chose, rely upon specific reasons for seeking to recover possession.
He accepted that it was open to a tenant to raise at the hearing of the possession application any of the matters previously raised in opposition to the dispossession on the statutory review under section 129 of the 1996 Act.
Lord Hopes analysis
Lord Hope deals with issues 3 and 4 together.
He does so first in relation to homelessness cases, but goes on to apply the same reasoning to introductory tenancies.
So far as issue 3 is concerned, I have agreed with Lord Hopes identification of the legitimate aims.
He deals very shortly with the factual issues that may be relevant to the issue of proportionality.
He states at para 37 that in the overwhelming majority of cases no issue will arise as to whether the authority is pursuing legitimate aims, for this will be presumed.
The only factual issue that may arise will be whether, in the light of the occupiers personal circumstances, the order is lawful and proportionate.
At para 41, dealing with homelessness, and again at para 45, when dealing with introductory tenancies, he states that in the ordinary case the relevant facts will be encapsulated in the two legitimate aims that were identified in Pinnock and that it is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what he has to say about his personal circumstances.
Discussion
I agree with Lord Hopes analysis.
In seeking an order for possession, the local authority is not required to advance a positive case that this will accord with the requirements of article 8(2).
This will be presumed by reason of the authoritys ownership of the property and duties in relation to the management of the housing stock.
Ownership alone is not enough to satisfy article 8(2), where the owner is a social landlord, as Lord Hope observes at para 36, citing Kryvitska and Kryvitsky v Ukraine (Application No 30856/03) given 2 December 2010.
Article 8(2) requires that the authority should be seeking possession in order to further the performance of its housing duties but, unless the tenant raises a challenge, this will be presumed.
The question raised by issue 4 is, however, the nature of the challenge that it is open to the tenant to make.
This is an important question.
If article 8(2) requires that repossession of accommodation let on an introductory tenancy should be in furtherance of the authoritys housing duties, the same is true of the independent requirements of English public law.
If the latter are satisfied, then, so it seems to me, it will almost inevitably follow that the requirements of article 8(2) are also satisfied.
The policy behind the introductory tenancy scheme is not in doubt.
It was well summarised in three short quotations at para 28 of Mr Ardens printed case, one from a consultation paper on Probationary Tenancies and two from parliamentary debates on the Housing Bill 1996.
Introductory tenancies place the tenant on probation.
They require the tenant to demonstrate that he is a good tenant, both as regards his behaviour towards his neighbours and as regards his contractual obligations to his landlord, before he is granted a tenancy that is secure for life.
When deciding whether to dispossess a tenant who has been granted an introductory tenancy, a local authority must have regard to this policy.
The authority cannot simply rely upon the fact that it owns the property and that the tenant has no security of tenure.
The decision to dispossess the tenant must be a reasoned decision.
Section 128(3) of the 1996 Act requires the tenant to be given notice of the reasons for the landlords decision to seek a possession order and section 129 entitles the tenant to a review of the decision and to the reasons for its confirmation if, indeed, it is confirmed.
Under the Introductory Tenants (Review) Regulations 1997 (SI 1997/72) made pursuant to section 129(3) of the 1996 the tenant is entitled to an oral hearing of the review, carried out by a person who was not involved in the original decision and (where the decision makers are officers) senior to that person.
He is entitled to be represented at that hearing.
It is implicit in this scheme that the reasons for terminating the introductory tenancy before it becomes secure will be that, in one way or another, the tenant has proved unsatisfactory.
That has certainly been the position in the cases of Mr Hall and of Mr Frisby.
It is possible to envisage a proportionality challenge before the judge being based on exceptional personal circumstances which have nothing to do with the reasons for seeking the possession order.
Normally, however, any attack on the proportionality of dispossession is likely to amount to an attack on the reasons given to the tenant for seeking the possession order.
Either the tenant will argue that the facts relied upon by the authority to justify seeking the order do not do so, or he will contend that those facts were not accurate.
In paras 51 to 53 this Court in Pinnock commented on the proposition that it will only be in very highly exceptional cases that it will be appropriate for the court to consider a proportionality argument.
I believe that this proposition is an accurate statement of fact in relation to introductory tenancies.
This is because the judge should summarily dismiss any attempt to raise a proportionality argument unless the defendant can show that he has substantial grounds for advancing this.
Two factors make it extremely unlikely that the defendant will be in a position to do this.
The first is the relatively low threshold that the authority has to cross to justify terminating the introductory tenancy.
The second is the significant procedural safeguards provided to the tenant that I have described in para 90 above.
As to the threshold, the arguments advanced by Mr Arden that I have considered at para 78 above are of some relevance.
The introductory scheme is designed to enable a local authority to select as long term secure tenants those who demonstrate that they are unlikely to pose problems for the authority or for their neighbours.
The authority can properly require a high standard of behaviour by the tenant during the probationary period.
Thus I do not accept Mr Lubas suggestion that the authority could not properly rely upon a breach of the tenancy condition if it had no adverse impact on any third party.
Furthermore, if a tenancy has given rise to complaints by neighbours of anti social behaviour the authority does not have to be in a position to prove that these are well founded in order to justify terminating the tenancy.
As Waller LJ remarked in R(McLellan) v Bracknell Forest Borough Council [2002] QB 1129, at para 97: Under the introductory tenancy scheme it is not a requirement that the council should be satisfied that breaches of the tenancy agreement have in fact taken place.
The right question under the scheme will be whether in the context of allegation and counter allegation it was reasonable for the council to take a decision to proceed with termination of the introductory tenancy.
As to the procedural safeguards, they may not be enough in themselves to satisfy article 8(2) in that the decision makers are representatives of the authority and thus not independent.
None the less, they have no axe to grind when deciding whether or not an introductory tenant has shown himself to be a suitable candidate for a secure tenancy.
It is likely to be a rare case, particularly as the defendant has a right to a review, where the defendant will be in a position to demonstrate that there are substantial grounds for attacking the authoritys findings of fact, or the decision based on them.
I note that in McCann at para 54 the Strasbourg Court accepted that it would only be in very exceptional cases that an applicant would succeed in raising an arguable case which would require the court to examine the issue and that in the great majority of cases it would be possible for possession orders to continue to be made in summary proceedings.
Issue 5: Can section 127(2)of the 1996 Act be read compatibly with the occupiers article 8 rights so as to allow him to defend a claim for possession of premises held on an introductory tenancy in the county court?
Mr Luba and Mr Stilitz submitted that this question should be answered in the affirmative on the ground that the reasoning of this Court in Pinnock in relation to section 143D(2) of the 1996 Act applied equally to section 127(2).
Mr Arden and Mr Underwood submitted to the contrary.
Mr Arden advanced two reasons for distinguishing the reasoning in Pinnock.
The first was that demoted tenancies are relatively rare whereas introductory tenancies are the norm for all new lettings nationally and amount to tens of thousands a year.
The second was that, syntactically it was not possible, as it had been in Pinnock, to imply the word lawfully into the statutory conditions precedent to making the possession order.
Mr Underwood QC advanced a further argument against applying the reasoning in Pinnock to section 127(2).
Section 143D(2) was inserted into the 1996 Act by amendment after the HRA came into force.
Accordingly the construction of the subsection was subject to section 3 of the latter Act.
The same was not true of section 127(2), which predated the HRA.
Consequently the latter subsection had to be given its natural meaning.
I have not found any of these arguments persuasive.
Mr Arden himself accepted that, in principle, the volume of cases affected had no obvious impact on construction.
As to the syntactical argument, the precise formulation of the proviso required by article 8 is of no significance.
Compatibility can be achieved in the case of either subsection by implying the phrase provided that article 8 is not infringed.
As to Mr Underwoods argument, section 3 of the HRA applies to all legislation, whether enacted before or after the HRA came into force.
Insofar as this alters the construction given to legislation before the HRA came into force, the HRA has the effect of amending legislation: see Ghaidan v Godin Mendoza [2004] 2 AC 557.
For the reasons given by Lord Hope in paras 50 to 56 I would give an affirmative answer to Issue 5.
Issues 6 and 8: Procedural questions
The parties agreed a considerable list of procedural questions which would arise if an affirmative answer were given to Issue 5.
There is no doubt that the affirmative answer that I would give to that issue creates a requirement for some procedural rules in order to provide an orderly process by which (i) an introductory tenant can raise a proportionality issue by way of defence to a claim for a possession order in respect of his home and (ii) the authority seeking possession can respond to such a defence.
I agree with Lord Hope that it is not appropriate for this Court to attempt to give directions or guidance in relation to the appropriate procedures.
These are much better formulated in the form of rules of court, practice directions or protocols by those who are normally responsible for producing these.
There is, however, one important matter of principle upon which I wish to comment.
This is whether the local authority should be required to give notice of the reasons that have led it to seek possession of the defendants home.
In the case of introductory tenancies this question is academic, for sections 128 and 129 of the 1996 Act expressly require reasons to be given.
Accordingly I propose to deal with this question in the context of homelessness cases.
Section 89 of the Housing Act 1980
Section 89 of the 1980 Act is of general application, so that it applies in relation to both introductory tenancies and homelessness cases.
In Pinnock, at para 63, this Court raised, but did not answer, the question of whether article 8 of the Convention impacts on, or is incompatible with, the true construction of section 89.
Lord Hope has dealt with this question at paras 57 to 64 of his judgment.
I agree with his conclusions, but wish to add a word on the question of incompatibility, which he has considered at para 64.
In any situation where the judge dealing with an application for a possession order has power to refuse to make the order on the ground that it would infringe article 8, no question of incompatibility can arise in relation to section 89.
That section merely increases the options open to the judge.
He can (i) make an immediate order for possession; (ii) make an order the operation of which is postponed up to the limit permitted by section 89; (iii) refuse to make the order on the ground that it would infringe article 8.
The clear limit on the judges discretion to postpone the operation of the order may thus, in rare cases, have the consequence that the order is refused, whereas it would otherwise have been granted, subject to postponement of its operation for a greater period than section 89 permits.
This is not a consequence that Parliament can have envisaged.
Issue 7
This does not arise Issue 9: Disposal.
For the reasons that he gives I would make the orders proposed by Lord Hope in respect of the appeals in the cases of both Mr Hall and Mr Frisby.
HOMELESSNESS CASES
I now turn to consider the position of those who, like Rebecca Powell, are provided with accommodation by a local authority pursuant to its duties under Part VII of the 1996 Act, which deals with homelessness.
Lord Hope has summarised the essential features of this scheme at paras 11 to 13 of his judgment.
The first two issues that I have considered in relation to introductory tenancies have not been raised in relation to tenancies under Part VII, for all parties have accepted, correctly in my view, that accommodation provided to the homeless will normally become their homes for the purposes of article 8 and that a judge, usually a district judge, who is considering an application for a possession order under Part VII, is entitled to entertain by way of defence to the application a submission that to make the order will infringe article 8.
Issue 1: What special features, if any, apply to the determination of an article 8 defence in the context of accommodation provided under Part VII?
Mr Luba has helpfully set out in his printed case six reasons why a person may be accommodated by a local authority under Part VII: (1) the authority has not yet reached a decision on the homelessness application but the applicant is being accommodated in the interim because he may be eligible, homeless and have a priority need: Housing Act 1996, section 188; (2) the authority is in the process of referring the application to a different local housing authority but accommodating the applicant until that process is resolved: Housing Act 1996, section 200; (3) the authority has determined the application but the applicant has invoked a statutory review or statutory appeal and the authority is accommodating until the review/appeal is determined: Housing Act 1996, sections 188 and 204(4); (4) the authority has decided to exercise its power to accommodate an applicant who is eligible, homeless, not intentionally homeless but not in priority need: Housing Act 1996, section 192(3); (5) the authority has decided that because the applicant is eligible, homeless, and in priority need but has become homeless intentionally it is under a duty to accommodate for such time as gives the applicant a reasonable opportunity of securing his own accommodation: Housing Act 1996, section 190(2)(b); or (6) the authority has decided that the applicant is eligible, homeless, in priority need and did not become homeless intentionally (the main housing duty): Housing Act 1996, section 193.
It is apparent from this list why it is that a local authority will not normally be prepared to grant security of tenure where accommodation is provided under Part VII.
The scheme is concerned with the provision of temporary accommodation while a persons claim under Part VII is addressed.
The housing stock from which the authority provides this temporary accommodation may well not all be owned by the authority.
Often it will have been obtained from a housing association or a private landlord.
It is important that the authority should have the maximum flexibility to move, where necessary, a tenant from one unit of accommodation to another.
Nevertheless, a tenant may be permitted to remain in accommodation provided under Part VII for a considerable period and the local authority may wish to remove the tenant from that accommodation not simply in the interests of the more efficient management of the housing stock, but because of shortcomings in the tenants behaviour, such as anti social activity or a failure to pay rent.
Issue 2: What legitimate aims may the local authority invoke when seeking to justify under article 8 (2) the dispossession of a tenant who is in occupation of premises pursuant to Part VII?
This issue is the same as Issue 3 in relation to introductory tenancies and the answer is the same (see para 80 above).
The difference in practice is that the local authoritys decision under Part VII is more likely to be dictated by the practical requirements of making the best allocation of a limited and fluctuating housing stock.
Issue 3: In the light of the legitimate aims what type of factual issues will be relevant to any such proportionality determination?
Just as in the case of introductory tenancies, the factual issues that will be relevant if a defendant makes a proportionality challenge to the making of a possession order are likely to depend upon the reasons that have led the local authority to seek the order.
As Mr Luba accepted, where the local authority simply wishes to relocate the defendant in alternative accommodation in the interests of the more efficient allocation of limited and fluctuating housing stock, it is not easy to envisage any issue of fact that the defendant could raise that would constitute a substantial ground for making a proportionality challenge.
In this context it is relevant that section 202 of the 1996 Act gives a statutory right to a review of the suitability of accommodation offered to a person pursuant to a local authoritys duties under Part VII.
Where the reason for seeking possession is alleged shortcomings on the part of the tenant, such as failure to pay rent, it will be open to the tenant to seek to challenge the facts upon which the decision is based.
The position will be similar to that considered in relation to introductory tenancies.
The defendant will have to show that he has substantial grounds for the challenge if he is to avoid the summary imposition of the possession order.
As Mr Luba pointed out, where the reason is non payment of rent there is not likely to be much scope for bona fide issues of fact.
For these reasons the statement that it will only be in rare cases that a valid proportionality challenge can be raised by way of defence to a possession order applies equally to repossession of accommodation provided under Part VII.
Issue 4: Does article 8 require the local authority to give notice of its reasons for seeking possession?
Mr Luba submitted that the procedural protections implicit in article 8 required that the tenant should be informed of the authoritys intention to seek possession and the reasons for it before service of the notice to quit, or at least before the commencement of the possession proceedings, in order to permit the tenant the opportunity to challenge those reasons and the authoritys decision.
This raises an important question of principle.
Sometimes a local authority will wish to recover possession of premises in the interests of a more effective allocation of the housing stock.
Sometimes the authority will be reacting to the behaviour, or perceived behaviour of the tenant.
In the latter event the authority may be proceeding on the basis of a factual assumption that is unsound.
If the only reason that the authority is seeking possession is that the tenant has been guilty of bad behaviour, obtaining possession will not further the legitimate aims of the authority if that factual premise is unsound.
If the defendant is not informed of the reason why the authority is seeking possession he will be denied the opportunity of displacing the presumption that the authoritys action will serve a legitimate aim.
I do not believe that the Strasbourg Court would tolerate a regime under which a person can be deprived of his home by a public authority without being told the reason for this.
Nor would I, for it is fundamentally unfair.
In Connors v United Kingdom (2004) 40 EHRR 189, at para 94 the Strasbourg Court said: The power to evict without the burden of giving reasons liable to be examined as to their merits by an independent tribunal has not been convincingly shown to respond to any specific goal .
The references to flexibility or administrative burden have not been supported by any concrete indications of the difficulties that the regime is thereby intended to avoid.
The Court was there dealing with gipsies but those words are equally applicable in the present context.
I do not suggest that there is any burden on a local authority, in the first instance, to justify to the court its application for a possession order or to plead the reason for seeking this.
What I do suggest is that the tenant must be informed of the reason for the authoritys action so that he can, if so minded, attempt to raise a proportionality challenge.
I do not believe that recognition of this obligation will have any significant practical consequences for I find it inconceivable that local authorities are, in practice, seeking possession orders against tenants accommodated pursuant to Part VII without telling them why they are doing so.
Mr Luba told the Court that tenants under Part VII who are relocated by the local authority usually agree to this course.
I would expect the local authority to inform the tenant of the reason for the proposed relocation, in order to procure this consent.
Where it is the conduct of the tenant that has led to the authoritys action, I would equally expect the authority to make this plain.
Certainly Hounslow did so in the case of Rebecca Powell.
Mr Luba urges that notice of the authoritys reasons should be given before service of a notice to quit.
I suspect that this is precisely what does happen in practice, but I would not, without further consideration, rule that article 8 requires this.
It is possible that article 8 will be satisfied provided that the occupier is given the information he needs in time to decide whether or not to raise a challenge in the possession proceedings.
Issue 5: When and how should notice of the authoritys reasons be given?
These are matters of procedure on which I do not propose to comment.
Mr Luba has referred the Court to a paper prepared by HH Judge Madge on Article 8 la lutta continua? (2009), JHL 2009, 12(3), 43 47, which has been approved by the Housing and Land Committee of the Civil Justice Council.
I consider that Judge Madge and that Committee are better placed to decide upon the appropriate procedural changes required by Pinnock and by the decision on these appeals than am I.
Issue 6
This raises the point on section 89 that I have already considered in the context of introductory tenancies.
Issue 7: Should the judge hearing the application for possession also rule on the validity of the notice to quit?
Mr Luba draws attention to the fact that if the judge refuses to make a possession order on article 8 grounds, but does not also rule that the notice to quit was unlawful, the defendant will remain in possession as a tolerated trespasser rather than as a non secure tenant.
He urges that this court should endorse the view expressed by Lord Scott in Doherty v Birmingham City Council [2008] UKHL 57; [2009] AC 367, at para 84 that the judge hearing a challenge to the claim for a possession order should also be prepared to entertain an article 8 challenge to the validity of the notice to quit.
This issue interrelates with the point that I have considered under Issue 4.
I can, in principle, see no reason why, if the validity of the notice to quit is challenged by way of defence to the claim for possession, the judge should not be entitled to deal with that challenge.
Issue 8: Disposal
I agree, for the reasons that he gives, that Rebecca Powells appeal should result in the order proposed by Lord Hope.
LORD RODGER, LORD WALKER, LADY HALE, LORD BROWN
LORD COLLINS
For the reasons given by Lord Hope and Lord Phillips, with which we entirely agree, we too would make the orders proposed by Lord Hope.
| These appeals concern the making of orders for possession of a persons home in favour of a local authority.
The issue is whether, in circumstances where the occupier is not a secure tenant, the court that makes the order must consider the proportionality of making it.
Most residential occupiers of property owned by local authorities are secure tenants under the Housing Act 1985.
This restricts the circumstances in which they can be evicted.
Certain types of tenancy, however, are excluded from that regime.
The case of London Borough of Hounslow v Powell involved one such type: accommodation provided under the homelessness regime in Part VII of the Housing Act 1996.
In order to regain possession of such accommodation, domestic law requires only that the local authority must give notice to quit and obtain a court order.
Ms Powell, as a homeless person to whom the local authority owed a duty to provide accommodation, had been given a licence to occupy property under Part VII.
Rent arrears of over 3,500 accumulated and the local authority issued a claim for possession of the property.
The court hearing the claim made an order requiring Ms Powell to give up possession.
The cases of Leeds City Council v Hall and Birmingham City Council v Frisby involved a second type of non secure tenancy: introductory tenancies entered into under Part V of the Housing Act 1996.
This type of tenancy is designed to provide an initial period of probation.
It remains introductory for a period of one year, after which it becomes secure unless the introductory tenancy has been terminated.
If the local authority decides to terminate the introductory tenancy the tenant is entitled to a review of that decision, but once the relevant procedures have been gone through section 127(2) of the 1996 Act provides that the court shall make a possession order.
Mr Hall and Mr Frisby had both been granted introductory tenancies, by Leeds and Birmingham City Councils respectively.
Allegations were made against them of noise nuisance and anti social behaviour.
The local authorities served notices indicating their intention to seek possession, which were upheld on review.
In possession proceedings the courts found in favour of the local authorities.
The three occupiers appealed to the Court of Appeal.
They argued that Article 8 of the European Convention on Human Rights, which provides that Everyone has the right to respect for his home, required that the court hearing the possession proceedings must be able to assess the proportionality of making the orders against them.
As the court did not do this, there was a breach of their Article 8 right.
The Court of Appeal dismissed the appeals and the occupiers appealed to the Supreme Court.
The Supreme Court unanimously holds that a court must have power to consider the proportionality of making possession orders under the homelessness and introductory tenancy schemes.
In the cases of Powell and Hall the Court allows the appeals and, having considered the facts in the case of Frisby, it dismisses his appeal.
Lord Hope and Lord Phillips give judgments.
These cases were a sequel to the case of Manchester City Council v Pinnock [2010] UKSC 45.
There the Supreme Court held that Article 8 of the European Convention on Human Rights requires that a court, which is being asked to make a possession order against a person occupying under the demoted tenancy scheme in Part V of the Housing Act 1996, must be able to consider whether it would be proportionate to do so.
The present cases raised the question of whether that principle applied to the homelessness and introductory tenancy schemes and, if so, how cases of this kind should be dealt with in practice by the courts.
The Court held that the principle from Pinnock applied to the homelessness and introductory tenancy schemes: in all cases where a local authority seeks possession of a property that constitutes a persons home under Article 8, the court must be able to consider the proportionality of making the order. [3] The Court then set out general guidance on meeting this requirement.
A court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and has crossed the high threshold of being seriously arguable.
The threshold will be crossed in only a small proportion of cases.
The question then will be whether making an order for possession is a proportionate means of achieving a legitimate aim.
Two legitimate aims should always be taken for granted: the making of the order will (a) vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
The authority is not required to plead in advance any more particularised reasons or to advance a positive case that possession would accord with the requirements of Article 8: such a requirement would collapse the distinction between secure and non secure tenancies.
Where the local authority has a particularly strong or unusual reason for seeking possession, however, it is entitled to ask the court to take that reason into account and it should plead the reason if it wishes the court to do so.
If a court entertains a proportionality argument, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order sought. [33] [49] On the face of it, section 127(2) of the Housing Act 1996 gives the court no discretion in the case of an introductory tenancy.
But this does not prevent the court considering proportionality.
Given that lawfulness is an inherent requirement of the procedure for seeking a possession order, it is open to the court to consider whether that procedure has been lawfully followed in respect of the defendants Article 8 rights. [56] Section 89 of the Housing Act 1980, however, does restrict the courts discretion as to the period for which the taking effect of the order can be deferred.
The section provides that a court making a possession order cannot postpone the date for possession for more than fourteen days or, in the case of exceptional hardship, six weeks.
The Supreme Court held that the mandatory language of the section prevents a court allowing a longer period to comply with the requirements of proportionality.
There was, however, no indication that proportionality requires a longer period and therefore no reason to declare section 89 incompatible with Article 8. [64]
|
The question in this case is whether the appellants BH (Mr H) and his wife KAS or H (Mrs H) should be extradited to the United States of America to face trial in Arizona.
The United States has requested their extradition under the Extradition Act 2003 on charges of conspiracy and unlawful importation into the United States of chemicals used to manufacture methamphetamine, knowing or having reasonable cause to believe that they would be used for that purpose.
If they were the only persons whose interests had to be taken into account, the answer to be given to this question would have been relatively straightforward.
The crimes of which they are accused are very serious, and the public interest in the honouring of extradition arrangements for the prevention and punishment of crime is compelling: Norris v Government of the United States of America (No 2) [2010] UKSC 9, [2010] 2 AC 487.
But the persons whose interests must be taken into account include the appellants children too.
It is obvious that the childrens interests will be interfered with to at least some degree by the extradition of either parent.
If both parents are to be extradited the effect on the family life of the children will be huge.
The weight to be given to their best interests lies at the heart of the issue whether the extradition of both parents, or either of them, would be proportionate.
The case comes before this court as an appeal against the determination of a devolution issue by the High Court of Justiciary.
The appellants had argued both before Sheriff McColl in the Sheriff Court and in the High Court of Justiciary that it would be incompatible with their Convention rights within the meaning of the Human Rights Act 1998 for them to be extradited, as this would interfere with the exercise of their right to respect for their private and family life contrary to article 8 of the European Convention on Human Rights.
Mrs H is the mother of six children, of whom the eldest is aged 14 years and the youngest is just one year old.
Mr H is the father of the four younger children.
In a judgment delivered on 3 April 2008 after a hearing which began on 16 November 2007 the sheriff held that the appellants extradition would be compatible with their Convention rights.
So she sent the case of each appellant to the Scottish Ministers in terms of sections 87(3) and 141(1) of the 2003 Act for their decision whether either of the appellants was to be extradited.
On 29 May 2008 the Scottish Ministers ordered the appellants to be extradited to the requesting territory.
The appellants appealed to the High Court of Justiciary under section 103 read with section 216(9) of the 2003 Act.
On 29 July 2011, after proceedings in that court which the court itself acknowledged had been exceptionally protracted, the High Court of Justiciary (Lord Osborne, Lord Reed and Lord Mackay of Drumadoon) held that neither of the appellants was entitled to be discharged under section 87 of the 2003 Act: [2011] HCJAC 77, para 101.
There is no appeal to this court from a decision of the High Court of Justiciary under section 103 of the 2003 Act: sections 114(13) and 116.
But the question whether the Scottish Ministers had no power in terms of section 57(2) of the Scotland Act 1998 to make an order for the appellants extradition because their extradition would be incompatible with their Convention rights is a devolution issue within the meaning of paragraph 1(d) of Schedule 6 to the Scotland Act.
An appeal lies to this court under paragraph 13 of the Schedule against the determination of a devolution issue by a court of two or more judges of the High Court of Justiciary.
On 11 August 2011 the High Court of Justiciary granted leave to the appellants to appeal to this court in respect of the devolution issues relating to article 8 that arose during the hearing of the appeal under the 2003 Act.
The appellants submit that the public interest in giving effect to the extradition request is outweighed by the consequences that this would have for the best interests of their children.
The proper conclusion, they say, is that the proposed interference fails to meet the test of proportionality required by article 8.
So the Scottish Ministers had no power to order their extradition, as to extradite them would be incompatible with their rights and those of their children under article 8 of the Convention.
The facts
Mr H and Mrs H are both British citizens.
They are aged 48 and 34 respectively.
Mrs H is the mother of six children: A, who was born on 5 August 1997 and is 14; B, who was born on 16 March 1999 and is 13; C, who was born on 15 October 2002 and is nine; D, who was born on 16 February 2006 and is six; E, who was born on 5 May 2009 and is three; and F, who was born on 29 March 2011 and is one.
Mr H is the father of C, D, E and F. The father of A never lived with Mrs H (Miss S, as she then was) and has never had contact with that child.
The father of B lived in family with Miss S until they separated in 2001.
Mr H who was then living in Middlesbrough and had three children by previous relationships, was Miss Ss employer at the time of the separation.
He helped Miss S to find accommodation for herself and her children A and B in Middlesbrough.
In about 2002 they formed a relationship.
They were married in 2008.
Mr H spent a period from about 1989 to 1994 or 1995 living in the United States.
He and his then partner had a daughter J, who was born in about 1986.
When she was aged 6 and they were living in Arkansas she made disclosures to a school teacher which indicated that she had been a victim of sexual abuse by Mr H. This led to a police investigation and she was taken into care.
Mr H left Arkansas and moved to Oklahoma where he could not be prosecuted for offences said to have occurred in Arkansas.
But he remained in contact with Js mother, with whom he devised a plan for J to be returned to live with them.
She persuaded the authorities to return J to her sole care, and then took the child with her to Oklahoma so that she could resume her relationship with Mr H. Following their return to the United Kingdom that relationship came to an end.
Mr H formed a relationship with someone else by whom he had a son.
While he was living in that family he learned that J had again been taken into care.
But he took no steps to offer her a home with him in this new relationship.
After the birth of C, who was his first child with Mrs H, Js allegation that she had been sexually abused by Mr H when they were living in Arkansas came to the notice of the local authority in Middlesbrough.
It brought proceedings against him under the Children Act 1989 in the Family Division of the High Court for his contact with Miss Ss children to be terminated.
Mr H responded by mounting an attack on the local authoritys email system which led to the taking out of an injunction against him.
In a judgment which was delivered on 30 January 2004 His Honour Judge Bryant, sitting as a judge of the High Court, found that Mr H had sexually abused J on a number of occasions in Arkansas and Texas in 1993 and 1994.
He said that he was satisfied that Mr H remained a real and continuing danger to young girls, and continued the proceedings so that Miss Ss position in relation to his findings could be ascertained.
She accepted Judge Bryants findings, and on 6 September 2004 he made an order against Mr H that he was to have no contact whatsoever with Miss Ss children A, B and C. Regrettably, his order was ignored entirely by both Mr H and Miss section
On 23 March 2005 search warrants were granted by Teesside Magistrates Court under the Firearms Act 1968 in connection with an investigation into Mr H ordering a handgun through the internet.
They were executed at a business address in Stockton-on-Tees and at residential addresses in Middlesbrough.
Two handguns were recovered as well as documents, computers and bank records which contained information relating to the sale of chemicals through a website whose address was kno3.com.
The chemicals included red phosphorus and iodine.
The information showed that red phosphorus and iodine had been sold to customers around the world including about 400 customers in the United States and that the appellants were aware that it was illegal to sell these substances in that country.
In April 2005 the appellants left Middlesbrough and moved with the three children to Scotland where they have remained ever since.
Mrs H has relatives in the Bonnybridge area.
On 21 June 2006 further search warrants were granted by Teesside Magistrates Court.
On 23 June 2006 they were backed by a sheriff at Falkirk Sheriff Court.
They were executed on the same day at a business address in Grangemouth and at a residential address nearby.
A quantity of red phosphorus and iodine was recovered, as well as documents, computers and bank records indicating that the appellants were still trading in these substances.
They were arrested but not at that stage detained in custody.
Following a separate investigation which had been conducted by authorities in the United States over the same period, an indictment was filed in the United States District Court for the District of Arizona on 27 September 2006 charging the appellants with various offences relating to the importation into that country and the distribution there of red phosphorus and iodine.
This led to the request that they be extradited to the United States so that they could face trial in that court.
Warrants for the appellants arrest were issued in the United States on 28 September 2006.
On 31 January 2007 the proceedings for the appellants extradition first came before the sheriff and the appellants were remanded in custody.
They both were released on bail after seven months in custody on 31 August 2007.
Mr Hs bail order was revoked on 21 April 2011 following his failure to attend a hearing of his appeal in the High Court of Justiciary.
A warrant was issued for his arrest and he was returned to custody on 26 April 2011.
Mrs H was again remanded in custody on 29 July 2011 when the High Court of Justiciary refused the appellants appeals.
She was released on bail on 12 August 2011, but Mr H remains in custody.
Initially, following her release, Mrs H visited Mr H in prison with all six children.
The number of visits then diminished and only the four younger children regularly go to the prison with her.
The two elder children are reluctant to take part in these visits.
Within a few weeks of her release from custody Mrs H decided that she did not want her relationship with Mr H to continue, and their relationship has broken down.
The children were placed on the child protection register in July 2009 as a result of allegations of sexual abuse against Mr H by the nine year old daughter of a neighbour.
They were removed from the register after a case hearing on 13 December 2011.
But this was on the basis that they would be restored to it if Mr H were to be released from custody and to resume contact with the family.
The extradition request
On 3 November 2006, by Diplomatic Note No 078, the United States requested the extradition of the appellants in accordance with article VIII of the Extradition Treaty between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America of 8 June 1972 (Cmnd 6723), as amended by the Supplementary Treaty of 25 June 1985.
A new treaty, the Extradition Treaty of 2003 (Cm 5821) came into force on 26 April 2007.
But as the extradition documents in this case were submitted before that date the new treaty does not apply to it.
As is well known, the 1972 Treaty imposed mutual obligations on each party to extradite in respect of offences which carry a sentence of at least 12 months imprisonment in each jurisdiction.
These obligations are however subject to specified exceptions.
Among them is article V(2), which provides that extradition may be refused on any ground which is specified by the law of the requested party.
It follows that the United Kingdom will not be in breach of its treaty obligations if, by reason of section 87 of the 2003 Act or section 57(2) of the Scotland Act 1998, extradition is refused on the ground that to extradite the person whose extradition is requested would be incompatible with any of the Convention rights.
The documents submitted in support of the request included a copy of the indictment of the Grand Jury of the United States District Court for the District of Arizona dated 27 September 2006 and warrants for the arrest of the appellants.
82 counts are specified in the indictment.
The first is a count of conspiracy in the following terms: Beginning on a date unknown to the Grand Jury but no later than August of 2004, continuing through at least September of 2006, in the District of Arizona, and elsewhere, defendants [the appellants] did knowingly and intentionally conspire and agree with each other and with others known and unknown to the Grand Jury, to commit offenses against the United States including the following: a. to knowingly and intentionally distribute a listed chemical, specifically Red Phosphorus, knowing and having reasonable cause to believe it will be used to manufacture a controlled substance, in violation of Title 21 United States Code, Sections 841(c) (2); b. to knowingly and intentionally import and distribute a chemical, specifically Red Phosphorus, which may be used to manufacture a controlled substance, knowing and having reasonable cause to believe that it will be used to manufacture a controlled substance in violation of the Controlled Substances Act and the Controlled Substances Import and Export Act, in violation of Title 21 United States Code, Sections 843(a)(7); and c. to knowingly and intentionally distribute a List I chemical, specifically Red Phosphorus, without the registration required by the Controlled Substances Act, in violation of Title 21 United States Code, Section 843(a)(9).
The indictment then gives details of the manner and means of the conspiracy.
It alleges that the appellants are the owners and founders of an internet business which operated under various names but is referred to in the indictment as KN03.
At all relevant times they operated a website through which their business solicited customers around the world, including customers in the United States, who were seeking to purchase chemicals.
Among the chemicals that they sold were red phosphorus and iodine.
It is alleged that the appellants knew that these chemicals could be used to manufacture methamphetamine.
This is a central nervous system stimulant drug which has a high potential for abuse.
At the relevant time it was listed in the United Kingdom under the name methylamphetamine as a class B drug for the purposes of the Misuse of Drugs Act 1971.
It was re-classified as a class A drug by the Misuse of Drugs Act 1971 (Amendment) Order 2006 (SI 2006/3331).
The indictment states that the website advertised that it offered discreet delivery and that customers often asked for discreet packaging in the comments which they submitted along with their orders for chemicals.
It also states that KN03 shipped orders to its customers with incorrect and misleading labelling as to the contents being sent.
This included labelling on red phosphorus indicating that it was red metal for iron works and labelling on iodine indicating that it was for medical use.
The indictment states that in addition to requests for discreet packaging KN03 received other emails alerting the appellants to the fact that the chemicals sold were being used to manufacture methamphetamine.
A website giving a recipe for manufacturing methamphetamine from red phosphorus and iodine was found saved on a KN03 computer.
Between August 2004 and August 2006 KN03 sold 296 kg of red phosphorus and 44 kg of iodine to customers in the United States, including customers in Arizona.
Numerous examples are given of persons who manufactured methamphetamine in Arizona and ordered chemicals from KN03.
At least 70 methamphetamine manufacturing locations are said to have been found in the United States which were supplied with chemicals by KN03.
KN03 is said to have received approximately $132,922 between August 2004 and August 2006 from customers in the United States purchasing red phosphorus and iodine.
Counts 2 to 17 allege the unlawful distribution by the appellants of red phosphorus knowing and having reasonable cause to believe that it would be used to manufacture a controlled substance in violation of specified provisions of the United States Code.
Details are given of 16 specific supplies to customers in Arizona.
Counts 18 to 33 allege the unlawful distribution and importation of red phosphorus knowing and having reasonable cause to believe that it would be used to manufacture a controlled substance in violation of another group of specified provisions of the United States Code, in relation to which details are given of the same 16 supplies.
Counts 34 to 49 are counts of the distribution of red phosphorus without the required registration.
Counts 50 to 65 allege the unlawful use of a communication facility, specifically the internet and United States mail, in committing the felony constituted by the unlawful distribution of red phosphorus to the same 16 customers in Arizona.
Counts 66 to 81 are counts of importing red phosphorus into the United States without the required registration.
Count 82 is a count of conspiracy to import red phosphorus into the United States without the required registration in violation of the relevant provisions of the United States Code.
In an affidavit sworn on 30 October 2006 which was submitted in support of the extradition request Mary Beth Pfister, Assistant US Attorney for the District of Arizona, gave this explanation of the general nature of the evidence to be relied on by the prosecutor: The evidence the government will use to prove all of the allegations contained in the indictment against [Mr H] and [Mrs H] will include the incriminating computer records recovered from KN03 including emails, the admissions by [Mr H] and [Mrs H] regarding their involvement in the operation, the false and misleading statements made on packaging of KN03 products sent to the United States, the undercover sales made to the United States authorities, the fact that KN03 continued to sell red phosphorus to customers in the United States even after being advised that the sales were illegal and after being advised that the products were being used for the manufacture of methamphetamine, and the evidence that KN03 customers were operating clandestine methamphetamine laboratories.
The sheriff held that all the counts in the indictment were extradition offences.
The High Court of Justiciary held that the conduct alleged in relation to paragraph 12(c) of count 1 and counts 34 to 82 would not constitute an offence under the law of Scotland.
It allowed the appellants appeal against the sheriffs decision to that extent, and in relation to these offences only ordered the appellants discharge and quashed the orders for their extradition with respect to them.
The appeal against the remaining charges was refused.
The number of counts listed in the indictment might suggest, at first sight, that the allegation is of a course of wrongful conduct on a grand scale.
As the foregoing summary indicates, its length is attributable to the separate listing of each of the various provisions of the United States Code said to have been violated in relation to each of the specific transactions that have been identified.
Nevertheless the allegation is of a sustained and deliberate course of unlawful conduct, during which the appellants are said have sold 296 kg of red phosphorus and 44 kg of iodine to about 400 customers in the United States between August 2004 and August 2006 in return for which they are said to have received approximately $132,922.
The High Court of Justiciary noted in para 96 of its judgment that the conduct was said to have persisted even after the execution of the search warrants in England and an undertaking to desist.
The appellants are said to have been well aware that these products were being used for the clandestine manufacture of methamphetamine and for this reason to have gone to some lengths to conceal the nature of their activities.
The potential for harm to which their alleged conduct is said to have contributed is very great, due to the addictive nature of that drug and its potential for abuse.
There is no doubt, even after the subtraction from the indictment of counts 12(c) and 34 to 82 by the High Court of Justiciary, that the offences that have been alleged against the appellants are very serious.
All the offences are punishable in the United States, the lowest penalty being four years imprisonment and the maximum 20 years.
Conduct of this kind would attract a term of imprisonment well in excess of the minimum period 12 months referred to in section 137(2)(b) of the 2003 Act were the appellants to be prosecuted in Scotland.
Is the appeal competent?
As has already been noted in para 4 above, there is no appeal to this court from a decision of the High Court of Justiciary under section 103 of the 2003 Act.
Section 114(13) provides that the provisions of section 114 relating to appeals to this court from a decision of the High Court do not apply to Scotland.
Section 116, read together with section 141(1), provides that a decision of the sheriff or the Scottish Ministers under Part 2 may be questioned in legal proceedings only by means of an appeal under that Part.
Section 34 makes similar provision in relation to a decision of the sheriff under Part 1 of the 2003 Act.
On the other hand, paragraph 13 of Schedule 6 to the Scotland Act 1998 provides a right of appeal to this court against the determination of a devolution issue by a court of two or more judges of the High Court of Justiciary, with the leave of the court from which the appeal lies or, failing such permission, with leave of the Supreme Court.
This is a right of appeal which is separate and distinct from that provided by the 2003 Act.
The question is whether the right of appeal to this court under paragraph 13 of Schedule 6 to the Scotland Act can survive the clear and unequivocal direction in section 116 of the 2003 Act that a decision of the sheriff may be questioned only by means of an appeal under Part 2 of that Act and the equivalent direction in section 34 with regard to proceedings under Part 1 which exclude appeals to the Supreme Court against decisions under those Parts of the Act by the High Court of Justiciary.
Although no-one in these proceedings submits that it cannot and that the Supreme Court does not have jurisdiction to determine this appeal, the question whether it does have jurisdiction is obviously a matter of general public importance.
We were invited to consider it as a preliminary issue in the light of written submissions provided by counsel for the Scottish Ministers and the Lord Advocate.
Among the issues which the sheriff must consider in his capacity as a judge under Part 2 of the 2003 Act is whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998: section 87(1).
The question whether for the Scottish Ministers to order the person to be extradited to the territory to which his extradition is requested under section 93 of the 2003 Act would be incompatible with his Convention rights for the purposes of the Scotland Act 1998 is just another way of putting the same question.
Section 57(2) of the Scotland Act provides that a member of the Scottish Executive has no power to do any act so far as the act is incompatible with any of the Convention rights.
That provision is of general application, irrespective of the source of the power that is being exercised.
The functions which sections 93 and 141(1) of the 2003 Act confer on the Scottish Ministers are subject to the constraints of section 57(2) of the Scotland Act in just the same way as any other function which they may be called upon to exercise.
There can be no doubt that the question whether an order for a persons extradition by the Scottish Ministers would be incompatible with any of the Convention rights falls within the definition of a devolution issue in paragraph 1(d) of Schedule 6 to the Scotland Act and that, as such, it is open to determination by the court under the provisions of that Schedule.
But under the system that the 2003 Act lays down the question whether the persons extradition would be compatible with the Convention rights must be determined by the court before the question whether an order for the persons extradition should be made can come before the Scottish Ministers.
There are two aspects of the system that Part 2 of the 2003 Act lays down that might be taken as suggesting that the right of appeal in relation to a devolution issue under the Scotland Act has been excluded.
The first is to be found in section 118(2), which applies where the effect of the decision of the relevant court on an appeal is that the person is to be extradited to a category 2 territory.
A similar provision relating to the system in Part 1 is to be found in section 35.
Section 118(2) provides that the person must be extradited to the category 2 territory before the end of the required period, which is 28 days starting with the day on which the decision of the relevant court on the appeal becomes final, or the day on which the proceedings on the appeal are discontinued.
The relevant court in the application of this provision to Scotland is the High Court of Justiciary: section 118(8)(a).
The remaining provisions of this section, which make detailed provisions as to when the decision becomes final in the event of an appeal to the Supreme Court, do not apply to Scotland: section 118(8)(b).
There is no provision which tells us when the 28 day period is to start should there be an appeal against the High Courts determination of a devolution issue under the Scotland Act.
The problem could perhaps be cured if the Supreme Court were to remit the case to the High Court to pronounce a final order in the event that it decides that the appeal to it should be dismissed.
This would involve reading the words becomes final in section 118(2)(a) as embracing this possibility.
But this solution is not without difficulty.
In contrast to the situation contemplated by the remaining provisions of section 118, no specific time limit is provided either by the Scotland Act or by an Act of Adjournal for applications for leave to appeal to this court under paragraph 13 of Schedule 6.
The second aspect is to be found in section 115A(1)-(4), which was inserted by the Police and Justice Act 2006, section 42 and Schedule 13, paragraph 8(13).
Its Part 1 equivalent is to be found in section 33A, inserted by paragraph 8(5) of that Schedule.
Subsections (1)-(4) of section 115A make provision for a person to be remanded in custody where that persons discharge has been ordered on appeal but the court is informed immediately on behalf of the category 2 territory of an intention to appeal to the Supreme Court.
Those provisions do not apply to Scotland: section 115A(5).
There is no equivalent provision which enables the person to be detained in custody should the Lord Advocate wish to appeal to the Supreme Court on behalf of the category 2 territory against the determination of a devolution issue in that persons favour.
This is a significant omission.
It puts the Lord Advocate, should he wish to appeal in that event, at a significant disadvantage in comparison with the authorities in the other parts of the United Kingdom.
It is reasonably clear that, when the 2003 Act and the Police and Justice Act 2006 which amended it were enacted, Parliament did not contemplate that decisions of the High Court of Justiciary in an appeal under section 87(1) against the sheriffs determination of the question whether the persons extradition would be compatible with the Convention rights would be appealable under the Scotland Act.
But this does not lead inevitably to the conclusion that an appeal to the Supreme Court under that Act against the determination of a devolution issue by the High Court as part of an appeal under section 103 of the 2003 Act is incompetent.
There are powerful considerations the other way.
First, there is the fact that the effect of the Scotland Act is that the Scottish Ministers derive their existence only from that Act.
As has been repeatedly pointed out by the court, they have no power to act other than in a way that is consistent with section 57(2) of that Act: see, eg, R v HM Advocate [2002] UKPC D3, 2003 SC (PC) 21, [2004] 1 AC 462, paras 46, 129; McGowan v B [2011] UKSC 54, 2011 SLT 37, [2011] 1 WLR 3121, para 6.
The functions that the 2003 Act has conferred on the Scottish Ministers must be seen in that light.
It would perhaps have been open to Parliament to override the provisions of section 57(2) so as to confer on them more ample powers than that subsection would permit in the exercise of their functions under the 2003 Act.
But in my opinion only an express provision to that effect could be held to lead to such a result.
This is because of the fundamental constitutional nature of the settlement that was achieved by the Scotland Act.
This in itself must be held to render it incapable of being altered otherwise than by an express enactment.
Its provisions cannot be regarded as vulnerable to alteration by implication from some other enactment in which an intention to alter the Scotland Act is not set forth expressly on the face of the statute.
In any event, the courts presume that Parliament does not intend an implied repeal: Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [2001] QB 388, per Arden LJ at p 405.
In modern times, when standards of parliamentary draftsmanship are high, the presumption against implied repeal is strong: Nwogbe v Nwogbe [2000] 2 FLR 744, para 19, per Walker LJ.
And it is even stronger the more weighty the enactment that is said to have been impliedly repealed: Bennion on Statutory Interpretation, 5th ed (2008), p 305.
The provisions of Schedule 6 which enable devolution issues to be brought to the Supreme Court on appeal go hand in hand with the constraints which the Scotland Act imposes on the powers of the Scottish Ministers.
They are as much part of the constitutional settlement as the constraints themselves.
They were included in the Scotland Act as a means of ensuring that the rule of law and the protection afforded by the Convention rights is respected across the entire range of the activities of the Scottish Government.
It permits of no exceptions, and the right of appeal to the Supreme Court under paragraph 13 of Schedule 6 is part of that mechanism.
The fact that this right has not been expressly excluded by the 2003 Act is a powerful reason for holding that it is unaffected by sections 34 and 116.
Then there is the fact that it has been held, in the context of proceedings under the 2003 Act in England and Wales, that sections 34 and 116 apply only to decisions in respect of which a right of appeal lies under the 2003 Act.
As was pointed out in R (Hilali) v Governor of Whitemoor Prison [2008] UKHL 3, [2008] AC 805, para 21, one of the features of the provisions about appeals in the 2003 Act is that not every decision that the judge is required to take can be appealed under the statute: see R (Asliturk) v City of Westminster Magistrates Court [2010] EWHC 2148, [2010] 1 WLR 1139; R (Nikonovs) v Governor of Brixton Prison [2005] EWHC 2405 (Admin), [2006] 1 WLR 1518, para 18 where Scott Baker LJ said that it would require the strongest words in a provision such as section 34 to remove the ancient remedy of habeas corpus where the applicant was able to satisfy the court that he had not been brought before a judge as soon as practicable for the purposes of section 4(5), a decision under which is not appealable.
This adds force to the point that, although sections 34 and 116 of the 2003 Act provide that a decision of a judge under the relevant Part of the Act may be questioned by means of an appeal under that Part, they have no application to the system for the determination of devolution issues that the Scotland Act lays down because they do not exclude resort to it expressly.
The system under which the present appeal has been brought before this court lies outside the contemplation of those sections of the 2003 Act.
The competency of devolution minutes in extradition proceedings was considered in Goatley v HM Advocate [2006] HCJAC 55, 2008 JC 1 and La Torre v HM Advocate [2006] HCJAC 56, 2008 JC 23.
In both cases the Lord Advocate conceded that devolution minutes were competent in proceedings under the 2003 Act as the functions carried out by the Lord Advocate and the Scottish Ministers under Part 2 of the 2003 Act were acts that they were performing as members of the Scottish Executive within the meaning of section 57(2) of the Scotland Act.
This concession was approved by the High Court: Goatley, paras 13 and 14; La Torre paras 46 and 47.
It seems to me, with respect, that it was properly made and the High Court was right to give the concession its approval.
If an extradition were to be incompatible with the Convention rights of the person to be extradited the Scottish Ministers would be carrying out an act which they had no power to do.
A challenge to their proposed exercise of that function by means of a devolution minute is a parallel remedy to that afforded by section 87(1) of the 2003 Act.
The issue which the sheriff and, in its turn the High Court, had to decide under that subsection was just as much a devolution issue as it was an issue arising under the 2003 Act.
The effect of the statutes is that the appellants are entitled to exercise the right of appeal which paragraph 13 of Schedule 6 to the Scotland Act provides for, notwithstanding the fact that there is no appeal to this Court against the determination of the High Court under the 2003 Act.
For these reasons I would hold that the appeal to this court against the determination of the devolution issue for which the High Court gave permission is not prohibited by section 116 of the 2003 Act and that it is competent.
It is to be hoped that the difficulties that the operation of sections 115A and 118 and their equivalents in Part I of the 2003 Act may give rise to will be the subject of an early legislative solution by Parliament.
The proceedings below
On 15 January 2007 the Scottish Ministers issued a certificate under section 70 of the 2003 Act to the effect that the extradition request was valid.
They sent it to the Sheriff Court, as they were required to do by subsection (9) of that section.
On 16 January 2007 warrants were granted for the arrest of the appellants.
They appeared before the sheriff on 31 January 2007 and were remanded in custody.
They remained in custody until they were released on bail in August 2007.
When they were on remand their four children (E and F had not yet been born) were looked after by Mrs Hs mother who had had regular contact with them up to that date.
Other family members and friends of the family had individual children to stay with them from time to time.
The extradition hearing before the sheriff began on 16 November 2007.
The children were not separately represented.
It was suggested in the written case for Mrs H that it would have been appropriate for submissions to have been entertained on their behalf.
But Mr Hugo Keith QC, who appeared for the Official Solicitor in HH and PH v Deputy Prosecutor of the Italian Republic, Genoa [2012] UKSC 25 which was heard together with the cases of Mr and Mrs H in this court, accepted that cases where this is needed will be rare.
The court was also shown the product of inquiries made by the Crown Offices International Co-operation Unit through the European Judicial Network as to whether children are separately represented in extradition proceedings before the national courts in other Contracting States.
The responses that were received indicate that the practice in almost every state is for the children not to be separately represented, although in Malta the parents can ask for the child to be represented.
It was not suggested before the sheriff or in the High Court of Justiciary that separate representation was necessary in this case.
The court should nevertheless be alive to the information that is needed for it to have regard to the best interests of the child as a primary consideration: HH and PH, para 86, per Lady Hale.
The sheriff took the necessary steps in this case.
The hearing continued on dates in January and March, and the sheriff issued her judgment on 3 April 2008.
In para 66 she said that she did not regard either of the appellants as credible or reliable witnesses.
She rejected a submission by Mr Hs counsel that she should disregard the judgment of Judge Bryant in the High Court in Middlesbrough.
In her view it was relevant to the appellants credibility and reliability and it was inconceivable that they were not aware of his injunction.
In para 67 she said that she did not accept the picture that the appellants had sought to present of themselves and their children as totally united and alone without any support being available if the extradition request were to be granted.
In para 68 she said that the bleak scenario of the four children of necessity being taken into care and housed separately and without being able to sustain their relationship with their parents to the extent that it would be extinguished or irreparably damaged was not made out.
The sheriff provided her explanation for this assessment in the next two paragraphs.
In para 69 she said that she accepted that Mrs Hs mother was at times overwhelmed with the care of the children, who were naturally upset by the removal of their parents.
The mother said that she would not be able to cope with caring for them again.
But she did not say that she was not prepared to play any part in the childrens care should the need arise, and in her past conduct she had shown great care and support for them.
In para 70 the sheriff said that if Mrs Hs mother did not feel able to care for them the local authority might require to accommodate them.
In that situation it would look to find accommodation in the first instance within the childrens wider family or close friends.
If, as the evidence indicated, there were no friends or family willing or able to take care of the children the local authority would require to place the children in foster care.
She accepted evidence from a social services resource team manager that it might prove difficult to find a placement for all the children in one family.
But no permanent placement would be considered until the final outcome of any proceedings in the United States was known.
She accepted the social workers evidence that however the children were to be placed everything possible would be done to foster their relationship with one another and their parents.
In para 76 she said that it seemed to her highly unlikely that Mrs Hs mother would not participate in any efforts by the local authority to maintain those relationships.
The sheriff was referred to declarations by two witnesses from the United States which indicated that the United States authorities are committed to encouraging family visits in appropriate circumstances, to allowing visits beyond the confines and security of the prison and to allow family groups to visit where those members had travelled a long distance.
She was also referred to the Council of Europe Convention on the Transfer of Sentenced Prisoners of 21 March 1983, Council of Europe Treaty Series No 112, which entered into force in the United States on 1 July 1985 and in the United Kingdom on 1 August 1985.
She was told that in evaluating a request that a sentenced person should serve a sentence of imprisonment in the home country the United States authorities include consideration of the presence of close family members in the home country, the strength of their family ties and the likelihood of family reunification.
In para 76 she said that the mechanisms operated by the United States authorities to maintain and assist in the fostering of family bonds would assist the appellants to maintain their bond with the children and the children to maintain their bonds with them, even if any such arrangements could not be regarded as ideal.
The sheriffs conclusion was, as she said in para 82 of her judgment, that the appellants extradition would be compatible with their Convention rights.
She answered the question in section 87(1) of the 2003 Act in the affirmative and sent the case of each appellant to the Scottish Ministers for their decision under section 93 whether the appellants were to be extradited.
On 29 May 2008 the Scottish Ministers ordered the appellants to be extradited to the requesting territory.
Mr H appealed to the High Court of Justiciary under section 103 of the 2003 Act against the sheriffs decision and under section 108 against the order for his extradition by the Scottish Ministers.
Mrs H appealed under section 103 against the sheriffs decision to send her case to the Scottish Ministers.
The appeals were set down for hearing on 4 to 6 March 2009.
On 4 March 2009 the court was informed that those instructed for Mrs H had withdrawn from acting, and the hearing of her appeal was adjourned to a later date.
The hearing of Mr Hs appeal proceeded but it was not completed on 6 March so it was continued for hearing for four more days in May 2009.
Mrs Hs appeal was set down for that date also, but it had to be adjourned again having regard to the imminent birth of E, who was born on 5 May 2009.
Investigations then had to be made into Mrs Hs mental health.
Following the completion of those investigations an application was made on Mrs Hs behalf for her to be discharged under section 91 of the 2003 Act.
The Lord Advocate submitted that the court had no jurisdiction to consider that matter so the case had to be continued again for a hearing on jurisdiction.
Having held that it did have jurisdiction, the court heard evidence about Mrs Hs mental condition and concluded that her contention that her mental condition was such that it would be unjust or oppressive for her to be extradited had not been established.
After various other procedural hearings a further application was made on Mrs Hs behalf in June 2010 in which it was maintained that there had been a material deterioration in her health since the previous application had been considered.
She had again become pregnant and had suffered a miscarriage in February 2010.
This had been found to be a molar pregnancy which had required monitoring.
A further hearing was fixed for 11 August 2010.
The court was then informed that, despite advice that she should avoid pregnancy because of risks to her health, Mrs H had become pregnant again.
The hearing fixed for that date was discharged.
At a procedural hearing on 24 September 2010 the court was informed that Mr H had instructed new solicitors and counsel (his fourth set of representatives).
On 7 December 2010 the court refused Mrs Hs second application under section 91.
Mrs H then again changed her representatives for the fifth time.
A continued hearing of the appeals proceeded on 10 January 2011.
It had to be adjourned again on 14 January 2011 when Mr H told the court staff that Mrs H, who was by now seven months pregnant, had been taken to hospital.
A further hearing was fixed for 19 April 2011, but it had to be adjourned to 21 April as the court was informed that Mr H had attempted suicide that morning by taking an overdose of paracetamol and had been taken to hospital.
Mr H failed to attend court on that date.
A letter was produced from a general practitioner saying that, for unspecified reasons, he was unfit to attend court.
For this and other reasons the hearing was adjourned to 26 April 2011, when the court was provided with a discharge letter prepared by a consultant psychiatrist who had examined Mr H on 20 April 2011 in Stirling Royal Infirmary.
He said that when he saw Mr H that day he had been quite explicit about the fact that he wished to attract a psychiatric diagnosis, as was his wife, to avoid extradition to America.
Mr H denied having said any such thing, but the court heard evidence from the consultant psychiatrist whom it found to be an entirely convincing witness.
In para 26 of its opinion of 29 July 2011 (see para 44, below) the court said that the evidence relating to this episode supported its conclusion that Mr H was a devious and manipulative individual whose behaviour can be unpredictable and irresponsible.
The hearing of the appeals was concluded on 28 April 2011.
Mr H, for whose arrest a warrant had been issued on 21 April 2011, was remanded in custody.
The opinion of the court was delivered by Lord Reed on 29 July 2011: [2011] HCJAC 77.
In para 99 he said that in the case of Mr H it appeared to it to be plain that his extradition could be justified under article 8(2).
He was charged with very serious offences, and his case did not come close to meriting his discharge under section 87 of the 2003 Act.
In para 101 he said that it had to be recognised that the family life of Mrs H and the children would inevitably be disrupted by her extradition.
But he said that, applying the guidance in Norris v Government of the United States of America (No 2) [2010] 2 AC 487 and having regard to the seriousness of the offences charged, the court had come to the conclusion that Mrs H also was not entitled to be discharged under section 87.
On 11 August 2011 the court gave leave to the appellants to appeal to the Supreme Court in respect of the devolution issues relating to article 8 that had arisen during its hearing of the appeal.
The reasoning of the High Court of Justiciary
As has just been noted, Lord Reed said in para 101 of his opinion that the court had applied the guidance in Norris in coming to its conclusion in the case of Mrs H: see paras 72-78.
In para 79 he considered the decision in ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166.
Having done so, Lord Reed set out his understanding of the approach to be adopted in paras 80-81.
In para 81 he said that it was important to note that ZH was concerned not with extradition but with deportation, and that the approach adopted to article 8 rights in extradition cases must be radically different from that adopted in deportation or expulsion cases.
He referred to the following passage in the admissibility decision in King v United Kingdom (Application No 9742/07) (unreported) given 26 January 2010, para 29 where the Strasbourg court said: Mindful of the importance of extradition arrangements between states in the fight against crime (and in particular crime with an international or cross-border dimension), the court considers that it will only be in exceptional circumstances than an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition.
Summing up on this point at the end of para 80 of his opinion, Lord Reed said: Since the factors which are generally of overriding importance in extradition cases are not present in deportation or expulsion cases, it follows that decisions on article 8 rights in cases of the latter kind are of no direct relevance in the context of extradition.
In para 81 he referred to passages in paras 15 and 51 of the judgment in Norris, in which Lord Phillips indicated that the distinction between extradition and deportation was fundamental to its reasoning.
He also said that it was necessary to bear in mind that Norris was not referred to in the judgments in ZH nor was it cited in argument.
He summarised the courts approach to ZH in these words: Against that background, we are not persuaded that anything said in ZH was intended to modify or depart from what had been said in Norris, or indeed was said with extradition in mind.
At the same time, in a case where it is necessary to determine whether the extradition of a person with dependent children is justified under article 8(2) of the Convention, the best interests of the children are naturally a primary consideration.
As appears from King v United Kingdom, however, that consideration will be outweighed, in all but exceptional circumstances, by the public interest in the application of extradition arrangements.
We in this court have the great advantage of being able to develop our own thinking on the issues raised by these two cases, and I would not wish to be too critical of the way the High Court of Justiciary sought to reconcile them.
Their task was not made easier by the fact that the focus in Norris was on the state of health of Mr and Mrs Norris and not on Mr Norriss relationship with his two sons, who were grown up, or with his three grandchildren.
It was acknowledged that the impact of extradition on family life did not fall to be considered simply from the viewpoint of the extraditee, that the family unit had to be considered as a whole and that each family member had to be regarded as a victim: para 64, per Lord Phillips.
But, on the facts of that case, it was only Mr and Mrs Norris who were seen as the victims.
The conclusions that can be drawn from Norris are set out by Lady Hale in HH and PH v Deputy Prosecutor of the Italian Republic, Genoa, para 8.
ZH on the other hand was entirely different case on its own facts and, as it was concerned with immigration control and not extradition, nothing that was said in Norris was relevant to how it should be decided.
So Norris was not referred to in the judgments, nor was it cited in argument.
That does not mean, however, that nothing that was said in ZH is relevant to how issues about the rights of children should be dealt with in the context of extradition.
On the contrary, the reasoning in that case can have a very real and important part to play in the extradition context too where those affected by a request for extradition include the children of the persons sought to be extradited.
The error in the courts reasoning was to see these two cases as dealing with entirely different things.
While that was true when the facts in ZHs case were being considered, it would not have been true if ZH had come first and the family unit to which it was necessary to have regard in Norris had included children, as it does in the present case.
As I said in Norris, para 89, I do not think that there are any grounds for treating extradition cases as falling into a special category which diminishes the need to examine carefully the way the process will interfere with the individuals right to respect for his family life.
The need to do this here is just as great as it was in ZH, although the conclusion that is likely to be reached may not be the same.
I cannot agree therefore with the proposition that the approach adopted to article 8 rights in extradition cases must be radically different from that adopted in deportation or expulsion cases.
The public interest in giving effect to a request for extradition is a constant factor in cases of that kind.
Great weight will always have to be given to it, and the more serious the offence the greater will be that weight.
The public interest in immigration control lacks the treaty base which is at the heart of the extradition process.
But, the question, so far as the article 8 right is concerned, is the same in both cases.
How is one to balance two powerful and competing interests? In Norris, para 91, I said that the question was whether the article 8 right carries enough weight to overcome the public interest in giving effect to the request or in maintaining a proper and efficient system of extradition.
I agree with Lord Wilson that the significance of the way one puts the question may be more theoretical than practical: R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa [2012] UKSC 25, para 152.
But I think that it would be more accurate where the family life of children is involved, as the best interests of children are a primary consideration, to put the question the other way round as I did in ZH, para 44: is the article 8 right outweighed by the strength of any other considerations?
The article 8 rights in this case
As Ross D Parke and K Alison Clarke-Stewart declared in the opening sentence of their paper Effects of Parental Incarceration on Young Children (December 2001), for imprisoned mothers one of the greatest punishments that incarceration carries with it is separation from their children.
The same point can be put the other way round.
One of its greatest effects is to punish the children too.
For those members of the family who were living together before the incarceration, their patterns of contact with each other will be severely disrupted.
This may happen at a crucial stage of the childrens development, when the damage done to their well-being and development may be irreparable.
These effects are likely to be even greater where the parent is to be extradited for trial and likely incarceration in another country.
As Lady Hale said in ZH, paras 25-26, article 9 of the UNCRC draws a distinction between separation of children from their parents for reasons connected with their upbringing and separation of parents from their children for deportation, detention or imprisonment.
But even in decisions of the latter kind, the best interests of the child must be a primary consideration.
The intellectual exercise which this principle requires is not to be seen as dictated to in a mechanistic way without regard to the context.
In ZH, para 44, I said that the starting point was to assess whether the childrens best interests were outweighed by the strength of any other considerations.
But I agree with Lord Judge that this does not require the decision-taker always to examine the interests of the children at the very beginning of the exercise: R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa [2012] UKSC 25, para 124.
It does not, as Mr Gill QC pointed out in his helpful note for the Coram Childrens Legal Centre, impose a straitjacket.
What it does do, by encouraging a temporal approach, of the kind described by Lady Hale in her judgment in that case at para 33, is ensure that the best interests principle will not be seen as having a reduced importance when there are other important compelling considerations which, on the particular facts of the case, must be respected.
The place where the best interests and well-being of any children takes in the list of factors which the Strasbourg court set out in AA v United Kingdom (Application No 8000/08) (unreported) given 20 September 2011, para 56, supports this approach.
As Lady Hale said in ZH, para 26, the strength of those other considerations may outweigh the best interests of the children, provided that those other considerations are not treated as inherently more significant than they are.
So it is important to have a clear idea of their circumstances and of what is in their best interests before one asks oneself whether those interests are outweighed by the force of any other consideration.
But to begin with the whole exercise must be placed into its proper context.
The court was shown an affidavit by William Bryan III, an assistant United States Attorney for the District of Arizona, in which he stated that it is impossible to state with precision how long it would take to bring the appellants to trial following their extradition.
While they are awaiting trial the appellants may be released on conditions, but a more realistic assessment is that they will be detained in custody until and throughout the trial.
Mail and telephone calls would be permitted during this period, provided those imprisoned have sufficient funds for this.
But direct face-to-face contact with visitors would not be possible.
The trial itself can be expected to last about two to four weeks.
In view of the dangers involved in the manufacture of methamphetamine and the harm that its use can give rise to, the appellants conviction would be likely to attract very long sentences.
The effect of those sentences may be mitigated by the fact that arrangements exist under which the appellants might thereafter be permitted to serve part of their sentences in Scotland under the European Convention on the Transfer of Sentenced Prisoners of 21 March 1983: see para 39, above.
But there is no certainty that permission would be given in this case, and is not possible to predict when any such arrangements would be likely to be made even if they are agreed to.
The prospect has to be faced that the appellants are likely to be kept apart from their children, and their children apart from them and perhaps from each other, for a very long time.
Where do the best interests of the children stand in relation to Mr H? He has been in custody since 26 April 2011.
Contact has been maintained by means of prison visits, but the two elder children have made it clear that they no longer wish these visits to continue.
Mrs H regards her relationship with Mr H as at an end, so the prospect of his ever living together with her and the children as a family seems remote.
Although no regard was paid to it by either of them, one cannot ignore the fact that on 6 September 2004 Judge Bryant ordered that, in the light of his abuse of his daughter J, Mr H was to have no contact whatsoever with Mrs Hs three elder children who are all girls.
D and E are also girls, and all six children were placed on the child protection register in July 2009 as a result of another allegation of sexual abuse by Mr H, this time of a neighbours daughter.
They were removed from it on 13 December 2011, but they would all be placed on it again if Mr H were to resume contact with the family on his release from custody.
The childrens family relationship with Mr H has effectively been brought to an end by these events, at least for the time being.
The prospect of their ever resuming family life together is remote.
The argument that it would be contrary to their best interests for him to be extradited is, at best, very weak.
As against that, the offences of which he is accused are very serious and the treaty obligation that requires effect to be given to the request is compelling.
Lord Reed said in para 99 that Mr Hs case did not come close to meriting his discharge under section 87(2).
I agree with that assessment, and the devolution issue that Mr H has raised falls to be answered in the same way.
I would refuse his appeal.
Mrs Hs case is, as Lord Reed said in para 100 of his opinion, more difficult.
But, as he explained in para 101, the court based its decision in her case exclusively upon the law as laid down in Norris.
The guidance that was to be derived from ZH was ignored.
For the reasons already given (see paras 47-49, above), I consider that this was a misdirection.
As it was on this basis that the court reached a clear conclusion that, having regard to the seriousness of the offences charged, she was not entitled to be discharged under section 87 of the 2003 Act, it is necessary to look at her case more closely to see whether the equivalent conclusion with regard to the Scottish Ministers powers under the Scotland Act can be regarded as justified.
There is no doubt where the childrens best interests lie.
Their best interests must be to continue to live with their mother.
They will be deprived of her care and guidance if she is taken away from them, and it seems likely that the long term effects of a prolonged separation of the magnitude that is in prospect in this case will be profound.
She has, of course, been separated from them before.
She has already spent two periods in remand in connection with this case, from 31 January 2007 to 31 August 2007 and from 29 July 2011 to 12 August 2011.
On both occasions her mother, with the help of other family members and friends, was able to keep the family together.
Whether this will be possible if Mrs H were to be extradited is quite uncertain.
The sheriff does not seem to have been unduly troubled on this point: see paras 37-38, above.
But there must be a risk that the children will be taken into care and, if that happens, that they will no longer be able to live together.
Resuming family life together after a prolonged separation is likely to be very difficult.
The gravity of the situation is compounded by the fact that the children are, for all practical purposes, now fatherless.
On the other hand there is no escape from the fact that these are criminal proceedings and that the crimes alleged, which were persisted in over a substantial period, are very serious.
The interests of justice must be given effect to.
The treaty obligation requires that Mrs H be sent for trial in the United States, and it points to the conclusion that it is in that forum that her participation in the alleged crimes must be determined.
It is well established that extradition may amount to a justified interference under article 8(2) if it is in accordance with the law, is pursuing the aims of the prevention of disorder and crime and is necessary in a democratic society: Launder v United Kingdom (1997) 25 EHRR CD67, para 3; Aronica v Germany (Application No 72032/01) (unreported) given 18 April 2002; King v United Kingdom, para 29.
The treaty obligation points to the conclusion too that if there are grounds for leniency, or for mitigation of sentence on the grounds of her family circumstances, it is for the authorities in the United States, not for this court, to make that assessment.
The Strasbourg court has repeatedly said that it will only be in exceptional circumstances that an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition: King v United Kingdom, para 29; Babar Ahmad v United Kingdom (2010) 51 EHRR SE97, para 172.
In Nunez v Norway (Application No 55597/09) (unreported) given 28 June 2011, the article 8 right was sufficient to tip the balance in a immigration case.
But the fact that the court has not yet decided any extradition case in favour of the applicant, even where those to be extradited are the parents of young children, indicates how high the bar against refusing a request for extradition has been set.
The best interests of the children do however suggest that the High Court of Justiciary was wrong to hold, as Lord Reed indicated in para 101 of his opinion, that it was unnecessary to consider the possibility of a prosecution in this country.
It will not be necessary to do this in every case.
But I would make an exception here.
The extradition request extends to both parents, and there are six children, four of whom are under the age of ten.
The best interests of the children suggest that we should be satisfied that the interests of justice cannot be served equally well by prosecuting the parents in this country.
It is to that issue that I now turn.
Prosecution in this country
It was submitted for Mr H that, although there is no reported case where this argument has been successful, the logical conclusion is that, where a domestic prosecution is an option, it ought to be the preferred one and that where the best interests of children were involved the obligation to adopt the least onerous means of meeting the legitimate aim should be adhered to.
The same points were made on behalf of Mrs H too.
Reference was made to R (Bermingham) v Director of the Serious Fraud Office [2006] EWHC 200 (Admin), [2007] QB 727, para 121 where Laws LJ said that there might be an instance where such a possibility might tip the balance of judgment in favour of a conclusion that a persons extradition would amount to a disproportionate interference with his article 8 rights and that this had to be accepted if section 87 of the 2003 Act was to constitute effective protection of the Convention guarantees.
In King v United Kingdom, para 29, the Strasbourg court observed that considerations as to whether prosecution exists as an alternative may have a bearing on whether the extradition would be in violation of one of the rights guaranteed by the Convention.
But in Babar Ahmad v United Kingdom, para 175 the Court, recalling that there was no right in the Convention not to be extradited and that, by implication, there was no right to be prosecuted in a particular jurisdiction, said that it was not for the Court to adjudicate on the natural forum for prosecution.
Its only task was to determine whether that extradition would be compatible with the applicants Convention rights.
In Bermingham, para 126 Laws LJ said that he wished to underline the observations of Lord Hardie, sitting in the Outer House, in Wright v The Scottish Ministers 2004 SLT 823, para 28 where he said: Extradition does not and should not depend upon the ability or otherwise of the requested state to undertake its own investigations with a view to prosecuting the case within its own jurisdiction.
Such an approach would involve unnecessary duplication of effort, would result in additional delays in the prosecution of suspected criminals and would have an adverse effect upon international relations and international co-operation in the prosecution of serious crime.
When Wright reached the Inner House the extreme submission that extradition would be proportionate only in circumstances where it was demonstrated that a prosecution in the jurisdiction where the subject lay would be impossible was, not surprisingly, rejected: [2005] CSIH 40, 2005 1 SC 453.
The Extra Division also said in para 67 that it found itself in complete agreement with the observations of the Lord Ordinary.
In the Bermingham case the Divisional Court had little difficulty in rejecting the argument that the defendants should be tried in this country as the case against them had very substantial connections with the United States and was perfectly properly triable there: para 125.
In King too the Strasbourg court was satisfied that the United Kingdom authorities had given convincing reasons as to why they regarded it as appropriate for any prosecution to take place in Australia, not the least that the applicants co-accused had all been tried there.
In Norris v Government of the United States of America (No 2) [2010] 2 AC 487, para 67, having noted in para 66 that there had recently been a string of cases in which the extraditee had argued that he ought to be prosecuted in this jurisdiction of which Bermingham was one, Lord Phillips said: Extradition proceedings should not become the occasion for a debate about the most convenient forum for criminal proceedings.
Rarely, if ever, on an issue of proportionality, could the possibility of bringing criminal proceedings in this jurisdiction be capable of tipping the scales against extradition in accordance with this countrys treaty obligations.
Unless the judge reaches the conclusion that the scales are finely balanced he should not enter into an inquiry as to the possibility of prosecution in this country.
In a postscript to his judgment which he wrote in the light of the admissibility decision in King he said that he remained of the view that rarely, if ever, was the possibility of prosecution as an alternative to extradition likely in practice to tilt the scales against extradition: para 86.
These remarks had the unanimous support of all the other members of the court.
On the other hand cases where both parents of young children are at risk of being extradited may be regarded as being of an exceptional character, so as to raise the need to consider the possibility of a prosecution in this country a bit higher than the bar which the observations in Norris have set for it.
The issue remains one of proportionality.
The more compelling the interests of the children the more important it will be for the alternatives to extradition, if there are any, to be carefully examined and brought into the balance to see if they carry any weight.
This is not to diminish the importance to be given to this countrys treaty obligations.
Rather it is to recognise that in cases involving the separation of parents from young children there is another powerful factor which is likely to make the scales more finely balanced than they would be if the children were not there.
In its Review of the United Kingdoms Extradition Arrangements, 30 September 2011, para 6.17 the Review Panel chaired by Sir Scott Baker said, with regard to the forum bars in sections 19B and 83A inserted into Parts 1 and 2 of the 2003 Act by paragraphs 4(2) and 5(2) of Schedule 13 to the Police and Justice Act 2006 which has not yet been brought into force, that in its view their effect is that in any case where the forum was raised there would be no alternative to the judge conducting a detailed analysis of all relevant circumstances.
There is no statutory requirement to go that far in this case, and Mr Wolffe QC for the Lord Advocate said that the case had not been investigated with a view to prosecution in Scotland.
But we do not lack information about the view that was taken about the possibility of prosecution in England.
Advice on the jurisdictional issues that had arisen in connection with the investigation of the appellants activities wasgiven by the Crown Prosecution Service in 2006 following their move to Scotland earlier that year.
Section 20 of the Misuse of Drugs Act 1971 provides that a person commits an offence if in the United Kingdom he assists in or induces the commission in any place outside the United Kingdom of an offence punishable under the provisions of a corresponding law in force in that place.
In a note dated 5 May 2006 the CPS advised that, where offending had taken place both in England and Scotland, it would be possible to charge the suspects either with a number offences under section 20 with respect the supply of red phosphorus to the United States or with an over-arching conspiracy covering the whole of the period of their operations.
In a further note dated 4 April 2007 consideration was given to the possibility of prosecuting for these offences in England leaving it to the Scottish authorities to prosecute offences occurring within their jurisdiction themselves, of prosecuting all the offences in the English courts or of allowing the United States authorities to proceed with their application for extradition.
It was pointed out that a large number of witnesses would have to attend from the United States if the complete scale of the appellants involvement in drug making activities there was to be placed before the court, whereas the number of witnesses who would need to travel for a trial in that country would be small.
A court in the United States would be best placed to deal with the legal issues, and it was appropriate that the appellants should be dealt with in the jurisdiction where the effect of their crimes was felt.
The advice was that the public interest was best served by the police assisting, in so far as it was proper and possible, in the extradition of the appellants to stand trial in the United States.
There is no indication that the best interests of the children were taken into account in that assessment, although regard was had to the considerations mentioned in R (Bermingham) v Director of the Serious Fraud Office.
I would however accept Mr Wolffes submission that the scales are not finely balanced in this case and that taking account of the best interests of the children does not change the analysis.
He accepted, of course, that regard should be had to article 3.1 of the UNCRC, which provides that the best interests of the child shall be a primary consideration.
But those interests must be assessed in the context of this countrys treaty obligations in the suppression of trade in narcotic drugs across international borders (UN Convention against Illicit Trading in Narcotic Drugs and Psychotropic Substances 1988).
There are good reasons too for looking to the place of the mischief as the place where the prosecution should be brought: Office of the Kings Prosecutor, Brussels v Cando Armas [2005] UKHL 67, [2006] 2 AC 1, para 36-40; Clements v HM Advocate 1991 JC 62, p 71.
The United States has a substantial interest in trying the appellants in its own courts and there are strong practical reasons for concluding that that country, where most of the witnesses reside and the degree of the criminality involved is best assessed, is the proper place for them to be tried.
As Mr Wolffe points out, the very fact that the basis for a prosecution in this country would appear to be section 20 of the Misuse of Drugs Act 1971 emphasises that the crimes which the appellants are alleged to have committed are really US crimes.
I would hold that, taking all these considerations into account, it would not be appropriate for the appellants to be tried here.
Nor would it be acceptable for Mrs H not be prosecuted at all for the crimes with which she has been charged.
It would not, of course, be sensible to prosecute Mrs H here while sending Mr H to the United States for prosecution in that country.
So their cases must stand or fall together on this point.
The proper forum in which the prosecution should be brought is in the United States of America.
Conclusion
As I have already said, I would refuse Mr Hs appeal.
I am satisfied that the Scottish Ministers order that he must be extradited was not incompatible with his Convention rights.
For obvious reasons the balance is not so easy to strike in the case of Mrs H. But I have come to the conclusion that the best interests of the children, even when weighed together with her own article 8 right to respect for her family life with them, are not strong enough to overcome the overwhelming public interest in giving effect to the request.
I would hold that it was not incompatible with her Convention rights for the Scottish Ministers to order her extradition, and I would refuse her appeal also.
I would add one further comment.
There have been a number of recent cases, to which much publicity has been given, which have tended to shake public confidence in the current arrangements with the United States.
I would not regard this case as falling into that category.
Although the conduct that has been alleged against the appellants took place in this country, it is plain that it was in the United States that it had its effect.
It cannot be said that the appellants have not had proper notice of the crimes with which they have been charged.
Nor, in view of the steps that have been taken here to gather evidence with a view to a possible prosecution in England, does it appear that the allegations that have been made against them are entirely without substance.
What is happening in this case is a tragedy, especially for the children.
But this is not a ground on which the extradition arrangements which must now be put into effect can properly be criticised.
I agree, for the reasons which Lord Hope has given, that this Court is competent to decide these appeals.
I also agree, for the reasons given in his judgment and the judgments of Lord Judge and Lord Wilson in F-K v Polish Judicial Authority and R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa [2012] UKSC 25 delivered today, that these appeals should be dismissed.
Although it could have been desirable to have the point argued adversarially, I agree with Lord Hope for the reasons he gives that this appeal is competent.
In the present case, and for the reasons given by Lord Hope in his paras 50 to 72, I also conclude that the article 8 rights of the children are on the facts of this case outweighed by the pressing public interest in giving effect to the extradition requests received from the United States of America in respect of both Mr and Mrs H.
I have read the judgment of Lord Hope.
I agree for the reasons that he has given that this Court is competent to decide these appeals, and for the reasons in his judgment and my own judgment in F-K v Polish Judicial Authority and R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa delivered today that these appeals should be dismissed.
I agree, for the reasons which Lord Hope has given, that this court is competent to decide these appeals.
I also agree, for the reasons given in his judgment and in my own judgment in F-K v Polish Judicial Authority and R (HH and PH) v Deputy Prosecutor of the Italian Republic, Genoa delivered today, that these appeals should be dismissed.
| The Appellants (Mr and Mrs H) are both British citizens.
The United States has requested their extradition under the Extradition Act 2003 to face trial in Arizona on charges of conspiracy and unlawful importation into the United States of chemicals used to manufacture methamphetamine, knowing or having reasonable cause to believe that they would be used for that purpose.
The Appellants argue that it would be incompatible with their right to respect for their private and family life under Article 8 of the European Convention on Human Rights for them to be extradited.
Mrs H is the mother of six children, of whom the eldest is aged 14 years and the youngest is one year old.
Mr H is the father of the four younger children.
The Appellants submit that the public interest in giving effect to the extradition request is outweighed by the consequences that this would have for the best interests of their children.
Mr H is also the father of two other children, of different mothers.
Allegations of sexual abuse of the elder daughter by Mr H when they were living in Arkansas led to her being taken into care for a period of time.
Mr H moved to Oklahoma where he could not be prosecuted for offences said to have occurred in Arkansas.
In 2004, after Mr H had moved to England and formed a relationship with Mrs H (then Miss S), the High Court in Middlesbrough found that Mr H had indeed sexually abused his eldest daughter on a number of occasions in Arkansas and Texas in 1993 and 1994.
It made an order against Mr H that he was to have no contact whatsoever with Miss Ss three elder children.
This order was ignored entirely by both Mr H and Miss section The extradition proceedings first came before the sheriff on 31 January 2007 and the Appellants were remanded in custody.
They were both released on bail after seven months in custody on 31 August 2007.
Mr H was returned to custody on 26 April 2011 after failing to attend a court hearing.
Mrs H was again remanded in custody on 29 July 2011 when the Appellants appeals were refused.
She was released on bail on 12 August 2011, but Mr H remains in custody.
While the Appellants were in custody, the children were looked after by Mrs Hs mother, as well as by other friends and family.
Initially following her release, Mrs H visited Mr H in prison with all six children.
The number of visits then diminished and only the four younger children now regularly go to the prison with her.
The two elder children are reluctant to visit.
Within a few weeks of her release from custody, Mr and Mrs Hs relationship broke down.
The children were placed on the child protection register in July 2009 as a result of allegations of sexual abuse against Mr H by the nine year old daughter of a neighbour.
They were removed from the register in December 2011.
But this was on the basis that they would be restored to it if Mr H were to be released from custody and to resume contact with the family.
On 29 May 2008 the Scottish Ministers ordered the Appellants to be extradited to the United States.
The Appellants appealed to the High Court of Justiciary.
The hearing of the appeals was delayed on a number of occasions as a result of changes of legal representation by both Appellants.
Mrs Hs appeal was also further delayed by pregnancy complications and the birth of her two youngest children, and by the need for investigations into her mental health.
Mr Hs appeal was further delayed by an apparent suicide attempt.
The Appellants appeals were dismissed on 29 July 2011.
The Supreme Court unanimously dismisses the appeal.
The leading judgment is given by Lord Hope.
Lord Brown, Lord Mance, Lord Judge and Lord Wilson give short concurring judgments.
There is no appeal to this court against the determination of the High Court of Justiciary under the 2003 Act.
But the Appellants are entitled to exercise their right of appeal under Scotland Act, as the question whether it could be incompatible with article 8 for them to be extradited raises a devolution issue.
So the appeal is competent.
The offences that have been alleged against the Appellants are very serious, attracting penalties of up to 20 years imprisonment.
The allegation is of a sustained and deliberate course of unlawful conduct, during which the Appellants are said to have sold around $133,000 worth of chemicals to about 400 customers in the United States over a two year period [22 23].
Great weight must be given to the public interest in giving effect to a request for extradition.
The more serious offence the greater will be that weight.
The approach to Article 8 rights in extradition cases need not be radically different from that adopted in deportation or expulsion cases.
Where, as here, the family life of children is involved, the best interests of the children are a primary consideration.
The question is therefore: Is the Article 8 right outweighed by the strength of any other considerations? [49].
In view of the likely length of their sentences following conviction, and the lack of certainty as to the possibility of a transfer to prison in Scotland, the prospect has to be faced that in the event of conviction the Appellants are likely to be kept apart from their children, and their children perhaps apart from each other, for a very long time [53].
In relation to Mr H, the childrens family relationship with him has effectively been brought to an end by the breakdown of the parents relationship; the two elder childrens refusal to visit him in prison; the 2004 order that he have no contact with Mrs Hs three elder children; and the placing of all six children on the child protection register from July 2009 to December 2011.
The prospect of their ever resuming family life together is remote.
The argument that it would be contrary to their best interests for him to be extradited is, at best, very weak.
Mr Hs case does not come close to meriting his discharge under section 87(2) of the 2003 Act [53 54].
Mrs Hs case is more difficult.
The childrens best interests clearly lie in continuing to live with their mother.
There is a risk that they will be taken into care after she is extradited and that, if this happens, they will no longer be able to live together.
Resuming family life after a prolonged separation is likely to be very difficult.
The gravity of the situation is compounded by the fact that the children are, for practical purposes, now fatherless [57].
On the other hand there is no escape from the fact that the crimes alleged, which were persisted in over a substantial period, are very serious.
The interests of justice must be given effect to.
It is well established that extradition may amount to a justified interference under Article 8(2) if it is in accordance with the law, is pursing the aims of the prevention of crime or disorder and is necessary in a democratic society.
If there are grounds for leniency, or for mitigation of sentence on the grounds of her family circumstances, it is for the authorities in the United States, not for this court, to make that assessment [58 59].
Cases where both parents of young children are at risk of being extradited may be regarded as being of an exceptional character, so the court must be satisfied that the interests of justice cannot be served equally well by prosecuting the parents in this country[60 & 65].
However, there are strong practical reasons for concluding that the United States, where most of the witnesses reside and the degree of criminality involved is best assessed, is the proper place for the Appellants to be tried.
Taking all of the relevant considerations into account, it would not be appropriate for the Appellants to be tried here.
Nor would it be acceptable for Mrs H not to be prosecuted at all for the crimes with which she has been charged.
And it would not be sensible to prosecute Mrs H here while sending Mr H to the United States for prosecution.
The proper forum in which both prosecutions should be brought is the United States.
The best interests of the children, even when weighed together with Mrs Hs own Article 8 right to respect for her family life with them, are not strong enough to overcome the overwhelming public interest in giving effect to the extradition request [70 71].
|
A person infringes a patent for a particular product if he makes, disposes of, offers to dispose of, uses or imports the product or keeps it see section 60(1)(a) of the Patents Act 1977 (the 1977 Act).
The principal issue on this appeal concerns the meaning of the word makes.
The other aspect of this appeal raises a number of issues arising out of section 68 of the 1977 Act.
The background facts and the patent in suit
Intermediate Bulk Containers
An intermediate bulk container, unsurprisingly known as an IBC, is a large container, normally around 1000 litres in volume, used for the transport of liquids.
Such containers face tough transport conditions.
They must be capable of bearing heavy weights (as much as six tonnes, as they are often stacked four-high), of withstanding prolonged or violent vibration, and of resisting the forces caused by the liquid splashing around inside, without buckling, cracking or springing leaks.
IBCs of a two-part construction, resting on a flat pallet (of wood, steel, or plastic) have been well known in the trade for many years.
They consist of a metal cage into which a large plastic container (or bottle) is fitted.
The bottle has to fit the cage snugly, as otherwise the cage will not provide full protection, and the walls of the bottle will not be properly supported.
The general idea is shown by the prior art IBC which is illustrated in the description of the patent involved in this case:
IBCs are used to transport a wide range of types of liquid.
Often, the bottle cannot be reused, because it contains residues of a toxic liquid or because it has been physically damaged.
While the cage also has a limited life-span, which depends on a number of factors (such as the means and conditions of transport and climatic conditions), it has a significantly longer life expectancy than a bottle; the evidence suggested that, on average, it is about five or six times as long.
Reconditioning
Reconditioners engage in re-bottling or cross-bottling used IBCs.
In either case the old bottle is removed, any damage to the cage repaired, and a new bottle is fitted within the cage.
Re-bottling involves replacing the bottle with a fresh bottle from the original manufacturer; cross-bottling involves replacing the bottle with a bottle from a different source.
Opinion in the industry is divided about cross-bottling.
Because the bottle is not specifically designed for the cage, the fit is not always as good as with a bottle from the original manufacturer.
For instance, stabilising loops in the top of the bottle may not precisely match up with bars on the cage, or the bottle may not fit so as to drain properly without tipping.
However, there appears to be a healthy market for cross-bottled IBCs.
The IBC market
IBCs are normally sold by a manufacturer to a filler, who then uses the IBC to send its product to an end-user.
Fillers typically include large chemical companies, and end-users include fizzy drink wholesalers, cosmetic suppliers and pharmaceutical companies.
Manufacturers of new IBCs often also recondition their own original IBCs, but there are many suppliers of IBCs who are solely reconditioners.
Reconditioners (whether or not they are the original manufacturers) normally collect used IBCs from end-users, who have no further use for the used IBCs.
The end-users are sometimes, but by no means always, paid for these used IBCs by the reconditioners.
After re-bottling or cross-bottling an IBC, the reconditioner offers the reconditioned product to fillers on the market in competition with the products of original manufacturers, and of other reconditioners.
Reconditioned IBCs are, predictably, generally cheaper than new IBCs.
The invention and the Patent in this case
European Patent (UK) 0 734 967 (the Patent) has a priority date of 30 March 1995.
Claim 1 of the Patent (the Claim) is the only relevant claim for present purposes.
It is in the following terms (with added sub-paragraphs): [A] Pallet container for the transporting and storing of liquids, having a flat pallet, an exchangeable inner container made of plastic material with an upper, closable filler opening and a lower emptying device and also, surrounding the inner container, one outer sleeve which consists of vertical and horizontal lattice bars made of metal which support the plastic inner container filled with liquid, [B] the lattice bars which are configured as tubes being indented at the intersection points to form trough-like, double-walled recesses extending in the longitudinal direction of the lattice bars [C] in such a manner that at each intersection point between the longitudinal edges of the recesses of two lattice bars lying perpendicularly one above the other there arise four contact points with a material accumulation respectively corresponding to the quadruple lattice bar wall thickness, and the four contact points of the two lattice bars being welded together at the intersection points, [D] characterised in that the trough-like recesses of the vertical and horizontal lattice bars have a central raised part extending across the cross-section of the recesses, [E] two lattice bars respectively lying one above the other at the intersection points are welded together at the four contact points of these raised parts and the incisions of the recesses of the lattice bars adjacent on both sides to the raised part [F] with the contact and weld points form restrictedly elastic bending points with a reduced bending resistance moment relative to the raised part for relieving the weld joints at the intersection points upon application of static and/or dynamic pressure on the lattice sleeve.
Read on its own, the Claim is not immediately accessible, and it would normally be inappropriate to consider its meaning or effect without explaining its factual and technical context, including the description (i.e. the narrative preceding the claims) of the Patent, reasonably fully.
However, given the issues which require consideration on this appeal, only the following points need be identified: i. Item [A] extends to a complete IBC, i.e. a pallet, a bottle (the inner container) and a cage (the outer sleeve); ii.
The claimed inventiveness lies in items [D], [E], and [F], as is indicated by the introductory words characterised in that; iii.
The inventiveness of the Patent lies in the idea of flexible weld joints in the cage, to increase its strength and durability; iv.
More specifically, the inventiveness lies in the idea of introducing a dimple on either side of the weld and a central raised portion; v. The description of the Patent acknowledges that the bottle is exchangeable i.e. replaceable.
The parties
The proprietor of the Patent is Protechna S.A. (Protechna).
The respondent, Schtz (U.K.) Limited (Schtz) is its exclusive licensee in this country, and is the leading manufacturer of rigid composite IBCs in the United Kingdom.
Most of its sales are of new IBCs, but about 25% are rebottled IBCs, whose cages have, after any necessary repairs, been re-bottled with new Schtz bottles.
The appellant, Werit UK Limited (Werit), sells bottles (Werit bottles) for IBCs to a reconditioner, Delta Containers Limited (Delta).
Delta acquires discarded IBCs originally put on the market by Schtz (Schtz IBCs), and replaces the original bottles (Schtz bottles) with Werit bottles, and then offers these cross-bottled IBCs on the market.
These cross-bottled IBCs are therefore in competition with the original Schtz IBCs, marketed by, or with the express authority of, Schtz.
Schtz objects to its cages being used by cross-bottlers.
Apart from the competitive consequences, Schtz claims to be concerned that publicity about any accident with a cross-bottled product made with one of its cages might harm its reputation.
Accordingly, it objects to Deltas re-bottling activities and contends that they infringe the Patent.
It is common ground that, if Delta thereby infringes the Patent, Werit does so.
The legislation
Section 60(1) of the 1977 Act (section 60(1)) is concerned with direct infringement, and provides in para (a) that a person infringes a patent if, where the invention is a product, he makes, disposes of, offers to dispose of, uses or imports the product or keeps it whether for disposal or otherwise, without the consent of the patentee.
Section 60(2) of the 1977 Act is concerned with indirect infringement, which includes the knowing supply to a primary infringer of any of the means which enables him to carry out the infringing act.
(Hence the common ground referred to at the end of the preceding paragraph).
Section 125(1) of the 1977 Act (section 125(1)) provides that unless the context otherwise requires, an invention for a patent for which a patent has been granted should be taken to be that specified in a claim of the specification of the patent , as interpreted by the description and any drawings contained in that specification, and the extent of the protection conferred by a patent shall be determined accordingly.
Section 130(7) of the 1977 Act states that certain specified sections of that Act, including sections 60 and 125, are so framed as to have, as nearly as practicable, the same effects in the United Kingdom as the corresponding provisions of the [European Patent Convention and the Community Patent Convention] have in the territories to which those Conventions apply.
The scope of protection afforded by a European patent is defined by Article 69(1) of the European Patent Convention (the EPC), as amended in 2000, which provides that [t]he extent of the protection conferred by a European patent shall be determined by the terms of the claims.
It also provides in Article 64(1) that the protection to be afforded to an EPC patentee should be the same as that afforded to a patentee under a national patent.
Article 25(a) of the Community Patent Convention (the CPC) prohibits the making, offering, putting on the market, or using a product which is the subject-matter of the patent.
The present litigation
On 7 August 2008, Schtz issued these proceedings against Werit seeking relief on the ground that Werit infringed the Patent (as well as two earlier patents, also vested in Protechna and of which Schtz was the exclusive licensee).
The proceedings were met with a denial of infringement on more than one ground, and a counterclaim for revocation of the three patents.
By the time the case came on for hearing before Floyd J in March 2010, the issues concerned only two of the three patents, but there were other issues which he had to resolve.
Following a seven-day hearing, he gave a full and prompt judgment - [2010] EWHC 660 (Pat), [2010] Bus LR 1244, [2010] FSR 22.
The only question relevant to the present appeal which he had to consider was whether Delta infringed the Patent by mak[ing] the article claimed by the Claim, contrary to section 60(1)(a).
On that question, Floyd J held, distinguishing the House of Lords decision in United Wire Ltd v Screen Repair Services (Scotland) Ltd, [2000] 4 All ER 353, [2001] RPC 24, that Deltas activity of replacing the inner container of a Schtz IBC with a Werit bottle does not amount to making the patented product.
He justified this conclusion on the ground that the correct approach is to ask whether, when the part in question is removed, what is left embodies the whole of the inventive concept of the claim, and the inventive concept of [this claim] is wholly embodied in the Schtz cage paras 181, 197, and 206.
Schtz appealed on a number of points.
In a judgment given by Jacob LJ (with which Ward and Patten LJJ agreed), the Court of Appeal upheld the Judge on all other points, but reached a different conclusion on this issue.
Relying on the reasoning of the Court of Appeal and House of Lords in United Wire, Jacob LJ said that it was inappropriate to determine the issue by reference to the inventive concept, and that [the] product (i.e. the IBC) ceased to exist when the bottle is removed, so [w]hat remained at that stage was merely an important component from which a new IBC could be made - [2011] EWCA Civ 303, [2011] Bus LR 1510, [2011] FSR 19, paras 69, 75, and 64.
Accordingly, Werit was found to be liable to Schtz to pay damages or account for its profits, arising out of its infringement of the Patent.
The Court of Appeal also had to deal with an issue relating to costs and damages, arising out of section 68 of the 1977 Act (section 68), and the fact that Schtz had failed to register its exclusive licence.
This led to two decisions, which were favourable to Schtz.
Accordingly, Werit had to pay the great majority of Schtzs costs of the proceedings at first instance and almost all of Schtzs costs in the Court of Appeal.
Werit was granted permission to appeal both against the substantive order that it had infringed the Patent and against the costs order.
I shall first consider the main issue, namely whether the Court of Appeal were right to hold that Delta did indeed make the patented article contrary to section 60(1)(a), and I shall then address certain issues arising under section 68.
Infringement: the proper approach to the meaning of makes
Introductory
It seems clear that the effect of section 60(1)(a) is that a person infringes a patent for a product if that person makes the product, as claimed in the patent concerned.
As to the making, that is the verb used in section 60(1)(a).
As to the product being defined by the claim, that seems clear from section 125(1).
In any event, if it is not the product as claimed in the patent, it is hard to see what else the subject matter of the making could rationally be.
The word makes must, of course, be interpreted contextually.
In this case, the word should, in my view, be approached bearing in mind a number of considerations (which sometimes may be apparently irreconcilable in this field, as Robert Walker LJ pointed out in Cartonneries De Thulin SA v CTP White Knight Ltd [2001] RPC 6, para 21 quoting Attorney-General v Prince Ernest Augustus Of Hanover [1957] AC 436, 461).
First, the word makes must be given a meaning which, as a matter of ordinary language, it can reasonably bear.
Secondly, it is not a term of art: like many English words, it does not have a precise meaning.
Thirdly, it will inevitably be a matter of fact and degree in many cases whether an activity involves making an article, or whether it falls short of that.
Fourthly, the word makes must be interpreted in a practical way, by reference to the facts of the particular case.
Fifthly, however, there is a need for clarity and certainty for patentees and others, and for those advising them.
Sixthly, it should be borne in mind that the word applies to patents for all sorts of products, from machinery to chemical compounds.
Seventhly, one should bear in mind, at least as part of the background, the need to protect the patentees monopoly while not stifling reasonable competition.
Eighthly, the word makes must be interpreted bearing in mind that the precise scope of a claim may be a matter almost of happenstance in the context of the question whether the alleged infringer makes the claimed product.
Lord Diplock described the specification of a patent as a unilateral statement by the patentee, in words of his own choosing by which he states what he claims to be the essential features of the new product Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183, 242.
As Lord Hoffmann explained in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2004] UKHL 46, [2005] 1 All ER 667, [2005] RPC 169, para 21, a claim is, or at least should be drafted not only in the interest of others who need to know the area within which they will be trespassers but also in the interests of the patentee, who needs to be able to make it clear that he lays no claim to prior art or insufficiently enabled products.
As Lord Hoffmann went on to explain in para 35, all sorts of factors, only some of which may appear to be rational, can influence the person drafting a claim.
Ninthly, where, as here, there is a decision (United Wire) of the House of Lords or this court on the meaning of the word, it cannot be departed from save for very good reasons indeed.
Finally, particularly given that section 60 (like section 125) is one of the sections mentioned in section 130(7) of the 1977 Act, the word should be interpreted bearing in mind that it is included in a provision which is intended to be part of a scheme which applies in many other jurisdictions.
United Wire
The decision of the House of Lords in United Wire assumed central importance in the Court of Appeal, as is clear from para 91 of Jacob LJs judgment, where he described Schtzs appeal as determined by United Wire, a proposition unsurprisingly supported by Mr Meade QC on behalf of Schtz before this court.
However, while we must be careful not to cause confusion in this area, the reasoning in that case, like the reasoning of any court, was inevitably based on the facts agreed between the parties or decided by the judge, and on the arguments raised by the parties or suggested by the court.
United Wire involved two patents, and the facts were summarised by Lord Hoffmann at paras 62-64 (taking the paragraph numbering from the RPC report, which includes the decision of the Court of Appeal) in these terms: 62.
[B]oth patents are for a screen consisting of a frame to which two meshes of different mesh sizes are adhesively secured at the periphery so as to be at different tensions.
The differences are the striking screens of the first patent and the flexible apertured [frame] of the second. . 63.
The meshes quickly become torn in use.
The plaintiffs therefore enjoy [the] aftermarket in selling replacement screens made in accordance with their inventions.
64.
The defendants [sell] reconditioned screens made from the plaintiffs own frames.
The [metal] frames weigh about 10 kilos [and look] more like a drain cover than a picture frame.
They are durable in relation to the rest of the materials of the screen.
The defendants acquire the frames from the plaintiffs customers and strip them down to the bare metal by sandblasting.
They recoat them with adhesive polyethylene and attach the two layers of mesh, coarse below and fine above.
The differences in the sizes of the mesh produces the necessary differential tensions when both are tensioned together.
Heat is then used to bond the meshes to the polyethylene coating of the frame, the selvage of mesh around the frame is cut off and the edges trimmed and taped.
At first instance in United Wire, the judge had been narrowly persuaded that the defendants activities amounted to repair, and therefore that the defendant did not make the article claimed under either of the two patents.
The Court of Appeal took a different view.
In a judgment which was expressly approved by the House of Lords, Aldous LJ held that in cases where it is claimed that the alleged infringer makes a product contrary to section 60(1)(a) the question must be whether his acts amount to manufacture of the product, namely the product of the invention see para 25.
In para 27, he briefly summarised the patentees case, which he accepted, and which included the contention that the defendants activities should be contrasted with on-site repair.
He then described the defendants activity as equivalent to the purchase on the open market of frames and then using them to produce an assembly para 28.
In the House of Lords, Lord Bingham and Lord Hoffmann gave reasoned speeches, with which the other Law Lords agreed.
Lord Bingham, at para 56, thought the issue was simply whether the defendant made the patented article, to which the answer was a question of judgment; that it was better not to ask whether the defendants work involved repair; and that the Court of Appeal had identified the right question and reached a conclusion open to them.
Lord Hoffmann described the point as a very short one, and (discussing an earlier case) he said that the real issue was whether the defendants had made the patented product paras 68 and 72.
He quoted (para 70) with approval a statement made by Lord Halsbury LC that you may prolong the life of a licensed article but you must not make a new one under the cover of repair, and he warned (para 71) of the dangers of asking whether the work constituted repair.
Lord Hoffmann described the question raised as one of fact and degree in para 72, and, at the end of his final paragraph, para 73, he said that: [The patented] product ceased to exist when the meshes were removed and the frame stripped down to the bare metal.
What remained at that stage was merely an important component, a skeleton or chassis, from which a new screen could be made.
Neither Lord Bingham nor Lord Hoffman said, at least in terms, that the decision of the trial judge to the contrary effect was one which he could not have reached.
What Lord Hoffmann said at para 73 was that the Court of Appeal was entitled to substitute its own evaluation because the judge did not correctly identify the patented product.
Lord Bingham seems also to have justified the Court of Appeal having substituted its own decision on this ground, saying in para 56 that the judge did not concentrate his attention on whether the defendants had made the patented product.
Decisions of German courts
The fact that the word makes is in a section of the 1977 Act which is intended to conform with the provisions of an international convention is particularly significant where, as is the case with the EPC and the CPC, the convention contains a set of principles which are intended to apply consistently across signatory states.
(The EPC is not an EU convention, whereas the CPC is; however, the CPC is not yet in force.)
The House of Lords and this court have emphasised on a number of occasions the desirability of national courts following the established approach to validity of the Technical Board of Appeal of the European Patent Office (the EPO), and the German Bundesgerichtshof (the BGH) have taken the same view see, most recently, Human Genome Sciences Inc v Eli Lilly & Co [2011] UKSC 51, [2012] 1 All ER 1154, paras 84-87, and Case Xa ZR 130/07.
The parties in this case have not referred to any relevant decision of the EPO, as we are here concerned with infringement.
However, it is worth addressing four decisions of the BGH which consider what activities constitute making a patented article.
The most recent such decision related to the German equivalent of the Patent Paletenbehlter II, Schtz v Mauser (Pallet Container II) Case X ZR 97/11, in July 2012.
These are not only decisions of a highly expert, experienced and respected court on the very point which is raised in this case, but they are decisions of a court of another signatory state to the EPC (and the CPC) on a point of some significance arising under those Conventions.
We should therefore accord them considerable respect, and sympathetically consider the extent to which we should adopt any points of principle or practice which they raise.
However, there can be no question of the courts in this jurisdiction feeling obliged to follow the approach of the German courts, any more than the German courts could be expected to feel obliged to follow the approach of the English and Welsh courts.
Unlike the EPO, both this court and the BGH are national courts.
As such, while they have a great deal, including many principles, in common, they have inevitably developed somewhat different techniques and approaches in relation to many issues, including many which arise in the field of patents.
While complete consistency of approach may be achieved one day, it is not a feasible or realistic possibility at the moment.
Nonetheless, given the existence of the EPC (and the CPC), it is sensible for national courts at least to learn from each other and to seek to move towards, rather than away from, each others approaches.
It appears that the BGH is of the same view.
In Flgelradzhler (Impeller Flow Meter) Case X ZR 48/03, para 2.a, it made the point that, following the CPC, the case law on the old German patent law cannot be used automatically to interpret section 10 of the German Patent Act (equivalent to section 60 of the 1977 Act).
In the same case at the end of para 3.b.ii, the BGH cited the reasoning of Lord Hoffmann in United Wire.
And in Pallet Container II it considered the decision of the Court of Appeal in this case see para 47 below.
In Impeller Flow Meter, the BGH referred to the distinction between a (permissible) repair and a (prohibited) remaking and observed that this could only be determined in the light of the particular nature of the subject matter of the invention and a balancing of the conflicting interests.
It then said that When the interests are weighed, increasing importance can be given to whether it would be customary to expect the relevant parts to be replaced during the service life of the device .
But what is also relevant is the extent to which the technical effects of the invention are reflected by the replaced parts.
Therefore, the replacement of a part subject to wear and tear that is usually replaced during the expected service life of the machine - sometimes repeatedly - does not usually constitute a new manufacture.
The situation can be different, however, if this part in fact embodies essential elements of the inventive concept.
This approach was adopted by the BGH in Laufkranz (Wheel Tread) Case X ZR 45/05, para 17, and it was also followed in Pipettensystem (Pipette System) Case X ZR 38/06.
In Pallet Container II, the BGH cited these three earlier decisions in support of the proposition that it may also be significant whether the parts [replaced] are such that one normally expects them to be replaced during the useful life of the product and to what extent the technical effects of the invention are reflected in the replaced parts para 23 (substantially repeated at para 28).
It was made clear at paras 43 to 45 that, in the view of the BGH, the technical effects of the invention were not reflected in the bottle, as they were not manifested in the replaced part.
However, the BGH went on to say that [i]f, according to the prevailing market opinion, the replacement of a part is seen as re-manufacturing the patented product, then as a general rule, a patent infringement cannot be denied, but if it was seen by general market opinion as a repair, the opposite conclusion would probably apply paras 29 and 41.
It then observed that there was insufficient evidence available to reach a concluded view, and suggested that, if used [IBCs] which require the replacement of the inner container are viewed as practically worthless in the prevailing opinion of the purchasers of such containers, then the installation of a new inner container [w]ould be viewed as the re-manufacture of the [IBC] para 34.
The BGH remitted the case for a determination as to what proportion of used IBCs were returned to Schtz or reconditioners for no consideration.
In the light of the argument before us, I should make two further, perhaps connected, points about the decision in Pallet Container II.
First, I do not read the BGH as suggesting that the question of whether a new article is made depends on who carries out the work involved.
That would be illogical and unprincipled, and indeed contrary to what was said in para 19 of Pallet Container II.
When the BGH referred to the market, it was simply looking at the difference in value between a used IBC before and after it is reconditioned.
Secondly, the BGH said at para 40 that it disagreed with the Court of Appeal in this case that weight should be given to the fact that Delta described their rebottled IBCs as re-manufactured.
I agree with the BGH on this point: the issue we have to determine is not how a party views or markets its products, but how those products should be characterised.
Repairing and making
The reasoning of Lord Bingham and Lord Hoffmann in United Wire emphasises that one must avoid basing a decision on the point at issue by simply contrasting the two concepts of making and repairing, not least because the notions of making and repair may well overlap para 71 per Lord Hoffmann.
However, it was a contrast which Buckley LJ drew, and apparently found helpful, in this context in Solar Thomson Engineering Co Ltd v Barton [1977] RPC 537, 555 (in a passage quoted and approved by Lord Hoffmann in United Wire at para 72), and which Aldous LJ appears to have approved in his judgment in United Wire at paras 21-22 and 26-27.
The approach of Buckley LJ supports the notion that, subject to the overriding point that it should not obscure the central issue of whether the alleged infringer makes the patented article, it may sometimes be useful to consider whether the alleged infringer is repairing rather than making the article.
I am fortified in that view by the fact that the BGH also plainly considers this distinction to be a useful one in this field.
The mere fact that an activity involves replacing a constituent part of an article does not mean that the activity involves making of a new article rather than constituting a repair of the original article.
Repair of an item frequently involves replacement of one or some of its constituents.
If there are broken tiles on a roof, the replacement of those tiles is properly described as repairing the roof, and such replacements could not be said to involve rebuilding, or making, the roof.
Indeed, replacing the whole of a deteriorated roof of a building could be regarded as repairing the building, taken as a whole, rather than reconstructing the building.
There are many cases concerned with repairing obligations in leases which illustrate this point - see e.g. the discussion in Woodfall on Landlord and Tenant (October 2008), Vol 1, paras 13.32 to 13.037.12.
In the more directly relevant context of chattels rather than buildings, the normal use of making and repairing demonstrates the same point.
Works to a ship or a motor car, which involve removal and replacement of defective significant constituent parts, could be substantial in terms of physical extent, structural significance, and financial cost, without amounting to making a ship or motor car, as a matter of ordinary language: in such a case, they would be repair of the existing ship or motor car.
Thus, in Coleborn & Sons v Blond [1951] 1 KB 43, 49-50, Denning LJ said, in a case concerned with purchase tax, that [s]peaking generally, if you replace an old engine by a new one, or an old body by a new body, you are not making a different vehicle: you are altering and improving an old one .
On the facts of that case he held a new thing was made out of two parts - the old chassis and the new body [which] when assembled together make a different thing from either of them separately.
The approach of Lord Hoffmann in the remarks at the end of his judgment in United Wire, quoted at the end of para 35 above, appear to me to be consistent with the approach of Denning LJ in Coleborn.
On the facts of United Wire, Lord Hoffmann concluded (or said that the Court of Appeal was entitled to conclude) that the totality of the work described in his para 64 amounted to making a new article, because the removal of the meshes and the stripping down and repairing of the frame resulted merely in a component of the patented article from which a new screen could be [and was] made.
Returning to the theme of the normal meaning of a word, observations about the meaning of make in a different legal or factual context from that under consideration should be approached with caution.
The examples given above are referred to primarily to emphasise the somewhat slippery nature of the meaning of the word, and the very important role which context plays in determining whether a particular activity involves making an article.
In general terms, in a case under section 60(1)(a) the particular contextual features are those identified in paras 26 to 29 above.
Infringement: the present case
The reasoning in the decisions below
The first question to consider is whether either of the Courts below adopted the right approach to the question which they had to decide.
In my view, they did not.
In para 196 of his judgment, Floyd J said that [t]he difficult question, as it seems to me, is the case where the invention resides, or resides principally, in the part retained.
This was not the case in United Wire.
Mr Meade QC challenged this statement, contending that, at any rate in the case of the second of the patents in United Wire, the inventive concept in the patented article lay, at least primarily, in the frame which the defendant retained, and not in the wire meshes which it replaced.
I accept that contention, although, as explained below, it does not by any means wholly invalidate the approach adopted by Floyd J.
Similarly, Floyd J over-simplified the position in the following paragraph of his judgment, when he said that the correct approach is to ask whether, when the part in question is removed, what is left embodies the whole of the inventive concept of the claim.
The notion that the issue of infringement in a case such as this is to be determined simply by answering the question which the judge formulated in that passage is attractive and simple to apply.
However, it seems to me to conflict with the wording of sections 60(1)(a) and 125(1) as well as with the approach adopted by the Court of Appeal and House of Lords in United Wire.
On the other hand, I consider that the Court of Appeal were too ready to accept that the outcome of this case was governed by United Wire.
They do not appear to have recognised that the question of whether replacing a part of a patented article constitutes making it is a matter of fact and degree.
Indeed, Jacob LJ appears to have thought that replacing any part of a patented article would involve making it.
At para 70, he said that if Delta made a frame according to Claim 1 and fitted it with a Schtz bottle that must produce exactly the same outcome as the present position.
Similarly, at para 64, he said that the IBC ceased to exist when the bottle is removed and [w]hat remained at that stage was merely an important component [viz the Schtz cage] from which a new IBC could be made.
However, as mentioned above, it is a matter of degree, to be assessed in each case, whether replacing a worn or damaged part of a patented article amounts to making the patented article.
If, very unusually, an original Schtz IBC was in such a state that the bottle could be reused but the cage could not, it would, I think, be hard to challenge the view that putting the existing bottle in a new Schtz cage would involve making the claimed article.
On the other hand, if an original Schtz IBC was entirely reusable save that the detachable lid of the bottle (assuming the bottles design involved a detachable lid) was damaged, it could not be plausibly contended that the replacement of the lid constituted making the claimed article, even though the IBC would be unusable without a new lid.
In other words, the replacement of a damaged essential constituent of an IBC can constitute repairing, rather than making, the article.
The fact that merely replacing the damaged lid of a Schtz bottle in a Schtz cage would not infringe the Patent, cannot possibly mean that there would be no infringement if one took a lid from an IBC marketed by Schtz and fixed it to a newly made bottle in a newly made cage, which (but for the lid) would infringe the Claim.
By the same token, Jacob LJ was wrong to say that, because a person who replaced a damaged original Schtz cage, while keeping the original Schtz bottle, would infringe, it must follow that a person who replaced a damaged original Schtz bottle, while keeping the original Schtz cage would infringe.
The correct approach in this case
Since neither the Judge nor the Court of Appeal approached the issue in this case in the right way, we must reconsider and, if possible, determine for ourselves, the central issue, namely, whether Delta makes a patented article when it removes a damaged Schtz bottle from a Schtz cage, and replaces it with a Werit bottle.
As is clear from United Wire, this question requires the court to focus on the question of whether, when it replaces a component of the article (viz. the bottle) the subject of the Claim, Delta makes that article (viz. the IBC as described in the Claim).
In answering that question, I consider that it is both legitimate and helpful to consider the question of whether the bottle is such a subsidiary part of the patented article that its replacement, when required, does not involve making a new article.
There are undoubtedly points in favour of the view that the bottle is more than subsidiary in this sense, so that its replacement involves making the claimed article, namely an IBC.
Thus, it is a necessary part, indeed an integral part, of the patented article, but so, self-evidently, is the lid of the bottle, whose replacement, when damaged, cannot, as observed in para 59 above, sensibly be said to involve making the IBC.
Further, the bottle is specifically referred to in Item [A] of the Claim, but then so is the lid, albeit arguably only impliedly (an upper closable filler opening).
The question, however, is one of degree.
In that connection, the bottle is a much more substantial feature of the composite article described in the Claim than the lid of the bottle.
Indeed, the bottle would appear to have a greater surface area than the cage (at least if one ignores the gaps between the bars).
However, while undoubtedly an essential and physically large part of the patented article, it seems to me that, particularly in the context of the present issue, the bottle can fairly be said to be a relatively subsidiary part of the article, viewed as a whole.
In that connection, Mr Thorley QC identified two significant features of the bottle.
First, the bottle has a significantly lower life expectancy than the cage and, presumably, than the pallet.
In particular, one would anticipate replacing the bottle, on average, five or six times during the life of the cage.
The fact that one would expect the bottle to be replaced in this way reinforces the notion that it is a subsidiary part.
Another aspect of the same point is that the bottle is also physically less substantial than the cage (or, no doubt, the pallet), since it is made of plastic (albeit tough plastic) rather than metal.
Looking at the point another way, if the cage has a much greater life expectancy than the bottle, a purchaser of an IBC might well expect to be able to replace the bottle.
As Lord Hatherley LC said in Betts v Willmott (1871) LR 6 Ch App 239, 245, in a passage cited by Lord Hoffmann in United Wire at para 68: When a man has purchased an article he expects to have the control of it, and there must be some clear and explicit agreement to the contrary to justify the vendor in saying that he has not given the purchaser his licence to sell the article, or to use it wherever he pleases as against himself.
In principle, a purchaser of a patented article, as I see it, should be taken as entitled to make such an assumption, subject to section 60(1)(a).
Accordingly, for that reason also, where the article includes a component which is physically easily replaceable and in practice relatively perishable, those features must constitute a factor (which may, of course, be outweighed by other factors) in favour of concluding that the replacement of that component does not fall foul of section 60(1)(a).
Secondly, the bottle does not include any aspect of the inventive concept of the Patent.
The extent to which a component of an article is a subsidiary part, so that its replacement is more likely to involve repairing than making the article, must be a matter of degree.
It therefore seems to me that it must be legitimate, in the context of addressing the question whether a person makes the patented article by replacing a worn out part, to consider whether that part includes the inventive concept, or has a function which is closely connected with that concept.
While, as already observed, there is nothing in the judgments in United Wire to support the notion that the inventive concept is relevant to the question raised in an appeal such as this, there is nothing inconsistent with such a notion either.
What the reasoning in that case does rule out is the attractively simple use of the inventive concept in this sort of case which Floyd J suggested in his para 196.
Mr Meade QC contended that the inventive concept of a patent is often a controversial issue, and that there could therefore be problems if it was treated as relevant in determining whether an alleged infringer makes the patented article.
I am unconvinced by that contention.
In almost all patents, the claimed inventive concept is clearly identified or identifiable from the patent, and, if it is unclear or disputed, it will often be an issue in the proceedings anyway.
I note that the BGH appears to have no difficulty in accommodating the inventive concept in this exercise, and, if Mr Meade QC was right, it would be much more likely to be a problem in Germany with its bifurcated approach (where different courts deal with infringement and validity) than in England with our unitary approach (where the two issues are dealt with by the same court).
Two further factors (which are connected to some extent) carry some weight with me.
They can be highlighted by contrasting the facts of this case with those in United Wire.
In this case, the replaced part, the bottle, is a free-standing item of property, which does not include, or relate to, the inventive concept.
In United Wire, the replaced part, the wire mesh system, had no independent identity from the retained part, the frame.
Hence it was much easier to say, as Lord Hoffmann did in that case, that the original product ceased to exist when the meshes were removed, whereas in this case there are, as it were, two products (disregarding the pallet, which is included in the Claim), and one of them, which is significantly longer lasting, more substantial, and the only inventive component, certainly does not cease to exist.
Furthermore, there is a significant difference between the nature of Deltas operations in this case and that of the defendants operations in United Wire, as described by Lord Hoffmann at para 64 of his opinion (quoted in para 31 above).
In this case, a damaged free-standing plastic bottle is simply replaced within the metal cage, which contains the inventive concept, and the metal cage is repaired if necessary.
In United Wire, unlike in this case, (i) the replaced part was integrally connected to the retained part, so the work included a significant element of demolition, (ii) the replaced part was subjected to significant improvement work, (iii) the inventive concept either largely resided in the replaced part (the first patent) or was closely connected to that part (the second patent), and (iv) the work involved could undoubtedly be described as manufacture.
Merely replacing a damaged plastic bottle (albeit one of considerable size) with a new plastic bottle (even allowing for the fact that the replacement has to be made) appears to me to be an exercise of a very different order.
It seems to me that it would accord with the eight general principles set out in paras 26 to 28 above to take into account the various factors mentioned in the preceding eleven paragraphs, when deciding whether Delta makes the patented article.
I derive comfort from the fact that they are factors which appear to carry force with the BGH when it is considering this issue.
I also consider that there is nothing in the speeches of Lord Bingham or Lord Hoffmann in United Wire which suggests that it would be wrong to take these factors into account.
The speeches appear to me to establish that the question to be determined in a case such as this is whether the alleged infringer makes the patented article, and that the answer to that question is often a matter of fact and degree.
The speeches do not give much guidance as to what specific considerations can or cannot be taken into account when determining the question.
The next issue to be addressed is whether it is also appropriate to consider the further point raised by the BGH in Pallet Container II, summarised in para 44 above.
In my view, the question of whether the end-user is paid for a used IBC could have relevance to the issue which we have to determine.
If an article has no value when it has been used and before it is worked on, and has substantial value after it has been worked on, that could fairly be said to be a factor in favour of the work resulting in the making of a new article, or, to put the point another way, in favour of the work involved amounting to more than repair.
However, that would be just one factor, and it would have to be approached with caution.
For instance, there might be considerable value to an end-user in having the used IBC collected by Delta, as it might otherwise have to be disposed of at some cost.
Or a cross- bottled IBC may have a relatively small value, so that the collection by Delta represents significant cost to Delta.
Further, it is possible that the value of the cage could vary significantly with the price of the metal from which it is made, and it would seem wrong that the issue whether Delta makes a new article should fluctuate with prices on the metal exchanges.
In this case, as in Pallet Container II, there was no evidence which can fairly enable us to assess this factor.
However, unlike the BGH in Pallet Container II, I am firmly of the view that we should not remit the case back to Floyd J, let alone another judge, so as to enable the parties to adduce evidence on the matter.
A first instance hearing in this jurisdiction involves a full and detailed examination of all the issues, requiring the parties to devote considerable expense and effort, and taking up a significant amount of court time; and an appeal is normally limited to points of law.
Parties are expected to adduce all their evidence and arguments before the trial judge, and are normally only permitted to adduce new evidence (whether on appeal or through a rehearing) if there was a very good reason why the evidence was not adduced at trial.
In any event, on the basis of the evidence and arguments which we have heard, I think it very unlikely that any such evidence would have affected the outcome.
Infringement: conclusion
Weighing up the various relevant factors, I have come to the conclusion that by replacing the bottle in the IBC, Delta does not make the article identified in the Claim.
Given the size of the bottle, and the fact that it is one of the two (or three, if one includes the pallet) components of that article, the issue is by no means clear.
However, the combination of the factors discussed in paras 63 to 72 above persuade me that the conclusion reached by Floyd J on this point was right, albeit for somewhat more nuanced reasons.
Deciding whether a particular activity involves making the patented article involves, as Lord Bingham said, an exercise in judgment, or, in Lord Hoffmanns words, it is a matter of fact and degree.
In some such cases, one can say that the answer is clear; in other cases, one can identify a single clinching factor.
However, in this case, it appears to me that it is a classic example of identifying the various factors which apply on the particular facts, and, after weighing them all up, concluding, as a matter of judgment, whether the alleged infringer does or does not make the patented article.
In the present case, given that (a) the bottle (i) is a freestanding, replaceable component of the patented article, (ii) has no connection with the claimed inventive concept, (iii) has a much shorter life expectancy than the other, inventive, component, (iv) cannot be described as the main component of the article, and (b) apart from replacing it, Delta does no additional work to the article beyond routine repairs, I am of the view that, in carrying out this work, Delta does not make the patented article.
I should add that, while ones focus in a case such as this should not be deflected from the central question of whether the alleged infringer makes the patented article, it may sometimes be a useful cross-check to consider whether its activities involve repairing the original product.
As mentioned, that was a question which Buckley LJ found helpful in Solar Thompson, and which the BGH also invokes in this connection.
In this case, I consider that the question does not take matters much further: for the reasons I have given for concluding that Delta does not make a new patented article, I am of the view that its cross-bottling activities involve repairing the original product.
I would therefore allow Werits appeal on the main issue.
That means that Werits appeal on the section 68 issue is academic.
However, because the issues that the appeal raises were fully argued, and because I do not agree with some of the conclusions of the Court of Appeal, it is right to deal with that aspect also, at least to the extent that it is safe to do so.
The section 68 appeal
The background facts and law
As mentioned above, Schtz has been granted an exclusive licence by the patentee, Protechna.
Schtz was initially granted a licence (the first licence) on 24 March 1994.
On 26 November 2009, the first licence was determined, and on the same day another licence (the second licence) was granted in its place.
Sections 32 and 33 of the 1977 Act (sections 32 and 33) provide for a register of patents, on which not only patents themselves, but also transactions, instruments or events affecting rights in or under patents can be registered, partly for the purpose of establishing priority.
The first licence was not registered until 17 July 2008, more than fourteen years after it had been granted, and just before these proceedings were started.
The second licence was not registered until 15 November 2012, some two years after it had been granted and well after the decision of the Court of Appeal on infringement.
Section 68, in its original and current form, is in these terms: Where by virtue of a transaction, instrument or event to which section 33 above applies a person becomes the proprietor or one of the proprietors or an exclusive licensee of a patent and the patent is subsequently infringed, the court shall not award him damages or order that he be given an account of the profits in respect of such a subsequent infringement occurring before the transaction, instrument or event is registered, in proceedings for such an infringement, the court shall not award him costs or expenses unless (a) the transaction, instrument or event is registered within the period of six months beginning with its date; or (b) the court is satisfied that it was not practicable to register the transaction, instrument or event before the end of that period and that it was registered as soon as practicable thereafter.
The italicised words were in the section as enacted, but, with effect from 29 April 2006, they were repealed and replaced by the words in bold, to ensure that the section did not fall foul of Articles 13(1) and 14 of the Enforcement Directive (2004/48/EC).
This was effected by regulation 2(2) of, and para 4 of Schedule 2 to, the Intellectual Property (Enforcement etc) Regulations 2006 (SI 2006/1028).
The purpose of section 68 is not in dispute.
People need to know who is on the register.
This section is aimed at making the people who own the monopolies get on the register, as Jacob J observed in LG Electronics v NCR Financial Solutions Group Ltd [2003] FSR 24, para 18.
The effect of the Court of Appeals decision that Werit infringed the Patent was, at least on the face of it, that Schtz was entitled to (i) damages or an account of profits in respect of infringements occurring on or after 7 August 2002 (being six years before the issue of these proceedings), and (ii) its costs (subject, of course, to any point which Werit could have legitimately raised).
However, if section 68 applied, (i) its original provisions would have disentitled Schtz from recovering any damages or account in respect of infringements occurring before 29 April 2006, and (ii) the amended provisions would have cut down Schtzs right to recover costs.
After the Court of Appeals judgment on the main issue had been made available in draft, Werit gave notice that it intended to rely on section 68.
This led to two further decisions of the Court of Appeal [2011] EWCA Civ 927, [2012] FSR 2 and [2011] EWCA Civ 1337, [2012] Bus LR 746, [2012] 2 Costs LR 306.
The first of those decisions gives rise to three issues, and the second decision to a fourth issue.
I shall consider those issues in turn.
To what extent should reliance on section 68 be pleaded?
The first issue is whether Werit needed to have specifically raised its reliance on section 68 in its pleaded case before it could rely on its original restriction on damages and an account, and its subsequent restriction on costs recovery.
The Court of Appeal held that the point need not be pleaded, because of the mandatory terms in which section 68 is expressed the court shall not.
I do not agree.
The main point of requiring a party to put forward its contentions in a statement of case or a pleading is to ensure that the other party is not taken by surprise.
The mere fact that a statute is expressed in directory terms should not mean that its contents can be relied on by a party without any warning to the other party.
Of course, there may be good public policy issues justifying a different view in a particular case, but, absent such a factor, I consider that clear words would be required before a party could, as of right, raise a point of this nature without fairly putting the other party on notice, which would normally be in its statement of case.
This conclusion is supported by the reasoning of the Court of Appeal in Fookes v Slaytor [1978] 1 WLR 1293 in relation to section 1 of the Law Reform (Contributory Negligence) Act 1945, which provides that, in a negligence case, damages shall be reduced to take into account contributory negligence.
To much the same effect is what Lord Griffiths said about the need to plead a limitation defence in Ketteman v Hansel Properties Ltd [1987] AC 189, 219.
The same view is taken in Bennion on Statutory Interpretation (5th edition, 2007), p.114, and specifically in relation to section 68, by Terrell on the Law of Patents (17th edition, 2010) at para 18.89.
It should be recorded that none of these authorities appears to have been cited to the Court of Appeal in this case.
The policy behind section 68 is to encourage persons such as Schtz to register their licences or other interests under section 33 of the 1977 Act.
Although the court should favour an interpretation which gives such a policy real effect, I do not consider that it is a policy which justifies the view that the point need not be pleaded.
It would be a remarkably harsh result for a licensee who had failed to register, and would represent a potentially remarkable windfall for an infringer.
Under the section as originally drafted, an infringer would be able to lie low during proceedings brought by an unregistered licensee, knowing that there was a complete defence to any financial liability for continuing infringement which the licensee could end by registering.
Accordingly, Schtzs case on this point is a fortiori that of the successful parties in Fookes and Ketteman, where there was no continuing benefit for the party who had failed to plead the point.
Was Werits case sufficiently pleaded to enable it to raise section 68?
The second question is whether Werit did, in fact, plead its case sufficiently to enable it to rely on section 68.
The Court of Appeal held that if, contrary to their view, Werit had to plead its case on section 68, it had not done so.
Again I disagree.
In its pleaded case, Werit not only denied that Schtz was entitled to the relief it sought, which included damages, an account, and costs, but, crucially, in my opinion, para 5 of Werits statement of case (i) put Schtz to proof as to its status as exclusive licensee, and (ii) stated that any alleged licence had not been filed for registration and it is not admitted that the said transaction, instrument or event was registered within the period of six months beginning with its date.
Thus, Werits pleaded case denied Schtzs right to damages or costs, raised all the facts which were needed for a section 68 argument, and quoted the crucial words from that very section.
CPR 16.5(2)(a) requires a defendant to state its reasons for denying any allegation, and para 13.3(1) of Practice Direction 16 merely entitles a party to refer to any point of law it relies on.
At least in the circumstances of this case, it seems to me clear that there was a sufficient pleading for section 68 purposes.
If there were any doubt about this, it would be put to rest by the fact that para 5 was in a defence to a claim brought under the 1977 Act by an exclusive licensee, whose claim form recorded that it had instructed solicitors and counsel who were acknowledged experts in the field.
I should add that we were referred in this connection to evidence on behalf of Schtz as to how para 5 of Werits statement of case was understood by Schtz.
I very much doubt that such evidence was admissible, but, if it was, it tends to support my conclusion.
I therefore reach the same conclusion as the Court of Appeal on the procedural issue of whether it was open to Werit to rely on section 68, but for very different reasons.
The Court of Appeal thought that Werit had not pleaded the point but did not need to do so; I am of the view that Werit had to plead the point, and had done so.
How does the costs sanction under section 68 work?
The conclusion of the Court of Appeal, supported by Mr Meade QC on behalf of Schtz, was that section 68 simply serves to disentitle a licensee from recovering costs incurred in connection with an infringement action during a period that the licence is unregistered.
Werits case, as advanced by Mr Thorley QC in the Court of Appeal and before us, is that if a claim for damages or an account by the licensee of a patent relates to an infringing act prior to registration of the licence, then the claimant licensee can recover no costs.
Like the Court of Appeal, I cannot accept Werits case on this point.
It seems to me to produce an arbitrary and potentially penal result.
It is arbitrary because the sanction would be the same whether the licensee was claiming for one weeks infringement before registration and five years after, or for five years infringement before the registration and for one weeks after.
In the former case, it would also be penal.
The interpretation favoured by the Court of Appeal and Schtz does not produce a penal or arbitrary result, but it leaves the section with very little bite, as an unregistered licensee could avoid its consequences simply by registering and then starting the proceedings.
It also seems to me to be difficult to reconcile with the wording of the amended section 68.
The expression proceedings for such an infringement must be a reference to the proceedings for infringe[ment] before the transaction is registered, not to proceedings, before the transaction is registered, for infringement.
Because the section is poorly drafted, that may not have been an insuperable obstacle to Schtzs case were there not a third interpretation, which was raised in argument by Lord Mance, and which I think is right.
That interpretation is that, where a licensee successfully claims damages or an account for infringement of a patent, it cannot recover its costs in so far as they are attributable to the claim for damages or an account in respect of infringements pre-dating the registration of the licence, but it can recover costs attributable to such relief in respect of infringements post-dating the registration.
In my view, this is the right interpretation, as it accords with the wording of section 68, and it reflects its purpose as described in LG Electronics.
Apparently, this interpretation was considered in argument in the Court of Appeal, but rejected on the ground that it would be unworkable.
I do not see why.
Obviously in a case where there was a claim for pre- and post-registration relief, there would have to be an apportionment, and the apportionment would normally involve an element of rough justice.
But that is a familiar state of affairs when it comes to costs.
The consequence of the late registration of the second licence
The final issue arises from the fact that the second licence was not registered until 15 November 2012, even though it was granted on 26 November 2009.
The effect of the reasoning so far is that, if Schtz had succeeded on infringement, (i) it would not have been entitled to relief in respect of infringements before 29 April 2006 (when section 68 was amended), (ii) it would have been entitled to relief in respect of infringements after that date, (iii) it would not have been entitled to costs in relation to infringements occurring between 29 April 2006 and 17 July 2008 (when the first licence was registered); (iv) it would have been entitled to costs in relation to infringements occurring between 17 July 2008 and 26 November 2009 (when the first licence was determined and the second licence was granted); (v) it would have claimed costs in relation to infringements between 26 November 2009 and 15 November 2012 (when the second licence was registered); and (vi) it would have been entitled to costs in respect of infringements after 15 November 2012.
Thus, the remaining issue, which is in respect of item (v) in the preceding paragraph, would have concerned costs in respect of infringements committed between 26 November 2009 and 15 November 2012.
The Court of Appeal accepted Schtzs contention that what mattered was that it had been registered as a licensee in July 2008 and had remained registered as such at all times since that date, and the fact that it had surrendered the first licence in exchange for the second licence did not require it to go through the exercise of re-registration.
This conclusion is reinforced by the fact that, although the register records the date of the licence as well as the name of the licensee, and the public has a right to inspect the register, those who wish to inspect the register have no right to see, or to be told of the terms of, the licence.
Werit contends, however, that the natural meaning of section 68, and in particular the word becomes, demonstrates that Schtz should have registered the second licence.
Some support for that proposition may also be found in the fact that sections 32 and 33 appear to envisage registration of licences and other documents rather than of licensees and proprietors.
The Court of Appeal accepted that Werits argument had force, but concluded that Article 14 of the Enforcement Directive required it to adopt what Ward LJ referred to as an artificial meaning, as opposed to the natural meaning of section 68, so as to enable Schtz to rely on the registration of the first licence, even after it had been determined and replaced by the second licence.
The Court of Appeal may have been right about the natural meaning of section 68 in the absence of Article 14; certainly its conclusion derives support from the reasoning of Aldous J in Minnesota Mining & Manufacturing Co v Rennicks (UK) Ltd [1992] FSR 118, Pumfrey J in Spring Form Inc v Toy Brokers Ltd [2001] EWHC 535 (Pat);[2002] F.S.R. 17, and Peter Smith J in Finecard International Ltd v Urquhart Dyke and Lord [2005] EWHC 2481 (Ch); [2006] F.S.R. 27.
However, despite these decisions, there does appear to be an argument the other way.
If the Court of Appeal was right about the natural meaning of the section, then I am very dubious about its invocation of Article 14 to justify a very different meaning to the section, especially as it has not been argued that Article 14 has direct effect.
This final point throws up two questions which are not straightforward and were (understandably in all the circumstances) not as fully argued as they might have been.
Accordingly, it would be safer not to decide the point, although I would emphasise that the reasoning of the Court of Appeal both as to the natural reading of section 68 and as to the justification for adopting an artificial meaning, should not be regarded as necessarily correct.
Conclusion on the section 68 costs issue
Accordingly, I would have allowed Werits appeal against the first section 68 judgment, but not to the extent to which Werit contended, and I would leave open the question of whether it should succeed on its appeal against the second section 68 judgment.
However, as I would allow Werit’s appeal on the main, infringement, issue, my conclusions on the section 68 costs issues are, strictly speaking, obiter.
| The principal issue on this appeal concerns the meaning of the word makes in section 60(1)(a) of the Patents Act 1977 (the 1977 Act), which provides that a person infringes a patent for a particular product if he makes the product without the consent of the patentee.
This issue arises in respect of European Patent (UK) 0 734 967 (the Patent), of which Protechna S.A. (Protechna) is the proprietor.
Claim 1 of the Patent (the Claim) extends to certain aspects of a complete intermediate bulk container (IBC).
An IBC is a large container used by suppliers of liquids (fillers), for the transport of a wide range of liquids to a so called end user.
IBCs of a two part construction consist of a metal cage into which a large plastic container (or bottle) is fitted.
Often, the bottle cannot be reused, because it contains residues of a toxic liquid or because it has been physically damaged.
The inventiveness of the Patent lies in the idea of flexible weld joints to the cage, to increase its strength and durability, and in the idea of introducing a dimple on either side of the weld and a central raised portion.
The description of the Patent acknowledges that the bottle is exchangeable (i.e. replaceable).
The cage has a life expectancy on average five or six times longer than a bottle, which is why so called reconditioners engage in re bottling or cross bottling used IBCs.
In either case, the old bottle is removed, any damage to the cage is repaired, and a new bottle is fitted within the cage.
Re bottling involves replacing the bottle with a fresh bottle from the original manufacturer, whereas cross bottling involves replacing the bottle with a bottle from a different source.
After re bottling or cross bottling an IBC, the reconditioner offers the reconditioned product to fillers on the market, in competition with the products of original manufacturers, and of other reconditioners.
Schtz (U.K.) Limited (Schtz) is the exclusive licensee of Protechna, and the leading manufacturer of rigid composite IBCs, in the United Kingdom.
Werit UK Limited (Werit) sells bottles (Werit bottles) for IBCs to a reconditioner, Delta Containers Limited (Delta).
Delta acquires discarded IBCs originally put on the market by Schtz (Schtz IBCs), replaces the original bottles (Schtz bottles) with Werit bottles, and then offers these cross bottled IBCs on the market.
These cross bottled IBCs are therefore in competition with the original Schtz IBCs.
Schtz objected to Deltas cross bottling activities, and issued proceedings against Werit, seeking relief on the ground that Werit infringed the Patent.
It is common ground that, if Delta thereby infringes the Patent, Werit does so.
Two issues arising from those proceedings are relevant to the present appeal.
The first issue is whether Delta infringed the Patent by mak[ing] the article claimed by the Claim, contrary to section 60(1)(a) of the 1977 Act.
The second issue, which arises only if it is found that Delta infringes the Patent, concerns costs sanctions in such proceedings under section 68 of the 1977 Act (the section 68 issue).
At first instance, Floyd J held that Deltas cross bottling activities do not amount to making the patented product, on the ground that the inventive concept of the Claim is wholly embodied in the Schtz cage.
The Court of Appeal considered that it was inappropriate to determine the issue by reference to the inventive concept, and held that Deltas cross bottling activities do amount to making the patented product, on the basis that the Schtz IBC ceases to exist when the Schtz bottle is removed, and all that remains at that stage is merely an important component from which a new IBC could be made.
The Supreme Court unanimously allows Werits appeal and holds that Delta did not make the patented article contrary to section 60(1)(a) of the 1977 Act.
Lord Neuberger gives the judgment of the Court.
This decision renders Werits appeal on the section 68 issue academic, but because the issues that appeal raises were fully argued, Lord Neuberger provides some guidance on how the costs sanctions under section 68 of the 1977 Act work [80] [107].
The central issue is whether Delta makes a patented article when it removes a damaged Schtz bottle from a Schtz cage, and replaces it with a Werit bottle.
The word makes does not have a precise meaning.
It must be interpreted contextually, by reference to the facts of the particular case, and in a practical way, bearing in mind that the precise scope of a claim may be a matter almost of happenstance.
It must also be given a meaning which, as a matter of ordinary language, it can reasonably bear.
There is a need for clarity and certainty for patentees and others, and for those advising them.
It should also be borne in mind that the word makes applies to patents for all sorts of product.
Moreover, there is a need to protect the patentees monopoly while not stifling reasonable competition [26] [29].
Therefore, it will inevitably be a matter of fact and degree in many cases whether an activity involves making an article [26],[57],[58],[72],[78].
Observations about the meaning of make in a different legal or factual context from that under consideration should be approached with caution because of the somewhat slippery nature of the meaning of the word, and the very important role which context plays in determining whether a particular activity involves making an article [53].
The mere fact that an activity involves replacing a constituent part of an article does not mean that the activity involves the making of a new article, rather than constituting a repair of the original article.
One must, however, avoid simply contrasting making and repairing, not least because these concepts may well overlap.
That said, it may sometimes be useful to consider whether the alleged infringer is repairing rather than making the article, because repair of an item frequently involves replacement of one or some of its constituents [48] [50].
It is both legitimate and helpful to consider the question whether the bottle is such a subsidiary part of the patented article that its replacement, when required, does not involve making a new article [61].
While undoubtedly an essential and physically large part of the patented article, four factors indicate that the bottle can fairly be said to be a relatively subsidiary part of the IBC, when that article is viewed as a whole [64]. (i) The bottle has a significantly lower life expectancy than the cage [65] [66]. (ii) The bottle does not include any aspect of the inventive concept of the Patent [67] [69]. (iii) The bottle is a free standing item of property [70]. (iv) The damaged free standing bottle is simply replaced within the metal cage, which contains the inventive concept, and the metal cage is repaired if necessary [71].
The question whether the end user is paid for a used IBC could be of relevance [74], although there was no evidence which can fairly enable assessment of this factor [75], and it is very unlikely that any such evidence would have affected the outcome [76].
This case represents a classic example of identifying the various factors which apply on the particular facts, and, after weighing them all up, reaching a conclusion on infringement.
Given that (a) the bottle (i) is a freestanding, replaceable component of the patented article, (ii) has no connection with the claimed inventive concept, (iii) has a much shorter life expectancy than the other, inventive, component, (iv) cannot be described as the main component of the article, and (b) apart from replacing it, Delta does no additional work to the article beyond routine repairs, Delta does not make the patented article [78].
|
Suppose that a convicted drug trafficker is found to have benefited from his trafficking to the extent of 1m but, having at the time realisable property worth only 100,000, a confiscation order is initially made against him just for this lesser sum.
Suppose then that the defendant, entirely legitimately, later acquires property to the value of upwards of a further 900,000.
Is he at that stage liable to a further court order increasing to the full extent of his criminal gain the amount recoverable under the confiscation order by reference to these after acquired assets?
It is not in doubt that, assuming his offences were committed after 24 March 2003, and that he were therefore subject to the provisions of the Proceeds of Crime Act 2002 (POCA), the answer would be a clear yes see particularly section 22(3) of POCA.
But what if, as in the case of this appellant, his offences were committed before that date so that he falls to be dealt with under the Drug Trafficking Act 1994 (the 1994 Act), in particular under section 16 of that Act? Section 16, as amended by section 165(1) of, and paragraph 169 of Schedule 9 to, the Powers of Criminal Courts (Sentencing Act 2000, provides: (1) This section applies where, by virtue of section 5(3) of this Act, the amount which a person is ordered to pay by a confiscation order is less than the amount assessed to be the value of his proceeds of drug trafficking. (2) If, on an application made in accordance with subsection (3) below, the High Court is satisfied that the amount that might be realised in the case of the person in question is greater than the amount taken into account in making the confiscation order (whether it was greater than was thought when the order was made or has subsequently increased) the court shall issue a certificate to that effect, giving the courts reasons. (3) An application under subsection 2 above may be made either by the prosecutor or by a receiver appointed in relation to the realisable property of the person in question under section 26 or 29 of this Act or in pursuance of a charging order. (4) Where a certificate has been issued under subsection (2) above the prosecutor may apply to the Crown Court for an increase in the amount to be recovered under the confiscation order; and on that application the court may (a) substitute for that amount such amount (not exceeding the amount assessed as the value referred to in subsection (1) above) as appears to the court to be appropriate having regard to the amount now shown to be realisable; and (b) increase the term of imprisonment or detention fixed in respect of the confiscation order under subsection (2) of section 139 of the Powers of Criminal Courts (Sentencing) Act 2000 (as it has effect by virtue of section 9 of this Act) if the effect of the substitution is to increase the maximum period applicable in relation to the order under subsection (4) of that section.
Is the High Court, on an application made under section 16(2), entitled to have regard to after acquired assets? That is the critical question now for decision by this court, leave to appeal in respect of it having been granted on 11 April 2011.
It was a question expressly left open by the House of Lords successively in In re Maye [2008] 1 WLR 315 (see Lord Scott of Foscotes speech at para 24) and R v May [2008] AC 1028 (see Lord Binghams speech at para 41).
There is, however, a preliminary issue also to be decided: was section 16 in force at the material time?
With that brief introduction let me sketch in, to the limited extent necessary, the particular facts of the present case.
On 7 January 1997 the appellant pleaded guilty before Judge Slinger at the Crown Court sitting at Preston to five offences of conspiracy to supply controlled drugs, two offences relating to Class A drugs, three to Class B drugs, all committed in 1995.
On 8 January 1997 he was sentenced to 12 years imprisonment, reduced on appeal to ten years.
In confiscation proceedings commenced under the 1994 Act the judge assessed the value of the appellants proceeds of drug trafficking to be 273,717.50 but the amount then realisable to be only 823.
Accordingly, on 10 July 1997, pursuant to section 5 of the 1994 Act, the judge made a confiscation order for 823 payable within 14 days, an order which was duly satisfied.
Following his release from prison in November 2000, the appellant went into the property business with his father and acquired very substantial further assets.
In the light of this change of circumstances, the prosecution sought and obtained from the High Court, initially a restraint order under section 26 (made by Richards J on 18 March 2005) and thereafter a certificate under section 16(2) (issued by Mitting J on 18 May 2005) certifying that the amount that might now be realised was greater than the 823 taken into account when the confiscation order was first made.
Armed with that certificate the prosecution then applied to the Crown Court under section 16(4) for an increase in the amount to be recovered under the confiscation order.
On 26 October 2007, following a seven day hearing, Judge Slinger found that the appellant now held realisable assets to the value of 348,315.54 and on 14 November 2007 he exercised his discretion to substitute for the 823 originally recoverable the sum of 273,717.50 (the full value of the appellants proceeds from crime) to be paid within six months, with three years imprisonment in default.
On 20 February 2009 (for reasons given on 2 April 2009) the Court of Appeal (Criminal Division) dismissed the appellants appeal, brought on the basis that Judge Slinger had over estimated the value of his realisable assets and had failed to take properly into account in the exercise of his discretion the length of time which had elapsed since the appellants release from prison.
The appellant no longer contends that, in making the order under section 16(4), Judge Slinger exercised his discretion incorrectly.
Subsequently the prosecution obtained from Pitchford J on 18 December 2009 an order under section 31 of the 1994 Act appointing a receiver with a view to enforcing the revised confiscation order.
However, in the light of the appellants argument (citing the reservations of the House of Lords in In re Maye and R v May) that Mitting Js section 16(2) certificate, made by reference to after acquired assets, had been issued without jurisdiction, the judge suspended the receivers powers pending a proposed appeal.
The appellants appeal, brought by leave of Black LJ granted on 30 June 2010, was heard by the Court of Appeal (Arden, Thomas and Etherton LJJ) on 10 November 2010 and dismissed on 20 December 2010.
Arden LJ gave the only reasoned judgment.
She regarded the court as bound by an earlier decision of the Court of Appeal (Criminal Division) (judgment given by Rose VP) in R v Tivnan [1999] 1 Cr App R(S) 92 in the prosecutions favour.
She in any event agreed with it.
As for the appellants submission that section 16 no longer had effect after POCA came into force on 24 March 2003, Arden LJ regarded it as clearly wrong having regard to the terms of The Proceeds of Crime Act 2002 (Commencement No 5, Transitional Provisions, Savings and Amendment) Order 2003 (SI 2003/333) (the Commencement Order).
It is convenient, and in any event appropriate, to deal first with the appellants argument that, by the time of Mitting Js section 16(2) certificate, section 16 was no longer in force.
The Commencement Order
Unless saved by the transitional provisions of the Commencement Order, it is clear that POCA repealed the relevant sections of the 1994 Act with effect from 24 March 2003.
One turns, therefore, to article 3 of the Commencement Order headed Transitional Provisions relating to confiscation orders England and Wales and in particular to article 3(1): Section 6 of the Act (making a confiscation order) shall not have effect where the offence, or any of the offences, mentioned in section 6(2) was committed before 24 March 2003.
Section 6 of POCA (to broadly similar effect as section 2 of the 1994 Act) is the opening section of Part 2 of POCA dealing generally with confiscation orders in England and Wales and it comes into play when two conditions are satisfied, the first (specified by section 6(2)) being that a defendant has been convicted or is being committed to the Crown Court in respect of certain offences.
The second condition is for present purposes immaterial.
What, then, is the position where, as here, the relevant offences were committed before 24 March 2003 so that, by virtue of article 3 of the Commencement Order, section 6 of POCA does not have effect? The answer to this is to be found in article 10 of the Commencement Order under the heading Savings for England and Wales: (1) Where, under article 3 . a provision of the Act does not have effect, the following provisions shall continue to have effect . (e) sections 1 to 36 and 41 of the Drug Trafficking Act 1994;
The appellants contention is that article 3 (and, in turn, article 10) only come into play when not only was the relevant offending before 24 March 2003 but also no confiscation order had by then been made.
Section 6 of POCA, he submits, is concerned only with the making of a confiscation order, not with any subsequent adjustments, up or down, of the amount payable under it.
If no confiscation order has been made in respect of pre 24 March 2003 offending, and after that date it appears that such an order may be appropriate, then, since article 3 precludes that happening under section 6 of POCA, article 10 provides that the relevant provisions of the 1994 Act continue to have effect instead.
These include sections 13 and 14 (concerning respectively the reconsideration of a case where initially the court did not consider making a confiscation order under section 2 and reassessing whether the defendant has in fact benefited from drug trafficking, both therefore predicating that no confiscation order has yet been made).
Sections 15 and 16, however, (concerning respectively a revised assessment of the proceeds of drug trafficking and an increase in realisable property) would not continue to have effect since both these sections predicate that a confiscation order has already been made.
Nor, for the same reason, would section 17 (concerning the inadequacy of the defendants realisable property to pay the amount outstanding under a confiscation order) continue to have effect, much though the defendant might wish to invoke it.
Mr Pownall QC for the appellant accepts that there is no good reason why, in the circumstances he postulates, Parliament should have wished to repeal rather than give continuing effect to sections 15 and 16, still less section 17, of the 1994 Act.
Construing article 3 as he does, however, namely as applying only to the actual making of confiscation orders and not to other legislative provisions in respect of them, such, he submits, is the (admittedly unsatisfactory) effect of the commencement order.
The Court of Appeal was to my mind clearly right to reject this argument.
Section 6 of POCA is the foundational section for the whole confiscation order scheme and article 3, in disapplying it in respect of pre 24 March 2003 offending, is thereby disapplying the entire POCA confiscation order regime, leaving it to article 10, in particular article 10(1)(e), to continue in force the whole confiscation order scheme earlier provided for by the 1994 Act.
So much for this preliminary issue.
Does section 16(2) extend to after acquired assets?
Mr Perry QC for the prosecution submits that section 16(2) is concerned with the amount that might be realised as at the date of the High Court hearing of the application.
It is couched in the present tense and contains no words of limitation as to time.
It is thus intended and apt to be operated in any or all of the following four differing (but sometimes overlapping) factual situations: (a) where the defendant concealed assets at the time the confiscation order was originally made (concealed assets); (b) where the assets originally taken into account were initially undervalued (undervalued assets); (c) where the assets originally taken into account have since increased in value (appreciated assets); (d) where, subsequent to the making of the original confiscation order, the defendant has increased his realisable property (after acquired assets).
The appellant argues that while section 16(2) applies to the first three situations, it does not apply to the fourth.
It is, I should add, common ground that, with regard to the first three situations, section 16(2) applies no less to different property representing property actually held by the defendant at the time of the original confiscation order as to such property as was originally held.
So much, indeed, was decided by the House of Lords in In re Maye [2008] 1 WLR 315 which held (with regard to comparable legislation in Northern Ireland) that the appellants interest in his parents unadministered estates (an interest later valued at 18,000) had been a thing in action, and accordingly his property, when the confiscation order had originally been made; and so too an action for damages for false imprisonment, subsequently settled for 2,500.
In deciding upon the correct construction of section 16(2) the court must, of course, be guided principally by the language of the section itself and by the definition sections in the 1994 Act which bear upon it.
Section 64 provides that: In this Act the expressions listed below are defined by, or otherwise fall to be construed in accordance with, the provisions of this Act indicated below.
Amongst the expressions then listed is amount that might be realised, the provision indicated being section 6(1).
Section 6(1) provides (so far as presently material): For the purposes of this Act the amount that might be realised at the time a confiscation order is made against the defendant is (a) the total of the values at that time of all the realisable property held by the defendant .
Section 6(2) then defines realisable property to mean (again, so far as presently material) (a) any property held by the defendant .
Mr Pownalls central submission is that those definition sections require section 16(2) to be construed as if it read: If, on an application made in accordance with subsection (3) below, the High Court is satisfied that the total values of all property held by the person in question at the time the confiscation order is made is greater than the amount taken into account in making the confiscation order (whether it was greater than was thought when the order was made or has subsequently increased) the court shall issue a certificate to that effect, giving the courts reasons.
For my part I find that a difficult submission.
The words in section 16(2) falling to be construed in accordance with section 6(1) are not amount that might be realised at the time a confiscation order is made against the defendant but are rather amount that might be realised.
When, therefore, one comes to section 6(1), which defines the former (longer) rather than the latter (shorter) expression, it seems to me that the meaning of this shorter expression (that in section 16(2) and section 64) is to be found in the part of section 6(1)(a) reading the total of the values . of all the realisable property held by the defendant ie excluding the words at that time which refer back to the time a confiscation order is made against the defendant, words conspicuously absent from section 16(2).
I would accordingly construe the material words in section 16(2) as if they read: If . the High Court is satisfied that the total of the values of all the realisable property held . is greater than the amount taken into account in making the confiscation order . the court shall issue a certificate .
In short, nothing in the definition sections requires section 16(2) to be construed for all the world as if it referred to the amount that might have been realised at the time the confiscation order was made.
On the contrary, it seems to me plainly directed to the amount that might be realised now and by reference to realisable property now held by the defendant.
As for the words in parenthesis (whether it [the amount that might be realised, as both sides agree] was greater than was thought when the order was made or has subsequently increased) it seems to me that they are designed to encompass all ways in which the amount might have grown and can apply equally to after acquired assets as to concealed assets, undervalued assets or appreciated assets.
The Court of Appeal in the present case thought that after acquired assets fell for consideration within the first limb of the parenthesis.
The Court of Appeal in Northern Ireland in In re Maye [2005] NI CA 41; [2006] NI 206 thought rather that they fell within the second limb, as having caused the realisable amount to be subsequently increased.
For my part I prefer the Northern Ireland view but really it matters not.
No one suggests that the critical issue now arising can be determined by reference to the words in parenthesis.
It follows that, as a matter of pure construction of section 16 itself, I prefer Mr Perrys argument.
There are, however, as it seems to me, other pointers too in the same direction.
It is, for example, accepted that after acquired assets are properly to be taken into account in the operation of sections 15 and 17 of the Act.
True it is that, so far as section 15 is concerned, the question is put beyond doubt by subsections 7 and 9.
But presumably that is because section 15 is directed essentially to revising the assessment of the proceeds of drug trafficking and, but for these subsections, would not appear to involve any recalculation of realisable assets.
Sections 16 and 17 by contrast are directly concerned with determining the value of the defendants realisable property section 16 to see whether it has increased, section 17 to see whether it has proved to be or has become inadequate to pay the amount outstanding.
To my mind it is logical that, by the same token that the defendant cannot require his after acquired assets to be ignored in the determination of his present ability to pay, (as was expressly conceded by Mr Pownall both in his written case and in his oral argument although now rather surprisingly Lord Hope suggests an entirely different view of section 17), nor should they be ignored in deciding whether he can pay an additional amount up to the point when he will have disgorged an amount equivalent to all the benefit which has accrued to [him] from drug dealing (per Rose LJ in Tivnan [1999] 1 Cr App R (S) 92, 97).
The symmetry between sections 16 and 17 is to my mind striking.
Their sidenotes read respectively: Increase in realisable property and Inadequacy of realisable property.
Sidenotes, as Lord Hope explained in R v Montila [2004] 1 WLR 3141, paras 33 34, although unamendable and thus carrying less weight than other parts of the Act, can nevertheless properly be considered in the Acts construction.
Why should realisable property, in one case but not the other, be confined to that held by the defendant at the time of the original confiscation order?
The Court of Appeal in Tivnan [1999] 1 Cr App R (S) 92, 97 further found support for the prosecutions contended for construction of section 16 in section 9(5) of the 1994 Act: Where the defendant serves a term of imprisonment or detention in default of paying any amount due under a confiscation order, his serving that term does not prevent the confiscation order from continuing to have effect, so far as any other method of enforcement is concerned.
Although I would not myself place very much weight upon it, I too would regard section 9(5) as at least a straw in the wind: an indication of Parliaments intention that even serving a term in default will not exonerate a defendant from the possibility of eventually having to disgorge assets up to the extent of his criminal gains.
I also see some force in Mr Perrys argument that Parliament would not willingly have sought to put upon the court the burden of disentangling the value of assets held at the time of the confiscation order from their value at the time of a section 16(2) application.
Suppose that when the confiscation order was made the defendant had partly completed the manuscript of a novel or a painting which was later completed and then sold for a substantial sum.
Or suppose that at the time of the confiscation order he was part way to acquiring a statutory right to buy his council house at a favourable price (the factual background to the Court of Appeal (Criminal Division) decision in R v Bates [2007] 1 Cr App R (S) 9).
Why should the court have to apportion the eventual gain and ignore that part of it acquired subsequent to the confiscation order? Or suppose the defendant wins the lottery.
Why should it make all the difference whether he bought his ticket the day before or the day after the confiscation order was made? Of course, considerations of this kind cannot be decisive.
But I see no good reason to ignore them entirely.
The main argument in support of the appellants case is that it is unfair and counter productive to increase the amount of a confiscation order by reference to after acquired assets.
This, it is said, would militate against his reform and rehabilitation and be likely to discourage him (once he has satisfied any initial confiscation order and been released from any sentence of imprisonment) from engaging in lawful and openly profitable employment.
And, of course, the longer after conviction it is sought to confiscate after acquired assets, the more unfair it may appear.
Such no doubt were the considerations which led the House of Lords in In re Maye [2008] 1 WLR 315 and in R v May [2008] AC 1028 to leave open what Lord Scott in In re Maye, para 24 called this important and difficult question for later decision.
In the same connection Mr Pownall points to the six year limitation period six years beginning with the date of conviction to which applications under sections 13, 14 and 15 of the 1994 Act are all made subject.
If the prosecution cannot beyond such six year time limit seek to obtain, or increase the amount payable under, a confiscation order by reference to the defendants gains from drug trafficking, he asks, why should they be entitled to increase the amount payable in respect of such gains by reference to after acquired assets with no limitation of time whatever?
There seems to me, however, nothing in this latter point.
It is plain that section 16 contains no limitation period, yet no one disputes that it can be invoked without limit of time in respect of concealed, undervalued or appreciated assets.
The absence of a limitation period, therefore, tells one nothing about whether section 16 applies also to after acquired assets.
The reason for introducing a six year time limit into sections 13, 14 and 15 must surely be to establish a finite period for determining the full extent of a defendants criminal gains the ultimate ceiling for any confiscation order.
These sections fix the extent of a defendants criminal liability for disgorgement under the confiscation scheme; sections 16 and 17 go to the very different question as to how far this liability is required to be met.
As for the main argument, based on fairness and rehabilitation, naturally I recognise that Parliament could have chosen a different policy with regard to after acquired assets.
But it seems to me perfectly understandable that in fact Parliament decided (as indisputably it did when later enacting POCA) to leave it open to the courts as a matter of discretion to mulct a defendant of his criminal gains on an ongoing basis irrespective of precisely how and when he came by any increased wealth.
That the court does indeed have a discretion in the matter is plain both from the wording of section 16(4) and from a number of authorities, notably In re Saggar (Confiscation Order: Delay) [2005] 1 WLR 2693; R v Bates [2007] 1 Cr App R (S) 9; and R v Griffin [2009] 2 Cr App R (S) 587.
This is not, however, the occasion to explore the approach to the proper exercise of that discretion or, indeed, the question whether its exercise could ever be affected by considerations arising under the Human Rights Act 1998.
As already noted, there is no challenge here to the exercise of the Crown Courts section 16(4) discretion, only to whether the section 16(2) certificate was lawfully issued.
In my judgment the section 16(2) certificate here was lawfully issued: the section requires that after acquired assets are properly to be taken into account.
In common, therefore, with Lord Walker and Lord Wilson, with both of whose judgments I am in full agreement, I too would dismiss this appeal.
LORD WALKER
On the first issue in this appeal the court is unanimous, and I need say no more than that I agree with the reasoning and conclusions of Lord Brown (with whom Lord Wilson agrees) and Lord Hope (with whom Lady Hale agrees).
But on the second issue there is division.
I agree with Lord Browns reasoning and conclusions of Lord Brown and Lord Wilson and I respectfully disagree with Lord Hopes.
I shall set out my reasons as briefly as possible.
On the second issue Lord Hope takes as his starting point the well established principle of statutory construction that property rights are not to be taken away without compensation unless Parliaments intention to expropriate them has been expressed in clear and unambiguous terms.
The principle is in no doubt.
But the statutory purpose of the Drug Trafficking Act 1994 (the 1994 Act), and similar statutes, could hardly have been made clearer.
As Lord Steyn observed in relation to Part VI of the Criminal Justice Act 1998 in R v Rezvi [2003] 1 AC 1099, 1152, para 14: It is a notorious fact that professional and habitual criminals frequently take steps to conceal their profits from crime.
Effective but fair powers of confiscating the proceeds of crime are therefore essential.
The provisions of the 1988 Act are aimed at depriving such offenders of the proceeds of their criminal conduct.
Its purposes are to punish convicted offenders, to deter the commission of further offences and to reduce the profits available to fund further criminal enterprises.
These objectives reflect not only national but also international policy.
The United Kingdom has undertaken, by signing and ratifying treaties agreed under the auspices of the United Nations and the Council of Europe, to take measures necessary to ensure that the profits of those engaged in drug trafficking or other crimes are confiscated: see the United Nations convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (19 December 1988); Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, Strasbourg, 8 November 1990.
These Conventions are in operation and have been ratified by the United Kingdom.
There are numerous other authoritative statements to the same effect.
It is sufficient to refer to the observations of Lord Bingham in McIntosh v Lord Advocate [2003] 1 AC 1078, para 4 and in R v May [2008] AC 1028, paras 7 to 9.
Once it is recognised that Parliament certainly did intend to strip those convicted of serious crimes of the proceeds of their wrongdoing, the force of the general principle of construction is considerably attenuated.
Of course the fact remains that the 1994 Act is a statute of a penal nature, and its detailed provisions must be closely considered and fairly applied.
But I am not persuaded that the linguistic points mentioned by Lord Hope in paras 60 to 67 of his judgment raise any real doubt, so as to enable the appellant to be given the benefit of that doubt.
Before considering these detailed points I would draw attention to an ambiguity in the expression after acquired property which may lead to confusion (as it did in R v Maye [2008] 1 WLR 315, an appeal from Northern Ireland which must be distinguished from R v May [2008] AC 1028).
A newly acquired asset may be obtained in place of another asset in numerous ways: for instance, by making changes in a portfolio of investments, or by remortgaging a house in order to pay the deposit on a second house, or by receiving cash on the surrender or maturity of a life policy.
These may be termed substituted assets but they are not after acquired property in the relevant sense, that is property accruing to a person (whether as earnings or by gift, inheritance or some other windfall) without a corresponding diminution in that persons existing assets.
All this is elementary and was explained by Lord Scott in R v Maye. (The distinction is clearest in the law of personal insolvency.
Under section 307 of the Insolvency Act 1986 an undischarged bankrupts trustee in bankruptcy can give notice causing after acquired property of the bankrupt to vest in him.
This necessarily means after acquired property in the full sense, since assets acquired by any sort of process of exchange would necessarily already belong to the trustee.)
Section 6 of the 1994 Act explains the meaning of the amount that might be realised when a confiscation order is made.
Section 6(1)(a) shows that it is an aggregate value: The total of the values at that time of all the realisable property held by the defendant, subject to adjustment in two ways that are not now material.
The plural form values indicates, as one would expect, that separate items of property are to be identified and valued.
Section 6(1) expressly focuses on the time when a confiscation order is made.
Section 6(3), referring to various coercive orders that may be made under penal statutes, does not have the same explicit focus.
If the language of section 6(1) has to be adapted to valuation at a later time, as sections 16 and 17 plainly require, I see no reason why section 6(3) should not be adapted in the same way.
In paras 63 and 64 Lord Hope refers to section 15(7) and (9) of the 1994 Act.
Section 15 is concerned with reassessing the proceeds of drug trafficking as determined (in the normal course) under the provisions of sections 2 and 4.
It is a central feature of the legislation that under section 2(4) (and apart from the special procedure for postponed determinations under section 3) the determination of the amount to be recovered is to be made under section 4 (assessing the proceeds of drug trafficking) and section 5 (amount to be recovered under confiscation order) before the convicted defendant is sentenced.
A reassessment of the proceeds of drug trafficking is therefore a major step and subsections (6) to (14) of section 15 are required in order to spell out the detailed changes in the statutory procedure needed to make the process of reassessment workable.
Section 16 is concerned, as Lord Hope observes, with the other part of the formula defining the quantum of any varied confiscation order.
Section 16 (and its counterpart, section 17) are less complicated because the amount of the proceeds (whether as assessed before the original confiscation order was made, or as reassessed under section 15) are by then a given, and section 16 is unmistakeably looking at the matter at the time of the application under that section.
Section 16(2) provides: If . the High Court is satisfied that the amount that might be realised . is greater than the amount taken into account in making the confiscation order.
The section then has a parenthesis with two loosely framed alternatives (Whether it [the amount] was greater than was thought when the order was made or has subsequently increased).
The amount is, as already noted, an aggregate value of separate items of property which must be first identified and then valued.
The past tense of the words was greater is surprising but I do not think anything can turn on it.
It would be odd, to my mind, if separate items of realisable property were to be identified at one date (that of the original confiscation order) but valued at another (the date when the section 16 application is heard).
I agree with Lord Hope that it is not necessary to read section 16 as extending to after acquired assets in order to give it some sensible meaning.
But if after acquired property is excluded, difficult problems of identification and tracing are likely to arise, especially if the individual in question has engaged in business activities highly geared by borrowing, such as those of which the appellant gave evidence.
Had Parliament intended to draw a distinction between substituted assets and after acquired assets it could easily have made its intention clearer.
Neither side made any submission as to the effect of section 7(3) of the 1994 Act.
In relation to section 17 Lord Hope does not accept the submission of Mr Perry QC as to his construction producing symmetry between section 16 (increase in realisable property) and section 17 (inadequacy of realisable property).
Lord Hopes point (though not put quite so bluntly) is that this argument begs the question in that it makes the unreasoned assumption that for the purposes of section 17 after acquired property must be taken into account.
But in my opinion there are sound reasons for approaching the question of symmetry on that basis.
Under section 17 a convicted criminal subject to a confiscation order is asking to be released from his obligation.
The justification for section 17 is that not even the worst offender should be sent to prison for an additional term if he is simply incapable of complying with his obligation under an existing order.
If he can comply with it out of his after acquired assets, he should be required to do so.
For these reasons, and for the fuller reasons set out in the judgments of Lord Brown and Lord Wilson, I would dismiss this appeal.
LORD WILSON
I agree with Lord Brown and Lord Walker that the appeal should be dismissed.
On the first issue I wish to add nothing to Lord Browns judgment.
On the second issue I add this judgment only because the other four members of the court are evenly divided.
I consider that a natural reading of section 16(2) of the 1994 Act yields the conclusion that after acquired assets fall to be taken into account upon applications to the High Court and thereafter to the Crown Court under the section.
There is in my view a fallacy at the heart of the construction which Mr Pownall QC presses upon the court.
The inquiry of the High Court is whether the amount that might be realised is greater than another specified and easily identified amount.
Mr Pownall is right to say that, in the construction of the quoted phrase, section 64 sends the court back to section 6.
But then comes his misconstruction.
Section 6 provides that the amount that might be realised at the time a confiscation order is made. is. the total of the values at that time of all the realisable property held by the defendant subject to adjustments.
But the two references to the time when a confiscation order is made form no part of the meaning of the phrase.
The draftsman of the section is doing no more than to apply the meaning of the phrase, viz the total of the values. of all the realisable property held by the defendant, to the particular time which section 6 is designed to address.
The particular time which, by contrast, section 16(2) is designed to address is the time of the application made thereunder: is the amount that might be realised greater than the other specified amount? In my view, moreover, Mr Pownalls construction does not work if only because it is common ground that, in relation to pre acquired assets, the inquiry is into their value at the time of the application rather than their value at the time when the confiscation order was made.
So I find nothing in section 16(2) to suggest an exclusion of after acquired assets.
On the contrary I consider that the words in parenthesis confirm their inclusion.
The words are whether [the amount that might be realised] was greater than was thought when the order was made or has subsequently increased.
The Court of Appeal relied on the first alternative whereas I consider that the relevant alternative is the second.
The use of the aorist tense (was) in the first alternative requires the court to survey pre acquired assets, in particular when hidden or undervalued at the time when the confiscation order was made, and to assess their true value at that time.
But the use of the perfect tense (has increased) in the second alternative requires the court to survey any increase up to the date of its inquiry in the amount that might be realised, not just because of a rise in the value of the pre acquired assets.
A second obvious reason for such an increase is the acquisition of assets after the date of the confiscation order.
Sections 16 and 17 of the 1994 Act are opposite sides of the same coin.
Their side notes describe their subject matter as increase in realisable property and inadequacy of realisable property respectively.
Both sections address the situation in which, pursuant to section 5(3), the court has ordered that the amount to be recovered from the defendant is the amount that might be realised rather than the higher amount of his proceeds of drug trafficking and in which, subsequently, the prosecution and the defendant wish to argue that the ordered amount should then be seen to be too low or too high respectively and be adjusted accordingly.
There was no issue before this court but that, on an application by the defendant under section 17, the High Court should survey the present value of all the defendants property, whether acquired before or after the making of the confiscation order.
Such was decided by the Court of Appeal, Civil Division, in In re ODonoghue [2004] EWCA Civ 1800 in relation to a provision, namely section 83(1) of the Criminal Justice Act 1988, in substantially identical terms.
It would be surprising if the courts survey under section 16 lacked the same width.
Section 16 does not oblige the Crown Court to order an increase in the amount of the confiscation order (which is subject in any event to the ceiling of the assessed value of the defendants proceeds of drug trafficking) in parallel with its assessment of the amount of the increase in the defendants realisable property.
Subsection (4) confers on it a discretion to order such lesser increase as appears to the court to be appropriate having regard to the amount now shown to be realisable.
It is clear from the decision of the Court of Appeal, Criminal Division, in R v Bates [2006] EWCA Crim 1015, [2007] 1 Cr App R (S) 9, at paras 12 and 13, that factors such as the defendants abandonment of a life of crime, the legitimate nature of his acquisition of the assets, the passage of time since the confiscation order was made and matters of exceptional hardship may be relevant to the exercise of the discretion.
Such is in my view the area which Parliament has provided for the court to make allowance for the type of factors which, as is clear in para 59, Lord Hope instead prefers to weigh in his approach to the exercise of construction.
I agree with the observation of Lord Hope, at para 61 below, that, in the exercise of construction, broad generalisations about the purpose of the 1994 Act are to be avoided.
That is why, in my respectful view, there may be pitfalls in an approach founded first upon a proposition that the Act is not designed to provide for confiscation in the sense in which schoolchildren and others understand it (para 57) or in the popular sense (para 58) and then upon a conclusion that the respondents construction of section 16 would provide for confiscation in such senses.
Nor do I agree that a rule of construction apt to a provision which expropriates property without compensation should be applied to a provision designed to extract from a defendant a sum which cannot exceed the value of his proceeds of drug trafficking.
In my view the most arguable point in favour of the appellants construction of section 16(2) is that Parliament could have made it clearer or, as I prefer to say, even clearer that after acquired assets were to be included.
In this regard a contrast is fairly made with section 22(3) of the Proceeds of Crime Act 2002 and, in particular, with section 15(7) and (9)(c) of the 1994 Act itself.
But then Parliament could have made it clearer or, as I prefer to say, would have made it clearer had such been its intention that after acquired assets were to be excluded.
So, albeit that it is the most arguable, the point fails in my mind to deflect the force of the arguments in support of their inclusion which I have sought to articulate.
LORD HOPE (with whom Lady Hale agrees)
I agree with Lord Brown, for the reasons he gives, that section 16 of the Drug Trafficking Act 1994 was in force on 18 May 2005 in relation to existing confiscation orders such as those which were made against the appellant on 10 July 1997 when Mitting J issued his certificate under that section.
Section 6 of the Proceeds of Crime Act 2002 sets out the basic framework for the making of a confiscation order under the 2002 Act.
Article 3(1) of the Proceeds of Crime Act 2002 (Commencement No 5, Transitional Provisions, Savings and Amendment) Order 2003 provides that section 6 of the 2002 Act shall not have effect where the offence, or any of the offences, mentioned in section 6(2) was committed before 24 March 2003.
There is therefore a clear dividing line between the 1994 Act on the one hand and the 2002 Act on the other as to the date when the scheme of the 1994 Act was to cease to apply and the scheme of the 2002 Act was to take effect.
It would be surprising, however, if article 3(1), which is in the widest terms, was intended to prevent the courts from increasing the amount to be recovered under a confiscation order that was made under the 1994 Act where it turns out after the scheme of the 2002 Act has come into operation that the real value of the proceeds of drug trafficking was greater than the assessed value, or that there was an increase in the defendants realisable property.
That these contingencies, which sections 15 and 16 of the 1994 Act provided for, were not overlooked becomes plain when the Commencement Order is read as a whole.
Article 10(e) states that, where under article 3, a provision of the 2002 Act does not have effect, sections 1 to 36 and 41 of the 1994 Act shall continue to have effect.
These words ensure that the scheme of the 1994 Act is preserved in relation to persons such as the appellant whose offences were committed before 24 March 2003.
It is worth noting, as Lord Brown points out at the end of para 14, that the scheme of the 1994 Act contains, in section 17, a provision that is designed to operate in favour of a defendant unlike sections 15 and 16 which are available to be invoked against him by the prosecutor.
That provision is available where the defendants realisable property is inadequate to enable him to satisfy the terms of the confiscation order.
The court can, if satisfied that this is the situation, substitute a different amount as the amount to be recovered under it.
But for that provision, defendants in the situation that it refers to would be exposed to the risk of a prison sentence for failing to meet the terms of the confiscation order.
The need to preserve the protection that it gives to the defendant is not one which the draftsman of the Commencement Order is likely to have overlooked.
Mr Pownall QC for the appellant submitted, however, that the saving provision in article 10 applied only to orders made after 23 March 2003 by virtue of sections 13, 14 or 19 of the 1994 Act.
This was because orders made under those sections were confiscation orders within the meaning of section 2(9) of the 1994 Act, not variations of existing confiscation orders.
He acknowledged that Parliament was unlikely to have wanted to prevent a defendant whose confiscation order was made before that date from applying for relief under section 17, and he was unable to suggest any good reason for supposing that it was Parliaments intention to exclude the application of sections 15 and 16 in such a case either.
But he said that the wording of the Commencement Order was clear and that article 3(1) was to be read narrowly according to its own terms.
Its effect, in a case such as this, was that section 22 of the 2002 Act which provides for the making of a fresh order on reconsideration of the available amount could not apply, as it was available only in the case of orders made under section 2 of that Act and those referred to in section 2(9).
The answer to this submission is, as I have already indicated, that article 3 does not stand alone.
It has to be read in the context of the Commencement Order as a whole.
Article 10(e) of the Order says all that is needed to preserve the scheme that was comprised in sections 1 to 36 of the 1994 Act.
Its effect is to fill the gap that would have been created if those sections were not to continue to be available where the offence was committed before 23 March 2003.
As sections 15 to 17 were part of that scheme, they remain available.
I would hold that the appellant fails on this issue.
The more difficult question is whether section 16(2) of the 1994 Act extends to after acquired assets in the full sense of that expression as explained by Lord Walker in para 35.
The difficulty lies partly in the wording of that subsection, which is framed in general terms and does not address this question directly, and partly in the nature of the exercise that, on the respondents construction of it, the court is required to carry out.
In R v May [2008] AC 1028, para 9 Lord Bingham of Cornhill said the process for which the statute provides is not confiscation in the sense in which schoolchildren and others understand it.
This was because the object is to deprive the criminal who has benefited financially from crime, directly or indirectly, of what he has gained: see also para 48(1) where he added that the system does not operate by way of a fine.
He had already made that point in McIntosh v Lord Advocate [2003] 1 AC 1078, para 4, where he said that one of the important premises on which the Proceeds of Crime (Scotland) Act 1995 rested was that it was desirable to deprive traffickers of their ill gotten gains.
Lord Steyn in R v Rezvi [2003] 1 AC 1099, para 14 said that the measures that the United Kingdom had undertaken to take by signing and ratifying the relevant treaties was to ensure that the profits of those engaged in drug trafficking are confiscated.
I do not find anything in these observations that suggests that they had mind the problem raised by this case.
The respondent says that the object of the scheme of which section 16 forms part is to deprive the defendant of realisable assets whether or not they consist of after acquired assets in the full sense, albeit not exceeding the value of the benefit received from his offending.
He points out that, when proceeding under section 6 of the 1994 Act, the court was required to assess the amount that might be realised at the time the confiscation order was made by having regard to all assets, irrespective of whether they were acquired by criminal conduct or legitimate means.
The amount to be recovered was not limited to the product of the defendants criminal enterprise.
But it seems to me that if legitimate after acquired assets were to be included too, this would indeed amount to their confiscation in the popular sense.
It seems to be clear that the effect of reading section 16(2) of the 1994 Act in that way could be to penalise a defendant for the efforts of his own enterprise and hard work after he is released from custody.
That objection can indeed be made in this case.
The appellant was released from prison in November 2000.
There is no suggestion that the increase in the value of his assets that has accrued since then has had anything to do with his previous offending.
The assumption must be that the assets that he has acquired as a result of his business activities are entirely legitimate.
I think that to deprive him of the increase can properly be described as confiscation.
This is the kind of situation that, according to well established principles, ought not to be assumed to have been what Parliament intended unless it provided for this in clear terms.
Section 22(3) of the 2002 Act, which states that the court must apply the available amount provision in section 9 when that amount is being recalculated under it as if references to the time the confiscation order is made were to the time of the new calculation, does satisfy this test.
There is no doubt that the solution which section 22(3) has adopted meets the problems of identification and tracing if after acquired property is excluded to which Lord Walker refers in para 39.
The question is whether the same result was achieved by section 16(2), which lacks a clear direction to that effect.
The general principle of construction is that a statute should not be held to take away property rights without compensation unless the intention to do so is expressed in terms which are clear and unambiguous: Colonial Sugar Refining Co Ltd v Melbourne Harbour Trust Comrs [1927] AC 343, 359, per Lord Warrington of Clyffe.
As Lord Reid explained in Westminster Bank Ltd v Beverley Borough Council [1971] AC 508, 529, this principle flows from the fact that Parliament seldom intends to do that, and that before attributing such an intention we should be sure that it was really intended.
But he added this qualification to the way the principle was expressed by Lord Warrington: When we are seeking the intention of Parliament that may appear from express words but it may also appear by irresistible inference from the statute read as a whole.
But I would agree that, if there is a reasonable doubt, the subject should be given the benefit of the doubt.
There is no hint here that this principle should be attenuated according to the impression one forms as to whether or not the subject deserves, or does not deserve, to be given that benefit.
It is a principle of universal application.
Its force would be greatly weakened if it were otherwise.
Lord Bingham was, I think, making the same point in R v May [2008] AC 1028 when, in the course of his description of the principles to be followed by those called upon to exercise this jurisdiction in the future, he said in para 48, under item (4) of his list, that in view of its importance and difficulty the court should focus very closely on the language of the statutory provision in question and in the light of any statutory definition.
We are not concerned in this case with his warning to avoid being distracted by proliferating case law or any judicial gloss or exegesis, as the question which we have to address here was left open both in R v May and in In re Maye [2008] 1 WLR 315.
But his advice that guidance should be sought in the statutory language itself is very much in point in this case.
Broad generalisations as to what the legislation was designed to achieve will not do.
One must concentrate on the words that were used by Parliament.
The wording that the head note to section 16 uses is Increase in realisable property.
The expression realisable property is defined in section 6(2) of the Act: see the index of defined expressions in section 64.
Section 6(1) states that for the purposes of the Act an amount that might be realised at the time a confiscation order is made against the defendant includes, among other things, the total of the values at that time of all the realisable property held by the defendant.
It is in that context that section 6(2) provides: In this Act realisable property means, subject to subsection (3) below (a) any property held by the defendant; and (b) any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Act.
Section 6(3) provides that property is not realisable property if an order made under various Acts which provide for the forfeiture of property is in force in respect of it.
The context in which the definition appears directs attention to the time that the confiscation order is made.
It does not appear to contemplate the carrying out of the exercise that section 6(1) refers to at any later date.
Mr Pownalls argument that the expression realisable property has nothing to do with after acquired property is reinforced by the presence in section 15, which deals with the revised assessment of the proceeds of drug trafficking, of subsections (7) and (9)(c).
Section 15(7) provides: Any determination under section 2(4) of this Act by virtue of this section shall be by reference to the amount that might be realised at the time when the determination is made. [emphasis added] Section 15(9)(c) provides that section 6(1) of the Act shall have effect as if for confiscation order is made there were substituted of the determination.
These modifications would not have been required if the expression the amount that might be realised in section 6(1), read together with section 6(2), was capable of embracing assets acquired after the date when the confiscation order was made.
Section 15 is concerned with the amount assessed to be the value of the defendants proceeds of drug trafficking.
Section 16 is concerned with the other part of the formula that defines the amount to be recovered under the compensation order, as the head note makes clear.
In contrast to what one finds in sections 15(7) and 15(9)(c), there is no indication that in this context the date as at which the realisable property held by the defendant is to be identified, for the purpose of assessing the amount that might be realised by it, is different from that as at which the exercise directed by section 6(1) was carried out.
The fact that recourse to the court under section 16 is not subject to any time limit, unlike section 15(15) which imposes a six year time limit on applications for a revised assessment of the proceeds, adds weight to this argument.
It is not inconceivable that it was the intention that assets acquired legitimately many decades after the making of the confiscation should enable the recoverable amount to be recalculated and it can, of course, be said that there are no words that exclude after acquired property.
But the confiscatory nature of the exercise requires us to be satisfied that this was what Parliament really intended and to give the benefit of the doubt to the defendant if we are not.
Moreover, it is not necessary to read section 16 as extending to after acquired property to make sense of it.
Mr Perry QC for the respondent accepted that section 16 can be invoked where the defendant concealed assets at the time of the confiscation order, or where the assets that were originally taken into account were undervalued when the order was made or where they have increased in value.
The presence of the words in parenthesis in section 16(2), which contemplate that the amount that might be realised was greater than was thought when the order was made or has subsequently increased, is sufficiently explained by those three situations.
They do not point irresistibly to the conclusion that after acquired assets may be taken into account too when the court is determining the amount that might be realised under that section.
Section 17 deals with the problem which arises where the realisable property is inadequate for the payment of any amount remaining to be recovered under the compensation order.
It was said by Mr Perry to support his argument that section 16 extended to after acquired property.
There was, he said, a symmetry between the two sections which enabled the court to have regard to the defendants assets as a whole when it was making its assessment.
There is an obvious symmetry if the cause of the problem is that the assets that were originally taken into account were overvalued at that time or that they have decreased in value.
In either of these situations the property that was taken into account as realisable property within the meaning of section 6(2) would be incapable of providing the defendant with the funds needed to meet the terms of the confiscation order.
So means are provided for an adjustment to be made to take account of this.
There is obvious force in the point that Lord Walker makes in para 41 that the offender should not be excused from his prison sentence if he can comply with the terms of the existing order.
But there is no indication in section 17 that any assets that the defendant may have acquired after the making of the compensation order have any part to play in this assessment.
The fact that it uses the defined expression realisable property (which section 6(2), read with the direction in section 64 as to how these words are to be construed, identifies as the assets held by the defendant at the time of the making of the confiscation order) to identify the subject matter of the exercise is an indication to the contrary.
The symmetry argument might, indeed, be said to support the conclusion that section 16 is no more concerned with after acquired property than, on this reading of it, is section 17.
Section 23(2) of the 2002 Act solves this problem, as does section 22(3), by making it clear in express terms that the available amount is to be re assessed at the time of the new calculation.
It is perhaps worth noting that the author of the unusually detailed annotations to the 1994 Act in Current Law Statutes included the following sentence in his general note on section 16: Note that this section does not apply to property which comes into the possession of the defendant after the order is made.
No reasons are given for this observation.
But this may be because the annotator, who had studied the background to this enactment in great detail, regarded the point as so obvious as not to require any explanation.
In any event, it is of some interest that this was what a contemporary writer understood to be the effect of the section.
For the reasons I have given, I do not think that it is self evident that he was wrong.
A contrast can, no doubt, be drawn between the phrase the amount that might be realised in section 16(2) and the phrase the amount that might be realised at the time a confiscation order is made in section 6(1).
As Lord Brown says in para 21, the words at the time a confiscation order is made are conspicuously absent from the phrase used in section 16(2).
It can also be said that section 16(2) does not in terms confine its attention to what, as defined by section 6(2), is realisable property.
But, as the head note to section 16 indicates, the exercise that it contemplates is concerned only with an increase in the value of realisable property, which is a defined expression.
None of the language that it uses is unworkable on that assumption.
I do not think that the other factors that Lord Brown so helpfully refers to in his judgment carry much weight.
I do not see that section 9(5) of the 1994 Act, to which the Court of Appeal in R v Tivnan [1999] 1 Cr App R (S) 92 attached some importance, as providing any guidance as to what Parliament intended in a case where a defendant who was in default had acquired more assets after the date of the making of the confiscation order.
All one can say is that the purpose of the terms imposed in default of payment is to encourage or coerce payment of the sum due under the order.
They are not imposed as a substitute for payment.
So it makes sense for the order to continue to have effect, for what it may be worth.
I have not found this an easy question to answer, and I confess that my initial impression was that Mr Perry was right and, as there was no express direction to the contrary, that the High Court was entitled under section 16 to have regard to after acquired assets in determining the amount that might be realised.
But, on further reflection, I have concluded that the proper approach is that indicated by Lord Reid in Westminster Bank Ltd v Beverley Borough Council [1971] AC 508, 529.
Before attributing such an intention to Parliament we have to be sure that this is what it really intended.
The section, in contrast to what one finds in section 15, does not say this expressly, and I am unable to say that such an intention appears by irresistible inference when the statue is read as a whole.
I cannot, with the greatest of respect, agree with Lord Walker that the linguistic points that I have mentioned do not raise any real doubt.
In my opinion there is such a doubt, and the benefit of the doubt must go to the appellant.
For these reasons I would allow the appeal and set aside the section 16(2) certificate.
| In January 1997, Mr Peacock was convicted of five offences of conspiracy to supply controlled drugs and sentenced to 12 years imprisonment, reduced on appeal to ten years.
Mr Peacock was found to have benefited from his drug trafficking to the extent of 273,717.50.
However, at the time of sentence, he owned realisable assets worth only 823, so, accordingly, a confiscation order was made against him just for this lesser sum.
Following his release from prison in November 2000, Mr Peacock went into the property business and, entirely legitimately, acquired very substantial assets.
The prosecution sought recovery of the full 273,717.50 and applied to the High Court.
The High Court granted the appropriate certificate increasing the realisable amount under the original confiscation order; and, on application by the prosecution, the Crown Court substituted for the 823 originally recoverable the sum of 273,717.50.
Mr Peacock appealed the lawfulness of the certificate issued by the High Court.
The Court of Appeal dismissed his appeal.
Had Mr Peacock committed the drug trafficking offences of which he was convicted after 24 March 2003, the Proceeds of Crime Act 2002 (POCA) would have applied and, under section 22(3) of that Act, Mr Peacock would clearly have been liable to a further court order increasing to the full extent of his criminal gain the amount recoverable under the confiscation order by reference to his after acquired assets.
However, Mr Peacock committed the relevant drug trafficking offences in 1995, and the question therefore arose whether the same position had obtained under section 16(2) of the Drug Trafficking Act 1994 (the 1994 Act).
The questions for the Supreme Court were: (1) Did section 16 of the 1994 Act apply after POCA came into force on 24 March 2003? (2) If section 16 was in force after 24 March 2003, was the High Court entitled to have regard to after acquired assets under section 16(2) when issuing a certificate to increase the amount payable under the confiscation order?
The Supreme Court dismisses the appeal by a majority (Lord Hope and Lady Hale dissenting on the second issue).
Lord Brown gives the leading judgment of the Court with which Lord Walker and Lord Wilson agree.
The first issue before the Court is dealt with swiftly and by unanimous agreement.
The statutory transitional provisions implemented alongside POCA in 2003 disapplied the entire POCA confiscation order regime in respect of offences committed prior to 24 March 2003.
In respect of such offences, the whole confiscation order scheme provided for by the 1994 Act continues in force.
Accordingly, section 16 of the 1994 applies to Mr Peacocks circumstances [16].
The statutory purpose of the 1994 Act could hardly have been made clearer: to strip those convicted of serious crimes of the proceeds of their wrongdoing [33] [34].
Section 16(2) of the 1994 Act enables
the High Court, on application, to issue a certificate certifying that the amount that might be realised in the case of a person against whom a confiscation order has been made is greater than the amount taken into account in making the confiscation order (whether it was greater than was thought when the order was made or has subsequently increased).
Nothing in the definition sections of the 1994 Act requires section 16(2) to be construed as if it refers to the amount that might have been realised at the time the confiscation order was made.
On the contrary, section 16(2) is plainly directed to the amount that might be realised now and by reference to realisable property now held by the defendant [21].
It is common ground between the parties that, in relation to pre acquired assets, the inquiry is into their value at the time of the application rather than their value at the time when the confiscation order was made [44].
That the provision also applies to after acquired assets property accruing to a person (whether as earnings or by gift, inheritance or some other windfall) without a corresponding diminution in that persons existing assets [35] is clear from the words in section 16(2) in parentheses which encompass all ways in which the amount might have grown [22].
Parliament would have made it clearer had its intention been to exclude after acquired assets from the scope of section 16(2) [49].
Section 17 of the 1994 Act, enabling the High Court on application to grant a certificate that the defendants realisable property is inadequate to meet the amount remaining to be recovered under the confiscation order, is symmetrical to section 16 [23], [41].
They are opposite sides of the same coin [46].
It is logical that, by the same token that a defendant cannot require his after acquired assets to be ignored in the determination of his present ability to pay, nor should they be ignored in deciding whether he can pay an additional amount up to the point when he will have disgorged an amount equivalent to all the benefit which has accrued to him from drug trafficking [23].
By enacting section 16, Parliament decided to leave it open to the courts as a matter of discretion under section 16(4) to deprive a defendant of his criminal gains on an ongoing basis irrespective of precisely how and when he came by any increased wealth [29] [30], [47].
Accordingly, the section 16(2) certificate here was lawfully issued and the appeal is dismissed [31].
Lord Hope (with whom Lady Hale agrees) dissents from the outcome reached by the majority of the Court.
The effect of reading section 16(2) so as to include legitimate after acquired assets could be to penalise a defendant for the efforts of his own enterprise and hard work after he is released from custody.
To deprive Mr Peacock of the increase in the value of his assets legitimately accrued following his release from custody ought not, according to well established principles, to be assumed to have been what Parliament intended unless it provided for this in clear terms [59].
The general principle of construction, of universal application, is that a statute should not be held to take away property rights without compensation unless the intention to do so is expressed in terms which are clear and unambiguous [60].
Although there are no words that exclude after acquired property from the scope of section 16, the confiscatory nature of the exercise under that provision requires us to be satisfied that the inclusion of after acquired property within its scope was what Parliament really intended and to give the benefit of the doubt to the defendant if we are not [64], [71].
|
The issue is simply stated.
Child tax credit (CTC) is payable to one person only in respect of each child, even where the care of the child is shared between separated parents.
It is (now) accepted that entitlement to CTC falls within the ambit of article 1 of the First Protocol to the European Convention on Human Rights (Protection of property): see R (RJM) v Secretary of State for Work and Pensions [2008] UKHL 63, [2009] 1 AC 311.
It is (now) accepted that the rule discriminates indirectly against fathers, because experience shows that they are far more likely than mothers to be looking after the child for the smaller number of days in the week.
The question, therefore, is whether this discrimination is justified or whether the refusal of CTC to a father who looks after his children for three days a week is incompatible with his convention rights.
If it is incompatible there is a further question as to how this incompatibility can be remedied.
The facts
The appellant father has two children, a son born on 7 June 1998, and a daughter born on 6 May 1999.
We are concerned with the period from 12 January 2004 until December 2005.
During that time, they lived with their mother but had very extensive contact with their father, who looked after them for at least three days a week.
A court order dated 8 November 2004 sets out the precise arrangements determined after a contested hearing between the parents.
In effect, this provided for the father to have the children for three full weekends in every four and on Thursdays in the fourth week and for half of all school holidays.
In other cases, such a level of shared care might well be reflected in a shared residence order rather than in an order for residence and contact.
But the labels attached to the arrangements are immaterial for the purpose of the present issue.
Throughout the relevant period, the father was in receipt of income support, contributory incapacity benefit and non-contributory disability living allowance.
Income support was, of course, a means-tested benefit equivalent to income-based jobseekers allowance and set at the officially prescribed subsistence level.
Following the introduction of CTC, the childrens needs were not taken into account in assessing the fathers entitlement to income support.
He claimed CTC in respect of both children but his claim was refused on the ground that the mother had the main responsibility for them.
He challenged this decision on the ground that the rule restricting entitlement to one household discriminated in favour of women.
He succeeded in the Appeal Tribunal (Ref: 201/07/453 and 08/337, 16 June 2008) but failed before Upper Tribunal Judge Jacobs in the Upper Tribunal (CTC/2608/2008, 4 February 2009) and before the Court of Appeal where the judgment of the court was delivered by Richards LJ: [2010] EWCA Civ 56; [2010] 1 FCR 630.
Child Tax Credit
CTC and Working Tax Credit were introduced by the Tax Credits Act 2002 (TCA).
CTC replaced the separate systems for taking account of childrens needs in the tax and benefits systems.
Previously, people in work (or otherwise liable to pay income tax) might claim the childrens tax credit to set off against their income.
This was administered by the tax authorities.
People out of work (or otherwise claiming means-tested benefits) might claim additions to their income support or income-based jobseekers allowance to meet their childrens needs.
This was administered by the benefits authorities.
Under the new system, a single tax credit is payable in respect of each child, irrespective of whether the claimant is in or out of work, and is administered by Her Majestys Revenue and Customs (HMRC).
CTC is like income support and jobseekers allowance, in that it is a benefit rather than a disregard and it is means-tested, so that the higher ones income the less the benefit, until eventually it tapers out altogether.
But in several other respects, including the light touch and non-stigmatising way of measuring income, calculated for the year ahead based on the previous years income, with a balancing exercise at the end of the year, it is like a tax allowance.
As the Government explained, in The Child and Working Tax Credits: The Modernisation of Britains Tax and Benefits System, April 2002, para 2.3: The Child Tax Credit will create a single, seamless system of support for families with children, payable irrespective of the work status of the adults in the household.
This means that the Child Tax Credit will form a stable and secure income bridge as families move off welfare and into work.
It will also provide a common framework of assessment, so that all families are part of the same inclusive system and poorer families do not feel stigmatised.
CTC is, of course, separate from and additional to child benefit, which (at that time) was a universal flat rate benefit available to everyone with children, and also administered by HMRC.
Like CTC, child benefit cannot be split between two claimants (Social Security Contributions and Benefits Act 1992, section 144).
This single payment rule has been challenged but so far unsuccessfully: see R (Barber) v Secretary of State for Work and Pensions [2002] EWHC 1915 (Admin); [2002] 2 FLR 1181.
Where separated parents share the care of their children, they may elect who is to receive the benefit.
Failing that, HMRC has a discretion to decide who should have it, without any statutory test (Sched 10, para 5 of the 1992 Act).
They may, therefore, allocate the benefit for one child to one household and for another child to the other: see R (Ford) v Board of Inland Revenue [2005] EWHC 1109 (Admin).
Entitlement to CTC depends upon making a claim: TCA, section 3(1).
A claim may be made either jointly by a couple or by a single person who is not entitled to make a joint claim: section 3(3).
Opposite or same sex partners who are married or in a civil partnership or living together as if they were married or civil partners are a couple unless they are separated by court order or in circumstances in which the separation is likely to be permanent (section 3(5A) as substituted by paragraph 144(3) of Part 14 of Schedule 24 to the Civil Partnership Act 2004).
Joint claims are assessed on the couples aggregate income (section 7(4)(a)).
Entitlement to CTC depends upon the claimant or either or both claimants in a couple being responsible for one or more children (section 8(1)).
The circumstances in which a person is or is not responsible for a child may be prescribed by regulations (section 8(2)).
If more than one person may be entitled to CTC in respect of the same child, the regulations may provide for the amount of the CTC for any of them to be less than it would be if only one claimant were entitled (section 9(7)).
In other words, the regulations could provide for the CTC to be shared, for example between separated parents, but in fact they do not.
Regulation 3(1) of the Child Tax Credit Regulations 2002 (SI 2002/2007), (as amended by article 4(3) of the Civil Partnership Act 2004 (Tax Credits, etc) (Consequential Amendments) Order 2005 (SI 2005/2919)), provides, so far as relevant: For the purposes of child tax credit the circumstances in which a person is or is not responsible for a child . . .
shall be determined in accordance with the following Rules.
Rule 1 1.1 A person shall be treated as responsible for a child who is normally living with him (the normally living with test).
1.2 This Rule is subject to Rules 2 to 4.
Rule 2 2.1 This Rule applies where (a) a child . . .
normally lives with two or more persons in (i) different households, or (ii) the same household, where those persons are not limited to members of a couple, or (iii) a combination of (i) and (ii), and (b) two or more of those persons make separate claims (that is, not a single joint claim made by a couple) for Child Tax Credit in respect of the child . . .
2.2 The child . . .
shall be treated as the responsibility of (a) only one of those persons making such claims, and (b) whichever of them has (comparing between them) the main responsibility for him (the main responsibility test), subject to Rules 3 and 4.
Rule 3 3.1 The persons mentioned in Rule 2.2 (other than the child . . .) may jointly elect as to which of them satisfies the main responsibility test for the child . . ., and in default of agreement the Board may determine that question on the information available to them at the time of their determination.
As with child benefit, therefore, the parents are free to elect between themselves who is to have the CTC.
Unlike child benefit, however, HMRC is constrained by the main responsibility test if the parents fail to agree.
Although the Act allows for sharing, the decision not to provide for it in the regulations was deliberate.
The Paymaster General, Mrs Dawn Primarolo, explained to Parliament (Hansard House of Commons Debates, 26 June 2002, vol 387, col 926-927): Together [the Act and the regulations] create a system that ensures that the family with main responsibility for a child will be provided with a suitable level of support, depending on their needs.
That is similar to many current systems of support for children, and we believe that currently - it provides the most suitable means to ensure that we can focus support on raising children out of poverty.
Our present aim is to enable one family to claim support for any particular child at any one time.
That is the principle on which the Bill, the draft regulations and the business systems being developed are based.
There are several sound reasons for that approach.
Usually, the person or couple who have the main responsibility for care of a child bear more of the everyday responsibilities for the child, and meet the everyday expenditure for him or her.
It is vital, especially for families on lower incomes, that enough support is directed to that family to lift the child from poverty, or to keep him or her out of poverty.
The Government recognised that patterns of care may be changing, that many more families now share responsibility for children than was previously the case, and so, in future, directing support to one family might not be the right approach.
But they had no intention . .
.
of making hasty or ill-considered changes.
The question of shared responsibility for children goes wider than tax credits and affects other systems of support that recognise the needs of families with children, such as housing benefit.
Consultation and contact with lobby groups had shown that payment of support to the family with the main responsibility for the child is seen as the most appropriate way to deal with the vast majority of families with children.
Any change would also entail extensive and expensive IT and business systems changes.
This no-splitting approach is in line with the approach generally adopted across the benefit system, including housing and council tax benefits, although splitting had earlier been provided for in the child tax allowances which were abolished as from 1982, in the short-lived childrens tax credits which preceded CTC, and in the rules for supplementary benefit which was replaced by income support in 1988.
So the Government adopted a no-splitting policy having had some experience of operating the alternative.
Under the Welfare Reform Act 2012, CTC and many other benefits will be replaced by a new benefit, Universal Credit.
Initially this will apply only to new claims, so that existing claimants will remain on CTC until they are transferred to Universal Credit.
The Government has announced that its current intention is to retain the no-splitting rule (Universal Credit: welfare that works, Chapter 2, para 40).
After the decision not to provide for CTC to be split, there came the decision of the Court of Appeal in Hockenjos v Secretary of State for Social Security [2004] EWCA Civ 1749, [2005] EuLR 385.
This concerned claims for child supplements to jobseekers allowance which had been made in 1997, long before the introduction of CTC.
Father and mother were sharing the care of their two children roughly equally, but the mother was receiving the child benefit in respect of them.
The father was claiming jobseekers allowance, but was denied the supplements applicable to children for whom the claimant was responsible because he was not in receipt of the child benefit.
The regulations provided that the person in receipt of child benefit was to be treated as responsible for the child in question.
Unlike CTC, jobseekers allowance was covered by Council Directive 79/7/EEC, article 4 of which prohibited discrimination on grounds of sex.
The Court of Appeal held that the rule was indirectly discriminatory against fathers; that the link with child benefit could not be justified; and that treating only one parent as responsible in a shared care situation could not be justified.
Following Hockenjos, officials in HMRC and HM Treasury conducted a review of the no splitting rule in CTC.
They produced a Table of Policy Issues, assessing the options of Single Payment, Split Payment and Extra Payment against the criteria of Precedent, Rationale, Impact on the benefits system, Public expenditure, Support for Shared parenting, Administration and Other factors.
The full table is annexed to Upper Tribunal Judge Jacobs decision and the columns relating to the Single payment and Split payment options are reproduced by the Court of Appeal at para 33 of their judgment (the Extra payment option no doubt being regarded by all as a complete non-starter).
The full table is also annexed to this judgment.
Unsurprisingly, officials concluded that there had been no material change in the balance of policies which had led to the original CTC scheme and so no further work was done.
Upper Tribunal Judge Jacobs in the present case distinguished Hockenjos on the basis: first, that discrimination under EU law is different from discrimination under the ECHR; that cost is no excuse in EU law, but it may be a justification under the ECHR; that there were no competing claims in that case, because the mother was not claiming jobseekers allowance; that there was a fundamental principle of equality in EU law; and finally, and most importantly, that the structure of jobseekers allowance and CTC were different.
The Court of Appeal did not think that the differences between EU and ECHR law were likely to lead to materially different outcomes (para 53); but they were impressed that the Government had thought about the issue when introducing CTC and had reviewed the policy in the light of the Hockenjos case (para 55); that there was no equivalent to the linkage with child benefit, which was the primary objectionable feature of the JSA scheme (para 59); and that CTC is a benefit of a different kind from JSA (para 60).
They therefore reached their own conclusion on justification rather than following Hockenjos: [2010] EWCA Civ 56.
The test for justification?
The proper approach to justification in cases involving discrimination in state benefits is to be found in the Grand Chambers decision in Stec v United Kingdom (2006) 43 EHRR 1017.
The benefits in question were additional benefits for people who had to stop work because of injury at work or occupational disease.
They were entitled to an earnings related benefit known as reduced earnings allowance (REA).
But on reaching the state pension age, they either continued to receive REA at a frozen rate or received instead a retirement allowance (RA) which reflected their reduced pension entitlement rather than reduced earnings.
Women suffered this reduction in benefits earlier than men because they reached state pension age at 60 whereas men reached it at 65.
The Court repeated the well-known general principle that A difference of treatment is, however, discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised (para 51).
However, it explained the margin of appreciation enjoyed by the contracting states in this context (para 52): The scope of this margin will vary according to the circumstances, the subject-matter and the background.
As a general rule, very weighty reasons would have to be put forward before the Court could regard a difference in treatment based exclusively on the ground of sex as compatible with the Convention.
On the other hand, a wide margin is usually allowed to the State under the Convention when it comes to general measures of economic or social strategy.
Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the Court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation.
The phrase manifestly without reasonable foundation dates back to James v United Kingdom (1986) 8 EHRR 123, para 46, which concerned the compatibility of leasehold enfranchisement with article 1 of the First Protocol.
In Stec, the Court clearly applied this test to the states decisions as to when and how to correct the inequality in the state pension ages, which had originally been introduced to correct the disadvantaged position of women.
Similarly, the decision to link eligibility for REA to the pension system was reasonably and objectively justified, given that this benefit is intended to compensate for reduced earning capacity during a persons working life (para 66).
The Grand Chamber applied the Stec test again to social security benefits in Carson v United Kingdom (2010) 51 EHRR 369, para 61, albeit in the context of discrimination on grounds of country of residence and age rather than sex.
The same test was applied by Lord Neuberger (with whom Lord Hope, Lord Walker and Lord Rodger agreed) in R (RJM) v Secretary of State for Work and Pensions [2008] UKHL 63, [2009] 1 AC 311, which concerned the denial of income support disability premium to rough sleepers.
Having quoted para 52 of Stec he observed, at para 56, that this was an area where the court should be very slow to substitute its view for that of the executive, especially as the discrimination is not on one of the express, or primary grounds.
He went on to say that it was not possible to characterise the views taken by the executive as unreasonable.
He concluded (para 57): The fact that there are grounds for criticising, or disagreeing with, these views does not mean that they must be rejected.
Equally, the fact that the line may have been drawn imperfectly does not mean that the policy cannot be justified.
Of course, there will come a point where the justification for a policy is so weak, or the line has been drawn in such an arbitrary position, that, even with the broad margin of appreciation accorded to the state, the court will conclude that the policy is unjustifiable.
Their Lordships all stressed that this was not a case of discrimination on one of the core or listed grounds and that this might make a difference.
In R (Carson) v Secretary of State for Work and Pensions [2005] UKHL 37, [2006] 1 AC 173, both Lord Hoffmann and Lord Walker drew a distinction between discrimination on grounds such as race and sex (sometimes referred to as suspect) and discrimination on grounds such as place of residence and age, with which that case was concerned.
But that was before the Grand Chambers decision in Stec.
It seems clear from Stec, however, that the normally strict test for justification of sex discrimination in the enjoyment of the Convention rights gives way to the manifestly without reasonable foundation test in the context of state benefits.
The same principles were applied to the sex discrimination involved in denying widows pensions to men in Runkee v United Kingdom [2007] 2 FCR 178, para 36.
If they apply to the direct sex discrimination involved in Stec and Runkee, they must, as the Court of Appeal observed (para 50), apply a fortiori to the indirect sex discrimination with which we are concerned.
The reality is that, although the rule does happen to be indirectly discriminatory against fathers, the complaint would be exactly the same if it did not discriminate between the sexes.
Mothers who share the care of their children for a shorter period each week while living on subsistence level benefits have exactly the same problem.
The real object of the complaint is the discrimination between majority and minority shared carers.
It is quite likely that the Strasbourg Court would regard this as another status for the purpose of article 14, because they have taken a broad view of what that entails.
But this reinforces the view that they would apply the manifestly without reasonable foundation test of justification.
In fact, the appellant did not argue for anything other than the test established in Stec and RJM.
It is unnecessary for us to consider to what extent the test under the ECHR is different from the test in EU law.
EU law requires that, in order to justify indirect sex discrimination, the state has to show that the rule in question is a suitable and necessary means of achieving a legitimate social policy aim which is unrelated to discrimination on the prohibited ground.
In choosing the measures capable of achieving the aims of its social and economic policy, the state has a broad margin of discretion, although it cannot frustrate the implementation of a fundamental principle such as equal pay for men and women: see R v Secretary of State for Employment, Ex p Seymour-Smith (Case C-167/97) [1999] ECR I-623 and [1999] 2 AC 554.
The Court of Appeal in this case thought that the two tests would not lead to materially different outcomes and in particular that the Court of Appeal in Hockenjos would have reached the same conclusion under the ECHR as they did under EU law (para 53).
Is the rule justified?
But the fact that the test is less stringent than the weighty reasons normally required to justify sex discrimination does not mean that the justifications put forward for the rule should escape careful scrutiny.
On analysis, it may indeed lack a reasonable basis.
This case is different from Stec and Runkee in two important respects.
First, they were concerned with non-means-tested benefits; CTC is of course means-tested, though not at subsistence level, and the other benefits to which the appellant was entitled were at subsistence level.
And secondly, the justification advanced in each case was the historic need to cater for the disadvantage suffered by women in the workplace, in the first place by allowing them to retire with a state pension earlier than men, and in the second place by giving them a pension to compensate for the loss of their deceased husbands income on which they had usually been dependent.
The margin lay in deciding when and how to remove the discrimination.
We are not here concerned with the timing of transitional arrangements, but with a considered policy choice which could last indefinitely.
The appellants case is simple (and skilfully deployed).
He is responsible for looking after his children for three days a week.
He is dependent upon subsistence level benefits: his incapacity benefit is deducted from his income support and his disability living allowance is to meet the particular needs arising out of his disability.
He therefore has nothing with which to meet the needs of his children while they are with him.
The mother could agree to share the CTC and the child benefit with him, but she does not have to do so.
HMRC can give one of them the child benefit for one child and the other the benefit for the other child, but they cannot do this with the CTC.
The court which made the order in the family proceedings has no power to order the mother to share the CTC with the father: the family courts powers to make periodical payments orders for the benefit of children were removed with the introduction of the child support scheme: see Child Support Act 1991, s 8(3).
Splitting used to be possible under the fore-runner to income support and under the child tax allowance scheme, so it can be done.
And in fact it is now possible to share Child Tax Benefit under the comparable scheme in Canada (in Australia, shared carers can each claim the full benefit).
Comparisons with other European states are not helpful, because of their different approaches to the allocation of parental responsibility after separation and of their very different tax and social security systems.
The parties have each done a considerable amount of work on the systems in other countries.
The respondent has produced a Comparative Survey of Legislative Provisions governing the Allocation of Child Benefits in Shared Care Arrangements and the appellant has produced a Research Note into that survey.
Of the 30 countries surveyed, only six provide for splitting child benefits between separated parents; of these, five provide for equal sharing and one provides for sharing in proportion to the time spent caring for the child.
The difficulty, as the appellant points out, is knowing what is meant by a child benefit in the particular country and how it fits into their tax and social security systems as a whole.
Interesting though this information is, it is hard for us to draw any conclusions from it as to the justification for the UK rule, other than that there is little European consensus about the merits of sharing the care of children, let alone about the merits of splitting state support for them.
The respondents case is also simple (and skilfully deployed).
The aim of CTC is to provide support for children.
The principal policy objective is to target that support so as to reduce child poverty.
The benefit attaches to the child rather than the parent.
It is paid to the main carer because the main carer bears more of the everyday expenditure for the child and most of the capital expenditure on things such as clothes, shoes, sporting and leisure equipment, school trips and the like.
Splitting the benefit would reduce the amount available to the main carer, who is usually the one less well placed to earn income, and might result in neither household being able to afford such items as clothes and shoes.
Nor is it obvious how the means test should operate if the award is split.
Should it be based on the main carers household income, or on the minority carers household income, or on both carers household income, or a pro rata award to each based on their household income? Unless based on the main carers income, the total amount payable would go down when the minority carers income went up, thus reducing the amount available to the main carer even before the benefit was split.
Nor is it clear how the benefit should be apportioned between them, especially as shared care arrangements tend to vary over time, while CTC awards are made for a year at a time.
There would inevitably be increased administrative complexity and costs.
Given the overall limits on public expenditure, this would be likely to result in less money being available to support children.
It would also have knock-on effects elsewhere in the system, for example for those benefits which are pass-ported by receipt of the full rate of CTC.
The respondent also points out that the appellant is not attacking the no- splitting rule in every case, but only in cases such as his, where a substantial minority carer is dependent upon means-tested benefits.
In other words, he is asking for an exception to be made to an otherwise justifiable rule.
The more usual case of shared care is likely to involve a minority carer who is in full time work and a main carer who is not.
It is well-established that bright line rules of entitlement to benefits can be justified, even if they involve hardship in some cases.
Hence, this rule cannot be said to be unreasonable or manifestly without reasonable foundation.
As to Hockenjos, the respondents primary case is that it was wrongly decided.
Both Scott Baker LJ and Ward LJ based their decisions upon the view that the EU principle of equal treatment could not be frustrated and thus gave no weight to the margin of discretion.
Arden LJ set out the right test, which was little different from the domestic test of Wednesbury unreasonableness (para 107) but then failed to apply it.
It was unfair to criticise the Government for not addressing its mind to whether there was a viable alternative, as they clearly had done so when introducing the new CTC scheme.
It was also wrong for Ward LJ to base his conclusion on the fact that the parents were not claiming the same benefit and thus competing for the same child premiums.
In fact one was claiming jobseekers allowance and the other was claiming income support, both subsistence level means-tested benefits, to which additional payments for children could be made to one parent only, so the effect of the Court of Appeals decision was a double payment.
Furthermore, as entitlement was linked to child benefit, once the father had claimed and been awarded the child benefit for one child, he also qualified for the additional allowance for that child.
The respondents secondary case, if Hockenjos was rightly decided, is that this case can be distinguished, because it concerns a different test under the ECHR, a different benefit, consideration was given to the alternatives and separated parents are competing for the same benefit.
Discussion
I am a little sceptical about the objective of lifting the child from poverty or keeping him or her out of poverty.
This is, of course, a laudable aim.
But success in achieving it will depend upon how child poverty is defined, rather than upon the actual living standards of real children.
Both this government and the last have committed themselves to abolishing or at least reducing child poverty.
Precise targets are set out in the Child Poverty Act 2010.
But the definitions in the Act all depend upon the relevant income group into which the household where the child lives falls.
Thus, for example, for the target reduction of relative low income (in section 3), the household falls within the relevant income group if its equivalised net income is less than 60% of the median equivalised net household income for the year in question (equivalised means adjusted to take account of variations in household size and composition: s 7).
Thus if support is targeted upon only one household, it will be much easier to say that a child has been lifted out of poverty than it would be if the support had to be split between two households.
However, the statistical definition of child poverty may reflect a wider truth.
If funds are targeted at one household, it is likely that a child living in that household will be better off than he or she would be if the funds are split between two households with modest means.
The state is, in my view, entitled to conclude that it will deliver support for children in the most effective manner, that is, to the one household where the child principally lives.
This will mean that that household is better equipped to meet the childs needs.
It also happens to be a great deal simpler and less expensive to administer, thus maximising the amount available for distribution to families in this way.
The rule is also linked to the move from tax allowances and social security benefits into a seamless tax credit system.
When child additions to subsistence level benefits were decided on a week by week basis, it was practicable, although not easy, to divide them between two households which were claiming the same or essentially the same benefits.
Once the benefit is payable, on a means tested but not subsistence basis, irrespective of the work status of the parents, it becomes much harder to split it between two households who may move in and out of work at different times and whose incomes may be very different.
This brings with it all the problems of how to calculate the benefit mentioned earlier.
It would also mean that the benefit available to the lower income main carer would go down when the higher income minority carers income went up.
The ideal of integrating the tax and social security systems, so as to smooth the transition from benefit to work and reduce the employment trap, has been attractive to policy makers for some time.
The introduction of CTC (and working tax credit) was a step in that direction.
In my view it was reasonable for government to take that step and to regard the targeting of child support to one household as integral to it.
It is also reasonable for a government to regard the way in which the state delivers support for children, and indeed for families, as a separate question from the way in which children spend their time.
The arrangements which separated parents make for their children are infinitely various and variable.
They depend upon a multitude of factors, such as the childrens ages and preferences, where they go to school, how close the parents live to one another, and what the parents can afford.
Most parents can and do sort out these arrangements for themselves.
Only a small minority have to have these imposed upon them by a court, and even then they are free to change them if they both want to do so.
Some might think that the ideal solution would lie with restoring to the family courts the power to make appropriate orders to deal with such payments, either by ordering one parent to share it with the other, or by ordering a periodical payment to take account of the benefits which one parent receives.
Then the order could be properly tailored to the different means available in each household, rather than divided according to an arbitrary criterion of time spent with each parent.
It would not make sense to order a mother living on a low income to make a payment to a father living on a high income just because the children spent some of their time with him.
The children would need the money more when they were living with their mother than when they were living with their father.
But if the circumstances were the other way round, then of course it would make sense to order that the benefit be shared or even ceded entirely to a parent living at subsistence level.
The difficult case is where both parents are living at subsistence level, because without the full amount of the benefit neither might be able to provide properly for the child.
The less happy one of the parents was to share care with the other, the less likely it is that a satisfactory solution will be agreed.
Unfortunately, the advent of the child support scheme has removed the possibility of doing justice from the courts.
To restore it would obviously be the more rational solution to the problem under discussion.
For all the reasons given, I conclude that the no-splitting rule is a reasonable rule for the state to adopt and the indirect sex discrimination is justified.
Remedy
Had I reached a different conclusion, it would have been necessary to consider the difficult question of remedy.
It is difficult for several reasons, not least because this is a statutory appeal rather than judicial review, so that we are limited to upholding or setting aside the tribunals decision and if we set it aside to re-making it ourselves or sending it back to the tribunal to decide.
If we were to disapply Rule 2.2 in reg 3 (para 7 above), the effect of section 7(2) of the 2002 Act would appear to be that, as the father was in receipt of a prescribed benefit, he would be entitled to CTC at the full rate if he were held to be responsible for the children during the period in question, even though the mother has already received it at that rate and there is no machinery for recovering any part of it from her.
In other words, we would be disapplying a rule which has a discriminatory effect without any means of applying the only sensible alternative rule, which is to share the benefit between the parents.
Section 7(2) is in primary legislation and cannot simply be ignored.
Fortunately, we do not have to grapple with this conundrum, although of course that fact that it arises in this case would not have been a reason to hold that the impugned rule is justified.
However I agree with the Upper Tribunal and the Court of Appeal that the rule is justified and would therefore dismiss this appeal.
| This case concerns the scope for justifying indirect discrimination against men in the allocation of Child Tax Credit (CTC).
CTC was introduced by the Tax Credits Act 2002 and replaced the previous separate systems of tax credits and benefit supplements for people looking after children, separately administered by the tax and benefits authorities.
CTC is a benefit payable in respect of each child irrespective of whether the applicant is employed.
It is administered solely by HMRC.
The amount of CTC payable depends on the income of the applicant.
Under the Child Tax Credit Regulations 2002 (SI 2002/2007), CTC in respect of each child is payable to only one person, even where the care of the child is shared between two or more persons.
Entitlement to CTC depends on who is deemed responsible for the child.
Regulation 3(1) creates a set of rules for determining this.
Rule 1 provides that where the child lives with one person, that person is treated as responsible.
Rule 2 provides that where a child lives with two or more persons in different households, the person having main responsibility for the child is treated as being responsible.
The Appellant is a father of two children.
Between January 2004 and December 2005 both children lived with their mother but retained substantial contact with the Appellant, spending most weekends and half of all school holidays with him.
The Appellant applied for CTC which was considered under Rule 2, above.
The Respondent determined that the mother had main responsibility for the children and the Appellants application was rejected.
The CTC was paid solely to the mother.
The Appellant appealed the refusal of CTC arguing that the legislative scheme breached article 14 read with article 1 of the First Protocol to the European Convention on Human Rights (the ECHR) in that it indirectly discriminates against men because, on the whole, fathers are more likely than mothers to have secondary, but nonetheless significant, responsibility for the care of their children.
Entitlement to CTC falls within the scope of the right to protection of property under article 1 of the First Protocol to the ECHR.
Article 14 of the ECHR provides that the enjoyment of rights and freedoms under the ECHR shall be secured without discrimination on grounds of, amongst others, sex.
The HMRC now accepts that the legislative scheme indirectly discriminates against men.
The key issue was whether that discrimination was objectively justified.
The appeal tribunal held that it was not and therefore that denying CTC to the father was a breach of article 14 of the ECHR read with article 1 of the First Protocol.
The Upper Tribunal held that the discrimination was justified and that decision was upheld by the Court of Appeal.
The Supreme Court unanimously dismisses the appeal.
Lady Hale gives the lead judgment with which Lord Walker, Lord Clarke, Lord Wilson and Lord Reed agree.
The Appellant relied upon the Court of Appeal decision in Hockenjos v Secretary of State for Social Security [2004] EWCA Civ 1749, [2005] EuLR 385 in which it was held that the denial of child supplements to a fathers jobseekers allowance where he and the mother shared roughly equal care of the children was unjustified indirect discrimination [12].
The case was brought under European Union anti discrimination law rather than the ECHR.
Following that decision HMRC conducted a review of the no splitting rule in CTC, the results of which helped persuade both the Upper Tribunal and the Court of Appeal that there were features of the instant case distinguishing it from Hockenjos.
The specific test under the ECHR for justifying discrimination in the context of state benefits is set out in Stec v United Kingdom (2006) 43 EHRR 1017, a decision of the Grand Chamber of the European Court of Human Rights [15].
The benefits in that case were for people who were required to stop work because of injury.
Entitlement reduced upon reaching retirement age which had a discriminatory effect on women who reached that age five years before men.
The Court repeated that A difference in treatment is discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised (para 51).
However, when it comes to general measures of economic and social strategy, a wide margin of appreciation is allowed to member states.
The Court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation [16].
Hence this particular measure was justified.
The test in Stec has been applied in other direct discrimination cases.
If it applies to direct discrimination cases, then it must also apply to indirect discrimination cases such as this.
In the context of state benefits, under the ECHR the normally strict test for justification of sex discrimination gives way to the manifestly without reasonable foundation test [19].
This does not mean however that the justifications put forward will escape careful scrutiny by the courts [22].
The Appellants main complaint is that the scheme leaves him with nothing to provide for the needs of his children when they stay with him [23].
Although the mother could choose to share the CTC, neither HMRC nor the courts can compel her to do so.
Against this, HMRC points out that the aim of the scheme is to reduce child poverty.
It is paid to the main carer on the expectation that that person incurs most of the expenditure in looking after the child [25].
Splitting the CTC between two carers of modest means could result in neither of them being able to provide for the childs needs [25].
Furthermore, splitting CTC on the basis of means would introduce administrative complexities and increase costs [25].
Finally, the Appellant is asking for an exception to be made to an otherwise justifiable rule.
It has been previously established that generally justifiable rules are not unreasonable or without foundation merely because they result in hardship in some cases [26].
The scheme in this case is geared towards reducing child poverty.
The current definitions of child poverty rely upon household income, which means that targets will be easier to meet if support is given to single households rather than split [28].
However, the state is entitled to conclude that children will in fact be better off if CTC is distributed in this way rather than divided between two households with modest means [29].
That method is also simpler and less expensive to administer, thereby maximising the funds available for distribution [29].
It was an integral part of the move to combine tax allowances and social security benefits into a seamless tax credit system [30].
It is also reasonable for the state to regard the way in which it delivers support for children and families as a separate issue from the way in which children spend their time [31].
It is perhaps unfortunate that the courts making orders about where children are to live no longer have the power to make consequential orders about benefit sharing, where appropriate [32].
However, the no splitting rule is a reasonable rule for the state to adopt and the indirect discrimination in this case is justified [33].
|
This appeal arises out of the grounding of the OCEAN VICTORY (the vessel) in the port of Kashima in Japan on 24 October 2006.
She was a Capesize bulk carrier, built in China in 2005.
By a demise charterparty dated 8 June 2005, the vessels owners, Ocean Victory Maritime Inc (OVM or the owners), chartered the vessel to Ocean Line Holdings Ltd (OLH), which is or was a related company, on the widely used Barecon 89 as amended.
On 2 August 2006, OLH time chartered the vessel to China National Chartering Co Ltd (Sinochart) and on 13 September 2006, Sinochart in turn sub chartered her to Daiichi Chuo Kisen Kaisha (Daiichi or the charterers) for a time charter trip.
The demise charterparty and both time charterparties contained an undertaking (on materially identical terms) to trade the vessel between safe ports.
On 12/13 September 2006, Daiichi (and thus Sinochart) gave the vessel instructions to load at Saldanha Bay in South Africa and to discharge at Kashima.
Between 19 and 21 September she loaded 170,000 tonnes of iron ore.
She arrived off Kashima on 20 October and discharge began that afternoon.
The port of Kashima is entered from the sea through the northern end of a specially constructed channel known as the Kashima Fairway, which runs almost due north south, and is the only route into and out of the port.
The Kashima Fairway is bounded on one side (to the east) by the South Breakwater and on the other (to the west) by the land.
On 24 October the vessel sought to leave the port during a storm.
However, she allided with the northern end of the South Breakwater and grounded.
Shortly thereafter another Capesize vessel, the ELIDA ACE, also grounded in the Kashima Fairway while attempting to leave the port.
Salvors were engaged but the OCEAN VICTORY eventually broke in two.
Her wreck was subsequently removed in the course of a lengthy wreck removal operation.
Some two years later, on 15 October 2008, Gard Marine & Energy Ltd (Gard), one of the vessels hull insurers at the time of her loss, took assignments of the rights of OLH and OVM in respect of the grounding and total loss of the vessel.
In its capacity as assignee of those rights, Gard subsequently brought a claim against Sinochart (which Sinochart passed on to Daiichi) for damages for breach of the charterers undertaking to trade only between safe ports.
On 30 July 2013, Teare J (the judge) held that the casualty was caused by the unsafety of the port in breach of the safe port undertaking in the time charters.
He awarded Gard substantial damages, namely the agreed value of the vessel (US$88.5m), damages in respect of liability for SCOPIC expenses (US$12m), damages for wreck removal expenses (US$34.5m) and damages for loss of hire (US$2.7m).
Permission to appeal to the Court of Appeal on certain specific issues was granted.
On 22 January 2015, the Court of Appeal (Longmore, Gloster and Underhill LJJ) allowed the appeal and set aside the judgment of the judge on the grounds that the conditions which affected Kashima were an abnormal occurrence and that there was no breach of the safe port undertaking on the part of the charterers.
The Court of Appeal also held that, in the light of the insurance provisions of the demise charterparty, OVM and OLH (and Gard as their assignee) were not entitled to claim in respect of losses covered by the hull insurers.
On 20 May 2015 Gard were granted permission to appeal to this Court.
Issues in the appeal
The parties agreed the issues in this appeal as follows. 1.
Was there a breach of the safe port undertaking? In particular the following specific questions were agreed: (1) was the port unsafe within the meaning of the safe port undertaking, so that the charterers were in breach; or (2) was there an abnormal occurrence within the context of the safe port undertaking, which was no breach of the undertaking? If there was a breach of the safe port undertaking, do the provisions 2. for joint insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterer for breach of an express safe port undertaking.
If there was a breach of the safe port undertaking, is Daiichi entitled 3. to limit its liability for Gards losses or any (and, if so, which) of them as against Sinochart (and Sinochart in turn against Gard) pursuant to section 185 and Schedule 7 article 2(1) of the Merchant Shipping Act 1995? It was agreed that in the event that the appeal succeeds (that is that the answer to issue 1(1) is yes), issues of time bar and causation should be remitted to the Court of Appeal.
In this judgment I will focus first on the safe port issue.
Safe port the facts
The events which led to the grounding and subsequent loss of the vessel are summarised in paras 127 and 128 of the judges judgment as follows: 127.
The danger facing OCEAN VICTORY was one which was related to the prevailing characteristics of Kashima.
The danger flowed from two characteristics of the port, the vulnerability of the Raw Materials Quay to long swell and the vulnerability of the Kashima Fairway to northerly gales caused by a local depression.
It may well be a rare event for these two events to occur at the same time but nobody at the port could, I consider, be surprised if they did.
There is no meteorological reason why they should not occur at the same time.
Long waves were clearly a feature of the port (as they must be of any port facing the Pacific) and low pressure systems generating gale force winds cannot, in my judgment, be regarded as abnormal.
I do not consider that the juxtaposition of long waves and a low pressure system generating gale force winds from the north amounts to an abnormal occurrence unrelated to the characteristics of Kashima.
Long waves may give rise to a need for a vessel to leave the port.
It may be a matter of chance whether at that time there is also a low pressure system generating gale force winds from the north but I am unable to accept that such winds are so rare that they cannot be said to be a feature of the port.
It is not without significance that the Guide to Port Entry notes that during periods of northerly swell the entry channel is fully exposed and that vessels at low speed generally have difficulty in steering. 128.
It may be that the storm which affected the port on 24 October 2006 was one of the most severe storms to have affected Kashima in terms of severity, speed of deterioration and duration as suggested by Mr Lynaghs analysis of its characteristics.
But the relevant characteristics are those which give rise to the danger, namely the occurrence of long waves and northerly gales.
Neither long waves nor northerly gales can be described as rare.
Even if the concurrent occurrence of those events is a rare event in the history of the port such an event flows from characteristics or features of the port.
The principles abnormal occurrence
In the Court of Appeal Longmore LJ (giving the judgment of the court) noted in para 14 that it was common ground between the parties that, if the damage sustained by the vessel at Kashima on 24 October 2006 was caused by an abnormal occurrence, then the charterers would not have been in breach of the safe port warranty.
That common ground was based on the classic dictum of Sellers LJ in The Eastern City [1958] 2 Lloyds Rep 127, 131 that: A port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship .
Longmore LJ added in para 15 that what was in dispute between the parties on the appeal in relation to this issue was (i) what, as a matter of law, was the correct test for an abnormal occurrence; (ii) in particular, was the judge correct to hold (in paras 110, 127 128, 132 and 134 of his judgment) that the combination of two weather conditions on the casualty date (namely the phenomenon of swell from long waves, which might have forced the vessel to leave the berth, and a very severe northerly gale which meant that the vessel could not safely exit the port) was not to be characterised as an abnormal occurrence, notwithstanding that the coincidence of the two conditions was rare, because both conditions were physical characteristics or attributes of the port; and (iii) on the facts as found by, or undisputed before, the judge, did the weather conditions on the casualty date amount to an abnormal occurrence? It is important to note that it was not submitted that the relevant test could or should be other than that described by Sellers LJ in The Eastern City.
In any event that test has stood the test of time.
The question is what is meant by an abnormal occurrence.
The Court of Appeal summarised the charterers case in para 44 of their judgment as follows: (i) There was no breach of the safe port undertaking.
By the safe port undertaking, the charterers did not assume responsibility for loss from every foreseeable risk at the port to which the ship was ordered.
They assumed responsibility only for risks which were sufficiently regular or sufficiently foreseeable to amount to an attribute or feature of the port. (ii) The prospective nature of the undertaking was material to the test, because the right way to approach this test was to imagine a charterer with full knowledge of the port giving the order on the relevant day.
He had to ask himself: will the port be safe for the ship to reach, use and depart from? If he could say yes, then, barring some abnormal occurrence, there was no breach.
So a charterer did not assume the risk of loss from an unusual event which was not characteristic of the port at the time when the ship should be there.
The obligation to give indemnity for loss from such unusual events lay properly and legally with the owners hull insurers. (iii) The phrase abnormal occurrence was not a term of article An occurrence was just an event something that happened on a particular time at a particular place in a particular way.
Abnormal was something well removed from the normal.
It was out of the ordinary course and unexpected.
It was something which the notional charterer would not have in mind. (iv) A rare event could not be an attribute of a port.
It was, in the language of the cases, an abnormal occurrence and so outside the undertaking.
The judge erred in law in holding that a rare event was a feature of the port. (v) The judge erroneously held that it did not matter if the event was rare or unexpected, provided it arose from the combined occurrence of two or more characteristics or attributes of the port. (vi) Words such as characteristic or attributes of the port were tools to help identify what arose in the ordinary course.
They were not intended to bring events well out of the ordinary course into the scope of the charterers undertaking. (vii) The judge went wrong by breaking down the question into components instead of asking one unitary question, namely: would it be an unexpected event for Capesize vessels calling at Kashima to find it necessary to leave the berth due to danger from a long wave swell at the very time when it was dangerous to transit the Fairway? The judges approach was to consider whether long waves and strong northerly winds from low pressure storms affecting navigation in the Kashima Fairway were respectively attributes of the port.
Having reached the conclusion that they were attributes, he wrongly assumed that it did not matter how rare their combination was. (viii) On the facts, the combination of the two weather events (namely long waves and strong northerly winds from low pressure storms) had never apparently happened in the previous 35 years preceding the instruction to proceed to Kashima.
Accordingly the conditions on 24 October were an abnormal occurrence for which the charterers were not liable.
It was not in dispute that the question whether the port was unsafe must be tested as at the moment that the charterers instructed the owners to proceed to it.
It was submitted on behalf of the charterers that the appropriate test was whether a reasonable shipowner trading the ship for his own account and knowing the relevant facts would decline to proceed to the nominated port.
That is essentially the test set out in the Court of Appeals summary of the charterers case in sub para 44(ii) above.
To my mind the key points in this appeal are to be found in sub paras 44(i), (ii), (iii) and (iv).
It is important to note that the test is not whether the events which caused the loss were reasonably foreseeable.
Reasonable foreseeability is a well known test in some parts of the law of tort, notably negligence and remoteness of damage.
The courts could well have adopted such a test but they have not done so.
Instead they have asked whether the relevant event was an abnormal occurrence.
What then is meant by abnormal occurrence? The question is whether it has the meaning proposed by the charterers and set out in para 44(iii) quoted above or the meaning proposed by Gard in para 66 of its case as follows: The phrase abnormal occurrence in the Court of Appeals judgment took on its own momentum as a term of art or something to be construed as if in a statute.
It is not.
The phrase is not something that appears in the words of the charter.
It is a qualification derived from the authorities intended to assist the court, and the parties, to work out whether the port was safe within the contractual clause.
It is a description for an occurrence which does not result from the set up or characteristics of the port; the set up and characteristics of the port (tested at the time the order is given) being the concern of the safe port undertaking.
In other words, an abnormal occurrence is in contradistinction to an occurrence which results from the set up or characteristics of the port.
The result of the Court of Appeals approach is to widen the category of abnormal occurrences, so as to include occurrences which do result from the set up of the port, and in turn to narrow the circumstances in which a port will be regarded as unsafe (despite the obligation being a strict one).
I would accept the charterers submission recorded in sub para 44(iii) that an abnormal occurrence has its ordinary meaning.
It is not a term of article As stated in that sub paragraph, [a]n occurrence was just an event something that happened on a particular time at a particular place in a particular way.
Abnormal was something well removed from the normal.
It was out of the ordinary course and unexpected.
It was something which the notional charterer would not have in mind.
We were referred to a number of cases which seem to me to support that conclusion.
Sellers LJs famous dictum quoted above was taken from the judgment of Morris LJ in The Stork [1955] 2 QB 68, 105, which was a time charterparty case.
See also Reardon Smith Line Ltd v Australian Wheat Board (The Houston City) [1956] AC 266, which was a voyage charterparty case to which essentially the same principles were applied.
In Kodros Shipping Corpn v Empresa Cubana de Fletes (The Evia) (No 2) [1983] 1 AC 736, which was another time charterparty case, Lord Diplock said at p 749 that he regarded the nature of the contractual promise by the charterer in what he called the safe port clause as having been well settled for a quarter of a century at the very least.
He referred specifically to the expression abnormal occurrence used by Sellers LJ in The Eastern City which he said reflected the previous statement of Morris LJ in The Stork.
At p 749H, Lord Diplock referred to the distinction between damage sustained by a particular vessel in a particular port on a particular occasion caused by an abnormal occurrence and damage resulting from some normal characteristic of the particular port at the particular time of year.
He added that there were dangers that judges of first instance sometimes omitted important qualifications.
He was referring (at p 750A B) to what he called the heresy that, in the previous decade or so, had been embraced by judges in the commercial court culminating in that of Mustill J in Transoceanic Petroleum Carriers v Cook Industries Inc (The Mary Lou) [1981] 2 Lloyds Rep 272, 277.
Lord Diplock agreed with the judgment of Lord Roskill which had been prepared with the assistance of Lord Brandon.
The heresy to which Lord Diplock referred was that identified by Lord Roskill at p 757.
It arose in the construction of what he described as these eight words in clause 2 of the relevant time charterparty: The vessel to be employed between safe ports Those were essentially the same words as in the charterparties in the instant case.
The heresy identified by Lord Diplock was the conclusion of Mustill J in The Mary Lou and, indeed, of Robert Goff J in The Evia (No 2) that there was an absolute continuing contractual promise that at no time during her chartered service would the ship find herself in any port which was or had been unsafe for her: see Lord Roskill at p 756G.
On p 757 Lord Roskill gave his reasons for rejecting that approach as a matter of construction of the charterparty.
In particular, he said at p 757D that a charterer will exercise his contractual right to require the shipowner to carry out his contractual obligations by giving the shipowner orders to go to a particular port or place of loading or discharge.
He added that it was clearly at the point of time when that order is given that the contractual promise to the charterer regarding the safety of that intended port or place must be fulfilled.
Lord Roskill then said this at p 757E: The charterers contractual promise must, I think, relate to the characteristics of the port or place in question and in my view means that when the order is given that port or place is prospectively safe for the ship to get to, stay at, so far as necessary, and in due course, leave.
But if those characteristics are such as to make that port or place prospectively safe in this way, I cannot think that if, in spite of them, some unexpected and abnormal event thereafter suddenly occurs which creates conditions of unsafety where conditions of safety had previously existed and as a result the ship is delayed, damaged or destroyed, that contractual promise extends to making the charterer liable for any resulting loss or damage, physical or financial.
So to hold would make the charterer the insurer of such unexpected and abnormal risks which in my view should properly fall upon the ships insurers under the policies of insurance the effecting of which is the owners responsibility under clause 3 unless, of course, the owner chooses to be his own insurer in these respects.
Having expressed those views as a matter of construction of the charterparty, Lord Roskill analysed the cases and concluded that they strongly supported the views he had expressed.
The cases included Ogden v Graham (1861) 1 B & S 773 and GW Grace and Co Ltd v General Steam Navigation Co Ltd (The Sussex Oak) [1950] 2 KB 383 in addition to The Stork, The Houston City and The Eastern City.
He noted in particular the dissenting judgment of Sir Owen Dixon CJ in the High Court of Australia in The Houston City which was accepted as correct by the Privy Council.
Lord Roskill paid particular attention at p 760 to the reference to some abnormal occurrence by Morris LJ in The Stork, which, as he put it, was the foundation of the similar view of Sellers LJ in The Eastern City as described above.
Like Lord Diplock, Lord Roskill emphatically adopted that approach as correct.
As I read the remainder of his judgment, in which he refers to a number of other cases, they are all to substantially the same effect.
In all these circumstances, I would accept these three submissions made on behalf of the charterers arising out of the cases referred to above and, in particular The Evia (No 2) in the House of Lords.
First, the date for judging breach of the safe port promise is the date of nomination of the port.
A safe port promise is not a continuing warranty.
Second, the promise is a prediction about safety when the ship arrives in the future.
These propositions are not in dispute.
As I see it, such a promise necessarily assumes normality; given all of the characteristics, features, systems and states of affairs which are normal at the port at the particular time when the vessel should arrive, the question is whether the port is prospectively safe for this particular ship.
If the answer is yes unless there is an abnormal occurrence, the promise is fulfilled.
As Robert Goff J said at first instance in The Evia (No 2) [1981] 2 Lloyds Rep 613, 621, the formulation of a test whether the port is unsafe must assume normality, and must therefore exclude danger caused by some abnormal occurrence.
I would further accept the third submission made on behalf of the charterers that on the authorities to which I have referred, safe port disputes should be reasonably straightforward.
Was the danger alleged an abnormal occurrence, that is something rare and unexpected, or was it something which was normal for the particular port for the particular ships visit at the particular time of the year?
I would also accept the submission that this approach, that is the approach in The Eastern City as elaborated by Lord Roskill and Lord Diplock in The Evia (No 2), provides a coherent allocation of risk between the various interests as follows.
The owners are responsible for loss caused by a danger which is avoidable by ordinary good navigation and seamanship by their master and crew.
The charterers are responsible for loss caused by a danger which was or should have been predictable as normal for the particular ship at the particular time when the ship would be at the nominated port and was not avoidable by ordinary good seamanship.
The owners (and ultimately their hull insurers) are responsible for loss caused by a danger due to an abnormal occurrence.
As Lord Roskill put it at p 757E quoted above, charterers are not insurers of unexpected and abnormal risks.
On the contrary, the charterparty terms require owners to take out hull insurance (as they will invariably do) which is their protection against rare and unexpected events.
On the charterers case on the facts, the characteristics of the port were such that the ship was prospectively safe, but they unexpectedly combined in a critical way such as to create an exceptional, and apparently unprecedented danger.
This was within the letter and spirit of Lord Roskills description of an unexpected and abnormal risk.
It is to my mind important to note the emphasis in the cases upon the meaning of the expression abnormal occurrence.
I would accept the charterers submission in para 44(iii) of the Court of Appeals judgment that abnormal is something well removed from the normal.
It is out of the ordinary course and unexpected.
It is something which the notional charterer or owner would not have in mind.
In short, I would accept the charterers submission that the first question is whether a reasonable shipowner in the position of the particular shipowner trading the ship for his own account and knowing the relevant facts would proceed to the nominated port.
If the answer is yes unless there is an abnormal occurrence, the port is prospectively safe for the particular ship and the promise is fulfilled.
In a case where the vessel suffers loss or damage, a second question arises, namely whether there was damage caused by an abnormal occurrence as defined above.
Contrast between the approaches of the judge and of the Court of Appeal
This contrast can be seen in the judgment of the Court of Appeal.
Having summarised the essential facts at para 48, in para 49 the Court of Appeal described the core of the judges reasoning at paras 127 129 of his judgment thus: On analysis his approach appears to have been that, in deciding whether the casualty resulted from an abnormal occurrence: he did not need to consider the evidence relating (i) to how rare the critical combination of the two component dangers was, although, without analysing the evidence in any detail, he was prepared to hold that it may well be a rare event for these two events to occur at the same time; (ii) he did not need to consider whether the critical combination was rare, because [e]ven if the concurrent occurrence of those events is a rare event in the history of the port, what mattered was that: (a) separately the two component features of the critical combination were characteristics or attributes of the port; looked at separately, neither of the two b) component features could be said to occur rarely; long waves and northerly gale winds were at least foreseeable in Kashima; (c) there was no meteorological reason why the two component features should not occur at the same time; despite the fact that the storm which affected Kashima on 24 October 2006 may have been exceptional in terms of its rapid development, its duration and its severity, there was a clear risk of gale force winds from the northerly quadrant in the Kashima Fairway at the same time as long waves were affecting the Raw Materials Quay; (d) therefore, it was necessarily foreseeable that at some stage the critical combination would occur and nobody could be surprised if it did; and (e) the critical combination was accordingly an event which flow[ed] from the characteristics or features of the port; (iii) accordingly, in those circumstances the critical combination could not be said to be an abnormal occurrence; in the language of Mustill J (as he then was) in The Mary Lou , the critical combination was not something which could be said, if the whole history of the port were regarded, to have been out of the ordinary; again, adopting Mustill Js words, long waves and northerly gale winds were events of the type and magnitude in question [which were] sufficiently regular or at least foreseeable to say that their occurrence is an attribute or characteristic of the port, so as not to amount to an abnormal occurrence; the critical combination flowed from those characteristics and therefore could not be an abnormal occurrence.
In paras 50ff the Court of Appeal embarked upon a critique of the judges approach.
In para 50 they set out their conclusion that the judges approach was flawed.
They then referred in detail to the speeches of Lord Diplock and Lord Roskill in The Evia (No 2).
In the speech of Lord Roskill they highlighted in bold the passage at p 757E which I quoted at para 21 above.
It is to my mind important that that passage includes the proposition that where the characteristics of a port make the port prospectively safe, Lord Roskill did not think that if some unexpected and abnormal event thereafter suddenly occurs which creates conditions of unsafety where conditions of safety had previously existed and as a result the ship is delayed, damaged or destroyed, that contractual promise extends to making the charterer liable for any resulting loss or damage, physical or financial.
He added that so to hold would make the charterer the insurer of such unexpected and abnormal risks which should properly fall on the ships insurers.
Immediately after quoting an extensive passage from the speech of Lord Roskill in The Evia (No 2), most of which is quoted above, in para 52 the Court of Appeal said that its import was clear.
They said that charterers do not assume responsibility for unexpected and abnormal events which occur suddenly and which create conditions of unsafety after they have given the order to proceed to the relevant port.
They are the responsibility of the ships hull insurers (if owners have insured) or of owners themselves.
The Court of Appeal further noted in para 52 that the concept of safety is necessarily not an absolute one.
They did so by reference to the decision of the Court of Appeal in The Saga Cob [1992] 2 Lloyds Rep 545, 551, where, in the context of political risks, Parker LJ, giving the judgment of the court, said this: In the latter [the safe port warranty case] one is considering whether the port should be regarded as unsafe by owners, charterers, or masters of vessels.
It is accepted that this does not mean that it is unsafe unless shown to be absolutely safe.
It will not, in circumstances such as the present, be regarded as unsafe unless the political risk is sufficient for a reasonable shipowner or master to decline to send or sail his vessel there.
In the instant case the Court of Appeal, in my opinion correctly, held (at para 53) that a similarly realistic approach should be adopted to the determination of what it called the essentially factual question whether the event giving rise to the particular casualty is to be characterised as an abnormal occurrence or as resulting from some normal characteristic of the particular port at the particular time of year.
The Court of Appeal, emphasised the word normal in the term normal characteristic, noting that it was used by Lord Diplock when he observed in The Evia (No 2) at p 749 that: it is not surprising that disputes should arise as to whether damage sustained by a particular vessel in a particular port on a particular occasion was caused by an abnormal occurrence rather than resulting from some normal characteristic of the particular port at the particular time of year.
Importantly in the instant case, the Court of Appeal further observed (also at para 53) that, in what they described as an illuminating passage, in The Saga Cob the Court of Appeal at pp 550 551 emphasised that the fact that an event (in that case a guerrilla attack) was theoretically foreseeable did not make it a normal characteristic of the port.
They noted that on the facts in The Saga Cob the event relied upon could not be regarded as other than an abnormal and unexpected event.
This approach underlines the fact that foreseeability is not the test of the normality of an event.
The cases show that an abnormal occurrence or event is something that is unexpected when the vessel arrives at and remains in the port: see eg The Evia (No 2) per Lord Roskill quoted at paras 21 and 30 above.
In para 54 the Court of Appeal placed reliance upon the approach of Mustill J in The Mary Lou at p 278.
They noted that in his description of what constitutes an abnormal occurrence, Mustill J implicitly recognised the need to approach the identification of an abnormal occurrence realistically and having regard to whether the event had occurred sufficiently frequently so as to become a characteristic of the port.
At the end of the same paragraph, having recognised the difficulty of finding an appropriate turn of phrase, Mustill J said this: It may be said that the loss is not recoverable unless events of the type and magnitude are sufficiently regular or at least foreseeable to say that the risk of their occurrence is an attribute or characteristic of the port.
Or it may be said that abnormal or casual events do not found a claim.
The Court of Appeal identified a number of respects in which they concluded that the judge went wrong.
They summarised them in para 55 of their judgment: First of all he failed to formulate the critical and unitary question which he had to answer: namely, whether the simultaneous coincidence of the two critical features, viz (a) such severe swell from long waves that it was dangerous for a vessel to remain at her berth at the Raw Materials Quay (because of the risk of damage or mooring break out) and (b) conditions in the Kashima Fairway being so severe because of gale force winds from the northerly/north easterly quadrant), as to make navigation of the Fairway dangerous or impossible for Capesize vessels, was an abnormal occurrence or a normal characteristic of the port of Kashima? Or put even more simply, was it an abnormal occurrence or a normal characteristic of the port that a vessel might be in danger at her berth at the Raw Materials Quay but unable at the same time safely to leave because of navigation dangers in the Kashima Fairway arising from the combination of long waves and gale force northerly winds which, in fact, occurred?
The Court of Appeal added in para 56 that, instead of asking the unitary question directed at establishing the correct characterisation of the critical combination (abnormal occurrence or normal characteristic of the port), the judge merely addressed the respective constituent elements of the combination (swell from long waves making it dangerous for a vessel to remain at the Raw Materials Quay and gale force winds from the northerly/north easterly quadrant making navigation of the Fairway dangerous or impossible for Capesize vessels) separately.
He looked at each component and decided that, viewed on its own, neither could be said to be rare and both were attributes or characteristics of the port.
The Court of Appeal concluded that that was the wrong approach; what mattered was not the nature of the individual component dangers that gave rise to the events on 24 October, but the nature of the event (namely the critical combination of the two) which gave rise, on the judges findings, to the vessel effectively being trapped in port.
The Court of Appeal further held in para 57 that the judge was also wrong to hold that, even if the critical combination was rare, nonetheless it was a characteristic of the port, for two reasons.
The first (as stated in his para 127) was because, although it might well be rare for these two events to occur at the same time, nobody at the port could be surprised if they did, and there was no meteorological reason why they should not occur at the same time.
The second (as stated in his para 128) was because, even if the concurrent occurrence of those events was a rare event in the history of the port, such an event flowed from the characteristics or features of the port.
The Court of Appeal concluded that both reasons were fallacious.
In my opinion they were correct so to hold.
As to the first, the Court of Appeal noted in para 58 that the conclusion that nobody at the port could be surprised that both the above events occurred at the same time appears to have been based on the idea that, provided an event is theoretically foreseeable as possibly occurring at the relevant port, because of the ports location, then that is enough to qualify the event as a characteristic of the port.
The Court of Appeal correctly said at para 58 that the judge appears to have derived that test from dicta in the judgment of Mustill J in The Mary Lou at p 278, where (in the passage quoted at para 33 above) he referred to long waves and northerly gale winds as being at least foreseeable.
However the Court of Appeal, in my opinion correctly, held that satisfaction of the test of mere foreseeability was per se clearly not sufficient to turn what the judge himself described as a rare event in the history of the port into a normal characteristic or attribute of the port.
They held that the error made by the judge was to pick up on the words at least foreseeable in his citation from Mustill Js judgment, and to use minimum foreseeability, without more, as some sort of litmus test for establishing whether an event was a characteristic of a port, without having any regard to significant factors such as the actual evidence relating to the past history of the port, the frequency (if any) of the event, the degree of foreseeability of the critical combination and the very severe nature of the storm on the casualty date.
The Court of Appeal further held that in doing so the judge departed from the orthodox and practical approach of Mustill J in his judgment in The Mary Lou at p 278 and of Lords Diplock and Roskill in The Evia (No 2), to the question of whether an event was abnormal.
Such an approach necessarily includes an examination of the past history of the port and of whether, in that evidential context, the event was unexpected.
I agree.
The Court of Appeal also noted in para 58 that he took the phrase at least foreseeable as used by Mustill J out of context.
I agree with the Court of Appeal that it is clear that, when the passage is read in context, Mustill J was certainly not suggesting that mere, theoretical, foreseeability on its own was sufficient.
He was not setting up some sort of alternate test which excluded considerations of questions such as the frequency of past occurrences of the particular event, or the degree of likelihood that the event was to occur in the future.
Moreover, the Court of Appeal noted at para 59 that, as the Court of Appeal emphasised in The Saga Cob in the passage cited at para 32 above, one has to look at the reality of the particular situation in the context of all the evidence, to ascertain whether the particular event was sufficiently likely to occur to have become an attribute of the port.
Otherwise the consequences of a mere foreseeability test lead to wholly unreal and impractical results.
The Court of Appeal focused on these examples in the instant case: does the mere fact that it is foreseeable from the location of San Francisco that earthquakes may occur in its vicinity, or from the location of Syracuse, beneath Mount Etna, that there may be volcanic explosions in its vicinity, predicate that any damage caused to vessels in those ports from such events, were they to occur in the future, would flow from the normal characteristics or attributes of those ports, and therefore necessarily involve a breach of any safe port warranty? The answer given by the Court of Appeal was obviously not; whether, in such circumstances, there would be a breach of the safe port warranty, or the event would be a characterised as an abnormal occurrence, would necessarily depend on an evidential evaluation of the particular event giving rise to the damage and the relevant history of the port.
The Court of Appeal was particularly struck (at para 60) by the fact, as they put it, that the judge provides no evidential basis for his apparent factual conclusion that nobody at the port could, I consider, be surprised if the crucial combination occurred, or for the conclusion reached earlier in para 110 of the judgment that there must have been a clear risk of gale force winds from the northerly quadrant in the Kashima Fairway at the same time as long waves were affecting the Raw Materials Quay.
The final conclusion of the Court of Appeals on the first reason advanced by the judge and referred to by the Court of Appeal in para 57 was set out in para 61 of their judgment (which must be read in the context of para 60) as follows: 61.
In the light of the evidence to the effect that no vessel in the ports history had been dangerously trapped at the Raw Materials Quay, with a risk of damage or mooring break out, at the same time as the Kashima Channel was not navigable because of gale force winds, it is difficult to see how he reached this conclusion.
This may be because he did not adequately focus evidentially on the particular situation which he had to consider, namely one where a vessel was effectively trapped, because the swell from long waves affecting vessels berthed at the Raw Materials Quay was so severe that it was dangerous for a vessel to remain there (as opposed to merely a situation where long waves caused swell and a vessel decided to leave the Raw Materials Quay) and the Kashima Channel not being navigable because of gale force winds.
It may also be because he did not give adequate weight to the evidence of Mr Lynagh (which he gives no cogent reason for rejecting) that the storm which occurred on 24 October was exceptional in terms of its rapid development, its duration and its severity (see para 48(ix) above).
As to the second reason advanced by the judge, the Court of Appeal responded in this way in para 62: 62.
The second reason given by the judge (Even if the concurrent occurrence of those events is a rare event in the history of the port such an event flows from characteristics or features of the port) is, in our view, equally flawed.
As we have already stated in paras 55 and 56 above, what the judge had to decide was whether the concurrent occurrence of those events (ie the critical combination) was itself a normal characteristic of the port or an abnormal occurrence.
That was the relevant event which the judge had to characterise.
It simply did not follow, logically or otherwise, from the fact that that event arose from (or, as the judge said, flow[ed] from) the combination of two individual dangers, which he had held were normal characteristics or attributes of the port, that the concurrent occurrence of those events was also a normal characteristic or attribute of the port.
By way of postscript, I note that on behalf of the owners significant stress was placed upon the failure of the Kashima port authority to carry out a risk assessment and put in place a proper safety system to deal with the risk of the two types of weather conditions referred to by the judge occurring at the same time.
However, while it may be relevant in some cases, the question remains whether the event (or in this case the combination of natural events) which led to this casualty was an abnormal and unexpected occurrence or not.
For the reasons I have given I conclude that the Court of Appeal were entitled to reach the decision which they did.
The ultimate conclusion of the Court of Appeal was set out in paras 63 and 64 as follows: 63.
In deciding whether the critical combination was itself a normal characteristic of the port or an abnormal occurrence, what the judge should have done was to evaluate the evidence relating to the past frequency of such an event occurring and the likelihood of it occurring again.
He should have also, in our view, have taken into account what appears to have been the unchallenged evidence of Mr Lynagh referred to above relating to the exceptional nature of the storm that affected Kashima on 24 October 2006 in terms of its rapid development, its duration and its severity.
Had he done so, then, on the basis of his own finding that the concurrent occurrence of those events was rare, and on the basis of the evidence which we have summarised above, there would, in our view, have been only one conclusion which he could have reached namely that the event which occurred on 24 October 2006 was indeed an abnormal occurrence. 64.
For the above reasons we conclude that the conditions which affected Kashima on 24 October 2006 were an abnormal occurrence, that there was no breach by the charterers of the safe port obligation, and accordingly that the appeal should be allowed on this ground.
I agree with the Court of Appeal.
Conclusion on the safe port issue
In my opinion, the Court of Appeal reached the correct conclusions for the reasons they gave.
I initially questioned whether the Court of Appeal should have interfered with the decision of the judge at first instance.
However, in the light of the submissions made on both sides, I have concluded that this was one of those rare cases in which the correct conclusion is that the casualty was caused by an abnormal occurrence as that expression is explained in the cases.
I accept the reasoning of the Court of Appeal and prefer their approach to that of the judge.
I would accordingly dismiss the appeal on the safe port issue.
I would answer the questions raised on that issue by the parties and set out in para 8.1(1) and (2) as follows.
The port was not unsafe within the meaning of the safe port undertaking so that the charterers were not in breach of it.
The conditions at the port amounted to an abnormal occurrence as that expression is understood in the cases.
Joint insurance
Issue 2 summarised in para 8 above assumes (contrary to my view) that there was a breach of the safe port undertaking and asks whether the provisions for insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterers for breach of the express safe port undertaking.
The judge held that the owners and hull insurers were entitled to recover notwithstanding clause 12, whereas the Court of Appeal held that they were not.
Lord Sumption agrees with the judge whereas Lord Toulson agrees with the Court of Appeal.
I agree with the judge and Lord Sumption, essentially for the reasons they give.
Lord Sumption has set out clauses 12 and 13, which I will not repeat.
I have been particularly struck by these considerations.
I agree with the judge (at para 185) that the demise charterparty must be given the meaning which, having regard to the background known to both parties, it would reasonably be understood to bear and that, in circumstances where, in clause 29, the demise charterparty contains a clear safe port warranty, one would expect any exemption of the demise charterers from liability in damages for breach of the safe port warranty to be clearly expressed.
In para 190 the judge observed that the charterers relied upon the The Evia (No 2), in which the question arose whether (as Lord Roskill put it at p 766) the war risks clause cast upon the owners and their insurers all war risks and thus freed the charterers from liability for them pursuant to the safe port clause.
It was held that the charterers were freed from any liability that they might otherwise have.
Lord Roskill identified the relevant question as being whether the war risks clause was a complete code exhaustive of the owners rights, which depended upon the construction of the time charterparty as a whole.
As the judge noted at para 191, the charterers adopted that reasoning here and said that it was applicable to the demise charterparty and, indeed, that it was a stronger case because, not only did the demise charterers pay for the cost of hull insurance, but they were also named as joint assureds and, generally speaking, an insurer cannot exercise rights of subrogation to pursue a claim in the name of one co assured against another.
The judge rejected that submission in these terms: 192.
Cases decided after The Evia (No 2) have emphasised that the decision in that case depended upon there being a clause which, on its true construction, provided an exhaustive code of the rights and liabilities of the parties; see The Concordia Fjord [1984] 1 Lloyds Reports 385 and The Chemical Venture [1993] 1 Lloyds Reports 508. 193.
In The Concordia Fjord the arbitrator, Mr MacCrindle QC, said that he was not aware of any principle exempting the Charterers from liability for their breaches of contract merely on the ground that they have directly or indirectly provided the funds whereby the Owners insured themselves against such damages.
Bingham J agreed; see pp 387 388.
Thus the mere fact that the charterer pays for the hull insurance is not enough to exempt him from liability for breach of his obligations under the charterparty.
There has to be an intention to create an exhaustive code which determines the parties rights and liabilities by reference to a claim on the insurance policy. 194.
If clause 12 of the demise charterparty were such a code it would apply, not just to a particular issue such as war risks as was the case in The Evia (No 2), but to all hull, war and P&I risks.
The charterparty contains a clear and express safe port warranty.
If clause 12 were to be construed as an exhaustive code that clause would be rendered nugatory with regard to insured risks.
It would in effect exempt the demise charterer from liability for breach of the safe port warranty in exchange for paying for the hull insurance.
For that to be the intention of the parties there would have to be clear words.
Counsel for Gard emphasised the rule of construction that clear words are necessary before the court will hold that a contract has taken away rights or remedies which one of the parties would otherwise have had; see Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689.
This rule of construction is usually expressed with regard to rights which a party would have at common law but it must also apply to valuable rights given by other parts of a contract.
Counsel submitted that there are no such words in clause 12 of the demise charterparty.
The sentences of clause 12(a) and 12(c) on which particular reliance is placed by Daiichi do not expressly remove the right to damages for breach of the safe port warranty.
They merely give the demise charterer certain rights with regard to proceeds of the insurance policy for which they have paid.
I entirely agree with the judge.
It follows from the fact that clause 12 contains no such express exclusion that any such exemption can only arise by necessary implication.
In short, there is nothing in clause 12 which provides that the demise charterers have no liability for breach of clause 29 and I see no basis for such a necessary implication, essentially for the reasons given by the judge and by Lord Sumption.
In particular, it seems to me to be striking that, as the judge observed in para 195, clause 13, which contained an alternative insurance and repairs clause which not only provided that hull insurance would be paid for by the registered owner but also expressly stated that the registered owners and/or insurers would not have any rights of recovery or subrogation against the demise charterers in respect of insured losses, was deleted from the printed form.
Thus the demise charterers chose not to be bound by clause 13.
After a detailed analysis (between paras 196 and the first part of para 198), the judge said that he did not consider that clause 12 codified the rights and liabilities of the parties with regard to insured risks.
He noted that it provides for the provision of insurance and who is to pay for it, for the demise charterers to be responsible for insured repairs and to reimburse themselves from the proceeds of the insurance policy, for the demise charterers to be responsible for other repairs and for the claims on a total loss to be paid to the mortgagee for distribution to the registered owners and demise charterers in accordance with their respective interests.
I agree with the judge that this does not in the required sense codify the rights and liabilities of the parties with regard to breach of the safe port warranty where the casualty caused by the breach has given rise to a claim on the insurance.
It is true that, as the judge put it in para 199, what clause 12 has, which neither the clause in The Evia (No 2) nor the clause in The Concordia Fjord (as expressly noted by Mr MacCrindle QC) had, is a provision that the owners and demise charterers were to be co assureds, thereby, on the face of it, bringing into play the principle that, generally, an insurer cannot exercise rights of subrogation to pursue a claim in the name of one co assured against another.
After referring (in para 200) to the decision and reasoning of Rix LJ in Tyco Fire and Integrated Solutions (UK) Ltd v Rolls Royce Motor Cars Ltd [2008] 2 All ER (Comm) 584, the judge concluded in para 201 as follows: In the present case there was an express safe port warranty by the demise charterers, there was no code of rights and obligations in clause 12 with regard to insured losses caused by a breach of the safe port warranty and there was no express ouster of the right of subrogation in clause 12.
Those features of the demise charterparty suggest to me that, construing the charter as a whole, it was intended that the demise charterer would be liable to the owner for breach of the safe port warranty, notwithstanding that they were joint assured and could take the benefit of the insurance in the manner set out in clause 12.
I agree.
For these reasons and those given by Lord Sumption, I would have answered the question or issue 2 summarised in para 8 above, namely whether the provisions for insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterers for breach of the express safe port undertaking, in the negative.
I am not persuaded by the judgments of Lord Mance and Lord Toulson (with whom Lord Hodge agrees) to reach a different conclusion.
Limitation of liability
Introduction
Question or issue 3 summarised in para 8 above assumes (contrary to my view) that there was a breach of the safe port undertaking and asks whether Daiichi is entitled to limit its liability for Gards losses or any (and, if so, which) of them as against Sinochart (and Sinochart in turn against Gard) pursuant to section 185 and Schedule 7 article 2(1) of the Merchant Shipping Act 1995, which gave the force of law to the Convention on Limitation of Liability for Maritime Claims 1976 (the 1976 Convention).
Like the joint insurance issue, this issue does not arise in the light of our decision on the safe port issue.
However it raises a point of some potential importance and was fully argued before us.
Neither of the courts below considered it because it was accepted that they were both bound by the decision of the Court of Appeal in The CMA Djakarta [2004] 1 Lloyds Rep 460.
In that case Longmore LJ gave the only substantive judgment, with which Waller and Neuberger LJJ agreed.
As formulated on behalf of Daiichi, who were time charterers, the question at issue is whether Daiichi (hereinafter the charterers) can limit their liability for the loss of the vessel and consequential losses arising out of the loss of the vessel.
The answer to that question depends largely upon whether The CMA Djakarta was correctly decided in the Court of Appeal.
The limitation issue is a short but important one.
It concerns the correct interpretation of the 1976 Convention.
The Convention provides, so far as relevant, as follows: Article 1.
Persons entitled to limit liability Shipowners and salvors, as hereinafter defined, may 1. limit their liability in accordance with the rules of this Convention for claims set out in article 2. 2.
The term shipowner shall mean the owner, charterer, manager or operator of a seagoing ship. 3. 4.
If any claims set out in article 2 are made against any person for whose act, neglect or default the shipowner or salvor is responsible, such person shall be entitled to avail himself of the limitation of liability provided for in this Convention. 5.
In this Convention the liability of a shipowner shall include liability in an action brought against the vessel herself.
Article 2.
Claims subject to limitation Subject to articles 3 and 4 the following claims, 1. whatever the basis of liability may be, shall be subject to limitation of liability: (a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation) occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom; (b) (c) claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connexion with the operation of the ship or salvage operations; (d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship; (e) the rendering harmless of the cargo of the ship; (f) claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures. claims in respect of the removal, destruction or 2.
Claims set out in paragraph 1 shall be subject to limitation of liability even if brought by way of recourse or for indemnity under a contract or otherwise.
However, claims set out under paragraph 1(d), (e) and (f) shall not be subject to limitation of liability to the extent that they relate to remuneration under a contract with the person liable.
Article 3.
Claims excepted from limitation The rules of this Convention shall not apply to: (a) claims for salvage or contribution in general average Both parties rely principally upon article 2.1(a) quoted above.
However, as appears below, reliance is also placed upon articles 6 and 9 11.
Although I have included the references to salvors in the above quotation, it is common ground that those references are irrelevant to the issues in this appeal.
They were included in the Convention in order to depart from the decision of the House of Lords in The Tojo Maru [1972] AC 242.
The critical question for present purposes is whether The CMA Djakarta was correctly decided in the Court of Appeal.
Gard say that it was.
They rely upon the fact that it has not been criticised in any case since it was decided.
They thus rely upon the reasoning of the Court of Appeal in The CMA Djakarta.
They also rely upon some at least of the reasoning of David Steel J at first instance in that case, reported at [2003] 2 Lloyds Rep 50 and of Thomas J in The Aegean Sea [1998] 2 Lloyds Rep 39.
By contrast, the charterers say that both cases were wrongly decided.
I have reached the clear conclusion that the Court of Appeal were correct, essentially for the reasons they gave.
History of limitation
The 1976 Convention had of course been preceded by earlier Conventions, which David Steel J referred to as part of his historical analysis of the right to limit liability set out in detail in his judgment at first instance reported in [2003] 2 Lloyds Rep 50.
I entirely agree with his analysis (at pp 51 53) and will not repeat it here, save to note some key points.
He referred to the first relevant limitation statute, which was the Responsibility of Shipowners Act 1733 and then to the Merchant Shipping Act 1854, the Merchant Shipping Acts Amendment Act 1862 and the Merchant Shipping Act 1894, which consolidated the earlier legislation.
As David Steel J put it, section 503 of the 1894 Act furnished a limit to an owners liability in respect of certain categories of occurrence in these terms: 503.(1) The owners of a ship, British or foreign, shall not, where all or any of the following occurrences take place without their actual fault or privity; (that is to say,) (b) Where any damage or loss is caused to any goods, merchandise, or other things whatsoever on board the ship; (d) Where any loss or damage is caused to any other vessel, or to any goods, merchandise, or other things whatsoever on board any other vessel, by reason of the improper navigation of the ship; be liable to damages beyond the following amounts David Steel J added that section 71 of the Merchant Shipping Act 1906 provided that the expression owner would be deemed to include any charterer to whom the ship is demised.
He further noted that, even prior to that Act, owner was construed as being inclusive of a demise charterer: The Hopper No 66 [1908] AC 126.
The two Conventions to which David Steel J then specifically referred were the two Conventions for the Unification of Certain Rules relating to the Limitation of Liability of Seagoing Vessels in 1924 and 1957 (the 1924 Convention and the 1957 Convention respectively).
Although the United Kingdom signed the 1924 Convention, it never became part of English law and was replaced by the 1957 Convention as between states that ratified the 1924 Convention.
In para 20 David Steel J noted that the right of limitation was still afforded to owners for certain occurrences but the categories of occurrence were enlarged by article 1(1) to include (a) loss of, or damage to, any property on board the ship; and (b) loss of, or damage to any other property or infringement of any rights caused by the act, neglect or default of any person on board the ship for whose act, neglect or default the owner is responsible or any person not on board the ship for whose act, neglect or default the owner is responsible: provided however that in regard to the act, neglect or default of this last class of person, the owner shall only be entitled to limit his liability when the act, neglect or default is one which occurs in the navigation or the management of the ship or in the loading, carriage or discharge of its cargo In para 21 he added that the range of those entitled to limitation was also enlarged by article 6(2), which provided: the provisions of this Convention shall apply to the charterer, manager and operator of the ship, and to the master, members of the crew and other servants of the owner, charterer, manager or operator acting in the course of their employment, in the same way as they apply to an owner himself: provided that the total limits of liability of the owner and all such other persons in respect of personal claims and property claims arising on a distinct occasion, shall not exceed the amounts determined in accordance with article 3 of this Convention.
The impact of the 1957 Convention was enacted in the form of the Merchant Shipping (Liability of Shipowners and Others) Act 1958 (the 1958 Act) by way of amendment to the 1894 Act.
In purported compliance with article 1(1)(b), section 2 prescribed that a new subsection (d) should be substituted in subsection 1 of section 503 of the 1894 Act as follows: (d) Where any loss or damage is caused to any property (other than any property mentioned in paragraph (b) of this subsection) or any rights are infringed through the act or omission of any person (whether on board the ship or not) in the navigation or management of the ship, or in the loading, carriage, or discharge of its cargo or through any other act or omission of any person on board the ship Further, in purported compliance with article 6(2), section 3 of the 1958 Act provided: (1) The persons whose liability in connection with a ship is excluded or limited by Part VIII of the Merchant Shipping Act 1894 shall include any charterer and any person interested in or in possession of the ship, and, in particular, any manager or operator of the ship.
The Convention
At first instance in The CMA Djakarta David Steel J noted at para 25 that the Convention introduced radical changes as regards to both the size of the fund and the circumstances in which the entitlement to limit might be lost.
As he put it, in short, the Convention made available a significantly enhanced fund at what he said was perceived to be the maximum insurable level, but the entitlement to which could only be challenged in quite exceptional circumstances: see The Leerort [2001] 2 Lloyds Rep 291.
He said in para 26 that it was notable that the Convention left largely untouched the range of persons entitled to limit, although it expressed the category in somewhat different terms.
David Steel J identified the rival contentions of the parties succinctly in paras 28 and 29.
It was the charterers case, first that, as charterers, they fell squarely within the category of persons enabled to limit their liability as prescribed by article 1, and secondly that the entire claim for damages arising out of the casualty fell equally squarely within the category of qualifying claims under article 2.
By contrast, it was the owners case that it was clear from the overall context, having regard to the object and purpose of the Convention, that the entitlement to limit was restricted to those persons identified in article 1(2) whose liability for the qualifying claim arose qua owner and not otherwise.
On the facts, limitation was not available since it was common ground that no part of the claim arose from the role of the appellant charterers qua owners.
David Steel J essentially accepted the submissions made on behalf of the charterers and, in doing so, followed the decision and reasoning of Thomas J in The Aegean Sea.
General approach of the Court of Appeal in the CMA Djarkta
Longmore LJ set out his general approach to the Convention in paras 9 11.
He first identified what he concluded were errors made by David Steel and Thomas JJ.
In particular, he did not agree with them that, in order to succeed in limiting their liability, it was necessary for charterers claims to arise from their role qua owners.
I agree that Longmore LJs conclusions in that regard were correct for the reasons he gave and do not need to revisit them.
Longmore LJ then cited a number of cases which support the proposition that, given that the Convention is in its own words incorporated into English law, the task of the court is to construe the Convention as it stands without any English law preconceptions.
As he put it, the interpretation of international conventions must not be controlled by domestic principles but by reference to broad and general principles of construction.
He cited a number of well known cases: Stag Line Ltd v Foscolo, Mango & Co Ltd [1932] AC 328, 350, James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152D E, Fothergill v Monarch Airlines Ltd [1981] AC 251, 272E, 282A and 293C, and Morris v KLM Royal Dutch Airlines [2002] 2 AC 628, 656 at para 78.
He added in para 10 that, while it may be difficult to know what are broad and acceptable principles, some principles are enshrined in articles 31 and 32 of the Vienna Convention on the Law of Treaties (1969), which was ratified by the United Kingdom in 1971 and came into force in 1980.
Those articles provide: ARTICLE 31 General rule of interpretation 1.
A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2.
The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
ARTICLE 32 Supplementary means of interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) (b) unreasonable. leaves the meaning ambiguous or obscure; or
leads to a result which is manifestly absurd or
Longmore LJ summarised his conclusions derived from articles 31 and 32 in this way.
The duty of a court is to ascertain the ordinary meaning of the words used, not just in their context but also in the light of the evident object and purpose of the Convention.
The court may then, in order to confirm that ordinary meaning, have recourse to the travaux prparatoires and the circumstances of the conclusion of the Convention.
The 1957 Convention was signed by the United Kingdom.
Like Longmore LJ in para 10, I would regard the existence and terms of a previous international convention (even if not made between all the same parties) as one of the circumstances which are part of a conclusion of a new convention but recourse to such earlier convention can only be made once the ordinary meaning has been ascertained.
Such recourse may confirm that ordinary meaning.
It may also sometimes determine that meaning but only when the ordinary meaning makes the convention ambiguous or obscure or when such ordinary meaning leads to a manifestly absurd or unreasonable result.
Context, object and purpose
In para 11 Longmore LJ set out the object and purpose of the 1976 Convention as agreed between the parties as follows (omitting the reference to the Tojo Maru).
First, the general purpose of owners, charterers, managers and operators being able to limit their liability was to encourage the provision of international trade by way of sea carriage.
Second, the main object and purpose of the Convention was to provide for limits which were higher than those previously available in return for making it more difficult to break the limit.
Under the 1894 Act an owner was entitled to limit his liability if he showed that the casualty occurred without his actual fault or privity.
Under the 1976 Convention (and the 1995 Act) the (now higher) limit is to apply unless it can be shown that the loss resulted from the personal act or omission of the party relying on the limit committed with intent to cause such loss or recklessly with the knowledge that such loss would probably result.
It is thus particularly difficult to break the limit, but the amount available for compensation is higher than it was previously.
Longmore LJ added that it was not possible to ascertain with certainty any object or purpose beyond that common ground.
He therefore turned to the ordinary meaning of the Convention, beginning at the beginning.
Ordinary meaning
Leaving the position of salvors on one side, at para 13 Longmore LJ noted in the context of article 1 that the word shipowner was defined as the owner, charterer, manager or operator of a seagoing ship.
He then rejected the opinion of David Steel J and Thomas J that a charterer could only limit his liability if he was acting in the management or operation of the vessel.
In particular he expressed the view that the mere fact that charterer is part of the definition of the word shipowner cannot of itself mean that a charterer, which was an expression otherwise unqualified, has to be acting as if he were a shipowner (ie qua shipowner) before he can limit his liability.
He added: To my mind the ordinary meaning of the word charterer connotes a charterer acting in his capacity as such, not a charterer acting in some other capacity.
Longmore LJ then said in para 13 that there were two difficulties in the argument to the contrary.
I do not think that it is necessary for me to discuss them in any detail, since they were not relied upon on behalf of the charterers here.
In para 18, to my mind correctly, Longmore LJ said that he would not give any gloss to the word charterer in article 1(2) and that he would give it what seemed to him to be its ordinary meaning.
I agree with that approach.
Longmore LJ noted at para 21 that the issue was not resolved by a consideration of article 1 of the Convention because it was still necessary to ascertain whether a claim for damage to the ship by reference to which a charterer seeks to limit his liability is a claim which falls within article 2.
In paras 22 24 he considered loss or damage to the ship under article 2(1)(a), which he correctly held extends the right to limit, inter alia, to claims in respect of loss of or damage to property occurring on board, which is not apposite to include loss of or damage to the ship itself since neither the loss of a ship nor damage to a ship can be said to be loss or damage to property on board.
Property on board means something on the ship and not the ship itself.
The question then arises whether this is a claim in respect of loss of or damage to property occurring in direct connexion with the operation of the ship.
Longmore LJ held in para 23 that the most obvious reason for including this category of claim is to cater for cases of collision with another ship.
Loss or damage to that other ship (or its cargo) is not loss of or damage to property occurring on board but is loss of or damage to property occurring in direct connexion with the operation of the ship.
The critical part of his reasoning is to my mind in the next part of para 23, where he said that that wording was not apt to cater for a case where the very ship, by reference to the tonnage of which limitation is to be calculated, is lost or damaged because the loss envisaged is loss to something other than that ship herself.
He added at para 24 that it was not without interest that in order to describe this category of claim the framers had used the phrase occurring in direct connexion with the operation of the ship.
That was, he said, virtually the same phrase as that used by David Steel J to define what he meant by qua owner.
If one were to postulate the case of the vessel being in berth when the dangerous cargo exploded and damaged parts of the harbour, the harbour authority could sue for that damage but one would expect that the shipowners would be able to limit any liability for that claim.
In order to do so, however, they would have to assert that the loss or damage occurred in direct connexion with the operation of the ship.
The fact that dangerous cargo had with their permission been loaded on the ship would, one thinks, be enough for that purpose.
But if it would be sufficient for that purpose, it would be odd that a charterer pursuant to article 1 could not say of his own act in permitting such cargo to be loaded that it was an act in direct connexion with the operation of the ship.
Articles 9 to 11 of the Convention
Longmore LJ treated these provisions as of some importance in reaching his conclusion.
In my opinion he was correct to do so.
In para 25 he noted that Thomas J set them out in detail in The Aegean Sea and summarised them broadly in this way.
Article 9(1) provides for the claims against (a) the persons mentioned in article 1(2) (viz owner, charterer, manager or operator) to be aggregated if they arose on distinct occasions; likewise for claims against (b) the owner of a ship rendering salvage services and a salvor operating from that ship and (c) a salvor not operating from a ship.
Article 9(2) then deals with passenger claims.
Article 10 provides that liability can be limited without the creation of a fund.
Article 11 then provides for the constitution of a limitation fund when that is, in fact, done; it provides for separate funds for the shipowner category of those entitled to limit and the salvor categories (and for passenger claims) by providing: A fund constituted by one of the persons mentioned in paragraph 1(a), (b) or (c) or paragraph 2 of article 9 or his insurer shall be deemed constituted by all persons mentioned in paragraph 1(a), (b) or (c) or paragraph 2 respectively.
Thus through the references to article 9(1)(a) all those persons designated as shipowners in article 1(2) of the Convention are brought together as a single unit for the constitution of the fund.
Thomas J said this (p 49): In my view the combined effect of these articles is important.
As there is provision for a fund for those categorized as shipowners and that fund is to cover both charterers and owners, it is difficult to see how charterers can claim the benefit of limitation through that fund where a claim is brought against them by owners.
Owners are entitled to the benefit of limitation for a claim by charterers as that claim is being brought by charterers not when performing a role in the operations of the ship or when undertaking the responsibility of a shipowner, but in a different capacity, usually through their interest in the cargo being carried.
While I entirely agree with this passage from The Aegean Sea, the considerations advanced by the judge to my mind more effectively support a conclusion that the claims in respect of which an owner or a charterer can limit do not include claims for loss or damage to the ship relied on to calculate the limit rather than a conclusion that a charterer can only limit in respect of operations he does qua owner.
Further, at para 26 Longmore LJ approved Thomas Js view that, if he was wrong in his general conclusion that the charterers could only limit when the loss (a total loss in that case) was caused by an act normally performed by the shipowner, the claim for the loss of the vessel did not fall within article 2(1)(a) because the loss of the ship was not loss of property occurring in direct connection with the operation of the ship.
This in turn was because, as Thomas J put it at (p 51): it is the operation of the very ship that must cause the loss of property; the ship cannot be the object of the wrong.
Longmore LJ added that, similarly in The CMA Djakarta, which was a case of extensive repair rather than total loss, David Steel J upheld the shipowners argument that the vessel cannot be both the victim and the perpetrator and that the property envisaged in the article must be the property of a third party either on board the vessel (eg cargo) or external to the vessel, for example an SBM.
David Steel J said (at para 52): The property damaged cannot be the very same thing as the operation of which caused the damage.
I agree with both Thomas J and David Steel J in this respect and conclude that the ordinary meaning of article 2(1)(a) does not extend the right to limit to a claim for damage to the vessel by reference to the tonnage of which limitation is to be calculated.
Confirmation of the ordinary meaning of article 2(1)(a)
In para 27 Longmore LJ gave a further reason for his earlier conclusion based on the ordinary meaning of article 2(1)(a), with which I also agree.
I agree that the effect of giving the words their ordinary meaning is not absurd or unreasonable, nor is there ambiguity or obscurity.
As Longmore LJ pointed out, David Steel J considered the wording of the 1957 Convention and held that his conclusion derived support from article 1 of that Convention, which drew an express distinction between the ship and other property.
Longmore LJ held that it was, if anything, even clearer than the 1976 Convention on this point.
He held that that served to confirm the proposition since any intention to change the previous agreement so that damage to the ship itself would be subject to limitation would have been made much more explicitly.
I agree, although I do not regard this point as of any great significance.
I should add that, in my opinion, in agreement with David Steel J and the Court of Appeal in The CMA Djakarta, there is nothing in the travaux prparatoires which supports any other conclusion.
Some reliance was placed upon article 4(1)(iv) of the Liens and Mortgages Convention (1967), which provides: The following claims shall be secured by maritime liens on the vessel . (iv) claims against the owner, based on tort and not capable of being based on contract, in respect of loss of or damage to property occurring, whether on land or on water, in direct connection with the operation of the vessel .
No one suggested that loss or damage to property could include loss of or damage to the very vessel on which the maritime lien was secured.
I would accept the submission made on behalf of Gard that, when similar wording was exported to the 1976 Convention, the expression loss of or damage to property in direct connection with the operation of the ship was not intended to include loss of or damage to the very vessel on the basis of whose tonnage limitation was calculated.
Conclusion on limitation
For the reasons I have given, which are essentially the same as those of the Court of Appeal in The CMA Djakarta, I would hold that, if there were a breach of the safe port warranty, the charterers would not be entitled to limit their liability under the Convention in accordance with the limitation fund calculated by reference to the vessel.
CONCLUSIONS
On the safe port issue (question 1), I would hold that the port was not unsafe within the meaning of the safe port undertaking so that the charterers were not in breach of it.
The conditions in the port amounted to an abnormal occurrence as that expression is understood in the cases.
On the joint insurance issue, if (contrary to para 88 above) there were a breach of the safe port undertaking, I would have answered question or issue 2 summarised in para 8 above, namely whether the provisions for insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterers for breach of the express safe port undertaking, in the negative.
However I recognise that this is a minority view.
On the limitation issue (question 3), again assuming that there were a breach of the safe port undertaking, I would hold that the charterers were not entitled to limit their liability in accordance with a limitation fund calculated by reference to the vessel.
It may be appropriate for declarations to be made reflecting the above.
The parties are invited to make submissions on the form of order and on costs within 21 days of the handing down of the judgments.
LORD SUMPTION:
I agree that there was no breach of the safe port warranty in this case, for the reasons given by Lord Clarke, which substantially correspond to those of the Court of Appeal.
On that footing, it was strictly speaking unnecessary for the Court of Appeal to decide whether, if there had been a breach, there would have been any liability in damages.
For the same reason, it is unnecessary for us to deal with it.
Nonetheless, I propose to do so, because the question is of some general importance and I am not persuaded that the Court of Appeal answered it correctly.
They held that the demise charterers suffered no loss by the destruction of the ship because, although there was a corresponding safe port warranty in the demise charter of which they were (on this hypothesis) in breach, they would have had no liability to pay damages representing the value of the ship.
This is said to be the result of clause 12 of the demise charter, which provided for the demise charterers to procure insurance for the vessel at their own expense against marine, war and protection and indemnity risks, for the joint interests of themselves and the head owners.
From this, and from the provisions of clause 12 relating to the distribution of the insurance proceeds upon a total loss, it is said to follow that the head owners were obliged to look exclusively to the insurance proceeds and not to the demise charterer to recover the value of their ship.
Therefore the demise charterers had no liability to pass on to the time charterers as damages for breach of the safe port warranty, and the insurers, as their assignees, had no greater right.
The same would, on this analysis, have been true if the insurers had brought a subrogated claim against the time charterers in the name of the demise charterers.
It is accepted that this argument applies only to that part of the loss which represents the value of the ship.
It does not apply to the claim for SCOPIC expenses (essentially salvage), wreck removal costs or loss of hire, which together accounted for rather more than a third of the claim.
It is necessary to draw attention at the outset to the limited basis on which this issue comes before the court.
There are three possible bases on which a demise charterer might be in a position to claim damages from a subcharterer for the loss of a ship of which he is the bailee but not the owner: (1) on the basis that he is himself liable to the head owner under the demise charter; (2) on the basis that as a bailee he has a possessory title which entitles him to recover in his own name, accounting to the head owner for any recovery exceeding his actual loss: Waters v Monarch Fire and Life Assurance Co (1856) 5 El & Bl 870; The Winkfield [1902] P 42; and (3) under what has sometimes been called the principle of transferred loss, which may permit a contracting party to recover substantial damages for breach of contract where the loss is foreseeably suffered by a third party and the latter has no direct claim against the wrongdoer: Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518.
The recovery in such a case is held on trust for the third party.
For reasons which it is unnecessary to explore, the insurers have confined their case to basis (1).
The claim was argued on that basis in the courts below, and before us their counsel (Mark Howard QC) confirmed that the appeal would be argued on that basis alone.
The demise charter was on the Barecon 89 form.
The form was originally drafted in 1974 by the Documentary Committee of the Baltic and International Maritime Council, and revised in 1989.
It is said to have become, in one or other of its variants, the most commonly used form of bareboat charter world wide.
Under clause 9 of the form, the demise charterers have the usual obligation to maintain the vessel in good repair and efficient operating condition and to take immediate steps to have any necessary repairs carried out.
The form as printed contains no trading limits other than clause 5, which simply requires the vessel to be employed in conformity with the terms of its insurances, including any insurance warranties, unless the agreement of the insurers is obtained.
The insurances are governed by either clause 12 or clause 13, one of which must be selected.
Clause 12, which was selected in this case, provides (so far as relevant): 12. lnsurance and Repairs (a) During the Charter period the Vessel shall be kept insured by the Charterers at their expense against marine, war and Protection and indemnity risks in such form as the Owners shall in writing approve, which approval shall not be unreasonably withheld.
Such marine, war and P & I insurances shall be arranged by the Charterers to protect the interests of both the Owners and the Charterers and mortgagees (if any), and the Charterers shall be at liberty to protect under such insurances the interests of any managers they may appoint.
All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear.
If the Charterers fail to arrange and keep any of the insurances provided for under the provisions of sub clause (a) above in the manner described therein, the Owners shall notify the Charterers whereupon the Charterers shall rectify the position within seven running days, failing which Owners shall have the right to withdraw the Vessel from the service of the Charterers without prejudice to any claim the Owners may otherwise have against the Charterers.
The Charterers shall, subject to the approval of the Owners and the Underwriters, effect all insured repairs and shall undertake settlement of all costs in connection with such repairs as well as insured charges, expenses and liabilities (reimbursement to be secured by the Charterers from the Underwriters) to the extent of coverage under the insurances herein provided for.
The Charterers also to remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurances and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances. (b) If the conditions of the above insurances permit additional insurance to be placed by the parties, such cover shall be limited to the amount for each party set out in Box 28 and Box 29, respectively.
The Owners or the Charterers as the case may be shall immediately furnish the other party with particulars of any additional insurance effected, including copies of any cover notes or policies and the written consent of the insurers of any such required insurance in any case where the consent of such insurers is necessary. (c) Should the Vessel become an actual, constructive, compromised or agreed total loss under the insurances required under sub clause (a) of clause 12, all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the Owners and the Charterers according to their respective interests.
The Charterers undertake to notify the Owners and the Mortgagee, if any, of any occurrences in consequence of which the Vessel is likely to become a Total Loss as defined in this clause. (d) If the Vessel becomes an actual, constructive, compromised or agreed total loss under the insurances arranged by the Charterers in accordance with subclause (a) of this Clause, this Charter shall terminate as of the date of such loss. (e) (f) For the purpose of insurance coverage against marine and war risks under the provisions of sub clause (a) of this clause, the value of the vessel is the sum indicated in Box 27.
The alternative insurance clause, clause 13, was intended for short term demise charters and envisaged that the demise charterer would become entitled under existing insurance arrangements made by the head owner.
It accordingly provided for the vessel to be kept insured against marine and war risks by the owner at their expense under a policy in joint names, and against P & I risks by the charterers at their expense.
For present purposes, however, the most significant difference between the two clauses consists in the addition in clause 13(a) of an express provision dealing with the relationship between the liability of insurers and that of demise charterers.
It provided: The Owners and/or insurers shall not have any right of recovery or subrogation against the Charterers on account of loss of or any damage to the vessel or her machinery or appurtenances covered by such insurance, or on account of payments made to discharge claims against or liabilities of the Vessel or the Owners covered by such insurance.
In the present case, the Barecon 89 form was amended by deleting the trading limits clause (clause 5) and adding at clause 29 a safe port warranty in the following terms: 29.
Trading Exclusions Vessel to be employed in lawful trades for the carriage of lawful merchandises only between good and safe berths, ports or areas where vessel can safely lie always afloat, always accessible within IWL except NAABSA in River Plate where it is customary for similar size or similar dimension vessels to safely lie aground, specially excluding Abkhazia, Albania, Angola, Bosnia Herzegovina, CLS Pacific ports, Democratic Republic of Congo (formerly Zaire), Eritrea, Israel, North Korea, Lebanon, Liberia, Libya, Sierra Leone, Somalia, Sri Lanka, Federal Republic of Yugoslavia, Zimbabwe, in Arabian Gulf and adjacent waters including the Gulf of Oman North of 24 deg North, any United Nation embargo countries/ports.
Charterers have right to send vessel to the war/warlike zone or other zones for which additional insurance are levied by vessels war risk insurers.
In such event, Charterers are fully responsible to pay for all additional war risk premium upon demand by vessels underwriters and/or P+I club with all risks/consequences to be for Charterers account.
Charterers shall have right to break IWL in which case Charterers are fully responsible to pay for all additional premium upon demand by vessels underwriters and/or P+I Club for breaching IWL with all risks/consequences to be for Charterers account.
Any ice affected port(s) and/or place(s).
No direct sailing between PRC and Taiwan or vice versa.
It is not disputed that if Kashima was an unsafe port there was a breach of clause 29.
The provisions which are said to exclude a right to recover the value of the ship as damages for breach of clause 29 are clauses 12(a) and (c).
Clause 12(a) requires insurance to be in place for the parties joint account.
Clause 12(c) provides that all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the owners and the charterers according to their respective interests.
The argument is that the clause as a whole is a complete code governing financial liability for loss or damage to the ship, and that the words quoted provide for the relief, and the only relief, available as between the head owner and the demise charterer for a total loss.
To address this argument, I propose to deal first with the law relating to rights as between co insured.
I shall then consider how, if at all, it applies to this demise charter.
The starting point is the general rule that insurance recoveries are ignored in the assessment of damages arising from a breach of duty: Bradburn v Great Western Railway Co (1874) LR 10 Ex 1; Parry v Cleaver [1970] AC 1.
This can conveniently be called the collateral payments exception.
It is a departure from the general principle that collateral benefits are brought into account, and is probably best regarded as being based on public policy.
Insurance recoveries are a benefit which the injured party has bought in consideration of his premiums, which are intended to inure to his benefit alone, not that of third party wrongdoers.
Moreover, the courts have traditionally been concerned to preserve the subrogation rights of insurers against those who are legally responsible for the loss, which are an important part of the economics of insurance.
The effect of the collateral payments exception is that as between the insured and the wrongdoer who has caused the loss, they are not treated as making good the formers loss or as discharging the latters liability.
The assumption underlying it is that as far as the wrongdoer is concerned, insurance is res inter alios acta, ie, loosely translated, none of his business.
The rule thus stated falls to be modified in a case where insurance manifestly is the wrongdoers business because, for example, he is a co insured and/or the insurance is taken out for his benefit.
The business context in which this has most commonly arisen is the co insurance of employer, contractor and subcontractors under standard forms of building contract.
It is well established, and common ground between the present parties, that where it is agreed that the insurance shall inure to the benefit of both parties to the contract, they cannot claim against each other in respect of an insured loss.
Co insurance is the paradigm case.
The principle first appears in the United States, but was successively adopted in early editions of MacGillivray on Insurance Law, by the Supreme Court of Canada in Commonwealth Construction Co Ltd v Imperial Oil Ltd [1978] 1 SCR 317 and by the English courts in a line of cases beginning with the decision of Lloyd J in Petrofina (UK) Ltd v Magnaload Ltd [1984] QB 127.
What is less clear is its juridical basis.
Lloyd J was inclined to think that it was based on the rule against circuity of action, which is difficult to accept given that the insurer will not be a party to any litigation between the co insureds.
The better view, which was endorsed by the House of Lords in Co operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] 1 WLR 1419, paras 61 65 (Lord Hope), is that it is an implied term of the contract of insurance and/or of the underlying contract between the co insureds pursuant to which their interests were insured.
The implication is necessary because if the co insureds are both insured against the relevant loss, the possibility of claims between them is financially irrelevant.
It would be absurd for the insurer to bring a subrogated claim against a co insured whom he would be liable to indemnify against having to meet it.
It should be noted that this reasoning is relevant only to the position as between the co insureds.
In all of the English cases before this one the question arose between the co insureds and their insurer.
None of them raised the question how the principle about co insurance affects claims against a third party wrongdoer who is not himself a co insured and is not party to the arrangements between them.
There is no necessity to exclude a claim against him and indeed no reason why either of the co insureds or their insurer should wish to do so.
It is impossible to identify any contract whose business efficacy depends upon that result being achieved.
As between a co insured (or his insurer) and a third party wrongdoer, a different question arises which none of the existing English authorities purports to answer.
The question is this: when we say that one co insured cannot claim damages against another for an insured loss, is that because the liability to pay damages is excluded by the terms of the contract, or is it because as between the co insureds the insurers payment makes good any loss and thereby satisfies any liability to pay damages? The significance of this question may be illustrated by a hypothetical case.
Suppose that A and B are engaged in some contractual venture, involving the use of As property.
The property is insured in their joint names.
It is damaged in breach of some contractual duty owed to A by B, but the cause of the damage is some act of Bs agent, X.
If the effect of the co insurance is that Bs liability to pay damages to A is excluded, then B never had a relevant liability and has suffered no loss which he can claim over against X.
But if its effect is that payment by the insurer makes good As loss as between A and B and thereby satisfies any liability of B, the result is different.
The effect is to exclude the collateral payments exception, so as between A and B the receipt of the insurance proceeds must be taken into account.
However, the fact that the insurers payment has made good the loss as between A and B does not mean that it has done so as between B and the stranger, X.
As between B and X the insurance is res inter alios acta.
Indeed, its normal consequence is that the claim will survive to be pursued by the subrogated insurers.
Either analysis will achieve the object of the implication, namely to prevent claims between co insureds.
But they have radically different consequences for claims against third parties.
Which is the correct analysis must depend on the particular terms of the particular contract.
The answer will not necessarily be the same in every case.
I therefore return to the contractual arrangements between the head owners and demise charterers of the OCEAN VICTORY.
We have not seen the actual policy.
What matters, however, is not the actual policy but the policy envisaged in clause 12 of the demise charter.
The relevant insurance is the insurance against marine risks which is required by clause 12(a).
That is an insurance on property.
As far as the demise charterer is concerned, although it is not a liability insurance, he is treated as having an insured interest in the property as such, because his potential liability to the head owner as a bailee and time charterer means that he stands in [a] legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof: see Marine Insurance Act 1906, section 5(2) (emphasis supplied); cf Arnould, Law of Marine Insurance and Average, 18th ed (2013), para 11.37 11.38.
If the ship is lost or damaged, the measure of any liability of the demise charterer will be the same as the measure of the owners loss, namely the diminution, partial or total, in the value of the ship.
There is no other basis on which he could be entitled to insure on the same basis as the owner.
When the OCEAN VICTORY was lost, the insurers were bound under clause 12(c) to pay its insured value to the head owner or, rather, to the mortgagee for the account of the head owner.
But the natural legal inference from (i) the fact that the demise charterer is insured for his interest in the ship, (ii) the implied prohibition of claims for damages between the co insured for loss of or damage to the ship, and (iii) the avoidance of double recovery, is that the insurers payment to the head owner makes good the head owners loss not just as between the insurer and the head owner but as between both of them and the demise charterer.
The demise charterers liability under the demise charter for the loss of the ship has not been excluded.
It has been satisfied.
It follows that the demise charterer may claim over against a time charterer who is not party to the insurance or any of the contractual arrangements connected with it.
This may be tested by asking what would happen if the insurer did not pay, for some reason which did not involve a breach of duty by either co insured, for example because the insurer became insolvent after the casualty.
The demise charterers obligation to insure ceases upon the termination of the demise charter: see clause 12(a).
And the demise charter terminates upon the total loss of the ship: see clause 12(d).
The result is that there is no effective insurance, no default of the demise charterer in there being no effective insurance, and no basis on which the head owner can be supposed to look exclusively to its proceeds to make good a loss arising from a breach of the safe port warranty.
The demise charterer would be bound to pay damages, not because he was responsible for the lack of insurance but because he was liable for the destruction of the ship in breach of his contract.
This can only be because it is the payment of the insurance proceeds which discharges the liability of the demise charterer by making good the head owners loss.
In the absence of payment, there is no discharge and no bar to a claim between the co insureds.
This does mean that if the insurer, being solvent, delays in paying the claim, the head owner can require the demise charterer to pay the loss at once.
But I do not regard that as undermining what I consider to be the way that clause 12 works.
Quite apart from the consideration that the contract must be construed on the assumption that the insurer will perform his obligations, an obligation to pay damages upon a breach of contract is a routine consequence of the chartered service.
It is no more unthinkable in the case of the demise charter than it is in the case of the time charter, where no question of co insurance arises.
This analysis derives strong support from a number of other features of this particular demise charter: In the Barecon 89 form as printed, the demise charterers sole (1) obligation in relation to the physical condition of the ship was the maintenance and repairing obligation in clause 9.
Breach of that obligation would not give rise to an insured loss.
The only trading warranty was in clause 5.
This did not give rise to an insured loss either, because it did no more than prohibit the trading of the vessel to places where she would not be insured.
Under the unamended Barecon 89 form, therefore, it is difficult to envisage circumstances in which an insured loss could arise from a breach of contract by the demise charterers.
The present issue simply could not arise.
The parties are therefore unlikely to have intended to address it.
The present issue arises only because the printed form has been modified by adding in clause 29 a contractual obligation not to trade the vessel to unsafe ports where she may suffer an insured loss.
In adding clause 29 to the printed form, the parties must have intended that in relation to loss or damage arising from the unsafeness of ports, the liability of the charterers and the insurers would coexist.
If, as the Court of Appeal thought, the liability of the charterers did not extend to damages, the parties must be taken to have included an elaborate trading warranty which is almost entirely redundant.
Its only effect, on this view of the matter, was to entitle the head owners to protest if they happened to learn in advance of the demise charterers intention to visit an unsafe port.
If the demise charterers persisted (as they were in a position to do since they were in operational control of the ship and employed the master and crew), and the ship was damaged or lost, there would be no consequences in damages.
This is not a realistic intention to impute to commercial parties in the absence of express words to that effect. (2) The only words of clause 12 which are said to have this effect are the words of clause 12(c) which deal with the distribution of the insurance proceeds upon a total loss.
They seem to me to be irrelevant to the present issue.
They deal with the mechanics of payment of the insurance proceeds and not the substantive rights of the parties.
The proceeds are to be paid in the first instance to the mortgagee bank, and thereafter to the head owner and demise charterer according to their respective interests.
This provision does not exclude a right to damages for breach of contract.
Its purpose appears to be (i) to protect the position of the mortgagee, and (ii) to distinguish the position where there is a partial loss (see the fourth paragraph of clause 12(a)) when the insurance proceeds will go to the demise charterer by way of indemnity against the cost of repairs. (3) It is right to add that in relation to war risks clause 29 expressly provides that all risks / consequences of breach are to be for charterers account, notwithstanding the obligation under clause 12 to maintain war risks insurance. (4) If clause 12(c) contains the decisive language, as the time charterers have suggested, then it becomes necessary to distinguish between insurance payments under the hull policy in respect of the loss of the ship and insurance payments under the P & I insurance representing other elements of the claim such as SCOPIC and wreck raising expenses.
The latter will be recoverable as damages in the ordinary way, as well as under the express indemnities at clauses 17 and 18 of the demise charter.
Logically, it also requires a distinction to be made between the insured value of the ship (in this case, $70m) and its market value (in this case $88.5m), the difference being recoverable as damages, as the time charterers accepted before Teare J.
It is very difficult to see why, if the principle underlying clause 12 was that the parties were to look exclusively to the insurance proceeds for compensation for a breach of clause 29, they should have intended this arbitrary distinction between different elements of the loss. (5) Finally, there are the terms of clause 13(a), which expressly exclude any right to recover damages in respect of insured loss of or damage to the ship.
If that option is chosen, the result for which the time charterers contend is achieved by the express words of the contract.
I recognise that clause 13 is designed for a very different kind of chartered service.
It is nonetheless a striking fact that when the draftsman of this contract wished to deal with the overlap between the liability of the insurers and that of the demise charterers, he did so in express terms, using language which finds no equivalent in clause 12. (6) Lord Clarke has made some further observations at paras 49 to 57 of his judgment, with which I agree.
In my judgment the Court of Appeal was wrong to hold that the demise charterers were relieved by the terms of the demise charter of the obligation to pay damages for the consequences of an order to an unsafe port.
I would therefore have allowed the appeal on this point if it had arisen.
On the limitation issue, I agree with Lord Clarke.
LORD MANCE:
I agree with the judgment prepared by Lord Clarke on the first and third issues and with the judgment of Lord Toulson on the second issue in this appeal.
In what follows, I set out some supplementary reasons of my own for agreeing with Lord Toulson on the second issue.
Clauses 12 and 13 are standard clauses of the Barecon 89 Standard Bareboat Charter issued by the Baltic and International Maritime Council (BIMCO).
It is relevant to consider how the scheme introduced by clause 12 (or, where used, clause 13) operates in circumstances where there is no clause 29.
A demise charter involves a bailment on whatever terms may be agreed.
Clauses 9 and 12 impose on charterers strict responsibility for having all necessary repairs done.
But a demise dharterer may well cause total loss of the demised vessel in circumstances constituting a breach of duty or of an express or implied contract term.
Printed clause 5, which was replaced in the present charter by clauses 29 and 30, could itself involve such a breach.
Its first and third paragraphs include, for example, various obligations relating to lawful trading and the carriage of suitable lawful merchandise.
Clause 12 (or, where used, 13) contains a scheme designed to address the possibility of the vessel requiring repairs or suffering a total loss.
First, and fundamentally, these clauses provide who is to take out marine, war risks and protection and indemnity (P&I) insurance.
Clause 12 deals with circumstances where the charterers are to do both, clause 13 with circumstances in which owners are to maintain marine and war risks insurance while demise charterers have to maintain P&I insurance.
Secondly, they provide for the nature of the insurance which is to be maintained.
Under clause 12 all the insurances are to be in such form as the owners shall in writing approve, which approval shall not be unreasonably withheld, whereas clause 13 provides for marine and war risks insurance under the form of policy attached hereto, while the P&I insurance to be arranged by charterers has again to be in such form as the owners shall in writing approve, which approval shall not be unreasonably withheld.
Under both clauses 12 and 13, the value of the vessel for marine and war risks insurance purposes is to be that stated in box 27 (here USD 70m), while boxes 28 and 29 are to specify whether either or both parties may take out additional insurance and if so for how much (each being, under the present charter, prohibited from so doing).
Thirdly, under clause 12 all the insurances are to be arranged to protect both the Owners and the Charterers and mortgagees (if any)and to be in the joint names of the Owners and the Charterers as their interests may appear.
Under clause 13, the marine and war risks insurances are likewise to be in the joint names of the Owners and the Charterers as their interests may appear, but there is also an express provision that: The Owners and/or insurers shall not have any right of subrogation against the Charterers on account of loss of or any damage to the Vessel or her machinery or appurtenances covered by such insurance, or on account of payments made to discharge claims against or liabilities of the Vessel or the Owners covered by such insurance.
Fourthly, both clauses 12 and 13 make the demise charterers responsible for effecting any repairs, securing reimbursement from underwriters to the extent of the insurance coverage, but remaining responsible for all repairs not covered by the insurance and/or falling within any possible insurance franchise or deductibles.
Fifthly, both clauses 12 and 13 address the possibility of the vessel becoming an actual, constructive, compromised or agreed total loss.
Clause 12(c) provides that in this event the marine or war risks insurance payments for such loss shall be paid to the Mortgagee (if any), who shall distribute the moneys between themselves, the owners and the charterers according to their respective interests.
Clause 13(h) provides that they shall be paid to the Owners, who shall distribute the moneys between themselves and the Charterers according to their respective interests.
The scheme of clause 12 (and 13) is clearly intended to be comprehensive.
Whatever the causes, both repairs and total losses fall to be dealt with in accordance with its terms, rather than by litigation to establish who might otherwise be responsible for undertaking them, for bearing the risk of their occurrence or for making them good.
This is reinforced by the provisions for marine and war risks insurances to be taken out to protect the interests of owners, charterers and any mortgagees, and to be in the joint names of owners and charterers, as their interests may appear.
It is well established, as Lord Sumption and Lord Toulson both acknowledge, that, where it is agreed that insurance shall inure to the benefit of both parties to a venture, the parties cannot claim against each other in respect of an insured loss.
This principle is now best viewed as resting on the natural interpretation of or implication from the contractual arrangements giving rise to such co insurance: Co operative Retail Services Ltd v Taylor Young Partnership Ltd (CRS) [2001] Lloyds Ins Law Rep 122 (CA), [2002] 1 WLR 1419, per Lord Bingham, para 7 (favouring the rationale suggested by Brooke LJ in the Court of Appeal at para 72) and Lord Hope, paras 61 to 65.
It is merely reinforced where, as here, the principal co insureds, owners and charterers, are in the same group and ultimate beneficial ownership.
Hull insurance covers losses whether or not it is due to the fault of any party, and it is, rightly, not suggested that the principle in CRS is subject to any exception where the loss is due to fault: see also on this point Mark Rowlands Ltd v Berni Inns Ltd [1986] QB 211, 232G 233B, per Kerr LJ.
Repairs were to be undertaken by charterers, regardless whether their cost was fully covered by insurance.
But the scheme of both clauses 12 and 13 was for marine and war risks insurances in agreed form to be taken out in a fixed amount, and for no more unless otherwise specifically agreed.
At the date of her total loss the OCEAN VICTORY is said to have been worth some USD 15m more than the amount for which she was valued for insurance under the demise charter.
It is in my opinion implausible to suggest that, having developed this careful scheme for specific protection of their respective interests, it should have been intended that owners should as against charterers, a company in the same group and beneficial ownership, be able to reopen the scheme by claims of breach, exposing charterers to paying damages for the hull loss based on a different alleged value to that which owners and charterers had agreed between themselves.
Just as parties must, for better or worse, accept a valuation agreed under a marine insurance (Marine Insurance Act 1906, sections 27(1) and (2)), so here the parties to this charter must be taken to have accepted the value they agreed for insurance purposes as conclusive as between themselves.
In this respect, the schemes of clauses 12 and 13 are in my opinion effectively mirror images of each other.
Clause 13 has an express exclusion of any right of recovery or subrogation on the part of owners and/or insurers against charterers.
That is explicable in the context of a clause dealing with insurance taken out by owners.
BIMCO in their observations on the Barecon 89 form explain the optional clause 13 on the basis that It has been felt that it may be useful to cover also the possibility which is believed may arise from time to time, that a vessel is bareboat chartered for a short period, say, four to six months.
BIMCO give the example of passenger vessels.
They continue: It is believed that it is normal practice that the Owners carry on with the insurances for their own account.
BIMCO also confirm that: The main difference between Clause 12 and Clause 13 is that in Clause 13 the responsibility for arranging and keeping the marine and war risks insurances has been shifted back to the Owners.
There is no suggestion by BIMCO that the responsibilities for repairs and total loss differ in any other respect as between clauses 12 and 13.
There is no reason to think that clauses 12 and 13 were devised as anything other than two routes to the same substantive allocation of responsibilities for repairs and total loss, irrespective of fault.
I conclude that the express exclusion of a right of recovery or subrogation in clause 13 was simply belt and braces in the context of insurances taken out by owners, and that the reason why no such express term appears in clause 12 was that it never occurred that there could be such claims in the context of insurances arranged by charterers to cover their own as well as owners interests.
It is inconceivable that the parties intended fundamentally to alter the incidence of risk by permitting or excluding breach based claims as between themselves in respect of a hull loss, depending upon whether it happened to be convenient to continue to use hull insurances taken out by owners or to rely on fresh insurances taken out by charterers.
The judges speculation (para 202) that the risk of insurers insolvency might have motivated such a distinction is unconvincing, where not only is such risk most unlikely to have been in the forefront of the parties minds, but the decision which party should be responsible for hull insurances has no connection with any such risk or with the question whether or not breach based liability should exist.
I do not consider that the substitution of printed clause 5 by typed clause 29 can have been intended to, or did, alter this basic scheme.
In many respects clause 29 simply makes different provision for the same subject matter as clause 5.
Clause 29 overlaps with clause 5, in so far as it requires employment in lawful trades.
It specifies (not entirely felicitously, in so far as it refers to Zimbabwe) certain trading limits.
Clause 5 contemplates that trading limits would be found in Box 19, but adds that the charterers must furthermore employ the vessel in conformity with the terms of her insurances.
Both clause 29 and clause 5 address additional insurance premiums, which a vessels trading might in some circumstances require to be paid.
Clause 29 has the provision for employment only between good and safe berths, ports or areas where vessel can safely lie always afloat on which Gard relies.
Owners could no doubt object if they learned of intended or actual trading contrary to clause 29, and a breach by charterers in this respect might have consequences outside the scope of hull insurance and so outside the scheme of clauses 12 and 13.
But it is, in my opinion, most unlikely that the safe port provision in clause 29 can have been meant to give rise to a system of recourse for loss of the hull, by way of damages for breach of contract, separate from and potentially counteracting the no fault scheme of responsibility and insurance recovery for a hull loss introduced by clause 12.
Teare J held that the owners, although indemnified by the insurers, had a subrogated right to claim against the demise charterers damages for breach of clause 29: judgment, paras 203 204.
That makes no sense in the context of a co insurance such as this, as Mr Recorder Jackson QC pointed out in Hopewell Project Management Ltd v Ewbank Preece Ltd [1998] 1 Lloyds Rep 448, 458, in a passage approved by Lord Hope in CRS at para 65.
It would mean treating the present co insurance as if it involved two separate and severable insurances, leaving charterers exposed, without liability cover, to claims for breach of charter or duty brought by owners in respect of loss of the hull.
That is obviously not what anyone contemplated by clause 12 or clause 13.
It is no answer that demise charterers might in turn have a back to back claim for damages against sub charterers.
They might equally well not have, eg if they were trading the vessel on their own account, so there was no sub charter, or the sub charter was on different terms or the sub charterer was not worth powder and shot.
I add, though no one suggested this as a correct analysis, that it is inconceivable that anyone contemplated that the co insurance to be arranged could give rise to successive payments of the same sum to different parties, with the second of such payments going to reimburse insurers for the first.
In these circumstances, Gard suggests an alternative basis for its claim, that liability exists in the first instance for any total loss attributable to a breach of the safe port warranty, but is then discharged to the extent of any recovery under the marine or war risks insurance taken out under clause 12.
This analysis has the twin results, that (i) owners could after a total loss call upon charterers to pay the value of the vessels hull, even though an insurance claim was on foot, but had not yet been paid, and (ii) owners could look to charterers in damages for any amount by which the vessels actual value at the date of loss exceeded her insured value, both before and after insurers had paid the insured value.
Both results are in my view inconsistent with the scheme of clause 12 (or 13), or with any sensible understanding of its evident purpose to cater comprehensively for responsibility for repairs and total loss.
Still more fundamentally, in the context of the present claim by Gard as assignees of demise charterers, there is no basis for treating payment of the vessels value under her marine or war risks insurance as discharging pro tanto any liability existing between owners and demise charterers.
Both the ordinary marine and the war risks insurances are property insurances on the vessels hull.
Payments made under them go to owners (or their mortgagees) and charterers for their respective interests in the hull.
They cannot be treated as satisfying, at one and the same time, any liability (if there were any) which charterers had to owners.
The contrary analysis involves the proposition that the parties were prepared to treat the hull insurance moneys as going in the first instance to charterers, not to the owners or their mortgagees, and then being passed up to owners.
That is clearly not what happened or would ever happen in fact, and it is only in a counter factual world and by contradicting the clear intent of clause 12 that it could be treated as if it had happened.
In my opinion, the reason why owners have no claim against charterers for damages for loss of the hull is not that such a claim exists under clause 29 but is at some point discharged.
It is that, under a co insurance scheme like the present, it is understood implicitly that there will be no such claim.
This understanding applies, in my opinion, whether or not the insurance moneys have yet been paid.
But, even if (contrary to my opinion) one were to treat this understanding as biting only upon payment of the insurance moneys, it still would not arise from or involve the proposition that some liability of the charterers to owners was discharged in the sense of paid or satisfied by the insurance moneys.
The understanding would simply be that, upon payment of the hull insurance proceeds to those interested in the hull for their respective interests, no further liability would exist inter se.
On that basis, charterers would still be unable to show that they had or had discharged any liability to owners, on the basis of which they could pursue a back to back claim against sub charterers.
But, as I have made clear, in my opinion the implied understanding arising from the co insurance scheme is that there would be no liability for the hull value in the event of a total loss, whether or not the insured value had yet been disbursed.
Lord Sumption raises the question what would happen if an insurer became insolvent after a loss.
This is in my view a remote eventuality which cannot be a guide to the meaning of clause 12 (or 13).
It also raises different considerations of risk and implications to any which require determination on this appeal.
Two views might be taken.
One is that, under a scheme where both parties have agreed to the particular form of policy, presumably by particular insurers, the risk lies where it falls.
It is to be noted that the risk could impact either party in different circumstances.
It could impact charterers, who undertake an absolute responsibility for repairs, irrespective of fault, and would be unable to recoup themselves from the hull insurance as contemplated by clause 12 or 13.
It could impact owners and charterers for their respective interests, in the event of a total loss occurring without fault.
There is no reason to think that the parties intended any different result in the event of a loss which might be attributed to a breach of clause 29 or any other clause.
But another view might be that the risk lies by implication on the party responsible for maintaining the insurance during the charter period, even though clauses 12 and 13 provide that the charter terminates as of the date of any total loss.
The former seems the more likely position, but it is unnecessary on this appeal to decide which applies, since the point cannot assist to determine the present, quite different issue as to the implications of the insurance scheme when it is effective, which is no doubt what the parties, and BIMCO, had in mind when using and devising it.
Finally, it is submitted that charterers must have some liability towards owners under clause 29, because otherwise there can be no back to back claim down the line under the equivalent clause in the sub charter between demise charterers and Sinochart, who in turn cannot pass on liability under the equivalent clause in the sub sub charter between Sinochart and Daiichi, who were and should be ultimately responsible.
The difficulty with this submission is that it has not been tested and I, for my part, regard it as entirely open.
Gards case before the Supreme Court has been put exclusively on the basis that charterers had a liability to owners, which in turn enables charterers to claim damages down the line.
Mr Howard QC, who did not appear for Gard below, very frankly acknowledged that it had occurred to him, when he came into the case, that there could have been other bases on which the claim could have been presented, but that it had been concluded that Gard was confined to the way in which the case had been argued on its behalf below.
Those other bases are (i) that the charterers possessory title gave them a sufficient interest to be able to maintain a claim for the hull loss: compare the principle in The Winkfield [1902] P 42, whereby a bailee can claim in tort in his own name, without showing that he has any liability to the head owner, but accounting to the head owner for any loss exceeding his own loss, and/or (ii) that there are circumstances in contract where a contracting party can claim substantial damages for loss of or damage to property, when another person has actually borne such loss or damage: Dunlop v Lambert (1839) 6 Cl & F 600, The Albazero [1977] AC 774, 846G 847F.
More recently, this latter possibility has been more widely recognised, by giving special treatment to contracts relating to property where loss due to a breach of the contract will be suffered by a holder of the property other than the contracting party: see Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd and St Martins Property Corp Ltd v Sir Robert McAlpine Ltd (St Martins) [1994] 1 AC 85 where it was in the contemplation of the parties when the contract was made that the property, the subject of the contract and the breach, would be transferred to or occupied by a third party, who would in consequence suffer the loss arising from its breach: see also Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68 and the narrow ground of decision expressed by Lord Browne Wilkinson at p 114G H in St Martins, in which all members of the House joined.
In such a situation, the claimant is seen as suing on behalf of and for the benefit of the injured third party and is bound to account accordingly: see St Martins, per Lord Browne Wilkinson at p 115A B and McAlpine Construction Ltd v Panatown Ltd (Panatown) [2001] 1 AC 518, per Lord Clyde, at pp 530E F and 532D E. (An even broader principle was also suggested by Lord Griffiths in St Martins, at p 96F 97D and reviewed inconclusively by Lord Browne Wilkinson at pp 111F 112F as well as by the members of the House in Panatown, to the effect that a contracting party might itself have an interest in performance enabling it to claim damages without proving actual loss.)
In the absence of argument, it is not appropriate to reach any conclusion as to whether or how far either of these principles might have assisted Gard, had it been open to Gard to rely on them now.
Suffice it to say that, since their application has not been tested, I am not prepared to proceed on the basis that charterers must be recognised as having had liability to owners, in order to be able to claim down the line against Sinochart and so for Sinochart against Daiichi.
If the absence of such a liability is fatal to a claim by charterers down the line, it must be because neither alternative basis of claim identified in para 125 is available, and, if neither proved to be available, that would, presumably, be because the law did not regard this situation as one where considerations of justice comparable to those reflected in the reasoning in those cases militated in favour of recognising a right on the part of the charterers to claim down the line.
LORD HODGE:
I also agree with Lord Clarkes judgment on the first and third issues in this appeal.
On the second issue I agree with the judgments of Lord Toulson and Lord Mance.
LORD TOULSON:
I agree with the judgments of Lord Clarke and the Court of Appeal on the issue whether there was a breach of the safe port warranty, and I would therefore dismiss the appeal.
I agree also with Lord Clarke on the issue of limitation of liability and would affirm the decision of the Court of Appeal in The CMA Djakarta [2004] 1 Lloyds Rep 460.
On the issue as to the effect of the charters joint insurance provisions, I agree with the reasoning and conclusion of the Court of Appeal and disagree with Lord Clarke and Lord Sumption for reasons explained in the rest of this judgment.
It is a curious feature of this appeal that permission to appeal on the joint insurance issue was sought on the basis that the Baltic and International Maritime Council (BIMCO) form of bareboat charter codenamed Barecon 89 is a standard form of contract in common use and the effect of clause 12 is therefore a matter of general importance, but the argument turned on the relationship between that clause and clause 29, which is not part of the standard form.
It is nevertheless sensible to begin by considering the effect of clause 12 in the unamended version of Barecon 89.
It is important to understand its basic structure.
The standard terms, set out in Part II of the policy, contain nothing about safe ports.
Clause 5, headed Trading Limits, stipulates that the vessel is to be employed in lawful trades for the carriage of suitable lawful merchandise within trading limits which may be specified in the schedule which forms Part I of the policy, and that the vessel is not to be employed otherwise than in accordance with the terms of the insurance which is required to be maintained.
The insurance requirements are set out in clause 12 or its alternative, clause 13.
Clause 12 is headed Insurance and Repairs.
It provides: (a) During the Charter period the Vessel shall be kept insured by the Charterers at their expense against marine, war and Protection and Indemnity risks in such form as the Owners shall in writing approve, which approval shall not be unreasonably withheld.
Such marine, war and P and I insurances shall be arranged by the Charterers to protect the interests of both the Owners and the Charterers and mortgagees (if any), and the Charterers shall be at liberty to protect under such insurances the interests of any managers they may appoint.
All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear.
If the Charterers fail to arrange and keep any of the insurances provided for under the provisions of sub clause (a) above in the manner described therein, the Owners shall notify the Charterers whereupon the Charterers shall rectify the position within seven running days, failing which Owners shall have the right to withdraw the Vessel from the service of the Charterers without prejudice to any claim the Owners may otherwise have against the Charterers.
The Charterers shall, subject to the approval of the Owners and the Underwriters, effect all insured repairs and shall undertake settlement of all costs in connection with such repairs as well as insured charges, expenses and liabilities (reimbursement to be secured by the Charterers from the Underwriters) to the extent of coverage under the insurances herein provided for.
The Charterers also to remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurances and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances.
All time used for repairs under the provisions of sub clause (a) of this Clause and for repairs of latent defects according to Clause 2 above including any deviation shall count as time on hire and shall form part of the Charter period. (b) If the conditions of the above insurances permit additional insurance to be placed by the parties, such cover shall be limited to the amount for each party set out in Box 28 and Box 29 respectively.
The Owners or the Charterers as the case may be shall immediately furnish the other party with particulars of any additional insurance effected, including copies of any cover notes or policies and the written consent of the Insurers of any such required insurance in any case where the consent of such insurers is necessary. (c) Should the vessel become an actual, constructive, compromised or agreed total loss under the insurances required under sub clause (a) of clause 12, all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the Owners and the Charterers according to their respective interests.
The Charterers undertake to notify the Owners and the Mortgagee, if any, of any occurrences in consequence of which the Vessel is likely to become a Total Loss as defined in this Clause.
If the Vessel becomes an actual, constructive, (d) compromised or agreed total loss under the insurances arranged by the Charterers in accordance with sub clause (a) of this Clause, this Charter shall terminate as of the date of such loss. (e) The Owners shall upon the request of the Charterers, promptly execute such documents as may be required to enable the Charterers to abandon the Vessel to insurers and claim a constructive total loss. (f) For the purposes of insurance coverage against marine and war risks under the provisions of sub clause (a) of this Clause, the value of the Vessel is the sum indicated in Box 27.
Clause 13 applies in place of clause 12 if the parties so choose in part I of the policy.
In relation to P and I risks during the charter, clause 13 follows the provisions of clause 12, but in relation to marine and war risks clause 13(a) puts the responsibility for maintaining cover on the owner.
It provides: During the Charter period the Vessel shall be kept insured by the Owners at their expense against marine and war risks under the form of policy or policies attached hereto.
The Owners and/or insurers shall not have any right of recovery or subrogation against the Charterers on account of loss of or any damage to the Vessel or her machinery or appurtenances covered by such insurance, or on account of payments made to discharge claims against or liabilities of the Vessel or the Owners covered by such insurance.
All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear.
The significant feature of bareboat chartering, or chartering by demise, is that during the period of the charter (in the words of BIMCOs explanatory notes to Barecon 89) the vessel comes in the full possession, at the absolute disposal, and under the complete control of the bareboat charterers.
The notes add that bareboat chartering is therefore entirely different from ordinary time chartering when it comes to the allocation of costs, liabilities and responsibilities.
Clause 12 in the unamended form deals comprehensively with the risks of loss or damage to the vessel and what is to happen in such an event.
In summary, the demise charterer is responsible for arranging and maintaining insurance, in a form approved by the owner, in the names of both parties for an agreed value; the charterer is responsible for effecting all insured repairs; the charterer is responsible for repairs not covered by the insurance, for example, due to deductibles under the terms of the insurance (or, for that matter, due to use of the vessel outside the terms of the insurance); and in the case of a total loss covered by the insurance, the clause provides for the processing of the insurance moneys.
BIMCOs explanation for the optional alternative of clause 13 was that sometimes a vessel is bareboat chartered for only a short period and it may make sense for the owners to carry on with the insurances which they are likely to have in place.
Clause 13 therefore provides that the vessel is to be kept insured by the owners against marine and war risks, and that the owners and their insurers are to have no right of recovery or subrogation against the charterers on account of loss or damage covered by such insurance.
It would be unnecessary to include equivalent words in clause 12.
It cannot have been the parties intention that the charterers exposure to liability should be greater under clause 13, where cover against marine and war risks was to be maintained at the owners expense than under clause 12, where it was to be maintained at the charterers expense.
Longmore LJ put the point pithily when he described the exclusion of rights of recovery or subrogation in clause 13 as a confirmation rather than a negation of such exclusion in the more usually adopted clause 12 for the longer term charters when it is the charterers who pay the premium (para 88).
The critical question then arises as to the effect, in relation to the operation of clause 12, of the substitution of clause 5 by clause 29, which provides that the vessel is to be employed in lawful trades for the carriage of lawful merchandises only between good and safe berths, ports or areas where the [vessel] can safely lie always afloat, etc.
On the hypothesis that Kashima was not prospectively a safe port for the OCEAN VICTORY when Daiichi gave instructions for her to discharge there, Daiichi was thereby in breach of the safe port undertaking in the time sub charter between itself and Sinochart, which in turn was in breach of the equivalent undertaking in the time charter between itself and the demise charterer, OLH, which in turn was in breach of clause 29 of the demise charter between itself and the owners, OVM.
The consequence of that breach was that the vessel was lost, but the demise charterer and the owners were co insured (as required by clause 12) and the insurers paid its insured value.
One of the insurers, Gard, claims to be entitled to recover that sum from the time charterers as assignee of the rights of the demise charterer.
The claim therefore depends on the demise charterer being liable to the owners for that sum by way of damages for breach of clause 29, and thus entitled to recover the same sum from the time charterer as loss suffered by the demise charterer.
Gards case is that the breach of clause 29 caused the loss of the vessel; therefore the demise charterer was liable to the owners for the vessels value, and the fact that the owners were paid that amount by the insurers is res inter alios acta as between the demise charterer and the time charterer.
The critical question is whether the contractual scheme between the owners and the demise charterer precluded any claim by the former against the latter for the insured loss of the vessel.
This is a matter of construction.
It has become a common practice in various industries for the parties to provide for specified loss or damage to be covered by insurance for their mutual benefit, whether caused by one partys fault or not, thus avoiding potential litigation between them.
The question in each case is whether the parties are to be taken to have intended to create an insurance fund which would be the sole avenue for making good the relevant loss or damage, or whether the existence of the fund co exists with an independent right of action for breach of a term of the contract which has caused that loss.
Like all questions of construction, it depends on the provisions of the particular contract: see, for example, Co operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] 1 WLR 1419.
In that case a building owner entered into a standard form of building contract for the construction of office premises.
Under its terms the contractor was required to take out and maintain a policy in the names of the owner, the contractor and specialist electrical subcontractors, Hall, for all risks insurance covering loss or damage to the works from specified perils including fire.
Hall entered into a collateral contract with the owner warranting that it had exercised and would exercise all reasonable care and skill in the design and execution of the sub contract works.
A fire occurred causing extensive damage.
The owners sued their architects and mechanical and engineering consultants, who brought third party proceedings against Hall.
This raised the question whether Hall was liable to the owners in respect of the fire damage, alleged by the third party claimants to have been caused by Halls negligence and breach of warranty.
The House of Lords, upholding a decision by the first instance judge and the Court of Appeal, held that it cannot have been the parties intention that parties who were jointly insured under a contractors all risks policy could make claims against one another in respect of damage covered by the insurance, or that the insurers could make a subrogated claim in the name of the owners against Hall, and that the court would if necessary hold that there was an implied term to such effect (which I infer in relation to Hall must logically have taken effect as an implied term of the collateral contract between itself and the owners).
In so holding the House of Lords approved and applied the reasoning of Mr Recorder Jackson QC, as he then was, in Hopewell Project Management Ltd v Ewbank Preece Ltd [1998] 1 Lloyds Rep 448, 458, where he described it as nonsensical if those parties who were jointly insured under a contractors all risks policy would make claims against one another in respect of damage to the contract works.
The implied term presupposes, of course, that the party relying on it has not by his own conduct prevented recovery of the loss under the policy a point made by Jackson J (as he had by then become) in Board of Trustees of the Tate Gallery v Duffy Construction Ltd [2007] BLR 216.
In the present case the Court of Appeal followed the same reasoning in holding that the proper construction of clause 12 was that there was to be an insurance funded result in the event of loss or damage to the vessel by marine risks and that, if the demise charterers had been in breach of the safe port clause, they would have been under no liability to the owners for the amount of the insured loss because they had made provision for looking to the insurance proceeds for compensation.
It did not consider that the introduction of clause 29 was intended to alter the way in which clause 12 was to operate.
I agree with the Court of Appeal.
The demise charter allowed for a sub demise with the owners consent, which was not to be unreasonably withheld.
The risk existed that the vessel might be directed to an unsafe port, not necessarily by negligence on anyones part, so causing peril to the vessel, but the risk of consequential damage to the vessel was catered for by the insurance required to be maintained by the demise charterer in the joint names of itself and the owners.
The commercial purpose of maintaining joint insurance in such circumstances is not only to provide a fund to make good the loss but to avoid litigation between them, or the bringing of a subrogation claim in the name of one against the other.
I do not accept that by substituting clause 29 for clause 5 the parties intended to subvert that purpose.
If anything, the present case is stronger in this regard than Co operative Retail Services Ltd v Taylor Young Partnership Ltd, because in that case Halls obligation to use skill and care was in a separate contract from the contract between the owner and the contractor which contained the provisions about insurance whereas in the present case clauses 12 and 29 are part of a single contract.
Gards submission that clause 29 becomes pointless if clause 12 has the effect held by the Court of Appeal is fallacious.
It sets limits on the use of the vessel, breach of which may give rise to loss, but clause 12 deals with the consequences of loss or damage to the vessel, regardless of whether it resulted from negligence or other fault of the demise charterer (or a sub charterer).
Mr Mark Howard QC argued that this interpretation misapprehends the purpose of clause 12, which in a case of loss caused by a breach of contract by the charterer does no more than to ensure that the owners right to recover damages is backed by an available fund.
This in substance was the argument advanced unsuccessfully against Hall in Co operative Retail Services Ltd v Taylor Young Partnership Ltd. Lord Hope (paras 39 and 40) distinguished between a provision for insurance which curtails the means of recovering loss whether or not it was caused by a contracting co insureds default, and a provision which backs the other partys other obligations with an insuring obligation but leaves the other obligations enforceable against the other party by other means.
He agreed with the judges conclusion that the contractual insurance arrangements meant that if a fire occurred, the owners were to look to the joint insurance policy to provide the fund for the cost of restoring and repairing the fire damage rather than, in the judges words, indulge in litigation with each other.
In the present case, if one were to ask whether it would have accorded with the parties intentions that on the morning after the loss the owners would have been entitled to demand immediate payment from the demise charterers, rather than make a claim on the insurers and wait for it to be settled, my answer would be that they intended no such thing.
The insurance arrangements under clause 12 provided not only a fund but the avoidance of commercially unnecessary and undesirable disputes between the co insured.
It does not follow that the demise charterers (or their insurers in their shoes) necessarily had no available remedy against the time charterers.
The court was told that at one stage the insurers intimated a claim analogous to the claim which a bailee may bring under The Winkfield [1902] P 42.
However, the matter was not pursued, and it would be inappropriate to express a positive view about the likelihood of success of such a claim (or any alternative), about which the court has heard no argument.
For those reasons I would have upheld the decision of the Court of Appeal on the recoverability issue, if the demise charterers had been in breach of the safe port clause.
I have had the benefit of reading Lord Mances additional reasons, with which I agree.
Like him, I do not think it is necessary to reach a final conclusion about the position in the case of an insolvent insurer, which it is not reasonable to suppose was in the minds of the BIMCO drafters of Barecon 89 and ought not to affect its core interpretation.
| This appeal arises out of the grounding of the Ocean Victory (the vessel).
By a demise charterparty the vessels owners, Ocean Victory Maritime Inc. (the owners) chartered the vessel to Ocean Line Holdings Ltd (the demise charterer) on the widely used Barecon 89 form, as amended [1].
It provided for the demise charterers to procure insurance for the vessel at their expense against marine, war and protection and indemnity risks for the joint interest of themselves and the owners [93].
The demise charterer time chartered the vessel to China National Chartering Co Ltd (Sinochart), who sub chartered the vessel to Daiichi Chuo Kisen Kaisha (Daiichi).
The demise charter and both time charters contained the same undertaking to trade the vessel between safe ports [1 2].
In September 2006, Daiichi gave the vessel instructions to load at Saldanha Bay in South Africa and discharge at the port of Kashima in Japan [3].
The quay at Kashima was vulnerable to long waves which can result in a vessel being required to leave the port.
The only route in and out of Kashima is by a narrow channel, the Kashima Fairway, which is vulnerable to northerly gales [3, 9].
There is no meteorological reason why these two events should occur at the same time [9].
However, on 24 October 2006, the vessel sought to leave the port due to long waves but, due to a severe northerly gale, was unable to safely navigate the fairway and was grounded, becoming a total loss [1, 4].
Gard Marine & Energy Ltd (Gard), one of the vessels hull insurers, took assignments of the rights of the owners and the demise charterer in respect of the grounding and total loss.
It brought a claim against Sinochart (which Sinochart passed on to Daiichi) for damages for breach of the charterers undertaking to trade only between safe ports [5].
In the High Court, Teare J held that there had been a breach of the safe port undertaking.
The combination of the two weather conditions was not an abnormal occurrence, even though the coincidence of the conditions was rare, because both conditions were physical characteristics of the port.
The Court of Appeal allowed Daiichis appeal on this issue (issue 1).
The Court of Appeal also held that, due to the joint insurance provisions, the owners were not entitled to claim against the demise charterparty in respect of insured losses (issue 2), reversing Teare Js finding on this issue.
Gard appealed on both these issues [7].
In addition, the Supreme Court considered whether Daiichi would be entitled to limit its liability for loss of the ship pursuant to the 1976 Convention on Limitation of Liability for Maritime Claims (the Convention) enacted into English law by the Merchant Shipping Act 1995.
This issue was not considered by the courts below as it was accepted that they were bound by the decision of the Court of Appeal in The CMA Djakarta [2004] 1 Lloyds Rep 460 which had held that such limitation was not possible (issue 3) [58 59].
The Supreme Court unanimously dismisses the appeal on the ground that there was no breach of the safe port undertaking.
Lord Clarke gives the lead judgment, with which all the justices agree on issue 1 and on issue 3; if there had been a breach of the safe port undertaking Daiichi would not have been entitled to limit its liability under the Convention.
In respect of issue 2, Lord Toulson and Lord Mance, in judgments with which Lord Hodge concurs, agree with the Court of Appeal, that the joint insurance would have precluded any claim by owners against the demise charterer, or therefore by the latter down the line.
Lord Clarke and Lord Sumption take the opposite view.
It was common ground that the test for breach of the safe port undertaking is whether the damage sustained by the vessel was caused by an abnormal occurrence [10], that the date for judging the breach of the safe port promise is the date of nomination of the port and the promise is a prediction about the safety of the port when the ship arrives in the future. [13, 24].
Abnormal occurrence should be given its ordinary meaning; something rare and unexpected that the notional charterer would not have in mind [16, 25, 27].
The test is not whether the events which caused the loss are reasonably foreseeable.
The fact that the combination of long waves and northerly gales was theoretically foreseeable does not make it a normal characteristic of the port.
Regard must be had to the reality of the situation in the context of all the evidence to ascertain whether the particular event was sufficiently likely to occur to have become an attribute of the port [14, 32, 37 40].
Teare J erred in failing to answer the unitary question of whether the simultaneous coincidence of the long waves and gales was an abnormal occurrence [34].
No vessel in the ports history had risked damage in the quay due to long waves at the same time the Kashima Fairway was unnavigable because of gale force winds.
There was also evidence regarding the exceptional nature of the rapid development, duration and severity of the storm.
On the basis of this evidence the conditions in question were an abnormal occurrence and there was therefore no breach by Daiichi of the safe port undertaking [41 45].
Assuming there had been a breach of the safe port warranty, Gard claims to be able to recover the insured value of the vessel from the time charterers as the demise charterers assignee on the basis that the demise charterer is liable to the owners for breach of its safe port undertaking, and is therefore entitled to recover the same sum from the time charterer [93, 138].
Lord Toulson, Lord Mance and Lord Hodge conclude that the provisions of clause 12 of the demise charter, which provide for joint insurance and a distribution of insurance proceeds, preclude such a claim.
It is well established that co insureds cannot claim against each other in respect of an insured loss.
Clause 12 provides a comprehensive scheme for an insurance funded result in the event of loss of the vessel by marine risks.
The safe port undertaking does not alter this scheme. [139 146, 114 122].
Lord Sumption agrees that co insureds cannot claim against each other in respect of an insured loss.
Whether this is because liability to pay damages is excluded by the terms of the contract, or because as between the co insureds the insurers payment makes good any loss and satisfies any liability to pay damages will depend on the terms of the contract [99 100].
In this case clause 12 of the demise charter envisages the latter [101 105].
Lord Clarke agrees with Lord Sumption on this issue [48 57].
Had there been a breach of the safe port warranty, Daiichi would not have been entitled to limit its liability under the Convention.
Article 2(1)(a) of the Convention allows owners or charterers to limit liability for loss or damage to property occurring on board the ship or in direct connexion with the operation of the ship [61].
The court agrees with the Court of Appeal in The CMA Djakarta that giving the words their ordinary meaning, this category of claim does not include loss or damage to the ship itself [79 81].
This interpretation is supported by Articles 9 to 11 of the Convention [82 84] and there is nothing in the travaux prparatoires which supports another conclusion [86].
|
This appeal is about the right conferred by the Water Industry Act 1991 (the Act) on a property owner to connect his private drain or sewer to a public sewer for the purpose of discharging his sewage into the public sewer.
The principal issue raised is whether it is the property owner or the sewerage undertaker who is entitled to determine the point at which the property owners drain or sewer is to connect to the public sewer.
This narrow issue of statutory construction conceals, however, wider and more fundamental issues that are less easily resolved.
I propose first to resolve the narrow issue, before commenting on these wider issues.
Llanfoist is a village near Abergavenny in Monmouthshire.
Its surface water and foul water drainage requirements are met by a public sewerage system that terminates in a waste water treatment works (the Treament Works) about 1/3 mile to the East of the village and below it.
This system is about 60 years old.
Approximately mid way between the village and the Treatment Works, at manhole SO29125900 (the CSO), the sewage pipe that links the two reduces from a diameter of 225 mm to a diameter of 150 mm and continues for a distance of 282m before it increases, at manhole SO29127901 to a diameter of 300mm for the final stretch to the Treatment Works.
The narrow section, described as a pipe bridge determines the capacity of the system, or at least all that part of it that lies upstream of manhole SO29127901.
The Respondents, Barratts, are in the process of building a substantial development of 98 houses and a primary school on a greenfield site contiguous to the East side of Llanfoist.
They constructed a private sewer to receive the sewage from this development.
They claimed a statutory right to connect their private sewer to the public sewer at a point of their own choosing, which was in the close vicinity of their development.
This point of connection was not satisfactory to Welsh Water, as it would overload the system upstream of manhole SO29127901.
They claimed a statutory right to refuse connection at this point, offering instead connection at manhole SO29127901, an option that would saddle Barratts with the cost of the link from their development to manhole SO29127901.
Thus arose the narrow issue of the interpretation of the relevant provisions of the 1991 Act.
At first instance, in a judgment delivered on 1 August 2008, Wyn Williams J found in favour of Welsh Water [2008] EWHC 1936 (QB).
His decision was reversed by the Court of Appeal on 28 November 2008 [2008] EWCA Civ 1552.
Barratts then proceeded to connect the developments sewer to the public sewer at the place of their choice.
Welsh Water do not seek, by this appeal, to effect a physical reversal of what has taken place.
They accept that what has taken place in this case is now water under the bridge.
They are anxious to establish, however, that a sewerage undertaker has a right to refuse to permit connection to be made to one of their sewers when they consider that the proposed point of connection is not suitable.
Should they establish this right of refusal a further issue arises as to the effect of a statutory time limit for giving notice of refusal.
The Water Industry Act 1991
The law in relation to sewers has its origin in the reign of Henry VIII, but the modern law begins with the Public Health Act 1848.
There followed a series of Acts which consolidated and amended the law, of which the 1991 Act is one.
The provisions of that Act which are directly relevant to this appeal can be traced back to the Victorian legislation.
They provide as follows: 94 General duty to provide sewerage system (1) It shall be the duty of every sewerage undertaker (a) to provide, improve and extend such a system of public sewers (whether inside its area or elsewhere) and so to cleanse and maintain those sewers and any lateral drains which belong to or vest in the undertaker as to ensure that that area is and continues to be effectually drained; and (b) to make provision for the emptying of those sewers and such further provision (whether inside its area or elsewhere) as is necessary from time to time for effectually dealing, by means of sewage disposal works or otherwise, with the contents of those sewers. 106 Right to communicate with public sewers (1) Subject to the provisions of this section (a) the owner or occupier of any premises, or (b) the owner of any private sewer which drains premises, shall be entitled to have his drains or sewer communicate with the public sewer of any sewerage undertaker and thereby to discharge foul water and surface water from those premises or that private sewer. (2) Subject to the provisions of Chapter III of this Part, nothing in subsection (1) above shall entitle any person (a) to discharge directly or indirectly into any public sewer (i) any liquid from a factory, other than domestic sewage or surface or storm water, or any liquid from a manufacturing process; or (ii) any liquid or other matter the discharge of which into public sewers is prohibited by or under any enactment; or (b) where separate public sewers are provided for foul water and for surface water, to discharge directly or indirectly (i) foul water into a sewer provided for surface water; or (ii) except with the approval of the undertaker, surface water into a sewer provided for foul water; or (c) to have his drains or sewer made to communicate directly with a storm water overflow sewer. (3) A person desirous of availing himself of his entitlement under this section shall give notice of his proposals to the sewerage undertaker in question. (4) At any time within twenty one days after a sewerage undertaker receives a notice under subsection (3) above, the undertaker may by notice to the person who gave the notice refuse to permit the communication to be made, if it appears to the undertaker that the mode of construction or condition of the drain or sewer (a) does not satisfy the standards reasonably required by the undertaker; or (b) is such that the making of the communication would be prejudicial to the undertakers sewerage system. (5) For the purpose of examining the mode of construction and condition of a drain or sewer to which a notice under subsection (3) above relates a sewerage undertaker may, if necessary, require it to be laid open for inspection.
In this judgment I shall, where appropriate, refer to the developer as shorthand for the owner or occupier of premises who enjoys rights under section 106.
Section 106(6) provides that any question as to the reasonableness of an undertakers refusal to permit a communication to be made or of a requirement under subsection (5) may be referred for determination by the Director of the Office of Water Services (OFWAT).
Section 107 entitles the sewerage undertaker to give notice within 14 days of receipt of a notice under section 106(3) that the undertaker intends to make the communication himself.
In that event the developer has to pay the reasonable cost of the work.
The point of connection
Submissions
Mr Porten QC for Barratts submitted that the provisions of section 106 of the 1991 Act were clear.
Subsection (1) gave a property owner the right to connect to a public sewer, subject only to such limitations as were imposed by other provisions of the section itself.
That right was a right to connect at whatever point the property owner chose to do so.
The only restrictions on that right were those set out in subsection (4).
Those restrictions were very limited.
They gave the undertaker the right to refuse to permit the connection only on grounds of the inadequacy of the mode of construction or condition of the private drain or sewer that was to be joined to the public sewer.
No objection could be made to the point of connection, however inconvenient that might be for the undertaker.
Lord Pannick QC for Welsh Water submitted that the Court should not accept this interpretation, for its consequences ran counter to the object of the legislation.
That object was the protection of health and of the environment.
Parliament cannot have intended that a property owner should be entitled to insist on a specific point of connection however great the harm that this would cause to the environment or to public health and however reasonable it might be to require the property owner to connect elsewhere.
The potential harm identified by Lord Pannick was damage to the environment or to health as a result of the escape of foul water from the sewage system.
The overload on the system consequent upon the point of connection chosen by Barratts had increased the risk of escape of foul water at the CSO.
The CSO was intended to act as an escape point for sewage to a limited extent deemed acceptable in conditions of overload caused by exceptional rainfall in storm conditions.
The additional loading on the system as a result of connecting Barratts sewer upstream rather than downstream of the pipe bridge was calculated to lead to escape of foul water beyond the limit that was acceptable.
Such escape would result in Welsh Water committing criminal offences of strict liability under section 85 of the Water Resources Act 1991 and would infringe provisions of Directive 91/271/EEC concerning the collection, treatment and discharge of urban waste water (the Directive) and the Urban Waste Water Treatment (England and Wales) Regulations 1994 (SI 1994/2841) (the 1994 Regulations) passed to give effect to the Directive.
Lord Pannick treated the facts of the present case as illustrative of the general effect of an interpretation of section 106 of the 1991 Act that permits a developer to select the point of connection between his sewer and a public sewer.
That is the only relevance of the facts of this case to the issue of interpretation that is raised and I shall defer a more detailed consideration of those facts to later in this judgment.
Lord Pannick further submitted that the escape of waste water consequent upon a property owner connecting to a public sewer at an inappropriate point could include pollution and risk to health, thereby infringing Articles 2, 3 or 8 of The European Convention on Human Rights.
The Court was bound, if possible, so to interpret section 106 of the 1991 Act as to avoid these consequences see Marsleasing SA v La Comercial Internacional de Alimentacion SA (Case C 106/89) [1990] ECR 1 4135 and section 3 of the Human Rights Act 1998.
Lord Pannick submitted that such interpretation could be achieved by reading the provisions of section 106 in a manner that implicitly incorporated express provisions in earlier legislation that the 1991 Act had replaced.
Lord Pannick advanced two alternative ways of interpreting section 106 that produced the result for which he contended.
The first involved reading the mode of construction of the drain or sewer in subsection (4) as embracing the point of connection.
This interpretation was, he submitted, supported by the legislative history.
Section 21 of the Public Health Act 1875 (the 1875 Act) provided: The owner or occupier of any premises within the district of a local authority shall be entitled to cause his drains to empty into the sewers of that authority on condition of his giving such notice as may be required by that authority of his intention so to do, and of complying with the regulations of that authority in respect of the mode in which the communications between such drains and sewers are to be made, and subject to the control of any person who may be appointed by that authority to superintend the making of such communications.
The Public Health Act 1936 (the 1936 Act) replaced the provisions of the 1875 Act with provisions that more closely resemble those of the 1991 Act.
Section 34 provided: (1) Subject to the provisions of this section, the owner or occupier of any premises, or the owner of any private sewer, within the district of a local authority shall be entitled to have his drains or sewer made to communicate with the public sewers of that authority, and thereby to discharge foul water and surface water from those premises or that private sewer: . (3) A person desirous of availing himself of the foregoing provisions of this section shall give to the local authority notice of his proposals, and at any time within twenty one days after receipt thereof, the authority may by notice to him refuse to permit the communication to be made, if it appears to them that the mode of construction or condition of the drain or sewer is such that the making of the communication would be prejudicial to their sewerage system, and for the purpose of examining the mode of construction and condition of the drain or sewer they may, if necessary, require it to be laid open for inspection: Provided that any question arising under this subsection between a local authority and a person proposing to make a communication as to the reasonableness of any such requirement of the local authority, or of their refusal to permit a communication to be made, may on the application of that person be determined by a court of summary jurisdiction.
Lord Pannick submitted that the legislature can have had no intention of restricting the rights of the local authority and that mode of construction in the 1936 Act should be given the same meaning as mode in which the communicationsare to be made in the 1875 Act.
The latter phrase was wide enough to embrace the point at which the communication should be made.
The same interpretation should be given to mode of construction in section 106 of the 1991 Act.
Alternatively, Lord Pannick submitted that section 106(1) did not confer any entitlement on a property owner to connect at any point of his choosing and that it was open to an undertaker to respond to a proposal under section 106(3) by identifying a location at which connection might be made, such a response being subject to dispute resolution under section 106(6).
Lord Pannick relied in support of these submissions on observations by Walton J in Beech Properties v GE Wallis & Sons Ltd [1977] EG 735, to which I shall return.
The Judgments below
Wyn Williams J accepted the first of Lord Pannicks approaches to the construction of section 106, then advanced on behalf of Welsh Water by Mr Maurice Sheridan.
In doing so he relied upon the judgment of Walton J in Beech Properties.
He added that he considered it would be objectionable to construe the statute in such a way as to preclude an undertaker from refusing a connection that would have potentially deleterious environmental consequences.
In the leading judgment of the Court of Appeal, reversing the decision of the trial judge, Carnwath LJ held that section 34 of the 1936 Act, which was essentially reproduced in section 106 of the 1991 Act, provided only narrow grounds on which an undertaker could refuse connection.
These related solely to the mode of construction or condition of the connecting drain.
This formulation was even narrower than under the 1875 Act, which permitted the authority to regulate the mode of communication.
Furthermore, the reason why Welsh Water objected to the point of connection was that connection would overload the public sewer and there was clear authority that an undertaker could not resist connection on this ground.
Lawrence Collins LJ agreed with the judgment of Carnwath LJ.
Pill LJ also agreed.
He held at paragraph 54: I am unable to conclude that the expression mode of construction and condition of the drain or sewer in section 106(4), repeated in section 106(5) of the 1991 Act, has any bearing upon the location of the communication with the public sewer contemplated in section 106(1)(b) and section 106(4).
Mode of construction has nothing to do with location.
He added in the following paragraph that he would not accept the submission of Mr Porten that the owner or occupier could dictate the precise location of the connection.
Circumstances may be such as to allow a modest discretion to the sewerage undertaker where good reason is shown, for example, that the precise location chosen by the applicant is not a feasible or sensible location at which to connect.
That was not this case.
Welsh Water were seeking to dictate a communication situated about 300 metres from that requested and across land in third party ownership and control.
The Statutory scheme
The right to connect to a public sewer afforded by section 106 of the 1991 Act and its predecessors has been described as an absolute right.
The sewerage undertaker cannot refuse to permit the connection on the ground that the additional discharge into the system will overload it.
The burden of dealing with the consequences of this additional discharge falls directly upon the undertaker and the consequent expense is shared by all who pay sewerage charges to the undertaker.
Thus in Ainley v Kirkheaton Local Board (1891) 60 LJ (Ch) 734 Stirling J held that the exercise of the right of an owner of property to discharge into a public sewer conferred by section 21 of the 1875 Act could not be prevented by the local authority on the ground that the discharge was creating a nuisance.
It was for the local authority to ensure that what was discharged into their sewer was freed from all foul matter before it flowed out into any natural watercourse.
described the right under section 21 as an absolute right, adding that: In Brown v Dunstable Corporation [1899] Ch 378 at p. 390 Cozens Hardy J This absolute right is no doubt subject to any regulations in respect of the mode of making connections and subject to the control of any person appointed to superintend the making of the connections; but no regulations can justify an absolute refusal to allow a connection to be made on any terms.
In Smeaton v Ilford Corporation [1954] Ch 450 the Corporation was the authority responsible for sewerage in Ilford.
They were sued by the plaintiff in nuisance caused by the escape of sewage from a sewer.
Upjohn J held that they were not liable.
The nuisance was not caused by the Corporation but arose because the Corporation were bound by section 34 of the 1936 Act to permit occupiers or premises to make connections with the sewer and to discharge their sewage into it.
Smeaton was cited with approval by the House of Lords in Marcic v Thames Water Utilities Ltd [2003] UKHL 66; [2004] 2 AC 42.
Lord Nicholls of Birkenhead remarked at paragraph 34 that Thames Water had no control over the volume of water entering their sewers.
A sewerage undertaker was unable to prevent connections being made to the existing system, and the ingress of water through those connections, even if this risked overloading the existing sewers.
It follows that the duty imposed on Welsh Water by section 94 of the 1991 Act requires them to deal with any discharge that is made into their sewers pursuant to section 106.
It does not follow, however, that where a new development is constructed, Welsh Water are obliged, at their own expense, to construct a sewer to accept the sewage from the development if one does not already exist.
Section 98 entitles a developer, among others, to requisition a public sewer, or a lateral drain linking with a public sewer, in order to service the buildings being constructed, but on terms that he meets the costs of so doing.
Section 101 provides that the place or places where the public sewer and drain are to be located are to be agreed between the requisitioner and the undertaker or, in default of agreement, to be determined by OFWAT.
Sections 102 and 103 of the 1991 Act make provision for a sewerage undertaker to adopt private sewers, lateral drains and disposal works.
Section 104 makes provision for a person who is constructing or who proposes to construct a sewer, lateral drain or disposal works to enter into an agreement with a sewerage undertaker under which the undertaker will adopt the works at or after their completion.
Section 112 of the 1991 Act provides: Requirement that proposed drain or sewer be constructed so as to form part of general system (1) Where (a) a person proposes to construct a drain or sewer; and (b) a sewerage undertaker considers that the proposed drain or sewer is, or is likely to be, needed to form part of a general sewerage system which that undertaker provides or proposes to provide, the undertaker may require that person to construct the drain or sewer in a manner differing, as regards material or size of pipes, depth, fall, direction or outfall or otherwise, from the manner in which that person proposes, or could otherwise be required by the undertaker, to construct it. (2) If any person on whom requirements are imposed under this section by a sewerage undertaker is aggrieved by the requirements, he may within twenty eight days appeal to [OFWAT].
Any additional cost that this involves has to be paid by the undertaker.
Section 113 of the 1991 Act provides: Power to alter drainage system of premises in area (1) Where any premises have a drain or sewer communicating with a public sewer or a cesspool, but that system of drainage, though sufficient for the effectual drainage of the premises (a) is not adapted to the general sewerage system of the area; or (b) is, in the opinion of the sewerage undertaker for the area, otherwise objectionable, the undertaker may, at its own expense, close the existing drain or sewer and fill up the cesspool, if any, and do any work necessary for that purpose. (2) The power conferred on a sewerage undertaker by subsection (1) above shall be exercisable on condition only that the undertaker first provides, in a position equally convenient to the owner of the premises in question, a drain or sewer which (a) is equally effectual for the drainage of the premises; and (b) communicates with the public sewer.
The scheme of the legislation, as reflected in the above provisions and as affecting a developer, can be summarised as follows: i) Where connection of a development to a public sewer requires consequential works to accommodate the increased load on the public sewer, the cost of these works falls exclusively upon the undertaker. ii) Where works are done, whether by or on the requisition of the developer, that will be used exclusively by the development, the costs of such works fall exclusively on the developer.
In specified circumstances the undertaker is entitled to require the developer to carry out the works in a manner other than that proposed by the developer, or to alter the works carried out by the developer.
In either case the undertaker has to bear the costs involved. iv) Costs that are borne by the undertaker are passed on to all who pay sewerage charges.
These include those who occupy the houses in the development. iii)
The natural meaning of section 106
It is plain from section 106(5) that the drain or sewer referred to in section 106(4) is the private drain or sewer that the developer proposes to connect to the public sewer, and Lord Pannick accepted that this was so.
I agree with the Court of Appeal that it is impossible to extend the natural meaning of the mode of construction of the existing drain or sewer so as to include the point at which it is proposed to connect that drain or sewer to the public sewer.
Lord Pannick argued that one reason why this extension of mode of construction should be made was that it was unlikely that the mode of construction of the private sewer or drain would be of concern to the undertaker if that phrase were given its natural meaning.
As to this, we received no evidence as to why the condition or mode of construction of the private drain or sewer should be of concern to the undertaker, but I note that section 114 gives the undertaker a right to open a private drain or sewer for inspection if, inter alia, there are reasonable grounds for believing that any such drain or private sewer is so defective as to admit subsoil water.
I see no justification for approaching section 106(4) on the premise that the condition or mode of construction of the private drain or sewer is unlikely to be of concern to the undertaker.
The provisions of section 106(4) of the 1991 Act contrast with the equivalent provisions in relation to sewerage in Scotland set out in section 12 of the Sewerage (Scotland) Act 1968: (3) The owner of any premises who proposes to connect his drains or sewers with the sewers or works of a local authority, or to alter a drain or sewer connected with such sewer or works in such a manner as may interfere with them, shall give to the authority notice of his proposals, and within 28 days of the receipt by them of the notice the authority may refuse permission for the connection or alteration, or grant permission for the connection or alteration, subject to such conditions as they think fit, and any such permission may in particular specify the mode and point of connection and, where there are separate public sewers for foul water and surface water, prohibit the discharge of foul water into the sewer reserved for surface water, and prohibit the discharge of surface water into the sewer reserved for foul water. (4) A local authority shall forthwith intimate to the owner their decision on any proposals made by him under subsection (3) above, and, where permission is refused, or granted subject to conditions, shall inform him of the reasons for their decision and of his right of appeal under subsection (5) below. (5) If a person to whom a decision has been given under subsection (4) above is aggrieved by the decision or any conditions attached thereto, he may appeal to the Secretary of State who may confirm the decision and any such conditions either with or without modification or refuse to confirm it.
This merely underlines the fact that mode of construction does not naturally embrace the point of connection.
No explanation was offered to us as to why those who drafted the Scottish Act chose different language from that of the 1991 Act.
So far as Lord Pannicks alternative approach to construction is concerned, I can see no basis, if the wording of section 106 is given its natural meaning, for inferring that it confers a right on the part of the undertaker to refuse permission to communicate with a public sewer on the ground that the intended point of connection is not satisfactory.
Beech Properties v
Wallis
The issue in this case was whether a vendor of property had satisfied an obligation to provide the purchaser with the right to run foul and surface water from the land sold to a public sewer.
The vendor contended that this obligation was satisfied by the right of the purchaser to connect a 12 inch diameter pipe to a 9 inch diameter public sewer at a particular location, pursuant to section 34 of the 1936 Act.
Walton J held, essentially because of uncertainty as to this right, that the condition was not satisfied.
His judgment contained the following observations at pp. 748 9: However, it does appear to me that, wide as the words of subsection (1) may be, and for the moment ignoring the opening qualification, they do not confer upon an individual the right to connect his sewer to the water authoritys sewer at any point which he may choose.
In most cases, of course, the matter will be quite academic.
There will be the water authoritys sewer, going along the road; a new house is built in the road; and quite obviously and clearly the owner will expect to have a right to drain into that sewer, and it would be very difficult, assuming that there are no problems under the proviso to subsection (1), to imagine a set of circumstances where the water authority would be entitled to say that he must not connect to that sewer but to some other sewer.
Even so, if the new house was built at a crossroads and there were available sewers in both roads, I can see no reason why the owner should be entitled to drain into the sewer of his choice if the water authority required him to drain into the other, which might, for example, well be a relief sewer expressly provided for the district because the other sewer was approaching capacity.
Similarly, I see no reason why the owner is entitled to connect at point X rather than an adjacent point Y, if the water authority requires him to connect at Y.
This passage sounds eminently sensible, but the judge gave no satisfactory explanation as to how the authoritys option to select the point of connection could be derived from section 34.
This decision cannot sustain the weight placed upon it by the trial judge and by Lord Pannick.
The requirements of European Law and the Human Rights Convention.
Lord Pannick submitted that if the words of section 106 did not naturally bear the meaning for which he contended, they should be so interpreted as to carry that meaning nonetheless in order to avoid infringement of the Directive, the 1994 Regulations and the Human Rights Convention.
While he relied upon the facts of the present case as illustrating his thesis, much of the argument focussed on a rather different scenario.
Mr Porten argued that Pill LJ had erred in suggesting that an undertaker enjoyed a modest discretion to refuse to connect at the precise location chosen by an applicant where this was not a feasible or sensible location at which to connect.
He submitted that a developers proposals under section 106(3) could specify the precise point of connection and that the undertaker had no right to insist on deviation from that point by so much as a metre.
Lord Pannick seized on this reductio ad absurdum as demonstrating that the construction for which Barratts contended could not possibly be correct.
The scenario postulated is indeed absurd.
It is impossible to conceive of any reason why a developer should not be prepared, indeed eager, to co operate with the sewerage undertaker in selecting the point of connection that is most suitable, provided that this is within reasonable proximity of the development.
In the present case the evidence placed before us shows that Barratts were prepared to contemplate any one of a number of manholes in the vicinity of their development as the connection point.
It is, I believe, significant that, in nearly a century and a half since the 1875 Act was passed, this is the first occasion upon which the English court has been required to resolve a dispute between property owner and sewerage undertaker as to the point of connection of a private sewer or drain to a public sewer.
The 1875 Act permitted Local Authorities to make regulations in respect of the mode in which the communications between such drains and sewers are to be made.
There is no evidence that any regulations relevant to the issues raised on this appeal were ever made.
Nor is there any evidence that suggests that the change to the single ground for refusing a connection made by the 1936 Act led to any practical difficulties.
Pill LJ did not identify the source of the modest discretion that he suggested would exist on the part of an undertaker to object to the precise point of connection selected by the developer should this prove not feasible or sensible.
I suggest that section 108(1) of the 1991 Act probably provides the answer.
This requires the developer, before commencing the work of making the communication, to give reasonable notice to any person directed by the undertaker to superintend the carrying out of the work and to afford such person all reasonable facilities for superintending the carrying out of the work.
The sub section is silent as to the powers of the superintendent, but his role can be traced back to section 21 of the 1875 Act, which provided that the making of the communication should be subject to the control of any person who may be appointed by that authority to superintend the making of such communications (my emphasis).
It is at least arguable that section 108 of the 1991 Act implicitly confers on the undertakers superintendent power to control the making of the connection and thus to insist that the precise point of communication is one where it is technically feasible and sensible to make the connection.
There is a lacuna in the Act in that the powers of the superintendent are not spelt out and no machinery is provided for resolving any dispute between the superintendent and the developer.
Once again this may reflect the fact that the possibility of a dispute between the supervisor and the developer is one that exists in theory rather than in practice.
I now turn from the unlikely scenario of a dispute as to the precise point of
connection to the situation that has led to the dispute in the present case.
The real problem
The real problem that is demonstrated by the facts of this case arises out of the absolute right conferred by section 106 of the 1991 Act on the owner or occupier of premises to connect those premises to a public sewer without any requirement to give more than 21 days notice.
While this might create no problem in the case of an individual dwelling house, it is manifestly unsatisfactory in relation to a development that may, as in the present case, add 25% or more to the load on the public sewer.
The public sewer may well not have surplus capacity capable of accommodating the increased load without the risk of flooding unless the undertaker has received sufficient advance notice of the increase and has been able to take the necessary measures to increase its capacity.
This problem is accentuated by the fact that the budgets of sewerage undertakers and the charges that they are permitted to make have to be agreed by OFWAT and that this process takes place at five yearly intervals so that forward planning may have to be carried out five years in advance.
This is not a problem that arises because, if it be the case, the developer has the right to select the point of connection.
It is fortuitous that in this case there was spare capacity in the final short section of Welsh Waters sewer that led to the Treatment Works.
In many cases there will be no alternative point of connection that will avoid overload on the public sewer.
Welsh Water has presented this appeal as if the problem to be addressed relates to the point of connection whereas in truth the problem relates to the right of a developer, on no more than 21 days notice, to connect to a public sewer that lacks the relevant capacity.
The Court of Appeal suggested that the practical answer to this problem lies in the fact that the building of a development requires planning permission under the Town and Country Planning Act 1990.
The planning authority can make planning permission conditional upon there being in place adequate sewerage facilities to cater for the requirements of the development without ecological damage.
If the developer indicates that he intends to deal with the problem of sewerage by connecting to a public sewer, the planning authority can make planning permission conditional upon the sewerage authority first taking any steps necessary to ensure that the public sewer will be able to cope with the increased load.
Such conditions are sometimes referred to as Grampian conditions after the decision of the House of Lords in Grampian Regional Council v Secretary of State for Scotland [1983] 1 WLR 1340.
Thus the planning authority has the power, which the sewerage undertaker lacks, of preventing a developer from overloading a sewerage system before the undertaker has taken steps to upgrade the system to cope with the additional load.
Mr David Holgate QC, whose expertise in the field of planning led Lord Pannick to delegate to him this area of the case, sought to persuade us that planning law did not provide a satisfactory answer to the problem.
He demonstrated that there are some projects that have a major impact on sewerage that are not subject to any planning control.
Further, the planning authority may not always take the right decision so far as demands on the sewerage system are concerned.
Article 10 of the Town and Country Planning (General Development Procedure) Order 1995 (SI 1995/419) sets out a wide range of bodies that must be consulted by the local planning authority on an application in relation to a development such as Barratts.
They include the Health and Safety Executive, highway authorities, the Environment Agency, English Heritage, Natural England, the Countryside Council for Wales and the National Assembly for Wales, but not sewerage undertakers.
If conditions of planning permission are to provide the answer to the problem of the connection of private sewers to public sewers which are not adequate to bear the additional load, it would seem essential that there should be input to planning decisions from both the relevant sewerage undertaker and OFWAT.
In the present case there was input from each, but in the submission of Welsh Water the County Councils planning department made an erroneous decision.
Before looking briefly at what occurred, it is instructive to note that Welsh Water and OFWAT were approaching the situation from different viewpoints.
In 1997 an appeal was made to OFWAT, purportedly under section 106 of the 1991 Act, by the Post Office against a refusal by Yorkshire Water to allow a connection to a sewer in Sheffield on the sole ground of lack of capacity in the sewer.
OFWAT ruled that this was not a valid ground for refusing connection.
Subsequently, on 28 November, OFWAT sent a letter to all sewerage undertakers about this decision.
It included the following passages: The key issue, which the Director was required to consider when making his recent determination, is whether the Act allows companies to refuse, or impose conditions upon, a connection of a surface water drain to its public combined sewer on the grounds of limited capacity in the latter.
The Director concluded in his determination that the company was not able to refuse a connection solely on the grounds of lack of capacity.
The Act refers only to the condition or construction of the private drain or sewer which is to be connected.
This cannot, in the Directors view, extend to a consideration of the additional flows to be discharged into the public sewer, except in very specific circumstances.
For example, if the additional flows were to be discharged at such high pressure as to potentially cause damage to the receiving sewer.
The Director also considers that companies are not able to make connection conditional upon works, by the person requesting the connection, designed to reduce flows and therefore address capacity problems in the companies own systems.
The Director also acknowledges that it is not in anybodys interest for new connections to lead to flooding from the public sewers.
Although there is no specific provision in the Act to allow conditions to be imposed as to the timing of the connection, there may be circumstances in which it would be desirable to seek a deferment of the connection date to allow the company time to carry out necessary works to prevent flooding.
However, if the company has had warning of a development and ought reasonably to have foreseen a likely connection (for example, if it is included in the local structure plan), but fails to act, then a deferment condition is unlikely to be defensible.
In this context, the companies duty under Section 94 of the Act to provide, improve and extend the system of public sewers so as to ensure that the area is effectually drained is relevant.
Finally, all of the comments above regarding rights of connection assume a situation in which there are no specific planning conditions upon a development specifying the nature of the connection or works to be completed prior to making the connection.
There may be cases in which a planning condition would prohibit making a connection to a particular sewer, or place conditions upon that connection.
There are mechanisms by which developers may appeal against such planning conditions, in which the Director has no role.
Despite this advice, Mr Ian Wyatt, the New Business Manager of Welsh Water, made it clear in a statement in these proceedings that Welsh Water believed that fairness required that a developer such as Barratts should bear any costs caused by the connection of the developments private sewer to a public sewer.
Welsh Water had not budgeted for the cost of upgrading their system to cope with the demands that Barratts proposed to make on it by connecting at their chosen point.
Upgrading involved replacing the pipe bridge with a pipe of larger diameter at a cost of about 200,000.
Welsh Waters attitude throughout has been that Barratts should pay for this to be done or alternatively requisition Welsh Water under section 98 of the 1991 Act to build a parallel sewer to link the development to the public sewer at SO29127901, again at Barratts expense.
The facts in this case
In 1999 a pre deposit draft of Monmouthshire County Council (MCC)s Unitary Development Plan was sent to Welsh Water for purposes of consultation.
This made provision for, inter alia, the Llanfoist development.
Welsh Waters response was that they objected to this proposed development because their sewerage system was already overloaded and improvements to it were not included in their relevant development programme.
On 18 August 2005 Barratts applied to MCC for planning permission for a development of 120 dwellings.
Welsh Water were consulted and, on 14 September 2005, objected to this development for the same reason given in 1999.
They added, however, that it might be possible for the developer to fund the accelerated provision of replacement infrastructure or to requisition a new sewer under sections 98 to 101 of the 1991 Act.
Barratts revised their planning application, reducing the number of dwellings to 98 but adding a primary school.
On 14 May 2007 MCC granted planning permission, subject to a number of conditions, which included: 10.
No development shall take place until a scheme of foul drainage, and surface water drainage has been submitted to, and approved, by the Local Planning Authority and the approved scheme shall be completed before the building(s) is/are occupied.
Meanwhile, negotiations proceeded between Barratts and Welsh Water under the common assumption that, if the development was to proceed, Barratts would have to fund either upgrading of the public sewer to accommodate the increased load or the construction of a new sewer to link with the public sewer at manhole SO29127901.
On 29 May 2007 Barratts served a notice under section 106 of the 1991 Act, on a standard form provided by Welsh Water, of their intention to make a foul water connection to the public sewer on or after June 07 at SO29131302, this being a manhole in close proximity to the development.
A parallel application was made in relation to surface water.
Welsh Water replied on 26 June 2007 as follows: Thank you for your application to connect the foul and surface water flows from the above proposed development into the public sewerage systems.
We are in a position to approve the connections, however, the foul water connection must be made into or downstream of manhole SO29127901, as shown on the attached plan (ref.
ConF1).
Please note that if you encounter problems with third party landowners you may requisition, under Sections 98 to 101 of the Water Industry Act 1991, one of the following: A new sewer from the boundary of your site to this point of adequacy, or, The necessary improvement works as identified in the hydraulic assessment dated November 2006.
It is now accepted that this somewhat confusing letter is to be treated as a refusal of Barratts proposal.
Discussions continued between Barratts and Welsh Water on the premise that, in one way or another, Barratts would be funding the cost of dealing with Welsh Waters capacity problem.
However, on 11 September 2007 Barratts wrote to Welsh Water, referring to their letter of 26 June, asserting that Welsh Water had no right under section 106 to set the point of connection and asking Welsh Water to approve the connection.
Welsh Waters response on 26 September was to contend that Barratts had served a requisition notice under section 98 and that this precluded any right to connect under section 106.
On 25 January 2008 OFWAT, who had been kept informed of these developments, wrote to Welsh Water with a copy to Barratts, stating that there was no impediment on a developer pursuing simultaneously rights under sections 98 and 106.
This letter concluded with the following statement: In any case, it is apparent that the application under section 106 of the Act by Barratt Homes was made on 29 May 2007, received by Welsh Water on 30 May 2007 and the company did not respond to the application until 26 June 2007.
The response on 26 June 2007 was outside the statutory 21 days provided under section 106(4) and the company was not, therefore, entitled to refuse the application as made.
That being the case, please confirm by 1 February, that Barratt Homes proposal for connection as notified on 29 May 2007 can proceed.
It is for Barratt Homes to confirm with the Planning Authority that it can satisfy the planning condition No 10.
This letter was, I suspect, something of a bombshell.
If so, it was as nothing compared to the next development.
Barratts, with the aid of OFWATs letter and an opinion from Mr Porten, the content of which has never been disclosed, persuaded MCC to treat condition 10 as discharged.
The present proceedings followed.
Conclusions on the point of connection
On its natural construction section 106 of the 1991 Act gives the developer the right to connect his private drain or sewer to a public sewer subject only to (i) the right of the sewerage undertaker to give notice refusing permission to make the communication on the ground of deficiencies in the condition of the private drain or sewer (section 106(4)) and (ii) the right of the sewerage undertaker to give notice that he will make the connection himself (section 107).
The section confers no express right on the sewerage undertaker to select the point of connection or to refuse permission to make the communication on the ground that the point of connection proposed by the developer is open to objection.
Lord Pannick has argued that, despite its natural meaning, the section must be interpreted as conferring such a right if the operation of the relevant provisions of the 1991 Act are not to be rendered insensible, absurd or ineffective to achieve its evident purpose the phrase used by Lord Bridge of Harwich as justifying the disregard of particular words or phrases in a statute in McMonagle v Westminster City Council [1990] 2 AC 716 at p. 726E.
I have not been persuaded by this argument.
The lengthy history of the right to communicate with a public sewer does not suggest that the point of connection has ever given difficulty in practice.
The facts of this case do not illustrate that section 106 gives rise to a problem with the point of connection.
It illustrates the more fundamental problem that can arise as a result of the fact, accepted by Lord Pannick, that no objection can be taken by a sewerage undertaker to connection with a public sewer on the ground of lack of capacity of the sewer.
As OFWAT has pointed out, although the 1991 Act affords no such right, there is a case for deferring the right to connect to a public sewer in order to give a sewerage undertaker a reasonable opportunity to make sure that the public sewer will be able to accommodate the increased loading that the connection will bring.
The only way of achieving such a deferral would appear to be through the planning process.
Some difficult issues of principle arise however: Is it reasonable to expect the sewerage undertaker to upgrade a public sewerage system to accommodate linkage with a proposed development regardless of the expenditure that this will involve? How long is it reasonable to allow a sewerage undertaker to upgrade the public sewerage system? Is it reasonable to allow the sewerage undertaker to delay planned upgrading of a public sewer in the hope or expectation that this will put pressure on the developer himself to fund the upgrading?
The facts of this case suggest that a sewerage undertaker may well take a different view from OFWAT as to how these questions should be answered.
Be that as it may, it would seem desirable that the sewerage undertaker and OFWAT should at least be consulted as part of the planning process.
I would endorse the comment made by Carnwath LJ, at para 48, that more thought may need to be given to the interaction of planning and water regulation systems under the modern law to ensure that the different interests are adequately protected.
These comments are an aside from the narrow issue of statutory interpretation raised in relation to the point of connection.
For the reasons that I have given I would endorse the judgments of the Court of Appeal in holding that a sewerage undertaker has no right to select the point of connection or to refuse a developer the right to connect with a public sewer because of dissatisfaction with the proposed point of connection.
The 21 day limit.
Section 106(4) of the 1991 Act provides that the sewerage undertaker has 21 days from receipt of a notice under section 106(3) in which to give notice of refusal to permit the communication to be made.
The issue arises of whether this time limit results in an absolute bar on giving such a notice once it has expired.
In the light of my conclusion that the right of a sewerage undertaker to refuse permission to connect under section 106 of the 1991 Act arises only where there is reason to question the condition of the private drain or sewer that is to be connected, this issue is of limited importance, and of no significance at all on the facts of this case.
A similar issue arises in relation to section 107(1), which gives the sewerage undertaker 14 days in which to give notice that it intends itself to make the communication.
In the Court of Appeal both Carnwath LJ and Pill LJ inclined to the view that the 21 day time limit was not mandatory but refrained from deciding the point.
I take the opposite view.
Notices given under sections 106(4) and 107(1) remove a right to connect which is otherwise vested in the developer.
Under the provisions of sections 107 and 109 respectively it is a criminal offence to cause a drain or sewer to communicate with a public sewer after a notice has been given under section 106(4) or section 107(1).
In these circumstances it seems to me that the time limits in those two subsections must be strictly applied.
For the reasons that I have given I would dismiss this appeal.
LADY HALE (Dissenting)
It is curious that it should have taken so long for a dispute of this sort to reach the courts.
One might have thought that developers and sewerage undertakers were quite frequently at odds with one another about how best to accommodate a new housing development within the sewerage system and how the costs should be borne.
But there is no English or Welsh case directly in point.
Wyn Williams J reached one conclusion on the meaning of the legislation and the Court of Appeal reached another.
Most members of this Court agree with the Court of Appeal, but the legislative history of the matter leads me to disagree.
Section 106 of the Water Industry Act 1991 can be traced back to section 21 of the Public Health Act 1875 and before that to section 8 of the Sanitary Act 1866.
The 1875 Act consolidated with amendments the patchwork of public health legislation which began with the Public Health Act 1848.
The 1848 Act, together with the Local Government Act 1858, provided for the setting up of Local Boards of Health with a variety of powers dealing with sewers and drains, road cleaning, water supply and the like.
Under those Acts, the Local Boards had the duty of effectually draining their Districts.
There was no right to connect to their sewers without their consent.
But the drive was to get new and existing houses to connect.
The Board could direct how any new house built within 100 feet of a sewer was to connect to it and could require old houses within the same distance to connect.
But Local Boards did not cover the whole country.
The Sewage Utilization Act 1865 set up Sewer Authorities in other areas and gave them all the powers of the Local Boards.
Section 8 of the Sanitary Act 1866 gave owners or occupiers of premises within the district of a Sewer Authority the conditional right to cause his drains to empty into the Authoritys sewers in almost identical terms to section 21 of the 1875 Act.
The Public Health Act 1872 rationalised the administration by dividing the whole of England and Wales (apart from the Metropolis) into urban and rural sanitary districts.
The Metropolis was included in 1874 and the whole legislative scheme consolidated in the 1875 Act.
Section 21 provided that the owner or occupier of any premises within the district of a local authority shall be entitled to cause his drains to empty into the sewers of that authority, subject to giving the authority such notice as they required of his intention to do so and by complying with the regulations of that authority in respect of the mode in which the communications between such drains and sewers are to be made and subject to superintendence of its making.
In Ainley v Kirkheaton Local Board (1891) 60 LJ (Ch) 734, the plaintiff was already connected to the authoritys sewer but they wanted to cut him off because the sewer emptied into an open stream and proceedings had been taken against the authority for fouling the stream.
Stirling J held that the owners right to drain into the existing sewers was not affected by the authoritys obligation under section 17 of the Act not to allow its sewers to convey untreated sewage into a natural stream or watercourse.
It was for the authority to provide sufficient sewers and to treat the sewage before discharging it into the stream.
This case was followed in Brown v Dunstable Corporation [1899] 2 Ch 378, where Cozens Hardy J held that he could not grant an injunction to prevent the authority from allowing new connections to a sewer.
Following Ainley in preference to Charles v Finchley Local Board (1883) 23 Ch D 767, at 390, he held that the absolute right is no doubt subject to any regulations in respect of the mode of making connections and subject to the control of any person appointed to superintend the making of the connections; but no regulations can justify an absolute refusal to allow a connection to be made on any terms .
It is obvious that under this by law the surveyor can only prescribe the manner of connection.
He cannot refuse to allow any connection.
In Wilkinson v Llandaff and Dinas Powis Rural District Council [1903] 2 Ch 695, CA, the main issue was whether a roadside surface water drain was a sewer within the meaning of the Act.
If it was, the authority had to keep it clean.
One of the arguments against its being a sewer was that section 21 would then give everyone the right to connect their own drains into it.
Romer LJ bluntly observed, at p 702, that it does not follow that, because this channel is a sewer within the definition of the Act, it can be used by any inhabitants of the district for sewage or faecal matter.
Stirling LJ (as he had become) thought, at p 703, that the argument was an exaggeration of the effect of section 21: Section 21 does not provide that every owner or occupier of premises within the district of a local authority shall be entitled as of right to connect every drain which he has with every sewer belonging to the local authority.
That is not the meaning of the section.
All that is given by that section to the owner and occupier is a right to have the drain connected or made to communicate with the sewers of the local authority, subject to compliance with certain conditions amongst others, that he is to comply with the regulations of the local authority in respect of the mode in which the communication with the sewers is to be made.
So that, in my opinion, the local authority may define by regulation the particular sewer with which the communication is to be made.
Each party in this case can get something from these three authorities.
For the developer, the fact that continuing an existing connection or allowing a new one would cause a nuisance to the public or to a private individual was not by itself a reason to stop up or prohibit the connection.
For the undertaker, on the other hand, the mode in which the communication . is to be made could be regulated and this could cover the time and the place where the connection was to be made.
The Public Health Act 1875 was consolidated with other enactments and some amendments in the Public Health Act 1936.
Section 21 of the 1875 Act became section 34 of the 1936 Act.
Once again, the owner or occupier of any premises, or the owner of any private sewer, within the district of a local authority was entitled to have his drains or sewer made to communicate with the public sewers of that authority.
This was subject to various restrictions in the section itself, and to the requirement in section 34(3) that a person wanting to avail himself of this right should give notice to the local authority and at any time within 21 days after receipt thereof, the authority may by notice to him refuse to permit the communication to be made, if it appears to them that the mode of construction or condition of the drain or sewer is such that the making of the communication would be prejudicial to their sewerage system .
Disputes about the reasonableness of any refusal could be determined by a magistrates court.
Lord Pannick has referred us to the Report which led up to the 1936 Act (Cmd 5059 of 1936).
There is nothing in that report to suggest that the change in language, from the mode in which the communications between such drains and sewers are to be made to the mode of construction or condition of the drain or sewer, was intended to cut down the existing scope of the local authoritys power to control the place and manner of the connection.
Yet one would expect such a significant change to be flagged up in any report proposing consolidation with amendments.
It would be very strange if Parliament had intended to make such a change.
The public interest in ensuring that connections were made in ways which were not prejudicial to the sewerage system remained the same.
There were no other means available of doing so.
It could not have been contemplated, for example, that the developer could knock a big hole into an existing sewer and simply stick his own perfectly sound drain through it without making good.
It would also be strange if Parliament had legislated for such a change in England and Wales, while leaving the position in Scotland, under section 110 of the Public Health (Scotland) Act 1897, the same as it had been in England and Wales under section 21 of the 1875 Act.
And further that Parliament should later re enact and clarify that provision in section 12(1) of the Sewerage (Scotland) Act 1968, which provided that the Scottish local authorities could specify the mode and point of connection.
It is inexplicable why provisions which began in the same legislation covering the whole United Kingdom should diverge in this respect.
It is much more likely that Parliament intended them to mean the same thing.
Then came the well known case of Smeaton v Ilford Corporation [1954] 1 Ch 450.
The local authoritys Victorian sewers were over loaded and from time to time sewage erupted from a manhole near the plaintiffs house and overflowed into his premises.
Despite section 31 of the 1936 Act, providing that a local authority shall so discharge their functions as not to create a nuisance, the plaintiffs claim in nuisance failed.
The local authority were not causing or adopting the nuisance.
Upjohn J explained, at pp 464 5: It is not the sewers that constitute the nuisance; it is the fact that they are overloaded.
That overloading, however, arises not from any act of the defendant corporation but because, under section 34 of the Public Health Act 1936, subject to compliance with certain regulations, they are bound to permit occupiers of premises to make connections to the sewer and to discharge their sewage therein .
Nor, in my judgment, can the defendant corporation be said to continue the nuisance, for they have no power to prevent the ingress of sewage into the sewer.
The real problem in such a case, as both Lord Nicholls of Birkenhead and Lord Hoffmann pointed out in Marcic v Thames Water Utilities Ltd [2004] 2 AC 42, is that the every new house built has an absolute right to connect (para 34) and the undertaker has a duty to accept whatever water and sewage the owners of property in their area choose to discharge (para 53).
The overflow is not caused by any failure to clean or maintain the existing sewers but by a failure to build new or bigger ones.
And there is a long line of authority, dating back to Glossop v Heston and Isleworth Local Board (1879) 12 Ch D 102, that the authoritys duty to provide sufficient sewers effectually to drain the area is to be enforced through the statutory scheme and not by private action.
The decisions in Smeaton and Marcic were predicated on the authoritys or undertakers duties to allow connections and to accept sewage, but they did not decide what that duty entailed.
The only other relevant observations to which we have been referred are in Beech Properties Ltd v GE Wallis & Sons Ltd [1977] EG 735, where the question was whether a condition in a contract for the sale of land had been performed.
Part of this depended upon whether the purchaser would have the right to connect to the public sewer at a particular point.
Walton J thought it obvious that the right given by section 34 of the 1936 Act is not an absolute, but a qualified, right (p 747).
He continued (pp 748 9): . wide as the words of subsection (1) may be, . , they do not confer upon an individual the right to connect his sewer to the water authoritys sewer at any point which he may choose.
In most cases, of course, the matter will be quite academic.
There will be the water authoritys sewer, going along the road; a new house is built in the road; and quite obviously and clearly the owner will expect to have a right to drain into that sewer .
Even so, if the new house was built at a crossroads and there were available sewers in both roads, I can see no reason why the owner should be entitled to drain into the sewer of his choice if the water authority required him to drain into the other, which might, for example, well be a relief sewer expressly provided for the district because the other sewer was approaching capacity.
Similarly, I see no reason why the owner is entitled to connect at point X rather than an adjacent point Y, if the water authority requires him to connect at Y.
So we have three propositions for which there is respectable authority going back over many years and which are not inconsistent with one another.
The first is that the sewerage authority or undertaker cannot refuse to allow an owner or occupier to connect at all.
He must allow some sort of connection even if the system is already overloaded or will thereby become so overloaded that a nuisance will result.
The second is that the authority or undertaker is not liable for nuisances which result from such over loading.
The remedy lies in the statutory procedures to oblige them to build more sewers.
But the third is that all courts which have addressed themselves specifically to the point at issue here, the place and manner in which a particular connection is to be made, have expressed the view that the authority or undertaker can refuse to agree to the developers proposals.
There is no material difference between the 1936 and 1991 Acts for this purpose.
The 1936 Act provided that disputes between developers and authorities should go to a magistrates court.
The 1991 Act provides that a developer who argues that an authoritys refusal is unreasonable can take the dispute to OFWAT, which is a much more appropriate body to resolve such matters.
The 1936 Act provided that a local authority could refuse on the ground that the making of the communication would be prejudicial to their sewerage system and section 106(4)(b) provides the same.
This is obviously capable of including the deleterious effects of connecting at point A rather than point B. This too may help cast some light on the meaning of the words mode of construction or condition: it is easier to think of ways in which the place and manner of making the connection would be deleterious to the system than of ways in which the physical condition of the developers drain would be so.
In the light of the historical development of this difficult legislation, therefore, I would hold that the words mode of construction or condition do cover the way in which it is proposed to connect that private drain or sewer to the public sewer, including the place.
Whether the undertakers reasons for refusing to allow the proposed connection are reasonable is another matter, which in my view it is for OFWAT to resolve.
If that were the only issue in the case, therefore, I would have allowed this appeal.
| The Respondents, Barratt Homes Limited, were engaged in building a substantial development of homes and a primary school in Llanfoist, near Abergavenny in Monmouthshire.
They sought to exercise the right of a property owner under s 106 Water Industry Act 1991 to connect the drains to the public sewer at a point close to the development.
The appellant sewerage undertakers, Welsh Water, argued that it was entitled to insist on a connection at point some 300m further downstream, as the sewer did not have the capacity to deal with the increased load until that point.
Welsh Water succeeded in the High Court but the decision was reversed on appeal and Barratt Homes made the connection at the place of its choice.
Welsh Water pursued an appeal to the Supreme Court, seeking to establish that s 106 gave a sewerage undertaker the right to refuse to permit connection to the public sewer at an unsuitable point.
The Supreme Court dismissed the appeal (Lady Hale dissenting).
The judgment of the majority was given by Lord Phillips.
The exercise of the right of a property owner to discharge into a public sewer pursuant to s 106 Water Industry Act 1991 (the 1991 Act) was an absolute right which could not be prevented on the ground that the additional discharge would create a nuisance.
That was for the sewerage undertaker to deal with [paras 23 26].
The right to object to the mode of construction in s 106(4) did not extend to the point of connection [para 32].
It was significant that in nearly a century and a half since the first enactment conferring this right was passed, this was the first dispute between an owner and sewerage undertaker as to the point of connection to a public sewer to have reached the courts [para 38].
The real problem behind the dispute in this case lay in the requirement to give only 21 days notice to a sewerage undertaker before exercising the absolute right in s 106.
This was manifestly unsatisfactory in relation to a development which in this case would add 25% or more to the load on the public sewer [para 41].
The only way to achieve a deferral of the
right was through the planning process, in which both the sewerage undertaker and OFWAT should be consulted.
More thought might need to be given to the interaction of planning and water regulation systems under modern law to ensure that the different interests were adequately protected [paras 57 58].
The 21 day limit for refusing applications to connect to the public sewer in s 106(4) was mandatory, in view of the fact that it was a criminal offence to connect a drain after such notice had been given [para 62].
Lady Hale would have allowed the appeal on the construction of s 106(4).
The legislative history led her to conclude that Parliament had not intended to cut down the scope of the local authoritys power to control the place and manner of connection in the Public Health Act 1936 (the predecessor to the 1991 Act), while leaving the position in Scotland unchanged [para 73].
The words mode of construction or condition in s 106(4) should be interpreted as including the place of connection to the public sewer [para 79].
|
The appellant is the brother of the late Alan Austin (the deceased) who was the tenant of a dwelling house at 52 Michael Faraday House, Thurlow Street, London.
The London Borough of Southwark (the Council) granted the deceased a tenancy of the premises on 12 July 1983.
It was a secure tenancy under the Housing Act 1980.
The provisions of that Act were consolidated in the Housing Act 1985 (the 1985 Act).
In June 1986 the Council brought a claim against the deceased in Lambeth County Court for possession of the premises, relying on the fact that he was in arrears of rent.
An order for possession was made against him on 4 February 1987.
It was a conditional suspended possession order, issued in the form then current which was Form N28.
It provided that it was not to be enforced so long as the deceased paid the arrears of rent, amounting to 3,312.98, by 4 March 1987.
The deceased failed to comply with the terms of the order, so on 4 March 1987 it became enforceable.
But he remained in the premises, paying rent plus amounts towards the arrears, until his death 18 years later on 8 February 2005.
Prior to his death the deceased had been suffering from a chronic illness which proved to be terminal.
The appellant maintains that he moved in to live with his brother in October 2003 and became the deceaseds full time carer.
The Council does not accept the appellants claim that he resided at the premises prior to the deceaseds death.
This has not yet been established as a fact.
The deceased died intestate.
No grant of probate or administration has been made, and he has no personal representative.
On 11 September 2006 the Council served a notice to quit on the appellant, and in January 2007 it issued proceedings against him in Lambeth County Court for possession of the premises.
Those proceedings are currently stayed, pending the outcome of this appeal.
On 29 March 2007 the appellant lodged an application in Lambeth County Court seeking to be appointed to represent the deceaseds estate in the possession proceedings which had been brought in 1986, pursuant to CPR 19.8.
If so appointed, his intention is to apply to the County Court under section 85(2)(b) of the 1985 Act for postponement of the date for possession in the order that was issued against the deceased in 1987.
If that application is successful, it would have the effect of reviving the deceaseds secure tenancy.
The appellant would then seek to show that he was resident in the premises throughout the period of twelve months that ended with the deceaseds death.
If that is found to have been the case, the deceaseds secure tenancy will vest in the appellant by virtue of section 87 of the 1985 Act.
On 5 September 2007 the appellants application to be appointed to represent the deceaseds estate in the original possession proceedings was dismissed by HHJ Welchman.
On 29 January 2008 Flaux J dismissed the appellants appeal against its dismissal: [2008] EWHC 355 (QB).
On 16 February 2009 the Court of Appeal (Pill, Arden and Longmore LJJ) dismissed the appellants appeal against the order of Flaux J: [2009] EWCA Civ 66.
He now appeals to this Court.
The issues
It has until now been assumed that a secure tenancy ends at the moment when the tenant is in breach of the terms of a conditional suspended possession order.
In his annotations to the 1985 Act in Current Law Statutes the annotator, Andrew Arden, seems to have entertained no doubt on the point.
He said of section 82(2) that when the tenancy is brought to an end by the court under that subsection it ends on the date the court specifies, not at any later date when the tenant is actually evicted.
In Thompson v Elmbridge Borough Council [1987] 1 WLR 1425, 1430 1431 Russell LJ described the effect of the subsection in this way: In my judgment, once the defendant in proceedings of this kind where there is a suspended order for possession, ceases to comply with the conditions of the order, namely, the punctual payment of the current rent and arrears, and there is a breach of the terms of the order, the tenancy, whatever it may be, from that moment comes to an end.
In Burrows v Brent London Borough Council [1996] 1 WLR 1448, 1457 Lord Jauncey of Tullichettle, referring to the decision in Thompson, said that if the court makes an order but postpones the date of possession the tenancy will not be terminated under section 82(2) until any condition imposed under subsection (3) has been breached by the tenant.
He added these words: However, the courts power to make an order postponing the date of possession is not restricted to exercise on the first application for an order for possession but may be exercised on the application of either party at any time prior to execution of that order and even after the secure tenancy has ended by reason of section 82(2).
This is made clear by the words in section 85(2) or at any time before the execution of the order: see also Greenwich London Borough Council v Regan, 28 HLR 469, 476, per Millett LJ.
In such an event the secure tenancy is reinstated or revived subject to any conditions imposed under subsection (3).
Encouraged by observations to the contrary effect by Lord Neuberger of Abbotsbury in Knowsley Housing Trust v White [2009] AC 636, para 91, the appellant now seeks to challenge this assumption.
He submits that a secure tenancy does not end on breach of a conditional suspended possession order but endures until the order for possession is executed.
That is the first issue in this appeal.
On the assumption that a secure tenancy ends on breach of the terms of a conditional suspended possession order, a former tenant who continues in occupation assumes an unusual status.
It has come to be known as that of a tolerated trespasser.
Commenting on this expression in Knowsley, paras 3 4, Lord Walker of Gestingthorpe described the phrase as rather unfortunate, but he concluded that it was too firmly embedded to be dislodged.
If the appellant is right on the first issue, however, the deceased was still a tenant when he died.
The description of him and so many other secure tenants who are in the same position as he was as tolerated trespassers will be consigned to history.
The appellant has an alternative argument, should he not succeed on the first issue.
Until now it has been assumed that the right of a former secure tenant to apply for postponement of the date for possession to enable him to remedy the default, and thus revive a secure tenancy under section 85(2) of the 1985 Act according to the principles described by Millett LJ in Greenwich London Borough Council v Regan (1996) 28 HLR 469, 476, did not survive the death of the former secure tenant.
In Brent London Borough Council v Knightley (1997) 29 HLR 857, 862 Aldous LJ said that the right to apply for a postponement of an order for possession was not an interest in land capable of being inherited.
It was held that the daughter of a deceased tolerated trespasser who had resided with her could not apply under that subsection for the revival of the tenancy.
The appellant submits that that case was wrongly decided.
So the second issue is whether the former tenants statutory right to apply to postpone the date for possession, and thus revive the secure tenancy, survives his death and passes to the estate of the deceased former tenant.
In support of the position which he seeks to advance on the second issue the appellant submits that the statutory right to apply to the court under section 85(2) is a possession, the enjoyment of which is protected within the meaning of article 1, Protocol 1 of the European Convention on Human Rights.
If so, he submits that a construction of section 85(2) which holds that the right determines on death would be contrary to that provision and should not be adopted.
Those are the third and fourth issues.
The fifth issue is whether, if the statutory right to apply under section 85(2) endures beyond the death of a former tenant, the deceased was a person who had an interest in a claim for the purposes of CPR 19.8 and, if so, what claim.
But the respondent accepts that, if the claimed right did exist at the date of the deceaseds death, the appellant would be entitled to apply to the court under that rule.
The statutory provisions
It is not necessary to do more to describe the general background than to refer to Lord Neubergers summary of the law governing residential security of tenure in Knowsley [2009] AC 636, paras 30 47.
There were three appeals in that case.
They raised issues about the effect of suspended possession orders on the status and rights of secure tenants under the 1985 Act and assured tenants under the Housing Act 1988.
It was held that an assured tenancy subject to a suspended possession order ended only when possession was delivered up, but that reconsideration of the approach that had been adopted to secure tenancies under the 1985 Act was inappropriate since it derived from long standing authority, had been applied in numerous cases and would be resolved by section 299 of and Schedule 11 to the Housing and Regeneration Act 2008 (the 2008 Act) which had amended and clarified the law.
I shall come back to examine that part of the decision in Knowsley later.
As we are concerned in this case only with secure tenancies, I shall concentrate on the relevant provisions of the 1985 Act as originally enacted and on the amendments that were introduced by the 2008 Act.
It should be noted that the relevant provisions of the 2008 Act were, for the most part, prospective only.
They took effect from the commencement date of Schedule 11, which was 20 May 2009: Housing and Regeneration Act 2008 (Commencement No 5) Order 2009 (SI 2009/1261).
Section 79(1) of the 1985 Act provides that a tenancy under which a dwelling house is let as a separate dwelling is a secure tenancy at any time when the conditions described in sections 80 and 81 as the landlord condition and the tenant condition are satisfied.
Section 80(1) provides that the landlord condition is that the interest of the landlord is vested in one or more of the authorities or bodies listed in that subsection, which include a local authority.
Section 81 provides that the tenancy condition is satisfied if the tenant is an individual and occupies the dwelling house as his only or principal home.
Section 82 deals with security of tenure.
As originally enacted, subsections (1) to (3) of this section were in these terms: (1) A secure tenancy which is either (a) a weekly or other periodic tenancy, or (b) a tenancy for a term certain but subject to termination by the landlord, cannot be brought to an end by the landlord except by obtaining an order of the court for the possession of the dwelling house or an order under subsection (3). (2) Where the landlord obtains an order for the possession of the dwelling house, the tenancy ends on the date on which the tenant is to give up possession in pursuance of the order. (3) Where a secure tenancy is a tenancy for a term certain but with a provision for re entry or forfeiture, the court shall not order possession of the dwelling house in pursuance of that provision, but in a case where the court would have made such an order it shall instead make an order terminating the tenancy on a date specified in the order and section 86 (periodic tenancy arising on termination of a fixed term) shall apply.
As amended by para 2 of Part 1 of Schedule 11 to the 2008 Act with effect from 20 May 2009, the opening subsections of section 82 now provide: (1) A secure tenancy which is either (a) a weekly or other periodic tenancy, or (b) a tenancy for a term certain but subject to termination by the landlord, cannot be brought to an end by the landlord except as mentioned in subsection 1A. (1A) The tenancy may be brought to an end by the landlord (a) obtaining (i) an order of the court for the possession of the dwelling house, and (ii) the execution of the order, (b) obtaining an order under subsection (3), or (c) obtaining a demotion order under section 82A. (2) In the case mentioned in subsection (1A)(a), the tenancy ends when the order is executed.
Section 83 provides that the court shall not entertain proceedings for the possession of a dwelling house let under a secure tenancy unless the landlord has served on the tenant a notice complying with the provisions of that section.
Section 84 deals with the grounds on which an order for possession may be made.
In cases where the tenant is in arrears of rent they require the landlord to satisfy the court that it is reasonable to make such an order before the court will order possession.
In such a case the court is given very wide and flexible powers by section 85.
Subsections (1) (2) and (3) of this section, as originally enacted, were in these terms: (1) Where proceedings are brought for possession of a dwelling house let under a secure tenancy on any of the grounds set out in . ([being] cases in which the court must be satisfied that it is reasonable to make a possession order), the court may adjourn the proceedings for such period or periods as it thinks fit. (2) On the making of an order for possession of such a dwelling house on any of those grounds, or at any any time before the execution of the order, the court may (a) stay or suspend the execution of the order, or (b) postpone the date of possession, for such period or periods as the court thinks fit. (3) On such an adjournment, stay, suspension or postponement the court (a) shall impose conditions with respect to the payment by the tenant of arrears of rent (if any) and rent or payments in respect of occupation after the termination of the tenancy (mesne profits), unless it considers that to do so would cause exceptional hardship to the tenant or would otherwise be unreasonable, and (b) may impose such other conditions as it thinks fit.
By para 3(2) of Part 1 of Schedule 11 to the 2008 Act the reference to mesne profits in section 85(3)(a) was omitted with effect from 20 May 2009.
The first issue
The question to which this issue is directed is about the effect of section 82(2) of the 1985 Act.
Does the secure tenancy end when the tenant is in breach of the conditions of the suspended possession order? Or does it end only when possession is delivered up when the possession order is executed? As I said earlier, it was for a long time assumed that the law was as stated in Thompson v Elmbridge Borough Council [1987] 1 WLR 1425.
In that case a secure tenant had fallen into arrears of rent.
The local authority obtained an order for possession in the same form as that which was set out in the order which the Council obtained against the deceased in this case.
It stated that it was not to be enforced for 28 days in any event, and for so long thereafter as the tenant paid the arrears of rent by stated instalments in addition to the rent.
She failed to comply with the terms of the order and the question was whether, and if so when, the secure tenancy had come to an end.
Russell LJ rejected an analogy which was sought to be drawn with the position under the Rent Acts.
Basing his decision simply on the terms of section 82(2), he said that where there was a breach of the terms of the order the tenancy came to an end from the moment of the breach: see para 5, above, where the words that he used are set out.
In Burrows v Brent London Borough Council [1996] 1 WLR 1448 a secure tenant had fallen into arrears with the rent and the council obtained a final order for possession of the premises.
Shortly before the order was due to take effect the council entered into an agreement with the tenant that she would not be evicted provided she complied with certain conditions, which she failed to do.
The question was whether a new tenancy had been created by this agreement.
Reference was made to the Court of Appeals decision in Thompson [1987] 1 WLR 1425, but the soundness of that decision was not questioned by either side.
Lord Browne Wilkinson referred to it at p 1453 when he was summarising the local authoritys argument that the old tenancy came to an end when the tenant failed to comply with the conditions imposed by the possession order.
Lord Jauncey, with whom Lord Griffiths and Lord Steyn agreed, at p 1457 went further.
He summarised the law in a way that indicated that in his opinion Thompson, which by then had been followed by the Court of Appeal in Greenwich London Borough Council v Regan (1996) 28 HLR 469, was rightly decided.
There the matter rested until it came under the scrutiny of the House of Lords more than a decade later in Knowsley Housing Trust v White [2009] AC 636.
Lord Neuberger observed in that case at para 73 that a number of cases in the Court of Appeal had proceeded on the assumption that the law was as stated in Thompson: see, for example, Harlow District Council v Hall [2006] 1 WLR 2116.
He also said that there would also have been tens of thousands of cases in the county courts, many negotiations, much legal advice and many actions which had also proceeded on that assumption.
In para 91 however, having added that he strongly suspected that, if the point had not been determined in Burrows [1996] 1 WLR 1448, he would have reached the same conclusion in relation to section 85 of the 1985 Act as that which he had reached in relation to section 9 of the Housing Act 1988 in relation to assured tenancies, he said: There is a powerful case for saying that the date on which the tenant is to give up possession in pursuance of the order in section 82(2) of the 1985 Act can, and therefore should, mean the date specified in a warrant of possession which is duly executed (or acted on by the tenant).
Furthermore section 121 of the 1985 Act [circumstances in which the right to buy cannot be exercised] appears to me to be arguably inconsistent with the decisions in Thompson [1987] 1 WLR 1425 and in Hall [2006] 1 WLR 2116, in that it appears expressly to assume that a tenant who is, as well as a tenant who will be, obliged to give up possession pursuant to a court order, would remain entitled to pursue the right to buy, and only a person who is a secure tenant can have that right.
Despite these reservations, he refrained from moving the House to hold that Thompson [1987] 1 WLR 1425 and Hall [2006] 1 WLR 2116 were wrongly decided so far as secure tenancies were concerned.
He set out his reasons for doing so in paras 92 and 93.
One was the response that was received from counsel in that case, all highly experienced in the field of social housing law.
Mr Luba QC said that it was simply too late to take that course, as Thompson had been assumed to be right, and had been acted on, in many tens of thousands of cases over the past 20 years or so.
The other was that, by section 299 of and Schedule 11 to the 2008 Act, Parliament had amended and clarified the law so that secure and assured tenancies would only end when the order for possession was executed by means of provisions that were largely prospective in their effect.
Agreeing with these submissions, Lord Neuberger said that it would be wrong for the House effectively to go back on its previous approval of Thompson in Burrows [1996] 1 WLR 1448, when there was in place amending legislation having the same effect as such a reversal, in which Parliament had decided to amend the law only prospectively.
Mr Lubas position for the appellant in this case, as he frankly accepted, is the reverse of that which he adopted in Knowsley [2009] AC 636.
He submits nevertheless that this Court should now take the step from which the House held back in that case and hold that Thompson [1987] 1 WLR 1425 was wrongly decided.
There are, then, two questions that must be addressed.
The first is whether, as Lord Neuberger indicated, section 82(2) can be read as meaning that, notwithstanding that the tenant is in breach of the conditions in the possession order, the tenancy continues until the date specified in a warrant for possession which is duly executed or acted upon.
The second is whether, if it can be so read, it should now be held that this is indeed its meaning and Thompson should be overruled.
As to the first question, it is a remarkable fact that a conclusion about the meaning of section 82(2) which, admittedly with the benefit of hindsight, is so obviously unsatisfactory and conceptually confusing should have been reached with so little reasoning.
The Court of Appeals decision on the point in Thompson [1987] 1 WLR 1425 was expressed by Russell LJ in a single sentence at pp 1430 1431.
It amounted to little more than an assertion.
No attempt was made to see whether the meaning that he attributed to the subsection was consistent with provisions that were to be found elsewhere in the 1985 Act.
As for the references to Thompson in Burrows [1996] 1 WLR 1448, I think that Lord Neuberger was perhaps being a little generous when he said in Knowsley [2009] AC 636, para 72 that Lord Browne Wilkinson and Lord Jauncey expressly stated that Thompson was rightly decided.
Lord Browne Wilkinson referred to that case at p 1453 when summarising the submissions that were before the court in Greenwich London Borough Council v Regan (1996) 28 HLR 469 and accepting counsels analysis of that case.
Lord Jauncey went further in endorsing what was said in Thompson, but I do not detect in his treatment of it any attempt on his part to reach a view of his own as to whether section 82(2) had to be read in the way that Russell LJ had indicated.
I would not attach much weight to the uncritical way in which the decision in Thompson was treated by the House of Lords in Burrows.
The wording of section 82(2) needs therefore to be examined more closely in its context.
There are, of course, other ways in which a tenancy may come to an end.
But, as the section as a whole is concerned with security of tenure, it deals with the steps that must be taken by the landlord.
The landlord must first obtain an order for possession of the dwelling house.
In the case of a secure tenancy for a term certain with a provision for re entry or forfeiture, the court is required to make an order terminating the tenancy on a date specified in the order, which unless the court orders that both termination and possession are to take effect on the same date will be followed by a periodic tenancy: section 82(3).
Section 82(2) adopts a different approach.
It does not say, as it could have done, that the date specified in the order is to be the date when the tenancy terminates.
It refers instead to the date when the tenant is to give up possession in pursuance of the order.
That phrase can, I think, be read as indicating that the date when the tenancy is to terminate is to be found in the possession order itself.
That is how Russell LJ read it in Thompson [1987] 1 WLR 1425, at pp 1430 1431.
But the words is to give up possession can also be read, as Lord Neuberger said in Knowsley [2009] AC 636, para 91, as contemplating the date when possession will actually be given up under a warrant for possession which is duly executed or acted upon.
I think that the context tends to favour Lord Neubergers indication that the tenancy ends only when the order for possession is executed.
The fact that the court is given such wide powers by section 85, including the power to discharge or rescind the possession order if the conditions are complied with, suggests that it was envisaged that the tenancy could still be in existence during the period when the court can exercise this control.
Then there are the indications in section 121, to which Lord Neuberger referred in para 91, that the section was drafted on the assumption that a tenant who is obliged to give up possession pursuant to a court order is nevertheless still entitled to exercise the right to buy which is a right that, as section 118 makes clear, only a secure tenant can have.
The reference in section 85(3) to payments after the termination of the tenancy and mesne profits might seem to indicate the contrary.
But, as Lord Neuberger pointed out in paras 87 and 88, this is best seen as an example of torrential drafting as the same wording appears in section 100(3) of the Rent Act 1977 where it cannot have that effect.
Apart from this point, I do not find anything in the context that supports the interpretation that was given to section 82(2) in Thompson [1987] 1 WLR 1425.
The conclusion which I would draw is that there is much to be said for Lord Neubergers interpretation.
Perhaps the strongest point in its favour is that reading section 82(2) in the way he has suggested avoids what he described in Knowsley [2009] AC 636, para 80 as the anomalous and potentially retrospectively reversible status of tolerated trespassers.
The conceptual problems that this gives rise to do not seem to have been anticipated by the judges who guided the law in a different direction in Thompson [1987] 1 WLR 1425 and Burrows [1996] 1 WLR 1448.
A fair and practical reading would, as Lord Neuberger suggests, eliminate these difficulties.
But it seems to me that the contrary view is not unarguable.
The question then is whether this Court should now hold that the interpretation of section 82(2) that Lord Neuberger has suggested is indeed what this subsection means and that Thompson [1987] 1 WLR 1425 should be overruled.
As is of course very well known, the House of Lords issued a Practice Statement on 26 July 1966 which stated that it would still treat former decisions of the House as normally binding, but that it would depart from a previous decision when it appeared right to do so: Practice Statement (Judicial Precedent) [1966] 1 WLR 1234.
Its application was considered and applied from time to time by the Appellate Committee during the 40 years or so that were to elapse until 1 October 2009 when the appellate jurisdiction was transferred from the House of Lords to this Court: see, for example, R v National Insurance Commissioner, Ex p Hudson [1972] AC 944, 966 per Lord Reid; R v Knuller (Publishing, Printing and Promotions) Ltd [1973] AC 435, 455 per Lord Reid; Miliangos v George Frank (Textiles) Ltd [1976] AC 443; Fitzleet Estates Ltd v Cherry [1977] 1 WLR 1345, 1349 per Lord Wilberforce ; Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508; Vestey v Inland Revenue Commissioners (Nos 1 and 2) [1980] AC 1148; R v Secretary of State for the Home Department, Ex p Khawaja [1984] AC 74; R v Howe [1987] AC 417; R v Kansal (No 2) [2002] 2 AC 69; Rees v Darlington Memorial Hospital NHS Trust [2004] 1 AC 309; and Horton v Sadler [2007] 1 AC 307, para 29 per Lord Bingham of Cornhill.
The Supreme Court has not thought it necessary to re issue the Practice Statement as a fresh statement of practice in the Courts own name.
This is because it has as much effect in this Court as it did before the Appellate Committee in the House of Lords.
It was part of the established jurisprudence relating to the conduct of appeals in the House of Lords which was transferred to this Court by section 40 of the Constitutional Reform Act 2005.
So the question which we must consider is not whether the Court has power to depart from the previous decisions of the House of Lords which have been referred to, but whether in the circumstances of this case it would be right for it to do so.
In R v Knuller (Publishing, Printing and Promotions) Ltd [1973] AC 435, 455 Lord Reid made the following observations about the Practice Statement which I think are particularly in point in this case: I have said more than once in recent cases that our change of practice in no longer regarding previous decisions of this House as absolutely binding does not mean that whenever we think that a previous decision was wrong we should reverse it.
In the general interest of certainty in the law we must be sure that there is some very good reason before we so act.
I think that however wrong or anomalous the decision may be it must stand and apply to cases reasonably analogous unless or until it is altered by Parliament.
In R v National Insurance Commissioner, Ex p Hudson [1972] AC 944, 966, on the other hand, he said that it might be appropriate to do so if to adhere to the previous decision would produce serious anomalies or other results which were plainly unsatisfactory.
In Rees v Darlington Memorial Hospital NHS Trust [2004] 1 AC 309, para 31 Lord Steyn said that, without trying to be exhaustive, a fundamental change in circumstances such as was before the House in Miliangos v George Frank (Textiles) Ltd [1976] AC 443, or experience showing that a decision of the House results in unforeseen serious injustice, might permit such a departure.
In Horton v Sadler [2007] 1 AC 307, para 29 Lord Bingham said that the power had been exercised rarely and sparingly but that too rigid an adherence to precedent might lead to injustice in a particular case and unduly restrict the development of the law.
The House, he said, will depart from a previous decision where it appears right to do so.
Two previous decisions of the House are before us in this case: Burrows v Brent London Borough Council [1996] 1 WLR 1448 and Knowsley Housing Trust v White [2009] AC 636.
Of these the one that gives rise to most concern is Knowsley.
In para 92 of his speech in that case Lord Neuberger addressed the question directly as to whether, given that the point at issue was not actually debated in Burrows, the cases of Thompson [1987] 1 WLR 1425 and Hall [2006] 1 WLR 2116 were rightly decided.
His answer, as he explained in para 93, was that it should not reconsider the view expressed by the House in Burrows that Thompson was rightly decided so far as secure tenancies were concerned.
It is true that this was the approach that had been contended for by counsel.
But there was much more in it than that.
The fact that the decision in Thompson was of such long standing and had been acted upon in so many cases was a powerful factor in his assessment.
So too was the way the need for an amendment of the law had been dealt with by Parliament.
I am not persuaded that we should depart from the decision which the House took in Knowsley [2009] AC 636 that the view expressed about Thompson [1987] 1 WLR 1425 in Burrows [1996] 1 WLR 1448 should not be reconsidered and departed from.
It is true that we have had the benefit of a more complete argument on the point than was before the House in Knowsley.
But the fact remains that the law was regarded as having been settled by Thompson and the effects of reversing that decision now are incalculable.
As Lord Neuberger said, it has been assumed to be right and has been acted upon in many tens of thousands of cases.
The area of greatest concern is the effect that a retrospective reversal would have on social landlords who for so long have assumed that those who had failed to comply with the conditions in a suspended possession order were no longer tenants with a right to enforce the implementation of repairing covenants.
Although we have not seen any direct evidence on the point, it is a reasonable assumption that the consequences of reviving these covenants and the opportunity that this would give for claiming damages for breach of these obligations was one of the factors that led to the decision that the law should be amended by the Housing and Regeneration Act 2008 only prospectively.
In August 2007 the Department for Communities and Local Government issued a consultation paper on tolerated trespassers.
It set out four options for changes to the legislation relating to secure and assured tenancies.
One was to do nothing.
The second was to deal only with tenants who were subject to future possession orders.
The third was to restore tenancy status to all existing tolerated trespassers.
The fourth was to restore this status to tolerated trespassers who had complied with the terms of the possession order.
In its summary of responses to the consultation in April 2008 the Department noted that the overwhelming majority of those who responded were in favour of legislation to prevent the creation of future tolerated trespassers.
It also noted that, while there was strong support for amending the legislation to restore the tenancies of all existing tolerated trespassers, there were dissenting voices.
Those who opposed this option suggested that it could be seen to reward tenants who had repeatedly failed to meet their obligations and that it would remove potential leverage against difficult tenants.
They drew attention too to the need to protect landlords from liability for actions taken in accordance with the law at the time.
The Governments position was that the opportunity should be taken to prevent the creation of future tolerated trespassers and restore tenancy status to all existing tolerated trespassers.
In an impact assessment issued in November 2008 it was indicated that, following consultation, the options had been narrowed down to two: do nothing, and restore tenancy status to all tolerated trespassers.
The 2008 Act received the Royal Assent on 22 July 2008.
Section 299 introduces Schedule 11.
Part 1 of the Schedule amends the relevant legislation for the future.
Part 2 restores tenancy status to existing tolerated trespassers.
These provisions were brought into force by the Housing and Regeneration Act 2008 (Commencement No 5) Order 2009 (SI 2009/1261).
Significantly, however, what Part 2 of the Schedule does is to provide for the creation of replacement tenancies.
As paragraph 16 states, these are new tenancies.
Paragraph 18 provides that the new tenancy is to have effect on the same terms and conditions that were applicable to the original tenancy immediately before it ended.
Absent from the Schedule however is any provision for the revival or restoration of the pre existing tenancy.
This carefully crafted system avoids the problems to which the dissenting voices had drawn attention during the consultation process.
For us now to declare that Thompson [1987] 1 WLR 1425 was no longer good law would undermine the system with the result that those problems would, after all, become unavoidable.
Such a result would contradict the will of Parliament.
Reverting to what Lord Reid said in R v Knuller (Publishing, Printing and Promotions) Ltd [1973] AC 435, 455, I think that, far from there being some very good reasons for reversing the decision that the House took in Knowsley [2009] AC 636, the position in this case is the other way round.
There are very good reasons for accepting that the law as declared in Thompson [1987] 1 WLR 1425, however unsatisfactory it can now be seen to be, should not be disturbed.
I would therefore reject the appellants argument on the first issue.
The second issue
This issue is directed to the effect of section 85(2) of the 1985 Act.
The question is whether the former tenants statutory right to apply to postpone the date for possession, and thus revive the secure tenancy, survives death and passes to the estate of the deceased former tenant.
The answer to it depends on how the wording of this subsection should be construed in the context of the scheme of Part IV of the 1985 read as a whole.
In the Court of Appeal it was submitted that the short answer to this question was that the point was decided in Brent London Borough Council v Knightley (1997) 29 HLR 857 and that that case was binding authority in that court for the proposition that the right to apply for the postponement of the order for possession under section 85(2) is not an interest in land capable of being inherited.
So it could not survive the deceaseds death.
Having examined the decision, Arden LJ, with whom Pill LJ agreed, concluded that it bound the court to hold that the former tenants right to apply under section 85(2) terminates on the tenants death: [2009] EWCA Civ 66, para 42.
Longmore LJ said that, even if the matter had not been expressly decided by Knightley, the correct view must be that the right is not exercisable by a deceaseds personal representatives: para 54.
The appellant in Knightley (1997) 29 HLR 857 was the daughter of the tenant under a secure tenancy.
Upon her mothers death she claimed the right to succeed to the tenancy under section 89 of the 1985 Act.
The council refused to accept her claim on the ground that, as the mother had died, there was no tenancy to which the daughter could succeed as it had been terminated pursuant to a conditional possession order for non payment of rent.
In other words, the mother was no more than a tolerated trespasser.
The judgment of the Court of Appeal was delivered by Aldous LJ.
At p 862 he noted that the law as to the effect of section 82(2) had recently been clarified by the decision of the House of Lords in Burrows [1996] 1 WLR 1448.
Given that, at her mothers death, there was no tenancy to which the daughter could succeed, everything depended on whether it was open to her to apply for an order under 85 to postpone the order for possession and revive the tenancy.
He concluded that her submissions to that effect were untenable.
Aldous LJ set out the reasoning on which that conclusion was based in the following paragraph at p 862: The right to apply for a postponement of an order for possession is not an interest in land capable of being inherited.
Further, the right to apply under section 85 is a right given to the tenant and in subsection (5) to the tenants spouse or former spouse.
Section 87 also gives a right to apply to a person who is qualified to succeed as a tenant under a secure tenancy.
That section only applies where there is a tenancy in existence.
That was not the case here.
To be a tolerated trespasser of the kind contemplated in Burrows, the person must be a trespasser tolerated by the law.
The appellant was not such a person.
In my view, there is no right given to a person in Miss Knightleys position to apply to revive a tenancy and no tenancy existed at the time when her mother died.
Endorsing that decision in the Court of Appeal [2009] EWCA Civ 66, Longmore LJ introduced his remarks with this comment in para 53: Aldous LJ, with whom the other members of the court agreed, said in terms that the right was incapable of being transmitted.
That conclusion applies to transmission by will or on intestacy just as much as any other transmission eg by assignment between living persons.
What Aldous LJ actually said, in the passage which I quoted in para 35, was that the right was not capable of being inherited.
There is an important distinction between these two phrases.
Had Aldous LJ appreciated that the question which is really at issue here is whether the right is capable of being transmitted, not whether it is capable of being inherited, he might perhaps have arrived at a different answer.
The right to apply to the court for the exercise of the powers that are given to it by section 85(2) is a right conferred by the statute.
So the answer to the question whether the right can be exercised after the tenant has died is to be found by construing the statute.
It does not depend on whether it is thought to be a right that is capable of being inherited at common law.
Addressing himself, in para 54, to the terms of the statute, Longmore LJ said that Parliament plainly intended that the person who would otherwise be entitled to a secure tenancy if it had been revived should not be able to revive it in his or her own name.
To hold that the deceaseds estate can apply to revive it for the purpose of enabling that person to obtain a secure tenancy would be to circumvent, if not flout, that intention by means of a legal device.
I have to confess that I do not follow this reasoning.
It seems to confuse the provisions about succession on the death of the tenant under a secure tenancy with the situation that section 85 is dealing with, which is the exercise of powers by the court on the making of a possession order.
Of course, one thing may lead to another.
But the sections must be taken in the order in which they appear, and they must be taken separately.
The first thing that strikes one, on reading the words of the subsection, is that the powers that it refers to are said to be exercisable at any time before the execution of the order.
The possibility that the tenant may have died in the meantime is not mentioned.
If it had been the intention that the powers should not be exercisable on the tenants death it would have been easy to say so.
Indeed, given the width of the phrase that is actually used, one would have expected words to that effect to have been inserted.
Cases could arise, for example, where the tenant has died before the possession order has taken effect to end the tenancy.
There would seem to be no reason why the deceaseds personal representative should not be able to seek the exercise of the power to postpone giving effect to the possession order, for example to enable the deceaseds affairs to be put in order and any licensee or sub tenant to be re housed.
Another example of a case where one would expect the personal representative to be able to apply would be where the deceased tenant, having made good a previous default, has applied for the date for possession to be postponed but dies the day before his application is to be heard.
The wording of the subsection does not compel a reading that would deny the jurisdiction of the court to exercise its powers in such circumstances.
There are other indications in this Part of the Act that support this approach.
When it contemplates what is to happen on death, it says so.
Sections 87 to 90, which deal with succession on the tenants death, constitute the prime example.
It is worth noting too that section 90, which deals with fixed term tenancies, contemplates that the tenancy may continue after the secure tenant dies and vest in someone else in the circumstances referred to in subsection (3).
One would expect the powers under section 85(2) to be exercisable after the tenants death in such circumstances, and there is nothing in its wording that suggests the contrary.
Also, the rights that were given to the tenants spouse or former spouse who is in occupation when proceedings for possession are brought by section 85(5) are not said to come to an end when the secure tenant dies.
That subsection was repealed by section 299 of and Schedule 11, paras 1 and 3 to the 2008 Act.
But it was there when section 85 was enacted, and it indicates the width and variety of the circumstances in which the powers under section 85(2) were intended to be available.
For these reasons I would hold that Knightley (1997) 29 HLR 857 was wrongly decided and that it should be overruled.
In my opinion the fact that the former secure tenant has died does not deprive the court of its jurisdiction to exercise the power conferred on it by section 85(2)(b) of the 1985 Act to postpone the date of possession under a possession order.
It follows that it is open to the appellant, who seeks to represent the estate of the person who was served with a claim for possession, to apply under CPR 19.8 for the date for possession to be postponed.
I have to say that I regard this solution to his case to be preferable to the solution for which Mr Luba contended under the first issue.
It is directed precisely to the situation that arises where a former tenant who has become a tolerated trespasser has died.
Above all, it preserves the discretion of the court under section 85(2) to do what is just in all the circumstances.
This is a protection for the landlord which would be entirely absent if the first solution were to be adopted.
Conclusion
In view of the conclusion that I have reached in the appellants favour on the second issue I do not need to say anything about the remaining issues.
Mr Drabble QC for the Council did not suggest that, if the second issue were to be answered in the appellants favour, the deceased was not a person who had an interest in a claim for the purposes of CPR 19.8 which in the events that have happened could be invoked by his estate.
The claim which the appellant can invoke for this purpose is the claim for possession that was issued against the deceased in 1986.
I would allow the appeal.
I would order that the appellant be appointed to represent the estate of the deceased under CPR 19.8(1)(b) and would remit his application under section 85(2) of the 1985 Act for postponement of the 1987 possession order to Lambeth County Court for determination.
LORD WALKER
I am in full agreement with the reasoning and conclusions in Lord Hopes judgment.
I have nothing to add except to express my admiration for the concurring judgment of Lady Hale, who has written the definitive obituary of the tolerated trespasser.
Indeed her trenchant analysis clearly demonstrates that this unfortunate zombie like creature achieved a sort of half life only through a series of judicial decisions in which courts failed, or did not need, to face up to the theoretical and practical contradictions inherent in the notion.
But in common with all the members of the Court I agree that Parliament is best fitted to give the tolerated trespasser his quietus, as it has by the Housing and Regeneration Act 2008.
LADY HALE
I agree that this appeal should be allowed for the reasons given by Lord Hope but wish to add a few words on the issue of tolerated trespassers.
In my view, had it not been for Parliaments intervention, it would have been the duty of this Court to set the matter right.
There is no reason to believe that Parliament intended that such an anomalous status should arise as a result of the provisions of the 1980 and 1985 Housing Acts.
There is little reason to believe that the full implications of their decision were apparent to the Court of Appeal when they decided Thompson v Elmbridge Borough Council [1987] 1 WLR 1425.
That decision was assumed to be correct by the House of Lords in Burrows v Brent London Borough Council [1996] 1 WLR 1448 but it suited both parties in that case for them to do so.
And the issue did not strictly arise in Knowsley Housing Trust v White [2008] UKHL 70, [2009] AC 636, which was concerned with a different statutory regime.
Thus there is no House of Lords case which has addressed the issue full on and reached a reasoned conclusion about it.
If there had been, it would have had to address all the conceptual and practical problems which have arisen since Thompson.
These were forcefully spelled out by Lord Neuberger in Knowsley, but it is worth reiterating them here, because in Knowsley the parties did not want the House to address the matter, whereas in this case the Court has expressly been asked to do so.
A tolerated trespasser is an oxymoron.
A trespasser is someone who should not be there.
But tolerated trespassers were allowed to be there.
Indeed, in some cases the local authority had no right to evict them.
The Court of Appeal decided in Harlow District Council v Hall [2006] 1 WLR 2116 that if the order fixed a date for possession, but postponed its enforcement on terms, the tenancy came to an end on the date fixed, even if the trespasser complied with the terms.
In other cases, the local authority had expressly agreed that the trespasser could stay.
The House of Lords decided in Burrows v Brent London Borough Council [1996] 1 WLR 1448 that even a written agreement not to evict the trespasser if she complied with certain terms did not create a new tenancy.
Even without such an agreement, the local authority were often quite uninterested in enforcing the order.
They may not have realised that the order had been breached; they may have realised that the order had been breached but also that this was not the trespassers fault but the result of the way the housing benefit system worked; they may have obtained the order without any intention of actually evicting the trespasser, but in order to obtain a money judgment and encourage more punctual payment of what both still regarded as rent; and they may not have wanted to have to rehouse a trespasser, who was by definition homeless, if she was in priority need.
These were not people whom the local authority were reluctant to have there and were waiting for the machinery of eviction to take its course.
These were people whom the authority wanted to have there, provided that they could be persuaded to pay most, if not all, of their rent.
In normal circumstances this would give rise to some sort of right to be there, whether a licence or (more probably, given Street v Mountford [1985] AC 809) a tenancy and, if the landlord and tenant conditions required by section 79 were satisfied, this would be a secure tenancy.
But the House of Lords was persuaded in Burrows to hold that a new tenancy would not arise, save in special circumstances.
The practical reason for this was that local authorities did not want to have to go back to court for a new possession order if the new agreement was breached.
The chain of reasoning which persuaded the House relied mainly on the decision in Greenwich London Borough Council v Regan (1996) 28 HLR 469, that the old tenancy could be revived by a successful application under section 85(2) at any time before the possession order was actually executed.
No one argued that the same sensible policy result could have been reached by overruling Thompson.
So we had a situation in which people became trespassers in their own homes, whether they or their landlords knew that this was so and irrespective of whether the landlords were content for them to stay.
During the time that they were trespassers, neither the landlord nor the tenant could enforce the covenants under the tenancy agreement, although the tenant might be able to sue the landlord for nuisance.
The statutory scheme for determining the rent did not apply.
The trespasser could not exercise the right to buy even if he was now fully paid up.
His spouse, partner or member of his family living there with him could not succeed.
Technically, they were all homeless.
Yet all these consequences could be retrospectively reversed by a successful application under section 85(2).
The tenancy miraculously sprang back into life and it was as if the trespasser had been a tenant all along.
Whether the court always realised that this would be the effect of its order may be doubted.
The standard form of possession order granted in the county courts has changed over the years.
The pre 1993 form N28, which was used in this case, did not specify a date upon which possession was to be given up.
It merely adjudged that the landlord do recover against the defendant possession of the land mentioned.
It ordered that the judgment for possession should not be enforced for 28 days in any event and for so long thereafter as the defendant punctually pays to the plaintiff or his agent the arrears of rent, mesne profits and costs by 4th March 1987.
This was in fact 28 days after the date of the order, which was 4th February 1987.
The order was also most unusual in ordering the defendant to pay off the whole arrears plus costs within that time rather than by the more usual instalments.
This does not induce confidence that either the plaintiff landlord or the court had addressed their minds to the exact consequences if this was not done.
Was it an order for possession forthwith, postponed for 28 days and suspended on terms? Or was it an order for possession on 4th March? Or was it an order for possession at some indeterminate future date? The standard form changed in 1993 and again in 2001.
Paragraph 1 of the 2001 order required that the defendant give the claimant possession of [. ] on or before [. ].
If this form was used, the Court of Appeal held in Harlow District Council v Hall that the tenant became a trespasser on that date, even if she faithfully complied with the terms for postponing enforcement.
But the standard form did not have to be used and, in Bristol City Council v Hassan [2006] 1 WLR 2582, the Court of Appeal approved an order providing that the date on which the defendant is to give up possession of the premises to the claimant is postponed to a date to be fixed by the court on an application by the claimant.
It is a fair assumption that there are many old possession orders around which had an effect which the court making them would have avoided if it had known how to do so.
The acquisition of trespasser status was accidental not intentional.
It was also very common.
Strict compliance with the terms of suspension would, in Lord Neubergers view, be rare.
All of this nonsense could have been avoided if a different construction had been put upon section 82(2) of the Housing Act 1985.
The whole edifice was built upon the extempore judgment of a two judge Court of Appeal in Thompson.
Section 82(1), so far as is material, provides that a secure tenancy cannot be brought to an end by the landlord except by obtaining an order of the court for the possession of the dwelling house .
This does not affect the ways in which the tenancy may be brought to an end by the tenant or by agreement between the landlord and the tenant.
But it does mean that the landlord cannot end the tenancy without getting a possession order.
Section 82(2) then provided that where the landlord obtains an order for the possession of the dwelling house, the tenancy ends on the date on which the tenant is to give up possession in pursuance of the order.
Clearly, the construction put upon section 82(2) in Thompson and in subsequent cases is a tenable one.
The subsection did say is to give rather than actually gives up possession.
Equally clearly, as Lord Neuberger demonstrated in Knowsley, it is not the only tenable construction.
The order made in this case did not specify a date on which the tenant had to give up possession, so why choose an unspecified and indeterminate date upon which the tenant puts himself in a position whereby he may be required to give up possession in pursuance of the order? Even if the order does specify a date or an event upon which possession is in theory to be given up, that is never the end of the story.
Unless the tenant leaves voluntarily, the landlord will have to get and have executed a warrant for possession.
The tenant is not obliged to leave until a warrant has been obtained and cannot be forced to do so until the date specified in the warrant.
So an even more tenable interpretation is that it refers to the date specified in a warrant of execution.
But that too is not the end of the story, because the landlord may obtain a warrant and never execute it.
That, in fact, is what happened in Thompson; the possession order was obtained on 31 January 1985; its terms were breached at the latest by 5 September 1985; and a warrant was obtained on 8 January 1986; the proceedings by the tenants husband then ensued.
It is therefore difficult to say that the tenant is to give up the property until he actually does so, whether of his own accord or with the encouragement of the bailiffs.
This construction is reinforced by section 85(2), which allows the court to stay or suspend execution or postpone the date of possession at any time before the execution of the order.
If the tenancy continues until then, there is no need for it to be resurrected with retrospective effect.
This construction is also, as Lord Neuberger observed in Knowsley, arguably more consistent with section 121.
This provides that the right to buy cannot be exercised by a tenant who is obliged to give up possession of the dwelling house in pursuance of an order of the court, thus assuming that even if a person is currently obliged to give up possession he is nevertheless still a tenant until he actually does so.
Arguably inconsistent with this construction was section 85(5), which gave the current or former spouse or civil partner of a tenant the same rights in relation to adjournment, stay, suspension or postponement of possession proceedings under section 85 as he or she would have if his or her home rights had not been affected by the termination of the tenancy.
This may be explained as an example of torrential drafting in which the same provision is inserted into different statutory schemes irrespective of its applicability.
Thus there is indeed a powerful case for construing the date referred to in section 82(2) as the date specified in a warrant of possession which is duly executed (or acted on by the tenant), as Lord Neuberger put it in Knowsley, at para 91.
When the linguistic case is put together with the conceptual and practical problems which arise from any other construction, the case becomes overwhelming.
Legislation designed to protect residential tenants should be clear, simple and consistent in its effects, not dubious, complex and arbitrary.
It is scarcely surprising that the Governments view, when consulting on what became Schedule 11 to the Housing and Regeneration Act 2008, was that the result of Thompson had been unintended.
Were it not for that Act, I would consider it right for this Court to sort the matter out.
The decisions in Thompson and the cases which proceeded on the unquestioned basis that Thompson was correct were not merely wrongly decided.
They set the law on a course which was wrong in principle and wrong in practice.
They produced a position with which no one was happy neither the landlords nor the tenants as is shown by the response to the Governments consultations.
Even if some local authority landlords might have welcomed not being under a contractual obligation to repair properties for which the occupier was not paying the full rent, they would also have acknowledged that it could not be right for them to be able to charge the equivalent of the full rent which was calculated on the basis that they did have an obligation to repair.
In such circumstances, it would ordinarily be our duty to recognise that the law had always been what we hold it to be.
Does the 2008 Act make a difference? I am persuaded that, in this case, it does.
It has abolished the problem for tenancies granted after it came into force.
It has given those formerly considered tolerated trespassers a new tenancy which is in most respects the same as the tenancy they would otherwise still have had.
In other respects, of which repairing covenants are likely to be the most important, the court has the discretion to tailor a just solution.
The only gap which counsel have identified is the gap exemplified by this case where the tolerated trespasser has died before an application under section 85(2) has been made or determined.
But this case solves that problem.
Parliament has therefore recently devised a considered and carefully balanced solution to the problem.
We would be obliged to respect the will of Parliament if it had devised a wholly new scheme or amended a scheme which we thought had been properly interpreted by the courts.
I am persuaded that we should also do so in this case even if we believe that the premise which led them to devise the new scheme was wrong.
In agreement with the other members of the Court, therefore, I would reluctantly dismiss the appeal on the first issue but happily allow it on the second.
| The Appellants brother, who is now deceased (the Deceased), held a secure tenancy under the Housing Act 1985 (the 1985 Act) of a property owned by the London Borough of Southwark (the Authority).
The Appellant contends that he lived in his brothers home for the 12 months preceding his death, caring for him during his terminal illness.
The Appeal arises from the efforts of the Appellant to resist the Authoritys efforts to evict him from the property.
On 4 February 1987, a conditional suspended possession order (the CSPO) was issued by the court against the Deceased on the ground he was in arrears of rent.
The CSPOs terms provided that it would not become enforceable if he paid the sum due by 4 March 1987.
He failed to pay by the specified deadline and so the CSPO became enforceable.
However, the Authority did not take any action to evict him and he remained in the premises until his death some 18 years later, paying the rent as it became due plus sums towards the outstanding arrears.
Two principal issues arise in the Appeal.
Firstly, whether pursuant to s.82(2) of the 1985 Act the secure tenancy was terminated by the Deceaseds failure to pay the arrears of rent by the date specified in the CSPO so that he remained in the property as a so called tolerated trespasser; or, alternatively, whether the tenancy continued until his death, with the effect that the tenancy could transmit to the Appellant via the Deceaseds estate.
Secondly, whether the statutory right of a former secure tenant to apply to the court to postpone enforcement of a possession order, pursuant to s.85(2) of the 1985 Act, terminates on the death of a tenant, or is capable of transferring to the Appellant so as to allow him to apply to the court to postpone the possession order.
The Supreme Court unanimously allows the appeal, holding that the tenants right to apply to the court to postpone enforcement of a possession order, and thus revive the secure tenancy, can survive death and transmit to a successor.
The case is remitted to the county court for determination of the Appellants application for postponement of the possession order.
Lord Hope delivered the leading judgment and Lady Hale delivered a separate concurring judgment.
The First Issue: The Effect of s.82(2)
It has been assumed since the Court of Appeals decision in Thompson [1987] 1 WLR 1425 that a secure tenancy is terminated immediately upon any term of a conditional possession order being breached [Lord Hope, para [15]].
Thompson was criticised in the House of Lords decision of Knowsley [2009] AC 636.
However, notwithstanding reservations concerning the merits of the decision, the House of Lords refrained from disturbing it on the basis that: (i) 20 years had elapsed and tens of thousands of cases had proceeded on the basis that it accurately stated the law; and (ii) Parliament had legislated in respect of the issue in the Housing and Regeneration Act 2008 (the 2008 Act), and had opted to change the law only with prospective effect.
A subsequent judicial decision with retrospective effect would thus run contrary to the will of Parliament [Lord Hope, paras [17] [18]].
There is much to said for the view that s.82(2) should be interpreted as only terminating a secure tenancy when the possession order is actually executed: (i) the conclusion in Thompson was unsupported by reasoning and no examination was conducted of the consistency of the courts interpretation with the other provisions of the 1985 Act; (ii) subsequent references to Thompson by the House of Lords were cursory and/or uncritical and could not be regarded as lending it any great support; (iii) the 1985 Act contemplates circumstances in which a secure tenancy would remain in force notwithstanding that a conditional possession order was outstanding; and (iv) this construction would avoid the creation of so called tolerated trespassers [Lord Hope, paras [20] [23]].
However, the alternate interpretation of s.82(2) is not unarguable and so the question is whether the Supreme Court should depart from the view taken by the House of Lords in Knowsley.
The House of Lords 1966 Practice Statement on departure from its own previous decisions applies equally to the Supreme Court [Lord Hope, paras [24] [25]].
For the same reasons identified in Knowsley, essentially the passage of time and the need to respect the will of Parliament as expressed in the 2008 Act, it would not be appropriate for the Supreme Court to disturb the understanding of s.82(2) that has prevailed since Thompson [Lord Hope, paras [28] [31]].
The Second Issue: The Effect of s.85(2) The effect of s.85(2) must be resolved by construing the 1985 Act as a whole.
The right is created and defined by a statute and it is the legislation which determines it metes and bounds; its ambit cannot be determined by what the common law would treat as an inheritable right [Lord Hope, para [36]].
The statutory language used in s.85(2) is wide and unqualified.
There is no suggestion that the power of the court to order the postponement of the enforcement of a possession order is not exercisable after the tenants death.
Given the broad character of the words used, it would be reasonable to expect express provision to be made if any such limitation was intended.
Moreover, there are a number of readily foreseeable circumstances in which it would be desirable for the court to exercise the power after the tenant had died.
The wording of the section does not compel the conclusion that the court would be powerless to provide relief in these circumstances [Lord Hope, para [38]].
Part IV of the 1985 Act contains other indications that support this construction [Lord Hope, para [39]].
The tenants death does not prevent the court from exercising its power under s.85(2) of the 1985 Act to postpone the effect of a possession order.
This preserves the discretion of the court to do what is just in all the circumstances of the case, which itself provides a protection
for the landlord that would be absent if an alternate construction was adopted [Lord Hope, paras [40] [41]].
Lady Hale noted the unforeseen and undesirable consequences of the notion of tolerated trespass to which the decision in Thompson had given rise.
If Parliament had not legislated in the field, in the form of the 2008 Act, then it would have been incumbent upon the Supreme Court to set the matter aright [paras [44] [56]].
|
The issue in this appeal is: what are the statutory consequences if the fingerprints of a defendant have been taken in a police station in Northern Ireland by an electronic device for which the legislation required approval from the Secretary of State, when such approval has never been given? In particular, is any evidence which makes use of the control fingerprints thus taken inadmissible in any subsequent court proceedings?
Article 61 of the Police and Criminal Evidence (Northern Ireland) Order 1989 (the Northern Ireland Order) sets out the powers of the police to take fingerprints without consent.
Similar (but not in every respect identical) provision is made for England and Wales by section 61 of the Police and Criminal Evidence Act 1984.
These powers are exhaustively defined; otherwise prints may only be taken with consent see article 61(1) and, in England and Wales, section 61(1).
The cases where prints may be taken without consent have been varied a little from time to time and do not need to be set out seriatim here.
One of the principal cases, however, was and is where a person is in police detention having either been arrested for a reportable offence, or charged with, or informed that he will be reported for, such.
Another is where he has been convicted of such an offence.
Generally, fingerprints may be taken once only in the course of any single investigation, although there are now provisions permitting replacement prints to be required if the first ones were of insufficient quality to allow satisfactory analysis, comparison or matching.
Between 1 March 2007 and 12 January 2010 article 61(8B) of the Northern Ireland Order provided: Where a persons fingerprints are taken electronically, they must be taken only in such manner, and using such devices, as the Secretary of State has approved for the purposes of electronic fingerprinting.
That provision matched an intended section 61(8A) of the Police and Criminal Evidence Act 1984, which latter provision was inserted into the 1984 Act by the Criminal Justice and Police Act 2001 but was never brought into force.
Both article 61(8B) and section 61(8A) were later repealed as redundant by section 112 and schedule 8 of the Policing and Crime Act 2009, with effect from 12 January 2010, and with that repeal there disappeared from England and Wales and from Northern Ireland all requirement for statutory approval of fingerprinting devices.
However, although the requirement for approval existed in Northern Ireland (but not in England and Wales) from 1 March 2007, such approval was, by oversight, not given to any device until it was belatedly provided on 29 March 2009 after the omission had been noticed.
It follows that for the two years from March 2007 to March 2009 article 61(8B) was in force but no device had been approved as contemplated by it.
The two appellants were defendants charged with theft in Northern Ireland.
The offence was alleged to have taken place on 6 October 2007, during the two year period mentioned.
A stack of building materials had been found removed from the owners depot and placed apparently ready for collection by the thieves.
The appellants were found nearby in a van but said that they were there innocently and had not been near the stolen materials.
Their fingerprints were taken when they were detained in the police station after their arrest.
A fingerprint matching Elliotts left thumb was found on the packaging of the stolen materials.
The match of fingerprints was relied upon by the Crown and proved in the magistrates court.
The defendants were convicted.
The device used in the police station to collect the control sample of the fingerprints of each appellant was a combination of camera, scanner and computer, known as Livescan.
No one noticed that no type approval had been given for its use as required by article 61(8B).
When this was appreciated, the appellants appealed to the County Court, where the appeal proceeded by way of fresh hearing ab initio.
The preliminary point was taken that the evidence of comparison was inadmissible because of the absence of approval.
That argument succeeded before the County Court judge but on further appeal by the Crown, by way of case stated, the Court of Appeal ruled against it.
The Livescan process was and is generally used by the police throughout Northern Ireland, as well as throughout England and Wales and Scotland and, indeed, worldwide.
It has very largely superseded the traditional process of ink pad and paper.
It is possible to have mobile devices as well as those located in police stations.
Both are linked directly to computerised storage and searching equipment located centrally.
Amongst the advantages is the ease of electronic transmission, storage and sorting of the prints taken.
One aspect of that is that a set of fingerprints given at a scene or in the street can now often almost instantaneously verify or refute the identity of the person tested.
Another is that international exchange of data is made much easier.
Livescan devices were in general use in Northern Ireland from 2006 and throughout the two year period 2007 2009 when type approval was required by article 61(8B).
For the appellants, the first and principal submission of Mr McMahon QC is
that the language of article 61(8B) unequivocally renders a nullity any fingerprints taken by a device which has not been approved.
Therefore, no legal use can be made of them.
For this reason, there is, he submits, no occasion to investigate what consequences Parliament must have intended should follow from a failure to use an approved device.
That would be necessary only if there were an ambiguity in the wording.
There is none, and it necessarily follows that the product of an unapproved fingerprinting process is inadmissible.
Any other conclusion would, he submits, leave article 61(8B) a dead letter.
The difficulty with this attractively simple submission is that the statute says nothing at all about the consequences of failure to use an approved device.
There is ample precedent for such a statutory provision to be accompanied by an express provision that evidence shall only be admissible if obtained in accordance with it.
An example is afforded by the statutory rules relating to evidence of speed provided by speed guns.
Section 20 of the Road Traffic Offenders Act 1988 provides, for England and Wales: (1) Evidenceof a fact relevant to proceedings for an offence to which this section applies may be given by the production of a record produced by a prescribed device, and (a) (b) (4) A record produced or measurement made by a prescribed device shall not be admissible as evidence of a fact relevant to proceedings for an offence to which this section applies unless the device is of a type approved by the Secretary (a) of State, and (b) any conditions subject to which the approval was given are satisfied.
Identical provisions are contained in the equivalent Northern Ireland legislation: article 23(1) and (4) of the Road Traffic Offenders (Northern Ireland) Order 1996.
There are provisions to similar effect in section 6 of the Noise Act 1996, and in section 45 of the Antisocial Behaviour etc (Scotland) Act 2004, in respect of noise meters.
The absence of this kind of explicit statutory provision from article 61(8B) thus raises the question of what consequence was intended to follow from non approval.
This legislation was enacted against the background of the well understood
general common law rule that evidence which has been unlawfully obtained does not automatically thereby become inadmissible.
That has been clear since at least the decision of the Judicial Committee of the Privy Council in Kuruma v The Queen [1955] AC 197, where the defendant was charged with unlawful possession of ammunition which had been found on him as a result of an unlawful search, carried out by a policeman of insufficient seniority to make it.
Lord Goddard CJ said this at p 203: In their Lordships opinion the test to be applied in considering whether evidence is admissible is whether it is relevant to the matters in issue.
If it is, it is admissible and the court is not concerned with how the evidence was obtained.
This proposition was endorsed by the House of Lords in R v Sang [1980] AC 402, which dealt more specifically with the judges discretion to exclude evidence which will have the effect of rendering the trial unfair (see now section 78 of the Police and Criminal Evidence Act 1984 and its equivalent, article 76 of the Northern Ireland Order).
Likewise in R v Khan [1997] AC 558 evidence obtained by unauthorised surveillance and the secret recording of private conversations was admissible despite the unlawful methods by which it had been obtained.
The position was summarised by Lord Fraser, with whom all other members of the House of Lords agreed, in Fox v Chief Constable of Gwent [1986] AC 281, 292A as follows: It is a well established rule of English law, which was recognised in R v Sang, that (apart from confessions as to which special considerations apply) any evidence which is relevant is admissible even if it has been obtained illegally.
It is clear that this inclusive rule of relevant evidence extends equally to evidence created by an unlawful process as it does to existing material uncovered by unlawful process; the recording in Khan is an example of the former.
This common law background to the legislation, of which Parliament must be taken to have been well aware, shows that inadmissibility of the fingerprints here under consideration cannot possibly simply follow from the existence of the requirement for device approval.
Rather, it is necessary to examine the Parliamentary intention as to consequence.
With great respect to Mr McMahons principal argument, it is not correct that article 61(8B) would have no purpose, or would be a dead letter, unless its consequence were that any fingerprints obtained from an unapproved device were inadmissible.
Whether or not inadmissibility is the consequence, the article still meant that a requirement by a policeman of a suspect in custody that he provide his fingerprints on an unapproved device would be one which the suspect was entitled to refuse.
It might not be very likely that a suspect would be acquainted with the presence or absence of approval, but his solicitor might well be.
Such a suspect could therefore refuse to provide his fingerprints on a Livescan device and he would not thereby commit the offence of obstructing a police officer that no doubt he otherwise would.
Similarly, if it became known that the police were regularly using an unapproved device, there would be no defence to an application for judicial review in which the unlawfulness of their actions would be declared and, if persisted in, no doubt prohibited.
Thus the clear statutory purpose of preventing the use of a device unless it is approved by the Secretary of State would be achieved.
There is no need for the additional consequence of inadmissibility of evidence in order to give content to the statute.
It follows that the wording of article 61(8B) does not itself provide the solution to the issue in this appeal.
It is necessary to examine the question what Parliament must have intended to be the consequence of non approval of Livescan.
The correct approach to this enquiry was explained by Lord Steyn in R v Soneji [2005] UKHL 49; [2006] 1 AC 340.
It had previously been thought that statutory provisions could be classified as either mandatory (carrying the consequence of total invalidity for breach) or directory (carrying lesser consequence).
The over rigidity of that a priori approach had given rise to difficulty.
At para 23 Lord Steyn said this: Having reviewed the issue in some detail I am in respectful agreement with the Australian High Court [in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355] that the rigid mandatory and directory distinction, and its many artificial refinements, have outlived their usefulness.
Instead, as held in Attorney Generals Reference (No 3 of 1999) [2001] 2 AC 91, the emphasis ought to be on the consequences of non compliance, and posing the question whether Parliament can fairly be taken to have intended total invalidity.
That is how I would approach what is ultimately a question of statutory construction.
That more flexible approach does not necessarily mean that failure to comply with statutory provisions may not have far reaching consequences.
It may sometimes yield the conclusion that the inevitable consequence is total invalidity.
That was the outcome in R v Clarke and McDaid [2008] UKHL 8; [2008] 1 WLR 338, where the question was whether the failure to sign an indictment nullified the ensuing trial.
The statutory provisions there in question were sections 1(1) and 2(1) of the Administration of Justice (Miscellaneous Provisions) Act 1933 which provided for a bill of indictment (which had of itself no legal standing save as a proposal of charges) to become an indictment when signed.
It was common ground that a valid indictment was a pre condition to a valid Crown Court trial.
It can be seen from Lord Binghams speech at para 18 that he faithfully posed the Soneji question, namely what Parliament had intended, when passing the 1933 Act, should be the consequence of lack of signature.
Since at the time of the 1933 Act the signature was taking the place of the previously existing endorsement of the bill by a Grand Jury, the answer was inescapable, if inconvenient: the signature validated the indictment in the same way as the Grand Jurys decision previously had done.
Accordingly the absence of signature did indeed invalidate the subsequent trial, notwithstanding the fact that modern changes in the routes by which criminal cases arrive in the court of trial had in the meantime reduced the signature, in practice, to mere formality.
The position had to be put right by amending legislation, in the form of the Coroners and Justice Act 2009.
Should a similar parliamentary intention be deduced from article 61(8B)? Mr McMahon relies upon the well established rule that the product of a breathaliser test is inadmissible unless the testing device is an approved one.
The cases begin with Scott v Baker [1969] 1 QB 659, decided in the infancy of the Road Safety Act 1967, which had introduced for the first time the offence of driving with blood alcohol beyond a prescribed statutory limit.
The power to require a suspect to provide a laboratory blood or urine sample, by which blood alcohol could be tested, was made dependent upon a complex step by step procedure.
The first step in that procedure was the taking of a preliminary (usually roadside) breath test.
By section 7 a breath test was defined as one carried out using a device approved by the Secretary of State.
The court held that such approval was essential to the statutory steps leading to a validly required laboratory sample, and that approval must be proved.
The details of the blood alcohol driving legislation have been changed from time to time since then, and breath tests of a different kind are nowadays used not simply as a screening test but to determine the blood alcohol level.
However, it remains the statutory rule, under section 7(1) of the Road Traffic Act 1988 and, in Northern Ireland, under article 18(1) of the Road Traffic (Northern Ireland) Order 1995, that a specimen of breath may be required in the course of an investigation into the offences of driving with excess alcohol, or of driving when unfit through drink or drugs, or of causing death by careless or dangerous driving when over the limit or under the influence, and that what may be thus required is limited to: specimens of breath for analysis by means of a device of a type approved by [the appropriate person.] Mr McMahon is therefore right to say that a breath specimen may be adduced in evidence against a defendant not only when the result constitutes the very offence of driving with excess alcohol but also where it is simply some part of the evidence relied on to prove an offence with different components, such as driving when unfit through drink.
No one doubts the rule, however, that the product of a breath test will not be admissible unless the device used is an approved one.
The statutory requirement for approval of an electronic fingerprint reader is not, however, analogous to the approval requirements in the cases of breath test or speed gun devices.
Both the latter are methods of measuring something which cannot subsequently be re measured.
They capture a snapshot of a suspects activity.
The snapshot is often itself the offence.
It is the speed, as measured by the device, which constitutes the offence of exceeding the speed limit.
It is the blood alcohol content, as measured by the device, which constitutes the offence of driving with excess alcohol.
In other cases, the snapshot is simply part of the evidence, for example if the offence charged is careless driving, or driving whilst unfit through drink.
But in both kinds of situation, the activity measured by the device cannot be reproduced to be re measured.
It is therefore entirely comprehensible that there should be a statutory requirement that the device should be approved, and that the measurements which can be relied upon in evidence should be limited to the products of such devices.
That is no doubt why there are the specific statutory provisions in relation to speed guns described at para 8 above, and it is clearly why the courts have held that the requirements for approval in the case of breath tests have the like effect.
The control fingerprints taken from the appellants in the police station were not snapshots.
The impressions which their fingers provided could be reproduced at any time afterwards, and would be the same.
The accuracy of the Livescan readings, if disputed, could readily be checked independently by the appellants providing more samples, whether by ink and paper or by any other means, for examination by an independent expert.
The ease with which this can at any time be done demonstrates that there was no need at all for Parliament to stipulate, or to intend, that the product of unapproved electronic fingerprint readers should be inadmissible.
It is the fact that in the present case there was no challenge whatever to the accuracy of the control fingerprints taken from Elliott by the Livescan device; the fingerprint found at the scene matched his control prints in no less than 45 particulars and there was no sign of any reliance on expert opinion either in the magistrates court or, after the absence of approval was appreciated, in the County Court.
But if there had been a dispute, as in other cases it is at least possible that there might be, it would have been the simplest possible matter for new control prints to be provided so that independent expert opinion could be obtained.
There appeared at first to be some limited support for the appellants contentions in an explanatory note which accompanied the proposed insertion into the Police and Criminal Evidence Act 1984 of section 61(8A) requiring type approval of electronic fingerprint readers.
That amendment of the 1984 Act would have been achieved through section 78(7) of the Criminal Justice and Police Act 2001, had that subsection ever been brought into force.
The explanatory note to that subsection (number 234) read as follows: Subsection (7) provides that where fingerprints are taken electronically, the device used must have type approval from the Secretary of State.
This is to ensure that the device will produce images of the appropriate quality and integrity to be used for evidential purposes.
However, the other background material shown to this court demonstrates that the purpose of the proposal for type approval was not principally the protection of the individual against risk of conviction on inaccurate evidence.
The concern was much more closely related to the needs for the technology to work properly so that investigations could proceed confidently, for compatibility between police forces, both domestic and foreign, and for uniform machinery for search and comparison.
The then Minister of State referred to the aim of facilitating a proper evidential trail.
The House of Lords Select Committee on Science and Technology had emphasised the need for the technology to be robust.
It is also clear that there was thought at one time that type approval would curtail any potential for unnecessary dispute in court about the legitimacy of electronically taken control fingerprints.
The initial recommendation of the Police Scientific Development Branch had been against any stipulation for type approval.
The reasons for that stance included the difficulty of formulating a test standard and the frequency of developments to many of the component parts of the system.
The successful operation of Livescan in England and Wales over a decade without any type approval, as well as the experience in Northern Ireland, clearly contributed to the subsequent decision in 2009 not to commence the amendment to the English statute, and to repeal both article 61(8B) and the uncommenced section 61(8A).
Overall the legislative history does not suggest any basis for concluding that Parliament intended that the consequence of use of unapproved apparatus should be the exclusion of the evidence.
Such a consequence would, it is clear, be unnecessary and inappropriate.
It is unnecessary because a reading of control fingerprints can always be checked subsequently.
It is inappropriate because to exclude such evidence would deprive courts of reliable and relevant material.
Since the product can be checked, and the evidence it provides is relevant, it ought to be admissible.
If it were not, it would not be open to the police to take further control fingerprints without the consent of the subject, because he would no longer be in detention following arrest on suspicion of the offence, nor would he have been convicted of it.
If the control fingerprints were to be inadmissible, not only would there be a windfall benefit to those who have committed crimes, perhaps of great gravity, but also defendants would be unable to rely on the evidence of the fingerprints of others when it was necessary for them to do so in order to defend themselves.
A defendant who wished to show that a fingerprint found in an incriminating place belonged to another person, whom he contends committed the offence rather than himself, would be unable to adduce the evidence to do so.
Some years after the provisions which we have here to construe, the Protection of Freedoms Act was enacted in 2012.
Part 1, Chapter 1 contains, by way of proposed amendments to the Police and Criminal Evidence Act 1984, prospective provisions relating to fingerprints and other biometric data.
Equivalent provision for the amendment of the Northern Ireland Order is made by section 9 of and Schedule 2 to the Criminal Justice (Northern Ireland) Act 2013.
Neither set of provisions is yet in force but there is a proposed timetable for commencement.
If and when these provisions are commenced they will provide for the destruction of fingerprints and other data in certain defined circumstances and/or after prescribed periods.
There is express provision in proposed new section 63T(2) of the Police and Criminal Evidence Act 1984 (and in proposed new article 63Q(2) of the Northern Ireland Order) making inadmissible (at least against the person to whom the material relates) fingerprints or other data which the police have come under a duty to destroy.
This proposed statutory scheme is consistent with the construction of the provisions we are considering in the present case.
Where the intention is to make material inadmissible, express provision is made saying so, in the same way as it was in the statutes considered at para 8 above.
Moreover, the proposed new scheme for destruction of biometric data is clearly founded on a view of individual rights which was considered to justify the consequence of inadmissibility if there is a duty to destroy the material.
Such considerations do not apply to type approval for the machinery of taking fingerprints which there is no requirement to destroy.
For these reasons it is clear that the correct conclusion is that Parliament did not intend, by enacting article 61(8B), that the consequence of an absence of approval should be to render inadmissible any fingerprints produced electronically.
The decision of the Court of Appeal that the evidence of Elliots control fingerprints was admissible was correct.
It follows that this appeal must be dismissed.
| The issue in the appeal is: what are the statutory consequences if the fingerprints of a defendant have been taken in a police station in Northern Ireland by an electronic device for which the legislation required approval from the Secretary of State, when such approval has never been given? In particular, is any evidence which makes use of the fingerprints taken on such a device inadmissible at the defendants trial? The appellants were charged with theft in Northern Ireland.
The offence was alleged to have taken place on 6 October 2007.
A stack of building materials had been found removed from the owners depot apparently ready for collection by thieves.
The appellants were found nearby in a van but said they were waiting there innocently.
They were arrested and their fingerprints were taken at the police station using an electronic fingerprint scanner called Livescan.
This machine has been commonly used by police in the UK, including in Northern Ireland, for a number of years.
A fingerprint matching Elliotts left thumb was found on packaging of the building materials.
Article 61 of the Police and Criminal Evidence (Northern Ireland) Order sets out the powers of the police to take fingerprints without consent.
Between 1 March 2007 and 12 January 2010 article 61(8B) provided that where a persons fingerprints are taken electronically, they may only be taken using such devices, as the Secretary of State has approved for the purpose of electronic fingerprinting.
Due to an oversight no approval was ever given to any device (including Livescan) until it was belatedly provided on 29 March 2009.
Article 61(8B) was later repealed by the Policing and Crime Act 2009.
Therefore at the time the fingerprints were taken from the appellants there was no approval for the Livescan machine in breach of article 61 (8B).
The appellants were convicted at trial and no issue over the fingerprints was taken.
After the lack of approval for the Livescan device was noticed the appellants appealed to the County Court which, after a full re hearing, declared the fingerprint evidence inadmissible and acquitted the appellants.
The Public Prosecution Service appealed to the Court of Appeal who allowed the appeal and reinstated the appellants convictions.
The appellants primary argument before the Supreme Court and the courts below was that the lack of approval for the Livescan device meant that the fingerprints obtained with it were automatically inadmissible at the appellants trial.
The Supreme Court dismisses the appeal.
Lord Hughes gives the judgment of the court.
The difficulty with the appellants argument is that the statute says nothing about the potential consequences of failure to use an approved device.
This is despite the fact that there are numerous examples of other statutes where such consequences are expressly spelled out, such as in relation to obtaining specimens of breath for road traffic offences [8].
There is a well understood common law rule that evidence which has been obtained unlawfully does not automatically become inadmissible.
It is clear that this rule extends equally to evidence created by an unlawful process as it does to existing material uncovered by unlawful process.
The common law background to the legislation (article 61 (8B)) shows that inadmissibility of the fingerprints here under consideration cannot possibly simply follow from the existence of the requirement for device approval [9].
It is not correct to say that article 61 (8B) would have no purpose unless fingerprints obtained from unapproved devices were inadmissible at trial.
A defendant who was asked to give a fingerprint on an unapproved device could lawfully refuse to do so.
While, if such devices were found to be routinely in use by police, there would be no defence to an application for judicial review in which their unlawfulness could be declared and further use prohibited [10].
The appellants relied on the rule that the product of a breathalyser test was inadmissible unless the testing device was an approved one.
However, the requirement for approval of fingerprint devices is not analogous to that in cases of breath tests or speed guns.
The latter are methods of measuring something that cannot be re measured, they capture a snapshot of the suspects activity and are often the offence itself i.e. being found to be over the prescribed limit of alcohol at the time of driving.
The fingerprints on the other hand could be reproduced at any time afterwards, and would be the same.
If the Livescan readings were disputed they could readily be independently checked for accuracy and further fingerprints taken by a different method.
The ease of which this could be done shows there was no need for Parliament to stipulate that the product of unapproved fingerprint readers should be inadmissible.
Further, no challenge was ever made by the appellants to the accuracy of the fingerprints taken by the Livescan device [15].
The background material to the legislation shown to the Court further shows that the purpose of the requirement for device approval was not principally the protection of the individual against the risk of conviction on inaccurate evidence [16].
Relevant parts of the Protection for Freedoms Act 2012 and Criminal Justice (Northern Ireland) Act 2013 regarding fingerprints that have yet to come into force further support the construction of the legislation chosen by the Supreme Court in this case as, where required, express provision is made for evidence to be inadmissible [18].
|
This case concerns the jurisdiction of a court in England to make a maintenance order in favour of a party to a marriage (here, the wife) pursuant to section 27 of the Matrimonial Causes Act 1973 (as amended section 27) in circumstances in which for most of the marriage the parties lived in Scotland and where the relevant divorce proceedings (those issued by the husband) were conducted in Scotland.
After marriage in England in 1994, the parties lived together in Scotland between 1995 and 2012, when they separated.
The wife returned to England in 2012 and has lived in England since then.
On 13 January 2015 she issued her application under section 27 in England for an order requiring the husband to make maintenance payments.
Under section 27, an order can be made for periodic payments or payment of a lump sum directed to satisfying an obligation in the nature of provision of maintenance.
The wife issued a divorce petition in England in July 2013, which included a prayer for financial orders.
The husband issued a writ for divorce in Scotland in October 2014.
The writ sought relief only in the form of an order to dissolve the marriage and included no prayer for orders in relation to financial matters.
The effect of the relevant statutory provision (paragraph 8 of Schedule 1 to the Domicile and Matrimonial Proceedings Act 1973) was that the application for divorce had to be assigned to the court in Scotland, since the parties had last lived together there.
The wife accepted this and on 13 January 2015 she consented to an order dismissing her petition in England, which order was made on 16 January 2015.
The husbands writ for divorce could then proceed in Scotland.
Relief in the form of an order for maintenance under section 27 is not tied to the grant of a decree of divorce and such an order can be sought in separate proceedings.
Therefore, subject to questions of jurisdiction, the wife was free to issue her application under section 27 in England, as she did on the same day on which she consented to the dismissal of her petition for divorce.
By her application, she seeks an order for payment of periodical payments and a lump sum.
She has also applied for interim periodical payments under section 27(5).
Issuing proceedings for maintenance in England was both more convenient for her, since she lives in England, and offered the prospect of more generous maintenance provision than would be available to her if she sought orders in Scotland.
The husband applied for an order to stay or dismiss the wifes application under section 27 on the basis that the court in England either did not have or should not exercise jurisdiction to hear the application, alternatively on the basis that her application should be rejected on the merits.
These matters were considered at a hearing before Parker J in the High Court.
She rejected the husbands challenge to the jurisdiction of the English court and made an order for, among other things, interim periodical payments of maintenance by the husband: [2016] EWHC 668 (Fam); [2017] 1 FLR 1083.
The husband appealed to the Court of Appeal.
The Court of Appeal (King, David Richards and Moylan LJJ) dismissed the appeal: [2018] EWCA Civ 1120; [2019] Fam 138.
King LJ gave the sole substantive judgment, with which the other members of the court agreed.
The husband now appeals to this court, with permission granted by this court, in relation to the jurisdictional issues.
These are concerned with the interpretation and effect of Schedule 6 to the Civil Jurisdiction and Judgments (Maintenance) Regulations 2011 (SI 2011/1484) (Schedule 6 and the 2011 Regulations, respectively) and the interpretation and effect of Council Regulation (EC) No 4/2009 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations (the Maintenance Regulation).
The 2011 Regulations were promulgated by the Secretary of State for Justice pursuant to section 2(2) of the European Communities Act 1972 (the ECA 1972), and on the appeal to this court the husband has been given permission to raise a new point as to whether Schedule 6 to those Regulations, or any part of it, is ultra vires the Secretary of States powers under section 2(2).
The final determination of the wifes application for financial orders under section 27 was adjourned pending the appeal to the Court of Appeal and then adjourned again pending the appeal to this court.
The order by Parker J for payment of interim periodical payments has not been stayed, but the husband has failed to comply with it.
presented by Mr Horton, counsel for the appellant): Four issues arise on the appeal, as follows (in the order in which they were (1) On the proper interpretation of section 27(2), does an English court have jurisdiction to make any order for maintenance in a case with no international dimension at all? (2) If the answer to (1) is yes, does the English court have a discretion which has survived the promulgation of Schedule 6, to stay maintenance proceedings before it on the general ground of forum non conveniens (and if so, should it exercise that discretion so as to give priority to the Scottish courts to deal with financial issues between the parties)? (3) If the answer to (2) is no, was the purported removal by Schedule 6 of a general discretion to stay proceedings on the ground of forum non conveniens ultra vires the Secretary of States powers in section 2(2) of the ECA 1972? and (4) If the answer to (3) is no, with the result that the jurisdictional position is governed by the express terms of the Maintenance Regulation, as adopted into domestic law by Schedule 6, is the husbands divorce proceeding in Scotland a related action for the purposes of article 13 of the Maintenance Regulation (as so adopted) and, pursuant to that provision, should the English court decline jurisdiction in respect of the wifes claim for a maintenance order under section 27?
Legislative background
The national legislation governing jurisdiction in cross border cases is primarily contained in the Civil Jurisdiction and Judgments Act 1982 (the CJJA 1982).
That Act gave effect in domestic law to the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters of 1968 (the Brussels Convention).
The Brussels Convention was amended on the association of Denmark, Ireland and the United Kingdom in 1978.
It was replaced as the principal instrument governing jurisdiction in cross border cases between member states of the European Union by Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Brussels Regulation or, as it is sometimes called, the Judgments Regulation), which in large part replicated the provisions of the Brussels Convention.
The CJJA 1982 was amended to refer to and give effect in domestic law to the Brussels Regulation.
The Brussels Regulation has been replaced by Regulation (EU) No 1215/2012 (the Brussels Recast Regulation).
The Brussels Convention did not apply to issues of the status of natural persons, including marriage, nor to rights in property arising out of a matrimonial relationship (article 1(1)), but it did apply in respect of claims for maintenance.
The Convention set out a general principle that a person should be sued in his state of domicile (article 2), but this was subject to certain special rules of jurisdiction.
One such rule was that in matters relating to maintenance, the person owing an obligation to pay maintenance (the maintenance debtor) could be sued by the person to whom that obligation was owed (the maintenance creditor) in the courts for the place where the maintenance creditor was domiciled or habitually resident (article 5(2)).
This was specifically designed to make it easier for a maintenance creditor to enforce his or her rights, by giving them the right to choose where to sue the maintenance debtor.
The rationale for this was explained by Mr Jenard in his report on the Brussels Convention (OJ 1979 C59, pp 24 25, excluding footnotes): The Convention is in a sense an extension of the Hague Convention of 15 April 1958 concerning the recognition and enforcement of decisions relating to maintenance obligations in respect of children, since it ensures the recognition and enforcement of judgments granting maintenance to creditors other than children, and also of the New York Convention of 20 June 1956 on the recovery abroad of maintenance.
The Committee decided that jurisdiction should be conferred on the forum of the creditor, for the same reasons as the draftsmen of the Hague Convention.
For one thing, a convention which did not recognize the forum of the maintenance creditor would be of only limited value, since the creditor would be obliged to bring the claim before the court having jurisdiction over the defendant.
If the Convention did not confer jurisdiction on the forum of the maintenance creditor, it would apply only in those situations where the defendant against whom an order had been made subsequently changed residence, or where the defendant possessed property in a country other than that in which the order was made.
Moreover the court for the place of domicile of the maintenance creditor is in the best position to know whether the creditor is in need and to determine the extent of such need.
However, in order to align the Convention with the Hague Convention, article 5(2) also confers jurisdiction on the courts for the place of habitual residence of the maintenance creditor.
This alternative is justified in relation to maintenance obligations since it enables in particular a wife deserted by her husband to sue him for payment of maintenance in the courts for the place where she herself is habitually resident, rather than the place of her legal domicile.
Article 5(2) of the Brussels Convention was amended in 1978 so as to expand this special rule of jurisdiction, so that in matters relating to maintenance the maintenance debtor could be sued in the courts for the place where the maintenance creditor is domiciled or habitually resident or, if the matter is ancillary to proceedings concerning the status of a person, in the court which, according to its own law, has jurisdiction to entertain those proceedings, unless that jurisdiction is based solely on the nationality of one of the parties.
The object of this provision remained the protection of the maintenance creditor, who was regarded as the weaker party: see the judgments of the European Court of Justice (the ECJ) in Farrell v Long (Case C 295/95) EU:C:1997:168, [1997] QB 842, para 19, and Freistaat Bayern v Blijdenstein (Case C 433/01) EU:C:2004:21, [2004] All ER (EC) 591, paras 29 and 30.
The Brussels Convention set out rules governing cases of lis pendens and related actions at articles 21 and 22, respectively, in terms closely similar to what later became articles 27 and 28 of the Brussels Regulation, articles 12 and 13 of the Maintenance Regulation and articles 29 and 30 of the Brussels Recast Regulation.
The effect of articles 12 and 13 of the Maintenance Regulation is discussed below.
Section 16(1) of the CJJA 1982 stated that the provisions in Schedule 4 to the Act (which contained a modified version of Title II of the Brussels Convention) should have effect for determining, in each part of the United Kingdom, whether the courts of that part had jurisdiction in proceedings where the subject matter of the proceedings was within the scope of the Brussels Convention as determined by article 1 (therefore, maintenance proceedings were covered) and the defendant was domiciled in the United Kingdom.
As Lord Wilson explains, the Brussels Convention had nothing to say about determination of jurisdiction of courts in different parts of a single state and the CJJA 1982 did not adopt articles 21 and 22 of the Brussels Convention as part of the scheme for allocation of jurisdiction as between different jurisdictions in the United Kingdom (ie in an intra state case with a cross jurisdiction dimension).
The position in such cases remained governed by ordinary domestic discretionary rules, according to the principles relating to the forum non conveniens doctrine.
Section 49 of the CJJA 1982 provided: Nothing in this Act shall prevent any court in the United Kingdom from staying, sisting, striking out or dismissing any proceedings before it, on the ground of forum non conveniens or otherwise, where to do so is not inconsistent with the [Brussels Convention].
The Brussels Regulation followed the structure of the Brussels Convention.
Like the Convention, the Regulation did not apply to issues of status of natural persons, nor to rights in property arising out of a matrimonial relationship (article 1.2(a)).
Like the Convention, the Regulation included provisions governing jurisdiction in respect of claims for maintenance payments.
Article 2 repeated the general rule that a defendant should be sued in the courts of his domicile.
Article 5(2) of the Brussels Convention (as amended) was repeated.
The object remained, as before, that the maintenance creditor, who is regarded as the weaker party, should have options regarding where to sue, so that he or she could proceed in the place most convenient or advantageous for him or her.
As with the Brussels Convention before it, the Brussels Regulation did not harmonise the law of maintenance.
The substantive law to be applied was therefore a matter for the national law of the forum in which the maintenance claim was brought.
This meant that by giving the maintenance creditor a choice regarding the forum in which to bring their claim, the maintenance creditor was also afforded a choice regarding the substantive law to be applied.
The CJJA 1982 was amended so as to refer to the Brussels Regulation in relevant provisions.
As explained below, the domestic doctrine of forum non conveniens is excluded by the Brussels Regulation, as it was by the Brussels Convention before it.
However, as the Brussels Regulation was (unlike the Convention) directly applicable in the United Kingdom as a matter of EU law, it was not necessary for section 49 of the CJJA 1982 to be amended to refer to it in order for the Regulation to have effect to govern the allocation of jurisdiction in inter state cases.
As regards the effect of the Brussels Regulation, it is not the CJJA 1982 which prevents a court in the United Kingdom from staying proceedings before it on the ground of forum non conveniens, but the directly applicable Regulation itself.
The final clause of section 49 now refers to inconsistency with the Brussels Convention (as this still has application in a small number of cases), or, as the case may be, the Lugano Convention or the 2005 Hague Convention.
The reason for these references is that, since these instruments only have the status of treaties, they do not have direct effect in domestic law and so have to be given effect by a legislative provision in order to achieve the intended result that they, too, should exclude the operation of the forum non conveniens doctrine.
Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition of and enforcement of judgments in matrimonial matters and matters of parental responsibility (the Matrimonial Regulation, or the Brussels II Revised Regulation as it is often called) excluded maintenance obligations from its scope.
In due course, maintenance obligations were covered by their own jurisdictional regime as set out in the Maintenance Regulation.
Accordingly, EU legislation has continued the original scheme of the Brussels Convention, by treating maintenance obligations and questions of marital status, including divorce, as separate matters for the purposes of jurisdiction.
Recital (9) to the Maintenance Regulation states that a maintenance creditor should be able to obtain easily, in a member state, a decision which will automatically be enforceable in another member state.
Recital (11) makes it clear that the Maintenance Regulation covers all maintenance obligations arising from, among other things, marriage.
Recitals (21) and (25) make it clear that the Maintenance Regulation is not concerned with questions affecting the existence of family relationships, such as marriage.
Recitals (15) and (45) (in material part) are as follows: (15) In order to preserve the interests of maintenance creditors and to promote the proper administration of justice within the European Union, the rules on jurisdiction as they result from [the Brussels Regulation] should be adapted.
The circumstance that the defendant is habitually resident in a third State should no longer entail the non application of Community rules on jurisdiction, and there should no longer be any referral to national law.
This Regulation should therefore determine the cases in which a court in a member state may exercise subsidiary jurisdiction. (45) Since the objectives of this Regulation, namely the introduction of a series of measures to ensure the effective recovery of maintenance claims in cross border situations and thus to facilitate the free movement of persons within the European Union, cannot be sufficiently achieved by the member states and can therefore, by reason of the scale and effects of this Regulation, be better achieved at Community
level, the Community may adopt measures
Article 3 of the Maintenance Regulation provides: In matters relating to maintenance obligations in member states, jurisdiction shall lie with: the court for the place where the defendant is the court for the place where the creditor is (a) habitually resident, or (b) habitually resident, or (c) the court which, according to its own law, has
jurisdiction to entertain proceedings concerning the
Articles 12 and 13 of the Maintenance Regulation provide as follows: status of a person if the matter relating to maintenance is ancillary to those proceedings, unless that jurisdiction is based solely on the nationality of one of the parties, or (d) the court which, according to its own law, has jurisdiction to entertain proceedings concerning parental responsibility if the matter relating to maintenance is ancillary to those proceedings, unless that jurisdiction is based solely on the nationality of one of the parties.
Article 12 Lis pendens 1.
Where proceedings involving the same cause of action and between the same parties are brought in the courts of different member states, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. 2.
Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.
Article 13 Related actions 1.
Where related actions are pending in the courts of different member states, any court other than the court first seised may stay its proceedings. 2.
Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.
For the purposes of this article, actions are deemed to be 3. related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.
As is made clear by recital (15), the Maintenance Regulation is intended to preserve and enhance the rights of maintenance creditors as they had been set out previously in the Brussels Convention and the Brussels Regulation.
Therefore, article 3 of the Maintenance Regulation is concerned with defining the set of jurisdictions where the maintenance creditor has the right to bring her claim.
This is in line with the fundamental object of the Maintenance Regulation to protect the interests of the maintenance creditor as the weaker party and is also indicated by the text of the article itself.
The contrast between sub paragraphs (a) and (b) is between the place of habitual residence of the creditor (a term defined in article 2(10) to mean any individual to whom maintenance is owed or is alleged to be owed) and the place of habitual residence of the defendant (which is not a defined term; in context, it means the person against whom a claim is asserted that he owes maintenance).
This language reflects the fact that the jurisdiction provisions in relation to maintenance claims have been removed from the Brussels Regulation (where the special rule of jurisdiction set out in article 5(2) was in addition to the general right under article 2 to sue a defendant in the state of his domicile) and placed in a separate Regulation dedicated to maintenance claims.
The text of article 3 does not use the word debtor, which is a term defined in article 2(11) of the Maintenance Regulation to mean any individual who owes or who is alleged to owe maintenance.
Thus article 3 does not create a right for a maintenance debtor to pick a jurisdiction from those set out in that provision and commence proceedings seeking declaratory relief regarding the extent of any maintenance obligation he might have.
Although, as an EU Regulation, the Maintenance Regulation is directly applicable in domestic law as regards inter state cases, it required some degree of implementation in national law as at the date it came into effect in 2011 in relation to matters such as the designation of relevant central authorities and relevant courts for particular applications.
Such implementation and other associated legal changes were effected by the 2011 Regulations.
First, jurisdiction in relation to maintenance claims was removed from the CJJA 1982 by the amendments to that Act effected by regulation 6 of and Schedule 4 to the 2011 Regulations.
Therefore, section 49 of the CJJA 1982 has no application in relation to maintenance claims.
Secondly, regulation 3 of the 2011 Regulations gives effect to Schedule 1 to the 2011 Regulations which contains provisions relating to the enforcement of maintenance decisions pursuant to the Maintenance Regulation to the extent that national law is required to specify certain matters for the purposes of the Maintenance Regulation.
Thirdly, regulation 8 of and Schedule 6 to the 2011 Regulations provide the relevant rules for the allocation of jurisdiction for intra state cases within the United Kingdom in relation to maintenance.
Schedule 6 to the 2011 Regulations includes the following provisions, so far as material: 1.
The provisions of this Schedule have effect for determining, as between the parts of the United Kingdom, whether the courts of a particular part of the United Kingdom, or any particular court in that part, have or has jurisdiction in proceedings where the subject matter of the proceedings is within the scope of the Maintenance Regulation as determined by article 1 of that Regulation.
In this Schedule, a reference to an article by number 2. alone is a reference to the article so numbered in the Maintenance Regulation. 3.
The provisions of Chapter II of the Maintenance Regulation apply to the determination of jurisdiction in the circumstances mentioned in paragraph 1, subject to the modifications specified in the following provisions of this Schedule. 4.
Article 3 applies as if (a) the references in article 3(a) and (b) to the court for the place where the defendant or the creditor is habitually resident were references to the court for the part of the United Kingdom in which the defendant, or the creditor, as the case may be, is habitually resident; (b) the references to a persons nationality were references to a persons domicile. 12.
Article 12 applies as if after different member states there were inserted or different parts of the United Kingdom. 13.
Article 13 applies as if after different member states there were inserted or different parts of the United Kingdom.
As part of the suite of legislative amendments made by the 2011 Regulations to give effect to the Maintenance Regulation to govern allocation of jurisdiction relating to maintenance between member states and in parallel with the promulgation of the jurisdiction code in Schedule 6 governing allocation of jurisdiction relating to maintenance between jurisdictions within the United Kingdom, section 27 was amended (by paragraph 6 of Schedule 7 to the 2011 Regulations) by the insertion of a new subsection (2).
This provides: The court may not entertain an application under this section unless it has jurisdiction to do so by virtue of the Maintenance Regulation and Schedule 6 to [the 2011 Regulations].
Analysis
Although Lord Wilson says that the resolution of the question of jurisdiction in this case is absurdly complicated, in my respectful opinion it is not.
Schedule 6 was intended to introduce for intra state cases the same clear and certain jurisdictional rules which have been adopted for inter state cases in the Maintenance Regulation, and it has achieved that result.
This means that on proper analysis the resolution of the question of jurisdiction is straightforward, as it is intended to be. (1) Does an English court have jurisdiction under section 27(2) to make any order for maintenance in a case with no international dimension at all?
The submission of Mr Horton for the appellant on this issue is that section 27(2) can only apply if a case falls to be governed both by the Maintenance Regulation and by Schedule 6, so that it only applies in inter state cases.
On this issue I agree with Lord Wilson that Mr Hortons submission must be rejected.
Section 27(2) is intended to cover two classes of case: (i) inter state proceedings, in relation to which jurisdiction is governed by the Maintenance Regulation, and (ii) intra state proceedings, in relation to which jurisdiction is governed by Schedule 6.
In this context, it might perhaps be said that the use of the word and is infelicitous; but the meaning is abundantly clear.
There is no scope for the Maintenance Regulation and Schedule 6 both to apply, because they deal with different types of case.
Therefore, Mr Hortons proposed construction of section 27(2) would deprive it of any practical effect.
Rather, the drafter has used the formula referring to the Maintenance Regulation and Schedule 6 to indicate that the jurisdiction of an English court to make an order under section 27 is to be determined by application of the Maintenance Regulation and Schedule 6 taken together, in the sense that together they cover the whole possible field of inter state cases and intra state cases.
This interpretation is also borne out by the elaborate provisions in Schedule 6 which provide for the provisions of the Maintenance Regulation to apply with appropriate modifications to give them equivalent effect in intra state cases.
The intended effect of those provisions, as modified, would be defeated in a significant class of maintenance proceedings if section 27(2) were given the construction for which Mr Horton contends.
There is no rational basis for thinking that they were to be deprived of effect in this way. (2) Does the English court have a discretion which has survived the promulgation of Schedule 6, to stay maintenance proceedings before it on the general ground of forum non conveniens?
Appeal was right so to hold.
The jurisdictional scheme of the Maintenance Regulation is modelled on the similar schemes in the Brussels Convention and the Brussels Regulation (and is in line with the scheme of what is now the Brussels Recast Regulation).
The basic scheme of all these jurisdiction governing instruments is to provide clear guidance where proceedings may or must be brought.
The Grand Chamber of the ECJ authoritatively ruled in Owusu v Jackson (Case C 281/02) [2005] QB 801, a case concerning the interpretation of the Brussels Convention, that the scheme of this form of EU legislation is inconsistent with courts in a Member State retaining any discretionary power to stay proceedings on the grounds of forum non conveniens.
The case concerned an accident which occurred in Jamaica, but involving a defendant who was domiciled in England.
As the ECJ pointed out, a national court cannot retain a power to refuse to accept jurisdiction on forum non conveniens grounds, since to do so would allow it to defeat the mandatory provision in article 2 of the Brussels Convention which required that a defendant be sued in the courts of his state of domicile.
The relevant part of the judgment is at paras 37 46, as follows: In my judgment, the answer to this question is clearly no.
The Court of 37.
It must be observed, first, that article 2 of the Brussels Convention is mandatory in nature and that, according to its terms, there can be no derogation from the principle it lays down except in the cases expressly provided for by the Convention: see, as regards the compulsory system of jurisdiction set up by the Convention, Erich Gasser GmbH v MISAT Srl (Case C 116/02) [2005] 1 QB 1, 35, para 72, and Turner v Grovit (Case C 159/02) [2005] 1 AC 101, 113, para 24.
It is common ground that no exception on the basis of the forum non conveniens doctrine was provided for by the authors of the Convention, although the question was discussed when the Convention of 9 October 1978 on the Accession of Denmark, Ireland and the United Kingdom was drawn up, as is apparent from the report on that Convention by Professor Schlosser, OJ 1979 C59, p 71, at pp 97 98, paras 77 and 78. 38.
Respect for the principle of legal certainty, which is one of the objectives of the Brussels Convention (see, inter alia, GIE Groupe Concorde v Master of the vessel Suhadiwarno Panjan (Case C 440/97) [1999] ECR I 6307, 6350, para 23, and Besix SA v Wasserreinigungsbau Alfred Kretzschmar GmbH & Co KG (Wabag) (Case C 256/00) [2003] 1 WLR 1113, 1130, para 24), would not be fully guaranteed if the court having jurisdiction under the Convention had to be allowed to apply the forum non conveniens doctrine. 39.
According to its Preamble, the Brussels Convention is intended to strengthen in the Community the legal protection of persons established therein, by laying down common rules on jurisdiction to guarantee certainty as to the allocation of jurisdiction among the various national courts before which proceedings in a particular case may be brought: Besix, para 25. 40.
The court has thus held that the principle of legal certainty requires, in particular, that the jurisdictional rules which derogate from the general rule laid down in article 2 should be interpreted in such a way as to enable a normally well informed defendant reasonably to foresee before which courts, other than those of the state in which he is domiciled, he may be sued: the GIE Groupe Concorde case [1999] ECR I 6307, 6350 6351, para 24, and the Besix case [2003] 1 WLR 1113, 1130, para 26. 41.
Application of the forum non conveniens doctrine, which allows the court seised a wide discretion as regards the question whether a foreign court would be a more appropriate forum for the trial of an action, is liable to undermine the predictability of the rules of jurisdiction laid down by the Brussels Convention, in particular that of article 2, and consequently to undermine the principle of legal certainty, which is the basis of the Convention. 42.
The legal protection of persons established in the Community would also be undermined.
First, a defendant, who is generally better placed to conduct his defence before the courts of his domicile, would not be able, in circumstances such as those of the main proceedings, reasonably to foresee before which other court he could be sued.
Second, where a plea is raised on the basis that a foreign court is a more appropriate forum to try the action, it is for the claimant to establish that he will not be able to obtain justice before that foreign court or, if the court seised decides to allow the plea, that the foreign court has in fact no jurisdiction to try the action or that the claimant does not, in practice, have access to effective justice before that court, irrespective of the cost entailed by the bringing of a fresh action before a court of another state and the prolongation of the procedural time limits. 43.
Moreover, allowing forum non conveniens in the context of the Brussels Convention would be likely to affect the uniform application of the rules of jurisdiction contained therein in so far as that doctrine is recognised only in a limited number of contracting states, whereas the objective of the Brussels Convention is precisely to lay down common rules to the exclusion of derogating national rules. 44.
The defendants in the main proceedings emphasise the negative consequences which would result in practice from the obligation the English courts would then be under to try this case, inter alia as regards the expense of the proceedings, the possibility of recovering their costs in England if the claimants action is dismissed, the logistical difficulties resulting from the geographical distance, the need to assess the merits of the case according to Jamaican standards, the enforceability in Jamaica of a default judgment and the impossibility of enforcing cross claims against the other defendants. 45.
In that regard, genuine as those difficulties may be, suffice it to observe that such considerations, which are precisely those which may be taken into account when forum non conveniens is considered, are not such as to call into question the mandatory nature of the fundamental rule of jurisdiction contained in article 2 of the Brussels Convention, for the reasons set out above. 46.
In the light of all the foregoing considerations, the answer to the first question must be that the Brussels Convention precludes a court of a contracting state from declining the jurisdiction conferred on it by article 2 of that Convention on the ground that a court of a non contracting state would be a more appropriate forum for the trial of the action, even if the jurisdiction of no other contracting state is in issue or the proceedings have no connecting factors to any other contracting state.
In this respect there is no material difference between the Brussels Convention, as interpreted in Owusu, and the Maintenance Regulation.
Article 3 of the Maintenance Regulation establishes a mandatory rule regarding jurisdiction ( jurisdiction shall lie with ) of the same force as that in article 2 of the Brussels Convention.
Like the Brussels Convention, the Maintenance Regulation is intended to lay down clear and predictable common rules of jurisdiction and the principle of legal certainty applies with equal force.
In the context of the Maintenance Regulation, the objective of protection of the rights of the maintenance creditor has special force, as appears from the derivation of the Regulation from the special rule of jurisdiction in the Brussels Convention (as explained in the Jenard report), via the Brussels Regulation and as explained in recitals (9), (15) and (45) to the Maintenance Regulation.
The object of the mandatory rule of jurisdiction in article 3 of the Maintenance Regulation is to afford special protection for a maintenance creditor by giving him or her the right to choose the jurisdiction most beneficial for them out of the range of options specified in that article.
This has been confirmed by the caselaw of the Court of Justice of the European Union (the CJEU) on the Maintenance Regulation, most recently in R v P (Case C 468/18) ECLI:EU:C:2019:666; [2020] 4 WLR 8.
That case concerned a wife and husband who were both Romanian nationals, who lived in the United Kingdom and had a child there before separating.
The husband returned to Romania; the wife and child remained in the United Kingdom.
The wife issued proceedings in Romania seeking the dissolution of the marriage, an order that the child should reside with her and that she should have sole parental responsibility and an order that the husband pay maintenance for the child.
The husband contested the jurisdiction of the Romanian court.
The court held that it had jurisdiction under the Matrimonial Regulation to hear the divorce petition, but that by virtue of that Regulation it had no jurisdiction in relation to the issues of residence and parental responsibility, as the child was habitually resident in the United Kingdom and it was the courts there which had jurisdiction in relation to those matters.
The court was unsure whether it had jurisdiction under article 3 of the Maintenance Regulation in respect of the claim for maintenance, on the basis that the husband was habitually resident in Romania, or whether jurisdiction for such a claim lay with the courts of the United Kingdom; accordingly, it referred that question to the CJEU.
The CJEU ruled that article 3 of the Maintenance Regulation established a right for the maintenance creditor to choose the jurisdiction in which to sue the maintenance debtor, out of the range of options set out in that article, so that the Romanian court had jurisdiction in respect of the maintenance claim brought by the wife.
At paras 28 31 of its judgment, the CJEU said: 28.
By its three questions, which must be examined together, the referring court asks, in essence, whether article 3(a) and (d) and article 5 of [the Maintenance Regulation] must be interpreted as meaning that where there are three joined claims before a court of a member state concerning, respectively, the divorce of the parents of a minor child, parental responsibility in respect of that child and the maintenance obligation with regard to that child, the court ruling on the divorce, which has declared that it has no jurisdiction to rule on the claim concerning parental responsibility, nevertheless has jurisdiction to rule on the claim concerning the maintenance obligation with regard to that child since it is also the court for the place where the defendant is habitually resident and the court before which the defendant has entered an appearance, or if solely the court with jurisdiction to hear the claim concerning parental responsibility in respect of the child may rule on the claim concerning the maintenance obligation with regard to that child. 29.
It is apparent from the wording of article 3 of [the Maintenance Regulation], entitled General provisions, that that article lays down general criteria for attributing jurisdiction for the purposes of the courts of the member states ruling on maintenance obligations.
Those criteria are alternative, as is attested to by the use of the co ordinating conjunction or after each of them: see A v B [(Case C 184/14) EU:C:2015:479], para 34). 30.
In this connection, since the objective of [the Maintenance Regulation], as is apparent from recital (15) thereof, consists in preserving the interest of the maintenance creditor, who is regarded as the weaker party in an action relating to maintenance obligations, article 3 of that regulation offers that party, when he acts as the applicant, the possibility of bringing his claim under bases of jurisdiction other than that provided for in article 3(a) of that regulation: see Freistaat Bayern v Blijdenstein (Case C 433/01) EU:C:2004:21; [2004] ECR I 981; [2004] All ER (EC) 591, para 29 and Sanders v Verhaegen (Joined Cases C 400/13 and C 408/13) EU:C:2014:2461; [2015] 2 FLR 1229, paras 27 28). 31.
The maintenance creditor can thus bring his application either before the court for the place where the defendant is habitually resident, in accordance with point (a) of article 3, or before the court for the place where the creditor is habitually resident, in accordance with point (b) of that article, or further, in accordance with points (c) and (d) of that article, if the maintenance application is ancillary to a main action, relating to the status of a person, such as a divorce petition (under point (c)), or to an action concerning parental responsibility (under point (d)), before the court with jurisdiction to entertain either the former or the latter proceedings respectively.
The CJEU held that the fact that the Romanian court had declared that it had no jurisdiction to rule on an action in relation to the exercise of parental responsibility for a child made no difference to the availability of jurisdiction under the Maintenance Regulation, which set out mandatory rules of jurisdiction for maintenance claims.
This was so even though the courts in the United Kingdom might be better placed to assess the claim for maintenance for the child.
The maintenance creditor had a right to choose the jurisdiction for her claim from the list of options in article 3.
The CJEU said this at paras 41 51: 41.
That finding is supported by the scheme and the objectives of [the Maintenance Regulation]. 42.
So far as the scheme of [the Maintenance Regulation] is concerned, that regulation sets out, in Chapter II thereof, entitled Jurisdiction, all of the applicable rules to designate the court having jurisdiction with respect to maintenance obligations.
Recital (15) of that regulation stipulates in that regard that there should no longer be any referral to the rules on jurisdiction in national law, since the rules resulting from that regulation must be considered to be exhaustive. 43.
Thus, if a court seised of an application concerning maintenance obligations with regard to a child does not have jurisdiction to entertain proceedings in relation to an action concerning the parental responsibility for that child, it is first of all necessary to ascertain whether that court has jurisdiction to entertain proceedings on another basis under that regulation: orders of 16 January 2018, PM v AH (Case C 604/17) EU:C:2018:10, para 33, and of 10 April 2018, CV v DU (Case C 85/18PPU) EU:C:2018:220; [2018] IL Pr 21, para 55.
It must also be noted that [the Maintenance Regulation] 44. does not provide for the option, for a court with jurisdiction under one of the provisions of that regulation before which an application has legitimately been brought, to decline jurisdiction with regard to that application in favour of a court which, in its view, would be better placed to hear the case, as article 15 of Regulation No 2201/2003 permits in the matter of parental responsibility. 45.
Such an interpretation also corresponds to the objective of [the Maintenance Regulation] recalled in para 30 above.
As Advocate General Szpunar observed in his opinion EU:C:2019:649, points 59 and 61, that regulation provides for alternative and non hierarchised criteria for jurisdiction which give priority to the applicants choice. 46.
The importance of that choice given the aim of protecting the maintenance creditor reflects the Hague Protocol of 23 November 2007 on the law applicable to maintenance obligations, approved on behalf of the European Community by Council Decision 2009/941/EC of 30 November 2009 (OJ 2009 L331, p 17), the Court having observed that that protocol has close links with [the Maintenance Regulation]: KP v LO (Case C 83/17) EU:C:2018:408, para 49.
The court has thus ruled that that protocol enables the maintenance creditor, de facto, to choose the law applicable to his application concerning maintenance obligations by providing that the law of the forum, rather than the law of the State of the habitual residence of the creditor, may be applied as a matter of priority when the creditor introduces his application before the competent authority of the State where the debtor has his habitual residence: see Mlk v Mlk (Case C 214/17) EU:C:2018:744; [2019] IL Pr 2, paras 31 and 32. 47.
An interpretation of Regulation No 4/2009 according to which only the court with jurisdiction in respect of parental responsibility has jurisdiction to rule on an application concerning maintenance obligations is liable to limit that option for the maintenance creditor applicant to choose not only the court with jurisdiction, but also, as a result, the law applicable to his application. 48.
In a situation such as that at issue in the main proceedings, the initial choice of the parent representing the minor maintenance creditor child to regroup all his heads of claim before the same court is rendered inadmissible by the plea raised by the defendant alleging lack of jurisdiction of that court and a decision of that court declaring that it has no jurisdiction, under article 12 of Regulation No 2201/2003, in respect of the head of claim in relation to parental responsibility. 49.
In the light of the risk of having to bring his applications concerning maintenance obligations and concerning parental responsibility before two separate courts, that parent may wish, in the childs best interests, to withdraw his initial application concerning maintenance obligations brought before the court ruling on the divorce petition so that the court with jurisdiction in matters of parental responsibility also has jurisdiction to rule on that application concerning maintenance obligations. 50.
Nevertheless, that parent may also wish, in the childs best interests, to retain his initial application concerning maintenance obligations with respect to the child before the court ruling on the divorce petition, where that court is also the court of the place in which the defendant has his habitual residence. 51.
Many reasons, like those mentioned by Advocate General Szpunar in his opinion EU:C:2019:649, points 65 to 71, may be behind such a choice by the maintenance creditor, in particular the possibility of ensuring that the law of the forum is applied, that being Romanian law in the present case, the ability to express himself in his native language, the possibility of lower costs in the proceedings, the knowledge by the court seised of the defendants ability to pay and exemption from the requirement to seek leave to enforce decisions.
The importance of the object of the Maintenance Regulation of protecting the interests of the maintenance creditor was also emphasised by the CJEU in its judgment in Sanders v Verhaegan; Huber v Huber (Joined Cases C 400/13 and C 408/13) EU:C:2014: 2461; [2015] 2 FLR 1229.
The issue in that case was whether Germanys system of providing centralised courts with jurisdiction for cases involving maintenance claims against debtors resident outside the country was compatible with article 3(b) of the Maintenance Regulation.
The centralised courts were at a greater distance from where the maintenance creditors in these cases lived than their local courts.
Article 3(b) sets out a right for the maintenance creditor to sue in the court for the place where she is habitually resident, not the courts of the member state where she is habitually resident.
The CJEU held that article 3(b) would be incompatible with the German system, unless it could be shown that it sufficiently protected the interests of maintenance creditors while assisting in the effective recovery of their claims a matter which the referring courts were required to verify.
At paras 23 25 of the judgment the CJEU said: 23.
A preliminary point to note is that, as the Advocate General has observed at point 33 of his opinion, insofar as the provisions of the Maintenance Regulation relating to the rules on jurisdiction replaced those in [the Brussels Regulation], the courts case law concerning the provisions on jurisdiction in matters relating to maintenance obligations in the [Brussels Convention] and in [the Brussels Regulation], which follows on from the Brussels Convention, remains relevant for the purposes of analysing the corresponding provisions of the Maintenance Regulation. 24.
It should also be recalled that it is settled case law that the provisions relating to the rules on jurisdiction must be interpreted independently, by reference, first, to the objectives and scheme of the regulation under consideration and, secondly, to the general principles which stem from the corpus of the national legal systems (see, by analogy, judgments in CartierParfums Lunettes SAS and Axa Corporate Solutions Assurances SA v Ziegler France SA and Others (Case C 1/13) EU:C:2014:109, [2014] 1 LPR 25, at para 32 and the case law cited, and flyLAL Lithuanian Airlines AS, in Liquidation v Starptantiska lidosta Riga VAS and Another Company (Case C 302/13) EU:C:2014:2319, [2014] All ER (D) 324 (Oct), at para 24 and the case law cited). 25.
Against that background, article 3(b) of the Maintenance Regulation must be interpreted in the light of its aims, wording and the scheme of which it forms part.
At paras 26 27 the CJEU referred to recitals (9), (15) and (45) to the Maintenance Regulation.
At paras 28 30 and 32 the CJEU continued as follows: 28.
As regards the rules on jurisdiction in cross border disputes concerning maintenance obligations, the court has stated, in the context of article 5(2) of the Brussels Convention, that the derogation relating to the rules on jurisdiction in matters relating to maintenance obligations is intended to offer special protection to the maintenance creditor, who is regarded as the weaker party in such proceedings (see, to that effect, judgments in Farrell v Long (Case C 295/95) EU:C:1997:168, [1997] All ER (EC) 449, at para 19, and Freistaat Bayern v Blijdenstein (Case C 433/01) EU:C:2004:21, [2004] All ER (EC) 591, at paras 29 and 30).
The rules on jurisdiction provided for in the Maintenance Regulation, like the rule set out in article 5(2) of the Brussels Convention, are intended to ensure proximity between the creditor and the competent court, as indeed the Advocate General has observed at point 49 of his Opinion. 29.
It should also be pointed out that the objective of the proper administration of justice must be seen not only from the point of view of optimising the organisation of courts, but also, as the Advocate General has observed at point 69 of his Opinion, from that of the interests of the litigant, whether claimant or defendant, who must be able to benefit, inter alia, from easier access to justice and predictable rules on jurisdiction. 30.
Article 3(b) of the Maintenance Regulation specifies the criterion for identifying the court which has jurisdiction to rule on cross border disputes concerning maintenance obligations, namely, the place where the creditor is habitually resident.
That provision, which determines both international and territorial jurisdiction, seeks to unify the rules of conflict of jurisdiction (see, to that effect, judgment in Color Drack GmbH v Lexx International Vertriebs GmbH (Case C 386/05) EU:C:2007:262, [2007] ECR 1 3699, [2010] 1 WLR 1909, at para 30). 32.
In this connection, it should be stated that, although the rules of conflict of jurisdiction have been harmonised by the determination of common connecting factors, the identification of the competent court remains a matter for the member states (see, to that effect, judgments in Mulox IBC v Geels (Case C 125/92) EU:C:1993:306, [1993] ECR 1 4075, at para 25, and GIE Groupe Concorde and Others v Master of the Vessel Suhadiwarno Panjan and Others (Case C 440/97) EU:C:1999:456, [2000] All ER (EC) 865, at para 31), provided that the national legislation does not undermine the objectives of the Maintenance Regulation or render it ineffective (see, inter alia, to that effect, judgment in Zuid Chemie BV v Phillipos Mineralenfabriek NV/SA (Case C 189/08) EU:C:2009:475, [2010] 2 All ER (Comm) 265, at para 30, and, by analogy, judgment in Health Service Executive v SC and AC (Case C 92/12PPU) EU:C:2012:255, [2012] 2 FLR 1040, at para 79).
For intra state maintenance claims within the United Kingdom, Schedule 6 to the 2011 Regulations applies the provisions of the Maintenance Regulation with relevant modifications (to take account of the fact that the Schedule is concerned to set out the jurisdiction of courts in different parts of the United Kingdom rather than courts in different member states): see, in particular, paragraphs 1, 3 and 4 of Schedule 6, set out above.
The scheme of the Maintenance Regulation is replicated in domestic law for the purposes of intra state cases.
The mandatory rule regarding jurisdiction in article 3 of the Maintenance Regulation is repeated in the intra state context, adapted only so far as necessary to take account of that context: paragraph 4 of Schedule 6.
The effect of this transposition of the Maintenance Regulation into domestic law is that, for the same reasons as have been explained by the ECJ in Owusu and by the CJEU in R v P, a maintenance creditor has the right to choose from the menu of options in article 3 (as adapted by paragraph 4 of Schedule 6) the jurisdiction in which to bring her maintenance claim and the doctrine of forum non conveniens is excluded.
In saying this, I should also make it clear that I agree with what Lady Black says at para 73 of her judgment about case management powers.
Mr Horton submitted that section 49 of the CJJA 1982 preserves the jurisdiction of the English Court to stay proceedings on forum non conveniens grounds.
I cannot accept this submission.
As explained above, Schedule 6 is part of a legislative regime which has been established outside and separate from the CJJA 1982.
Therefore section 49 has no application.
Put another way, it is not anything in the CJJA 1982 which purports to prevent the English court in this case from staying the proceedings before it on forum non conveniens grounds; it is the separate legislative regime in Schedule 6, as promulgated by the 2011 Regulations, which does that.
The position in relation to section 49 is basically the same as for the operation of the Brussels Regulation (see para 16 above) and other current EU Regulations governing jurisdiction, such as the Brussels Recast Regulation and the Maintenance Regulation itself: where a legal instrument separate from the CJJA 1982 governs jurisdiction and excludes the operation of the forum non conveniens doctrine, section 49 has nothing to say about that.
In my view, it is clear that Schedule 6 is intended to be a comprehensive code to govern questions of jurisdiction in relation to maintenance claims with a cross jurisdictional dimension within the United Kingdom, just as the Maintenance Regulation provides such a code in relation to such claims with an inter state cross jurisdictional dimension.
As with the statutory code at issue in R (Child Poverty Action Group) v Secretary of State for Work and Pensions [2010] UKSC 54; [2011] 2 AC 15, there is no basis for reading down or modifying the plain terms of Schedule 6 by reference to fundamental human rights or the principle of legality: see para 31 per Sir John Dyson JSC.
There is no scope whatever for the operation of a forum non conveniens discretion in the context of the legislative scheme in Schedule 6. (3) Was the purported removal by Schedule 6 of a general discretion to stay proceedings on the ground of forum non conveniens ultra vires the Secretary of States powers in section 2(2) of the ECA 1972?
Section 2(1) and (2) of the ECA 1972 provide in relevant part as follows: (1) All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the [EU] Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly (2) Subject to Schedule 2 to this Act, at any time after its passing Her Majesty may by Order in Council, and any designated Minister or department may by order, rules, regulations or scheme, make provision (a) for the purpose of implementing any EU obligation of the United Kingdom, or enabling any such obligation to be implemented, or of enabling any rights enjoyed or to be enjoyed by the United Kingdom under or by virtue of the Treaties to be exercised; or (b) for the purpose of dealing with matters arising out of or related to any such obligation or rights or the coming into force, or the operation from time to time, of subsection (1) above;
In my view, the answer to the question posed above is no.
The Secretary of State submits that the making of the 2011 Regulations, including in particular Schedule 6 thereto, was authorised by section 2(2)(b) of the ECA 1972.
This submission is clearly correct for the reasons given by Lord Wilson at paras 141 145.
Section 2(2)(b) confers a wide power to make subordinate legislation for the purpose of dealing with matters (i) arising out of or (ii) related to the obligations of the United Kingdom under the Maintenance Regulation, or for dealing with matters (iii) arising out of the operation of section 2(1) of the ECA 1972 (relevant here, because the Maintenance Regulation creates rights and obligations under the EU Treaties which are recognised and available in law in the United Kingdom without further enactment) or (iv) related to such operation.
In my view, the promulgation of Schedule 6 was authorised under each of limbs (i) to (iv) of section 2(2)(b).
The purpose and effect of Schedule 6 is to ensure that there is one coherent, certain and predictable set of rules which apply to all maintenance claims with a cross jurisdictional dimension, whether the crossing of jurisdictions occurs on an inter state basis or on an intra state basis.
To have one set of rules which applies in both types of case makes obvious sense in a world where people are highly mobile, and liable to move between jurisdictions internationally and within the United Kingdom.
It enables everyone to know clearly where they stand and what their rights are, without having to worry about (and obtain expensive legal advice regarding) possible differences in the position which might apply if the applicable intra state jurisdictional rules are different from the applicable inter state rules.
Further, by reason of the different grounds of jurisdiction allowed for in article 3 of the Maintenance Regulation it is readily possible to envisage a case where, say, maintenance proceedings are commenced in each of Spain, England and Scotland.
Schedule 6 ensures that there is a single set of clear and coherent rules which the domestic courts can apply in order to resolve the jurisdictional issues which would arise in such a situation. (4) Is the husbands divorce proceeding in Scotland a related action for the purposes of article 13 of the Maintenance Regulation (as applied by Schedule 6) and, pursuant to that provision, should the English court decline jurisdiction in respect of the wifes maintenance claim under section 27?
As stated by the CJEU in its judgment in the Sanders/Huber case at paras 23 25 (see para 33 above), the proper interpretation of the Maintenance Regulation requires consideration of its specific objects and adjustment of the more general rules applicable under the Brussels Convention in the light of those objects.
In my judgment, the husbands divorce proceeding in Scotland is not a related action within article 13 of the Maintenance Regulation.
Therefore, neither article 13(1) nor article 13(2) has any application in this case to permit the English court to decline jurisdiction in relation to the wifes maintenance claim based on section 27.
As regards the claim under section 27, the wife is the maintenance creditor.
As explained above, the Maintenance Regulation and Schedule 6 give her the right to choose in which jurisdiction, within those listed in article 3 (as adapted by paragraph 4 of Schedule 6), she wishes to bring her maintenance claim.
She has an unfettered choice in that regard, and is entitled to choose to bring her claim in an English court on grounds of its convenience for her or because she believes that the law it will apply is more advantageous for her.
It is a fundamental object of the Maintenance Regulation to confer that right on a maintenance creditor, and the scheme of that Regulation is replicated for intra state cases by Schedule 6.
Articles 12 and 13 of the Maintenance Regulation (including as they are replicated for intra state cases by Schedule 6) have to be interpreted in the light of this object.
Article 3 of the Maintenance Regulation is concerned with defining the set of jurisdictions in which the maintenance creditor has the right to bring her claim.
This is in line with the fundamental object of the Maintenance Regulation to protect the interests of the maintenance creditor as the weaker party and is also indicated by the text of the article itself, read in the light of the legislative history: see para 21 above.
Article 12 is directed to dealing with the position which could arise if a maintenance creditor brought maintenance proceedings in more than one court.
The phrase the same cause of action in article 12(1) has to be read in the light of the objects of the Maintenance Regulation referred to in the case law cited above.
Since article 3 allows a choice of jurisdiction and the substantive law to be applied in relation to a maintenance claim differs as between member states, I consider that the phrase refers to the nature of the claims being brought, ie as claims for maintenance of a specific person, rather than to the precise cause of action in law.
It is possible that, by cross maintenance claims, each of a husband and wife might seek to claim that the other owes maintenance.
Then, each of them would be the maintenance creditor in respect of his or her claim and would be entitled to exercise the choice of jurisdiction allowed for by article 3.
In the context of the Maintenance Regulation, a core object of article 13 is to deal with this situation.
In article 13, read in the context of the Maintenance Regulation, I consider that the word actions refers primarily to maintenance claims of the kind to which the special regime in the Regulation applies.
If the position were otherwise, and the word actions meant legal proceedings of any kind whatever, that would undermine the fundamental object of the Maintenance Regulation that a maintenance creditor has the right to choose in which jurisdiction to claim maintenance.
On such a reading, there would be a substantial risk that this object of the Maintenance Regulation would be undermined by the commencement of proceedings by the maintenance debtor according to the jurisdictional provisions of instruments other than the Maintenance Regulation, laid down in pursuance of entirely different jurisdictional policies than that reflected in the Maintenance Regulation.
By contrast, by reading actions as referring primarily to maintenance claims, such claims will be brought in exercise of the rights conferred by the Maintenance Regulation and hence in accordance with its objects and policy.
Since it is the case that the Maintenance Regulation may have the effect of authorising more than one person to bring a maintenance claim, it needs to make provision for how a potential jurisdictional clash arising within the objects of the Regulation should be resolved.
Any extension of the concept of related action beyond this in the context of the Maintenance Regulation has to be tested against the objects and policy of that Regulation, and accordingly will be narrowly confined to cases in which the risk of conflicting judgments is very clearly made out (an example would be if an obligation to provide maintenance were conditional on a marriage relationship actually continuing, and a court in another member state had been asked to dissolve the marriage, thereby bringing the relationship on which the obligation depends to an end: cf Hoffman v Krieg (Case C 145/86) EU:C:1988:61, [1988] ECR 645, a decision on article 27(3) of the Brussels Convention, which was concerned with irreconcilable judgments).
The risk should be direct, real and present, not a speculative possibility.
By contrast with the situations in para 44 above, there is no relevant connection in the present case between the wifes maintenance claim under section 27 and proceedings concerned with determining marriage status, which is the subject of the Scottish proceedings brought by the husband.
That these are distinct subject matters is underlined by their separation for jurisdictional purposes under the successive EU jurisdictional regimes.
Article 3(c) of the Maintenance Regulation does not establish that proceedings concerning the marital status of a person must be regarded as related proceedings for the purposes of article 13.
It merely adds a jurisdictional option which the maintenance creditor is entitled to choose, if she wants to.
To give it wider significance than that would undermine the fundamental object of the Maintenance Regulation to protect the interests of the maintenance creditor by giving her the choice of where to litigate her claim for maintenance, since it would enable the opposing spouse, who is the maintenance debtor, to choose where to sue in relation to the question of marital status and then to argue, by reference to article 13, that the maintenance creditors maintenance claim must be brought in the same place.
In my opinion, interpreting article 13 of the Maintenance Regulation in light of the objects of that Regulation is an entirely conventional approach to interpretation of an EU legislative instrument.
Contrary to the view of Lord Wilson, I do not regard this as being in any way at odds with the interpretation given to article 22 of the Brussels Convention by the House of Lords in a different context in Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32.
As Lord Saville of Newdigate said in that case ([1999] 1 AC 32, 41F), the interpretation had to be arrived at bearing in mind the objective of the article, and the objective of article 13 of the Maintenance Regulation has to be assessed in light of the fundamental object of the Regulation itself.
I should mention that in Moore v Moore [2007] EWCA Civ 361; [2007] 2 FLR 339, it seems (albeit it is not entirely clear) that the Court of Appeal may have assumed but without deciding and with no critical examination of the issue that a maintenance debtor might be able to bring a claim in a jurisdiction of his choice which included an adjustment of family property rights to take account of the maintenance requirements of his wife and that this might be a related action for the purposes of what is now article 13 of the Maintenance Regulation (previously article 28 of the Brussels Regulation).
If they really meant to say this, I respectfully doubt that it is correct.
It would mean that the maintenance debtor rather than the maintenance creditor could in practice choose the jurisdiction for the maintenance claim, which would have been directly contrary to the fundamental object of article 5(2) of the Brussels Regulation (and the fundamental object of what is now the Maintenance Regulation: see para 21 above).
Whatever might have been the view of the Court of Appeal in relation to this point, it does not assist the husband in this appeal.
His proceeding in Scotland does not involve any claim for distribution of family property, let alone distribution of family property with allowance to take account of the wifes maintenance needs.
In other respects, the decision in Moore v Moore supports the wifes case on this appeal that the husbands divorce proceeding in Scotland is not a related action for the purposes of article 13.
So far as relevant for present purposes, the case concerned an English husband and wife who had relocated to Spain.
Their relationship broke down and the wife returned to England.
The husband filed a petition for divorce in Spain.
On 24 April 2006 he made an application in Spain in the context of the divorce procedure for a judgment regarding financial aspects arising from the divorce.
In conjunction with this, he made a financial offer to the wife to divide up the familys capital assets in a way which he maintained would allow her to meet her reasonable needs and maintain her standard of living.
On 24 May 2006, the wife commenced a maintenance claim in England.
The husband objected to the jurisdiction of the English court, arguing that it should stay its proceedings in accordance with articles 27 or 28 of the Brussels Regulation (now articles 12 and 13 of the Maintenance Regulation).
The wife, on the other hand, argued that her claim was the only claim relating to maintenance and therefore that articles 27 and 28 were not engaged and the English court had no power to stay her claim.
At first instance, McFarlane J decided that the husbands application was not a claim for maintenance: its essential object was to seek a division of the familys capital assets and it was not a claim by the wife for maintenance; so article 5(2) of the Brussels Regulation was not engaged by the Spanish proceedings (see [2007] EWCA Civ 361; [2007] 2 FLR 339, paras 30 31).
The Court of Appeal held that the essential object of the husbands application was to achieve sharing of the family property on his terms rather than an order based on financial needs, and consequently that it was not a matter relating to maintenance for the purposes of article 5(2), and therefore there would be no basis for the application of articles 27 or 28 of the Brussels Regulation (paras 94 95).
According to the Court of Appeal in Moore v Moore, the husbands petition for divorce and his application for financial relief in the divorce proceedings was not a related action in respect of the wifes claim for maintenance.
I consider that this conclusion was correct.
It reflects the different nature of the claims and the different jurisdictional regimes which govern issues of marital status and division of family property, on the one hand, and issues of maintenance on the other.
A fortiori in the present case, where the only application the husband has made in the Scottish court is for a decree of divorce, the Scottish proceedings do not constitute a related action in respect of the wifes claim for maintenance in the English court.
In the present case, as in Moore v Moore, there has only ever been one
maintenance claim, ie claim in a matter relating to maintenance obligations (in the language used in article 3 of the Maintenance Regulation).
It is the section 27 claim brought by the wife in the English court in reliance on article 3(b) (as adapted by paragraph 4 of Schedule 6), on the grounds that she is habitually resident in England.
Article 3 (as so adapted) provides that jurisdiction shall lie with that court.
The English court is the court first seised of the maintenance claim, so if there were any question of the Scottish court considering a maintenance claim by the wife it would be obliged to refuse jurisdiction under article 12 of the Maintenance Regulation (as adapted by paragraph 12 of Schedule 6).
As explained in R v P, if the wife wished to proceed with her maintenance claim in Scotland rather than in England, it would be open to her to withdraw her claim in England and issue a claim in Scotland.
Even if, contrary to my view above, a maintenance debtor might in principle be able to bring a claim of his own which in some sense comprehends a maintenance claim by the maintenance creditor against him and then argue that, as regards a maintenance claim brought by the maintenance creditor herself, either his claim involved the same cause of action between the same parties for the purposes of article 12 or was a related action for the purposes of article 13 of the Maintenance Regulation, that would not assist the husband on this appeal.
The interpretation of the definition of related action in article 13(3) has to reflect the policy and objects of the Regulation.
The definition in article 13(3) must be strictly applied, since if the husband sought to maintain such an argument he would be seeking to rely on article 13 to derogate from the fundamental object of the Maintenance Regulation (as replicated in Schedule 6 for intra state cases) to provide a right for the wife, as maintenance creditor, to choose where to bring her maintenance claim; and he would be seeking to do so by reference to an action brought by himself which relates to marital status or the division of matrimonial property rather than maintenance.
The special jurisdictional regime for maintenance claims is not lightly to be regarded as supplanted by the operation of a distinct jurisdictional regime designed for different types of case.
Still more clearly, on application of this approach to article 13(3), the divorce proceeding brought by the husband in the present case is not related to the wifes maintenance claim, within the meaning of article 13(3).
The subject matters of the two sets of proceedings are not connected at all.
The husband seeks a divorce, to end the marital status.
The wife claims maintenance.
It is only her claim which falls within the scope of the Maintenance Regulation.
Similarly, as regards the possibility suggested by Hoffman v Krieg that in some circumstances a proceeding to dissolve a marriage might be regarded as related for the purposes of article 13, that does not assist the husband in this case.
The wifes claim is not predicated on the result of the proceeding in Scotland, so there is no requirement that the two proceedings be heard and determined together to avoid the risk of irreconcilable judgments.
An award of maintenance to the wife is in no way incapable of being reconciled with an order for divorce issued by the Scottish court.
With respect to Lord Wilson, I consider that the decision of Moor J in N v N (Stay of Maintenance Proceedings) [2012] EWHC 4282 (Fam); [2014] 1 FLR 1399 was wrong and that the Court of Appeal in the present case was right to overrule it.
In N v N the husband issued divorce proceedings in Sweden.
The wife, who was habitually resident in England, then brought a maintenance claim in England under section 27.
She could have brought a maintenance claim in the course of the divorce proceedings in Sweden, but preferred to claim in England.
Moor J held that the divorce proceedings and the maintenance claim were related actions for the purposes of article 13 of the Maintenance Regulation, on the basis of very summary and flawed reasoning (para 25): The application here arises out of the marriage.
There would be no jurisdiction to make an order if the parties were not married.
The proceedings in Sweden relate to the dissolution of that very same marriage.
They are undoubtedly related.
Indeed, if article 13 of the Maintenance Regulation only applied to applications in each jurisdiction for maintenance, there would be no need for the article at all.
The position would be covered by article 12.
The two applications would be the same cause of action and would be automatically stayed without the need for the discretion given by article 13.
In so far as this reasoning does not simply rest on assertion, in my opinion it is wrong.
Article 13 clearly does have a role in circumstances which Moor J had overlooked: see paras 43 44 above.
On the basis that the divorce proceeding in Sweden and the maintenance claim in England were, in his view, related actions, Moor J held that the wifes maintenance claim in England should not proceed.
His decision was, in my view, directly contrary to the intended effect of the Maintenance Regulation, which was to give the wife (as maintenance creditor) the right to choose the jurisdiction in which to bring her maintenance claim which was most convenient and advantageous for her.
She was entitled to claim maintenance under section 27 whether or not the court in Sweden dissolved the marriage for the future, so it was not a case where there was a direct risk of irreconcilable judgments such as would justify application of article 13 by way of qualification of or departure from the fundamental object and policy of the Maintenance Regulation.
I find the reasons Moor J gave for his decision in para 28 revealing, as underlining the error which he made in his approach to the interpretation of the Maintenance Regulation.
He took himself to be following the spirit of the jurisdictional rules in the Matrimonial Regulation (para 28(a) (c) and (g)); but the jurisdictional regime in that Regulation is very different from the jurisdictional regime in the Maintenance Regulation, which was the relevant regime to be applied.
Absent a clearly established risk of directly irreconcilable judgments (of the kind illustrated by Hoffman v Krieg), jurisdiction established under the Matrimonial Regulation in respect of a divorce procedure brought by a maintenance debtor should not be allowed to undermine the right of a maintenance creditor under the Maintenance Regulation to choose the jurisdiction for her maintenance claim.
The judge relied on the fact that the husbands finances were based in Sweden (para 28(d)); but that ignores the importance under the Maintenance Regulation of the position of the wife (the maintenance creditor) and the identification of her needs in the place of her habitual residence, as explained in the Jenard report (para 10 above).
The judge said, [t]here is no prejudice to the wife as she can make her application in Sweden I am quite satisfied that the only reason she has not done so to date is tactical (para 28(e)).
However, there was prejudice to the wife, because by his ruling the judge deprived her of her rights under the Maintenance Regulation and her ability to rely upon section 27 as a matter of substantive law.
He clearly thought that the wife had engaged in illegitimate forum shopping; but the Maintenance Regulation laid down a right for her to choose the forum in which to sue.
She was entitled to do so by reference to tactical reasons.
In the context of the Maintenance Regulation, there was nothing illegitimate in her deciding to bring her maintenance claim in England.
At para 28(f) the judge said that it was undoubtedly expedient to hear and determine the issues between these parties together in the same jurisdiction; but the EU jurisdictional regimes expressly contemplate that different claims arising out of the marriage of the parties might well have to be determined in different jurisdictions.
The judge also speculated in para 28(f) that the husband might be able to apply for a maintenance order against himself in Sweden; but it would be contrary to the Maintenance Regulation to allow him, as the maintenance debtor, by such a stratagem to determine the jurisdiction in which his wifes maintenance claim should be heard.
Conclusion
For the reasons given above, I would dismiss this appeal.
LADY BLACK:
I am grateful to Lord Sales and to Lord Wilson for their thorough description of the legal provisions with which we are concerned, and of the history of those provisions.
I need not go over this material again and can proceed directly to deal with the issues that require determination.
For the most part, in what follows, I will refer to the various legal instruments using the same shorthand as Lord Sales.
Lord Sales identifies four issues as arising in the appeal, which he lists at para 7, whereas Lord Wilson identifies five.
The additional issue is whether the Maintenance Regulation (Council Regulation (EC) No 4/2009) (the Maintenance Regulation) itself regulates the allocation of jurisdiction to hear maintenance applications as between the various parts of the UK.
Lord Wilson deals with this as his first issue, and I take it first below.
The remaining four issues are: i) Can an application for financial provision be made under section 27 of the MCA in a purely domestic case, or, given the terms of section 27(2) as amended, is section 27 now only concerned with cases where another jurisdiction outside the UK is also involved? (Lord Sales Issue (1); Lord Wilsons Second Point) ii) Can a UK court stay maintenance proceedings which are before it, in favour of proceedings in another part of the UK, on the basis that it is a less appropriate forum than the court in the other part of the UK? (Lord Sales Issue (2); Lord Wilsons Fifth Point) iii) If Schedule 6 to the 2011 Regulations (Civil Jurisdiction and Judgments (Maintenance) Regulations 2011) should be construed as preventing a stay of maintenance proceedings in one part of the UK in favour of proceedings in another part of it on a forum non conveniens basis, was it within the powers of the Secretary of State under section 2(2) of the 1972 Act to make regulations to that effect? (the third issue/point for both Lord Sales and Lord Wilson) iv) Are the Scottish proceedings and the English proceedings in this case related actions within article 13 of the Maintenance Regulation as applied by Schedule 6 to the 2011 Regulations, and if so, should the English court stay/dismiss its proceedings on that basis? (the fourth issue/point for both Lord Sales and Lord Wilson) Does the Maintenance Regulation determine intra UK jurisdiction?
At paras 128 134 of his judgment, Lord Wilson rejects the Secretary of States argument that the Maintenance Regulation itself determines questions of jurisdiction as between the various parts of the UK.
I infer that Lord Sales is of the same view (see his para 22 where he refers to the implementation of the Maintenance Regulation by the 2011 Regulations).
I too would reject this argument, for the reasons Lord Wilson gives.
Is section 27 confined to cases with an international element?
Turning to Lord Sales Issue 1 (Lord Wilsons Point 2), both Lord Sales (para 26) and Lord Wilson (paras 135 140) would reject the husbands argument that section 27 relief is no longer available in purely domestic cases.
I share their view that the argument is wrong.
Lord Sales considers that the use of the word and, in the section 27(2) provision that the court may not entertain an application under this section unless it has jurisdiction to do so by virtue of the Maintenance Regulation and Schedule 6, might be said to be infelicitous.
For the reasons given by Lord Wilson, I do not think that it is in fact inappropriate.
Even though there is no need to have recourse to the Maintenance Regulation where there is no competing jurisdiction outside the UK, both parties naturally having gravitated to the courts of the member state entrusted with jurisdiction by Chapter II of the Maintenance Regulation, the Maintenance Regulation is still the foundation for the jurisdiction of the UK courts.
In such circumstances, a court might be said to have jurisdiction by virtue of both the Maintenance Regulation and Schedule 6, even in a purely domestic case.
In the alternative, should it be wrong to view things this way, I would agree with Lord Sales interpretation of section 27(2), namely that the drafter referred to the Maintenance Regulation and Schedule 6 in order to encompass the whole field of inter state and intra state cases.
Either way, the condition in section 27(2) can be satisfied in a purely domestic case.
Forum non conveniens discretion?
I now turn to Lord Sales Issue 2 (Lord Wilsons Point 5), namely the question of whether there is a discretion to stay on the forum non conveniens basis.
Lord Sales deals with the issue at paras 27 to 36.
He concludes that there is no scope for the operation of a forum non conveniens discretion in the context of the legislative scheme in Schedule 6.
I share Lord Sales view, and I will attempt to explain, as shortly as I can, why that is.
Lord Wilson reaches the same conclusion, but does so, as he explains in para 173, on a contingent basis, dependent on the reach of article 13.
Although my conclusion is not contingent, I have still found myself much assisted by Lord Wilsons discussion of the arguments for and against the continuing availability of a discretion, as also by Lord Sales analysis of the position.
My starting point is that ever since the Brussels Convention, it has been clear that there is no room for a forum non conveniens discretion in cases which are not purely domestic.
That appears from Owusu v Jackson (Case C 281/02) [2005] QB 801, from which Lord Sales quotes extensively at para 28.
It can be seen from the passages quoted that the decision to reject the doctrine was influenced significantly by the view that it would undermine the uniformity, and predictability, of the rules of jurisdiction, and thus legal certainty.
The position was unchanged when the Brussels Convention was replaced with the Brussels Regulation (Council Regulation (EC) No 44/2001).
And when the Maintenance Regulation came in, dealing separately with maintenance for the first time, the same approach applied, see R v P (Case C 468/18) [2020] 4 WLR 8, with which Lord Sales deals at paras 30 32.
In this context, emphasis was placed on the objective of the Maintenance Regulation, which the CJEU said consists in preserving the interest of the maintenance creditor, who is regarded as the weaker party in an action relating to maintenance obligations (para 30 of the CJEU judgment), and on the importance of the right that the maintenance creditor has to choose from the range of courts featured in article 3.
The Maintenance Regulation must be considered exhaustive, said the CJEU (para 42 ibid), and it does not permit a court which has jurisdiction under one of the provisions of the Maintenance Regulation to decline jurisdiction on the basis that another court would be better placed to hear the case (para 44 ibid).
Schedule 6 to the 2011 Regulations, in seeking to regulate allocation of jurisdiction within the UK, kept the Maintenance Regulation centre stage.
It will be recalled that Schedule 6 provides: 3.
The provisions of Chapter II of the Maintenance Regulation apply to the determination of jurisdiction in the circumstances mentioned in paragraph 1, subject to the modifications specified in the following provisions of this Schedule.
The circumstances mentioned in paragraph 1 are that there is (i) a jurisdiction clash between parts of the UK, and (ii) the subject matter of the proceedings is within the scope of the Maintenance Regulation.
The modifications specified were, of course, set out in the rest of Schedule 6, many of them concerned with replacing references to member state with references to part of the United Kingdom, although there were changes of other types too.
As to these other changes, it is relevant for present purposes to note particularly that they included the disapplication of article 9 (which sets out when a court is deemed seised).
In contrast, articles 12 and 13 (lis pendens and related actions) were not disapplied.
Having chosen to regulate the domestic allocation of jurisdiction by adopting (to a large extent) a model which, operating in its natural habitat, did not permit recourse to the forum non conveniens doctrine, did the drafters of the provisions nonetheless intend to leave the doctrine in place? As Lord Wilson observes at para 168, until the advent of the 2011 Regulations, UK courts could have recourse to the doctrine in maintenance proceedings when determining jurisdiction issues between the courts of different parts of the UK.
But the pre 2011 law was significantly different.
First, the version of the European regulation that was applied by Schedule 4 of the CJJA 1982 did not include the articles dealing with lis pendens and related actions.
Secondly, the effect of section 49 of the CJJA 1982 (the saving for powers to stay, sist, strike out or dismiss proceedings) was clear.
It provided that [n]othing in this Act was to prevent a court in the UK staying proceedings.
Schedule 4 regulated allocation of jurisdiction around the UK, and Schedule 4 was plainly something in this Act.
It followed that nothing in Schedule 4 could prevent a stay on the basis of forum non conveniens, as indeed the Court of Appeal held in the Cook and McNeil cases (see Lord Wilson para 130).
If I put to one side for a moment the question of whether section 49 has a continuing role to play in relation to maintenance jurisdiction, it seems to me that Schedule 6 to the 2011 Regulations imports into domestic law a scheme which excludes stays on the basis of forum non conveniens.
The principal jurisdiction provisions closely follow those of the Maintenance Regulation which firmly shut out the doctrine.
And it can safely be assumed that those who drafted the 2011 Regulations shared, with the creators of the Maintenance Regulation, the objective of protecting the interests of the maintenance creditor, which objective was served by him or her having the choice of the available jurisdictions, a choice which could not be overridden by the selected court declining to entertain the proceedings.
Furthermore, there is the inclusion in Schedule 6 (for the first time) of the lis pendens and related actions articles (articles 12 and 13).
I cannot persuade myself that articles 12 and 13 and a forum non conveniens
discretion can sensibly co exist.
The first point to make is that the discretion to stay on forum non conveniens grounds is not confined within the conditions set out in articles 12 and 13, as Lord Wilson points out at para 166.
If it continues to be available, it would be quite sufficient to enable the court to take action in the circumstances regulated by the articles.
The articles are not therefore required as facilitative provisions.
It might be suggested, however, that rather than intending to provide the court with power to stay proceedings or to decline jurisdiction, the purpose of the articles was to confine the courts discretion, in certain cases, by stipulating the conditions for its exercise.
I do not find that a convincing explanation for the inclusion of the articles, however.
My view can be tested by reference to article 13 (related actions).
By article 13(1), any court other than the court first seised may stay its proceedings.
It does not have to do so; it is given a discretion, with no restriction on how it is to be exercised.
So far, therefore, the article adds nothing to the forum non conveniens discretion.
But, it may be said, article 13(1) does limit the discretion to any court other than the court first seised, whereas there is no such limitation with forum non conveniens which would permit even the court first seised to stay its proceedings if the circumstances justified it.
True, but what purpose is served by article 13 limiting stays to courts other than the court first seised, if it can be circumvented by the first seised court, exercising a forum non conveniens discretion instead of acting under article 13?
Subject always to section 49, to which I will come shortly, it seems to me that what was intended was that the Schedule 6 scheme would follow the Maintenance Regulation model, relying exclusively on articles 12 and 13 to deal with cases where concurrent proceedings existed, ousting reliance on the forum non conveniens doctrine, and thus aligning the intra UK position in this respect with the inter state position, and protecting the interests of the maintenance creditor.
Alignment was indeed what the Explanatory Memorandum to the 2011 Regulations said, at para 7.3, was intended: Schedule 6, however, embodies a policy decision to align the rules of jurisdiction between the different parts of the UK on the provisions of the Maintenance Regulation However, I reach my view without placing weight on the Memorandum, particularly given that, as Lord Wilson says at para 171, para 7.3 goes on to make the erroneous observation that when the Brussels Regulation (No 44/2001) came in, the law for domestic maintenance cases between UK jurisdictions was aligned with the requirements of the EU legislation.
This was inaccurate because the articles of the Brussels Regulation (No 44/2001) which dealt with lis pendens and related actions were not adopted, and forum non conveniens intervention remained possible in domestic cases until the 2011 Regulations.
The final question then, is whether section 49 operates to preserve the forum non conveniens discretion, as Mr Horton submits that it does.
Like Lord Sales, and for the reasons he sets out in para 35, I cannot accept this submission.
It follows that, in my view, as Lord Sales says at para 36, there is no scope for the operation of a forum non conveniens discretion in the context of the legislative scheme in Schedule 6.
I should make plain that in ruling out the exercise of a forum non conveniens discretion in this context, I do not intend to suggest that normal case management powers are unavailable to the court.
A stay/dismissal on the ground of forum non conveniens is the practical incarnation of a decision that another forum is the appropriate forum.
It is a specialised order and must be distinguished from, for example, an order adjourning a case for a period in order that the court should be better able to decide it.
To take an example unrelated to this case, if one court were to be determining issues between spouses as to residence of their children, the court determining the parties financial issues might wish to await the first courts determination on residence, because it would potentially affect the needs and resources of the spouses.
The same might apply if one court were determining maintenance and another determining property issues.
Was the removal of the forum non conveniens discretion ultra vires?
The third issue/point logically falls next for determination ie whether the removal of the forum non conveniens discretion was ultra vires the Secretary of States powers in section 2(2) of the ECA 1972.
Both Lord Wilson and Lord Sales would hold that it was not.
I agree with them for the reasons that they give.
Were the proceedings related actions within article 13?
That leaves the question of whether the proceedings in this case fall within article 13 on the basis that they are related actions, and if so whether there should be a stay.
For convenience, I will again set out article 13, in the amended form applicable to intra UK cases: 1.
Where related actions are pending in the courts of different member states or different parts of the United Kingdom, any court other than the court first seised may stay its proceedings. 2.
Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.
For the purposes of this article, actions are deemed to be 3. related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.
Lord Wilson and Lord Sales differ on the application of article 13 to the present case.
Lord Wilson would hold that there are related actions pending in England and Scotland, so that the English court, not being the court first seised, has power under article 13 to stay, and indeed to decline to entertain, the wifes application under section 27.
Lord Sales considers article 13 inapplicable, and, given his conclusion that there is no power to stay proceedings on a forum non conveniens basis, this means that the English court proceedings would continue.
Lord Wilson reasons that, in contrast to article 12, article 13 applies to proceedings which do not involve the same cause of action.
Although he considers that article 13(3) was probably intended to provide an exclusive definition of which actions are deemed to be related, he considers that too literal an interpretation of it would exclude situations to which article 13(2) appears to extend.
He considers that the definition of related actions in article 13(3) must be driving at the situation where it is expedient to hear and determine together the issues raised in the two actions, and possible to do so because the actions can be consolidated in the court first seised and heard together there.
So, he concludes, in light of the pending Scottish proceedings, the English court has power to stay/decline jurisdiction and the husbands application to this end should be remitted to a judge of the Family Division to determine whether it should be exercised.
Lord Sales reasoning revolves around the wifes status as maintenance creditor.
It has, in essence, the following steps: therefore Schedule 6 has to be interpreted in the light of the objective i) it was a fundamental object of the Maintenance Regulation to give the maintenance creditor the right to choose the jurisdiction in which to bring her claim; ii) Schedule 6 to the 2011 Regulations replicates the Maintenance Regulation scheme; iii) of giving the maintenance creditor the right to choose her jurisdiction; iv) interpreting article 13 in that light, it should be narrowly confined so that actions refers primarily to maintenance claims of the kind to which the Maintenance Regulation regime applies; v) any extension of the concept of related action beyond this needs to be confined to cases in which the risk of conflicting judgments is very clearly made out; it is not made out here because there is no relevant connection between vi) the wifes section 27 maintenance claim in England and the proceedings concerning marital status in Scotland; vii) be undermined.
I have found the interpretation of article 13 extremely difficult.
The natural
response of a family lawyer might be to say that obviously one court should resolve all the financial issues that arise upon the ending of a marriage.
Indeed, an initial response might be to go further and say that one court should resolve all the issues, of whatever sort, arising upon the ending of a marriage.
Further thought would remind the family lawyer that that sort of consolidation is by no means universal, however.
Two examples will demonstrate the point.
First, jurisdiction in relation to parental responsibility issues is often dictated by the habitual residence of the child if it were otherwise, the protection of the maintenance creditor would (see domestic law and the Brussels II Revised Regulation (Council Regulation (EC) No 2201/2003)).
Secondly, financial relief can be available in the courts of England and Wales, following the granting of an overseas divorce, under the Matrimonial and Family Proceedings Act 1984, including in situations where there has already been an order elsewhere for a payment, or transfer of property, to be made in favour of the applicant or a child of the family.
Nevertheless, the idea of two courts within the United Kingdom both making orders which will regulate the finances of the parties to a marriage following divorce is not very palatable.
And yet that is what the position might be if, as the Court of Appeal decided in a very clearly reasoned judgment, article 13 does not permit the court to intervene.
The husbands argument is that the Court of Appeal erred in its construction of article 13 for one of two alternative reasons.
First, there was no need to construe the 2011 Regulations strictly in accordance with EU law, and the Court of Appeal should have construed the domestic incarnation of article 13 so as to allow for a stay in the present circumstances.
But secondly, if it was right to construe the 2011 Regulations in accordance with EU law, it was wrong to proceed upon the basis that, as it is put in the husbands written case, actions could only be related if they both had maintenance as their cause of action.
The Court of Appeal was wrong, in the husbands submission, to be guided towards this view by Moore v Moore [2007] 2 FLR 339 (see para 48 of Lord Sales judgment and para 157 of Lord Wilsons judgment).
Amongst other things, the judgments in Moore did not consider the lis pendens and related actions articles separately.
If both actions had to have maintenance as their cause of action, article 13 would have a very limited scope indeed.
On the contrary, in the husbands submission, proceedings for divorce and proceedings for maintenance, arising out of the same marriage, can be sufficiently closely connected to be related.
If his appeal is not allowed, the husband says, the law will serve to encourage forum shopping, by maintenance creditors within the UK, in favour of England and Wales.
The wife argues that the Court of Appeals analysis is unimpeachable.
She submits that Moore v Moore is a complete answer to the husbands case, and there is an even stronger argument against the application of article 13 in the present case than there was in the Moore case, because in Moore there were ancillary financial proceedings in Spain, whereas in the present case there are merely divorce proceedings with no financial aspects in Scotland.
As for the husbands proposal that there should be a more permissive interpretation of article 13 for domestic proceedings, the wifes submission is that there is no warrant for that, given the importation of articles 12 and 13 from the Maintenance Regulation into domestic law.
And in any event, no matter how broad the interpretation, article 13 could not encompass the two sets of proceedings in this case.
I have already explained that in my view, the 2011 Regulations were
intended to follow the scheme of the Maintenance Regulation, and that those who drafted the 2011 Regulations shared the objective of protecting the maintenance creditor by conferring on him or her a choice from whatever jurisdictions were available on the facts of a particular case.
The provisions of article 13 must, I think, be interpreted in light of that choice and the protection it is intended to confer.
If article 13 is interpreted as widely as the husband submits it should be, the protection of the maintenance creditor would be diluted.
The facts of the present case demonstrate that the maintenance creditors habitual residence will not necessarily be in the part of the United Kingdom which has jurisdiction over the divorce suit.
If the wife has to pursue her maintenance claim in Scotland, alongside the divorce there, she will have been deprived of the possibility of litigating in her place of habitual residence.
I can see the attraction of Lord Wilsons approach of looking to see whether it is expedient to hear and determine the issues raised in the two actions together.
However, even giving heed to the helpful observations of Lord Saville of Newdigate in Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32, 41, to the effect that a broad common sense approach should be taken to whether actions are related (see Lord Wilsons judgment at para 155), I cannot reconcile Lord Wilsons rather wide interpretation with the wording of article 13 or the objective of the Maintenance Regulation or of the 2011 Regulations.
In explaining why I say this, and what my interpretation of article 13 would be, I would start by noting that article 12 and article 13 must be dealing with different situations, otherwise there would be no point in having both of them.
If the two sets of proceedings in question were maintenance claims by the wife against the husband, one could expect the situation to fall within article 12 (same cause of action, same parties), so article 13 must be intended to extend further than that.
In contrast to article 12, it does not require that the proceedings involve the same cause of action between the same parties.
It is focused instead on related actions.
The ambit of this category is to be ascertained from article 13(3), which, like Lord Wilson, I think is intended to be a complete definition.
Related actions are, accordingly, actions which are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.
Articles 13(1) and 13(2) concern only related actions which come within this definition, article 13(1) referring to the situation [w]here related actions are pending and article 13(2) referring back to this in its opening words [w]here these actions are pending .
It is plain from article 13(3) that the actions have to be closely connected.
But that is insufficient to define a related action for the purposes of the article.
Actions could be said to be closely connected if they were both brought by the same litigant, but if one action was against a retailer in respect of a defective domestic appliance and the other was a petition for divorce, no one would suggest that they were related actions for article 13 purposes.
The reference to avoiding the risk of irreconcilable judgments is vital, therefore, in fixing the boundaries of the category.
We are asked to draw from Moore v Moore the principle that to be related, both actions must relate to maintenance.
It will be recalled that in Moore, they did not, because, whether or not the wifes application in England, under Part III of the Matrimonial and Family Proceedings Act 1984, involved maintenance, the husbands application in Spain did not, being concerned with a division of matrimonial property.
The Court of Appeal in the present case relied on Moore as providing the answer (see paras 89 to 92 of King LJs judgment), concluding that separate applications, one concerning status alone (Scotland) and the other for maintenance (England), could not be related, when in the Moore case the Court of Appeal held that a general application for financial relief and a discrete application for maintenance were not.
The husband argues that no reliance should be placed on Moore v Moore because the Court of Appeal in that case did not, in fact, address the issues that arise in relation to article 13, not having given any specific attention to its precursor, article 28 of the Brussels Regulation (No 44/2001).
For my part, I do not consider that there is much to be gained from arguing over the detail of Moore v Moore, although it is important to have regard to the fact that the court there, on stronger facts than those of the present case, found no basis to stay the English proceedings.
The decision is also useful in pointing up the firm distinction made in what is there called the Brussels regime (for present purposes, the Brussels Convention of 1968, the Brussels Regulation, Brussels II (Council Regulation (EC) 1347/2000), and in due course Brussels II Revised, and the Maintenance Regulation) between maintenance on the one hand, and rights in property arising out of a matrimonial relationship on the other.
As Lord Sales says at paras 17 and 46 of his judgment, maintenance obligations and questions of marital status are also treated as separate matters for jurisdiction purposes.
Similarly, I would not linger too much over the case of N v N (Stay of Maintenance Proceedings) [2014] 1 FLR 1399 (see para 54 of Lord Sales judgment and para 156 of Lord Wilsons judgment), which is relied upon by the husband, who commends the analysis of Moor J, but which the Court of Appeal in the present case concluded was wrongly decided (para 87 of King LJs judgment).
In my view, what is important is to go back to the wording of article 13 and to interpret it in the light of the objectives of the regulatory scheme which the 2011 Regulations have adopted to cater for intra UK cases.
So what sort of proceedings are likely to be closely connected in a way which would give rise to a risk of irreconcilable judgments within the meaning of article 13(3)? I do not intend to offer a definitive answer to this question all that is required is to determine whether the two sets of proceedings in this case were related actions, and further mapping out of the territory of article 13 ought to wait until it is required to cater for other facts.
But examples of the sorts of situations that might fall within article 13(3) can still be helpful in ascertaining its meaning.
Two such useful examples can be found in the husbands written case.
They are: (1) where a spouse is being pursued for maintenance by his or her first and second spouse at the same time, and (2) where there are child maintenance proceedings in one court, and spousal maintenance proceedings in another (assuming of course that these are considered to be two separate causes of action).
Lord Sales suggests the situation where there are cross applications for maintenance, by the wife against the husband in one part of the UK and by the husband against the wife in another (see para 44 of his judgment).
He gives a further example at para 45, inspired by the case of Hoffman v Krieg (Case 145/86) [1988] ECR 645.
Another possibility might be where one spouse (say, the wife) applies for maintenance from the other spouse in one part of the UK and, in another part, the husband applies for an order against himself (see Dart v Dart [1996] 2 FLR 286, 292).
Again, this would depend on whether or not the two actions were, in fact, classed as proceedings involving the same cause of action and therefore within article 12 rather than article 13.
It is also worth noting that, in this last example, there would need to be consideration of the point made by Lord Sales, at para 46 of his judgment, about the potential problems of a maintenance debtor choosing the jurisdiction for a maintenance claim.
But, in all of these examples, it is possible to foresee that, depending on the precise facts, there could be a risk of the two courts giving irreconcilable judgments.
Furthermore, looking particularly at article 13(2), as Lord Wilson does, it is possible to contemplate that, in any of these examples, the first instance court first seised might have jurisdiction over both actions, and be permitted to consolidate them.
The present case is, in my view, materially different from these examples.
As I see it, the Court of Appeal was right to decide that here, where one action deals with status and the other with maintenance, there can be no risk of irreconcilable judgments.
It was not deflected from its conclusion by the fact that an application could be made for financial relief in the Scottish proceedings.
What mattered, it considered (and I agree) was that the Scottish Court was not actually seised of the question of maintenance.
Moreover, as Lord Sales says at para 53, even the Hoffman v Krieg inspired possibility that in some circumstances a proceeding to dissolve a marriage might be regarded as related for article 13 purposes does not assist the husband here.
A judgment in the wifes maintenance claim would not be irreconcilable with a divorce decree in Scotland, as provision made under section 27 can survive divorce (see section 28 MCA).
Concentrating therefore on the wording of article 13, and reminding myself of the special objective of protecting the maintenance creditor, and of the roots that the article has in the European tradition of a firm separation of maintenance and property issues, I agree with the Court of Appeal, and with Lord Sales, that the English and the Scottish proceedings are not related actions.
The frustration that a UK family lawyer might feel, when contemplating the potential fragmentation of the proceedings required to resolve the financial affairs of the husband and wife upon the ending of their marriage, is understandable.
It is, however, in my view, a consequence of the system that has been adopted by the 2011 Regulations, promoting maintenance as a separate claim, and prioritising the needs of the maintenance creditor.
I should add that I am grateful to Lord Wilson for his searching postscript, which has caused me to revisit my own view of the issues in the case, and to subject it to further careful scrutiny.
In the end, however, this process has not caused me to alter my analysis, even though I entirely understand how frustrating the result might be for those who become involved, in whatever capacity, in litigation within the United Kingdom concerning family finance.
LORD WILSON: (dissenting) (with whom Lady Hale agrees)
A husband, habitually resident in Scotland, lodges a writ for divorce in Scotland.
His wife, now habitually resident in England, is constrained by the law to concede that the divorce should proceed in Scotland; so she consents to the dismissal of the petition for divorce which she has issued in England.
She wishes to make financial claims against the husband.
But, instead of then making them within the Scottish proceedings for divorce, she issues an application in England in which she alleges that he has failed to provide reasonable maintenance for her and so should be ordered to make periodical payments to her and to pay her a lump sum.
The issue is whether the English court has power to stay the application made to it by the wife and thereby in effect to require her to make her financial claims against him within the Scottish proceedings for divorce.
It is common ground, and a subject of current political debate, that financial awards to a spouse following both separation and divorce are more generous in England and Wales than in Scotland.
This fact explains the genesis of the issue but plays no part in its resolution.
One would expect resolution of the issue to be straightforward.
In fact it proves to be absurdly complicated.
The husband is aged 57 and the wife is aged 61.
They married in England in 1994.
From 1995 until their separation in 2012 they lived in Dumbarton, which lies north west of Glasgow.
There was a child of the marriage, now adult.
Upon separation, the wife came to live south of the border, now in London, and she has become habitually resident in England.
The habitual residence of the husband continues to be in Scotland.
In 2013 the wife issued a petition for divorce in England.
In 2014 the husband lodged a writ for divorce in Scotland.
Since they had last resided together in Scotland and had by then been habitually resident there for at least a year, the English court was obliged to stay the wifes petition: section 5(6) of, and paragraph 8(1) of Schedule 1 to, the Domicile and Matrimonial Proceedings Act 1973 (the DMPA).
In January 2015, after it had been stayed, her petition was by consent dismissed.
But thereupon the wife issued an application in England under section 27 of the Matrimonial Causes Act 1973 (the MCA).
Such applications are rare.
The ground of the wifes application under section 27 of the MCA was that the husband had failed to provide reasonable maintenance for her.
Upon that ground she sought orders that he should make periodical payments to her under subsection (6)(a) and should pay her a lump sum under subsection (6)(c).
Under section 27 a court in England (and of course Wales) has no power analogous to its power when granting a divorce to order a transfer of, or other adjustment of, property in favour of an applicant or to make a pension sharing order.
An applicant under section 27 has to be a party to a subsisting marriage.
The marriage between these parties subsists even now because no decree of divorce has yet been granted to the husband pursuant to his writ in Scotland.
An order for periodical payments under subsection (6)(a) cannot extend beyond the joint lives of the parties: section 28(1)(a).
It can extend beyond the parties later divorce.
In that event, however, it would also end on the payees remarriage: section 28(2).
By contrast the inevitable future grant of a decree of divorce in Scotland will not enable the wife to apply in England for financial relief following overseas divorce under Part III of the Matrimonial and Family Proceedings Act 1984 (the 1984 Act): for, by section 27 of it, Scotland is not an overseas country.
The husband, acting in person, defended the wifes application under section 27 of the MCA, which was determined by Parker J on 8 July 2016, [2016] EWHC 668 (Fam), [2017] 1 FLR 1083.
The husbands first contention was that the wife had not been habitually resident in England on the date of issue of her application, with the result that the court would have lacked jurisdiction to entertain it.
Parker J rejected the husbands first contention, about which nothing further need be said.
His second contention was that, even if the court had jurisdiction to entertain it, it should stay the wifes application in the light of the writ for divorce in Scotland, the lodging of which had preceded it.
The arguments presented to Parker J in this regard bore little relation to those which have since developed.
At all events Parker J refused to stay the application and proceeded to make an interim order for the husband to make periodical payments to the wife.
She also made an order for payments by the husband in respect of the cost of legal services to be obtained by the wife; and whether the judge had jurisdiction to do so is irrelevant to this appeal.
The husband, still acting in person, applied to the Court of Appeal for permission to appeal against the orders made by Parker J.
His application was refused on paper.
Then, however, the Bar Pro Bono Unit assigned to him the services of Mr Horton and Mr Laing.
At an oral renewal of the application, they secured permission for him to appeal to the Court of Appeal.
They have continued to represent him, free of charge, in his substantive appeals to the Court of Appeal and now before this court.
The amount of work which they have done for him is phenomenal; and its high quality will become evident as this judgment proceeds.
By a judgment delivered by King LJ on 17 May 2018, with which David Richards and Moylan LJJ agreed, the Court of Appeal dismissed the husbands appeal: [2018] EWCA Civ 1120, [2019] Fam 138.
Its dismissal of the two, alternative, grounds for a stay of the wifes application, pressed upon it on behalf of the husband, is better explained when, later in this judgment, those grounds are examined.
Its reasons for dismissal of the husbands subsidiary objections to the orders for interim periodical payments and for payments in respect of the cost of legal services are irrelevant to this further appeal.
Rival Jurisdictions in Respect of Maintenance
For reasons which will become clear, analysis of the law in relation to the stay or dismissal of a claim for maintenance in England in favour of the jurisdiction of Scotland or Northern Ireland must be accompanied by an analysis of EU law in relation to such an issue as between member states.
The two analyses must go hand in hand; and they must be both historical and chronological in order for them to illumine the evolution of these laws up to the present day.
History
The history begins with the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters signed at Brussels on 27 September 1968 (the 1968 Convention).
The fourth paragraph of its preamble made clear that it governed international jurisdiction, in other words as between one contracting state and another.
It did not purport to provide for the allocation of jurisdiction between such different legal parts of a contracting state as might exist.
Indeed in due course the European Court of Justice (the ECJ) expressly recognised that it did not thus provide: Kleinwort Benson Ltd v Glasgow City Council (Case C 346/93) [1996] QB 57.
The civil matters within the scope of the convention included claims for spousal maintenance.
The basic jurisdictional provision, set out in article 2, was that a person domiciled in a contracting state should be sued there.
But article 5(2) made special provision in matters relating to maintenance; for the maintenance creditor, in other words the applicant for maintenance, could instead sue in the place where she or he was domiciled or habitually resident.
As the Advocate General of the ECJ explained in Farrell v Long (Case C 295/95) [1997] QB 842, paras 69 to 71, there were two main reasons for the grant of this option: first, the applicant for maintenance was likely to be the more impecunious of the parties and might be unable to afford to go abroad to sue in the state of the respondents domicil; and, second, the court of the place of the applicants domicil or habitual residence was better placed to assess her or his needs.
By articles 21 and 22, under the heading Lis pendens related actions, the convention provided for the determination of issues of rivalry between contracting states in relation to the exercise of the jurisdiction for which it provided; but, since the substance of these articles was later replicated in a second, and even more relevantly a third, community instrument, there is no need further to consider them at this stage.
Schedule 1 to the DMPA governed and continues to govern the staying of matrimonial proceedings in England in favour of the jurisdictions of Scotland and Northern Ireland.
Indeed, as noticed in para 96 above, it operated so as to require a stay of this wifes English petition for divorce.
But, by paragraph 2 of Schedule 1, matrimonial proceedings are so defined as not to include an application for maintenance made outside proceedings for divorce or for relief analogous to divorce.
On 1 January 1973 the UK became a member of what later came to be called the European Union; and it ratified the 1968 Convention.
On 1 January 1987 most of the Civil Jurisdiction and Judgments Act 1982 (the 1982 Act) came into force.
By section 2(1), it gave the force of law in all three legal parts of the UK to the 1968 Convention, in other words so as to regulate jurisdiction as between any of those parts on the one hand and another contracting state on the other.
But, by section 16, entitled Allocation within UK of jurisdiction in certain civil proceedings, it also extended provisions in the 1968 Convention, albeit in a modified form, so as to regulate jurisdiction to entertain civil proceedings within the scope of the convention as between one part of the UK and another part of it.
Paragraph 1 of Schedule 4, to which section 16 gave effect, imported, albeit with modification, the basic provision that a person domiciled in one part of the UK should be sued in the courts of that part.
But, again with modification, it also imported the special provision in the convention under which an applicant for maintenance could instead sue in the place where she or he was domiciled or habitually resident.
In that way the indulgence given to the applicant for maintenance in the convention was carried into the domestic law of the UK.
But the provisions in articles 21 and 22 of the convention entitled Lis Pendens related actions were not imported into Schedule 4.
So, unless other provision were to be made in the 1982 Act, there would be nothing to determine issues of jurisdictional rivalry between the three parts of the UK in relation to civil proceedings within the scope of the convention.
In England the High Court has an inherent power to stay proceedings before it.
The power, being inherent at common law, has not been conferred by statute.
But its existence has long been recognised in statute: see section 24(5) of the Supreme Court of Judicature Act 1873 (36 & 37 Vict c 66), and now section 49(3) of the Senior Courts Act 1981.
The power has also been extended to the county court: see section 76 of the County Courts Act 1984.
It was this inherent power to stay proceedings which was specifically recognised in the 1982 Act as applicable to proceedings brought in England pursuant to Schedule 4.
For section 49 provides: Nothing in this Act shall prevent any court in the United Kingdom from staying, sisting, striking out or dismissing any proceedings before it, on the ground of forum non conveniens or otherwise, where to do so is not inconsistent with the 1968 Convention Inasmuch as the 1968 Convention did not extend to the subject matter of Schedule 4, namely the allocation of jurisdiction as between the three parts of the UK, a stay of proceedings brought pursuant to the schedule would not be inconsistent with the 1968 Convention.
In their General Note to Schedule 4 in Current Law Statutes Annotated 1982, its authors explain the omission from the schedule of articles 21 and 22 of the convention.
They refer to section 49 and assert that it enables the courts of the different parts of the UK, in relation to jurisdiction as between themselves, to adopt a more sophisticated approach of assuming or yielding jurisdiction according to the court which is considered most suitable for disposing of the case than is provided for in the [articles], which [adopt] the rule that the court first seised shall have jurisdiction.
The English stay and the Scottish sist to which section 49 of the 1982 Act referred, and still refers, were on the ground of forum non conveniens or otherwise.
It is possible that, in referring to forum non conveniens, the drafter of the 1982 Act regarded it as the ground only of a Scottish sist; and that the word otherwise was intended to cover the ground of an English stay.
For it was only in 1986, four years after the Acts passage into law, that the principle of forum non conveniens was squarely adopted as part of English law: Spiliada Maritime Corpn v Cansulex Ltd (The Spiliada) [1987] AC 460.
In Chapter 3 of Forum (Non) Conveniens in England (2019), Ardavan Arzandeh charts the slow movement of the principle across the border.
In summary the principle had been established in Scotland by 1873: Macadam v (a) Macadam (1873) 11 M 860; (b) the ground for a stay of proceedings in England was narrower, namely whether they were vexatious and oppressive: McHenry v Lewis (1882) 22 Ch D 397; (c) the narrowness of the English ground, which persisted for 90 years, betrayed a degree of arrogance that proceedings in England were intrinsically better than proceedings elsewhere, exemplified by comments by Lord Denning MR in the Court of Appeal in The Atlantic Star [1973] QB 364, 381 382; (d) on further appeal in that case, [1974] AC 436, the House of Lords, while not expressly adopting the Scottish principle, moved closer to it by enlarging the considerations relevant to a stay; and (e) in the Spiliada case, cited above, the House of Lords, in squarely adopting the Scottish principle as part of English common law, defined the basis of it to be to permit a stay where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, ie in which the case may be tried more suitably for the interests of all the parties and the ends of justice: Lord Goff of Chieveley, at p 476.
It is surely better to use English language when attempting to explain English law.
In the Spiliada case Lord Goff observed at pp 474 475 that appropriate was a better translation of the Latin word conveniens than convenient.
The Latin word forum, however, has also become an English word.
So, in what follows, I will refer to the principle as being that of the less appropriate forum.
The history continues with Council Regulation (EC) No 44/2001, 22 December 2000, on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the Judgments Regulation or the Brussels Regulation).
The regulation came into force on 1 March 2002 (article 76) and it superseded the 1968 Convention (article 68).
It covered much of the ground which the 1968 Convention had covered; and, like that convention, it contained nothing to indicate any purported regulation of jurisdiction as between the different legal parts of a member state.
Its main purpose, explained in its sixth recital, was to make provisions which, unlike those in the convention, would be binding and directly applicable.
Since it was a regulation, such was its effect.
Like the convention, it applied to jurisdiction in matters relating to maintenance; and, by article 5(2), it continued the specific provision for an applicant for maintenance to have the option to proceed in the courts for the place where she or he was domiciled or habitually resident rather than in the courts of the member state in which the respondent was domiciled.
By articles 27 and 28, in the section entitled Lis pendens related actions, the regulation repeated articles 21 and 22 of the convention subject only to some verbal re arrangement.
Albeit out of chronological order, it is appropriate to note here that, with effect from 10 January 2015, the Judgments Regulation was recast by Regulation (EU) No 1215/2012, 12 December 2012, (the Recast Judgments Regulation).
It will be necessary to refer to one article of this in para 152 below.
The supersession of the 1968 Convention by the Judgments Regulation required substantial amendment to the 1982 Act.
This was achieved by the Civil Jurisdiction and Judgments Order 2001 (SI 2001/3929).
But, as in the case of their predecessors in the convention, there was no attempt to import the rules in articles 27 and 28 of the Judgments Regulation into the substituted rules in Schedule 4 for the allocation of jurisdiction within the UK.
Issues of jurisdictional rivalry within the UK remained solely governed by section 49 of the 1982 Act, which was not amended.
Next in time came Council Regulation (EC) No 2201/2003, dated 27 November 2003 (the Brussels II Revised Regulation or the Matrimonial Regulation), which, in expanding the rules of an earlier regulation, applied to the allocation of jurisdiction as between member states not only in matters of divorce or analogous to divorce but also in most matters relating to children.
By paragraph 3(e) of article 1, however, matters of maintenance were excluded from the regulation.
As was explained in its eleventh recital, they were to continue to be covered by the Judgments Regulation.
Now at last we reach the two pieces of legislation which lie at the heart of the appeal.
The first is Council Regulation (EC) No 4/2009, 18 December 2008, on Jurisdiction, Applicable Law, Recognition and Enforcement of Decisions and Cooperation in matters relating to Maintenance Obligations (the Maintenance Regulation).
The second is the Civil Jurisdiction and Judgments (Maintenance) Regulations 2011 (SI 2011/1484) (the 2011 Regulations), made by the Secretary of State for Justice pursuant to section 2(2) of the European Communities Act 1972 (the 1972 Act) and extending to all parts of the UK.
Both pieces of legislation came into force on 18 June 2011.
The effect of the Maintenance Regulation was to remove from the Judgments Regulation the EUs rules in respect both of the rights of its members to determine maintenance applications and of their reciprocal obligations to recognise and enforce maintenance orders: article 68(1).
It is a bespoke regulation which addresses only maintenance obligations; and in relation to them it widened, and no doubt improved, the rules in the Judgments Regulation.
In its first recital to the Maintenance Regulation the EU Council referred to its intention to adopt measures relating to judicial cooperation in civil matters having cross border implications.
In its fourth recital it recorded an invitation made to it in 1999 to establish common procedural rules to simplify and accelerate the settlement of cross border disputes concerning maintenance applications.
In its ninth and tenth recitals it stated as follows: (9) A maintenance creditor should be able to obtain easily, in a member state, a decision which will be automatically enforceable in another member state without further formalities. (10) In order to achieve this goal, it is advisable to create a Community instrument in matters relating to maintenance obligations bringing together provisions on jurisdiction, conflict of laws, recognition and enforceability, enforcement, legal aid and cooperation between Central Authorities.
Article 3 of the regulation, in Chapter II entitled Jurisdiction, defines the general jurisdiction of a member state to determine a maintenance application in terms different from those of the Judgments Regulation.
But, as before, the applicant for maintenance is given an initial choice.
For jurisdiction is conferred on the court for the place where (a) the respondent or (b) the applicant is habitually resident; or, if the maintenance application is ancillary to divorce proceedings, it is conferred, (c), on the court which has jurisdiction to hear them.
The significance of this third basis of jurisdiction will already be apparent: it is that the regulation expressly recognises that a claim for maintenance can appropriately be made in the divorce court.
A fourth basis, (d), is irrelevant.
It will be seen that in the present case the Scottish court would have jurisdiction on the first and third bases and that the English court has jurisdiction on the second basis.
The Maintenance Regulation did not change the rules which required or permitted the court of a member state to stay proceedings in respect of which jurisdiction had been conferred on it in favour of the court of another member state.
For articles 27 and 28 of the Judgments Regulation were repeated, word for word, in articles 12 and 13 of the Maintenance Regulation.
Article 12, entitled Lis pendens, provides: 1.
Where proceedings involving the same cause of action and between the same parties are brought in the courts of different member states, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established. 2.
Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.
Article 13, entitled Related actions, is of central importance to the resolution of this appeal.
It is better set out in para 147 below, where it must begin to receive close attention.
Articles 12 and 13 of the Maintenance Regulation both refer to the seisin of the court, as had articles 27 and 28 of the Judgments Regulation and indeed articles 21 and 22 of the 1968 Convention.
The 15th recital of the Judgments Regulation had declared that there should be a clear mechanism for obviating problems flowing from national differences as to the determination of the time when a case is regarded as pending [and for] the purposes of this Regulation that time should be defined autonomously.
The autonomous concept of seisin had therefore been defined in article 30 of the Judgments Regulation; and the definition was repeated, in effect word for word, in article 9 of the Maintenance Regulation in order to enable articles 12 and 13 to be similarly interpreted throughout the member states.
It is unnecessary to set it out.
The principal purpose of the 2011 Regulations was to facilitate the application of the Maintenance Regulation within the UK.
Since the latter was to come into force on 18 June 2011, it was necessary for the 2011 Regulations also to come into force on that date.
Unfortunately the Ministry of Justice left it late to make the regulations, which, under paragraph 2(2) of Schedule 2 to the 1972 Act, were subject to the negative resolution procedure.
They were both made and laid before Parliament on 13 June 2011 and so came into force only four clear days later.
In addition to the Explanatory Note appended to the regulations, an Explanatory Memorandum was also laid before Parliament for the attention of its Joint Committee on Statutory Instruments.
In the memorandum the Ministry expressed regret for the breach of the convention which requires instruments subject to the negative resolution procedure to be laid before Parliament at least 21 days before they come into force.
It is unclear whether the committee had any opportunity during those four days to consider the regulations.
Annexed to the Explanatory Memorandum was a Transposition Note, in which, at para 5, the Ministry of Justice stated: These regulations do not go beyond what is necessary to facilitate the application of the Maintenance Regulation in the United Kingdom, with one minor exception.
This minor exception was the product of a decision that, just as the EU was removing its rules in respect of maintenance issues from the Judgments Regulation and was placing them into a regulation of their own, so too the UK should remove its rules for the allocation of maintenance proceedings within the different parts of the UK from the 1982 Act and should place them separately, namely within Schedule 6 to these regulations.
Their removal from the 1982 Act was effected by paragraph 11 of Schedule 4 to the regulations.
But the rules were not just to be placed separately: they were to be changed, at least to some extent.
In its Explanatory Memorandum the Ministry stated, at para 3.3: The Departments view was that the policy decision to align the jurisdiction scheme for intra UK cases on the jurisdictional rules of the EU Maintenance Regulation was the right approach as this replicated what was done in 2002 when the [Judgments Regulation] was implemented Unfortunately, as will be explained in para 171 below, it was not correct to say that the provisions of the 1982 Act had been aligned with the Judgments Regulation in 2002.
In para 7.3 of the memorandum the Ministry proceeded to explain that the rules in Schedule 6 would determine which court [within the different parts of the UK] will have power to deal with applications within the scope of the Maintenance Regulation.
How much consultation had the Ministry conducted in relation to the proposed content of Schedule 6 to the 2011 Regulations? The answer is given in para 8.1 of the Explanatory Memorandum: there had been a limited specialist technical consultation which had extended to the entire contents of the proposed regulations and which had lasted for only three weeks.
The absence of any proper consultation in relation to Schedule 6 and of any sensible opportunity for parliamentary scrutiny of it may help to explain why it is in part an unsatisfactory piece of legislation.
Paragraph 1 of Schedule 6 to the 2011 Regulations, to which regulation 8 gave effect, provides: The provisions of this Schedule have effect for determining, as between the parts of the United Kingdom, whether the courts of a particular part of the United Kingdom have jurisdiction in proceedings where the subject matter of the proceedings is within the scope of the Maintenance Regulation as determined by article 1 of that Regulation.
Although the reference is to whether the courts have jurisdiction, it seems clear that the provisions of the schedule are also intended to govern, at least to some extent, whether they should exercise such jurisdiction as they have.
Paragraph 3 of Schedule 6 provides: The provisions of Chapter II of the Maintenance Regulation apply to the determination of jurisdiction in the circumstances mentioned in paragraph 1, subject to the modifications specified in the following provisions of this Schedule.
Paragraph 12 and, being of central importance to the resolution of this appeal, paragraph 13 of Schedule 6 provide: 12.
Article 12 applies as if after different member states there were inserted or different parts of the United Kingdom. 13.
Article 13 applies as if after different member states there were inserted or different parts of the United Kingdom.
The reader of para 117 above will recall that articles 12 and 13 of the Maintenance Regulation fall to be construed by reference to the autonomous concept of seisin, which is defined in its article 9.
Paragraphs 12 and 13 of Schedule 6 to the 2011 Regulations make no change to the reference to seisin in articles 12 and 13 of the regulation.
Why then does paragraph 10 of the Schedule provide that article 9 does not apply? Sir James Eadie, on behalf of the Secretary of State, confesses to having no clear answer; and he concedes that the absence of a definition of seisin for the purposes of construing articles 12 and 13, as modified for the purposes of Schedule 6, is unsatisfactory.
UK courts, so it seems, are expected to seek to interpret the concept by provisions of their own laws.
It is important to realise that it was only part of the Maintenance Regulation which was imported, as modified, into Schedule 6 to the 2011 Regulations.
The importation relates only to the rules in Chapter II of the Maintenance Regulation entitled Jurisdiction.
There was no attempt to import the rule entitled Applicable Law in Chapter III of the regulation nor the rules entitled Recognition, Enforceability and Enforcement of Decisions in Chapter IV of it.
Under Chapter III the applicable law falls to be determined by reference to the Hague Protocol dated 23 November 2007, the effect of which, for those states which have ratified it (not including the UK), is that, subject to exceptions, maintenance obligations are governed by the law of the state of habitual residence of the applicant for maintenance.
Within the UK, however, the court of such part as has jurisdiction under Schedule 6 will determine the application for maintenance by reference to its own law.
Equally, the recognition and enforcement in one part of the UK of a maintenance order made in another part of it (including an order made in England under section 27 of the MCA) are governed by the provisions for registration and enforcement in sections 16 to 18 of the Maintenance Orders Act 1950.
A footnote to this section requires the reader, however briefly, to step back from Schedule 6 to the 2011 Regulations and into the text of the regulations themselves.
Regulation 10 obliged the Secretary of State to review the operation of the regulations in England and Wales and to publish his conclusions in a report.
He was obliged to do so by 18 June 2016.
Now, almost four years later, no such report has been published.
Sir James has no instructions with which to explain the reason for this breach of the law indeed of the Secretary of States own law.
The breach is irrelevant to the disposal of this appeal.
But it does not follow that we should overlook it.
We should direct the Secretary of State within 28 days to submit proposals for his belated compliance with Regulation 10.
Five Points
Does, then, the English court have power in one way or another to stay the wifes application? Five points are raised.
In my view the first three and the fifth should be rejected; but the fourth should be upheld.
First Point
The first point arises out of the third.
By the latter, the husband asserts that within Schedule 6 to the 2011 Regulations the Secretary of State included a provision which he had no power to include.
It is this third point, not raised in the Court of Appeal, which has precipitated the intervention of the Secretary of State in this further appeal.
By his intervention the Secretary of State introduces a startling point which logic requires the court to consider first.
It is at least arguable, so he contends, that the Maintenance Regulation has effect (and, being a regulation, has direct effect) in allocating jurisdiction to hear maintenance applications not only between member states but also between the different legal parts of a member state such as the UK.
The argument would mean, of course, that in creating Schedule 6 to the 2011 Regulations in order that, as modified, the Maintenance Regulation should apply to the allocation of jurisdiction within the UK (see paras 121 and 122 above), the Secretary of State made legislation of wholesale redundancy; and that, in stating in the Explanatory Memorandum that he had made a policy decision to align the provisions of the Maintenance Regulation with those for the allocation of jurisdiction within the UK (see para 119 above), he substantially, albeit no doubt unintentionally, misspoke.
It is clear that the provisions of the 1968 Convention had not extended to the allocation of jurisdiction between one part of a contracting state and another: see para 102 above.
It is equally clear that the Judgments Regulation had not so extended: Cook v Virgin Media Ltd and McNeil v Tesco plc [2015] EWCA Civ 1287, [2016] 1 WLR 1672, paras 18 to 26.
How, then, and indeed why, might that substantial extension have been introduced when maintenance applications were removed from the Judgments Regulation and placed within an instrument bespoke to themselves, namely the Maintenance Regulation? In answer the Secretary of State raises two arguments.
The first argument is to refer to two EU regulations to which, as it happens, the UK is not subject and which address not the jurisdiction of member states to determine actions for the enforcement of contractual and non contractual obligations respectively but the law which they are required to apply when they do so: Regulation (EC) No 593/2008, 17 June 2008 (Rome I) and Regulation (EC) No 864/2007, 11 July 2007 (Rome II).
Article 22(2) of the former and article 25(2) of the latter provide that member states which comprise different legal parts are not obliged to apply the regulations to conflicts solely between the laws of those parts.
The absence of analogous provision in the Maintenance Regulation is said to be significant.
Might it, however, have been at least marginally more significant if there had been analogous provision in the Judgments Regulation which had been omitted from the Maintenance Regulation?
The second, and main, argument depends largely upon the fact that in article 3, in which it makes general provision for the allocation of jurisdiction, the Maintenance Regulation partly overrides the legal arrangements within a member state by referring to the courts for the place where each party is habitually resident rather than generally to the courts of a member state: see para 115 above.
In its article 5, however, the Judgments Regulation had also allocated jurisdiction to the courts for a place within a state rather than to the courts of the state itself.
In Color Drack GmbH v Lexx International Vertriebs GmbH (Case C 386/05) [2010] 1 WLR 1909, the ECJ addressed the provision in article 5(1)(b) of the Judgments Regulation which permitted a claimant under a contract for the sale of goods to sue in the place where the goods were delivered.
It explained in para 23 that the court of that place was presumed to have a close link to the contract and in para 30 that, by referring to the place, the provision determined local as well as international jurisdiction, in other words without reference to the domestic rules of the member states.
In Sanders v Verhaegen; Huber v Huber (Joined Cases C 400/13 and C 408/13), [2015] 2 FLR 1229, the renamed Court of Justice of the European Union (the CJEU) applied the analysis in the Color Drack case to the allocation of jurisdiction in article 3(b) of the Maintenance Regulation to the court for the place where the creditor is habitually resident.
It observed in para 28 that the objective behind the allocation was to ensure proximity between the applicant for maintenance, regarded as the weaker party, and the competent court; and in para 37 that to that extent article 3 restricted the freedom of a member state to determine its competent court.
By their references to place, the drafters of the Judgments Regulation and of the Maintenance Regulation reflected a need, in the interests of effective access to justice, to allocate jurisdiction not just to the courts of a state but to the courts for places within a state.
The references apply to all member states irrespective of whether they comprise more than one legal part.
With respect to the Secretary of State, the references to place in the Maintenance Regulation cannot in my view be construed as a different invasion of member state autonomy.
For they do not invade the right of a state which comprises more than one part to resolve for itself an issue as to which of its parts should exercise jurisdiction to determine a maintenance application assigned by the regulation to each of those parts as places.
I confess that the Secretary of States second argument deserves greater respect than I had originally afforded to it.
But, when one stands back, it fails to stand up.
In its first recital to the Maintenance Regulation the EU Council referred to the objective, linked to the free movement of people, of judicial cooperation in civil matters having cross border implications and in its ninth recital it identified the objective that orders for maintenance made in one member state should automatically be enforceable in another member state: see para 115 above.
Indeed articles 12 and 13 of the regulation are crucial.
In the light of the four different, yet equally valid, bases of jurisdiction identified in article 3, it was essential that, when more than one of them was invoked, the regulations should determine which of them should prevail.
Such is the function of articles 12 and 13.
Yet each is expressly limited to proceedings brought in different member states.
The conclusion has to be that, in conferring jurisdiction on the different parts of the UK as places, the Maintenance Regulation, like the Judgments Regulation, did not identify which of them should prevail in the event of rivalry; and that, irrespective of whether it entirely succeeded in filling that gap, Schedule 6 to the 2011 Regulations is not redundant.
Second Point
The second point, raised by the husband but not in the courts below, arises out of the substitution of a fresh subsection (2) of section 27 of the MCA, which was effected by regulation 9 of, and paragraph 6(2) of Schedule 7 to, the 2011 Regulations.
The subsection addresses the jurisdiction of a court in England to entertain an application for financial provision under subsection (1).
Prior to 18 June 2011 subsection (2) provided that the jurisdiction could be founded upon the domicil or (broadly speaking) the residence of one or other of the parties in England.
But the fresh subsection provides: The court may not entertain an application under this section unless it has jurisdiction to do so by virtue of the Maintenance Regulation and Schedule 6 to the [2011 Regulations].
By reference to the fresh subsection, Mr Horton submits that the English court no longer has jurisdiction to entertain an application for financial provision under section 27 in what he calls a purely domestic case, by which he means a case in which all parties live in the UK.
The submission is astonishing because, if valid, it would deprive the section of almost all its effect.
Mr Hortons premise is that the court will not have jurisdiction under the Maintenance Regulation unless there is a cross border issue; and therefore that, although Schedule 6 applies within the UK, a purely domestic case cannot fall within the Maintenance Regulation as well as within Schedule 6, as required by the word and in the fresh subsection.
Mr Scott QC on behalf of the wife helpfully explains why this argument needs careful unpacking.
It is correct that in its recitals the Maintenance Regulation makes clear that its objective is to address cross border issues so as to ensure the effective recovery throughout the EU of maintenance duly awarded in one of its member states.
But it in no way follows that a member state is unconstrained by the regulation when a cross border issue is not, or not yet, visible to it in relation to a maintenance application.
An effective system for the orderly determination of maintenance applications and for the effective recovery of sums thereby awarded requires rules which determine the jurisdiction of the courts of member states in relation to all maintenance applications made to them.
Thus the opening words of article 3 of the regulation are unqualified: In matters relating to maintenance obligations in member states, jurisdiction shall lie with ; and the article then proceeds to identify the four bases of jurisdiction.
The fresh subsection (2) of section 27 is therefore correct to recognise that any application under the section for financial provision has to comply with the jurisdictional requirements of the Maintenance Regulation.
Indeed, were there to be a rival application for maintenance in a court of another member state which also complied with those requirements, it would again be the provisions of that regulation, namely in articles 12 and 13, which the English court, as well as the other court, would apply with a view to ending the rivalry.
But the fresh subsection is also correct to require compliance with Schedule 6 to the 2011 Regulations: for, were there to be a rival application for maintenance in a court in Scotland or Northern Ireland which also complied with those requirements, it would be the provisions of that schedule, supplemented, according to Mr Horton, by the less appropriate forum principle (this being the fifth point below), which, like the rival court, the English court would apply with a view to ending the rivalry.
There is nothing wrong with the fresh subsection of section 27.
It does not yield absurd results.
The premise of Mr Hortons submission is incorrect.
The subsection does not exclude what he calls a purely domestic case.
Third Point
Logically this point follows the fifth point below; but it is convenient to address it now.
The husbands argument, not raised in the courts below, is that, if, which he denies, the purported effect of Schedule 6 to the 2011 Regulations is to disapply the less appropriate forum principle from potential deployment in staying maintenance proceedings in one part of the UK in favour of proceedings in another part of it, it is an effect which it was beyond the powers of the Secretary of State, in making those regulations, to achieve.
The construction of section 2(2) of the 1972 Act, pursuant to which the Secretary of State made the regulations, also requires consideration of section 2(1) of it.
Section 2(1) provides: All such rights obligations and restrictions from time to time created under the [EU] Treaties as in accordance with the Treaties are without further enactment to be given legal effect in the United Kingdom shall be recognised and available in law It is by virtue of this subsection that the Maintenance Regulation is recognised as law in the UK.
Had it been a directive rather than a regulation, it would, by contrast, have imposed an obligation which the UK was required to implement by specific legislation.
Section 2(2) enables the making of regulations which make provision: (a) for the purpose of implementing any EU obligation of the United Kingdom ; or (b) for the purpose of dealing with matters arising out of or related to any such obligation or the operation from time to time of subsection (1) above; The operation of subsection (1) was such as to recognise the Maintenance Regulation as UK law.
It is therefore my view that, in the application of subsection (2)(b) to the present case, the matters to which it refers must arise out of, or be related to, the operation of subsection (1) rather than out of, or to, any such obligation as might have fallen to be implemented under subsection (2)(a).
The question then becomes whether the 2011 Regulations were made for the purpose of dealing with matters arising out of, or related to, the operation of subsection (1) in recognising the Maintenance Regulation as UK law.
Insofar as they facilitated the way in which that regulation was to be applied in the UK, the 2011 Regulations undoubtedly dealt with matters arising out of the operation in this respect of subsection (1).
But, by regulation 8 and Schedule 6, and as the Secretary of State has always acknowledged, they went further than that.
So the narrower question is whether any purported disapplication in Schedule 6 of the less appropriate forum principle was for the purpose of dealing with matters related to the operation of subsection (1) in recognising the Maintenance Regulation as UK law.
The court has been referred to a number of authorities on the width of the phrase related to in section 2(2)(b) of the 1972 Act.
There seems to be a tendency for one judge to offer an explanation of its extent and for the next judge to discard the explanation as an unwarranted gloss.
Perhaps it is better to allow the phrase to speak for itself; but never to forget that the required relationship is to the particular terms of the EU instrument which either already has been, or is being, given the force of law in the UK.
The most helpful commentaries upon the meaning of the phrase seem to be those of Waller LJ in Oakley Inc v Animal Ltd (Secretary of State for Trade and Industry intervening) [2005] EWCA Civ 1191, [2006] Ch 337, para 39, and of Lord Mance in United States of America v Nolan [2015] UKSC 63, [2016] AC 463, para 61.
But there is no need to lengthen this judgment by reciting those paragraphs.
For it is already clear that the husbands argument faces insuperable obstacles.
The first stems from his making of a realistic, indeed an inevitable, concession.
It is that in principle the provisions in Schedule 6 for the purpose of resolving jurisdictional issues between the different parts of the UK were related to the arrival of the Maintenance Regulation into UK law by operation of section 2(1) of the 1972 Act.
The Judgments Regulation had, by its reference to place, held out the prospect that different parts of the UK would have equal jurisdiction to hear maintenance applications.
But its provisions for the resolution of jurisdictional rivalry between member states in relation to maintenance applications had not extended to such rivalry as might arise between different parts of a member state.
In section 49 of the 1982 Act the UK had therefore identified the law which would resolve such rivalry.
The effect of the Maintenance Regulation was to remove maintenance applications from the scope of the Judgments Regulation; and so it required at least some adjustment to UK law in that regard.
The decision was to make the adjustment in Schedule 6.
But, once the concession is made that the Secretary of State had power under section 2(2)(b) of the 1972 Act to resolve issues of jurisdictional rivalry between different parts of the UK in relation to maintenance applications, how can it be said that his suggested inclusion in Schedule 6 of one particular provision in that regard was beyond his power? His power to provide for the resolution of issues of rivalry must have included power to disapply the less appropriate forum principle and to assign the resolution of such issues entirely to other provisions.
The real question, which is the fifth point, is whether that power was exercised.
So this third point falls to be rejected at an early stage; and there is no need to wrestle with the problems which would have confronted it at a later stage.
These are problems arising out of the fact that in Schedule 6 there is on any view no express disapplication of the less appropriate forum principle.
The disapplication perceived by the Court of Appeal was, so that court held, implied in Schedule 6.
The husbands argument was therefore that any implied provision to that effect was beyond the Secretary of States powers.
But, if the result of discerning an implied provision in regulations were to be that it would be beyond the powers of their maker, that would be a strong argument for not discerning it.
Would it indeed be a contradiction in terms to speak of a provision implied in a set of rules being beyond the rule makers powers? And another knotty question would the court have to proceed to identify the express provisions in the regulations from which the impugned provision was implied and to rule them to be beyond their makers powers in giving rise to the implication?
Fourth Point
The husband contends that paragraph 13 of Schedule 6 to the 2011 Regulations applies to the present case.
Subject to making an insertion into it, paragraph 13, set out in para 123 above, applies article 13 of the Maintenance Regulation to the resolution of jurisdictional rivalry between the courts of England and Scotland in a case such as the present.
Subject to the insertion, which will be set out in square brackets, article 13, entitled Related actions, provides as follows: 1.
Where related actions are pending in the courts of different member states [or different parts of the United Kingdom], any court other than the court first seised may stay its proceedings. 2.
Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof. 3.
For the purposes of this article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.
Since Schedule 6 does not relate to rivalry between the courts of different member states, it is not obvious why the words inserted into article 13 were presented as an alternative to the words different member states rather than as a substitution for them.
But nothing turns on it.
The husband contends that, as is agreed, the Scottish court must be taken to be the court first that his proceedings for divorce in Scotland and the wifes application (a) for maintenance in England are related actions within the meaning of article 13 of the Maintenance Regulation; (b) seised; (c) that within the divorce proceedings the Scottish court has jurisdiction to hear any application for maintenance which the wife might there bring so long as she were to do so prior to the grant of a decree; and (d) that accordingly the English court has power under article 13 of the Maintenance Regulation, as applied by paragraph 13 of Schedule 6 to the 2011 Regulations, to stay and indeed to dismiss the wifes application for maintenance.
Article 13 of the Maintenance Regulation must be construed in its context, adjacent to article 12, set out in para 116 above.
The articles have the same shape.
In each of them paragraph 1 provides for a court to stay proceedings, in other words to make a temporary order.
In each of them paragraph 2 provides for the court in specified additional circumstances to proceed to decline jurisdiction, in other words to proceed to make a permanent order.
What, then, is the difference between them? Article 12, which addresses a Lis pendens, governs proceedings involving the same cause of action and imposes a duty on a court other than that first seised to stay its proceedings and in the specified additional circumstances to proceed to decline jurisdiction.
But article 13, which addresses Related actions, confers only a power on a court other than that first seised to stay its proceedings and in the specified additional circumstances to proceed to decline jurisdiction.
It follows that article 13 applies to proceedings which do not involve the same cause of action.
Article 13(3) of the Maintenance Regulation defines the circumstances in which actions are deemed to be related.
It is probably intended to provide an exclusive definition of such circumstances.
These are that the actions are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments.
But actions in different member states, as also in different parts of a member state, cannot be heard and determined together.
Paragraph (3) must mean that it is expedient to hear and determine together the issues raised in the two actions.
Article 13(2) of the Maintenance Regulation is in principle significant.
For, in specifying the additional circumstances in which the court has power to proceed to decline jurisdiction, the paragraph necessarily identifies circumstances which can exist in related actions.
But what are those circumstances? In Owens Bank Ltd v Bracco (Case C 129/92) [1994] QB 509, the Advocate General Lenz of the ECJ observed at para 66 that the provision in the 1968 Convention in terms identical to those in article 13(2) was not wholly easy to comprehend.
Article 13(2) requires that the related actions should both be pending at first instance.
Why? We have the benefit of an interesting insight in relation to this question.
Article 13(2) is in identical terms to the provision in the Judgments Regulation which had preceded it, namely article 28(2).
But in 2012 the Judgments Regulation was recast; and, when article 28(2) was recast as article 30(2), an opportunity was taken to make a small but significant amendment to it.
The words [w]here these actions are pending at first instance were recast as [w]here the action in the court first seised is pending at first instance.
Although in the present case the English action, having been to date the subject only of interim orders, happens to remain pending at first instance, as indeed does the Scottish action, the drafters of the Recast Judgments Regulation clearly regarded it as important for the purposes of this provision only that the action in the court first seised should remain pending at first instance.
Why? The answer is surely that, once the action has been determined at first instance, the opportunity to add to its subject matter will have been lost.
This construction is confirmed by the further requirement of article 13(2), namely that the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.
It seems clear that article 13(2) demands an affirmative answer to the following question: would the court first seised have jurisdiction also to determine the cause of action raised before the other court and if so would its procedural rules permit that cause of action to be consolidated with the cause of action already raised before it and thus permit both to be determined in the same proceedings?
To this Mr Scott QC has only one answer.
But it deserves respect.
Have regard, he says, to the definition of related actions in article 13(3): actions are related only if there is a risk of irreconcilable judgments resulting from separate proceedings.
He argues that there would be no risk of irreconcilable judgments if the maintenance proceedings in England and the divorce proceedings in Scotland were each to continue.
The difficulty is that the reference to irreconcilable judgments in article 13(3) does not fit with the clear meaning of article 13(2) in identifying circumstances which can exist in related actions.
No doubt that is what the Advocate General in the Owens Bank case had in mind when making the comment quoted in para 151 above.
What, then, is to be done?
In Sarrio SA v Kuwait Investment Authority [1999] 1 AC 32 the two actions brought by the claimant against the defendant each stemmed indirectly from the claimants sale of part of its business to a third party.
But the causes of action were entirely distinct.
In its action in Spain the claimant alleged that the defendant was obliged to purchase from it shares which it had been required to receive as part consideration for the sale.
In its action in England, by contrast, it claimed damages for negligent misrepresentations on the part of the defendant which had induced it to enter into the sale.
The House of Lords held that the English court should decline jurisdiction on the basis that the action before it and the action in Spain were related for the purpose of article 22 of the 1968 Convention. [T]he debate, said Lord Saville of Newdigate at p 38H when making the only substantive speech, has concentrated on whether there is a risk of irreconcilable judgments resulting from the two sets of proceedings.
The appellate committee reversed the decision of the Court of Appeal, which had held that judgments were irreconcilable only if issues of fact or law essential to the respective decisions were common to both.
This, so Lord Saville observed at p 40, gave too limited a meaning to the word irreconcilable.
The matters in the two courts, he added, did not need to be virtually identical for the actions to be related; it sufficed that the connection between them was close enough to make it expedient for them to be determined together in order to avoid the risk in question.
He summarised the basis of the decision of the House at p 41, [T]here should be a broad commonsense approach to the question whether the actions in question are related, bearing in mind the objective of the article, applying the simple wide test set out in article 22 and refraining from an over sophisticated analysis of the matter.
Also of relevance to the present issue is the decision of Moor J in N v N (Stay of Maintenance Proceedings) [2012] EWHC 4282 (Fam), [2014] 1 FLR 1399.
The facts bear a striking resemblance to those of the present case.
The Swedish husband and the Dutch wife had lived in Sweden.
Upon separation she came to live in England.
The husband issued divorce proceedings in Sweden.
Later the wife issued divorce proceedings in England but they were stayed pursuant to the Brussels II Revised Regulation.
The wife thereupon issued an application for financial provision in England under section 27 of the MCA.
The husband asked Moor J to decline jurisdiction to entertain her application pursuant to article 13(2) of the Maintenance Regulation.
Moor J considered the article in context.
In para 18 he recited article 12.
In para 19 he observed that, since the wife had chosen not to apply for maintenance in the Swedish divorce proceedings, it could not be said that there were proceedings involving the same cause of action in both states, with the result that article 12 was not engaged.
In para 20, however, he proceeded to recite article 13.
He then considered the wifes submission that, because of the absence of an application for maintenance in Sweden, the actions in the two states were not related.
Although not spelt out in terms, her submission must have been that there was no risk of irreconcilable judgments.
But Moor J held in para 25: [I]f article 13 of the Maintenance Regulation only applied to applications in each jurisdiction for maintenance, there would be no need for the article at all.
The position would be covered by article 12.
The two applications would be the same cause of action and would be automatically stayed without the need for the discretion given by article 13.
Having at para 28 given seven reasons for exercising the discretion conferred by article 13, the judge then, at para 29, considered whether to stay the wifes application under para (1) or to decline jurisdiction under para (2).
He elected to decline jurisdiction.
In the present case the Court of Appeal held in para 87 that Moor J had wrongly decided the N case; in para 86 that, had the earlier decision of the Court of Appeal in Moore v Moore [2007] EWCA Civ 361, [2007] 2 FLR 339, been cited to him, he would probably have decided that the wifes English application had to proceed; and in para 89 that the effect of the decision in the Moore case was that the husbands reliance on article 13 in the present case was misplaced.
Although this court would not be bound by it in any event, the decision in the Moore case clearly requires examination.
In the Moore case the judgment of the court was delivered by Thorpe LJ.
The facts were that the parties were British; that they had gone to live in Spain; that the wife had resumed habitual residence in England; that the husbands petition for divorce in Spain had preceded the wifes petition for divorce in England, with the result that the latter had been stayed; that an order for divorce had been pronounced in Spain; that the husband had then applied in Spain for what the Court of Appeal no doubt correctly understood to be an order defining the parties respective property rights; that, despite an initial reversal, his application in Spain probably remained pending; that later, in England, the wife had sought leave to apply for financial relief following overseas divorce under Part III of the 1984 Act; that the wife had secured leave; that the issue before the Court of Appeal was whether a judge had rightly refused the husbands application to set the leave aside; and that part of the husbands case was that the judge should have stayed the wifes application under what were then articles 27 and 28 of the Judgments Regulation.
It is not disrespectful to the Court of Appeal to say that in places its judgment in the Moore case is not entirely easy to follow.
One of the complications was that, while at that time the Judgments Regulation governed applications for maintenance (article 5(2)), rights in property arising out of a matrimonial relationship have never been within its scope (article 1(2)(a)).
It seems, however, to have been agreed that, at least in part, the wifes application under Part III was indeed for maintenance; and that, since she had resumed habitual residence in England, the English court had jurisdiction under article 5(2) to entertain an application on her part for maintenance.
So, in this part of the husbands case, the only questions were surely whether, in the light of his application in Spain, the wifes application either should be stayed under article 27(1) or could be stayed under article 28(1).
Instead the court seems to have concentrated on whether the Spanish court itself had jurisdiction under article 5(2) to entertain the husbands application.
Its overall conclusion on this part of the husbands case was as follows: 95.
Consequently we are satisfied that [the husbands] application was not a matter relating to maintenance for the purpose of article 5.2, and therefore that there would be no basis for the application of articles 27 or 28 of [the Judgments Regulation] even if those proceedings were still pending.
Thus, in the light of its reasoning, the Court of Appeal in the Moore case never recognised a need to address either article 27 or article 28 of the Judgments Regulation.
Had it addressed article 27, it would, in the light of its analysis of the husbands application, undoubtedly have held that the two sets of proceedings did not involve the same cause of action and thus that there was no requirement for the wifes application to be stayed.
But how would it have addressed article 28? There can be no answer to this question.
In four places the court referred compendiously to articles 27 and 28.
It set out article 27.
It did not set out article 28.
Nor did it refer to the terms or effect of article 28.
Nor did it even note that article 28 provided a ground for stay distinct from, and additional to, the ground in article 27.
With respect, I cannot agree with the Court of Appeal in the present case that in its judgment in the Moore case that court based any part of its decision upon what was then article 28 of the Judgments Regulation and is now article 13 of the Maintenance Regulation; cannot agree that the answer to the husbands reliance on article 13 in the present case is therefore to be found in that judgment; and cannot agree that the decision of Moor J in the N case to decline jurisdiction under article 13(2) was therefore wrong.
On the contrary, in my view his decision was right.
On any view article 13 of the Maintenance Regulation is poorly drafted; and, when in domestic law its effect was extended by the 2011 Regulations, the opportunity was not taken to clarify it for the purposes at any rate of the extension.
Called upon to construe it, the court is presented with a conundrum.
Should it give effect to the clear meaning of article 13(2) at the expense of attributing a normal meaning to the reference in article 13(3) of the phrase irreconcilable judgments? Or should it attribute a normal meaning to the phrase and deprive article 13(2) of effect? In my view we should follow the decision of our predecessors in the Sarrio case and adopt a broad, common sense, approach to resolution of the conundrum.
Our more important function is to give effect to article 13(2).
That is the dog.
The reference to irreconcilable judgments is no more than the tail.
In the light of the pendency of the Scottish proceedings the English court therefore has power under paragraph 13 of Schedule 6 to the 2011 Regulations to stay, and indeed to decline jurisdiction to entertain, the wifes application under section 27.
The husbands appeal should in my view be allowed and, in the absence of Parker J who has retired, his application should be remitted to another judge of the Family Division for determination whether the power should be exercised.
Fifth Point
The husband contends that the common law principle of the less appropriate forum remains available for application by a UK court when determining an issue of jurisdictional rivalry between it and another UK court in relation to an application for maintenance.
In the light of my conclusion above in relation to the fourth point, this fifth point may not need to be decided.
For there is no reason to consider that in the present case the discretion under article 13(2) of the Maintenance Regulation, as applied by the 2011 Regulations, would be exercised differently from any discretion which might arise under the common law principle.
Nevertheless the court has received extensive submissions on the fifth point.
I offer a review of the most significant of them in the paragraphs which follow.
Were it to apply to jurisdictional rivalry between UK courts in relation to maintenance, the common law principle would extend to some situations beyond those covered by articles 12 and 13 of the Maintenance Regulation, as applied by the 2011 Regulations.
In particular it could precipitate a stay both of proceedings in the court first seised and also of proceedings even in the absence of any proceedings yet issued in the court considered to be the more appropriate forum.
Even when the law of a member state, such as the UK, adheres to the less appropriate forum principle, it cannot apply it to its determinations under the Maintenance Regulation.
For articles 12 and 13 represent an exclusive code for the resolution of jurisdictional rivalry between the courts of different member states in relation to maintenance.
The decision of the Grand Chamber of the ECJ in Owusu v Jackson (Case C 281/02) [2005] QB 801, made this clear even in relation to the expanded situation in that case, in which the potential choice of forum was between that of a member state (the UK) and that of a non member state (Jamaica) which might have been more appropriate.
Nothing turns on the fact that the decision was made by reference to the terms of the 1968 Convention which was then operative, rather than those of the Judgments Regulation or now of the Maintenance Regulation.
The ECJ held in para 41 that the objective of legal certainty which formed the basis of the convention might be undermined by the less appropriate forum principle; in para 43 that in any event there were only a few contracting states which recognised the principle; and in para 46 that it could not be applied so as to displace jurisdiction conferred by the convention.
Indeed recently, in R v P (Case C 468/18) ECLI:EU:C:2019:666, [2020] 4 WLR 8 the CJEU confirmed in para 44 that, if conferred with jurisdiction under the Maintenance Regulation, a member state could not decline to exercise it by reference to any principle of the less appropriate forum.
To decline to do so would, observed the court in para 45, undermine the priority given by the regulation to the choice of forum made by the applicant for maintenance.
By contrast, however, it is clear that, at any rate until 18 June 2011, when the 2011 Regulations came into force, UK courts did have power to apply the less appropriate forum principle when determining issues of jurisdictional rivalry between the courts of the different parts of the UK in relation to maintenance applications.
Schedule 4 to the 1982 Act had in a modified form applied within those different parts the provisions of the 1968 Convention for the allocation of jurisdiction to hear civil proceedings.
But Schedule 4 had not replicated the articles in the convention entitled Lis pendens related actions; and section 49 of the 1982 Act had expressly provided that the power of UK courts to stay proceedings by reference to the less appropriate forum principle was unaffected by the Act, including therefore by Schedule 4.
When in 2002 the Judgments Regulation superseded the 1968 Convention, there was no change in this respect.
For, similarly, the articles in the Judgments Regulation entitled Lis pendens related actions were not replicated in the substituted version of Schedule 4; and section 49 continued in force.
Indeed, while maintenance applications were removed from the scope of the 1982 Act on 18 June 2011 and were therefore no longer governed by section 49, it has continued to govern the resolution of issues of jurisdictional rivalry between UK courts in relation to other civil proceedings.
In the Cook and McNeil cases, cited in para 130 above, the claimants, who lived in Scotland, each brought actions in England for damages for personal injuries sustained in Scotland against companies based in England.
The Court of Appeal held that the district judge had been entitled to stay their actions on the ground that Scotland was the more appropriate forum.
Lord Dyson, Master of the Rolls, observed in para 30 that the rules in Schedule 4 were not a mirror of those in the Judgments Regulation and in para 33 that section 49 of the 1982 Act provided a complete answer to the claimants contentions.
The wife does not dispute that, in determining an issue of jurisdictional rivalry with a court in another part of the UK in relation to all proceedings other than for maintenance, a UK court has power to stay proceedings before it by reference to the less appropriate forum principle.
So the question becomes: have the 2011 Regulations rendered the power no longer available in relation to maintenance proceedings? The fact that there is no inclusion of the power in the regulations does not answer the question.
The power does not need to be conferred: it already exists in the common law of all parts of the UK.
As the wording of section 49 of the 1982 Act recognises in confirming that the Act does not prevent exercise of the power, the question is not whether the 2011 Regulations include the power but whether they exclude it; and, more particularly, whether, in the absence of any express exclusion of it, they exclude it by necessary implication.
In R (Child Poverty Action Group) v Secretary of State for Work and Pensions [2010] UKSC 54, [2011] 2 AC 15, the issue concerned the Secretary of States right to recover overpayments of social security benefits.
He claimed that he had a right to recover them at common law and that statutory provisions for recovery had not displaced it.
This court held that no such right of recovery existed at common law but that if, alternatively, it had existed, the statutory provisions had displaced it by necessary implication.
Sir John Dyson JSC, as he was during the first months of his service in this court, said in para 34: The question is whether, looked at as a whole, a common law remedy would be incompatible with the statutory scheme and therefore could not have been intended [to] coexist with it.
A question whether something could have been intended is often illumined by inquiry into what was intended.
But not in this case.
Neither in the consultation paper which preceded the making of the 2011 Regulations nor in the Explanatory Memorandum which accompanied them when laid before Parliament was there reference to the power to stay by reference to the less appropriate forum principle which had hitherto existed in relation to jurisdictional rivalry within the UK.
In that regard the amended provisions of the 1982 Act had not aligned the jurisdictional rules for the allocation of maintenance applications within the UK with those in the Judgments Regulation; and the memorandum was wrong to state otherwise.
It is impossible to avoid the conclusion that, in their hasty production of the 2011 Regulations, its drafters overlooked the applicability up to that point of the common law power to stay.
A substantial change made in Schedule 6 to the 2011 Regulations was to import into the rules for allocation of jurisdiction in relation to maintenance applications within the UK the two articles in the Maintenance Regulation entitled Lis pendens and Related actions.
So the question becomes more focussed: is the common law power to stay incompatible with their importation? Under the Maintenance Regulation the two articles represent an exhaustive code for the determination of issues of jurisdictional rivalry between member states.
Should they therefore be regarded as an exhaustive code under the 2011 Regulations? Would it be a necessary consequence of their importation that a UK court which regards itself as the less appropriate forum should be disabled from staying a maintenance application in favour of another UK court otherwise than in accordance with their terms?
On balance, in answer to Sir John Dysons question, I am reluctantly driven to the conclusion that the less appropriate forum principle is incompatible with, and so cannot be deemed to have been intended to co exist with, articles 12 and 13 which, once imported, have covered much, albeit not all, of the same ground.
I stress, however, that I regard my conclusion as correct only if article 13 requires to be construed with reasonable width as suggested above.
Were I, by contrast, to have felt obliged to give it so narrow a construction as not to extend to most of the more likely cases of jurisdictional rivalry within the UK, it would have been clear to me that the articles were not incompatible with the common law principle and that their importation had not excluded it.
Postscript
I drafted almost all of the above before the judgments of Lord Sales and Lady Black became available to me.
In the light of their judgments, and of Lord Kerrs agreement with that of Lord Sales, my judgment becomes a dissenting judgment and is rightly placed last.
In this postscript I raise six questions which reflect my concerns about the courts decision today in relation to article 13.
My respect for each of my three colleagues applies to all that follows.
The framing of my concerns as no more than questions reflects my respect for them; and there will be no need to reiterate it.
First question: was it optimum for Lord Sales and Lady Black to consider whether the less appropriate forum principle continues to apply prior to considering whether article 13 applies to the present case? In paras 67 and 68 of her judgment Lady Black concludes that the importation of articles 12 and 13 into Schedule 6 to the 2011 Regulations cannot co exist with the survival of the common law principle.
But that conclusion depends on the meaning of the articles.
I reach that same conclusion but only in the light of my understanding of the meaning of them, in particular of article 13.
If, however, as the majority later proceeds to hold, the articles require the narrowest possible construction, the strength of Lady Blacks conclusion falls away.
Second question: how credible are the examples given by the majority of the circumstances in which, on its construction, article 13 applies? In para 44 above Lord Sales states that a core object of the article is to address a situation in which by cross maintenance claims, each of a husband and wife might seek to claim that the other owes maintenance.
In para 89 above, Lady Black joins Lord Sales in presenting this situation as exemplifying the reach of the article.
Her background, like mine, is in family law, and, in the light of her experience, she clearly considers that the situation which he identifies is realistic.
In my experience, by contrast, it is entirely unrealistic.
I cannot recall having encountered a situation in which each spouse claims maintenance from the other; but, even if a cross claim is conceivable, probably as an ill considered tactic, what is for me inconceivable is that it would be made in a different jurisdiction.
Not even in the Moore case was the husband claiming maintenance from the wife.
Some lawyers, although clearly not all, would regard it as preposterous that article 13 should be construed by reference to that perception of its core object.
In para 89 above Lady Black mines a few other examples, all very rare, of situations which might fall within the majoritys construction of the article, although, she adds, some of them might instead fall within her construction of article 12.
Even if one adds her examples to the situation identified by Lord Sales, the second question remains: how credible is their analysis of the circumstances in which article 13 applies?
Third question: was it correct for the majoritys analysis of article 13 to be dominated by an understanding that, at every stage, priority must be given to the choice of jurisdiction made by the maintenance creditor (for convenience, the wife)? In 16 paragraphs of his judgment Lord Sales refers, as does Lady Black in seven paragraphs of her judgment, to the objective behind the successive European instruments of giving priority to the choice made by the wife.
In para 67 of her judgment Lady Black summarises their conclusion that the objective could not be overridden by the selected court declining to entertain the proceedings.
It is clear that, since 1968, the objective to which they refer has been reflected in the wider choice of jurisdiction given to the wife for the issue of her claim.
But should it follow and is there authority to suggest that, when a rival action is already pending in another state, resolution of the rivalry pursuant to what are now articles 12 and 13 is in effect foreclosed by reference to that objective? Might it have been forgotten that article 13 confers only a power and that, if for whatever reason the wifes choice deserves continuing priority at that stage, the power to stay or dismiss her action will not be exercised? Indeed is not the law relating to the resolution of rivalry between the three UK jurisdictions clearer still? When in 1987 the provisions of the 1968 Convention, including the wider provisions for the issue of maintenance claims, were extended so as to operate within those jurisdictions, Parliament confirmed that the resolution of rivalry between them was to be governed by an objective not of giving priority to the wifes choice but of identifying the less appropriate forum pursuant to the common law principle.
When in 2011 its resolution came instead to be governed by articles 12 and 13, was not the legislative intention that the articles would broadly cover the ground which the common law principle had governed? Why would the legislator have intended to emasculate the jurisdiction to stay by reference to a different objective, namely of giving continuing priority to the wifes choice? Can any such intention be collected from anything then said or done?
Fourth question: did the majority afford sufficient significance to article 3(c) of the Maintenance Regulation brought within the UK by paragraph 4 of Schedule 6 to the 2011 Regulations? As part of the priority given to the wifes choice of jurisdiction for the issue of her claim, article 3(c) confers jurisdiction upon the court which, according to its own law, has jurisdiction to entertain proceedings concerning the status of a person if the matter relating to maintenance is ancillary to those proceedings The article thus expressly contemplates that a maintenance claim can be ancillary to divorce proceedings and that, if so, it is appropriate for it to be determined in the divorce court.
So the fourth question becomes refined: if a claim for maintenance can be ancillary to divorce proceedings and appropriately issued in that court for the purpose of article 3(c), how can it be other than related to divorce proceedings for the purpose of article 13? Is it convincing for Lord Sales to respond in para 46 above that to reason from article 3(c) to article 13 would be to defeat the priority given to the wife, particularly in circumstances in which article 3(c) itself reflects that priority?
Fifth question: did the majority sufficiently address the significance of the decision of the House of Lords in the Sarrio case, analysed by me at para 155 above? In para 83 above Lady Black notes only that Lord Saville there observed that an inquiry into whether actions are related should be approached with broad common sense.
But, for present purposes, the real significance of the case lies in the application of broad common sense on the part of the House of Lords to the inquiry before it.
For its unanimous decision was that the claimants English action for damages in tort was related to its Spanish action for payment due under a contract within the meaning of what is now article 13 and should be dismissed under what is now paragraph 2 of it.
So the question, also prompted by the treatment given by Lord Sales to the decision in para 47 above, is whether further recourse to the mantra of giving priority to the wife justifies the attribution to the word related of a meaning in the context of maintenance claims entirely different from its meaning in the context of other civil claims.
Sixth and final question: did the majority check its construction of article 13 in the light of its adverse consequences? When lawyers conclude that the construction of an instrument is clear, they will not shrink from their conclusion by reference to its adverse consequences.
If, however, their provisional conclusion has adverse consequences, they will check it before making it their concluded view.
There will be two adverse consequences of todays decision, one expressly noticed only by Lord Sales, and the other only by Lady Black.
The first will be the untrammelled licence given to a wife to go forum shopping, in other words to put her husband at an initial disadvantage unrelated to the merits of her case.
Having observed that in the N case the judge considered that the wife had engaged in illegitimate forum shopping, Lord Sales comments in para 56 above that she had been entitled to choose the forum for her claim by reference to tactical reasons and that, under the Maintenance Regulation, there had been nothing illegitimate in her doing so.
The second will be the inability of a court in one part of the UK to decline to determine a wifes maintenance claim even when a court in another part alone has power to determine a claim by one spouse or the other for transfer of property or for some other adjustment (such as would, for example, disentangle them from joint ownership of property) or for a pension sharing order.
As Lady Black says in para 79 above, the prospect is not very palatable.
So the final question can be refined: did the adverse consequences of todays decision oblige the majority to undertake a rigorous examination of its provisional conclusion about the meaning of article 13 and, if so and in the light of all the questions posed above, can its provisional conclusion have received rigorous examination?
| This appeal brought by the husband concerns the jurisdiction of an English court to make a maintenance order in favour of the wife under section 27 of the Matrimonial Causes Act 1973 (as amended) (section 27) when the parties had mostly lived in Scotland and the divorce proceedings were conducted there.
The parties married in England in 1994 and lived together in Scotland between 1995 and 2012, when they separated and the wife returned to England.
She issued a divorce petition in England in July 2013 and the husband issued a writ for divorce in Scotland in October 2014.
As the parties had last lived together in Scotland, the application for divorce was assigned to the Scottish court.
On 13 January 2015 the wife consented to an order dismissing her petition in England and she issued an application under section 27 in England for maintenance payments.
The husband applied to stay or dismiss this application on the basis that the English court did not have or should not exercise jurisdiction to hear the application.
The English High Court rejected the husbands challenge and ordered maintenance to be paid by the husband.
The husband unsuccessfully appealed against the decision to the Court of Appeal.
The husband now appeals to this Court in relation to the jurisdictional issues.
The issues relate to Council Regulation (EC) No 4/2009 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations (the Maintenance Regulation) and Schedule 6 to the Civil Jurisdiction and Judgments (Maintenance) Regulations 2011 (Schedule 6 and the 2011 Regulations, respectively), promulgated by the Secretary of State for Justice pursuant to section 2(2) of the European Communities Act 1972 (the ECA 1972).
By a majority, the Supreme Court dismisses the appeal.
Lord Sales gives the lead judgment, with which Lord Kerr agrees.
Lady Black gives a concurring judgment.
Lord Wilson gives a dissenting judgment, with which Lady Hale agrees.
In the lead judgment, Lord Sales sets out the four issues that arise on the appeal: (1) whether under section 27 an English court has jurisdiction to make any order for maintenance in a case with no international dimension; (2) if so, whether Schedule 6 allows for an English court to retain its previous discretion to stay maintenance proceedings before it on the ground of forum non conveniens (ie the courts discretion to make an assessment as to which jurisdiction is the most appropriate); (3) if not, whether the purported removal of that discretion was outside the scope of the Secretary of States powers in section 2(2) of the ECA 1972; and (4) if not, whether the husbands divorce proceeding in Scotland is a related action for the purposes of article 13 of the Maintenance Regulation and the corresponding
provision in Schedule 6 and, accordingly, whether the English court should decline jurisdiction in respect of the wifes claim for a maintenance order under section 27 [7].
Lord Sales considers that the European Union (EU) legislation governing jurisdiction in cross border cases treats maintenance obligations and questions of marital status, including divorce, as separate matters for the purposes of jurisdiction [8] [24].
Maintenance obligations are covered by their own inter state jurisdiction regime set out in the Maintenance Regulation [17].
Schedule 6 applies the provisions of the Maintenance Regulation to the allocation of jurisdiction for intra state cases within the United Kingdom relating to maintenance [22] [23].
On the first issue, the husband submits that section 27 can only apply if a case falls to be governed by both the Maintenance Regulation and by Schedule 6, which would have the effect of it only applying in inter state cases.
Lord Sales considers (and Lord Wilson agrees) that section 27 does not require that both the Maintenance Regulation and Schedule 6 apply.
Section 27 refers to both the Maintenance Regulation and Schedule 6 only in the sense that together they cover the whole possible field of inter state cases and intra state cases [26], [135] [140].
On the second issue, Lord Sales follows EU case law to hold that the scheme of the EU legislation is inconsistent with the courts of a Member State retaining any discretionary power to stay proceedings on forum non conveniens grounds [28].
This is particularly applicable to the Maintenance Regulation, which aims to afford special protection to a maintenance creditor by giving him or her the right to choose jurisdiction [29].
Schedule 6 replicates the scheme of the Maintenance Regulation in domestic law for intra state cases, and accordingly has the effect of removing any discretion based on the domestic forum non conveniens doctrine [34].
On the third issue, Lord Sales considers (and Lord Wilson agrees) that the making of the 2011 Regulations is within the wide power conferred on the Secretary of State by section 2(2) of the ECA 1972 to make subordinate legislation [38], [141] [145].
On the fourth issue, in Lord Saless judgment the husbands divorce proceeding in Scotland is not a related action within article 13 of the Maintenance Regulation, so that article (and the corresponding provision in Schedule 6) does not permit the English court to decline jurisdiction [40].
The Maintenance Regulation must be considered in light of its fundamental object of conferring the right to choose jurisdiction on a maintenance creditor [41].
The word actions in article 13 refers primarily to maintenance claims to which the special regime in the Regulation applies.
Holding it to mean any legal proceedings would undermine the object of the Regulation [45].
There is no relevant connection between the wifes section 27 maintenance claim in England and the Scottish proceedings concerned with determining marriage status [46].
In her concurring judgment, Lady Black agrees with Lord Saless conclusion on article 13, despite the fact that it leads to the potential fragmentation of the proceedings required to resolve financial affairs upon divorce.
Based on the wording of article 13, with the object of protecting the maintenance creditor in mind, she considers that the English and the Scottish proceedings are not related actions [91].
In his dissenting judgment, Lord Wilson views the English and Scottish proceedings as related actions for the purpose of article 13, giving the English court the power to stay or decline the wifes maintenance application.
He would adopt a broad, common sense approach to the interpretation of the article [162].
As a result, Lord Wilson would have allowed the husbands appeal [163].
|
The appellant and his brother, Daniel Mansell, were convicted of murder and two robberies at Leeds Crown Court on 27 February 1998.
The appellants tariff in respect of his life sentence for murder was set at 18 years.
On 1 December 2009, the Court of Appeal (Criminal Division) (Hooper LJ, Cooke and Swift JJ) quashed the convictions following a reference on 25 November 2008 by the Criminal Cases Review Commission (CCRC) on the ground that the convictions had been procured by gross prosecutorial misconduct on the part of the police.
The Court of Appeal then had to decide whether to order a retrial.
Section 7(1) of the Criminal Appeal Act 1968 as amended by the Criminal Justice Act 1988 provides: Where the Court of Appeal allow an appeal against conviction and it appears to the Court that the interests of justice so require, they
may order the appellant to be retried
After balancing the public interest in convicting those guilty of murder against the public interest in maintaining the integrity of the criminal justice system, the court decided to order a retrial.
The question that arises on this appeal is whether they were right to do so.
Outline of the facts
What follows is the barest outline of the facts.
A fuller account appears at paras 65 to 90 of the judgment of Lord Brown.
The main prosecution witness at the trial was Karl Chapman.
He is a professional criminal and a supergrass.
In late 1995 and early 1996, Chapman and the appellant were together in prison.
The appellant was serving an 8 year sentence for a series of robberies and Chapman was awaiting sentence, having pleaded guilty to more than 200 offences of robbery.
On 3 June 1996, the appellant was released from prison.
On 11 June 1996, a robbery took place at the home of two elderly brothers, Bert Smales aged 67 and Joe Smales aged 85.
The incident was not reported to the police, but it was later established that the robbers were masked, used violence to extract money from the Smales brothers and stole more than 1,000.
On 13 October 1996, the Smales brothers were the victims of a second robbery committed in similar circumstances to the first.
Both brothers were subjected to physical violence.
Joe Smales sustained injuries to the head which resulted in a fractured jaw, internal bleeding and a fracture of the cervical spine.
He died in hospital on 7 November 1996 from pneumonia and deep vein thrombosis which were the direct consequence of the attack.
Between December 1996 and April 1997, Chapman provided the police with information and witness statements implicating the appellant and Mansell.
The appellant and Mansell were charged with the robberies of both of the Smales brothers and the murder of Joe Smales.
At the trial, Chapmans evidence (which occupied one week) was central to the prosecution case.
The defence sought to discredit him by suggesting that he was expecting benefits of some kind from the police and that he therefore had an interest in securing the convictions of the appellant and Mansell.
Chapman vigorously denied these suggestions.
Following the convictions, there were allegations in the local press that the police were planning to pay Chapman a large sum of money upon his release from prison.
On the basis of these allegations, the appellant and Mansell applied for leave to appeal their convictions.
Leave was refused by a single judge on 30 July 1998.
The applications for leave to appeal were renewed in early February 1999 and adjourned on two occasions to allow the CPS to supply further information.
On 5 November 1999, an ex parte hearing was held on a public interest immunity application by the prosecution.
In the course of the hearing, senior police officers gave evidence to the effect that a reward of 10,000 had been set aside for Chapman, but that he was not aware of it.
The Court of Appeal accepted this evidence and on 13 December 1999 dismissed the renewed applications for leave to appeal.
The next significant event was the decision by the CCRC to investigate the case.
The North Yorkshire Police carried out detailed investigations into the activities of the police.
Their report formed the basis of the CCRC report in November 2008.
The findings of the report, which have not been challenged, reveal that the police systematically misled the court, the CPS and counsel by concealing and lying about a variety of benefits received by Chapman and his family.
These included not only financial reward, but, inter alia, visits to brothels and permission to consume drugs in police company.
Furthermore, allegations of violent attacks by Chapman were not investigated, still less the subject of prosecutions.
The clear conclusion of the investigation by North Yorkshire Police was that a number of senior police officers involved in the Smales investigation had conspired to pervert the course of justice.
They had deliberately concealed information from the court; they had colluded in Chapmans perjury at trial; they had lied in response to enquiries following conviction; and they had perjured themselves in the ex parte leave hearing in the Court of Appeal.
It was in the light of its findings that on 25 November 2008 the CCRC referred the case back to the Court of Appeal.
The appellant had meanwhile made a series of important admissions of guilt to different persons between October 1998 and September 2004.
These are summarised by Lord Brown at paras 85 to 90 of his judgment.
The Court of Appeal said that these admissions provided clear and compelling evidence of the appellants guilt of the murder and the robberies.
That assessment has not been challenged in the present appeal.
As I have said, the Court of Appeal allowed the appellants appeal against conviction.
They concluded that, if during the trial it had become clear that the trial court had been deliberately deceived about the circumstances relating to Chapman, the trial judge might well have stayed the prosecution as an abuse of process.
Alternatively, the judge might have applied section 78 of the Police and Criminal Evidence Act 1984, and excluded the evidence of Chapman altogether, in which case the appellant and Mansell would have been acquitted.
In these circumstances, the decision to quash the convictions was inevitable.
More difficult was the question whether or not to order a retrial.
The question for the Court of Appeal was whether, in the light of the unchallenged findings of the CCRC and the clear and compelling evidence of the appellants guilt of a shocking murder, the interests of justice required a retrial.
In particular, the Court of Appeal had to decide whether the police misconduct so tainted the criminal process that it would on that account not be in the interests of justice to order a retrial.
The arguments before us proceeded on the basis that, in substance, the issue for the Court of Appeal was whether a retrial would be an abuse of process analogous to the question whether a trial at first instance should be stayed on the grounds of abuse of process.
Retrials following prosecutorial misconduct
It is well established that the court has the power to stay proceedings in two categories of case, namely (i) where it will be impossible to give the accused a fair trial, and (ii) where it offends the courts sense of justice and propriety to be asked to try the accused in the particular circumstances of the case.
In the first category of case, if the court concludes that an accused cannot receive a fair trial, it will stay the proceedings without more.
No question of the balancing of competing interests arises.
In the second category of case, the court is concerned to protect the integrity of the criminal justice system.
Here a stay will be granted where the court concludes that in all the circumstances a trial will offend the courts sense of justice and propriety (per Lord Lowry in R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42, 74G) or will undermine public confidence in the criminal justice system and bring it into disrepute (per Lord Steyn in R v Latif and Shahzad [1996] 1 WLR 104, 112F).
category of case was settled.
As he put it: In Latif at page 112H, Lord Steyn said that the law in relation to the second The law is settled.
Weighing countervailing considerations of policy and justice, it is for the judge in the exercise of his discretion to decide whether there has been an abuse of process, which amounts to an affront to the public conscience and requires the criminal proceedings to be stayed: Reg. vs Horseferry Road Magistrates Court, Ex parte Bennett [1994] 1 A.C. 42 Ex parte Bennett was a case where a stay was appropriate because a defendant had been forcibly abducted and brought to this country to face trial in disregard of extradition laws.
The speeches in Ex parte Bennett conclusively establish that proceedings may be stayed in the exercise of the judges discretion not only where a fair trial is impossible but also where it would be contrary to the public interest in the integrity of the criminal justice system that a trial should take place.
An infinite variety of cases could arise.
General guidance as to how the discretion should be exercised in particular circumstances will not be useful.
But it is possible to say that in a case such as the present the judge must weigh in the balance the public interest in ensuring that those that are charged with grave crimes should be tried and the competing public interest in not conveying the impression that the court will adopt the approach that the end justifies any means.
The same principles have also been applied by the Court of Appeal when quashing a conviction on the grounds that it considers the conviction to have been unlawful by reason of an abuse of process.
An example of such a case is R v Mullen [2000] QB 520 where the defendant was tried and convicted following his illegal deportation to England.
There has been some debate in academic literature about the scope and true rationale for the second category of abuse of process.
I refer, for example, to the writings of distinguished commentators such as Professor Ashworth (Exploring the Integrity Principle in Evidence and Procedure in Essays for Colin Tapper, 2003) and Professor L T Choo (Abuse of Process and Judicial Stays of Proceedings, 2nd edition, 2008).
Moreover, Mr Perry QC urged the court to adopt the approach taken by the majority of the Canadian Supreme Court to abuse of process applications in R v Regan [2002] 1 SCR 297.
Like Lord Brown, I see no reason to depart from the settled law as expounded by Lord Steyn in Latif.
The present case is not, however, an appeal against a refusal to stay criminal proceedings for abuse of process nor is it an appeal against the dismissal by the Court of Appeal of an appeal against conviction on the grounds that the conviction was unlawful by reason of an abuse of process.
The Court of Appeal quite rightly allowed the appellants appeal.
The appeal to this court is against the decision to order a retrial.
The use of the words may order in section 7 of the 1968 Act shows that the Court of Appeal has a discretion to order a retrial following the quashing of a conviction on appeal if it appears to the court that the interests of justice so require.
It is noteworthy that Parliament has not specified any of the factors that the Court of Appeal may (or indeed may not) take into account when deciding whether or not to order a retrial.
Instead, Parliament has propounded a broad and uncomplicated test and has entrusted to the good sense of the Court of Appeal the task of deciding whether the interests of justice require a retrial, having regard to all the circumstances of the particular case.
That is hardly surprising since the Criminal Division of the Court of Appeal is a specialist criminal court whose judges have considerable experience and expertise in criminal procedural and substantive law.
All of them have had experience of conducting criminal trials and of making rulings in accordance with the law, fairness and justice.
The interests of justice is not a hard edged concept.
A decision as to what the interests of justice requires calls for an exercise of judgment in which a number of relevant factors have to be taken into account and weighed in the balance.
In difficult borderline cases, there may be scope for legitimate differences of opinion.
I do not believe it to be controversial that a decision under section 7 of the 1968 Act as to whether the interests of justice require a retrial calls for an exercise of judgment which should only be upset on appeal if it was plainly wrong in the sense that it is one which no reasonable court could have made or if the court took into account immaterial factors or failed to take into account material factors.
It seems very likely that the reason why there has been no other appeal to the House of Lords or Supreme Court from a decision under section 7 is because of the expertise that the Court of Appeal has in deciding questions such as whether the interests of justice require a retrial and the difficulty of challenging such decisions on appeal.
Most appeals to the Court of Appeal where the court has to decide whether the interests of justice require a retrial do not raise any issue of prosecutorial misconduct.
Typically, the court considers questions which include (but are not limited to) whether the alleged offence is sufficiently serious to justify a retrial; whether, if re convicted, the appellant would be likely to serve a significant period or further period in custody; the appellants age and health; and the wishes of the victim of the alleged offence.
I do not believe it to be controversial that the gravity of the alleged offence is an important relevant factor for the court to take into account when deciding whether to order a retrial in a case which is not complicated by prosecutorial misconduct.
In a case where the issue of prosecutorial misconduct is raised by an appellant as a reason for refusing a retrial, the Court of Appeal may treat the case as to some extent analogous to a second category application to stay a case.
But the analogy should not be pressed too far.
The question whether the interests of justice require a retrial is broader than the question whether it is an abuse of process to allow a prosecution to proceed (whether or not by retrial).
I do not, therefore, agree with Lord Brown (para 98) that in each case the question is the same: what do the interests of justice require?
The gravity of the alleged offence is plainly a factor of considerable weight for the court to weigh in the balance when deciding whether to stay proceedings on the grounds of abuse of process.
At page 534D in Mullen, giving the judgment of the court Rose LJ said: As a primary consideration, it is necessary for the court to take into account the gravity of the offence in question.
It is unnecessary to engage with the academic criticism of this approach: see, for example, Professor Ashworths article already cited at page 120.
That is because, whatever the position may be in relation to an application to stay proceedings for abuse of process, it seems to me beyond argument that, when the court is deciding whether the interests of justice require a retrial, the gravity of the alleged offence must be a relevant factor.
Society has a greater interest in having an accused retried for a grave offence than for a relatively minor one.
No case has been cited to us where the court has had to consider the relevance of prosecutorial misconduct in the original proceedings to the question whether the interests of justice require a retrial.
It goes without saying that, when allowing the appeal in the present case essentially on the grounds of prosecutorial misconduct, the Court of Appeal could not rationally have concluded that the interests of justice required a retrial if the retrial would be substantially based on evidence which was the product of that very misconduct.
But the prosecution say that their case at the retrial would not be based on that evidence at all.
They rely on the admissions made on various occasions by the appellant and contend that this evidence is not tainted by the prosecutorial misconduct.
It is helpful to start by asking whether the interests of justice would require a retrial in circumstances where the prosecution evidence at the new trial would be incontestably free of taint.
Let us suppose DNA evidence comes to light after the appellant has been convicted which strongly points to his guilt; or an apparently credible independent witness comes forward and makes a statement implicating the appellant.
Let us further suppose that the prosecution say that, if there were a retrial, they would only rely on the fresh evidence and would not adduce the tainted evidence.
In deciding whether or not the interests of justice require a retrial, it is surely clear that the Court of Appeal would be entitled to disregard the earlier misconduct since it would have no effect at the retrial.
The only justification for refusing a retrial on the grounds of the misconduct in such a case would be to mark the courts disapproval of that historical misconduct and to discipline the police.
But that is not the function of the criminal courts.
Thus, for example, in relation to a stay on the grounds of abuse of process where there has been prosecutorial misconduct, in Bennett at page 74H Lord Lowry said: The discretion to stay is not a disciplinary jurisdiction and ought not to be exercised in order to express the courts disapproval of official conduct.
Accordingly, if the prosecuting authorities have been guilty of culpable delay but the prospect of a fair trial has not been prejudiced, the court ought not to stay the proceedings merely pour encourager les autres.
The same approach was recommended by the majority of ten (of twelve) members of the Royal Commission on Criminal Justice chaired by Viscount Runciman (July 1993).
At paras 47 to 50 of chapter 10, there is a section headed Appeals based on pre trial malpractice or procedural irregularity.
They said: 48.
We are not unanimous on what should happen in cases of malpractice, ranging from serious breaches of PACE to fabricating a confession, where there is nevertheless other strong evidence of the defendants guilt.
Two of us think that if the pre trial irregularity or defect is sufficiently serious materially to affect the trial but not to render the conviction unsafe, the Court of Appeal should retain the power to order a retrial or to quash the conviction depending on its view of the gravity of the defect.
The rest of us believe that the Court of Appeal should not quash convictions on the grounds of pre trial malpractice unless the court thinks that the conviction is or may be unsafe. 49.
In the view of the majority, even if they believed that quashing the convictions of criminals was an appropriate way of punishing police malpractice, it would be nave to suppose that this would have any practical effect on police behaviour.
In any case it cannot in their view be morally right that a person who has been convicted on abundant other evidence and may be a danger to the public should walk free because of what may be a criminal offence by someone else.
Such an offence should be separately prosecuted within the system.
It is also essential, if confidence in the criminal justice system is to be maintained, that police officers involved in malpractice should be disciplined.
Does it make a material difference that (as in the present case) the evidence without which there would be no order for a retrial consists of admissions which the appellant would not have made but for the original misconduct which led to his conviction and failed appeal? The Court of Appeal considered that the fact that the admissions would not have been made but for the conviction which had been obtained by prosecutorial misconduct was a factor militating against a retrial; but it was no more than one of a number of relevant factors to be taken into account in the overall decision of whether the interests of justice required a retrial.
In my view, the court was right to consider that the but for factor was no more than a relevant factor and that it was not determinative of the question whether a retrial was required in the interests of justice.
It should not be overlooked that the appellant made the admissions entirely voluntarily, no doubt because he considered that it was in his interests to do so.
As the court said, there were several relevant factors which had to be weighed in the balance before a final decision could be reached on the question of whether or not the interests of justice required a retrial.
The weighing of the balance is fact sensitive and ultimately calls for an exercise of judgement.
Appellants criticisms of the Court of Appeals decision
I now turn to the criticisms that Mr OConnor makes of the approach of the Court of Appeal.
I accept that a criticism can properly be made of para 62 where the court said: 62.
Grant is not a case in which, to use Lord Browns words in Basdeo Panday, but for an abuse of executive power, he would never have been before the court at all.
Putting the misconduct to one side, the appellant could have a fair trial (and probably did).
Whilst helpful to the appellants, it should be remembered that Grant involved, as Laws LJ said a deliberate violation of a fundamental condition on which the administration of justice as a whole rests.
The statement in para 62 in relation to R v Grant [2006] QB 60, [2005] 2 Cr App R 28 that it involved a deliberate violation of a fundamental condition on which the administration of justice as a whole rests (ie legal professional privilege) suggests that the Court of Appeal considered that the present case involved no deliberate violation of such a fundamental condition.
If that is what the Court of Appeal meant, they were wrong.
The conduct of the police in the present case was a gross violation of the appellants right to a fair trial and a far worse case than Grant (like Lord Brown, I have considerable reservations as to whether that case was correctly decided).
But the real complaint in this case is that the court failed to take properly into account the fact that the proposed retrial evidence was the product of the misconduct.
As Mr OConnor QC he puts it in his written case, the court would therefore be acting upon the fruit of the very misconduct at the heart of the case, which would be unconscionable and incompatible with the integrity of the court process.
He also submits that the decision reached by the Court of Appeal was plainly wrong and should therefore be set aside by this court.
As one would expect, this experienced court carried out the balancing exercise precisely and with great care.
At para 66, they identified the reasons why a retrial should not be ordered in the following terms: There a good reasons why a retrial should not be ordered.
They are: (i) the nature and scale of the prosecutorial misconduct; (ii) the fact that the misconduct infected both the trial and the first (iii) (iv) appeal; the fact that the prosecution case was based more or less entirely on the evidence of Chapman and the appellants would not have been charged or tried in its absence; the strong possibility that the trial would not have proceeded (being either aborted by the prosecution or stayed by the judge) if the circumstances of Chapmans treatment by the police had been made known to the prosecuting team; (v) the circumstances in which Maxwells admissions were made, namely: the first admission (to his solicitor) would not have been made had it not been for the conviction obtained by prosecutorial (a) (b) (vi) misconduct.
Having been made, it would never have come to light had it not been for the fact that, due to prosecutorial misconduct, the appeal failed and a subsequent investigation by the CCRC was necessary, in the course of which Maxwell waived privilege; the admissions made subsequently would not have been made had it not been for the unsuccessful appeal and (in the case of admissions to the North Yorkshire Police) the CCRC investigation necessitated by the prosecutorial misconduct; both appellants have served 12.5 years in prison, a longer term than they would receive if they were found guilty of manslaughter, the offence which Maxwell is admitting.
At para 67, they said that they accepted the strength of these reasons.
In other words, they were not merely reasons militating against a retrial, but they were strong reasons.
But in carrying out the balancing exercise that they were required to carry out, they concluded that the public interest in convicting those guilty of murder outweighed the public interest in maintaining the integrity of the criminal justice system on the facts of this case.
They acknowledged that the balancing exercise was difficult.
That was because on the one hand, as Lord Brown has described in graphic detail, there had been appalling misconduct by the police.
Had it been known at the time of the trial, it is almost certain that the appellant would not have been convicted.
On the other hand, the court said, (i) the alleged offence, involving as it did the beating to death of an innocent and defenceless 85 year old man at his home in the course of a planned robbery, was particularly shocking and fully merited the minimum term of 18 years that was imposed by the trial judge and (ii) there was new and compelling evidence untainted by the prosecutorial misconduct.
It is (rightly) accepted by Mr OConnor that the proposed retrial evidence, if accepted, amounts to clear prima facie evidence of the appellants guilt of the murder.
He also accepts that the evidence is untainted by the misconduct except in the sense that the admissions would probably not have been made but for the misconduct.
Mr OConnor suggests that (ii) indicates that the court lost sight of the fact that the new and compelling evidence would not have come into being but for the misconduct of the police.
But I cannot accept this.
In the immediately preceding paragraph, the court had carefully set out in para 66(v) the circumstances in which the admissions had come into being.
In using the phrase untainted by the prosecutorial misconduct in para 67, what the court meant was that the evidence was not the product of the misconduct and it was not the intended result of that conduct.
It is obvious that it could not have been in the contemplation of the police that the appellant would make the admissions that he made.
He made the admissions of his own free will for his own purposes.
It is in that sense that the evidence was untainted.
It is important to note the limited scope of the criticisms that Mr OConnor makes of the courts approach.
He accepts that the court was right to carry out a balancing exercise and that all of the factors set out in para 66 of the judgment of the court were relevant factors to be set in the scale against ordering a retrial.
He does not contend that there were other relevant factors which the court left out of account.
He also accepts that the public interest in convicting those guilty of grave crimes such as murder was an important factor in favour of a retrial.
Apart from the point which I have dealt with at para 32 above, his sole criticisms are that the case against a retrial was so strong that no reasonable court could have ordered a retrial and that the court did not properly take into account that the admissions to be relied on at the retrial were the product of the misconduct.
I do not accept that the conclusion that was reached by the Court of Appeal was plainly wrong.
They were faced with a difficult balancing exercise.
In deciding what the interests of justice required, the Court of Appeal were right to respect the strength of the public interest in seeing that that those against whom there is prima facie admissible evidence that they are guilty of crimes, especially very serious crimes, are tried.
This public interest is all the greater where, as in the present case, there is compelling evidence of guilt.
As regards the criticism that the court did not properly take into account the fact that the admissions were the product of the misconduct, in substance this is a complaint that the court did not place sufficient weight on this fact.
But the court did identify it as a separate factor at para 66(v) of the judgment.
This court, like any appellate court, is always slow to allow an appeal on the ground that the decision maker failed to place sufficient weight on a relevant fact which it rightly took into account.
It must be a rare case where this court would interfere with the exercise by the Court of Appeal of its power to order a retrial.
It is possible that a differently constituted Court of Appeal would have arrived at a different conclusion from that reached by the court in the present case.
Different courts can legitimately differ as to the weight they accord to relevant factors.
But this court should not interfere with the Court of Appeals decision to order a retrial in this case on the grounds that they failed to accord sufficient weight to the but for factor unless we are satisfied that their decision was plainly wrong.
This was a difficult case because on the one hand the police misconduct was so egregious and on the other hand the alleged offence was so shocking.
I am in no doubt that this court should not interfere with the way the balance was struck by the court in this case.
The decision was not plainly wrong.
There was a strong case for concluding that the interests of justice would be served on the facts of this case by requiring the appellant to face trial for the most serious of crimes and requiring the offending police officers to face disciplinary and possibly criminal proceedings.
On the face of it, there is a strong case of conspiracy to pervert the course of justice and forgery.
No explanation has been provided to the court as to why there have been no such disciplinary or criminal proceedings.
I cannot help but think that, if the offending police officers had been disciplined and indeed prosecuted, the argument that a retrial based on the appellants admissions would have been offensive to the courts sense of justice and propriety would have lost much of its force.
In that way, the interests of justice would have been served.
Society would have signalled its intense disapproval of the behaviour of the police.
But the interests of society in having a fair trial of those against whom there is new and compelling evidence untainted by the misconduct would have been served by a retrial.
To put it at its lowest, this was a tenable view to hold as to what the interests of justice required on the facts of this case.
I do not consider that the question of whether the interests of justice required a retrial of this appellant should depend on the fortuity of whether the offending police officers were disciplined and/or prosecuted for their appalling misconduct.
In my view, the Court of Appeal were right to say that the balancing exercise in this case was difficult.
But for the reasons that I have given, there was a strong case for ordering a retrial.
More importantly, however, it has not been shown that that they erred in law in deciding to order a retrial.
I would dismiss this appeal.
LORD RODGER
At the end of the hearing I inclined to the view that the appeal should be allowed.
Having considered the matter further, I now agree with Lord Dyson that, for the reasons he gives, the appeal should be dismissed.
I put the matter briefly in my own words only because the Court is divided.
Lord Brown and Lord Dyson have outlined the appalling history of misconduct by officers of West Yorkshire Police when the witness Karl Chapman was a resident informant of that force and right up until Mr Maxwells first appeal to the Court of Appeal.
That misconduct can be described as prosecutorial misconduct, but it is important to notice that the Crown Prosecution Service and prosecuting counsel were lied to and duped just as much as the defence, the trial court and the Court of Appeal at the hearing of Mr Maxwells first appeal.
So this is not a case where the Crown Prosecution Service or prosecuting counsel abused their power, or indeed were in any way at fault in conducting the prosecution.
Given the catalogue of events, it is at first sight surprising that none of the police officers involved has been prosecuted or disciplined for his or her part in these events.
The true position was uncovered only as a result of an investigation which was set in motion by the CCRC acting under section 19 of the Criminal Appeal Act 1995.
The investigating officer carried out a parallel criminal and disciplinary investigation, the results of which were submitted to the Crown Prosecution Service and to the relevant police disciplinary authority.
No proceedings of either kind were taken.
The Court does not know the reasons for this, but it would be quite wrong to assume that they were anything other than entirely proper.
The investigating officer had to penetrate a closed world where police officers had been prepared to conceal the true position from the prosecuting authorities and the courts and where they had every incentive to conceal it from the CCRC investigation.
Not surprisingly, therefore, at various points the Statement of Reasons indicates that evidence was obtained only in exchange for a waiver of any potential disciplinary action based on what the witness told the investigating officer.
Waivers of disciplinary and prosecution proceedings as a result of statements made to the inquiry are a familiar feature of public inquiries into disasters of various kinds.
They are the price that has to be paid for finding out what happened and learning the lessons for the future.
Here such waivers may well have been necessary if the investigating officer was to achieve the purpose for which he had been appointed, viz, to discover whether there had been misconduct on the part of the police which would be a basis for referring Mr Maxwells conviction to the Court of Appeal.
In other words, Mr Maxwells appeal may well have been made possible only because the investigating officer gave those waivers.
So it would not be surprising if, as a result of the investigation, there were grounds for the Commission making the reference to the Court of Appeal, but there was no proper basis for the prosecuting or disciplinary authorities taking action against individual police officers.
Assuming as the Court surely must that the prosecuting and disciplinary authorities have acted properly, I am satisfied that the lack of action against the police officers concerned was not a relevant factor for the Court of Appeal to take into account in deciding whether to direct that Mr Maxwell should be retried.
As Lord Dyson emphasises, this appeal is only against the decision of the Court of Appeal to order a retrial.
Lord Brown quotes the language of section 7(1) of the Criminal Appeal Act 1968 at para 62 of his judgment.
Comparable language is to be found in section 6(1) of the Criminal Appeal (Northern Ireland) Act 1980 but nowhere else.
The language has been very carefully chosen to make it clear that the whole matter is one for the determination of the Court of Appeal.
For my part, I would not gloss the crucial words of the test (and the interests of justice so require): the Court of Appeal is to ask itself whether it appears that the interests of justice require it to order a retrial.
As Lord Dyson observes, the assumption must be that Parliament left the question of a retrial to be decided on this broad basis by members of the Court of Appeal who could be expected to have knowledge and experience in these matters and who, moreover, could be expected to be familiar with the relevant facts of the particular case from the proceedings which had led them to allow the appeal.
Of course, if the Court of Appeal reached a decision on retrial which no reasonable Court of Appeal could have reached, then doubtless this Court could intervene to put matters right.
But that is not the position in this case.
The Court of Appeal admitted that it had found the decision difficult.
In para 66 it set out the factors against ordering a retrial and then went on, in paras 67 to 83, to describe what it saw as the new and compelling evidence against Mr Maxwell.
Having done so, the Court of Appeal did not explicitly weigh the competing considerations.
Initially, I was inclined to think that this was a flaw in the courts approach.
But, on reflection, I am satisfied that it would be quite unfair to impute such a failure to the experienced members of the court when they have carefully alluded to the rival considerations.
In the absence of any indication to the contrary, it must be assumed that the Court of Appeal duly weighed them and so reached the view that it should order that Mr Maxwell should be retried, even though no retrial was to be ordered in Mr Mansells case.
Of course, if differently constituted, the Court of Appeal might have come to a different conclusion.
And, clearly, Lord Brown would have done so on the narrow ground that the present case falls within what he describes as the but for category of cases: but for executive misconduct, the defendant would not have been brought to this country and placed before the court; but for executive misconduct, the defendant would not have committed the crime for which he was to stand trial.
Here, but for the misconduct of the police officers, the chances are that Chapman would not have given evidence against Mr Maxwell or that, if he had, he would have been discredited.
So, but for their misconduct, Mr Maxwell would not have been convicted and so would not have made the statements on which the prosecution intends to rely in any retrial.
In my view, however, that would be to take this line of reasoning too far.
The statements were made by Mr Maxwell voluntarily and for his own purposes.
Indeed, one of them was made for the purposes of the very investigation by the CCRC which led to his appeal being allowed.
The use of those statements by the prosecution would involve no abuse of the trial court.
The fact that the statements would not have been made but for the antecedent misconduct of the police is not enough to taint them any more than it would taint, say, DNA evidence which was now available only by reason of advances made in research since Mr Maxwell was charged, or evidence of a witness who had come forward as a result of reading reports of the investigation into the misconduct of the West Yorkshire Police.
The fact that the statements would not have been made but for the police misconduct was a factor to be taken into account by the Court of Appeal in deciding whether the interests of justice required that it should order a retrial.
That is precisely how the Court of Appeal treated it in para 66.
Having taken that factor into account, it still appeared to the Court that the interests of justice required it to order a retrial.
That was a decision which the Court of Appeal was entitled to reach and with which, accordingly, this Court is not entitled to interfere.
LORD MANCE
There was in this case the gravest police misconduct both before and at trial, and it was persisted in during the first set of appellate proceedings.
Once revealed, it was inevitable that the appellants conviction should be set aside on a further reference to the Court of Appeal.
That does not resolve the question whether, having allowed the appeal, the Court of Appeal was justified in ordering a retrial.
Under Criminal Appeal Act 1968, section 7, it was for the Court of Appeal to decide as a matter of discretion whether there should be a retrial.
The Court of Appeal, when allowing a conviction, has the power to order a trial, if it appears to the Court that the interests of justice so require.
It is common ground that the exercise of discretion involved a balancing exercise.
It is also common ground that the Court in its full and clear judgment on the point identified all relevant factors.
Lord Dyson sets out the courts reasoning in paras 30 to 35.
Like him, I consider that it is clear (in particular from the language of para 67 of the courts judgment) that the court weighed all of these factors in reaching its decision.
Essentially, the criticisms made of the Courts decision focus on (a) the seriousness of the police misconduct, (b) the fact that, but for such misconduct, there would have been no original trial and so the context in which the appellant made the admissions on which reliance is now placed would never have existed and (c) the submission that the Crown in proceeding against the appellant on the basis of those admissions is and would be, or be seen as, condoning or taking advantage of the polices misconduct.
On behalf of the appellant, it is argued that the Court of Appeal must either have failed to take such considerations sufficiently into account when performing the relevant balancing exercise or for some other reason simply reached a decision not open to it in their light.
The latter (and as I see it probably also the former) submission amounts to saying that the courts exercise of its discretion was one which no reasonable court could reach in the circumstances.
This is not an easy case.
The egregious and persistent nature of the police misconduct involved invites a forceful response.
But it is common ground that it is not the courts role to refuse a retrial under section 7 of the 1968 Act in order to discipline the Crown for the polices misconduct, and the fact that the police misconduct has not received the sanction it deserved is not a reason to depart from this stance.
The court is however entitled to take into account the effects of ordering a re trial, including any perception that might be created that the Crown condoned misconduct and any general discouragement of future misconduct that might be achieved.
It is not suggested that the admissions on which the Crown wishes to rely were made other than freely and voluntarily; and I do not myself see any basis for regarding the Crown, or for thinking that right minded people would regard the Crown, in relying on them as condoning misconduct or as adopting the approach that the end justifies any means (see R v Latif [1996] 1 WLR 104, 113, per Lord Steyn).
I also find unconvincing any suggestion that refusal to order a retrial in the present case would have any real incentive effect on police behaviour.
Further, the court is entitled to bear in mind the effect on public confidence in the administration of justice if persons who have on their face of it admitted to very serious crimes (and who, if their admissions are true, perjured themselves at the original trial) are not retried (as they in fact said they wished when making the admissions) in order to establish the truth.
I have had the benefit of reading in draft all four of the judgments which my colleagues have prepared.
Lord Brown in para 105 concludes that Given, however, the but for character of this case and the enormity of the unpunished police misconduct involved, it seems to me quite simply inappropriate that it should now be retried on fresh evidence and that Unless one is to say that in relation to serious crimes the but for approach is to apply only in the context of wrongful extradition, it is difficult to think of any case where the stay principle would properly be invoked if not here.
However, I consider the present case to be significantly different from those involving extradition and entrapment to which Lord Brown refers.
In R v Horseferry Road Magistrates Court Ex p Bennett [1994] 1 AC 42 and again R v Mullen [2000] QB 520, the governments wrongful act in bringing the relevant defendant within the jurisdiction was the very direct cause of his standing in the dock.
In an entrapment case, the police act is one which leads directly to the commission of the alleged crime itself.
In the present case, the alleged crime was independent of any police act, and the admissions were made voluntarily of the appellants own choice and for his own purposes.
It is true that the context in which the admissions were made would not have existed but for the police misconduct.
But the voluntary element is important; it breaks the directness of the chain of causation and it relegates the police misconduct to the status of background.
Indeed, in respect of one of the admissions, if the prior trial was part of the background at all, it appears to have been very remote background.
The appellants letter to Detective Inspector Steele of West Yorkshire Police dated 9 February 2000 making the admission describes how it came about: Dear Mr Steele, We met some time ago at armley prison when you came to eliminate me from enquiries into the death of isabel grey.
As you are no doubt aware I am currently serving a life sentence for the murder of Joe Smales and the robbery of Joes brother Bert.
I initially denied these offences, however I now fully admit my guilt.
I watched you on television last night and decided to write and offer any help that I can give you, in your Quest to protect the old and vulnerable I have no ulterior motives for doing this and want nothing in return.
If you could compile a detailed Questionaire I will willingly supply you with detailed answers.
Best wishes
Paul Maxwell
I am not sure that I share Lord Browns difficulty in conceiving of cases other than the wrongful extradition cases in which a but for link with a proposed trial might require the court to refuse a fresh trial.
Suppose in the present case that the police or prison authorities had improperly recorded conversations between the appellant and his solicitors after his original conviction, and had as a result discovered independent evidence (e.g. DNA evidence or another third party witness) linking the appellant to the crime.
In those circumstances, a re trial could well be refused.
I would also reject any suggestion that the Supreme Court should treat the Court of Appeal as having reached a decision not reasonably open to any court on the present facts.
On this aspect, as on others, I find compelling the judgment and conclusions of Lord Dyson.
I also agree with Lord Rodgers supplementary observations.
For these reasons, I am unable to accept that the Court of Appeal erred in any way entitling the Supreme Court to interfere with its decision to order a re trial.
LORD BROWN
Few of those urging upon the court a vindication of the rule of law could be less deserving of its benefits than this appellant.
A professional criminal with a history of violent crime, he is almost certainly guilty of the murder and the two robberies of which he was convicted (together with his brother, Daniel Mansell) by the Crown Court at Leeds on 27 February 1998.
These were shocking offences indeed, callous attacks upon elderly reclusive brothers in their own home, the second involving injuries of such severity as to occasion the elder brothers death within the month.
The appellants tariff (in respect of his life sentence for murder, imposed concurrently with twelve year terms for the robberies) was set at eighteen years.
It was not a day too long.
The 1998 convictions were, however, as later investigations by the North Yorkshire Police and the Criminal Cases Review Commission (CCRC) were all too clearly to demonstrate, procured by tainted evidence and prosecutorial misconduct of the gravest kind.
Following a reference by the CCRC, the Court of Appeal (Criminal Division) (Hooper LJ, Cooke and Swift JJ) accordingly had no alternative but to quash them: [2009] EWCA Crim 2552, judgment of 1 December 2009.
So much was by then undisputed.
What was in dispute, however, and remains the central issue upon this further appeal, was whether or not the appellant should be retried pursuant to section 7(1) of the Criminal Appeal Act 1968.
Section 7(1) provides: Where the Court of Appeal allow an appeal against conviction and it appears to the Court that the interests of justice so require, they may order the appellant to be retried.
In the course of a thoughtful and thorough reserved judgment given by Hooper LJ the Court of Appeal: reached the conclusion (not without difficulty) that the public interest in convicting those guilty of murder outweighs the public interest in maintaining the integrity of the criminal justice system.
This was a shocking case and if there is new and compelling evidence untainted by the prosecutorial misconduct revealed by the findings of the North Yorkshire Police and the CCRC, we should order a new trial.
In particular we bear in mind that the new and compelling evidence relied upon by the respondent as against Maxwell consists of admissions made to the North Yorkshire Police by Maxwell with the benefit of legal advice during the course of an investigation into the safety of his convictions and that Maxwell said to the police that he would like a retrial and that he would plead guilty to the robberies and manslaughter. (para 67) The Court of Appeal accordingly ordered that the appellant be retried and meantime remain in custody.
No such order was made in respect of Mansell (who had made no post conviction admissions of guilt and against whom, therefore, there was no new and compelling evidence) and he was accordingly set free.
The point of law of general public importance subsequently certified by the Court of Appeal was this: May the Court of Appeal order a retrial having quashed a conviction on the grounds of serious executive or prosecutorial misconduct, and, if so, in what circumstances? In reality what the Court must now decide is whether, having regard to all the circumstances of this case, the Court of Appeal could properly reach their conclusion that the interests of justice require this appellants retrial based substantially upon his post conviction admissions of guilt.
As the Court of Appeal recognised, plainly there is a public interest in convicting those guilty of murder.
Plainly too there is a public interest in maintaining the integrity of the criminal justice system.
No less plainly, each interest is of a high order.
Where, as here, these interests appear to conflict, how should that conflict be resolved? This is by no means an easy area of the law.
Obviously, however, it is an important one.
With that brief introduction let me at once turn to the facts, critical as ultimately these must be to the determination of this appeal.
The two robberies
The robberies took place respectively on 11 June 1996 and 13 October 1996, on each occasion at the Yorkshire home of two vulnerable and reclusive brothers, Bert Smales aged 67 and Joe Smales aged 85.
They were known to keep substantial sums of money in the house and had more than once been burgled in the past although this had never been reported to the police (as similarly the June 1996 robbery went unreported).
On both occasions the robbers were masked; on both they used violence in demanding to know where they brothers kept their money; on both they stole a few thousand pounds.
It appears, however, that substantially greater violence was used in the October robbery.
On that occasion Bert Smales suffered a fractured nose and forehead, his injuries leaving him with little recollection of the robbery beyond opening the door to his attackers.
Joe Smales was punched in the face so severely that he suffered not only a fractured jaw and internal bleeding to the head but in addition a fracture of the cervical spine (broken neck); from his resultant prolonged immobility in hospital he developed pneumonia and a deep vein thrombosis from which on 7 November 1996 he died.
Although it is unclear which of the robbers attacked which victim, the level of violence used in the October robbery and, indeed, the admissions that the appellant came to make in his post conviction statements clearly supported a conviction for murder on the basis of joint enterprise and it is unsurprising that Mr OConnor QC has never submitted on his behalf that any retrial should only be on a charge of manslaughter.
Karl Chapman
Chapman is a central figure in this case and it will be necessary to say more about him later.
It is convenient, however, to introduce him briefly at this stage, he having been the main prosecution witness at the appellants trial, without whose information and evidence, indeed, the appellant (and Mansell) would never have been indicted, tried or convicted at all.
Chapman (like the appellant) is a professional criminal.
In late 1995 and early 1996 both men were together in prison.
The appellant was serving an eight year sentence (from which he was finally released on 3 June 1996) for a series of robberies; Chapman was a remand prisoner having pleaded guilty on 31 July 1995 to no fewer than 267 offences (including 256 similar offences taken into consideration), mostly bogus official robberies targeting frail and elderly victims.
Chapman eventually came to be sentenced on 23 December 1997 to a term of 9 years imprisonment, a sentence to be contrasted with the 25 year term imposed for comparable offences committed by an erstwhile associate of his named Ford against whom Chapman had earlier (in November 1996) given evidence, as indeed he was to give evidence (in February 1998) against the appellant and Mansell.
As already stated, the appellant was released from prison on 3 June 1996, just eight days before the first Smales robbery.
It now seems clear that it was from Chapman that the appellant learned of the address and vulnerability of, amongst others, the Smales brothers and it is clear too that during the period when these robberies were committed the appellant and Chapman remained in touch.
In December 1996 Chapman began to provide the police with information pointing to the appellants involvement in these robberies, a process leading in April 1997 to him making a series of witness statements, on the basis of which the appellant and Mansell were on 28 April 1997 arrested, charged and ultimately, on 27 February, 1998, convicted.
As stated in the agreed statement of facts and issues: without Chapmans evidence, there could have been no prosecution at all.
The February 1998 trial and conviction
The trial lasted three weeks, Chapmans evidence occupying five days: 5, 6, 9, 10 and 11 February 1998.
Not surprisingly, his evidence was fiercely challenged by both defendants.
As the judge later put it in his summing up, it was the defence case that Chapman was bent as a fourteen pound note.
More particularly the defendants were alleging that by giving incriminating evidence against them, Chapman, notwithstanding that he had already been sentenced the previous December, was still expecting benefits of one sort or another, whether by way of earlier release on parole or otherwise.
All this Chapman resolutely and persistently denied as appears from a number of passages in the summing up, for example: Now, he knows what date he is due to be released and that that will happen whether or not he gives evidence in this case.
He has got his date in the year 2000.
That cannot be delayed beyond that time.
He says he has nothing to gain by giving false evidence against the defendants. (Chapman was, in fact, released in August 1999.) The whats in it for him line was pursued and I will remind you again of it briefly .
He says, Theres nothing.
I am putting myself at risk for the rest of my life.
He was then taken through the privileges that he had enjoyed as a supergrass, and what the wing was like.
Well, there is no suggestion that he was accorded privileges that were any greater than those accorded to other supergrasses.
Chapmans evidence was, there can be no doubt, damning against both defendants.
It did not, however, stand entirely alone.
Rather, as the (263 page) CCRC report was later to say, it was supported by a jigsaw of other pieces of evidence.
In particular there was evidence (i) of telephone calls between Chapman and the appellant on key dates, (ii) of Mansells arrest for a driving offence on his way back to Lancashire from Yorkshire on the day of the June robbery, (iii) of the appellant having reconnoitred the home of another of Chapmans previous victims, Miss Bell, (iv) of the appellant being in Leeds and attempting to contact Chapman on the day of the October robbery, (v) of an A Z map given to the police by Chapman bearing the appellants fingerprints and containing various markings seemingly connecting the appellant to the addresses of other Chapman victims in the Yorkshire area, (vi) of a letter from the appellant to Chapman in July 1996 referring to coming over to Leeds for a days work, apparently alluding to the burglary of another of Chapmans previous victims, (vii) of Mansells identification by a neighbour of the Smale brothers as one of two men she had observed hurrying by on the afternoon of the October robbery, (viii) of a footwear mark found at the scene of the October robbery consistent with the size and brand of Mansells boots, (ix) of lies told by the appellant and Mansell about their movements on the days of the robberies in the course of police interviews, and (x) of the appellants creation of a false alibi for the time of the October robbery (as he was later to admit).
some 9 hours and 40 minutes after the jury first retired.
The 1999 appeal
Within days of the appellants conviction press reports in the Yorkshire Evening Post suggested that 100,000 had been set aside to provide Chapman with assistance on his release from prison.
Those then acting for the appellant and Mansell immediately sought clarification of this from the CPS but made little headway, their initial application for leave to appeal against conviction being refused by the single judge on 30 July 1998.
In February 1999, however, fresh solicitors and counsel were instructed and extensive further enquiries were then made of the CPS both as to any payment promised to Chapman and more generally as to his treatment by the police.
The appellants and Mansells renewed leave applications to the Court of Appeal were adjourned on account of these enquiries first from 30 April 1999 and then again from 8 July 1999, on each occasion for the CPS to supply the further information being sought.
In the event both defendants were convicted by majority verdicts of 10:2
Finally, following a detailed series of questions from Birnberg Peirce & Partners dated 15 October 1999 and letters in response dated 3 November 1999 respectively from Detective Superintendent Rennison (Director of Intelligence responsible for the management and use of informants in West Yorkshire) and Detective Chief Superintendent Taylor (Senior Investigating Officer on the Chapman operation), the Court of Appeal (Otton LJ, Potts J and the Recorder of Liverpool) on 5 November 1999 held first an ex parte hearing on a PII application by the prosecution and then an inter partes hearing on other grounds of appeal unrelated to the handling of Chapman.
During the ex parte hearing evidence was given by Detective Sergeant Grey (an officer of the Major Crime Unit attached to the Chapman operation) and Chief Superintendent Holt (the Senior Investigating Officer on the appellants case), in particular with regard to a statement in Mr Rennisons letter of 3 November that: a reward of 10,000 was agreed by the West Yorkshire Police Command Team without discussion with Chapman, to be paid after completion of his sentence.
In the course of his evidence D S Grey said that the agreement was reached possibly three or four months before the end of [Chapmans] sentence [August 1999] and that when Chapman had given his evidence he [was not] told at all that he was to receive any form of reward.
Chief Superintendent Holt similarly confirmed that before Chapman gave his evidence there was no discussion or agreement with him whatever in relation to any reward or any benefit for his involvement in this particular case.
The Court of Appeal thereupon expressed themselves satisfied that when the informant, Chapman, came to give evidence nothing had been done or said to give him any expectation of reward for his evidence in this murder trial. any arrangements for reward or change of identity to Chapman were made a long time after the [appellants] conviction was recorded.
In the result, in a judgment given on 13 December 1999 dismissing the appellants and Mansells renewed leave application, the Court of Appeal noted in respect of Ground 1 The financial reward of the supergrass: At the outset of the hearing before us we considered the public interest immunity application by the Crown.
As a result of our ruling this ground was not pursued on behalf of the applicants.
There matters lay until, some nine years later, on 25 November 2008, the CCRC referred the case back to the Court of Appeal following an investigation by the North Yorkshire Police under section 19 of the Criminal Appeal Act 1995, an investigation which had painstakingly examined the integrity of Chapmans treatment as a prosecution witness.
The CCRC Report
The unchallenged findings of this report are not just disturbing but quite frankly astonishing.
They reveal that, as a result of his cooperation with the police, Chapman and other members of his family received a variety of benefits which were not merely undisclosed to the CPS or counsel but were from first to last carefully concealed from them.
They were benefits which both contravened the controls designed to preserve the integrity of Chapmans evidence and were in addition inherently improper.
Amongst the more surprising were that whilst in police custody Chapman was at various times permitted to visit a brothel, to engage in sexual relations with a woman police constable, to visit public houses, to consume not merely alcohol but also cannabis and even heroin, to socialise at police officers homes, to enjoy unsupervised periods of freedom, and indeed, throughout the actual period of the appellants trial, whilst threatening not to give evidence after all, he was permitted long periods of leisure (hours at a time) in places of his choice, ostensibly as exercise, and in addition phone calls and visits from his own solicitor.
Without suggesting that it typifies Chapmans relations with every police officer involved in this operation, some colour is lent to all this by a letter written to him in prison by DC Dunham (one of Chapmans regular escorting officers) on 18 December 1996, shortly after Chapman had given evidence at the Ford trial and on the very day he made his first statement implicating the appellant and Mansell, an event celebrated by a visit to a brothel (shown in the custody record as an outing to assist in the locations of crime).
DC Dunham wrote: . really glad you enjoyed the night.
Truth to tell I quite enjoyed it myself.
Little bit of this, little bit of that.
Variety, they say, is the spice of life.
What a spicey night! Lets hope there is a second leg in March.
I am demob happy now and disinclined to dip out on any good times that may be up for grabs.
BT [another officer] told me to tell you that if you were serious about a literary venture at some time in the future he can put you in touch with some top class author types who can assist in ghost writing.
Sometime later, Dunham having mentioned the brothel outing to the female police officer with whom Chapman was enjoying sexual relations, Chapman wrote to her apologising: I was drunk and stoned on weed, they paraded a dozen beautiful women in front of me and said take your pick.
As for financial benefits, the report states blandly: North Yorkshire Police found that the information provided to the court at trial and appeal did not accurately reflect the financial benefits and rewards given to Mr Chapman by the police or his expectations when he gave evidence at the trial of Mr Maxwell and Mr Mansell.
The fact is that large sums had been expended on Chapman, far exceeding his entitlement under the rules governing the treatment of informants and prisoner witnesses.
Luxury items had been purchased for him and substantial sums from time to time handed to him in cash (for example 475 on the occasion of the December 1996 brothel visit with DC Dunham, less than 7 remaining on Chapmans return to the police station at 1 a.m. the following morning).
This expenditure, totalling several thousand pounds, was financed by claims on a variety of police funds, with no proper records, accounting, supervision or control and various steps taken to conceal the level of payments made.
None of this was disclosed either at trial or on appeal.
With regard to the 10,000 reward itself, the report concluded, flatly contrary to the senior officers evidence to the Court of Appeal, that the polices intention to reward Chapman had long since been communicated to him so that his as yet unfulfilled expectation of reward may have been a factor affecting [his] cooperation and evidence at the appellants trial.
Nor were these favours and financial benefits the only advantages secured by Chapman as the price of his cooperation.
He was not proceeded against in respect of a number of violent incidents which in the ordinary way would have been expected to result in prosecution: a vicious attack on a fellow prisoner called Jennings in March 1994, repeatedly stabbing him with a piece of broken glass bound with twine; an alleged rape of his cellmate (buggery whilst holding a razor to the victims throat) in August 1994, reported sometime later; an assault in November 1999 on the WPC with whom by then Chapman had split up.
Nor was action taken against him for various drug offences.
Similarly a caution received by Chapmans mother in July 1995 for handling stolen property was not properly recorded, nor were steps taken against her for attempting to supply heroin both to Chapman in prison in September 1996 and to Chapmans girlfriend (also a prisoner) in October 1996.
Chapmans brother too was not arrested when he should have been.
All these various benefits and indulgences were conferred on Chapman to ensure his continuing cooperation with the police and not least to persuade him to give evidence as he did at the February 1998 trial of the appellant and Mansell.
To quote just four short passages from the CCRC report: In the Commissions view those benefits may have acted as an inducement and their non disclosure denied the defence the opportunity to explore their possible impact on the credibility of Mr Chapman and also on the fairness of the trial.
The omission of [certain of these benefits] from Mr Chapmans custody records ensured that those records offered no hint of the reality of his treatment whilst in police custody.
The circumstances in which Mr Chapman provided information to the police in the murder investigation were therefore obscured.
The failure to reveal what could reasonably have been considered inducements surrounding Mr Chapmans evidence left the prosecution unable to assess his reliability as a witness and precluded appropriate disclosure to the court and the defence.
It also caused the trials involving Mr Chapman as a prosecution witness to proceed on the incorrect basis that he had not been the recipient of favours or privileges.
In contrast to the appearance of legitimacy in his treatment, the undisclosed information would have supported an argument that Mr Chapmans evidence against Mr Maxwell and Mr Mansell was tainted by a sustained catalogue of improper inducements and an ongoing expectation that he would be favourably treated in every aspect of his relationship with the police.
Those representing Mr Maxwell and Mr Mansell were denied the opportunity to deploy this material in support of a tenable argument that the proceedings against them were an abuse of process and to have this issue determined by the court.
In the light of these various findings it is now possible to summarise the position really quite shortly.
A large number of police officers involved in the investigation and prosecution of the Smales robbery and murder case, including several of very high rank, engaged in a prolonged, persistent and pervasive conspiracy to pervert the course of justice.
They colluded in conferring on Chapman a variety of wholly inappropriate benefits to secure his continuing cooperation in the appellants prosecution and trial.
They then colluded in Chapmans perjury at that trial, intending him throughout his evidence to lie as to how he had been treated and as to what promises he had received.
They ensured that Chapmans police custody records and various other official documents presented a false picture of the facts, on one occasion actually forging a custody record when its enforced disclosure to the defence would otherwise have revealed the truth.
They lied in their responses to enquiries made of the CPS after the appellants conviction and, in the case of the two senior officers who gave evidence to the Court of Appeal, perjured themselves so as to ensure that the appellants application for leave to appeal against his conviction got nowhere.
To describe police misconduct on this scale merely as shocking and disgraceful is to understate the gravity of its impact upon the integrity of the prosecution process.
It is hard to imagine a worse case of sustained prosecutorial dishonesty designed to secure and hold a conviction at all costs.
Scarcely less remarkable and deplorable than this catalogue of misconduct, moreover, is the fact that, notwithstanding its emergence through the subsequent investigation, not a single one of the many police officers involved has since been disciplined or prosecuted for what he did.
The appellants post conviction admissions
For my part I have no doubt that the series of admissions which the appellant came to make to various bodies following his conviction constitutes compelling evidence upon which, certainly when taken together with the supporting evidence already summarised (para 70 above), a jury would be highly likely to find him guilty both of the two robberies and of Joe Smaless murder (although just possibly the verdict on that count could be one of manslaughter).
I must nevertheless briefly summarise this evidence to indicate the circumstances in which these admissions came to be made.
An altogether fuller account of all this can be found at paragraphs 68 81 of the Court of Appeals judgment below.
The appellants first recorded admission was made on 12 October 1998 to his then solicitor, retained to advise him on the appeal against conviction.
The solicitors file note records: To my great surprise Paul confessed that he and his brother did do the murder .
He explained that at no stage did he ever anticipate any injury would be caused to Mr Smales.
At the time of the murder, he was in fact inside the house, whilst his brother carried it out in the garden.
I told Paul that on the basis of what he had told me, I felt that he could have a possible appeal on the authority of R v English and R v Powell.
Told by his solicitor that he would have to prepare a detailed and persuasive confession for there to be any chance of a successful appeal, the appellant wrote a lengthy statement on 21 February 1999 detailing his involvement in both robberies and asking that the statement be placed on his prison file.
A Local Prison Assessment (Life Sentence Plan) Report noted on 24 February 1999 that the appellant: accepts the guilty part he played but states the deceased did not die at his hands and indeed admits that he used as much violence on the victim who survived as his brother did on the victim who died.
In February and March 2000 the Home Office sponsored a research project into offences committed against the old and vulnerable by offenders pretending to be officials.
In the course of this research, whilst Detective Chief Superintendent Steele of West Yorkshire Police was interviewing a number of convicted offenders, the appellant wrote to him on 9 February 2000 offering to assist the project and stating: As you are no doubt aware I am currently serving a life sentence for the murder of Joe Smales and the robbery of Joes brother Bert.
I initially denied these offences, however I now fully admit my guilt.
When the appellant was interviewed by Mr Steele and other officers on 2 March 2000, he admitted his involvement and explained how in relation to the October robbery he had used violence against Bert Smales whilst his brother had used violence against Joe.
An Initial Sentence Plan Summary prepared by the prison on 1 August 2000 included a note from the Sentence Management Unit stating: Maxwell admitted, for the first time outside confidential counselling, that he admitted the offence openly and despite finding it difficult to talk about, accepted culpability for the death of the victim.
He claims that he did not attack the victim who died, but in no way tried to minimise his role in the offence saying that he planned the robbery and was co perpetrator, so that made him just as guilty of the murder as his co accused.
This was a violent attack and Maxwell finally admits he attacked the surviving victim, probably more viciously than his co defendant attacked the murder victim.
A prison report dated 23 May 2001 noted that the appellant continued to accept responsibility for his crimes.
A prison probation officer reported on 11 January 2002: Mr Maxwell told me he is ashamed of what he did and although he claims not to have assaulted Joe Smales he admits to assaulting his brother.
He does not deny that his actions were instrumental in the death of Mr Smales and admits to planning the burglary and involving his brother in the crime.
Mr Maxwell told me he is appealing the conviction, not because he does not accept responsibility for the death of Mr Smales but because he does not think he and his brother were given a fair trial.
It is his hope he will be able to enter a guilty plea to manslaughter at a re trial.
In the course of the investigation by the North Yorkshire Police the appellant was interviewed on a number of occasions in relation to his admissions, several times maintaining that he had made false admissions of guilt out of expediency.
However, in a statement dated 14 September 2004 he said this: I now admit the robberies of the Smales brothers in June and October of 1996.
My brother was with me on both occasions.
No one else was present.
I was not involved in the death of Joe Smales and had no intention to cause serious injury to either of the brothers.
In a statement dated 23 September 2004 the appellant said: I would like a retrial and I would plead guilty to robbery and manslaughter.
The Law
The power of a criminal court to stay proceedings as an abuse of process in order to safeguard an accused person from injustice and oppression has long been recognised see, for example, Connelly v Director of Public Prosecutions [1964] AC 1254 and R v Humphrys [1977] AC1.
The more recent decision of the House of Lords in R v Horseferry Road Magistrates Court Ex p Bennett [1994] 1 AC 42, however, can be seen as the foundation of much of the modern law regarding the Courts approach to abuse of process applications, more particularly in cases where, as here, no question arises of the defendant being unable to receive a fair trial were the case against him to proceed.
Bennett concerned an appellant unlawfully brought to this country as a result of collusion between the South African and British police and on arrival here arrested and brought before magistrates to be committed for trial.
The House held by a majority of four to one that in those circumstances the English court should refuse to try the defendant.
For present purposes the following brief citations from the speeches will suffice: In the present case there is no suggestion that the appellant cannot have a fair trial, nor could it be suggested that it would have been unfair to try him if he had been returned to this country through extradition procedures.
If the court is to have the power to interfere with the prosecution in the present circumstances it must be because the judiciary accept a responsibility for the maintenance of the rule of law that embraces a willingness to oversee executive action and to refuse to countenance behaviour that threatens either basic human rights or the rule of law. (Lord Griffiths at pp 61 62) [T]he court, in order to protect its own process from being degraded and misused, must have the power to stay proceedings which have come before it and have only been made possible by acts which offend the courts conscience as being contrary to the rule of law.
Those acts by providing a morally unacceptable foundation for the exercise of jurisdiction over the suspect taint the proposed trial and, if tolerated, will mean that the courts process has been abused. (Lord Lowry at p76 C D) It may be said that a guilty accused finding himself in the circumstances predicated is not deserving of much sympathy, but the principle involved goes beyond the scope of such a pragmatic observation and even beyond the rights of those victims who are or may be innocent.
It affects the proper administration of justice according to the rule of law and with respect to international law. (Lord Lowry at p76 G)
Bennett was directly applied by the Court of Appeal (Criminal Division) in R v Mullen [2000] QB 520 where it was held that the British authorities, in securing Mullens deportation from Zimbabwe, had been guilty of a blatant and extremely serious failure to adhere to the rule of law with regard to the production of a defendant for prosecution in the English courts (p.535H) so that when, some eight years later, this came to light, his conviction fell to be quashed.
This was so, moreover, notwithstanding Mullens concession that he had been properly convicted by the jury and that, as Rose LJ giving the Courts judgment observed, The sentence of 30 years imprisonment reflects the gravity of the offence (involvement in an IRA conspiracy to cause explosions).
The principle which the court there derived from Bennett was that certainty of guilt cannot displace the essential feature of this kind of abuse of process, namely the degradation of the lawful administration of justice. (p534 C).
The Bennett principle was similarly applied in the context of entrapment in R v Latif [1996] 1 WLR 104 where, at pp112 113, Lord Steyn put it thus: The law is settled.
Weighing countervailing considerations of policy and justice, it is for the judge in the exercise of his discretion to decide whether there has been an abuse of process, which amounts to an affront to the public conscience and requires the criminal proceedings to be stayed .
The speeches in ex parte Bennett conclusively establish that proceedings may be stayed in the exercise of the judges discretion not only where a fair trial is impossible but also where it would be contrary to the public interest in the integrity of the criminal justice system that a trial should take place. in a case such as the present the judge must weigh in the balance the public interest in ensuring that those that are charged with grave crimes should be tried and the competing public interest in not conveying the impression that the court will adopt the approach that the end justifies any means.
Just how that approach should apply in any particular entrapment case was further considered by the House of Lords in R v Looseley [2001] 1 WLR 2060 which decided that to lure, incite or pressurise a defendant into committing a crime which he would not otherwise have committed would be unfair and an abuse of process but not so if the law enforcement officer, behaving as an ordinary member of the public would behave, had merely given the defendant an unexceptional opportunity to commit a crime of which he had freely taken advantage.
Although sometimes in such circumstances a stay is said to be on abuse of process grounds, Lord Hoffmann thought with Lord Griffiths in Bennett that the jurisdiction was more broadly and accurately described as a jurisdiction to prevent abuse of executive power. (p2073E)
This line of authority has since been followed in two much publicised Court of Appeal decisions: R v Early [2003] 1 Crim App.
R.288 (judgment of Rose LJ) and R v Grant [2006] QB 60 (judgment of Laws LJ).
Although both cases were cited and discussed at some length by the court below, I propose to consider them comparatively briefly.
Early concerned a number of appellants charged with fraud offences arising out of the improper diversion to the UK market of large quantities of duty suspended alcohol from bonded warehouses, some of 30 or 40 separate such scams involving the Inland Revenue in an overall loss of some 300m.
The defendants case was essentially that they had been encouraged and facilitated in their offending by customs officers working in collusion with the warehouse manager (one Allington, a registered informant), a defence therefore somewhat akin to entrapment.
Put very shortly, having failed in abuse of process applications following voir dire evidence from various customs officers and from Allington and others during lengthy PII and disclosure hearings, the defendants on advice pleaded guilty.
Subsequently Allington admitted having lied, lies which he said had been approved by Customs and for which he had received benefits.
Allowing the appeals, Rose LJ said (para 18): It is a matter of crucial importance to the administration of justice that prosecution authorities make full relevant disclosure prior to trial and that prosecuting authorities should not be encouraged to make inadequate disclosure with a view to defendants pleading guilty.
When inadequate disclosure is sought to be supported by dishonest prosecution evidence to a trial judge, this Court is unlikely to be slow to set aside pleas of guilty following such events, however strong the prosecution case might appear to be.
He then added, however, in the very next paragraph: In the ordinary way we would have ordered a retrial so that a trial judge, on the basis of honest evidence, could have had the opportunity of deciding about disclosure and about whether or not a stay should be granted.
However, as the appellant has already served his sentence and it is nearly six years since the offence is alleged to have taken place, we make no such order, as it would not be in the interests of justice to do so.
Those passages in the judgment related specifically to Earlys appeal; the other appellants appeals, however, were similarly disposed of.
In short, despite the courts understandably harsh condemnation of the misconduct there, but for the passage of time it would nevertheless have ordered a re trial to see whether in truth the case was one of entrapment.
In Grant [2006] QB 60, the appellant had been convicted of conspiracy to murder, his wifes lover having been shot dead whilst answering a knock at the door.
The appellants case on appeal was that the trial judge should have allowed his abuse of process application and stayed the prosecution because of police misconduct: following the appellants arrest the police had deliberately eavesdropped upon and tape recorded privileged conversations between him and his solicitor in the police station exercise yard.
Notwithstanding that this eavesdropping had in no way prejudiced the appellants trial, his appeal was allowed and his conviction quashed.
The Court of Appeal said this: True it is that nothing gained from the interception of solicitors communications was used as or (however indirectly) gave rise to evidence relied on by the Crown at the trial.
Nor, as we understand it, did the intercepts yield any material which the Crown might deploy to undermine the defence case.
But we are in no doubt but that in general unlawful acts of the kind done in this case, amounting to a deliberate violation of a suspected persons right to legal professional privilege, are so great an affront to the integrity of the justice system, and therefore the rule of law, that the associated prosecution is rendered abusive and ought not to be countenanced by the court. (para 54) Where the court is faced with illegal conduct by police or State prosecutors which is so grave as to threaten or undermine the rule of law itself, the court may readily conclude that it will not tolerate, far less endorse, such a state of affairs and so hold that its duty is to stop the case. (para 56) We are quite clear that the deliberate interference with a detained suspects right to the confidence of privileged communications with his solicitor, such as we have found was done here, seriously undermines the rule of law and justifies a stay on grounds of abuse of process, notwithstanding the absence of prejudice consisting in evidence gathered by the Crown as the fruit of police officers unlawful conduct. (para 57) It may be noted that the Court of Appeal later certified the following point of law of general public importance in the case: Where an accused person has been properly arrested and brought before the court but during the course of the investigation there is significant impropriety by some or all of the investigating officers in relation to the accused person, but the evidence that will be presented to the court is untainted by such impropriety so that the accused person can have a fair trial, when considering the interests of all parties, including the victim of the crime, is the greater public interest in having the accused person tried, it therefore being fair to try him, or in staying the indictment which is therefore a method of disciplining the investigating authority thereby overriding the rights of the victim? Whether the House of Lords then refused leave to appeal or the Crown chose not to pursue an appeal we have not been told.
But I have to say that for my part I have the gravest doubts as to the correctness of the courts decision in Grant.
True it is that Lord Taylor of Gosforth CJ had described legal professional privilege in R v Derby Magistrates Court, Ex p B [1996] AC 487, 507 as much more than an ordinary rule of evidence, limited in its application to the facts of a particular case.
It is a fundamental condition on which the administration of justice as a whole rests.
But that is not to say that its every violation must result in a quashed conviction.
The law against perjury may equally be described as fundamental to the whole administration of justice but no one has ever suggested that perjury by a prosecution witness (even a police officer) must in all circumstances, irrespective of whether it prejudices the defendant, necessarily preclude a defendants conviction or, if discovered later, result in its quashing.
Deeply regrettable though police perjury must always be, the law reports are replete with examples of convictions nonetheless being upheld on appeal on the basis that, the perjured evidence (sometimes in relation to purported confessions statements) aside, ample evidence remains to sustain the convictions safety.
The Court of Appeal in the present case distinguished Grant on the basis that, [w]hilst helpful to the appellants, it should be remembered that Grant involved, as Laws LJ said, a deliberate violation of a fundamental condition on which the administration of justice as a whole rests: para 62.
I too would distinguish Grant from the present case but on the very different basis that the police misconduct there constituted an altogether lesser, rather than a materially greater, threat to the administration of justice than the prolonged prosecutorial misconduct here misconduct without which this appellant would never have been prosecuted or convicted in the first place.
All the cases I have been considering are cases where, whatever executive or prosecutorial misconduct may have occurred in the past, there is no impediment to a fair trial of the defendant in future.
The central question for the Court in all these cases is as to where the balance lies between the competing public interests in play: the public interest in identifying criminal responsibility and convicting and punishing the guilty on the one hand and the public interest in the rule of law and the integrity of the criminal justice system on the other.
Which of these interests is to prevail? It is, of course, as the cases show, a question which may arise in a number of different circumstances.
It may arise before trial or in the course of trial, where the question for the court is whether or not to grant a stay and so halt the process short of verdict.
Or it may arise on appeal against conviction when the question for the court is, first, should the conviction be quashed, and, if so, secondly, as in the present case, should a re trial be ordered.
In each case, as it seems to me, the question is the same: what do the interests of justice require (the interests of justice, of course, clearly encompassing both the conflicting public interests in play)?
As the court below noted, not long ago the Privy Council in Panday v Virgil [2008] 1 AC 1386 had occasion to consider this area of the law, including in particular what may be called the wrongful extradition and entrapment cases, in the context of a disputed order for a fresh trial following the quashing of the appellants conviction by the Trinidad and Tobago Court of Appeal the conviction there having been quashed for apparent (although, for the purposes of the further appeal to the Board, assumed actual) bias.
In the course of giving the Boards judgment dismissing the appeal I said this (at para 28): It will readily be seen that the factor common to all these cases, indeed the central consideration underlying the entire principle, is that the various situations in question all involved the defendant standing trial when, but for an abuse of executive power, he would never have been before the court at all.
In the wrongful extradition cases the defendant ought properly not to have been within the jurisdiction; only a violation of the rule of law had brought him here.
Similarly, in the entrapment cases, the defendant only committed the offence because the enforcement officer wrongly incited him to do so.
True, in both situations, a fair trial could take place, but, given that there should have been no trial at all, the imperative consideration became the vindication of the rule of law.
In that case, however, there was no question of the appellant not having been properly before the court at all.
As we said: the quashing of his conviction restores the defendant to the position he was in before the unfair trial.
Why should his success gain him immunity from what is conceded to be the position he now faces under the Court of Appeals order: a fair trial upon charges properly brought? We therefore upheld the order for a retrial.
In the great majority of cases apart, of course, from those like the wrongful extradition and entrapment cases where the defendant would not have stood trial at all but for the violation of the rule of law which had brought him before the court in the first place that would seem to me the appropriate outcome.
The balance will ordinarily fall in favour of the fair trial of those rightly charged with serious crimes rather than in favour of the suspects absolute discharge from the criminal justice system supposedly in the wider interests of the integrity of that system as a whole.
All that said, however, I have come to the conclusion that on the particular facts of the present case the balance falls the other way.
In a real sense, indeed, this case can be seen to come within the same category of but for situations as the wrongful extradition and entrapment cases: but for the prosecutorial misconduct which initially secured the appellants conviction and then ensured the failure of his appeal, he would never have made the series of admissions upon the basis of which it is now sought to prosecute him afresh.
There can be little doubt that these admission statements were made generally with a view to advancing the appellants interests following conviction.
For the most part it seems that he made them in the hope that his murder conviction would be replaced by a conviction for manslaughter, but perhaps also in the hope of appearing contrite and securing his earlier release on parole.
Either way, the likelihood is that were a trial now to take place and a conviction to be obtained on the basis of these admissions, those responsible for corrupting the original process would still be seen thereby to have achieved their ends and in the long term to have engineered the appellants conviction.
That to my mind is the critical consideration in this case.
The court should be astute to avoid giving the impression that it is prepared, even in this limited way, to condone such unforgivable executive misconduct as occurred here.
It is essentially on this narrow basis that for my part I would allow the appeal here.
Had, say, the appellant unambiguously confessed his guilt, not before but after successfully overturning his original conviction, I would see no objection whatever to an order for his retrial on the basis of new and compelling evidence pursuant to Part 10 of the Criminal Justice Act 2003.
In such circumstances it would obviously not then be open to the defence to suggest that realistically the confession was the product of the executives misconduct.
In this context I should perhaps say a word about the emphasis given by the court below to their view that the appellants post conviction admissions here did indeed constitute new and compelling evidence within the meaning of the 2003 Act.
As Mr Perry QC for the Crown rightly points out, that concept is not to be found in section 7(1) of the Criminal Appeal Act 1968 itself the section specifically providing for the possibility of a retrial on the quashing of a conviction (see para 62 above).
Indeed, it is plain that a retrial will often be appropriate without any of the evidence upon which it is proposed to base it being new and compelling. (In deciding whether a person should be retried, the so called double jeopardy principle clearly carries altogether less weight when the decision arises on the same occasion as the conviction is being quashed than when it arises subsequently i.e. following acquittal either by the jurys verdict or by an earlier successful appeal.) To my mind, however, where, as here, the question whether the interests of justice require a retrial arises in the context of a conviction quashed because of serious executive misconduct, it will always be relevant and may on occasion be decisive to consider whether indeed new and compelling evidence of guilt exists.
This will be so in cases where, despite the but for test not being satisfied (as I judge it to be satisfied here), a balance nevertheless has to be struck between the competing interests in play.
In cases of this sort the nature and extent of the executive misconduct will obviously be highly relevant.
But so too will a number of other considerations including not least the seriousness of the defendants alleged criminality and the strength of the case against him and that will be so no less when an abuse of process application is being made before or during trial than when the question arises on appeal.
It therefore seems to me understandable that in the present case, the extent of police misconduct notwithstanding, the Court of Appeal placed very considerable weight not only upon the gravity of the appellants offending but also upon the strength of the fresh evidence now available against him (although more countervailing importance might perhaps have been attached to the length of time he had already spent in prison as in Early (see para 94 above) and, indeed, to the disparity of outcome of the appeal as between the appellant and his brother).
Certainly, had this not been what I regard as akin to a but for case, I would not myself have been inclined to overturn the judgment below merely by reference to the general question whether the appellants retrial can now properly be regarded to be in the public interest.
Given, however, the but for character of this case and the enormity of the unpunished police misconduct involved, it seems to me quite simply inappropriate that it should now be retried on fresh evidence.
Of course the crime was a grave one.
But so too was Mullens crime.
Unless one is to say that in relation to serious crimes the but for approach is to apply only in the context of wrongful extradition, it is difficult to think of any case where the stay principle would properly be invoked if not here.
Exceptionally, therefore, I would in this case regard the Court of Appeal as having erred in law in their approach to the section 7 power.
I should at this stage note that in the course of argument counsel introduced the Court to a good deal of international jurisprudence and academic commentary on the whole question of abuse of process applications.
I shall not, however, dwell on this: none of it seemed to me especially helpful.
Take the line of Canadian authority, culminating in the Supreme Courts judgments (five justices in the majority, four dissenting) in R v Regan [2002] 1 SCR 297, urged upon us by Mr Perry for the Crown.
I confess to sharing the view about Regan expressed by H A Kaiser in a 2002 article (49 Crim Reps (5th) 74, 85 86) noted by Professor Andrew L T Choo in the second edition (2008) of his work, Abuse of Process and Judicial Stays of Criminal Proceedings, at p132 that: Neither [the majority nor the minority] judgment advances the comprehensibility and predictability of abuse of process and stays of proceedings, especially with regard to the residual category of cases where trial fairness is not implicated. (Though it was perhaps a little harsh of Mr Kaiser at the outset of his article, p74, to describe the judgments in Regan as the Courts recent meanderings.)
So far as this countrys approach is concerned, Professor Choos conclusion (p132) is that: The courts would appear to have left the matter at a general level, requiring a determination to be made in particular cases of whether the continuation of the proceedings would compromise the moral integrity of the criminal justice system to an unacceptable degree.
Implicitly at least, this determination involves performing a balancing test that takes into account such factors as the seriousness of any violation of the defendants (or even a third partys) rights; whether the police have acted in bad faith or maliciously, or with an improper motive; whether the misconduct was committed in circumstances of urgency, emergency or necessity; the availability or otherwise of a direct sanction against the person(s) responsible for the misconduct; and the seriousness of the offence with which the defendant is charged.
It is difficult to disagree.
It may however be possible and helpful to summarise the position a little more specifically as follows. (1) Whenever, executive misconduct notwithstanding, it remains possible to ensure that the defendant can be fairly tried (or, as the case may be, retried), this ordinarily is the result for which the court should aim, making whatever orders short of a permanent stay are necessary to achieve it (or as the case may be, by ordering a retrial). (2) In certain particular kinds of case, however, the but for cases as I have sought to describe and categorise them, even though it would be possible to try (or retry) the defendant fairly, it will usually be inappropriate to do so.
It will be inappropriate essentially because, but for the executive misconduct, either there would never have been a trial at all (as in the wrongful extradition and entrapment cases) or (as in the present case) because the situation would never have arisen whereby the all important incriminating evidence came into existence (which is not, of course, to say that the fruit of the poison tree is invariably inadmissible).
Obviously this is not an exhaustive definition of the but for category of cases and, as the word usually is intended to denote, whether in any particular case a trial (or retrial) has in fact become inappropriate may still depend in part on other considerations too.
Essentially, however, it is the executive misconduct involved in this category of cases which, I suggest, most obviously threatens the integrity of the criminal justice system and where a trial (or retrial) would be most likely to represent an affront to the public conscience. (3) Exceptionally, even in cases of executive misconduct not within the but for category, it may be that the balance will tip in favour of a stay (or, as the case may be, a quashed conviction with no order for retrial), notwithstanding that a fair trial (retrial) remains possible.
With regard to cases of this sort, and as to whether (in Professor Choos language) a trial (retrial) would unacceptably compromise the moral integrity of the criminal justice system, a whole host of considerations is likely to be relevant, including most obviously those which Professor Choo himself lists.
I repeat, however, in my judgment only exceptionally will the court regard the system to be morally compromised by a fair trial (retrial) in a case which cannot be slotted into any but for categorisation.
The risk of the court appearing to condone the misconduct (appearing to adopt the approach that the end justifies the means) prominent in the but for category of cases, is simply not present in the great majority of abuse cases.
Rather, as the Board put it in Panday v Virgil [2008] 1 AC 1386, executive misconduct ought not generally to confer on a suspect immunity from a fair trial (or retrial).
Beyond this general statement of what I believe to be the governing principles in play it is not, I think, possible to go.
For the reasons given earlier in this judgment, however, for my part I would allow this appeal and quash the Court of Appeals order for the appellants retrial.
LORD COLLINS
I agree with Lord Brown that the appeal should be allowed.
Public confidence that the police will act properly and lawfully is one of the cornerstones of democracy.
Without proper police conduct and without public confidence in the honesty of the police, the rule of law and the integrity of the criminal justice system would be seriously undermined.
The certified point of law is whether the Court of Appeal may order a re trial having quashed a conviction on the grounds of serious executive or prosecutorial misconduct, and, if so, in what circumstances.
There is no doubt about the answer to the first part of the question since section 7(1) of the Criminal Appeal Act 1968 gives a discretion to the Court of Appeal to order a re trial if it appears to the Court that the interests of justice so require.
It is not suggested that in the present case the Court of Appeal took into account any irrelevant or impermissible factors, or failed to take into account relevant factors.
The only question is whether in the light of all the circumstances the misconduct is such that the Court of Appeal could have been justified in deciding that the interests of justice required a re trial.
At trial DC Daniels and DC Dunham perjured themselves.
Each of them told the court that all payments to Chapman had been disclosed.
Each of them told the court that Chapman had been quarantined from the case officers.
In 1999 the full Court of Appeal (Criminal Division) adjourned the applications for leave to appeal against conviction to enable the Crown to respond to the grounds of appeal alleging non disclosure, in particular that Chapman had been promised a substantial sum to establish a new identity as part of his reward for giving information and evidence against Maxwell and Mansell.
On the day of the substantive hearing, after hearing evidence on an ex parte PII hearing, the court ruled that it was satisfied that when Chapman came to give evidence in the trial he had no expectation of reward, and consequently his evidence was not tainted in that regard.
That ruling was procured by false evidence.
Two letters were written to the Court of Appeal by senior police officers after consultation with the officers closely involved with the case.
The first letter stated: No discussions were ever made [sic] concerning any monies to be paid to [Chapman] for giving evidence in the Maxwell/Mansell trial.
The second letter stated: A reward of 10,000 was agreed by the West Yorkshire Police Command Team without discussion with Chapman, to be paid after completion of his sentence The Crowns skeleton argument for the Court of Appeal stated: Neither the Crown prosecution Service nor the Police Officers in the case were aware of any reward being paid to Mr Chapman for his evidence in this case.
Detective Sergeant Gray gave evidence that the decision to pay the 10,000 reward to Chapman had been reached without consultation with Chapman and more than a year after he had last given evidence at the trial; and that when Chapman had given his evidence he was not aware of any factor which might have affected the content or quality of his evidence.
Chief Superintendent Holt confirmed that before Chapman gave his evidence there was no discussion or agreement with him in relation to any reward or any benefit for his involvement in this case.
He also gave evidence that he had no idea when the agreement for a reward had been arrived at.
In fact the police had communicated to Chapman their intention to make a substantial payment to him for his co operation in the Yew II investigation (an operation in relation to his allegations against a man called Ford, Maxwell, Mansell, and others) once he had been released from prison.
In addition, as a result of the investigation by the North Yorkshire Police, it turned out that: (1) As a result of his co operation with the police, Chapman and other members of his family received benefits which were concealed from the CPS and counsel. (2) Whilst in police custody Chapman was permitted to visit a brothel, to engage in sexual relations with a woman police constable, to visit public houses, to consume alcohol, cannabis and heroin, to socialise at police officers homes, to enjoy unsupervised periods of freedom, and long periods of leisure in places of his choice as exercise. (4) Luxury items were purchased for him and substantial sums handed to him in cash. (5) He was not proceeded against in respect of a number of violent incidents, including a vicious attack on a fellow prisoner; an alleged rape of his cellmate; an assault in November 1999 on the WPC from whom by then he had split up. (6) Police officers ensured that his police custody records presented a false picture of the facts, and forged a custody record when its enforced disclosure to the defence would otherwise have revealed the truth. (7) Police officers colluded in Chapmans perjury at that trial, intending him throughout his evidence to lie as to how he had been treated and as to what promises he had received, and they lied in their responses to enquiries made of the CPS after conviction.
Of course, the power not to order a re trial should not be used as a form of discipline.
But the interests of justice are not limited to the individual case.
The police misconduct must be seen in the wider context of the preservation of the rule of law, and of public confidence in the criminal justice system.
This is an extreme case.
The murder was indeed a shocking crime.
In my judgment, the level of misconduct is such that the interests of justice demand that, after a conviction procured by such misconduct, and after the accused has served a substantial sentence, and would not have made the admissions but for the conviction so procured, there be no retrial.
I would find that the interests of justice demand the application of the integrity principle.
In this case it means that there should be no re trial on evidence which would not have been available but for a conviction obtained (and upheld) as a result of conduct so fundamentally wrong that for the criminal process to act on that evidence would compromise its integrity.
| The issue in this appeal is whether the Court of Appeal was right to order a retrial in respect of the appellant.
The circumstances in which a court may order a retrial are set out in section 7(1) of the Criminal Appeal Act 1968, as amended by the Criminal Justice Act 1988, which provides: Where the Court of Appeal allows an appeal against conviction and it appears to the Court that the interests of justice so require, they may order the appellant to be retried.
The appellant and his brother were convicted of murder and two robberies at Leeds Crown Court on 27 February 1998.
The appellant was sentenced to life imprisonment for murder to be served with concurrent twelve year terms for the robberies.
The main prosecution witness was Karl Chapman, a professional criminal and a supergrass.
On 11 June and 13 October 1996 robberies took place at the home of two elderly brothers.
On both occasions the robbers used violence and took money.
On the second occasion, the elder brother sustained injuries to the head which later resulted in his death.
In the ensuing police investigation Chapman provided the police with information and witness statements implicating the appellant and his brother.
They were charged with robbery and murder.
Chapmans evidence was central to the prosecutions case at trial.
He vigorously denied that he was expecting or receiving any benefits from the police for his evidence.
Following the convictions there were allegations in the local press that the police were planning to pay Chapman a large sum of money upon his release from prison.
Subsequently, the Criminal Cases Review Commission (CCRC) decided to investigate.
North Yorkshire Police carried out detailed investigations into the activities of the police which formed the basis of the CCRC report in November 2008.
The findings of the report showed that the police had conspired to pervert the course of justice in concealing and lying about a variety of rewards and benefits received by Chapman.
It was revealed, for example, that the police had paid him sums of money, taken him to brothels, allowed him to consume drugs in their company and not investigated allegations that he had committed violent attacks.
On 25 November 2008 the CCRC made a reference to the Criminal Division of the Court of Appeal on the ground that the convictions had been procured by gross prosecutorial misconduct on the part of the police.
The appellant and his brother remained in prison during this period.
Between October 1998 and September 2004, whilst in prison, the appellant had made a series of admissions of guilt freely and voluntarily to various persons.
On 1 December 2009, the Court of Appeal quashed the convictions of the appellant and his brother.
The findings of the CCRC relating to the gross police misconduct were not challenged.
The court held that had the findings been revealed during the trial, the trial judge might have stayed the prosecution as an abuse of process or applied section 78 of the Police and Criminal Evidence Act 1984 to exclude Chapmans evidence altogether, in which case the appellant and his brother would have been acquitted.
However, the court also held that the admissions made by the appellant between 1998 and 2004 constituted clear and compelling evidence of his guilt.
In light of this the Court of Appeal found that it was in the interests of justice to order a retrial of the appellant.
The Supreme Court dismisses the appeal by a majority of 3:2.
Lord Dyson gives the lead judgment.
Lords Rodger and Mance give short concurring judgments.
Lords Brown and Collins dissent.
On 17 November 2010 the Supreme Court handed down its decision but withheld its reasoning until the completion of the retrial.
On 16 June 2011, in Leeds Crown Court Paul Maxwell pleaded guilty.
By section 7 of the Criminal Appeal Act 1968, as amended, Parliament has given the Criminal Division of the Court of Appeal the power to order a retrial where, having regard to all the circumstances of the particular case, in its view the interests of justice so require.
The interests of justice is not a hard edged concept.
Rather, it requires an exercise of judgment in which a number of relevant factors have to be balanced against each other.
A decision of the Court of Appeal as to whether the interests of justice require a retrial should only be upset on appeal if it was plainly wrong in the sense that it is one which no reasonable court could have made or if the court took into account immaterial factors or failed to take into account material factors: [18] [19].
The majority of cases under section 7 of the 1968 Act do not involve any issue of prosecutorial misconduct.
Indeed, no case was cited where the court had to consider the relevance of prosecutorial misconduct in the original proceedings to the question of whether the interests of justice require a retrial.
Usually, under section 7 the court will consider the gravity of the offence, the length of time the appellant is likely to serve in custody if reconvicted, the appellants age and health, and the wishes of the victim of the alleged offence: [20].
Where prosecutorial misconduct is involved the Court of Appeal may treat the case as to some extent analogous to an application to stay proceedings as an abuse of process where it offends the courts sense of justice and propriety to try the accused.
However, the tests for when the court should stay proceedings for abuse of process and when it should order a retrial are not coterminous.
The question of whether the interests of justice require a retrial is broader than the considerations involved in an application for a stay: [21], [44].
It is common ground that the prosecutions case at a retrial would not be based on any evidence which was the product of the misconduct.
However, the new evidence constitutes admissions made by the appellant which would not have been made but for the original misconduct which led to his conviction.
The Court of Appeal was right to consider that the but for factor was no more than a relevant factor and that it was not determinative of the question whether a retrial was required in the interests of justice.
In deciding whether to order a retrial, there were several relevant factors which had to be weighed in the balance.
The balancing act is fact sensitive and ultimately requires an exercise of judgment.
The Court of Appeal carried out the balancing exercise precisely and with great care.
They held that there were strong reasons for not ordering a retrial given the egregious misconduct by the police.
However, they concluded that the public interest in convicting those guilty of murder prevailed on the facts of this case.
In particular this was because of the gravity of the alleged offence and the existence of new and compelling evidence untainted by the police misconduct.
The fact that a differently constituted Court of Appeal might have come to a different conclusion is not material.
Accordingly, the decision of the Court of Appeal was not plainly wrong and its judgment should not be interfered with: [23] [38], [45] [47], [50] [60].
Lord Brown, with whom Lord Collins agrees, would have allowed the appeal.
They would have held that since the appellant would not have made the admissions but for the prosecutorial misconduct and in light of the enormity of the police misconduct, it is inappropriate that that the case should be retried on new evidence: [102] [105].
|
On 11 September 2014, the Cleveland Meat Company Ltd (CMC) bought a live bull at the Darlington Farmers Auction Mart for 1,361.20.
The bull was passed fit for slaughter by the Official Veterinarian (OV) stationed at CMCs slaughterhouse.
It was assigned a kill number of 77 and slaughtered.
A post mortem inspection of both carcass and offal was carried out by a Meat Hygiene Inspector (MHI), who identified three abscesses in the offal.
The offal was not retained.
Later that day, the OV inspected the carcass and, after discussion with the MHI, declared the meat unfit for human consumption, because pyaemia was suspected.
Accordingly, the carcass did not acquire a health mark certifying that it was fit for human consumption.
The consequence of this was that it would have been a criminal offence for CMC to seek to sell the carcass (under regulation 19 of the Food Safety and Hygiene (England) Regulations 2013 (the Food Hygiene Regulations)).
CMC took the advice of another veterinary surgeon and challenged the OVs opinion.
It claimed that, in the event of a dispute and its refusal to surrender the carcass voluntarily, the OV would have to seize the carcass under section 9 of the Food Safety Act 1990 (the 1990 Act) and take it before a Justice of the Peace to determine whether or not it ought to be condemned.
The Food Standards Agency (FSA) replied that there was no need for it to use such a procedure.
Having been declared unfit for human consumption by the OV, the carcass should be disposed of as an animal by product.
On 23 September 2014, the OV, acting for the FSA, served on CMC a notice for the disposal of the carcass as an animal by product (the disposal notice) (under regulation 25(2)(a) of the Animal By Products (Enforcement) (England) Regulations 2013 (the Animal By Products Regulations) and Regulation (EC) No 1069/2009).
The disposal notice informed CMC that failure to comply with the notice could result in the Authorised Person under the Regulations arranging for compliance with it at CMCs expense and that it was an offence to obstruct an Authorised Person in carrying out the requirements of the notice.
The disposal notice also stated: You may have a right of appeal against my decision by way of judicial review.
An application for such an appeal should be made promptly and, in any event, generally within three months from the date when the ground for the application first arose.
If you wish to appeal you are advised to consult a solicitor immediately.
These judicial review proceedings are brought by the Association of Independent Meat Suppliers, a trade association acting on behalf of some 150 slaughterhouses, and CMC (the claimant appellants) to challenge the FSAs assertion that it was unnecessary for it to use the procedure set out in section 9 of the 1990 Act and to claim in the alternative that it is incumbent on the United Kingdom to provide some means for challenging the decisions of an OV in such cases.
They failed in the High Court and Court of Appeal and now appeal to this Court.
There are three main issues in the proceedings.
The issues in the case
The first revolves around an issue of domestic law.
Is the procedure contained in section 9 of the 1990 Act available in these circumstances and does it have to be used by the OV or the FSA, if the carcass owner refuses to surrender the carcass voluntarily, so as to afford the carcass owner a means of challenging decisions of the OV with which it disagrees? The Food Hygiene Regulations provide that section 9 is to apply for the purpose of those Regulations.
Under section 9, if it appears to an authorised officer of an enforcement authority such as the FSA that food intended for human consumption fails to comply with food safety requirements, he may seize the food and remove it in order to have it dealt with by a Justice of the Peace (who may be either a lay magistrate or a legally qualified District Judge, but who will be local to the slaughterhouse and readily accessible at all hours).
If it appears to the Justice of the Peace, on the basis of such evidence as he considers appropriate, that the food fails to comply with food safety requirements, he shall condemn it and order it to be destroyed at the owners expense.
If he refuses to condemn it, the relevant enforcement authority must compensate the owner for any depreciation in its value resulting from the officers action.
Under section 8(2), food fails to comply with food safety requirements if it is unsafe within the meaning of article 14 of Regulation (EC) No 178/2002: ie injurious to health or unfit for human consumption (see para 12 below).
The procedure in section 9 of the 1990 Act is not framed in terms of an appeal from the OVs decision.
It sets out a procedure whereby an officer of a food authority or an enforcement authority can refer the question of destruction of a carcass to a Justice of the Peace for decision.
Normally, we are told, the owner accepts the OVs decision that an animal is not fit for human consumption and voluntarily surrenders it.
But if the owner does not, the claimant appellants say that this procedure provides both (i) a way in which the OV or the FSA can take enforcement action consequent upon the OVs decision and (ii) a means whereby the owner can subject that decision to judicial scrutiny and ask the Justice of the Peace to decide whether or not the carcass did in fact comply with the food safety requirements.
They accept that the Justice of the Peace cannot order the OV to apply a health mark.
However, they argue that the OV can be expected to respect the decision and apply a health mark accordingly.
Further, compensation may be payable under the 1990 Act if the Justice of the Peace refuses to condemn the carcass.
In the claimant appellants view, this procedure has been part of the United Kingdoms food safety regime since the 19th century, and continues to operate under the European Unions food safety regime contained in the suite of Regulations coming into force in 2006.
The FSA agrees that the procedure under section 9 of the 1990 Act would be available to it as one possible means of enforcement if the operator of a slaughterhouse attempted to introduce into the food chain an animal carcass which had not been given a health mark by an OV.
However, it does not accept that this procedure would be suitable, still less obligatory, to resolve a dispute as to whether the carcass is or is not fit for human consumption.
A Justice of the Peace has no power to order an OV to apply a health mark and, moreover, the FSA says that he would have no power under section 9 to do anything other than condemn for disposal a carcass bearing no such mark.
Although not raised by the FSA in argument, the Court observes that it would be open to the operator of a slaughterhouse such as CMS to bring judicial review proceedings in the High Court to challenge the OVs decision that the meat of a carcass was unfit for human consumption, and thus to deny a health mark, or to quash a disposal notice.
The High Court may quash a decision of an OV on any ground which makes the decision unlawful, including if he acts for an improper purpose, fails to apply the correct legal test or if he reaches a decision which is irrational or has no sufficient evidential basis.
The High Court does occasionally hear oral evidence and make mandatory orders, and has power to award compensation for breaches of the rights under the European Convention on Human Rights (ECHR).
However, contrary to what was said in the notice quoted in para 3 above, judicial review is not an appeal on the merits of the decision.
The main reason advanced by the FSA why the section 9 procedure is not also applicable is that such a procedure, operated in the way the claimant appellants say that it can be operated, in effect as an appeal against the merits of the OVs decision, would be incompatible with the regime contained in the suite of EU food safety Regulations which came into force in the United Kingdom in 2006.
Hence, the second issue is whether use of the procedure in section 9 of the 1990 Act is compatible with the food safety regime laid down by European Union law, specifically by Regulation (EC) No 852/2004 on the hygiene of foodstuffs; Regulation (EC) No 853/2004 laying down specific hygiene rules for food of animal origin; Regulation (EC) No 854/2004 laying down specific rules for the organisation of official controls on products of animal origin intended for human consumption; Regulation (EC) No 882/2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules; and Regulation (EC) No 1069/2009 on health rules as regards animal by products.
Also relevant is the prior Regulation (EC) No 178/2002 laying down the general principles and requirements of food law.
The third issue is whether Regulation (EC) No 882/2004 mandates an appeal procedure and if so whether such an appeal should be capable of challenging the OVs decision on the full factual merits or whether the more limited scope of challenge involved in judicial review of the OVs decision and of a disposal notice as referred to above is sufficient to comply with the requirements of Regulation (EC) No 882/2004.
Relevant European Union Law
Under article 2 of Regulation (EC) No 178/2002, food means any substance or product intended to be, or reasonably expected to be ingested by humans.
It is common ground between the parties that carcass 77 was food when it was slaughtered and remained so after the OV formed the opinion that it was unfit for human consumption and declared it as such.
Article 14 of Regulation (EC) No 178/2002 provides that food shall not be placed on the market if it is unsafe.
Food is deemed unsafe if it is considered to be (a) injurious to health, (b) unfit for human consumption.
Article 5.1 of Regulation (EC) No 853/2004 provides that food business operators (FBOs) such as slaughterhouses shall not place on the market a product of animal origin unless it has a health mark applied in accordance with Regulation (EC) No 854/2004 (or an identification mark if a health mark is not required by the latter Regulation).
Regulation (EC) No 854/2004 lays down specific rules for the organisation of official controls on products of animal origin (article 1.1).
The application of the official controls which it requires is without prejudice to the primary legal responsibility of FBOs to ensure food safety under Regulation (EC) No 178/2002 (article 1.3).
The controls are of several types.
Article 4, for example, deals with official controls to verify an FBOs general compliance with the Regulations, including detailed audits of good hygiene practices.
Article 5 requires member states to ensure that official controls with respect to fresh meat take place in accordance with Annex I.
Under article 5.1, the OV is to carry out inspection tasks in, inter alia, slaughterhouses in accordance with the general requirements of section I, Chapter II of Annex I and the specific requirements of section IV.
Under article 5.2, the health marking of domestic ungulates, such as cattle, is to be carried out in slaughterhouses in accordance with section I, Chapter III of Annex I; the criterion for applying health marks is stated thus: Health marks shall be applied by, or under the responsibility of, the official veterinarian when official controls have not identified any deficiencies that would make the meat unfit for human consumption.
Annex I lays down detailed rules about ante mortem and post mortem inspections, how they are to be done and by whom, the application of health marks and the communication of results.
Chapter IV of section III lays down detailed requirements for the qualifications and skills of Official Veterinarians and their auxiliaries (such as MHIs).
Regulation (EC) No 854/2004 does not define official controls nor does it lay down any specific enforcement measures or sanctions for non compliance with the controls which it mandates.
Article 1.1a provides that it applies in addition to Regulation (EC) No 882/2004 and article 2.2(b)(a) provides that the definitions in Regulation (EC) No 882/2004 shall apply as appropriate.
Regulation (EC) No 882/2004 lays down general rules for the performance of official controls for a variety of purposes, including preventing risks to humans and animals and protecting consumer interests in the feed and food trade (article 1.1).
It is without prejudice to specific Community provisions concerning official controls (article 1.3).
Official control means any form of control that the competent authority or the Community performs for the verification of compliance with feed and food law, animal health and animal welfare rules (article 2.1).
Non compliance means non compliance with feed or food law, and with the rules for the protection of animal health and welfare (article 2.10).
Recitals (41) and (42) to Regulation (EC) No 882/2004 state, inter alia, that breaches of food law may constitute a threat to human health and therefore should be subject to effective, dissuasive and proportionate measures at national level, including administrative action by competent authorities in the member states.
Recital (43) states: Operators should have a right to appeal against the decisions taken by the competent authority as a result of the official controls, and be informed of such a right.
The Court notes that in the French language version of the Regulation the relevant phrase used is Les exploitants devraient avoir un droit de recours and in the German language version Unternehmer sollten Rechtsmittel einlegen knnen .
Title VII of Regulation (EC) No 882/2004 deals with enforcement measures and Chapter I is concerned with national enforcement measures.
Article 54.1 requires the competent authority, when it identifies non compliance, to take action to ensure that the operator remedies the situation.
In deciding what action to take it shall take account of the nature of the non compliance and that operators past record with regard to non compliance.
Article 54.2 gives a non exhaustive list of the measures which must be available where appropriate.
These include (b) the restriction or prohibition of the placing on the market of food; (c) if necessary, ordering the recall, withdrawal and/or destruction of food; and (h) any other measure the competent authority deems appropriate.
Article 54.3 requires the competent authority to provide the operator concerned with written notification of its decision and the reasons for it and information on rights of appeal against such decisions and on the applicable procedure and time limits.
The Court notes that in the French language version this text appears as des informations sur ses droits de recours contre de telles decisions, ainsi que sur la procedure et les dlais applicables and in the German language version the phrase sein Widerspruchsrecht is used.
Article 55 requires member states to lay down the rules on sanctions applicable to infringements of feed and food law and to take all measures necessary to ensure that they are implemented.
The sanctions provided for must be effective, proportionate and dissuasive.
The parties arguments
The claimant appellants argue that the procedure in section 9 of the 1990 Act is applicable in cases such as this and is not incompatible with the regime laid down by the EU Regulations; indeed it or something like it is contemplated by the terms of article 54 of Regulation (EC) No 882/2004.
In summary, they assert that: (1) The section 9 procedure was applied during the very similar regime adopted pursuant to the EU Directives before the coming into force of the suite of Regulations referred to above.
There is no evidence that this caused any practical difficulties.
If it was not thought inconsistent with that regime, there is no reason to think it inconsistent with the current regime.
Indeed, in 2006, when the Regulations came into force, the Meat Hygiene Service Manual of Official Controls stated (and continued to state until shortly before these proceedings began) that where the OV was not satisfied that the meat was fit for human consumption and voluntary surrender was not forthcoming, the OV must seize the food under section 9 and take it before a Justice of the Peace for it to be condemned.
At the very least, this is an indication of past practice under the very similar regime which preceded the current EU Regulations and of what the FSA, as competent authority, initially thought the position to be under the Regulations. (2) The official controls in Regulation (EC) No 854/2004 are in addition to the more general provisions in Regulation (EC) No 882/2004.
They are specific to food of animal origin.
But they contain nothing about enforcement and sanctions.
Thus it is not surprising that they do not provide for a right of appeal against the decisions of the OV and competent authority.
Enforcement and sanctions are provided for in Regulation (EC) No 882/2004.
Regulation (EC) No 854/2004 is intended to work in combination with Regulation (EC) No 882/2004.
Recital (43) to Regulation (EC) No 882/2004 indicates that a right of appeal is required in a case such as this.
Articles 54 and 55 are applicable to all kinds of non compliance with Regulation (EC) No 854/2004, including non compliance with article 5 in individual cases as well as the more general non compliance dealt with by article 4.
The references to prohibiting placing on the market and ordering destruction in article 54.2 are clearly apt to deal with non compliance under article 5.
Article 54.3 should apply to action to deal with all kinds of non compliance.
These articles, read together with recital (43) mandate a right of appeal against the OVs decision. (3) There is nothing in any of the Regulations to prohibit a procedure such as that laid down in section 9.
This not only provides a means whereby the competent authority can enforce the requirements of Regulation (EC) No 854/2004 in relation to non compliance but also provides the operator with a means of challenging the decision of the OV that a carcass is not fit for human consumption on its merits.
The Justice of the Peace can (and should) hear expert evidence to determine the matter.
While only the OV can apply the health mark, on the claimant appellants interpretation of section 9 the Justice of the Peace can make a ruling which may result in an award of compensation if the mark is wrongly withheld. (4) At the point when the OV inspects the meat and forms the opinion that it is unfit for human consumption and declares it as such, the carcass is still food within the meaning of the above Regulations.
It has not become an animal by product within the meaning of Regulation (EC) No 1069/2009, laying down health rules as regards animal by products.
Animal by products are defined as entire bodies or parts of animals, products of animal origin or other products obtained from animals, which are not intended for human consumption (article 3.1).
Until the process of condemnation is complete, the FBO still intends the carcass for human consumption. (5) Providing a mechanism for judicial oversight of the process of condemnation is required by article 17 of the Charter of Fundamental Rights of the European Union (CFR) (equivalent to article 1 of the First Protocol to the ECHR) which protects the right to property, read with article 47, which requires an effective judicial remedy for everyone whose rights and freedoms guaranteed by community law are violated.
It would be a violation if an FBO were deprived of the property in the carcass or required to dispose of the carcass in such a way as to render it valueless without proper justification or compensation.
Judicial review does not constitute an appeal which satisfies the (6) requirement in Regulation (EC) No 882/2004 that there be a right of appeal.
Regulation (EC) No 882/2004 requires that there be a right of appeal against the decision of an OV on the merits going beyond what is possible in judicial review.
Against this, the competent authority, the FSA, argues that it would be incompatible with the regime established by the Regulations if resort were made to the procedure under section 9 of the 1990 Act in order to challenge the decision of the OV under article 5 of Regulation (EC) No 854/2004 on its merits.
The FSA accepts that the lawfulness of the decision can be challenged in judicial review proceedings as set out above.
In summary, the FSA asserts that: (1) The requirements of Regulation (EC) No 854/2004 are a lex specialis in relation to products of animal origin.
Regulation (EC) No 882/2004 is without prejudice to specific Community provisions regarding official controls (article 1.3).
Regulation (EC) No 854/2004 therefore takes precedence over Regulation (EC) No 882/2004 where it is necessary to do so. (2) There is a distinction between the roles undertaken by the OV under article 4 of Regulation (EC) No 854/2004 and those undertaken under article 5.
The former concerns the audit of an FBOs general practices and compliance with food hygiene requirements.
It is accepted that article 54 of Regulation (EC) No 882/2004 is capable of being applied to that role.
However, it should be noted that, despite the wording of recital (43), article 54.3 stops short of positively requiring that there be a right of appeal. (3) The role of inspecting and health marking individual carcasses under article 5 is quite different from the audit role under article 4.
The OV alone (with the assistance permitted under the Regulation) has responsibility for deciding whether or not to apply a health mark, which is a necessary prerequisite to placing the meat on the market.
Nobody other than the OV can perform this task.
This can only be done when official controls have not identified any deficiencies that would make the meat unfit for human consumption.
That weighted double negative test is consistent with the overall aim laid down in article 1.1 of Regulation (EC) No 178/2002, of the assurance of a high level of protection of human health and consumers interest in relation to food.
It may be that the meat remains food even after the OV has decided not to apply a health mark, but it cannot thereafter be lawfully intended for human consumption. (4) The qualifications and experience of the OV are carefully specified so as to ensure that he or she is properly qualified to undertake that decision making role (with the assistance permitted under the Regulations).
It would be incompatible with the requirements of Regulation (EC) No 854/2004 for a person or body other than the OV as referred to in article 5.2 and which does not have those qualifications and experience, such as a Justice of the Peace acting pursuant to section 9 of the 1990 Act, to decide whether a carcass should have had a health mark applied to it, even if adjudicating with the benefit of expert evidence presented by each side. (5) Article 17 of the CFR (and article 1 of the First Protocol to the ECHR) permit control of the use of property if this is a proportionate means of achieving a legitimate aim (reference is made to Booker Aquaculture Ltd (trading as Marine Harvest McConnell) v Scottish Ministers (Joined Cases C 20/00 and C 64/00) [2003] ECR I 7411).
The above aim is undoubtedly legitimate and the means chosen proportionate.
Article 17 does not mandate a right of challenge to the imposition of such controls. (6) If there is a requirement that there be a right of appeal in relation to the decision of an OV under article 5.2 of Regulation (EC) No 854/2004, it is satisfied by the availability of judicial review as set out above.
Judicial review also satisfies any requirement under article 17 of the CFR (or article 1 of the First Protocol to the ECHR) of a possibility of judicial control of the actions of an OV.
Conclusion
(1) Do Regulations (EC) Nos 854/2004 and 882/2004 preclude a procedure whereby pursuant to section 9 of the 1990 Act a Justice of the Peace decides on the merits of the case and on the basis of the evidence of experts called by each side whether a carcass fails to comply with food safety requirements? (2) Does Regulation (EC) No 882/2004 mandate a right of appeal in relation to a decision of an OV under article 5.2 of Regulation (EC) No 854/2004 that the meat of a carcass was unfit for human consumption and, if it does, what approach should be applied in reviewing the merits of the decision taken by the OV on an appeal in such a case? For the purposes of this reference, the Court of Justice of the European Union is asked to assume that the claimant appellants interpretation of section 9 of the 1990 Act is correct, and that a Justice of the Peace has power to give a ruling which may result in an award of compensation if he considers that a health mark ought to have been applied to a carcass.
In order to determine this appeal, this Court refers the following questions to the Court of Justice of the European Union:
| Cleveland Meat Company Ltd (CMC) bought a bull at auction.
It was passed fit for slaughter by the Official Veterinarian (OV) stationed at its slaughterhouse.
After a post mortem inspection of the carcass, and discussion with a Meat Hygiene Inspector, the OV declared the meat unfit for human consumption.
It did not therefore acquire a health mark.
CMC took the advice of another veterinarian surgeon and challenged the OVs opinion.
It contended that in the event of a dispute, and of its refusal to surrender the carcass voluntarily, the OV would have to seize it under s 9 of the Food Safety Act 1990 (the 1990 Act) and take it before a Justice of the Peace to determine whether or not it should be condemned.
The respondent (the FSA) did not accept that it needed to use this procedure.
It maintained that the carcass should be disposed of as an animal by product and served a notice for such disposal.
CMC, together with Association of Independent Meat Suppliers, issued a claim for judicial review to challenge the FSAs assertion that it did not have to use the s 9 procedure.
They claimed in the alternative that it was incumbent on the UK to provide some means for challenging the decisions of an OV in such cases.
The claim failed in the High Court and Court of Appeal.
Before the Supreme Court there were three main issues.
The first was a matter of domestic law: whether the s 9 procedure was available or mandatory in these circumstances.
The second issue was whether the use of the s 9 procedure was compatible with the food safety regime laid down by European Union law, specifically Regulations (EC) 178/2002, 852/2004, 853/2004, 854/2004, 882/2004, and 1069/2009.
The third issue was whether Regulation 882/2004 mandates an appeal procedure and, if so, whether such an appeal should allow a challenge to the full factual merits of the OVs decision or whether the limited scope of challenge in a judicial review claim is sufficient to comply with the regulations requirements.
The Supreme Court decides to refer two questions to the Court of Justice of the European Union.
The terms of the reference are set out by Lady Hale and Lord Sales in their joint judgment, with whom Lord Hodge, Lady Black and Lord Lloyd Jones agree.
For the purposes of this reference, the Court of Justice of the European Union is asked to assume that the claimant appellants interpretation of section 9 of the 1990 Act is correct, and that a Justice of the Peace has power to give a ruling which may result in an award of compensation if he considers that a health mark ought to have been applied to a carcass.
In order to determine this appeal, this Court refers the following questions to the Court of Justice of the European Union [22]: (1) Do Regulations (EC) Nos 854 and 882 preclude a procedure whereby pursuant to section 9 of the 1990 Act a Justice of the Peace decides on the merits of the case and on the basis of the evidence of experts called by each side whether a carcass fails to comply with food safety requirements? (2) Does Regulation (EC) No 882 mandate a right of appeal in relation to a decision of an OV under article 5.2 of Regulation (EC) No 854 that the meat of a carcass was unfit for human consumption and, if it does, what approach should be applied in reviewing the merits of the decision taken by the OV on an appeal in such a case?
|
This is a challenge by application for judicial review to the legality of the comprehensive ban on smoking at the State Hospital at Carstairs which the State Hospitals Board for Scotland (the Board) adopted by a decision taken at a meeting on 25 August 2011 and implemented on 5 December 2011.
The appellant, Mr McCann, does not challenge the ban on smoking indoors.
His challenge relates only to the ban on smoking in the grounds of the State Hospital and on home visits, which, by creating a comprehensive ban, prevents detained patients from smoking anywhere.
Mr McCann suffers from a mental disorder.
After committing a number of offences which were prosecuted on summary complaint, he was detained without limit of time in the State Hospital under orders made originally under the Criminal Procedure (Scotland) Act 1975 (and more recently under the Criminal Procedure (Scotland) Act 1995 (the 1995 Act)) in December 1995.
He remained in detention in the State Hospital until March 2014.
He was then transferred to a medium secure unit in Glasgow, called the Rowanbank Clinic, where he remains in the care of NHS Greater Glasgow (NHSGG).
NHSGG has decided to introduce a comprehensive smoking ban at the Rowanbank Clinic.
Mr McCann has challenged that decision in separate proceedings for judicial review but his application remains sisted (stayed), pending the outcome of this appeal.
Mr McCann raises three principal issues in his challenge.
First, he argues that the impugned decision is invalid at common law on the ground of ultra vires because, when so deciding, it did not adhere to the principles laid down in section 1 of the Mental Health (Care and Treatment) (Scotland) Act 2003 (the 2003 Act) (which I set out in para 22 below) or comply with the requirements of subordinate legislation made under the 2003 Act.
Secondly, he submits that the impugned decision was unlawful because it unjustifiably interfered with his private life and thereby infringed his right to respect for his private life under article 8 of the European Convention on Human Rights and Fundamental Freedoms (ECHR).
Thirdly, founding on article 14 of ECHR in combination with article 8, he argues that the Board, by implementing the comprehensive smoking ban, has treated him in a discriminatory manner which cannot be objectively justified when compared with (i) people detained in prison, (ii) patients in other hospitals (whether detained or not) or (iii) members of the public who remain at liberty.
After setting out the factual background and the relevant legislation and summarising the proceedings in the courts below, I will address each challenge in turn.
The factual background
For many years public authorities in Scotland and elsewhere in the United Kingdom have sought to discourage smoking because of concerns about its effects on the health of the smokers and of those exposed to second hand smoke, by so called passive smoking.
Section 4 of the Smoking, Health and Social Care (Scotland) Act 2005 empowered the Scottish Ministers to make regulations prescribing classes of premises in which smoking would be prohibited and also the premises to be excluded from that ban.
Among the premises which the Prohibition of Smoking in Certain Premises (Scotland) Regulations 2006 (SSI 2006/90) prescribed as no smoking premises were hospitals, hospices, psychiatric hospitals, psychiatric units and healthcare premises.
Open areas, such as hospital grounds, were not so specified.
Among the premises exempted from the smoking ban were designated rooms in psychiatric hospitals and psychiatric units.
Over time, public authorities have sought to extend the smoking ban.
Between 2007 and 2011 the buildings at the State Hospital were redeveloped and modernised.
The business case for the redevelopment, which the Scottish Government approved, proposed that the State Hospital would be a smoke free environment and that there would be no provision for smoking either indoors or in the gardens and grounds.
In accordance with that policy, the new buildings contain no indoor smoking rooms or facilities which would allow patients to take advantage of the exemption in the Regulations.
The Board then had to consider whether, and if so for how long, it would continue to allow smoking in the grounds of the State Hospital.
The process by which the Board came to take the impugned decision is set out in a document published by NHS Scotland in February 2012 called Working towards a smoke free environment: an account of the journey undertaken at the State Hospital.
Mr McCann founded on this document in his written pleadings (statement 5) as the factual background to the impugned decision.
In summary, on 28 October 2010 the Board considered a report by its medical director and resolved to work towards a comprehensive smoking ban with effect from May 2011.
After the judgment of the Court of Session in L v Board of State Hospital 2011 SLT 233, in which Lady Dorrian held that the Board had failed to consult with patients (as it had conceded it was required to do by section 1 of the 2003 Act) on its decision to ban visitors from bringing food parcels into the State Hospital and to ban patients from ordering in food, the Board reconsidered its policy concerning smoking at a meeting on 17 February 2011.
It agreed to allow smoking to continue in the existing smoking rooms and to conduct a consultation on the options of a partial or comprehensive smoking ban.
The Board conducted the consultation between 1 March and 31 May 2011.
It presented two options: a partial ban which permitted smoking only in designated open air areas within the grounds or a complete ban both internally and within the grounds. 86% of the patients who responded favoured the partial ban.
The Board met again on 23 June to consider a report on the consultation which recommended that smoking be permitted in designated external areas in the grounds.
The Board accepted that proposal subject to further consideration of how the partial ban would work in practice.
The Board also confirmed its commitment to working towards a smoke free hospital.
At a further meeting on 5 July 2011 the Board confirmed that position.
Because the patients were soon to move to the new building, the Board decided to close the smoking rooms in the existing buildings and to prohibit smoking in the ward gardens as from 1 August 2011, leaving only the designated external areas for smoking.
The Board agreed to review its decision in November 2011.
The Board conducted a further consultation in mid August 2011 in which it asked for responses to the same options of a partial ban or a comprehensive ban. 64% of patients favoured a partial ban and 36% a comprehensive ban.
The Boards chief executive prepared a report on the operation of the partial ban which the Board considered at a meeting on 25 August 2011.
At that meeting the Board made the impugned decision to implement a comprehensive smoking ban in December 2011.
The patients moved into the new buildings on 21 September 2011.
On 5 December 2011 the comprehensive smoking ban came into force.
In his petition for judicial review Mr McCann initially called for the Board to produce the minute of the meeting of 25 August 2011 in order to disclose the reasons for the impugned decision.
After the minute was produced, he founded on it to challenge the impugned decision for its failure to apply the principles set out in section 1 of the 2003 Act.
The minute of the meeting of the Board on 25 August 2011 recorded the reasons for the decision in these terms: [The Boards Chief Executive] outlined the activity following the Boards decision and the considerable problems experienced in operationalising the process, eg increasing numbers of higher risk patients had been referred for consideration of grounds access.
The Senior Team had discussed a draft operational policy at their meeting on 27 July 2011 and agreed that from a practical point of view, patients would be permitted to smoke in existing ward gardens at eight set points during each day.
The clinical team would agree the set points during each day.
Members were asked to consider: (i) The feedback received over the first month of the restrictions on the appendix received (ii) To allow smoking to continue in the grounds, with further limitations, until 30 November 2011 (iii) A full non smoking environment as of 1 December 2011 Members noted that the decision taken in June 2011 was to be reviewed in November 2011.
The documented feedback which had been received over the course of August 2011 from staff, as well as smoking and non smoking patients was reviewed.
The discussion that followed centred around the difficulties encountered with the partial cessation of smoking at the Hospital in relation to issues of safety and security, operational and clinical disruption, time demands on staff, fairness of the partial restrictions, and the inconsistencies around the set points in the day when smoking was permitted.
In light of the difficulties discussed and the importance of the operational managements view, Members agreed that the partial cessation of smoking at the Hospital had proved to be unworkable despite the best efforts of staff involved.
It was agreed that the State Hospital would be a full non smoking environment as of 1 December 2011.
Support to patients in their smoking cessation attempts would continue and be accelerated.
The document, Working towards a smoke free environment , to which I referred in para 7 above contains more details of the problems that became apparent in August and September 2011.
Patients tended to power smoke in the few opportunities they had to smoke and some reverted back to previous institutionalised behaviour such as clock watching.
Staff who attended them complained about daily exposure to passive smoking.
The document also spoke of significant operational and security risks.
After the move to the new buildings, concerns were expressed about patients congregating outside in breach of grounds access rules.
The impugned decision had several elements.
It prohibited a detained patient from smoking or possessing tobacco products in the State Hospital, including in its grounds, and from smoking on home visits.
It also prohibited visitors from bringing tobacco products and tobacco related products (such as electronic cigarettes or lighters) into the hospital.
Search and screening procedures were established to search both patients and visitors for such products.
Tobacco products which the patients possessed on 1 December 2011 had to be posted to an external address.
The impugned decision was taken against the backdrop of a developing policy of the Scottish Government to control the use of tobacco and to prevent smoking at NHS facilities.
The Scottish Ministers have continued to pursue that policy.
In March 2013 they published a document entitled Creating a Tobacco free Generation: A Tobacco Control Strategy for Scotland.
In that publication Ministers proposed (pp 26 27) (a) that mental health services should make sure that indoor facilities were smoke free by 2015 and (b) that all NHS Boards would implement and enforce smoke free hospital grounds by March 2015, by removing any designated smoking areas in NHS buildings or grounds.
Ministers excluded mental health facilities from the latter policy.
But since then some health boards have extended the comprehensive ban to such facilities.
The relevant legislation
(i) National Health Service (Scotland) Act 1978
Under section 102(1) of the National Health Service (Scotland) Act 1978, the Scottish Ministers are charged with the duty of providing such hospitals as appear to [them] to be necessary for persons subject to detention under the 1995 Act or the 2003 Act, which hospitals are described in subsection (2) as state hospitals.
Under subsection (4) the Scottish Ministers are empowered to provide for the management of a state hospital to be undertaken on their behalf by among others a special health board.
Under that provision the Board acts as the delegate of the Scottish Ministers in managing the State Hospital.
The Board contends that, in deciding upon and implementing the comprehensive smoking ban and measures to enforce that ban, it has acted solely under its power of management in this section.
(ii) Mental Health (Care and Treatment) (Scotland) Act 2003
Until the enactment of the 2003 Act, the care and treatment of mental health patients were governed by the Mental Health (Scotland) Act 1984.
Over time, concerns emerged that the legislation did not adequately protect the rights of patients who were subjected to compulsory detention.
One of the factors which led to these concerns was the increased emphasis on personal autonomy which resulted from the influence of the ECHR and the incorporation of the ECHR in our domestic law, first by the Scotland Act 1998 and then by the Human Rights Act 1998.
In 1999 the Scottish Ministers commissioned a review of mental health legislation by a committee under the chairmanship of the Rt Hon Bruce Millan, who had formerly been the Secretary of State for Scotland.
In January 2001 the Scottish Ministers laid the report, New Directions: Report on the review of the Mental Health (Scotland) Act 1984, before the Scottish Parliament.
The report sought to promote greater awareness of the need to respect human rights and the adoption of the least restrictive alternative in the compulsion of mental health patients.
It also sought to make sure that any compulsory intervention was tailored to the particular needs and circumstances of the individual (Introduction, paras 1 and 4).
It recommended that a new Act should be based on principles which were stated on the face of the Act itself (Introduction, para 2; Chapter 3).
This gave rise to section 1 of the 2003 Act, which I set out in para 22 below.
In chapter 11 of the report the committee addressed, among other things, the searching of patients, an issue which lies at the heart of the first ground on this appeal.
It observed that the 1984 Act contained no specific framework for searches.
The report (para 44) referred to the judgment of Potts J in R v Broadmoor Hospital Authority, Ex p S The Times, 5 November 1997, in which he held that a general power to conduct random searches must necessarily be implied as part of the Broadmoor Hospital Authoritys duty to create and maintain a safe and therapeutic environment.
The committee recommended that a Code of Practice should set out the parameters of search policies as it was important that the rights of patients were clear in relation to this (para 46).
The Scottish Executive did not accept all of the recommendations of the Millan Committee.
In its White Paper, Renewing Mental Health Law Policy Statement, the Executive accepted the committees recommendation as the framework for a future Bill while modifying some of its recommendations in relation to offenders with mental disorders.
It accepted both the inclusion of a statement of principles (p 5) and a Code of Practice to give guidance on the operation of the new statutory powers, including the regulation of searches (p 69).
The 2003 Act includes in section 1 a statement of principles for the discharge of functions under the Act; and it also contains in section 286 a provision for the making of regulations for safety and security in hospitals, including the searching of detained patients and the placing of restrictions on what detained persons and visitors may have with them.
The Policy Memorandum to the Bill in discussing the relevant clause which became section 286 stated: 255.
The Bill makes provision to regulate any interference by hospitals of certain civil rights of detained patients, including withholding correspondence, monitoring or restricting other forms of communication, searching patients or their belongings, and restricting access to visitors. 259.
The Bill also sets up a framework for regulations authorising measures in connection with the use of telephones, searches, surveillance and restrictions on patients or visitors.
The intention is that hospitals be required to develop policies setting out how any such security measures will be applied, recorded and monitored, and that the Executive and the Mental Welfare Commission will monitor the terms of these policies and their operation. (1) Subsections (2) to (4) below apply whenever a person is discharging a function by virtue of this Act in relation to a patient who has attained the age of 18 years. (2) In discharging the function the person shall, subject to subsection (9) below, have regard to the matters mentioned in subsection (3) below in so far as they are relevant to the function being discharged. (3) The matters referred to in subsection (2) above are
Section 1 of the 2003 Act, which is headed Principles for discharging certain functions, provides, so far as relevant: (a) the present and past wishes and feelings of the patient which are relevant to the discharge of the function; (b) the views of (i) the patients named person; (ii) any carer of the patient; (iii) any guardian of the patient; and (iv) any welfare attorney of the patient, which are relevant to the discharge of the function; (c) the importance of the patient participating as fully as possible in the discharge of the function; the importance of providing such information (d) and support to the patient as is necessary to enable the patient to participate in accordance with paragraph (c) above; (e) case; (f) benefit to the patient; the need to ensure that, unless it can be shown (g) that it is justified in the circumstances, the patient is not treated in a way that is less favourable than the way in which a person who is not a patient might be treated in a comparable situation; the importance of providing the maximum the range of options available in the patients (h) the patients abilities, background and characteristics, including, without prejudice to that generality, the patients age, sex, sexual orientation, religious persuasion, racial origin, cultural and linguistic background and membership of any ethnic group. (4) After having regard to the matters mentioned in subsection (3) above; such other matters as are relevant in the (a) and (c) circumstances, the person shall discharge the function in the manner that appears to the person to be the manner that involves the minimum restriction on the freedom of the patient that is necessary in the circumstances. (9) The person need not have regard to the views of a person mentioned in subsection (3)(b) above in so far as it is unreasonable or impracticable to do so.
Unsurprisingly, the 2003 Act does not define the functions which a person discharges by virtue of the Act.
But I would interpret subsection (1) as meaning that a person discharges such a function when he or she exercises a power conferred by the 2003 Act or by subordinate legislation made under the Act.
Section 286 of the 2003 Act, which is headed Safety and security in hospitals, provides, so far as relevant: (1) Regulations may authorise (a) the search of such persons detained in hospital by virtue of this Act or the 1995 Act as may be specified in the regulations and of anything they have with them in the hospital in which they are detained; (c) the placing of restrictions on the kinds of things which those persons may have with them in the hospitals in which they are detained and the removal from them of articles kept in breach of such restrictions; (d) the placing of prohibitions and restrictions on the entry into and the conduct while in those hospitals of persons (visitors) visiting those persons or otherwise entering or seeking to enter those hospitals and on the kinds of things which visitors may bring with them into those hospitals; (f) with them into those hospitals, the search of visitors and of anything they bring and make that which is authorised subject to conditions specified in the regulations.
The Scottish Ministers prepared regulations to give effect to section 286, which the Scottish Parliament approved by affirmative resolution: the Mental Health (Safety and Security) (Scotland) Regulations 2005 (SSI 2005/464) (the 2005 Regulations).
In their consultation on the draft regulations in 2004 the Scottish Ministers explained (paras 54 55) that hospitals had policies prohibiting certain articles and substances being brought into or retained in hospital and on searching patients and visitors.
The Ministers stated (para 56): [t]he aim of these regulations is to put these policies on a firm legislative footing, to ensure that there is proper recording and monitoring of decisions to use powers to search patients or visitors and to prevent certain substances and articles being brought into hospitals.
The 2005 Regulations (regulation 4) authorise measures such as the placing of restrictions on the kind of things that specified persons may have with them in hospitals and the removal from them of articles kept in breach of those restrictions.
Regulation 4 authorises similar restrictions on visitors, and the search of both specified persons and visitors.
Regulation 2 provides that a person detained in, among others, the State Hospital and the Rowanbank Clinic is a specified person if the hospital managers have (a) informed the patient and his or her named person and the Mental Welfare Commission for Scotland that he or she is a specified person and (b) informed the patient and his or her named person that he or she is subject to the regulation 4 measures and also that the specified person has a right of re assessment under regulation 5(b).
Consistently with the philosophy of the least restrictive alternative, regulation 5 sets out general conditions for the measures.
Condition (a) is that measures may only be applied to a specified person if the persons responsible medical officer (RMO) is of the opinion that not to apply them would pose a significant risk to the health, safety or welfare of any person in the hospital or the security or good order of the hospital.
Condition (b) requires the RMO to re assess the risk mentioned in condition (a) at the specified persons request and empowers the RMO to reverse the decision to apply the measure.
Condition (c) requires that the reasons for and outcome of applying a measure shall be recorded in the specified persons medical records and that the hospital managers make a separate record; and condition (d) requires, as a general rule, that the named person shall be given notice of the entry in the medical records.
Regulations 6 and 10 set out specific conditions for the searching of specified persons and visitors.
Regulation 8, which again is consistent with the philosophy of the least restrictive alternative, imposes a condition that restrictions shall be placed on having any article so as to minimise the impact on the freedom of the specified person compatible with the general condition in regulation 5(a) (ie condition (a) above).
Section 274 of the 2003 Act requires the Scottish Ministers to publish a code of practice giving guidance to any person discharging functions by virtue of the Act.
Subsection (4) requires any person discharging functions by virtue of the 2003 Act to have regard (so far as they are applicable to the discharge of those functions by that person) to the provisions of any code of practice published under subsection (1) above for the time being in force.
Chapter 12 of the Code of Practice, which the Scottish Ministers published under section 274 of the 2003 Act, gave guidance on procedures for restrictions on patients correspondence and use of telephones and also for measures to ensure the safety and security of hospitals, staff, patients and visitors.
It advised that the restrictions and measures must be applied in a way which respects patients rights and dignity and is commensurate with any perceived risk to the health, safety or welfare of the patient or any other person.
Para 50 of that chapter repeated the requirement of regulation 8 of the 2005 Regulations (above) to minimise the impact of the restriction on the patient.
As I discuss below, in relation to the application of the 2003 Act, central questions in this part of the appeal include (a) whether the Board, in imposing the comprehensive smoking ban, was exercising a function under the 2003 Act so as to bring into play the section 1 principles and (b) whether the prohibition of possession of tobacco products and the power of search and confiscation, which were components of the impugned decision, fall within the 2005 Regulations or are excluded on the basis that they do not relate to safety and security.
The legal proceedings
Mr McCann raised judicial review proceedings in which he sought the reduction (annulment) of the decision, a declarator of the breach of his Convention rights and also damages as just satisfaction.
As I have stated in para 7 above, he founded on the document, Working towards a smoke free environment in pleading the factual background to the impugned decision.
He initially complained about the Boards failure to disclose the minute which recorded the decision, but, having received the minute in the course of the proceedings, founded on it to amend his written pleadings in order to plead a case (statement 15 of his petition) that the Board had failed to take account of relevant factors, and in particular to apply the principles set out in section 1 of the 2003 Act (the 2003 Act principles).
At the First Hearing the Lord Ordinary, Lord Stewart, heard oral submissions on both the facts and the law.
Counsel presented their cases by referring to the documents for the factual background.
No affidavits were produced, no oral evidence was led and accordingly no challenge was made to the contents of the documents in cross examination.
As Mr McCann based his challenge on those documents, the absence of other evidence is not surprising.
The parties should have complied with good practice by entering into a joint minute agreeing the documents and dispensing with probation; but that was implicitly what they did.
The Lord Ordinary in his opinion narrated the events which the documents disclosed and which gave rise to the impugned decision.
In his interlocutor dated 27 August 2013 the Lord Ordinary declared that the impugned decision was unlawful so far as it affected Mr McCann both because it was not taken in accordance with the 2003 Act principles and also because it breached his Convention rights under articles 8 and 14 of the ECHR.
The Lord Ordinary did not award damages but ruled that the finding of the breach of those articles was just satisfaction in terms of article 41 of the ECHR.
The Board appealed that decision by a reclaiming motion which was heard by the Second Division of the Inner House (the Lord Justice Clerk (Lord Carloway), Lady Paton and Lord Brodie).
The Board submitted that the 2003 Act principles did not apply to the impugned decision, that Mr McCanns article 8 right to respect for his private life was not engaged, or, if it was, the impugned decision was a proportionate one which did not infringe his article 8 right.
The Lord Justice Clerk gave the leading opinion, with which Lord Brodie agreed, in which he allowed the appeal and refused the prayer of the petition.
He held that the Board was exercising its powers of management under the 1978 Act when it made the impugned decision.
The 2003 Act was concerned with the care and treatment of the individual patient and the impugned decision did not involve the discharge of a function under that Act.
Accordingly, the 2003 Act principles had no application to the decision.
In relation to the article 8 challenge, the Lord Justice Clerk referred to the decision of the Strasbourg court (the ECtHR) in Munjaz v United Kingdom [2012] MHLR 351; [2012] ECHR 1704, which (a) emphasised the principle of personal autonomy in article 8, (b) ruled that detained persons were presumed to enjoy all the fundamental rights and freedoms guaranteed by the ECHR, except the right to liberty, where the detention was lawfully imposed in accordance with article 5 of the ECHR and (c) required any restriction of those rights to be justified in each individual case.
He sought to apply those principles in this case.
In agreement with the Divisional Court and the majority of the Court of Appeal of England and Wales in the case concerning the statutory ban on smoking at Rampton Hospital, R (N) v Secretary of State for Health [2008] HRLR 42 and [2009] HRLR 31 (also reported as R (G) v Nottingham Healthcare NHS Trust [2009] PTSR 218 and [2010] PTSR 674) (the Rampton Hospital case), he held that a comprehensive smoking ban on persons detained in an institution did not have a sufficiently adverse effect on a detainees integrity and autonomy as to merit protection under article 8.
He ruled (para 93) that the comprehensive smoking ban did not engage article 8.
If article 8 were engaged, he held that the impugned decision was justified under article 8(2) as the comprehensive ban was proportionate to the legitimate aim of promoting the health of both the detained patients and staff.
On the same hypothesis, he rejected the article 14 challenge (a) as prisons could not be compared with the therapeutic environment of the State Hospital and (b) as the Scottish Government was proposing to introduce a comprehensive prohibition against smoking in all hospitals in the relatively short term.
Lady Paton agreed with the opinion of the Lord Justice Clerk except in one respect.
She opined that article 8 was engaged.
She drew support from Keene LJs dissenting judgment in the Rampton Hospital case and expressed the view that smoking was an addictive activity which was very much part of an individuals personal autonomy.
But she agreed that the impugned decision was justified under article 8(2) and that there had been no discrimination under article 14.
Discussion of the challenges the 2003 Act i)
The impugned decision involves not only a comprehensive ban on smoking, which extends to smoking in the grounds of the State Hospital and on visits to a detained persons home, but also a policy of searching both detained patients and visitors for and confiscating tobacco.
While the power to search for and confiscate tobacco is a necessary component of the decision as it is the means by which the comprehensive ban can be enforced, I am not persuaded that the comprehensive ban itself falls within the scope of the 2003 Act.
In my view the Board is correct in its submission that the comprehensive ban, viewed on its own, involves the exercise of a power of management under the 1978 Act.
But, for the reasons which I set out below, I have come to the view that the supporting prohibition on possession of tobacco products and the power to search for and confiscate such products fall within the scope of the 2003 Act and the 2005 Regulations.
First, I do not accept the submission that the 2003 Act is concerned only with the treatment of individual patients and that it does not impinge on more general management policies.
That Act, which replaced the 1984 Act, provides, among other things, for the detention of and the giving of care and treatment to mental health patients.
Many sections of the 2003 Act relate to the making of such provision to the individual patient.
But the discharge of functions under the 2003 Act is not confined to individual care and treatment.
In Part 18 of the Act (which is headed Miscellaneous) there are a series of sections (sections 281 286) which provide either directly or through regulations for the withholding of correspondence and the regulation of the use of telephones, as well as for the functions with which this appeal is concerned, namely the placing of restrictions on the kinds of things which specified persons may have in a hospital, searches and confiscation.
The regulations made in support of those provisions, namely the 2005 Regulations to which I have referred in paras 24 and 25 above and also the Mental Health (Definition of Specified Person: Correspondence) (Scotland) Regulations 2005 (SSI 2005/466) and the Mental Health (Use of Telephones) (Scotland) Regulations 2005 (SSI 2005/468), are subject to conditions (a) as a general rule that the detained patient, his or her named person and the Mental Welfare Commission for Scotland are informed that he or she is a specified person and (b) that the detained person is informed of the restriction.
Thus interested parties must be informed of measures which affect individual patients, whether as a result of general management policies or of individual targeting of patients.
The relevant regulations also require records to be kept of any decisions to search a specified person and to prohibit or restrict the use of telephones by such a person.
While the further requirement in the 2005 Regulations (regulation 5(c)) to record a measure in an individual patients medical records may seem unnecessary where a measure is of general application, that is not, in my view, a sufficient indication of an intention to confine section 286 and the 2005 Regulations to individually targeted measures.
The requirements in each of the sets of regulations mentioned in para 35 above are consistent with the policy underlying section 286 of the 2003 Act that the Scottish Government and the Mental Welfare Commission should monitor the terms of policies for such measures and their operation: para 21 above.
I can see no rationale for excluding measures of general application from this supervision, nor did counsel suggest any.
I recognise that some of the matters mentioned in section 1(3) of the 2003 Act are not relevant to the discharge of these functions, especially when the measures are not targeted at individual detained patients; but section 1(2) and (9) provide for that.
Secondly, the 2005 Regulations do not set limits on the things, the possession of which may be prohibited or restricted, and for which specified persons or visitors may be searched.
Both the heading of section 286 of the 2003 Act and the title of the 2005 Regulations refer to safety and security, but there is no provision in either the section or the 2005 Regulations which confines the things to items such as weapons which might threaten the safety of others.
Section 286 also provides for the taking of samples from persons, including swabs and blood (subsection (1)(b)) and the surveillance of specified persons or visitors (subsection (1)(e)).
Thirdly, the focus of the section and the regulations made under it is on the regulation of activities which impinge on the autonomy of individuals.
That focus on the detained patients autonomy is consistent with the Millan reports emphasis on the need to respect human rights.
It manifests itself in greater transparency by legislative provision for such policies, and through the informing of interested parties of the regulated measures, the maintenance of records of such measures, and the supervision by the Scottish government and the Mental Welfare Commission.
The devising of policies and the carrying out of such measures have thus become functions under the 2003 Act.
The principles in section 1 of that Act apply to such measures in so far as they are relevant.
One principle which is clearly relevant is the obligation in section 1(4) to discharge the function in the manner that involves the minimum restriction on the freedom of the patient that is necessary in the circumstances an obligation to which the Code of Practice draws attention.
The Board did not purport to act under the 2003 Act in instituting the policy of prohibiting the possession of tobacco products, searching for such products and confiscating them.
It may be the case that the consultation exercises which the Board carried out during 2011 were sufficient to comply with the obligations in section 1(2) and (3) of the 2003 Act.
But there appears to have been no consideration of the obligation under section 1(4) nor compliance with the obligations to inform and record in the 2005 Regulations.
This is not surprising as the Board considered that it was acting under the 1978 Act.
As a result, the prohibition on having tobacco products and the related powers to search and confiscate are in my view illegal and fall to be annulled.
Although Mr McCanns counsel argued that the component parts of the impugned decision were not severable and counsel for the Board made no submissions to the contrary, I would prefer to invite submissions on the form of order which this court should make before making such an order.
ii) Article 8 of the ECHR
As is well known, article 8 of the ECHR protects the right to respect for private and family life and provides: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence. 2.
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
In my view, the prohibition against having tobacco products, and the power to search patients in and visitors to the State Hospital for such products and confiscate them, infringe Mr McCanns right under article 8 of the ECHR because I consider (a) for the reasons discussed below, that they interfere with his article 8 right, and (b) for the reasons discussed above, that they do not comply with the 2003 Act and thus cannot meet the requirement of article 8(2) that they are in accordance with the law.
As it is likely that the problem of compliance with the 2003 Act is remediable, I set out why, contrary to the view of the majority of the Second Division, I have concluded that the comprehensive ban itself amounts to such interference, which has therefore to be justified.
I also set out my view as to why, but for the problem of the domestic legal basis of part of the decision (which I have discussed above), I consider that the impugned decision (comprising both the comprehensive ban on smoking and the supportive measures of the prohibition of possession and powers of search and confiscation) would have been a proportionate response to the legitimate aim of the protection of health, which is recognised in article 8(2), through its promotion and safeguarding of the health of both patients and staff at the State Hospital.
The scope of article 8: I adopt as a general statement Lord Binghams description of the purpose of article 8: It is to protect the individual against intrusion by agents of the state, unless for good reason, into the private sphere within which individuals expect to be left alone to conduct their personal affairs and live their personal lives as they choose: R (Countryside Alliance) v Attorney General [2008] AC 719, para 10 (Countryside Alliance).
But it is notoriously difficult and may be impossible to determine the boundaries of the personal sphere and thus of the article 8 right to respect for private life.
The ECtHR has identified values which the article protects but has rejected the possibility or necessity of attempting an exhaustive definition of the notion of private life: Niemietz v Germany (1992) 16 EHRR 97, para 29.
Judicial formulations of the values are inevitably influenced by the facts of the particular case and, in particular, by the nature of the states intervention or failure to intervene in the life of the claimant.
The House of Lords, when examining the boundaries of such values in Countryside Alliance in the context of the hunting ban, expressed differing and inconsistent views.
The concept encompasses securing a sphere within which an individual can freely pursue the development and fulfilment of his personality and to a certain degree the right to establish and develop relationships with other people: Brggemann and Scheuten v Federal Republic of Germany (1977) 3 EHRR 244 (the Human Rights Commission) paras 55 57.
More recently, emphasis has been placed on personal autonomy.
Thus in Pretty v United Kingdom (2002) 35 EHRR 1, which concerned the statutory ban on assisted suicide, the ECtHR summarised its jurisprudence (para 61): [T]he concept of private life is a broad term not susceptible to exhaustive definition.
It covers the physical and psychological integrity of a person.
It can sometimes embrace aspects of an individuals physical and social identity.
Elements such as, for example, gender identification, name and sexual orientation and sexual life fall within the personal sphere protected by article 8.
Article 8 also protects a right to personal development, and the right to establish and develop relationships with other human beings and the outside world.
Though no previous case has established as such any right to self determination as being contained in article 8 of the Convention, the Court considers that the notion of personal autonomy is an important principle underlying the interpretation of its guarantees.
The ECtHR recognised that a persons autonomy could extend to the pursuit of activities which caused him or her harm.
In para 62 it stated: The court would observe that the ability to conduct ones life in a manner of ones own choosing may also include the opportunity to pursue activities perceived to be of a physically or morally harmful or dangerous nature for the individual concerned.
The idea of personal autonomy can also be seen in von Hannover v Germany (2004) 40 EHRR 1, para 50 (in the context of press intrusion into private life) and Munjaz v United Kingdom (above), para 78 (in the context of solitary confinement).
Also relevant to this appeal is the protection which article 8 gives to the home as Mr McCann submits that as a result of his long term detention the State Hospital had become his home.
In article 8 home is an autonomous concept.
In Giacomelli v Italy (2007) 45 EHRR 38 (a case concerning environmental pollution) the ECtHR stated that a home will usually be the place, the physically defined area, where private and family life develops.
It continued: The individual has a right to respect for his home, meaning not just the right to the actual physical area, but also to the quiet enjoyment of that area (para 76).
Similarly, in Harrow London Borough Council v Qazi [2004] 1 AC 983 Lord Hope cited the opinion of Sir Gerald Fitzmaurice on the scope of article 8 in Marckx v Belgium (1979) 2 EHRR 330 and stated (para 50): The emphasis is on the persons home as a place where he is entitled to be free from arbitrary interference by the public authorities.
This court is not bound by the judgments of the ECtHR; section 2 of the Human Rights Act 1998 requires us to do no more than to take account of such decisions.
But in Countryside Alliance (above) the majority of the speeches in the House of Lords appear to have accepted the relevance of the concept of personal autonomy at least in certain contexts: Lord Bingham (para 10), Lord Hope (para 54), and Lord Brown (paras 138 139).
The concept is also consistent with Lady Hales identification of one of the values reflected in article 8, being the inviolability of the personal and psychological space within which each individual develops his or her own sense of self and relationships with other people (para 116).
She continued in the same paragraph by stating that article 8 protected that private space but opined that that falls some way short of protecting everything they might want to do even in that private space.
Lord Brown (para 139) expressed the wish that jurisprudence would extend to encompass a broad philosophy of live and let live, allowing people to engage in whatever pursuits they wish that were central to their well being unless there was a good and sufficient reason to forbid them.
But he also recognised that article 8 had not been interpreted as going that far.
So how should one apply article 8 to a detained patient in the State Hospital? Does a detained patient such as Mr McCann have a private space, in which his wish to smoke is protected? The majority of the Second Division held he did not and reasoned as follows (paras 89 93).
First, they said that a detainees right to respect for private life extended only to protection against interference beyond the concomitants of lawful detention.
They then considered that institutions such as the State Hospital would be unmanageable without some restriction of the scope of the right to respect for private life of detained persons to that beyond the ordinary restrictions pursuant to lawful detention.
Thirdly, they agreed with the majority of the Court of Appeal in the Rampton Hospital case (para 32 above) that a comprehensive smoking ban in such an institution did not have a sufficiently adverse effect on a persons physical or psychological integrity or his right to personal development as to merit protection.
I respectfully disagree with the third stage of that analysis.
Lawful deprivation of liberty involving long term detention in an institution inevitably curtails a detainees private sphere and constraints which are a necessary part of the detention would not fall within the ambit of article 8.
But it seems to me that the degree of constraint which lawful detention imposes on the detained patients private sphere works in the opposite direction from the third stage of that analysis because it requires the court assiduously to uphold the right to respect for what little remains of that sphere.
My starting point is the recognition in our domestic law that a person who is compulsorily detained by the state enjoys all the civil rights which are not taken away expressly or by implication as a result of that detention.
The House of Lords so held in the English case of Raymond v Honey [1983] 1 AC 1, 10 per Lord Wilberforce, and both Lord Glennie and the First Division of the Inner House have affirmed the same principle in Scots law: Potter v Scottish Prison Service 2007 SLT 1019, para 25.
The Grand Chamber of the ECtHR has taken a similar approach in relation to fundamental rights in Hirst v United Kingdom (No 2) (2006) 42 EHRR 41, in which it stated (para 69): prisoners in general continue to enjoy all the fundamental rights and freedoms guaranteed under the Convention save for the right to liberty, where lawfully imposed detention expressly falls within the scope of article 5 of the Convention.
See also Munjaz v United Kingdom (above) para 79, in which the Fourth Section repeated this analysis and added: Any restriction on those rights must be justified in each individual case.
The detained patients ability to conduct his or her life as he or she chooses is inevitably severely curtailed by compulsory detention in the State Hospital.
For sound therapeutic reasons, many things which are available to a person at liberty in his or her private home cannot be made available to a detained patient.
The circumstances of therapeutic detention may require the control of things which the detained patient may possess, including things that might be used as weapons against others or to self harm; the possession and consumption of alcohol may be prohibited; and many social activities, such as eating meals in the company of other patients, may have to be conducted only under close supervision.
Routine and random searches may be an incident of therapeutic detention and treatment: the Court of Appeal treated them as such in R v Broadmoor Hospital Authority, Ex p S [1998] COD 199.
In these ways and others, the loss of liberty entailed in therapeutic detention restricts the scope of the private sphere and therefore the protections available under article 8, as the Second Division held.
Further, I agree with Lady Hale (in Countryside Alliance para 116) that article 8 does not protect everything that people may want to do in their private space.
But where therapeutic detention has severely curtailed a detained patients private space in the institution in which he or she must reside, the limited areas in which a patient has freedom of choice become all the more precious to him or her and more readily form a core part of his or her life, as Lord Rodger used the phrase in Countryside Alliance (paras 95 106).
In L v Board of State Hospital (above) Lady Dorrian stated (para 26) that for people detained in the State Hospital the freedom to receive food parcels from visitors and to make purchases from an external source are some of the few areas in which they may exercise some sort of personal autonomy or choice.
She concluded that article 8 was engaged by an interference with that choice and that such interference had to be justified.
Because restrictions on food parcels and external purchases of food are not inherent in the loss of liberty occasioned by therapeutic detention, I agree; and I see an analogy in the comprehensive smoking ban.
It is not necessary to decide whether a comprehensive ban on smoking by people at liberty, or at least a ban outside their homes, would so interfere with their private lives as to require justification under article 8.
Such people can exercise personal autonomy in many other ways.
But there is a need to protect the residual autonomy of a person who has been subjected to long term therapeutic detention by requiring this further intrusion into his private life to be justified.
In this regard I agree with Keene LJ in his dissenting judgment in the Rampton Hospital case (para 101) and Lady Paton in this case (para 106).
I do not consider the addictive nature of smoking, which Lady Paton emphasises, is a decisive factor, not least because it militates against the persons autonomy.
But it may be said to reinforce the role that smoking can play in some peoples lives.
I also do not find it necessary to decide whether the State Hospital falls to be treated as Mr McCanns home for the purposes of article 8.
If it were, my analysis would essentially be the same as the one which I have adopted based on the concept of personal autonomy.
I therefore conclude that a comprehensive ban on smoking is within the ambit of article 8 of the ECHR, that it interferes with Mr McCanns right to respect for his private life and therefore that the Board must justify it.
Justification: As is well known, justification under article 8(2) requires that the measure which interferes with the right (i) is in accordance with the law, (ii) pursues a legitimate objective, (iii) is rationally connected to the legitimate objective and (iv) is proportionate.
I have already discussed the requirement that the interference be in accordance with the law and have concluded that the part of the impugned decision relating to the prohibition of possession, searches for and confiscation of tobacco products, did not meet that requirement because of the failure of the Board to address the requirements of section 1(4), and the regulations made under section 286, of the 2003 Act.
But because the Board may seek to introduce such measures in accordance with the 2003 Act, I address the other tests.
I address first the tests of legitimate objective and rational connection.
In the Rampton Hospital case both the Divisional Court and the Court of Appeal cited public documents which recorded (a) that in 1998 it was estimated that smoking in the United Kingdom caused each year 46,500 deaths from cancer and 40,300 deaths from circulatory diseases, (b) that those who smoke regularly and then die of smoking related disease lose on average 16 years from their life expectancy when compared with non smokers and (c) that in 2005 second hand smoking caused at least 12,000 deaths a year in the United Kingdom.
Having regard to the adverse effects that smoking can have on the health of smokers and others exposed to tobacco smoke, I have no difficulty in agreeing with the Second Division that the comprehensive smoking ban pursued the legitimate aim of the protection of health which is recognised in article 8(2).
The aim is to protect the detained patient from the health risks of his smoking and other people from the health risks of second hand smoke.
The comprehensive smoking ban clearly has a rational connection with the pursuit of that desirable goal.
Finally, in order to be necessary in a democratic society in the interests of public health the interference must be proportionate.
Again, as is well known, the tests for proportionality (in addition to the tests of the importance of the legitimate objective and the rational connection of the measure to that objective) are (i) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective and (ii) whether a fair balance has been struck between the rights of the individual and the interests of the community having regard to (a) the severity of the impact of the measure on the individuals rights and (b) the contribution of the measure to the achievement of the objective: Bank Mellat v HM Treasury (No 2) [2014] AC 700, para 20 per Lord Sumption, para 74 per Lord Reed.
No challenge is made to the ban on smoking indoors, where the danger of exposing other patients and supervising staff in designated smoking areas is obvious.
The minute (para 12 above) and the document discussed in para 7 above both record that the impugned decision which led to the comprehensive ban resulted from the operational difficulties which the Board faced in operating the partial ban which allowed supervised smoking within the hospital grounds.
Those problems threatened to compromise the health of the supervising staff, the welfare of the patients and the security of both.
Mr McCann did not challenge the account of events in those documents, which, in my view, this court must treat as the accepted factual background to the impugned decision.
Faced with such difficulties, I am satisfied that the Board did not act disproportionately in imposing the comprehensive smoking ban when it did.
If there is to be a comprehensive smoking ban, it is likely that the managers of the Board will need to prohibit the possession of tobacco products and also have powers to search for and confiscate such products.
As counsel for Mr McCann does not dispute that the introduction of such measures in accordance with the 2003 Act, the Code of Practice, and the 2005 Regulations would comply with the ECHR, it is not necessary further to consider the justification of those measures if they are introduced in that way.
Accordingly, but for the illegality under our domestic law of the prohibition of possession of tobacco products, the searches and the confiscation of tobacco products which are part of the impugned decision, I would have held that the decision was not contrary to Mr McCanns article 8 right to respect for his private life.
Article 14 of the ECHR
Because the impugned decision fell within the ambit of article 8, it is necessary to address briefly the challenge under article 14 of the ECHR that the Board has treated Mr McCann in a discriminatory manner which cannot be justified.
I am satisfied that this challenge fails for three principal reasons.
First, the Scottish Government is committed to extending the ban on smoking to all NHS facilities over time and also to extending the ban to prisons.
As a result, secondly, the differences in treatment between detained patients in the State Hospital on the one hand and patients in other NHS facilities or prisoners detained in prison are a matter of timing rather than policy.
The circumstances of individual public institutions will vary and each enjoys an area of discretion on how and at what speed it implements its anti smoking policy.
Thirdly, the explanation for the timing of the impugned decision is the documented difficulties of the partial smoking ban in the State Hospital which justified the introduction of the comprehensive smoking ban when it occurred.
It is therefore unnecessary to consider the differences between the circumstances of Mr McCann on the one hand and the circumstances of these groups of people on the other.
Further, I am not persuaded that there is any unjustified discrimination when detained patients are compared with the general public at liberty.
The circumstances of such members of the public are radically different as (i) they have opportunities to smoke in places which do not expose others to second hand smoke, and (ii) the public authorities do not have any legal duty of care to create a safe therapeutic environment for them or to protect their own staff from injury to health when they are in the public sphere and not acting in the course of their employment.
The documents to which I referred in paras 7 and 12 above reveal the problems of allowing smoking out of doors in a secure hospital.
Such problems do not occur among the general public.
The differences between the anti smoking policies applied to them and the comprehensive ban in the State Hospital can readily be justified.
It may be that the effects of smoking on patients with certain mental illnesses provide a further ground of distinction between mental health patients and those with whom Mr McCann wishes to be compared.
The Board referred in its written case to the strong association between poor mental health and smoking (which was also discussed in the evidential findings in the Rampton Hospital case) and there was a suggestion in the documents which suggested that smoking reduced the efficacy of clozapine, a drug for treating schizophrenia.
This was not explored in any detail in this appeal but I do not need to rely on it in reaching my view.
The article 14 challenge therefore fails.
Conclusion
I would allow the appeal but only to the extent that the prohibition on having tobacco products and the search and confiscation regime in the impugned decision are unlawful under our domestic law because they do not comply with the 2003 Act and the 2005 Regulations (paras 40 and 41 above).
In consequence, the impugned decision infringes Mr McCanns article 8 rights but only because the decision is not in accordance with our domestic law (para 62 above).
Otherwise I would dismiss the appeal.
I would invite parties to provide written submissions on the appropriate form of order within 21 days of the handing down of this judgment.
| Mr McCann suffers from a mental disorder and was detained in the State Hospital at Carstairs following his conviction for a number of offences.
On 5 December 2011 the State Hospital Board for Scotland (the Board) implemented a comprehensive smoking ban in the State Hospital.
A partial ban had previously been implemented allowing smoking in the grounds but this had created operational difficulties.
The comprehensive ban prohibited a detained patient from smoking or possessing tobacco products in the State Hospital, including in its grounds, and from smoking on home visits.
The ban also prohibited visitors from bringing tobacco products into the hospital.
Procedures were established to search both patients and visitors for such products.
Mr McCanns challenge relates only to (a) the ban on smoking in the grounds and on home visits, which, by creating a comprehensive ban, prevents detainees from smoking anywhere and (b) the ban on possession and powers of search and confiscation.
Mr McCann challenges the legality of the comprehensive smoking ban on three grounds.
First, he argues the decision to implement the smoking ban was unlawful as it did not adhere to the principles in section 1 of the Mental Health (Care and Treatment) (Scotland) Act 2003 (the 2003 Act) or comply with the requirements of the Mental Health (Safety and Security) (Scotland) Regulations 2005 (the 2005 Regulations).
Section 1 of the 2003 Act contains a statement of principles for the discharge of functions under that Act, which include an obligation to minimise restrictions on the freedom of the patient.
The 2005 Regulations were made under section 286 of the 2003 Act which is headed Safety and security in hospitals.
The 2005 Regulations authorise the placing of restrictions on items that specified patients and their visitors may have in hospital and the removal from them of prohibited items.
They require that the specified patient must be informed when any measure is to be applied to them and that records are kept of any searches.
The Board contends that in deciding upon and implementing the smoking ban and measures to enforce that ban, it acted solely under its power of management in section 102(4) of the National Health Service (Scotland) Act 1978 (the 1978 Act).
As such, it submits that it was not required to comply with the 2003 Act section 1 principles.
Secondly, Mr McCann submits that the decision unjustifiably interfered with his right to respect for his private life under Article 8 of the European Convention on Human Rights (ECHR).
Thirdly, he argues that the Board, by implementing the smoking ban, treated him in a discriminatory manner contrary to Article 14 ECHR when taken with Article 8 EHCR.
He submits that the discriminatory treatment cannot be objectively justified when compared with (i) people in prison, (ii) patients in other hospitals (whether detained or not) or (iii) members of the public at liberty.
The Supreme Court unanimously allows Mr McCanns appeal but only to the extent that the part of the impugned decision, which relates to the prohibition from possession of tobacco products and the
powers of search and confiscation, does not comply with the 2003 Act and 2005 Regulations.
Lord Hodge gives the lead judgment, with which the other Justices agree.
Mental Health (Care and Treatment) (Scotland) Act 2003 The Board is correct that the comprehensive ban, viewed on its own, involves the exercise of a power of management under the 1978 Act.
However, the supporting prohibition from possession of tobacco products and the power to search for and confiscate such products fall within the scope of the 2003 Act and the 2005 Regulations [34].
The 2005 Regulations do not set limits on the items which may be prohibited or searched for.
The focus of section 286 and the 2005 Regulations is on the regulation of activities which impinge on the autonomy of individuals [38].
The devising of such policies which concern the detained patients autonomy and the carrying out of such measures have thus become functions under the 2003 Act and the section 1 principles apply to such measures in so far as they are relevant [38 39].
One relevant principle is the obligation in section 1(4) to discharge the function in a manner that involves the minimum restriction on the freedom of the patient that is necessary in the circumstances [39].
In instituting the comprehensive smoking ban there was no consideration of this principle by the Board nor was there compliance with the obligations to inform and record in the 2005 Regulations [40].
As a result, the prohibition on having tobacco products and the related powers to search and confiscate are illegal and fall to be annulled [41].
Article 8 Mr McCanns Article 8 right to privacy has been infringed [43].
The smoking ban is within the ambit of Article 8 [57].
Where therapeutic detention has severely curtailed a detained patients private space, there is a need to protect this residual autonomy by requiring further intrusion into his private life to be justified [55].
The decision is not in accordance with law as the Board failed to address the requirements of section 1(4) of the 2003 Act and the 2005 Regulations in relation to the part of the ban relating to the prohibition of possession, searches and confiscation of tobacco products [58].
But for this illegality, the decision would not have been contrary to Article 8 [62].
The smoking ban pursued the legitimate aim of the protection of public health and was rationally connected to that aim [59].
Faced with the difficulties of implementing a partial ban, the Board did not act disproportionately in imposing the comprehensive smoking ban when it did [60].
Article 14 The Article 14 challenge fails.
The differences in treatment between detained patients in the State Hospital and patients in other NHS facilities or prisoners are a matter of timing rather than policy as the Scottish Government has committed to extending the ban.
The earlier implementation of the comprehensive smoking ban in the State Hospital is due to the difficulties faced by the State Hospital in operating the partial ban.
It is therefore unnecessary to consider the differences between the circumstances of Mr McCann and those of the other groups [64].
Further, there is no unjustified discrimination when detained patients are compared with the general public at liberty as the circumstances of members of the public are radically different [65].
|
This appeal relates to the right of the Police Service of Northern Ireland (PSNI) to retain personal information and data lawfully obtained from the appellant following his arrest on 14 October 2008 for the offence of driving with excess alcohol contrary to article 16(1)(a) of the Road Traffic (Northern Ireland) Order 1995 (the 1995 Order).
On 5 November 2008 the appellant pleaded guilty to that offence at Newry Magistrates Court.
He was thus a convicted person.
He was fined 50 and disqualified from driving for 12 months but no immediate or suspended custodial sentence was imposed on him.
He was born on 23 August 1972 and has therefore been an adult throughout the period relevant to this appeal.
The facts are set out in the agreed statement of facts and issues and can be shortly stated.
On 14 October 2008 at approximately 1.35 am the appellant was stopped at a police checkpoint.
He was arrested and taken to a police station where he provided samples of breath which were found to contain 65 milligrams of alcohol per 100 millilitres of breath.
That was 30 milligrams in excess of the permitted limit.
On the same day the following information or data relating to the appellant was taken from him: (a) fingerprints pursuant to the statutory power in article 61 of the Police and Criminal Evidence (Northern Ireland) Order 1989 (the 1989 Order); (b) a photograph pursuant to the statutory power to do so under article 64A of the 1989 Order; and (c) a non-intimate DNA sample by buccal swab, pursuant to article 63 of the 1989 Order.
For the purposes of this appeal it is not disputed that the appellants fingerprints, photograph and DNA sample were lawfully obtained by the PSNI with the consent of the appellant.
I note in passing that article 61(4) of the 1989 Order permits the PSNI to take fingerprints of a person charged with a recordable offence in circumstances where he or she does not consent.
Article 63(2A) of the 1989 Order permits the PSNI to take a non-intimate sample from a person detained in connection with a recordable offence in circumstances where he or she does not consent.
As to photographs, by article 64A of the 1989 Order, any person lawfully detained at a police station may be photographed even without his or her consent.
There is no threshold of recordable offence in relation to photographs.
As noted in para 1 above, the appellant was charged with the offence of driving with excess alcohol contrary to article 16(1)(a) of the 1995 Order, which is a recordable offence by virtue of regulation 2 of the Northern Ireland Criminal Records (Recordable Offences) Regulations 1989.
He pleaded guilty to the offence on 5 November 2008 at Newry Magistrates Court and (as stated above) was fined 50 and disqualified from driving for 12 months.
A DNA profile (described at paras 14 and 15 below) was subsequently taken from the DNA sample.
Schedule 1 of the Road Traffic (Northern Ireland) Order 1996 provides for a maximum penalty of six months imprisonment for the offence of driving with excess alcohol, a maximum fine of 5,000, or both, together with an obligatory disqualification from driving for 12 months.
Article 6 Table A of the Rehabilitation of Offenders (Northern Ireland) Order 1978 provides that a conviction for driving with excess alcohol is spent after the expiry of five years.
On 15 January 2009, just over two months after the appellant pleaded guilty, his solicitor wrote to the PSNI claiming that the retention of the appellants photograph, fingerprint and DNA sample was unlawful.
He requested that they be destroyed or returned to the appellant.
The PSNI replied on 27 February 2009 saying that the legal consequence of the decision of the European Court of Human Rights (ECtHR) in S and Marper v United Kingdom [2008] ECHR 1169 (S and Marper) was a matter for the United Kingdom Government and that any changes to the law of the United Kingdom would be fully complied with by the PSNI.
On 12 April 2010 responsibility for the DNA and fingerprint retention policy in Northern Ireland passed to the Northern Ireland administration following the devolution of policing and justice powers from Westminster.
It then became a matter for the Northern Ireland Minister of Justice and the Northern Ireland Assembly as to what legislative solution was to be introduced in Northern Ireland in response to the S and Marper judgment of the Grand Chamber in Strasbourg.
Issues
In the agreed statement of facts and issues the parties identified two questions for determination in this appeal as follows.
First, does the retention of the fingerprints, photograph, DNA sample and DNA profile disclose an interference with the appellant's right to respect for his private life within the meaning of article 8(1) of the European Convention on Human Rights (ECHR), the appellant having been convicted of a recordable offence? Second, if so, is that interference justified under article 8(2)? Those questions reflect, at least in part, the way in which the appellants case was put on an application to the Divisional Court in Northern Ireland (Higgins, Girvan and Coghlin LJJ) for judicial review of the right of the respondent to retain the material described above (which the Divisional Court described as the relevant data) for an indefinite period: [2012] NIQB 88.
In two respects the certificate granted by the Divisional Court is in somewhat different terms from the agreed statement of facts and issues, as follows: THE COURT CERTIFIES that the following point of law of general public importance is involved in the decision of the court.
Is the policy of the Police Service of Northern Ireland to retain indefinitely the DNA profile, fingerprints and photographs of a person convicted of a recordable offence in breach of article 8 of the ECHR? As can be seen, there is no reference to the DNA sample.
The PSNI intends to retain the DNA sample but only until the commencement of section 9 and, with it, Schedule 2 of the Criminal Justice Act (Northern Ireland) 2013 (the 2013 Act).
These provisions have yet to come into force but are expected to do so in the comparatively near future.
When they do come into force, Schedule 2 of the 2013 Act provides for the insertion of a new article 63P into the 1989 Order.
Article 63P(2) requires the destruction of all DNA samples as soon as a DNA profile has been taken or within six months of the taking of the DNA sample.
It will not therefore be possible to retain the appellants DNA sample once section 9 and Schedule 2 of the 2013 Act come into force.
In these circumstances the appeal was argued on the assumption that the appellants DNA sample will not be retained.
The appeal is thus concerned with the PSNIs policy with regard (a) to the retention of a convicted persons DNA profile and fingerprints, which I will refer to as his or her biometric data, and (b) to the retention of any photograph taken of him or her by the PSNI as described below.
The PSNI continues to retain and intends to retain indefinitely within its records the DNA profile, fingerprints and photograph relating to the appellant that were taken from him on 14 October 2008.
The appellant says that it cannot lawfully do so.
The statutory position in Northern Ireland
Pending the coming into force of the 2013 Act, which will broadly bring the position in Northern Ireland into line with the current position in England and Wales, the statutory position in Northern Ireland is as it was at the time of the decision of the ECtHR in S and Marper.
Article 64(lA) of the 1989 Order, as amended by the Police and Criminal Evidence (Amendment) (Northern Ireland) Order 2007 (the 2007 Order) provides a general permission to the PSNI to retain fingerprints and samples after they have fulfilled the purposes for which they were taken.
The use to which such fingerprints and samples may be put is, however, curtailed by article 64(lA) of the 1989 Order.
The fingerprints and samples must not be used by any person except for purposes related to the prevention or detection of crime, the investigation of an offence, the conduct of a prosecution or the identification of a deceased person or of the person from whom a body part came.
Article 64A(4) of the 1989 Order permits photographs relating to a person photographed to be retained by the police but it can only be used for a purpose permitted by statute.
Current statutory position in England and Wales
These amendments to the Police and Criminal Evidence Act 1984 (PACE) were introduced by the Protection of Freedoms Act 2012 in the light of the decision of the ECtHR in S and Marper.
Section 63I of PACE now provides that fingerprints and a DNA profile (derived from a DNA sample) taken from a person convicted of a recordable offence may be retained indefinitely.
Section 63K provides that where (i) the person convicted is under the age of 18 years at the time of the offence, (ii) the offence is a minor recordable offence (meaning an offence which neither attracts a custodial sentence of more than five years nor is a qualifying offence as defined in section 65A), and (iii) the person has not previously been convicted of a recordable offence, the period of retention of such material may be shorter: the length of the sentence plus five years where the person concerned receives a custodial sentence of less than five years (section 63K(2)), or, if no custodial sentence was given, five years from the time when the fingerprints or DNA sample were taken, as the case may be (section 63K(4)).
These provisions are subject to the person not re-offending during the relevant period: if the person is convicted of another recordable offence during the relevant period, the material may then be retained indefinitely (section 63K(5)).
Where the custodial sentence is five years or more or where the offence is a qualifying offence the material may again be held indefinitely.
Section 63R relates to the destruction of samples, including non- intimate samples.
Section 63R(4) provides for the general principle that a sample must be destroyed as soon as a DNA profile has been taken from it and, in any event, within six months of the sample being taken.
As to photographs, section 64A(4) of PACE is in the same terms as article 64A(4) of the 1989 Order.
At the request of the court, a note was produced on behalf of the Secretary of State, which included an annex setting out a summary overview of the PACE retention rules.
That annex is reproduced as Annex A to this judgment.
Policy and Practice of the PSNI
Before the decision of the ECtHR in S and Marper it was the policy and practice of the PSNI to retain the fingerprints, photographs and DNA samples of persons from whom such information or data had been lawfully taken and where there was no statutory obligation to destroy such information or data.
The fact that a person was subsequently acquitted of the offence that led to the taking of a photograph, fingerprint or sample was of no relevance.
After the decision in S and Marper the policy and practice of the PSNI changed in relation to those who were acquitted but remained unchanged in relation to those, like the appellant, who were subsequently convicted.
So, once the 2013 Act is in force, the policy and practice in the case of the appellant will allow the PSNI to retain the DNA profile, fingerprints and photograph for any use to which they may be lawfully put.
DNA Profiles
The method of obtaining a DNA profile is briefly described in the case for the Secretary of State and, so far as I am aware, is not in dispute.
When the PSNI takes a DNA sample from a person, it is sent to Forensic Science Northern Ireland ("FSNI"), which is an agency of the Northern Ireland Department of Justice.
FSNI extract a DNA profile from the DNA sample.
A DNA profile is digitised information in the form of a numerical sequence representing a very small part of the person's DNA.
The DNA profile extracted by FSNI indicates a persons gender.
Other than indicating the gender of the person, DNA profiles do not include any information from which conclusions could be drawn as to the person's wider characteristics, such as age, height, hair colour or propensity to develop a particular disease.
FSNI upload the DNA profile onto the Northern Ireland DNA Database (the NIDNAD), together with sufficient information to identify the person to whom it relates.
This information does not include information as to whether a person has been convicted of, or is under investigation for, an offence.
As of June 2012, the NIDNAD included the DNA profiles of 123,044 known persons.
DNA profiles uploaded on to the NIDNAD are also loaded on to the United Kingdom National DNA Database, although the retention of Northern Irish DNA profiles on the NIDNAD is governed by the law and policy applicable in Northern Ireland.
The NIDNAD is managed by FSNI on behalf of the PSNI.
It is held on a standalone computer that cannot be accessed from outside FSNI.
Access within FSNI is restricted to a small number of FSNI staff and access is audited.
In particular, police officers do not have access to the NIDNAD.
Where a search is requested, it will be undertaken by the appropriate FSNI staff and the police will only be provided with details of the matching profile, if any.
Requests for searches from police forces other than the PSNI are considered on a case by case basis and are in any event subject to the same controls as a request from the PSNI.
FSNI will not delete a DNA profile from the NIDNAD or destroy a DNA sample (which they retain) without instructions from the PSNI.
Decisions to delete profiles are subject to the oversight of the PSNI Biometric Retention/Disposal Ratification Committee.
When a DNA profile is loaded to the NIDNAD (whether it relates to a known person or whether it is a crime scene profile, with which this appeal is not concerned) it is cross-checked with the profiles already on the database.
It is this process, which is known as speculative searching, which gives rise to the matches that are of use in the detection of crime.
The control, management and operation of the NIDNAD are overseen by the NI DNA Database Board.
Fingerprints
When a person is taken into custody, the PSNI takes his or her fingerprints using a system which digitally scans fingerprints and palm prints and automatically loads them on to the IDENT1 United Kingdom database, where they are automatically searched against other sets of fingerprints held on that database.
If a match is found, an electronic message is sent to the terminal at the custody suite confirming the identity of the person from whom the fingerprints were taken.
It is said with force that the facility to verify the identity of the person from whom fingerprints are taken is necessary to combat the risk of a person giving a false identity, which is of particular use in the United Kingdom, where, by contrast with other European countries, there is no requirement to carry an identity card.
Photographs
When a person is taken into custody, the PSNI takes his or her photograph using a digital camera.
The photographs are then loaded on to a PSNI database known as Niche, along with the person's custody record.
They form part of the custody record and are available to view when accessing the custody record.
Access to the Niche database is limited to authorised PSNI personnel and is audited.
The Niche database does not have the capability to match photographs, whether by way of facial recognition software or otherwise.
Photographs can of course be used to verify the identity of a person in order to combat the risk of a person giving a false identity to the police.
They can also be used, subject to appropriate controls, to enable witnesses to identify a person.
Article 8 of the ECHR
Article 8 provides: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence.
2.
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals or for the protection of the rights and freedoms of others.
It is now rightly accepted on behalf of both the PSNI and the Secretary of State that article 8(1) is, as it is said, engaged, on the basis that the indefinite retention of a persons DNA profile, fingerprints and photograph interferes with the right to respect for private life recognised by article 8(1).
However, it is of course common ground that there is no violation of article 8 if the PSNI can satisfy the court that its policy is in accordance with the law and necessary in a democratic society for one of the reasons identified in article 8(2).
On the facts of this case, the questions which arise under article 8(2) are whether the retention policy is justifiable and, in particular, whether it satisfies the principle of proportionality.
In this regard it is helpful to recall the four elements identified by Lord Reed in Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2014] AC 700, para 74.
Although Lord Reeds judgment was a dissenting judgment, there is no difference in principle between his formulation of the relevant principles and those stated by Lord Sumption for the majority.
They are (1) whether the objective of the relevant measure is sufficiently important to justify the limitation of a protected right, (2) whether the measure is rationally connected to the objective, (3) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective, and (4) whether, balancing the severity of the measure's effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter.
Lord Reed added that, in essence, the question at step four is whether the impact of the rights infringement is disproportionate to the likely benefit of the impugned measure.
He also noted at para 71 that an assessment of proportionality inevitably involves a value judgment at the stage at which a balance is to be struck between the importance of the objective pursued and the value of the right intruded upon.
These proceedings
The appellant sought leave to apply for judicial review of the decision to retain the biometric data and the photograph.
By an order of Morgan J on 3 April 2009 the applicant was granted leave to apply for judicial review on the grounds set out in paras 9(c) and (d) of the Order 53 statement as follows: (c) The retention of the [data] for an indefinite period of time in the unregulated manner observed by the European court between paras 105-125 of its Judgment in S and Marper v UK (4 December 2008) is not proportionate and does not strike a fair balance between competing public and private rights.
(d) A conviction for an offence of relatively minor gravity is very much the type of circumstance in which the Committee of Ministers in R(92)(1) gave a provisional view that there was no need for the taking or retention of such samples.
The European court has been heavily influenced by that document and there is every reason to believe that they would continue to be influenced by that document and those observations in circumstances where they were dealing with the conviction of an individual for a minor offence in circumstances where the samples were taken not for the true purposes of investigating the offence but simply for the purpose of retaining data in connection with the individual.
The orders sought were: (a) a declaration that the indefinite retention of the data was unlawful and constituted an unjustifiable interference with his right to respect for private life under article 8; and (b) an order of prohibition preventing the respondent from making any use of the relevant data.
The substantive application was heard by the Divisional Court, which refused the application on 13 November 2012.
Girvan LJ gave the judgment of the court.
The Divisional Court was persuaded that the infringement was justified, so that article 8(2) was satisfied.
The appellant says that it was wrong.
The answer depends upon a number of matters: namely the correct approach under article 8(2), a consideration of the relevant statutory provisions in Northern Ireland, together with the policy of the PSNI, and an analysis of the cases decided so far, especially by the ECtHR.
I have considered both the correct approach to proportionality under article 8(2) and the relevant statutory provisions in Northern Ireland, together with the policy of the PSNI.
The Divisional Court considered in some detail both S and Marper in the House of Lords, reported in [2004] 1 WLR 219, and S and Marper in the ECtHR.
In that litigation the challenge was to the retention of fingerprints, cellular samples and DNA profiles after proceedings against the individuals had led to acquittal or discontinuance.
It will be recalled that the majority of the House of Lords, Baroness Hale dissenting, held that there was no infringement of article 8(1) and the House concluded unanimously that the retention could in any event be justified under article 8(2).
The ECtHR disagreed.
It held that there was a breach of article 8(1) and that the retention could not be justified as proportionate under article 8(2).
It was accepted by this court in R (GC) v Commissioner of Police of the Metropolis [2011] UKSC 21; [2011] 1 WLR 1230 that in the light of S and Marper the decision in the House of Lords could no longer be accepted as correct.
The reasoning of the ECtHR is important because both parties to this appeal rely upon it.
The Divisional Court distinguished it on the basis that the court was not concerned with a case of retention after conviction but only with retention after acquittal.
At para 30 Girvan LJ quoted these two striking paragraphs from the judgment, paras 119 and 125: 119.
the court is struck by the blanket and indiscriminate nature of the power of retention in England and Wales.
The material may be retained irrespective of the nature or gravity of the offence for which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken and retained from a person of any age arrested in connection with a recordable offence which includes minor or non-imprisonable offences.
The retention is not time limited, the material is retained indefinitely whatever the nature or seriousness of the offence of which the person was suspected.
Moreover there exist only limited possibilities for an acquitted individual to have the data removed from the Nationwide Database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances.
125.
In conclusion the court finds that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences as applied in the case of the present applicants, fails to strike a fair balance between competing public and private interests and that the respondent state has overstepped an acceptable margin of appreciation in this regard.
Accordingly, the retention at issue constitutes a disproportionate interference with the applicant's right to respect for private life and cannot be regarded as necessary in a democratic society.
This conclusion obviates the need for the court to consider the applicant's criticism regarding the adequacy of certain particular safeguards, such as too broad an access to the personal data concerned and insufficient protection against the misuse or abuse of such data.
In para 37 Girvan LJ noted that the Strasbourg analysis in S and Marper proceeded along the usual course of determining whether the interference with the individuals article 8 rights was (a) in accordance with law, (b) pursued a legitimate aim and (c) was necessary in a democratic society.
He added that question (c) involved the issue whether the retention was proportionate and struck a fair balance between the competing public and private interests.
Girvan LJ noted in para 38 that, having regard to the limited grounds upon which leave was granted, the focus of the appellants case was on the question of necessity and proportionality.
In para 39 he correctly noted that there was clearly a statutory power to retain the data and that the focus must be upon the proportionality of indefinite retention.
Under Legitimate aim, the ECtHR said at para 100 that it agreed with the Government that the retention of fingerprint and DNA information pursues the legitimate purpose of the detection and, therefore, prevention of crime.
It added that, while the original taking of this information pursues the aim of linking a particular person to the particular crime of which he or she is suspected, its retention pursues the broader purpose of assisting in the identification of future offenders.
Under the heading Necessary in a democratic society the ECtHR discussed the general principles between paras 101 and 104.
In summary it held that an interference will be considered necessary in a democratic society for a legitimate aim if it answers a pressing social need and, in particular, if it is proportionate to the legitimate aim pursued and if the reasons given by the national authorities to justify it are relevant and sufficient.
It is for the national authorities to make the initial assessment subject to review by the ECtHR.
A margin of appreciation must be left to the competent national authorities, which varies and depends upon a number of factors.
They include the nature of the right in issue, its importance for the individual, the nature of the interference and the object pursued by the interference.
Where there is no consensus among member states, either as to the relative importance of the interest at stake or as to how best to protect it, the margin will be wider.
In para 103 the ECtHR stressed the importance of the protection of data to a persons enjoyment of his rights under article 8 in some detail by reference, in particular, to Recommendation No R(92)1 of the Committee of Ministers.
However it concluded this part of the judgment in para 104 as follows: The interests of the data subjects and the community as a whole in protecting the personal data, including fingerprint and DNA information, may be outweighed by the legitimate interest in the prevention of crime (see article 9 of the Data Protection Convention).
However, the intrinsically private character of this information calls for the court to exercise careful scrutiny of any state measure authorising its retention and use by the authorities without the consent of the person concerned.
I agree with the Divisional Court that the ECtHR was not considering the position of convicted people.
At para 40 Girvan LJ said that the ECtHR was at pains to point out that the only issue to be considered was whether the retention of the data obtained from persons who had been suspected but not convicted of certain criminal actions.
He referred to para 106 without quoting it.
It must be set in its context, which begins with para 105 in the courts consideration of the application of the principles to the facts.
Paras 105 and 106 read: 105.
The court finds it to be beyond dispute that the fight against crime, and in particular against organised crime and terrorism, which is one of the challenges faced by todays European societies, depends to a great extent on the use of modern scientific techniques of investigation and identification.
The techniques of DNA analysis were acknowledged by the Council of Europe more than 15 years ago as offering advantages to the criminal-justice system (see Recommendation No R(92)1 of the Committee of Ministers, paras 43-44 above).
Nor is it disputed that the member states have since that time made rapid and marked progress in using DNA information in the determination of innocence or guilt.
106.
However, while it recognises the importance of such information in the detection of crime, the court must delimit the scope of its examination.
The question is not whether the retention of fingerprints, cellular samples and DNA profiles may in general be regarded as justified under the Convention.
The only issue to be considered by the court is whether the retention of the fingerprint and DNA data of the applicants, as persons who had been suspected, but not convicted, of certain criminal offences, was justified under article 8 paragraph 2 of the Convention.
In the following paragraphs the court nowhere suggests that the principles apply to convicted persons.
In para 112 it stresses the importance of carefully balancing the potential benefits of the extensive use of modern scientific techniques, and in particular extensive DNA databases, against important private-life interests.
It concludes para 112 by saying that any state claiming a pioneer role in the development of new techniques (in which it plainly included the United Kingdom) bears special responsibility for striking the right balance in this regard.
Paragraphs 113 and 114 read as follows: 113.
In the present case, the applicants fingerprints and cellular samples were taken and DNA profiles obtained in the context of criminal proceedings brought on suspicion of attempted robbery in the case of the first applicant and harassment of his partner in the case of the second applicant.
The data were retained on the basis of legislation allowing for their indefinite retention, despite the acquittal of the former and the discontinuance of the criminal proceedings against the latter.
114.
The court must consider whether the permanent retention of fingerprint and DNA data of all suspected but unconvicted people is based on relevant and sufficient reasons.
Girvan LJ quoted an extract from para 114 (without referring to the number) and italicised the words all suspected but unconvicted people.
In my opinion he was correct to do so.
They fit with the statement in para 106 quoted above that the only issue to be considered by the court was whether the retention of the fingerprint and DNA data of the applicants, as persons who had been suspected, but not convicted, of certain criminal offences, was justified under article 8(2) the Convention.
There is no indication that the Strasbourg court was considering the position of those who had been convicted at all.
I agree with Girvan LJs conclusion at para 42 that Strasbourg was not saying that a blanket policy of retaining the data of convicted persons would be unlawful.
It stressed in para 125 (quoted above) its conclusion that the blanket and indiscriminate nature of the powers of retention of the fingerprints, cellular samples and DNA profiles of persons suspected but not convicted of offences fails to strike a fair balance between competing public and private interests and that the respondent state has overstepped an acceptable margin of appreciation in this regard.
As Girvan LJ put it at the end of para 42, [t]he courts focus was solely and entirely on the issue of unconvicted persons and para 119 of the judgment [also quoted above] must be read in that context.
I recognise that it does not follow from the fact that the ECtHR was only considering unconvicted persons that the system in Northern Ireland (and the United Kingdom) is justified under article 8(2).
I also recognise that, save for exceptional cases, the policy of retaining DNA profiles from those convicted persons to whom it applies may be described as a blanket policy.
However, the ECtHR recognised the importance of the use of DNA material in the solving of crime.
It also recognised that, although the rights of the appellant and a person in his position are interfered with by the system in operation in the Northern Ireland and England and Wales (and indeed Scotland), the interference is a low level of interference.
I also recognise that a relevant factor to take into account in the balance is the nature of the offence of which the person concerned is convicted.
The United Kingdom has chosen recordable offences as the touchstone.
Recordable offences include any offences punishable by imprisonment, together with a limited number of non-imprisonable offences.
As the expression suggests, the police are obliged to keep records of convictions and offenders in relation to such offences on the Police National Computer.
I can see nothing unreasonable in the conclusion that such records ought to ought to include any available DNA profiles.
It is of course true that the appellant was only fined 50 and disqualified from driving for a year but driving with excess alcohol is a serious offence and can cause significant injury and damage.
It may lead to up to six months imprisonment.
In S and Marper the ECtHR was concerned with a scheme that involved the retention of all biometric data, including DNA samples, whereas, for the reasons explained above, the present case does not concern the retention of the sample or samples, but only the profile, which contains much less data.
S and Marper was also concerned with a scheme which did not discriminate between adults and children whereas the present case is concerned with a scheme which only applies to adults.
These limitations seem to me to be of real importance.
It is true that a conviction for driving with excess alcohol will become spent but there is no support in S and Marper for the conclusion that, just because a conviction may become spent, the biometric data of a person who is convicted cannot be kept indefinitely.
Reliance was placed on behalf of the appellant upon the reference to spent convictions in Principle 7 of the Council of Europes Committee of Ministers Recommendation No R(87)15, which was adopted on 17 September 1987 and provides: Principle 7 - Length of storage and updating of data 7.1 Measures should be taken so that personal data kept for police purposes are deleted if they are no longer necessary for the purposes for which they were stored.
For this purpose, consideration shall in particular be given to the following criteria: the need to retain data in the light of the conclusion of an inquiry into a particular case; a final judicial decision, in particular an acquittal; rehabilitation; spent convictions; amnesties; the age of the data subject, particular categories of data.
7.2 Rules aimed at fixing storage periods for the different categories of personal data as well as regular checks on their quality should be established in agreement with the supervisory authority or in accordance with domestic law.
As I see it, Principle 7 gives some support for the proposition that the fact that a conviction may become spent is a potentially relevant but by no means decisive factor in considering where the balance lies.
Indeed it was argued before us that account should be taken of the fact that Mr Gaughrans conviction had been spent in accordance with the Rehabilitation of Offenders (Northern Ireland) Order.
The Secretary of State submitted in response that the Order had no relevance, because it was concerned only with the use of past criminal convictions in legal proceedings.
In my opinion it is unnecessary to resolve this question.
It is not material to the application of article 8, unless it can be said that the retention of the material after the conviction has been spent is not in accordance with domestic law.
That has not been argued and would in any event be an unpromising argument.
The Rehabilitation of Offenders Order is not concerned with the retention of information about convicted persons, but only with the disclosure of the convictions themselves.
It is right to add, first, that we are hearing an appeal from the Divisional Court which decided this case before the conviction had been spent, and secondly that, when it comes into force, the 2013 Act will provide in terms that the right to retain information will not be affected by the fact that any conviction has become spent.
Taking account of all relevant factors I would hold that the balance struck by the Northern Irish authorities, and indeed in England and Wales, is proportionate and justified.
It is within the margin of appreciation which the ECtHR accepts is an important factor.
There is in my opinion nothing in the Strasbourg jurisprudence which leads to a different conclusion.
Before us, as before the Divisional Court, the appellant relied upon cases such as Van der Velden v The Netherlands 29514/04 and W v The Netherlands 20689/08, [2009] ECHR 277.
In those cases, the complaints were held to be inadmissible.
They show that there are many factors which are potentially relevant to the issue of proportionality.
Under Dutch law DNA profiles may be retained for 30 years where the relevant offence carries a sentence of six years or more and 20 years where it carries a sentence of less than six years.
As it seems to me, it does not follow from the fact that in those cases time limits were held to be proportionate that the system in a member state in which there are no time limits must be disproportionate.
It is simply one of the factors to take into account.
As I see it, the benefits to the public of retaining the DNA profiles of those who are convicted are potentially very considerable and outweigh the infringement of the right of the person concerned under article 8.
I would accept the submission made on behalf of the Secretary of State that the retention of the biometric data contributes to law enforcement and the investigation of offences in relation to both future and historic offences.
The Secretary of State puts it thus in para 22 of her case.
(1) Where a convicted person subsequently commits another offence in relation to which a crime scene profile or fingerprints is or are obtained, the fact that there is a record of his or her DNA profile or fingerprints will assist in identifying him or her as a suspect.
(2) Of particular relevance to DNA profiles, where a convicted person has in the past committed a crime that remains unsolved, but a subsequent cold case review later produces a crime scene profile, the fact that there is a record of his or her DNA profile will assist in identifying him or her.
A number of examples were given by the Secretary of State which it is not necessary to set out in detail here.
It is also of some note that a DNA profile may establish that the person concerned did not commit a particular offence.
This is a factor which was taken into account in both Van der Velden and W. In Van der Velden the ECtHR said at p 9: Secondly, it is to be noted that while the interference at issue was relatively slight, the applicant may also reap a certain benefit from the inclusion of his DNA profile in the national database in that he may thereby be rapidly eliminated from the list of persons suspected of crimes in the investigation of which material containing DNA has been found.
In W the ECtHR said that it had no cause to arrive at a different conclusion from the one it had reached in earlier cases including Van der Velden and S and Marper, Where it considered that the compilation and retention of a DNA profile served the legitimate aims of the prevention of crime and the protection of the rights and freedoms of others.
The ECtHR added: In its Van der Velden decision the court already pointed to the substantial contribution which DNA records have made to law enforcement in recent years, and noted that while the interference at issue was relatively slight, the applicant might also reap a certain benefit from the inclusion of his DNA profile in the national database in that it allowed for a rapid elimination of the applicant as a possible suspect of a particular crime in the investigation of which material containing DNA had been found.
The court finds that these considerations apply equally in the present case, where the person whose DNA profile is to be compiled and stored in the database is a minor.
In S and Marper the ECtHR, when considering the margin of appreciation in the case of those who were acquitted, placed some reliance upon the fact that the United Kingdom was alone or almost alone in retaining biometric data in such cases.
There is a much broader range of approaches in the case of those who have been convicted.
The Secretary of State produced an annex setting out a summary of inclusions and removal criteria in other jurisdictions.
It is attached to this judgment as Annex B. It shows that in such cases many countries retain biometric data for very long periods.
In addition to England and Wales and Northern Ireland, Ireland and Scotland are I think the only jurisdictions which provide for indefinite retention.
However, there are several states which provide for retention until death.
They are Austria: five years after death or 80 years of age; Denmark: two years after death or at 80 years of age; Estonia: ten years after death; Finland: ten years after death; Lithuania: 100 years after inclusion or ten years after death; Luxembourg: ten years after death; The Netherlands: as stated above and 80 years after a conviction against minors; Romania five years after death or 60 years of age; and Slovakia: 100 years after date of birth.
It seems to me that in the context of a persons rights under article 8 there is little, if any, difference between retention for an indefinite period and retention until death or effectively until death.
Annex B shows that there are other formulae.
They include Belgium: 30 years after inclusion; France: 40 years after the end of the sentence or after the age of 80; Hungary: 20 years after the sentence has been served; Latvia: 75 years of age; Poland: 35 years after conviction; Germany: DNA profiles are reviewed after ten years and removal depends on a court decision; Italy: 20 years after the incident but no profile can be kept for more than 40 years; and Sweden: ten years after sentence.
It can thus be seen that member states have chosen many different approaches but there is, in my opinion, no principled basis upon which the system in operation in Northern Ireland can be held to be disproportionate, especially when compared with the significant number of countries which retain DNA profiles until death or effectively until death.
Very few states have a process of review.
The factors set out above seem to me to be strong factors in support of the conclusion that the PSNI was entitled to retain the biometric data as it did in the case of those convicted.
As the ECtHR put in a different context in Animal Defenders International v United Kingdom (2013) 57 EHRR 21, para 23, the lack of consensus between states broadens the margin of appreciation to be accorded to individual states.
See also eg Frett v France (2004) 38 EHRR 31, para 41 and Goodwin v United Kingdom (2002) 35 EHRR 28, para 85.
While a blanket policy may be objectionable in some circumstances (see eg Hirst v United Kingdom (No 2) (2006) 42 EHRR 41, para 81), all depends upon the circumstances.
It was put thus in the Animal Defenders case at paras 109 and 110: 109.
It follows that the more convincing the general justifications for the general measure are, the less importance the court will attach to its impact in the particular case.
110.
The central question as regards such measures is not, as the applicant suggested, whether less restrictive rules should have been adopted or, indeed, whether the State could prove that, without the prohibition, the legitimate aim would not be achieved.
Rather the core issue is whether, in adopting the general measure and striking the balance it did, the legislature acted within the margin of appreciation afforded to it.
See also eg Clift v United Kingdom (Application No 7205/07) at para 76.
In these circumstances, it appears to me that there is no basis in the ECtHR jurisprudence for the conclusion that the PSNI policy of retaining biometric data indefinitely is not justified.
The policy was within the margin of appreciation identified by the ECtHR.
The question then arises how the Northern Irish court should proceed.
In R (Nicklinson) v Ministry of Justice [2014] UKSC 38, [2014] 3 WLR 200, Lord Neuberger put the position thus at para 75: Where the legislature has enacted a statutory provision which is within the margin of appreciation accorded to member states, it would be wrong in principle and contrary to the approach adopted in In re G, for a national court to frank the provision as a matter of course simply because it is rational.
However, where the provision enacted by Parliament is both rational and within the margin of appreciation accorded by the Strasbourg court, a court in the United Kingdom would normally be very cautious before deciding that it infringes a Convention right.
As Lord Mance said in In re G, the extent to which a United Kingdom court should be prepared to entertain holding that such legislation is incompatible must depend on all the circumstances, including the nature of the subject-matter, and the extent to which the legislature or judiciary could claim particular expertise or competence.
In re G (Adoption: Unmarried Couple) is reported at [2008] UKHL 38, [2009] AC 173.
Having concluded that the retention policy is within the margin of appreciation accorded by the Strasbourg court, the Northern Irish court must decide for itself whether it infringes a Convention right.
The question is whether the policy is proportionate, and therefore justified, under article 8(2).
Viewed from a domestic standpoint, it appears to me that the authorities in Northern Ireland were entitled to pursue such a policy on the basis that it was justified and proportionate under article 8(2), essentially for the reasons discussed above and given by the Divisional Court as summarised below.
Girvan LJ set out (at para 44) 11 factors which led him (and the Divisional Court) to the conclusion that the policy of indefinite retention is not disproportionate and that the application should be refused.
His 11 factors were these: (i) The building up of a database of such data from those convicted of offences provides a very useful and proven resource in the battle against crime by reason of the assistance it provides in identifying individuals.
It is clear that the larger the database the greater the assistance it will provide.
While a universal database would be of immense help in combatting crime, weighing the private rights of individuals against the good which would be achieved by such a universal system requires the striking of a fair balance.
Experience has shown that those who have committed offences may go on to commit other offences.
A state decision to draw the line at those convicted of a substantial category of offences is entirely rational and furthers the legitimate aim of countering crime so as to protect the lives and rights of others.
(ii) The rights and expectations of convicted persons differ significantly from those of unconvicted persons.
The striking of a balance between the public interest and the rights of a convicted or an unconvicted individual will inevitably be appreciably different.
Strasbourg recognises that even in the case of some unconvicted persons retention for a period may be justifiable in the public interest.
(iii) A person can only be identified by fingerprints and DNA sample either by an expert or with the use of sophisticated equipment.
The material stored says nothing about the physical make up, characteristics or life of the person concerned and it represents objective identifying material which can only be relevant or of use when compared with comparative material taken from a person lawfully subjected to a requirement to provide such material for comparison.
(iv) The use to which the material can be lawfully put is severely restricted by the legislation.
(v) As well as being potentially inculpatory the material may be exculpatory and thus in ease of a person such as the applicant.
If it is inculpatory its use assists in the detection of someone likely to have been involved in crime which is a matter of deep interest to the public.
(vi) There is in place an exceptional case procedure which permits of a possibility of an application to have data removed.
(vii) Any differentiation within the system between categories of convicted persons calls for administrative action and has the potential for administrative complexity.
Lord Steyn described how there was the potential for interminable and invidious disputes where differentiation is operated.
While he was making that point in the context of differentiation between convicted and unconvicted persons (and thus was in error according to the Strasbourg court) the point retains its force in the context of differentiation between convicted persons.
Carswell LCJ pointed out in In re McBride [1997] NI 269 at 274 that the legislature wished to have as wide a cover for the database as possible in order to give the police the best chance of detecting criminal offenders.
Marper requires protections for unconvicted persons and the current legislation and policy have limited the retention of data to those convicted of recordable offences.
To allow further exceptions would in the view of the authorities undermine the effectiveness of the process which is designed to build up a database of those who have been involved in criminality to assist in the war against crime.
Such a conclusion by the state authorities is legitimate and rational.
(viii) The current policy in fact does distinguish between (a) unconvicted persons and those convicted of offences which are not recordable and (b) those convicted of offences which are recordable.
This represents a policy and legislative intent which is not blanket or indiscriminate as such but one which distinguishes between cases.
The choice of that differentiation is one involving the exercise of judgment by the state authorities which seeks to balance, on the one hand, the very limited impact of retention and use of such material on a person's real private life and its minimal impact on the intimate side of his life and, on the other hand, the benefit to society flowing from the creation of as effective a database as legitimately possible to help in combatting crime.
The choice to retain the data of those convicted of recordable offences represents the exercise of a balanced and rational judgment by the authorities.
(ix) In this case the offence committed by the applicant cannot, as the applicant asserts, be described as minor or trivial.
It was an offence of a potentially dangerous antisocial nature.
The criminal law has as one of its aims the protection of the lives of others and the consumption of alcohol by a driver endangers human life.
Indeed the state under its operative duties under article 2 must have in place laws which protect the lives of others.
The offence was a recordable offence being one in respect of which a period of imprisonment could be ordered.
(x) Time limitations on the retention of data for particular categories of offences can be imposed as has occurred in some legal systems such as in The Netherlands (See W and Van der Velden).
Different countries operate different policies in this field and some other countries follow practices similar to those followed in the United Kingdom.
Any time restriction is inevitably somewhat arbitrary and it is difficult to point to any particular reason why one particular period as opposed to another should be chosen.
To introduce time limitations for some offences simply to avoid a possible charge of disproportionality smacks of defensive policy making in a field which requires a proper balancing of the interests of the public against the consequences of criminal activity.
The introduction of different time periods for different offences or for different sentences would clearly add to the administrative burden and would require changes and deletion of recorded data.
This complexity would be aggravated in the case of those found guilty periodically of repeat offending in respect of minor offences.
The removal of such data would give the offender no benefit other than the knowledge that his data is no longer recorded.
As already noted the retention of the data represents a very minor intrusion into his private life.
(xi) The retention of the data serves the added purpose of discouraging a convicted offender from re offending for the offender has the knowledge that the police have available data which could lead to his detection.
The permanent retention of that data thus serves a useful long term purpose in that regard.
I agree with that analysis and would dismiss the appeal.
I would answer the certified question (quoted at para 8 above) in the negative.
I do not think that it was suggested that, if the retention of the biometric data was lawful, the retention of the photograph was not.
Annex A SUMMARY OVERVIEW OF RETENTION RULES DNA SAMPLES Arrest/charge/conviction status All DNA samples regardless of whether person convicted or not Retention rule Must be destroyed once a DNA profile has been derived from it, or after six months, whichever is sooner (s 63R) Arrest/charge/conviction status Person arrested for, charged with or convicted of non-recordable offence Person arrested for recordable offence, investigation or court proceedings ongoing Person arrested for non-qualifying recordable offence (i.e. offence not on list of mainly sexual and violent offences), not charged or convicted Person arrested for qualifying recordable offence, not charged or convicted Person charged with non-qualifying recordable offence, not convicted Person charged with qualifying recordable offence, not convicted Person given penalty notice Person under 18 convicted of non-qualifying recordable offence (and not previously convicted of a recordable offence) DNA PROFILES AND FINGERPRINTS Retention rule No power to take DNA and fingerprints so no issue of retention (s 63D) Retention until investigation and/or proceedings complete, must then be destroyed unless another power to retain applies (s 63E) Must be destroyed (may first be searched against databases to check whether any match to unsolved crimes) (s 63D) Must be destroyed (may be searched against databases first), unless police apply to the Biometrics Commissioner for retention; if Biometrics Commissioner agrees, retention for 3 years (s 63F) Must be destroyed (may be searched against databases first) (s 63D) Retention for 3 years.
On expiry of that period the police may apply for a court order for retention for a further 2 years (ss 63F and 63G) Retention for 2 years (s 63L) Where not sentenced to a custodial sentence, retention for 5 years; where sentenced to a custodial sentence of less than 5 years, retention for the length of the sentence plus 5 years; where sentenced to a custodial sentence of 5 years or more, indefinite retention (s 63K) Indefinite retention (s 63I) Indefinite retention (s 63I) Retention for 2 years, extendable for a further 2 years if a further NSD made; however if the Biometrics Commissioner determines that retention is unnecessary the material must be destroyed (s 63M and PoFA s 20) Indefinite retention where an individual is convicted of a recordable offence (s 63N(3)).
Otherwise must be destroyed when it has fulfilled its purpose).
Person over 18 convicted of non-qualifying recordable offence Person convicted of qualifying recordable offence Material subject to a national security determination (NSD) Material given with consent Material retained with consent DNA samples, DNA profiles and fingerprints subject to the Criminal Procedure and Investigations Act 1996 and its Code of Practice (i.e. needed for disclosure or evidence in court) Annex B Retention for as long as the person consents consent must be in writing and can be withdrawn at any time (s 63O) Retention as long as CPIA or its Code apply; must be used only for the case in question and cannot be searched against databases (s 63U(5)) Summary of inclusion and removal criteria in other EU jurisdictions Derived from Santos et al, Forensic DNA databases in European countries: is size linked to performance? (2013) Life Sciences, Society and Policy, 9:12 Country Criteria for inclusion of profiles Austria Individuals suspected and/ or convicted of a dangerous assault a Belgium Suspects and individuals convicted of serious crimes (list) Denmark Estonia Finland Suspects and individuals convicted of crimes punishable by sentences of > 1 year and 6 months Suspects and convicted offenders Individuals suspected of crimes punishable with a sentence of > 6 months and offenders receiving sentences of > 3 years profiles Criteria for removal of Convicted: 5 years after death or at SO years of age if the individual has not been forensically identified in the last 5 years.
Minors: removed if s/he is not forensically identified in the previous three years.
Acquitted suspects have to apply for removal and/ or the authorities will decide if the acquitted suspect's profile is no longer necessary Convicted offenders 30 years after inclusion.
Profiles in the criminal investigation database deleted when no longer needed.
Convicted offenders 2 years after death or at 80 years of age.
Suspects 10 years after acquittal.
At 70 years of age, 2 years after death.
Suspects and convicted offenders 10 years after death.
Suspects 1 year after acquittal (on the order of a legal officer) or 10 years after death.
Convicted offenders 10 years after death.
France Suspects and individuals convicted of serious crimes (list) Germany Hungary Ireland Italy Lativa Lithuania Luxembourg Official suspects charged with crimes and individuals convicted of serious crimes or re-offending with other crimes Convicted offenders and individual suspected of crimes punishable with a sentence of > 5 years (or listed crimes involving lower sentences, such as drug trafficking) Suspects, convicted offenders (crimes punishable with a sentence of > 5 years or specific crimes involving lower sentences) and ex- convicts Individuals arrested, remanded in custody and convicted of premeditated crimes Suspects and convicted offenders any crime Suspects and convicted offenders any crime and those temporarily detained Individuals suspected of any crime (only by order of the court dealing with the case); convicted offenders included only if sentenced for listed crimes or by order of the solicitor or court dealing with the case The Netherlands Suspects and individuals convicted of offenses or crimes for which preventative custody is allowed, or by a judicial order Poland Suspects and convicted offenders (listed crimes) Convicted offenders 40 years after end of sentence or after individuals reach the age of 80.
Suspects removed when retention is no longer considered necessary by a law official (or at the request of the party concerned) Profiles reviewed 10 years (adults), 5 years (young people) or 2 years (children) after inclusion.
Removal of profiles of convicted offenders depends on a court decision.
Suspects deleted after acquittal.
Convicted offenders 20 after sentence has been served Profiles of suspects acquitted or not charged removed after 10 years, or 5 years in the case of minors.
Convicted offenders indefinite retention.
Individuals arrested and remanded in custody deleted on acquittal.
Convicted offenders 20 years after the incident that led to sampling.
No profile may be held for more than 40 years.
Convicted offenders 75 years.
Suspects 10 years after verdict, if acquitted.
100 years after inclusion or 10 years after the death of the suspect or convicted offender.
Suspects after acquittal, prescription of the crime or 10 years after death.
Convicted offenders 10 years Convicted offenders 30 years after sentencing if the crime is punishable with > 6 years 20 after death; 20 years if < 6 years or 12 after death.
Suspects and convicted sexual offenses against minors 80 years.
Retention may be extended in the event of a new conviction; Suspects DNA profiles are removed if they are not prosecuted or convicted (unless a match is found in the DNA database).
Suspects deleted after acquittal.
Convicted offenders after 35 years Portugal Individuals convicted of premeditated crimes with an effective prison sentence of 3 years or more, by court order Convicted offenders until criminal record annulled.
Romania Suspects and convicted offenders (listed crimes) Scotland Individuals detained of any crime Slovakia Suspects and convicted offenders any crime Spain Individuals detained and those convicted of serious crimes (list) Sweden Convicted offenders receiving non- financial sentences of over 2 years Suspects removed when retention no longer considered necessary by the courts or Public Prosecution.
Convicted offenders retained until aged 60 (in the event of the death of the individual, retained for a further 5 years) Suspects deletion after acquittal or extension of retention period in cases of relevant sexual or violent offences.
Convicted offenders indefinite retention.
Convicted offenders 100 years after the date of birth of the individual concerned.
Suspects removal after acquittal.
Individuals detained data deleted on prescription of crime.b Individuals convicted on date of prescription of criminal record (unless a court order states otherwise).
Suspects removed after acquittal.
Convicted offenders 10 years after sentence served.
aIn Austria serious crimes, as defined in section 16(2) of the Sicherheitspolizeigesetz (Security Police Act), are understood to be any threat against a legal asset by, committing a premeditated crime punishable by law.
In addition to the type of crime, the profile of an individual may be included when the police cite the nature of the crime or the personality of the respective individual as grounds for expecting them to reoffend (Prainsack and Kitzberger 2009).
bThe period of prescription for the crime applies to individuals who are detained and for whom the judicial proceedings do not result in acquittal or conviction.
LORD KERR: (dissenting)
On 14 October 2008 Fergus Gaughran was driving between Crossmaglen and Camlough, County Armagh when his vehicle was stopped at a police checkpoint.
As a result of a breath test taken from Mr Gaughran at the scene, it was suspected that he had been driving after having consumed more than the permissible amount of alcohol.
He was arrested and taken to a police station in Newry, County Down.
There he provided more samples of breath which, when analysed, were found to contain 65 milligrams of alcohol per 100 millilitres of breath.
This level of alcohol exceeded the permitted limit by 30 milligrams.
Mr Gaughran was charged with the offence of driving with excess alcohol.
He pleaded guilty to that offence at Newry Magistrates Court on 5 November 2008 and was fined 50 and ordered to be disqualified from driving for 12 months.
As well as supplying samples of breath, Mr Gaughran provided a DNA sample.
His photograph and fingerprints were taken.
It has been established that, despite initial claims by the appellant to the contrary, all of this was done with his consent and there is no issue as to the legal entitlement of the police to take these steps.
The photographs, fingerprints and DNA sample are held on the database maintained by the Police Service of Northern Ireland (PSNI).
Section 9 of and Schedule 2 to the Criminal Justice Act (Northern Ireland) 2013 make provision about the retention of samples.
When they come into force a new article 63P will be inserted into the Police and Criminal Evidence (Northern Ireland) Order 1989.
This will have the effect that Mr Gaughrans DNA sample will be destroyed.
But already a DNA profile compiled from his sample has been created by the Forensic Science Agency in Northern Ireland (FSNI).
A DNA profile consists of digitised information in the form of a numerical sequence representing a small part of the person's DNA.
The DNA profile extracted by FSNI comprises 17 pairs of numbers and a marker ("XX" or "XY") which indicates gender.
DNA profiles do not include any information from which conclusions about personal characteristics of an individual, such as his or her age, height, hair colour or propensity to develop a particular disease might be drawn.
The purpose of the profile is to provide a means of identification of the person in respect of whom it is held.
The European Court of Human Rights (ECtHR) made these observations in para 75 of S and Marper (2009) 48 EHRR 50 about the use to which DNA profiles can be put: the profiles contain substantial amounts of unique personal data.
While the information contained in the profiles may be considered objective, and irrefutable in the sense submitted by the Government, their processing through automated means allows the authorities to go well beyond neutral identification.
The court notes in this regard that the Government accepted that DNA profiles could be, and indeed had in some cases been, used for familial searching with a view to identifying a possible genetic relationship between individuals.
It also accepted the highly sensitive nature of such searching and the need for very strict controls in this respect.
DNA profiles obtained by police in Northern Ireland, such as that of Mr Gaughran, are held (and, it is intended, will remain) on the Northern Ireland DNA database.
Although a profile thus created does not include information as to whether that person has been convicted of or is under investigation for an offence, it contains sufficient material to allow the person concerned to be identified and, of course, it can be used to match a DNA sample subsequently obtained.
The photograph and fingerprints of Mr Gaughran have also been retained and it is intended that these will also be kept indefinitely.
As of June 2012, the Northern Ireland DNA database included the DNA profiles of 123,044 known persons.
DNA profiles uploaded onto the Northern Ireland system are also loaded onto the United Kingdom wide National DNA Database.
The retention of Northern Irish DNA profiles on the National DNA Database is governed by the law and policy applicable in Northern Ireland.
Mr Gaughran claims that the policy of PSNI to retain for an indefinite period his DNA profile, his photograph and his fingerprints is an interference with his right to respect for a private life guaranteed by article 8 of the European Convention on Human Rights and Fundamental Freedoms (ECHR) and that that interference has not been justified on any of the grounds advanced by the respondent (the Chief Constable of PSNI) or the intervener (the Secretary of State for the Home Department).
Article 8 of ECHR provides: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence.
2.
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals or for the protection of the rights and freedoms of others.
Justification of an interference with a Convention right
It is accepted by the respondent and the intervener that the appellants article 8 right has been interfered with; the single and central issue in the appeal is whether that interference has been justified.
Justification of interference with a qualified Convention right such as article 8 rests on three central pillars.
The interference must be in accordance with law; it must pursue a legitimate aim; and it must be necessary in a democratic society.
Proportionality is a sub-set of the last of these requirements.
The appellant has not argued that the retention of samples, his photograph and his fingerprints is other than in accordance with law see articles 64(1A) and 64A(4) of the Northern Ireland PACE Order of 1989.
Likewise, it is not disputed that the retention of these pursues a legitimate aim.
That aim was identified by ECtHR in S and Marper v United Kingdom at para 100 as the detection, and therefore, the prevention, of crime.
In particular the retention of samples etc.
was said to be for the broader purpose of assisting in the identification of future offenders.
One can focus, therefore, on the question of whether the measure is necessary in a democratic society.
In the context of this case, that means asking whether the policy is proportionate.
As Lord Wilson in R (Aguilar Quila) v Secretary of State for the Home Department [2012] 1 AC 621, para 45 and Lord Reed in Bank Mellat v HM Treasury (No 2) [2014] AC 700, 790, para 72ff explained, this normally requires that four questions be addressed: (a) is the legislative objective sufficiently important to justify limiting a fundamental right?; (b) are the measures which have been designed to meet it rationally connected to it?; (c) are they no more than are necessary to accomplish it?; and (d) do they strike a fair balance between the rights of the individual and the interests of the community?
The circumstance that the measure pursues a legitimate aim does not necessarily equate to the objective of the policy being sufficiently important to justify the limitation of a fundamental right, although, in most cases, the pursuit of such an aim will provide an effective answer to the first of the mooted questions.
It is, at least hypothetically, possible to conceive of a legitimate aim that a contemplated policy or a legislative provision might seek to achieve but, because the right that would thereby be infringed is so fundamental, no limitation on it, on the basis of the avowed legitimacy of the aim to be pursued, would be defensible.
One need not dwell on this, perhaps somewhat esoteric, question, however, because it has not been contended by the appellant that no limitation on his article 8 right could be justified.
It is accepted that the need to counteract crime is of sufficient importance to warrant some restriction of the right to respect for private life.
But the actual interference, as ECtHR observed in S and Marper at para 101, must conform to the general principle of the Strasbourg jurisprudence that an interference will only be considered necessary in a democratic society if it answers a pressing social need and, in particular is proportionate to the aim pursued.
Importantly, the court stated that the reasons which national authorities proffered to justify the interference must be relevant and sufficient.
This is of especial significance in addressing the question whether it has been shown that there is in fact a rational connection between the breadth of the policy as it is currently framed and the objective which it is said to be designed to achieve.
The two critical questions on the issue of the proportionality of the policy of indefinite retention of the appellants DNA profile, his photograph and his fingerprints are, in my opinion, whether there is a rational connection between the legislative objective and the policy and whether it goes no further than is necessary to fulfil the objective.
What is the objective of the policy?
It is, I believe, necessary to recognise the distinction between the legislative provisions which authorise the retention of samples etc.
and the policy of using those provisions to retain them indefinitely.
The justification of, on the one hand, the enactment of statutory provisions which permit retention and, on the other, the use of those provisions to devise a policy to retain without limit must be considered separately.
But no distinction has been drawn between the legislation and the policy in terms of their objective.
In the case of both, this has been assumed to be that which was articulated in S and Marper v United Kingdom, namely, the detection of crime and assisting in the identification of future offenders.
It is of fundamental importance that it be recognised that the objective is not the creation of as large a database of the Northern Irish population as possible, in order that it should be available as a potential resource in the counteracting of crime.
The objective is defined in terms of the actual detection of crime and identification of future offenders.
This distinction is important because it is not difficult to hypothesise that if everyones DNA profile was held by police this might have a significant impact on the detection of future criminals.
The theory is, perhaps, less obvious but still tenable in relation to photographs and fingerprints.
But hypothesis should not be confused with evidence.
And the question of whether the retention of DNA profiles, photographs and fingerprints of a limited class of person viz those convicted of recordable offences, as opposed to the population at large, would in fact make a substantial contribution to counteracting crime is, at best, imponderable.
But before it can be said that a rational connection exists between the retention of biometric data of all convicted of recordable offences and the detection of crime and identification of future offenders one must go beyond assumption or supposition.
To justify an interference, it is necessary that it be shown, at the very least, that the promoted objective will be advanced, in order to support the claim that there is a rational connection between the interference and the stated objective.
Rational connection?
A connection between the aim of a measure and its terms, in order to qualify as rational, must be evidence-based see para 101 of S and Marper.
Mere assertion that there is such a connection will not suffice, much less will speculation or conjecture that the connection exists.
The fact that the interference can be characterised as relatively slight (as ECtHR described the retention of DNA profiles and fingerprints of convicted persons in the two admissibility decisions of Van der Velden v The Netherlands 29514/05 EQ-IR and W v The Netherlands 20689-08 (2009) ECHR 277) does not diminish the need for the justification to be established positively.
Slight interference may sound on the question of whether a measure can be regarded as no more intrusive than necessary.
It does not supply the answer to the question whether it is rationally connected to its avowed aim.
Moreover, the rational connection here must be between the objective of the detection of future criminals and the indefinite retention of the profile, fingerprints and photograph.
It is not enough that retaining these items on a permanent basis might, in some vague or unspecified way, help in the detection of crime in the future.
It is necessary to show that in a real, tangible sense, keeping DNA profiles, fingerprints and photographs indefinitely will assist in counteracting or detecting future crime.
That is not to say, of course, that it needs to be shown that retention of the appellants particular details will assist in preventing or detecting crime in the future.
But, as a minimum, it must be established that retaining forever such items from all who have been convicted of recordable crime is likely to make a positive and significant contribution to the detection of future criminal activity.
I accept, of course, that it is not required of the state to show that the achievement of the aim of the measure will be the only and inexorable consequence of its implementation.
As Lord Reed said in Bank Mellat (No 2), quoting Wilson J in the Canadian case of Lavigne v Ontario Public Service Employees Union [1991] 2 SCR 211, 291 the inquiry into rational connection between objectives and means to attain them requires nothing more than showing that the legitimate goals of the legislature are logically furthered by the means government has chosen to adopt.
As Lord Reed then put it: The words furthered by point towards a causal test: a measure is rationally connected to its objective if its implementation can reasonably be expected to contribute towards the achievement of that objective.
This is the critical question on this particular aspect of the proportionality analysis.
Can the indefinite retention of biometric data of all who are convicted of recordable offences be reasonably expected to contribute to the detection of crime and the identification of future offenders? It is, of course, tempting to make the assumption that the more DNA profiles etc.
that the police hold, the greater will be their chances of discovering the identity of those who commit crime in the future.
But there is a striking lack of hard evidence to support the claim that a blanket policy of retaining such items indefinitely is indispensable to the need to counteract crime or even that it will make a significant contribution to the detection of future crime.
The usefulness of the assembly of a pool of personal data to assist with the detection of crime was rejected in S and Marper as justification for interference with the article 8 right and should also be in this case.
Without proof as to the likelihood of reoffending, there is no obvious, or rational, connection between the current policy and reducing crime.
The current system operates on the assumption that all persons who, at any time, commit any offence are potential suspects in any future crime.
No evidence to support this has been provided.
Indeed, the only evidence proffered by the respondent on this issue was that which suggested that 90% of those who were given custodial sentences reoffended within two years, regardless of the nature of the original offence.
But the true significance of this particular statistic must be recognised.
It involves (a) the commission of more serious offences, which attract a custodial offence; (b) more serious offenders, where the custodial option has been chosen; and (c) time-limitation, rather than indefinite duration.
In fact, the respondent accepted during the hearing that there was no robust evidence base for the current policy.
It seems to me clear, therefore, that a rational connection between the policy and its professed aim has not been established.
Much was made in the Divisional Court of the fact that S and Marper was concerned with the retention of the data of persons who had not been convicted.
But the need for a rational connection between the broad policy of indefinite retention of the DNA profiles, photographs and fingerprints of all who have been convicted of recordable offences is just as necessary in their case.
The connection cannot be considered to be supplied simply by the fact of conviction.
Many who have been convicted, especially of less serious recordable offences never re-offend.
The rational connection between the retention of their biometric data and photographs still needs to be established.
It is not to be inferred or presumed simply because they have been found guilty.
Nor can the connection be presumed to exist just because the importance of the use of DNA material in the solving of crime has been recognised by ECtHR.
It requires a considerable leap of faith, or perhaps more realistically, a substantial measure of conjecture, to say that simply because DNA material is useful in combatting crime in a general way the retention forever of DNA profiles of everyone convicted of a recordable offence establishes the rational connection between that particular policy and the aim the detection of crime and the identification of future offenders.
In this connection, it should be remembered that recordable offences occupy a wide spectrum of criminal activity.
Under the Northern Ireland Criminal Records (Recordable Offences) Regulations 1989 they include not only all offences punishable by imprisonment but also examples of what may fairly be described as minor, not to say trivial, offences such as tampering with motor vehicles (article 173 of the Road Traffic (Northern Ireland) Order 1981: improper use of the public telecommunications system (section 43 of the Telecommunications Act 1984).
To take some even more extreme examples they include blowing a horn or other noisy instrument or ringing any bell for the purpose of announcing any show or entertainment or hawking, selling, distributing or collecting any article whatsoever, or obtaining money or alms; wilfully and wantonly disturbing any inhabitant by ringing any doorbell or knocking at any door without lawful excuse, all under section 167 of the Belfast Improvement Act 1845 and being drunk in any street under section 72 of the Town Improvement (Ireland) Act 1854.
These might be considered to be frivolous examples of recordable crimes which would never, in practical reality, generate the taking of biometric samples but they serve to illustrate the extremely wide potential reach of PSNIs current policy and the failure of PSNI to confront the implications of the breadth of its possible application.
No more than necessary to achieve the aim?
If one accepts the premise that the retention of DNA profiles, fingerprints and photographs of those convicted of crime can help in the detection and identification of future offenders, the question arises whether a more tailored approach than that of the current PSNI policy in relation to the retention of those materials, sufficient to satisfy the aim, is possible.
ECtHR has consistently condemned, or, at least, has been extremely wary of, measures which interfere with a Convention right on an indefinite or comprehensive basis.
Thus in Campbell v United Kingdom (1992) 15 EHRR 137 the court rejected the justification for opening and reading all correspondence between prisoners and solicitors, pointing out that letters could be opened to check for illicit enclosures without having to be read at para 48.
And in Open Door Counselling and Dublin Well Woman v Ireland (1992) 15 EHRR 244, the permanent nature of an injunction granted by the Supreme Court of Ireland restraining the applicants from counselling pregnant women in Ireland on the options for travelling abroad to obtain an abortion was found to be disproportionate.
The Irish Supreme court had granted an injunction, restraining the applicants from counselling or assisting pregnant women to obtain further advice on abortion.
ECtHR found the injunction to be disproportionate and in breach of article 10, because of its perpetual nature and because of its sweeping application.
It applied regardless of the age or health of the women who sought the applicants advice or of the reasons that the advice was sought at para 73.
The question whether a measure interfering with a Convention right is no more than necessary to achieve the aim is sometimes expressed as an inquiry into whether the least intrusive means has been chosen.
This has not always been the basis used by the Strasbourg court as a measure of the proportionality of a particular species of interference and it has been suggested that it is a factor to be weighed in the balance, but not insisted on in every case Arden LJ Human Rights and European Law (2015) OUP, p 60.
In R (Wilson) v Wychavon District Council Richards LJ [2007] QB 801 suggested that the least restrictive means test was not an integral part of the proportionality assessment.
Recent case-law from ECtHR suggests, however, that resort to the least intrusive means approach will be much more readily made in deciding whether interference with a Convention right is proportionate.
In Mouvement Raelien Suisse v Switzerland (2012) 16354/06, para 75, the court observed at the conclusion of its proportionality reasoning: the authorities are required, when they decide to restrict fundamental rights, to choose the means that cause the least possible prejudice to the rights in question.
And in Nada v Switzerland (2013) 10593/08 , para 183, ECtHR made similar comments: The court has previously found that, for a measure to be regarded as proportionate and as necessary in a democratic society, the possibility of recourse to an alternative measure that would cause less damage to the fundamental right at issue whilst fulfilling the same aim must be ruled out.
In Bank Mellat Lord Reed, in outlining the four-fold test of proportionality followed the approach of Dickson CJ in the Canadian case of R v Oakes [1986] 1 SCR 103.
It is worth recalling that Lord Reed, in articulating the third element of the test, specifically endorsed the approach that one should ask whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective.
Of course it is true that this approach does not require the condemnation of an interference simply on the basis that it is possible to conceive of a less intrusive interference at a theoretical level.
The mooted less intrusive measure must be capable of fulfilling, and must not unacceptably compromise, the objective.
As Lord Reed pointed out, a strict application of a least restrictive means test would allow only one legislative response to an objective that involved limiting a protected right.
But where it is clear that the legislative objective can be properly realised by a less intrusive means than that chosen, or where it is not possible to demonstrate that the database that is created by the PSNI policy is in fact needed to achieve the objective, this is, at least, a strong indicator of its disproportionality.
I suggest, therefore, that the least restrictive measure test is now well established as part of domestic law.
A recent example of its application is to be found in a case decided in October 2014, R (Gibraltar Betting and Gaming Association Ltd) v Secretary of State for Culture, Media and Sport [2014] EWHC 3236 (Admin) where the High Court went to considerable lengths in paras 182-190 to analyse this test as part of its proportionality analysis under the TFEU, ultimately explicitly accepting that the least restrictive measure test is a proper part of the proportionality assessment.
See also R (Sinclair Collis Ltd) v Secretary of State for Health [2012] QB 394.
European Union law on the least restrictive means test
It is beyond question that proportionality is a fundamental principle of EU law.
In the Skimmed Milk Powder case Bergman v Grows-Farm [1977] ECR 1211 it was held that, in order to be lawful, an obligation had to be necessary in order to attain the objective in question.
Similarly, in Commission v United Kingdom (Re UHT Milk) [1983] ECR 203, at para 236, the ECJ commented: It must be ascertained whether the machinery employed in the present case by the UK constitutes a measure which is disproportionate in relation to the objective pursued, on the ground that the same result may be achieved by the means of less restrictive measures.
EU law and that of ECHR have become increasingly assimilated, not least because of the possible future accession of the EU to the Convention and the enactment of the European Charter on Human Rights.
In this context, see also cases such as Baumbast v Secretary of State for the Home Department [2002] (Case No C-413/99) [2003] ICR 1347.
The Court of Justice of the European Union has traditionally given the Convention special significance as a guiding principle in its case law (Anthony Arnull, The European Union and its Court of Justice (2006) pp 339-340) and therefore, while the EU approach to proportionality is not necessarily to be imported wholesale into the Convention analysis, it is clear that the prominence given to this general principle in EU law is likely to be reflected in Strasbourg jurisprudence.
Canadian case-law
Lord Reed in Bank Mellat (No 2), referred to the circumstance that Canadian law has long embraced the least restrictive measures principle see, in particular, Ford v Quebec [1988] 2 SCR 712 and Black v Royal College of Dental Surgeons [1990] 2 SCR 232 and the classic exposition of the test in R v Oakes above.
court stated: In Libman v AG of Quebec (1997) 151 DLR (4th ed) 385, paras 415-416 the The government must show that the measures at issue impair the right of free expression as little as reasonably possible in order to achieve the legislative objective.
The impairment must be minimal, that is the law must be carefully tailored so that rights are impaired no more than necessary.
The tailoring process seldom admits of perfection and the courts must accord some leeway to the legislator.
If the law falls within a range of reasonable alternatives, the court will not find it over broad because they can conceive of an alternative which may better tailor the objective to infringement.
This approach is largely mirrored in the current case-law of this country, particularly Bank Mellat (No 2).
There must be a proper inquiry into whether the measure affects the right of the individual no more than is necessary.
That does not require the state to show that every conceivable alternative is unfeasible a condition of unique practicability is not demanded.
But if it is clear that the measure goes beyond what the stated objective requires, it will be deemed disproportionate.
Application of the principles to the present case
One must return, therefore, to the question whether a more tailored approach than that of the current PSNI policy in relation to the retention of biometric materials, sufficient to satisfy the aim of detecting crime and assisting in the identification of future offenders, is possible.
To that question only one answer can be given, in my opinion.
Clearly, a far more nuanced, more sensibly targeted policy can be devised.
At a minimum, the removal of some of the less serious offences from its ambit is warranted.
But also, a system of review, whereby those affected by the policy could apply, for instance on grounds of exemplary behaviour since conviction, for removal of their data from the database would be entirely feasible.
Similarly, gradation of periods of retention to reflect the seriousness of the offence involved would contribute to the goal of ensuring that the interference was no more intrusive than it required to be.
In this context, article 5(e) of the Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data should be noted.
It provides that personal data undergoing automatic processing shall be preserved in a form which permits identification of the data subjects for no longer than is required for the purpose for which it is required.
There is no evidence that consideration has been given to the question of whether it is necessary for the effective combatting of crime that the materials concerned in this case should be retained indefinitely.
For the intervener, the Secretary of State for the Home Department, Mr Eadie QC accepted that the decision as to how long and for what offences biometric and other data should be retained called for a nuanced decision.
He argued that this had been achieved by the exclusion of non-recordable offences and offences committed by children and by the fact that such material from those not convicted was no longer retained.
He was unable to point to evidence, however, that the question of whether it was necessary that there be retention of all data from all convicted of recordable offences for all time had been considered.
Absent such consideration and in light of the fact that it is eminently possible to conceive of measures which are less intrusive but which would conduce to the avowed aim of the policy, it is simply impossible to say that the policy in its present form is the least intrusive means of achieving its stated aim.
A fair balance?
The final element in the proportionality examination is whether a fair balance has been struck between the rights of the individual and the interests of the community.
Although this may not be of quite the same importance as the rational connection and less intrusive means factors, it deserves consideration in its own right.
The starting point must be a clear recognition of the importance of the rights of the individual.
This was emphasised by ECtHR in S and Marper at para 103: The protection of personal data is of fundamental importance to a persons enjoyment of his or her right to respect for private and family life, as guaranteed by article 8 of the Convention.
The domestic law must afford appropriate safeguards to prevent any such use of personal data as may be inconsistent with the guarantees of this article.
The need for such safeguards is all the greater where the protection of personal data undergoing automatic processing is concerned, not least when such data are used for police purposes.
The domestic law should notably ensure that such data are relevant and not excessive in relation to the purposes for which they are stored; and preserved in a form which permits identification of the data subjects for no longer than is required for the purpose for which those data are stored.
The domestic law must also afford adequate guarantees that retained personal data was efficiently protected from misuse and abuse.
The above considerations are especially valid as regards the protection of special categories of more sensitive data and more particularly of DNA information, which contains the person's genetic make-up of great importance to both the person concerned and his or her family.
At para 104 the European court acknowledged that the interests of the data subjects and the community as a whole in protecting personal data could be outweighed by the legitimate interest in the prevention of crime but it emphasised that the intrinsically private character of the information called for careful scrutiny of any state measure authorising its retention and use by state authorities.
Addressing the blanket and indiscriminate nature of the power of retention, the court said this at para 119: The material may be retained irrespective of the nature or gravity of the offence with which the individual was originally suspected or of the age of the suspected offender; fingerprints and samples may be taken - and retained - from a person of any age, arrested in connection with a recordable offence, which includes minor or non-imprisonable offences.
The retention is not time limited; the material is retained indefinitely whatever the nature of seriousness of the offence of which the person was suspected.
Moreover, there exist only limited possibilities for an acquitted individual to have the data removed from the nationwide database or the materials destroyed; in particular, there is no provision for independent review of the justification for the retention according to defined criteria, including such factors as the seriousness of the offence, previous arrests, the strength of the suspicion against the person and any other special circumstances.
While this was said in relation to those who had not been convicted of crime, much of this passage is clearly relevant to the issue under discussion here.
No differentiation is made based on the gravity of the offence of which an individual was convicted; the retention is not time-limited, whatever the offence; and there is no provision for independent review of the justification for the retention of the data.
The court also addressed the question of stigmatisation of individuals by the retention of data.
At para 122 it said: Of particular concern in the present context is the risk of stigmatisation, stemming from the fact that persons in the position of the applicants, who have not been convicted of any offence and are entitled to the presumption of innocence, are treated in the same way as convicted persons.
In this respect, the court must bear in mind that the right of every person under the Convention to be presumed innocent includes the general rule that no suspicion regarding an accuseds innocence may be voiced after his acquittal.
It Ii true that the retention of the applicants private data cannot be equated with the voicing of suspicions.
Nonetheless, their perception that they are not being treated as innocent is heightened by the fact that their data are retained indefinitely in the same way as the data of convicted persons, while the data of those who have never been suspected of an offence are required to be destroyed.
Of course, it is true that the sense of stigmatisation may be more acutely felt by those who have been acquitted of crime but that does not mean that someone such as the appellant would be free from such sentiment knowing as he does that his biometric data and photograph will forever remain on police databases.
Although he has been convicted of a crime, and a serious crime at that, he is entitled to be presumed innocent of future crime notwithstanding that conviction.
His sense of stigmatisation and the impact that the retention of his data on police databases must be taken into account, therefore, in an assessment of whether a fair balance has been struck between his rights and the interests of the community as a whole.
As Lord Reed observed in para 71 of Bank Mellat this involves what is essentially a value judgment.
Making due allowance for what has been claimed will be the contribution made to fighting crime by the indefinite retention of data from those such as the appellant, when weighed against his personal interests, my judgment is that a fair balance has not been struck between the two.
I am reinforced in this view by consideration of the provisions and intended effect of the Rehabilitation of Offenders (Northern Ireland) Order 1978.
By virtue of article 5 of that Order, a person who has become rehabilitated for the purposes of the Order is to be treated for all purposes in law as a person who has not committed or been charged with or prosecuted for or convicted of or sentenced for the offence.
Retaining the biometric data of someone who has become rehabilitated is plainly inconsistent with the requirement that he or she be treated as if they had never been convicted of the offence.
Conviction of the offence is the very basis on which the data are retained.
If Mr Gaughran had not been convicted, his data could not be retained.
But he is being treated markedly differently from someone who has not been convicted.
The Secretary of State has submitted that the sole effect of the Order is to restrict the use that may be made of past convictions in legal proceedings, eg where the subject has suppressed a spent conviction.
This cannot be right.
The contexts in which a rehabilitated offender is entitled to demand that he or she be treated in precisely the same way as someone who has not been convicted are not prescribed by the Order.
If a rehabilitated offender is entitled, for instance, to refuse to disclose that he has not been convicted when applying for employment, why should he not be entitled to demand that his biometric data be destroyed, after the original purpose in obtaining them is no longer relevant, just as someone who has been arrested but not convicted of an offence is entitled to do?
It is suggested that the fact that a conviction may become spent is no more than one of a number of factors to be taken into account in deciding whether a proper balance has been struck between the appellants rights and the interests of the community.
I consider that it ranks much higher than this.
The single basis on which Mr Gaughrans biometric material is retained is that he has committed a crime.
If the principle of rehabilitation is to have any meaning, ex-offenders such as he cannot be defined by the fact of their former offending.
The philosophy underlying the rehabilitation provisions is the restoration of the ex-offender to his or her position as a citizen without the stigma of having been a criminal.
He once more shares with his fellow citizens, entitlement to be treated as if he was of good character.
If the fact that his conviction is spent is relegated to the status of a single factor of no especial significance, the purpose of rehabilitation is frustrated.
Rehabilitation is our criminal justice systems way of acknowledging and encouraging the potential for personal growth and change.
If we continue to define ex-offenders throughout their lives on the basis of their offending we deprive them of reintegration into society on equal terms with their fellow citizens.
The only reason proffered to justify the denial of that hope is the assertion that those convicted of offences may reoffend.
The premise which must underlie this claim is that those convicted of recordable offences are more likely to reoffend than those who have not been.
But no evidence has been presented to support that claim.
Unsurprisingly, therefore, no attempt to quantify such a risk has been made.
It is difficult to avoid the conclusion that the fact of conviction merely provides the pretext for the assembly and preservation of a database which the police consider might be useful at some time in the future and that it has no direct causal connection to the actual detection of crime and the prevention of future offending.
In any event, for the principle of rehabilitation to have proper effect, it is necessary that, once a conviction is spent, any supposed or presumed risk be regarded as having dissipated.
Offenders whose convictions are spent must be treated as any other citizen would be treated.
Allowing their biometric details to be retained indefinitely is in flat contradiction of that fundamental principle.
It is, of course, true that Mr Gaughrans conviction was not spent when the case was decided in the Divisional Court but that is nothing to the point.
In the first place, his conviction is now spent and, more importantly, the PSNI policy proceeds on the basis that the Rehabilitation Order provisions can effectively be ignored.
I do not believe that they can be and they constitute an unanswerable reason that the policy does not strike a fair balance between the rights of individuals who are entitled to the benefit of the Orders rehabilitation provisions and the interests of the community.
It might be said that, when the 2013 Act comes into force, there will be an express statutory power to retain indefinitely all biometric data of those convicted of a recordable offence.
If that will indeed be its effect, serious questions will arise, in my opinion, about its compatibility with article 8 of ECHR.
But that is not a matter for decision in this case.
The possibility of future legislation underpinning the present policy of PSNI should not deflect this court from recognising the current illegitimacy of that policy.
Margin of appreciation
It is, of course, the case that a margin of appreciation is available to national authorities in deciding where to strike the balance between the rights of the individual under article 8 of ECHR and the interests of the community.
The use and advantage of that margin is exemplified by the consideration in S and Marper of the different standards that have been adopted by various member states of the Council of Europe.
It is also referred to in the judgment of Lord Clarke and in the annexes to his judgment.
For a margin of appreciation to be accorded to the choice of the member state, however, some consideration must have been given by that state to the issues at stake and a considered judgment must have been made on the options available.
One cannot excuse a slack or ill-considered policy as survivable just because it can be said to be open to the member state to make a choice which is different from that of other member states.
There needs to be some form of evaluation or judgment of the issues at stake.
If the choice is the product of consideration and is designed to meet the particular circumstances or conditions encountered in the particular member state, that is one thing.
But an ill-thought out policy which does not address the essential issues of proportionality cannot escape condemnation simply because a broad measure of discretion is available to an individual state.
A margin of appreciation is accorded to a contracting state because Strasbourg acknowledges that the issue in question can be answered in a variety of Convention-compatible ways, tailored to local circumstances.
But the margin of appreciation that is available to the state does not extend to its being permitted to act in a way which is not Convention compliant.
If the state acts in such a way, it cannot insulate itself from challenge by recourse to the margin of appreciation principle.
In Wingrove v UK (1996) 24 EHRR 1, para 58, a broad margin case, ECtHR emphasised that authorities within the state in question were in a better position than international judges to give an opinion on the exact content of these requirements with regard to the rights of others as well as on the necessity of the restriction.
Domestic courts therefore have the responsibility to examine closely the proportionality of the measure without being unduly influenced by the consideration that the Strasbourg court, if conducting the same exercise, might feel constrained to give the contracting states decision a margin of appreciation.
For the reasons that I have given, I have concluded that the issues which must be considered under the proportionality exercise have not been properly addressed and that, if they had been, a more restricted policy would have been the inevitable product.
The margin of appreciation cannot rescue the PSNI policy from its incompatibility with the appellants article 8 right.
Conclusion
I would therefore allow the appellants appeal and declare that the policy of retaining indefinitely DNA profiles, fingerprints and photographs of all those convicted of recordable offences in Northern Ireland is incompatible with article 8 of ECHR.
I would therefore allow the appellants appeal and declare that the policy of retaining indefinitely DNA profiles, fingerprints and photographs of all those convicted of recordable offences in Northern Ireland is incompatible with article 8 of ECHR.
| The Appellant was arrested for driving with excess alcohol on 14 October 2008 and pleaded guilty to that offence on 5 November 2008.
He was fined 50 and disqualified from driving for 12 months.
A conviction for driving with excess alcohol is spent after five years.
He has been an adult throughout.
When the Appellant was arrested, the Police Service of Northern Ireland (PSNI) lawfully obtained from him: (i) fingerprints; (ii) a photograph; and (iii) a non intimate DNA sample by buccal swab.
The fingerprints are held on a UK wide database and the photograph is held on a PSNI database to which only authorised PSNI personnel have access.
A DNA profile was taken from the DNA sample.
A DNA profile is digitised information in the form of a numerical sequence representing a very small part of the persons DNA.
It indicates a persons gender and provides a means of identification.
The profile is held on a Forensic Science Northern Ireland database.
At present, the statutory position in Northern Ireland is that the PSNI may retain fingerprints, photographs, DNA samples and DNA profiles for an indefinite period after they have fulfilled the purpose for which they were taken, but they may only be used for specified policing purposes.
The Criminal Justice Act (Northern Ireland) 2013, when it comes into force, will require the PSNI to destroy all DNA samples as soon as a DNA profile has been taken or within six months of the taking of the DNA sample, and will otherwise bring the position broadly into line with the current legislation applicable in England and Wales.
The PSNI intends to destroy the Appellants DNA sample when that Act comes into force.
This appeal therefore does not concern the retention of the DNA sample.
The PSNI changed its practice following the decision in S and Marper v United Kingdom (2009) 48 EHHR 50 (S and Marper).
The European Court of Human Rights (ECtHR) held that the UKs policy of indefinite retention of individuals fingerprints, cellular samples and DNA profiles after proceedings against them had led to acquittal or discontinuance was a disproportionate interference with their right to respect for private life under article 8 of the European Convention on Human Rights (ECHR).
The PSNI now retains indefinitely biometric data only of those convicted of crimes.
The Appellant says that the PSNIs retention of his data breaches article 8 ECHR.
The Respondent accepts that there is an interference with the Appellants right to respect for his private life under article 8(1) and the Appellant accepts that the interference is in accordance with law and pursues a legitimate aim under article 8(2).
The sole question is therefore whether the interference was proportionate.
The Divisional Court held that it was.
The Appellant appeals to the Supreme Court.
The Supreme Court dismisses the appeal by a majority of 4:1.
Lord Clarke, with whom Lord Neuberger, Lady Hale and Lord Sumption agree, gives the leading judgment.
Lord Kerr dissents.
The majority considers that in S and Marper the ECtHR was concerned only with the position of suspected but non convicted persons, not convicted persons; its criticism of the UKs blanket and indiscriminate data retention policy should be read with this focus in mind [30 32].
He recognises that it does not follow that the practice of Northern Ireland (and the UK) in relation to convicted persons is automatically compliant with article 8 and that the policy as it applies to convicted persons could be described as a blanket policy [33].
However, the policy is in fact proportionate: The ECtHR did recognise in S and Marper the importance of the use of DNA material in the solving of crime and that the interference in question is low [33].
It is also important to note that the present scheme is concerned only with the retention of the DNA profile and applies only to adults, whereas the scheme criticised by the ECtHR in S and Marper provided for the retention of the full sample and did not distinguish between children and adults [35].
Factors such as the threshold of offence, whether retention is permitted once a conviction has been spent and whether retention is permitted indefinitely or is subject to a time limit are potentially relevant but not decisive in the proportionality analysis [34, 36 39].
The potential benefit to the public of retaining the DNA profiles of those who are convicted is considerable and outweighs the interference with the right of the individual [40].
The retention may even benefit the individual by establishing that they did not commit an offence [41].
In S and Marper the ECtHR placed some reliance on the fact that the UK was almost alone among ECHR member states in indefinitely retaining biometric data of non convicted persons.
In the case of convicted persons there is a much broader range of approaches, which broadens the margin of appreciation accorded to individual states [42 44].
Adopting a blanket measure is legitimate in some circumstances and it was legitimate here [45].
The retention policy is therefore within the UKs margin of appreciation, and the court has to decide for itself whether the policy is proportionate.
Essentially on the basis of the factors already discussed and for the reasons given by the Divisional Court, the majority concludes that it is and dismisses the appeal [46 49].
Lord Kerr would have allowed the appeal.
He explains that the critical questions on proportionality in this case are: (i) whether there is a rational connection between the legislative objective and the policy; and (ii) whether the policy goes no further than is necessary to fulfil the objective [61].
As to (i), it is important to recognise that the objective is not the creation of as large a DNA database as possible, but the actual detection of crime and identification of future offenders.
There is a striking lack of hard evidence in this case to support the assumption that all persons who commit any recordable offence are potential suspects in any future crime [62 68].
As to (ii), it is clear in Strasbourg, CJEU and domestic case law that the question is whether a less intrusive measure could have been used without unacceptably compromising the attainment of the objective [73 77].
A far more nuanced and more sensibly targeted policy could easily be devised.
In those circumstances it is impossible to say that the policy in its present form is the least intrusive means of achieving its stated aim [83 85].
As to whether a fair balance has been struck, the stigmatising application of the indefinite retention policy even to those whose convictions are spent frustrates the purpose of rehabilitation: this is an issue of first importance.
It should not be relegated to the status of a single factor of no especial significance [90 96].
A domestic court should not be slow to condemn an ill thought out policy which does not address the essential issues of proportionality simply because a broad measure of discretion is available to an individual state [99 101].
|
In this application under paragraph 2 of Schedule 2 to the Roads (Scotland) Act 1984 (the 1984 Act), Mr Walton challenges the validity of schemes and orders made by the Scottish Ministers under that Act to allow the construction of a new road network in the vicinity of Aberdeen.
The basis on which the schemes and orders are challenged, as ultimately argued before this court, is that the Ministers have failed to comply with the requirements of the Strategic Environmental Assessment Directive (Directive 2001/42/EC, OJ 2001 L197/30) (the SEA Directive), or in any event with common law requirements of fairness.
In the light of observations made by the Extra Division of the Inner House of the Court of Session (Walton v Scottish Ministers [2012] CSIH 19), it will also be necessary to consider questions relating to remedies.
These include the question whether, even if a failure to comply with the directive were established in the present case, Mr Walton should in any event be denied a remedy; and whether he is entitled to bring the application, or would have the necessary standing to seek an alternative remedy.
It will be necessary to examine in detail the facts bearing upon these legal issues.
It may however be helpful at the outset to explain the relevant provisions of the 1984 Act and of the directive.
The Roads (Scotland) Act 1984
The 1984 Act distinguishes between two different types of roads authority with different functions: a distinction which is apparent, in particular, from the definition of roads authority in section 151(1).
On the one hand there are local roads authorities, which are responsible for roads and proposed roads in their area other than roads for which the Secretary of State or the Ministers are the roads authority.
The local authority for a given area are also the local roads authority for that area.
They have the power to construct new roads, other than special roads (defined by section 151 as roads provided or to be provided under section 7), in accordance with section 20.
On the other hand there are the Secretary of State and the Ministers.
The Secretary of State is the roads authority as respects functions relating to the matters reserved by the relevant provisions of the Scotland Act 1998 and exercisable in relation to trunk roads, special roads or other roads constructed or to be constructed under section 19 of the 1984 Act.
The Ministers are the roads authority as respects any other functions exercisable in relation to any such roads, as the result of the transfer of functions from the Secretary of State effected by section 53 of the Scotland Act.
As roads authority, the Ministers have functions under sections 5 and 7 of the 1984 Act which are relevant to the present case.
Section 5(2) provides: The Secretary of State shall keep under review the national system of routes for through traffic in Scotland, and if he is satisfied, after taking into consideration the requirements of local and national planning, including the requirements of agriculture and industry, that it is expedient for the purpose of extending, improving or reorganising that system either (a) that any existing road, or any road proposed to be constructed by him, should become a trunk road, or (b) that any trunk road should cease to be a trunk road, he may by order direct that the road shall become, or as the case may be shall cease to be, a trunk road as from such date as may be specified in that regard in the order.
Section 7 provides: (3) A roads authority may be authorised by means of a scheme under this section to provide, along a route prescribed by the scheme, a special road for the use of traffic of any class so prescribed. 7.
It is also relevant to note a number of other provisions of the 1984 Act.
Section 20A requires the Ministers to carry out an environmental assessment where they have under consideration the construction of a new road for which they are the roads authority, and they consider that the project falls within the scope of the Environmental Assessment Directive (Directive 85/337/EEC, OJ 1985, L 175/40) (the EIA Directive).
They must, in particular, prepare an environmental statement and publish notice of it.
The notice must state that any person wishing to make any representations about the project and the environmental statement may do so, and that the Ministers will take any such representation into account before deciding whether to proceed with the project (section 20A(5A).
Section 139 permits the Ministers to hold an inquiry in connection with any matters as to which they are authorised to act under the Act.
The procedures for making orders under section 5 are set out in Part I of Schedule 1 to the Act.
They include the publication of the proposed order, an opportunity for any person to object to the making of the order (paragraph 1), and the holding of an inquiry in the event that an objection is received from any person appearing to the Ministers to be affected or from any of a specified group of persons, such as the relevant local authority (paragraph 5).
The Ministers are required to take into account the report of the person who held the inquiry.
Where an environmental statement has been published, they must also take into consideration any opinion on that statement or the project expressed by any person in writing (paragraph 7).
Analogous procedures are prescribed by Part II of Schedule 1 in relation to the making of schemes under section 7. 9. remedies.
Paragraphs 2 to 4 provide: Schedule 2 to the 1984 Act is relevant to the issues in this appeal relating to 2.
If any person aggrieved by the scheme or order desires to question the validity thereof, or of any provision contained therein, on the grounds that it is not within the powers of this Act or that any requirement of this Act or of any regulations made thereunder has not been complied with in relation to the scheme or order, he may, within six weeks of (a) the date on which the notice required by paragraph 1 above is first published; or (b) in a case where a notice under paragraph 1A above is required, the date on which that notice is first published, make an application as regards that validity to the Court of Session. 3.
On any such application the Court (a) may by interim order suspend the operation of the scheme or order or of any provision contained in it, either generally or in so far as it affects any property of the applicant, until the final determination of the proceedings; and (b) if satisfied that the scheme or order or any provision contained in it is not within the powers of this Act or that the interests of the applicant have been substantially prejudiced by failure to comply with any such requirement as aforesaid, may quash the scheme or order or any provision contained in it, either generally or in so far as it affects the property of the applicant.
Subject to paragraph 3 above, a scheme or order to which this 4.
Schedule applies shall not, either before or after it has been made or confirmed, be questioned in any legal proceedings whatever, and shall become operative on the date on which the notice required by paragraph 1 above is first published or on such later date, if any, as may be specified in the scheme or order.
The SEA Directive 10.
The SEA Directive forms part of a body of EU legislation designed to provide a high level of protection for the environment, in accordance with article 191 of the Treaty on the Functioning of the European Union and article 37 of the Charter of Fundamental Rights of the European Union.
It is complementary, in particular, to the EIA Directive.
Both directives impose a requirement to carry out an environmental assessment, but they are different in scope. 11.
The EIA Directive was adopted in 1985 and required to be implemented by July 1988.
It has been amended significantly by further directives, including the Public Participation Directive (Directive 2003/35/EC, OJ 2003 L156/17) (the PPD Directive), which gave effect to the public participation requirements of the Aarhus Convention on Access to Information, Public Participation in Decision making and Access to Justice in Environmental Matters.
The EIA Directive is concerned with the assessment of the effects of projects on the environment.
The SEA Directive, which was adopted 16 years later, is concerned with the environmental assessment of plans and programmes.
Taken together, the directives ensure that the competent authorities take significant environmental effects into account both when preparing and adopting plans or programmes, and when deciding whether to give consent for individual projects. 12.
The background to the SEA Directive, and the problem which it was designed to address, were explained by Advocate General Kokott in her opinion in Terre Wallone ASBL v Rgion Wallone and Inter Environnement Wallonie ASBL v Rgion Wallone ((Joined Cases C 105/09 and C 110/09) [2010] I ECR 5611, points 31 32: The specific objective pursued by the assessment of plans and programmes is evident from the legislative background: the SEA Directive complements the EIA Directive, which is more than ten years older and concerns the consideration of effects on the environment when development consent is granted for projects.
The application of the EIA Directive revealed that, at the time of the assessment of projects, major effects on the environment are already established on the basis of earlier planning measures (Proposal for a Council directive on the assessment of the effects of certain plans and programmes on the environment, COM(96) 511 final, p 6).
Whilst it is true that those effects can thus be examined during the environmental impact assessment, they cannot be taken fully into account when development consent is given for the project.
It is therefore appropriate for such effects on the environment to be examined at the time of preparatory measures and taken into account in that context. 13.
The Advocate General provided an example (point 33): An abstract routing plan, for example, may stipulate that a road is to be built in a certain corridor.
The question whether alternatives outside that corridor would have less impact on the environment is therefore possibly not assessed when development consent is subsequently granted for a specific road construction project.
For this reason, it should be considered, even as the corridor is being specified, what effects the restriction of the route will have on the environment and whether alternatives should be included. 14.
The relationship between the two forms of assessment was also described by the Commission in its first report on the application of the SEA Directive under article 12(3) (COM(2009) 469 final, para 4.1): The two Directives are to a large extent complementary: the SEA is up stream and identifies the best options at an early planning stage, and the EIA is down stream and refers to the projects that are coming through at a later stage.
In theory, an overlap of the two processes is unlikely to occur.
However, different areas of potential overlaps in the application of the two Directives have been identified.
In particular, the boundaries between what constitutes a plan, a programme or a project are not always clear, and there may be some doubts as to whether the subject of the assessment meets the criteria of either or both of the Directives.
In relation to that passage, it should be noted that a project need not necessarily be a downstream development of an option identified at an earlier upstream planning stage. 15.
The scope of the SEA Directive is defined by article 3.
Paragraphs (1) and (2) provide: 1.
An environmental assessment, in accordance with articles 4 to 9, shall be carried out for plans and programmes referred to in paragraphs 2 to 4 which are likely to have significant environmental effects. 2.
Subject to paragraph 3, an environmental assessment shall be carried out for all plans and programmes, (a) which are prepared for agriculture, forestry, fisheries, energy, industry, transport, waste management, water management, telecommunications, tourism, town and country planning or land use and which set the framework for future development consent of projects listed in Annexes I and II to [the EIA Directive] 16.
The obligation to carry out an SEA arises under article 3(1) in relation to plans and programmes referred to in article 3(2) to (4).
Those provisions are concerned with plans and programmes which set the framework for future development consent of projects.
In relation to article 3(2)(a), the projects listed in Annex I to the EIA Directive include the construction of motorways, express roads and other roads with four or more lanes (Annex I, point 7), and therefore include the road with which these proceedings are concerned. 17.
When member states require to determine whether plans or programmes are likely to have significant environmental effects, they are directed by article 3(5) to apply the criteria set out in Annex II, the first of which is the degree to which the plan or programme sets a framework for projects and other activities, either with regard to the location, nature, size and operating conditions or by allocating resources.
It is implicit in that criterion that a framework can be set without the location, nature or size of projects being determined.
As Advocate General Kokott explained in Terre Wallone (points 64 65): Plans and programmes may, however, influence the development consent of individual projects in very different ways and, in so doing, prevent appropriate account from being taken of environmental effects.
Consequently, the SEA Directive is based on a very broad concept of 'framework'.
This becomes particularly clear in a criterion taken into account by the member states when they appraise the likely significance of the environmental effects of plans or programmes in accordance with article 3(5): they are to take account of the degree to which the plan or programme sets a framework for projects and other activities, either with regard to the location, nature, size and operating conditions or by allocating resources (first indent of point 1 of Annex II).
The term 'framework' must therefore be construed flexibly.
It does not require any conclusive determinations, but also covers forms of influence that leave room for some discretion. 18.
Article 2 of the directive is headed Definitions, and provides: For the purposes of this Directive: (a) 'plans and programmes' shall mean plans and programmes, including those co financed by the European Community, as well as any modifications to them: which are subject to preparation and/or adoption by an authority at national, regional or local level or which are prepared by an authority for adoption, through a legislative procedure by Parliament or Government, and which are required by legislative, regulatory or administrative provisions. 19.
Although article 2(a) is headed Definitions, it does not in fact define the terms plan or programme, but qualifies them.
For the purposes of the directive, plans and programmes means plans and programmes which fulfil the requirements set out in the two indents: that is to say, they must be subject to preparation and/or adoption by an authority at national, regional or local level or prepared by an authority for adoption, through a legislative procedure by Parliament or Government, and they must also be required by legislative, regulatory or administrative provisions. 20.
The terms plan and programme are not further defined.
It is however clear from the case law of the Court of Justice that they are not to be narrowly construed.
As the court stated in Inter Environnement Bruxelles ASBL, Ptitions Patrimoine ASBL and Atelier de Recherche et d'Action Urbaines ASBL v Rgion de Bruxelles Capitale (Case C 567/10) [2012] CMLR 909, para 37, the provisions which delimit the directives scope, in particular those setting out the definitions of the measures envisaged by the directive, must be interpreted broadly.
The interpretation of the directive, in this respect as in others, has been based primarily upon its objective rather than upon its literal wording. 21.
Adopting therefore a purposive approach, the complementary nature of the objectives of the SEA and EIA Directives has to be borne in mind.
As Advocate General Kokott said in Terre Wallone (points 29 30): According to Article 1, the objective of the SEA Directive is to provide for a high level of protection of the environment and to contribute to the integration of environmental considerations into the preparation and adoption of plans and programmes by ensuring that an environmental assessment is carried out of certain plans and programmes which are likely to have significant effects on the environment.
The interpretation of the pair of terms plans and projects should consequently ensure that measures likely to have significant effects on the environment undergo an environmental assessment.
It is also necessary to bear in mind that the directive is intended to be applied in member states with widely differing arrangements for the organisation of developments affecting the environment.
Its provisions, including terms such as plan and programme, have therefore to be interpreted and applied in a manner which will secure the objective of the directive throughout the EU. 22.
In relation to the stipulation in the second indent that plans and programmes must be required by legislative, regulatory or administrative provisions, it appears from the judgment of the Court of Justice in Inter Environnement Bruxelles that that requirement is not to be understood as excluding from the scope of the directive plans or programmes whose adoption is not compulsory.
The court noted at para 29 that such an interpretation would exclude from the scope of the directive the plans and programmes concerning the development of land which were adopted in a number of member states.
Accordingly, as the court stated at para 31, plans and programmes whose adoption is regulated by national legislative or regulatory provisions, which determine the competent authorities for adopting them and the procedure for preparing them, must be regarded as required. 23.
The concept of modification was also considered in Inter Environnement Bruxelles, where one of the issues was whether the repeal of a plan or programme fell within that concept.
In holding that in principle it did, the court noted that such a measure necessarily entailed a change in the legal reference framework that is to say, the framework for development consent of projects and might therefore be likely to have significant effects on the environment (paras 38 40). 24.
A passage in the Commissions guidance document, Implementation of Directive 2001/42 on the Assessment of the Effects of Certain Plans and Programmes on the Environment (2003) (para 3.9) is also helpful: It is important to distinguish between modifications to plans and programmes, and modifications to individual projects, envisaged under the plan or programme.
In the second case, (where individual projects are modified after the adoption of the plan or programme), it is not [the SEA Directive] but other appropriate legislation which would apply.
An example could be a plan for road and rail development, including a long list of projects, adopted after SEA.
If, in implementing the plan or programme, a modification were proposed to one of its constituent projects and the modification was likely to have significant environmental effects, an environmental assessment should be made in accordance with the appropriate legal provisions (for example, the Habitats Directive, and/or EIA Directive). 25.
In terms of paragraph 1 of article 4 of the directive, the environmental assessment referred to in article 3 shall be carried out during the preparation of a plan or programme and before its adoption or submission to the legislative procedure.
Paragraph 3 is designed to avoid the duplication of assessments, and provides: Where plans and programmes form part of a hierarchy, member states shall, with a view to avoiding duplication of the assessment, take into account the fact that the assessment will be carried out, in accordance with this directive, at different levels of the hierarchy.
For the purpose of, inter alia, avoiding duplication of assessment, member states shall apply article 5(2) and (3). 26.
Article 5 requires the preparation of an environmental report.
Article 6 requires that the draft plan or programme and the environmental report must be the subject of public consultation.
For this purpose, member states have to identify the public, including the public affected or likely to be affected by, or having an interest in, the decision making subject to this directive, including relevant non governmental organisations, such as those promoting environmental protection and other organisations concerned (article 5(4)).
Article 8 requires that the environmental report prepared pursuant to article 5 [and] the opinions expressed pursuant to article 6 shall be taken into account during the preparation of the plan or programme and before its adoption or submission to the legislative procedure. 27.
Article 11 concerns the relationship between the directive and other EU legislation, and provides in particular: 1.
An environmental assessment carried out under this directive shall be without prejudice to any requirements under [the EIA Directive] and to any other Community law requirements. 2.
For plans and programmes for which the obligation to carry out assessments of the effects on the environment arises simultaneously from this directive and other Community legislation, member states may provide for coordinated or joint procedures fulfilling the requirements of the relevant Community legislation in order, inter alia, to avoid duplication of assessment. 28.
As the Court of Justice explained in Genovait Valiukien and Others v Pakruojo rajono savivaldyb and Others (Case C 295/10) [2012] Env LR 283, paras 57 60, it follows from article 11(1) that an assessment under the EIA Directive (an EIA) cannot dispense with the obligation to carry out an SEA where required by the SEA Directive, and is additional to any such assessment.
At the same time, the court has inferred from article 11(2) that, where an EIA has been carried out under a co ordinated or joint procedure, it may meet all the requirements of the SEA Directive; and, in that eventuality, there is no obligation to carry out a further assessment under the latter directive (Valiukien, paras 62 63).
If on the other hand the two assessments differ in their scope or content, then a second assessment is appropriate. 29.
In terms of paragraph 1 of article 13, member states were required to transpose the directive before 21 July 2004.
In relation to transitional arrangements, paragraph 3 provides: 3.
The obligation referred to in Article 4(1) shall apply to the plans and programmes of which the first formal preparatory act is subsequent to the date referred to in paragraph 1.
Plans and programmes of which the first formal preparatory act is before that date and which are adopted or submitted to the legislative procedure more than 24 months thereafter, shall be made subject to the obligation referred to in Article 4(1) unless Member States decide on a case by case basis that this is not feasible and inform the public of their decision.
The implication is that article 4(1) does not apply to plans and programmes which were adopted or submitted to legislative procedure prior to 21 July 2004. 30.
The directive has been transposed into domestic law.
It is however common ground that the appellant is entitled to rely upon the terms of the directive itself.
I need not therefore refer to the domestic law in detail.
The factual background 31.
Proposals for a western peripheral route around Aberdeen (referred to in the documents before the court as the WPR or AWPR), linking the A90 trunk road to the north and south of the city to the A96 to the west, have been in existence since the 1950s.
In 1996 Grampian Regional Council, which was the local roads authority at the time, decided on a corridor for the part of the route between the A96 and the A90 to the south of the city.
That corridor crossed the river Dee at Murtle of Camphill and joined the A90 at Charleston, just to the south of Aberdeen.
Following the reorganisation of local government, the successor local roads authorities, Aberdeen City Council and Aberdeenshire Council, endorsed the choice of the Murtle corridor. 32.
All local authorities were invited to prepare local transport strategies and submit them to the Ministers for approval during 2000.
The two councils prepared such strategies, working in collaboration, and adopted them in December 2000.
Each document set out a number of objectives and a package of projects designed to realise them.
One of the projects discussed was the WPR. 33.
On 1 November 2001 a non statutory regional transport partnership known as the North East Scotland Transport Partnership (NESTRANS) was established with support from the Ministers.
Its remit was to develop a regional transport strategy for the north east of Scotland in accordance with guidance (the Scottish Transport Appraisal Guidance or STAG) which had been issued earlier that year.
The partnership was between Aberdeen City Council, Aberdeenshire Council, Scottish Enterprise (a public body established under the Enterprise and New Towns (Scotland) Act 1990), and Aberdeen and Grampian Chamber of Commerce. 34.
The regional transport strategy developed for the period to 2011 was described in NESTRANS report, Delivering a Modern Transport System for North East Scotland, published in March 2003.
It appears from the report that the strategy, described as the Modern Transport System or MTS, comprised the local transport strategies adopted by the two local authorities in 2000, which NESTRANS had subsequently assessed in accordance with the Ministers requirements. 35.
Numerous schemes were described and costed in the report.
They included the WPR, which was shown as a road around the periphery of Aberdeen (p 15).
Its purpose was defined as follows (p 14): The key roles of the WPR are to enable through traffic to by pass Aberdeen, which in turn allows for prioritisation for buses, cycles and pedestrians within the urban area.
It also improves peripheral movements around the City, improving access to Park & Ride sites and relieving heavily used, unsuitable rural routes.
It will improve accessibility to existing and planned employment locations and open up possibilities for future land release.
Finally, it will transform accessibility of freight and business service movements to and from the north and west of Aberdeen.
The report proceeded on the basis that the design and construction of the WPR would be undertaken by the local roads authorities, subject to the continued provision by the Ministers of the necessary funding. 36.
On 19 March 2003 the Minister for Transport announced that the WPR would be promoted by the Ministers as a trunk road. 37.
In December 2004, in the face of a campaign against the routing of the WPR along part of the Murtle corridor (the Camphill issue), the Minister for Transport instructed that work on that corridor should be reviewed and that four other options, previously discarded, should be re examined.
One of those options, described as the Peterculter/Stonehaven route, crossed the Dee near Peterculter and then ran in a southerly direction to join the A90 at Stonehaven.
Another option, described as the Milltimber Brae route, crossed the Dee between Murtle of Camphill and Peterculter, and then ran eastwards to join the eastern section of the Murtle corridor.
Public consultation on the five options was undertaken in the spring of 2005. 38.
Prior to taking a final decision, the Minister for Transport commissioned a report comparing the Murtle and Milltimber Brae options with a hybrid option which combined the Milltimber Brae route with an A90 relief road to Stonehaven.
On 17 November 2005 the Minister was advised that the hybrid option offered many attractions, particularly as a means of anticipating a future need to increase the capacity of the A90 between Stonehaven and Aberdeen, at significant cost. 39.
On 1 December 2005 the Minister announced that the route would combine the Milltimber Brae option with part of the Peterculter/Stonehaven option: in other words, the hybrid option.
The route differed from the options which had been considered in the earlier consultation exercise, in that it broadly comprised the whole of one option and part of another that is to say, the whole of the Milltimber Brae option, and the part of the Peterculter/Stonehaven option to the south of the Dee.
The length of new road, and the environmental and other costs, would therefore be greater than for any of the options considered individually. 40.
The thinking behind the Ministers decision was explained in a minute which he sent to the First Minister on 18 November 2005.
One factor was the Camphill issue.
The other, he explained, was that it was necessary to provide a new trunk road connecting Stonehaven to the WPR as previously envisaged the Fastlink, as it became known in order to relieve growing congestion on the A90 between Stonehaven and Aberdeen and anticipate the need to increase the capacity of that road. 41.
The Ministers thinking was also explained in a report prepared by Transport Scotland (an executive agency of the Ministers) in November 2006 (Aberdeen Western Peripheral Route Project Development 2005 2006 Consolidation Assessment Report), which was made available to the public.
It stated that the scheme inherited from the local authorities did not reflect completely the strategic objectives of the trunk road network.
The inclusion of the Fastlink improved the overall efficiency of the scheme, allowing long distance strategic traffic to get round the city more quickly and reducing traffic using the busiest stretch of the A90 between Stonehaven and Aberdeen.
Maintaining the existing A90 south of Aberdeen and keeping traffic moving was, it was said, becoming increasingly difficult. 42.
Work was then undertaken to identify the preferred line within the corridor which the Minister had announced.
On 2 May 2006 the preferred line was announced.
Further work was then carried out to assess the preferred route.
The WPR was subsequently reflected in a number of transport strategies and development plans. 43.
On 14 December 2006 draft special road schemes, under section 7 of the 1984 Act, and draft trunk road and other orders, under section 5 and other provisions, were published together with an EIA prepared under section 20A of the 1984 Act.
In relation to the reasons for choosing the Fastlink, the EIA referred to the November 2006 report by Transport Scotland.
During September and October 2007 new draft schemes and orders were published, some of which were in substantially the same terms as before and others of which were additional to those previously published.
The EIA was also withdrawn and replaced by a new EIA reflecting additional work.
All objections to the 2006 draft schemes and orders were carried forward and treated as objections to the 2007 versions.
A further draft order was subsequently published in May 2008. 44.
About 10,000 objections were made.
They included a letter of objection dated 5 February 2007, written by Mr Walton as chairman of Road Sense, a local organisation opposed to the WPR.
Amongst other matters raised, it was contended that there was no demonstrable need for the Fastlink and that there had been no public consultation on the route.
Mr Walton also submitted a personal letter of objection, which appears to have been in similar terms.
A subsequent email reiterated some of Mr Waltons earlier objections.
A further email containing objections by Road Sense was also submitted by Mr Walton. 45.
Transport Scotland responded to Mr Waltons letter of objection, addressing each of the points which he had made.
In relation to the need for the Fastlink, it observed that keeping traffic moving on the A90 between Stonehaven and Aberdeen was becoming increasingly difficult, as was demonstrated by the disruption and delays caused by recent roadworks.
Online widening would be disruptive to traffic and would require extensive and complex traffic management arrangements and significant land and property purchases.
Mr Waltons attention was also drawn to the November 2006 report.
In relation to consultation on the route, it was observed that the Fastlink corridor followed one of the routes which had been the subject of consultation in 2005, and that the procedure consequent upon the publication of the draft schemes and orders would include further consultation on the route. 46.
On 12 October 2007 the Minister announced that a public local inquiry would be held under section 139 of the 1984 Act to consider objections to the scheme.
The scope of the inquiry was later extended to include draft compulsory purchase orders made in connection with the scheme. 47.
On 17 April 2008 the Ministers announced that they had appointed reporters to conduct the inquiry.
The announcement made clear the limited scope of the inquiry: Scottish Ministers, having taken a policy decision to construct a special road to the west of Aberdeen (known as the Aberdeen Western Peripheral Route) including a new carriageway to Stonehaven (known as Fastlink), have appointed [the reporters] to hold a public local inquiry and to report with respect to objections to the associated schemes and orders Having accepted the need in principle for the road, Scottish Ministers do not wish to be advised on the justification for the principle of the special road scheme in economic, policy or strategy terms.
Scottish Ministers consider that strategies and policies referring to the special road scheme are only relevant to the inquiry insofar as these set the context for the Aberdeen Western Peripheral Route.
Scottish Ministers have directed that they only wish to be advised on the technical aspects of the route choice including the environmental statement published in connection with the special road scheme and any opinions expressed thereon.
Given the assessment approach taken in the environmental statement, Scottish Ministers wish to be advised on the technical and environmental issues associated with the special road scheme together with its individual components. 48.
The limited scope of the inquiry was reflected in the approach adopted by the reporters.
Following a pre enquiry meeting, they issued a note dated 22 May 2008 stating that they did not intend to permit the presentation of evidence or questioning on the need for the scheme.
They added that the inquiry was into the scheme proposed by the Ministers and could not turn itself into an inquiry into a series of assumed alternative proposals. 49.
The inquiry proceeded between 9 September 2008 and 18 February 2009.
Road Sense was represented by counsel.
A written statement explained that Road Sense had been formed in January 2006 to oppose the proposed WPR and to promote the full and proper evaluation of alternatives.
It consisted of private individuals drawn mainly from the settlements situated along and close to the chosen route.
It had held public meetings with attendances ranging from 300 to 1,200 people.
One of the contentions advanced in the written statement was that the Ministers had failed to comply with the requirements of the SEA Directive.
Road Sense presented evidence to the inquiry, including oral evidence given by Mr Walton.
In their closing submissions, counsel for Road Sense confined themselves to matters falling within the remit of the reporters, but also submitted that the terms of that remit had prevented the inquiry from carrying out a proper assessment of the proposals. 50.
The report submitted by the reporters, dated 30 June 2009, reflected their remit.
They observed in the preamble to the report that a large number of objectors had questioned the need for the scheme in general, or for parts of it, notably the Fastlink.
Given their remit, they had not included these matters in the report. 51.
On 21 December 2009 the Ministers issued their decision to make the schemes and orders as had been proposed, subject to detailed modifications.
Before doing so, they were obliged to take into account all representations made timeously about the project and the EIA, in accordance with section 20A(5A) of the 1984 Act and the corresponding provisions of paragraphs 7 and 13 of Schedule 1.
That obligation extended to representations which fell outside the remit of the inquiry, such as Mr Waltons representations questioning the need for the Fastlink.
The decision letter stated that the Ministers had considered all the objections which were made and not withdrawn, and all of the evidence presented to the inquiry. 52.
The schemes and orders were made on 14 January 2010 and laid before the Scottish Parliament the following day.
They were approved by resolution of the Parliament on 3 March 2010.
The present application was then made by Road Sense, and by Mr Walton as an individual.
In the event, the application so far as presented by Road Sense was abandoned after the Ministers questioned whether the bringing of the application had been duly authorised.
The application then proceeded solely at the instance of Mr Walton. 53.
Before the Lord Ordinary, the schemes and orders were challenged on a wide variety of grounds, including procedural unfairness in respect of the limited scope of the inquiry, and a failure to comply with requirements of EU and domestic law relating to the protection of the Dee Special Area of Conservation and of several protected species.
It was also contended that there had been a failure to comply with the EIA Directive as amended by the PPD Directive.
Although the SEA Directive was touched upon, it does not appear to have been argued at that stage that there had been a failure to comply with its requirements.
The Lord Ordinary rejected the appellants submissions (Walton v Scottish Ministers [2011] CSOH 131; 2011 SCLR 686). 54.
Before the Inner House, it was again argued that there had been a failure to comply with the EIA Directive, with the common law requirements of a fair procedure, and with the EU and domestic law protecting habitats and species.
In addition it was argued that there had been a failure to comply with the SEA Directive in respect of the Fastlink component of the scheme.
Their Lordships of the Extra Division rejected these submissions and adopted the reasoning of the Lord Ordinary.
The Extra Division also raised the question whether Mr Walton was in any event a person aggrieved by the schemes and orders within the meaning of paragraph 2 of Schedule 2 to the 1984 Act: a question which had not been raised by the Ministers.
Their Lordships considered that he had failed to demonstrate that he was such a person.
They also accepted the Ministers submission that he had failed to demonstrate that his interests had been substantially prejudiced, within the meaning of paragraph 3 of Schedule 2, by any failure to comply with any requirement of the Act.
On that basis, they concluded that, even if Mr Waltons challenge to the validity of the schemes and orders had been well founded, the court would not have quashed them (Walton v Scottish Ministers [2012] CSIH 19). 55.
There are three schemes and eleven orders in issue.
Each of the schemes is a special roads scheme made under sections 7 and 10(1) of the 1984 Act, in terms of which the Ministers are authorised to provide a special road which will become a trunk road on the date when the scheme comes into force.
Each of the schemes relates to a different section of the route.
Of the eleven orders, three are trunk road orders made under section 5(2) of the Act, in terms of which specified lengths of road which the Ministers propose to construct will become trunk roads on the dates when the orders come into force.
Each of these orders again relates to a different section of the route.
The remaining orders authorise measures which are ancillary to the schemes and the trunk road orders, such as the construction of side roads, the stopping up of existing lengths of road, and the detrunking of existing lengths of road. 56.
Against this background, Mr Waltons primary contention is that the Fastlink element of the scheme was adopted without the public consultation required by the SEA Directive.
He therefore seeks the quashing of the schemes and orders only in so far as they concern the Fastlink.
The Ministers maintain that there has been no breach of the directive; that, if there has been, the court should in any event decline to quash the schemes and orders; but that, if the schemes or orders are to be quashed to any extent, they must then fall in their entirety, as the scheme and orders are so integrated with one another that they must stand or fall as a whole.
Issues arising in relation to the SEA Directive 57.
The argument advanced on behalf of Mr Walton proceeds in a number of steps.
The first proposition is that the regional transport strategy adopted by NESTRANS the MTS was a plan or programme within the meaning of article 2(a) of the SEA Directive.
The second proposition is that the decision to construct the Fastlink, announced by the Minister on 1 December 2005 and subsequently implemented by the orders under challenge, was a modification to that plan or programme: the MTS was modified by the addition of a new objective, namely the relief of congestion on the A90 between Stonehaven and Aberdeen.
If so, that decision was therefore itself a plan or programme within the meaning of article 2(a) and, since that plan or programme was adopted after 21 July 2004, it was subject to the requirements of the directive.
The final proposition is that there was a failure to comply with those requirements: the announcement was not preceded by any consultation on the question whether there should be a Fastlink or not, and that question was not addressed in the subsequent procedures as required by the SEA Directive.
Mr Waltons written case also founded upon the Public Access to Environmental Information Directive (Directive 2003/4/EC, OJ 2003 L41/26) and the PPD Directive.
In the event however those contentions were not pursued. 58.
The Ministers on the other hand contend in the first place that the MTS was not a plan or programme within the meaning of article 2 of the directive, since (a) the directive does not apply to plans and programmes of which the first formal preparatory act was prior to 21 July 2004 (by virtue of article 13(3)), and (b) the MTS was not prepared for adoption through a legislative procedure or required by legislative, regulatory or administrative provisions.
In that respect, reliance was placed upon the fact that NESTRANS was a non statutory partnership: it was accepted that if the MTS had been prepared by a statutory body, at a time when the SEA Directive was in force, an SEA would have been required.
Secondly, they contend that in any event the decision to construct the Fastlink was not a modification of any such plan or programme but rather an aspect of the implementation of an element of the MTS at project level.
Thirdly, they contend that the requirements of the directive were in any event fulfilled: the need in principle for the WPR was consulted upon at the plan or programme level as an element of the MTS, and public consultation took place after 2005 upon the Fastlink, as part of the WPR project, in accordance with the EIA Directive.
Discussion 59.
In the present case, the WPR was subject to an EIA; and there is no longer any complaint that that assessment failed to meet the requirements of the EIA Directive.
The question whether there also required to be an SEA depends upon whether the decision to construct the Fastlink as part of the WPR was a modification of a plan or programme as defined in article 2(a) of the SEA Directive, and was therefore itself such a plan or programme; and, if so, whether it set the framework for future development consent of a project listed in article 3(2)(a) (there being no dispute that the WPR is such a project).
The reasoning of the Court of Justice and the Advocate General in such recent cases as Terre Wallone ASBL v Rgion Wallone and Inter Environnement Wallonie ASBL v Rgion Wallone ((Joined Cases C 105/09 and C 110/09) [2010] I ECR 5611 and Inter Environnement Bruxelles ASBL, Ptitions Patrimoine ASBL and Atelier de Recherche et d'Action Urbaines ASBL v Rgion de Bruxelles Capitale (Case C 567/10) [2012] CMLR 909 suggests that these questions are to some extent inter related. 60.
In determining whether the Fastlink decision was a modification of a plan or programme as defined in article 2(a), the first question is whether, as Mr Walton contends, the MTS (or the local transport strategies which it comprised) was a plan or programme within the meaning of that provision. 61.
It might be argued with some force that none of these documents has been shown to have been required by legislative, regulatory or administrative measures as stipulated by the second indent of article 2(a), even according the term required the width of meaning given to it in Inter Environnement Bruxelles at para 31.
It might also be argued that NESTRANS, at least, was not an authority within the meaning of the first indent, since it was established voluntarily and did not exercise any statutory functions.
On the other hand, it might be argued that the documents set the framework for future development consent of projects, as explained by Advocate General Kokott in her opinion in Terre Wallone at points 64 65, and were therefore likely to have significant effects on the environment.
In those circumstances, it might be argued that a purposive interpretation of the directive would bring the documents within its scope. 62.
For reasons which I shall explain, it does not appear to me to be necessary to reach a concluded view on these questions.
It is sufficient to say that it appears to me to be arguable that the MTS, or the local transport strategies which formed its constituent parts, formed a plan or programme within the meaning of the directive.
The question whether the decision to construct the Fastlink constituted a modification to a plan or programme can be considered on the hypothesis that the MTS (or its constituent documents) comprised such a plan or programme. 63.
I should add that I am unable to accept the Ministers contention that the MTS was not a plan or programme because its first formal preparatory act was prior to 21 July 2004.
Article 13(3) defines the temporal scope of application of the directive: not what constitutes a plan or programme.
It is based on the premise that there were plans and programmes of which the first formal preparatory act was before 21 July 2004: see the second sentence.
The fact that article 4(1) does not apply to a plan or programme of which the first formal preparatory act was before that date, by virtue of article 13(3), does not therefore deprive such a plan or programme of its character as a plan or programme. 64.
Proceeding on the hypothesis that the MTS (or its constituent documents) constituted a plan or programme, the next issue which requires to be considered is whether the Fastlink constituted a modification to that plan or programme within the meaning of article 2(a).
In my view it did not. 65.
As I have explained, the MTS proposed that the local roads authorities should construct a WPR which would, on completion, become part of the trunk road network.
In March 2003 the Ministers took over responsibility for designing and constructing the WPR, as the authority responsible for trunk roads.
In doing so, the Ministers assumed responsibility for a specific development.
In the terminology of the EIA and SEA Directives, that development could aptly be described as a project, defined in article 1 of the EIA Directive as meaning, in the first place, the execution of construction works or of other installation or schemes.
It could not readily be regarded as a plan or programme subject to the SEA Directive (assuming that to have been temporally applicable): the Ministers did not assume responsibility for the preparation of a document setting the framework for future development consent of projects. 66.
The subsequent decision to enlarge the project, so as to provide a trunk road connection between Stonehaven and the WPR as previously envisaged, was taken by the Ministers primarily in order to relieve congestion on the A90 and anticipate the need to increase the capacity of that road.
In taking that decision, the Ministers modified a project: they did not modify the legal or administrative framework which had been set for future development consent of projects.
It is therefore not the SEA Directive which would apply, but other EU legislation such as the EIA Directive, as the Commission explained in its guidance document, Implementation of Directive 2001/42 on the Assessment of the Effects of Certain Plans and Programmes on the Environment (2003), para 3.9. 67.
My conclusion that the decision to construct the Fastlink was not a modification of the MTS therefore reflects, in the first place, the fact that the decision was taken by the Ministers in the course of executing a specific project and related solely to that project.
They did not take the decision in the exercise of any power to modify the MTS or otherwise set a legal or administrative framework for future development consent of projects. 68.
Furthermore, there were no national legislative or regulatory provisions, such as the Court of Justice envisaged in Inter Environnement Bruxelles ASBL, Ptitions Patrimoine ASBL and Atelier de Recherche et d'Action Urbaines ASBL v Rgion de Bruxelles Capitale (Case C 567/10) [2012] 2 CMLR 909, para 31, requiring the development in the Ministers thinking about the project to be implemented by means of the formal adoption of a plan or programme, or the modification of such a document.
Under domestic law, the Ministers decision was implemented in accordance with the procedures laid down for specific road projects in the 1984 Act. 69.
In addition, the conclusion that the decision to construct the Fastlink does not fall within the scope of the SEA Directive appears to me to be consistent with a purposive interpretation of that directive.
In Inter Environnement Bruxelles, the Court of Justice concluded that the repeal of a plan or programme should in principle be regarded as a modification, within the meaning of the directive, because it changed the framework for future development consent of projects and might therefore be likely to have significant effects on the environment.
As I have explained, the decision to construct the Fastlink did not alter the framework for future development consent of projects, but altered a specific project which continued to require development consent.
The effects of the Fastlink on the environment were capable of being fully assessed in accordance with other applicable EU legislation, including the EIA Directive. 70.
Given my conclusion that the decision to construct the Fastlink was not a modification of a plan or programme within the meaning of the SEA Directive, it is unnecessary to reach a concluded decision as to whether the MTS was in fact such a plan or programme. 71.
Neither party requested the court to make a preliminary reference to the Court of Justice.
The question whether the decision to construct the Fastlink was a modification appears to me to turn upon the application to the facts of this case of principles established in the recent case law of the Court of Justice.
In these circumstances, a reference does not appear to me to be necessary.
Common law fairness 72.
Mr Walton also contended in his written case that common law principles of fairness in any event required that the remit of the public local inquiry should include the economic, policy or strategic justification for the Fastlink.
That was said to follow from the decision in Bushell v Secretary of State for the Environment [1981] AC 75.
That case was however concerned with the procedure which had to be followed at an inquiry in order for it fairly to fulfil its remit: as Lord Diplock observed (p 95), what is a fair procedure to be adopted at a particular inquiry will depend upon the nature of its subject matter.
The complaint in the present case concerns the prior question of the subject matter of the inquiry. 73.
The 1984 Act lays down detailed provisions governing the consideration of representations and the holding of inquiries.
The Ministers are bound to take timeously submitted representations into account, whether or not there has been an inquiry: section 20A(5A), and paragraphs 7 and 13 of Schedule 1.
They have the power to hold an inquiry under section 139, and are under a duty to hold an inquiry if an objection is made to an order or scheme by any person on whom a copy of the relevant notice is required to be served, or any other person appearing to them to be affected: paragraphs 5 and 11 of Schedule 1.
Mr Walton was not a person on whom a copy of the notice required to be served.
Nothing before the court indicates that he was regarded as a person affected.
It has not been suggested that the Ministers were statutorily obliged to hold an inquiry into his objections.
It has not been suggested that he had any legitimate expectation that the remit of the inquiry would encompass the economic, policy or strategic justification for the Fastlink.
In those circumstances, there is no material before the court which suggests, let alone establishes, that the Ministers were bound as a matter of fairness to include those matters within the remit of the inquiry.
Remedies 74.
In the opinion of the Extra Division, delivered by Lord Clarke, a number of observations were made about matters relating to remedies.
First, it had been argued on behalf of the Ministers that, even if Mr Waltons contentions were accepted, the court should exercise its discretion under paragraph 3 of Schedule 2 to the 1984 Act to decline to grant him a remedy.
The court accepted that submission, stating (para 40) that it would have been quite inappropriate that the project should be stopped from proceeding by an individual in the position of this reclaimer.
In that regard, the court observed that it was not contended that the schemes and orders would substantially prejudice his interests or affect his property (para 39). 75.
Secondly, the court questioned whether Mr Walton was a person aggrieved within the meaning of paragraph 2 of Schedule 2.
Their Lordships noted that Mr Walton did not claim that his interests would be substantially prejudiced (the courts emphasis) or that his property would be affected.
Although his house was close to the route of the WPR, it was at some distance from the Fastlink.
The court cited Ealing Corporation v Jones [1959] 1 QB 384, 392 where Donovan J said that the word grievance connoted some legal grievance.
The court also cited the judgment of Lockhart J in Right to Life Association (NSW) Inc v Secretary, Department of Human Services and Health (1995) 128 ALR 238, 251 252, a decision of the Federal Court of Australia, where it was said that, in order to be a person aggrieved, the applicants interest must be above that of an ordinary member of the public.
The court observed that, although Mr Walton had opposed the project from its inception, he was no different in that respect from someone who lived many hundreds of miles from the proposed route but had on occasions to travel to Aberdeen (para 37). 76.
The court added that, even if the test were the same as that of standing to bring an application for judicial review, as explained in AXA General Insurance Ltd and others v HM Advocate and others [2011] UKSC 46; [2012] 1 AC 868; 2011 SLT 1061, it would find it difficult to consider that Mr Walton possessed sufficient interest to clothe him with rights under paragraph 2 (para 38).
Discretion 77.
Before this court, the Ministers accepted that, if there had been a substantial failure to accord Mr Walton proper participation as required under EU law, then the court should not withhold a remedy, at least if it were satisfied that he was a person aggrieved in respect of the particular breach found.
It would be inappropriate in these circumstances to embark upon an elaborate discussion.
It is sufficient to say that I would wish to reserve my opinion as to the correctness of the approach adopted by the Extra Division.
In my opinion the matter requires fuller consideration. 78.
That consideration might involve a number of inter related issues.
One is whether a failure to comply with the SEA Directive falls within the scope of paragraph 2 of Schedule 2 to the 1984 Act at all; and, if so, whether it falls under the first or the second of the grounds upon which a scheme or order can be challenged, as specified in that paragraph.
They are that it is not within the powers of this Act or that any requirements of this Act or of any regulations made thereunder have not been complied with in relation to the scheme or order.
It is only in relation to the second ground that it is necessary under paragraph 3 to demonstrate substantial prejudice.
The words person aggrieved are of wide import and should not be subjected to a restrictive interpretation.
They do not include, of course, a mere busybody who is interfering in things which do not concern him: but they do include a person who has a genuine grievance because an order has been made which prejudicially affects his interests. 84.
As Lord Fraser of Tullybelton made clear in Arsenal Football Club Ltd v Ende [1979] AC 1, 32, the meaning to be attributed to the phrase will vary according to the context in which it is found.
It is therefore necessary, as Lord President Rodger observed in Lardner v Renfrew District Council 1997 SC 104, 108, to have regard to the particular legislation involved, and the nature of the grounds on which the appellant claims to be aggrieved. 85.
Decisions both north and south of the border have indicated that a wider interpretation than that adopted in Ex parte Sidebotham is appropriate, in particular, in the context of statutory appeals under the Town and Country Planning Acts: a context which, like the present, is concerned with the granting of consent for proposed developments, and involves analogous procedures.
Scottish examples include North East Fife District Council v Secretary of State for Scotland 1992 SLT 373, Cumming v Secretary of State for Scotland 1992 SC 464, Mackenzies Trs v Highland Regional Council 1994 SC 693 and Lardner v Renfrew District Council.
Mention should also be made of the valuable review of the English authorities by Woolf LJ in Cook v Southend on Sea Borough Council [1990] 2 QB 1. 86.
It is apparent from these authorities that persons will ordinarily be regarded as aggrieved if they made objections or representations as part of the procedure which preceded the decision challenged, and their complaint is that the decision was not properly made.
In North East Fife District Council v Secretary of State for Scotland, for example, Lord President Hope said of the appellants (at 375 376): But in my opinion the fact that all three appellants were present at, and made representations at the public inquiry is sufficient for them to be persons aggrieved they were entitled to expect that the Secretary of State, in considering their representations, would act within the powers conferred upon him by the statute and they are entitled to appeal against his decision on the ground that he has not done so.
The same approach has been adopted in England and Wales: see for example Turner v Secretary of State for the Environment (1973) 28 P&CR 123, endorsed by the Court of Appeal in Times Investment Ltd v Secretary of State for the Environment (1990) 61 P&CR 98.
Many other decisions to the same effect are noted in Woolf, Jowell and Le Sueur, De Smiths Judicial Review (6th edition, 2007), para 2 060, and in Wade and Forsyth, Administrative Law (10th edition, 2009), p 630. 87.
The authorities also demonstrate that there are circumstances in which a person who has not participated in the process may nonetheless be aggrieved: where for example an inadequate description of the development in the application and advertisement could have misled him so that he did not object or take part in the inquiry, as in Cumming v Secretary of State for Scotland and the analogous English case of Wilson v Secretary of State for the Environment [1973] 1 WLR 1083.
Ordinarily, however, it will be relevant to consider whether the applicant stated his objection at the appropriate stage of the statutory procedure, since that procedure is designed to allow objections to be made and a decision then to be reached within a reasonable time, as intended by Parliament. 88.
In the present case, Mr Walton made representations to the Ministers in accordance with the procedures laid down in the 1984 Act.
He took part in the local inquiry held under the Act.
He is entitled as a participant in the procedure to be concerned that, as he contends, the Ministers have failed to consult the public as required by law and have failed to follow a fair procedure.
He is not a mere busybody interfering in things which do not concern him.
He resides in the vicinity of the western leg of the WPR.
Although that is some distance from the Fastlink, the traffic on that part of the WPR is estimated to be greater with the Fastlink than without it.
He is an active member of local organisations concerned with the environment, and is the chairman of the local organisation formed specifically to oppose the WPR on environmental grounds.
He has demonstrated a genuine concern about what he contends is an illegality in the grant of consent for a development which is bound to have a significant impact on the natural environment.
In these circumstances, he is indubitably a person aggrieved within the meaning of the legislation.
Standing to invoke the supervisory jurisdiction 89.
In view of the Extra Divisions observation that Mr Walton would lack standing, even if the test were the same as would apply to an application to the supervisory jurisdiction under the common law, it may be helpful to consider that matter briefly. 90.
In AXA General Insurance Ltd and others v HM Advocate and others [2011] UKSC 46; [2012] 1 AC 868; 2011 SLT 1061, this court clarified the approach which should be adopted to the question of standing to bring an application to the supervisory jurisdiction.
In doing so, it intended to put an end to an unduly restrictive approach which had too often obstructed the proper administration of justice: an approach which presupposed that the only function of the courts supervisory jurisdiction was to redress individual grievances, and ignored its constitutional function of maintaining the rule of law. 91.
As was said by Lord Hope and myself at paras 62 and 170 respectively, an applicant has to have sufficient interest: that is to say, an interest which is sufficient to justify his bringing the application before the court.
In further explanation of that concept, Lord Hope said (para 63): I would not like to risk a definition of what constitutes standing in the public law context.
But I would hold that the words directly affected which appear in rule 58.8(2) capture the essence of what is to be looked for.
One must, of course, distinguish between the mere busybody, to whom Lord Fraser of Tullybelton referred in R v Inland Revenue Comrs, Ex p National Federation of Self Employed and Small Businesses Ltd [1982] AC 617, 646, and the interest of the person affected by or having a reasonable concern in the matter to which the application related.
The inclusion of the word directly provides the necessary qualification to the word affected to enable the court to draw that distinction.
A personal interest need not be shown if the individual is acting in the public interest and can genuinely say that the issue directly affects the section of the public that he seeks to represent. 92.
As is clear from that passage, a distinction must be drawn between the mere busybody and the person affected by or having a reasonable concern in the matter to which the application relates.
The words directly affected, upon which the Extra Division focused, were intended to enable the court to draw that distinction.
A busybody is someone who interferes in something with which he has no legitimate concern.
The circumstances which justify the conclusion that a person is affected by the matter to which an application relates, or has a reasonable concern in it, or is on the other hand interfering in a matter with which he has no legitimate concern, will plainly differ from one case to another, depending upon the particular context and the grounds of the application.
As Lord Hope made plain in the final sentence, there are circumstances in which a personal interest need not be shown. 93. considered in the context of the issues raised.
I stated (para 170): I also sought to emphasise that what constitutes sufficient interest has to be A requirement that the applicant demonstrate an interest in the matter complained of will not however operate satisfactorily if it is applied in the same way in all contexts.
In some contexts, it is appropriate to require an applicant for judicial review to demonstrate that he has a particular interest in the matter complained of: the type of interest which is relevant, and therefore required in order to have standing, will depend upon the particular context.
In other situations, such as where the excess or misuse of power affects the public generally, insistence upon a particular interest could prevent the matter being brought before the court, and that in turn might disable the court from performing its function to protect the rule of law What is to be regarded as sufficient interest to justify a particular applicant's bringing a particular application before the court, and thus as conferring standing, depends therefore upon the context, and in particular upon what will best serve the purposes of judicial review in that context. 94.
In many contexts it will be necessary for a person to demonstrate some particular interest in order to demonstrate that he is not a mere busybody.
Not every member of the public can complain of every potential breach of duty by a public body.
But there may also be cases in which any individual, simply as a citizen, will have sufficient interest to bring a public authoritys violation of the law to the attention of the court, without having to demonstrate any greater impact upon himself than upon other members of the public.
The rule of law would not be maintained if, because everyone was equally affected by an unlawful act, no one was able to bring proceedings to challenge it. 95.
At the same time, the interest of the particular applicant is not merely a threshold issue, which ceases to be material once the requirement of standing has been satisfied: it may also bear upon the courts exercise of its discretion as to the remedy, if any, which it should grant in the event that the challenge is well founded.
In that regard, I respectfully agree with the observations made by Lord Carnwath at para 103. 96.
So far as the present case is concerned, I have listed the various factors which support Mr Waltons entitlement to bring the present application as a person aggrieved.
Mutatis mutandis, those factors would also have given him standing to bring an application for judicial review if, for example, he had sought to challenge the Ministers decision to restrict the remit of the inquiry so that some of his objections were, as he contended, unlawfully excluded from its scope.
Such a challenge would however have failed on its merits.
Conclusion 97.
For the reasons I have explained, the appeal should in my opinion be dismissed.
LORD CARNWATH Substance 98.
I agree that the appeal should be dismissed for the reasons given by Lord Reed.
These are, in short, that the adoption of Fastlink did not involve the modification of a plan or programme within the meaning of the SEA Directive; and that the procedure as a whole did not breach any common law principle of fairness. 99.
On the first point, like Lord Reed, I am content to proceed on the assumption that the MTS, as approved by NESTRANS in March 2003, was itself such a plan or programme.
However, I should register my serious doubts on the point, even accepting the flexible approach required by the European authorities.
I note from that the passage from Inter Environnement Bruxelles quoted by Lord Reed (para 22) refers to regulation of plans and programmes by provisions which determine the competent authorities for adopting them and the procedure for preparing them.
There may be some uncertainty as to what in the definition is meant by administrative, as opposed to legislative or regulatory, provisions.
However, it seems that some level of formality is needed: the administrative provisions must be such as to identify both the competent authorities and the procedure for preparation and adoption.
Given the relatively informal character of the NESTRANS exercise, it is not clear to me what administrative provisions could be relied on as fulfilling that criterion. 100.
On the issue of common law fairness, and the merits more generally, our conclusion has persuasive support from the decision of the Aarhus Compliance Committee on a complaint made by Road Sense in May 2009 (that is, after the conclusion of the inquiry, but before the final decision).
The Committee is responsible for enforcement of the Aarhus Convention, to which the UK is a party (more fully, the UNECE Convention on Access to Information, Public Participation, in Decision Making, and Access to Justice in Environmental Matters).
Although the Convention is not part of domestic law as such (except where incorporated through European directives), and is no longer directly relied on in this appeal, the decisions of the Committee deserve respect on issues relating to standards of public participation. 101.
The Committee, by a decision adopted on 25 February 2011, rejected all the allegations of breach of the Convention.
In particular they rejected a complaint about the limited scope of the public inquiry.
The Committee were satisfied that the public had had a number of opportunities during the ongoing participation process over the years to make submissions that the AWPR not be built, and to have those submissions taken into account (para 82).
Although they noted with some concern that the route finally selected and the dual carriageway character of the Fastlink were not subject to the informal consultation process, they found that these aspects had been subject to adequate public participation through the statutory authorisation process (para 85).
In relation to the argument that the addition of the Fastlink involved a new strategic objective of providing relief for the A90 without the consultation required by article 7 of the Convention, they held that the document which adopted this objective was not itself a plan (subject to article 7 of the Convention), but rather a document relating to a specific activity.
It seems therefore that this case has not disclosed any defects in domestic procedures judged by European standards.
Remedies 102.
Two issues have been argued before us in relation to the procedure: (i) discretion (ii) standing.
On the latter issue, I have nothing to add to Lord Reeds discussion of the expression person aggrieved, which confirms, as I understand it, that Scottish practice on these matters is, or should be, in line with that south of the border.
I also agree with his comments, and those of Lord Hope, on the issue of standing in judicial review more generally, although that issue does not arise directly for decision in this case. 103.
I will however add a few words of my own on the issue of discretion, which in practice may be closely linked with that of standing, and may be important in maintaining the overall balance of public interest in appropriate cases (see, for example, R v Monopolies and Mergers Commission, ex p Argyll Group plc [1986] 1 WLR 763, 774 775).
In this respect, I see discretion to some extent as a necessary counterbalance to the widening of rules of standing.
The courts may properly accept as aggrieved, or as having a sufficient interest those who, though not themselves directly affected, are legitimately concerned about damage to wider public interests, such as the protection of the environment.
However, if it does so, it is important that those interests should be seen not in isolation, but rather in the context of the many other interests, public and private, which are in play in relation to a major scheme such as the AWPR. 104.
Mr Mure QC for the Ministers drew a distinction between breaches respectively of domestic and of European law.
He accepted that if there had been a substantial failure to accord Mr Walton proper participation as required under European law, then subject to the issue of standing the court should not withhold a remedy.
Further, he submitted, since the schemes and orders were drawn in a form which does not enable Fastlink to be dealt with separately, the court would have no alternative under this statutory scheme but to quash them all, with the effect that the statutory procedures for the whole project would have to be started all over again. 105.
On the other hand, he submitted, if the only breach established were one of fairness under domestic law, then the court would have wider discretion to refuse relief.
It could draw a balance between the very attenuated nature of Mr Waltons own interest, and the great public interest in allowing this important scheme to proceed without delay.
In this connection, he cited the long delay since the 2003 MTS, when the scheme was already said to be overdue; the strong support for the scheme from large sections of the public, and from national and local elected bodies; the lack of any legal challenge from other non governmental or environmental organisations; the 115m of public money already spent on preparatory work and property acquisition; the uncertainty and blight which would be caused by quashing the orders; and the burden, on those who have participated in the consultations and inquiries over many years, of having to go through the same processes anew. 106.
On the other side Mr ONeill QC submitted that, if a significant breach were found in the requirements for public consultation under either European or domestic law, there would be no grounds to refuse him an effective remedy.
As he might have said: fiat justitia, ruat caelum.
He submitted, however, that, notwithstanding the limited nature of the remedies provided for in terms by the statute, it would not be necessary to quash the scheme and orders as whole.
The court had inherent powers to fashion a proportionate remedy, directed simply to remedying whatever defect was found in relation to the procedures relating to the Fastlink. 107.
In considering these submissions, I propose to consider first the statutory application procedure as it operates under domestic law, before turning to its application to alleged breaches of the European environmental assessment directives.
In the latter context, I note what Lord Reed has said about the implications of the Scotland Act.
We have not heard argument on that aspect, and nothing I say is intended to pre empt discussion of such issues in future cases.
Statutory challenge domestic law 108.
The procedure under which the present proceedings were brought is contained in Schedule 2 of the 1984 Act, the relevant provisions of which have been set out by Lord Reed (para 9).
There are six distinctive features: If the grounds are established the court may make an order; it is on The statutory procedure may be brought only by a person i) aggrieved by the scheme or order. ii) It must be brought within six weeks from the publication of the statutory notice of the making of scheme or order; there is no power to extend that time limit. iii) It is an exclusive procedure.
The validity of a scheme or order may not be challenged by any other procedural route before or after it is made. iv) There are two possible grounds for challenge: (a) not within the powers of the Act (b) failure to comply with any requirement of the Act or regulations made under it.
Under (b), the applicant must also show substantial prejudice to his interests caused by the failure. v) its face a discretionary jurisdiction. vi) The only remedies available to the court in terms of the Act are (a) an interim order suspending operation of the scheme or order pending final determination by the court, (b) a final order quashing the scheme or order either generally or in so far as it affects the property of the applicant. 109.
Provisions of this kind are found in many statutes relating to planning, highways and other similar public functions, but the detail varies.
The scope of the two statutory grounds, and the relationship between them, have been considered in a number of judgments, not all mutually consistent.
A useful review of the authorities over some forty years can be found in Wade & Forsyth, Administrative Law 10th ed pp 626 629.
From that, it can be seen that in some early Scottish cases a narrow view was taken of the second procedural ground.
It was held for example that a breach of the inquiries procedure rules was not covered, because they had been made under the Tribunals and Inquiries Act 1958, rather than the Acquisition of Land (Authorisation Procedure) (Scotland) Act 1947 under which the order had been made (see Hamilton v Roxburgh County Council 1971 SLT 2).
It is open to question whether this strict view would be upheld today, but the particular problem has been addressed in some later statutes, which include breach of the inquiries procedure rules as a separate and specific head of procedural challenge (see e.g. Acquisition of Land Act 1981 section 23(3)(b)); Town and Country Planning (Scotland) Act 1997 section 239(9)). 110.
On the other hand, the requirement for substantial prejudice under the second ground has been interpreted flexibly.
Thus, although prejudice to the applicants own interests provides the test, it has been accepted that he may be prejudiced by a failure to give appropriate notice which might have attracted other potential objectors to his cause (see Wilson v Secretary of State for the Environment [1973] 1 WLR 1083).
There has also been some debate about which ground is appropriate for a breach of common law principles of natural justice or fairness: whether substantive, procedural or both (see eg Fairmount Investments Ltd v Secretary of State for the Environment [1976] 1 WLR 1255).
On the other hand, in George v Secretary of State for the Environment (1979) 77 LGR 689, Lord Denning MR suggested that the issue was academic, since an actionable breach of natural justice necessarily implies a finding of substantial prejudice to the applicants interests. 111.
In the modern law, in my view, it would be wrong to construe such provisions too rigidly, or without regard to the parallel development of principles of judicial review.
In De Smiths Judicial Review (6th Ed paragraphs 17 025ff) the two statutory grounds are helpfully related to Lord Diplocks now well established categorisation of the grounds for judicial review in Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 (the GCHQ case).
It is suggested that ground (a) is equivalent to the grounds of judicial review known as illegality and unreasonableness; while ground (b) is close to the ground of judicial review of procedural propriety, treated by Lord Diplock as including both the common law rules of natural justice and the breach of statutorily required procedures.
The authors add: Normally in applications to quash, for the claimant to succeed in quashing the decision he must have been substantially prejudiced by the failure to comply with the statutes procedural conditions.
Under both substantive and procedural grounds of review the courts possess a residual discretion not to quash a decision where there has been no prejudice or detriment to the claimant and to refuse relief in exceptional circumstances. 112.
I find this a useful general guide, which gives appropriate, but not unduly legalistic, effect to the distinction drawn by the legislature between substantive and procedural grounds.
The applicant will be refused a remedy, where he complains only of a procedural failure (whether under statutory rules or common law principles), if that failure has caused him personally no substantial prejudice.
Where, however, a substantive defect is established, going either to the scope of the statutory powers under which the project was promoted, or to its legality or rationality in the sense explained by Lord Diplock, the courts discretion to refuse a remedy will be much more limited.
These general principles must of course be read in the context of the statutory framework applicable in a particular case. 113.
The application of these principles in the present case is to my mind straightforward under domestic law.
It is not suggested that the making of the schemes and orders authorising the AWPR was not within the powers conferred by the 1984 Act.
Nor is it alleged that they were vitiated by illegality or irrationality.
There is no allegation of any breach of the procedural requirements laid down by or under the Act itself.
Even if there had been some technical breach of those rules, or of analogous common law principles, Mr Walton would not have been entitled to a remedy, because he has not shown, or even alleged, that his own interests have been significantly prejudiced. 114.
In relation to the Fastlink, his legitimate interest extended to the right to be consulted, to make his views known on any aspect of the scheme, and to have those views considered.
He did not have a legal right to have those views examined at a public inquiry, but an inquiry was held and he was heard.
He had no right to dictate the result.
Furthermore, the balance of the factors listed by Mr Mure QC point overwhelmingly to the exercise of discretion in favour of allowing the scheme to proceed.
Statutory Challenge Environmental Assessment 115.
Breach of the rules relating to environmental assessment, derived from European directives, cannot be considered in a purely domestic context.
A more careful analysis is required having regard to the principles applying to remedies under European law.
In view of Mr Mures partial concession, the argument before us has been relatively limited.
However, I will take this opportunity to dispel what seem to me misconceptions as to the effect of some of the authorities, in the hope of clearing the way to fuller argument in another case. 116.
Mr ONeill submitted that, because a breach of the SEA Directive would involve a breach of European law, the principle of effectiveness (see now article 19(1) of the Treaty on the Functioning of the European Union) requires nothing less than the nullifying of any action based on it.
This submission (and Mr Mures partial concession) was derived principally from the speeches of the House of Lords in Berkeley v Secretary of State for the Environment (no. 1) [2001] 2 AC 603, relating to the EIA directive, and also on more recent CJEU authorities, R (Wells) v Secretary of State for Transport, Local Government and the Regions (C 201/02) [2004] ECR I 723, and (in respect of the SEA directive) Inter Environnement Wallonie ASBL v Rgion Wallonie (Case C 41/11) [2012] 2 CMLR 623.
I will consider those authorities below, but before doing so it is necessary to look in a little more detail at the relevant Scottish legislation.
EIA and SEA in Scottish law 117.
Lord Reed has outlined the relevant provisions of the European Directives.
For present purposes it is necessary to look in more detail at the implementation respectively of the EIA and SEA Directives in Scottish law.
EIA 118.
The Environmental Impact Assessment (Scotland) Regulations 1999 (SSI 1999/1) (replacing regulations made in 1988) gave effect to the 1985 EIA directive, as amended in 1997, in relation in particular to town and country planning and roads.
Environmental information was defined to include both the environmental impact statement, required by the regulations, and also any representations made in response (regulation 2). 119.
Different approaches were adopted in respect of decisions relating to planning and roads.
For the former, regulation 3 prohibited the grant of planning permission on an application covered by the regulations, unless the environmental information had been taken into consideration.
For the purposes of any statutory challenge to the Court of Session, references to action not within the powers of the Act were to be taken to extend to a grant of planning permission by the Scottish Ministers in contravention of regulation 3 (regulation 43).
As will be seen the corresponding English provision was relied on by Lord Hoffmann in Berkeley as indicating that breach of the EIA regulations was to be treated as not merely non compliance with a relevant requirement but as rendering the grant of permission ultra vires. 120.
Roads were dealt with separately by Part III of the regulations.
By dint of powers under the European Communities Act 1972, new sections were inserted into the Roads (Scotland) Act 1984, providing (inter alia) for environmental assessment of certain road construction projects (section 20A), and for consideration by Ministers of the environmental information and representations made in response (schedule 1).
In contrast with the planning provisions, it was not provided that non compliance should be treated as taking the action outside the powers of the Act for the purpose of a statutory challenge.
SEA 121.
As explained by Lord Reed, strategic environmental assessment was introduced into European law by Directive 2001/42/EC.
Implementation into national law was required by 21 July 2004.
In Scotland this was effected initially by the Environmental Assessment of Plans and Programmes (Scotland) Regulations 2004 (SSI 2004/258), which came into effect on 20 July 2004. (It is not therefore true, as was alleged at one time by the appellant, that there was a failure to implement the Directive by the due date.) From 20 February 2006 the regulations were replaced by the Environmental Assessment (Scotland) Act 2005. 122.
Unlike the EIA regulations, neither the SEA regulations nor the 2005 Act contained any specific provision making the SEA requirements part of the procedural requirements for a subsequent road project, nor otherwise stating the effects of non compliance on the validity of such a project.
Thus, it appears, breach of the SEA Directive or of the domestic provisions was not made a statutory ground for challenging a subsequent scheme or order under the 1984 Act.
One infers that such provision was thought unnecessary, because of the availability of judicial review as an effective remedy to challenge a plan or programme adopted in breach of the SEA directive at the appropriate time.
There was no reason for such a breach to be treated also as a breach of the 1984 Act, so as to give rise to a statutory challenge under that Act to the approval of a consequent project, perhaps many years later. 123.
Against that background I turn to consider the authorities.
Berkeley 124.
In Berkeley it was held that a planning permission for the development of a site owned by Fulham Football Club close to the River Thames was unlawful as it had been adopted in breach of the EIA Directive.
Relief should not be refused merely because the relevant information was before the Secretary of State in other forms, and compliance with the regulations would have made no difference to the result. 125.
On the scope of the courts discretion, Lord Bingham said (at p.608): Even in a purely domestic context, the discretion of the court to do other than quash the relevant order or action where such excessive exercise of power is shown is very narrow.
In the Community context, unless a violation is so negligible as to be truly de minimis and the prescribed procedure has in all essentials been followed, the discretion (if any exists) is narrower still: the duty laid on member states by article 10 of the EC Treaty, the obligation of national courts to ensure that Community rights are fully and effectively enforced, the strict conditions attached by article 2(3) of the Directive to exercise of the power to exempt and the absence of any power in the Secretary of State to waive compliance (otherwise than by way of exemption) with the requirements of the Regulations in the case of any urban development project which in his opinion would be likely to have significant effects on the environment by virtue of the factors mentioned, all point towards an order to quash as the proper response to a contravention such as admittedly occurred in this case. 126.
Similarly, Lord Hoffmann said (at p.616): A court is therefore not entitled retrospectively to dispense with the requirement of an EIA on the ground that the outcome would have been the same or that the local planning authority or Secretary of State had all the information necessary to enable them to reach a proper decision on the environmental issues.
Although section 288(5)(b) [of the Town and Country Planning Act 1990], in providing that the court may quash an ultra vires planning decision, clearly confers a discretion upon the court, I doubt whether, consistently with its obligations under European law, the court may exercise that discretion to uphold a planning permission which has been granted contrary to the provisions of the Directive.
To do so would seem to conflict with the duty of the court under article 10 (ex article 5) of the EC Treaty to ensure fulfilment of the United Kingdom's obligations under the Treaty.
In classifying a failure to conduct a requisite EIA for the purposes of section 288 as not merely non compliance with a relevant requirement but as rendering the grant of permission ultra vires, the legislature was intending to confine any discretion within the narrowest possible bounds.
It is exceptional even in domestic law for a court to exercise its discretion not to quash a decision which has been found to be ultra vires: see Glidewell LJ in Bolton Metropolitan Borough Council v Secretary of State for the Environment (1990) 61 P & CR 343, 353. [Counsel for the Respondent] was in my opinion right to concede that nothing less than substantial compliance with the Directive could enable the planning permission in this case to be upheld. 127.
Although of course these statements carry great persuasive weight, care is needed in applying them in other statutory contexts and other factual circumstances.
Not only did they rest in part on concessions by counsel for the Secretary of State, but the circumstances were very unusual in that, by the time the case reached the House of Lords, the developer had abandoned the project, and the decision had lost any practical significance. 128.
In Bown v Secretary of State for Transport, Local Government and the Regions [2003] EWCA Civ 1170; [2004] Env LR 509, 526 I said (with the agreement of Lord Phillips MR and Waller LJ): The speeches [in Berkeley] need to be read in context.
Lord Bingham emphasised the very narrow basis on which the case was argued in the House (p 607F 608A).
The developer was not represented in the House, and there was no reference to any evidence of actual prejudice to his or any other interests.
Care is needed in applying the principles there decided to other circumstances, such as cases where as here there is clear evidence of a pressing public need for the scheme which is under attack. (para 47) 129.
That passage was noted with approval by the House of Lords in R (Edwards) v Environment Agency [2008] UKHL 22; [2009] 1 All ER 57, paras 63 65.
Having referred to the background and reasoning of the decision in Berkeley, including the provision by which the grant of permission was to be treated as not within the powers of the planning Act, Lord Hoffmann added: But I agree with the observation of Carnwath LJ in Bown v Secretary of State for Transport, Local Government and the Regions [2004] Env LR 509, 526, that the speeches in Berkeley need to be read in context.
Both the nature of the flaw in the decision and the ground for exercise of the discretion have to be considered.
In Berkeley, the flaw was the complete absence of an EIA and the sole ground for the exercise of the discretion was that the result was bound to have been the same. 130.
In Edwards, by contrast with Berkeley, there had been no breach of European law, and the only breach of domestic law was the failure to disclose information about the predicted effect of certain emissions.
Since then, however, the actual emissions from the plant had been monitored, and taken into account, and it would be pointless to quash the permit simply to enable the public to be consulted on out of date data (para 65).
Lord Hoffmann added: To this pointlessness must be added the waste of time and resources, both for the company and the Agency, of going through another process of application, consultation and decision.
The courts below had accordingly been right to exercise their discretion against quashing the permit. 131.
In the present case, both the statutory context and the factual circumstances are again distinguishable from those applicable in Berkeley.
The factual differences are dramatic.
In Berkeley there was no countervailing prejudice to public or private interests to weigh against the breach of the directive on which Lady Berkeley relied.
The countervailing case advanced by the Secretary of State was one of pure principle.
Here by contrast the potential prejudice to public and private interests from quashing the order is very great.
It would be extraordinary if, in relation to a provision which is in terms discretionary, the court were precluded by principles of domestic or European law from weighing that prejudice in the balance. 132.
The statutory context, as I have explained it above, is also significantly different from that applicable in Berkeley.
First, under the 1984 Act, even in respect of EIA, a breach of the regulations does not, as under the planning Acts, render the subsequent decision outside the powers of the Act.
It is a breach of the requirements laid down by section 20A, and as such is within the second ground of challenge, but is thus also subject to the need to show substantial prejudice.
Secondly, and more importantly for the purposes of this case, there is nothing to assimilate the requirements of the SEA Directive to the requirements of the 1984 Act, breach of which alone may give rise to a challenge under that procedure.
No doubt the adoption of a plan or programme in breach of the SEA Directive would be subject to challenge by judicial review at the appropriate time.
But the legislature has not thought it necessary to provide for a separate right of challenge on those grounds in relation to the approval of a subsequent project made under the 1984 Act. 133.
Accordingly, subject to any overriding principles emerging from the European authorities (see below), it seems to me that, even if (contrary to what appears to be the effect of the statute) breach of the SEA Directive were a ground of challenge under the 1984 Act procedure, the court would retain a discretion to refuse relief on similar grounds to those available under domestic law.
European authorities 134.
As I have said, the two European cases on which Mr ONeill relies are R (Wells) v Secretary of State for Transport, Local Government and the Regions (C 201/02) [2004] ECR I 723, and Inter Environnement Wallonie ASBL v Rgion Wallonie (Case C 41/11) [2012] 2 CMLR 623. 135.
In Wells, it was held that EIA was required as part of the procedure for determining the registration conditions for an old mining consent.
In relation to the remedy for breach of that requirement, and in response to a submission of the UK Government that revocation or modification of the consent was not necessary, the court said (para 64 69): As to that submission, it is clear from settled case law that under the principle of cooperation in good faith laid down in Article 10 EC the Member States are required to nullify the unlawful consequences of a breach of Community law.
Such an obligation is owed, within the sphere of its competence, by every organ of the Member State concerned.
Thus, it is for the competent authorities of a Member State to take, within the sphere of their competence, all the general or particular measures necessary to ensure that projects are examined in order to determine whether they are likely to have significant effects on the environment and, if so, to ensure that they are subject to an impact assessment.
Such particular measures include, subject to the limits laid down by the principle of procedural autonomy of the Member States, the revocation or suspension of a consent already granted, in order to carry out an assessment of the environmental effects of the project in question as provided for by Directive 85/337.
The Member State is likewise required to make good any harm caused by the failure to carry out an environmental impact assessment.
The detailed procedural rules applicable are a matter for the domestic legal order of each Member State, under the principle of procedural autonomy of the Member States, provided that they are not less favourable than those governing similar domestic situations (principle of equivalence) and that they do not render impossible in practice or excessively difficult the exercise of rights conferred by the Community legal order (principle of effectiveness).
So far as the main proceedings are concerned, if the working of Conygar Quarry should have been subject to an assessment of its environmental effects in accordance with the requirements of Directive 85/337, the competent authorities are obliged to take all general or particular measures for remedying the failure to carry out such an assessment.
In that regard, it is for the national court to determine whether it is possible under domestic law for a consent already granted to be revoked or suspended in order to subject the project in question to an assessment of its environmental effects, in accordance with the requirements of Directive 85/337, or alternatively, if the individual so agrees, whether it is possible for the latter to claim compensation for the harm suffered. (emphasis added) The passage which I have emphasised, which was repeated in the courts answer to the specific question, contains as I read it an authoritative statement of the two applicable principles of equivalence and effectiveness.
On the facts of that case there can have been little doubt as to the practical effect of the project on Mrs Wells environment, her home being on the road separating the two halves of the quarry (para 21 22).
However, it is of interest that the court envisaged the payment of compensation, if possible under national law, as a possible alternative to revoking the consents.
It is not entirely clear why that should have depended on her agreement, rather than being a matter for the courts discretion.
However, that possibility indicates that the public interest in nullifying an action taken in breach of European law is not absolute, and that the remedy may in some circumstances be tailored to the extent of the practical damage, if any, suffered by a particular applicant. 136.
In Inter Environnement Wallonie the main issue was the application of the SEA Directive to a government order relating to protection of waters against pollution by nitrates.
The court restated the same principles of equivalence and effectiveness, as applicable by analogy to breach of the SEA Directive, adding: 47 The fundamental objective of Directive 2001/42 would be disregarded if national courts did not adopt in such actions brought before them, and subject to the limits of procedural autonomy, the measures, provided for by their national law, that are appropriate for preventing such a plan or programme, including projects to be realised under that programme, from being implemented in the absence of an environmental assessment. 137.
The factual context of that case was again very different.
However, it is to be noted that even there practical considerations had a part to play.
Having found a breach, the court accepted that, to avoid a legal vacuum (para 61), the order in question could exceptionally (para 62) be left in operation for the short period required to carry out the SEA. 138.
It would be a mistake in my view to read these cases as requiring automatic nullification or quashing of any schemes or orders adopted under the 1984 Act where there has been some shortfall in the SEA procedure at an earlier stage, regardless of whether it has caused any prejudice to anyone in practice, and regardless of the consequences for wider public interests.
As Wells makes clear, the basic requirement of European law is that the remedies should be effective and not less favourable than those governing similar domestic situations.
Effectiveness means no more than that the exercise of the rights granted by the Directive should not be rendered impossible in practice or excessively difficult.
Proportionality is also an important principle of European law. 139.
Where the court is satisfied that the applicant has been able in practice to enjoy the rights conferred by the European legislation, and where a procedural challenge would fail under domestic law because the breach has caused no substantial prejudice, I see nothing in principle or authority to require the courts to adopt a different approach merely because the procedural requirement arises from a European rather than a domestic source. 140.
Accordingly, notwithstanding Mr Mures concession, I would not have been disposed to accept without further argument that, in the statutory and factual context of the present case, the factors governing the exercise of the courts discretion are materially affected by the European source of the environmental assessment regime.
Form of order 141.
Finally, I should say something about the form, and consequences, of the order which would have been appropriate had Mr Walton succeeded in his challenge in relation to the Fastlink, having regard to his submission that the courts would not have been bound to quash the schemes and orders, but would have had power to fashion a suitable remedy.
His application did not condescend to any particulars as to how such a suitable remedy might be worded, assuming there was power to do so. 142.
I agree with Mr Mure that under this statutory scheme the only power given to the court is to quash the scheme or order, not merely the decision approving it (cf Town and Country Planning (Scotland) Act 1997 sections 237 239, in which under corresponding provisions specific power is given to quash, for example, a decision on a planning appeal).
I also agree that, given the form in which the schemes and orders were made, it is not possible to make a distinct order in respect of the Fastlink.
Mr ONeill was unable to point to any statutory or other source for a power to fashion a more limited remedy, nor to explain how in practice it would be done.
However desirable such a power might be, it is not in my view open to the court to confer on itself powers which Parliament has not granted. 143.
On the other hand, I would not necessarily agree with Mr Mure that under this procedure the quashing of the schemes and orders would inevitably require the whole process to be undertaken anew.
It is true that, in relation to similar orders made by local authorities, which are subject to confirmation by the Secretary of State, the accepted view seems to be that the quashing of the order relates to the original order as made by the authority, rather than simply to its confirmation by the Minister.
The result appears to be that everything that followed that action is also invalidated, regardless of whether it had any relevance to the legal defect (see Whitworth v Secretary of State for Environment, Food & Rural Affairs [2010] EWCA Civ 1468 paras 50 52). 144.
However, where such an order is promoted by Ministers, the statute normally (as in the present case) provides for it to be made first in draft, pending the completion of the statutory procedures, and only made when the Minister reaches a final decision.
Logically, therefore, (although it is not clear why there is a difference from the position in local authority cases) quashing the order affects directly only that last step, and does not necessarily invalidate the whole process.
How much can be salvaged from the earlier procedures will no doubt depend on the nature of the breach, and how it can effectively be remedied. 145.
I mention this point because it may be an issue of great practical importance in some cases, and it has not received much attention in the authorities or the textbooks (or even in the 1994 Law Commission report: Administrative Law: Judicial Review and Statutory Appeals, Law Com 226).
It is hard to see any policy justification either for the rigidity of the powers given to the court, or, still less, for the curious variations as between similar statutory schemes.
As I observed in Whitworth, there is a strong case for statutory reform to provide a more flexible and coherent range of powers in such cases, akin to those available in judicial review. 146.
In conclusion, for the reasons given by Lord Reed I also would dismiss the appeal.
LORD HOPE 147.
There is no doubt that the trunk road network on the periphery of Aberdeen is urgently in need of improvement.
The decision to construct the Fastlink, whose construction is said to be essential to the success of the scheme that is now in prospect, was taken nearly seven years ago.
There has been understandable frustration at the delays in the planning system, due in no small measure to Mr Waltons objection.
His determination to maintain his objection has been vigorously criticised, and there have been suggestions that this was irresponsible. 148.
It has to be said, however, that it became clear during the hearing of his appeal before this court that the question whether the decision to construct the Fastlink fell within the scope of the SEA raised a question of some difficulty which it was proper for this court to consider.
It was a matter of concession by the appellant both before the Lord Ordinary and in the Inner House that any plan or programme such as the MTS whose preparation began before 21 July 2004 did not require an assessment in compliance with the SEA Directive: [2012] CSIH 19, para 20.
Mr Mure QC sought to rely on this concession, which was accepted in the courts below, before this court too.
But, as Lord Reed points out in para 63, the fact that its first formal preparatory act was taken before 21 July 2004 does not deprive a plan or programme of its character as a plan or programme within the meaning of article 2(a).
The question whether the Fastlink decision was within the scope of the SEA cannot be dismissed simply on temporal grounds, which was the basis for the concession.
It must be regarded as a live issue which, as it was not dealt with below, this court has to decide. 149.
Having heard full argument from both sides on this issue, however, I have reached the conclusion for the reasons given by Lord Reed in paras 67 69 that the decision to construct the Fastlink was not a modification of a plan or programme within the meaning of the SEA Directive.
Like him, I would reserve my opinion on the question whether the MTS as described in NESTRANS report of March 2003 formed a plan or programme within the meaning of the Directive.
Even if it was, a careful analysis of the history shows that the decision to construct the Fastlink was taken purely and solely in furtherance of a specific project to relieve congestion on the A90.
It did not seek to affect or modify the legal or administrative framework for the future development consent of projects as described in the MTS. 150.
I also agree that, looking at the procedure as a whole and for the reasons given by Lord Reed in paras 75 76, Mr Waltons complaint of common law unfairness is not made out.
It is worth noting in support of this conclusion that, as Lord Carnwath points out in para 101, the decision of the Aarhus Compliance Committee in February 2011 to reject the complaint by Road Sense in May 2009 shows that, judged by European standards, the matters complained of did not disclose any defects in the domestic procedures that were adopted in this case.
For these reasons I too would dismiss the appeal. 151.
I should like however to add a few words of my own on the question of standing in the context of environmental law.
They are prompted by the Extra Divisions observation in para 37 that Mr Walton had placed no material before the court to support the proposition that the schemes or orders or any provision therein substantially prejudice his own interests or that they would affect his property.
His residence was some significant distance from the leg of the proposal which was the particular target of his attack.
There was, therefore, an initial question to be addressed, whether or not he was a person "aggrieved" for the purposes of paragraph 2 of Schedule 2 to the 1984 Act.
Indicating that they were of the view that he was not such a person, the judges of the Extra Division said in para 39 that in that situation they would have had no hesitation in concluding that, had they been with Mr Walton in all or any of his attempts to attack the legality of the schemes and orders, they would not have granted the remedy of quashing them.
This was because it would have been quite inappropriate that the project, whose genesis came about some 30 years ago and about which there had been a huge amount of public discussion and debate, should be stopped from proceeding by an individual in his position: para 40. 152.
I think, with respect, that this is to take too narrow a view of the situations in which it is permissible for an individual to challenge a scheme or order on grounds relating to the protection of the environment.
An individual may be personally affected in his private interests by the environmental issues to which an application for planning permission may give rise.
Noise and disturbance to the visual amenity of his property are some obvious examples.
But some environmental issues that can properly be raised by an individual are not of that character.
Take, for example, the risk that a route used by an osprey as it moves to and from a favourite fishing loch will be impeded by the proposed erection across it of a cluster of wind turbines.
Does the fact that this proposal cannot reasonably be said to affect any individuals property rights or interests mean that it is not open to an individual to challenge the proposed development on this ground? That would seem to be contrary to the purpose of environmental law, which proceeds on the basis that the quality of the natural environment is of legitimate concern to everyone.
The osprey has no means of taking that step on its own behalf, any more than any other wild creature.
If its interests are to be protected someone has to be allowed to speak up on its behalf. 153.
Of course, this must not be seen as an invitation to the busybody to question the validity of a scheme or order under the statute just because he objects to the scheme of the development.
Individuals who wish to do this on environmental grounds will have to demonstrate that they have a genuine interest in the aspects of the environment that they seek to protect, and that they have sufficient knowledge of the subject to qualify them to act in the public interest in what is, in essence, a representative capacity.
There is, after all, no shortage of well informed bodies that are equipped to raise issues of this kind, such as the Scottish Wildlife Trust and Scottish Natural Heritage in their capacity as the Scottish Ministers statutory advisers on nature conservation.
It would normally be to bodies of that kind that one would look if there were good grounds for objection.
But it is well known they do not have the resources to object to every development that might have adverse consequences for the environment.
So there has to be some room for individuals who are sufficiently concerned, and sufficiently well informed, to do this too.
It will be for the court to judge in each case whether these requirements are satisfied. 154.
For these reasons it would be wrong to reject Mr Waltons entitlement to bring his application on environmental grounds simply because he cannot show that his own interests would be substantially prejudiced.
I agree with Lord Reeds conclusion in para 88 that he has demonstrated a genuine concern about the legality of a development which is bound to have a significant impact on the environment, and that he is entitled to be treated as a person aggrieved for the purpose of the statute. 155.
The better way to meet the concerns that the Extra Division expressed about this case in para 40 would have been to weigh in the balance against any breach of the Directive that the applicant was able to establish the potential prejudice to public and private interests that would result if the schemes and orders were to be quashed.
I agree with Lord Carnwaths analysis of the speeches in Berkeley v Secretary of State for the Environment (No 1) [2001] 2 AC 603 in the light of the subsequent authorities, including R (Edwards) v Environment Agency [2008] UKHL 22, [2009] 1 All ER 57 where the circumstances were very different from those in Berkeley.
The fact that an individual may bring an objection on environmental grounds derived from European directives does not mean that the court is deprived of the discretion which it would have at common law, having considered the merits and assessed where the balance is to be struck, to refuse to give effect to the objection. 156.
The scope for the exercise of that discretion in that context is not therefore as narrow as the speeches in Berkeley might be taken to suggest.
The principles of European law to which Lord Carnwath refers in para 138 support this approach.
Where there are good grounds for thinking that the countervailing prejudice to public or private interests would be very great, as there are in this case, it will be open to the court in the exercise of its discretion to reject a challenge that is based solely on the ground that a procedural requirement of European law has been breached if it is satisfied that this is where the balance should be struck.
LORD KERR AND LORD DYSON 157.
We agree with the judgments of Lord Hope, Lord Reed and Lord Carnwath and for the reasons they have given, we too would dismiss the appeal. 79.
There is no requirement in the 1984 Act, or in any regulations made under that Act, that an SEA should be carried out: the provisions in the Act which are concerned with environmental assessment appear to have been designed to comply with the EIA Directive, presumably on the basis that the construction of a road is a project (the term employed in section 20A and in paragraphs 7 and 13 of Schedule 1), rather than a plan or programme.
In domestic law, the obligation to carry out an SEA arises under the Environmental Assessment (Scotland) Act 2005 (the 2005 Act), section 12 of which prohibits the adoption of a qualifying plan or programme, or its submission to a legislative procedure for the purposes of its adoption, unless the requirements of the Act have been met.
The adoption of a plan or programme in breach of the requirements of the 2005 Act could in principle be challenged by means of an application for judicial review.
In relation to a local roads authority, there would not appear to be any scope for basing an application under paragraph 2 of Schedule 2 to the 1984 Act upon a failure to comply with the SEA Directive. 80.
The position is however less straightforward so far as the Ministers are concerned.
The Scotland Act transferred the functions of the Secretary of State under the 1984 Act to the Ministers only so far as they were exercisable within devolved competence: see section 53(1).
It is outside devolved competence to make any provision by subordinate legislation which is incompatible with EU law, or to exercise a function in a way which is incompatible with EU law: section 54(2) and (3), read with section 29(2)(d).
More generally, the Ministers have no power to make any subordinate legislation, or to do any other act, so far as the legislation or act is incompatible with EU law: section 57(2).
These provisions are intended to disable the Ministers from acting in such a way as to place the United Kingdom in breach of its obligations under EU law.
The Act also contains provisions relating to remedies.
Section 102, for example, enables the court to make an order removing or limiting any retrospective effect of its decision, or suspending the effect of the decision to allow the defect to be corrected.
In an appropriate case, the court would have to consider the relationship 81. between the provisions of the Scotland Act and paragraphs 2 to 4 of Schedule 2 to the 1984 Act.
It would be necessary to consider, in particular, whether a scheme or order made by the Ministers in breach of EU law would be beyond the powers which they possess as a roads authority, by virtue of the transfer of functions effected by the Scotland Act, and would therefore be not within the powers of [the 1984] Act.
If so, it would also be necessary to consider the possible interaction between the remedial provisions of the two Acts.
In addition, it would be necessary to consider how the discretion conferred by paragraph 3 of Schedule 2 to the 1984 Act should be exercised in that context.
In relation to the latter aspect, the EU law principle of effectiveness, discussed by Lord Carnwath, would also be relevant.
Standing 82.
Before this court, as in the lower courts, the Ministers did not dispute Mr Waltons entitlement to bring the present application.
Nevertheless, this court cannot avoid the need to consider the Extra Divisions observations on the issue, as their obiter nature is unlikely to detract from their potential influence, both in relation to statutory applications and in relation to applications for judicial review.
A person aggrieved? 83.
I shall consider first the requirement that an application under paragraph 2 of Schedule 2 to the 1984 Act must be brought by a person aggrieved.
In Attorney General of the Gambia v NJie [1961] AC 617, 634 Lord Denning, delivering the judgment of the Judicial Committee of the Privy Council, said that the definition by James LJ of the phrase as connoting a person with a legal grievance (Ex parte Sidebotham; In re Sidebotham (1880) 14 Ch D 458, 465), which had been echoed by Donovan J in Ealing Corporation v Jones, was not to be regarded as exhaustive.
He went on to say this:
| This appeal concerns a challenge by the Appellant to the validity of schemes and orders made by the Scottish Ministers under the Roads (Scotland) Act 1984 (the 1984 Act) to allow the construction of a road network bypassing Aberdeen to the west of the city.
In March 2003, a partnership comprising local public and private bodies produced a regional transport strategy (the MTS), describing and costing numerous proposals, including the western peripheral route (the WPR), intended primarily to reduce congestion in Aberdeen.
The Ministers agreed to undertake the implementation of the WPR.
Following a campaign against part of the proposed route, the Ministers decided in December 2005 to revise the scheme so as to include a road connecting Stonehaven to the WPR (the Fastlink).
It was intended that the Fastlink would reduce congestion on the A90 between Stonehaven and Aberdeen.
The Ministers subsequently published Environmental Impact Assessments under s.20A of the 1984 Act, on the basis that the scheme fell within the scope of the Environmental Assessment Directive (the EIA Directive).
The Appellant is the chairman of Road Sense, a local organisation opposing the WPR whose members reside along or close to the proposed route.
Following objections from him and others, a public inquiry was held to consider environmental and technical issues associated with the WPR, but not whether to proceed with it at all.
Following detailed modifications, the Scottish Parliament approved the relevant orders and schemes on 3rd March 2010.
The Appellant challenged the validity of WPR in the Scottish courts, under paragraph 2 of schedule 2 to the 1984 Act, on a variety of grounds under EU and domestic law.
The Inner House rejected those submissions.
It also held that the Appellant was not in any event entitled to bring a challenge as he was not a person aggrieved, and that he had not shown his interests to have been substantially prejudiced so as to entitle him to a remedy, as required respectively by paragraphs 2 and 3 of Schedule 2 to the 1984 Act.
Before the Supreme Court, the Appellant argued that the Fastlink had been adopted without the consultation required by the Strategic Environmental Assessment Directive (the SEA Directive), and that that the scope of the public inquiry should have included the question whether the Fastlink was required, under common law principles of procedural fairness.
The Supreme Court unanimously dismisses the appeal.
The trunk road network on the periphery of Aberdeen is urgently in need of improvement.
As such, Mr Waltons determination to pursue his challenge has been the subject of vigorous criticism and suggestions that he has acted irresponsibly.
However, his challenge raised a difficult question of law which it was proper for the Court to consider [148 149].
The Court notes that the SEA and EIA Directives require environmental assessments to be carried out in different but mutually complementary circumstances.
The SEA Directive is concerned with the environmental effects of plans and programmes which set the framework for future development consent of projects.
The EIA Directive is concerned with the environmental impact of specific projects [11 14, 24].
With that distinction in mind, and assuming for the purposes of analysis that the MTS qualified as a plan or programme under the SEA Directive [62, 100, 150], the Court holds that the Fastlink was not a modification to that plan or programme, and therefore did not trigger the consultation requirements of the SEA Directive.
The WPR was a specific project undertaken following the MTS, and the Fastlink was a modification of that project, rendering it subject to the EIA Directives requirements instead [64 69, 99, 102, 150].
With regard to the fairness of the public inquiry, it was not argued that the Ministers were obliged by statute to assess the economic, policy or strategic justifications for the Fastlink.
Nor was it argued that the Appellant had a legitimate expectation that the scope of the inquiry would include that assessment.
In those circumstances, there was nothing to suggest that its remit was unfair to the Appellant [72 73, 101 102].
Those conclusions determined the Appellants challenge.
However, due to observations made by the Inner House [1, 74 76], the Supreme Court also clarifies elements of the law on standing to raise such a challenge, and on the availability of a remedy where that challenge is well founded in law .
The Court notes that, when considering whether an individual is a person aggrieved, as he must be in order to raise a challenge under paragraph 2 of schedule 2 to the 1984 Act, the legislative and factual context will be important [85].
Given the extent of the Appellants participation in the consultative procedures under the 1984 Act, he was indubitably a person aggrieved under that Act [86 89].
It would be inconsistent with the purpose of environmental law to require that a persons private interests must necessarily be affected for him to be a such a person, as environmental law proceeds on the basis that the environment is of legitimate concern to everyone.
If an individual or organisation has a genuine interest in and sufficient knowledge of an environmental issue to qualify them to raise issues in the public interest, they should be regarded as a person aggrieved [152 155].
The Court also concludes that the Appellant would have had standing, as a party with sufficient interest in the WPR, to raise common law proceedings for judicial review.
However, such proceedings would have failed on their merits [90 97].
In AXA General Insurance Ltd and others v HM Advocate and others [2011] UKSC 46, the Court had clarified that the function of such proceedings was not only to redress individual grievances [91].
While distinguishing between a busybody and someone with a legitimate concern is context specific, it is not always necessary for someone raising an action to demonstrate a personal interest where the challenged act affects the public generally [92 94].
The rule of law would not be maintained if no one could challenge an unlawful act because everyone was equally affected by it [95].
The Court considers that the nature of a persons interest will have a bearing on the courts exercise of discretion as to the remedy, if any, which should be granted where a challenge such as the Appellants is successful [96, 104].
The Appellant would not have been entitled to a remedy in any event.
The exercise of discretion to grant a remedy depends on the factual and statutory context, and there would be such prejudice to countervailing public and private interests that it would be extraordinary if it could not be taken into account in deciding whether the orders creating the Fastlink were to be quashed [132].
Nothing argued before the court suggested that this position is not in line with European legal principles on environmental assessment [135 141]. brackets are to paragraphs in the judgment
|
This is an appeal from an interlocutor of the First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) in a joint referral to the Special Commissioners by Scottish Widows Plc (the Company) and Her Majestys Revenue and Customs (HMRC) under para 31 of Schedule 18 to the Finance Act 1998: [2010] CSIH 47, 2010 SLT 885, 2010 STC 2133.
The question that was referred to the Special Commissioners for their determination was in these terms: Whether in computing the Case 1 profit or loss of Scottish Widows plc for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is agreed that the words as receipts, which were not in the question as referred, may be understood as following after the words into account.
The Special Commissioners answered that question in the affirmative.
The Company appealed against that decision and HMRC cross appealed.
The Court of Session by a majority (Lord Emslie dissenting) refused the appeal and unanimously refused the cross appeal.
Both sides have appealed against its decisions to this court.
The essence of the dispute between the parties is whether, in each of the three consecutive years in question, part of the entry in line 15 of the Companys form 40 must be taken as falling within the scope of either section 83(2) or section 83(3) of the Finance Act 1989, as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995 and paragraph 4 of Schedule 31 to the Finance Act 1996.
If it falls within the scope either of these two subsections, the sum concerned will fall to be treated as a chargeable receipt for the purposes of Case 1 of Schedule D in ascertaining whether, and if so to what extent, the Company made a loss during those years.
The Company carries on business as a life assurance company.
Insurance business is a trade within the meaning of Case 1 of Schedule D: Income and Corporation Taxes Act 1988, section 18.
The amounts to be taken into account in computing its profits include its investment income from its long term business fund and any increase in the value of its assets during the accounting period.
Those profits may be computed for tax purposes in one or other of two ways.
They may be computed on the Schedule D, Case 1 basis, the actuarial surplus being a suitable starting point for dealing with cases of this description: see Scottish Union and National Insurance Co v Inland Revenue (1889) 16 R 461, 475, per Lord President Inglis.
Or they may be computed on the basis of the income which the insurer receives on its investments less management expenses, known as the I E basis.
HMRC are entitled to elect to charge tax on the investment income, and they almost invariably do so as it nearly always pays the Crown to take the interest on the investments and not to trouble with the profits: Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227 per Lord President Dunedin.
But a Case 1 computation is nevertheless required in every case.
The dispute between the parties arises from the demutualisation in 2000 of the Scottish Widows Fund and Life Assurance Society (the Society) and the transfer, under a scheme sanctioned by the Court, of its business to the Company.
The scheme came into effect on 3 March 2000.
In para 22.1 it was provided that on or after the effective date the Company was to maintain a memorandum account within its long term fund, designated as the capital reserve, which was to represent the amount of the shareholders capital held within the long term business fund.
The capital reserve was to be divided between the Companys with profits fund and its non participating fund.
Para 22.4 provided that the Company was to maintain records of the capital reserve and of the parts of it allocated to each of these two funds.
While the funds comprised identifiable assets with all the qualities that attach to items of that kind, the capital reserve was a device or, as Lord Walker says in para 55, an abstraction.
It was created for accounting purposes only and had no real life of its own.
At the time of the transfer to the Company the value of the Societys assets was substantially in excess of its liabilities.
But the Company sustained trading losses in each of the relevant accounting periods.
The market value of its assets decreased from the inception of its long term business fund, due principally to falls in the value of the stock market.
The Company claims that account should be taken of its commercial losses in its non participating fund during the relevant accounting periods.
It has included Case 1 losses in its tax returns and computations for those periods equal to 28,689,437, 612,583,866 and 431,261, 757 respectively.
HMRC maintain that, on a proper construction of section 83(2) of the 1989 Act, which failing of section 83(3), and having regard to entries in the Companys statutory returns for the relevant periods in which it was required to show that it had a surplus in excess of its liabilities for regulatory purposes, these claims should be disallowed.
The Company brought various sums into account, described as transfers from the capital reserve, in the years in which they sustained losses.
HMRC submit that each increase in the regulatory value selected by the Company falls to be treated as an increase in the value of its assets within the meaning of section 83(2)(b).
In any event the amounts brought into account and recorded as transfers from the capital reserve fall to treated as receipts under section 83(3) because they were amounts which had previously been added to the long term business fund as part of the transfer of business to the Company from the Society.
The statutory provisions
Section 83, as amended, so far as relevant to this case provides as follows: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
In section 83(8) of the 1989 Act, as amended it is provided that the word add in that section, in relation to an amount and a companys long term business fund, includes transfer (whether from other assets of the company or otherwise).
Section 83A(1), which was inserted by section 51 of and paragraph 16 of Schedule 8 to the Finance Act 1995 and amended by paragraph 6 of Schedule 31 to the Finance Act 1996, provides that brought into account in sections 83 to 83AB (as inserted by paragraph 5 of Schedule 31 to the 1996 Act) means brought into account in an account which is recognised for the purposes of those sections.
Section 83A(2) provides: Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) any separate revenue account required to be prepared under that Act in respect of a part of that business.
Paragraph (b) above does not include accounts required in respect of internal linked funds.
The revenue account that section 83A(2)(b) refers to is the regulatory return in form 40: see para 12, below.
Section 431 of the 1988 Act contains a list of interpretative provisions relating to insurance companies.
They include a definition of the word value: see section 83(2)(b) of the 1989 Act.
It is in these terms: value, in relation to assets of an insurance company, means the value of the assets as taken into account for the purposes of the companys periodical return.
Insurance companies are under an obligation to submit annual returns to the Financial Services Authority (FSA) for regulatory purposes.
The purpose of these returns is to demonstrate that the insurer meets the regulatory standard of solvency.
They are required to show the results of a statutory actuarial investigation, which calculates the value of the insurers liabilities and identifies the amount of surplus in excess of those liabilities.
They must show that there is a sufficient surplus to cover any declared bonuses.
At the time of the demutualisation the relevant regulations were to be found in the Insurance Companies Act 1982, the Insurance Companies Regulations 1994 (SI 1994/1516) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943).
Section 17 of the 1982 Act provides that every insurance company carrying on insurance business in the United Kingdom must prepare a revenue account for each financial year of the company, a balance sheet and a profit and loss account, the contents of which are to be such as may be prescribed by regulations.
Section 18 provides for an actuarial investigation once in every period of twelve months of every insurance company which carries on long term business.
Section 28 provides that it must maintain an account of the assets and liabilities attributable to its ordinary long term insurance business.
Regulation 45(6) of the 1994 Regulations provides that an insurance company may, for the purposes of an investigation to which section 18 of the Act applied, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company.
This was already a practice of long standing in the insurance industry.
For a detailed description of the background to these requirements and to the provisions of the Finance Act 1989 about the taxation of the life assurance business of an insurance company, reference may be made to Lord Reeds opinion in the Court of Session to which, like Lord Walker, I would pay tribute: 2010 SLT 885, paras 91 126.
A useful summary of the FSA regime that was in force at the relevant time is to be found in Lord Emslies opinion, para 198 (ix) to (xii); see also Lord Walker, at paras 49 53, below.
In short, the regulatory returns which a company carrying on long term life insurance was required to complete and submit included a series of numbered forms.
Form 13 set out an analysis of all the companys admissible assets, entered at a value which broadly corresponded to their year end market value.
Form 14 set out in line 51 the amount by which the net admissible assets exceeded the companys long term business liabilities.
Form 40, which was headed Revenue account, set out revenue flows and expenditure for the Companys long term business fund, its with profits fund and its non participating fund, and the amount of each fund to be carried forward to form 58.
Form 58, which was headed Valuation result and distribution of surplus, determined the amount of the actuarial surplus by comparing the value of the insurers liabilities under the policies that it has issued with the fund shown on form 40.
The data that were used to prepare these regulatory returns were the same as those used to prepare the Companys statutory accounts.
The amounts that were calculated by the Company as the commercial losses of its non participating fund were derived from decreases in the market value of the admissible assets less liabilities in that fund during the relevant accounting periods.
For each of these periods, however, there were included in the figure entered as other income in line 15 of form 40 amounts described as transfers from capital reserve which reduced the capital reserve by an equivalent amount.
They should perhaps have been included as an increase in the value of assets brought into account in line 13.
But it is agreed that the way they fall to be treated does not depend on whether they were entered there or in line 15.
The Special Commissioners said there is no difference in principle, as both lines are brought into account in the total shown at line 19: para 51.
The amounts in aggregate for the relevant accounting periods were 33,410,000, 472,724,000 and 370,000,000 respectively.
The approach to construction
It is well understood that statutory provisions which bring profits and gains into charge to tax are to be construed as directed towards profits and gains in their natural and proper sense in a sense which no commercial man would misunderstand and that those words are equally applicable whatever the commercial concern may be: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
The objective is to ascertain and charge the true profits and gains of the business in question.
The requirement that there should be a true and fair view involves the application of a legal standard.
The courts are, in general, guided as to the content of the computation by expert opinions of accountants as to what the best current accounting practice requires: Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, 2007 SC (HL) 105, [2007] 1 WLR 1448, para 2, per Lord Hoffmann.
The special rules that section 83 of the 1989 Act lays down for the calculation of the profits of life assurance companies in respect of their life insurance business for the purposes of corporation tax are, in this respect, no different from the rules that apply to companies generally.
They provide a legal standard according to which these profits are to be ascertained.
As has already been noted, that section has been amended more than once.
But I do not think that it is helpful to look back into the legislative history.
Lord Wilberforce said in Farrell v Alexander [1977] AC 59, 73 that self contained statutes, whether consolidating previous law or so doing with amendments, should be interpreted, if reasonably possible, without recourse to antecedents, and that the recourse should only be had when there is a real and substantial difficulty or ambiguity which classical methods of construction cannot solve.
Further amendments to section 83 were introduced by section 170 and paragraph 2 of Schedule 33 to the Finance Act 2003.
In Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 1716 Lord Diplock said that it was a legitimate purpose of legislation by Parliament to clarify the law by making it clear in which of two alternative meanings the ambiguous language of an earlier statute was to be understood, but that it would only be if the language of a provision in an existing statute was ambiguous that it would be legitimate to infer that a purpose of the subsequent statute was to remove doubts as to what the law had always been.
So the proper approach is to concentrate on the wording of sections 83(2) and 83(3) as they were at the relevant accounting periods.
With that background, and with the benefit of the much more comprehensive description of the facts that Lord Walker has provided and of the carefully reasoned opinions of all the judges in the Inner House, I now turn to the provisions of the 1989 Act which are under scrutiny in this case.
Section 83(2)
This subsection directs that there must be taken into account as receipts of the period for the purposes of Case 1 of Schedule D (a) the Companys investment income from the assets of its long term business fund and (b) any increase in value of those assets, in so far as these items have been brought into account by the Company.
The question is whether its language permits the Company to claim that it in fact sustained an allowable loss during the relevant period when the values as brought into account for that period indicate the contrary.
It is common ground that the reference to investment income in paragraph (a) of the subsection is a reference to actual income from assets actually comprised in the long term business fund.
The Company submits that, by parity of reasoning, the reference to any increase in value in paragraph (b) must be taken to be a reference to something that can be recognised on a commercial basis as a real increase in real assets.
So the word assets in both paragraphs meant assets of the long term business fund which had the capacity to earn income and to grow in value.
The fact was that its assets had decreased, not increased, in each of the relevant accounting periods.
The amounts included in line 15 of form 40 were there for regulatory purposes only.
They were book entries which had no commercial validity.
The fact was that the assets of the long term business fund had decreased, not increased, in each of the relevant accounting periods.
The mere fact that an amount, such as interest on unpaid tax, was entered in form 40 did not mean that it was taxable.
To arrive at a true and fair view it was necessary to go behind the entries on the forms and look at the facts.
In the Court of Session the judges of the First Division were unanimous in accepting this argument and rejecting the argument for HMRC.
The Lord President said that he was unable to accept that the contents of the revenue account that had been prepared for regulatory purposes had the definitional character for which HMRC contended.
The fact that the investment income was inevitably an actual receipt suggested that the increase in value should be an actual sum, as opposed to an accounting element: para 54.
Lord Reed made the same point in para 181, adding that the words whether realised or not were a strong indication that section 83(2) was concerned with real gains rather than a change in notional values.
Lord Emslie said that, consistent with the long established distinction between assets and fund, the reference to an increase in value of assets should be taken as reflecting commercial reality in the form of actual increases in the value of assets: para 204.
As Mr Andrew Young QC for HMRC pointed out, however, that section 83(2) is a special rule for the computation of the profits of an insurance company in respect of its life assurance business.
The general rules for the computation of profits and gains for the purposes of Case 1 of Schedule D must be taken to have been modified to the extent provided for in this subsection.
The Company was being taxed on the I minus E basis and it is this subsection, not the rules that are generally applicable, that must be construed.
An insurance company is entitled to elect, under regulation 45(6) of the 1994 Regulations, to assign to any of its assets the value given to the asset in the books or other records of the company.
Section 83(2) can be taken to have been drafted in the light of the fact that insurance companies almost always, if not invariably, choose to use book values (in the sense indicated by regulation 45(6)) to arrive at the necessary balance in form 40 to demonstrate solvency to the regulatory authority.
Once this point is grasped, it seems to me that the meaning to be given to section 83(2)(b) falls fairly easily into place.
The wording of the subsection follows that of the forms.
While the investment income in paragraph (a) is real income, the increase in value referred to in paragraph (b) may or may not be a real increase.
The assets which gave rise to this increase in value may or may not be the same assets as those referred to in paragraph (a).
It depends on the content of the amounts shown in lines 13 and 15 of form 40.
Amounts taken from its long term business fund were used by the Company to supplement its trading income in each of the three years in question.
It chose to use its own book values, not values computed according to the current value of the assets of its long term business fund, to arrive at the final values that were brought into account on form 40.
In the absence of further directions in the statute as to how the increase in value is to be computed in cases where that option has been chosen and there are none I would hold that the increase in value referred to in paragraph (b) must be taken to be the amount which has been brought into account on the form.
The phrase as brought into account for a period of account in the opening words of the paragraph lies at the heart of this interpretation.
It was suggested by the Company that this phrase determined the period for which items were to be treated as taxable receipts but not the items which were taxable.
But this interpretation of the phrase does not, I think, give full weight to the word as.
Linked to the words the following items which precede it, the phrase indicates that the computation must proceed on the basis of the way the items have actually been entered on the forms.
If values shown in the books or other records of the company have been used, instead of market values, it will be the book values that will determine whether or not there has been any increase in value during the relevant period and, if so, how much that increase is.
The phrase and not otherwise was said to support the Companys interpretation of paragraph (b) because it indicated that it was being assumed that the items that were being brought into account when any increase in value was being assessed were items that could be realised, not notional ones.
But I think that their purpose is to make it clear that the basis of computation referred to in subsection (2) is the only basis that is relevant for the purposes referred to in subsection (1).
The words whether realised or not are there to indicate a change from the computation indicated by the original wording of section 83.
If the company chooses to bring unrealised increases in value into account, those increases in value must be taken into account as receipts for the period in the same way as increases that have been realised.
For these reasons I am unable to agree with the judges of the Court of Session as to the meaning and effect of section 83(2)(b).
But in para 205 of his opinion Lord Emslie made some further points which, as they were attractively put, need to be answered too.
He said that a factor which favoured the Companys construction of section 83(2) was that it accorded well with the general principles (1) that the ascertainment of receipts or gains for tax purposes should prima facie reflect commercial reality; (2) that income or gains to be taxed should prima facie be the taxpayers and not those of a third party; and (3) that the ordinary recognition of shareholders capital to cover actual trading should not prima facie be a chargeable receipt.
He described these principles in more detail in paras 197 and 198, and I agree with him that prima facie they can be taken to be a reliable guide as to how tax legislation ought to be construed.
But his use of the phrase prima facie indicates, if I may say so quite correctly, that these are not absolute rules that are incapable of being disapplied by the statute.
In this case we are dealing with special rules that have been designed to take account of the unique nature of the business carried on by life assurance companies.
That in itself suggests that it is the language of the statute, rather than these general rules, that should be the determinative factor in this case.
Taking Lord Emslies three points in turn, I would hold, firstly, that the language of section 83(2) shows conclusively that, if the insurance company chooses to use book values to arrive at the final values shown on form 40, it is on those values that the computation referred to in section 83(1) must be based.
This can be said to reflect the commercial reality of the life assurance industry, as the Companys taxable receipts were based on its own figures as submitted to the regulatory authorities to justify the surplus of assets that it wished to recognise.
Secondly, there is no question, in this case, of taxing the income or gains of a third party.
The values brought into account on form 40 are the product of assets that were vested in the Company when it established its long term business fund.
Their link with the Society was entirely broken when the transfer under the scheme took effect.
As to Lord Emslies third point, it must be appreciated that the capital reserve was not, as he said in para 202, ordinary shareholders capital.
The words themselves might be taken as suggesting otherwise, but I think that the name that was given to what the scheme described as a memorandum account is a distraction.
The reality is that the reserve had no life of its own separate from the long term business fund.
It was an accounting mechanism which the Company had established for its own internal accounting purposes as part of its long term business fund.
It did not consist of particular assets but was a financial structure which was subject to all the statutory restrictions and requirements to which that fund was subject.
In para 205 he said that, as the capital reserve was shareholders capital, its ordinary recognition to cover actual trading receipts should not prima facie be deemed a chargeable receipt.
But, as the capital reserve had no life of its own, amounts that were described as transfers from the reserve fell to be treated in the same way as any other assets comprised within the long term business fund for regulatory purposes and, in consequence, for the purposes of section 83(2) too.
For these reasons, and those given by Lord Walker, I would allow the HMRCs cross appeal.
Section 83(3)
As I would answer the question in the reference in favour of HMRC on the ground that the amounts in question fall to be taken into account as receipts under section 83(2) with the result that there was a corresponding increase in the assets of the long term business fund for each of the relevant accounting periods within the meaning of paragraph (b) of that subsection, the question whether section 83(3) applies to those amounts does not arise.
This is because section 83(4) provides that subsection (3) of that section does not apply where, or to the extent that, the amount concerned is taken into account under subsection (2).
But, as the judges of the Court of Session were divided in this issue and out of respect for the care which they took to examine it, I would like to make these few brief comments.
The exercise to which section 83(3) is directed proceeds in two stages which are, as Lord Reed said in para 191(1), conceptually distinct from each other.
First, there is the question whether an amount has been added to the companys long term business fund as a part of or in connection with a transfer of business to the company.
Section 83(8) provides that the word add includes transfer.
As for the facts of this case, amounts were added to the Companys long term business fund when the scheme took effect as part of the transfer of the Societys business to the Company.
The whole of the amount that was to be treated as the capital reserve for accounting purposes was added or transferred to the Companys long term business fund as an integral part of the scheme.
It seems to me to be plain, having regard to the terms of the scheme, that the addition to the Companys long term business fund was as part of or in connection with the transfer of the Societys business to the Company.
The fact that it was only later that some amounts were brought into account by way of what were called transfers from the capital reserve does not matter.
The second stage is the bringing of the amount into account for the period in question.
It seems to me that this occurs as and when, and indeed whenever, the amount is brought into account as an increase in value to reduce or eliminate a loss that would otherwise have occurred during the relevant period.
As Lord Reed said in para 191(2), there are understandable reasons why Parliament might consider that the use of amounts acquired on a transfer of business to offset liabilities resulting from normal patterns of trading which were not otherwise chargeable to tax should be disallowed.
I agree with him that, when the amounts were subsequently brought into account on form 40, they would but for the fact that they were already caught by section 83(2) have fallen to be treated by section 83(3) as chargeable receipts for the purpose of ascertaining whether or to what extent the Company had incurred a loss in each of the relevant periods.
Lord Emslies point, which he made in para 228 of his dissenting opinion, that the transfers were made in a non chargeable context is answered by the two stage nature of the exercise to which section 83(3) is directed.
It is not the context in which the transfer was made at the outset that determines the way in which the amounts fall to be treated when, at some later stage, they are brought into account.
Had it been necessary to do so to arrive at an answer to the question that was referred to the Special Commissioners, I would have affirmed the decision of the majority in the Inner House on this issue and dismissed the Companys appeal.
Conclusion
I would recall the interlocutor of the Inner House of the Court of Session, allow the cross appeal by the HMRC and answer the question referred to the Special Commissioners in the affirmative.
LORD WALKER
Introduction
On 3 March 2000 Scottish Widows plc (the Company), a new company within the Lloyds TSB banking group, acquired the principal assets and liabilities of the life assurance business of the Scottish Widows Fund and Life Assurance Society (the Society).
The Society had a long and distinguished history.
It was established in Edinburgh in 1814 upon the principle of mutual assurance.
It was incorporated by statute in 1861 as a company without a share capital and it remained a mutual life office that is an entity owned by its members, the policyholders, with no outside shareholders until the change in 2000, which has been referred to as demutualisation.
The process of demutualisation was achieved by a scheme of transfer approved by the Court of Session under section 49 of and Schedule 2C to the Insurance Companies Act 1982 (ICA 1982).
Some of the provisions of the scheme are of central importance to this appeal.
The transfers which it effected were on a very large scale: the Company acquired, in round terms, assets with a market value of the order of 25bn and became subject to actuarial liabilities of the order of 19bn.
The qualifying members of the Society received compensation of approximately 5.846bn, representing the difference (with various adjustments and enhancements) between the assets and the liabilities.
This compensation was paid by the Companys holding company, Scottish Widows Financial Services Holdings Limited (Holdings), which owns the whole of the Companys issued share capital.
The Societys assets included large holdings of equities as well as fixed interest securities, immovable property and other investments.
As it happens the United Kingdom stock market reached what was (and remains) an all time high in the new year of 2000, and in the first years of the Companys business the market value of its holdings of equities was substantially reduced.
This unexpected and unwelcome turn of events has led to a dispute between the Company and HM Revenue and Customs (the Revenue) as to the tax consequences.
On 11 October 2006 the Company and the Revenue joined in making a referral to the Special Commissioners under Schedule 18, para 31 of the Finance Act 1998.
The agreed question to be determined was as follows (with a small agreed explanatory addition): Whether in computing the Case 1 profit or loss of [the Company] for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is common ground that the answer to this question depends on two issues, one turning on the meaning and application of a general provision in subsection 83(2) (read with subsection (1)) of the Finance Act 1989 as amended (FA 1989), and the other turning on the meaning and application of a more particular provision in subsection 83(3) (read with subsection (4)) of the same section.
The Company must win on both issues in order to succeed.
Conversely it is sufficient for the Revenue to succeed if it wins on either issue.
The first issue, once understood, is a short point of construction.
But for the non specialist a lot of background, some of it quite technical, is required in order to understand the point, and to be able to weigh the linguistic arguments against more general considerations based on the legislative scheme and purpose.
The second issue (which arises only if the Company is successful on the first issue) is a rather more intricate point of construction.
The complex background, and the large amounts of tax at stake, help to explain why these two points of construction took four and a half days before the Special Commissioners, and no less than seven and a half days before the Court of Session.
The Special Commissioners (Mr J Gordon Reid QC and Dr John F Avery Jones CBE) decided the first issue in favour of the Company and the second issue in favour of the Revenue, so that the Revenue was successful.
The First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) reached the same conclusions on both issues, unanimously on the first and with Lord Emslie dissenting on the second: [2010] CSIH 47; 2010 SLT 885; [2010] STC 2133.
The Company now appeals on the second issue and the Revenue cross appeals on the first issue.
The historical background.
The first issue (the subject of the Revenues cross appeal) comes naturally before the second issue (the subject of the Companys appeal).
But before getting to the detailed arguments on either issue it is necessary to say something about the historical background, and to cover regulatory as well as taxation aspects, since these two aspects have become closely interrelated.
The background has already been covered with conspicuous thoroughness and clarity in the judgment of Lord Reed (paras 87 104), to which I gratefully acknowledge my indebtedness.
This part of my judgment is largely based on the fuller description by Lord Reed, with the addition of a few points of my own.
Life assurance, in its many different forms, has played an important part in British social and economic history.
Actuarial science was already developing by the beginning of the eighteenth century (one of the founding fathers, Edmund Halley, published a paper on The Degrees of the Mortality of Mankind, commissioned by the Royal Society, in 1693).
The Life Assurance Act 1774 addressed the problem of insurable interest and curbed the scandal of tontines, then fashionable in some wealthy circles.
Interest in life policies was by no means restricted to the wealthy.
The Society was only one (and among the most prominent in Scotland) of many mutual societies by which working men could insure against the risk of their families being left in penury in the event of the early death or disablement of the main breadwinner.
In England the most prominent comparable body was probably the Friends Provident Society, founded in 1832 (it was a registered friendly society, regulated by a different statutory system).
The growth of these mutual societies was remarkable: they had just over 700,000 members in 1803, over 3 million in 1887, and over 6 million in 1910 (there are fuller statistics in D. Green, Reinventing Civil Society, 1993).
The mutual movement went into decline after Lloyd George introduced a system of compulsory national insurance in 1911.
The public interest in life assurance as encouraging prudent self reliance was reflected in its tax treatment, though for the most part the incentives were directed to policyholders rather than life offices.
In 1870, after several life offices had run into difficulties, Parliament introduced a new system of regulation.
It was the foundation of the more elaborate system that we have today.
The Life Assurance Companies Act 1870 (LACA 1870) required life offices (whether mutual or proprietary) to keep proper accounts and to prepare annual financial statements consisting of a revenue account and a balance sheet in a prescribed form.
Regular actuarial investigations were made mandatory.
Lord Reed explains in his judgment (paras 91 94) how section 4 of LACA 1870 introduced for the first time the statutory concept of a life assurance fund held as security for the rights of holders of life policies and annuities.
This was the origin of what is now referred to as a life offices long term business fund (LTBF).
As regards taxation, during the 19th century and the first two thirds of the 20th century there was no corporation tax and no capital gains tax.
Companies were subject, in much the same way as individuals, to income tax assessed and charged under the various schedules and cases defined in the Income Tax Acts.
If a taxpayer received income which could be regarded as falling within more than one schedule or case, the Revenue could not claim tax twice, but could choose which schedule to apply.
This choice (sometimes referred to as the Crown option) was available to the Revenue in relation to proprietary life offices, which held large reserves of income producing investments in order to meet their actuarial liabilities and provide for unforeseen contingencies.
They could be taxed either on the profits of a trade under Schedule D Case I, or on their investment income as such.
It was usually more advantageous for the Revenue to make an assessment on the companys investment income, as Lord President Dunedin noted in Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227.
The Crown option was abolished by the Finance Act 2007 and replaced by mandatory provisions.
With a mutual life office the Revenue never had a choice, since mutual trading does not produce profits taxable under Schedule D Case I.
The first statutory provisions giving special tax treatment to life offices were in the Finance Act 1915.
Life assurance was to be treated as a separate business.
Annuity funds were to be taxed separately from life funds.
Life offices taxed on their investment income were to be allowed a deduction for management expenses (including commission paid to brokers).
This system of taxation is generally referred to as the I minus E (that is, income minus expenses) basis of assessment.
It remained open to the Revenue to choose to assess a life office to tax under Schedule D Case I, but the basis of that assessment was altered (and the likelihood of its actually being adopted by the Revenue was reduced) by section 16 of the Finance Act 1923 (FA 1923), which gave effect to a recommendation in the report, published in 1920, of the Royal Commission on Income Tax (Cmd 615).
Profits allocated to with profits policies were to be excluded from the life offices taxable profits.
This was not unprincipled, since on allocation the profits became liabilities.
This provision has been re enacted in successive consolidating statutes, and finally in section 433 of the Income and Corporation Taxes Act 1988 (ICTA 1988), the terms of which are set out in para 103 of Lord Reeds judgment.
Section 433 of ICTA 1988 was repealed and replaced by FA 1989.
The change made by FA 1923 was an important change.
In practical terms it diminished the difference in tax treatment as between proprietary and mutual life offices.
Its importance increased with changes in economic conditions in Britain during the second half of the 20th century (in brief, monetary inflation and the prospect of substantial capital gains from investment in equities and property).
The Society was required by its constitution and regulations (to be found in their final form in the Scottish Widows Fund and Life Assurance Act 1980), as the Company is required under the scheme, to allocate to the holders of its with profits whole life and endowment policies nine tenths of the with profits part of the gains which it recognised, or brought into account (the expressions mean the same), in the revenue account of its LTBF.
After the introduction of capital gains tax and corporation tax on chargeable gains, realised gains made by the Society were taxed at differential rates, the details of which are not material.
But unrealised gains could be recognised (or brought into account) in order to enable larger bonuses to be allocated and paid to with profits policyholders without having been taxed in the Societys hands.
This was perceived by the Revenue as a serious defect in the system, as appears from an official consultation document published in 1988, The Taxation of Life Assurance, (summarised in paras 123 126 of Lord Reeds judgment).
This document gives a summary of how during the 1980s the life assurance industry was rapidly evolving into being part of a larger savings industry, in competition with unit trusts and other savings media, and itself increasingly making use of unit linked policies rather than traditional with profit policies (investment by small savers in authorised unit trusts and approved investment trusts was encouraged in a different way, by deferring tax on capital gains until individual unitholders or shareholders realised their gains).
Section 83 of FA 1989, which is at the heart of this appeal, was part of the changes which Parliament made in consequence of this review.
It makes an express link between the imposition of liability to tax (or the creation of an allowable loss) under Schedule D Case I and the regulatory regime under ICA 1982.
It is therefore necessary, before coming to section 83, to give a short account of the regulatory regime in ICA 1982 and regulations made under it.
ICA 1982 and regulations under it
The regulatory system introduced by LACA 1870 had been re enacted and modified from time to time.
ICA 1982 replaced it with a similar but much more detailed system, elaborated in a number of statutory instruments, of which the most relevant for present purposes are the Insurance Companies Regulations 1994 (SI 1994/1516) (the 1994 regulations) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943) (the 1996 regulations).
Section 17 of ICA 1982 required every insurance company to which Part II applied to prepare with respect to each financial year of the company, a revenue account for the year, a balance sheet as at the end of the year and a profit and loss account (or for a mutual an income and expenditure account) for the year.
Each of these was to be in a form prescribed by regulations.
Under the 1996 regulations (as amended down to the year 2000) different forms were prescribed for different types of insurance companies, and they were still required by the new regulatory system mentioned in para 55 below.
The form of balance sheet prescribed (by regulation 6) for companies carrying on long term business were forms 13 (relating to assets) and 14 (relating to liabilities).
These together made up the two sides of the balance sheet.
The form prescribed (by regulation 8) for companies carrying on long term business was form 40; if the company had more than one LTBF a separate account was required for each LTBF, and a consolidated form for all of them.
The Company has three LTBFs, a with profits fund, a non participating fund for business taken over from the Society, and a non participating fund for new business.
Section 18 of ICA 1982 required every insurance company to which it applied, and which carried on long term business, to cause its actuary to make an annual investigation of its financial condition, and to cause an abstract of the actuarys report to be made.
Assets were to be valued and liabilities determined in accordance with valuation regulations, and the abstract was to be in a form prescribed by regulations.
Under regulation 25 of the 1996 regulations (as under the new regulatory system) the most relevant of the prescribed forms to be included in the abstract was form 58.
Regulation 45 of the 1994 regulations (as amended down to the material time) dealt with valuation of assets.
After some general provisions in paras (1) to (5) it dealt specifically with actuarial investigations under section 18 of ICA 1982: (6) Notwithstanding paragraph (1) above (but subject to the conditions set out in paragraph (7) below), an insurance company may, for the purposes of an investigation to which section 18 of the Act applies or an investigation made in pursuance of a requirement under section 42 of the Act, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company. (7) The conditions referred to in paragraph (6) above are (a) that the election shall not enable the company to bring into account any asset for the valuation of which no provision is made in this Part of these Regulations; (b) that the value assigned to the aggregate of the assets shall not be higher than the aggregate of the value of those assets as determined in accordance with regulations 46 to 57 of these Regulations.
Section 28 and 29 of ICA 1982 required separate accounts and funds to be maintained for long term business, and for the assets representing those funds to be applicable only for the purposes of the appropriate business, except so far as the value of the assets was shown, on a statutory actuarial investigation, to exceed the liabilities attributable to the fund.
I shall have to come back to the prescribed forms.
I add one comment.
Lord Reed observed (para 112), and I agree, that the use of the word fund in ICA 1982 is not entirely consistent.
Lord Reed had earlier quoted an observation of Lord Greene MR in Allchin v Coulthard [1942] 2 KB 228, 234: The word fund may mean actual cash resources of a particular kind (e.g. money in a drawer or a bank), or it may be a mere accountancy expression used to describe a particular category which a person uses in making up his accounts.
This is an important distinction, although Lord Greenes reference to cash resources is a little surprising and may have been influenced by the context of the particular case before him (it concerned the taxation of a local authoritys general rate fund).
In the context of life assurance a LTBF is a fund of investments of various types, and it falls within Lord Greenes first category.
The investments (the assets of the fund) change from time to time, as and when the investment managers need to raise money or exercise their judgment to switch investments, and the values of the assets fluctuate constantly.
But at any time it is possible to identify the assets for the time being constituting the fund, which is a continuing entity.
By contrast the Capital Reserve established by the scheme approved by the Court of Session and put into effect in 2000 (and here I am putting down a marker for later parts of this judgment), if it was a fund at all, was a fund in Lord Greenes second sense.
It was an accounting abstraction and it never consisted of identifiable assets.
Before going on to the scheme it is convenient to record, out of chronological sequence, that ICA 1982 was repealed by a statutory instrument made under the Financial Services and Markets Act 2000 which came into full force on 1 December 2001 (having come into force at earlier dates for limited purposes including rule making powers).
In consequence the new regime applied to the second and third of the Companys accounting periods relevant to this appeal that is, the calendar years 2001 and 2002; the Financial Services Authority (FSA) became the regulator, and the system of regulation was prescribed by rules made by the FSA rather than by statutory instrument.
But the substance of the system, and the identifying numbers of the forms, were unchanged.
In particular, rule 9.10(c) of the FSAs Interim Prudential Sourcebook for Insurers Instrument 2001 reproduced the effect of regulation 45(6) of the 1994 regulations.
There were some minor changes of terminology in the forms, which were set out in Appendices 9.1 (forms 13 and 14), 9.3 (form 40) and 9.4 (form 58) of the 2001 instrument.
The scheme
The scheme for the transfer of the Societys business to the Lloyds TSB group was preceded by an agreement dated 23 June 1999 between the Society and Lloyds TSB Group plc.
The agreement provided for the scheme to be approved by a special resolution of the Society in general meeting (which duly occurred) and for an application to be made to the Court of Session for sanction of the scheme under section 49 of and Schedule 2C to ICA 1982.
The Court of Session (Lord Nimmo Smith) sanctioned the scheme by an order made on 28 February 2000, and the scheme took effect on 3 March 2000.
The scheme also obtained regulatory approval and tax clearances.
The scheme is lengthy and in parts very technical.
It runs to 41 clauses and 12 schedules.
In bare outline, the bulk of the assets and liabilities of the Society were transferred to the Company; pension policies and assets and liabilities associated with them were transferred to another Lloyds TSB group company and are not relevant to this appeal.
Payment of the membership compensation to qualifying members of the Society (later quantified at 5,846m) was undertaken by Holdings, which is the owner of all the Companys issued share capital.
The provisions of the scheme which call for most attention are in Part D (Fund Structure) and Part E (operation of the Funds).
Clause 22 in Part E (Capital Reserve) is of particular importance.
Under Part D (Fund Structure) the most basic division was between the LBTF (defined as the Long Term Fund) and the Shareholders Fund.
The latter fund was to have allocated to it infrastructure assets and shares in seven subsidiaries and any joint venture companies (clause 15.1 and relevant definitions in Schedule 1).
All other assets (other than pension assets as mentioned above) were to be allocated to the LTBF, which was to be divided into two separate subfunds, the With Profits Fund and the Non Participating Fund (respectively the WPF and the NPF), with an appropriate allocation of existing policies (clauses 13 and 14.1).
The allocation of assets between the WPF and NPF was to be determined by the actuary in accordance with the detailed provisions of clause 15.2 to 15.6, 15.10 and 15.11.
Liabilities were to be similarly matched, subject to some special exceptions (clause 16).
In part E (Operation of the Funds) clause 18 deals with allocation of surplus arising in the WPF.
One ninth of the amount of bonuses allocated to conventional (that is, not unit linked) with profits policies (in other words one tenth of the gross allocation) is to be allocated to the NPF or the Shareholders Fund, as the board directs.
All other surplus is to be applied as bonus for the benefit of holders of with profits policies.
This replicates the position under the Societys constitution and regulations (para 47 above).
In life offices shorthand the WPF is a 90/10 fund.
The NPF, by contrast, is a 0/100 fund.
Following each actuarial valuation of the NPF the board may transfer to the WPF statutory surplus arising in the NPF (clause 21).
Finally I come to the Capital Reserve, provided for in clause 22.
Clause 22.1 is as follows: On and after [3 March 2000], [the Company] shall maintain a memorandum account within the [LTBF] designated as the Capital Reserve (the Capital Reserve).
At [3 March 2000] the Capital Reserve shall represent the amount of the shareholders capital held within the [LTBF].
Clause 22.2 provides for the Capital Reserve to be credited with an amount arrived at by a complicated formula.
It is common ground that this amount was 4,455m.
Clause 22.3 (headed Maintenance of Capital Reserve) provides that no more may be added to the Capital Reserve and that it may be reduced only by being brought into account in the revenue account of the WPF (up to a limit arrived at by a formula) or the revenue account of the NPF (without limit).
There does not seem to have been a finding or formal agreement as to the amount of the WPF limit, but the unchallenged evidence of Mr Adrian Eastwood, the Companys actuarial director at the material time, was that the amount was 432m.
Clause 22.4 to 22.6 provided for the Capital Reserve to be notionally allocated between the WPF and the NPF.
The initial division was 1,895m to the WPF and 2,560m to the NPF.
Tables B and C annexed to the agreed statement of facts and issues (SFI) show how the Companys opening capital of 4,769m in its LTBF can be reconciled with the opening Capital Reserve (4,455m) and the membership compensation (5,846m).
Clause 22A of the scheme provided for what was described as a contingent loan, free of interest, from the NPF to the WPF, repayable as mentioned in that clause.
Its purpose was to compensate the WPF for the fact that its right to future profits could not be included, for regulatory purposes, as an asset with an admissible value.
This inter subfund loan (described in SFI, para 29) hardly featured in the parties written and oral submissions, but it is a further complication in understanding the regulatory forms, to which I now turn.
The forms
The balance sheet consists of forms 13 and 14.
Form 13 sets out the values of the assets of the fund (that is, the LTBF or a subfund of it) at their admissible values (a technical term which in practice was not less than 99% of market value).
The effective bottom line of form 13 is line 89, Grand total of admissible values.
Form 14 sets out liabilities and margins.
For present purposes the most important lines are: 11, mathematical reserves (that is, actuarial liabilities which have not yet been finally quantified); 13, balance of surplus (or valuation deficit); 14, LTBF carried forward; 49, total other (ie non actuarial) liabilities; 51, excess of the value of net admissible assets; and 59, total liabilities and margins.
The entries at line 89 of form 13 and line 59 of form 14 must be the same.
The balancing items on form 14 are the figures entered at line 13 (balance of surplus) and line 51 (excess of the value of net admissible assets, which is also called the investment reserve: SFI para 53(2)).
The interrelation between the figures at lines 13 and 51 of form 14 is that the line 13 figure is generally a relatively small amount representing value that has been brought into account but not yet finally appropriated.
The line 51 figure is the true balancing figure, and is the last figure to be entered on the form.
It represents the (generally very much larger) value that has not yet been brought into account at all the amount by which the admissible value of the LTBF assets exceeds the book value that has been brought into account.
It illustrates the proposition stated (perhaps in rather question begging terms) in para 9 of the Revenues written case, that life offices are treated differently from most businesses in that they can shelter profits from taxation to meet unforeseen future liabilities.
This point is discussed further in paras 82 to 86 below headed Bringing assets into account at book value.
Form 40, the revenue account, shows movements during the accounting period.
The most important lines for present purposes are 11, earned premiums; 12, investment income; 13, increase (or decrease) in the value of non linked assets brought into account; 14, increase (or decrease) in the value of linked assets; 15, other income; 19, total income; 29, total expenditure; 39, increase (decrease) in fund in financial year; 49, fund brought forward; and 59, fund carried forward (39 + 49).
The entry at line 49 must be the same as line 14 on form 14 for the previous accounting period, and the entry at line 59 must be the same as line 14 on form 14 for the current period.
As to lines 13 and 14, Lord Reed explains in his judgment (para 116) that any increase or decrease in the value of linked investments (line 14) is required to be brought into account automatically, but unrealised increases in the value of non linked assets (line 13) need not be brought into account.
Form 58 (valuation result and distribution of surplus) shows the actuarial surplus (line 29), its movement during the accounting period (lines 31, 34 and 35), and its distribution as between policyholders (line 46), shareholders (line 47) and balance (line 49, this being the same as line 13 on form 14).
The term distribution as used in lines 41 48 does not imply that sums necessarily leave the Companys hands; it refers to an allocation as between policyholders and shareholders.
Three separate forms 58 were completed for the WPF, the transferred business in the NPF and the new business in the NPF.
How the forms were completed by the Company
Volume V of the papers before the Court contains over 500 pages of the Companys regulatory returns for the three relevant accounting periods, including completed forms 13, 14, 50 and 58 for the LTBF and its sub funds (except that form 58 was completed, as already noted, for three sub funds and not for the LTBF as a whole).
From these forms the following information as to the whole LTBF can be extracted (in bn, rounded to the nearest 1m, and with some rounding adjustments in the computations). 2000 2001 2002 Form 13 line 89: total assets at admissible value 20.962 Form 14 line 11: mathematical reserves 18.645 line 13: balance of surplus 0.181 line 14: LTBF carried forward 18.827 23.066 19.128 0.033 19.162 22.427 19.807 0.064 19.871 0.386 2.107 22.427 0.468 0.441 1.668 3.462 20.962 23.066 line 49: total non actuarial liabilities line 51: excess of value of net admissible assets line 59: total liabilities and margins Form 40 2.000 2.445 2.540 line 11: earned premiums 0.922 0.633 0.787 line 12: investment income line 13: increase (decrease) in value of non linked assets brought (2.254) 1.273 (1.168) into account line 14: increase (decrease) in value of (0.036) linked assets (0.031) (0.011) 0.408 0.502 16.875 line 15: other income 1.040 line 19: total income 21.216 2.631 1.921 2.084 2.054 line 29: total expenditure (1.045) line 39: increase (decrease) in LTBF 19.162 0.709 19.871 line 49: fund brought forward .000 19.162 19.162 19.871 18.827 line 59: fund carried forward Form 58 (WPF) line 59: distributed surplus line 61: percentage distributed to
policyholders
It would be imprudent to attempt any sophisticated commentary on these figures.
The entry on form 40, line 15 for 2000 is obviously exceptional, representing the effect of a change of ownership of a long established business; no one has suggested that the whole sum is taxable.
But we know that it included a sum of 33.410m as a transfer from Capital Reserve (see para 70 below).
Taken overall, the figures illustrate the effect of bringing into account value which, for prudential reasons, has not previously been recognised.
During the three accounting periods the admissible (for practical purposes, market) value of the assets of the LTBF fell by about 4bn (the figures can be collected from SFI, Table A and the Companys completed forms 13 for the three accounting periods).
The mathematical reserves decreased by a little under 0.5bn and the recognised value of the LTBF, tracking as it did the mathematical reserve and the unappropriated surplus, went down by about 0.3bn.
But the investment reserve, that is the excess of admissible value over the recognised value of the LTBF (line 51 on form 14) was reduced by almost 1.8bn.
The successive entries 0.633 0.915 94.72 96.64 0.576 97.05 on line 13 of form 40 are noteworthy.
In the accounting period ending on 31 December 2000 the value of non linked assets brought into account increased by over 1.2bn although their admissible value decreased during that period.
This disparity was reversed in the two following accounting periods, during which (taken together) admissible value fell further by about 1.6bn but the form 40, line 13 decrease was a good deal larger, about 3.4bn.
During the whole period the Company declared bonuses of significant amounts, and allocated more than the mandatory 90% to with profits policyholders.
Part of the form 40, line 15 amounts included sums described in the notes submitted with the statutory forms (volume V, pp1756, 2035 2036 and 2319) as transfers from Capital Reserve.
The amounts were as follows (SFI, paras 56 60): 2000 2001 2002 m to WPF 33.410 30.724 17.000 81.134 total 33.410 472.724 370.000 876.134 to NPF 442.000 353.000 795.000 Whether they should nevertheless have been brought into the computation of the Companys profit or loss under Schedule D Case I under section 83(1) and (2) of FA 1989 is the first issue.
Line 15 of form 40 is, it will be recalled, specifically mentioned in the referred question (set out at para 36 above).
The statutory provisions
The provisions which this Court has to construe are in a single section, section 83 of FA 1989.
A rapid survey of the landscape in which that section is found shows that in the consolidating statute, ICTA 1988, Part XII dealt with special classes of companies and businesses, and Chapter 1 of Part XII dealt with insurance companies, underwriters and capital redemption businesses.
I have already mentioned section 433, which was repealed by FA 1989 and replaced by similar (but more complex) provisions in section 82 of FA 1989.
Section 444A, inserted into ICTA 1988 by the Finance Act 1990, applies to a transfer of long term business in accordance with a scheme sanctioned under section 49 of ICA 1982, but neither side placed any reliance on this section.
At the time when the consolidating statute was enacted the government was engaged in a far reaching review of the taxation of life offices, as already noted (para 48 above).
The outcome was sections 82 to 90 of FA 1989 (together with Schedule 8 to that Act, amending Part XII of ICTA 1988).
These sections, and Schedule 8, were frequently amended between 1989 and 2000, especially by the Finance Acts of 1995 and 1996.
The details are set out in Lord Reeds judgment (paras 134 to 163).
But I agree with Lord Hope (in para 15 of his judgment) that it is unnecessary, and maybe unhelpful, to go into the legislative history.
What matters is the statutory provisions as they were in 2000, 2001 and 2002.
During that period section 83(1) to (4) was in the following terms: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
Section 83A(1) to (3) of FA 1989 was in the following terms: (1) In sections 83 to 83AB brought into account means brought into account in an account which is recognised for the purposes of those sections. (2) Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) that Act in respect of a part of that business. any separate revenue account required to be prepared under Paragraph (b) above does not include accounts required in respect of internal linked funds. (3) Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business.
It is common ground that the relevant revenue accounts are forms 40 for the whole LTBF and its constituent parts, the WPF and the NPF.
The first point of construction (which I have already described as a short point, but one which takes some getting to) is the meaning of value (whether realised or not) of those assets in section 83(2)(b).
The Company contends that it means market value, and that any reduction in their value (the form of words at the end of the subsection) is to be treated as an expense capable of giving rise to an allowable loss.
The Revenue contends that section 83(2) is referring to a difference in value (whether it be an increase or a reduction) as brought into account for the relevant period of account, and that section 83(A)(2) leaves no room for doubt as to what that means.
It directs attention to the appropriate regulatory account, in this case form 40.
The Lord President (para 54) described this approach as definitional.
Taxing a loss?
The Companys written case before this Court, and Mr Gardiner QCs robust oral submissions, characterised the Revenues position as unnatural, uncommercial and contrary to fundamental principles of tax law.
The Court was reminded of some famous judicial observations made more than a century ago, including Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315: The word profits I think is to be understood in its natural and proper sense in a sense which no commercial man would misunderstand and Lord Macnaghten in London County Council v Attorney General [1901] AC 26,35: Income tax, if I may be pardoned for saying so, is a tax on income.
It is not meant to be a tax on anything else.
In this case, Mr Gardiner submitted, the Revenue was attempting to tax what was in reality a loss of capital.
These submissions call for careful consideration.
The massive volume of documents and figures put before the Special Commissioners and the Court of Session, and now before this Court, creates a risk of getting lost in a labyrinth of abstractions.
Actuaries, accountants and lawyers are trying to converse in the same language, but it is not easy going.
It is a case in which there is a real danger, in the hackneyed phrase, of not seeing the wood for the trees.
It may help to avoid confusion to start with three simple points.
The first point is that the Revenue is not seeking to exact tax from the Company under Schedule D Case I either on profits or on losses incurred by the Company; it is taxing the Company on the I minus E basis.
Simultaneously the Company is seeking to establish large Schedule D Case I losses in order to have them available for surrender to obtain group relief.
The second point is that it is, and always has been, standard practice for life offices to bring the assets of their LTBFs into account, not at market values that fluctuate from year to year, but at a book value (though in practice that expression is applied to LTBFs in a way that an outsider may find surprising).
The third point is that the Capital Reserve is not, and never has been, a separate fund distinct from the Companys LTBF.
It has always been part of the LTBF.
Each of these three points calls for some further explanation.
The Crown option as it applies to this case
The Revenue is not seeking to charge tax under Schedule D Case I on losses incurred by the Company.
It is common ground (SFI, para 61) that at all material times since 3 March 2000 the Company has been taxed on the I minus E basis (the detailed computations for 2000 and 2002 can be seen in volume VII at pages 3211 and 3290; the relevant page for 2001 seems to have been inadvertently omitted).
Nevertheless (SFI paras 62 and 63) the Company seeks to claim an allowable loss under Schedule D Case I which would be available for surrender to other Lloyds TSB group companies by way of group relief.
The Revenue accepts (SFI, paras 62 and 63) that if the Company succeeds in this appeal the losses available for surrender would be approximately 28.7m for 2000, 612.6m for 2001 and 431.3m for 2002 (the relevant computations are at volume VII pages 3216, 3255 and 3295).
The fact that a proprietary life office can simultaneously pay tax on the I minus E basis and have an allowable loss under Schedule D Case I shows that whatever the position a century ago, when there were no special statutory provisions, the taxation of long term life assurance business is now a very specialised area.
Bringing assets into account at book value
Regulation 45(6) of the 1994 Regulations (set out in para 20 above, and later reproduced in Rule 9.10(c) of the FSAs 2001 instrument) allowed a life office, for the purposes of an actuarial investigation, to take the value of any of its assets as its value in the books or other records of the company.
This had been expressly permitted by the regulatory system since 1980, when Regulation 3 of the Insurance Companies (Valuation of Assets) Regulations 1976 (SI 1976/87), was amended by the Insurance Companies (Valuation of Assets) (Amendment) Regulations 1980 (SI 1980/5).
But the two expert witnesses agreed that it was a very long standing and well established practice, and the Special Commissioners made a finding to that effect (para 16 of their decision).
It would be potentially misleading to say that a life office is permitted to bring the assets of its LTBF into account at book value, since that is normally understood to mean historic cost.
In a LTBF some assets are normally brought into account at the full admissible value, and others at nil (Special Commissioners decision, para 48; also para 122 of Lord Reeds judgment).
It is unnecessary to go into the reasons for this practice, as to which there was no dispute.
The reasons for maintaining an investment reserve of unrecognised value are fundamental to the way in which long term life business, and especially with profits business, has been conducted in the United Kingdom.
It is the mechanism by which the life office, relying on the professional skills of its chief actuary and his staff, can achieve a balance between competing considerations and interests.
First and foremost is the overriding need for a sufficient margin of solvency.
Subject to that the life office will wish to produce consistently good results for its with profit policyholders, both in the policyholders interests and to preserve and enhance the companys reputation.
It must also achieve fairness between different classes of policyholders in accordance with their rights and expectations (the difficulties of which are illustrated by Equitable Life Assurance Society v Hyman [2002] 1 AC 408).
Finally there are tax considerations.
No company likes to pay more tax than it has to, or to pay it sooner than it has to.
Before 1989 the tax system allowed life offices to defer taxation, especially on unrealised capital gains.
It is common ground that section 83 of FA 1989 was intended to change that; the controversy is as to the extent of the change.
These points were well made by Mr Brian Drummond, an accountant, in an article entitled Making Sense of the FSA Return in Life Company Tax Computations (Tax and Accountancy Review, June 2006, p6).
Some changes had taken place by then (both on the regulatory front and the taxation front) but the article is nevertheless instructive.
After mentioning recent changes the author gives a brief overview of the forms: In broad terms, however, the overall structure remains unchanged.
Form 13 remains a reasonably straightforward analysis of the total admissible value of the assets of the company by category with narratives that are commendably clear; Form 40 demonstrates how much of the Form 13 value is brought into account for the purposes of calculating surplus; Form 58 deals with the calculation, composition and distribution of the surplus; and, Form 14 then links that exercise back to Form 13 by showing how much of that original Form 13 value is covering liabilities and bonuses and how much of it is being held in reserve.
He describes form 14 as an area of linguistic opacity, and comments: This confusion is carried across into form 14 of the FSA return where it increases further.
The first line in form 14 is described as mathematical reserves, after distribution of surplus and in this one narrative only two of the six words (after and of) take their conventional or even accounting meaning.
The most relevant passage is on the general philosophy of with profits business (at pp 9 10): Form 40 is described as revenue account but in conventional terms it is a very partial one.
By reference to normal accounting convention it is surprising to have a revenue account that makes no explicit reference to a movement in liabilities to third parties.
The layout of Form 40 and its interaction with Form 58 reflects much more of the history of with profit funds than it reflects normal accounting principles.
In with profits funds the starting point in determining the extent to which surplus is recognised is establishing what bonus should be recommended.
This will be driven by a combination of the results of the company (in terms of investment return and underwriting profit) together with policyholder reasonable expectations and the need to treat customers fairly.
One of the principles of UK with profits business is smooth bonuses from year to year.
Having established what bonus it is appropriate to declare for the year it is then possible, depending on the structure of the fund, to calculate the minimum extent to which surplus must be recognised both to meet the bonus requirement and any corresponding entitlement of the shareholders to participate in surplus as a fraction of the amount allocated to policyholders (very often one ninth the 90:10 structure).
Historically with profit funds hesitated to recognise any more surplus than was required to meet the bonus, and associated shareholder entitlement, and hence the fund would generally be approximately equal to the liabilities (after current year bonus) plus any residual surplus not allocated.
The nature of the Capital Reserve
The third point mentioned in para 78 above is that the Capital Reserve is not, and never has been, an appropriated fund separate from the Companys LTBF.
It is, as para 22.1 of the scheme makes clear, part of the LTBF.
It is an account falling within Lord Greene MRs second category in Allchin v Coulthard [1942] 2 KB 228, 234 235 merely an accounting category.
Abstract though it is, the Capital Reserve is on the Companys case of central importance to this appeal.
It is not easy to discern its purpose.
The Companys own independent actuarial expert, Mr Chamberlain, stated in his report dated 18 September 2007, para 5.1: The Scheme by which [the Society] demutualised established something it refers to as a Capital Reserve.
This Reserve is a financial structure whose form and operation is defined by the Scheme, and does not meet any particular regulatory or other requirement, other than that emanating directly from the Scheme.
It is a memorandum account and does not consist of particular assets.
Mr Allen, the Revenues independent expert, stated in his report dated 5 October 2007, para 6.1: Within the notes to their returns I understand that [the Company] created a memorandum account (the Capital Reserve) with an initial balance of approximately 4.5bn.
Notwithstanding that this account was referred to in the Scheme which obtained approval from the Court of Session, in my opinion this memorandum account had no meaning or relevance, other than as an item of information, as regards either the Companys statutory report and accounts or its regulatory returns.
The memorandum account did not represent any particular assets, nor did it reflect any actual profit or loss incurred by the Company, it was simply a note of a particular transaction.
The experts did not give a further explanation of the expression memorandum account, nor did counsel offer any.
The Special Commissioners made a finding that reflects the natural meaning of memorandum (para 45): The purpose of the Capital Reserve was to keep a record of this initial value created by [Holdings] and to distinguish it from subsequent profits.
The notion that it was an item of information that ought to be remembered comes out most clearly in the witness statement of Mr Michael Ross.
He was an actuary who was employed by the Society for most of his career, becoming chief actuary of the Society in 1986 and the first chief executive of the Company in 2000.
In his witness statement (paras 18 to 27, not challenged in cross examination) he described how demutualisation involved a strategic choice between ring fencing the estate and monetising the estate (the estate is a term used to describe a mutuals excess of assets over liabilities, or investment reserve).
After careful thought the Lloyds TSB group and the Society opted for monetising the estate.
This course was likely to be more attractive to the Societys members but required the Lloyds TSB group to find a very large sum to pay the membership compensation.
But the payment of that compensation gave the Lloyds TSB group the advantage that the Company had a comfortable investment reserve at the inception of its business (whereas with ring fencing the group might have had to inject further capital).
The group wanted to earmark what Mr Ross (para 27) regarded as shareholder owned capital, held within the [LTBF] in order to be able, in the long term, to benefit from it.
That provides a clue, I think, to the purpose of the restriction on reduction of the Capital Reserve in para 22.3 of the Scheme (summarised in para 60 above).
Only a limited amount (432m out of 4,455m) of the Capital Reserve could be brought into account in the revenue account of the WPF, because it was a 90/10 fund and nine tenths of the distributed surplus were to go for the benefit of holders of with profit policies; only one tenth (at most) could find its way to the shareholder, Holdings.
There was no restriction (beyond the total amount of the Capital Reserve) on bringing it into account in the NPF, which was a 0/100 fund.
The decision of the Special Commissioners and the judgments in the Court of
Session
The Special Commissioners decided the first issue in favour of the Company, and the Court of Session unanimously upheld that decision (Lord Emslies dissent was on the second, narrower issue as to section 83(3)).
All three members of the Court delivered full judgments, so this Court has four separately reasoned routes to the same conclusion on the first issue.
The reasoning can be imprecisely classified under three heads: the correct approach to the construction of taxing statues, arguments based on the legislative scheme and purpose, and detailed linguistic arguments.
The Lord President dealt most fully with statutory construction (paras 45 to 49).
He cited the well known speech of Lord Steyn in Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991, 9991000, in which Lord Steyn referred to Lord Wilberforces seminal speech in W T Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300, 323: Lord Wilberforce restated the principle of statutory construction that a subject is only to be taxed upon clear words .
To the question What are clear words? he gave the answer that the court is not confined to a literal interpretation.
He added There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded.
This sentence was critical.
It marked the rejection by the House of pure literalism in the interpretation of tax statutes.
The Lord President ultimately decided the issue by applying the clear words principle in the light of his view of the statutory purpose (paras 55 and 56).
Lord Emslie relied on the same principle, and some other principles which he set out at para 197: Since this appeal concerns the construction of tax legislation, certain fundamental rules, principles and presumptions may be thought to apply.
First, as Lord Wilberforce explained in Vestey v Inland Revenue Commissioners [1980] AC 1148, 1172: Taxes are imposed upon subjects by Parliament.
A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined.
Second, in the absence of specific charging provisions, capital and capital receipts do not fall to be taxed as revenue and vice versa.
Third, corporation tax being an annual tax on the profits of a company, it is prima facie reasonable and appropriate to construe statutory charging provisions as directed towards real receipts and gains . in a sense which no commercial man would misunderstand: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
And fourth, as reflected in countless provisions of the taxing statutes, a subject is in general assessable to tax on his own profits and gains, and not on those of any third party.
The second, third and fourth of these principles (and especially the second) may be what the Special Commissioners had in mind (in para 79 of their decision) in a more general reference to tax principles as predisposing them in the Companys favour, and in characterising the transfer from the Capital Reserve as a capital receipt (para 80).
Arguments based on the legislative scheme and purpose move from the very general to the rather more particular.
What was the underlying purpose of section 83? In particular was it intended, as the Lord President stated in para 55 of his judgment, to reverse the effect of section 433 of ICTA 1988? Is there a key conceptual distinction (Lord Emslie, para 201) between the Companys LTBF and the assets representing that fund? Was a transfer from the Capital Reserve a capital receipt comparable to an injection of new capital (Special Commissioners, para 80)? How cogent is the argument (Lord Reed, para 183; Lord Emslie, para 197, fourth point, and para 205, second point) that one taxpayer should not be taxed on another taxpayers profits or gains? What practical results do the statutory provisions produce if construed (Lord Emslie, para 200) as a one stage or alternatively a two stage process? I shall consider these points in turn.
Legislative scheme and purpose
It is permissible, without getting into the territory of Pepper v Hart [1993] AC 593, to look at the official consultation paper published in 1988, The Taxation of Life Assurance, to see the general nature of the problem perceived by the Revenue.
The most relevant paragraphs are paras 6.2 to 6.7, 6.12 to 6.21, 6.33 and 7.1 to 7.8 A life office might have a large capital gain on a long term income producing investment (such as a fully let office block or a strategic holding of shares in an oil company) as part of the with profits part of its LTBF.
Before 1989 this gain could be recognised (or brought into account) in its revenue account without being realised so as to give rise to a chargeable gain.
Value representing at least nine tenths of the gain could then be distributed (in the form 58 sense, that is allocated) to the holders of with profits policies so as to obtain the protection of section 433 of ICTA 1988, as well as escaping income tax or capital gains tax in the policyholders hands on the maturity of their policies (assuming them to be qualifying policies).
Section 83 of FA 1989 made the recognition of an unrealised capital gain a receipt to be brought into the Schedule D Case I computation, while section 82 of FA 1989 re enacted the substance of section 433 in a more satisfactory form.
All this is very clearly set out, in a good deal more detail, in paras 123 to 133 of Lord Reeds judgment (which refer to section 83 in the form in which it was originally enacted).
I respectfully think that in para 55 of his judgment the Lord President was to some extent running together the functions of sections 82 and 83, and misunderstanding the purpose of the two sections in tandem.
Lord Emslie referred to section 433 (para 200) but not to section 82.
In my opinion Lord Reeds analysis is to be preferred.
Section 83 is concerned with the immediate implications, in making the necessary Case I computations, of bringing into account all or part of the difference between book value and market value, and section 82 is concerned with the next stage of the computations, that is adjustments in respect of the distribution of surplus to holders of with profits policies (covered by form 58, lines 41 to 59).
The next point is the term fund.
It is, as both Lord Reed (para 112) and Lord Emslie (para 199) observed, used inconsistently both in ICA 1982 and in the regulatory forms.
But the two principal and relevant meanings, in this context, are clear (and here I am repeating ground I have already covered).
The LTBF is an actual, appropriated fund of identifiable investments, the constituent assets of which (with their admissible values) appear in form 13.
The Capital Reserve is a notional part of that fund to an initial amount of 4,455m; the independent actuarial experts agreed that it serves no regulatory purpose.
The fund for the purposes of lines 39, 49 and 59 of form 40, and for all the purposes of form 58, is the same fund, but valued in a special way (that is at book values in the sense that actuaries use that term) in order to produce the life offices objectives solvency and prudent preservation of the investment reserve, but at the same time smooth progress in the allocation of bonuses to with profits policies.
I am not sure that I understand para 201 of Lord Emslies judgment.
In that paragraph he is (as I understand it) setting out part of the submissions made on behalf of the Company.
But later (para 204) Lord Emslie himself accepted that there is a significant distinction between the assets and the fund itself.
Of course there is a difference, the difference between the parts and the whole.
But the value of the whole is in this case the sum of the values of the parts, and the significant distinction, affecting both, is the basis of valuation.
It is common ground that if in 2001 or 2002 the Lloyds TSB Group had decided to inject fresh capital into the Companys LTBF (as might have been done by the Company issuing new shares to Holdings, paid for in cash that was appropriated to the LTBF) it would not have been treated as a receipt under section 83(2).
The new money would have appeared on line 26 of form 40 (transfer from non technical account).
The admissible value of the LTBF would have been increased, and so (if it was needed for solvency purposes) would its value as brought into account (lines 39 and 59 of form 40).
A transfer from the Capital Reserve, by contrast, costs the group nothing (although it may be an indication that the state of the business is disappointing).
The transfer does not increase the market value of the LTBF.
Nor has it any regulatory significance, as the experts agreed.
What happens is that part of the value held in the investment reserve is brought into account, a familiar event generally recorded (as Mr Allen stated, though Mr Chamberlain disagreed) on line 13 of form 40.
I respectfully consider that the Special Commissioners, and to some extent the Court of Session also, attached too much weight to the label Capital Reserve and to the notion that capital gains ought not to be taxed under Schedule D, Case I.
It could not be clearer that under section 83(2)(b) any increase in value (whether realised or not) of investments constituting a LTBF, as brought into account, is to come into the Case I computation.
The argument that (in the absence of very clear words) one taxpayer ought not to be taxed on another taxpayers profits or gains is, on the face of it, a strong one.
It is not satisfactorily answered simply by pointing out (though this should not be forgotten) that this appeal is not about taxing profits.
It is about allowing losses capable of being surrendered for the benefit of other group companies.
But the Company acquired a long established mutual business and a LTBF with a healthy investment reserve.
That reserve may have been built up by the Society largely by means of unrealised gains.
But it was the Company and the Lloyds TSB Group that decided, for entirely understandable reasons, to bring part of the investment reserve into account, rather than making an injection of new capital.
The language of section 83(3)(b) (as amended in 1996) shows that Parliament had demutualisation well in mind as a situation for which the legislation should make provision.
The last general point to be considered, before getting to linguistic arguments, is the implication of Lord Emslies illuminating distinction (para 200, summarising the Companys argument, and para 204, accepting it) between a two stage process (asking whether there are any real gains, and then how far they have been brought into account) and a one stage process (asking simply what increase in value, if any, has been brought into account).
Again, it is necessary to be reminded that this appeal is about losses, not gains; and the three accounting periods have to be considered separately, and not as a whole.
In any accounting period the operation of the statutory provisions, if analysed as a two stage process, allows six different combinations, although some of them may be fairly improbable in practice, as follows (AV denoting admissible value, and RV value recognised and brought into account): (1) AV up, RV up by less (2) AV up, RV up by more (3) AV up, RV down (4) AV down, RV down by less (5) AV down, RV down by more (6) AV down, RV up.
It is easy to see how the competing interpretations work in situations (1), (2), (4) and (5).
On the Companys two stage approach the lower figure (whether an increase or a reduction) will be brought into the computations; on the Revenues one stage approach the difference in RV will always be taken.
But it is not so easy to see how either sides interpretation would apply to situations (3) and (6); and the Companys regulatory return for 2000 disclosed situation (6).
It might be thought that though neither sides interpretation fits easily, the Companys two stage approach is distinctly more difficult to reconcile with the situation in which there is a reduction in admissible value, but an increase in value brought into account, in an accounting period, and the Company is seeking to establish an allowable loss during that period.
But so far as I can see that submission was not made either to the Special Commissioners or to the Court of Session, nor do I recollect it being put forward in this Court.
The terms of the agreed question do not positively require the point to be resolved.
Indeed SFI, para 63 suggests that the point may already have been agreed between the parties.
So the best course is, I think, to exclude that point, which was not argued, from any consideration of the statutory scheme and purpose.
Nevertheless, unlike the Special Commissioners and (to some extent) the Court of Session, I do not approach the narrower linguistic points with any predisposition in favour of the Companys case.
I approach them disposed towards the Revenues case as being more in accordance with the statutory scheme and purpose.
Linguistic points on the first issue
I can take these more shortly, and it is convenient to do so by reference to the numbered sub paragraphs at the end of para 181 of Lord Reeds judgment.
The first point is that an increase in value . of . assets is said to refer most naturally to capital gains.
In some contexts it might do so.
In the context of a system of computation which is closely and explicitly linked to the regulatory returns in respect of LTBFs I see little force in this point.
What is important is how value is to be measured, and to my mind sections 83(2) and 83A leave no doubt about that.
The second point is on the words (whether realised or not) in section 83(2)(b).
The section was making an important change in the law in that unrealised increases in value, so far as brought into account, were to come into the tax computation.
To my mind it would have been surprising if the draftsman had not inserted this parenthesis so as to leave no doubt as to the character of the change in the law.
The third point is on another parenthesis in section 83(2), (and not otherwise), though these words have come out in the text of Lord Reeds judgment before us as or otherwise.
Again, I have to say that I think the draftsman is being rather unfairly criticised for his efforts to leave no doubt about the intended meaning.
The preceding word as means in the manner that and the parenthesis means and in no other manner.
To my mind it is a bit hard to dismiss this as otiose.
Lord Reeds fourth point is that the expression brought into account is not apt to describe the overall effect of those entries.
I confess that I simply do not understand this point.
The critical entry is line 13 on form 40 (increase (decrease) in the value of non linked assets brought into account).
That is the only line on form 40 in which the words brought into account are found.
It was conceded that the line 15 entry could have been on line 13.
The bottom lines (39, 49 and 59) show the overall position, and do not use the words brought into account.
Lord Reeds remaining points on the first issue (in para 181(5) and (6) and para 183) are more general and I will not revisit them.
Conclusion
In my judgment the Revenues submissions on the first issue are correct, both as to the statutory scheme and purpose and as to the linguistic points just mentioned.
I have gone into the matter at some length because I am conscious that I am differing both from the Special Commissioners and from the unanimous view of the Court of Session.
But in the end I consider that it is simply a question of giving section 83(1) and (2) of FA 1989, as amended, their natural meaning.
On that basis the second issue does not arise and I prefer to say nothing about it.
I would allow the Revenues cross appeal and treat the Companys appeal as moot.
LADY HALE
As so often happens, what appears at first sight to be a very complicated question turns out on closer analysis to be quite a simple one.
When calculating the profits of an insurance company in respect of its life assurance business under Case 1 of Schedule D to the Taxes Act, does an increase in value or conversely a reduction in the value of the assets of its long term business fund refer to an increase or decrease in their actual value? Or does it refer to an increase or decrease in their value as brought into account for a period of account in the companys revenue account prepared for the purpose of the Insurance Companies Act 1982?
We know that the words as brought into account for a period of account (and not otherwise) in section 83(2) of the Finance Act 1989 (set out by Lord Walker at para 41 above) describe the words the following items; we know that the following items are (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets; we know from section 83A (set out by Lord Walker at para 74 above) that brought into account means brought into account in the revenue account (or accounts) prepared for the purposes of the Insurance Companies Act 1982 in respect of the companys long term business (or part of it); so the linguistic question boils down to what is meant by as in section 83(2).
The Company would have it that as means when.
The link to the regulatory returns is a purely temporal one.
Value means real value not whatever the company chose to put in the forms.
The Revenue would have it that as means as.
What is taken into account in computing the companys profits for income tax purposes is what the company brings into account in completing its revenue accounts for regulatory purposes.
In my experience, if Parliamentary counsel mean when, they write when, and if they mean as, they write as.
We should be slow to re write what they have written.
The words and not otherwise, if nothing else, make it clear that there might have been some other way of taking items (a) and (b) into account for income tax purposes, but this is the way it is to be done.
They are making a special rule for life insurance business.
This is not surprising, for all the reasons that Lord Walker has so clearly and carefully explained.
The words whether realised or not point to the real change which was being made by the 1989 Act.
Otherwise it was business as usual.
It was not until 1995 that these insurance companies were required to file any other sort of accounts than those which they had to file for regulatory purposes.
It was natural for the Revenue to use the figures in the regulatory revenue account as their starting point.
In full agreement with Lord Walker, and Lord Hope and Lord Neuberger, therefore, I would allow the Revenues cross appeal and regard the Companys appeal as moot.
LORD NEUBERGER
I too would recall the interlocutor of the Inner House of the Court of Session and allow HMRCs cross appeal.
Having had the great benefit of reading in draft the judgments of Lord Hope and Lord Walker, I can express my reasons shortly.
The cross appeal raises an issue as to the meaning of section 83(2) of the Finance Act 1989 (as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995).
It is unnecessary for me to set out section 83, as it is fully quoted in para 7 of Lord Hopes judgment and para 73 of Lord Walkers judgment.
As will be clear to anyone who has read those judgments, the difficulty in this case arises from the fact that the issue of interpretation arises in the context of a very complex background.
That complexity is attributable to a number of different factors, namely (i) the technical rules as regards the regulatory returns to be made by life assurance offices, (ii) the many changes in the legislation embodying those rules since they were first introduced in 1870, (iii) the many changes in the statutory provisions governing the taxation of life assurance offices, (iv) the extensive contractual provisions in the documentation governing the scheme (the scheme) for transferring of the business of Scottish Widows Fund and Life Assurance Society to Scottish Widows plc (the Company), and (v) the details of the regulatory returns made by the Company in the three accounting years in issue.
When considering the application of section 83(2) to the facts of this case, I am sceptical about the value of analysing the history of the statutory provisions governing either the returns to be made by life assurance offices or the taxation of profits made by life assurance offices i.e. what I have characterised as factors (ii) and (iii).
This cross appeal concerns the meaning of the statutory provision in force during the three relevant years, section 83(2), and its impact on the returns actually made in respect of those years, in the then stipulated form by the Company.
Particularly as the provisions of the scheme, the prescribed forms for returns, and the contents of the Companys returns for the three years in question, all require careful analysis, it seems to me that to focus in addition on the rather intricate history, as opposed to the present provisions, of the regulations, risks taking ones eye off the ball (or, as Lord Walker puts it, not seeing the wood for the trees).
Legislative archaeology has its place in statutory interpretation, but its role is limited.
Where a statutory provision, when read in its immediate statutory and practical context, has a meaning which is tolerably clear as a matter of language, and not unreasonable or unfair in terms of its consequences, it seems to me that little is to be gained, and much may be lost (in terms of time, expense and eventual confusion) by going into the genesis and development of the provision in earlier legislation.
As Lord Hope points out, such an approach is consistent with what was said both by Lord Wilberforce in Farrell v Alexander [1977] AC 59, 73 and by Lord Diplock in Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 6.
Once one understands the scheme, the relevant regulations, the forms, and the Companys returns for the three years in question, it appears to me that the answer to the question posed on the cross appeal, namely the meaning and effect of section 83(2), is tolerably clear.
I could not hope to equal the clarity of Lord Walkers analysis in paras 49 to 53, 57 to 70, and 82 to 91, and, very gratefully, adopt the benefit of his distillation of the various complex matters which he there explains.
Turning to the central issue on the cross appeal, the meaning of section 83(2), it may be a little glib to suggest that HMRCs case is ultimately vindicated by a single word.
However, if one was to isolate a single crucial point, it seems to me that it would involve focussing on the word as in that subsection, as Lady Hale suggested during argument.
Section 83(2) stipulates that the items which should be taken into account as receipts of [a particular accounting] period are to be those items identified in paras (a) and (b) as brought into account for [that] period of account.
The obvious and natural effect of the words which I have emphasised is that those items are to be taken into account for the period in question in the same way and to the same extent as they are brought into account for that period.
It was argued on behalf of the Company that the expression as brought into account for a period of account should be treated simply as a reference to the period in which the item was brought into account, and was not concerned with how the item was brought into account.
Particularly in the light of the inclusion of the word as, that does not seem to me to accord with the natural reading of the expression.
Although both the Company and HMRC relied on other provisions in the 1989 Act to support their respective cases on the meaning of the expression, I am unconvinced that they are of any real assistance.
Thus, it was suggested that the words (and not otherwise) in the subsection assisted the Companys interpretation.
I do not see how that is so: they are there simply to emphasise that an item is only to be brought into account if it falls within the expression, and therefore they can take the issue of what the expression means no further.
Equally, the fact that section 83A(1) (as inserted by paragraph 16 Schedule 8 to, the 1995 Act and amended by paragraph 6 of Schedule 31 to the 1996 Act) defines the term brought into account does not take matters further, as the position of each party is consistent with that definition.
The conclusion that HMRCs construction of section 83(2) is correct seems to me to be supported, rather than undermined, by the normal approach to taxation of business profits as explained by Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315 and by Lord Hoffmann in Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, [2007] SC (HL) 105, [2007] 1 WLR 1448, para 2.
In connection with taxing business profits, the concept of a profit should normally be accorded its proper meaning, which will obviously depend on the specific context, but current accountancy practice is generally a good, and often the best, guide as to the precise quantification of any profit.
In the case of a life assurance business, HMRCs case is that, in effect, statute requires the profit to be assessed by a rather unusual means, namely by reference to the returns in the regulatory forms.
This is entirely consistent with the normal approach to assessing the profits of companies for taxation purposes, as these returns effectively take the place of the statutory audited accounts, which are relied on to define the profits of the overwhelming majority of other businesses owned by limited companies.
Furthermore, although there is, at first sight, real force in the Companys argument that HMRCs case results in its business being taxed on some figure which cannot sensibly be said to be a profit, a closer analysis of the situation, as provided by Lord Walker in paras 81 to 90 and 95 to 105, shows that this is incorrect.
Accordingly, and in agreement with the fuller reasoning of Lord Hope and Lord Walker, I would allow HMRCs cross appeal.
As the cross appeal succeeds, it is unnecessary to consider the Companys appeal.
I agree with Lord Walker that it would be better not to go into the question whether the majority of the Inner House was right in finding for HMRC on section 83(3).
It is tempting to do so, given that there is a decision of the Inner House on the point.
However, at least on the basis of the argument we have heard on this appeal, it does seem to me that the interpretation of subsection (3) is rather difficult, and I think it would be better to wait for a case where the issue matters, not least as it may be that some assistance would be gleaned from the facts of such a case, which may throw light on the practical consequences of the rival interpretations.
LORD CLARKE
I confess that I was initially attracted by the approach of Lord Emslie to the issues in relation to both the cross appeal and the appeal.
However, having considered the masterly judgment of Lord Walker, I have found his reasoning compelling and agree with him (and indeed Lord Hope, Lady Hale and Lord Neuberger) that the Revenues cross appeal on the true construction of section 83(2) of the Finance Act 1989 as amended should be allowed.
Like Lord Walker, Lady Hale and Lord Neuberger, I prefer to express no view on the issue of the true construction of section 83(3).
I too would therefore allow the Revenues cross appeal and treat the Companys appeal as moot.
| Scottish Widows Plc (Scottish Widows) is a life assurance company.
It was established in 2000, when it acquired the business of Scottish Widows Fund and Life Assurance Society (the Society) under a scheme of transfer which had been approved by the Court of Session in Scotland.
Scottish Widows acquired assets under the scheme which had an approximate value of 25bn, and it became subject to actuarial liabilities of approximately 19bn.
Members of the Society received compensation of approximately 5.8bn, which represented the surplus of the Societys assets over its liabilities at the time of the transfer.
The compensation was paid by Scottish Widows holding company, in return for the members of the Society giving up their right to participate in the surplus.
The scheme provided that Scottish Widows was to establish and maintain a Long Term Business Fund (LTBF) to fund its long term insurance business.
It also provided that there was to be a memorandum account within the LTBF, called the Capital Reserve.
This was said to represent the value of shareholders capital within the LTBF.
Life assurance companies are required to submit annual regulatory returns, in particular to demonstrate solvency.
Various forms are prescribed for these returns.
One these is known as Form 40, which is a revenue account in respect of the LTBF.
In the years following transfer the value of the assets of Scottish Widows LTBF fell substantially, principally because of falls in the stock markets.
To cover those losses and to allow for distributions to policyholders, Scottish Widows brought into account amounts on Form 40 for each of the accounting periods 2000, 2001 and 2002.
These amounts were recorded in line 15 of the relevant Form 40s.
They were described as transfers from the Capital Reserve.
Section 83 Finance Act 1989 provides for certain sums to be brought into account in the computation of the profits of an insurance company in respect of its life assurance business for the purposes of corporation tax.
In the terms that were in force between 2000 and 2003 section 83(2) provided that: [T]he following items, as brought into account for the period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
Section 83(3)(a) made provision for ascertaining whether or to what extent a company had incurred a loss in respect of its life assurance business where an amount was added to an insurance companys long term business fund as part of or in connection with a transfer of business to that company.
The Revenue maintained that the amounts to be brought into account as receipts for the computation of profits or losses for tax purposes under section 83(2)(b) or, in the alternative, under section 83(3)(a) were the amounts shown in line 15 on Form 40.
It maintained that the reference to a difference in value as brought into account directed attention to the figures that had been entered on Form 40, not the market value of the assets of the LTBF.
Scottish Widows argued that the words increase in value in section 83(2)(b) meant an increase in the actual value of actual assets, and that the words as brought into account were concerned with when the
increase was brought into account, not the extent of the increase.
Here the value of the assets of the LTBF had fallen during each of the relevant periods.
So there was no increase which could be brought into account.
The parties referred the question whether, in computing the Case I profit or loss of Scottish Widows for the accounting periods ending in 2000, 2001 and 2002, the amounts that fell to be taken into account as receipts to the Special Commissioners were the amounts shown in line 15 of Form 40.
It was agreed that, if Scottish Widows argument that it is actual values and not those amounts that should be taken into account is correct, it will have allowable losses in respect of those years of 28.7m, 612.6m and 431.3m.
The Special Commissioners answered the question in the affirmative.
They held that, although the amounts shown on Form 40 were not to be brought into account by section 83(2), they were covered by section 83(3)(a).
The Inner House unanimously dismissed the Revenues appeal against the decision on section 83(2) and by majority (Lord Emslie dissenting) dismissed Scottish Widows cross appeal against the decision in respect of section 83(3)(a).
Scottish Widows appealed and the Revenue cross appealed.
The Supreme Court unanimously allows the Revenues cross appeal and holds that the amounts that were to be taken into account as receipts by virtue of section 83(2) were the amounts shown on Form 40.
It therefore answers the question that was referred to the Special Commissioners in the affirmative.
Lord Hope and Lord Walker both give detailed judgments.
Lady Hale and Lord Neuberger give shorter judgments, agreeing with each other and with Lord Hope and Lord Walker.
Lord Clarke agrees with all of the judgments.
Although the applicable statutory provisions had been amended on various occasions, it was not helpful to look at their legislative history.
That should only be done where there is an interpretative difficulty which classical methods of construction cannot solve.
The proper approach was to concentrate on the wording of sections 83(2) and (3)(a) as they were during the relevant accounting periods: [15], [73], [122] [124].
Lord Walker analyses in detail the regulatory and taxation regime which applies to life assurance companies and the particular features of the demutualisation scheme so as to provide a backdrop to the statutory construction: [40] [71].
There were two particularly important points.
One was that when completing regulatory returns, book values could be used, and that an insurer enjoyed a certain freedom in determining what amount of its actuarial surplus to recognise in its returns: [82] [86].
It was also particularly important to appreciate the nature of the Capital Reserve.
It was not a fund of particular assets, separate from the LTBF, but was merely an accounting category recording an initial value within the LTBF: [87] [91] [101].
The key to interpreting section 83(2) was the phrase as brought into account and, in particular, the use of the word as: [22], [76], [116], [125].
This demonstrated that the computation must proceed on basis of what was actually entered on the appropriate regulatory account, in this case the form known as Form 40.
It was important that, when completing its returns, an insurance company should be permitted to use book values: [20].
The various arguments which were advanced in favour of Scottish Widows construction, based on general principles of interpreting tax legislation ([24] [26], [101] [102]), the statutory scheme and specific aspects of the drafting ([23], [107] [112]), fell to be rejected in the face of this clear statutory language.
The Special Commissioners and, to some extent, the Court of Session had attached too much weight to the label Capital Reserve, which had led them to attach undue weight to the notion that capital gains ought not to be taxed under Schedule D, Case I: [26], [101].
Given that the Court allows the Revenues cross appeal, a majority preferred to express no view on section 83(3)(a).
Lord Hope indicated that, had it been necessary to decide the point, he would have held in agreement with the majority in the Inner House that the relevant amounts would have been covered by section 83(3)(a): [28] [31].
|
This appeal concerns the assessment of damages arising out of the repudiation of a charterparty by charterers of a cruise ship called New Flamenco (the vessel).
I can take the facts from the judgment of Longmore LJ (with whom Christopher Clarke and Sales LJJ agreed) in the Court of Appeal.
He had in turn taken the facts from the judgment of Popplewell J (the judge) on appeal from the First Final Arbitration Award, dated 3 June 2013, (the award) made by Mark Hamsher as sole arbitrator.
The arbitrator gave detailed reasons which formed part of the award.
By a time charterparty on the NYPE 93 form dated 13 February 2004 (the charterparty) the vessel was chartered by her then owners, Cruise Elysia Inc to the defendants (the charterers) for a period of one year.
At that time the vessel was managed by the claimants (the owners), who bought the vessel on 4 March 2005 and entered into a novation agreement dated 23 March 2005 under which they assumed the rights and liabilities of the owners under the charterparty effective as from 7 March 2005.
In August 2005 the owners and the charterers concluded an agreement extending the charter for two years expiring on 28 October 2007, with an option for a third year.
The option was never exercised.
The extension was recorded in addendum A.
At a meeting on 8 June 2007, the owners and charterers reached an oral agreement in terms subsequently recorded in addendum B. The agreed terms extended the charterparty for a further two years expiring on 2 November 2009.
The charterers disputed having made the agreement recorded by addendum B and refused to sign it.
They maintained an entitlement to redeliver the vessel on 28 October 2007 in accordance with addendum A.
The owners treated the charterers as in anticipatory repudiatory breach and on 17 August 2007 accepted the breach as terminating the charterparty.
The vessel was redelivered on 28 October 2007.
Shortly before redelivery the owners entered into a memorandum of agreement for sale of the vessel for US$23,765,000.
The charterparty was governed by English law and provided for London arbitration.
The owners commenced arbitration on 11 September 2007 and Mr Hamsher was appointed sole arbitrator on 4 March 2008.
The charterers denied liability, claim submissions were served only on 23 November 2011 and the hearing took place in May 2013.
By the time of the hearing it was apparent that there was a significant difference between the value of the vessel in October 2007, when the owners sold her, and in November 2009, when the vessel would have been redelivered to the owners had the charterers not been in breach of the charterparty.
The collapse of Lehman Brothers in September 2008 and the financial crisis had occurred in the meantime.
The value of the vessel when she would have been redelivered in accordance with addendum B in November 2009 was, as the arbitrator subsequently found, US$7,000,000.
That finding was based on expert evidence of valuers as between a willing seller and a willing buyer.
The owners advanced their claim for damages calculated by reference to the net loss of profits which they alleged that they would have earned during the additional two year extension.
Such profits were set out in a detailed schedule identifying the revenue which would have been earned under the charterparty, and giving credit for the costs and expenses which would have been incurred in operating the vessel in providing the charterparty service for the two years, but which had been saved as a result of the sale of the vessel.
The amount claimed was 7,558,375.
As Longmore LJ put it, ironically the owners were, at this stage, prepared to give credit for what they called the reduction in the re sale value of the vessel (said to be for depreciation) between October 2007 and November 2009 of US$5,145,000.
The charterers argued that the owners were bound to bring into account and give credit for the whole difference between the amount for which the vessel had been sold in October 2007 (US$23,765,000) and her value in November 2009 (subsequently found by the arbitrator to be US$7,000,000).
The owners wished, however, to argue that the difference in value was legally irrelevant and did not fall to be taken into account.
Because there was no agreement between the parties on the accounting figures in relation to the net profits which would have been earned for the two year period under the charter, the arbitrator made no findings on the quantum of the owners claim and left the figures to be agreed by the parties or referred back to him in the absence of agreement.
But he declared that the charterers were entitled to a credit of 11,251,677 (being the equivalent of US$16,765,000) in respect of the benefit that accrued to the owners by selling the vessel when worth more in October 2007 than it was at the end of the charter period in November 2009.
This was more than the owners loss of profit claim and would result in the owners recovering no damages for the charterers repudiation.
As Longmore LJ observed in para 10, towards the end of the arbitration hearing the owners had made an application to amend their submissions by deleting the conceded credit.
That application was refused by the arbitrator but he allowed the point of principle (that no credit needed to be given) to be argued holding that, if the owners were successful on the point, the amount of the conceded credit would have, nevertheless, to be brought into account.
That remained the position before the judge.
The award and the judgment
There were two issues before the arbitrator: (1) whether the owners had been entitled to terminate the charterparty; and (2) if so, whether they had to give credit for any benefit that they had received by selling the vessel.
On the first issue, the arbitrator found that the parties had concluded an oral agreement on the terms of addendum B and that the charterparty had been terminated by the owners in response to the charterers repudiatory breach.
There has been no challenge to that finding.
The second issue was the only issue of quantum which was argued before the arbitrator (apart from the valuation issue referred to in para 4 above).
As I understand it, the parties agreed that, depending upon the circumstances, subject to the way in which the specific issue was decided, any other quantum issues would be the subject of directions and a further hearing.
The issue for determination by the arbitrator was recorded in para 3 of his reasons in this way: there was a fundamental difference between [the parties] as to whether any difference between the October 2007 sale and the putative November 2009 sale price had to be taken into account as a benefit that had accrued to the Owners.
The Owners argued that it was totally irrelevant in considering their claim for loss of profit.
The Charterers argued that it was a benefit that could and should be taken into account to establish the true net damages suffered by the Owners.
This was far from being an arid, legal dispute of little practical importance.
If the Charterers were correct both as to the extent of the alleged benefit that had accrued to the Owners and the fact that it had to be taken into account, then even if the Owners succeeded on liability, they could recover nothing because the benefit could exceed by a considerable margin the claim for loss of profits.
On this second issue, the arbitrator made a declaration in his award that, when damages fell to be assessed, the charterers were entitled to a credit of 11,251,677 in respect of the benefit that accrued to the owners when they sold the vessel in October 2007 as opposed to November 2009, which was the earliest time when they could have sold the vessel if addendum B had been performed.
The arbitrator added, consistently with the above, that since the parties had not agreed the other accounting figures between them, it was appropriate for him merely to declare the credit to which the charterers were entitled, leaving it to the parties either to refer the balance of their disputes to him or to resolve matters amicably.
Finally he reserved the right to make such further award or awards as might be appropriate including on costs.
The owners sought permission to appeal to the High Court pursuant to section 69 of the Arbitration Act 1996 on a question of law which was formulated in this way: When assessing shipowners damages for loss of profits on earnings of hire under a time charterparty which has been repudiated by the charterers and the repudiation accepted by the owners as terminating the contract, are the charterers entitled to have taken into account as diminishing the loss of earnings/hire sustained by the owner as a result of the accepted repudiation a benefit said to consist of avoidance of a drop in the capital value of the vessel because the vessel has been sold shortly after acceptance of the repudiation whereas, if the vessel had been retained until after performance of the charterparty, it would have had a lower capital value by reason of decline in the capital value of the vessel through market decline in ship sale values in that period? Permission to appeal was granted by Teare J on 17 September 2013.
He considered the question to be one of general public importance and that the arbitrators decision was at least open to serious doubt.
The appeal was argued before Popplewell J on 30 April and 1 May 2014 and judgment was given by the judge, allowing the appeal, on 21 May 2014.
In a judgment reported in [2014] 2 Lloyds Rep 230 he held in para 65 that, on the facts found by the arbitrator, the application of the principles of law which he had identified did not require the owners to give credit for any benefit in realising the capital value of the vessel in October 2007, by reference to its capital value in November 2009, because it was not a benefit which was legally caused by the breach.
The charterers appealed to the Court of Appeal, which allowed the appeal.
Before considering the reasoning of the Court of Appeal, it is appropriate to consider the reasoning of the judge.
Having set out the submissions of counsel in some detail between paras 13 and 62, he summarised his conclusions on legal principle in paras 63 and 64 as follows1: 63.
The search for a single general rule which determines when a wrongdoer obtains credit for a benefit received following his breach of contract or duty is elusive.
In Parry v Cleaver Lord Wilberforce said at [1970] AC 1, at pp 41H to 42B: As the learned justices in the High Court are careful to state, it is impossible to devise a principle so general as to be capable of covering the great variety of benefits from one source or another which may come to an injured man after, or because, he has met with an accident.
Nor, as was said by Dixon CJ in Espagnes case (1961) 105 CLR 569, is much assistance to be drawn from intuitive feelings as to what it is just that the wrongdoer should pay.
Moreover, I regret that I cannot agree that it is easy to reason from one type of benefit to another. 64.
Nevertheless a number of principles emerge from the authorities considered above which I would endeavour to summarise as follows: (1) In order for a benefit to be taken into account in reducing the loss recoverable by the innocent party for a breach of contract, it is generally speaking a necessary condition that the benefit is caused by the breach: Bradburn, British Westinghouse, The Elena DAmico, and other authorities considered above. 1 Case references as previously inserted in the judgment: Parry v Cleaver [1970] AC 1, Bradburn v Great Western Railway (1874) LR 10 Exch 1, British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railway Co of London Ltd [1912] AC 673, The Elena DAmico [1980] 1 Lloyds Rep 75, Coles v Hetherton [2015] 1 WLR 160, The Fanis [1994] 1 Lloyds Rep 633, Lavarack v Woods of Colchester Ltd [1967] 1 QB 278, Needler Financial Services Ltd v Taber [2002] 3 All ER 501, Hussey v Eels [1990] 2 QB 227, Palatine Graphic Arts Co Ltd v Liverpool City Council [1986] QB 335, Bellingham v Dhillon [1973] QB 304, Nadreph Ltd v Willmett & Co [1978] 1 WLR 1537, The Elbrus [2010] 2 Lloyds Rep 315, The Yasin [1979] 2 Lloyds Rep 45, Shearman v Folland [1950] 2 KB 43 and Smoker v London Fire and Civil Defence Authority [1991] AC 502. (2) The causation test involves taking into account all the circumstances, including the nature and effects of the breach and the nature of the benefit and loss, the manner in which they occurred and any pre existing, intervening or collateral factors which played a part in their occurrence: The Fanis. (3) The test is whether the breach has caused the benefit; it is not sufficient if the breach has merely provided the occasion or context for the innocent party to obtain the benefit, or merely triggered his doing so: The Elena DAmico.
Nor is it sufficient merely that the benefit would not have been obtained but for the breach: Bradburn, Lavarack v Woods, Needler v Taber. (4) In this respect it should make no difference whether the question is approached as one of mitigation of loss, or measure of damage; although they are logically distinct approaches, the factual and legal inquiry and conclusion should be the same: Hussey v Eels. (5) The fact that a mitigating step, by way of action or inaction, may be a reasonable and sensible business decision with a view to reducing the impact of the breach, does not of itself render it one which is sufficiently caused by the breach.
A step taken by the innocent party which is a reasonable response to the breach and designed to reduce losses caused thereby may be triggered by a breach but not legally caused by the breach: The Elena DAmico. (6) Whilst a mitigation analysis requires a sufficient causal connection between the breach and the mitigating step, it is not sufficient merely to show in two stages that there is: (a) a causative nexus between breach and mitigating step; and (b) a causative nexus between mitigating step and benefit.
The inquiry is also for a direct causative connection between breach and benefit (Palatine), in cases approached by a mitigation analysis no less than in cases adopting a measure of loss approach: Hussey v Eels, The Fanis.
Accordingly, benefits flowing from a step taken in reasonable mitigation of loss are to be taken into account only if and to the extent that they are caused by the breach. (7) Where, and to the extent that, the benefit arises from a transaction of a kind which the innocent party would have been able to undertake for his own account irrespective of the breach, that is suggestive that the breach is not sufficiently causative of the benefit: Lavarack v Woods, The Elena DAmico. (8) There is no requirement that the benefit must be of the same kind as the loss being claimed or mitigated: Bellingham v Dhillon, Nadreph v Willmett, Hussey v Eels, The Elbrus, cf The Yasin; but such a difference in kind may be indicative that the benefit is not legally caused by the breach: Palatine. (9) Subject to these principles, whether a benefit is caused by a breach is a question of fact and degree which must be answered by considering all the relevant circumstances in order to form a commonsense overall judgment on the sufficiency of the causal nexus between breach and benefit: Hussey v Eels, Needler v Taber, The Fanis. (10) Although causation between breach and benefit is generally a necessary requirement, it is not always sufficient.
Considerations of justice, fairness and public policy have a role to play and may preclude a defendant from reducing his liability by reference to some types of benefits or in some circumstances even where the causation test is satisfied: Palatine, Parry v Cleaver. (11) In particular, benefits do not fall to be taken into account, even where caused by the breach, where it would be contrary to fairness and justice for the defendant wrongdoer to be allowed to appropriate them for his benefit because they are the fruits of something the innocent party has done or acquired for his own benefit: Shearman v Folland, Parry v Cleaver and Smoker.
As stated above, the judge held in para 65 that, on the facts found by the arbitrator, the application of those principles did not require the owners to give credit for any benefit in realising the capital value of the vessel in October 2007, by reference to its capital value in November 2009, because it was not a benefit which was legally caused by the breach.
The judge gave his reasons for reaching those conclusions in his paras 66 to 72.
Whether his reasoning is correct is critical to the resolution in this appeal.
It may be summarised as follows.
He noted in para 66 that the vessel was an asset purchased by the owners in 2005 which the owners could have sold at any time thereafter at the prevailing market rate.
When they sold it in October 2007 it was worth US$23,765,000.
The judge held that the fact that it would have been worth only US$7m two years later was a result of the fall in the market flowing from the financial crisis.
The difference in the value of the vessel was not, he said, caused by the charterers breach of the charter; it was caused by the fall in the market which occurred irrespective of such breach.
He added that the effect of the fall in the market was also not caused by the charterers breach.
It was caused by the owners decision to sell the vessel.
He added in para 66 that it was caused thus.
At the moment of the breach, the owners had a choice whether or not to sell the vessel, as they had at any stage over the unexpired period of the charterparty.
If and when they chose to sell, market fluctuations in the vessels value thereafter would no longer affect them, for good or ill.
If the market subsequently rose, the decision to sell might with hindsight seem a poor one; if the market fell it would prove to be a wise one.
That was a matter for the owners commercial judgment and involved a commercial risk taken for their own account.
That is none the less so because it was reasonable for them to sell when faced with the charterers breach.
The decision to sell was legally independent of the breach, so far as concerns movements in the capital value of the vessel, just as was the decision of charterers not to charter in substitute tonnage in The Elena DAmico.
The breach merely provided the context or occasion for the owners to realise the capital value of the vessel.
It was the trigger not the cause.
The judge made a similar point in para 67.
The owners, he said, were not obliged to sell the vessel, as a matter of fact or law.
The arbitrator did not find that a failure to do so would have been a failure reasonably to mitigate loss.
There can be no question of the owners being obliged to realise the capital value of the vessel by selling it on breach, however reasonable such a course was from a business point of view.
Then in para 68 the judge concluded that the issue of causation was not concluded by the arbitrators finding that the sale was in reasonable mitigation of loss.
The true question was whether the owners suffered a net loss in income from the charterparty.
The judge added: The sale of the vessel mitigated this loss because it reduced the continuing costs of operating or laying up the vessel.
To the extent that the benefits flowing from the sale comprised such cost savings, there is no difficulty in treating the causal nexus between breach and benefit as established through the mitigating step of selling the vessel.
But insofar as the sale gave rise to a capital benefit, it was not caused by the breach, but by the independent decision of the owners to realise the capital value of their asset.
Although that was a benefit which flowed from the mitigating step of selling the vessel, it does not satisfy the principle that benefits are only to be taken into account to the extent that they are caused by the breach.
In short, the judge concluded in para 69 that a capital loss of this kind is different from the only relevant loss, which was a loss of income, not a loss of capital.
The judge further observed in para 70 that a further indication that the capital benefit to the owners derived from selling the vessel in 2007 rather than 2009 was not legally caused by the breach is to be found in the fact that a sale of the vessel was the kind of transaction which it was open to the owners to enter into irrespective of the charterers breach of charterparty.
Whilst the charter was on foot, the owners might have sold the vessel subject to charter, provided that they did so on terms which required the new owner to perform the charterparty so that they were not putting it out of their power to perform.
The judge considered this aspect of the case further in the remainder of para 70 and in para 71.
In para 72 the judge explained that the same result is reached if the issue is approached as one of the measure of damage rather than mitigation; the application of the causation test leads to the same conclusion.
In summary, he concluded that the change in capital value of the vessel consequent upon the drop in the market over the two years between the vessel being sold in November 2009 for immediate delivery and the vessel being sold in October 2007 had nothing to do with the contractual rights which the owners lost as a result of the charterers repudiation.
In his para 73 the judge added that the same result was dictated by the policy grounds which inform Bradburn and its extension in Parry v Cleaver and Smoker.
His reasoning was similar to that under the heading of causation.
He said this in para 73 after referring to those cases: The capital value of the vessel was a benefit which the owners had obtained for their own account prior to the breach when they bought the vessel in 2005.
They invested their money (or that which they borrowed) in an asset, taking upon themselves the risk of fluctuations in its capital value which would inevitably be affected by the sale and purchase market.
They took the risk of having invested in the vessel, and of the financial consequences of a decision of whether and when to sell her.
To allow the charterers to take the benefit of their decision to sell at what turned out to be an opportune moment in market conditions would be to allow the charterers to appropriate the fruits of the owners investment in a way that would be unfair and unjust.
In this respect the position is properly analogous to the position of a person who receives the proceeds of insurance or a pension following breach, and the policy rationale for ignoring such benefits articulated in Shearman v Folland, Parry v Cleaver and Smoker applies.
In paras 74 and 75 the judge considered a submission made to him on behalf of the charterers that questions of causation raised issues of fact which were matters for the arbitrator and not matters for the court on an appeal limited to issues of law.
The judge correctly accepted that his jurisdiction was limited to issues of law.
However, while recognising the deference and respect due to the very experienced arbitrator, there is considerable force in the points made at the end of para 74 as follows: I have nevertheless reached the conclusion that had the arbitrator applied the correct principles he could not have reached the conclusion to which he came, which is indicative of an error of law either in failing to identify the correct principles of law or in failing to apply them.
The arbitrator appears to have treated the issue as determined by: (a) the compensatory principle (award, paras 63 and 67); (b) his rejection of owners argument that the benefit had to be of the same kind as the loss mitigated (paras 67 and 68); and (c) his finding that the sale of the vessel was caused by the charterers breach and in reasonable mitigation of loss (para 73).
The finding that the sale of the vessel was caused by the charterers breach and in reasonable mitigation of loss was not legally sufficient to establish the necessary causative link between breach and benefit.
The Court of Appeal
The Court of Appeal took a different view from the judge.
Giving the leading judgment, Longmore LJ set out the conclusions of the judge as I have sought to do.
Having referred to the authorities in some detail, he said this in para 23: The important principle which emerges from these citations is that, if a claimant adopts by way of mitigation a measure which arises out of the consequences of the breach and is in the ordinary course of business and such measure benefits the claimant, that benefit is normally to be brought into account in assessing the claimants loss unless the measure is wholly independent of the relationship of the claimant and the defendant.
That should be a principle sufficient to guide the decision of the fact finder in any particular case.
In para 24 Longmore LJ said that an important question is whether there is an available market.
He referred in detail to the judgment of Robert Goff J in The Elena dAmico, where he asked himself why the normal rules of mitigation did not apply in available market cases.
The reason was that, by analogy with sale of goods cases, even if a reasonable buyer would wait before buying in other goods on the available market, the resulting loss or gain was not caused by the defendants breach of contract but by the independent decision of the innocent party not to take advantage of the available market.
If the innocent party chooses to speculate as to the way in which the market is going to go, the result of such speculation is for his account not the account of the guilty party.
Longmore LJ added that in this connection Robert Goff J cited the statement of Viscount Haldane LC in British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd (No 2) [1912] AC 673 at 689, where Robert Goff J noted that he emphasised that, for the benefit of mitigation to be taken into account, the action taken to acquire that benefit must be one arising out of the transaction.
Longmore LJ concluded thus at the end of para 24, in reliance upon the statement of Robert Goff J at p 89: A decision to speculate on the market rather than buying in (or selling) at the date of the breach did not arise from the contract but from the innocent partys decision not to avail himself of the available market.
He added in para 25 that that reasoning all depends on there being an available market which the innocent party decides for reasons of his own to ignore.
That thinking cannot be automatically transposed to cases where there is no available market.
In such cases the prima facie measure of loss in hire contracts is the difference between the contractual hire and the cost of earning that hire (crew wages, cost of fuel, etc).
But it will not usually be reasonable for the owners to claim that prima facie measure if they are able to mitigate that loss by trading their vessel if opportunities to trade that vessel arise.
If they do so trade the vessel they may make additional losses or additional profits but, in either event, they should be taken into account.
Longmore LJ further noted that in such a case the owners are not speculating on the market as they would be if there was an available market of which they choose not to avail themselves; they are just bringing into account the consequences of their decision to mitigate their loss and those consequences will arise, generally speaking, from the consequences of the breach of contract.
Then, between paras 26 and 29, Longmore LJ referred to a number of cases which made that proposition good.
As I see it, the critical para of Longmore LJs judgment is para 30, which is in these terms: The unusual facts of this case show, however, that as well as spot chartering the vessel an owner may equally decide to mitigate its loss by selling the vessel.
If so, it is not easy to see why the benefit (if any) which an owner secures by selling the vessel should not be brought into account just as much as benefits secured by spot chartering the vessel during the unexpired term of the time charterparty are, according to the decisions in The Kildare and The Wren, to be brought into account.
Nor is there any reason why the value of that benefit should not be calculated by reference to the difference between the value of the vessel at the time of sale and its value at the time when (in a falling market) the charterparty was due to expire.
Mr Croall [counsel for the charterers] accepted that, if the sale market had risen substantially during that time, the charterers would be liable for the owners inability to take advantage of that rise in the market, if the sale had arisen from the consequences of the breach of contract and been undertaken by way of mitigating the loss caused by that breach.
Christopher Clarke LJ said much the same in his judgment agreeing with Longmore LJ.
Sales LJ agreed with both judgments.
I have reached a different conclusion and prefer the reasoning of the judge.
Conclusions
Viewed as a question of principle, most damages issues arise from the default rules which the law devises to give effect to the principle of compensation, while recognising that there may be special facts which show that the default rules will not have that effect in particular cases.
On the facts here the fall in value of the vessel was in my opinion irrelevant because the owners interest in the capital value of the vessel had nothing to do with the interest injured by the charterers repudiation of the charterparty.
This was not because the benefit must be of the same kind as the loss caused by the wrongdoer.
In this regard I agree in particular with the eighth proposition identified by the judge in his para 63 and quoted in para 16 above.
As I see it, difference in kind is too vague and potentially too arbitrary a test.
The essential question is whether there is a sufficiently close link between the two and not whether they are similar in nature.
The relevant link is causation.
The benefit to be brought into account must have been caused either by the breach of the charterparty or by a successful act of mitigation.
On the facts found by the arbitrator, the benefit that the charterers are seeking to have brought into account is the benefit of having avoided a loss of just under about US$17m by selling the vessel in October 2007 for US$23,765,000 by comparison with the value of the vessel in November 2009, namely (as the arbitrator found) US$7m.
That difference or loss was, in my opinion, not on the face of it caused by the repudiation of the charterparty.
The repudiation resulted in a prospective loss of income for a period of about two years.
Yet, there was nothing about the premature termination of the charterparty which made it necessary to sell the vessel, either at all or at any particular time.
Indeed, it could have been sold during the term of the charterparty.
If the owners decide to sell the vessel, whether before or after termination of the charterparty, they are making a commercial decision at their own risk about the disposal of an interest in the vessel which was no part of the subject matter of the charterparty and had nothing to do with the charterers.
As I see it, the absence of a relevant causal link is the reason why they could not have claimed the difference in the market value of the vessel if the market value would have risen between the time of the sale in 2007 and the time when the charterparty would have terminated in November 2009.
For the same reason, the owners cannot be required to bring into account the benefit gained by the fall in value.
The analysis is the same even if the owners commercial reason for selling is that there is no work for the vessel.
At the most, that means that the premature termination is the occasion for selling the vessel.
It is not the legal cause of it.
There is equally no reason to assume that the relevant comparator is a sale in November 2009.
A sale would not have followed from the lawful redelivery at the end of the charterparty term, any more than it followed from the premature termination in 2007.
The causal link fails at both ends of the transaction.
For the same reasons the sale of the ship was not on the face of it an act of successful mitigation.
If there had been an available charter market, the loss would have been the difference between the actual charterparty rate and the assumed substitute contract rate.
The sale of the vessel would have been irrelevant.
In the absence of an available market, the measure of the loss is the difference between the contract rate and what was or ought reasonably to have been earned from employment of the vessel under shorter charterparties, as for example on the spot market.
The relevant mitigation in that context is the acquisition of an income stream alternative to the income stream under the original charterparty.
The sale of the vessel was not itself an act of mitigation because it was incapable of mitigating the loss of the income stream.
If the vessel were sold, say, a year into the two year period when it would have been employed under the repudiated charterparty, the sale of the vessel would or might be relevant for some purposes as follows.
It would shorten the period during which the owners could claim to have lost the income stream under the old charterparty and therefore the period during which there was a lost income stream to mitigate.
If it could be shown that the owners received less for the vessel than they could have done by selling it with the benefit of what remained of the old charterparty, the difference might also be recoverable on the basis that the effect of the sale would be to capitalise the value of a years hire payments.
But none of those considerations would make the sale of the vessel itself an act of mitigation.
It would simply be the exercise of the owners proprietary right which they enjoy independent of the charterparty and independent of its termination.
Disposal
For these reasons I would hold that the judge was correct to hold that the arbitrator erred in principle.
I would therefore answer the question formulated for the purposes of section 69 of the Arbitration Act 1996 (and set out in para 14 above) in the negative.
I would accordingly allow the appeal and restore the order of the judge, dated 21 May 2014, in which, inter alia, he allowed the appeal and set aside paragraph 7A of the award, in which the arbitrator declared that the charterers were entitled to a credit of 11,251,677 in respect of the benefit that accrued to the owners when they sold the vessel in October 2007 as opposed to November 2009, the earliest time they could have sold the vessel if Addendum B had been performed.
The arbitrator reserved such other issues to himself as may be necessary.
There remain a number of issues between the parties which fall for decision by the arbitrator, arising at least in part by reasons of concessions made before the arbitrator.
It appears to me that the most sensible course is for the remaining issues to be identified and formulated in the order of this Court and then remitted for determination by the arbitrator in the light of the answers set out above.
The parties should try to agree the remaining issues to be remitted and submit them to the Court.
In the absence of agreement, the parties should exchange submissions on the form of the order and costs and submit them to the Court within 28 days of the judgment being handed down.
| On 4 March 2005, the appellant (the owners) bought a cruise ship called the New Flamenco (the vessel).
The vessel had been chartered to the respondent (the charterers) by its previous owners by way of a time charterparty (the charterparty).
By a novation agreement the appellant assumed the rights and liabilities of the previous owner under the charterparty effective as from 7 March 2005.
In August 2005, the owners and the charterers concluded an agreement extending the charterparty for two years so that it was due to expire on 28 October 2007.
At a meeting on 8 June 2007, the owners and charterers reached an oral agreement extending the charterparty for a further two years, expiring on 2 November 2009.
The charterers disputed having made the agreement and maintained they were entitled to redeliver the vessel on 28 October 2007.
The owners treated the charterers as in anticipatory repudiatory beach and accepted the breach as terminating the charterparty.
The vessel was redelivered on 28 October 2007.
Shortly before the delivery the owners agreed to sell the vessel to a third party for US$23,765,000.
The owners commenced arbitration in London, as provided for by the charterparty, seeking damages for the charterers repudiatory breach [4].
The arbitrator found that an oral contract to extend the charterparty had been made, the charterers were in repudiatory breach of that contract and therefore the owners were entitled to terminate the charterparty.
This finding is unchallenged [9 10].
However, there was a significant difference between the value of the vessel when the owners sold it, and its value in November 2009 (found by arbitrator to be US$7,000,000), when the vessel would have been redelivered to the owners had the charterers not been in breach [6].
The arbitrator declared that the charterers were entitled to a credit for this difference in value, amounting to 11,251,677 (the equivalent of US$16,765,000), which could be discounted from any damages payable by the charterer to the owners from the loss of profit claim.
The credit was more than the owners loss of profit claim and would result in the owners recovering no damages [7, 12].
The owners appealed to the High Court pursuant to section 69 of the Arbitration Act 1996 on a question of law, namely whether when assessing the owners damages for loss of profits the charterers were entitled to take into account as diminishing the loss the drop in the capital value of the vessel [14].
Popplewell J held that they were not because the benefit accruing to the owners from the sale of the vessel in October 2007, instead of in November 2009, was not legally caused by the breach [15].
The charterers appealed to the Court of Appeal.
The appeal was allowed on the basis that the owners took a decision to mitigate their loss by selling the vessel in October 2007 and there was no reason why the benefit secured by doing this should not be brought into account, in the same way that benefits secured by spot chartering a vessel during an unexpired term of charterparty would be [28].
The owners now appeal that judgment to the Supreme Court.
The Supreme Court allows the owners appeal.
The charterers are not entitled to a credit for the difference in the value of the vessel when sold in 2007, in comparison to its diminished value in 2009.
Lord Clarke, with whom the other justices agree, gives the lead judgment.
The fall in the value of the vessel is irrelevant because the owners interest in the capital value of the vessel had nothing to do with the interest injured by the charterers repudiation of the charterparty [29].
This is not because the benefit must be the same kind as the loss caused by the wrongdoer, but because the benefit was not caused either by the breach of the charterparty or by a successful act of mitigation [30].
The repudiation resulted in a prospective loss of income for a period of about two years.
However, there was nothing about the premature termination of the charterparty which made it necessary to sell the vessel, at all or at any particular time.
It could also have been sold during the term of the charterparty.
When to sell the vessel was a commercial decision made at the owners own risk [32].
The owners would not have been able to claim the difference in the market value of the vessel if the market value had risen between the sale in 2007 and the time the charterparty would have terminated in 2009.
The premature termination of the charterparty was at most the occasion for selling the vessel, but it was not the legal cause of it.
There is equally no reason to assume that the relevant comparator is a sale in November 2009; there is no reason that a sale would necessarily have followed the lawful redelivery at the end of the charterparty term [33].
For the same reasons, the sale of the ship was not on the face of it an act of successful mitigation.
If there had been an available charter market, the loss would have been the difference between the actual charterparty rate and the assumed substitute contract rate.
Sale of the vessel would have been irrelevant.
In the absence of an available market, the measure of the loss is the difference between the contract rate and what was or ought reasonably to have been earned from employment of the vessel under shorter charterparties.
The relevant mitigation in that context is the acquisition of an alternative income stream to the income stream under the original charterparty.
The sale of the vessel was not itself an act of mitigation because it was incapable of mitigating the loss of the income stream [34].
Popplewell J was therefore correct to hold that the arbitrator erred in principle.
The Supreme Court prefers his conclusion to that of the Court of Appeals.
His order, setting aside the part of the arbitral award that declared that the charterers were entitled to a credit of 11,251,677 in respect of the benefit that accrued to the owners when they sold the vessel in October 2007 as opposed to November 2009, is therefore restored [36].
|
The appellants are former employees of the London Borough of Lewisham (the council).
They worked in the councils leisure department until 2002.
Their part of the councils undertaking was then contracted out to a private sector employer named CCL Ltd and they were transferred into its employment.
In May 2004 CCLs undertaking was taken over by another private sector employer named Parkwood Leisure Ltd (Parkwood), which is the respondent to this appeal.
As a result of that transfer the appellants became employees of Parkwood.
The Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794) (TUPE) applied to each of these transfers.
TUPE safeguards the rights of employees when the business in which they worked changes hands between employers.
It preserves their contractual rights so that they are enforceable against the transferee after the transfer.
Regulations 5(1) and 5(2) of TUPE provided that their contracts of employment were to have effect after the transfer as if originally made between the persons so employed and the transferee.
TUPE was replaced by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) which came into force on 5 April 2006.
But the transfers with which this case is concerned took place before that date.
So the position that applies to them is governed by the 1981 Regulations, which I shall continue to refer to as TUPE.
The council subscribed to the National Joint Council for Local Government Services (the NJC).
The NJC comprises within its membership representatives of local authority employers and trades unions.
As the appellants were employees of a local authority, their contracts of employment with the council included a term which entitled them to the benefit of the terms and conditions set by the NJC.
They were in a standard form which, under the heading Terms and Conditions of Employment, contained the following express term: During your employment with the council your terms and conditions of employment will be in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government Services, set out in the scheme of conditions of service (commonly known as the Green Book) supplemented by agreements reached locally through the councils negotiating committees.
Among the terms and conditions collectively agreed by the NJC were rates of pay for employees of local authorities.
At the date of the appellants transfer to CCL there were in place collectively agreed terms setting out the pay rates for the period from 1 April 2002 to 31 March 2004.
Those terms were honoured by CCL throughout the period of the appellants employment with that company.
In March 2004 NJC negotiations began for the period from 1 April 2004 to 31 March 2007.
There were twelve representations of the local government associations on the NJC and various unions, including UNISON of which the appellants were members.
But Parkwood does not recognise UNISON and, as it is a private sector employer, it cannot belong to the NJC or be represented on it.
So it was not a party to these negotiations.
The negotiations concluded on 4 June 2004, after the date of Parkwoods takeover of CCL.
On 14 July 2004 the NJC issued a circular summarising the three year settlement.
It included pay increases for the periods from 1 April 2004 and 1 April 2005.
Parkwood initially refused to award the appellants pay increases in accordance with the collective agreement for the periods from 1 April 2004 and 1 April 2005.
The appellants brought claims against it for unauthorised deductions from their wages contrary to section 13 of the Employment Rights Act 1996.
These claims were settled without admission of liability and the increases for these years were paid.
But Parkwood declined to award the appellants increased rates of pay in accordance with the collective agreements with effect from 1 April 2006 and 1 April 2007.
So the appellants brought further claims against Parkwood for unauthorised deductions in the London (South) Employment Tribunal (the ET).
The ET dismissed their claims, for reasons that were given in a judgment sent to the parties on 16 July 2008.
On 12 January 2009 the Employment Appeal Tribunal (the EAT), allowed the appellants appeal against that decision and remitted the claims to the ET for a hearing as to remedy: [2009] ICR 703.
Parkwood was given permission to appeal.
On 29 January 2010 the Court of Appeal (Ward, Smith and Rimer LJJ) allowed the appeal, set aside the order of the EAT and restored the decision of the ET to dismiss the appellants claims: [2010] EWCA Civ 24, [2010] ICR 793.
The issues
The issue which lies at the heart of this appeal is whether the effect of regulations 5(1) and 5(2) of TUPE is that the appellants are entitled to the benefit of increases in pay negotiated by the NJC after they were transferred into the employment of Parkwood.
It is common ground that, had this issue been solely one of domestic law, the question would have been open only to one answer.
In BET Catering Services Ltd v Ball (unreported) 28 November 1996, Lindsay J, delivering the judgment of the appeal tribunal in Mrs Balls favour, said that he could see no conceptual difficulty in a private sector employer binding itself to public sector pay rates.
In Whent v T Cartledge Ltd [1997] IRLR 153, in a judgment delivered by Judge Hicks QC, the appeal tribunal said that, once it was accepted that regulation 5 of TUPE applied and that there had been no relevant subsequent variation in the contract of employment, the issue became simply one of the true meaning of the clause that provided that the employees pay would be in accordance with the agreement made by the NJC as amended from time to time, and that there was no apparent reason why the transfer should cause any change in the meaning of these words: para 9.
The employment tribunals view that it could not be right that an employer is bound ad infinitum by the terms of a succession of collective agreements negotiated by bodies other than themselves was rejected.
In para 16 Judge Hicks said: there is simply no reason why parties should not, if they choose, agree that matters such as remuneration be fixed by processes in which they do not themselves participate.
In Glendale Grounds Management v Bradley, (unreported) 19 February 1998, and Glendale Managed Services v Graham [2003] EWCA Civ 773, [2003] IRLR 465 issues were raised as to whether a different result followed because of particular words used in the employees contract.
In Bradley it was held that the particular terms of the contract required the approval of the employer for the time being to any new negotiated terms, whereas Glendale had given none.
In Graham the clause provided that the rate of remuneration would normally be in accordance with the NJC.
The Court of Appeal held that it was an implied term of that contract that the employer must inform the employee if and when there was to be a departure from the normal situation.
BET Catering Services Ltd v Ball and Whent v T Cartledge Ltd were not referred to.
But I agree with Rimer LJs observation in the Court of Appeal in this case that the decision in Graham was impliedly consistent with the approach that was reflected in those cases: [2010] ICR 793, para 21.
The view that was taken in those decisions about the effect of conditions of the kind that the appellants rely on in this case was, in my opinion, entirely consistent with the common law principle of freedom of contract.
There can be no objection in principle to parties including a term in their contract that the employees pay is to be determined from time to time by a third party such as the NJC of which the employer is not a member or on which it is not represented.
It all depends on what the parties have agreed to, as revealed by the words they have used in their contract.
The fact that the employer has no part to play in the negotiations by which the rates of pay are determined makes no difference.
Unless the contract itself provides otherwise, the employee is entitled to be paid according to the rates of pay as determined by the third party.
This is simply what the parties have agreed to in their contract.
The same is true of the transferee in the event of the transfer of an undertaking regulated by TUPE.
Domestic law tells us that the term in the contract is enforceable against the transferee in just the same way as it was against the original employer.
As Rimer LJ said in the Court of Appeal, decisions such as Whent amount to no more than a conventional application of ordinary principles of contract law to the statutory consequences apparently created by regulation 5 of TUPE: [2010] ICR 793, para 46.
But the issue is not solely one of domestic law.
Regulation 5 of TUPE must be read together with article 3(1) of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees rights in the event of transfers of undertakings, businesses or parts of businesses (OJ 1977 L61, p 26) (the Directive), to which it gave effect.
The question that has brought the appeal before this court is whether the approach that has hitherto been taken as to the effect of TUPE can still stand, in the light of the decision of the European Court of Justice in Werhof v Freeway Traffic Systems GmbH & Co KG (Case C 499/04) [2006] ECR I 2397 (Werhof).
The ECJ was concerned in that case with the meaning and effect of article 3(1) of the Directive.
The Court of Appeal held that the decision of the ECJ in Werhof was to be understood as meaning that the transferee was not committed by article 3(1) to any collective agreement made after the expiry of an agreement that was in force at the date of the transfer, and that there was nothing in the language of regulation 5 of TUPE to indicate that it was intended to enlarge employees rights beyond those provided for by article 3(1).
Its conclusion was that, in the light of Werhof, the domestic decisions in cases such as Whent were wrong and should not be followed.
The appellants contend for what has been described as a dynamic interpretation of the effect of their contract on transferees.
That is to say, that their contracts should be given effect according to their terms, binding the transferee to give effect to collective agreements negotiated by the NJC from time to time in the same way as if they had still been employed by the council.
The respondents submit that the effect of Werhof is that static rights only are protected, with the result that the transferee is not bound by any collective agreements that were not already binding on the original employer on the date of the transfer.
The questions that must be examined, therefore, are these: (i) what is the effect of the judgment of the Court of Justice in Werhof as to the interpretation of article 3(1) of the Directive? (ii) to what extent, if at all, is there room for giving a different meaning to regulation 5 of TUPE in domestic law from that indicated by Werhof as to the meaning of article 3(1)?
The legislation
As Rimer LJ observed in para 9 of his judgment, the law in the United Kingdom prior to the bringing into force of legislation to comply with the Directive was that, if an employer transferred his business to another, the employees contracts of employment were terminated.
It was a matter entirely for the transferee to decide whether it should continue to employ the employees of the transferor in the business which it had acquired and, if so, on what terms.
That position was reversed by the implementation of the Directive in 1981 by TUPE.
The position now is that the rights of employees when the business in which they worked changes hands between employers are safeguarded.
The extent to which their contractual rights are protected so that they are enforceable against the transferee after the transfer has not hitherto been in question.
The 1977 Directive was amended by Council Directive 98/50/EC (OJ 1998 L201, p 88).
Article 3 of the amended version reproduced in substance the provisions of article 3 of the 1977 Directive, as the ECJ noted in Werhof, para 4.
Council Directive 2001/23/EC of 12 March 2001 (OJ 2001 L82, p 16) has replaced the 1977 Directive, but the tenor of the wording used in the article 3 of the 1998 Directive has been retained: Werhof, in the opinion of Advocate General Ruiz Jarabo Colomer, para 9.
As both the Advocate General and the Court of Justice directed their attention to the wording of the 1977 Directive in Werhof, and as that was the Directive that TUPE was intended to implement, I shall do the same for the purposes of this judgment.
The preamble to the Directive included the following recitals : Whereas it is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded; Whereas differences still remain in the Member States as regards the extent of the protection of employees in this respect and these difference should be reduced; Whereas these differences can have a direct effect on the functioning of the common market; Whereas it is therefore necessary to promote the approximation of laws in this field .
No mention was made in the recitals of any need to protect employers in the event of a change in employer as against the rights that were to be safeguarded for the protection of the employees.
In article 1(1) of the Directive it was declared that the Directive was to apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger.
Article 3 of the Directive included these provisions: 1.The transferors rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of article 1(1) shall, by reason of such transfer, be transferred to the transferee.
Member States may provide that, after the date of the transfer within the meaning of article 1(1) and in addition to the transferee, the transferor shall continue to be liable in respect of obligations which arose from a contract of employment or an employment relationship. 2.
Following the transfer within the meaning of article 1(1), the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.
Member States may limit the period for observing such terms and conditions, with the proviso that it shall not be less than one year.
As the aim of the Directive was the approximation of the laws of the Member States, not their harmonisation, article 7 of the Directive provided: This Directive shall not affect the right of member states to apply or introduce laws, regulations or administrative provisions which are more favourable to employees.
In that connection it should be noted that the Directive did not apply to sea going vessels: article 1(3).
Nor, according to consistent decisions of the Court of Justice, did it apply to transfers of undertakings in the context of insolvency proceedings unless the undertaking had continued to trade or was expected to continue to trade: see Transport and General Workers Union v Swissport (UK) Ltd (in administration) and another [2007] ICR 1593, paras 56 58.
TUPE was made under the authority of section 2 of the European Communities Act 1972, subsection (2) of which, as amended by section 27(1) of the Legislative and Regulatory Reform Act 2006, provides inter alia that at any time after the passing of that Act any designated Minister or department may by order, rules, regulations or scheme make provision for the purpose of implementing any EU obligation of the United Kingdom or enabling any such obligation to be implemented.
Paragraphs (1) and (2) of Regulation 5 of TUPE, as amended by section 33(4)(a) and (b) of the Trade Union Reform and Employment Rights Act 1993, provided: (1) Except where objection is made under paragraph (4A) below, a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee. (2) Without prejudice to paragraph (1) above, but subject to paragraph (4A) below, on the completion of a relevant transfer (a) all the transferors rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and (b) anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee.
A relevant transfer is a transfer to which TUPE applies, that is to say a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom: regulation 3, read with regulation 2(1).
Regulation 5(4A), which was inserted by section 33(4)(c) of the 1993 Act, provided that paragraphs (1) and (2) were not to operate to transfer the employees contract of employment and the rights, powers, duties and liabilities under or in connection with it if he informs the transferor or the transferee that he objects to becoming employed by the transferee.
Regulation 6 of TUPE was in these terms: Where at the time of a relevant transfer there exists a collective agreement made by or on behalf of the transferor with a trade union recognised by the transferor in respect of any employee whose contract of employment is preserved by regulation 5(1) above, then (a) without prejudice to section 18 of the 1974 Act or article 63 of the 1976 Order (collective agreements presumed to be unenforceable in specified circumstances) that agreement, in its application in relation to the employee, shall, after the transfer, have effect as if made by or on behalf of the transferee with that trade union, and accordingly anything done under or in connection with it, in its application as aforesaid, by or in relation to the transferor before the transfer, shall, after the transfer, be deemed to have been done by or in relation to the transferee; and (b) any order made in respect of that agreement, in its application in relation to the employee, shall, after the transfer, have effect as if the transferee were a party to the agreement.
Section 18 of the 1974 Act is now to be found in section 179 of the Trade Union and Labour Relations (Consolidation) Act 1992.
The interpretative obligation in domestic law
I shall deal with this question first so that the decision of the Court of Justice in Werhof [2006] ECR I 2397, which is the most troublesome aspect of this case, can be examined in the right context.
The appellants submit that, even if the ruling in Werhof is inconsistent with the interpretation of regulation 5 of TUPE for which they contend, it does not warrant any reading down of regulation 5 given that article 7 of the Directive expressly authorises more generous protection for employees.
The respondents, on the other hand, say that regulation 5 of TUPE was introduced to implement, and to do no more than implement, article 3 of the Directive and that, in that situation, the courts of the United Kingdom are obliged to construe the domestic legislation consistently with the Directive and rulings of the Court of Justice as to the meaning and scope of the Directive.
As to the latter point, it is well established that it is the duty of the court to construe domestic legislation which has been enacted to give effect to the United Kingdoms obligations under the EU Treaty so as to conform to those obligations, so far as it is possible to do so.
In Pickstone v Freemans plc [1989] AC 66 it was held that words were to be implied into a regulation which was designed to give effect to Council Directive 75/117/EEC dealing with equal pay for women doing work of equal value.
This was because, if the House had not been able to make that implication, the United Kingdom would have been in breach of its treaty obligations to give effect to Directives.
In Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546, where the employees had been dismissed a short time before the transfer became operative, the issue was as to the meaning of the words immediately before the transfer in regulation 5(3) of TUPE.
Lord Keith of Kinkel said at p 554: it is the duty of the court to give to regulation 5 a construction which accords with the decisions of the European Court upon the corresponding provisions of the Directive to which the regulation was intended by Parliament to give effect.
The precedent established by Pickstone v Freemans plc indicates that this is to be done by implying the words necessary to achieve that result.
Lord Oliver of Aylmerton said at p 559: If the legislation can reasonably be construed so as to conform with those obligations obligations which are to be ascertained not only from the wording of the relevant Directive but from the interpretation placed upon it by the European Court of Justice at Luxembourg such a purposive construction will be applied even though, perhaps, it may involve some departure from the strict and literal application of the words which the legislature has elected to use.
This approach is consistent with what the Court of Justice itself said in von Colson and Kamann v Land Nordrhein Westfalen (Case 14/83) [1984] ECR 1891 with regard to Council Directive 76/207/EEC on the implementation of the principle of equal treatment for men and women as regards access to employment (OJ 1976 L39, p 40).
In para 26 the court said that: the member states obligation arising from a Directive to achieve the result envisaged by the Directive and their duty under article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of member states including, for matters within their jurisdiction, the courts.
It follows that, in applying the national law and in particular the provisions of a national law specifically introduced in order to implement Directive 76/207, national courts are required to interpret their national law in the light of the wording and the purpose of the Directive in order to achieve the result referred to in the third paragraph of article 189.
All of this is, of course, now very well known and it is common ground between the parties.
Mr Linden QC for the appellants submitted, however, that there was no decision of the Court of Justice which prohibits the domestic court from doing other than applying its domestic law approach to interpretation in a case where there was no reason to be concerned that the domestic provisions fell short of what Community law requires.
In R (Hurst) v London Northern District Coroner [2007] UKHL 13, [2007] 2 AC 189, para 52 Lord Brown of Eaton under Heywood said that the interpretative effect that Community law required was strictly confined to those case where, on their particular facts, the application of the domestic legislation in its ordinary meaning would produce a result incompatible with the relevant European Community legislation.
In cases where no European Community rights would be infringed, the domestic legislation is to be construed and applied in the ordinary way.
Mr Linden referred to two decisions of the Court of Justice that he said supported this approach to the construction of domestic legislation by national courts.
They showed, he said, that it was open to national courts to adopt an interpretation of domestic legislation that had been designed to give effect to the result sought to be achieved by a Directive that was more favourable than that indicated by the Directive itself.
In Katsikas v Konstantinidis (Joined Cases C 132/91, C 138/91 and C 139/91) [1992] ECR I 6577 the court was asked to consider a provision in article 613a(1) of the German Domestic Code which had been held by the German Labour Court to have the effect of preventing a transfer of the employment relationship where one of the employees had objected to the transfer of his employment by the business in which he was employed.
Provisions to the same effect are now to be found in regulations 5(4A) and 5(4B) of TUPE.
The question was whether the words laws, regulations or administrative provisions in article 7 of the Directive, which enable Member States to introduce laws which were more favourable to employees than the Directive, covered more favourable interpretations of measures of that kind given by national courts.
The court said in paras 39 and 40 that it had been consistently held that the scope of national laws, regulations and administrative provisions had to be assessed having regard to the interpretation given to them by the national courts and that the expression used in article 7 must be understood as referring to those measures as they are interpreted by the courts of that state.
In Criminal Proceedings against Lindqvist (Case C 101/01) [2004] QB 1014 questions had been referred to the Court of Justice as to whether Council Directive 95/46/EC on the protection of individuals with regard to the processing of personal data was compatible with the general principles of freedom of expression and whether national rules might be introduced that were more restrictive than the Community provisions.
As to the first point, the court said in para 85 that it was at the stage of the application at national level of the legislation implementing the Directive in individual cases that a balance must be found between the rights and interests involved.
The courts of the member states had to make sure, however, that they did not rely on an interpretation which would be in conflict with the fundamental principles protected by the Community legal order: para 87.
In paras 97 98 it said: 97 It is true that Directive 95/46 allows the member states a margin for manoeuvre in certain areas and authorises them to maintain or introduce particular rules for specific situations, as a large number of its provisions demonstrate.
However, such possibilities must be made use of in the manner provided for by Directive 95/46 and in accordance with its objective of maintaining a balance between the free movement of personal data and the protection of private life. 98 On the other hand, nothing prevents a member state from extending the scope of the national legislation implementing the provisions of Directive 95/46 to areas not included within the scope thereof, provided that no other provision of Community law precludes it.
The question that these decisions give rise to are (1) whether regulations 5(1) and 5(2) of TUPE were designed to be more generous than article 3(1) of the Directive as interpreted by the Court of Justice in Werhof [2006] ECR I 2397, according to the respondents reading of that decision; and (2) if not, whether it is open to the national court to construe regulation 5 of TUPE more generously because to do so is not precluded by article 3(1).
Was regulation 5 of TUPE designed to be more generous?
There is no doubt that in some respects TUPE was more generous to employees than the Directive.
As already noted (see para 16, above), the Directive did not apply to sea going vessels.
In Castle View Services Ltd v Howes 2000 SLT 696, however, the First Division of the Court of Session held that the crews of such vessels were not excluded from the benefit of the regulations: see also NUMAST v P&O Scottish Ferries Ltd [2005] ICR 1270.
In Transport and General Workers Union v Swissport (UK) Ltd (in administration) [2007] 1CR 1593 it was held that TUPE applied to transfers of undertakings in insolvency cases, whereas the Directive did not.
TUPE did not adopt the one year maximum on the period for observing collective agreements after a transfer in regulation 6, as member states were authorised to do by the second paragraph of article 3(2).
And regulations 5(4A) and 5(4B) introduced by section 33 of the Trade Union Reform and Employment Rights Act 1993, which enable employees to object to being transferred, are also more generous: Katsikas v Konstantinidis v Stauereibetreib Paetz [1992] ECR I 6577.
It is not possible, however, to detect anything in regulations 5(1) and 5(2) of TUPE that is so obviously more generous than what is to be found in article 3(1) of the Directive.
Regulation 5(1) does say something that article 3(1) does not say in so many words.
This is that a relevant transfer shall not operate so as to terminate the contract of employment, which shall have effect after the transfer as if originally made between the employee and the transferee.
Article 3(1) leaves this to implication, concentrating as it does on the fundamental point that the transferors rights and obligations arising from the contract shall, by reason of the transfer, be transferred to the transferee.
This is the point that is picked up, admittedly in more elaborate language, in regulation 5(2)(a) and (b).
The words rights and obligations are expanded to rights, powers, duties and liabilities.
But the expanded phrase does not encompass anything more than was caught by the words used in article 3(1).
So there is in substance no difference.
Regulation 5(2)(b) goes on to refer to things done in relation to the transferor before the transfer, which are deemed to have been done by or in relation to the transferee.
But here too we find an expanded description of what is already captured by the words rights and obligations in article 3(1).
Mr Linden sought to find support for his argument as to the intention of Parliament from the fact that regulations 4(1) and (2) of the 2006 Regulations which came into force on 6 April 2006 were in almost the same terms as regulations 5(1) and (2) of TUPE.
He submitted that, by re enacting the equivalent provisions of TUPE, Parliament must be taken to have endorsed the interpretation that had been given to those provisions in BET Catering Services Ltd v Ball and Whent v T Cartledge Ltd (see para 7, above).
I do not think that it is open to us to make that assumption.
No reference to these authorities was made in the Public Consultation Document issued by the Employment Relations Directorate of the Department of Trade and Industry in March 2005 and none of the questions that were asked were addressed to this point.
Furthermore, by the time the 2006 Regulations were laid before Parliament on 7 February 2006 the Advocate Generals opinion in Werhof [2006] ECR I 2397 was in the public domain.
It was delivered on 15 November 2005, so anyone who was keeping an eye on what was being said about the effect of article 3(1) of the Directive would have been aware of the raising of the issue as to its limits by that time.
The judgment in Werhof was promulgated on 9 March 2006, and the 2006 Regulations came into force on 6 April 2006.
This timetable indicates that it would not be safe to infer that Parliaments intention was to do anything more than simply to give continuing effect to the Directive.
I think therefore that Rimer LJ summarised the situation correctly when he said that it seemed to him that the language of regulations 5(1) and (2) of TUPE sat harmoniously with that of article 3(1) and gave effect to it: [2010] ICR 793, para 56.
In my opinion Parliament must be taken to have intended to do no more, when it was enacting regulations 5(1) and (2), than implement article 3(1) of the Directive.
The same must be said of its intention when it was enacting the 2006 Regulations.
Is it open to the national court to interpret regulation 5 more generously?
I address this question on the assumption, whose soundness I will examine later, that the effect of the decision of the Court of Justice in Werhof [2006] ECR I 2397 is that the transfer of dynamic contractual rights was inconsistent with article 3(1) of the Directive.
It seems to me that Mr Lindens argument that it is open to the domestic courts to give regulations 5(1) and 5(2) of TUPE their ordinary meaning derives some support from what the Court of Justice said in the cases of Katsikas v Konstantinidis [1992] ECR I 6577 and Criminal Proceedings against Lindqvist [2004] QB 1014: see paras 24 and 25, above.
Lord Keiths statement in Litster v Forth Dry Dock & Engineering Co Ltd (In Receivership) [1990] 1 AC 546, 554 that it is the duty of the court to give to regulation 5 a construction which accords with the decisions of the European Court upon the corresponding provisions of the Directive to which the regulation was intended by Parliament to give effect must be read subject to this qualification.
It is open to the national court, as the Court of Justice said in para 98 of Lindqvist, to extend the scope of the national legislation implementing the provisions of the Directive to areas not included within its scope, provided that no other provisions of Community law preclude it.
In the present context this means that it would be open to the national court to give regulations 5(1) and 5(2) their ordinary and natural meaning so long as there was nothing in Werhof that indicates that it is not open to it to do so.
Mr Lynch QC for Parkwood submits however that this is exactly what, in the light of the ruling in Werhof, the national court cannot do.
Werhof
Mr Linden submits that there are two main reasons why Werhof v Freeway Traffic Systems GmbH & Co KG [2006] ECR I 2397 is not to be read as having the effect of overruling the case law of the EAT as indicated by Whent [1997] IRLR 153.
The first depends on the facts in Werhof.
He submits that it was concerned with a different question from that which arises in this case, as it did not concern a term in the employment contract which incorporated terms and conditions as agreed from time to time by a collective bargaining body such as the NJC.
The second is that in any event Werhof merely decided that the Directive did not require the transferred employees to be entitled to the benefit of subsequent collective agreements.
It did not prohibit national law from being more generous to the employees, in accordance with our own domestic case law as to the effect of regulation 5 of TUPE.
Mr Werhofs terms of employment with his original employer were governed by a framework collective agreement and wages agreement in force at the material time for workers in the North Rhine Westphalia metal and electrical industry negotiated between the trade union for the metal industry, of which he was not a member, and the metal and electrical Industry for North Rhine Westphalia, of which the undertaking was a member: Advocate General, para 17; ECJ, paras 7 and 8.
The Advocate General acknowledged that, under German employment law, a contract of employment may refer to other instruments such as collective agreements which have not necessarily been concluded by the contracting parties: para 30.
These clauses act statically or dynamically, depending on whether they refer to a specific agreement which is in force or to the agreement applicable at any time to the undertaking or economic sector in which the business is conducted: para 32.
Mr Werhofs agreement was of the dynamic kind.
This was what gave rise to the problem with which his case was concerned.
As the Advocate General explained in para 33, the problem arose as to the legal effects of an agreement of that kind when the undertaking has been transferred, where the transferor was a member of the employers federation with whom the union negotiated but the transferee was not and the collective agreement was replaced by another one after the transfer.
The referring court, the Landesarbeitsgericht at Dsseldorf, was in doubt as to whether the right to participate in amendments made to agreements following the transfer was one of the rights that passed to the transferee under article 3(1) of the Directive.
This was because, as the Advocate General explained in para 35, in Germany, the Bundesarbeitsgericht (Federal Labour Court) has interpreted paragraph 613a of the BGB stating that, under the second sentence, the collectively agreed rules become a constituent part of the contract of employment with the content that they possess at the time when the business is transferred and subsequent amendments are not relevant, because a right to benefit from the advantages of further dynamic development in negotiation cannot be inferred, since the protection granted to the rights of workers is static; the Bundesarbeitsgericht, combining the first sentence of the provision with paragraphs 3 and 4 of the TVG [Law on Collective Agreements: Advocate General, para 10], also considers that subjection of workers to subsequent collective agreements cannot do without the subjection of the employer; otherwise, if the company were transferred, the position of the employees would depend on the concluding of an arrangement for parity of treatment.
The point that the Advocate General was making in the concluding part of this paragraph was that the system of collective bargaining that was in issue in that case was enforceable by statute, which required the employer to be a member of the employers federation that was a party to the collective agreement.
The only way the collective agreement could be rendered enforceable, if the statute did not apply to it, would be by entering into a contract which gave parity of treatment to the employee.
Mr Werhofs contract of employment was not of that kind.
The first sentence of paragraph 613a(1) of the BGB provides that, where a business is transferred to another owner, the rights and obligations arising from the employment relationship existing on the date of the transfer shall pass to the owner.
The second sentence provides that, where the rights and obligations are governed by the provisions of a collective or works agreement, they shall be incorporated into the employment relationship with the new owner and the employee.
This was the provision that the Federal Labour Court had interpreted as having the effect that such agreements had the content that they possessed at the time when the business was transferred and that subsequent amendments were not relevant.
The question that the case raised was whether this interpretation was precluded by article 3(1) of the Directive.
The Advocate General drew attention to the distinction between articles 3(1) and 3(2) of the Directive in paras 38 43.
Article 3(1) refers to clauses applying to individuals and article 3(2) to those stipulated in a collective agreement.
Where the document concluded by the worker and the employer refers to a collective agreement on a matter such as wages it is governed by article 3(1) because it is included in an individual contract.
But the collective provision to which the parties refer is governed by article 3(2).
He drew attention too to the fact that the right to freedom of association under article 11 of the European Convention on Human Rights includes the right not to join or to withdraw from an association: Young, James and Webster v United Kingdom (1981) 4 EHRR 38; Gustafsson v Sweden (1996) 22 EHRR 409, para 45.
In para 49 he observed that if the new owner wished to participate in agreements with the unions he would have to join the negotiating employers federation which would curtail his freedom of association.
In paras 51 52 the Advocate General said that the right of a person acquiring an undertaking must prevail over any other of lesser importance, such as the right of the employee to the financial advantages arising from the development of the collective agreements signed by the transferor, otherwise the consequences would be similar to contracts imposing obligations on third parties in breach of the general principle pacta tertiis nec nocent.
In para 53 he concluded that a dynamic interpretation of the clause in Mr Werhofs contract was inappropriate.
He suggested that the Court of Justice should rule that it was not contrary to article 3(1) of the Directive if a transferee, who was not a member of an employers federation which negotiates such agreements, did not apply collective agreements which had replaced the one which was in force at the time of change of ownership.
The Court of Justice was more guarded in its approach to the question whether the principle that contracts cannot impose obligations on third parties would be infringed.
In paras 24 and 25 it noted that the Community legislature has sought to ensure that, on the transfer of an undertaking, employees enjoyed special protection designed to prevent the erosion which could result from the application of that principle.
According to the case law of the court, the Directive was intended to safeguard the rights of employees by allowing them to continue to work for the new employer on the same conditions as those agreed with the transferor.
The rights and obligations arising from a collective agreement to which the contract of employment refers were automatically transferred to the new owner even if the new owner was not a party to any collective agreement.
That having been said, however, the court found two reasons for holding that Mr Werhof could not maintain that his clause referring to collective agreements must necessarily be dynamic, so that by the application of article 3(1) of the Directive it referred to collective agreements concluded after the date of the transfer.
The first was that account had to be taken of article 3(2), which contained limitations to the principle that the collective agreement to which the contract of employment referred was applicable.
It showed that the object of the Directive was merely to safeguard the rights and obligations of employees in force on the date of the transfer, and was not intended to protect hypothetical advantages flowing from future changes to collective agreements: paras 28 29.
The second was that, although the interests of the employees must be protected, those of the transferee could not be disregarded.
If the dynamic interpretation were to be applied it would mean that the transferees fundamental right not to join an association could be affected, whereas that right would be fully safeguarded if the static interpretation were to be adopted: paras 31 35.
The Court concluded its judgment with a ruling in these terms, at para 37: .
Article 3(1) of the Directive must be interpreted as not precluding, in a situation where the contract of employment refers to a collective agreement binding the transferor, that the transferee, who is not a party to such an agreement, is not bound by collective agreements subsequent to the one which was in force at the time of the transfer of the business. [emphasis added] Is a dynamic interpretation precluded by article 3(1)?
The Advocate Generals summary of the facts indicates that the system under national law which applied in Werhof was different from that which formed the context for the appellants contracts of employment with the council.
Among other things, the German employment law with reference to which Mr Werhofs employment contract was framed assumes that the employer is a member of the employers federation which is a party to the collective agreement and, in consequence, is bound by statute to comply with it: Advocate General, para 12; see also Employment Law In Europe 2nd ed (2009), paras 11.197 11.200.
There is no such statutory obligation in our domestic law, nor is membership of the negotiating body a prerequisite for the enforceability of any agreement that has been reached collectively.
It all depends upon what the parties have provided for in their individual contracts.
There is therefore something to be said for Mr Lindens submission that the decision in Werhof is distinguishable on its facts, especially as to the point that the Court of Justice made in paras 31 35 of its judgment about the transferees fundamental right not to be required to join an employers federation.
The more important point of distinction for present purposes, however, is the second point on which Mr Linden relies: see para 34, above.
The question which the Court of Justice addressed by its ruling in Werhof is not the same as that which requires to be answered in this case.
It was sufficient to resolve the issue that had been raised by the referring court for it to say that the ruling of the Federal Labour Court summarised by the Advocate General in para 35 of his opinion was not precluded by article 3(1) of the Directive.
In our case the question has to be looked at the other way round.
This is because, as the Court of Justice recognised in Criminal Proceedings against Lindqvist [2004] QB 1014, para 98, there is nothing to prevent a member state from extending the scope of the national legislation implementing the provisions of the Directive to areas not included within it, so long as no other provisions of Community law preclude this.
It would, of course, not be open to the national court to adopt that approach if the effect of the Directive was that it was precluded by it.
That is why the way in which the Court of Justice framed its ruling in Werhof does not answer directly the question that needs to be resolved in this case.
The absence of a direct answer to it would not have given rise to difficulty if it had been possible to infer from the judgment how the question would have been answered.
Mr Lynch invited us to draw that inference, as his case is that the principle enunciated in the judgment is that the transfer of dynamic contractual rights is inconsistent with the Directive so regulation 5 of TUPE must be confined to static contractual rights.
But it is not obvious, if it is open to the national courts to interpret legislation that was intended to give effect to the Directive more generously in favour of employees than the Directive itself envisaged, why this should be so.
The first of the two reasons for the courts decision, that the object of the Directive was merely to safeguard the rights and obligations of employees in force on the date of the transfer, would not seem to preclude a more generous interpretation if the national court thought that this was appropriate to give effect to the ordinary meaning of TUPE.
There are various reasons for thinking that, when TUPE was originally being framed, it was thought that employment contracts such as those which the appellants entered into which provided for a dynamic approach to be taken to collective agreements were permitted by the Directive.
The aim of the Directive was to promote approximation of laws among the member states, not their harmonisation.
None of the recitals in the preamble refer to a need to balance protection for employers against the protection given to employees in the event of a change of employer.
And it was stated in article 7 of the Directive that it was not to affect the right of member states to introduce laws which are more favourable to employees.
It hardly needs to be said that the question whether Werhof precludes the dynamic approach, if this is indeed what the employment contract interpreted according to the principles of domestic law provides for, is of fundamental importance to the many employees who work in sectors where their terms and conditions of employment are commonly determined through collective bargaining.
The second reason for the courts decision was its finding that, when interpreting the Directive, account had to be taken of the principle of the coherence of the Community legal order which required secondary Community legislation to be interpreted in accordance with the general principles of Community law among which was that the right not to join an association or a union was protected in the Community legal order: paras 32 33.
As I have already mentioned, this point was directly relevant in Mr Werhofs case because of the way German employment law deals with collective agreements.
Our domestic law is entirely different.
There is no equivalent statutory framework.
The matter depends entirely on the domestic law of contract, under which parties are at liberty to agree to abide by agreements arrived at by a process in which they do not, and are not required to, participate.
Parkwood has not sought to argue that regulation 5 of TUPE is objectionable because it breached its article 11 Convention right of freedom not to join an association.
There is no question of its being forced to become a member of one of the participants in the NJC.
The appellants contracts do not require this, and in any event it would not be eligible to do so.
In these circumstances, as I consider the answer to the question not to be acte clair, I would refer the issue as to whether article 3(1) of the Directive precludes national courts from giving a dynamic interpretation to regulation 5 of TUPE in the circumstances of this case to the Court of Justice of the European Union for a preliminary ruling under article 267 TFEU (ex article 234 EC).
I would invite the parties to make submissions in writing within 28 days on the questions to be referred to the Court of Justice.
| The issue in this appeal is whether, where there has been a transfer of employees to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) apply, the new employer is bound by a term of an employees contract of employment which provides that terms and conditions of employment will be in accordance with collective agreements negotiated from time to time.
UK courts have previously held that Regulation 5 TUPE renders such a dynamic clause enforceable against the new employer.
This appeal considers whether that approach requires to be modified in light of a decision of the European Court of Justice in Werhof v Freeway Traffic Systems GmbH & Co KG (Case C 499/04) [2006] ECR I 2397 (Werhof).
Werhof interpreted Article 3(1) of the Directive which TUPE implements in domestic law (Directive 77/187/EEC on the approximation of the laws in the Member States relating to the safeguarding of employees rights in the event of transfers of undertakings, businesses or parts of businesses, as amended (the Directive).
The Appellants are former employees of the London Borough of Lewisham (the council) who worked in the councils leisure department until 2002.
The council subscribed to the National Joint Council for Local Government Services (the NJC).
The Appellants contracts of employment provided that their terms and conditions of employment will be in accordance with the collective agreements negotiated from time to time by the NJC supplemented by agreements reached locally through the councils negotiating committees.
In 2002 the part of the councils undertaking in which the Appellants worked was contracted out to CCL Ltd.
In 2004, CCL Ltds undertaking was taken over by the Respondent, another private sector employer.
TUPE applied to each of these transfers.
The employees therefore first became employees of CCL Ltd and then of the Respondent.
At the date of the transfer to CCL Ltd, there were collectively agreed terms setting out pay rates from 1 April 2002 to 31 March 2004.
Subsequent NJC settlements provided for further pay increases.
The Respondent refused to increase the Appellants pay in line with the NJC settlement with effect from 1 April 2006 and 1 April 2007.
The Appellants brought claims for unauthorised deduction from wages.
These were dismissed by the Employment Tribunal.
The Appellants appeal to the Employment Appeal Tribunal was successful, but the Court of Appeal restored the Tribunals decision.
It held that Werhof meant that Article 3(1) of the Directive did not bind the transferee to any collective agreement made after the transfer and that Regulation 5 TUPE did not indicate any intention to provide employees with greater protection.
The Appellants appealed to the Supreme Court.
The Supreme Court unanimously holds that there should be a reference to the Court of Justice of the European Union for a preliminary ruling to establish whether Article 3(1) of the Directive precludes national courts from giving a dynamic interpretation to Regulation 5 of TUPE in the circumstances of this case.
Lord Hope gives the judgment, with which the other members of the court agree.
Domestic legislation enacted so as to give effect to the UKs EU obligations must be construed so as to conform to those obligations, so far as possible to do so.
Two questions arise: (i) whether Regulations 5(1) and 5(2) TUPE were designed to be more generous than Article 3(1) of the Directive, as interpreted in Werhof; (ii) if not, whether it is open to the national court to construe those Regulations more generously because that is not precluded by Article 3(1) of the Directive: [19] [26].
As to the first question, Parliament must be taken to have intended to do no more in enacting Regulations 5(1) and (2) TUPE than implement Article 3(1) of the Directive.
Regulations 5(1) & (2) TUPE provided that contracts of employment to which it applied were to have effect after the TUPE transfer as if originally made between the employee and the transferee.
Although in some respects TUPE was more generous to employees that the Directive, there was nothing indicating such an intention in Regulations 5(1) & (2).
Although it is the 1981 TUPE Regulations which apply to this case, they were replaced by new regulations in 2006, which contained equivalent provisions to Regulations 5(1) & (2).
It was not possible to infer from this that Parliament had intended to endorse the interpretation which had been given to Regulation 5 in the existing domestic case law: [28] [30].
As to the second question, it is open to a national court to extend the scope of national legislation implementing a Directive to areas not included within the scope of the Directive, provided that no other provisions of EU law preclude that: [32].
The scope of Article 3 has now been interpreted by the ECJ in Werhof, which was a preliminary reference from Germany.
German law provides that collectively agreed rules become part of the employment contract with the content that they possess at the time when the business is transferred and are not updated after the transfer.
It therefore adopts a static approach.
The ECJ held such an approach was not precluded by Article 3(1) of the Directive: [37] [42] The question in this case is a different one: whether a member state is precluded from extending the protection afforded to employees on transfer, so as to provide dynamic protection, where that would be the consequence of an application of domestic contract law: [44].
It was not possible to infer from Werhof how the ECJ might have answered that question: [45].
First, the Directives aim was to promote approximation, not harmonisation, of law.
It was not to affect the right of member states to introduce laws more favourable to employees: [46].
Secondly, in Werhof the ECJ had taken into account the new employers right not to join an association or union, protected by Article 11 of the European Convention on Human Rights.
That had been of relevance there because of the way German employment law deals with collective agreements.
It was not a concern in this case, because the matter depended entirely on the domestic law of contract: [47].
The question whether Article 3(1) of the Directive precludes national courts from giving a dynamic interpretation to regulation 5 of TUPE in the circumstances of this case should therefore be referred for a preliminary reference to the Court of Justice: [48].
|
This appeal is concerned with the meaning and application of the client money rules and client money distribution rules contained in Chapter 7 of the Client Assets Sourcebook (CASS 7) issued by the Financial Services Authority for the safeguarding and distribution of client money in implementation of the Markets in Financial Instruments Directive 2004/39/EC (MiFID).
The central feature of the client money rules is the requirement that CASS 7 imposes on MiFID firms to segregate money that they receive from or hold for or on behalf of their clients in the course of MiFID business by placing it into a client money account so that it is kept apart from the firms own money.
Under English law the mere segregation of money into separate bank accounts is not sufficient to establish a proprietary interest in those funds in anyone other than the account holder.
A declaration of trust over the balances standing to the credit of the segregated accounts is needed to protect those funds in the event of the firms insolvency.
Segregation on its own is not enough to provide that protection.
Nor is a declaration of trust, in a case where the clients money has been so mixed in with the firms money that it cannot be traced.
So segregation is a necessary part of the system.
When both elements are present they work together to give the complete protection against the risk of the firms insolvency that the client requires.
That is why rule 14.1 of the Solicitors Regulation Authority Accounts Rules 2011 provides that client money must without delay be paid into a client account, except when the rules provide to the contrary.
Rule 6.3.1(b) of the Law Society of Scotland Practice Rules 2011 contains a provision to the same effect.
The Law Society of Scotlands guidance to rule 6.3.1(b) states that without delay normally means on the same day.
These elementary principles were adopted by section 139 of the Financial Services and Markets Act 2000 (the 2000 Act) when the rule making powers conferred on the FSA relating to the handling of client money were being formulated.
CASS 7 provides for the segregation of client money, and it creates a statutory trust over client money to support and reinforce the purposes of segregation.
This ensures that client money is kept separate and not used for the firms own purposes.
It protects the segregated funds from the claims of the firms creditors in the event that protection is most needed, which is the firms insolvency.
It also enables client money to be returned to the clients without delay, as it is beyond the reach of the firms creditors.
If the system works in the same way as it does under the accounts rules that regulate the activities of solicitors, the clients whose money has been segregated will be assured that their client money entitlement is not depleted by having to share the money in the clients account with others who may have claims against the firm, such as those whose client money has not been segregated and those for whom the firm does not hold any client money at all.
The rules that CASS 7 sets out are complex, and in the present case they have given rise to many problems.
This appeal raises three issues that are of fundamental importance to the way the system that CASS 7 lays down is to be worked out.
The first is when does the statutory trust arise? Does it arise only when the money has been placed in a segregated client account, or is the money subject to the trust as soon as it is in the firms hands irrespective of where it puts the money? If the latter is the case, the trust will extend to any client money that is held in the firms house account and has not yet been segregated as well as to money that has been segregated.
The second and third issues are concerned with what happens to client money in the event of the failure of the firm (described by CASS 7 as a primary pooling event).
The second is directed to the rules that CASS 7 lays down for the way client money is to be distributed should that event occur.
It asks whether these arrangements apply to money that is identifiable as client money in the firms house accounts or only to money that is in the segregated client accounts.
The third asks whether the right to participate in the pool that is to be distributed rateably to the clients is given only to those clients for whose benefit client money is held in the segregated client accounts, or whether a client whose money ought to have been segregated but was being held in a house account when the event occurs is entitled to participate in that money too.
I have had the great advantage of reading in draft Lord Walkers judgment, in which the background to the issues that we have to consider is so fully and carefully set out.
Those who are interested will find most of the provisions of CASS 7 that are relevant to those issues set out in appendix 1 to the judgment of Arden LJ in the Court of Appeal [2011] Bus LR 277, 325.
There are some omissions, but they are not important.
All the provisions that Lord Walker refers to in his analysis of the points that matter are to be found there.
As to the first issue, which is the time at which the statutory trust arises, I agree for the reasons Lord Walker gives that the trust arises on receipt of the money.
But I have also found it helpful to consider the issue from the position of Scots law.
As Lord Walker has explained in para 47, it is clear that CASS 7 was intended when transposing the Directives into national law to make use of the concept of holding money on trust.
But this is expressed by section 139(1) of the 2000 Act to be the position in relation to England and Wales and Northern Ireland only.
Section 139(3) provides: In the application of subsection (1) to Scotland, the reference to money being held on trust is to be read as a reference to its being held as agent for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him.
This provision is carried forward into the description of the statutory trust in section 7.7 of CASS which Lord Walker has quoted in full in para 41, below.
The wording of section 139(3) might be taken as an indication that the concept of trust is unknown in Scots law.
That would be a misconception.
There certainly is a law of trusts in Scotland.
This has been recognised from time to time by statute: see, for example, the Trusts (Scotland) Act 1961 and section 17(5) of the Trustee Investments Act 1961.
There are significant differences between English and Scots law as to its nature and origin.
For example, the law of Scotland does not accept that a relationship in trust can arise in equity.
It has a more limited basis.
Its origin can be traced back to mandate or commission, which is part of the law of obligations: Stair, Institutes of the Law of Scotland (1693), I.12.17.
Various attempts have been made to explain the basis for the concept.
They have not been successful, as its nature is considered to be of too anomalous a character to admit of a precise definition.
But it can at least be said that the duty that the trustee owes to the beneficiary is fiduciary in character: Wilson and Duncan, Trusts, Trustees and Executors 2nd ed, (1995), para 1 63.
In Council of the Law Society of Scotland v McKinnie 1991 SC 355 a question arose as to the character of funds held by a solicitor to the credit of his client account as at the date of his sequestration under section 31(1) of the Bankruptcy (Scotland) Act 1985.
Delivering the opinion of the court Lord President Hope said at pp 358 359: The order of priority in distribution which is prescribed by section 51 of the 1985 Act leaves no room for doubt that if sums at credit of the clients account were to be regarded as having vested in the permanent trustee, these funds would be exposed to the claims of all those entitled to a ranking on the debtors estate.
But property held on trust by the debtor for any other person lies outside this scheme of distribution altogether.
Section 33(1)(b) of the Act provides that such property shall not vest in the permanent trustee.
So if sums at credit of the clients account are to be regarded as having been held by the solicitor on trust on his clients behalf, it must follow that these sums do not vest in the permanent trustee on the sequestration of the solicitor, and accordingly that the judicial factor was right to resist the instruction by the accountant that the sums held on clients account in this case were to be made over to the permanent trustee.
We are in no doubt that sums held to the credit of the clients account are fiduciary in character and that for this reason they are sums to which section 33(1)(b) of the 1985 Act applies.
It is well settled that a solicitor stands in a fiduciary relation to his client in regard to all sums of money which he has received on the clients behalf.
Authority for the proposition in the last sentence of that passage is to be found in Jopp v Johnstons Trustee (1904) 6 F 1028.
In that case a law agent sold shares belonging to his client Mrs Jopp and lodged the money that he received for them in his own bank account, which at that time was in credit.
He later died insolvent and his estates were thereafter sequestrated.
It was held that, as he was in the position of a trustee in regard to the sum realised by the sale of his clients shares, the amount in his account at his death which represented the trust money still belonged to his client and did not form part of his sequestrated estate.
The case was concerned principally with the problem that had been created by the fact that the clients money had been mixed by the law agent with his own funds.
But some passages in the opinion of Lord Justice Clerk Macdonald are of particular interest in the present context.
At p 1034 the Lord Justice Clerk said: Now, there can be no doubt whatever that throughout the whole time during which the price of these shares was dealt with, Mr Johnston stood in a fiduciary relation to Mrs Jopp.
At p 1035 he referred to, and adopted, the solution to the problem that was to be found in English law: I have no difficulty in holding with Sir George Jessel MR in the case of In re Halletts Estate (1880) LR 13 Ch Div 696, 719, that, as he quoted from Lord Hatherley, if a man mixes trust funds with his own, the whole will be treated as [the] trust property, except [] so far as he may be able to distinguish what is his own.
It is no doubt true that Mr Johnston was not in the strict sense of the word Mrs Jopps trustee.
He was undoubtedly, while he held the money, under the obligations of trust, the obligation to hold it for another and to deal with it solely for that others interest.
After referring to a passage in the judgment of Thesiger LJ in Hallett at p 723 to the same effect, he added these words: Now, here, whatever Mr Johnston did, the fiduciary relation of agent undoubtedly subsisted, and to have uplifted the whole of these deposit receipts and used the contents for his own purposes would undoubtedly have been an absolute breach of his duty and the fiduciary position in which he stood.
I think that these passages tell us two things.
The first thing is that, while Scots law has no difficulty in using the word trust in this context, the concept is more accurately and precisely analysed by referring to the fiduciary duty that the agent owes to his client with regard to money that he holds on his clients behalf.
So the fact that a statutory trust is rejected by section 139(3) of the 2000 Act in favour of agency in the application of section 139(1) to Scotland, while at first sight surprising, does appear to have some basis in the language that was used to explain the relationship in Jopp v Johnstons Trustee.
We were shown a copy of a letter by the Chairman of the Scottish Law Commission, Lord Drummond Young, to the Advocate General for Scotland dated 28 September 2010 in which the Advocate Generals attention was drawn to section 139(3) of the 2000 Act, to CASS 7.7.1G and to an almost identical provision which is to be found in Chapter 5.3 of CASS in respect of insurance moneys.
Inquiries by the Commissions trust team of lawyers in HM Treasury had received a reply to the effect that the instructions for the 2000 Act did not disclose a policy reason for the choice of agency.
It appeared that an identical provision in section 55(5) of the Financial Services Act 1986 had been adopted without any independent policy consideration being given to the matter when the 2000 Act was being prepared.
The question was raised as to whether the CASS rules would achieve the intended level of client protection in the event of an insolvency north of the border.
This brings me to the second point that can be taken from the passages that I have quoted from Jopp v Johnstons Trustee.
It is directed to the question of how the agency approach that must be applied in Scotland can guide us towards a solution of the issues raised in this appeal.
I would approach this question on the assumption that it was the intention of Parliament to provide the same level of client protection north of the border as was to be available in England and Wales and in Northern Ireland.
This assumption is based on the fact that no policy reason has been disclosed for the different treatment that the legislation has laid down for the application of section 139(1) of the 2000 Act to Scotland.
The explanation for the difference may lie with the Parliamentary draftsman in the Lord Advocates department.
It is the kind of thing that would be picked up when he was checking through the legislation to see whether it should be expressed differently in the terminology of Scots law so as to achieve what he understood its effect to be in the other parts of the United Kingdom.
The Lord Justice Clerks opinion in Jopp v Johnstons Trustee would have provided him with the terminology he was looking for.
Returning then to the first issue, which is the time at which the statutory trust arises, the solution that would be arrived at under the agency approach is very simple.
As Lord Justice Clerk Macdonald said in Jopp v Johnstons Trustee at p 1034, the agent stands in a fiduciary relation to his client throughout the whole time that the clients money is in his hands.
The relationship from start to finish is one of agency.
At no stage does the money cease to be the clients money and become the property of the agent.
The fiduciary relationship which gives rise to the statutory trust arises on receipt of the money.
There is no interval between the moment of receipt and the commencement of the fiduciary relationship during which the agent can treat the money as his own.
The relationship remains throughout the period while the money is held in a client or house account until the obligation to the client has been discharged.
That was held to be the position in Council of the Law Society of Scotland v McKinnie, and I would apply the same reasoning here.
So if this were a Scottish case I would have no difficulty in adopting the reasons that Lord Walker gives in para 63.
As he explains in para 76, the clear conclusion he reaches on the first issue is that the effect of CASS 7 is that under the alternative approach referred to in 7.4.16, as well as under the normal approach referred to in 7.4.17, a firm receives and holds clients money as a trustee, with the beneficial ownership remaining in the clients.
I have no doubt that the law of Scotland would arrive at the same conclusion.
Lord Walker found it helpful to consider the third issue, which is whether participation in the client money pool (CMP) is dependent on actual segregation (in other words, how the CMP is to be distributed), before the second issue, which is whether the primary pooling arrangements apply only to the client money in house accounts (in other words, what is to go into the CMP): see para 89.
I agree, and like him I would approach the third issue on the basis that the CMP consists of the aggregate of the segregated funds holding clients money immediately before the primary pooling event (PPE).
I also agree that the words each client in the rule of distribution set out in 7.9.6R(2) must be taken in context to mean each client for whom client money is held as identified in the last reconciliation before the PPE.
The agency approach would lead one to expect that the CMP was to be distributed on the basis of what has been referred to as the contributions theory, rather than on the basis of the claims theory.
Sums received from or on behalf of the client are fiduciary in character.
They retain that character until all the obligations arising from the fiduciary relationship are discharged.
The fiduciary relationship protects them from being used to meet claims against the agent for breach of duties that he owes to others.
It would be surprising if the rule of distribution was intended to have the effect of removing that protection, which is what the claims basis of distribution would achieve.
As I see it, clear language would be needed to achieve such a paradoxical result.
Lord Dyson says in para 144 that the general scheme of CASS 7 is that all client money is subject to a trust that arises upon receipt of the money by the firm and that the distribution rules are intended to protect all the clients money received prior to a PPE.
He disagrees with Lord Walkers description of the notion that clients must be taken to have implicitly accepted the risk, on a PPE, of having to share their segregated funds with non segregated clients as unrealistic.
He finds nothing surprising in the notion that, once a PPE occurs, the treatment of client money is subject to a different regime from that to which it was subject before.
Lord Neuberger of Abbotsbury MR was of the same view in the Court of Appeal.
In para 216 he said that it seemed to him unlikely that the FSA would have intended that client money which had yet to be segregated was intended to be treated differently from client money which had been segregated either under the normal approach or under the alternative approach.
I find it hard to understand, for my part, why it should be thought that it was the intention of the FSA to depart from the basic principles upon which the rules that regulate the activities of solicitors have been based.
As I explained at the outset of this judgment, a declaration of trust, in a case where a clients money has been so mixed in with the firms money that it cannot be traced, is not enough to provide the protection that the client needs in the event of the firms insolvency.
Segregation is a necessary part of the system.
When both elements are present they work together to give the protection that the client requires.
To construe CASS 7 in the way Lord Dyson suggests would have the effect of depriving the client of the protection which the rules were designed to achieve at the very moment when it is most needed.
It is not just the exceptional nature of the facts of this case that make the consequences of his approach so striking.
It affects every client whose money is handled by any firm operating in the area of MiFID business, however large or small that amount may be.
If authority is needed to show that the requirement of segregation is crucial for their protection and how segregation works hand in hand with the fiduciary character that is attached to the funds that are segregated, it can be found in the observations by Professor Gower in his report, Review of Investor Protection which are quoted by Lord Collins in para 186, in the consultation papers to which he refers in para 187 and in Council of the Law Society of Scotland v McKinnie 1991 SC 355 to which I refer in para 9, above.
Like Lord Walker, I agree with the conclusion that Briggs J reached as to the effect of the final words of 7.9.6R(2) (calculated in accordance with CASS 7.9.7R).
Their effect, as Briggs J said in para 255, was to provide a basis for the clients rateable participation in the CMP.
It makes mandatory in the event of a PPE the standard method of money reconciliation that is set out in Annex 1 to CASS 7.
Given that it is to be expected that this exercise will have been carried out according to the rules at the Point of Last Segregation (PLS), it is hard to see why it must be gone over again now.
But whatever the purpose is that this rule is designed to serve, it does not contain a direction of the kind that I think would be needed to override the protection that attaches to the money that clients have actually contributed in consequence of the fiduciary relationship.
I agree with Lord Walker that GLGs appeal on the third issue should be allowed.
The second issue has to be approached on the assumption that there were movements in the client money requirement during the gap period between the PLS and the PPE and that significant sums of client money were still traceable in the house accounts at the PPE.
As Lord Walker points out in para 101, the issue resolves itself into a contest between what has been referred to as the final reconciliation theory and the general trust law theory.
The problem is best focussed by looking at the position of the unsegregated last minute provider of client money.
Is that client to be left to claim against LBIE as an unsecured creditor, or is its contribution to be protected in the same way as the contributions of those whose money was contributed before the PLS? Here again the agency approach tends to indicate that the money that this client provided should be protected by the fiduciary obligation which attached to that money as soon as it was received by LBIE.
The alternative is hard to reconcile with the fiduciary relationship, which must be taken to have been designed to protect the client from having to claim under the general law of insolvency.
It was accepted that there is nothing to prevent a final internal reconciliation from being carried out to take account of movements in clients entitlements during the gap period.
In any event I would so read the relevant provisions of CASS 7.
That being so, I do not find it difficult to conclude, in agreement with Briggs J and Lord Walker, that this is what ought to be done in this case.
I would therefore dismiss GLGs appeal on the second point and make the order which has been proposed by Lord Walker.
The question raised by the Scottish Law Commission as to whether the same level of client protection is available in Scotland as elsewhere in the United Kingdom may not have been entirely resolved by the way the questions before us in this appeal have been answered.
But it respectfully seems to me that the direction in section 139(3) of the 2000 Act that the reference to money being held on trust is to be read as a reference to its being held as agent offers a level of protection that is no less effective.
This is because it is to be assumed that the relationship between the agent and the client is a fiduciary relationship of the kind identified in Jopp v Johnstons Trustee and Council of the Law Society of Scotland v McKinnie.
It is worth noting too that I have found it helpful to examine the problems that this case gives rise to by assuming that the relationship between LBIE and its clients was indeed one of agency.
The clarity with which the effect and consequences of that relationship has been described is compelling.
As it is to be assumed that the protection given by the trust approach was intended to be just as effective, I think that the Scottish approach provides strong support for the conclusions that Lord Walker has reached in accordance with the direction in section 139(1) of the Act that applies to England and Wales.
I share Lord Walkers concern at the effect of the answers that the majority give to the second and third issues, and especially to the third issue which is so crucial to the protection of investors generally.
LORD WALKER
Introduction
Lehman Brothers International (Europe) (LBIE) is incorporated in England as an unlimited company with its head office in London.
It was the principal European trading company in the Lehman Brothers group.
It was authorised and regulated by the Financial Services Authority (FSA).
LBIE was not a licensed deposit taker but it was authorised to hold clients money.
Its ultimate holding company is Lehman Brothers Holdings Inc (LBHI), a company incorporated in Delaware and based in New York, now in Chapter 11 bankruptcy.
LBIE was put into administration by an order of Henderson J made before the opening of business on Monday, 15 September 2008.
Many difficulties have arisen in the administration and the administrators have made several applications to the Companies Court for directions under paragraph 63 of Schedule B1 to the Insolvency Act 1986.
Probably the most contentious and difficult of these is the client money application, which has led to this appeal.
Nine representative claimants were joined as parties to argue the issues.
On 15 December 2009 Briggs J, after a twelve day hearing, made an order giving directions on a range of issues concerned with client money: [2009] EWHC 3228 (Ch), [2010] 2 BCLC 301.
Some of the issues were matters of detail but others are of general and fundamental importance to LBIEs clients.
Four of these general issues were made the subject of an appeal to the Court of Appeal, and on 2 August 2010 the Court of Appeal (Lord Neuberger of Abbotsbury MR, Arden LJ and Sir Mark Waller) allowed the appeal on two of the four issues: [2010] EWCA Civ 917, [2011] Bus LR 277, [2011] 1 CMLR 27, [2011] 2 BCLC 164.
Permission to appeal or cross appeal to the Supreme Court was granted on three of those issues.
They are closely interconnected, and all of them depend on the application (to a complicated set of assumed facts) of what is known as CASS 7, that is, chapter 7 (Client money: MiFID business) of the Client Assets Sourcebook issued by the FSA.
MiFID is an abbreviation for the Markets in Financial Instruments Directive 2004/39/EC and CASS 7 has evolved from earlier regulatory instruments into a form intended to transpose MiFID and its Implementing Directive, Commission Directive 2006/73/EC dated 10 August 2006.
The FSAs powers of making rules and publishing guidance are conferred by sections 138, 139, 155 and 157 of the Financial Services and Markets Act 2000 (FSMA).
Section 139(1)(a) expressly permits rules to make provision which results in clients money being held on trust in accordance with the rules.
At the beginning of his judgment Briggs J (paras 2 to 7) gave an introduction to the problems in terms which I gratefully adopt: 2.
When first read, CASS 7 appears to provide a relatively straightforward and intelligible code for the safeguarding of client money by regulated firms.
In the barest outline, it provides for client money to be identified and promptly paid into segregated accounts, segregated that is from the firms house accounts.
It provides for client money to be held on trust, in substance for the clients for whom it is received and held.
Finally in the event of the failure of the firm, the rules provide for the pooling of the client money, thus far segregated and held on trust, and for its distribution to those entitled to it under that trust, pari passu in the event of a shortfall. 3.
In an ideal world, the flawless operation of the scheme created by the CASS 7 rules would ensure first, that the clients money could not be used by the firm for its own account and secondly, that upon the firms insolvency, the clients would receive back their money in full, (subject only to the proper costs of its distribution) free from the claims of the firms creditors under the statutory insolvency scheme.
The rules would achieve those twin objectives by ensuring that, promptly upon receipt, client money was held by a firm as trustee, separately and distinctly from the firms own money and other assets, and therefore out of the reach both of the firm (for the conduct of its business) and of the firms administrator or liquidator upon its insolvency (for distribution among its creditors). 4.
In the imperfect and hugely complex real world occupied by LBIE and its numerous clients, there has on the facts which I am invited to assume for present purposes been a falling short in the achievement of both of those objectives on a truly spectacular scale.
This shocking underperformance has occurred for a number of reasons, of which two stand out as prime causes.
The first is that (again on the facts which I am invited to assume) LBIE failed to identify as client money, and therefore also failed to segregate, vast sums received from or on behalf of a significant number of its clients.
In this respect, the most significant group of clients whose money LBIE failed to segregate were its own affiliates, that is members of the Lehman Brothers group of companies of which [LBHI] is the ultimate parent.
Those affiliates have advanced client money claims against LBIE in aggregate exceeding US$3 billion.
To put that extraordinary amount in perspective, the aggregate of the amounts actually held by LBIE in segregated accounts for clients for which it recognised a segregation obligation pursuant to CASS 7 when it went into administration on the morning of 15 September 2008 had a face value of only US$2.16 billion approximately. 5.
To the un segregated affiliates claims in excess of US$3 billion must be added claims of independent clients of LBIE who have challenged LBIEs treatment of its relationship with them as one of debtor/creditor rather than trustee and beneficiary, pursuant to the terms of its standard form contracts.
The amount of under segregation which may be attributable to that failure (if failure it be) has not been identified.
In addition, LBIE routinely treated otherwise than as client money sums deriving from options and derivative OTC transactions with its clients, regardless of the terms of the agreements pursuant to which LBIE conducted such trading for those clients.
The amount of potential segregation failure in respect of option transactions alone is said to have been US$146m. 6.
The second main reason for under achievement of the objectives behind the CASS 7 rules lies in the insolvent failure of another LBIE affiliate, Lehman Brothers Bankhaus AG (Bankhaus), with which LBIE had deposited no less than US$1 billion of segregated client money.
Bankhaus was subjected to a moratorium by the German regulator on 15 September 2008, and insolvency proceedings in relation to it were commenced on 12 November 2008.
The administrators have been unable even to hazard a guess at the amount, if any, of client money which may be recovered from Bankhaus.
Thus, even if there were no claims at all by clients whose client money LBIE failed to segregate, there exists a real risk that the shortfall on client account will exceed 40% due to the Bankhaus failure, quite apart from the costs and charges liable to be levied against the segregated fund in connection with its distribution, including the very large costs of this application. 7.
The combination of a massive failure to identify and segregate client money, coupled with the credit loss shortfall attributable to the Bankhaus failure, has thrown up a series of fundamental problems in the interpretation and application of the rules in CASS 7 to LBIEs business and insolvency.
The judge then went on to mention further complications and difficulties, some of which are still relevant to this appeal.
In the course of the appeal process the number of representative claimants has been reduced.
Of the original nine only four have been parties to the appeal to the Supreme Court, as follows: (1) GLG Investments plc (subfund: European Equity Fund) (GLG) was the representative of LBIEs fully segregated clients.
It was the winner before Briggs J on issues 2 and 3 but the loser (with the benefit of a preemptive costs order) before the Court of Appeal on all three issues.
It is the appellant (without the benefit of a preemptive costs order) in this court.
GLG appeared by Mr Antony Zacaroli QC, Mr David Allison and Mr Adam Al Attar. (2) CRC Credit Fund Limited (CRC) was the principal appellant before the Court of Appeal, as a representative of what Briggs J (para 25) referred to as the wholly unsegregated end of the spectrum.
Having succeeded before the Court of Appeal it is the principal respondent (with the benefit of a preemptive costs order) before this court, and it has appeared by Mr Robert Miles QC and Mr Richard Hill. (3) and (4) Lehman Brothers Inc. and Lehman Brothers Finance AG (the LB affiliates) are, on the assumed facts, largely unsegregated clients of LBIE, but they have been joined and represented separately, at their own risk as to costs, because of their special position as members of the Lehman Brothers group.
They have appeared by Mr Jonathan Crow QC, Mr Jonathan Russen QC and Mr Richard Brent, who have supported and supplemented the submissions made by Mr Miles.
The administrators have appeared by Mr Iain Milligan QC, Ms Rebecca Stubbs and Mr Richard Fisher.
The FSA was represented by leading counsel before Briggs J and the Court of Appeal.
It has not appeared by counsel in this court but has made written submissions prepared by Mr David Mabb QC and Mr Stephen Horan.
The FSA was generally supportive of the respondent claimants position.
In his judgment Briggs J had to answer no fewer than 26 questions, some of them subdivided.
He had to go into a number of technical matters that arose from the complex and varied character of LBIEs trading activities, including futures, margins, currency transactions, stock loans, depot breaks, fails, and unapplied credits.
Some of these terms are briefly explained in para 2.16 of the statement of assumed facts (SAF), most of which is reproduced in para 49 of Briggs Js judgment.
In this court the argument has on the whole proceeded at a more general level.
But at least a superficial acquaintance with some of the technicalities is necessary in order to understand the process of internal reconciliation of accounts that has to be undertaken on every business day by a firm operating the alternative approach described in paras 38 and 39 below.
The Directives
MiFID (Directive 2004/39/EC of the European Parliament and of the Council, dated 21 April 2004) replaces Council Directive 93/22/EEC on investment services in the securities field.
Its general purpose is set out in Recital (2): In recent years more investors have become active in the financial markets and are offered an even more complex wide ranging set of services and instruments.
In view of these developments the framework of the Community should encompass the full range of investor oriented activities.
To this end, it is necessary to provide for the degree of harmonisation needed to offer investors a high level of protection and to allow investment firms to provide services throughout the Community, being a Single Market, on the basis of home country supervision.
Recital (26) refers to the importance of segregation of clients funds from those of the firm: In order to protect an investors ownership and other similar rights in respect of securities and his rights in respect of funds entrusted to a firm those rights should in particular be kept distinct from those of the firm.
This principle should not, however, prevent a firm from doing business in its name but on behalf of the investor, where that is required by the very nature of the transaction and the investor is in agreement, for example stock lending.
The Directive is intended to state broad general framework principles to be implemented later (recital (64)).
Article 13 (Organisational requirements) imposes on the home member state (that is, the state in which an investment firm has its registered or head office) the duty of requiring the firm to comply with the organisational requirements set out in paragraphs 2 to 8 of the article.
These include: (7) An investment firm shall, when holding financial instruments belonging to clients, make adequate arrangements so as to safeguard clients ownership rights, especially in the event of the investment firms insolvency, and to prevent the use of a clients instruments on own account except with the clients express consent. (8) An investment firm shall, when holding funds belonging to clients, make adequate arrangements to safeguard the clients rights and, except in the case of credit institutions, prevent the use of client funds for its own account.
Paragraph 10 indicates that the Commission will by the Implementing Directive specify the concrete organisational requirements to be imposed on investment firms.
The Implementing Directive 2006/73/EC implemented MiFID as anticipated in article 13(10).
In particular article 16(1) imposes on member states the obligation to require investment firms to keep and maintain records and accounts, to make regular reconciliations, and (in subparagraph (e)) to ensure that client funds deposited, in accordance with article 18, in [an institution authorised by article 18] are held in an account or accounts identified separately from any accounts used to hold funds belonging to the investment firm.
Article 16(1)(f) requires member states to introduce adequate organisational arrangements to minimise the risk of the loss or diminution of client assets, or of rights in connection with those assets, as a result of misuse of the assets, fraud, poor administration, inadequate record keeping or negligence.
Article 18(1) provides that investment firms are to be required, on receiving any client funds, promptly to place those funds into one or more accounts with a central bank, an authorised credit institution, a bank authorised in a third country, or a qualifying money market fund.
Article 4 of the Implementing Directive (additional requirements on investment firms in certain cases) is concerned with what has been referred to as gold plating that is, transposing the Directive into national law in a form that imposes on investment firms requirements not imposed by the Directive itself.
Article 4(1) provides: Member states may retain or impose requirements additional to those in this Directive only in those exceptional cases where such requirements are objectively justified and proportionate so as to address specific risks to investor protection or to market integrity that are not adequately addressed by this Directive, and provided that one of the following conditions is met: (a) the specific risks addressed by the requirements are of particular importance in the circumstances of the market structure of that member state; (b) the requirement addresses risks or issues that emerge or become evident after the date of application of this Directive and that are not otherwise regulated by or under Community measures.
Any such requirements are to be notified and justified to the Commission.
No such notification or justification has been made in respect of CASS 7.
Gold plating was raised as an issue in the lower courts, as a possible argument against the imposition of an immediate trust of clients funds.
It was not relied on by Mr Zacaroli in this court, but Mr Milligan mentioned it as a point which we might feel bound to consider of our own initiative.
For my part I do not think it necessary to go further into the point.
CASS 7
CASS 7 (Client money: MiFID business) consists of nine sections, each subdivided into paragraphs containing mandatory rules (denoted R) and (distributed through the rules in smaller print) non mandatory guidance (denoted G).
Defined terms are printed in italics, the definitions being found in a separate glossary.
So for instance para 7.1.1R (Application) tells the reader that: This chapter (the client money rules) applies to: (1) A MiFID investment firm: (a) that holds client money. and para 7.1.2G tells the reader that CASS 7.2 (Definition of client money) sets out the circumstances in which money is considered client money for the purposes of this chapter.
There is also an annex setting out the standard method of internal client money reconciliation.
The rules contain numerous cross references to the Directives, to other chapters of CASS and to other FSA regulatory instruments including COBS (the current Conduct of Business Sourcebook) and SYSC (the part of the handbook on High Level Standards which has the title Senior Management Arrangements, Systems and Controls).
It is necessary to give a fairly full summary of CASS 7.
For brevity I will refer to particular sections and paragraphs without the prefix CASS.
The two crucial provisions are emboldened for emphasis.
The general scheme of CASS 7 is that section 7.1 sets out the scope of the client money rules and section 7.2 defines client money, doing so by a wide general definition followed by numerous specific exceptions.
There is no general exception for money belonging to an affiliated company (7.1.12G). 7.2.15R (discharge of fiduciary duty) lays down when money ceases to be client money.
Section 7.3 lays down general organisational requirements, substantially reproducing article 13(8) of MiFID and article 16(1)(f) of the Implementing Directive.
Section 7.4 (Segregation of client money) begins by reproducing the substance of article 18 of the Implementing Directive.
It then addresses client bank accounts and sets out rules and guidance that call for detailed treatment.
The direct quotations below follow the official text in the use of italics (though it can be something of a distraction) but use the same font size for rules and guidance alike.
7.4.11R, reproducing the substance of article 16(1)(e) of the Implementing Directive, provides: A firm must take the necessary steps to ensure that client money deposited, in accordance with CASS 7.4.1R, in a central bank, a credit institution, a bank authorised in a third country or a qualifying money market fund is held in an account or accounts identified separately from any accounts used to hold money belonging to the firm. 7.4.12G provides: A firm may open one or more client bank accounts in the form of a general client bank account, a designated client bank account or a designated client fund account (see CASS 7.9.3G). 7.4.13G explains when and how a designated client account may be used. 7.4.14G (payment of client money into a client business account) provides: Two approaches that a firm can adopt in discharging its obligations under the MiFID client money segregation requirements [defined in the glossary by reference to CASS 7.4.1R and CASS 7.4.11R] are: (1) the normal approach; or (2) the alternative approach.
The following rules and guidance about the normal approach and the alternative approach must be set out in full.
The alternative approach was first introduced in 1995.
Originally its adoption required formal consent from the statutory regulator, but this requirement was replaced by the procedure in 7.4.15R: 7.4.15R A firm that does not adopt the normal approach must first send a written confirmation to the FSA from the firms auditor that the firm has in place systems and controls which are adequate to enable it to operate another approach effectively. 7.4.16G The alternative approach would be appropriate for a firm that operates in a multi product, multi currency environment for which adopting the normal approach would be unduly burdensome and would not achieve the client protection objective.
Under the alternative approach, client money is received into and paid out of a firms own bank accounts; consequently the firm should have systems and controls that are capable of monitoring the client money flows so that the firm comply with its obligations to perform reconciliations of records and accounts (see CASS 7.6.2R).
A firm that adopts the alternative approach will segregate client money into a client bank account on a daily basis, after having performed a reconciliation of records and accounts of the entitlement of each client for whom the firm holds client money with the records and accounts of the client money the firm holds in client bank account and client transaction accounts to determine what the client money requirement was at the close of the previous business day. 7.4.17G Under the normal approach, a firm that receives client money should either: (1) pay it promptly, and in any event no later than the next business day after receipt, into a client bank account; or (2) pay it out in accordance with the rule regarding the discharge of a firms fiduciary duty to the client (see CASS 7.2.15R). 7.4.18G Under the alternative approach, a firm that receives client money should: (1)(a) pay any money to or on behalf of clients out of its own account; and (b) perform a reconciliation of records and accounts required under CASS 7.6.2R (Records and accounts), SYSC 4.1.1R and SYSC 6.1.1R, adjust the balance held in its client bank accounts and then segregate the money in the client bank account until the calculation is re performed on the next business day; or (2) pay it out in accordance with the rule regarding the discharge of a firms fiduciary duty to the client (see CASS 7.2.15R). 7.4.19G A firm that adopts the alternative approach may: (1) receive all client money into its own bank account; (2) choose to operate the alternative approach for some types of business (for example, overseas equity transactions) and operate the normal approach for other types of business (for example, contingent liability investments) if the firm can demonstrate that its systems and controls are adequate (see CASS 7.4.15R); and (3) use an historic average to account for uncleared cheques (see paragraph 4 of CASS 7 Annex 1G). 7.4.20G Pursuant to the MiFID client money segregation requirements a firm should ensure that any money other than client money deposited in a client bank account is promptly paid out of that account unless it is a minimum sum required to open the account, or to keep it open. 7.4.2.1R If it is prudent to do so to ensure that client money is protected, a firm may pay into a client bank account money of its own, and that money will then become client money for the purposes of this chapter.
Section 7.5 deals with transfers of client money to third parties.
Section 7.6 (records, accounts and reconciliations) reproduces the substance of article 16 (1)(a), (b) and (c) of the Implementing Directive.
It also introduces, in a curiously indirect way, the annex to CASS 7. 7.6.6G deals with internal reconciliations of client money balances and 7.6.6G (3) provides: The standard method of internal client money reconciliation sets out a method of reconciliation of client money balances that the FSA believes should be one of the steps that a firm takes when carrying out internal reconciliations of client money.
The first set of italics sends the reader to the glossary, which defines the phrase by reference to CASS 7 Annex 1G.
The provisions of the annex are summarised, so far as relevant, in paras 63 and 64 below.
Section 7.7 (Statutory trust) is of central importance in this appeal.
It must be set out in full: 7.7.1G Section 139(1) of the Act (Miscellaneous ancillary matters) provides that rules may make provision which result in client money being held by a firm on trust (England and Wales and Northern Ireland) or as agent (Scotland only).
This section creates a fiduciary relationship between the firm and its client under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client.
In the event of failure of the firm, costs relating to the distribution of client money may have to be borne by the trust. 7.7.2R A firm receives and holds client money as trustee (or in Scotland as agent) on the following terms: (1) for the purposes of and on the terms of the client money rules and the client money (MiFID business) distribution rules; subject to (3) [it is common ground that this is an error for (2) (4)], for the clients (other than clients which are insurance undertakings when acting as such with respect of client money received in the course of insurance mediation activity and that was opted in to this chapter) for whom that money is held, according to their respective interests in it; (3) after all valid claims in (2) have been met, for clients which are insurance undertakings with respect of client money received in the course of insurance mediation activity according to their respective interests in it; (4) on failure of the firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2); and (5) after all valid claims and costs under (2) to (4) have been met, for the firm itself.
Section 7.8 requires the trust affecting client money to be notified to and acknowledged by banks and other intermediaries.
Section 7.9 (Client money distribution) is also of central importance. 7.9.1 to 7.9.8 must be set out in full: 7.9.1R This section (the client money (MiFID business) distribution rules) applies to a firm that holds client money which is subject to the client money rules when a primary pooling event or a secondary pooling event occurs. 7.9.2G The client money (MiFID business) distribution rules seek to facilitate the timely return of client money to a client in the event of the failure of a firm or third party at which the firm holds client money. 7.9.3G A firm can hold client money in either a general client bank account, a designated client bank account or a designated client fund account.
A firm holds all client money in general client bank accounts for its clients as part of a common pool of money so those particular clients do not have a claim against a specific sum in a specific account; they only have a claim to the client money in general.
A firm holds client money in designated client bank accounts or designated client fund accounts for those clients that requested their client money be part of a specific pool of money, so those particular clients do have a claim against a specific sum in a specific account; they do not have a claim to the client money in general unless a primary pooling event occurs.
A primary pooling event triggers a notional pooling of all the client money, in every type of client money account, and the obligation to distribute it.
If the firm becomes insolvent, and there is (for whatever reason) a shortfall in money held for a client compared with that clients entitlements, the available funds will be distributed in accordance with the client money (MiFID business) distribution rules.
A primary pooling event occurs: 7.9.4R (1) on the failure of the firm; (2) on the vesting of assets in a trustee in accordance with an assets requirement imposed under section 48(1)(b) of the Act; (3) on the coming into force of a requirement for all client money held by the firm; or (4) when the firm notifies, or is in breach of its duty to notify, the FSA, in accordance with CASS 7.6.16 R (Notification requirements), that it is unable correctly to identify and allocate in its records all valid claims arising as a result of a secondary pooling event.
CASS 7.9.4R (4) does not apply so long as: 7.9.5R (1) the firm is taking steps, in consultation with the FSA, to establish those records; and (2) there are reasonable grounds to conclude that the records will be capable of rectification within a reasonable period. 7.9.6R If a primary pooling event occurs: (1) client money held in each client money account of the firm is treated as pooled; and (2) the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R. 7.9.7R (1) When, in respect of a client, there is a positive individual client balance and a negative client equity balance, the credit must be offset against the debit reducing the individual client balance for that client. (2) When, in respect of a client, there is a negative individual client balance and a positive client equity balance, the credit must be offset against the debit reducing client equity balance for that client. 7.9.8G A clients main claim is for the return of client money held in a client bank account.
A client may be able to claim for any shortfall against money held in a firms own account.
For that claim, the client will be an unsecured creditor of the firm.
Section 7.9 goes on to deal with client money received after a primary pooling event, and mixed remittances (7.9.10 to 7.9.12).
It then deals with secondary pooling events, defined in the glossary by reference to 7.9.14R: A secondary pooling event occurs on the failure of a third party to which client money held by the firm has been transferred under CASS 7.4.1R(1) to CASS 7.4.1R(3) (depositing client money) or CASS 7.5.2R (Transfer of client money to a third party). 7.9.13R provides that if both a primary pooling event and a secondary pooling event occur, the provisions of this section relating to a primary pooling event are to apply.
In this case there was a secondary pooling event (SPE), that is the failure of Lehman Brothers Bankhaus AG, mentioned in para 6 of the judgment of Briggs J and quoted in para 27 above, as well as a primary pooling event (PPE), that is the failure of LBIE.
Mr Zacaroli relied on the provisions as to the consequences of SPEs (7.9.18G to 7.9.25R as regards any bank failure) as reinforcing his submission that losses on segregated and non segregated funds are in general intended to lie where they fall, and to be shared rateably between those on whom they fall (this is an argument on the correct construction of CASS 7 which does not of course depend on the fact of the failure of Bankhaus).
The correct approach to construction of CASS 7
This appeal turns on the correct construction, in context, and against the background of the general law of trusts, of a small number of the provisions set out or summarised above.
The crucial provisions are 7.7.2R and 7.9.6R, set out above in bold type.
I have felt obliged to set out a large number of much more peripheral provisions because the text of CASS 7 has been subjected, both in the courts below and in this court, to a detailed analysis in which small verbal points (possibly an indication of no more than imperfect drafting) have been put forward and relied on as significant.
That is not intended as a complaint.
The correct construction of CASS 7 gives rise to real difficulties.
The modern approach of the court to construing commercial or regulatory documents is to prefer a purposive to a literal approach.
That approach is reinforced by the FSA Handbook, in which GEN 2.2.1R provides, Every provision in the Handbook must be interpreted in the light of its purpose.
But in this case any attempt to adopt a purposive approach runs almost immediately into difficulties.
It is clear that the Directives intended to achieve a high level of protection of clients money, and that the prompt and scrupulous segregation of clients money, confirmed by regular internal reconciliations and monitored by the national regulatory authority, was to be the means of achieving that end.
Equally it is clear that CASS 7 was intended to transpose the Directives into national law, and in doing so to make use of a basic concept of English law, the trust (Lord Hope has in his judgment addressed the application of CASS 7 where the law of Scotland applies).
It is not now contended that the use of the trust concept involves gold plating.
Whatever the position may be in other member states, under United Kingdom insolvency law mere segregation of clients money, without the support of an effective trust, would not give adequate protection in the event of a firms failure.
So far, so good.
But neither in the Directives nor in CASS 7 is there any indication of what is to happen if the organisational requirements are not complied with, and clients money is not segregated as it should be.
Both the Directives and CASS 7 assume compliance and do not address the possibility of any significant degree of non compliance, let alone non compliance on what Briggs J referred to as a truly spectacular scale.
In the Court of Appeal Arden LJ (para 63) instanced 7.6.13R as an example of a provision that contemplates non compliance.
It is one of three provisions (7.6.13R, 7.6.14R and 7.6.15R) which deal with the resolution of reconciliation discrepancies.
These routine rules, which contemplate internal reconciliations operating effectively, cannot, with respect, be taken as negating the rules general assumption of compliance.
On the contrary, their relatively trivial nature seems to me to underline a general assumption of compliance with organisational requirements that permeates CASS 7.
In these circumstances, with very large sums of money at stake, it is inevitable that the text of CASS 7 should have been subject to very close analysis.
Although the distinction between R rules and G guidance is important for regulatory purposes, it is common ground that for the purposes of construction provisions which contain guidance, as well as rules, should be taken into account.
Summary of assumed facts
The judgment of Briggs J contains quite a full account of LBIEs organisation and operating methods, partly in paras 1 to 45 of the judgment and partly in the SAF reproduced (except for its description of the claimants) in para 49.
For present purposes a shorter summary is sufficient.
LBIEs business was organised in three segments: capital markets, investment banking and investment management.
It provided a wide range of financial services to clients (including governments, trading corporations and wealthy individuals), and also traded on its own account (proprietary trading).
It regularly and on a daily basis handled money in more than 50 currencies on behalf of more than 1,500 clients in different time zones.
In order to cope with this volume of varied business it adopted the alternative approach (see paras 38 and 39 above) for the segregation of clients money.
As recorded in para 2.11 of the SAF: Client money would be paid directly into and out of LBIEs own bank accounts (or an affiliates bank accounts) and LBIE would segregate client money by making a single daily reconciling payment to (or withdrawal from) bank accounts used exclusively by LBIE in order to segregate client money.
The amount of any such payment would be calculated by LBIE each business day morning based on data as at close of business on the previous business day.
The client money segregated by LBIE would then be adjusted accordingly later that day.
In calculating the amounts which it had to segregate as clients money, LBIE generally did so by reference to a range of components, which varied according to the type of financial services undertaken for a particular client, and the terms of the contract with that client.
Under some contracts LBIE expressly agreed to provide client money protection.
Under others LBIE sought to rely on the total title collateral transfer exemption contained in CASS 7.2 (SAF para 2.6).
Clients money was received by LBIE, or was recognised as clients money by LBIE, in three different ways: payments from clients; payments from third parties; and appropriations by LBIE of its own money by segregating it in a clients money account in order to satisfy a pecuniary obligation such as a manufactured dividend on a stock lending transaction (SAF paras 2.18 and 2.19).
LBIE had more than 700 different bank accounts, falling broadly into three categories: (1) accounts used exclusively for clients money, referred to as core client [money] bank accounts; (2) an intermediate category of accounts (numbering more than 300) referred to as non core client money bank accounts; and (3) house accounts (numbering over 440) containing money of which LBIE regarded itself (in some cases, on the assumed facts, wrongly) as the beneficial owner (SAF 2.20; the word money does not occur in the actual designation in 2.20.1 but it does occur elsewhere, for instance in the next line of 2.20.1 and in 2.26).
In addition, clients money was held in client transaction accounts, that is accounts held in the name of LBIE in a fiduciary capacity, with about ten different clearing houses and brokers.
LBIE also had house transaction accounts for the purpose of its proprietary trading.
Sometimes a single transaction account was used for both clients money and proprietary trading (SAF paras 2.42 to 2.49).
LBIE had a liquidity management process described in SAF paras 2.21 to 2.27.
Its general object was to ensure, by projections of funding needs and appropriate transfers, that LBIE had sufficient liquidity, but not a large surplus of funds, for its trading operations.
Daily transfers were made between LBIE and LBHI so as to achieve this.
In the months leading up to its failure, LBIE was a net debtor of LBHI, so that the effect of transfers from LBIE to LBHI was to reduce the intra group indebtedness.
SAF 2.26 describes how client money was dealt with as part of that process: All of LBIEs bank accounts were subject to the liquidity management process save that, in relation to LBIEs core client money bank accounts, surplus funds would only be withdrawn from these accounts where LBIEs reconciliation and segregation calculation permitted LBIE to reduce the amount of money segregated by it.
Prior to the Time of Appointment therefore, client money first received into one of LBIEs bank accounts was regularly transferred to LBHIs bank account(s) each evening prior to LBIE segregating an equivalent amount the next morning.
As to the events immediately before LBIE was put into administration by an order made at 7.56 am on Monday 15 September 2008, the last internal reconciliation of clients funds took place on the morning of Friday 12 September 2008 by reference to data as at the close of business on Thursday 11 September.
SAF para 2.26 goes on to record: Given that, it is possible that client money received into LBIEs non core client money bank accounts or house accounts between [close of business] on 11 September 2008 and close of business on 12 September 2008 would have been passed up to LBHI as part of the liquidity management process prior to the Time of Appointment [of the Administrators].
There is a more detailed account of these events in SAF para 2.50.
In the judgment of Briggs J the close of business on 11 September 2008 is referred to as the Point of Last Segregation (PLS) and 7.56 am on 15 September 2008 is referred to as the Time of Appointment or, in the context of CASS 7, the PPE.
The appointment of the administrators on 15 September 2008 may be seen as a supervening event which made it impossible for LBIE to perform its obligation (under the alternative approach) to segregate clients money within one business day.
The other failures to segregate seem to have started long before and to have continued over a long period.
They are described as follows (by way of example) in SAF para 2.52: (1) LBIE did not segregate any money in relation to trading in any transactions, including margined transactions, carried out in respect of Affiliates trading on their own account.
The amounts claimed by the Affiliates in connection with this exceed USD3 billion. (2) LBIE did not segregate any money in connection with certain complex arrangements that it had for the trading of various positions with its Affiliates, in connection with which amounts would fall due and payable as between LBIE and those Affiliates but would be posted to the relevant intercompany ledger account rather than always immediately paid. [A footnote refers to a separate application relating to the RASCALS process.] (3) LBIE often entered into agreements with its clients under which LBIE understood that client money protection would not be afforded to various types of money held by it for those clients.
Where this was the case, LBIE did not generally segregate money on behalf of such clients.
A number of clients with agreements of these types seek to argue that the particular language contained in their agreements was not effective to exclude client money protection, at least not in its entirety.
Similarly where clients entered into a number of agreements with LBIE which provided for differing levels of client money protection, those clients may seek to argue that amounts which were held by LBIE for them at the Time of Appointment were held pursuant to an agreement which provided for some client money protection as opposed to another which did not. (4) LBIE did not generally segregate as client money certain amounts relating to options transactions with its clients.
This was the case for all clients, irrespective of whether they had in place title transfer arrangements with LBIE.
Whilst LBIE segregated premiums received for sold options and variation margin on certain options and gains on options closed out, it did not otherwise generally segregate for unrealised gains on open options positions.
As at 12 September 2008, the approximate aggregate value of unrealised gains (not deducting unrealised losses) arising from options transactions which had not been segregated was USD146m. (5) LBIE did not segregate any money in respect of OTC derivatives because all such money was regarded by LBIE as being held pursuant to total title transfers in accordance with CASS 7.2.3R. (6) From time to time operational errors occurred which led to a failure by LBIE to segregate an appropriate amount for a client.
There were also some potential instances of over segregation.
The particular facts relevant to CRC are summarised in SAF para 6: (1) CRC was a prime brokerage client of LBIE. (2) CRC is a wholly Unsegregated Client for whom no client money was segregated by LBIE at the Time of Appointment. (3) LBIE should have segregated as client money for CRC sums including USD52m in connection with FX transactions and a cash balance of approximately USD24m in various currencies on other accounts.
Claren Road Credit Master Fund Ltd (which was a party to the original application but is not represented on this appeal) is an example of a client for whom money was received on 12 September 2008 but whose money was not segregated because LBIE went into administration.
Details of its interest are given in SAF para 7.
The first issue
The first issue is the time at which the statutory trust arises.
In the case of money received from a client or from a third party, the two competing answers are time of receipt and time of segregation.
In the case of satisfaction of a monetary obligation of the firm to a client (the fourth issue in the Court of Appeal) it is now common ground that the trust arises on the appropriation of funds in satisfaction of the obligation, normally by a payment into a segregated client account.
On the first issue Briggs J and the Court of Appeal were in agreement that the statutory trust arises on receipt of the money; and this court, I understand, unanimously agrees that they were right.
In the circumstances I can deal with the point fairly shortly, and mainly by reference to the judges reasons.
Briggs J began his discussion with the observation (para 138), with which I agree, There is much to be said for the proposition, advanced by Mr Milligan in reply, that the question when the statutory trust attaches to client money is really a short point of construction, unambiguously answered by the opening words of CASS 7.7.2R: A firm receives and holds client money as trustee .
I would readily adopt those reasons, expressed in the judges words, as my In paras 139 and 140 he summarised the contrary arguments (put before him not by Mr Zacaroli but by counsel for a representative unsecured non client money creditor and by counsel for LBHI).
In paras 141 to 165 he gave his reasons for rejecting those arguments.
own, but I can summarise them, with some loss of finesse, as follows. (1) Where money is received from a client, or from a third party on behalf of a client, it would be unnatural, and contrary to the primary purpose of client protection, for the money to cease to be the clients property on receipt, and for it (or its substitute) to become his property again on segregation.
It would also be contrary to the natural meaning of the comprehensive language of 7.7.2R (paras 144 146). (2) Segregation without a trust would not achieve MiFIDs objective.
Under the alternative approach an immediate trust of identifiable client money does provide protection, though mixed funds are subject to a variety of risks (para 148). (3) The absence of express restrictions, under the alternative approach, on use of clients money while held in a house account does not mean that the firm is free to use it for its own purposes.
Its obligation is to segregate it promptly, and both section 7.3 of CASS and the general law of trusts would prevent use of clients money for proprietary purposes.
There are at least two methods, one contemplated by 7.4.21R, of ensuring the protection of clients money temporarily held in a house account (paras 149 156). (4) The most formidable argument in favour of segregation (premised on the view that the provision of the distribution rules in 7.9.6R(1) applies only to segregated funds) is that there is under the alternative approach potentially a black hole into which clients money may vanish, so as not to be caught by the distribution rules.
This is a point of substance, but it does not outweigh the opposing arguments.
To allow a limited defect of the alternative approach to dictate the interpretation of the essential provisions of section 7.2 would be to let the tail wag the dog.
In the Court of Appeal both Lord Neuberger MR (paras 190 203) and Arden LJ (paras 104 106) agreed with the reasoning of Briggs J, although each added some further particular reasons.
In his able submissions on behalf of GLG Mr Zacaroli sought to draw a fundamental distinction between the normal approach and the alternative approach.
He submitted that the latter approach is a complete contrast, under which the firm is expressly permitted to pay money into house accounts in which it would swill around with all the money in the firms house accounts.
This point is largely covered by the judges reasoning as briefly summarised in para 63(3) above.
I would add only that the alternative method is available not for the convenience of the firm, but as a better means of securing client protection (the judges second point in para 104 of his judgment).
Both methods are intended to achieve a high degree of client protection, either by immediate segregation or by very prompt segregation.
Moreover client money held temporarily in a house account does not, in the eyes of trust law, swill around but sinks to the bottom in the sense that when the firm is using money for its own purposes it is treated as withdrawing its own money from a mixed fund before it touches trust money (the point made by the judge in para 153 of his judgment).
I would therefore dismiss GLGs appeal on the first issue.
The second and third issues before Briggs J
The second and third issues are stated in the agreed statement of facts and issues in these terms: (2) Do the primary pooling arrangements apply to client money in house accounts? (3) Is participation in the pool dependent on actual segregation? They were formulated in similar, but not identical terms in the Court of Appeal (para 6 of Arden LJs judgment).
These are the issues on which the Court of Appeal unanimously differed from the judge.
I shall try to summarise the main lines of reasoning in the courts below, although (again) my summary will not do justice to many of the finer points in the judgments.
Briggs J covered what is now the second issue (his third issue, rather differently formulated) at paras 166 to 198.
Because the issue as to the constitution of the client money pool (CMP) was differently formulated, many of the arguments which the judge had to consider have not been pursued on appeal.
With hindsight derived from the hard toil of the appeal process I find it a little surprising that the judge concentrated so much on the language of 7.9.6R(1), to the exclusion of 7.7.2.
The statutory trust in 7.7.2 received only an indirect mention in para 195: There is in any event a persuasive symmetry between that part of CASS 7 which requires the identification and segregation of client money by a firm while in business, and the distribution rules which, on that interpretation, require the money thus segregated to be promptly distributed to the clients entitled to it upon the firms failure.
The judge concluded on this issue (para 197): (i) The CMP is constituted as at the PPE only by client money in segregated accounts. (ii) Client money outside the firms segregated accounts does not form part of the CMP. (iii) The identification of client money (if any) outside the firms segregated accounts depends upon the established principles by which a beneficiary must trace his property in order to pursue a proprietary claim in relation to it [with references to five well known cases].
As to the third issue, the basis of sharing the CMP, Briggs J approached that as a contest between what he called the contributions theory and the claims theory.
This corresponds closely to the contest as to whether in CASS 7 client money entitlement refers to contractual or proprietary entitlement.
It is to be noted that however the issue is formulated it arises as a problem, except in relation to the last business day, only in the event of non compliance with CASS 7.
The judge saw the contest as a difficult question with large consequences, which is undoubtedly correct.
He observed (para 228): Unhappily, CASS 7 provides no clear guidance on this question.
This is probably because the draftsman working in the utopian world of full compliance by the firm with the client money rules before its failure, assumed that there would be no substantial difference between the amount which should have been segregated and the amount which was actually segregated for any particular client.
The only differences would arise from dealings with client money during the short period between the PLS and the PPE, and then only in relation to a firm using the alternative approach.
In para 234 the judge came back to the point that the Directives contemplate that the protection of clients money will be achieved by compliance with the Directives organisational requirements.
In paras 238 and 239 he analysed the effect of 7.7.2R, in conjunction with other provisions, in imposing the statutory trust for the clients for whom that money is held, according to their respective interests in it.
Para 241 in effect sets out the case for the contributions theory at its highest, and then notes that there are counter arguments: The result is in my judgment that the MiFID Directives, the general law and an analysis of the proprietary rights in the segregated accounts prior to pooling, all support the contributions theory as against the claims theory.
There remains nonetheless the question whether, as submitted by (and for) the un segregated clients, the language of the distribution machinery contained in CASS 7.9.6R, 7R and 9R requires the application of a claims rather than contributions basis of calculation as a matter of interpretation.
For that purpose, there is no escape from a painstaking analysis of the meaning and purpose of those three paragraphs, and in particular paragraph 7.9.7R.
The counter arguments are summarised in seven sub paragraphs in para 242, described in the next paragraph as constituting a formidable textual argument.
But the judge discerned weaknesses in it.
First, the expression client money entitlement in CASS 7 does not have a single fixed meaning.
Second, the draftsman could not have contemplated a disparity between the results of the two methods because his aim was (para 246) to construct a scheme of obligations with which he expected firms to comply, rather than flout.
Moreover (para 250) it is no part of the distribution rules to confer upon clients whose money was, in breach of the client money rules, not contributed to the segregated accounts from which the CMP is constituted, a beneficial interest in that fund which did not exist immediately prior to the PPE.
The judge then embarked on what is indeed a painstaking examination of 7.9.6R(2), 7.9.7R and 7.9.9R, which took him into the purposes and structure of the annex.
He concluded (para 275): My conclusion on this issue therefore is that the basis for sharing in the CMP is the amount which the firm actually segregated for each client, as revealed by the last internal reconciliation account carried out by the firm before the PPE, and in LBIEs case (because it used the alternative approach) by reference to the PLS, subject to certain adjustments necessitated by CASS 7.9.7R, and by subsequent events, to which I will return later in this judgment.
The second and third issues in the Court of Appeal
In the Court of Appeal Arden LJ covered the second issue at paras 108 to 142 of her judgment, with her conclusions beginning at para 124.
She saw client money account (an undefined expression) as having a wide meaning.
She thought it significant that the statutory trust was a single trust, that client money entitlement in 7.9.6R(2) naturally referred to a contractual entitlement, and that 7.9.3G envisaged a pooling of all the client money, in every type of client money account (para 127).
She saw the contributions theory as producing unfair results (paras 130 and 131).
She rejected the argument that the claims theory involved any interference with the rights, prior to the PPE, of fully segregated clients (para 134).
Similarly she discounted the judges symmetry (para 195 of his judgment, quoted in para 67 above) as a distraction (para 137).
She concluded that there was to be a pooling of all client money in segregated accounts and house accounts (para 139), and that there should be a final reconciliation covering events down to the PPE (paras 140 142).
Lord Neuberger MR addressed the second issue at paras 204 to 224.
He could get only limited textual assistance, though he considered numerous detailed points (paras 205 to 215).
He saw some force in the submission that at least on a primary pooling event, the clients of the firm are in it together, and client money is pooled and paid out to all clients on a pro rata basis, and that the claims theory was fairer in avoiding a degree of randomness (paras 217 and 218).
He also attached some weight to the notion that the statutory trust was a single trust, and to the Directives aim of providing a single and consistent level of protection (paras 221 and 222).
So Lord Neuberger reached the same agreement as Arden LJ on the second issue, and Sir Mark Waller agreed with both of them.
Lord Neuberger does not seem to have commented on Lady Ardens view that a further, final reconciliation was appropriate, and the order of the Court of Appeal as perfected does not refer to this point.
But Mr Miles in his written case (para 182) and his oral submissions (Day 4, page 96) relied on Sir Mark Wallers general agreement with Arden LJ on the topic of pooling.
Arden LJ addressed the third issue at paras 143 to 163, with her conclusions beginning at para 154.
She repeated that client money entitlement referred to contractual entitlement, even if it meant distributing funds to clients with no proprietary claim.
It was open to the FSA, she stated, to treat the failure of the firm as a common misfortune in which those who had claims to the recovery of client money should share without distinction (para 154).
She noted that even under the contributions theory, adjustments have to be made, and considered that the judges reference to a glitch (in para 265 of his judgment) understated the problem (para 157 of the judgment of Arden LJ).
Referring to the words for the clients . for whom that money is held, according to their respective interests in it in 7.7.2R (3) Arden LJ stated (para 160): While the firm is a going concern those interests are the several interests of the clients but on a PPE a pooling occurs so that on any view those interests are varied.
Accordingly as from the happening of a PPE, the expression their respective interests must mean their respective interests under CASS 7.9.6R.
So Arden LJs conclusion was in favour of the claims theory.
So was that of Lord Neuberger MR (paras 225 234).
He regarded the objections to the contributions theory (set out in para 242 of the judges judgment) as not merely formidable but also decisive.
He thought that client money entitlement did have a consistent meaning if the claims theory was adopted; it was only if the contributions theory was adopted that inconsistency occurred.
Again, Sir Mark Waller agreed with Lord Neuberger and Arden LJ.
The intricate textual arguments outlined above (and it is merely an outline) have now been debated between highly skilled counsel for a total of 20 days.
Many of them seem to be the result of drafting imperfections in CASS 7.
As was pointed out below, there is no definition of the expression client money account, although the glossary (which is the size of a small dictionary) does contain definitions of client bank account (as a current or deposit account at a bank, in the name of the firm, which holds the money of one or more clients) and client transaction account (explained in 7.4.16G).
It is, I accept, impossible to avoid the most important of the textual arguments, particularly the formidable argument (paras 242 and 243 of the judgment of Briggs J) which ultimately persuaded Lord Neuberger, and also influenced Arden LJs conclusions (paras 154 to 160).
I shall return to those arguments.
But in my view the resolution of the second and third questions (which are closely bound together) depends ultimately on the general scheme and structure of the regulatory framework in CASS 7, and on seeing (in general terms) how segregation of clients money worked in practice, not merely on the catastrophic failure of the firm on the PPE, but from business day to business day during the firms trading operations.
The nature of the statutory trust
In the search for the essential scheme and structure of CASS 7 the outstanding feature is the statutory trust.
In line with the clear conclusion reached on the first issue, the effect of CASS 7 is that under the alternative approach, as well as under the normal approach, a firm receives and holds clients money as a trustee, with beneficial ownership remaining in the clients.
The trust in 7.7.2R is (1) for the purposes of and on the terms of the client money rules and the client money (MiFID business) distribution rules; (2) subject to [(4) costs of distribution on failure] for the clients [subject to an irrelevant exception] for whom that money is held, according to their respective interests in it.
The client money rules are defined in the glossary as CASS 7.1 to 7.8, and the client money (MiFID business) distribution rules as CASS 7.9.
The latter rules apply only in what was (until shortly before LBIEs failure) no doubt regarded as a remote contingency, that is the failure of the firm or some other event amounting to a PPE.
Unless and until such an untoward event happens, the purposes of the statutory trust are those in CASS 7.1 to 7.8.
This point needs to be made since Mr Miles, for understandable reasons, referred to the statutory trust as a purpose trust and placed emphasis on the purposes of the client money distribution rules in CASS 7.9, and especially 7.9.6R.
Those rules came into operation on the failure of the firm on 15 September 2008.
Until then clients money had been held, no doubt in some cases for years, in client money bank accounts (some general and some designated) for all the purposes of CASS 7.4, 7.5, 7.6 and 7.8 that is segregation, transfer to third parties, record keeping and internal reconciliation, and protection (by notice to banks) of client money bank accounts.
Those purposes were not ends in themselves (as in a trust for charitable purposes).
They were purposes directed to the protection and management of clients money in the beneficial ownership of clients who were identified beneficiaries of the trust, being (as 7.7.2R(2) puts it) those for whom that money is held, according to their respective interests in it.
The biggest objection to the claims theory of interpreting 7.9.6R is that it involves, on the assumed facts of this case, a cataclysmic shift of beneficial interest on the PPE, to the detriment of those clients who must have supposed that their funds were safely segregated in accordance with CASS 7.1 to 7.8.
That shift (or bifurcation, to use a term which counsel used a great deal in argument) is in striking contrast to the persuasive symmetry that Briggs J (para 195 of his judgment, para 67 above) found in the contributions method.
It is a far more extraordinary bouleversement than the relatively trivial bifurcation involved in segregation of clients money being deferred, under the alternative approach, until the next business day after its receipt.
In his written case (para 34) Mr Zacaroli suggested that it would amount to the segregated clients funds being used as a strange form of compensation fund for disappointed clients whose funds had not been segregated.
The Court of Appeal was aware of this difficulty.
Arden LJ recognised (para 134) that the court should not of course interfere with property rights but dismissed the difficulty on the ground that dealings between the firm and its clients take place on the basis of CASS 7, and thus pooling is implicit in their dealings, followed by a reference to 7.9.3G.
It is true that money in a general client account is pooled, and is at a risk that it will be shared rateably between the beneficial owners in the event of a SPE (such as the failure of a bank holding clients money) occurring without a PPE.
But the notion that clients must be taken to have implicitly accepted the risk of discovering, on a PPE, that their carefully segregated funds must be shared with non segregated clients (including Lehman Brothers affiliates) seems, with respect, quite unrealistic.
An associated point on the judgments in the Court of Appeal is the notion that all the clients of LBIE were victims of a common misfortune or disaster.
Arden LJ referred to this (para 125 and, for what she called the happenstance point, para 131).
Arden LJ did not accept Mr Zacarolis submission that the correct analysis was not the common misfortune of the firms failure, but the separate misfortune (suffered by some clients but not by others) of LBIEs assumed failure, on a massive scale, to comply with its obligations under CASS 7.4.
Both Arden LJ (para 131) and Lord Neuberger (para 218) seem to have accepted the submission of Mr Mabb QC (appearing for the FSA, the statutory regulator whose share of responsibility for the misfortunes of some or all of LBIEs clients is not an issue in these proceedings) that the non segregation was happenstance and that equal treatment seems fairer than randomness.
With great respect to the Court of Appeal, I regard that approach as inappropriate.
The court has to give directions to the administrators on the basis of the assumed facts set out in the SAF.
Those assumed facts are stated for the most part at a high level of generality, and with an almost clinical detachment from what the judge referred to as LBIEs shocking underperformance.
We simply do not know how it came about that so much clients money was paid into house accounts when it should have been segregated.
In particular, apart from the terse statements in SAF 2.52 (para 58 above) we do not know the circumstances in which LBIE came to overlook, or decide not to apply 7.1.12G (Affiliated companies) in dealing with Lehman Brothers affiliates (SAF 2.52(1) and (2)); or the circumstances in which terms were negotiated with clients leaving room for argument as to whether client money protection was wholly or partly excluded (SAF 2.52(3)).
There is no basis, in my respectful opinion, for deciding that one scheme of distribution would be fairer than another.
Our task is to construe CASS 7, and then apply it to the assumed facts.
In construing CASS 7 we have to look at its essential scheme and structure.
Beyond that a purposive approach gives little assistance, since it is plain (as already noted) that neither the Directives nor CASS 7 contemplate non compliance with regulatory requirements (in the judges words) on a truly spectacular scale.
Both Lord Neuberger and Arden LJ gave some weight to the statutory trust being a single trust, without much explanation of what that meant or why they saw it as significant.
The trust is declared in simple terms as affecting client money, but the detailed guidance, especially that in 7.9.3G, shows that some client money will be pooled in general client bank accounts, while other client money will be held separately in designated client bank accounts.
Some but not all clients will be entitled to interest on their client money (7.2.14R).
A bank holding client money may fail (as Bankhaus did) and on a SPE any loss will fall rateably only on those clients whose money was deposited with that bank not on all clients.
So the single trust argument does not provide much support for the claims theory.
The majority judgments in this court
Lord Dyson disagrees with the views set out in para 81 above.
In his view (para 159) a purposive interpretation clearly supports the claims basis for participation.
That is because the Directives overriding purpose is to safeguard the assets of all clients and to provide all clients with a high degree of protection (his emphasis).
This purpose is to be achieved, in his view, by a solution which means that no client of LBIE is provided with a high degree of protection, even those whose funds were (at all times down to the PPE) meticulously segregated and accounted for in accordance with CASS 7.
With the greatest possible respect, I simply cannot follow this argument.
I consider the majority view also gives insufficient weight to the fact that, although CASS 7 provides a detailed code, that code is erected on the foundation of the general law of trusts.
Lord Collins refers (para 186) to Professor Gowers Review of Investor Protection (1984), noting that under English law segregation of funds provides a client with insufficient protection unless it is backed by the clients continuing beneficial ownership.
So (as already noted) CASS 7 was not gold plating the Directives.
But it is equally clear that a trust without segregation is a very precarious form of protection because of the risk or rather, in this context, the strong probability that the element of trust property in unsegregated funds will rapidly become untraceable.
Immediately before the PPE, many of the non segregated clients probably the great majority of them had no identifiable trust property held in trust for them.
The funds of the segregated clients, by contrast, belonged in equity, immediately before the PPE, to the respective clients for whom they had been segregated.
Lord Dyson (para 144) and the others in the majority evidently regard it as realistic to suppose that those segregated clients accepted the risk of having the bulk of their beneficial interests divested in order to compensate other non segregated clients who, immediately before the PPE, had no beneficial interest in any identifiable trust property (and of whom, and of whose affairs, the segregated clients knew nothing).
The majoritys decision makes investment banking more of a lottery than even its fiercest critics have supposed.
Internal client money reconciliation (the Annex)
Any trustee which holds large sums of money in trust for clients must have in place appropriate procedures, keep accurate records, and regularly reconcile its balances.
For a financial services firm like LBIE, which offered a wide variety of services to a large number of clients, these obligations were of particular importance, and CASS 7.6, together with the Annex, laid down detailed and fairly complicated rules.
These were needed because clients did not leave their money inactive.
They deployed it in trading activities in which their positions might change from day to day.
So the daily internal reconciliation had to cover clients money held in client transaction accounts (SAF 2.12 and 2.42 to 2.49) or committed to futures or other margin transactions (SAF 2.28 to 2.39).
These complications are reflected in the Annex.
I gratefully adopt the judges summary (paras 256 to 258): 256The standard method of client money reconciliation is set out in [the Annex].
It requires a firm on each business day to identify its client money requirement (as defined by paragraph 6) and to ensure that its client money resource is at least equal to the client money requirement. 257.
The firms client money requirement is (in the first of two alternative formulations in paragraph 6) the aggregate of all individual client balances, excluding negative client balances and client equity balances, together with the total margined transaction requirement, which is (as appears from paragraph 14) the aggregate of all positive client equity balances, subject to certain deductions which do not matter for present purposes. 258.
Paragraphs 12, 18 and 19 of [the Annex] give the firm certain discretions as to how to carry out these calculations.
Paragraph 12 gives the firm a discretion to deduct fees and other expenses due and payable by the client to the firm.
Paragraph 18 (further explained by paragraph 19) gives the firm a discretion to make an offset between a positive individual client balance and a negative client equity balance, or vice versa, so as to reduce either the individual client balance or the client equity balance.
Client equity balance is defined in the glossary as the amount which a firm would be liable (ignoring any non cash collateral held) to pay to a client (or the client to the firm) in respect of his margined transactions if each of his open positions was liquidated at the closing or settlement prices published by the relevant exchange or other appropriate pricing source and his account closed.
That explains why the balance can be either positive or negative.
Briggs J went on (paras 258 to 261) to a detailed consideration of 7.9.7 R, under which it is mandatory, after a PPE, to make the paragraph 18 offset which has until then been discretionary.
That point is best considered as part of the discussion of 7.9.6R and 7.9.7R, which follows.
The third issue: the effect of primary pooling
Mr Miles arranged his written and oral submissions so as to deal with the third issue (how is the CMP to be distributed?) before the second issue (what is to go into the CMP?).
There are advantages in that approach.
The second issue, if understood (as it must be) in a way that does not pre empt the third issue, becomes a relatively narrow issue limited to any money which was held in house accounts at the PPE and was identifiable, under the general law of trusts, as clients money.
Mr Zacaroli submitted that if he lost on the second issue he could still win on the third, and (he might have added) the third issue is almost certainly of much greater importance in financial terms, both to his client and to the other claimants.
I shall therefore adopt Mr Miless approach and consider the third issue before the second issue.
PPE: It is worth repeating the crucial provisions which come into operation on a 7.9.6R If a primary pooling event occurs: (1) client money held in each client money account of the firm is treated as pooled; and (2) the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R. 7.9.7R (1) When, in respect of a client, there is a positive individual client balance and a negative client equity balance, the credit must be offset against the debit reducing the individual client balance for that client. (2) When, in respect of a client, there is a negative individual client balance and a positive client equity balance, the credit must be offset against the debit reducing client equity balance for that client.
At the beginning of his discussion of the second issue Briggs J observed (para 166): The (perhaps old fashioned) principle of construction that words are there for a purpose suggests that the phraseology used was designed to achieve at least the following two purposes.
The first is that it was not the intention of the draftsman to capture all client money held by the firm, but only client money held in each client money account of the firm.
Secondly, it was not the intention to capture all money held in each client money account of the firm, but only client money held in such accounts.
I agree that that is the right starting point, not only for the second issue, but also (as they are so closely connected) for the third issue.
The expression client money account is not defined in the glossary, but it naturally refers to (i) every client bank account (which is a defined term and covers every general client bank account, every designated client bank account and every designated client fund account of the firm, those being the different forms of account mentioned in 7.9.3G) and (ii) every client transaction account (which is a defined term and is explained in 7.4.16G).
These are the accounts affected by the internal reconciliation obligation, as appears from the unnumbered preamble to the Annex.
Arden LJ considered (para 136) that the expression client money account must have been deliberately chosen as being wider than client bank accounts and client transaction accounts but I do not understand her reasoning and I respectfully differ from her conclusion.
Lord Neuberger considered the textual arguments to be much more evenly balanced (paras 205 to 215) and he seems ultimately to have decided the point by a general appeal to fairness, with which I have already expressed my respectful disagreement.
For these reasons I approach the third issue on the provisional basis, at least, that the CMP the distributable pool consists of the aggregate of the segregated funds holding clients money immediately before the PPE.
Those funds are assumed to have been subject to internal reconciliation on every business day, following the detailed procedure in the Annex, so that the client money resource is at least equal to the client money requirement (Annex, paras 2 and 6).
That pool is to be distributed in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R.
As the judge observed (para 251), had this provision stopped at the comma after 7.7.2R there would have been no doubt but that the clients entitled to participate in the distribution were those identified in the last reconciliation.
They were under 7.7.2 R (2) the clients . for whom that money is held and it was to be distributed according to their respective interests in it.
In the course of his excellent submission Mr Miles urged that each client in 7.9.6R must be taken as meaning what it says.
But the words must be read in context.
When read in context, they mean each client for whom client money is held.
In In re Global Trader Europe Ltd [2009] EWHC 602 (Ch) [2009] 2 BCLC 18, para 99, Sir Andrew Park reached the same conclusion as Briggs J on this point.
The second part of 7.9.6R(2) begins with the words so that.
Those words are apt to introduce the natural consequences of what has gone before, rather than to herald an abrupt change.
The reference to a rateable distribution of the CMP indicates the possibility of a shortfall, and in practice a shortfall is almost inevitable on the failure of the firm, since in that event the costs of distributing the CMP are to be a first charge on it under 7.7.2R(4).
There are also some more technical reasons which may produce a shortfall in the CMP, though any such shortfall would probably be relatively small.
These are identified in paras 262 to 269 of the judges judgment.
I agree with the judges analysis and I need not repeat it.
The final words of 7.9.6R(2) are calculated in accordance with CASS 7.9.7R.
The judge said of this (paras 254 to 256, whose language I gratefully adopt as I cannot improve on it): 254.It is this concluding phrase, and its incorporation of CASS 7.9.7R, that lies at the heart of the argument of the protagonists for a claims basis of sharing in the CMP.
Put another way, the case for rejecting a contribution basis rests wholly on an understanding of CASS 7.9.7R, to which I now turn. 255.
The first thing to notice about CASS 7.9.7R is that it does not purport to constitute a comprehensive formula for the calculation of a client money entitlement.
It merely provides for the offset of two particular types of accounting debit against two particular types of accounting credit.
By subparagraph (1) a positive individual client balance is to be reduced by offsetting a negative equity balance.
By subparagraph (2) a positive client equity balance is to be reduced by any negative individual client balance.
It says nothing about the situation where a client has positive balances, or negative balances, of both types.
It is, as Mr Zacaroli described it, a reducing mechanism.
Its effect is, in the stated circumstances, to reduce what otherwise might have been identified as a clients client money entitlement, which is to serve as the basis for his rateable participation in the CMP. 256.
In the case of a reasonably compliant firm, it may be assumed that the basis upon which the firm had segregated client money for each of its clients prior to the PPE would be disclosed from the last internal client money reconciliation account, upon the basis of which (for example) a firm using the alternative approach would have adjusted the amount of the segregated accounts as at the PLS.
The judge then continued with the passage that I have already quoted at para 90 above, and went on to comment that the option conferred by paragraph 18 of the Annex permits, but does not require, a firm to carry out precisely the same offsetting process as is made mandatory after a PPE by CASS 7.9.7R (para 258).
He regarded the purpose of 7.9.7R as obscure (para 232).
Arden LJ noted (para 152) that it has a limited operation, but did not go further into its purpose.
Nor did Lord Neuberger (paras 189 and, in a quotation from the judge, 228).
I agree with Briggs J that it is very hard to see why one point of detail in the Annex has been singled out, as it were, for particular mention in 7.9.7R.
But I am in full agreement with his conclusion (para 261) that this obscure provision does not necessitate a construction, contrary to all other indications, that the CMP is to be distributed on the basis of the claims theory rather than the contributions theory.
For these reasons, which are the same as those of the judge, I would allow GLGs appeal on the third issue.
The second issue: final reconciliation as at the PPE
If the first and third issues are resolved in the way set out above, the second issue is seen to be within a relatively narrow compass.
It becomes focused on movements in the client money requirement as between the PLS (close of business on Thursday, 11 September 2008, the critical time for the data on which an internal reconciliation took place on Friday, 12 September) and the PPE (7.56am on Monday, 15 September).
I shall refer to this period as the gap period.
This court has to decide the issue as a matter of principle, proceeding on the basis of assumed facts.
But it may be worth pulling together the few passages in the SAF which touch on this point.
SAF para 2.26 (quoted in paras 56 and 57 above) mentions the possibility that client money received into non core client money accounts or house accounts would have been passed up to LBHI as part of the liquidity management process.
SAF 2.50.1 states that a total sum of over $45m of client money was paid to clients from house accounts during the gap period.
At first instance Mr Zacaroli accepted that a client who was repaid client money during the gap period could not expect to be repaid twice (para 268 of Briggs Js judgment).
SAF 2.50 does not state in terms how much client money was received during the gap period.
But SAF para 2.20.3 states that 24 house accounts regularly used for client transactions had at the PLS credit balances totalling about $162m, and that at the PPE 26 accounts had credit balances totalling about $297m.
The third supplement to the SAF, para 1, adds to this that the 24 accounts mentioned in SAF 2.20.3 were not swept to zero on 12 September 2008 (that point does not seem to have been picked up by Briggs J at para 110 of his judgment).
Para 2 of the third supplement adds that on the current state of the administrators knowledge much of the money in these accounts was probably not clients money.
It is not necessary, or indeed possible, to try to go much further into the incompletely stated (and in any event assumed) facts about movement of funds in the gap period.
But the mere fact that there was no sweep under the liquidity management process on 12 September 2008 makes it possible that significant sums of client money are traceable, under the general law of trusts, as still held in LBIEs house accounts at the PPE.
In practice the second issue resolves itself into a contest between two theories. (1) One theory (the final reconciliation theory) is that as soon as possible after the PPE LBIE, although then under the control of the administrators, should have carried out a final reconciliation in accordance with the provisions of the Annex. (2) The other theory (the general trust law theory) is that it was not the administrators duty to carry out a final reconciliation, but that a similar result would be produced by clients whose money was stranded in a house account during the gap period claiming it, not under CASS 7, but under the general law of trusts.
In reply to a question from Lord Clarke Mr Miles said (Day 3, page 93) that exactly the same result was produced by either route.
I do not think that is quite right (though I may have misunderstood Mr Miles).
Under the final reconciliation theory there would be a small alteration in the constitution of the CMP and any clients making last minute contributions to the CMP would share rateably, and suffer rateably any inadequacy in the pool (whether from the failure of Bankhaus, or from the costs of distribution under 7.7.2R(4), or from any other cause).
Under the general trust law theory they would claim the whole of their respective contributions, so far as sufficient client money could be traced and identified, and there might be some deduction for administrative costs under the principle in In re Berkeley Applegate (Investment Consultants) Ltd [1989] Ch 32.
So the outcome would not be exactly the same, but it might well be similar.
Under the general trust law theory an unsegregated last minute provider of client money would be left to his claim as an unsecured creditor only if and so far as his money was not traceable and identifiable in credit balances in house accounts.
The guidance in 7.9.8G (set out in para 43 above) is therefore (to put it no higher) incomplete.
Briggs J recorded (para 127) that before him leading counsel then appearing for the FSA roundly declared that it was wrong, and that the FSA intended to change it as soon as practicable.
In his judgment Briggs J considered the final reconciliation theory (though not under that name) as part of an important passage (paras 199 to 226), much of which was concerned with whether LBIE was under a duty to top up the CMP out of its own funds.
He held that that would be contrary to basic principles of insolvency law, and there is no appeal on that point.
He then more briefly rejected the suggestion that there was an obligation to top up the CMP with any identifiable client money in house accounts, concluding (para 224): In my judgment the lacuna is sufficiently filled by the general law, which permits those clients whose money is identifiable within house accounts, and not therefore part of the CMP, to pursue proprietary claims for its recovery, if they can surmount the evidential obstacles imposed by the need to trace.
It is interesting to note (para 225) that at that stage Mr Zacaroli, if correctly reported, seems to have been supporting the final reconciliation theory, or something like it.
In the Court of Appeal Arden LJ expressed a clear preference for the final reconciliation theory (paras 140 to 142).
I have already noted that Lord Neuberger did not cover this point, and the order of the Court of Appeal leaves it in doubt whether Sir Mark Wallers general agreement with Arden LJ should be taken as covering this particular point.
Before this court Mr Miles and Mr Crow have supported the final reconciliation theory with some detailed written submissions (paras 179 to 183 and 49 to 52 of their respective written cases) as well as in oral argument.
They have pointed out that it avoids a bifurcated scheme and achieves a symmetrical result.
Mr Zacaroli dealt with this point quite briefly in his written case (para 213) and in his oral submissions.
On this issue I accept the submissions of Mr Miles and Mr Crow.
There was no real challenge to Mr Miles argument that there is nothing in CASS 7, or in the general law of insolvency applicable to administrators, to prevent a final internal reconciliation being carried out on the data as they were at the PPE, limited to taking account of events during the gap period (and not reopening previous reconciliations down to and including the PLS).
That interpretation avoids bifurcation, achieves symmetry, and assimilates the effect of the alternative approach with that which would have occurred under the normal approach.
I would therefore dismiss GLGs appeal on the second issue so far as it relates to movements in clients entitlements during the gap period.
But I would allow the appeal to the extent of limiting the wide language of the direction or declaration in para 5 of the Court of Appeals order.
Whatever the outcome of this appeal, the terms of the order are going to need careful consideration and drafting in order to give the administrators the clearest possible guidance.
As a postscript, I have not overlooked the parties submissions on two points: legislative history and the need for a timely, workable solution.
As to the first, counsel have been very helpful in exploring how this area of regulatory law has evolved, but I do not think it gives the court any significant assistance in the task of construing CASS 7.
As to the need for the administrators to have a workable scheme which provides for a timely distribution, that is an aspiration which has already, sadly, perished.
A straightforward, timely distribution is impossible because of LBIEs massive non compliance with CASS 7.
Because of it, there is in one sense no commercially sensible solution to the problem, and that is the bleak situation in which the court has to give guidance to the administrators.
But I have little doubt that the decision of the majority will lead to much more delay, uncertainty and expense than if the judges directions had been restored.
LORD CLARKE
I had initially intended simply to add my agreement with the judgment and reasons of Lord Dyson.
That intention was formed on the basis that it is rarely helpful to publish a concurring judgment which does no more than repeat the conclusions and reasoning of the principal writer.
However, in the light of the sharp division of opinion between the members of the court, I offer this short contribution.
I remain of the view that this appeal should be dismissed for the reasons given by Lord Dyson.
I also agree with the reasoning in the short judgment written by Lord Collins.
In particular, I agree with them that the questions raised by the issues in this appeal depend, not upon the ordinary law of trusts, but on the true construction of the relevant provisions of CASS 7.
Lord Dyson has described with clarity the factual background against which CASS 7 must be construed.
The most important features of that background are MiFiD and the Implementing Directive, the purposes of which include providing a high level of protection for all clients who provide moneys for investment on their behalf.
As I see it, one of the principal purposes of CASS 7 is to provide protection as between clients on the one hand and the firm on the other.
Clients as a whole have a higher level of protection if all clients who have provided money and who have a claim against the company are entitled to claim against the pool than if such claims are limited to those with a proprietary right.
I do not see anything odd or inappropriate in such a conclusion.
On the contrary, it seems to me to be consistent with the principles underlying MiFiD and the Implementing Directive.
All the judges who have considered the issues have concluded that a trust arises on receipt of client moneys by the firm.
Thus CASS 7.7.2(1)R provides that a firm receives and holds money for the purposes of the client money rules and the distribution rules.
By CASS 7.2.1 client money means any money that a firm receives or holds for or on behalf of a client.
It follows that the fiduciary duties imposed by CASS are owed by the firm before there is segregation of client moneys and whether or not there has been segregation.
By CASS 7.2.15, which is under the heading Discharge of fiduciary duty, money ceases to be client money in certain specific circumstances, notably when it is paid away on the instructions of the client.
Until then, the money remains client money and, importantly, the firm retains fiduciary duties in relation to it.
I agree with Lord Collins approach to the first issue.
In particular I agree with Lord Collins conclusion at para 192 that, if the trust does not arise until segregation, then whether or not clients are protected by CASS 7 would become arbitrary and dependent upon the firms own practices; and the greater the level of incompetence or misconduct on the part of the firm, the less the protection for the clients.
This consideration seems to me to support the conclusion that CASS 7 is intended to protect all clients who provided money and have contractual claims.
Similar considerations support Lord Dysons conclusions on the second issue at paras 161 to 167, namely that money received by the firm before a PPE is to be treated as pooled, whether it is received before or after the PLS.
In particular I agree with his conclusions at paras 164 to 167.
By CASS 7.9.6R(1), if a PPE occurs, client money held in each client money account of the firm is treated as pooled.
I agree with Lord Dyson at para 164 (and Lord Neuberger of Abbotsbury MR [2011] Bus LR 277, paras 207 and 208), that the expression client money account of the firm should be given the wider meaning, namely that it extends to any account of the firm into which client money has been paid and that it is not restricted to segregated client money accounts.
I agree with Lord Dyson at para 165 that to exclude identifiable money in house accounts from the distribution regime runs counter to the policy underlying CASS, which is to provide a high degree of protection to all clients in respect of money in each money account of the firm (Lord Dysons emphasis).
As I read CASS, it is only CASS 7.9.6R(1) which governs what money is treated as pooled.
Thus it is only client money held in a client money account.
If the narrower meaning is given to that expression, only money held in a segregated account is included.
All other client money, whether received in the gap period between the PLS and the PPE, or before the PLS and not segregated (although it ought to have been), will not be treated as pooled because it would not be covered by CASS 7.9.6R(1) and there is no other provision of CASS under which it would be so treated.
Yet it is accepted by Lord Walker and Lord Hope that it would be unsatisfactory to exclude money which could not have been segregated because it was received by the firm after the PLS because of the inevitable time gap between segregations.
They therefore accept that unsegregated moneys received by the firm between the PLS and the PPE should be treated as pooled and that a reconciliation should take place as at the PPE.
They prefer that approach (the final reconciliation theory), to the general trust theory, under which clients whose money is stranded in a house account during the gap period would have to rely upon the general law of trusts.
I agree with them that it would be unsatisfactory to exclude money which was received after the PLS.
However, as I see it, the difficulty with the final reconciliation theory, if it is limited to money received in the gap period between the PLS and the PPE, is that it has no support in CASS.
I agree with Arden LJ [2011] Bus LR 277, para 142 and Lord Walker that there must be a final reconciliation as at the PPE.
I can however see no reason why it should be limited to money received after the PLS and in this respect I agree with Arden LJ at para 142.
It seems to me that it must be the duty of the administrators to conduct the reconciliation exercise fully and effectively.
Thus, in principle, it must be their duty to conduct the reconciliation in accordance with CASS 7.
I see no warrant for their being entitled to assume that the segregation as at the last PLS had been carried out correctly.
Indeed, in a case where the failure of the firm has caused the PPE, it is not unlikely that the firm will not have done so.
There are many possible ways in which the firm may have carried out the last segregation otherwise than in accordance with CASS.
For example, there may have been no segregation for several days (or more) before the PPE.
Or the firm may have segregated only the funds of one client (or some clients) and not others, or it may have segregated only some of a particular clients (or particular clients) money.
A number of questions arise.
For example, what would be the position if the firm had conducted no segregations at all for some days preceding the PPE? Would the administrators final reconciliation cover: (a) all identifiable moneys deposited between the date of the last actual segregation and the PPE; or (b) all identifiable moneys deposited between the date when the last segregation ought to have taken place and the PPE?
Neither option seems satisfactory.
Option (a) draws a sharp dividing line at the time of the last actual segregation, no matter how limited (would a single act of segregation suffice?) or ineffectual (would segregation of 1 suffice?) it may have been.
However option (b) draws an arbitrary distinction between clients who deposited moneys during the last business day before the PPE and all other clients.
If LBIE wholly failed to comply with their segregation obligation for several days in a row, why afford preferential treatment to clients who deposited funds on the last day before the PPE? All these clients funds would be unsegregated and, as I see it, they should be treated in the same way.
Either they should all be treated as having money in the pool or none of them should be so treated.
As I understand it, Lord Walker and Lord Hope accept that unsegregated client money received by the firm between the PLS and a PPE must be treated as pooled under CASS 7.9.6R(1).
In my opinion, that is only permissible on the basis that client money in a firm account is held in a client money account of the firm.
It seems to me that, if that is so, there is no reason not to hold that client money held in a firm account before the PLS is also in a client money account of the firm.
In these circumstances, in agreement with Lord Dyson at paras 165 and 167 and with the Court of Appeal (per Arden LJ at paras 124 to 142 and Lord Neuberger at paras 204 to 224), I would hold that the primary pooling arrangements apply to client money in firm accounts whenever it was paid in and that issue 2 should be answered on that basis.
That conclusion seems to me to be entirely consistent with the conclusion (reached by everyone) that a trust comes into existence on receipt of client money by the firm.
The answer to issue 2 seems to me to point the way to the answer to issue 3.
Although I can see that, if issue 3 is taken first, it can be said with some force that the reverse is the case, it does seem to me that, logically, it is sensible to take issue 2 first, as the Court of Appeal did.
It makes more sense to identify the CMP before deciding who should share in it rather than the other way round.
I agree with Lord Neuberger at para 226 that, as he put it, it could be dangerous to look at the general law of trusts because CASS 7 is intended to be a code.
The distribution model underlying the CASS 7 trust differs markedly from that of private trust law.
The focus of issue 3 is CASS 7.9.6R(2), which provides that, if a PPE occurs: (2) the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R.
It appears to me that, if that paragraph is read as a whole, as to my mind it should be, the words after the comma are of considerable importance because they tell the firm that it must distribute client money so that each client receives a sum which is rateable to the client money entitlement in accordance with CASS 7.9.7R.
In short, the distribution must be in accordance with CASS 7.9.7.
Reference to that provision seems to me strongly to support the claims basis.
I agree with Lord Neubergers conclusion at para 227 that, once one accepts that client money includes such money when paid into a mixed money house account, then the concept of "client money entitlement" carries with it the notion of all money, which (in my opinion correctly) he says is a point reinforced by CASS 7.9.1R.
As Lord Dyson notes at para 152, the judge (at para 243) described the respondents case on the construction of CASS as involving a formidable textual argument.
With apologies for repetition, but because of what I regard as its significance in this appeal, I set out the argument again here.
In para 242, after referring to CASS 7.9.6R(2) and underlining calculated in accordance with CASS 7.9.7R, the judge said: ii) CASS 7.9.7R requires, on a client by client basis, a netting process to be carried out between each client's individual client balance and that client's client equity balance. iii) CASS 7.9.9R(2) makes it clear (albeit for a different purpose) that the client money entitlement for each client will be calculated in accordance with CASS 7.9.7R as at the time of the PPE. iv) The phrase client equity balance is defined in the Glossary by reference to the amount which a firm would be liable to pay to a client in respect of that clients margined transactions if each of his open positions was liquidated at the prices published by the relevant exchange and his account closed.
It is a form of entitlement having nothing to do with the amount contributed by the client to the firm's segregated accounts. v) The phrase individual client balance is not a term defined in the Glossary, but it is fully explained in paragraph 7 of Annex 1, again in terms which are based upon the contractual position between the client and the firm, rather than the amount actually contributed by the client to the firm's segregated accounts. vi) Thus it necessarily follows that the phrase client money entitlement, where used both in CASS 7.9.6R(2) and 7.9.9R(2) is a reference to the clients contractual entitlement to have money segregated for it, rather than to the client's proprietary interest in the CMP, derived from having had its money actually segregated, ie paid into the segregated accounts from which the CMP is constituted.
Lord Dyson has considered and rejected the reasons given by the judge for not accepting the textual argument.
I agree with Lord Dysons conclusions at paras 152 to 160.
In particular, I agree with him that there is no legitimate basis upon which CASS 7.9.6R(2) can be construed by disregarding the words after the comma.
On the contrary, as indicated above, they point the way.
Moreover, they are mandatory and clear.
I agree with Lord Dyson that there is no good reason for construing the expression each client in CASS 7.9.6(2) as being limited to each client for whom money is held.
As I see it, each client means what it says and thus includes each client who deposited money and has a claim.
Further, I see nothing ambiguous in the reference in CASS 7.9.6(2) to CASS 7.9.7R.
It simply provides that the client money entitlement must be calculated in accordance with CASS 7.9.7R.
There are a number of difficulties with the contributions approach.
For example, the consequence of treating the PLS as the critical moment is that parties whose moneys were deposited in house accounts after the PLS would certainly have their funds effectively segregated by the administrators (provided that those moneys are still identifiable).
Those parties would therefore be able to participate in the CMP.
By contrast, clients whose moneys were deposited before the PLS would only be able to participate in the CMP if the firm actually complied with their obligation to segregate those funds.
Given the firms widespread failure to comply with this obligation, many of those clients would not be able to participate in the CMP.
The net effect would be that parties who deposited funds in house accounts after the PLS would be likely to be in a better position than parties who deposited funds in house accounts before the PLS.
This seems to me to be a strange result.
If, as I believe to be the case, CASS 7.9.7R applies to any distribution, there can in my opinion be no real doubt that the claims basis must be correct.
If the basis of the right to claim were a contributions basis, a clients entitlement to participate in the CMP would depend on whether or not it had made a contribution to the CMP.
Yet the distribution rules, namely CASS 7.9.6R and 7.9.7R, make it clear that the quantum of a participants share depends not upon the size of their contribution to the pool but upon the size of their contractual entitlement vis vis the firm.
In this regard I agree with the conclusions of Arden LJ at paras 154 to 164.
In particular I agree with her concerns expressed in paras 156 and 157 that, on the contributions basis, significant problems arise which cannot be dismissed as a glitch in the way in which they were by the judge at para 265.
In short I agree with Lord Dyson, Lord Neuberger, Arden LJ (and indeed Sir Mark Waller) that the natural construction of the CASS rules is that client moneys as at the PPE are to be distributed on a claims and not a contributions basis.
I also agree with them that such a construction gives better effect to the underlying purpose of the CASS code, namely the protection of all those who deposited money with the firm.
LORD DYSON
I am grateful to Lord Walker for setting out the facts and the relevant documentation so clearly and so comprehensively.
This appeal raises three issues concerning the true construction of CASS 7.
These are (i) when does the statutory trust created by 7.7.2(R) arise; (ii) do the primary pooling arrangements apply to client money held in house accounts; and (iii) is participation in the notional client money pool (CMP) dependent on actual segregation of client money? I agree with the conclusions of Briggs J, the Court of Appeal and Lord Walker, Lord Hope and Lord Collins on the first issue.
I cannot improve on their reasons for holding that the statutory trust created by 7.7.2(R) arises at the time of the firms receipt of the client money.
But I have reached a different conclusion from that of Briggs J, Lord Walker and Lord Hope on the second and third issues.
Before I turn (to the extent that it is necessary to do so) to the points of detail that have been debated so meticulously, I wish to make two preliminary points.
Two preliminary points
The first point is that CASS 7 provides a detailed code for the safeguarding of client money by firms regulated by the Financial Services Authority.
On the assumed facts, there was shocking underperformance by LBIE.
As the judge put it, there was non compliance with the regulatory requirements on a truly spectacular scale (para 4).
Furthermore, the most significant group of clients whose money LBIE failed to segregate was its own affiliates, who have advanced money claims against LBIE in excess of $US 3 billion.
But it is important not to allow these exceptionally striking facts to influence the outcome of this appeal.
The issues of construction that are raised are of general application.
Their resolution cannot depend on the size of the firm or the scale of its non compliance or the identity of the particular client in question.
Indeed, 7.1.12G states that a firm that holds money on behalf of, or receives money from, an affiliated company in respect of MiFID business must treat the affiliated company as any other client of the firm for the purposes of [chapter 7].
The second point that I wish to emphasise at the outset is that the client money which is subject to the statutory trust is any money that a firm receives from, or holds for, or on behalf of, a client in the course of, or in connection with, its MiFID business unless otherwise specified in this section (7.2.1R).
Accordingly, unless otherwise specified in section 7.2, all client money is subject to the statutory trust.
The Directives
It is not in issue that CASS 7 was made for the purpose of fulfilling the EU requirements contained in the Markets in Financial Instruments Directive 2004/39/EC (MiFID) and the Commission Directive 2006/73/EC (the Implementing Directive) and that CASS 7 should therefore be interpreted, as far as possible, so as to give effect to these Directives: see, for example, HM Revenue and Customs Comrs v IDT Card Services Ireland Ltd [2006] STC 1252.
As Arden LJ explained at paras 59 to 62 of her judgment, this requires a two stage test to be applied.
The first involves interpreting the Directives.
The second involves interpreting CASS 7 in the light of the meaning of the Directives.
At para 57 of his judgment, Briggs J correctly stated that domestic legislation which is made for the purposes of fulfilling the requirements of EU law contained in a Directive must be interpreted in accordance with the following principles: (i) it is not constrained by conventional rules of construction; (ii) it does not require ambiguity in the legislative language; (iii) it is not an exercise in semantics or linguistics; (iv) it permits departure from the strict and literal application of the words which the legislature has elected to use; (v) it permits the implication of words necessary to comply with Community law; and (vi) the precise form of the words to be implied does not matter.
The purposes of MiFID and the Implementing Directive include providing a high level of protection for clients and safeguarding their rights to funds in the event of the insolvency of the firm to which their funds have been entrusted.
The recitals to MiFID include recital (2) which states it is necessary to provide for the degree of harmonisation needed to offer investors a high level of protection (emphasis added); recital (17) which states that persons who provide the investment services and/or perform their investment activities covered by this Directive should be subject to authorisation by the home member states in order to protect investors and the stability of the financial system; and recital (26) which provides: in order to protect an investors ownership and other similar rights in respect of securities and his rights in respect of funds entrusted to a firm, those rights should in particular be kept distinct from those of the firm.
The aim of protecting investors is also expressed in recitals (31), (44), (61) and (71).
Article 13(7) of MiFID requires an investment firm to make adequate arrangements in relation to financial instruments belonging to clients to safeguard clients ownership rights, especially in the event of the investment firms insolvency.
Article 13(8) requires an investment firm, when holding funds belonging to clients, to make adequate arrangements to safeguard the clients rights and prevent the use of client funds for its own account.
The Implementing Directive contains detailed rules for giving effect to the objectives of MiFID.
Its recital (2) states that rules for the implementation of the regime governing organisational requirements for investment firms should be consistent with the aim of [MiFID].
Recital (5) states that the rules for the implementation of the regime governing operating conditions for the performance of investment services and activities should reflect the aim underlying that regime.
That is to say they should be designed to ensure a high level of investor protection to be applied in a uniform manner through the introduction of clear standards and requirements governing the relationship between an investment firm and its client (emphasis added).
Article 16 of the Implementing Directive contains rules for safeguarding client assets and gives effect to article 13(7) and (8) of MiFID.
Article 16(1) makes provision for record keeping and accounts (para (1)(a) and (b)); conduct of reconciliations (para (1)(c)); ensuring that client financial instruments and funds that are deposited are identified separately, ie are segregated (para (1)(d) and (e)); and organisational arrangements designed to minimise the risk of loss or diminution of client assets or of rights in connection with those assets, as a result of fraud, poor administration, inadequate record keeping or negligence (para (1)(f)).
Article 16(2) provides: If, for reasons of the applicable law, including in particular the law relating to property or insolvency, the arrangements made by investment firms in compliance with paragraph 1 to safeguard clients rights are not sufficient to satisfy the requirements of article 13(7) and (8) of [the MiFID Directive], member states shall prescribe the measures that investment firms must take in order to comply with those obligations.
It follows that the effect of article 13(7) and (8) of MiFID and article 16(2) of the Implementing Directive is that member states are under a duty to prescribe measures that firms should take to ensure that there are adequate arrangements under the domestic law relating to insolvency to safeguard the clients rights to funds belonging to them in order to achieve the investor protection purpose of MiFID.
When dealing with the first issue, Briggs J acknowledged the importance of interpreting CASS 7 by reference to the MiFID Directives (para 148).
He said in relation to the first issue that an interpretation of 7.7.2R by reference to the Directives was strongly supportive of the case that a trust of client money received by a firm arises upon receipt, rather than only upon segregation.
He added: Quite simply, that analysis better serves the MiFID objectives of protecting clients rights in relation to their funds, both from use of those funds for the firms own purposes, and from the consequences of the firms insolvency.
He added that the imposition of a statutory trust was the kind of additional requirement contemplated by article 16(2) of the Implementing Directive necessary to make the requirements set out in article 16(1) effective in the context of the domestic law of a particular member state.
I entirely agree with this approach.
When he came to deal with the third issue, he did not derive decisive assistance from an analysis of the purposes behind the MiFID Directives.
He said (para 234): On the one hand it may be said that the general aspiration to provide a high level of investor protection is best served by conferring a right to share in the CMP upon all clients whose money should have been segregated, whether or not it was.
On the other hand, the MiFID Directives are, as I have sought to explain, aimed at the establishment of obligations and organisational requirements which, if complied with, would protect clients funds both from misuse by the firm, and from loss occasioned by the firms insolvency.
The contemplation of the Directives was that this would be achieved by identification, reliable accounting and segregation, such that clients money actually dealt with in that way would be protected, but not otherwise.
I shall examine the third issue later in this judgment.
It seems that the judge considered that the underlying purpose of the Directives was sufficiently met by the introduction into our domestic law of the organisational requirements specified in article 16(1) of the Implementing Directive.
In other words, the requirement in article 13(7) and (8) of MiFID to make adequate arrangements to safeguard the clients rights in relation to financial instruments and funds would be satisfied by meeting the specific requirements of article 16(1) of the Implementing Directive.
But the requirements prescribed by article 16(1) are not to be equiparated with the requirements stated in article 13(7) and (8) of MiFID.
Indeed, as the judge recognised when he addressed the first issue, article 16(2) contemplates that the arrangements made by investment firms in compliance with article 16(1) might not be sufficient to satisfy the requirements of article 13(7) and (8) of MiFID.
The important point, however, is that the judge rightly acknowledged the principle that it is necessary to construe CASS 7 in a manner which promotes the purpose of providing a high level of protection for clients as required by the Directives.
The third issue
The second and third issues are closely related.
Lord Walker and Lord Hope prefer to start with the third issue.
I am content to take the same course.
The question raised by this issue is whether participation in the CMP is based on (i) the amount of client money which has actually been segregated at the date of the primary pooling event (PPE) (the so called contributions basis for participation) or (ii) the amount which ought to have been segregated at that date (the so called claims basis for participation).
The resolution of this issue depends on the proper interpretation of 7.9.6R, 7.9.7R and 7.7.2R.
The starting point is 7.7.2R which provides that a firm receives and holds client money (ie any money that it receives from or holds for, or on behalf of, a client) on the terms set out in 7.7.2R (1) to (5).
The beneficiaries of the trust are identified at 7.7.2R (2) as being the clients. for whom [the client money] is held, according to their respective interests in it and the trust is for the purposes of and on the terms of the client money rules and the client money (MiFID business) distribution rules (7.7.2R(1)).
The client money rules are defined as the rules contained in 7.1 to 7.8.
The client money (MiFID business) distribution rules (the distribution rules) are defined as the rules contained in 7.9.
I accept that until a PPE occurs, client money is held for the purposes of 7.3, 7.4, 7.5, 7.6 and 7.8 (ie safeguarding, segregation, transfer to third parties, record keeping and internal reconciliation and protection (by notice to banks) of client money bank accounts).
As Lord Walker says (para 77), these purposes are directed to the protection and management of clients money in the beneficial ownership of clients who are identified beneficiaries of the trust, being those (as 7.7.2R(2) puts it) for whom that money is held, according to their respective interests in it.
Lord Walker says (at para 78) that the biggest objection to the claims basis of interpreting 7.9.6R is that it involves on the assumed facts of this case a cataclysmic shift of beneficial interest on the PPE, to the detriment of those clients who must have supposed that their funds were safely segregated in accordance with CASS 7.1 to 7.8.
It would amount to the segregated clients funds being used as a strange form of compensation fund for disappointed clients whose funds had not been segregated.
It is true that, on the assumed facts of this case, the claims basis can be said to involve a cataclysmic shift of beneficial ownership on the PPE.
But that is because, on the assumed facts, there was a spectacular failure to comply with the CASS 7 rules for a very long period.
But I have already counselled against allowing the exceptional nature of the assumed facts to compel a particular conclusion to the issues of construction that arise in this case.
More importantly, CASS 7.7.2R provides that the trust is for the purposes and on the terms of the client money rules and the distribution rules.
Thus 7.7.2R itself points to the beneficiaries under the distribution rules as being all the clients for whom the firm has received and is holding client money.
In other words, such interest under the trust as any clients have is expressly on the terms of the distribution rules, of which 7.9.6R is the principal operative provision.
Lord Walker says that the notion that clients must be taken to have implicitly accepted the risk of discovering, on a PPE, that their carefully segregated funds must be shared with non segregated clients (including LBIEs own affiliates) seems quite unrealistic (para 79).
I respectfully disagree.
The general scheme of CASS 7 is that all client money is subject to a trust that arises upon receipt of the money by the firm.
This includes money received from the firms affiliated companies.
I have already referred to the wide definition of client money in 7.2.1R (para 130 above).
The client money rules are, therefore, intended to protect all the clients money received prior to a PPE.
The distribution rules are intended to protect all the clients money in the event of a PPE.
There is nothing surprising in the notion that, once a PPE occurs, the treatment of client money is subject to a different regime from that to which it was subject before.
It is the exceptional nature of the assumed facts in this case which makes the consequences of a change of regime so striking.
I accept that, in order to reach a conclusion on the third issue, it is necessary to examine the language of the relevant rules.
But I start from the position that it is not inherently unlikely that the draftsman intended that clients with established proprietary interests in segregated funds should have those interests disturbed by the distribution rules in the event of a PPE.
There is no a priori reason why the draftsman would not have intended to produce a scheme pursuant to which the protection afforded to clients is modified in the event of a PPE.
There is nothing unrealistic in a scheme which provides that, in the event of the failure of a firm, the beneficial interests in the client money are adjusted so as to provide that each client receives a rateable proportion of the aggregate of all the client money; in other words that all clients share in the common misfortune of the failure.
The draftsman had to decide what provision to make for the distribution of client money in the event of a PPE.
He could have decided that pooling and distribution was to be limited to client money which had been segregated or that it should include all client money.
That was a policy choice he had to make.
Which choice he made depends on the true construction of CASS 7.
In my view, it does not depend on a consideration of any general principles of trust law.
I acknowledge that segregation is an important part of the CASS 7 system.
But it does not follow that the draftsman intended that upon a PPE only segregated client money would qualify for distribution under the distribution rules.
As Mr Miles points out, on any view of the distribution rules, client money which has been segregated is treated as pooled on a PPE and must be distributed so that each client receives a rateable share of the CMP.
The distribution model underlying the CASS 7 trust therefore differs from that of private trust law.
To this extent at least, the notion that a client has a fixed beneficial interest in the segregated moneys which cannot be disturbed on the failure of a firm is incorrect.
The only question is how far that disturbance goes: is the rateable sharing with other segregated clients or with all clients?
As I have said, the resolution of this question depends on the true construction of the relevant provisions of CASS 7.
But in approaching this question of construction, it is necessary to bear in mind that (i) all client money is subject to the statutory trust and, (ii) where there is a choice of possible interpretations, the court should adopt the one which affords a high degree of protection for all clients who have client money with the firm and to safeguard their interests, thereby furthering the purposes of the Directives.
It is not the purpose of the Directives to provide a level of protection only for those clients who are recorded in the firms ledger as clients with client money entitlements when the firm calculated the net amount to segregate at the last reconciliation.
Lord Walker is of the view that, in construing CASS 7, we have to look at its essential scheme and structure.
Beyond that, he says, a purposive approach gives little assistance, since it is plain that neither the Directives nor CASS 7 contemplate non compliance with regulatory requirements (paras 48 and 81).
But even if the premise that the Directives did not contemplate non compliance with regulatory requirements is correct, it does not follow that rules introduced by member states to give effect to the Directives should not be construed in the manner which best fulfils the overriding purpose of the Directives to provide a high degree of protection to money entrusted by clients to investment firms.
If there are two possible interpretations of CASS 7, it seems to me to be axiomatic that the interpretation which more closely meets the purpose of the Directives should be adopted.
I do not see how this can be affected by whether the Directives did or did not contemplate non compliance with the regulatory requirements.
As I have already said, the judge did not derive decisive assistance from the Directives because he considered that their purpose was met by the incorporation in CASS 7 of requirements which satisfy the provisions of article 16(1) of the Implementing Directive.
But article 16(2) makes it clear that member states are required to prescribe the measures that firms must take in order to comply with the obligations set out in article 13(7) and (8) of MiFID, if compliance with article 16(1) does not suffice.
I do not see why the existence in domestic law of rules which satisfy the requirements of article 16(1) makes it unnecessary to interpret the distribution rules contained in 7.9, so far as possible, as imposing obligations which satisfy the requirements of article 13(7) and (8) of MiFID, thereby affording clients a high degree of protection.
I now turn to examine some of the detailed points arising from the language of the relevant provisions of CASS 7.
So far as material, 7.9.6R provides: If a primary pooling event occurs: (1) (2) client money held in each client money account of the firm is treated as pooled; and the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R.
Mr Miles relies on the reference to a calculation in accordance with CASS 7.9.7R as supporting the claims basis rather than the contributions basis for participation.
The steps in the argument were carefully set out by the judge at para 242 of his judgment as follows: (i) CASS 7.9.6R(2) requires the firm to distribute client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R [his underlining]. (ii) CASS 7.9.7R requires, on a client by client basis, a netting process to be carried out between each clients individual client balance and that clients client equity balance. (iii) CASS7.9.9R(2) makes it clear (albeit for a different purpose) that the client money entitlement for each client will be calculated in accordance with CASS 7.9.7R as at the time of the PPE. (iv) The phrase client equity balance is defined in the Glossary by reference to the amount which a firm would be liable to pay to a client in respect of that clients margined transactions if each of his open positions was liquidated at the prices published by the relevant exchange and his account closed.
It is a form of entitlement having nothing to do with the amount contributed by the client to the firms segregated accounts. (v) The phrase individual client balance is not a term defined in the Glossary, but it is fully explained in paragraph 7 of Annex 1, again in terms which are based upon the contractual position between the client and the firm, rather than the amount actually contributed by the client to the firms segregated accounts. (vi) Thus it necessarily follows that the phrase client money entitlement, where used both in CASS 7.9.6R(2) and 7.9.9R(2) is a reference to the clients contractual entitlement to have money segregated for it, rather than to the clients proprietary interest in the CMP, derived from having had its money actually segregated, ie paid into the segregated accounts from which the CMP is constituted. (vii) By way of a postscript, Mr Knowles submitted that, in any event, not all contributions to the segregated accounts were made in respect of particular clients.
For example, he pointed to the prudential payments contemplated by CASS 7.4.21R. Segregation in relation to depot breaks is another example: see below.
At para 243, the judge described this as a formidable textual argument.
He rejected it for the following principal reasons.
First, the phrase client money entitlement means different things in different places, so that its meaning in any particular paragraph must be informed by its context.
Secondly, (for the reasons that he gave at paras 255 to 262) the correct interpretation of 7.9.7R does not support the claims basis for participation in the CMP.
He pointed out that 7.9.7R does not purport to constitute a comprehensive formula for the calculation of a client money entitlement.
It merely provides for the offset of two particular types of accounting debit against two particular types of accounting credit.
It is a reducing mechanism, whose effect is, in the stated circumstances, to reduce what otherwise might have been identified as a clients client money entitlement, which is to serve as the basis for his rateable participation in the CMP (para 255).
He said that the existence of these offsetting provisions is not sufficient to indicate that it was intended to go behind the last internal reconciliation account to establish if necessary by enormous forensic endeavour and even litigation, the true contractual entitlements of the firms clients to have their money segregated, without limitation in historical time, so as to include un segregated and partially segregated clients as beneficiaries of the CMP, with obvious adverse consequences in terms of the timely and efficient distribution of the pooled client money to the clients entitled to it (para 261).
Both the judge (para 232) and Lord Walker (para 97) said that the purpose of 7.9.7R is obscure and, at least by inference, that the reference to it in 7.9.6R(2) cannot bear the weight that Mr Miles seeks to place on it.
But I do not think that the reference in 7.9.6R (2) to the sum being calculated in accordance with CASS 7.9.7R can be brushed aside so easily.
CASS 7.9.7R provides for a calculation which takes account of each clients individual client balance and client equity balance.
The individual client balance calculation is dealt with in detail in para 7 of Annex 1.
The client equity balance is defined in the glossary as the amount which a firm would be liable (ignoring any non cash collateral held) to pay to a client (or the client to the firm) in respect of his margined transactions if each of his open positions was liquidated at the closing or settlement prices published by the relevant exchange or other appropriate pricing source and his account closed.
As Mr Miles says, the calculation involves an assessment of the clients actual and objective entitlement in respect of client money.
It has nothing to do with the amount which may or may not in fact have been segregated for the client, nor with the ledger entries which the firm may have made in respect of any particular segregation or reconciliation.
The reducing mechanism interpretation favoured by the judge (and supported by Mr Zacaroli) treats the phrase client money entitlement in 7.9.6R(2) as envisaging (i) a calculation by reference to the historical amounts recorded in the ledgers, and (ii) (as a downward adjustment) a calculation by reference to 7.9.7R.
But there is no support for this two fold scheme of calculation in the language.
As Mr Miles points out, 7.9.6R(2) simply refers to the client money entitlement being calculated in accordance with 7.9.7R.
Like Lord Neuberger MR (para 230), I do not consider that there are sound reasons for rejecting the formidable textual argument.
Lord Walker at para 94 (in agreement with the judge) says that, if 7.9.6R(2) had stopped at the comma after in accordance with CASS 7.7.2R, there would have been no doubt that the right to receive a distribution from the CMP was limited to those clients for whom the firm had actually segregated client money or those identified as entitled to participate in the distribution in the last reconciliation.
They were under 7.7.2R(2) the clients for whom that money is held and it was to be distributed according to their respective interests in it.
Lord Walker says that each client in 7.9.6R does not mean what it says; in context, it means each client for whom client money is held.
I see the force of this argument.
But 7.9.6R(2) must be read as a whole, including the words which follow the comma after in accordance with CASS 7.7.2R. So read, I think the better interpretation is that the right to share in a distribution is given to each client of the firm, so that all clients with a client money entitlement are entitled to share.
That is what 7.9.6R(2) says.
The reason for referring back to 7.7.2R is not to identify the client money that is to be distributed (that is done in 7.9.6R(1) and (2)).
It is to introduce the order of priorities referred to in 7.7.2R.
Thus, for example, the incorporation of 7.7.2R(2) throws the costs properly attributable to the distribution of client money on to the client money (rather than on to the general assets of the firm).
The costs of distribution will have to come from the trust before division to clients.
One final textual point.
I think that Mr Miles is right to say that some support for his case on the meaning of client money entitlement can be found in 7.9.9R(2).
This creates an exception from the usual rule that all client money received by the firm after a PPE must be returned to the client.
The exception is where it is client money relating to a client, for whom the client money entitlement, calculated in accordance with CASS 7.9.7R, shows that money is due from the client to the firm at the time of the primary pooling event.
This is a reference to a calculation being performed in the manner prescribed in Annex 1 (albeit with mandatory off setting).
The exercise is intended to establish whether, objectively and in fact, the client is a debtor of the firm, in which case the firm can keep the money.
In the context of 7.9.9R(2), client money entitlement has nothing to do with the amounts actually segregated for a client by the firm.
It is telling that 7.9.9R(2), like 7.9.6R(2), requires the client money entitlement to be calculated in accordance with 7.9.7R as at the date of the PPE.
To summarise, for the reasons that I have given, the language of the relevant provisions of CASS 7 tends to support the claims basis for participation in the CMP.
I accept, however, that the linguistic points are not conclusively supportive of this interpretation.
That is why it is necessary to stand back from the detail and ask which interpretation better promotes the purpose of CASS 7.
In my view, a purposive interpretation clearly supports the claims basis for participation.
This basis better reflects the fact that all client money is subject to the statutory trust and that CASS 7 is intended to give effect to the Directives whose overriding purpose is to safeguard the assets of all clients and to provide all clients with a high degree of protection.
I should add that we heard detailed submissions about the complexities of the process that the claims basis would entail and the inevitable costs and delay that it would occasion.
The judge was impressed by these points: see, for example, para 152 above.
I have little doubt that distribution on the claims basis in this case would be complex and would take a long time to complete.
That is because of the extraordinary circumstances of this case.
In other cases, the position might well be very different.
But it has not been shown that, in a typical case, the complexity of the claims basis will necessarily be greater than that of the contributions basis.
Still less has it been shown that, in a typical case, the complexity of the claims basis will be so much greater than that of the contributions basis that the draftsman could not have intended the former.
I do not think that it would be right to allow the scale of the exercise that would be required in this case to lead to a solution which, for the reasons that I have given, would defeat the underlying purpose of CASS 7.
For the reasons that I have given, I have reached the strong provisional conclusion that participation in the CMP is not dependent on actual segregation at the time of the PPE.
But I recognise that the second and third issues are closely linked.
The third issue concerns the true construction of 7.9.6R(2).
The second issue concerns the true construction of 7.9.6R(1).
The closeness of the link between the two issues is seen clearly in 7.9.6R(2) which provides that the firm must distribute that client money in accordance with CASS 7.7.2R (underlining added).
That client money is the client money referred to in 7.9.6R(1), ie client money held in each client money account of the firm.
The second issue focuses on whether the client money to be distributed must be in a client account or may be identifiable client money held in a house account of the firm.
The second issue
If, as Lord Walker and Lord Hope would hold, participation in the CMP is dependent on actual segregation at the time of the point of last segregation (PLS), then the second issue is limited to the question whether there is anything in CASS 7 or the general law of insolvency to prevent a final internal reconciliation from being carried out on the data as they were at the PPE, but limited to taking account of events during the gap period between the PLS and the PPE (and not reopening previous reconciliations down to and including the PLS).
In the light of the conclusion that I have reached on the third issue, the second issue cannot be viewed so restrictively.
It is necessary to decide whether 7.9.6R(1) requires all identifiable client money to be treated as pooled, or only that client money which is held in the firms segregated client accounts.
The phrase client money account of the firm is not defined.
As a matter of ordinary language, the phrase client money account is capable of meaning (i) an account which contains or is intended to contain exclusively client money or (ii) an account of the firm which contains client money.
Even where a firm is fully compliant, CASS 7 contemplates that client money will be held in the firms own account.
Thus, where the alternative approach of payment of client money into a client bank account is adopted under 7.4.16G, 7.4.18G and 7.4.19G, the firm may receive client money into its own bank account before (on the next business day) paying it out to or on behalf of the client (see 7.4.18G).
The question of whether a house account in which client money is held is a client money account of the firm arises, therefore, both in relation to money held by the firm where it adopts the alternative approach and where (as in the present case) it wrongly retains client money in its own account.
A number of detailed textual points have been made on both sides of the argument.
Some of these are discussed by Lord Neuberger at paras 205 to 215 of his judgment.
I agree with his conclusion on these (para 223) that they are fairly limited in their value and pretty finely balanced in their relative strengths and that overall they do not favour either interpretation.
I, therefore, see no point in rehearsing them in this judgment.
Since an examination of the text shows that there are two possible interpretations of the phrase each client money account of the firm, it seems to me that the correct interpretation is the one which best promotes the purpose of CASS 7 as a whole.
As I have already explained, the fundamental purpose of CASS 7 is to provide a high level of protection for client money received by financial services firms.
That is why all client money received from or held for or on behalf of a client in the course of, or in connection with its MiFID business (7.2.2R) is held on trust upon receipt and why the other client money rules in 7.1 to 7.8 are expressed as they are; and that is the policy underlying the distribution rules.
To exclude identifiable client money in house accounts from the distribution regime runs counter to this policy.
It creates what was referred to in argument as a bifurcated scheme which provides clients with different levels of protection, namely a right to claim in the CMP under the CASS 7 rules for those whose money is held in segregated client accounts but no right (other than a right to trace in equity) to those whose money is held in the firms house accounts.
The purpose of the scheme (as required by the Directives) is to provide a high level of protection to all clients and in respect of client money held in each money account of the firm.
That purpose would be frustrated if the protection were restricted in this way.
As Mr Miles and Mr Crow point out, a bifurcated scheme would provide clients with different levels of protection based on the happenstance of whether the firm has segregated money on behalf of that client.
That is an arbitrary basis for a scheme which is intended to provide protection to all clients who entrust their money to a firm.
It is unlikely that the draftsman of CASS 7 intended the scheme to have this effect.
It is improbable that the draftsman contemplated that there would be two regimes substantially in operation for the distribution of client money (one under the CASS 7 rules set up for the purpose and one under equitable tracing principles and outside CASS 7).
There is the further point that, in view of the overriding purpose of the scheme, it is unlikely that client money which had yet to be segregated under the alternative approach was intended to be treated differently from client money which had been segregated, whether under the normal approach or the alternative approach.
It is unlikely that the draftsman would have intended that a client who makes a payment to a firm which adopts the alternative approach should, albeit for a short period, be at risk in a way in which a client who makes a similar payment to a firm which adopts the normal approach would not be.
Lord Walker and Lord Hope recognise the force of this last point.
They would meet it by holding that a final reconciliation must be carried out on the data as they were at the PPE limited to taking account of events during the gap period (and not reopening previous reconciliations down to and including the PLS).
I accept that, in relation to client money received after the PLS, this interpretation avoids bifurcation, achieves symmetry and assimilates the effect of the alternative approach with that which would have occurred under the normal approach.
But it does not avoid bifurcation or achieve symmetry as between client money received before the PLS which is held in segregated clients accounts and client money which is held in the firms house accounts.
I would hold, in agreement with the Court of Appeal, that the primary pooling arrangements apply to client money in house accounts.
This conclusion is consistent with and reinforces the conclusion which I have expressed on the third issue.
In these circumstances, it is not necessary to deal with the alternative submission of Mr Miles that, as at the PPE, the firm remains a regulated firm subject to CASS 7 and is therefore obliged to perform a final reconciliation as at the PPE.
This is the submission that Arden LJ accepted at para 142 of her judgment.
Lord Walker and Lord Hope accept this submission, but only so as to take account of events during the gap period between the PLS and the PPE.
I agree with them, but am inclined to think that there is no good reason why the final reconciliation should be limited in the way that they suggest.
There is nothing in the language of 7.6 which supports such a limitation.
Since (as I have held) all client money is held by the firm on trust for the purpose of distribution in accordance with the distribution rules, if it were necessary to decide the point, I would hold that the final reconciliation should not be limited to an examination of what has happened between the PLS and the PPE.
Overall conclusion
I would, therefore, dismiss this appeal.
I would hold that (i) client money is held on the statutory trust imposed by CASS 7.7. from the time of receipt by a firm; (ii) the money treated as pooled at the PPE should be distributed to clients in accordance with their respective client money entitlements under CASS 7 construed in accordance with this judgment; and (iii) the pooling at the PPE includes all client money identifiable in any account of LBIE into which client money has been received and is not limited to client money in the firms segregated accounts.
If the implications of these holdings call for further decision, application should be made to Briggs J for directions.
LORD COLLINS
The issues on this appeal are of great importance to financial institutions and regulatory authorities, and the amount of money involved is enormous.
They raise some difficult questions of construction of CASS 7 in accordance with settled principles, but not points of law of general importance.
Two of these questions have divided the courts below and the members of this court.
I agree with the judgments of Lord Walker and Lord Hope on the first issue, and those of Lord Dyson and Lord Clarke (and with the conclusions of Lord Neuberger MR, Arden LJ, and Sir Mark Waller in the Court of Appeal) on the second and third issues.
I begin with my views on the first issue, namely whether the statutory trust over client money contained in CASS 7.7 attaches only to client money in segregated accounts or whether it also extends to client money which LBIE was entitled to, and did, pay or receive into its own house accounts.
The question is whether the statutory trust over clients funds arises on receipt of the funds, as CASS 7.7.2R seems to say (A firm receives and holds client money as trustee) and as Briggs J and the Court of Appeal decided, or whether it arises only when the money is received and segregated.
Recital 26 of the Markets in Financial Instruments Directive 2004/39/EC (MiFID) recites that In order to protect an investors ownership and other similar rights in respect of securities and his rights in respect of funds entrusted to a firm those rights should in particular be kept distinct from those of the firm, .
Article 13(8) of MiFID provides: An investment firm shall, when holding funds belonging to clients, make adequate arrangements to safeguard the clients' rights and, except in the case of credit institutions, prevent the use of client funds for its own account.
Article 16(1) of Commission Directive 2006/73/EC (the Implementing Directive) provides that: Member states shall require that, for the purposes of safeguarding clients rights in relation to financial instruments and funds belonging to them, investment firms comply with the following requirements (e) they must take the necessary steps to ensure that client funds deposited, in accordance with article 18, in a central bank, a credit institution are held in an account or accounts identified separately from any accounts used to hold funds belonging to the investment firm; (f) they must introduce adequate organisational arrangements to minimise the risk of loss or diminution of client assets, or of rights in connection with those assets, as a result of misuse of assets, fraud, poor administration, inadequate record keeping or negligence. and article 16(2) provides: If, for reasons of the applicable law, including in particular the law relating to property or insolvency, the arrangements made by investment firms in compliance with paragraph 1 to safeguard clients rights are not sufficient to satisfy the requirements of article 13(7) and (8) of [MiFID], member states shall prescribe the measures that investment firms must take in order to comply with those obligations.
Section 139(1)(a) of the Financial Services and Markets Act 2000 (FSMA) provides for rules to make provision which results in clients money being held on trust in accordance with the rules.
CASS 7.3 (Organisational requirements: client money) provides: Requirement to protect client money 7.3.1R A firm must, when holding client money, make adequate arrangements to safeguard the client's rights and prevent the use of client money for its own account. [Note: article 13(8) of MiFID] Requirement to have adequate organisational arrangements 7.3.2R A firm must introduce adequate organisational arrangements to minimise the risk of the loss or diminution of client money, or of rights in connection with client money, as a result of misuse of client money, fraud, poor administration, inadequate record keeping or negligence. [Note: article 16(1)(f) of the MiFID implementing Directive]
CASS 7.2.1R defined client money as any money that a firm receives from or holds for, or on behalf of, a client.
CASS 7.7 (Statutory trust) provides (omitting the special provisions for insurance undertakings): 7.7.1G Section 139(1) of the Act (Miscellaneous ancillary matters) provides that rules may make provision which result in client money being held by a firm on trust (England and Wales and Northern Ireland) or as agent (Scotland only).
This section creates a fiduciary relationship between the firm and its client under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client.
In the event of failure of the firm, costs relating to the distribution of client money may have to be borne by the trust.
Requirement 7.7.2R A firm receives and holds client money as trustee (or in Scotland as agent) on the following terms: (1) and the client money (MiFID business) distribution rules; (2) that money is held, according to their respective interests in it; (4) on failure of the firm, for the payment of the costs properly attributable to the distribution of the client money in accordance with (2); and (5) for the firm itself. subject to (3) [an error for (4)], for the clients for whom for the purposes of and on the terms of the client money rules after all valid claims and costs under (2) to (4) have been met,
CASS 7.8 requires the trust affecting client money to be notified to and acknowledged by banks and other intermediaries.
Where client money is held in a client bank account, the firm is obliged to notify the third party bank that the account is a trust account, and to require from the third party bank an acknowledgment that money standing to the credit of the account is trust money, and that the bank is not entitled to combine the account with any other account or to exercise any right of set off or counterclaim against the money in that account: CASS 7.8.1R.
The client money rules do not impose any such obligation where client money is held in a house account.
The essence of the appellants elaborate argument that the enormous sums which Lehman failed to segregate in this case are not subject to the statutory trust comes down to two main points: the first is that as a matter of construction the statutory trust does not arise before segregation.
The second, which is put at the forefront of the argument, is that CASS 7 allows client money to be paid into the firms house accounts under the alternative approach.
The essential feature of a trust is that the trustee must deal with the trust property solely for the purposes of the trust.
Under the alternative approach the firm is free to use the client money paid into its house accounts for its own purposes, and that is inconsistent with an intention that such funds are held on trust for others.
The first argument, on the construction of the wording, is that the opening words of CASS 7.7.2R (A firm receives and holds client money as trustee on the following terms) do not show that the trust was intended to apply to all client money from the moment of its receipt by the firm.
The use of the phrase receives and holds is explained by the fact that it tracks the definition of client money in CASS 7.2.1R, being any money that a firm receives from or holds for, or on behalf of, a client, which reflects the fact that the firm may come under an obligation to treat money as client money in two separate circumstances: (1) where it receives money from or on behalf of a client; and (2) where, as a result of a transaction involving a client, the firm is obliged to segregate some of its own money into a client bank account as client money.
There is nothing in MiFID in general, or in article 13(8) of MiFID or article 16(1) and (2) of the Implementing Directive or in CASS 7.3 in particular, which requires a trust to be imposed from the moment of receipt.
The second argument is essentially that the use of the alternative approach by investment firms such as LBIE operating in a complex environment is inconsistent with the imposition of a trust on receipt.
In practice it is impossible in such an environment for the firm to keep track, on a real time basis, of the extent to which each trade, or movement in the market, or payment relating to a particular client gives rise to a requirement to make a payment into or out of the segregated client bank accounts (as required by the normal approach).
As a result, with auditor certification, the firm is permitted to receive client money from or on behalf of clients into its own accounts, and to pay any money to or on behalf of clients out of its own accounts.
The firm is required to maintain in the client bank accounts an amount equal to the aggregate amount of client money it is required to hold for clients (less the amount held in the client transaction accounts).
Since it is impossible to achieve this on a real time basis, an adjustment is required to be done daily, by performing a reconciliation of records and accounts required under CASS 7.6.2R, and adjusting the balance held in its client bank accounts to accord with that reconciliation, until the process is repeated on the next business day.
The firm is under no obligation in relation to the actual money received as client money; but it is obliged to make payments to or on behalf of clients out of the funds in its own accounts (ie its own funds), and permitted to receive client money into its own accounts.
It must, on a daily basis, ensure that there is sufficient money in the segregated accounts to satisfy the client money requirement as at the close of business on the previous business day.
If necessary, this will involve a payment from the firms own accounts into the client bank accounts, but it may instead involve a withdrawal from the client bank accounts, or no change to the aggregate balance in the client bank accounts.
The appellants say that under the alternative approach the firm is free to use the client money paid into its house accounts for its own purposes, and that is inconsistent with an intention that such funds are held on trust for others: Henry v Hammond [1913] 1 KB 515, 521; Paragon Finance Plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400, 416.
A trust over client money in the firms house accounts would create practical problems which the draftsman cannot have intended.
It is in practice impossible for the firm to monitor, on a real time basis: (1) the payments made into its house accounts which attract the MiFID client money segregation requirements; (2) the payments which do not; and (3) the payments out of its house accounts which would impact on the application of those requirements.
The draftsman must have envisaged that a firm which received client money into its house accounts under the alternative approach would necessarily be unable to distinguish what was client money in each account from its own funds, and would therefore in the ordinary course make payments from its house accounts without differentiating between them.
In my judgment, the appeal on the first issue fails.
That the trust arises on receipt is not only consistent with the objectives of the Directives and the Rules, but also emerges clearly from the wording of CASS 7.7.2R in its context.
The statutory trust to safeguard clients funds pre dates MiFID.
It has its origin in section 55(2)(a) of the Financial Services Act 1986.
In his report Review of Investor Protection, Report: Part 1 (1984) (Cmnd 9125) (which preceded the Financial Services Act), para 6.31, Professor Gower noted that under English law mere segregation of funds was not enough to protect those funds from the firms creditors in the event of its insolvency, and investors money could be safeguarded by segregation only if it was segregated in such a way that ownership remained with them, ie under a trust: The ultimate safeguard for investors is an assurance that on the failure of the investment business such of their money or investments as have not been disposed of in the legitimate conduct of that business are recoverable by them.
In most cases this can be achieved only by a combination of two methods.
The first is by the segregation of clients money and investments from the firms money and investments.
This is effective only if clients money and investments are segregated in such a way that ownership remains with them.
This is not achieved merely by holding their money in a designated clients account.
Unless that account is held on trust for the clients it will not afford protection, as many clients of recently liquidated investment managers and commodity dealers have learnt to their cost.
In its 2000 consultation paper, Protecting Client Money on the failure of an authorised firm, para. 4.13, the FSA said: All consumers have an interest in the system of regulatory protection that safeguards client money held by a firm.
When a firm fails, its clients will want to know that their money can be returned to them as quickly as possible.
When it amended the client money rules to take account of the Directives, the FSA retained the existing trust mechanism.
In its consultation paper 06/14, Implementing MiFID for Firms and Markets (July 2006) at para 10.17 it said: MiFIDs segregation provisions require a firm, on receiving any client funds, promptly to segregate those funds in an account or accounts identified separately from any accounts used to hold funds belonging to the investment firm.
Our view is that under English law, a trust is the most appropriate mechanism for segregating client money and a statutory trust has advantages over a private law trust.
For example, the incorporation of the client money distribution rules into the statutory trust assists in the efficient and prompt distribution of client money.
The FSA proposed (para 10.18): to use the existing requirements concerning the establishment of the statutory trust and the segregation and operation of client money accounts.
This will provide certainty as to beneficial ownership and the authority of the firm.
And it would preserve the solid foundation for action by us, or liquidators or other persons appointed on their behalf, in the event of firm default.
A statutory trust does not necessarily bear all the indicia of a trust as would be recognised by a Court of Chancery.
Thus in Ayerst v C&K (Construction) Ltd [1976] AC 167, 180, Lord Diplock said (in the context of a trust arising on insolvency) that all that might be meant by the use of the word trust was giving property the essential characteristic which distinguishes trust property from other property; namely, it cannot be used or disposed of by the legal owner for his own benefit but must be used or disposed of for the benefit of others.
Thus CASS 7.7.1G provides that the statutory trust creates a relationship under which client money is in the legal ownership of the firm but remains in the beneficial ownership of the client.
Consequently, it does not follow that, when the word trust is used, that brings with it the full range of trust indicia associated with a traditional private law trust, particularly so when the trust is imposed by statute and is in the context of the exercise of a public function: cf In re Ahmed & Co [2006] EWHC 480 (Ch); 8 ITELR 779.
The starting point on issue 1 is the wording of CASS 7.7.2R, which expressly provides that [a] firm receives and holds client money as trustee on the following terms.
There is nothing to suggest that the trust does not arise on receipt.
Other provisions of CASS 7 are consistent with the conclusion that a firm which receives client money is under an immediate fiduciary duty, including (1) the definition of client money in CASS 7.2.1R which refers to a firm receiving or holding money; (2) CASS 7.2.15R, which provides for the limited situations in which client money is released from fiduciary obligations on the part of the firm, and (3) CASS 7.4.23G (Mixed remittance), which provides that pursuant to the client money segregation requirements, a firm operating the normal approach which receives a mixed remittance (part client money and part other money) must pay the full sum into a client bank account promptly, and in any event, no later than the next business day after receipt; and pay the money that is not client money out of the client bank account promptly, and in any event, no later than one business day of the day on which the firm would normally expect the remittance to be cleared.
That conclusion is also inevitable in the light of the requirement in article 13(8) of MiFID, which obliges member states to require an investment firm when holding funds belonging to clients to prevent the use of client funds for its own account.
CASS 7 must be construed in order to comply with that requirement.
It is also supported by articles 16(1) and 16(2) of the Implementing Directive, and by CASS 7.3.
Article 16(1) of the Implementing Directive provides that client funds are to be held in accounts separate from the firms funds, and that firms must introduce adequate organisational arrangements to minimise the risk of loss or diminution of client assets, as a result of (inter alia) the misuse of assets.
Most important, if because of insolvency law the arrangements are not sufficient to safeguard clients rights, member states have to prescribe the measures that investment firms must take in order to comply with those obligations: article 16(2).
CASS 7.3.1R provides that the firm must prevent the use of client money for its own account.
I accept the respondents argument that if the trust did not arise until segregation, then whether or not clients are protected by the CASS rules would become arbitrary and dependent on the firms own practices: the greater the level of incompetence (or misconduct) on the part of the failed firm, the lesser the protection for clients.
As for the arguments based on the use of the alternative approach, the starting point is that the alternative approach is merely a method which firms are entitled to adopt, in certain circumstances, if to do so would achieve the client protection objective.
The alternative approach is not expressly contemplated by MiFID and is an option permitted only if the firm has in place systems and controls which are adequate to enable it to operate the alternative approach effectively: CASS 7.4.15R.
The alternative approach does not, and cannot, assist in the interpretation of the Directives, nor does it help in the interpretation of CASS 7.7.2R.
I agree with Briggs J (at [144]) that since the purpose of the statutory trust is to protect client money from misuse, it would be odd if client money (originally the client's beneficial property) ceased to be the client's property upon receipt by the firm, and it (or substitute money) then became the clients property again upon segregation shortly thereafter.
There is no doubt that money in a mixed fund may be held on trust, and that a trust of money can be created without an obligation to keep it in a separate account: In re Kayford Ltd [1975] 1 WLR 279, 282, per Megarry J.
The supposed difficulties in operating the alternative method if there were a continuing trust of client money are in my judgment of no substance, and in any event irrelevant to the question whether the trust arises on receipt.
For those reasons I would uphold the conclusions of Briggs J and the Court of Appeal [2011] Bus LR 277 on the first issue.
I add only a few words about the third issue.
Lord Walker and Lord Dyson have between them set out fully all of the textual and policy considerations which divide them.
My principal reasons for coming to the conclusion that the claims basis is the right basis (as does Lord Dyson, and as did Lord Neuberger MR, Arden LJ and Sir Mark Waller in the Court of Appeal) are these: (a) although CASS 7 uses trust concepts, it is not intended to codify, or be limited by, the ordinary rules of trust law; (b) the exercise is purely one of construction of CASS 7; (c) CASS 7.7.2R provides that the trust is for the purposes and on the terms of the client money rules and the distribution rules; (d) CASS 7.9.6R provides that, on a primary pooling event, client money held in each client money account of the firm is treated as pooled; and the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R; (e) client money entitlement is a reference to the contractual entitlement to have money segregated for the client; (f) that interpretation better serves the purposes of MiFID and the Rules.
| This appeal arises from the insolvency and administration of the Lehman Brothers group of companies.
Lehman Brothers International (Europe) (LBIE) was the principal European trading company in the group and is incorporated in England as an unlimited company with its head office in London.
LBIE is authorised and regulated by the Financial Services Authority (FSA).
Its ultimate holding company is Lehman Brothers Holdings Inc (LBHI), incorporated in Delaware and based in New York.
LBHI is now in Chapter 11 bankruptcy.
LBIE was put into administration by order of the High Court made before the opening of business (at 07.56am) on Monday 15 September 2008: [24].
Many difficulties have arisen in the administration and the administrators have made several applications to the Companies Court for directions.
The application which gives rise to this appeal relates to the provisions governing client money, namely chapter 7 (Client money: MiFID business) of the Clients Assets Sourcebook issued by the FSA (CASS 7), made under the Financial Services and Markets Act 2000 (FSMA): [25] [26].
CASS 7 provides for a normal approach and an alternative approach to discharging a firms client money segregation requirements.
LBIE adopted the alternative approach. 7.4.16G of CASS 7, among other things, provides that Under the alternative approach, client money is received into and paid out of a firms own bank accounts A firm that adopts the alternative approach will segregate client money into a client bank account on a daily basis, after having performed a reconciliation of records and accounts of the entitlement of each client for whom the firm holds client money with the records and accounts of the entitlement of each client for whom the firm holds in client bank account and client transactions accounts to determine what the client money requirement was at the close of the previous business day.
CASS 7 (7.7.2R) further provides that A firm receives and holds client money as trustee (or in Scotland as agent) Where the firm fails, this is known as a primary pooling event (PPE). 7.9.6R provides that If a primary pooling event occurs: (1) client money held in each client money account of the firm is treated as pooled; and (2) the firm must distribute that client money in accordance with CASS 7.7.2R, so that each client receives a sum which is rateable to the client money entitlement calculated in accordance with CASS 7.9.7R. A secondary pooling event occurs on the failure of a third party to which client money held by the firm has been transferred (7.9.14R). 7.9.13R provides that if both a primary pooling event and a secondary pooling event occur, the provisions relating to a primary pooling event are to apply: [44].
In an ideal world, the flawless operation of the scheme created by the CASS 7 rules would ensure that, upon a firms insolvency, the clients would receive back their money in full, free from the claims of the firms creditors.
In the imperfect and highly complex real word occupied by LBIE and its numerous clients, there has been a falling short in the achievement of these objectives on a truly spectacular scale.
This is a result of two prime causes: first, on the basis of the assumed facts, LBIE failed to identify as client money, and therefore also failed to segregate, vast sums received from or on behalf of a significant number of its clients; second is the failure of another LBIE affiliate, Lehman Brothers Bankhaus AG (Bankhaus) with which LBIE had deposited at least US$1 billion of segregated client
money: [27].
Before the administration order, the last internal reconciliation of clients funds took place on the morning of Friday 12 September 2008.
This appeal has proceeded on assumed facts and raises three issues concerning the true construction of CASS 7: (i) when does the statutory trust created by 7.7.2R arise; (ii) do the primary pooling arrangements apply to client money held in house accounts; and (iii) is participation in the notional client money pool (CMP) dependant on actual segregation of client money? [128]
The Supreme Court dismisses the appeal by a majority (Lords Hope and Walker dissenting as to the second and third issues): the statutory trust under CASS7 arises on receipt of client money; the primary pooling arrangements apply to client money in house accounts; and, participation in the CMP is not dependant on the segregation of client money.
As to when the statutory trust arises, the two competing answers are time of receipt and time of segregation of the funds.
The Court unanimously holds that the trust arises at time of receipt.
Where money is received from a client or from a third party on behalf of a client it would be unnatural, and contrary to the primary purpose of client protection, for the money to cease to be the clients property on receipt, and for it (or its substitute) to become his property again on segregation.
It would also be contrary to the natural meaning of the comprehensive language of CASS 7.7.2R. Segregation without a trust would not achieve MiFIDs objective whereas under the alternative approach an immediate trust of identifiable client money does provide protection: [62] [63], [182] [183].
Lord Hope further supports this conclusion on the basis that the same result would be obtained using the law of agency, as it is in Scots law: [7] [14].
As to whether participation in the notional CMP is dependant on actual segregation of the clients money, the answer is to be found in the proper interpretation of CASS 7, in particular 7.9.6R, 7.9.7R and 7.7.2R: [139].
It does not depend on a consideration of any general principles of trust law: [145].
The general scheme of CASS 7 is that all client money is subject to a trust that arises upon receipt of the money.
The client money rules are therefore intended to protect all the clients money received prior to a PPE.
The distribution rules are intended to protect all the clients money in the event of a PPE, all client money is subject to a statutory trust and where there is a choice of possible interpretations, the court should adopt the one which affords a high degree of protection for all clients: [147].
The language of the relevant provisions of CASS 7 tends to support the claims basis for participation in the CMP (i.e. that no segregation is required).
As the linguistic points are not conclusive, it is necessary to stand back from the detail and ask which interpretation better promotes the purpose of CASS 7.
This clearly supports the claims basis: [159].
As to whether the primary pooling arrangements apply to client money held in house accounts, it is necessary to decide whether 7.9.6(1)R requires all identifiable client money to be treated as pooled, or only that client money which is held in the firms segregated client accounts.
Since an examination of the text shows that there are two possible interpretations of the relevant CASS 7 rule, the correct interpretation is the one which best promotes the purpose of CASS 7 as a whole, namely to provide a high level of protection for client money.
To exclude identifiable client money in house accounts from the distribution regime runs counter to this policy.
The alternative would provide different levels of protection based on the happenstance of whether the firm has segregated money, which is arbitrary: [164] [165].
The primary pooling arrangements apply to client money in house accounts: [167].
|
Where a tenancy of land is held by more than one person, those persons hold the tenancy jointly.
In Hammersmith and Fulham LBC vs Monk [1992] AC 478 (Monk), the House of Lords unanimously held that, where such a tenancy is a periodic tenancy, which can be brought to an end by a notice to quit, the common law rule is that, in the absence of a contractual term to the contrary, the tenancy will be validly determined by service on the landlord of a notice to quit by only one of the joint tenants. (This was not a revolutionary decision: it had long been assumed to be the law: see eg Doe d Aslin v Summersett (1830) 1 B & Ad135, 140 per Lord Tenterden CJ).
Thus, in common law, one of a number of joint periodic tenants can bring the tenancy to an end against the wishes, even without the knowledge, of his or her co tenant or co tenants, by serving a notice to quit on the landlord.
The present case concerns a secure weekly tenancy of a house granted to a husband and wife, Mr and Mrs Sims.
Some years after the tenancy was granted, the couple separated, and Mrs Sims served a notice to quit on the landlord, Dacorum Borough Council.
The tenancy was a secure tenancy under the Housing Act 1985.
Under sections 82 84 of that Act, a secure periodic tenancy can only be brought to an end by a landlord if it obtains and executes a court order for possession, and such an order can only be granted if (i) the landlord has served a notice relying on one or more of the grounds specified in Schedule 2, and (ii) depending on the ground, it is reasonable to order possession and/or alternative accommodation is available for the tenant.
Accordingly, the effect of the 1985 Act is to deprive a landlord of its common law right to determine a secure tenancy by serving a notice to quit on the tenant.
By contrast, there is no restriction in the 1985 Act on the exercise by a tenant of his or her common law right to determine a secure tenancy by serving a notice to quit on the landlord.
Accordingly, following the reasoning in Monk, Dacorum contends that the secure tenancy granted to Mr and Mrs Sims has come to an end, and Mr Sims must vacate the house.
Monk was decided before the Human Rights Act 1998 was enacted, and, now that it has come into force, Mr Sims contends that his rights (a) to respect for his home under article 8 of the European Convention on Human Rights and/or (b) peacefully to enjoy his possessions under article 1 of the first protocol to the Convention (A1P1) would be wrongly infringed if Dacorums claim succeeds.
Accordingly, he contends that the decision, or the effect of the decision, in Monk should now be reconsidered.
The factual background
On 15 March 2002, Dacorum granted Michael and Sharon Sims a written tenancy of a three bedroom house at 5 Dunny Lane, Chipperfield, Kings Langley, Hertfordshire.
The tenancy agreement, which was expressed as if it was written to Mr and Mrs Sims by Dacorum, provided that: 92.You must notify us in writing at least four clear rent weeks ahead of your intention to terminate the tenancy which should end at midnight on a Sunday.
The agreement also stated that as regards Ending joint tenancies: 100.
Where either joint tenant wishes to terminate their interest in a tenancy they must terminate the full tenancy as in (92) above. 101.
We will then decide whether any of the other joint tenants can remain in the property or be offered more suitable accommodation.
The tenancy was initially an introductory tenancy under Part V of the Housing Act 1996, and, after Mr and Mrs Sims had resided in the house for a year, the tenancy became a joint secure weekly tenancy by virtue of the provisions of that Act.
Until March 2010, Mr and Mrs Sims lived together in the house as their only home together with their four children.
Unfortunately, the marriage broke down in about September 2009.
Following an alleged act of violence by Mr Sims on one of his sons in November 2009, Mrs Sims told Dacorum that he had been guilty of previous acts of domestic violence, and that she wished to move out.
Mrs Sims left the house in March 2010 with their two youngest children, and moved into a womens refuge from which she applied to Wycombe District Council for accommodation.
Wycombe told her that her application could not be granted so long as she had a tenancy of a residential property.
Accordingly, she wrote to Dacorum to say that she wanted to give up her tenancy, and Dacorum replied suggesting that she could achieve this by serving a notice to quit.
On 25 June 2010 Mrs Sims served a notice to quit on Dacorum purporting to terminate the tenancy on 26 July 2010.
Mr Sims, who suffers from learning difficulties, remained living in the house with the older two children (although by the time of the trial those two children were no longer living there).
Before the notice to quit had been served, Mr Sims asked Dacorum if he could remain in the house and have the tenancy transferred into his sole name.
By a letter dated 19 July 2010, Dacorum refused this request, and informed Mr Sims that he had no legal right to stay in the house.
Despite a letter from Mrs Sims, supporting Mr Simss application to remain in the house and expressing concerns about his mental health, Dacorum confirmed this decision following internal reviews in December 2010 and June 2011. 11.
Mr Sims now appeals to the Supreme Court.
The basis upon which the appeal was brought (as is reflected in Mr Simss petition for permission to appeal) was the same as that which was pursued before the Court of Appeal.
However, in the statement of facts and issues as agreed between the parties and his written case and oral submissions, Mr Arden retreated from his submissions in the Court of Appeal and argued only that we should revisit the decision in Monk, on the basis that the effect of that decision in the present case infringed Mr Simss rights under article 8 and under A1P1.
Discussion: A1P1 14.
A1P1 provides, inter alia, that everyone is entitled to peaceful enjoyment of his possessions, and that nobody should be deprived of his possessions except in the public interest and subject to conditions provided for by law. 15.
The property which Mr Sims owned and of which he complains to have been wrongly deprived, whether one characterises it as the tenancy or an interest in the tenancy, was acquired by him on terms that (i) it would be lost if a notice to quit was served by Mrs Sims (clause 100), and (ii) if that occurred, Dacorum could decide to permit him to stay in the house or find other accommodation for him (clause 101).
The property was lost as a result of Mrs Sims serving a notice to quit, and Dacorum did consider whether to let Mr Sims remain, as he requested, and decided not to let him do so.
Given that Mr Sims was deprived of his property in circumstances, and in a way, which was specifically provided for in the agreement which created it, his A1P1 claim is plainly very hard to sustain.
The point was well put in the written case of Mr Chamberlain QC on behalf of the Secretary of State: the loss of [Mr Simss] property right is the result of a bargain that he himself made.
I believe that that conclusion is reinforced by the admissibility decision in Di Palma v United Kingdom (1986) 10 EHRR 149, which concerned the implementation of a forfeiture proviso in a lease against a tenant in rather harsh circumstances. 16.
The only two arguments which I think Mr Sims could even conceivably raise in those circumstances would be (i) that clause 100 is irrational or at least so unreasonable as to offend the right to enjoy the property concerned, or (ii) that Dacorum unfairly or irrationally operated clause 101.
Assuming (without deciding) that those arguments are open to him in principle in relation to his A1P1 claim, it is nonetheless plain that they fail on the facts. 17.
Clause 100 is consistent with a common law principle which is not now attacked, and its effect is anyway mitigated by clause 101.
Further, it is not an unreasonable provision, in that someones interest has to suffer when one of two joint periodic tenants serves a notice to quit.
If the result is not as decided in Monk, either the tenant who served the notice is forced to remain a tenant against her will, or the landlord is landed with one tenant instead of two, which means less security and, in a case such as the present, a family property occupied by a single person.
Just as a joint tenant in Mr Simss position can claim that the outcome determined as correct in Monk is harsh, so could a joint tenant in Mrs Simss position or a landlord in Dacorums position contend that either of the alternative outcomes is harsh. 18.
As to Dacorums operation of clause 101, the Deputy District Judge dealt with this when considering whether Dacorums decision to seek possession of the house was reasonable and proportionate, on the basis that the two issues were different sides of the same coin; no complaint is made of that, and rightly so.
The Deputy District Judge took into account the facts that Mr Sims had lived in the property for ten years, that Mrs Sims had voluntarily served a notice to quit, that she had not been unaware of the effect of serving the notice, that Dacorum had not induced her to serve the notice, that Mr Sims had been responsible for her vacating the property by his violence, that there were no relevant medical circumstances or particular vulnerability pertaining to Mr Sims which would impede his search for other accommodation, that Dacorum had a clear right to re allocate the property, that [s]ocial housing is a scarce resource, and that procedurally, Mr Sims had been accorded an ample opportunity to present his case, and Dacorum had carefully considered the position and had fully reviewed its own decision.
Accordingly, as already mentioned, she made the order for possession sought by Dacorum.
In my view, the Deputy District Judges conclusion was, to put it at its very lowest, one to which she was entitled to come for the reasons that she gave.
Indeed, I would go further, and say that, in light of her conclusions of primary fact, she reached the only appropriate conclusion she could have reached.
In these circumstances, I would reject Mr Simss case based on A1P1. 19.
Discussion: article 8 20.
Article 8.1 provides, inter alia, that everyone is entitled to respect for his private life [and] his home, and article 8.2 states that there should be no interference by a public authority with the exercise of this right save if it is in accordance with the law. necessary in a democratic society, and in the interests of the economic well being of the country or for the protection of the rights or freedoms of others. 22. 21.
So far as Mr Simss case on article 8 is concerned, there is no doubt but that he was entitled to raise the question of the proportionality of Dacorums pursuit of the claim for possession of the house in the light of Pinnock v Manchester City Council [2010] UKSC 45, [2011] 2 AC 104 and Hounslow LBC v Powell [2011] UKSC 8, [2011] 2 AC 186, as explained by Lord Hodge in R (CN) v Lewisham LBC [2014] UKSC 62, paras 58 60 and 63.
However, in this case, that point gets Mr Sims nowhere.
As I have already indicated in paras 18 and 19 of this judgment, the Deputy District Judge carefully considered that question, and, in relation to Mr Simss case on article 8, she came to the conclusion that Dacorums careful decision making process amply accorded with article 8.1 [and] that the decision that the Council made was one to which it could reasonably have come.
She then said that [h]aving reviewed all the relevant factors myself, in my judgment it is lawful and proportionate to make an order for possession in this case.
Again, I consider that this was plainly correct.
In these circumstances, Mr Arden argued that the service of the notice to quit by Mrs Sims was itself a violation of Mr Simss article 8 rights because it put in jeopardy his right to remain in his home.
The fact that the service of the notice to quit put Mr Simss right to stay in his home at risk does not mean that it therefore operated as an infringement of his right to respect for his home.
No judgment of the Strasbourg court begins to justify such a proposition.
Mrs Sims had the right to serve the notice, and, as already observed, the service of such a notice and its consequences were specifically covered by the agreement which gave Mr Sims the right to occupy the house as his home in the first place (see clauses 100 and 101).
I accept that the effect of the service of the notice to quit was to put at risk Mr Simss enjoyment of his home.
I also accept that different considerations may very well apply for article 8 purposes to Mr Sims, who is at risk of losing what has been his family home for many years, from those considerations that apply to temporarily housed homeless people who are at risk of losing their temporary accommodation as in R (CN) v Lewisham.
However, I do not consider that that undermines the point that full respect for Mr Simss article 23. 8 rights was accorded by the facts that (i) his tenancy was determined in accordance with its contractual terms to which he had agreed in clause 100 of the tenancy agreement, (ii) he was entitled to the benefit of clause 101 of his tenancy agreement, (iii) under the Protection from Eviction Act 1977, he could not be evicted without a court order, and (iv) the court would have to be satisfied that Dacorum was entitled to evict him as a matter of domestic law, and (v) the court could not make such an order without permitting him to raise a claim that it would be disproportionate to evict him, in accordance with the reasoning in Pinnock and Powell. 24.
Mr Arden suggested that this conclusion was inconsistent with the judgment of the Strasbourg court in Buckland v United Kingdom (2013) 56 EHRR 16, but I agree with the written submission of Mr Bhose QC for Dacorum that the judgment simply supports the proposition that, where the court is considering making an order for possession against a public sector residential tenant, she must have the opportunity of raising the argument that, in the light of article 8, no order for possession should be made.
I do not therefore think that it assists Mr Sims in this case.
In these circumstances, I consider that Mr Simss case based on article 8 also fails.
Conclusion 26.
It follows from this analysis that I would dismiss this appeal. 25.
On 28 October 2010, Dacorum issued proceedings in the County Court against Mr Sims seeking possession of the house, and, in his Defence dated 5 January 2011 Mr Sims raised a number of arguments, including challenges to the effectiveness of the notice to quit and challenges to Dacorums decision to seek possession against him.
The proceedings were delayed while Dacorums internal reviews proceeded, but the trial eventually took place before Deputy District Judge Wood on 2 December 2011.
Two weeks later, she gave an admirably clear and thorough judgment in which she examined all the evidence and arguments which had been put before her, and decided that she should make an order for possession against Mr Sims.
In summary, the Deputy District Judge held that (1) Mr Sims had committed acts of domestic violence, which was the reason why Mrs Sims had left the house; (2) Mrs Sims had understood that a possible outcome of her serving the notice to quit was that Dacorum would seek to evict Mr Sims, (3) no pressure to serve the notice to quit was put on Mrs Sims by Dacorum, (4) Mr Sims did not suffer from learning difficulties to any extent relevant either to Dacorums decision making process or to considerations of proportionality, (5) she was quite satisfied that the Council's careful decision making process amply accorded with article 8.1 and that the decision that the Council made was one to which it could reasonably have come, (6) she was bound by authority to hold that, as a matter of law, where, as here, a notice to quit has been served by one of two joint tenants of his own accord, that notice is effective to determine the joint tenancy, (7) it was lawful and proportionate to make a possession order, and (8) she should make an outright order for possession of the house. 12.
Mr Sims appealed to the Court of Appeal, and the only ground which he pursued on that occasion was that the decision in Monk was incompatible with his article 8 rights, and that the court should change the common law so that it was compatible.
Mr Arden QC, who appeared on Mr Simss behalf, as he did on the appeal to the Court of Appeal, accepted that Mr Simss appeal should be dismissed by the Court of Appeal, which duly happened, for reasons trenchantly given by Mummery LJ (with whom Etherton LJ and Sir Scott Baker agreed) [2013] EWCA Civ 12.
| This case concerns a secure weekly tenancy of a house granted to a husband and wife, Mr and Mrs Sims, as joint tenants, by Dacorum Borough Council.
A secure periodic tenancy can only be brought to an end by a landlord by obtaining and executing a court order for possession.
By contrast, there is no such restriction on the ability of a tenant to exercise a common law right to bring a periodic secure tenancy to an end by serving a notice to quit on the landlord.
Following the decision of the House of Lords in Hammersmith and Fulham LBC v Monk [1992] Ac 478 (Monk), a periodic tenancy held by joint tenants may be validly brought to an end by only one of the joint tenants serving a notice to quit on the landlord.
Under the terms of the tenancy agreement in this case it was specifically provided in clause 100 that, if either of the joint tenants wished to terminate their interest in the tenancy, they were required to terminate the full tenancy.
Clause 101 provided that Dacorum would then decide whether the other joint tenant could remain in the property or be offered more suitable accommodation.
Mr and Mrs Sims separated, and Mrs Sims served a notice to quit on Dacorum.
Dacorum therefore contends that the secure tenancy has come to an end, and Mr Sims must vacate the house.
Monk was decided before the Human Rights Act 1998 was enacted.
Mr Sims contends that his right to a private and family life under Article 8 of the European Convention on Human Rights and his right peacefully to enjoy his possessions under Article 1 of the first protocol to the Convention would be wrongfully infringed if Dacorums claim were to succeed.
The issue in this appeal is therefore whether the eviction of Mr Sims would be a wrongful infringement of his rights either:
The Supreme Court unanimously dismisses the appeal.
Lord Neuberger (with whom the other Justices agree) gives the only judgment.
In his written case and oral submissions, counsel for Mr Sims retreated from the suggestion that the Supreme Court should revisit the decision in Monk, but maintained that the effect of that decision in the present case infringed Mr Sims rights under Article 8, or under A1P1 Article 1 of the first protocol to the European Convention of Human Rights [14 19]
(1) under Article 1 of the first protocol to the Convention (A1P1); or (2) under Article 8 of the Convention.
Under A1P1, everyone is entitled to peaceful enjoyment of his possessions and nobody should be deprived of his possessions except in the public interest and subject to conditions provided for by law [14].
Clause 100 provided that the tenancy could be determined by one only of the tenants and Clause 101 provided that if that occurred, Dacorum could decide to permit him to stay in the house.
In this case, Mrs Sims determined the tenancy in accordance with clause 100 and Dacorum did consider whether to let Mr Sims remain in accordance with clause 101 and decided not to let him do so.
The way in which Mr Sims was deprived of his property was thus specifically provided for in the agreement which created the property, that is, his interest in the tenancy.
He lost this property right as a result of the bargain that he himself made. [15 16].
In these circumstances, the only arguments Mr Sims could raise would be either (1) that clause 100 is irrational or so unreasonable as to offend the right to enjoy the property concerned or (2) that Dacorum unfairly or irrationally operated clause 101.
However, clause 100 is consistent with the common law principle in Monk, and the effect of clause 100 is mitigated by clause 101.
The effect of Monk for a joint tenant in Mr Sims position is harsh.
However, when one of two joint periodic tenants serves a notice to quit, someones interest has to suffer; if the position were otherwise than it is under Monk, there would be a harsh result for the other joint tenant or for the landlord [17].
The Deputy District Judge considered Dacorums operation of clause 101, and concluded that procedurally Mr Sims had been accorded ample opportunity to present his case and that Dacorum had carefully considered the position and had fully reviewed its own decision.
In light of the Deputy District Judges conclusions of primary fact, she reached the only appropriate conclusion she could have reached, namely that Dacorums operation of clause 101 was reasonable.
In these circumstances, Mr Sims case based on A1P1 fails. [18 19].
Article 8 of the European Convention of Human rights [20 25] Under Article 8.1 of the Convention, everyone is entitled to respect for his private life [and] his home and Article 8.2 provides that there should be no interference by a public authority with the exercise of this right save if is in accordance with the law, necessary in a democratic society, and in the interests of the economic well being of the countryor for the protection of the rights or freedoms of others [20].
Mr Sims was entitled to raise the question of the proportionality of Dacorums pursuit of the claim for possession of the house in light of previous decisions of the House of Lords and Supreme Court.
However, proportionality does not assist Mr Sims.
The Deputy District Judge carefully assessed Dacorums decision making process and she was plainly correct that it was lawful and proportionate to make an order for possession in this case [21].
Service of the notice to quit put at risk Mr Sims enjoyment of his house which had been his family home for many years.
However, Mr Sims Article 8 rights were accorded full respect, given that (1) his tenancy was determined in accordance with agreed contractual terms, (2) he received the benefit of clause 101, (3) under the Protection from Eviction Act 1977 he could not be evicted with a court order, (4) the court would have to be satisfied that Dacorum was entitled to evict him, and (5) the court could not make such an order without permitting him to raise a claim that it would be disproportionate to evict him[22 23].
Accordingly, Mr Sims case cased on Article 8 fails [24 25].
|
This is an application for directions in a pending appeal for which permission was granted by this court on 25 March 2014.
The appeal arises out of a transaction by which Mr Richard Gabriel, the claimant in the proceedings below, lent 200,000 to a company called Whiteshore Associates Ltd. The courts below have found that his solicitors, BPE Solicitors, were negligent in their handling of the transaction.
For present purposes, all that need be said about the issues is that they relate mainly to damages.
The trial judge awarded the full amount that Mr Gabriel would have recovered under the facility agreement if Whiteshore had been good for the money.
The Court of Appeal held that this loss was not within the scope of the solicitors duty.
They accordingly reduced the award to a nominal 2.
They also held, in the alternative, that even if substantive damages had been awarded, they would have been reduced by 75% on account of Mr Gabriels contributory negligence.
The trial judge awarded the costs of the claim up to the conclusion of the trial to Mr Gabriel.
The Court of Appeal set aside the judges costs order and ordered Mr Gabriel to pay BPEs costs of the proceedings up to and including the appeal.
The costs claimed by BPE under this head amount to 469,170.60.
The Court of Appeals order was pronounced on 22 November 2013.
On 5 March 2014, Mr Gabriel was made bankrupt on his own petition by order of the Gloucester and Cheltenham County Court.
On 25 March 2014, Mr Hughes Holland was appointed as his trustee in bankruptcy.
As a result, the right to pursue the appeal vests in the trustee.
Mr Hughes Holland has not yet decided whether to pursue it.
The reason is the uncertainty, on the current state of the authorities, about the extent of his potential liability for costs if the appeal fails.
The ordinary rule is that a trustee in bankruptcy is treated as party to any legal proceedings which he commences or adopts, and is personally liable for any costs which may be awarded to the other side, subject to a right of indemnity against the insolvent estate to the full extent of the assets.
Accordingly, Mr Hughes Holland accepts that he is personally at risk for BPEs costs of the appeal to the Supreme Court.
But he contends that he is not personally at risk by virtue of having adopted the appeal as trustee in bankruptcy for BPEs costs of the proceedings below in the event that the Court of Appeals order against Mr Gabriel should be affirmed.
The italicised words are important.
The present application is not concerned with costs that may be awarded against the trustee on any other ground.
I shall return to this point below.
The answer to this question has significant implications for the trustees decision whether to adopt the current appeal.
The evidence is that if the appeal is not pursued, unsecured creditors are likely to receive a modest dividend of between about 3p and 5p in the pound.
If it is pursued and succeeds, that figure is expected to rise to between 23p and 25p in the pound.
But if it is pursued and fails, the impact on creditors will depend on whether in that event the trustee would be personally liable only for the costs of the appeal, or for the costs of the proceedings below as well.
If the trustees liability for BPEs costs is limited to the costs of the appeal to this court, the dividend available to creditors will be reduced, subject to ATE insurance.
But if the trustees liability for costs extends to the costs below as well, they will exceed the entire assets of the estate.
The creditors will receive no dividend and the trustee will be personally exposed for the balance subject to any indemnity which he is able to obtain from the creditors.
It is far from clear that such an indemnity will be forthcoming.
The largest creditor, accounting for about 60% by value of claims, is the Nautilus Trust, a discretionary settlement in which Mr Gabriel has a life interest.
The evidence is that it has few assets other than debts owed to it by Mr Gabriel.
In these circumstances, we were not surprised to learn from Mr Chichester Clark, for the trustee, that if he is potentially liable for BPEs costs below, the appeal is unlikely to be pursued.
Jurisdiction
Mr Stewart QC, who appears for BPE, raises a preliminary issue about this courts jurisdiction to deal with this application.
He submits that we have no jurisdiction to deal with the incidence of costs except (i) as a condition imposed at the time of granting permission to appeal, or (ii) as part of the ultimate disposition of the appeal.
This point is in my view misconceived.
Section 40(5) of the Constitutional Reform Act 2005 confers on this court the power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
The Supreme Court Rules 2009 (SI 2009/1603 (L17)) provide: Orders for costs 46. (1) The court may make such orders as it considers just in respect of the costs of any appeal, application for permission to appeal, or other application to or proceeding before the court. (2) The courts powers to make orders for costs may be exercised either at the final determination of an appeal or application for permission to appeal or in the course of the proceedings.
The question which the trustee wishes to have decided is not among the substantive issues on the appeal, but it is a question which will have to be decided at some stage of the proceedings if the court is to perform its duty to determine the incidence of costs.
If an order for costs may be made at any stage of the proceedings, it is clear that a decision on a question of principle arising in relation to costs may be made at any stage.
This court would not normally decide an issue going to costs before the hearing of the substantive appeal.
But that is because it is not normally just or even practical to do so.
In the present case there is every reason for ruling on the trustees potential liability now, and no reason for deferring it until after judgment.
In the first place, the ruling which is presently sought is necessary in order to enable the trustee and the creditors to make an informed decision about whether to proceed with the appeal.
A decision on the point after judgment will be of no use to them for that purpose.
There is no interest of justice and no public interest which would be served by requiring the trustee and the creditors to make their decision in ignorance of the true position.
Secondly, the trustees application is, as I have pointed out, limited to the question whether a liability for BPEs costs below would follow as a matter of law from his adoption of the appeal.
There are no discretionary considerations involved.
In particular, nothing that we decide now (or indeed after judgment) will affect any issue which may arise about the propriety of any decision of the trustee to pursue the appeal, which is a matter for the High Court.
This court is therefore in as good a position to deal with the matter now as it would be at any other time.
The question of principle
A trustee in bankruptcy, unlike the liquidator of a company, is personally a party to legal proceedings which he has adopted.
The reason is that the assets of the bankrupt at the time of the commencement of the bankruptcy vest in him personally, and the bankrupt has no further interest in them.
The rule, which dates back to the beginning of bankruptcy jurisdiction in England, is currently embodied in section 306 of the Insolvency Act 1986.
The trustees position differs in this respect from that of a liquidator, for although a liquidator is a trustee for the proper administration and distribution of the estate, the assets remain vested in the company and proceedings are brought by or against the company.
It follows that with the exception of a limited (and for present purposes irrelevant) class of purely personal actions, a bankrupt claimant has no further interest in the cause of action asserted in the proceedings.
Likewise, as Hoffmann LJ observed in Heath v Tang [1993] 1 WLR 1421, 1424, where the bankrupt is the defendant, he has no further interest in the defence, because the only assets out of which the claim can be satisfied will have vested in the trustee.
None of this means that the trustee is bound to adopt the action.
If the trustee does not adopt it, the action cannot proceed and will be stayed or dismissed if the bankrupt is the claimant: Heath v Tang [1993] 1 WLR 1421.
If the bankrupt is the defendant, an action which the trustee does not adopt is liable to be stayed under section 285(1) and (2) of the Insolvency Act 1986.
If, however, the trustee does adopt the action, he becomes the relevant party in place of the bankrupt.
In the ordinary course, he will be substituted for the bankrupt under what is now CPR 19.2.
But it is well established that he will be treated as the party if he has in fact adopted the proceedings by conducting the litigation, even if there has been no formal substitution: Trustee of the Property of Vickery (a bankrupt) v Modern Security Systems Ltd [1998] 1 BCLC 428.
It follows that an order for costs in favour of the other side is made against the trustee personally in the same way as it would be made against any other unsuccessful litigant.
The cost of satisfying the order is treated as an expense of performing his office, for which he assumes personal liability just as he does for any other expenses and liabilities incurred in the administration and distribution of the estate, but subject to a right of indemnity against the assets if the expenses and liabilities were properly incurred.
These principles are easy enough to apply in a case where substantially all the costs of the other side were incurred at a time when the litigation was being conducted by the trustee.
But what is to happen if the proceedings were begun by or against a litigant who subsequently became bankrupt, and part of those costs was incurred by the other side before bankruptcy supervened?
The only authority which deals directly with this question is Borneman v Wilson (1884) 28 Ch D 53, in which the Court of Appeal extended the personal liability of the trustee to cover costs incurred by the other side before his adoption of the proceedings.
The facts were that the Wilsons, father and son, had acted as commercial agents of one Borneman.
He began an action against them in the Chancery Division for an account of their dealings with his goods and obtained interlocutory relief on motion including an injunction and the appointment of a receiver.
The Wilsons served a notice of appeal, but shortly afterwards a bankruptcy order was made against them.
On 7 October 1884, a trustee in bankruptcy was appointed.
On 18 October, the trustee was substituted as a defendant, apparently ex parte on the application of Borneman.
On 31 October, he gave notice abandoning the appeal.
He then entered an appearance in the substantive proceedings and called for a statement of claim.
Borneman applied for an order against the trustee requiring him to pay the costs of the appeal which he had incurred before receipt of the notice of abandonment.
The Court of Appeal (Bowen and Fry LJJ) made that order.
Their reason was that notwithstanding the trustees prompt and express abandonment of the appeal, by appearing and calling for a statement of claim in the Chancery proceedings he had adopted the action, and that meant the entire action including the appeal.
The trustee, said Bowen LJ, cannot adopt part of the action and leave out the rest.
Fry LJ agreed.
The trustee, he said, had put himself into the place of the bankrupt as regards the action and cannot take one part of it and reject another.
On the face of it, Borneman v Wilson is authority for the proposition that the proceedings must as a matter of law be adopted either in their entirety (including any discrete prior proceedings conducted by the bankrupt before his appointment), or not at all.
The decision has not subsequently been applied in any reported case, although it was treated as correct by a strong Court of Appeal (Lord Esher MR and Lopes and Kay LLJJ) in School Board for London v Wall Brothers (1891) 8 Morr 202 and by Sir John Vinelott in Trustee of the Property of Vickery (a bankrupt) v Modern Security Systems, supra, at 434.
However, in my opinion it is no longer good law.
The Court of Appeals rather cursory judgments give no reason for its all or nothing approach to the adoption of current legal proceedings.
But their conclusion is nevertheless understandable in the light of the law as it then was, or at least as it was thought to be.
At the time when Borneman v Wilson was decided, an order for costs could be made only against a party to the proceedings.
The modern jurisdiction to make an order for costs against a non party is conferred by section 51(3) of the Senior Courts Act 1981, which dates back to section 5 of the Supreme Court of Judicature Act 1890.
Even after 1890 the existence of the power was not recognised by the courts until the decision of the House of Lords in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965.
It followed that once a party to subsisting legal proceedings had become bankrupt and the trustee had been substituted for him, there was no possibility of obtaining an order for costs against the bankrupt himself.
Moreover, even if such an order had been possible (for example, because no formal substitution had occurred), it would have been pointless because a liability arising from a costs order made after the commencement of the bankruptcy would not have been provable against the estate.
Although debts which were contingent at the commencement of the bankruptcy had in principle been provable since the Bankruptcy Act 1869, it was considered that the discretionary character of a costs order meant that it was not even a contingent liability until the order had actually been made: see In re Bluck, Ex p Bluck (1887) 57 LT 419, In re British Gold Fields of West Africa [1899] 2 Ch 7, In re A Debtor (No 68 of 1911) [1911] 2 KB 652, In re Pitchford [1924] 2 Ch 260, Glenister v Rowe [2000] Ch 76.
These cases were overruled in In re Nortel GmbH (in administration); In re Lehman Brothers International (Europe) (in administration) [2014] AC 209: see paras 87 93 (Lord Neuberger), and 136 (Lord Sumption).
This court held in that case that by participating in litigation, a party submitted himself to a liability to pay costs in accordance with rules of court, contingently upon an order for costs being made against him.
It followed that where proceedings were begun by or against a company before it went into liquidation, a liability for costs under an order made after it went into liquidation was provable as a contingent debt.
The position is the same in bankruptcy.
Against this background, it is easy to understand why late Victorian judges should have been unwilling to allow the trustee to adopt an action for his own account without assuming the liabilities for what had gone before.
The result would have been to allow the action to proceed while leaving the other side with no remedy in costs in respect of earlier stages of the proceedings, irrespective of the outcome.
Freed of the baggage of earlier misconceptions, however, it is possible to revisit the issue as a matter of principle.
Where an action in progress at the time of the trustees appointment is adopted by the trustee, one issue now open for reconsideration is whether there is any reason in principle why the trustee should necessarily be required, simply by virtue of his adoption of the action, to pay the other sides costs of legal proceedings including those incurred at a time when he was not a party and the action was being conducted by the bankrupt for his own account.
Although this issue was not as such addressed by the parties submissions, I think that there can no longer be any absolute rule to that effect.
The most that can be said is that it may be appropriate as a matter of discretion to make such an order.
The trustee will have conducted the action for the benefit of the estate.
The expenditure of costs on both sides will have been directed to achieving the desired outcome, and it may well be reasonable for that outcome to determine the incidence of costs whether they were expended before or after the trustees adoption of the action.
Equally, it will be for the court, in the exercise of its discretion, to decide whether a non party order should be made against the bankrupt himself in respect of some part of the costs incurred while he was conducting the litigation before bankruptcy supervened.
If this was the issue in the present case, it could not be right to pre empt the discretion in advance on an application like this one.
But it is not the issue in the present case, because a trial and the successive appeals from the order made at trial are distinct proceedings for the purposes of costs, albeit distinct proceedings in the same action.
A distinct order for costs will be made in respect of each of them.
Costs incurred in generating material for the trial will be recoverable, if at all, under the costs order made in respect of the trial.
It will not be recoverable as part of the costs of a subsequent appeal even if the material is reused on the appeal: Wright v Bennett [1948] 1 KB 601 (CA).
Mr Gabriel was responsible for the entire conduct of the trial and the appeal to the Court of Appeal.
The Court of Appeal has disposed of that appeal, and has ordered Mr Gabriel to pay BPEs costs at both stages.
All of this happened before Mr Gabriel became bankrupt.
His liability under the costs order of the Court of Appeal is a provable debt.
Indeed, a proof has been lodged.
If this court were in due course to dismiss the appeal, it would normally make no order of its own in relation to the costs below other than to affirm (or possibly to vary) the order which had already been made by the Court of Appeal.
That order would continue to represent a liability of Mr Gabriel and not of the trustee.
The mere fact that the trustee has adopted the appeal could not possibly justify this court in ordering the trustee to pay the costs which the Court of Appeal has ordered to be paid by Mr Gabriel.
The trustee is entitled to adopt the appeal to this court without adopting the distinct proceedings below.
Indeed, the adoption of proceedings below would be contrary to principle.
In a case where the proceedings below had been conducted to their conclusion before the bankruptcy by the bankrupt himself, to order the trustee to pay them personally would in effect enable BPE to obtain an unwarranted priority for its claim under the Court of Appeals costs order.
The trustee would recover an indemnity from the estate in respect of a provable debt to the full extent of the assets before any distribution fell to be made to other creditors.
I would expect the result to be the same if the bankrupt had succeeded in the courts below and failed in this court, so that an order for costs in respect of the proceedings below was made in favour of the other side for the first time in this court.
It is difficult to see any principled distinction between the two situations.
But the position would be procedurally more complicated, because it would involve making a non party order against the bankrupt so that the resultant liability could be proved against the estate as a contingent debt.
For that reason other questions may arise which are best left to a case where they are relevant.
I would declare that in the event that the Trustee adopts the appeal to the Supreme Court he will not be held personally liable for any costs incurred by the respondent in relation to this action up to and including the order of the Court of Appeal dated 22 November 2013, by virtue only of the fact of his office as Trustee of Mr Gabriels estate in bankruptcy or of his adoption of the appeal.
| This is an application for directions in a pending appeal.
The appeal concerns a claim in negligence by Mr Gabriel (the Appellant) against his solicitors (the First Respondent).
The trial judge awarded Mr Gabriel 200,000 in damages and ordered the solicitors to pay Mr Gabriels costs.
The Court of Appeal reduced the damages award to a nominal 2, set aside the judges costs order, and ordered Mr Gabriel to pay the solicitors costs of the proceedings up to and including the appeal.
That order was made on 22 November 2013.
On 5 March 2014, Mr Gabriel was made bankrupt.
On 25 March 2014, Mr Hughes Holland was appointed as his trustee in bankruptcy.
Also on 25 March 2014, permission was granted for the appeal to proceed to the Supreme Court.
The right to pursue the appeal now rests with the trustee.
If a trustee in bankruptcy decides to adopt legal proceedings which were on foot at the time of the bankruptcy, the trustee personally becomes a party to those proceedings in place of the bankrupt, either by way of formal substitution or simply by virtue of being treated as if he has been substituted.
An order for costs may therefore be made against the trustee personally if the proceedings are unsuccessful.
The trustee then has a right of indemnity against the bankrupts assets if the costs liability is properly incurred.
Mr Hughes Holland accepts that if he decides to pursue this appeal and loses he will be personally liable for the solicitors costs before the Supreme Court.
However, he says that he is not personally at risk by virtue of adopting the appeal as trustee in bankruptcy for the solicitors costs of the proceedings before the trial judge and the Court of Appeal.
If Mr Hughes Holland pursues the appeal and wins, then Mr Gabriels creditors will receive between 23p and 25p in the pound instead of between 3p and 5p in the pound.
But if Mr Hughes Holland pursues the appeal and loses, and he is ordered to pay not only the costs of the appeal to the Supreme Court but also the costs of the hearings below, the costs liability will exceed the value of the estate and Mr Hughes Holland will probably have to make up the difference from his own pocket.
He therefore seeks confirmation as to the costs position so that he can decide whether to pursue the appeal.
The solicitors argue that the Supreme Court does not have jurisdiction to make any order as to costs at this stage and in any event that Mr Hughes Holland should be personally liable for the costs of the proceedings below if he loses the appeal.
The Supreme Court unanimously holds that if Mr Hughes Holland decides to pursue the appeal he will not by virtue only of his office as Mr Gabriels trustee in bankruptcy or of his adoption of the appeal be held personally liable for costs of the hearings before the trial judge and the Court of Appeal.
Lord Sumption gives the only judgment, with which all other members of the Court agree.
The Supreme Court has jurisdiction to deal with this application and it is proper to exercise it.
Section 40(5) of the Constitutional Reform Act 2005 empowers the Court to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
Rule 46 of the Supreme Court Rules 2009 further provides that the court may make such costs orders as it considers just, and that it may do so either at final determination of an appeal, or application for permission to appeal, or in the course of proceedings.
It is not usual for the court to decide an issue going to costs before the hearing of the substantive appeal.
However, the ruling is necessary now to enable the trustee to decide whether to proceed, and the court is in as good a position to decide this issue now as it would be later: the application does not raise any discretionary considerations, nor does it affect the propriety of any decision of the trustee to pursue the appeal. [6 8] The Court of Appeal authority Borneman v Wilson (1884) 28 Ch D 53 suggests that a trustee in bankruptcy must either adopt proceedings in their entirety or not at all, even where there are discrete prior proceedings conducted by the bankrupt before his appointment.
At that time, the court did not have jurisdiction to award costs against a non party, which would have included the bankrupt where the trustee had been substituted for the bankrupt; moreover, liability under such an order would not have been provable against the estate because of a line of case law which said that such liability was not contingent at the time of bankruptcy.
The jurisdiction to award costs against a non party was recognised by the House of Lords in 1986 and the possibility of proving liability under a costs order against a company in liquidation, and consequently also against a bankrupts estate, was recognised by the Supreme Court in 2014.
The reasons behind the Court of Appeals conclusion in Borneman are therefore no longer relevant and it is possible to revisit the issue as a matter of principle. [11 14] It may be appropriate as a matter of discretion to order a trustee in bankruptcy to pay the other sides costs of legal proceedings including those incurred before the trustee became a party, but there is no longer any absolute rule to that effect. [15] But the issue in this application does not concern that discretionary assessment.
A trial and the successive appeals from the order made at trial are distinct proceedings in the same action and a distinct order for costs is made in respect of each stage. [16] Mr Gabriel was responsible for the entire conduct of the trial and the appeal to the Court of Appeal, and the costs order which was made against him by the Court of Appeal is a provable debt in his bankruptcy.
It would be contrary to principle for Mr Hughes Holland to be held liable for costs in the proceedings below, as this would merely give the solicitors an unwarranted priority for their claim under the Court of Appeals costs order. [17]
|
A company employs a business executive pursuant to a written agreement.
Following the termination of her employment she wishes to become employed by a firm whose business is in competition with that of the company.
The company contends that her proposed employment would breach a covenant in the agreement.
She answers that the covenant is void at common law because part of it is in unreasonable restraint of trade.
Before this court the company replies with three contentions, each of which she disputes.
Each of the companys contentions raises an issue with a different hypothesis, as follows: (A) The hypothesis in Issue (A) is that the employees construction of the part of the covenant alleged to be in unreasonable restraint of trade is correct.
Here the company contends that the impugned part falls outside the doctrine against restraint of trade (the doctrine) and that it is therefore irrelevant that, had it fallen within the doctrine, it would have been in unreasonable restraint of it. (B) The hypothesis in Issue (B) is that the employees construction of the impugned part is incorrect.
Here the company contends that, upon a correct construction of it, it is not in unreasonable restraint of trade. (C) The hypothesis in Issue (C) is that, as in Issue (A), the employees construction of the impugned part is correct; but that, contrary to the companys contention in Issue (A), it does fall within the doctrine.
Here the company contends that, although it is in unreasonable restraint of trade, the impugned part should be severed and removed from the remainder of the covenant, which would therefore survive so as to prohibit the employees entry into the proposed employment.
One can argue that Issue (B) is logically anterior to Issue (A).
But, since Issue (A) purports to test the very boundaries of the doctrine, a balance of convenience favours consideration of it first.
I will explain why in my opinion the most difficult and important issue raised in the appeal is Issue (C): when part of a post employment covenant is in unreasonable restraint of trade, in what circumstances should the court sever and remove it so as to leave the employee bound by the remainder of it?
The Facts
Egon Zehnder Ltd (the company), the appellant, is the UK subsidiary of a Swiss company and part of a worldwide group which is in the business of specialist executive search and recruitment.
The group has nine practice areas into one of which it will place each of its recruiting customers.
Ms Tillman, the respondent, had previously been employed by J P Morgan as European Managing Director.
The company considered that she would be ideally placed in the financial services practice area of its business.
It employed her as a consultant, with effect from 5 January 2004, pursuant to the terms of an employment agreement dated 10 December 2003.
It agreed to pay her a salary of 120,000 pa and, at the end of the first year, a bonus of 100,000 provided that she then remained in its employment.
Mann J, at first instance, observed that the company regarded Ms Tillman as a bit special and that it expected to promote her.
It duly promoted her to be a principal in 2006 and to be a partner in 2009.
A condition of her becoming a partner was that she should hold shares in the Swiss holding company; and she began to do so.
In 2012 she became joint global head of the companys financial services practice area.
The agreement made in 2003 was never replaced in order to reflect her promotions although no doubt a few of its terms, in particular relating to her remuneration, then changed.
In any event, however, resolution of the issues raised by the appeal requires the court to address the terms of the original agreement.
Clause 13 of the agreement was entitled COVENANTS and it provided for five restraints upon the activities of Ms Tillman following the end of her employment, all limited to the six months which would immediately follow it.
By the first, in clause 13.1, she covenanted not to endeavour to entice away from the company any of its employees in specified senior positions.
The other four restraints were included in clause 13.2.
Its introductory words, arguably relevant to Issue (B), are as follows: You [Ms Tillman] shall not without the prior written consent of the company directly or indirectly, either alone or jointly with or on behalf of any third party and whether as principal, manager, employee, contractor, consultant, agent or otherwise howsoever By the first of the other four restraints, set out in clause 13.2.1, Ms Tillman covenanted not to solicit the custom of, nor to deal with, specified suppliers of services to the company.
By the second, set out in clause 13.2.2, she covenanted not to seek to interfere with supplies to the company.
By the fourth, set out in clause 13.2.4, she covenanted not to use any name likely to be confused with any name recently used by the company.
The third of the restraints in clause 13.2, set out in clause 13.2.3, is central to all the issues in the appeal.
There Ms Tillman covenanted that she would not directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company or any Group Company which were carried on at the Termination Date or during the period of 12 months prior to that date and with which you were materially concerned during such period.
I will refer to this as the non competition covenant.
By clause 13.3, Ms Tillman acknowledged that the provisions of clause 13 were fair, reasonable and necessary to protect the goodwill and interests of the company.
Clause 13.4 provided: If any of the restrictions or obligations contained in this clause 13 is held not to be valid as going beyond what is reasonable for the protection of the goodwill and interest of the Company but would be valid if part of the wording were deleted, then such restriction or obligation shall apply with such modifications as may be necessary to make it enforceable.
As I will explain, the question raised in Issue (B) relates to whether the word interested in clause 13.2.3 purports to prohibit Ms Tillman from holding any shares in a company conducting business in competition with such businesses there specified as were conducted within the companys group.
To that question an earlier clause of the agreement, casting a restraint upon her during the period of her employment, is arguably relevant: 4.5.
You shall not, during the course of your employment, directly or indirectly, hold or have any interest in, any shares or other securities in any company whose business is carried on in competition with any business of the Company , except that you may hold or have an interest in, for investment only, shares or other securities in a publicly quoted company of up to a maximum of 5% of the total equity in issue of that company.
On 30 January 2017 Ms Tillmans employment by the company came to an end.
Shortly thereafter she informed it that she intended to start work, on (as she later added) 1 May 2017, as an employee of a firm which was in competition with the company.
She made clear that she intended fully to comply with all her covenants in the agreement apart from that in clause 13.2.3.
She conceded that, by its terms, this last clause prevented her entry into the proposed employment but alleged that it was in unreasonable restraint of trade and therefore void.
On 10 April 2017 the company issued proceedings in which it applied for an interim injunction to restrain Ms Tillmans entry into the proposed employment.
On the undertaking of the company to compensate her in damages if the court were later to hold it not to be entitled to the injunction, she undertook not to enter into the proposed employment until the court had determined the application.
The lower courts were impressively accommodating to the fact that the issue related to a covenant which on any view had no effect beyond 30 July 2017.
On 15 and 16 May 2017 Mann J heard the companys application and on 23 May he delivered a substantial judgment in which he granted the injunction: [2017] EWHC 1278 (Ch), [2017] IRLR 828.
On 11 July the Court of Appeal heard Ms Tillmans expedited appeal and on 21 July, by a judgment delivered by Longmore LJ with which Patten and Sales LJJ agreed, it upheld it, set aside the injunction and dismissed the companys claim: [2017] EWCA Civ 1054, [2018] ICR 574.
It is against the Court of Appeals order that the company brings the present appeal.
The temporal limitation of the dispute and therefore the reality that determination of the companys application would dispose of the whole claim also led the parties to agree, and Mann J to accept, that the grant of the injunction should depend on a closer inquiry into the merits of the companys claim than whether it merely raised a serious question apt to the conventional determination of an application for an interim injunction: NWL Ltd v Woods [1979] 1 WLR 1294.
By her Defence, Ms Tillman alleged that the non competition covenant exceeded the companys need to protect its legitimate interests, and was therefore void, for no less than five different reasons.
But, by the time of the hearing before Mann J, the substantial focus was on one argument alone.
It was that the effect of the part of the non competition covenant not to be interested in any of the competing businesses there specified was unreasonably to prohibit her from holding even a minority shareholding in such a business.
She did not allege that she aspired to hold any shares in the business which proposed to employ her or in any other of the competing businesses there specified; but such was agreed to be irrelevant.
The companys response to her argument was (a) to dispute that, on its proper construction, the covenant prohibited her from holding even a minority shareholding in any of the competing businesses there specified; and to concede that, if, contrary to (a), the covenant did prohibit her from (b) doing so, the whole of it was in unreasonable restraint of trade but to contend that a word or words (which the judge took to be the words or interested) should be severed and removed from the remainder of the clause, with the result that she would remain prohibited from entering into the proposed employment.
Mann J upheld the companys response at (a) above.
He so construed the word interested in the non competition covenant as not to prohibit Ms Tillman from holding shares in any of the competing businesses there specified.
He therefore had no need to address what he took to be the companys alternative contention that, together of course with the word or, the word should be severed and removed from the remainder of the clause; he added however that, although it had not been developed at any length, he did not find that contention appealing.
In upholding Ms Tillmans appeal, the Court of Appeal rejected the construction placed by Mann J upon the word interested in the non competition covenant.
It held that its effect would be to prohibit Ms Tillman from holding even a minority shareholding in any of the competing businesses there specified and that, as such, the covenant was in unreasonable restraint of trade; and it refused to sever the word from the remainder of the clause so as to save the remainder of the prohibition.
Issue (A): The Doctrine
The hypothesis here is that Ms Tillman is correct to construe the word interested in the non competition covenant as purporting to prohibit her from holding any shares, however small a proportion of those issued, in a company conducting business in competition with such of the businesses of the group as are there specified.
On that hypothesis the company concedes that, if the doctrine applied to it, the prohibition reflected in that word, in particular by excluding the sort of minor shareholding which was permitted to Ms Tillman during her employment, would exceed any necessary protection of its interests; that it would therefore be in unreasonable restraint of trade; and that the word would accordingly need to be severed and removed from the remainder in order to justify the injunction sought.
But the company contends that the doctrine does not apply at all to a prohibition against holding shares.
Not every post employment restriction agreed in a contract of employment will, says the company, restrain trade.
It seeks to make its point by reference to an extreme example: what if (it asks) Ms Tillman had there agreed not to play mah jong for six months following the end of her employment?
The company did not raise Issue (A) in either of the courts below.
Wrongly, as I will suggest, it considered that the doctrine of precedent would have obliged both of them to reject its contention which the issue reflects.
The company seems to have had in mind in particular the decision of the Court of Appeal in Scully UK Ltd v Lee [1998] IRLR 259.
An employee had covenanted that throughout the year following termination he would not engage in or be otherwise interested in, whether as a shareholder employee or in any other capacity any business, which was defined in terms not limited to the employers competitors.
The trial judge held that the prohibition against shareholding on the part of the employee was too wide because it would catch even a small holding but that it should be severed and removed and that the remainder should be enforced against him.
The Court of Appeal took no issue with the judges objection to the prohibition against shareholding but upheld the employees appeal on the basis that there were other unreasonable features of the covenant incapable of severance.
It seems clear therefore that in the Scully UK case both courts were making an assumption, rather than reaching a focussed determination, that the word interested not only represented a prohibition against holding shares but also fell within the doctrine.
The same can be said of the decision in Geo Hill and Co v Hill (1886) 55 LT 769.
The claimant company acquired the meat export business of the defendant, who covenanted not to be in any way concerned or interested in any similar business within ten miles of the Royal Exchange.
He became an employee of a similar business within that radius.
The judge held that it was unnecessary to decide whether he was interested in the business, which, the judge added, meant in commercial language entitled to profits, because on any view he was concerned in it; and that the covenant should be enforced against him.
When a court makes an assumption about the law, instead of reaching a focussed determination in relation to it, the decision based upon it does not carry binding authority under the doctrine of precedent: National Enterprises Ltd v Racal Communications Ltd [1975] Ch 397, 406 to 408.
But, notwithstanding the absence of a decision on Issue (A) which could have been sought in the courts below, this court has granted permission to the company to raise it and it must therefore receive a focussed determination.
The doctrine is one of the earliest products of the common law.
It epitomises the nation which developed it: a nation which has ascribed central importance to the freedom of all of us to work in the interests both of the self sufficiency of ourselves and our families and of our common prosperity.
In Dyers case, 2 Hen 5, f 5, pl 26, 1414, John Dyer, a dyer, was sued in the Court of Common Pleas for breach of a condition in an indenture that he would not work as a dyer for six months.
He contended that he had not broken the condition but Justice Hull observed that he should have taken a wider point, namely that the obligation was void.
By God, added the judge, if the plaintiff was here, he would go to prison until he paid a fine to the King.
Two hundred years later the invalidity of restraints of trade remained unqualified.
In Colgate v Bacheler (1601) Cro Eliz 872, the defendant agreed that, if for three years his son worked as a haberdasher in Canterbury or Rochester, he would pay the plaintiff 20.
The court held the agreement to be void irrespective of its limitations of time and place because it was against the benefit of the commonwealth and because the defendants son ought not to have been abridged of his trade and living.
But in the 17th century the absolute nature of the right of the ex employee or vendor of a business to work or trade elsewhere irrespective of his covenant began to be tempered.
For paradoxically the doctrine against restraint of trade was positively inhibiting trade.
In Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535, 564, Lord Macnaghten explained: it was found that a rule so rigid and far reaching must seriously interfere with transactions of every day occurrence.
Traders could hardly venture to let their shops out of their own hands; the purchaser of a business was at the mercy of the seller; every apprentice was a possible rival.
So the rule was relaxed.
The law came to recognise that the employer or the purchaser of a business had legitimate interests which might justify his placing limited restrictions on his employee or vendor.
In 1711 Chief Justice Parker, later Lord Macclesfield, gave the seminal judgment of the Court of Queens Bench in Mitchel v Reynolds.
The immaculate report of it is at (1711) 1 P Wms 181 and any study of the contribution made by law reporters to the development of our law would do well to include it.
The defendant had assigned to a purchaser the lease of a bakery in Holborn for five years and had entered into a bond with him not to trade as a baker elsewhere in Holborn for that period.
Lord Macclesfield held at p 192 that all restraints of trade were presumed to be bad but that at p 193 that Judge Hulls vehemence towards them had been (a) the presumption was rebuttable; (b) excusable but not his manner of expressing it; (c) at p 191 that a restraint of trade throughout England would always be bad (for what does it signify to a tradesman in London what another does at Newcastle?); but (d) of the assignment, was reasonable and should be enforced. at p 197 that this bakers bond, limited to Holborn and to the five years Thus was the concept of reasonableness authoritatively grafted on to the doctrine by way of modification of it.
Based as it is on public policy, the doctrine has regularly had to adjust to social change.
The need for adjustment is well exemplified by the decision of the appellate committee of the House of Lords in the Nordenfelt case cited in para 24 above.
The appellant, who had been a manufacturer of guns and ammunition, had covenanted with the respondent, which had taken over his business, not to engage in manufacture of them anywhere in the world for 25 years.
The committee held that, notwithstanding its width, the covenant was reasonable and so enforceable against him.
Lord Herschell, the Lord Chancellor, explained at p 547 that changed conditions of commerce and of the means of communication meant that Lord Macclesfields reference to the irrelevance to a London trader of similar trade in Newcastle was out of date; and that what would once have been merely a burden on the covenantor may now be essential if there is to be reasonable protection to the covenantee.
Lord Watson observed at p 555 that there had been a protracted struggle between the principle of freedom of contract and the doctrine and that the latter had had the worse of the encounter, particularly in courts of equity.
Lord Macnaghten held at p 565 that there was a general rule that restraints of trade were void but that there was an exception to the rule where the restriction was reasonable by reference to the interests of both parties and of the public.
You cannot, so he observed at p 572 in relation to a vendors covenant, sell the cow and sup the milk.
In Herbert Morris Ltd v Saxelby [1916] 1 AC 688 the members of the appellate committee all stressed that different considerations applied to restraints on a vendor of a business from those which applied to restraints on an ex employee; that, as Lord Atkinson said at p 701, the purchaser of a business had paid for its goodwill, including for the vendors covenant which protected and enhanced it; that, as Lord Shaw of Dunfermline said at p 714, an employer was entitled to reasonable protection against dissemination of his trade secrets or solicitation of his customers, in other words against misuse of his property, but not directly against the employees use of his skill and his manual or mental ability, which were the employees own property; and that, as Lord Shaw added at p 716, a delicate balance was always required between freedom of trade and freedom of contract.
During the last century questions arose about the width of the doctrine, in particular whether it extended beyond contracts of employment and for sale of a business.
Did it apply to a contract in which I agree to buy specified goods only from you? Or to sell specified goods only to you? Or to sell to others specified goods bought only from you? An early example was Servais Bouchard v The Princes Hall Restaurant (Ltd) (1904) 20 TLR 574.
A restaurant in Piccadilly had contracted with a supplier of burgundy not to sell burgundy to its customers other than such as it had purchased from the supplier.
The restaurant broke the contract and the Court of Appeal held that the supplier was entitled to enforce it.
Sir Richard Henn Collins, the Master of the Rolls, held that the contract fell outside the doctrine; the other members of the court apparently held instead that, albeit within the doctrine, the restraint was reasonable.
Later decisions demonstrated a similar slide into a verdict in relation to reasonableness in preference to an attempt to discern the boundaries of the doctrine: Dickson v Pharmaceutical Society of Great Britain [1970] AC 403, 431.
The outer reaches of the doctrine were, however, more fully explored, albeit with obvious difficulty, by the appellate committee in Esso Petroleum Co Ltd v Harpers Garage (Stourport) Ltd [1968] AC 269.
The garage company had entered into solus agreements with Esso to sell petrol bought only from Esso at two of its filling stations and to do so at one of them for in effect five years and at the other for 21 years.
The committee held that, on balance, both contracts fell within the doctrine and that, while the agreement for the shorter period was reasonable and enforceable against the garage, the other was unreasonable and unenforceable.
Lord Reid noted at p 294 that a contract under which a person agreed to work exclusively for another fell outside the doctrine although it detracted from his freedom to work as he pleased; and at p 298 that a restrictive covenant upon land which prohibited its use for trading fell outside the doctrine because the purchaser of the land who became subject to it was not surrendering any freedom to trade there which he had previously enjoyed.
Lord Pearce observed at p 325 that, for the same reason, a contract under which a publican took a lease from a brewer of a tied public house fell outside the doctrine; but that the garage company, by contrast, already ran the filling stations when it accepted Essos restrictions.
He added at p 328 that it was the sterilising of a mans capacity for work and not its absorption that underlay the objection to restraint of trade; and he cited Warner Brothers Pictures, Inc v Nelson [1937] 1 KB 209, in which the contract by which Miss Bette Davis had agreed not to work otherwise than for the claimant for one year was enforced against her.
Lord Wilberforce, at pp 333 to 335, favoured a pragmatic analysis under which restrictive covenants on land and tied public houses, having long been accepted to fall outside the doctrine, must for that reason be taken to have satisfied the demands of public policy on which the doctrine rested.
In my view the resolution of Issue (A) does not require any closer study of the boundaries of the doctrine.
For the contract in the present case is of the classic type between employer and employee and, as is agreed, it does provide for a restraint of trade which falls within the doctrine and which is therefore void unless reasonable.
The only question under Issue (A) is whether an assumed prohibition against holding shares forms part of the restraint.
In this regard assistance is to be derived from the decision of the Court of Appeal in Proactive Sports Management Ltd v Rooney [2011] EWCA Civ 1444, [2012] IRLR 241.
Wayne Rooney set up a company to which he assigned his image rights, in other words his rights to exploit his image by, for example, his indorsement of sports products and by other forms of promotion and sponsorship.
His company contracted with the claimant to act as its agent in negotiating contracts for the exploitation of his image.
His company breached the contract and, when sued by the claimant, it contended that the contract fell within the doctrine.
The claimant disputed that it did so but accepted the trial judges conclusion that, if it did so, its terms were in unreasonable restraint of trade and unenforceable, albeit that it was entitled to a restitutionary remedy.
At para 67 my lady, then Arden LJ, recorded the claimants submission that Wayne Rooneys trade was as a footballer and that exploitation of his image rights formed no part of it.
She held however at paras 92 and 93 that, although his business of exploiting his image rights was ancillary to, and indeed dependent on, his primary occupation of playing football, it fell within the doctrine.
The other members of the court agreed.
Gross LJ added at para 153 that Wayne Rooneys activities on field and, in exploiting his image rights, off field were both part of a single trade; and at para 155 that the court should adopt a broad, practical, rule of reason approach to determining the applicability of the doctrine.
It is an approach which this court should also adopt.
In Issue (A) the company contends that the word interested in the non competition covenant falls outside the doctrine but concedes that the remainder of the covenant falls within it.
It is a curious proposition, namely that the restraints provided in the rest of the covenant are valid only if reasonable but that the restraint provided by that word is valid although unreasonable.
The company cites no authority in which a particular word in a covenant which substantially falls within the doctrine has been held to fall outside it.
The covenant was cast in terms which, no doubt on advice, the company considered that it could justify as reasonable for the purposes of the doctrine; and among these terms was one which, for the purposes of Issue (A), we are to construe as prohibiting Ms Tillman from holding any shares in the specified businesses.
By clause 13.3 Ms Tillman acknowledged that the provisions of this clause 13 are fair and reasonable.
The acknowledgement is hard to explain unless the law required them all of them to be fair and reasonable.
A similar conclusion is to be derived, even more clearly, from clause 13.4, set out in para 9 above.
It provided that, were any restriction in clause 13 to be held invalid as exceeding what was reasonable for the protection of the companys interest, it should be severed and the balance of the restriction should remain enforceable.
Subclause (4) represents a clear acknowledgement that all the restraints in subclauses (1) and (2) fall within the doctrine.
Nor is it in any way surprising that, in seeking to protect itself against competing activity on the part of Ms Tillman in the immediate aftermath of her employment, the company should have aspired to prohibit her from holding shares in the potentially competitive businesses specified in the non competition covenant.
Any controlling shareholding on her part would, by definition, enable her to direct the competitors operations.
But even a minority shareholding, say a 25% shareholding in a company started up with three others, would enable her to influence its operations.
And, even more obviously, the employment of a top executive such as Ms Tillman is frequently subject to conditions that she should hold shares in her employer or be remunerated partly in its shares or in options to purchase them.
Indeed, as explained in para 5 above, it was a condition of her becoming a partner in the company in 2009 that she should hold shares in the holding company.
In substance as well as in form the restraint on shareholding is part of the restraint on Ms Tillmans ability to work in the immediate aftermath of her employment.
The proper determination of Issue (A) is that, on the assumption that the word interested purports to restrain Ms Tillman from holding shares in the specified businesses, it falls within the doctrine.
Issue (B): Construction
The companys argument here is that, when properly construed, the word interested in the non competition covenant does not prohibit Ms Tillman from holding shares in the businesses there specified; and that accordingly in this respect Mann J was right and the Court of Appeal was wrong.
The company concedes that in some contexts a person holding shares in a company will properly be described as being interested in it.
But it contends, uncontroversially, that the meaning of the word is informed by its context in the agreement as a whole: Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173, para 10.
It argues that the word interested, when considered in the context of its agreement with Ms Tillman as a whole, does not cover a shareholding; and that in particular it fails to cover a shareholding once the validity principle, as explained below, has been applied so as to identify its meaning.
One might expect the company to have aspired, and reasonably to have aspired, to prohibit Ms Tillman from, for example, having a controlling interest as a shareholder in a competing company even if she was not working in it.
But, in relation to this issue, the company cannot have it both ways: it cannot sensibly argue that the word interested covers a large shareholding but not a small shareholding.
It is all or nothing.
The company contends for nothing.
Better considered without reference to its original formulation in Latin, which nowadays few people understand, the validity principle proceeds on the premise that the parties to a contract or other instrument will have intended it to be valid.
It therefore provides that, in circumstances in which a clause in their contract is (at this stage to use a word intended only in a general sense) capable of having two meanings, one which would result in its being void and the other which would result in its being valid, the latter should be preferred.
In the present appeal, however, the parties are at odds about the specific circumstances in which the principle is engaged.
Is it engaged only when the two meanings are equally plausible or is it also engaged even when the meaning which would result in validity is to some extent less plausible?
In In re Badens Deed Trusts [1969] 2 Ch 388 the Court of Appeal, by a majority, determined the meaning of a deed of settlement by reference to the validity principle.
Harman LJ said at p 400: the court is at liberty, if the considerations on both sides seem evenly balanced, to lean towards that which may effectuate rather than frustrate the settlors intentions I by no means hold that the court may take this course by flying in the teeth of the provisions of the deed, so that the weaker view may prevail because it is likely to have an effectual result, but where the terms of the deed produced a balance so even as the present I am of opinion that the doctrine may be called in aid. (italics supplied)
To say that rival meanings are evenly balanced is to say that they are equally plausible.
Thus, in The Interpretation of Contracts, 6th ed, 2015, Sir Kim Lewison offers the following proposition at the head of chapter 7, section 16: Where two interpretations of an instrument are equally plausible, upon one of which the instrument is valid, and upon the other of which it is invalid, the court should lean towards that interpretation which validates the instrument. (italics supplied)
Others, however, have taken a wider view of the circumstances in which the principle is engaged.
In the text of section 16 Sir Kim quotes an observation made by my Lady, then Arden LJ, in Anglo Continental Educational Group (GB) Ltd v Capital Homes (Southern) Ltd [2009] EWCA Civ 218, [2009] CP Rep 30, para 13, that if the agreement is susceptible of an interpretation which will make it enforceable and effective, the court will prefer that interpretation to any interpretation which would result in its being void (italics supplied).
And in TFS Derivatives Ltd v Morgan [2004] EWHC 3181 (QB), [2005] IRLR 246, Cox J suggested at para 43 that the principle applied if there was an element of ambiguity about the meaning of a covenant.
It was her approach which, in the present case, Mann J adopted at paras 32 and 43.
In my view the point at which the validity principle is engaged lies between these various descriptions of it.
To require a measure of equal plausibility of the rival meanings is to make unnecessary demands on the court and to set access to the principle too narrowly; but, on the other hand, to apply it whenever an element of ambiguity exists is to countenance too great a departure from the otherwise probable meaning.
In Inland Revenue Comrs v Williams [1969] 1 WLR 1197, which related to the meaning of a clause in a deed of appointment, Megarry J adverted at p 1201 to the reference by Harman LJ in the Badens Deed Trusts case to the need for an even balance and added: It is possible that the same approach might be adopted where the scales are tilted only slightly to one side or the other; but plainly it cannot apply where, apart from the effect of the rule against perpetuities or some other sources of invalidity, the court reaches the conclusion that one construction is clearly preferable to the other the right view may well be that, before the doctrine can apply, the court must be left in a state of real and persistent uncertainty of mind.
In Great Estates Group Ltd v Digby [2011] EWCA Civ 1120, [2012] 2 All ER (Comm) 361, Toulson LJ explained that, if the contract was capable of being read in two ways, the meaning which would result in validity might be upheld even if it is the less natural construction.
And in Tindall Cobham 1 Ltd v Adda Hotels [2014] EWCA Civ 1215, [2015] 1 P & CR 5, Patten LJ, with whom the other members of the court agreed, observed at para 32 that the search was for a realistic alternative construction which might engage the principle.
In my view Megarry J, Toulson LJ and Patten LJ were identifying the point at which the principle is engaged in much the same place.
Let us work with Patten LJs adjective: let us require the alternative construction to be realistic.
In its need to set up a realistic construction of the word interested, alternative to a construction which relates it to a shareholding, the company adverts to three features of the context of the word in the agreement as a whole.
The first is the content of clause 4.5, set out in para 10 above.
For the duration of her employment, it expressly prohibited Ms Tillman from holding shares in specified businesses except for a holding of up to 5% of issued shares in a publicly quoted company.
So the company argues that, when in their agreement it and Ms Tillman wanted to address her holding of shares, they did so expressly; and that it would be anomalous that, having acknowledged her freedom to hold a limited number and type of shares in specified businesses during her employment, they should have agreed that she should be prohibited from doing so in the immediate aftermath of her employment by their use of the word interested, which of course stands unqualified in the non competition covenant.
This argument found favour with Mann J, who held that it would be right to adopt a construction which did not give rise to this anomaly.
The second feature relates to the introductory words of clause 13.2, set out in para 7 above.
There the company and Ms Tillman set out the different types of status in which she was to be subject to the restraints which followed, namely as principal, manager, employee, contractor, consultant, agent or otherwise howsoever.
Notwithstanding (says the company) the catch all words at the end, the significance of the list is that it could so easily have included the word shareholder if the restraint in the non competition covenant had been intended to prohibit Ms Tillman from holding shares.
The third feature relates to the direct link in the non competition covenant between the word interested and the words in any business.
Interest in a business, submits the company, connotes active interest in it and is to be contrasted with the passive interest of a shareholder in a company.
In relation to the first and third features the company claims to derive valuable support from the decision of Foskett J in Tradition Financial Services Ltd v Gamberoni [2017] EWHC 768 (QB), [2017] IRLR 698.
There the post employment restrictions on the employee were in somewhat similar terms to those in the present case and included a covenant on his part not for six months to undertake, carry on or be employed, engaged or interested in any capacity in any business activity of a specified character.
Among the employees various contentions that the restrictions were in unreasonable restraint of trade was a contention, identical to that reflected in Issue (B), that the word interested disabled him from holding even a small quantity of shares in companies of the specified character.
In response the employer in the Tradition Financial Services case adverted to two features of the contract, identical to the first and third features to which the company adverts in the present case.
Thus, as Foskett J explained in para 127 of his judgment, the employer relied on an earlier clause of the contract under which during his employment the employee had been permitted to hold small amounts of shares, even apparently in competing companies.
This was the foundation of the employers primary argument, which the judge described as follows and which he accepted: it cannot sensibly have been intended that [the employee] should be subject to a more onerous restriction as to shareholdings after his employment had terminated than whilst still an employee, particularly if it is suggested that the more onerous obligation is created by a clause that makes no express reference to shareholdings at all.
In other words, whatever interested in any capacity . in any business activity means, it cannot be a reference to a shareholding.
Indeed, as Foskett J explained in para 128, the employer also relied on the fact that the covenant prohibited the employee from being interested in a business activity and it argued that passive investment by way of a minority shareholding was not a business activity.
The judge explained that he gave less weight to this argument but that, when added to the employers primary argument, it supported his conclusion that the word interested did not cover a shareholding.
The trouble is that, without expressly acknowledging it, Foskett J, whose opinion is on any view entitled to considerable respect, was there departing from the obvious natural meaning of the word interested, such as had been recognised in our law for more than a century without dissent.
In Smith v Hancock [1894] 2 Ch 377 the defendant sold his grocery business near Stoke on Trent to the claimant and agreed not for the following ten years to carry on or be in any wise interested in any similar business operating within five miles of it.
The defendants wife set up a grocery within those parameters.
In the Court of Appeal Lindley LJ held at p 386 that the word interested meant a proprietary or pecuniary interest and that it did not extend to the indirect interest which every man has in the happiness and welfare of his wife.
He and A L Smith LJ both reluctantly held that, on the judges findings, the defendant was not interested in his wifes business.
In Gophir Diamond Co v Wood [1902] 1 Ch 950 the ex employee of a jewellery shop in Regent Street had become a salaried employee of a rival shop in the same street.
Swinfen Eady J noted at p 952 that his covenant had only been not to be interested in a similar business; and the judge added, intriguingly for present purposes, that in that regard the covenant had materially departed from the common form in the then current edition of Palmers Company Precedents that the covenantor should not be engaged or concerned or interested in a similar business.
He held that, since his remuneration had in no way depended on the profits of the rival shop, the ex employee was not in breach of his covenant.
It does seem that the phrase engaged or concerned or interested, adopted in the non competition covenant in the present case, has been included in standard precedents for the drafting of non competition covenants throughout the last century.
It has popped up frequently in the reported cases, including in CEF Holdings Ltd v Mundey [2012] EWHC 1524 (QB), [2012] IRLR 912.
Silber J there held that for various reasons the non competition covenant was in unreasonable restraint of trade.
One of his reasons, set out in para 65(i), was that [i]ts width is so great that it prevents any employees from having any interest in [a competing] company, such as even owning one share in a publicly quoted company.
The companys alternative construction of the word interested needs to be realistic.
What is its proposed construction? At the hearing Lady Hale inquired about it.
Even Mr Laddie QC on behalf of the company struggled to find an answer.
He suggested that the word might be casual surplusage.
Is that good enough? What was the construction placed on the word by Foskett J in the Tradition Financial Services case? As set out in para 48 above, he did no more than to adopt the employers submission that, whatever it meant, it did not refer to shareholding.
Was that good enough?
The proper determination of Issue (B) is that the natural construction of the word interested, consistent with long standing authority, is that it covers a shareholding; that the three features of the present agreement on which the company relies are insufficient to require a different construction to be placed on the word, when found in clause 13.2.3; that the company fails to establish even a realistic alternative construction of it which would engage the validation principle; that the word interested in the non competition covenant in the present case therefore covers a shareholding, whether large or small, and on that basis is, as is conceded, in unreasonable restraint of trade; and that, unless it can be severed and removed from the rest of the clause, the Court of Appeal was right to set aside the injunction granted against Ms Tillman.
Issue (C): Severance
Where part of a contract is unenforceable, the enforceability of the remainder represents an issue which arises far more widely than in contracts of employment.
In Carney v Herbert [1985] AC 301 the problem was that the security for payment of the price, for which a contract for the sale of shares had provided, was not only a guarantee but also mortgages which were statutorily illegal.
The Privy Council indorsed a decision of the Supreme Court of New South Wales that the provision for mortgages could be severed and removed from the contract, with the result that the guarantee should be enforced.
Lord Brightman, who delivered the judgment of the Board, observed at p 309 that tests for determining severability in certain types of case were not always applied satisfactorily in others.
But then, with hesitation, he suggested at p 317 that, as a general rule, where parties enter into a lawful contract and there is an ancillary provision which is illegal but exists for the exclusive benefit of the plaintiff, the court may and probably will, if the justice of the case so requires, and there is no public policy objection, permit the plaintiff to enforce the contract without the illegal provision.
It is clear that considerations of public policy drove the evolution of the doctrine under common law that post employment restraints of trade were, unless reasonable, void: see paras 23 to 25 above.
It is less clear that, until the early years of the last century, considerations of public policy also drove a more restrictive approach to severance in post employment restraints of trade than was adopted in other areas.
Take, for example, Chesman v Nainby (1726) 2 Ld Raym 1456.
Miss Nainby traded as a draper from her home in Drury Lane.
Prior to her marriage Mrs Chesman became apprenticed to Miss Nainby.
Mrs Chesman entered into a bond that, after leaving Miss Nainbys service, she would not trade as a draper, nor assist anyone else to do so, within half a mile of Miss Nainbys home in Drury Lane or of any other house that [Miss Nainby] shall think proper to remove to and that, in the event of breach, she would pay Miss Nainby 100.
After leaving Miss Nainbys service Mrs Chesman assisted her husband to trade as a draper elsewhere up Drury Lane.
It was held in the Court of Common Pleas, and upheld on appeal first by the Court of Kings Bench and then by the House of Lords itself in accordance with the opinion of its judicial members, that Mrs Chesman owed Miss Nainby 100.
Applying the recent decision in Mitchel v Reynolds addressed in para 25 above, the court accepted that it was unreasonable to seek to restrict Mrs Chesman from trading, or continuing to trade, within half a mile of any other house to which Miss Nainby might at any stage move, even in the remotest part of the kingdom.
Nevertheless at p 1459 it upheld Miss Nainbys submission that if a bond is given, with condition to do several things, and some are agreeable to law, and some against the common law; the bond shall be good as to the doing the things agreeable to law, and only void as to those that are against the law.
Early in the last century, however, a much more restrictive view was suddenly taken of the availability of severance in post employment covenants.
The reasons of public policy which drove a conclusion that, unless reasonable, they were void were adopted and expanded to suggest a further conclusion that, where parts of them were unreasonable, not even the reasonable parts should usually be enforced.
This further conclusion was most vividly expressed in unlikely circumstances.
In Mason v Provident Clothing and Supply Co Ltd [1913] AC 724 the employee had covenanted not to work for any of the employers competitors within 25 miles of London.
The appellate committee held that the employer had failed to establish that the extension of the restraint to the area thus specified was reasonably necessary for its protection and concluded that it was therefore void.
It is hard to see how on any view the offending words could have been severed; and, although the employer apparently argued in the alternative for severance, it must have done so briefly for there is no mention of it in the report of its counsels argument.
At all events, at the end of his speech, with which no other member of the committee expressed agreement, Lord Moulton, at p 745, added the following: It was suggested in the argument that even if the covenant was, as a whole, too wide, the court might enforce restrictions which it might consider reasonable (even though they were not expressed in the covenant), provided they were within its ambit.
My Lords, I do not doubt that the court may, and in some cases will, enforce a part of a covenant in restraint of trade, even though taken as a whole the covenant exceeds what is reasonable.
But, in my opinion, that ought only to be done in cases where the part so enforceable is clearly severable, and even so only in cases where the excess is of trivial importance, or merely technical, and not a part of the main purport and substance of the clause.
It would in my opinion be pessimi exempli if, when an employer had exacted a covenant deliberately framed in unreasonably wide terms, the Courts were to come to his assistance and, by applying their ingenuity and knowledge of the law, carve out of this void covenant the maximum of what he might validly have required.
It must be remembered that the real sanction at the back of these covenants is the terror and expense of litigation, in which the servant is usually at a great disadvantage, in view of the longer purse of his master.
These passing observations of Lord Moulton were to have an electric effect on the law.
Within six months of their publication Sargant J was seeking to explain part of them away.
In SV Nevanas & Co v Walker and Foreman [1914] 1 Ch 413 an employer admitted that the second part of a post employment covenant was void but contended that the first part was valid and, following severance, should be enforced.
Sargant J held that the first part was also void and so dismissed the claim.
He was however at pains to say that, had the first part been valid, the second part could have been severed and removed from it.
He said at p 422 that he wished to clear the ground at once from a suggestion that, in view of certain remarks of Lord Moulton in the recent case of [Mason], this part of the covenant is invalidated, because the succeeding part of the covenant is, admittedly, too wide.
I do not think that those remarks were intended to be applicable to cases where the two parts of a covenant are expressed in such a way as to amount to a clear severance by the parties themselves, and as to be substantially equivalent to two separate covenants.
No question of the kind was involved in the case before the House of Lords, and I think that Lord Moulton was not intending to deal with the numerous cases of high authority in which the good part of such a covenant was held to be enforceable,
notwithstanding its collocation with a bad part
Several months later, however, Lord Moultons observations attracted outspoken support from Neville J in Goldsoll v Goldman [1914] 2 Ch 608.
In the event the judge applied the principle of severance to a non competition agreement made between two jewellers in Bond Street; and, later to be substantially upheld by the Court of Appeal [1915] 1 Ch 292, he enforced the valid part of it by injunction.
At the outset of his judgment, however, at pp 611 612, he had railed against the long standing modification of the doctrine against restraint of trade which rescued a restraint to the extent that it was reasonable; indeed he called it a blot on the jurisprudence.
Then at p 613 he had added: Again I think that the application of the doctrine of severability of the terms of a contract in restraint of trade has proved mischievous.
It seems to me to be in accordance both with principle and justice that if a man seeks to restrain another from exercising his lawful calling to an extent which the law, even as it now stands, deems unreasonable, the contract by which he does so, whether grammatically severable or not, should be held to be void in toto.
To hold otherwise seems to me to expose the covenantor to the almost inevitable risk of litigation which in nine cases out of ten he is very ill able to
afford
Thus was the stage set for the decisions in Attwood v Lamont, first of the Divisional Court of the Kings Bench Division, [1920] 2 KB 146, and then of the Court of Appeal, [1920] 3 KB 571.
The claimant, who carried on business in Kidderminster as a draper, tailor and general outfitter, employed the defendant as a cutter in the tailoring department.
The defendant covenanted not at any time thereafter to trade as a tailor, dressmaker, general draper, milliner, hatter, haberdasher, gentlemens, ladies or childrens outfitter within ten miles of Kidderminster.
The defendant left the claimants employment and set up business as a tailor; and, although he based it more than ten miles away, he returned to Kidderminster to obtain and execute tailoring orders there, including from the claimants former customers.
The Divisional Court, on appeal from the county court, agreed that the list of prohibited trades was too wide but held that the covenant should be severed so as to enable the reference to all trades other than that of a tailor to be removed and that the defendant should be enjoined from trading as a tailor within ten miles of the town.
Bailhache J at p 156 held that the covenant was clearly severable.
He noted that in the Mason case, in which on any view the covenant had not been severable, Lord Moulton had added that, even if clearly severable, a covenant should not be severed unless the excess was trivial or technical.
But he, Bailhache J, expressed himself satisfied that Lord Moultons addition was contrary to authority.
Sankey J at pp 158 159 made similar remarks.
The Court of Appeal, reversing the order of the Divisional Court, held that the covenant was not severable.
But, although its conclusion was unanimous, the route taken to it was different.
Lord Sterndale MR gave the first judgment; but the binding authority of the decision attached to the judgment of Younger LJ because it was with his judgment that, without adding anything, Atkin LJ agreed.
Lord Sterndale observed at p 577 that the tendency of recent decisions had been to limit severability more than previously but that in his view it remained the law that severance was available if the parts proposed to be severed were independent and if it did not affect the meaning of what was proposed to remain.
At p 578 he quoted with approval what Sargant J had said in the SV Nevanas case, set out in para 59 above; and he suggested that, if severance of one part were to leave the remainder of the covenant with a meaning different in kind and not only in extent from its previous meaning, the parts of the covenant could not be said to be substantially equivalent to separate covenants.
At p 580 he concluded, however, that severance of the list of trades would entirely alter the scope and intention of the agreement and so failed Sargant Js test.
Younger LJ (a) stated at p 581 that recent decisions of the House of Lords had wrought a fundamental change in the approach of the law to post employment restrictions, which were peculiarly susceptible to current views of public policy; (b) observed there that the principle of freedom of contract still remained operative in contracts between the vendor and purchaser of a business; (c) suggested at p 593 that severance of a covenant was available only where it was not really a single covenant but [was] in effect a combination of several distinct covenants; (d) held there that the list of prohibited trades was in effect contained in one covenant because (so he reasoned) the claimant himself had only one trade and not several trades; (e) noted there that, even if he was wrong to regard the list of trades as contained in one covenant, the court should nevertheless decline to sever it; (f) quoted with approval at pp 594 595 the observations first of Lord Moulton that severance should be confined to the trivial and the technical and then of Neville J in the Goldsoll case that a partly unreasonable restraint should make it entirely void, even if grammatically severable; and (g) concluded at p 595 that severance should not generally be allowed.
Although, as I will suggest in para 82 below, there were, and remain, good reasons of public policy for the law to take a cautious approach to the severance of a post employment restraint, the decision of the majority in the Attwood case, founded, as it was, upon the passing observations of Lord Moulton and on the hostile approach of Neville J to the whole concept, suddenly made the common law fiercely restrictive of it.
How easy would it be for courts to apply the first requirement, that the covenant should in effect be a combination of different covenants? And what would they make of the second requirement, that the part proposed to be removed should be no more than trivial or technical?
In Putsman v Taylor [1927] 1 KB 637 the claimant employed the defendant as manager of his tailoring business at 49 Snow Hill in Birmingham.
The defendant covenanted that, following the end of his employment, he would not be employed by a tailor (a) anywhere else on Snow Hill nor (b) within half a mile of Aston Cross nor (c) within half a mile of the Bristol Road.
He became employed by a tailor at 73 Snow Hill.
The Divisional Court of the Kings Bench Division severed the covenant, removed (b) and (c) as too wide and enforced (a) against the defendant by way of injunction.
Salter J suggested at pp 640 641 that in the Attwood case it had been Lord Sterndale who had articulated a definite test, namely whether severance would render the covenant different in kind and not only in extent; and he held that removal of (b) and (c) affected only the extent of the covenant.
Talbot J observed at p 643 that the law relating to the severability of illegal contracts was as fully applicable to those in restraint of trade as to those illegal in any other respect; and at p 645 that Lord Moultons observations in the Mason case referred to the inability of the court to substitute terms which had not been expressed for terms which were unreasonably wide.
Neither judge addressed the second requirement identified in the Attwood case.
In Scorer v Seymour Jones [1966] 1 WLR 1419 the Court of Appeal took a similar approach to that taken by the Divisional Court in the Putsman case.
The claimant, an estate agent in Dartmouth, opened a branch in Kingsbridge and employed the defendant to manage it.
The defendants post employment covenant was not to set up as an estate agent within five miles either of Kingsbridge or of Dartmouth.
He set up as an estate agent within five miles of Kingsbridge.
The court severed the covenant, removed the reference to Dartmouth as too wide and enforced the remainder.
Although the Attwood case was cited to them, none of the judges expressly referred to either of its requirements.
In T Lucas & Co Ltd v Mitchell [1974] 1 Ch 129 the claimant, which manufactured foodstuffs, employed the defendant as a salesman in Manchester.
His post employment covenant was not to deal in goods similar to those manufactured by the claimant nor to solicit orders from, nor to supply, any of its recent customers.
Following termination of his employment, he solicited orders from a number of its recent customers.
The Court of Appeal held that the claimants legitimate interests justified the covenants against solicitation and supply but that the covenant against dealing was unreasonable.
It held, however, that the latter should be removed following severance and the former enforced.
By a judgment delivered on its behalf by Russell LJ, it held at p 135 that the latter could be removed without altering the nature of the contract and that its removal would not confer on the former a meaning and effect different in kind and extent.
Then, at p 136, the court addressed the further step apparently required by the Attwood case; and, although it did so in slightly ambiguous terms, a careful reading of the report impels the conclusion that it was referring to what I have described as the second requirement in the Attwood case, namely that the part proposed to be removed should be no more than trivial or technical.
The court declared that it looked askance at this requirement, which, it added, much strains our loyalty to precedent and with which a decision of equal stature, namely that of the Court of Appeal in the Scorer case, was wholly inconsistent.
The post employment covenant in Sadler v Imperial Life Assurance Co of Canada Ltd [1988] IRLR 388 arose in circumstances significantly different from those addressed above.
The defendant employed the claimant as an insurance agent on commission, to be calculated by reference to premiums paid to the defendant for the first ten years under any policy which he had procured.
A clause of the contract stated that, if in certain circumstances he left the defendants employment, it would, subject to a proviso, continue to pay him commission in respect of premiums thereafter paid to it for the first ten years under any policy which he had procured.
The proviso was that this post employment commission would cease if he began to work for another insurance company.
The claimant left the defendants employment and began to work for another insurance company.
The defendant refused to pay him further commission.
In his claim for payment of it he contended that the proviso was in unreasonable restraint of trade and thus void and that it should be severed and removed from the remainder of the clause, which should continue to entitle him to the commission.
Mr Peter Crawford QC, sitting as a deputy judge of the Queens Bench Division, upheld his claim.
He rejected the defendants contention that if, which it had denied, the doctrine against restraint of trade applied at all, the whole clause, including for the payment of further commission, was void.
Following a survey of the authorities, the deputy judge concluded at para 19 that the proviso could be removed from the remainder of the clause since (1) there was no need to add to or modify the wording of the remainder, (2) the remainder continued to be supported by adequate consideration and (3) the removal did not so change the character of the contract that it becomes not the sort of contract that the parties entered into at all.
Save for one complicating feature, the circumstances in Marshall v NM Financial Management Ltd [1995] 1 WLR 1461 were similar to those in the Sadler case.
The claimants remuneration from the company was again linked to premiums paid over many years under policies issued by the company which he had procured.
Again the contract included a clause that in specified circumstances such remuneration should continue to be paid notwithstanding termination of his agency; but in this case payment was subject to two provisos.
The first was that in the immediately following year he should not work for a competitor.
Within that year the claimant, then aged 40, did work for a competitor.
Mr Jonathan Sumption QC, sitting as a deputy judge of the Chancery Division, chose to apply the three criteria for severance which had been identified in the Sadler case; but he suggested a fourth, namely that severance should be consistent with the public policy underlying avoidance of the offending part.
He said at p 1466 that application of the third criterion, which called for inquiry into change in the character of the contract, was altogether more satisfactory than the more traditional and question begging statement of the test: whether there is one obligation or more than one.
The complicating feature was the second proviso, which identified an alternative route to entitlement to post employment commission, namely that on termination the agent should have attained the age of 65.
This second proviso was not even arguably in restraint of trade but, if the first proviso were alone to be removed, the second would survive to preclude payment of the commission to the claimant.
In the event the deputy judge regarded both provisos as linked and removed them both.
In the Marshall case the Court of Appeal, [1997] 1 WLR 1527, dismissed the companys appeal against the deputy judges decision.
Millett LJ observed at p 1531: Although the question is described as one of severance it is important to bear in mind that we are not concerned to decide how much of an offending restriction should be struck down.
In such a case the question is to what extent can the party who imposed the restriction enforce those parts of it which are not in unreasonable restraint of trade.
We are concerned with a very different question, namely, whether the party who has been freed from an invalid restraint of trade can enforce the remainder of the contract without it.
As Millett LJ observed, it was the employee (or agent) who was seeking severance in the Sadler and Marshall cases; and therefore there was no relevance in the public policy reasons for restricting severance when sought by overbearing employers who had required their employees to subscribe to extravagant restraints.
In Beckett Investment Management Group Ltd v Hall [2007] EWCA Civ 613, [2007] ICR 1539, the defendants, who had been employed by the claimant as independent financial advisers, covenanted that, for the year immediately following termination of their employment, they would not deal with any of the claimants clients with whom they had dealt in the preceding year; and that, if they had then dealt with agents of its clients, the agents should be deemed to be its clients for this purpose.
The Court of Appeal held that the deeming of agents as clients was unreasonable; that the covenant should be severed and the deeming provision removed; and that the remainder of the restraint should be enforced against the defendants.
In a judgment with which Sir Anthony Clarke MR and Carnwath LJ agreed, Maurice Kay LJ (a) observed at para 34 that [a]t one stage there had been an assumption in the authorities, such as the Mason case, that courts should be reluctant to sever a covenant in restraint of trade in favour of an employer; (b) declared at paras 35 37 that the appropriate starting point was what Lord Sterndale and Younger LJ had said in the Attwood case; (c) noted at para 38 that in the T Lucas case, cited in para 69 above, the court had authoritatively rejected the second prerequisite of severance which Younger LJ had identified; addressed at para 40 the three criteria identified in the Sadler case and (d) noted that it had been applied both in the Marshall case and in the TFS Derivatives case cited in para 41 above; (e) rejected at paras 41 and 42 the suggestion that those three criteria applied only to claims by employees to post employment commission and likened the third criterion to the reference in the T Lucas case to the availability of severance if achievable without altering the nature of the contract; (f) approaching these cases and should be adopted; and (g) the deeming provision removable. concluded at para 44 that application of those three criteria rendered
suggested at para 43 that the threefold test is a useful way of
Following the decision in 2007 in the Beckett case, there have been a number of decisions at first instance in which issues of severability of post employment restraints have been determined by reference to those three criteria, sometimes with the addition of the fourth criterion suggested in the Marshall case.
For example, in East England Schools CIC v Palmer [2013] EWHC 4138 (QB), [2014] IRLR 191, the claimants business was that of an agency which sought to find teachers for schools with teaching vacancies.
Among the post employment restraints included in the first defendants contract with the claimant was a provision that, whether as shareholder or otherwise, she should not be concerned with the supply of Services to any school or teacher with whom she had had recent dealings.
Mr Richard Salter QC, sitting as a deputy judge of the Queens Bench Division held at para 77 that this provision, which specifically extended to her status as a shareholder, was unreasonably wide because it would even prevent her from having a minority shareholding in a competing company which supplied such services.
But, by reference to the three criteria and the additional criterion, he proceeded to declare that the provision should be severed and removed from the remainder of the restraints, which were enforceable.
He had therefore asked himself at para 86 whether severance would change the underlying character of the contract.
He had not asked himself whether the unreasonable provision in effect formed a separate covenant.
In UK Power Reserve Ltd v Read [2014] EWHC 66 (Ch) there was focus, yet again, on whether the effect of the words concerned or interested in a post employment restraint was to preclude the ex employee from having no more than a passive minority shareholding in a competitor, because, if so, they were unreasonably wide.
Mr Jeremy Cousins QC, sitting as a deputy judge of the Chancery Division, held that, in the light of a proviso, such was not the effect of the words.
But in paras 87 to 93 he observed in passing that, had such been their effect, he would have severed the covenant and removed them from the remainder in accordance with the four criteria first identified in the Sadler and Marshall cases.
He referred in para 87 to the strong body of recent authority which suggested that the law had developed so as to require them to be applied.
In Freshasia Foods Ltd v Lu [2018] EWHC 3644 (Ch) Mr Daniel Alexander QC, sitting as a deputy judge of the Chancery Division, recently granted an interlocutory injunction by way of enforcement of parts of an employees non solicitation post employment covenant.
Treating the inquiry as purely interlocutory, he made only provisional determinations.
These were that three aspects of the covenant were unreasonably wide but that, following severance, they should be removed from the remainder.
Prompted in part, so it would seem, by the Court of Appeals decision against which this present appeal is brought, he conducted a wide ranging survey of the law of severance of post employment restraints in which he made a number of valuable observations.
Even more recently, following a full hearing, Arnold J delivered a judgment in the Freshasia Foods case, [2019] EWHC 638 (Ch), in which he ruled at para 144 that the employer had failed to establish legitimate interests which required the protection of the covenant.
He therefore declined to continue the injunction; and, apart from adverting to the difficulty of reconciling the decision in the Beckett case with the decision under present appeal, he explained at para 148 that he had no need to address the issues relating to severance.
This final disposal of the application does not however detract from the value of the deputy judges observations.
In particular he (a) observed that the deeming provision in the Beckett case could not be regarded as a separate covenant but had nevertheless been severed (para 37); (b) inferred from the Beckett case that the historical reluctance to sever, exemplified in the Mason and Attwood cases, was something of a relic (para 41); (c) recognised on the one hand that an employer had legitimate interests worthy of protection in the public interest; that they might easily be prejudiced when an important employee left; and that they should not be frustrated by too narrow an approach to severability (para 48); (d) recognised on the other hand that Lord Moultons concerns in the Mason case remained valid; and that the law should not allow an employer first to extract an unreasonably wide restraining covenant, inhibiting the employee from leaving to work elsewhere and even from threatening to do so in order to obtain fairer terms from him, and then, if challenged in court, too easily to secure its removal and the enforcement of the remainder (paras 49 and 50); (e) questioned whether Lord Moultons concerns were best addressed by a rule which denies severance of a term within a single covenant, even if insignificant (paras 51 and 52); and (f) concluded that it might be preferable to address substance rather than form and thus to permit the removal of relatively minor terms if it would not materially change the nature of the contract (para 53).
A survey of the development in England and Wales of the severance principle, when applied to post employment restraints of trade, would be deficient if it failed to note the current standing of the principle in other common law jurisdictions.
In Shafron v KRG Insurance Brokers (Western) Inc [2009] 1 RCS 157 the Supreme Court of Canada, by a judgment delivered by Rothstein J, firmly adhered at para 36 to the historical approach directed by the Attwood case from the foot of the observations of Lord Moulton; and it even rejected the move in the T Lucas case to shed the second requirement of triviality or technicality.
By contrast, in Lee Gwee Noi v Humming Flowers and Gifts Pte Ltd [2014] SGHC 64, a magisterial survey of the standing of the principle in Singapore, albeit conducted at first instance, concluded that its application there was subject to the three criteria approved in the Beckett case: paras 155 and 172.
In New Zealand the legislature has relieved the courts altogether from the shackles of the severance principle by conferring on them a discretion actively to rewrite an unreasonable covenant in restraint of trade: see section 83(1)(b) of the Contract and Commercial Law Act 2017.
Now, at last, it becomes appropriate to address the reasoning of the Court of Appeal in refusing to sever the words or interested from the remainder of Ms Tillmans non competition covenant.
In paras 29 and 30 Longmore LJ cited the Attwood case for the proposition that parts of a single covenant could not be severed; and he observed that, in that it prevented Ms Tillman from engaging or being concerned or interested in a competing business in any one of several capacities, the non competition covenant had to be read as a whole and could not be severed.
In para 33 he rejected the companys submission that the three criteria approved in the Beckett case had replaced the requirement for separate covenants.
He explained that: The requirement is reflected in the third of the three tests because it must always be doubtful whether parts of a single covenant can be deleted without the contract becoming not the sort of contract that the parties entered into at all.
We in this court have had the benefit of fuller argument and greater opportunity for reflection than had the Court of Appeal.
At all events it is clear that, even were the Attwood case still to be regarded as authoritative, that court took a narrow view of its effect in appearing to discern a single covenant by reference to nothing other than the form of its words.
More importantly, however, the time has come to determine whether the Attwood case should remain authoritative.
High ranking employees can do particular damage to the legitimate interests of their employers following termination of their employment; and it may be that, when they enter into their post employment covenants, they are able to negotiate with their employers on nearly an equal footing.
As Denning LJ said in M & S Drapers v Reynolds [1957] 1 WLR 9, 19, A managing director can look after himself; and so, arguably, could Ms Tillman.
But then he added: A traveller is not so well placed to do so.
The law must protect him.
It is clearly common practice for an employer to present a prospective employee with a substantial written contract, many terms of which, including those imposing post employment restraints, are derived from books of precedent.
It is as valid in 2019 as it was in 1913 to infer that most prospective employees will not be able, even if minded, to decline to accept such terms, still less, following the end of their employment, to defend a claim that they are in breach of them.
The courts must continue to adopt a cautious approach to the severance of post employment restraints.
Nevertheless both of the requirements which were shoe horned into the law by the Attwood case were, as we have seen, to prove both instantly controversial and ultimately unsatisfactory.
An inquiry whether the covenant proposed to be severed was indeed one covenant or whether in effect it was more than one covenant proved to be of elusive application, largely dependent on the eye of the beholder.
Why was the list of prohibited trades in the Attwood case one covenant but the list of prohibited areas in each of the Putsman and Scorer cases in effect more than one covenant? And, being a question noted in para 78(e) above, why should an unreasonable restraint of insignificant proportions fail to qualify for severance just because of its place in a single covenant? The second requirement of triviality or technicality reflected an attempt to sideline application of the entire severance principle to post employment restraints.
It is far from clear that, even in 1913 and 1920, public policy demanded it; and in 1972 in the T Lucas case, it was rightly criticised in the strongest possible terms, following which it fell away.
criteria indorsed in the Beckett case.
The first is that the unenforceable provision is capable of being removed without the necessity of adding to or modifying the wording of what remains.
This is the so called blue pencil test.
Unfortunately it can work capriciously and, if the aspiration of our judgments today had been to discern in the common law a principle which can always be applied so as to produce a sensible outcome, we would have laboured in vain.
In his judgment in the Divisional Court in the Attwood case, cited in para 61 above, Bailhache J said at p 155: It therefore becomes appropriate to analyse the effect of each of the three the courts will sever in a proper case where the severance can be performed by a blue pencil but not otherwise.
To give an illustration, a covenant not to carry on business in Birmingham or within 100 miles may be severed so as to reduce the area to Birmingham, but a covenant not to carry on business within 100 miles of Birmingham will not be severed so as to read will not carry on business in Birmingham.
The distinction seems artificial, but is I think settled.
The distinction is indeed settled.
It is inherent in the word severance itself, which means cutting things up and does not extend to adding things in.
The blue pencil criterion is a significant brake on application of the principle; and, although it can work arbitrarily, it is in my view an appropriate brake on the ability of employers to secure severance of an unreasonable restraint customarily devised by themselves.
Were it ever to be thought appropriate to confer on the court a power to rewrite a restraint so as to make it reasonable, it would surely have to be achieved by legislation along the lines of that in New Zealand which has been noticed in para 79 above.
The second criterion is that the remaining terms continue to be supported by adequate consideration.
It goes without saying that an employer who sues on a covenant made otherwise than under seal must show that he provided consideration for it.
But why is it said to be a prerequisite of his ability to sever? The answer is surely to be found in the unusual circumstances of the Sadler and Marshall cases, which generated the criteria adopted in the Beckett case.
In those two cases it was the claimant employee who secured severance of unreasonable obligations cast by the contract upon himself.
In that situation the court needed to satisfy itself (and in each case it did so) that, were his unreasonable obligation to be removed, there would nevertheless remain consideration passing from him under the contract such as would support the obligation which he was seeking to enforce.
In the usual post employment situation, however, the need to do so does not arise.
A claimant employer who asks the court to sever and remove part of a covenant made by the defendant employee is in no way proposing to diminish the consideration passing from himself under the contract such as is necessary to support the obligation which he seeks to enforce.
In the usual situation the second requirement can be ignored.
The third criterion is that the removal of the unenforceable provision does not so change the character of the contract that it becomes not the sort of contract that the parties entered into at all.
This is the crucial criterion and I find it impossible to equate it with the Attwood requirement, as suggested by the Court of Appeal.
In my view this third criterion was rightly imported into the general jurisprudence by the Beckett case and has rightly been applied by our courts ever since then, otherwise than in the decision under appeal.
But I suggest, with respect, that the criterion would better be expressed as being whether removal of the provision would not generate any major change in the overall effect of all the post employment restraints in the contract.
It is for the employer to establish that its removal would not do so.
The focus is on the legal effect of the restraints, which will remain constant, not on their perhaps changing significance for the parties and in particular for the employee.
Application of the severance principle to Ms Tillmans restraint covenants now becomes straightforward.
First, the words or interested are capable of being removed from the non competition covenant without the need to add to or modify the wording of the remainder.
And, second, removal of the prohibition against her being interested would not generate any major change in the overall effect of the restraints.
So those words should be severed and removed.
Another of the Court of Appeals objections to removing the words or interested from Ms Tillmans non competition covenant was that removal would be idle in that the remainder would continue unlawfully to oblige her not to hold any shares in companies of the character there specified.
For the covenant would then become that she would not directly or indirectly engage or be concerned in any business; and, so the Court of Appeal considered, any holding of shares in a company would mean that she was indirectly concerned in it.
The company expressly accepts, at any rate in this court, that, if necessary, it would be content for the words or be concerned also to be removed from Ms Tillmans covenant; and my view is that, had the Court of Appeals construction of the word concerned been correct, it would, by reference to the criteria identified above, have been appropriate also to remove them.
But are you, as no more than a shareholder in a company, concerned in it? In Ashcourt Rowan Financial Planning Ltd v Hall [2013] EWHC 1185 (QB), [2013] IRLR 637, the defendants non competition covenant prohibited him from being engaged or concerned in any business.
It did not include the words or interested.
Andrew Smith J concluded at para 39, that the word concerned denoted working for the business or having some other active involvement in it and so did not extend to a proprietary interest, such as a shareholding, in it.
But a conclusion which there was clearly borderline becomes stronger in the present case.
For Ms Tillman covenanted that she would not engage or be concerned or interested ; and there was no specific reference to her doing so as a shareholder, as there was in the East England Schools case.
Conventional principles of construction require value to be attributed, if possible, to each word of an agreement.
But, were the word concerned to be construed so as to cover passive interest in a business such as that enjoyed by a shareholder, what value would be left to be attributed to the word interested? Nor is such an exercise in construing the word concerned undermined by the fact that the words or interested are to be severed and removed.
The meaning which the words of an agreement carry at its inception is not changed by later events.
In British Reinforced Concrete Engineering Co Ltd v Schelff [1921] 2 Ch 563, 573, Younger LJ (no less) said: Now the effect of severing by striking out with a blue pencil the obnoxious part of a covenant is not to alter or affect the construction of what is left.
That must be construed as if the portion struck out still remained
Conclusion
I therefore propose that the court should set aside the Court of Appeals order and should overrule the decision in the Attwood case; and that, although the contractual period of the restraints has expired long ago, it should formally restore the injunction granted by Mann J, subject only to the removal of the words or interested.
The court should also invite submissions on the proper orders in respect of the costs incurred in each of the three courts.
In para 104 of his judgment on the interim inquiry into the Freshasia Foods case the deputy judge described as legal litter the unreasonable parts of post employment restrictions to which employers extract the agreement of prospective employees; and he added that they cast an unfair burden on others to clear them up.
It is a neat metaphor.
In my view the company should win but there might be a sting in the tail.
| In 2003, the appellant, Egon Zehnder Ltd (Egon Zehnder), an executive search and recruitment company, hired the respondent, Ms Tillman, to work in its financial services practice area.
She was first employed as a consultant and promoted to principal in 2006, partner in 2009 and joint global practice head in 2012.
She was always employed largely on the terms of her original contract (the agreement).
Clause 13 provided for five restraints upon the activities of Ms Tillman following the end of her employment, all limited to a period of six months from the termination date.
Clause 13.2.3 (the non competition covenant) is in issue in this appeal.
By this covenant, Ms Tillman agreed that she would not directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of [Egon Zehnder] within a twelve month period prior to the termination date and with which [she was] materially concerned during such period.
On 30 January 2017 Ms Tillmans employment with Egon Zehnder came to an end.
Shortly thereafter, she informed it that she intended to start work as an employee of a competitor firm.
She made clear that she intended to comply with all her covenants in the agreement apart from the non competition covenant in clause 13.2.3.
She conceded that it would prevent her proposed employment within the restricted six month period but alleged that it was in unreasonable restraint of trade and thus void.
On 10 April 2017 Egon Zehnder issued proceedings.
It applied for an interim injunction to restrain Ms Tillmans entry into the proposed employment.
On 23 May 2017 Mr Justice Mann (Mann J) in the High Court granted the injunction.
The Court of Appeal allowed Ms Tillmans appeal and set aside the injunction.
In the courts below, the enforceability of the non competition covenant turned on whether the words interested in unreasonably prevented even a minor shareholding by Ms Tillman in a competing business and, if so, whether the offending part of the covenant could be severed.
Mann J agreed with the company that interested in did not preclude a minor shareholding, without reaching a final view on severance.
The Court of Appeal disagreed with Mann J on the effect of the words interested in, considering that they did prohibit even a minor shareholding, and refused to sever those words.
Clause 13.2.3 was thus held to be void as an unreasonable restraint of trade.
In this Court, the issues were whether: (1) assuming that clause 13.2.3 prohibits shareholding, that part of the covenant falls entirely outside the restraint of trade doctrine; (2) the words interested in, properly construed, prohibit any shareholding; and (3) the correct approach to severance was applied.
The Supreme Court unanimously allows the appeal.
Lord Wilson gives the lead judgment, with which all members of the Court agree.
The injunction granted by Mann J is formally restored although the contractual period of restraint has since expired.
Issue (1): Scope of application of the restraint of trade doctrine The restraint of trade doctrine is one of the earliest products of the common law, and reflects the central importance ascribed to the freedom to work [22].
By the early 20th century, it was recognised that different considerations applied to restraints on the seller of a business from those on an ex employee [27].
The question of the width of the doctrine has arisen, particularly in Esso Petroleum Co Ltd v Harpers Garage (Stourport) Ltd [1968] AC 269 (HL), which remains the key decision [27 29].
It is not necessary to decide on the outer boundaries of the doctrine in this case [30].
The agreement is an employment contract, and it is agreed that clause 13.2.3 does provide for a restraint of trade [30].
In substance as well as in form the restraint on shareholding is part of the restraint on Ms Tillmans ability to work after her employment with Egon Zehnder, so the doctrine applies on the facts [33 34].
Issue (2): Proper construction of the words interested in This issue turns on the proper understanding of the validity principle in construing agreements.
This principle proceeds on the premise that the parties to a contract or other instrument will have intended it to be valid [38].
This Court considers that requiring two meanings to be equally plausible or for there to be an element of ambiguity is unsatisfactory [38 42].
The test of whether the alternative construction is realistic is preferred [42].
In the present case, the starting point is that the phrase engaged or concerned or interested, adopted in clause 13.2.3, has long been included in standard precedents for the drafting of non competition covenants and treated as including a shareholding prohibition [51].
Egon Zehnder was unable to advance a realistic alternative construction of the word interested [52].
The natural meaning of the word, which includes a shareholding (large or small), applies [53].
Subject to severance, clause 13.2.3 is thus void as an unreasonable restraint of trade [53].
Issue (3): Correct approach to severance in restraint of trade cases On the question of severance, this Court is faced with two main differing approaches, found in particular in the decisions in Attwood v Lamont [1920] 3 KB 571 (CA) and Beckett Investment Management Group Ltd v Hall [2007] ICR 1539 (CA) [57 73].
The Attwood approach limits severance to situations where the covenant is in effect a combination of different covenants [66].
By contrast, the Beckett approach uses three criteria for severance [73].
This Court prefers the Beckett approach, provides guidance on its application and overrules the decision of the Court of Appeal in Attwood [81 91].
On the Beckett approach, the first criterion is whether the unenforceable provision is capable of being removed without the necessity of adding to or modifying the wording of what remains this is the so called blue pencil test [85].
The second criterion is that the remaining terms continue to be supported by adequate consideration [86].
This will not usually be in dispute [86].
The third criterion is that the removal of the unenforceable provision does not so change the character of the contract that it becomes not the sort of contract that the parties entered into at all [87].
This is the crucial criterion but this Court prefers to express it as being whether removal of the provision would not generate any major change in the overall effect of all the post employment restraints in the contract [87].
It is for the employer to establish this, and the focus is on the legal effect of the restraints and not their perhaps changing significance for the parties [87].
On the facts, the words or interested are capable of being removed from clause 13.2.3 without the need to add to or modify the wording of the rest of the clause and removal of the prohibition against her being interested would not generate any major change in the overall effect of the restraints [88].
|
So much depends upon how one frames the question.
Put simply, when disputes arise about the age of some one who is asking a local childrens services authority to provide him with accommodation under section 20(1) of the Children Act 1989, who decides whether he is a child or not? Section 20(1) reads as follows: (1) Every local authority shall provide accommodation for any child in need within their area who appears to them to require accommodation as a result of (a) there being no person who has parental responsibility for him; (b) his being lost or having been abandoned; or (c) the person who has been caring for him being prevented (whether or not permanently, and for whatever reason) from providing him with suitable accommodation or care.
By section 105(1) of the Act, a child means . a person under the age of eighteen.
The appellants, supported by the Childrens Commissioner for England, say that, in cases of dispute, the court must decide whether a person is a child on the balance of probabilities.
The respondent local authorities, supported by the Home Secretary, say that the authority must decide the matter, subject only to judicial review on the usual principles of fairness and rationality.
The importance of the issue
No doubt there have always been foundlings, abandoned or runaway children whose age was not immediately apparent to the authorities.
But with many of these it will at least have been apparent that they were children.
And sooner or later it will usually have been possible to establish their exact age by discovering their identity and obtaining a birth certificate.
The problem of determining age has come to prominence with the recent increase in migration and particularly in unaccompanied young people coming to this country, some of them to claim asylum for their own benefit but some of them also having been trafficked here for the benefit of others.
Although the focus of debate has been upon unaccompanied asylum seeking children, we must not lose sight of the other young people for whom the issue may also be important.
The importance comes from two directions.
If a young person is a child, and otherwise meets the qualifying criteria, he must be provided with accommodation and maintenance under sections 20(1) and 23(1) of the 1989 Act.
This brings with it a wider range of services than other forms of housing and benefit provision.
These include the services for young people who leave social services accommodation which were described in R (M) v Hammersmith and Fulham London Borough Council [2008] UKHL 14, [2008] 1 WLR 535, paras 20 24.
While once upon a time young people may have resisted the quasi parental services provided for children in need, many now recognise that they bring distinct advantages over the housing and welfare benefits available to home claimants (as in R (M) v Hammersmith and Fulham London Borough Council, above, and R (G) v Lambeth London Borough Council [2009] UKHL 26, [2009] 1 WLR 1299) and the National Asylum Support Service (NASS) support available to asylum seekers, as in the cases before us.
The Home Secretary also adopts different policies in relation to asylum seekers who are under eighteen.
Legally, these may not be relevant to the issue which we have to determine, and in practice they are much more susceptible to change than is primary legislation such as the 1989 Act.
But they are an important part of the factual background.
Not only are unaccompanied asylum seeking children looked after by the local childrens services authorities rather than by NASS while their claims are decided.
Currently, if a claim is rejected when the child is under the age of seventeen and a half, the Home Secretary will not remove him for three years or until he reaches seventeen and a half, whichever is the earlier, unless there are adequate arrangements to look after him in his country of origin.
Also, such children will not be detained under the Home Secretarys immigration powers, save in exceptional circumstances and then normally only overnight.
When a young person who says that he is a child arrives in this country or makes a claim for asylum, immigration officers make a preliminary determination based upon his physical appearance and demeanour.
In a borderline case, the policy is to give him the benefit of the doubt and treat him as a child.
Under the Secretary of States 2007 Policy on Age Dispute cases, if his appearance or demeanour very strongly suggests that he is aged eighteen or over, the officer will dispute the age unless there is credible documentary or other evidence to show the age claimed.
And if his appearance or demeanour very strongly suggest that he is significantly over eighteen then he will be treated as an adult.
In the middle, age disputed, category, it is the policy to refer the case for assessment by the local social services authority and to accept that assessment if it is considered to have been properly carried out (in accordance with the procedural guidance given by Stanley Burnton J in R (B) v Merton London Borough Council [2003] EWHC 1689 (Admin), [2003] 4 All ER 280).
This was the policy adopted by the Home Secretary in August 2007.
But in February 2007 the Home Office published a consultation paper, Planning Better Outcomes and Support for Unaccompanied Asylum Seeking Children; and in January 2008, it published its conclusions and recommendations in Better Outcomes: The Way Forward, Improving the Care of Unaccompanied Asylum Seeking Children.
Key Reform Number 4 was to put in place better procedures to assess age, in order to ensure that children and adults are not accommodated together.
Both the Childrens Commissioner and the Refugee Council have been critical of the present procedures, based partly upon their own experience and observations and partly upon research conducted by Professor Heaven Crawley for the Immigration Law Practitioners Association.
As Ms Nathalie Lieven QC for the Home Secretary points out, the issue before us is not whether the policy and procedures for assessing age in these cases could be improved, but whether the law requires that, in cases which cannot be resolved through those processes, the court shall make the final determination.
However, the one thing which these proposals do show is that the assessment of age can be and is carried out quite separately from the assessment of need and the other criteria for accommodation under section 20.
These two cases
A arrived in this country from Afghanistan on 13 November 2007 and claimed asylum the following day, stating that his date of birth was 8 April 1992 (making him then fifteen and a half).
The immigration officer considered that he was eighteen and referred him to Croydon for an age assessment.
He was interviewed by two social workers who assessed him as an adult.
He was therefore referred to NASS.
Soon afterwards his solicitors produced a copy of a birth certificate from Afghanistan showing his date of birth as 8 April 1992.
They also arranged for him to be examined by a paediatrician, who reported that in her opinion he was aged between 15 and 17.
A claim for judicial review of the decision that he was not entitled to accommodation under section 20 of the 1989 Act was made on 7 March 2008 and an interim order made against the authority until the determination of the claim.
M arrived in this country in November 2006 and claimed asylum three days later, saying that he was born on 15 December 1989 (making him then just under seventeen).
His age was disputed and he was referred to Lambeth for an age assessment by two social workers who concluded that he was over eighteen.
Once again, a paediatricians report was obtained which concluded that he was indeed aged seventeen.
Judicial review proceedings were brought and Lambeth reviewed its decision but provided further reasons for concluding that M was more than twenty years old.
Meanwhile an immigration judge heard his appeal against the refusal of asylum and the Home Secretarys decision as to his age.
The judge was not referred to the local authoritys assessment and accepted the paediatricians report.
The Home Secretary therefore granted M discretionary leave to remain which has been extended pending the determination of his application for an extension of his leave.
These two and five other claims for judicial review were joined for the purpose of deciding a number of preliminary issues, with these two being treated as the lead cases.
Those issues were (a) whether the local authorities determinations were contrary to the procedural protections in article 6 and/or 8 of the European Convention on Human Rights; (b) whether the question of child or not for the purpose of section 20 of the 1989 Act was one of precedent fact for the court to determine on the balance of probabilities; and (c) whether in Ms case the local authority could disagree with the immigration judges decision.
On 20 June 2008, Bennett J decided all three issues in favour of the local authorities: [2008] EWHC 1364 (Admin).
He also declined to decide a fourth issue, as to the evidential value of paediatricians reports in age disputes.
That issue has since been determined by Collins J in R (A) v Croydon London Borough Council; R (WK) v Kent County Council [2009] EWHC 939 (Admin), the Kent case taking the place of the Lambeth case as lead case in this issue.
Collins J held that the paediatricians views should be taken into account but that they were not likely to be any more reliable or helpful than those of experienced social workers and the authorities were entitled to prefer the latter.
He was, of course, bound by the decision of the Court of Appeal as to the role of the courts in these cases.
On 18 December 2008, the Court of Appeal had dismissed the appellants appeals from the decisions of Bennett J on the preliminary issues of law: [2008] EWCA Civ 1445, [2009] PTSR 1011.
The issues have been slightly reformulated for the purpose of the appeals before us, but the first two are closely inter related: (i) whether, as a matter of statutory construction, the duty imposed by section 20(1) is owed only to a person who appears to the local authority to be a child, so that the authoritys decision can only be challenged on Wednesbury principles, or whether it is owed to any person who is in fact a child, so that the court may determine the issue on the balance of probabilities; (ii) whether the issue child or not is a question of precedent or jurisdictional fact to be decided by a court on the balance of probabilities; and (iii) whether section 20(1) gives rise to a civil right for the purpose of article 6(1) of the European Convention on Human Rights and if so whether the determination of age by social workers subject to judicial review on Wednesbury principles is sufficient to comply with the requirement that the matter be determined by a fair hearing before an independent and impartial tribunal.
The construction of section 20(1)
The argument on construction, advanced by Mr John Howell QC for A, is quite straightforward.
The words of section 20(1) themselves distinguish between the statement of objective fact any child in need within their area and the descriptive judgment who appears to them to require accommodation as a result of the three listed circumstances which is clearly left to the local authority.
The definition of child in section 105(1), which applies throughout the 1989 Act, is unqualified: a person under the age of eighteen not a person who appears to the local authority to be under the age of eighteen or a person whom the local authority or any other person making the initial decision reasonably believes to be under the age of eighteen.
Reaching the conclusion that this is what it means in section 20(1) requires, as the Court of Appeal accepted, words to be read into section 20 which are not there.
This argument is bolstered by two others.
One is derived from the legislative history.
Section 20(1) of the 1989 Act is the successor to section 2 of the Child Care Act 1980 which consolidated (without amendment) what had been section 1 of the Children Act 1948 with later legislation.
The 1948 Act was an important component of the establishment of the post war welfare state, bringing together all the disparate powers and duties of the state to look after children who had no families or whose families were unable to look after them properly, and infusing those new duties with a commitment to the welfare of the individual child which had been so lacking before (see Report of the Care of Children Committee, Chairman: Miss Myra Curtis, 1946, Cmd 6922).
Section 1(1) of the 1948 Act, reproduced in section 2(1) of the 1980 Act, began Where it appears to a local authority with respect to a child in their area appearing to them to be under the age of seventeen .
Section 20(1) of the 1989 Act made various changes.
These included raising the age of eligibility to cater for all children, not just those who appeared to be under seventeen.
But they also included the change in wording, which no longer limited the duty to those who appeared to the local authority to be under the relevant age.
There is nothing in the Review of Child Care Law: Report to Ministers of an Interdepartmental Working Party (DHSS, 1985) or in the white paper, The Law on Child Care and Family Services (1987, Cm 62), which preceded the 1989 Act to cast light on the reasons for the change in wording.
But when Parliamentary draftsmen make changes such as this they are normally presumed to have done so deliberately and not by mistake.
The second point is that the same definition of child applies throughout the 1989 Act.
The 1989 Act contains a variety of powers and duties relating to children, some of them voluntary, but many of them coercive as against the child or his parents.
Most of the coercive powers, to make orders relating to the care and upbringing of children, depend upon court orders.
Clearly, in those cases it is for the court to determine any disputes about the age of the child.
But there are some coercive powers which are operated in the first instance by other authorities, subject to bringing the case to court within a relatively short time.
One of these is the power of the police, in section 46, where a constable has reasonable cause to believe that a child would otherwise be likely to suffer significant harm to remove a child to suitable accommodation and keep him there.
This power is not infrequently used to pick up young people who are camping out in railway stations with no apparent place to go.
If someone who was not a child was removed in this way, he could apply immediately for habeas corpus and the court would have to inquire into whether or not he was indeed a child.
The section does not refer to a person whom the constable has reasonable cause to believe to be a child and where liberty is at stake the court would be slow to read it in that way.
A similar case is perhaps more telling for our purposes because it is contained in section 25, which, like section 20, appears in Part III of the 1989 Act, entitled Local Authority Support for Children and Families.
Section 25, and the regulations made under it, place limits on the circumstances in which a child who is being looked after by a local authority may be placed in accommodation provided for the purpose of restricting liberty.
A child who is being looked after by a local authority means any child who is subject to a care order or a child who is provided with accommodation by a local authority under their social services functions, which include section 20(1) (see 1989 Act, section 22(1)).
The regulations allow a child to be placed in secure accommodation that is, to be locked up for up to 72 hours without the authority of a court (Children (Secure Accommodation) Regulations 1991, SI 1991/1505, reg 10(1)).
Again, if a person who was not a child was locked up in this way, he could apply for habeas corpus and the court would have to enquire into whether or not he was a child.
There is nothing to suggest that the power can be exercised in relation to someone whom the authority reasonably believes to be a child.
Against these arguments, the respondents make three main points.
The first is that section 20(1) refers to a child in need.
Section 105(7) provides that references to a child in need shall be construed in accordance with section 17.
Section 17(10) provides that: For the purposes of this Part a child shall be taken to be in need if (a) he is unlikely to achieve or maintain, or to have the opportunity of achieving or maintaining, a reasonable standard of health or development without the provision for him of services by a local authority under this Part; (b) his health or development is likely to be significantly impaired, or further impaired, without the provision for him of such services; or (c) he is disabled, .
Thus, argues Mr Charles Bar QC for Lambeth, it cannot have been the intention of Parliament that the sorts of professional value judgment involved in assessing whether a child is in need should be made by the court.
Child in need is a composite term of art so that the same should apply to the assessment of age as well as need.
This argument is closely allied to a second and more fundamental argument about the respective roles of public authorities and the courts when determining whether the conditions exist for the exercise of a statutory power or duty.
The court decides what the words mean and the authority decides whether the facts fit those words.
Thus, in the well known case of R v Barnet London Borough Council, Ex p Shah [1983] 2 AC 309, the court decided what was meant by ordinarily resident in the criteria for entitlement to a mandatory education grant and sent the case back to the local authority to decide.
Lord Scarman said this, at p 341: If a local education authority gets the law right, or, as the lawyers would put it, directs itself correctly in law, the question of fact ie has the student established the prescribed residence? is for the authority, not the court, to decide.
The merits of the application are for the local education authority subject only to judicial review to ensure that the authority has proceeded according to the law.
To similar effect were the observations of Lord Brightman in R v Hillingdon London Borough Council, Ex p Puhlhofer [1986] AC 484, where the court decided whether the Housing (Homeless Persons) Act 1977 imported any requirement that the accommodation currently occupied by a household claiming to be homeless be accommodation which it was reasonable for them to continue to occupy.
Having decided that it did not, Lord Brightman insisted, at p 517, that What is properly to be regarded as accommodation is a question of fact to be decided by the local authority.
Third in the line of cases cited on this point were my own words in R (Wahid) v Tower Hamlets London Borough Council [2002] LGR 545, 554, which are particularly pertinent because they relate to the duty of local social services authorities, under section 21(1)(a) of the National Assistance Act 1948, to provide residential accommodation for vulnerable adults who meet the criteria there laid down: it is for the local social services authority to assess whether or not those conditions are fulfilled, and if so, how the need is to be met, subject to the scrutiny of the courts on the ordinary principles of judicial review.
We are not deciding where the lines of responsibility are to be drawn under the National Assistance Act 1948.
We are deciding where Parliament intended that the lines be drawn under the Children Act 1989.
The task in all these cases is to decide what Parliament intended.
In the Shah case, it was common ground between the parties on all sides that it was for the local education authority to decide the facts.
No one mounted an argument such as has been mounted in this case.
We do not need to decide how it would have fared in 1983, any more than we need to speculate upon how it might be decided now.
In the Puhlhofer case, the statutory duty to provide accommodation for the homeless was clearly expressed in terms that the local authority was satisfied that the criteria existed, as indeed is its successor today.
Lord Brightman emphasised, at p 518, that the 1977 Act abounds with the formula when, or if, the housing authority are satisfied as to this, or that, or have reason to believe this, or that in support of his conclusion that Parliament intended the local authority to be the judge of fact.
That is not the case with the National Assistance Act 1948, which has gone through several modifications since it was first enacted, when the duty of the local authority was to prepare a scheme for accommodating the vulnerable which had then to be approved by the minister.
It is not impossible that Parliament did not contemplate that such a duty would be owed to any particular individual, whereas this House has clearly held, in R (G) v Barnet London Borough Council [2003] UKHL 57, [2004] 2 AC 208, that the duty in section 20(1) of the 1989 Act is owed to the individual child.
These days, Parliamentary draftsmen are more alive to this kind of debate.
The 1989 Act draws a clear and sensible distinction between different kinds of question.
The question whether a child is in need requires a number of different value judgments.
What would be a reasonable standard of health or development for this particular child? How likely is he to achieve it? What services might bring that standard up to a reasonable level? What amounts to a significant impairment of health or development? How likely is that? What services might avoid it? Questions like this are sometimes decided by the courts in the course of care or other proceedings under the Act.
Courts are quite used to deciding them upon the evidence for the purpose of deciding what order, if any, to make.
But where the issue is not, what order should the court make, but what service should the local authority provide, it is entirely reasonable to assume that Parliament intended such evaluative questions to be determined by the public authority, subject to the control of the courts on the ordinary principles of judicial review.
Within the limits of fair process and Wednesbury reasonableness there are no clear cut right or wrong answers.
But the question whether a person is a child is a different kind of question.
There is a right or a wrong answer.
It may be difficult to determine what that answer is.
The decision makers may have to do their best on the basis of less than perfect or conclusive evidence.
But that is true of many questions of fact which regularly come before the courts.
That does not prevent them from being questions for the courts rather than for other kinds of decision makers.
The arguments advanced by Mr Bar might have to provide an answer in cases where Parliament has not made its intentions plain.
But in this case it appears to me that Parliament has done just that.
In section 20(1) a clear distinction is drawn between the question whether there is a child in need within their area and the question whether it appears to the local authority that the child requires accommodation for one of the listed reasons.
In section 17(10) a clear distinction is drawn between whether the person is a child and whether that child is to be taken to be in need within the meaning of the Act.
Taken to be imports an element of judgment, even an element of deeming in the case of a disabled child, which Parliament may well have intended to be left to the local authority rather than the courts.
I reach those conclusions on the wording of the 1989 Act and without recourse to the additional argument, advanced by Mr Timothy Straker QC for M, that child is a question of jurisdictional or precedent fact of which the ultimate arbiters are the courts rather than the public authorities involved.
This doctrine does, as Ward LJ pointed out in the Court of Appeal [2008] EWCA Civ 1445, [2009] PTSR 1011, para 19, have an ancient and respectable pedigree.
Historically, like the remedy of certiorari itself, it was applied to inferior courts and other judicial or quasi judicial bodies with limited jurisdiction.
Thus a tithe commissioner could not give himself jurisdiction over land which had previously been discharged from tithe (Bunbury v Fuller (1853) 9 Ex 111); and a rent tribunal could not give itself jurisdiction over an unfurnished letting (R v Fulham, Hammersmith and Kensington Rent Tribunal, Ex p Zerek [1951] 2 KB 1).
Although of course such a body would have to inquire into the facts in order to decide whether or not to take the case, if it got the decision wrong, it could not give itself a jurisdiction which it did not have.
In R v Secretary of State for the Home Department, Ex p Khawaja [1984] AC 74, the same principle was applied to the power of the Home Office to remove an illegal entrant.
The existence of the power of removal depended upon that fact.
It was not enough that an immigration officer had reasonable grounds for believing the person to be an illegal entrant.
As Lord Scarman put it, . where the exercise of executive power depends upon the precedent establishment of an objective fact, the courts will decide whether the requirement has been satisfied (p 110).
This doctrine is not of recent origin or limited to powers relating to the liberty of the subject.
But of course it still requires us to decide which questions are to be regarded as setting the limits to the jurisdiction of the public authority and which questions simply relate to the exercise of that jurisdiction.
This too must be a question of statutory construction, although Wade and Forsyth on Administrative Law suggest that As a general rule, limiting conditions stated in objective terms will be treated as jurisdictional (9th ed (2004), p 257).
It was for this reason that Ward LJ rejected the argument, for he regarded the threshold question in section 20 as the composite one of whether the person was a child in need.
This was not a limiting condition stated in wholly objective terms so as to satisfy the Wade and Forsyth test (para 25).
However, as already explained, the Act does draw a distinction between a child and a child in need and even does so in terms which suggest that they are two different kinds of question.
The word child is undoubtedly defined in wholly objective terms (however hard it may be to decide upon the facts of the particular case).
With a few limited extensions, it defines the outer boundaries of the jurisdiction of both courts and local authorities under the 1989 Act.
This is an Act for and about children.
If ever there were a jurisdictional fact, it might be thought, this is it.
The final arguments raised against such a conclusion are of a practical kind.
The only remedy available is judicial review and this is not well suited to the determination of disputed questions of fact.
This is true but it can be so adapted if the need arises: see R (Wilkinson) v Broadmoor Special Hospital Authority [2001] EWCA Civ 1545, [2002] 1 WLR 419.
That the remedy is judicial review does not dictate the issue for the court to decide or the way in which it should do so, as the cases on jurisdictional fact illustrate.
Clearly, as those cases also illustrate, the public authority, whether the childrens services authority or the UK Border Agency, has to make its own determination in the first instance and it is only if this remains disputed that the court may have to intervene.
But the better the quality of the initial decision making, the less likely it is that the court will come to any different decision upon the evidence.
If the other members of the Court agree with my approach to the determination of age, it does not mean that all the other judgments involved in the decision whether or not to provide services to children or to other client groups must be subject to determination by the courts.
They remain governed by conventional principles.
Article 6
Those conclusions make it unnecessary to reach any firm conclusions on the application of article 6 of the Convention to decisions under section 20(1) of the 1989 Act.
Article 6(1) requires that in the determination of his civil rights and obligations . everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.
There are two questions.
First, is the decision whether or not to provide accommodation under section 20(1) the determination of a civil right, so that article 6 is engaged? Secondly, if it is, what does article 6 require? Neither question is easy to answer.
First, it seems to me clear that, once the qualifying criteria are established, the local authority has no discretion under section 20(1): the accommodation must be provided.
The existence of the criteria is a matter of judgment, not discretion.
Thus it makes sense to talk in terms of a correlative right to the accommodation, rather than simply a right to apply for it.
But that does not tell us whether it is a civil right for the purpose of article 6.
As Lord Hoffmann explained in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 78 et seq, the concept of a civil right in article 6 was originally intended to apply only to private rights, not rights arising in public law.
But that distinction has long been abandoned and the concept of the determination of a civil right extended to many questions arising in public law.
With that extension has gone some modification of what article 6 requires.
Mr Nigel Giffin QC, appearing for Croydon, has helpfully divided the Strasbourg cases into two categories.
In the first are those cases where the determination of a public law question is also decisive of the existence of private law rights.
The obvious examples are Ringeisen v Austria (No 1) (1971) 1 EHRR 455, in which a contract for the sale of land between private citizens required the approval of the public authority; and Obermeier v Austria (1990) 13 EHRR 290, in which the dismissal of a disabled person by a private authority required the consent of a public authority; but the cases concerning the licensing of a trade or profession, such as Benthem v The Netherlands (1985) 8 EHRR 1, Albert and Le Compte v Belgium (1983) 5 EHRR 533, and Kingsley v United Kingdom (2002) 35 EHRR 177, directly affecting private contractual relationships, also fall into this category.
The second category, however, is more difficult to define.
Mr Giffin suggests that it consists of rights in public law which are closely analogous to rights in private law.
These began with rights to contributory state benefits, which are clearly analogous to rights under private contracts of insurance (Feldbrugge v The Netherlands (1986) 8 EHRR 425).
They have now been extended to rights to non contributory state benefits, which have also been recognised as rights of property for the purpose of article 1 of the First Protocol (Salesi v Italy (1993) 26 EHRR 187; Mennitto v Italy (2000) 34 EHRR 1122; Mihailov v Bulgaria, app no 52367/99, judgment of 21 July 2005) and to the distribution of compensation for forced labour during the second world war (Wos v Poland (2006) 45 EHRR 659).
They have also extended to some types of public sector employment, despite the clear reluctance of many European countries (including the United Kingdom) to regard public sector employment in the same light as private sector employment (Vilho Eskelinen v Finland (2007) 45 EHRR 985).
But there remain limits: taxation proceedings do not raise issues of civil rights, despite their obvious impact upon individual property rights (Ferrazzini v Italy (2001) 34 EHRR 1068); nor do immigration decisions (P v United Kingdom (1987) 54 DR 211); or decisions about state subsidies to housing associations (Woonbron Volkshuisvestingsgroep v The Netherlands, app no 47122/99, admissibility decision of 18 June 2002).
So does a claim to be provided with welfare services by the state amount to a civil right for this purpose? The House of Lords, in R (Runa Begum) v Tower Hamlets London Borough Council (First Secretary of State intervening) [2003] UKHL 5, [2003] 2 AC 430, was content to assume, without deciding, that a claim to be provided with suitable accommodation under the homelessness provisions of Part VII of the Housing Act 1996 was such a right.
But no Strasbourg case had yet gone so far.
Mr Howell argues that the court has now done so; a number of cases from Russia, about delays in enforcing court judgments that an applicant was entitled to be provided with a flat of a certain size, have taken it for granted that this was a civil right (see eg Teteriny v Russia, app no 11931/03, judgment of 30 June 2005; Sypchenko v Russia, app no 38368/04, judgment of 1 March 2007).
Enforcement only comes within article 6 because it is an intrinsic part of the trial.
Thus, he argues, the underlying right to which the judgment relates must be a civil right.
There is no requirement in the Strasbourg case law that the right be analogous with a right existing in private law, for the non contributory state benefits have no such equivalent.
All that is required is that the right is economic in nature and personal to the individual.
This he gets from, for example, Salesi v Italy, above, where the court said, of a claimant to non contributory disability allowance, she suffered an interference with her means of subsistence and was claiming an individual, economic right flowing from specific rules laid down in a statute (para 19).
It does not have to be tradable and, he argues, like many ordinary private rights, it may well depend upon evaluative judgments rather than specific rules.
On the other hand, it does not appear that there was any argument upon the point in the Russian cases and it is easy to slip into the assumption that once a right has been crystallised in a court judgment against a public authority it must amount to a civil right.
In Loiseau v France, app no 46809/99, admissibility decision of 18 November 2003, which concerned a freedom of information request for sight of the applicant teachers personnel file, the court considered this a right of a private nature, firstly because it concerns an individual right of which the applicant may consider himself the holder, and secondly because the documents requested related directly and exclusively to his personal situation (para 7).
Any entitlement under section 20(1) does not depend upon discretion, but it does depend upon an evaluation of some very soft criteria rather than specific rules, and it is difficult to say at what point the applicant may consider himself to be the holder of such a right.
Hence, as Lord Walker of Gestingthorpe observed in Runa Begum, at para 115, if a right such as this is a civil right at all, it must lie close to the boundary of the concept and not at the core of what it entails.
If so, this may have consequences for the second question, which is what article 6 requires.
In Runa Begum, the House decided that the process of decision making on homelessness claims was sufficient to comply with article 6 if it applied at all.
The initial decision was subject to review by another officer who had had nothing to do with the original decision and was subject to procedural rules designed to ensure a fair process.
It was then subject to an appeal to the county court on conventional judicial review grounds.
The reviewing officer was not independent of the local authority but she was impartial.
If she did not conduct her review in an impartial way, the court could correct this.
In Tsfayo v United Kingdom (2006) 48 EHRR 457, the Strasbourg court quoted extensively from both Alconbury and Runa Begum without expressing either approval or disapproval.
It drew three distinctions between those cases and the determination of a claim for housing benefit by the local authoritys housing benefit review board.
First, the decision on the housing benefit claim was a simply question of whether or not the claimant had good cause for a late claim; it was not an issue requiring professional judgment as the decision on homelessness in Runa Begum had been.
Second, it was a question of entitlement, not depending upon the application of government policy which was properly the province of the democratically accountable bodies, as the decision on the application of planning policy in Alconbury had been.
Third, the review board was not merely lacking in independence.
It could not be an impartial tribunal because it consisted of councillors who were directly connected to the authority which would have to pay the benefit if it was awarded.
Mr Howell argues that the social workers deciding upon section 20 claims cannot be impartial as required by article 6 because they are employed by an authority with a direct financial interest in the outcome.
Although their individual professionalism is not in doubt, they may unconsciously be influenced by tacit pressures from their seniors, who are only too conscious of the many demands upon the childrens services scarce resources.
These are not necessarily fully compensated by payments from the UK Border Agency.
In any event it is not actual bias which matters, for that can hardly ever be proved, but the public perception of the possibility of unconscious bias (in the words of Lord Steyn in Lawal v Northern Spirit Ltd [2003] UKHL 35, [2003] ICR 856, at para 14).
Although judicial review may be able to cure actual bias, which leads the decision maker to take irrelevant considerations into account or disregard the relevant ones, it cannot cure apparent unconscious bias of this kind.
I would be most reluctant to accept, unless driven by Strasbourg authority to do so, that article 6 requires the judicialisation of claims to welfare services of this kind.
Unlike the arguments based upon statutory construction and jurisdictional fact, Mr Howells argument cannot sensibly distinguish between the determination of age and the determination of the other criteria of entitlement.
Every decision about the provision of welfare services has resource implications for the public authority providing the service.
Public authorities exist to serve the public.
They do so by raising and spending public money.
If the officers making the decisions cannot be regarded as impartial, and the problem cannot be cured by the ordinary processes of judicial review based upon the usual criteria of legality, fairness and reasonableness or rationality, then tribunals will have to be set up to determine the merits of claims to childrens services, adult social services, education services and many more.
Resources which might be spent on the services themselves will be diverted to the decision making process.
Such a conclusion would be difficult, if not impossible, to reconcile with the decision of this House in Runa Begum.
The degree of judicialisation required of an administrative decision, in the view of Lord Hoffmann in Alconbury, depends upon the nature of the decision (para 87, repeated in Runa Begum, para 33).
If this is a civil right at all, therefore, I would be inclined to hold that it rests at the periphery of such rights and that the present decision making processes, coupled with judicial review on conventional grounds, are adequate to result in a fair determination within the meaning of article 6.
Conclusion
For the reasons given earlier, however, I would allow these appeals and set aside the order of the Court of Appeal.
The result is that if live issues remain about the age of a person seeking accommodation under section 20(1) of the 1989 Act, then the court will have to determine where the truth lies on the evidence available.
It is not, however, entirely clear what relief the appellants now seek and so I would invite submissions upon this, and upon the question of costs, within fourteen days.
LORD HOPE
This case raises two distinct issues of general public importance.
Their importance extends well beyond the facts of the two cases that are before us.
On the one hand there is the question whether the word child in section 20(1) of the Children Act 1989 means, as the Court of Appeal held, a person whom the local authority has reasonable grounds for believing to be a child: [2008] EWCA Civ 1445; [2009] PTSR 1011, paras 30 31; or whether it raises a question of precedent fact which must be determined, if necessary, by a court.
On the other there is the question whether a decision that the local authority makes as to whether or not to provide accommodation for a child in need under section 20(1) is a determination of a civil right within the meaning of article 6(1) of the European Convention on Human Rights.
As to the first issue, it has wider implications because the appellants are both asylum seekers.
The immediate question is how it is to be determined whether the appellants are under the age of eighteen and thus entitled to be considered for local authority support under Part III of the Children Act 1989.
But, as the Secretary of State points out, an asylum seekers age will have implications too for the way in which his or her application for asylum will be treated.
This is because the Secretary of States policy on returning unaccompanied minors usually leads to those whom he considers to be under the age of 18 being given discretionary leave to remain.
Age, as such, is not a determinant as to a persons immigration status.
But it is relevant to the way the Secretary of State discharges his immigration and asylum functions and the exercise of his powers and duties to provide asylum support.
In practice, in disputed age cases, the Secretary of State follows the assessment that has been arrived at by the local authority.
As a result any challenges to the lawfulness of the local authoritys assessment are likely to affect the way that the Secretary of State acts in reliance on the assessment.
His concern is that the appellant As contention that the question whether or not a person is a child is, in the event of challenge, to be determined by a court will result in an inappropriate judicialisation of the process.
The suggestion is that this will slow down the process and make it harder to administer.
As to the second, a holding that the local authoritys decision as to whether or not to provide accommodation under section 20(1) of the 1989 Act amounted to the determination of a civil right would have far reaching implications.
This because the right which is guaranteed by article 6(1) is to a decision by an independent and impartial tribunal established by law.
As the House recognised in Runa Begum v Tower Hamlets London Borough Council (First Secretary of State intervening) [2003] UKHL 5, [2003] 2 AC 430, it cannot plausibly be argued that the employees of the local authority who take decisions of this kind on its behalf are independent of the authority: see Lord Bingham of Cornhill, para 3, and Lord Hoffmann, para 27.
The question then is what must be done if the articles requirements are to be satisfied.
In Runa Begum the House held that the county courts appellate jurisdiction under section 204 of the Housing Act 1996, exercising the normal judicial review jurisdiction of the High Court, was sufficient to satisfy the requirements of the article.
But, although the housing officer in that case could not be regarded as independent, no question was raised as to her impartiality.
In this case the impartiality of the social workers is challenged.
This in turn raises questions as to the intensity of any judicial review that must be undertaken if the requirements of article 6(1) are to be satisfied.
This will have implications as to the way decisions are taken in the provision of a wide range of public services.
The facts of these appeals and the general background to the issues they raise have been summarised by Lady Hale.
I accept her valuable description of them with gratitude.
I wish to add only a few words on the first issue, as I am in full agreement with what she says.
As for the second, I agree with her that it follows from our decision on the first issue that it is unnecessary to reach any firm conclusions on it.
But I think that it is reasonably clear from the present state of the authorities how it should be answered.
In view of its general importance I should like to explain the answer that I would give to it.
The section 20(1) issue
It seems to me that the question whether or not a person is a child for the purposes of section 20 of the 1989 Act is a question of fact which must ultimately be decided by the court.
There is no denying the difficulties that the social worker is likely to face in carrying out an assessment of the question whether an unaccompanied asylum seeker is or is not under the age of 18.
Reliable documentary evidence is almost always lacking in such cases.
So the process has to be one of assessment.
This involves the application of judgment on a variety of factors, as Stanley Burnton J recognised in R (B) v Merton London Borough Council [2003] EWHC Admin 1689, [2003] 4 All ER 280, para 37.
But the question is not whether the person can properly be described as a child.
Section 105(1) of the Act provides: In this Act child means, subject to paragraph 16 of Schedule 1, a person under the age of eighteen.
The question is whether the person is, or is not, under the age of eighteen.
However difficult it may be to resolve the issue, it admits of only one answer.
As it is a question of fact, ultimately this must be a matter for the court.
In the Court of Appeal and in the argument before us, reference was made to the rule that where the exercise of executive power depends upon the precedent establishment of an objective fact, the courts will, if called upon to do so in a case of dispute, decide whether the requirement has been satisfied: R v Secretary of State for the Home Department, Ex p Khawaja [1984] AC 74, 110, per Lord Scarman.
On the other hand, as Sir Thomas Bingham MR observed in R v Secretary of State for the Home Department, ex p Onibiyo [1996] QB 768, 785, where the question is one that is to be determined by the executive itself, its determinations will be susceptible to challenge only on Wednesbury principles: R v Secretary of State for the Home Department, Ex p Bugdaycay [1987] AC 514.
In order to decide into which class of judgment the case falls one must, of course, first construe the statutory language used and the scheme of the legislation.
If, as the respondents contend, and Ward LJ in the Court of Appeal, para 25, accepted, the phrase child in need which sets the threshold for the provision of accommodation under section 20 must be taken as a whole, the judgment that must be made will fall into the latter category.
But the definition of child in section 105(1) applies to the Act as a whole, without qualification or exception.
The question whether the child is in need is for the social worker to determine.
But the question whether the person is or is not a child depends entirely upon the persons age, which is an objective fact.
The scheme of the Act shows that it was not Parliaments intention to leave this matter to the judgment of the local authority.
As for the practical consequences, the process begins with the carrying out of an assessment of the persons age by the social worker.
Resort to the court will only be necessary in the event of a challenge to that assessment.
So I do not accept that our conclusion will inevitably result in an inappropriate judicialisation of the process.
It may, of course, require a judicial decision in some cases.
But I would hope that the fact that the final decision rests with the court will assist in reducing the number of challenges.
The initial decision taker must appreciate that no margin of discretion is enjoyed by the local authority on this issue.
But the issue is not to be determined by a consideration of issues of policy or by a view as to whether resort to a decision by the court in such cases is inappropriate.
It depends entirely on the meaning of the statute.
We must construe the Act as we find it.
As I have said, when the subsection is properly construed in the light of what section 105(1) provides, the question admits of only one answer.
The article 6(1) issue
Much of the background to the questions which this issue raises was explored in Runa Begum v Tower Hamlets London Borough Council [2003] 2 AC 430.
With that advantage we can examine the issue from the point where that decision left it.
On the other hand I would be very reluctant to take anything away from the carefully balanced conclusion that the House reached in that case unless driven to do so by subsequent guidance from Strasbourg.
As Lord Bingham explained in para 5, that case exposed more clearly than any earlier case had done the interrelation between the article 6(1) concept of civil rights on the one hand and the article 6(1) requirement of an independent and impartial tribunal on the other.
The narrower the interpretation that is given to civil rights, the greater the need to insist on review by a judicial tribunal exercising full powers.
Conversely, the more elastic the interpretation that is given to the expression, the more flexible must be the approach to the requirement if over judicialisation of welfare schemes is to be avoided.
What the House did in that case was to assume, without deciding, that Runa Begums domestic right was also a civil right and, having made that assumption, to hold that the absence of a full fact finding jurisdiction in the tribunal from which an appeal lay from the administrative decision making body did not disqualify the tribunal for the purposes of article 6(1): Lord Bingham, paras 6, 11; Lord Hoffmann, paras 58, 70.
In this case, having held that it was for the social workers to decide the age of the applicant, the Court of Appeal held that judicial review of their decision was sufficient to satisfy the requirements of article 6(1): [2008] EWCA Civ 1445, [2009] PTSR 1011, para 84.
Although he recognised that, having reached that view, it was not necessary for him to do so, Ward LJ went further and held that the right of accommodation given by section 20(1) was a right but that it could not be classified as a civil right within the meaning of article 6(1) because too much discretion was given to the local authority to decide what kind of accommodation is to be provided: para 59.
Maurice Kay LJ and Sir John Chadwick expressed some hesitation as to whether this was a right at all: paras 92, 93.
The effect of our decision that the question whether the applicant is or is not under eighteen is an objective fact which must ultimately be one for the court is that the issue will, in the event of a dispute, be decided by an independent and impartial tribunal with powers which fully satisfy the requirements of article 6(1).
The question whether the applicant is a child in need must then be for the social worker to deal with.
But it is very hard to see how an unaccompanied child who is an asylum seeker could be otherwise than in need.
This is not an issue that has been raised in these appeals.
In this situation it is open to us to regard the article 6(1) issue as academic and to say no more about it.
But the questions were fully and carefully argued before us, and they are of general public importance.
We are as well informed about the present state of the jurisprudence of the Strasbourg court as we can be.
With that advantage, I would venture these observations.
The most significant development since the decision in the Runa Begum case is the decision of the Strasbourg court in Tsfayo v United Kingdom (2006) 48 EHRR 457.
The applicant in that case had failed to renew her application for housing and council tax benefit.
After taking advice she submitted a prospective claim and a backdated claim for both types of benefit.
The council accepted the prospective claim but rejected the backdated one on the ground that the applicant had failed to show good cause why she had not claimed these benefits earlier.
The councils housing benefit and council tax benefit review board rejected her appeal against this decision.
Her complaint was that the board was not an independent and impartial tribunal, contrary to article 6(1).
The court held that disputes about entitlement to social security and welfare benefits generally fell within the scope of article 6(1).
It agreed with the parties that the applicants claim concerned the determination of her civil rights, that article 6(1) applied and that she had a right to a fair hearing before an independent and impartial tribunal: para 40.
It held that the requirements of article 6(1) had been violated.
The board, which included five councillors from the local authority which would be required to pay the benefit, lacked independence and the safeguards built into its procedure were not adequate to overcome this fundamental lack of objectivity.
The review board had power to quash the councils decision.
But it did not have jurisdiction to rehear the evidence or substitute its own views as to the applicants credibility: paras 47, 48.
The question whether the claim concerned the determination of the applicants civil rights was not disputed.
This was not surprising, as the case fell within the mainstream of cases where the issue was one as to the entitlement to an amount of benefit that was not in the discretion of the public authority.
This is shown by the cases referred to in a footnote to para 40: Salesi v Italy (1993) 26 EHRR 187, para 19; Schuler Zgraggen v Switzerland (1993) 16 EHRR 405, para 46; Mennitto v Italy (2000) 34 EHRR 1122, para 28.
As Lord Walker of Gestingthorpe said in Runa Begum v Tower Hamlets London Borough Council [2003] 2 AC 430, para 112, these cases, which started with Feldbrugge v The Netherlands (1986) 8 EHRR 425, indicate that article 6(1) is likely to be engaged when the applicant has public law rights which are of a personal and economic nature and do not involve any large measure of official discretion.
As the court put in Salesi v Italy, para 19, the applicant was claiming an individual, economic right flowing from specific rules laid down in a statute.
In Mennitto v Italy, para 23, the court said that the outcome of the proceedings must be directly decisive for the right in question.
In Tsfayo v United Kingdom the court directed its attention to the decision making process.
It quoted, with approval, Lord Binghams description of the interrelation between the article 6(1) concept of civil rights and the requirement for an independent and impartial tribunal: para 31.
The case was decided against the United Kingdom because, in contrast to Runa Begum and Bryan v United Kingdom (1995) 21 EHRR 342 where the issues to be decided required a measure of professional knowledge or experience and the exercise of discretion pursuant to wider policy aims, the review board in Ms Tsfayos case was deciding a simple question of fact, namely whether there was good cause for her delay in making the claim.
So far as it goes, this decision supports the view that in cases which concern the provision of welfare services of the nature at issue in these appeals judicial review of the kind contemplated in Runa Begum will meet the requirements of article 6(1).
As the court explained in para 46: No specialist expertise was required to determine this issue, which is, under the new system, determined by a non specialist tribunal.
Nor, unlike the cases referred to [Bryan and Runa Begum], can the factual findings in the present case be said to be merely incidental to the reaching of broader judgments of policy or expediency which it was for the democratically accountable authority to take.
I read this passage as an endorsement of the point that Lord Bingham made in Runa Begum, para 5, that if an elastic interpretation is given to the article 6(1) concept of civil rights flexibility must also be given to the procedural requirements of that article if over judicialisation of the administrative welfare schemes is to be avoided.
But it is important, too, to recognise that in Tsfayo, as in Runa Begum, the question whether, and if so at what point, administrative welfare schemes fall outside the scope of article 6(1) altogether was not tested.
Tsfayo, as I have said, fell within the mainstream of cases about social security and welfare benefits.
In Runa Begum the House preferred not to take a decision on this issue.
There are, however, a number of straws in the wind that have been generated by the decisions from Strasbourg since Runa Begum that suggest that a distinction can now be made between the class of social security and welfare benefits that is of the kind exemplified by Salesi v Italy and those benefits which are, in their essence, dependent upon the exercise of judgment by the relevant authority.
The phrase civil rights is, of course, an autonomous concept: eg Woobron Volkshuisvestingsgroep v The Netherlands, application no 47122/99), 18 June 2002 (unreported).
But it does convey the idea of what, in Stec v United Kingdom (2005) 41 EHRR SE18, para 48, the Strasbourg court referred to as an assertable right.
In that paragraph, having declared that the Convention must be read as a whole and interpreted in such a way as to promote internal consistency and harmony between its various provisions, and in para 49 that it is in the interests of the Convention as a whole that the autonomous concept of possession in article 1 of Protocol No 1 should be interpreted in a way which is consistent with the concept of pecuniary rights in article 6(1), the court said, at para 51: In the modern, democratic state, many individuals are, for all or part of their lives, completely dependent for survival on social security and welfare benefits.
Many domestic legal systems recognise that such individuals require a degree of certainty and security, and provide for benefits to be paid subject to the fulfilment of the conditions of eligibility as of right.
Where an individual has an assertable right under domestic law to a welfare benefit, the importance of that interest should also be reflected by holding article 1 of Protocol No 1 to be applicable.
The courts references in Loiseau v France application no 46809/99, 18 November 2003 (unreported), para 7, to a private right which can be said, at least on arguable grounds, to be recognised under domestic law and to an individual right of which the applicant may consider himself the holder are consistent with this approach.
So too are the references in Mennitto v Italy (2002) 34 EHRR 1122, para 23, to a right which can be said, at least on arguable grounds, to be recognised under domestic law, where the court added: The dispute must be genuine and serious; it may relate not only to the actual existence of a right but also to its scope and the manner of its exercise.
The outcome of the proceedings must be directly decisive for the right in question. [emphasis added] Cases where the award of benefit is dependent upon a series of evaluative judgments as to whether the statutory criteria are satisfied and, if so, how the need for it as assessed ought to be met do not answer to that description.
The exact limits of the autonomous concept remain elusive.
One can be confident that cases where the relationship between the beneficiary and the public authority is of a public law character, as in Woodbron v The Netherlands, where the role of the applicant associations in regard to the construction and maintenance of public housing was of a typically general interest character, fall outside its scope.
Mr Howell QC submitted that there is no distinction to be drawn between the forms in which welfare benefits may be provided.
But none of the Strasbourg authorities go that far, and the carefully worded passages from Loiseau v France and Stec v United Kingdom to which I have referred seem to me to contradict his proposition.
The series of cases about the enforcement of judgments made by the courts about social housing in Russia to which he referred, of which the latest is Nagovitsyn v Russia application no 6859/02, 24 January 2008 (not reported), offer no assistance as the question whether a duty to provide social housing gives rise to a civil right was not argued.
For these reasons I think that it can now be asserted with reasonable confidence that the duty of the local authority under section 20(1) of the 1989 Act to provide accommodation for any child in need within their area who appears to them to require accommodation as a result of the factors mentioned in that subsection does not give rise to a civil right within the meaning of article 6(1) of the Convention.
LORD SCOTT
I have found Lady Hales discussion of the issues raised illuminating and her reasons for the conclusions she has expressed convincing.
I cannot usefully add anything or improve upon those reasons and gratefully associate myself with them.
I would, therefore, for the reasons she has given, allow these appeals and adopt the suggestion she has made in the last sentence of her opinion.
LORD WALKER
I am in full agreement with the judgment of Lady Hale.
In his judgment Lord Hope gives powerful reasons for concluding that a local authoritys duty under section 20(1) of the Children Act 1989 is not a civil right for the purposes of Article 6(1).
But the Court does not have to decide that point in order to dispose of this appeal.
The Strasbourg jurisprudence is still developing.
I would prefer to leave the point open, while acknowledging the force of Lord Hopes reasoning.
LORD NEUBERGER
For the reasons given by Lady Hale, I too would allow this appeal.
| Local authorities owe a variety of duties towards children in need, who may include unaccompanied minors coming here to seek asylum.
Such children may be entitled to accommodation and other help which is different from, and rather better than, the services available to adults.
So disputes may arise about whether a young person is or is not a child.
Today, the Supreme Court unanimously decided that it is ultimately for the courts, and not the local authority, to resolve this question.
The Court considered two individual cases, but there are many others raising the same issue.
A and M both arrived alone in England and claimed asylum, stating that they were under eighteen.
Each was referred to local authority social workers who assessed him as an adult.
Each challenged the resulting decision of the local authority that he was not entitled to accommodation.
Two main issues were before the Supreme Court: (1) Whether the duty on local authorities to provide accommodation and related services under the Children Act 1989 is owed only to a person who appears to the local authority to be a child (so that the decision is ultimately for the authority to make), or whether it is owed to a person who is in fact a child (so that the decision is ultimately for a court to make); (2) Whether the decision to provide accommodation is the determination of their civil rights, so that the decision making process has to comply with the requirements for a fair trial before an independent and impartial tribunal under Article 6 of the European Convention on Human Rights.
The Court unanimously allowed these appeals.
The lead judgment of the Supreme Court was given by Lady Hale.
The other members of the Court (Lord Hope, Lord Scott, Lord Walker, and Lord Neuberger) agreed with her.
On the first main issue, Lady Hale explained that the many references to a child throughout the 1989 Act must mean the same thing, that is, a person who is in fact a child.
There was a
right or a wrong answer to this question, difficult though it might be to decide it in some cases.
It was a different type of question from whether the child was in need within the meaning of the Act, which involved a number of different value judgements suitable for expert assessment by social workers (paragraphs [26] [27]).
She pointed out, however, that local authorities (or the UK borders agency in asylum cases) will still have to decide whether or not a person is a child in the first instance; it will only be if this remains disputed that the court may have to take the decision itself (paragraph [33]).
On the second main issue, Lady Hale said that it was unnecessary, in light of her conclusion on the first issue, to reach any firm conclusions on the application of Article 6 of the Convention (paragraph [34]).
She declined to decide whether a childs entitlement to accommodation under the 1989 Act was a civil right, but commented that she would be most reluctant to hold that Article 6 required the judicialisation of claims to welfare services of this kind (paragraphs [44] [45]).
Lords Scott, Walker and Neuberger agreed with her approach (paragraphs [66] [68).
While agreeing that it was unnecessary to reach any firm conclusions on the point (paragraph [50]), Lord Hope doubted whether the duty of local authorities to provide accommodation under the 1989 Act gave rise to a civil right within the meaning of Article 6 of the Convention (paragraphs [55] [65]).
|
This appeal is about whether the appellant, Nigerian National Petroleum Corporation (NNPC), should have to put up a further USD 100m security (in addition to USD 80m already provided) in respect of a Nigerian arbitration award which the respondent, IPCO (Nigeria) Ltd (IPCO), has been seeking since November 2004 to enforce in this jurisdiction.
The enforcement proceedings have, therefore, a long history and it is necessary to set some of it out, to understand the context.
The arbitration award has an even longer history.
It is dated 28 October 2004 and is for USD152,195,971 plus Naira 5m plus interest at 14% per annum.
The arbitration took place under a contract dated 14 March 1994 whereby IPCO undertook to design and construct a petroleum export terminal for NNPC.
The contract was subject to Nigerian law and contained an agreement to arbitrate disputes in accordance with the Nigerian Arbitration and Conciliation Act 1988.
The award once made was challenged by NNPC before the Nigerian Federal High Court.
Initially, the challenge was for what have been called non-fraud reasons.
As from 27 March 2009, NNPC, relying on evidence supplied by a former IPCO employee, Mr Wogu, has also challenged the whole award on the basis that IPCO procured it in substantial part by fraudulent inflation of the quantum of its claim using fraudulently created documentation.
Both Field J [2014] EWHC 576 (Comm) and the Court of Appeal (Christopher Clarke, Burnett and Sales LJJ) [2015] EWCA Civ 1144 concluded that the fraud challenge was made bona fide, that NNPC has a good prima facie case that IPCO practised a fraud on the tribunal and that NNPC has a realistic prospect on that basis of proving that the whole award should be set aside.
It is unnecessary to describe the vicissitudes which befell the challenges before the Nigerian courts.
Suffice it to say that they have been closely examined in the English courts on more than one occasion; and that the Court of Appeal has concluded (para 164, per Christopher Clarke LJ) that it would not be profitable to seek to determine which party (if either) is more to blame for the delay, which appears, to me in large measure, to result from the workings of the Nigerian legal system.
At the outset of the English proceedings, Steel J made an ex parte order for enforcement dated 29 November 2004.
This led in turn to an application by NNPC for the ex parte order to be set aside under sections 103(2)(f) and 103(3) of the Arbitration Act 1996 (the 1996 Act), or alternatively for its enforcement to be adjourned under section 103(5), pending the resolution of the non-fraud challenges in the Nigerian courts.
After an inter partes hearing, Gross J held on 27 April 2005 [2005] EWHC 726 (Comm) that NNPC should pay IPCO a sum of just over USD 13m (which, at that stage, when only the non-fraud challenge had been raised, appeared indisputably due), and that NNPC should provide security in the sum of USD 50m in respect of the adjournment.
The USD 13m ordered was duly paid, and the security was also provided.
At that stage, it was envisaged that the non-fraud challenge in Nigeria might be resolved with relative despatch.
This was not to be, and on 17 July 2007 IPCO applied to have Gross Js order reconsidered on the basis that the Nigerian challenge appeared now to be unlikely to be determined for several years.
Tomlinson J in a judgment dated 17 April 2008 concluded that the change of circumstances, catastrophic though it is did not justify a complete re-opening of the exercise undertaken by Gross J. Nevertheless, he ordered NNPC to pay a further net sum of around USD 52m (after taking account of USD 7.7m already paid), plus USD 26m by way of interest.
He gave permission to appeal and ordered a stay pending appeal, conditional upon NNPC providing additional security to the value of USD 30m.
This additional security was also provided.
Tomlinson J adjourned any decision regarding enforcement of the balance of the award under section 103(5).
The Court of Appeal upheld Tomlinson Js order, but it was further stayed pending the outcome of a petition to appeal to the House of Lords.
Before this petition was determined (by refusal of leave), NNPC on 2 December 2008 moved to stay Tomlinson Js order on the ground that it had now obtained evidence of fraud.
Flaux J on 16 December 2008 stayed Tomlinson Js order to enable NNPC to make an application under section 103(3) based on this new evidence and/or under section 103(5) for a further adjournment of enforcement.
He ordered that NNPC maintain the security totalling USD 80m which had been ordered by Gross J and Tomlinson J. By application dated 18 December 2008 NNPC applied to vary Tomlinson Js order so as to provide that recognition or enforcement of the Award dated 28 October 2004 be refused pursuant to section 103(3) of the Arbitration Act 1996 because it would be contrary to public policy to do so; alternatively, the decision on whether to enforce the Award be adjourned pursuant to section 103(5) of the Arbitration Act 1996 with liberty to apply.
The grounds given for refusal of recognition or enforcement were that there had been a material change of circumstances and/or Tomlinson J had been misled into believing that the Award had been properly obtained and/or public policy.
The ground given for the alternative of adjournment was that the Nigerian courts would or might set aside the Award for fraud, false evidence or forgery.
On 27 March 2009 NNPC applied to amend its pleadings in the Nigerian proceedings to raise the fraud challenge (an application adjourned by consent and never determined).
In this light, a consent order dated 17 June 2009 was made in the English proceedings, whereby inter alia, upon NNPC undertaking to maintain the USD 80m security until further order of the court, those parts of Tomlinson Js order dated 17 April 2008 ordering payment of sums were set aside (para 1), and the decision on enforcement of the Award was adjourned pursuant to section 103(5) of the Arbitration Act 1996 (para 2).
Delay continued to dog the Nigerian proceedings, and on 24 July 2012 IPCO renewed its application to enforce the Award in England, again on the ground that there had been a sufficient change of circumstances to justify this.
By order dated 1 April 2014 made after a six day hearing in October 2013 Field J dismissed this application, but added that, even if it had been appropriate to reconsider enforcement in England afresh, he would have refused it, on the ground that NNPC had a good prima facie case of fraud, and that this case should continue to trial in Nigeria.
The security, which NNPC had undertaken by the consent order to maintain, in these circumstances continued.
The Court of Appeal took a different view.
It held that there had been a material change of circumstances, and decided to cut the Gordian knot caused by the sclerotic process of the proceedings in Nigeria (paras 172-173).
By order dated 10 November 2015 it therefore allowed IPCOs appeal, set aside Field Js order (by para 1) and ordered as follows (by paras 2 and 3): 2.
Upon condition that the respondent provides security as set out at paragraph 5 below: (a) the proceedings shall be remitted to the Commercial Court for determination, pursuant to section 103(3) of the Act, as to whether the arbitral award dated 28 October 2004 (the Award) should not be enforced in whole or in part because it would be against English public policy so to do (the Section 103(3) Proceedings); (b) any further enforcement of the Award shall be adjourned, pursuant to section 103(5) of the Arbitration Act 1996, pending determination of the Section 103(3) Proceedings. 3.
Upon any failure of the respondent to comply with the said condition the adjournment shall lapse and the appellant may enforce the Award in the same manner as a judgment or order of the court to the same effect and the appellant shall immediately be entitled to demand payment under the Guarantee and Further Guarantee (as defined in the Order of Mr Justice Tomlinson dated 17 April 2008) [ie the two existing guarantees totalling USD 80m].
5.
The security to be provided by the respondent must be provided by 4 pm on 4 December 2015 by way of first class bank guarantee issued in London in similar form to the Guarantee and the Further Guarantee in the sum of US$ 100,000,000.
This security is to be in addition to that provided by those Guarantees.
The parties have subsequently agreed that not only the fraud issue, but also the non- fraud issues should be decided should be decided in the English enforcement proceedings.
The order dated 10 November 2015 did not reflect the Court of Appeals initial conclusions as to the appropriate disposition.
They were set out in a draft, circulated on 4 September 2015 in the usual way, by para 175 of which the Court proposed to require NNPC to provide security for the whole of the principal and interest then claimed, around USD 300m.
This led to a request by NNPC to the Court for it, exceptionally, to reconsider the position, on the ground that the order for security was made without jurisdiction or was alternatively wrong in principle and/or manifestly wrong.
On the former point, NNPC referred to Soleh Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyds Rep 208 and Dardana Ltd v Yukos Oil Co (Dardana v Yukos) [2002] EWCA Civ 543; [2002] 2 Lloyds Rep 326.
After receiving submissions from both parties, the Court of Appeal issued two judgments, neither in precisely the same terms as the original draft.
It rejected the submission of lack of jurisdiction, but acceded to the request that it reconsider the quantum of security, which it reduced to a requirement for a further USD 100m.
In the Courts first, main judgment, Christopher Clarke LJ, said: Decision 174.
In my judgment the appropriate course to take is as follows.
First, we should order that IPCOs application to enforce should be adjourned pending the determination by the Commercial Court pursuant to section 103(3) of the Act as to whether the Award should not be enforced in whole or in part because it would be against English public policy so to do.
175.
Second, we should make that order conditional upon the provision by NNPC of further security in a form and within a time period to be agreed, or if not agreed, to be determined by this Court, in the sum of $ 100m. 176.
Third, we should order that, if such security is not provided within a period which we shall specify from the time when the form of security is agreed or determined, IPCO shall have permission to enforce the Award.
177.
Fourth, we should order that, if such security is provided, then, if and to the extent that it is determined by a final order of the courts of England and Wales that the enforcement of the Award is not contrary to the public policy of England & Wales, IPCO may enforce it.
178.
Fifth, there shall be Permission to apply to the Commercial Court.
In the Courts shorter supplementary judgment [2015] EWCA Civ 1145 dealing more extensively with the issue of jurisdiction, Christopher Clarke LJ said: Discussion 18.
In the present case it seems to us that in reality it is NNPC, the Award debtor, which sought the continuance of the adjournment in the face of IPCOs attempt to enforce the Award and bring the adjournment to an end.
In its respondents notice NNPC said that, if the judges contingent exercise of his discretion was in error, he was nevertheless correct to conclude that it was appropriate to adjourn under section 103(5) so that the challenge could proceed in Nigeria inter alia because, if the court were minded to enforce the Award, it would still have to decide whether the enforcement of the award was contrary to English public policy.
In other words it was relying on the possibility of a later English public policy challenge as a reason to uphold the continuance of the adjournment, ordered by consent on 17 June 2009, pending resolution of the fraud challenge in Nigeria, rather than suggesting that enforcement should only abide a section 103(3) determination.
19.
So far as the ability of IPCO to enforce any judgment is concerned, much will depend on whether NNPC has sufficient assets in this country, or any other country in which an English judgment may be enforced, to ensure that it can swiftly receive the fruits of any judgment in its favour.
20.
Although NNPC is a large business we have no details of its assets within such countries, or the form in which they are held, how long they have been held there, or how readily any trading arrangements might be changed so as to render enforcement difficult or impossible.
21.
where there is a very large award, delay without security is inherently likely to prejudice the award creditor and certainly risks doing so.
We regard that as a factor which should incline us towards providing some security to ensure that if the fraud challenge fails, IPCO will not be faced with a further round of attempts to avoid payment of the Award or a situation in which its prospects of recovery have worsened.
22.
Another material factor is the need in a case involving such extraordinary delay, extending over a decade, to provide a strong incentive to securing finality.
NNPL [sic] says that, now that the fraud challenge is to be heard in London, the prospects of excessive delay are much reduced.
Hopefully so.
But the history of these proceedings, and their inordinate delay, persuades us of the need to provide an incentive, indeed something of a goad, to progress.
23.
Lastly we bear in mind that the delay which has already taken place has meant that the ratio between the amount of security in place and the amount due has greatly decreased.
Interest under the award is running at 14% per annum.
Gross J ordered that security of $ 50m be provided 10 years ago.
$ 50m x 14% x 10 = $ 70m.
The same exercise applied to the $ 30m security provided in 2008 produces about another $ 31.5m ($ 30m x 14% x 7.5).
NNPC now appeals, by permission of this Court, against the Court of Appeals order for security, in essence on the ground that the order was made without jurisdiction or wrong in principle and/or was illegitimate in circumstances where NNPC has a good prima facie case of fraud entitling it to resist enforcement of the whole award.
Sections 100 to 104 of Part III of the 1996 Act address the recognition and enforcement of foreign awards.
They give effect to the United Kingdoms obligations under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
Section 103 is central to the resolution of this appeal.
It reads: 103.
Refusal of recognition or enforcement.
(1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases.
(2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves - (a) that a party to the arbitration agreement was (under the law applicable to him) under some incapacity; (b) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made; (c) that he was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; (d) that the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration (but see subsection (4)); (e) that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, with the law of the country in which the arbitration took place; (f) that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.
(3) Recognition or enforcement of the award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to recognise or enforce the award.
(4) An award which contains decisions on matters not submitted to arbitration may be recognised or enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those on matters not so submitted.
(5) Where an application for the setting aside or suspension of the award has been made to such a competent authority as is mentioned in subsection (2)(f), the court before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the recognition or enforcement of the award.
It may also on the application of the party claiming recognition or enforcement of the award order the other party to give suitable security.
Section 103(2) and (3) give effect to article V, while section 103(5) gives effect to article VI, of the New York Convention.
Articles V(1) specifies as a ground on which recognition and enforcement may be refused that: (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
Article VI reads: If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.
In this light it was common ground, and it is in any event clear, that sections 103(2)(f) and (5) are both addressing a situation where an award sought to be recognised or enforced in this jurisdiction has been or is under challenge in an overseas jurisdiction where, or under the law of which, it was made.
The issue on this appeal falls under two heads: first, whether the Court of Appeals order was justified by reference to section 103(5) of the 1996 Act; and, second, whether it was justified by reference to general English procedural rules.
In the latter connection, reliance is placed on CPR 3.1(3) as well as, indirectly, on section 70(7) of the 1996 Act.
CPR 3.1(3) provides that: Where the court makes an order, it may - a) make it subject to conditions, including a condition to pay a sum of money into court; and specify the consequences of failure to comply b) with the order or a condition.
Section 70(7) is one of a group of sections appearing under the heading Powers of the court in relation to award in Part I of the 1996 Act.
Part I concerns arbitrations that (unlike the present) have their seat in England, Wales or Northern Ireland: see section 2(1).
The group starts with section 66, addressing enforcement generally: Enforcement of the award (1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.
(2) Where leave is so given, judgment may be entered in terms of the award.
(3) Leave to enforce an award shall not be given where, or to the extent that, the person against whom it is sought to be enforced shows that the tribunal lacked substantive jurisdiction to make the award.
The right to raise such an objection may have been lost (see section 73).
(4) Nothing in this section affects the recognition or enforcement of an award under any other enactment or rule of law, in particular under Part II of the Arbitration Act 1950 (enforcement of awards under Geneva Convention) or the provisions of Part III of this Act relating to the recognition and enforcement of awards under the New York Convention or by an action on the award.
Section 66 must be read with section 81(1), providing that: Saving for certain matters governed by common law.
(1) Nothing in this Part shall be construed as excluding the operation of any rule of law consistent with the provisions of this Part, in particular, any rule of law as to - (a) matters which are not capable of settlement by arbitration; (b) (c) arbitral award on grounds of public policy.
the effect of an oral arbitration agreement; or the refusal of recognition or enforcement of an Sections 67, 68 and 69 concern challenges to awards for lack of substantive jurisdiction (section 67), serious irregularity (section 68) or by way of appeal on a point of law (section 69), in each case in proceedings initiated before the court by the award debtor.
They therefore contrast with section 66(3), which, read with section 81, enables an award debtor to challenge enforcement on grounds there indicated by resisting enforcement proceedings initiated by the award creditor.
Section 70(1) provides that the following provisions, inter alia, apply to an application or appeal under sections 67, 68 or 69 of the Act: (6) The court may order the applicant or appellant to provide security for the costs of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.
(7) The court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.
CPR 62.18(9) provides that, within 14 days of service of an ex parte order giving permission to enforce under section 66, the defendant may apply to set aside the order and the award must not be enforced until after any application made by the defendant within that [14 day] period has been finally disposed of.
I start with the relationship between the Court of Appeals order and the scheme of section 103 of the Act.
The order was that the fraud issue, raised as an issue of public policy under section 103(3), should, for the purposes of determining whether enforcement should be ordered, be decided in the English, rather than Nigerian, proceedings.
But the decision of the fraud issue was made conditional upon the provision by NNPC of a further USD 100m security, failing which the Court gave leave to enforce without any decision of the fraud issue.
Upon provision of such security, on the other hand, the Courts order provided that any further enforcement of the award should be adjourned under section 103(5) pending decision of the fraud issue.
The position is therefore that the Court held that an enforcing courts decision upon an issue, raised by an award debtor under section 103(3) or, as must follow, section 103(2) could (and in the instant case should) be made conditional upon the award debtors provision of security in respect of the award.
Further, it regarded the delay which would follow while that decision was being reached by the enforcing court as involving an adjournment within the meaning of the words the court may adjourn the decision on the recognition or enforcement of the award in section 103(5).
In both these respects, the Court of Appeal fell in my opinion into error.
First, nothing in section 103(2) or (3) (or in the underlying provisions of article V of the New York Convention) provides that an enforcing court may make the decision of an issue raised under either subsection conditional upon the provision of security in respect of the award.
In this respect, there is a marked contrast with section 103(5), which specifically provides that security may be ordered where there is an adjournment within its terms.
Second, the Court erred in regarding its order that the English court should as the enforcing court decide the fraud issue as involving adjournment of the decision on that issue within the terms of section 103(5).
This error has two aspects.
First, as stated in para 15 above, section 103(5) concerns the situation where an enforcing court adjourns its decision on enforcement under section 103(2) or (3), while an application for setting aside or suspension of the award is pending before the court of the country in, or under the law of which, the award was made.
This was the situation when orders were made by Gross J on 12 April 2005, by Flaux J on 16 December 2008 and by consent on 17 June 2009.
But it ceased to be the situation for the future, once the Court of Appeal held that the issue whether fraud was an answer to enforcement should no longer await the outcome of the Nigerian proceedings, but should be decided by the English courts.
Although the literal trigger to the application of section 103(5) is that an application has been made to the courts of the country where, or under the law of which, the award was made, the adjournment which it contemplates is pending the outcome of that application.
Once it is held that there should be no such further adjournment, there is no basis for ordering further security under section 103(5).
The Court of Appeal, in ordering that any further enforcement of the award should be adjourned under section 103(5) pending determination of the section 103(3) proceedings, was, therefore, misusing the word in the context of section 103(5).
Of course, any decision of an issue raised under section 103(2) or (3) may take a court a little time, even if it is only while reading the papers, or adjourning overnight or for a number of weeks, in order to consider and take the decision.
But that does not mean that the decision was being adjourned within section 103(5).
On the contrary, delays of this nature are all part of the decision-making process.
The second aspect is that section 103(5) contemplates an order for security being made on the application of the party claiming recognition or enforcement of the award.
It is true that in Dardana v Yukos, when giving the reasons of all members of the court, I said, at para 31: I am fully prepared to proceed on the basis that section 103(5) provides the court with jurisdiction to make such an order, in a case where it, either of its own motion (cf Soleh Boneh) or at the instance of the party seeking [sic] recognition or enforcement, decides to adjourn, pending a foreign application to set aside by the party resisting recognition or enforcement.
Christopher Clarke LJ in his supplementary judgment, para 6, questioned how section 103(5) was thought to provide jurisdiction to the court to act of its own motion.
It is unnecessary to consider that question here, although I shall return to para 6.
What is however important to note is an evident error in the passage cited, which no one appears to have spotted.
The word seeking after which I have inserted sic should clearly have read resisting, to reflect the actual language of section 103(5).
That is also evident from the actual decision in Dardana v Yukos and its supporting reasoning.
In Dardana v Yukos, the award debtor (Yukos) was challenging a Swedish award in Stockholm, but its primary response to an application to enforce in England was that the English courts should themselves decide whether the award should be recognised or enforced under section 103(2)(b) and/or (d).
(Only in the alternative, did Yukos apply for an adjournment under section 103(5).) For a considerable time, the award creditor (Dardana) shared the award debtors stance, that the issues should be decided under section 103(2)(b) and/or (d).
But, during the hearing, Dardana appreciated that its case was less strong than it had thought.
It then changed direction, and rather than risk losing in England, resisted determination of Yukoss case in England, and itself in reality sought an adjournment pending the outcome of the Swedish proceedings (see judgment, para 23).
In these circumstances, the Court of Appeal held in Dardana v Yukos that the English courts had no power under section 103(5) to order Yukos to provide security on the tacit basis that, if Yukos did not do this, immediate enforcement would be ordered against it (paras 26-31).
Security pending the outcome of foreign proceedings is, in effect, the price of an adjournment which an award debtor is seeking, not to be imposed on an award debtor who is resisting enforcement on properly arguable grounds.
The reasoning in Dardana v Yukos underlines both these aspects.
I have added italics for emphasis: 27.
In most cases it would be the party resisting recognition or enforcement, who had already begun proceedings to set aside in the foreign state, who would be seeking an adjournment of the recognition or enforcement proceedings, pending resolution of the foreign application.
An order for security, on the application of the party seeking recognition or enforcement, would be the price of the adjournment sought by the other party, and would protect the party seeking recognition or enforcement during the adjournment.
There is no power under section 103(5) to order security except in connection with an adjournment.
If no foreign application had been made to set aside, the domestic proceedings under section 103(2) would have had to be fought out to a conclusion; and there would be no power under section 103(5) to order security during the period which that took.
There could of course, in an appropriate case be an application for freezing relief 28.
In a case where a party resisting enforcement applies under section 103(2), but later seeks an adjournment of its application pending resolution of foreign proceedings in which it is also challenging the award, adjournment may as a matter of general principle be ordered on condition that security be provided (failing which the order for adjournment will be vacated and the issues under section 103(2) will be determined).
29.
The reality in the present case is that the appellants were obliged to provide the security, on the tacit basis that, if they did not do so, then enforcement would be ordered unconditionally against them, despite their outstanding application under section 103(2).
The provision for security was, in other words, made a condition not of any adjournment sought by the appellants, but of avoiding immediate and final enforcement; and, failing its provision, the appellants outstanding application under section 103(2) would have been liable to be struck out or dismissed, without determination of its merits.
I do not consider that as a legitimate sanction to attach to any order made for the provision of security in the present circumstances.
It would involve overriding or fettering an outstanding application under section 103(2), in a way for which sections 100-104 provide no warrant.
It is inconsistent with paragraph 31.9 of the Arbitration Practice Direction, and the concluding words of Mr Justice Steels order, whereby the award was not to be enforced, if the appellants applied (as they did) to set aside his order, until the application was finally disposed of.
Paragraph 31.9 of the Arbitration Practice Direction has now become CPR 62.18, set out in para 21 above.
In the present case, the Court of Appeals order involves the same error as that identified in the first and third italicised passages.
It required security, not as the price of a further adjournment falling within section 103(5), but as the price of the decision of an issue under section 103(3).
The Court was lifting the adjournments previously ordered pending the outcome of the Nigerian proceedings, not ordering an adjournment.
It had no power under section 103 to make a decision of the properly arguable case raised by NNPC under section 103(3) conditional on NNPC providing further security.
The Court of Appeals reasoning at paras 174-177 of its main judgment and para 18 of its supplementary judgment demonstrates the same errors that are evident in its order.
Para 18 by focusing on NNPCs (alternative) submission that, if Field Js contingent exercise of his discretion (to refuse enforcement) was wrong, there should be an adjournment under section 103(5) case misses the point.
What is critical here is not what submissions were advanced (contingently), but whether there was in the event an adjournment (and, if there was, whether it was effectively at the award debtors instance as well as pending the outcome of the relevant challenge in the overseas court of the country in which, or under the law of which, the award was made).
Here, no such adjournment was ordered by the Court of Appeal, which on the contrary decided that the fraud issue should be resolved in the English proceedings.
There was therefore no adjournment under section 103(5) onto which to hang, as the price, a requirement of further security.
The Court of Appeals further reasons at paras 19-23 in its supplementary judgment do not go to the jurisdiction or power to order security under section 103, though they might have gone to the exercise of any discretion, if (contrary to my conclusion) any such discretion had existed under section 103.
The perceived inadequacy by the time of the Court of Appeals order of the security of USD 80m validly ordered as a condition of past adjournments under section 103(5) was no basis for ordering further security when further adjournment was being refused.
Mr Michael Black QC suggested that, when the matter came before Field J and the Court of Appeal, there was no outstanding challenge by NNPC under section 103(3).
If that were so, it is difficult to understand what either court was doing in considering and deciding, at some length, whether NNPC had shown a good prima facie case of fraud, and, in the case of the Court of Appeal, making an order for its decision by the English courts.
Further, NNPC had made a formal challenge by its application dated 18 December 2008; the decision on that challenge was adjourned, pending the outcome of the Nigerian proceedings, by the consent order dated 17 June 2009; and the whole purpose and effect of the Court of Appeals decision that there had been a change of circumstances justifying the reopening of the consent order was to lift the adjournment and to order that the challenge be decided in the English proceedings.
For these reasons, the Court of Appeals order for security was not within the scope of any jurisdiction or power conferred by section 103 of the 1996 Act.
Mr Black has, however, submitted that the order can be and was justified on grounds not directly considered in Dardana v Yukos, and touched on, if at all, then only very tangentially by the Court of Appeal.
At the basis of this submission is the proposition that the New York Convention, and sections 100-104 of the 1996 Act, leave untouched the ordinary procedural powers of the English courts in respect of proceedings before them.
I have no difficulty accepting the general correctness of that in relation to the conduct of a challenge to recognition or enforcement being decided under section 103(2) and/or (3): see further para 45 below.
But it provides no basis for making the raising for decision of a properly arguable challenge under these sections conditional upon the provision of security for the award.
providing: In support of his submission, Mr Black points to article III of the Convention, Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles.
There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.
Although article III is not itself part of English law, Mr Black submits that we can and should, on familiar principles, view sections 100-104 of the 1996 Act in its light.
I also have little difficulty with that as a general proposition, although the possible differences between the meaning of the word conditions used twice in article III have given rise to much discussion.
I am prepared for present purposes to proceed on the basis, without deciding, that the second reference to conditions refers in effect to principles or rules of procedure (as Mr Black submits with the weighty support of Professor Albert van den Bergs commentary on The New York Arbitration Convention of 1958 (1981), p 239).
Mr Blacks submission is that sections 100-104 only occupy the field of procedural matters to a limited extent.
The second paragraph of article VI (which led domestically to the second paragraph of section 103(5)) was, according to the Summary Record of the Seventeenth Meeting of the United Nations Conference on International Commercial Arbitration held on 3 June 1958, inserted to address the risk of abuse of what became article VI by proceedings started in the country where, or under whose law, the award was issued without a valid reason purely to delay or frustrate the enforcement of the award; it may, he submits, have been necessary to regulate this limited procedural aspect at an international level, because individual states might not have their own procedural mechanisms to do so; but it did not follow that states could not attach procedural conditions to challenges made under article V (ie domestically, under section 103(2) and (3)).
The submission continues by pointing to the English courts general power to make conditional orders, including orders on its own motion under CPR 3.1(3)(a) and 3.3.
In this connection, Mr Black is able to submit that this is in fact what the Court of Appeal must, or must also, have had in mind when it made its order.
In para 6 of his supplementary judgment, commenting on the passage from Dardana v Yukos set out in para 27 above, Christopher Clarke LJ said this: It is not wholly clear to us how section 103(5) was thought to provide jurisdiction to the Court to act of its own motion but, in any event, a court which is asked to adjourn, or continue an adjournment of, enforcement is entitled to impose conditions on the exercise of its discretion to do so: CPR 3.1(3)(a); and may do so of its own initiative: CPR 3.3.
Section 103(5) cannot be treated as precluding the exercise of that right.
Finally, Mr Black argues that the English courts would, contrary to article III, be discriminating procedurally against foreign awards compared with awards in arbitrations where the seat is English, if they could not order security against a party who was merely mounting a challenge under section 103(2) or (3).
It is in this connection that he deploys section 70(7) of the 1996 Act.
He relies on reasoning of Rix LJ (supported to some extent by that of Moses LJ, but opposed by that of Buxton LJ) in Gater Assets Ltd v NAK Naftogaz Ukrainiy (Gater) [2007] EWCA Civ 988; [2007] 2 Lloyds Rep 588; [2008] Bus LR 388.
Rix LJ considered that an award debtor resisting enforcement by destroying the formal validity of the award, either as a matter of substantive jurisdiction or serious irregularity or as a matter of public policy is in substance in a position of a claimant analogous to that of an award debtor under an English award seeking to challenge an award under sections 66 to 69 of the Act, and is liable accordingly to be made subject to an order for security for costs: see paras 77-80 (see also per Moses LJ para 93, and, to the contrary effect, per Buxton LJ paras 101-104).
On Mr Blacks case, therefore, if English procedural law does not enable an award creditor under a Nigerian arbitration award to apply and, if the court thinks fit, to obtain security for the award from an award debtor who is challenging enforcement under section 103(2) or (3), then it is imposing on the award creditor substantially more onerous conditions, in the sense of procedural rules, than those applicable to English awards under section 70(7) of the Act.
Mr Blacks case on these points fails, in my opinion, at a number of levels.
First, the Court of Appeal in Gater was addressing an issue of security for the future costs of a challenge under section 103(3), which raises very different considerations to an issue of security for the past award itself.
Even then, although Rix LJ did not make this the ground of decision because it had not been argued, he noted that the Convention might be regarded as a complete code, precluding the making of a decision under section 103(2) or (3) conditional upon the provision of security for costs: para 82.
More importantly, in relation to the provision of security for the award itself, he said this, at para 81: Field J, however, was prepared to refuse enforcement, on the ground of failure to provide the security for costs ordered.
That was the order that Field J made, setting aside the enforcement order if the security was not provided, and doing so on a ground not expressly within the Convention.
There is no express basis in the New York Convention for that condition.
Enforcement may be refused only if one of the exceptions within article V is made good.
Security is discussed in the Convention, but only security for the award itself and only in the context of an adjournment of enforcement proceedings pending an application to set aside or suspend the award to the competent authority of the country in which, or under the law of which, that award was made: article VI, reproduced in section 103(5) of the 1996 Act.
That is not just an example of a circumstance in which such security might be ordered, but is the only circumstance in which it might be: see the decision of this court in Dardana Ltd v Yukos Oil Co [2002] All ER (Comm) 819, para 27.
In my opinion, the conditions for recognition and enforcement set out in articles V and VI of the Convention do constitute a code.
Just as article V codifies the grounds of challenge (see Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 16-137), so the combination of articles V and VI must have been intended to establish a common international approach, within the field which they cover.
They contemplate that a challenge under article V may only be made conditional upon the provision of security in one situation falling within their scope.
Had it been contemplated that the right to have a decision of a properly arguable challenge, on a ground mentioned in article V (domestically, section 103(2) and (3)), might be made conditional upon provision of security in the amount of the award, that could and would have been said.
The Convention reflects a balancing of interests, with a prima facie right to enforce being countered by rights of challenge.
Apart from the second paragraph of article VI, its provisions were not aimed at improving award creditors prospects of laying hands on assets to satisfy awards.
Courts have, as noted in Dardana v Yukos, other means of assisting award creditors, which do not impinge on award debtors rights of challenge, eg disclosure and freezing orders.
It is unnecessary in this context to address the issue which divided the Court of Appeal in Gater, whether or how far an award debtor challenging an award should or may be regarded as being in the position of a claimant, rather than a defendant.
Suffice it to say that I would leave open the correctness of Rix LJs view (Gater, paras 77-79) that there is no material difference at a domestic level between challenges falling within the scope of section 66 of the Act, read with section 81(1), and challenges falling within sections 67, 68 or 69.
The fact that section 70(6) and (7) only apply to the latter, and not to challenges under section 66, highlights this point.
If it were appropriate or relevant to have regard to the position regarding an English award, the true domestic analogy with, at any rate, the present fraud challenge under section 103(3) would be a challenge under section 66 read with section 81(1)(c).
On that section 70(7) cannot on any view offer any direct assistance to Mr Blacks submission.
In fact, however, the challenges permissible under section 103(2) and (3) embrace, but do not distinguish between, matters which could in some cases be raised both under section 66 and under either section 67 or 68 and in other cases only under one of the latter two sections.
Domestic analogies are in these circumstances unlikely to illuminate the operation of the internationally-based provisions of sections 100-104.
In any event, I do not regard the argument based on article III and section 70(7) as having any force.
First, article III may serve as a caution against interpreting or applying English procedural provisions in a sense which discriminates against Convention awards by imposing substantially more onerous rules of procedure.
But this is only so long as the conditions laid down in the following articles of the Convention do not otherwise provide.
As I have indicated, I consider that articles V and VI constitute a code relating to security for an award when the issue is enforcement or adjournment; and that the code excludes requiring security for an award in the face of a properly arguable challenge under article V, except in so far as article VI provides.
Second, even if that were not so, I would have some doubt whether an inability to order security on a challenge to an overseas award could constitute a substantially more onerous rule of procedure in relation to recognition or enforcement than a rule allowing such security in the case of an English award.
Third, be that as it may, the fact is that the 1996 Act contains in relation to Convention awards no equivalent to section 70(7) in relation to English awards.
Whatever article III might require in that respect (if anything), it is not found in the 1996 Act, and no amount of consistent interpretation can alter the Act in that respect.
Fourth, there is first instance authority, which in my opinion accurately reflects what would be expected as a matter of principle in relation to the provision of security for the amount of an award in issue, that the power under section 70(7) will only be exercised if the challenge appears flimsy or otherwise lacks substance: A v B (Arbitration: Security) [2010] EWHC 3302 (Comm); [2011] 1 Lloyds Rep 363; [2011] Bus LR 1020, para 32 per Flaux J; Y v S [2015] EWHC 612 (Comm); [2015] 1 Lloyds Rep 703, para 33 per Eder J. That cannot by any stretch be said of NNPCs fraud challenge in the light of the evidential material set out in the Court of Appeals judgment.
Finally, I turn to CPR 3.1(3).
In my opinion, this takes IPCO nowhere.
It is a power, expressed in general terms, to impose conditions on orders.
It cannot authorise the imposition, on a person exercising its right to raise a properly arguable challenge to recognition or enforcement, of a condition requiring security for all or any part of the amount of the award in issue.
Its obvious subject matter is the imposition of a condition as the price of relief sought as a matter of discretion or concession, not the imposition of a fetter on a person exercising an entirely properly arguable right.
The Court of Appeal was right to underline in Huscroft v P & O Ferries Ltd (Practice Note) [2010] EWCA Civ 1483; [2011] 1 WLR 939, paras 18- 19 that rule 3.1(3) does not give the court a general power to impose conditions on one or other party whenever it happens to be making an order, and that its purpose is to enable the court to grant relief on terms and that the court should focus attention on whether the condition (and any supporting sanction) is a proper price for the party to pay for the relief being granted, satisfying itself also that the condition it has in mind represents a proportionate and effective means of achieving that purpose.
CPR 3.1(3) may be relevant where the court only permits the pursuit on terms of a claim or defence which in some respect is problematic: see Deutsche Bank AG v Unitech Global Ltd [2016] EWCA Civ 119, paras 72-81 (to which the appellants solicitors very properly drew the Supreme Courts attention after the handing down in draft of this judgment).
But it is entirely clear that CPR 3.1(3) has no relevance on this appeal.
That is not to say that CPR 3.1(3) or the courts other general procedural powers may never become relevant in the context of an issue being decided under section 103(2) or (3).
I have noted that the courts power to make disclosure and freezing orders is one means by which an award may indirectly be secured, without impinging on a defendants right to raise challenges under section 103.
The court may in the course of such a challenge make all sorts of other procedural orders, and back them where necessary with sanctions.
But none of this has anything to do with this appeal.
NNPC here had not misconducted themselves or given any sort of cause for the exercise of any procedural discretion to make an order against them or to condition it in any way.
Some of the factors to which the Court of Appeal alluded in paras 19 to 23 of its supplementary judgment might have had some possible relevance had NNPC in some way defaulted in the pursuit of a challenge under section 103.
As it is, paras 19-21 amount to no more than concern that the award might be difficult to enforce in practice, while para 23 links this to a perception that the previously ordered security now appears insufficient.
These were not admissible bases for attaching a condition to the future exercise in this jurisdiction of a right of challenge under section 103(3).
The wish in para 22 to provide a goad to progress was also an inadmissible basis for securing the award, particularly in the absence of any finding of any relevant prior default by NNPC from which it needed relief, and is (one might add, if it had had any potential relevance) difficult to understand as a matter of fact in circumstances where the fraud issue will from now be case- managed by the Commercial Court.
I should not finish without addressing a point made by NNPC in a footnote - doubtless to avoid too obvious a hostage to fortune on the main issue - on the last page of its written case.
The footnote records that NNPC also considers that it follows that NNPC can allow the guarantees given previously (in a total sum of US$ 80m) to lapse without affecting its right to have its defence under section 103(3) of the 1996 Act determined prior to IPCO being permitted to enforce the Award.
I do not accept that.
The security of USD 80m was the agreed price of adjournments in 2005 and 2008-2009 which have lasted in total nearly 12 years.
NNPC undertook by the consent order dated 17 June 2009 to maintain the guarantees until further order of the Court.
That the adjournment will now lapse is no reason for the Court to permit the existing security to lapse, still less for any argument that NNPC is entitled to allow it to lapse.
The guarantees should continue in place until further order, pursuant to NNPCs undertaking.
For the reasons I have given, the appeal must in my opinion be allowed, the Court of Appeals order attaching conditions (in particular, the requirement to provide further security of USD 100m) in relation to the challenges raised by NNPC must be set aside and NNPCs fraud and non-fraud challenges must be remitted to the Commercial Court for decision free of any such further conditions.
The parties will have 21 days to make submissions as to the precise form of order and as to costs.
For the reasons I have given, the appeal must in my opinion be allowed, the Court of Appeals order attaching conditions (in particular, the requirement to provide further security of USD 100m) in relation to the challenges raised by NNPC must be set aside and NNPCs fraud and non-fraud challenges must be remitted to the Commercial Court for decision free of any such further conditions.
The parties will have 21 days to make submissions as to the precise form of order and as to costs.
| This appeal concerns the enforcement in England of a Nigerian arbitration award dated 28 October 2004 for USD 152,195,971 plus 5m Nigerian Naira in respect of a contract by which IPCO (Nigeria) Limited (IPCO) undertook to design and construct a petroleum export terminal for Nigerian National Petroleum Corporation (NNPC).
The award is subject to still outstanding challenges by NNPC in Nigeria, initially for what have been called non fraud reasons and, from 27 March 2009, for alleged fraud in relation to IPCOs presentation of its claim.
The issue before the Court is whether the appellant, NNPC, should have to put up a further USD 100m security in the English enforcement proceedings.
An ex parte order for enforcement made by Steel J on 29 November 2004 led to an application by NNPC to set aside under ss.103(2)(f) and 103(3) or, alternatively, for enforcement to be adjourned under s.103(5), of the Arbitration Act 1996 (the 1996 Act).
On 27 April 2005, Gross J ordered that enforcement be adjourned pending resolution in Nigeria of the non fraud challenges, conditional on NNPC (i) paying IPCO USD 13.1m and (ii) putting up security of USD 50m under s.103(5).
Following a further application for enforcement based on the delay in the Nigerian proceedings, and further orders including one under which a further USD 30m was provided by way of security, NNPC applied in Nigeria to raise the fraud challenge.
A consent order dated 17 June 2009 was then made in the English proceedings whereby the decision on enforcement was further adjourned under s.103(5), upon NNPC undertaking to maintain the security of USD 80m thus far provided until further order.
On 24 July 2012, IPCO renewed its application to enforce on the ground of the further delay in the Nigerian proceedings.
This application was dismissed by Field J but allowed on appeal by the Court of Appeal, which decided to cut the Gordian knot caused by the sclerotic process of the Nigerian proceedings.
The Court of Appeal ordered that (i) the proceedings be remitted to the Commercial Court for it to determine pursuant to s.103(3) whether the award should be enforced in light of the alleged fraud and (ii) any further enforcement of the award be adjourned in the meanwhile under s.103(5), such order being made conditional on NNPC providing a further USD 100m security (in addition to the USD 80m already provided).
NNPC appeals against the order for security on the basis that it was made without jurisdiction or wrong in principle and/or was illegitimate in circumstances where both Field J and the Court of Appeal had concluded that NNPC had a good prima facie case of fraud entitling it to resist enforcement of the whole award.
The Supreme Court unanimously allows NNPCs appeal.
Lord Mance gives the lead judgment, with which all the Justices agree.
Section 103(5) of the 1996 Act The Court of Appeals order was not justified by reference to s.103(5).
Nothing in s.103(2) or (3) (or in the underlying provisions of article V of the New York Convention) provides a power to make an enforcing courts decision on an issue raised under these provisions conditional on an award debtor providing security in respect of the award.
This is in marked contrast to s.103(5), which specifically provides that security may be ordered where there is an adjournment within its terms [24].
The Court also erred in treating its order that the English Commercial Court should decide the fraud issue as involving an adjournment of the decision on that issue within the terms of s.103(5).
Section 103(5) concerns the situation where an enforcing court adjourns its decision on enforcement under s.103(2) or (3) while an application for setting aside or suspension of the award is pending before the court of the country in, or under the law of which, the award was made.
It does not extend to delays in the decision making process occurring while a decision of an issue under s.103(2) or (3) is made [25 26].
Further, s.103(5) contemplates an order for security being made on the application of the party claiming recognition or enforcement of the award.
The reasoning in Dardana v Yukos [2002] confirms that security pending the outcome of foreign proceedings is, in effect, the price of an adjournment which an award debtor is seeking; it is not to be imposed on an award debtor who is resisting adjournment on properly arguable grounds [27 29].
In the present case, there was no adjournment under s.103(5) onto which to hang, as the price, a requirement of further security [30 32].
The Court of Appeals further reasons for imposing the security, including as an incentive to securing finality in the context of lengthy delays, do not go to the jurisdiction or power to order security under s.103 [32].
General English procedural rules The requirement to provide security could not be justified by reference to general English procedural rules.
Reliance was placed on CPR 3.1(3) and, indirectly, s.70(7) of the 1996 Act [16 21].
However, the conditions for recognition and enforcement set out in articles V and VI of the New York Convention (to which s.103(2), (3) and (5) give effect) constitute a complete code intended to establish a common international approach.
Had it been contemplated that the right to have a decision of a properly arguable challenge, on a ground mentioned in article V (i.e. s.103(2) and (3)), might also be made conditional on provision of security in the amount of the award, that could and would have been said.
The Convention reflects a balancing of interests.
Its provisions were not aimed at improving award creditors prospects of laying hands on assets to satisfy awards.
Courts have other means of assisting award creditors which do not impinge on award debtors rights of challenge, such as disclosure and freezing orders [41].
Section 70(7) provides that the court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal.
It only applies, however, to arbitrations that (unlike the present) have their seat in England, Wales or Northern Ireland.
The 1996 Act contains no equivalent in relation to Convention awards.
Further, the power will only be exercised if the challenge appears flimsy or otherwise lacks substance, which cannot be said of NNPCs fraud challenge [43].
Finally, CPR 3.1(3) has no relevance on this appeal.
It is a power, expressed in general terms, to impose conditions on orders.
Its focus is the imposition of a condition as the price of relief sought as a matter of discretion or concession, and not the imposition of a fetter on a person exercising its right to raise a properly arguable challenge to recognition or enforcement [44].
|
The question in this appeal is whether sections 1 and 9 of the Tobacco and Primary Medical Services (Scotland) Act 2010 (the 2010 Act) are outside the legislative competence of the Scottish Parliament.
Section 28(1) of the Scotland Act 1998 (the 1998 Act) provides that, subject to section 29, the Scottish Parliament may make laws, to be known as Acts of the Scottish Parliament.
Section 29(1) provides that an Act of the Scottish Parliament is not law so far as any provision of the Act is outside the legislative competence of the Parliament.
Five of the various rules that affect the legislative competence of the Parliament are in point in this case.
Section 29(2)(b) provides that a provision is outside that competence so far as it relates to reserved matters, details of which are set out in Schedule 5.
Section 29(2)(c) provides that a provision is outside competence if it is in breach of the restrictions in Schedule 4.
Paragraph 1 of Schedule 4 to the 1998 Act provides that an Act of the Scottish Parliament cannot modify Article 6 of the Union with Scotland Act 1706 and of the Union with England Act 1707 so far as it relates to freedom of trade.
Paragraph 2 of Schedule 4 provides that an Act of the Scottish Parliament cannot modify, or confer power by subordinate legislation to modify, the law on reserved matters.
And section 29(4) provides that a provision which would otherwise not relate to reserved matters but makes modifications of Scots private law or Scots criminal law as it applies to reserved matters is to be treated as relating to reserved matters, unless the purpose of the provision is to make the law in question apply consistently to reserved matters and otherwise.
According to its long title the 2010 Act makes provision, among other things, about the retailing of tobacco products.
Chapter 1 of Part 1 of the Act is headed Display, sale and purchase of tobacco products.
Sections 1 and 9 are included within that Chapter.
Section 1 prohibits the display of tobacco products in a place where tobacco products are offered for sale.
Section 9 prohibits vending machines for the sale of tobacco products.
The appellants, Imperial Tobacco Ltd, maintain that those sections are outside legislative competence because they relate to matters which are listed in Part II of Schedule 5 to the 1998 Act as reserved matters for the purposes of that Act, and that they should in any event be treated as relating to reserved matters as they make modifications to Scots criminal law as it applies to reserved matters.
They further maintain that the sections modify the law on reserved matters, contrary to the prohibition in paragraph 2 of Schedule 4.
They also maintained in the Court of Session that the sections are outside competence because they modify article 6 of the Acts of Union so far as they relate to freedom of trade.
The bringing into force of the 2010 Act has been deferred until these challenges to the competence of these sections have been finally determined.
On 30 September 2010 the Lord Ordinary, Lord Bracadale, held that none of the appellants challenges to the legislative competence of the Scottish Parliament to pass sections 1 and 9 of the 2010 Act were well founded, and he dismissed their petition for judicial review: [2010] CSOH 134, 2010 SLT 1203.
On 2 February 2012 the First Division (Lord President Hamilton and Lords Reed and Brodie) dismissed the appellants reclaiming motion against the Lord Ordinarys interlocutor: [2012] CSIH 9, 2012 SC 297.
The appellants have now appealed to this court, but they departed from their challenge to the legislative competence of sections 1 and 9 under section 29(2)(c) of the 1998 Act read together with paragraph 1 of Schedule 4.
Shortly before the hearing of the appeal they also departed from their challenge under section 29(4).
The Advocate General did not appear in the Inner House, but he sought and was given permission to intervene in this appeal.
Background
Thirteen years have elapsed since the Parliament met to conduct business for the first time on 2 July 1999.
There have been a number of challenges to the legislative competence of Acts of the Scottish Parliament during this period.
For example, section 1 of the Mental Health (Public Safety and Appeals) (Scotland) Act 1999, which was the first Act of the Parliament, was challenged unsuccessfully on the ground that its provisions were incompatible with article 5(1)(e) of the European Convention on Human Rights and thus outside competence under section 29(2)(d) of the 1998 Act: A v Scottish Ministers 2002 SC (PC) 63.
Legislation prohibiting mounted foxhunting was challenged unsuccessfully on the ground that it was contrary to the petitioners Convention rights in Adams v Scottish Ministers 2004 SC 665 and Whaley v Lord Advocate [2007] UKHL 53, 2008 SC (HL) 107.
An amendment to the Criminal Procedure (Scotland) Act 1995, which placed restrictions on the questioning of the complainer in trials of persons charged with sexual offences, was challenged unsuccessfully on the ground that the restrictions were incompatible with the right to a fair trial under article 6 of the Convention in DS v HM Advocate [2007] UKPC 36, 2007 SC (PC) 1.
Since then there have been two cases where challenges have been made on the ground that provisions fell to be treated as relating to reserved matters as they made modifications to Scots criminal law as it applied to reserved matters: Logan v Spiers [2008] HCJAC 61, 2010 JC 1; Martin v Most [2010] UKSC 10, 2010 SC (UKSC) 40.
In those cases too the challenges were rejected.
In AXA General Insurance Ltd v Lord Advocate [2011] UKSC 46, 2012 SC (UKSC) 122 one of the grounds of the unsuccessful challenge to the Damages (Asbestos related Conditions) (Scotland) Act 2009 was that its provisions were incompatible with the insurers Convention rights under article 1 of the First Protocol.
In Sinclair Collis Ltd v Lord Advocate [2012] CSIH 80 a challenge by a cigarette vending machine operator to section 9 of the 2010 Act on the ground that it was incompatible with its rights under that article and with article 34 of the Treaty on the Functioning of the European Union did not succeed either.
But, remarkably, this is the first case in which provisions of an Act of the Scottish Parliament have been challenged on the ground that they relate to specific reservations listed in Part II of Schedule 5 as reserved matters for the purposes of the 1998 Act.
The scheme that Schedule 5 sets out lies at the heart of the devolution settlement.
It contains a long and complicated list of reserved matters which, at first sight, might have been expected to give rise to frequent disputes which would require to be resolved by the courts.
That this has not happened until now is due partly to the use of legislative consent motions passed by the Scottish Parliament to enable the UK Parliament to pass legislation on devolved issues relating to Scotland: see Martin v Most, para 4.
But it is also due in no small measure to the care that is taken by officials within the Parliament to ensure that the provisions that the Scottish Parliament does enact are within competence.
The Bill in which sections 1 and 9 appear was accompanied on its introduction by a statement by the Presiding Officer under section 31 of the 1998 Act that in his view its provisions would be within the legislative competence of the Parliament, and it was submitted for Royal Assent under section 32 of the Scotland Act 1998 as no question had been raised about its legislative competence under section 33 of the Act by any of the Law Officers.
But there is no presumption of legislative competence from the fact that an objection to the competence of these sections has not been raised by the Presiding Officer or any of the Law Officers: A v Scottish Ministers [2001] UKPC D5, 2002 SC (PC) 63, para 7.
If an issue as to legislative competence is raised, it will be entirely a matter for the courts to determine.
The subject matter of the provisions that are under scrutiny in this case is the control of smoking in the interests of public health.
The appellants have made it clear throughout that, while they do not accept the validity or correctness of the evidence relating to smoking and health that was before the Scottish Parliament, they do not seek to challenge that evidence in these proceedings.
Nor is their challenge brought, as was done in AXA General Insurance Ltd v Lord Advocate, on the ground that the provisions in question are open to review on common law grounds as an unreasonable, irrational and arbitrary exercise of the Parliaments legislative authority.
The only question is whether any of the particular rules that were laid down in the 1998 Act by which it is to be determined whether or not a provision is outside legislative competence have been breached.
That is not to say that the question is easy to answer or unimportant.
But the exercise that has to be carried out is essentially one of statutory construction.
The answer to the question is to be found by construing the words used by the 1998 Act and examining the provisions that are under challenge in the light of the meaning that is to be given to those words.
The interpretation issue
Much of the discussion in the Court of Session was devoted to the question whether a different approach should be taken to the interpretation of the 1998 Act from that applicable to other statutes because it was said to be a constitutional instrument.
I do not think that it is necessary to dwell on that issue at length at this stage.
The Dean of Faculty accepted that the object was to arrive at the true meaning of the statute.
Its content might influence the approach to be taken, but assertions about its constitutional nature were not in point.
He acknowledged that the exercise to be undertaken was in essence no different from that which was applicable in the case of any other United Kingdom statute.
Mr Mure QC for the Lord Advocate and the Advocate General were, however, not entirely at one as to the approach that should be adopted.
For the Lord Advocate it was stressed that a construction should be avoided which would render the endowment of plenary law making powers on the Scottish Parliament futile.
The Advocate General, for his part, said that it would be wrong to favour an expansive approach to the meaning and application of the provisions about legislative competence.
Asserting that the purpose of the 1998 Act was to devolve plenary legislative power on the Parliament did not assist in determining the actual scope of what it was designed to achieve.
The Dean of Faculty said that the appellants were content to align themselves with the views of the Advocate General.
It is unsatisfactory that there should continue to be room for doubt on this matter.
So it may be helpful to summarise, quite briefly, three principles that should be followed when undertaking the exercise of determining whether, according to the rules that the 1998 Act lays down, a provision of an Act of the Scottish Parliament is outside competence.
First, the question of competence must be determined in each case according to the particular rules that have been set out in section 29 of and Schedules 4 and 5 to the 1998 Act.
It is not for the courts to say whether legislation on any particular issue is better made by the Scottish Parliament or by the Parliament of the United Kingdom at Westminster: Martin v Most 2010 SC (UKSC) 40, para 5.
How that issue is to be dealt with has been addressed and determined by the United Kingdom Parliament.
As Lord Walker observed in Martin, para 44, its task was to define the legislative competence of the Scottish Parliament, while itself continuing as the sovereign legislature of the United Kingdom.
The statutory language was informed by principles that were applied to resolve questions that had arisen in federal systems, where the powers of various legislatures tend to overlap: see Martin, paras 11 15.
But the intention was that it was to the 1998 Act itself, not to decisions as to how the problem was handled in other jurisdictions, that one should look for guidance.
So it is to the rules that the 1998 Act lays down that the court must address its attention, bearing in mind that a provision may have a devolved purpose and yet be outside competence because it contravenes one of the rules.
As Lord Atkin said in Gallagher v Lynn [1937] AC 863, 870, an Act may have a perfectly lawful object but may seek to achieve that object by invalid methods.
Second, those rules must be interpreted in the same way as any other rules that are found in a UK statute.
The system that those rules laid down must, of course, be taken to have been intended to create a system for the exercise of legislative power by the Scottish Parliament that was coherent, stable and workable.
This is a factor that it is proper to have in mind.
But it is not a principle of construction that is peculiar to the 1998 Act.
It is a factor that is common to any other statute that has been enacted by the legislature, whether at Westminster or at Holyrood.
The best way of ensuring that a coherent, stable and workable outcome is achieved is to adopt an approach to the meaning of a statute that is constant and predictable.
This will be achieved if the legislation is construed according to the ordinary meaning of the words used.
Third, the description of the Act as a constitutional statute cannot be taken, in itself, to be a guide to its interpretation.
The statute must be interpreted like any other statute.
But the purpose of the Act has informed the statutory language.
Its concern must be taken to have been that the Scottish Parliament should be able to legislate effectively about matters that were intended to be devolved to it, while ensuring that there were adequate safeguards for those matters that were intended to be reserved.
That purpose provides the context for any discussion about legislative competence.
So it is proper to have regard to the purpose if help is needed as to what the words actually mean.
The fact that section 29 provides a mechanism for determining whether a provision of an Act of the Scottish Parliament is outside, rather than inside, competence does not create a presumption in favour of competence.
But it helps to show that one of the purposes of the 1998 Act was to enable the Parliament to make such laws within the powers given to it by section 28 as it thought fit.
It was intended, within carefully defined limits, to be a generous settlement of legislative authority.
It will, of course, be necessary to identify the purpose of the provision if the challenge is brought under section 29(2)(b) on the ground that it relates to a reserved matter, bearing in mind that the phrase relates to indicates something more than a loose or consequential connection: see Lord Walker in Martin v Most, para 49.
As Lord Rodger said in that case at para 75, the clearest indication of its purpose may be found in a report that gave rise to the legislation or in a report from one of the committees of the Parliament.
But it may also be clear from its context.
As is the case when any other statute is being construed, the context will be relevant to understanding the meaning of the words used by the 1998 Act.
This is a point of some importance in this case, as the appellants have raised the issue as to what account, if any, could be taken of the headings and sidenotes in Part II of Schedule 5.
It is proper to have regard to them if help is needed as to the meaning of any of the words in the list that it sets out.
The headings and sidenotes were included in the Bill for guidance and ease of reference as its provisions were being debated.
So they are part of the contextual scene of the statute: see R v Montila [2004] UKHL 50, [2004] 1 WLR 3141, paras 34 36.
The first step in the analysis that must now be carried out is to examine the provisions whose legislative competence has been brought into question and to identify the purpose of the provisions according to the test that section 29(3) lays down.
Then the rules that the 1998 Act sets out, so far as relevant, must be examined in more detail in order to identify the tests that have to be applied in order to determine whether the provisions are outside competence.
This, the second stage, is of critical importance and it requires to be handled with great care.
The final stage will be to draw these two exercises together to reach a conclusion as to whether or not the grounds of challenge are well founded.
Sections 1 and 9 of the 2010 Act
Section 1 of the 2010 Act is headed Prohibition of tobacco displays, etc.
Subsections (1), (2) and (3) are in these terms: (1) A person who in the course of business displays or causes to be displayed tobacco products or smoking related products in a place where tobacco products are offered for sale commits an offence. (2) A person does not commit an offence under subsection (1) if the display (a) is in a specialist tobacconist, (b) does not include cigarettes or hand rolled tobacco, and (c) complies with any prescribed requirements. (3) A person does not commit an offence under subsection (1) if (a) the tobacco products or smoking related products are displayed in the course of a business involving the sale of tobacco products only to persons who carry on a tobacco business (or their employees), and (b) the display complies with any prescribed requirements.
Subsection (4) enables the Scottish Ministers to provide in regulations that no offence is committed under subsection (1) in relation to a display of tobacco products or smoking related products which complies with specified requirements.
Subsection (5) provides that a person guilty of an offence under subsection (1) is liable on summary conviction to a fine not exceeding level 4 on the standard scale.
Subsection (6) provides that a website is not a place for the purposes of subsection (1).
Subsection (7) provides that specialist tobacconist has the meaning given by section 6(2) of the Tobacco Advertising and Promotion Act 2002.
Section 9 is headed Prohibition of vending machines for the sale of tobacco products.
It is in these terms: (1) A person who has the management or control of premises on which a vending machine is available for use commits an offence. (2) A person guilty of an offence under subsection (1) is liable on summary conviction to a fine not exceeding level 4 on the standard scale. (3) In this section vending machine means an automatic machine for the sale of tobacco products (regardless of whether the machine also sells other products).
The Scottish Ministers have prepared draft regulations in relation to the display of tobacco or smoking related products in specialist tobacconists and other retail premises, and also in relation to the display or prices of tobacco products and smoking related products under powers given to them by section 3 of the 2010 Act.
They are set out in the Sale of Tobacco (Display of Tobacco Products and Prices) (Scotland) Regulations 2012.
These regulations have not yet been made or laid before the Scottish Parliament.
The appellants accept that sections 1 and 9 stand or fall together on the issue of legislative competence.
They also accept that the reason why they were enacted by the Scottish Parliament could be described in the broadest terms as being to promote public health.
Lord Reed said in the Inner House that the extrinsic material indicated that the purpose of section 1 was to enable the Scottish Ministers to take steps which might render tobacco products less visible to potential consumers, and thereby achieve a reduction in sales and thus in smoking: 2012 SC 297, para 133.
In the following paragraph he said that the extrinsic material indicated that the purpose of section 9 was to make cigarettes less readily available, particularly (but not only) to children and young people, with a view to reducing smoking.
He also said that the legal effect and short term consequences were consistent with those purposes.
The Dean of Faculty said that he concurred with these observations.
It is common ground too that the protection of health is not a reserved matter.
Head J in Part II of Schedule 5 deals with health and medicines.
But the five sections which it contains deal with particular matters (abortion; xenotransplantation; embryology, surrogacy and genetics; the subject matters of various statutes; and regulations relating to medicines, medical supplies and poisons and welfare foods), not with the promotion of public health generally.
The fact that the sections of the 2010 Act that are under challenge do not relate to any of the matters that are reserved by Head J does not, of course, mean that they are immune from challenge on other grounds.
The rules of the 1998 Act
The rules which provide the appellants with their remaining grounds of challenge, in order of appearance in the 1998 Act, are as follows: (a) Section 29(2)(b), which provides that a provision is outside competence if it relates to reserved matters.
That provision must be read together with section 29(3) which provides that, for the purposes of that section, the question whether a provision of an Act of the Scottish Parliament relates to a reserved matter is to be determined by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances. (b) Paragraph 2(1) of Schedule 4, which provides that an Act of the Scottish Parliament cannot modify, or confer power by subordinate legislation to modify, the law on reserved matters.
That rule must be read together with paragraph 2(3), which states that sub paragraph (1) applies to a rule of Scots private law or Scots criminal law only to the extent that the rule in question is special to a reserved matter. (c) Section C7 in Head C Trade and Industry in Part II of Schedule 5, which is headed Consumer protection and includes Regulation of (a) the sale and supply of goods and services to consumers. (d) Section C8 in Head C, which is headed Product standards, safety and liability and includes Product safety and liability.
The appellants have three grounds of challenge: (1) that, on a proper construction of section 29(2)(b) and 29(3) read together with section C7(a) of Head C in Schedule 5, sections 1 and 9 of the 2010 Act relate to the sale and supply of goods to consumers, which is a reserved matter; (2) that, on a proper construction of those subsections read together with section C8 of Head C, sections 1 and 9 relate to product safety, which is a reserved matter; and (3) that, on a proper construction of paragraph 2 of Schedule 4, sections 1 and 9 modify rules of Scots criminal law because they create new offences which can only be committed in the course of the sale and supply of goods to consumers.
The first two grounds of challenge require one to understand the scope of the matters that are reserved by sections C7 and C8.
Once one has an understanding of their subject matter, the question will be whether sections 1 and 9, by reference to their purpose (having regard among other things to their effect in all the circumstances), relate[s] to it.
The third ground of challenge raises a different point.
It depends on an understanding of the word modify in paragraph 2 of Part I of Schedule 4.
It is not in doubt that sections 1 and 9 create new offences.
The question is whether they modify offences which are already part of Scots criminal law and, as their subject matter is a reserved matter, form part of the law on reserved matters for the purposes of that paragraph.
Section C7(a)
The appellants argument is that, as the long title of the 2010 Act states in terms that one of its purposes is to make provision about the retailing of tobacco products and as the headnote to Chapter 1 states that it is concerned with the display, sale and purchase of tobacco products, sections 1 and 9 must be taken to relate to the matters reserved by the words the sale and supply of goods to consumers in section C7(a).
They say that these words must simply be given their ordinary and natural meaning.
Where the words have a clear meaning, as they have here, it would be wrong to allow that meaning to be overridden by other aids to interpretation such as the heading to section C7.
The words used do not give rise to any ambiguity.
The reserved matter is the regulation, in any way and for any purpose, of the sale and supply of goods to consumers.
It would be surprising if the words used in section C7(a) had such a wide reach.
Responsibility for Scots private law, including the law of obligations arising from contract, belongs to the Scottish Parliament.
This is made clear by section 29(4) which deals with modifications to Scots private law as it applies to reserved matters but leaves Scots private law otherwise untouched, and by the definition of what references to Scots private law are to be taken to mean in section 126(4).
The sale and supply of goods is part of the law of obligations and, as such, is the responsibility of the Scottish Parliament.
The appellants argument as to the reach of section C7(a) does not sit easily with this conclusion or with the way Scots private law is dealt with elsewhere in the 1998 Act.
This makes it necessary to look more closely at the context in which the words of that section appear.
As a starting point, there is the underlying purpose of Part II of Schedule 5 itself.
It will be recalled that paragraph 1 of Part I of Schedule 4 to the 1998 Act provides that an Act of the Scottish Parliament cannot modify Article 6 of the Union with Scotland Act 1706 and of the Union with England Act 1707 so far as it relates to freedom of trade: see para 2, above.
Part II of Schedule 5 contains eleven Heads and a total of 67 sections, within which there are numerous subsections and paragraphs.
Their content ranges from fiscal, economic and monetary policy in Head A to outer space in Head J.
Sometimes the subject matter is described in broad terms; sometimes it is identified simply by the name and date of a statute.
There is no common characteristic, but there is a common theme.
It is that matters in which the United Kingdom as a whole has an interest should continue to be the responsibility of the United Kingdom Parliament at Westminster.
They include matters which are affected by its treaty obligations and matters that are designed to ensure that there is a single market within the United Kingdom for the free movement of goods and services.
As the purpose of Part II of Schedule 5 is to define the limits of the legislative competence of the Scottish Parliament, anything that does not fall within the matters listed there must be taken to be within competence.
These considerations cannot be used to override the clear meaning of the words used in the Schedule.
But they are part of the overall context.
They set the scene for a closer look at the provisions within section C of Head C itself.
Section C7 is headed Consumer protection.
It falls into three parts.
First, there is a list of nine areas of consumer protection which are the subject of regulation.
Two of them, mentioned in paragraphs (d) and (e), are the subject of exceptions.
The exception to paragraph (e), which deals with misleading and comparative advertising, refers to regulation specifically in relation to food, tobacco and tobacco products.
But this is because, at the time when the Bill was being debated, an agreement on a European basis was in prospect and it was intended that implementation of that type of agreement would be a devolved matter: HL Debates, 23 July 1998, col 1124.
It offers no assistance on the point at issue in this case.
Secondly, there follows as a separate item the safety of, and liability for, services supplied to consumers.
Thirdly, there is the subject matter of eight areas of consumer protection which are defined by reference to the statutes or regulations by which they are regulated.
There is one exception to the entire section.
It is the subject matter of section 16 of the Food Safety Act 1990.
As the Lord President explained in para 9 of his opinion, this is to be understood as having been inserted simply to make it clear that the power to make regulations under that section was to remain, as it had been before devolution, with the Scottish authorities.
It does not cast any significant light on the meaning that is to be given to section C7(a).
The relevant section of the Notes on Clauses that accompanied the Scotland Bill states that the titles of heads, sections, etc are merely signposts and that they do not form part of the definitions of the reserved matters.
But, taken overall, the context of section C7 is as its heading indicates.
It is concerned with consumer protection in all its various aspects, and the part of it within which paragraph (a) appears is headed by the words regulation of.
The words regulation, protection and consumer are important pointers to the sections subject matter.
Cowan Ervine and D S J Templeton observe in their title on Consumer Protection in the Stair Memorial Encyclopaedia Reissue, para 1, that as a topic consumer protection is ill defined.
But the key concepts which serve as a guide to the meaning to be given to the words used in section C7(a) are those of regulation and protection.
This is an area where the law intervenes on behalf of the consumer in the sale and supply of goods and services to address a significant inequality of bargaining power: Butterworths Trading and Consumer Law, para 2.
It aims to address the imbalance that occurs where the seller or supplier overreaches himself to the disadvantage of the consumer.
As Lord Brodie said in the Inner House, para 196, its purpose is to facilitate and encourage participation by the consumer by making the market operate more fairly and therefore more effectively: see also the Final Report of the Committee on Consumer Protection (1962, Cmnd 1781), para 1, in which the Committee rejected the notion that it should scrutinise the whole range of commercial life wherever it touched the consuming public.
The Lord President set out in para 12 passages from Explanatory Notes dealing with section C7 that were prepared and published by the Scotland Office in 2004, some time after the 1998 Act was enacted.
Among the points made by them, drawing on points made in the Notes on Clauses, is that the reservation in section C7(a) as to the sale and supply of goods and services to consumers covers the terms on which such goods and services are sold.
The Lord President recognised that they did not have the interpretative value which they would have had if they had accompanied the Bill in its passage through Parliament.
But in para 13 he said that the commentary did go some way, quantum valeat, to suggesting that section C7(a) is concerned essentially with the contractual aspects of the sale and supply of goods and services to consumers which was the interpretation which he would otherwise favour.
It seems to me however, with respect, that it would be wrong to pay any regard to Explanatory Notes, as they do not form any part of the contextual scene of the statute.
They are no doubt useful as they provide guidance, but unlike the Notes on Clauses they have no more weight than any other post enactment commentary as to the meaning of the statute.
I also think that the Lord Presidents description of the scope of section C7(a), which was based on his reading of them, was too narrow.
The better view is that given by Lord Reed in para 96, with which Lord Brodie agreed.
It encompasses all aspects of regulation of the sale and supply of goods and services to consumers within the field of consumer protection with which section C7 as a whole is concerned.
The key words in this formulation are the words regulation, protection and consumer: see para 31, above.
The word protection points away from the appellants argument that the reserved matter is the regulation, in any way and for any purpose, of the sale and supply of goods to consumers.
Section C8
The appellants argument under this head of challenge is that sections 1 and 9 of the 2010 Act fell within the scope of section 11 of the Consumer Protection Act 1987 and that accordingly they relate to the matter reserved by that part of section C8 which refers to product safety.
The Secretary of State is given power by section 11 to make such provision as he considers appropriate for the purpose of ensuring that goods to which it applies are safe; that goods which are unsafe, or would be unsafe in the hands of persons of a particular description, are not made available to persons generally or to persons of that description; and that appropriate information is, and inappropriate information is not, provided in relation to goods to which the section applies.
In R v Secretary of State for Health, Ex p United States Tobacco International Inc [1992] QB 353 it was held that regulations banning oral snuff were within the powers of the Act, as its provisions applied both to defective goods and to goods which were intrinsically dangerous.
Taylor LJ said at p 365 that there was no basis for confining the objects of the Act to safety risks or defects other than the inherent nature of tobacco and that, in the context of oral snuff, the Act was on any view apt to protect the consumer whether one called its purpose consumer protection or public health.
Lord Reed noted in para 98 that section 11 of the Consumer Protection Act 1987 is not restricted to consumer goods or to the sale or supply of goods to consumers.
This may explain why this matter does not appear in section C7 but in a separate section dealing with product standards, safety and liability.
In para 100 he said that, having regard to the significance of product safety to the operation of a single market, and bearing in mind also that the Scottish Office was not responsible for the protection of Scottish consumers in relation to product safety prior to devolution, it was unlikely that Parliament intended to devolve a general legislative competence in relation to matters falling within the scope of section 11.
He held that the matters with which that section deals fell within the scope of the expression product safety, giving those words their ordinary meaning, and that they are accordingly reserved by section C8.
The appellants accept his conclusions as to the meaning of these words.
Paragraph 2 of Schedule 4
The appellants challenge under this heading is presented under reference to two sets of regulations made in the exercise of the powers conferred by section 11 of the Consumer Protection Act 1987.
They are the Tobacco for Oral Use (Safety) Regulations 1992 (SI 1992/3134) and the Tobacco Products (Manufacture, Presentation and Sale) (Safety) Regulations 2002 (SI 2002/3041).
It is not necessary to set out the detailed content of these regulations, except to note that they each contain prohibitions in the field of product safety which is a reserved matter under section C8 of Head C of Schedule 5, and that a contravention of their provisions constitutes an offence.
The argument proceeds in these stages: first, that these regulations are to be treated as part of the law on reserved matters within the meaning of paragraph 2(1) of Schedule 4 to the 1998 Act as their subject matter is a reserved matter; second, that they both contain rules of Scots criminal law which are special to a reserved matter, so the prohibition in that paragraph applies to them; third, that sections 1 and 9 of the 2010 Act modify the rules that each set of regulations contains which is contrary to that prohibition; and fourth, that they are outside competence under section 29(2)(c) because they are in breach of the restrictions in Schedule 4.
There is no dispute as to the first and second stages of this argument.
The question is whether the third and fourth stages are well founded, having regard to the purpose and effect of those sections.
Drawing these points together
The question whether sections 1 and 9 of the 2010 Act relate to the matters reserved by section C7(a) and section C8 in Head C of Schedule 5 is to be determined by reference to the purpose of those provisions, having regard among other things to their effect in all the circumstances: section 29(3).
The purpose of section 1 is to enable the Scottish Ministers to take steps which might render tobacco products less visible to potential consumers, and thereby achieve a reduction in sales.
The purpose of section 9 is to make cigarettes less readily available, particularly to children and young people, with a view to reducing smoking: see para 22, above.
Their legal effect and their short term consequences can be taken to be consistent with those purposes.
As tobacco products will be less visible and less readily available, the result is likely to be a reduction in sales and a consequent reduction in smoking.
The extent to which those aims will be realised in practice does not matter, as it is to the purpose of the provisions that section 29(3) directs attention in order to determine whether they are within competence.
Can it be said that these provisions relate to the matters reserved by sections C7(a) and C8 or either of them?
I take first section C7(a).
I approach it on the assumption most favourable to the appellants that it encompasses all aspects of regulation of the sale and supply of goods and services to consumers within the field of consumer protection: see para 34, above.
But I do not see how, even on that assumption, it can be said that the purpose of sections 1 and 9 of the 2010 Act has anything to do with consumer protection in that sense.
Their aim is to discourage or eliminate sales of tobacco products, not to regulate how any sales are to be conducted so as to protect the consumer from unfair trade practices.
There will be nothing of that kind to regulate as far as the vending machines are concerned.
The use of such machines will be prohibited, and there will be no sales from any of them.
As for any sales that may be entered into in a place where tobacco products are offered for sale, the purpose of section 1 is to discourage transactions in such products by preventing them from being displayed and, by this means, their availability for sale from being advertised.
The terms and conditions of any sale that may take place are unaffected, as are any other aspects of the transaction that may need to be regulated to ensure that the consumer is not exposed to a method of trading that is unfair.
The area of activity with which the section deals is outside the scope of consumer protection, because it does not seek to regulate in any way any sales that may actually take place.
For these reasons I would hold that this ground of challenge is misconceived and that it must be rejected.
As for section C8, the scope of the expression product safety extends to matters falling within the scope of section 11 of the Consumer Protection Act 1987: see para 36, above.
Here too there is a mismatch between what falls within the scope of that expression and the purpose of sections 1 and 9 of the 2010 Act.
Their purposes have nothing to do with the standards of safety to be observed in the production and sale of tobacco products or smoking related products that are available for purchase in places where they are offered for sale or are sold by means of vending machines.
The Secretary of State is empowered by section 11 of the Consumer Protection Act 1987 to make such provision as he considers appropriate to prohibit the supply of specific tobacco products either generally or to a particular class of persons: R v Secretary of State for Health, Ex p United States Tobacco International Inc [1992] QB 353, per Taylor LJ at p 365.
But sections 1 and 9 do not prohibit the supply of these products either generally or to any particular class.
Nor is it their purpose to do so.
They are designed to promote public health by reducing their attractiveness and availability, not to prohibit in any way the sale of these products to those who wish and are old enough to purchase them.
Promotion of public health in Scotland is a responsibility of the Scottish Parliament under the devolution settlement.
Taylor LJs observation in United States Tobacco at p 365 that the 1987 Act is apt to protect the consumer for reasons of public health must not be taken out of context.
The words product safety in C8 direct attention to matters that are of concern to the single market in the general area of trade and industry.
It is not the purpose of sections 1 and 9 to disrupt or unbalance trading in tobacco products in that way at all.
I would reject this ground of challenge also.
I do not see this as a case which gives rise to the problem which may need to be dealt with if the provision in question has two or more purposes, one of which relates to a reserved matter.
In such a situation the fact that one of its purposes relates to a reserved matter will mean that the provision is outside competence, unless the purpose can be regarded as consequential and thus of no real significance when regard is had to what the provision overall seeks to achieve: see para 16, above.
In this case the purposes of sections 1 and 9 can be identified without difficulty.
There is no question of those purposes relating in any way to a reserved matter.
But if, contrary to the conclusion I have reached, it could be said that one of the purposes of sections 1 and 9 was to inhibit trading in tobacco products and smoking related products in Scotland in a way that was of concern to the single market, I would hold that that purpose is simply a consequence of the purpose to promote public health which is what these provisions are really about.
It is a means to an end.
It is not, as Lord Dunedin put it in Kaye v Burrows [1931] AC 454, 485, a purpose and end in itself.
The question whether sections 1 and 9 of the 2010 Act are in breach of the restrictions in Schedule 4 because they modify the law on reserved matters must be dealt with in a different way.
This is because section 29(3) applies only to questions of the kind that section 29(2)(b) gives rise to.
Here the issue arises under section 29(2)(c), the question being simply whether any of the restrictions in Schedule 4 have been breached.
It must be approached in this case on the basis that the 1992 and 2002 Regulations, which were made under the powers conferred by section 11 of the Consumer Protection Act 1987, are part of the law on reserved matters for the purposes of paragraph 2(1) of Schedule 4.
Sections 1 and 9 do not seek to amend or otherwise affect anything that is set out in those regulations.
In that sense they cannot be said to modify them at all.
As Lord Reed said in para 152, the regulations continue in force as before.
But the appellants say that they modify the law on reserved matters because they create new offences, in addition to those already provided for, which can only be committed in the course of the sale and supply of goods to consumers.
I would reject that argument.
The purpose of the offences that these sections create, as I have said, is to discourage or eliminate the sale or supply of tobacco products or smoking materials.
If this purpose is realised, that will be their effect.
This is plain in the case of the vending machines, because the effect of section 9 is that cigarettes will no longer be available to be sold by this means.
The criminal law relating to any sales that may be made in a place where these products are available for sale will not be affected by section 1.
It does not create any new offence in regard to any such sales, and the existing offences are not modified.
It is not a provision of the kind referred to in section 11 of the Consumer Protection Act 1987, as it is not its purpose to secure that the products sold are safe, that products that are unsafe are not made available for sale or that appropriate information is provided and inappropriate information is not.
I can see no connection between its purpose and effect and the law on reserved matters.
There is no basis for holding that sections 1 and 9 are outside competence on this ground.
Conclusion
For these reasons I would hold that none of the challenges are well founded and that sections 1 and 9 of the 2010 Act are not outside the legislative competence of the Scottish Parliament.
I would dismiss the appeal and affirm the First Divisions interlocutor.
| In this appeal, the Appellants argue that sections 1 and 9 of the Tobacco and Primary Medical Services (Scotland) Act 2010 (the 2010 Act) are outside the legislative competence of the Scottish Parliament.
Section 1 of the 2010 Act prohibits the display of tobacco products in a place where tobacco products are offered for sale.
Section 9 prohibits vending machines for the sale of tobacco products [3].
The limits to the legislative competence of the Scottish Parliament are set out in the Scotland Act 1998 (the 1998 Act).
The Appellants first broad argument is that, by reference to their purpose, sections 1 and 9 relate to the sale and supply of goods to consumers and product safety.
These are matters which are reserved to the UK Parliament under the 1998 Act and on which the Scottish Parliament cannot legislate.
Their second broad argument is that sections 1 and 9 modify the law on reserved matters.
They say that two sets of Regulations (the Tobacco for Oral Use (Safety) Regulations 1992 and the Tobacco Products (Manufacture, Presentation and Sale) (Safety) Regulations 2002) should be treated as being part of the law on reserved matters because their subject matter is a reserved matter.
Those Regulations contain rules of Scots criminal law which are special to a reserved matter.
Sections 1 and 9 modify those rules, which under the 1998 Act they cannot do.
The Appellants also say that sections 1 and 9 create new offences, in addition to those already provided for in the Regulations, which can only be committed in the course of the sale and supply of goods to consumers [2, 3, 25 and 38].
This is the first case in which provisions of an Act of the Scottish Parliament have been challenged on the ground that they relate to the specific reservations in the list of reserved matters [6].
At first instance, the Court of Session held that none of the Appellants challenges to the legislative competence of sections 1 and 9 (which included the challenges made in this appeal) were well founded, and it dismissed their petition for judicial review.
Their reclaiming motion (appeal) to the Inner House of the Court of Session was unsuccessful [4].
The Supreme Court unanimously dismisses the appeal.
Sections 1 and 9 of the 2010 Act are within the legislative competence of the Scottish Parliament.
The judgment is given by Lord Hope with whom all the other Justices agree.
Three principles should be followed when undertaking the exercise of determining whether, according to the rules that the 1998 Act lays down, a provision of an Act of the Scottish Parliament is outside competence.
First, the question of competence must be determined in each case according to the
particular rules that have been set out in the 1998 Act.
Second, those rules must be interpreted in the same way as any other rules that are found in a UK statute.
Third, the description of the 1998 Act as a constitutional statute cannot be taken, in itself, to be a guide to its interpretation [12 15].
The exercise is essentially one of statutory construction.
The answer to the question of whether the challenged provisions are within legislative competence is to be found by construing the words used by the 1998 Act and examining the challenged provisions in the light of the meaning that is to be given to those words.
In this case, the first stage is to examine sections 1 and 9 and to identify their purpose.
The second stage is to examine the relevant rules in the 1998 Act to identify the tests that have to be applied.
This stage is of critical importance and it requires to be handled with great care.
The final stage is to draw these exercises together to reach a conclusion on the legislative competence of sections 1 and 9 [9 and 18].
The purpose of section 1 is to enable the Scottish Ministers to take steps which might render tobacco products less visible to potential consumers and thereby achieve a reduction in sales and thus in smoking.
The purpose of section 9 is to make cigarettes less readily available, particularly (but not only) to children and young people, with a view to reducing smoking.
The legal effect and short term consequences are consistent with those purposes [22].
In the 1998 Act, the reserved matter of the sale and supply of goods and services to consumers encompasses all aspects of regulation of the sale and supply of goods and services to consumers within the field of consumer protection.
The reserved matter of product safety extends to matters falling within the scope of section 11 of the Consumer Protection Act 1987 (which gives the Secretary of State power to make product safety regulations) [34, 36, 40 and 42].
The Court does not see how it can be said that the purpose of sections 1 and 9 has anything to do with consumer protection.
The aim of sections 1 and 9 is to discourage or eliminate sales of tobacco products, not to regulate how any sales are to be conducted so as to protect the consumer from unfair trade practices [40 41].
The purpose of sections 1 and 9 also has nothing to do with the standards of safety to be observed in the production and sale of tobacco products.
Sections 1 and 9 are designed to promote public health by reducing the attractiveness and availability of tobacco products, not to prohibit in any way their sale to those who wish and are old enough to purchase them.
The words product safety in the 1998 Act direct attention to matters that are of concern to the single market in the general area of trade and industry.
It is not the purpose of sections 1 and 9 to disrupt or unbalance trading in tobacco products in that way at all [42].
Sections 1 and 9 do not seek to amend or otherwise affect anything that is set out in the two sets of Regulations.
In that sense they cannot be said to modify them.
The purpose of the offences that sections 1 and 9 create is to discourage or eliminate the sale or supply of tobacco products.
If this purpose is realised, that will be their effect.
This is plain in the case of the vending machines, because the effect of section 9 is to prohibit the sale of tobacco products by way of vending machines.
The Court can see no connection between the purpose and effect of section 1 and the law on reserved matters.
The criminal law relating to any sales in a place where tobacco products are available for sale will not be affected by section 1.
Section 1 does not create any new offence in regard to any such sales, and the existing offences are not modified.
Section 1 is not a provision within the scope of section 11 of the Consumer Protection Act 1987 [44 45].
|
This is a reference of a devolution issue which has arisen in proceedings in the Sheriff Court of Lothian and Borders at Edinburgh.
It was required by the Lord Advocate under paragraph 33 of Schedule 6 to the Scotland Act 1998.
The respondent, to whom I shall refer as B as his case has not yet gone to trial, has been charged on summary complaint with housebreaking with intent to steal and having in his possession a controlled drug contrary to section 5(2) of the Misuse of Drugs Act 1971.
He pled not guilty and was admitted to bail.
A trial diet was fixed for 10 October 2011.
By letter dated 1 August 2011 his solicitor gave notice of his intention to raise a devolution issue in terms of paragraph 1 of Schedule 6 to the Scotland Act 1998.
The issue was described in his Devolution Minute in these terms: (a) Article 6(3)(c) of the European Convention on Human Rights provides: Everyone charged with a criminal offence has the following minimum rights: To defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require. (b) That in the Minuters case he was interviewed by the police.
The Minuter was offered legal assistance prior to the interview but declined.
This was done without recourse to a solicitor.
Access to a solicitor should be automatic when someone has been detained in police custody. (c) Accordingly the Minuters right to a fair trial under article 6 has been breached if the Crown choose to lead evidence of the Minuters police interview.
The Lord Advocate understood the propositions in para 2(b) of the Minute to have been based on the observations of the High Court of Justiciary in Jude v HM Advocate [2011] HCJAC 46, 2011 SLT 722.
In para 34 of his opinion, with which all the other members of the Appeal Court agreed, the Lord Justice Clerk (Gill) said that he could not see how a person could waive his right to legal advice when he had not had access to legal advice on the point.
In view of the importance of the question raised by this observation the Lord Advocate invited the sheriff to refer the issue to this court, which the sheriff has now done.
The reference
The questions that were referred by the sheriff did not appear to focus the issue in sufficiently precise terms.
So, at the Courts request, an amended version was agreed between the parties.
The following are the questions in their amended form: (i) whether it would necessarily be incompatible with article 6(1) and 6(3)(c) of the European Convention on Human Rights for the Lord Advocate to lead and rely upon evidence of answers given during a police interview of a suspect in police custody (whether voluntarily, as a detainee under section 14 of the Criminal Procedure (Scotland) Act 1995 or after arrest and prior to charge) who, before being interviewed by the police: had been informed by a police officer of his Salduz/article 6 rights of access to legal advice; and without having received advice from a lawyer, had stated that he did not wish to exercise such rights. (ii) whether it would be compatible with the respondents rights under articles 6(1) and 6(3)(c) of the ECHR for the Lord Advocate, at the trial of the respondent, to lead and rely upon evidence of answers given by the respondent during a police interview conducted with him between 10 and 11 July 2011 in circumstances where, prior to such interview taking place, the respondent was informed by a police officer of his Salduz/article 6 rights of access to legal advice and, without having received advice from a lawyer, indicated: verbally to police officers prior to being interviewed; in writing by signing a solicitor access recording form (SARF); and verbally at the start of the interview that he did not wish to exercise such rights.
The first question raises an issue of principle, which is focused by the word necessarily.
The second question is directed to the facts of this case.
The Convention issue which it raises, and to which the argument was directed, is focused by the words without having received advice from a lawyer.
I agree with Lord Hamilton that the task for this court is to identify as best it can the requirements which the Strasbourg court has set for the making of an effectual waiver of Convention rights (see para 78, below).
I emphasise the words the Strasbourg court, as they indicate the proper limits of the jurisdiction that was given to this court by the Scotland Act 1998.
It may be, as Lord Kerr makes clear in his judgment, that the way interviews with suspects are currently conducted in Scotland is in need of improvement.
But I do not think that this should be done by giving a more generous scope to the Convention rights than that which is to be found in the jurisprudence of the Strasbourg court.
The structure of the Scotland Act, section 57(2) of which places such a tight fetter on the powers of the Lord Advocate as head of the system of criminal prosecution in Scotland, is an important factor in the determination of how we should perform our task.
As Lord Rodger of Earlsferry declared in HM Advocate v Scottish Media Newspapers Ltd 2000 SLT 331, 333, the Lord Advocate simply has no power to move the court to grant any remedy which would be incompatible with the European Convention on Human Rights: see also HM Advocate v Robb 2000 JC 127, 131, per Lord Penrose.
This is in sharp contrast to the position under the Human Rights Act 1998, section 8(1) of which provides that in relation to an act of a public authority which it finds unlawful the court may grant such relief or remedy as it considers just and appropriate.
The absolute nature of the fetter which section 57(2) imposes affects cases in the past (other than closed cases) as well as this one, and it will affect all cases in the future.
This makes it especially important for us to avoid laying down fixed rules that may impede the prosecution of crime in the public interest, unless they have been clearly identified as such by the court in Strasbourg.
We are, after all, dealing here with implied rights which are open, in principle, to modification or restriction so long as this is not incompatible with the right to a fair trial.
It is not the purpose of article 6 to make it impracticable to bring those who are accused of crime to justice: Montgomery v HM Advocate 2001 SC (PC) 1, 29, [2003] 1 AC 641, 673; Dyer v Watson 2002 SC (PC) 89, 133, [2004] 1 AC 379, 429 per Lord Rodger of Earlsferry.
There is no treaty provision which expressly governs the circumstances in which a Convention right may or may not be taken to have been waived.
The rules, if there are to be rules, must be found in the judgments of that court.
It should be remembered, too, that there is a difference between an absolute rule and a guiding principle.
The virtue of a guiding principle is that its application will depend on the facts and circumstances of each case.
If that is as far as Strasbourg has taken the point on waiver, we should be content with that.
We should not try to push it further by creating a system which is fenced in by fixed rules.
A descent to that level of detail is contrary to the approach that the court itself has adopted.
The President of the court, Sir Nicolas Bratza, said in a paper which he gave in Edinburgh in March 2011 that the Strasbourg court has been careful, in general, to leave the national authorities to devise a more Convention compliant system without itself imposing specific requirements on the State: [2011] EHRLR 505, 510.
The facts
The respondent was detained at 2057 hrs on 10 July 2011 under section 14 of the Criminal Procedure (Scotland) Act 1995 on suspicion of housebreaking with intent to steal.
He was cautioned and made no reply.
He was searched and found to be in possession of a substance which he said was cannabis.
He was then taken to a police station, where he arrived at 2130 hrs.
He was then advised that he had been detained under section 14 and that he was under no obligation to answer any questions other than to give his name and address, which he then did.
At 2145 hrs he was told of his rights under sections 15 and 15A of the 1995 Act, as amended by the Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010, section 1(4).
He was told that he was entitled to have intimation of his detention and of the place where he was being detained sent to a solicitor.
In reply he gave the name of a firm of solicitors, Central Criminal Lawyers.
He was asked whether he wished to have intimation sent to anyone else, to which he replied no.
He was also told that he had the right for a private consultation with a solicitor before being questioned by the police and at any time during questioning.
He was asked whether he wished a private consultation with a solicitor before being questioned, to which he replied no.
These questions and replies were noted on a pro forma detention form.
At 2335 hrs the following statement was read out and signed by him immediately before the start of his interview: You have chosen not to have a private consultation with a solicitor.
Signing this in no way prevents you from changing your decision at a later time.
His interview began at 2336 hrs on 10 July 2011.
It continued until 0032 hrs on 11 July 2011.
At the start of the interview he was asked whether he had been offered a consultation with a solicitor prior to the interview.
He confirmed that this was correct.
He was also asked whether it was correct that he had declined that interview and stated that he was happy to be interviewed without a lawyer being present or having a private consultation.
He replied that this too was correct.
He was then questioned about the alleged housebreaking with intent to steal, which ultimately became the first charge in the summary complaint.
In the course of that interview he made statements in relation to that matter which were incriminating.
At 0021 hrs on 11 July 2011 he was cautioned and arrested for housebreaking with intent to steal.
He made no reply.
The interview then continued in relation to the matter which ultimately became the second charge on the summary complaint.
Before he was asked any questions about it the respondent confirmed that when he was first taken into custody he was found in possession of a herbal substance which he stated was cannabis.
He was also asked whether he wished to consult with a solicitor before the police continued with the interview, to which he replied no.
He was then questioned in relation to that matter between 0024 hrs and 0032 hrs.
At 0032 hrs he was cautioned and arrested for a contravention of section 5(2) of the Misuse of Drugs Act 1971.
He again made no reply.
I am grateful to Lord Hamilton for the references he has made in paras 74 and 75 to the current legislation and to section 4 of the Manual of Guidance of Solicitor Access produced by the Association of Chief Police Officers in Scotland (ACPOS Manual) which was published in January 2011.
They are an important part of the background.
The issue in this case
At no stage either before or during the police interview did the respondent receive advice from a lawyer on the question whether he should exercise his right of access to a solicitor before being questioned or during the questioning.
Nor was he given an opportunity to seek legal advice on this matter before he decided whether or not he should exercise it.
The question is whether he can be taken to have validly waived his right of access to a lawyer without having received advice from a lawyer on this point.
In other words, does article 6(1) read with article 6(3)(c) of the Convention require, as a rule, that a person must have had legal advice before he can be taken to have waived that right? It does not say so expressly.
But, as is abundantly clear from the jurisprudence of the Strasbourg court, the article is to be interpreted broadly by reading into it a variety of other rights to which the accused person is entitled to give effect, in a practical way, to the right to a fair trial: see Brown v Stott 2001 SC (HL) 43, p 74C E; [2003] 1 AC 681, 719 F G.
As those rights are not set out in absolute terms in the article, they are open to modification or restriction so long as they are not incompatible with the right to a fair trial.
The ruling by the Grand Chamber in Salduz v Turkey (2008) 49 EHRR 421 illustrates how this is done.
In para 55, it said: Against this background, the Court finds that in order for the right to a fair trial to remain sufficiently practical and effective article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police, unless it is demonstrated in the light of the particular circumstances of each case that there are compelling reasons to restrict this right.
In Ambrose v Harris (Procurator Fiscal, Oban) [2011] UKSC 43, 2011 SLT 1005, [2011] 1 WLR 2435 the issue which the court had to decide was whether the right of access to a lawyer prior to police questioning which was established in Salduz applies only to questioning which takes place when the person has been taken into police custody.
In para 25 of my judgment in Ambrose I said: The domestic law test for the admissibility of the answers that were given to the questions put by the police is whether or not there was unfairness on the part of the police.
The fact that the person did not have access to legal advice when being questioned is a circumstance to which the court may have regard in applying the test of fairness, but it is no more than that.
There is no rule in domestic law that says that police questioning of a person without access to legal advice who is suspected of an offence but is not in custody must always be regarded as unfair.
The question is whether a rule to that effect is to be found, with a sufficient degree of clarity, in the jurisprudence of the Strasbourg court.
That approach to the issue was supported by the majority of the court in that case, and I would apply the same approach to the questions raised by this reference too.
There is no rule in the domestic case law that says that a detainee cannot ever waive his right to legal advice when he is being questioned by the police when he has not had access to legal advice on the question whether or not he should waive that right, and that police questioning in such circumstances must always be regarded as unfair.
The question is whether a rule to that effect is to be found, with a sufficient degree of clarity, in the jurisprudence of the Strasbourg court.
Mr Scott QC for the respondent acknowledged in his written case that there is, as yet, no clear and constant jurisprudence of the Strasbourg court that says that legal advice is a necessary safeguard in order to ensure that any waiver is valid.
He did not depart from that position in his oral argument, at the outset of which he said that it was not his position that a waiver was bad simply because it was given without legal advice, as had been indicated by the Appeal Court.
He submitted that legal advice was none the less the most effective of the possible safeguards for ensuring that a waiver is knowing and intelligent and that, in certain circumstances, it may be the minimum safeguard to ensure a valid waiver.
His position was that the first question in the reference should be answered in the negative; and that we should answer the second question, which is directed to the facts of this case, in the negative also.
For the Crown, the advocate depute also submitted that the first question should be answered in the negative.
But she submitted that the second question should be answered in the affirmative.
Notwithstanding the position which Mr Scott adopted in the course of his very able argument, I think that the Strasbourg jurisprudence needs to be examined with some care to see whether it provides any support for the Lord Justice Clerks statement in Jude v HM Advocate 2011 SLT 722, para 32 that the argument for the Crown that the appellants right of access to a lawyer was capable of being waived failed because their consent to be interviewed was not informed by legal advice.
He returned to this point in para 34, where he said: Furthermore, a valid waiver can proceed only on the basis of an informed decision.
Since the right allegedly waived was that of access to legal advice, I cannot see how any of the appellants could waive that right when, ex hypothesi, he had no reason to think that he had any such right and had not had access to legal advice on the point (cf Millar v Dickson 2002 SC (PC) 30; Pfeifer v Austria (1992) 14 EHRR 692; Pishchalnikov v Russia (Application No 7025/04) (unreported) given 24 September 2009) The respondent in this case did have reason to think that he had a right of access to legal advice, as his detention took place after the decision in Cadder v HM Advocate [2010] UKSC 43, 2011 SC (UKSC) 13 and he was told that he had a right to a consultation with a solicitor before he was interviewed.
But the question whether his decision not to exercise that right was an informed decision is directly in point in his case, as it is in many other cases which are still pending where this issue has been raised as a devolution issue in the sheriff courts and the High Court of Justiciary.
The Strasbourg cases
It is convenient to examine the jurisprudence of the Strasbourg court as it has developed over time in three stages.
In the first group there is the jurisprudence which formed the basis of the discussion of this issue in Millar v Dickson 2002 SC (PC) 30; [2002] 1 WLR 1615.
The second consists of the jurisprudence on which the court relied when commenting on this issue in Salduz.
The third is the jurisprudence since Salduz.
It has, of course, to be borne in mind when looking at this jurisprudence that the rights which are said to have been waived may vary in importance according to the circumstances of each case.
The right which we are dealing with in this case is the right of the detainee to have access to legal advice prior to and during his interview by the police while in police custody.
And the test of whether the waiver is effective may vary in intensity according to whether it was express or is said to have been implied from the actings of the applicant.
This is a case where the waiver that is in question was an express waiver, not one that is said to have arisen by implication.
So care needs to be taken when looking at cases where the right said to have been waived was a different right, such as the right to an independent and impartial tribunal, and where the right to legal assistance was not declined expressly as it was in this case and in Scotland it always will be, if the practice of offering it which has been adopted in the light of Cadder and the requirements of section 15A of the 1995 Act is properly carried out.
The factual background has always been important to the approach that the Strasbourg court has taken to implied rights.
Dicta in a case with one set of facts may not be a safe guide to what it would make of a case with facts that were materially different, and the domestic court too should be aware of these differences.
(a) the first group
In Millar v Dickson 2002 SC (PC) 30 the question was whether the appellants had waived their right to an independent and impartial tribunal under article 6 of the Convention by appearing before the temporary sheriffs without objecting to their hearing their cases on the ground that they did not meet this requirement.
Drawing on such jurisprudence as was to be found in the judgments of the Strasbourg court at that time, Lord Bingham of Cornhill said in para 31: In most litigious situations the expression waiver is used to describe a voluntary, informed and unequivocal election by a party not to claim a right or raise an objection which it is open to that party to claim or raise.
In the context of entitlement to a fair hearing by an independent and impartial tribunal, such is in my opinion the meaning to be given to the expression.
That the waiver must be voluntary is shown by Deweer v Belgium (1980) 2 EHRR 439, where the applicants failure to insist on his right to a fair trial was held not to amount to a valid waiver because it was tainted by constraint (para 54, p 465).
In Pfeifer and Plankl v Austria (1992) 14 EHRR 692 there was held to be no waiver where a layman had not been in a position to appreciate completely the implication of a question he had been asked (para 38, p 713).
In any event, it cannot meaningfully be said that a party has voluntarily elected not to claim a right or raise an objection if he is unaware that it is open to him to make the claim or raise the objection.
The words voluntary, informed and unequivocal capture the essence of what is needed for a waiver of any kind to be valid.
I said in Millar v Dickson, para 53 that the Strasbourg jurisprudence showed that, unless the person was in full possession of all the facts, an alleged waiver of the right to an independent and impartial tribunal must be rejected as not being unequivocal.
It could also be said to have been uninformed.
No evidence was produced by the prosecutor in that case, on whom the onus lay, to show that the appellants were aware of the system which had been developed by the executive for making and not renewing the sheriffs appointments.
The judgment in Deweer v Belgium (1980) 2 EHRR 439 was directed to the first part of Lord Binghams test.
The applicant paid a fine under protest, following an order by the public prosecutor for the provisional closure of his butchers shop unless it was paid by way of settlement.
The decision in his case shows that to be effective a waiver must have been voluntary, not tainted by constraint.
The judgment in Pfeifer and Plankl v Austria (1992) 14 EHRR 692 provides authority for the requirement that the election by which the right is said to have been waived must be informed.
In the absence of his counsel, Mr Pfeifer waived his right under national law to have two investigating judges who later presided at his trial disqualified.
He then complained that he had been denied an impartial trial in violation of article 6(1).
In para 38 of its judgment in his case the court referred to articles of the Code of Criminal Procedure which required the investigating judges to inform the president of the trial court of the circumstances entailing their disqualification, and to the fact that there was no provision of Austrian law which defined the procedure to be followed for a defendant expressly to waive his right to be tried by a court whose composition was in accordance with the law.
It stressed that this was a right of essential importance and that its exercise could not depend on the parties alone.
It went on to note that, when the applicant was told by the presiding judge, in the absence of his lawyer, that the investigating judges were disqualified, there was put to him a question which was essentially one of law, whose implication Mr Pfeifer as a layman was not in a position to appreciate completely.
A waiver of rights expressed there and then in such circumstances appears questionable, to say the least.
The fact that the applicant stated that he did not think it necessary for his lawyer to be present makes no difference.
The decision in that case shows that regard must be had to the character or nature of the right when a decision is made as to whether the person was given sufficient information about that right for him to make an informed decision as to whether or not he should waive it.
The requirement that the waiver of a right guaranteed by the Convention must be unequivocal was emphasised in Oberschlick v Austria (1991) 19 EHRR 389, to which Lord Bingham referred in Millar v Dickson, para 31; see also para 55.
That was a case where a journalist was convicted by a court which regarded itself as bound by the opinion of the court of appeal which had remitted his case to the lower court for trial after it had been dismissed by that court.
The judge who presided over the court of appeal was the same judge as had presided over it on the first occasion, contrary to the code of criminal procedure.
The journalist complained that the court of appeal on the second occasion was not an independent and impartial tribunal.
The argument that he had impliedly waived that right because he had not raised this objection at the hearing of his appeal was rejected, on the ground that neither he nor his counsel were aware until well after the hearing of all the circumstances that provided grounds for objecting to the tribunal on the grounds of impartiality: Oberschlick, para 51.
In Jones v United Kingdom (2003) 37 EHRR CD269 the applicant was absent and unrepresented throughout his trial.
The Fourth Section said at p CD278 that before he could be said to have impliedly through his conduct waived his right it must be shown that he could reasonably have foreseen what the consequences of his conduct would be.
This could not be done at the time of his trial as it had not yet been clearly established under English law that it was possible to try an accused in his absence throughout, so it could not be said that he had unequivocally and intentionally waived his rights.
His application was held to be inadmissible on other grounds.
This first group of cases provides ample support for the proposition that, in order to be effective as a waiver of a Convention right, the acts from which the waiver is to be inferred must be voluntary, informed and unequivocal.
But they do not go more deeply into the question as to what is needed for the waiver to be informed in the context of an alleged waiver of a right such as that which is in issue in this case, where the person is first told what the right is and then says in terms that he does not want to exercise it.
In Oberschlick and Jones the applicant did not have the information, and in Pfeifer the question that was put to him about disqualification raised an issue of law whose implication he was not in a position fully to appreciate.
(b) the second group
The second group of cases consists of those that the Grand Chamber relied on in Salduz v Turkey (2008) 49 EHRR 421.
The applicant in that case did not have access to a lawyer because the offence which he was accused of having committed fell within the jurisdiction of the state security courts.
The system in force at that time did not permit him to have access to a lawyer when he made his statements to the police, to the public prosecutor and to the investigating judge.
But he had signed a form in which it was stated that he had been reminded of his right to remain silent.
In para 59 of its judgment the Grand Chamber made these comments on this aspect of the case: The Court further recalls that neither the letter nor the spirit of article 6 of the Convention prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial.
However, if it is to be effective for Convention purposes, a waiver of the right to take part in the trial must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance.
Thus, in the present case, no reliance can be placed on the assertion in the form stating his rights that the applicant had been reminded of his right to remain silent.
Reference was made in support of these observations to Sejdovic v Italy (2004) 42 EHRR 360, para 36, Kolu v Turkey (Application No 35811/97) (unreported) given 2 August 2005, para 53 and Colozza v Italy (1985) 7 EHRR 516, para 28.
In Sejdovic v Italy the applicant was tried in his absence and convicted of manslaughter.
He was held by the Italian authorities to have waived his right to appear at his trial because after the killing he had become untraceable.
In para 33 the Court said: The Court re iterates that neither the letter nor the spirit of article 6 of the Convention prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial; however, any such waiver must be made in an unequivocal manner and must not run counter to any important public interest.
In para 35 it said that to inform someone of a prosecution brought against him was a legal act of such importance that it must be carried out in accordance with procedural and substantive requirements capable of guaranteeing the exercise of the accuseds rights.
In para 36 it said that, even supposing that the applicant was indirectly aware that criminal proceedings had been opened against him, it could not be inferred that he had unequivocally waived his right to appear at his trial.
As for the question of safeguards, It remains to be determined whether the domestic legislation afforded him with sufficient certainty the opportunity of appearing at a new trial.
It held that that safeguard was absent, as the remedy that the criminal procedure code provided did not guarantee with sufficient certainty that the applicant would have the opportunity of appearing at a new trial to present his defence.
The reference to the right to take part in the trial in para 59 of the judgment in Salduz appears to have been copied from Sejdovic v Italy.
It is consistent with the view that the Grand Chamber had expressed in para 54 about the importance of the investigation stage, which was the stage at issue in the Salduz case, for the preparation of the criminal proceedings as a whole.
I would take from the judgment in Sejdovic that the requirement that a waiver must be made in an unequivocal manner applies to waivers that are alleged to have been made expressly as much as to implied waivers, and that the reference in Salduz, para 59 to the alleged waiver of a right being attended by minimum safeguards commensurate to its importance applies to them too.
But the right under consideration in Sejdovic was the applicants right to present his defence at his trial, and the fact that he had no guarantee that he could do this at any new trial made it all the more difficult for the Court to hold that for him to be deemed to have waived his right to appear satisfied the requirements of article 6 of the Convention.
In Colozza v Italy (1985) 7 EHRR 516, para 28 the court said that, to be effective, the alleged waiver must be established in an unequivocal manner.
In that case it was alleged the applicant had impliedly waived his rights because he did not appear at his trial.
But it was held that an examination of the facts did not provide a sufficient basis for saying that the waiver was unequivocal, as there was no evidence that he had been made aware of the opening of the criminal proceedings against him.
All that had happened was that notifications of the trial had been lodged with the investigating judge and subsequently with the registry of the court.
In Kolu v Turkey (Application No 35811/97), according to the minutes, the applicant was asked by the investigating authorities if he required a lawyer, said that he did not want one and then proceeded to make several incriminating statements in answer to the questions that were put to him: para 19.
He complained that he had not the benefit of a lawyer and that the minute had been drafted after, not during, his questioning: para 48.
In para 53 the court said that it found it difficult to believe the statement in the minutes that he had refused the assistance of a lawyer.
It reaffirmed, under reference to Colozza v Italy, para 28, that to be effective a waiver of the benefit of the guarantees under article 6 had to be shown to have been unequivocal, which was not so on the facts of that case.
Sejdovic and Colozza were cases of implied waiver.
In Kolu it was express.
The right that was in issue in Sejdovic and Colozza was the right to take part in the trial.
They do not provide a basis for reading into the ruling in Salduz a requirement that the accused must have had legal advice on the point before he can be held to have waived his right of access to a lawyer before being questioned while in police custody.
In Kolu the point might have been taken, as that was a case where the applicants complaint was that he had been denied access to a lawyer when he was being questioned.
It might have been said, if the court had wanted to make the point, that the argument that he had waived that right was unsustainable because he had not received legal advice on the question whether he should waive it.
The court did not take that opportunity.
It relied instead on the rule that a waiver, to be effective, must be unequivocal.
(c) the third group
The third group of cases consists of a selection from an increasingly large number of decisions of the Strasbourg court on waiver since the Grand Chambers judgment on 27 November 2008 in Salduz.
It has been stressed repeatedly that, to be effective, a waiver must be established in an unequivocal manner and attended by the minimum safeguards commensurate to the importance of the right.
But in none of these cases did the court say that waiver of a right under article 6 was necessarily incomplete because the applicant had not received legal advice as to whether or not he should waive it.
It was not suggested that the court has said this in any other case that might have been selected for consideration in this group.
The case which comes closest on its facts to this one is Pishchalnikov v Russia (Application No 7025/04) (unreported) given 24 September 2009, which is the only case in this group that was mentioned by the Lord Justice Clerk in his opinion at para 34.
The applicant was arrested on suspicion of aggravated robbery.
He asked for the assistance of a lawyer during his interrogation, but this was disregarded by the investigator who proceeded to question him.
It was argued that his decision then to confess his guilt to the investigator constituted an implied waiver of his right to counsel.
The court found that his statements, made without having had access to counsel, did not amount to a valid waiver of his right.
counsel: In paras 77 78 of Pishchalnikov the court said, with reference to the right to 77.
A waiver of the right, once invoked, must not only be voluntary, but must also constitute a knowing and intelligent relinquishment of a right.
Before an accused can be said to have implicitly, through his conduct, waived an important right under article 6, it must be shown that he could reasonably have foreseen what the consequences of his conduct would be. 78.
The Court considers that the right to counsel, being a fundamental right among those which constitute the notion of fair trial and ensuring the effectiveness of the rest of the foreseen guarantees of article 6 of the Convention, is a prime example of those rights which require the special protection of the knowing and intelligent waiver standard.
It is not to be ruled out that, after initially being advised of his rights, an accused may himself validly waive his rights and respond to interrogation.
However, the Court strongly indicates that additional safeguards are necessary when the accused asks for counsel because if an accused has no lawyer, he has less chance of being informed of his rights and, as a consequence, there is less chance that they will be respected.
As for the facts of that case, the court said in para 79 that, when an accused had invoked his right to be assisted by counsel during his interrogation, a valid waiver of that right could not be established by showing only that he responded to further police questioning even if he had been advised of his rights.
In para 80 it went on to say this: Furthermore, the Court does not rule out that, in a situation when his request for assistance by counsel had been left without adequate response, the applicant who, as it follows from the case file, had had no previous encounters with the police, did not understand what was required to stop the interrogation.
The Court is mindful that the applicant may not have had sufficient knowledge, experience, or even sufficient self confidence to make the best choice without the advice and support of a lawyer.
It is possible that he did not object to further questioning in the absence of legal assistance, seeing the confession (true or not) as the only way to end the interrogation.
Given the lack of legal assistance the Court considers it also unlikely that the applicant could reasonably have appreciated the consequences of his proceeding to be questioned without the assistance of counsel in a criminal case concerning the investigation of a number of particularly grave criminal offences.
The reasoning in para 80 shows that the Strasbourg court is sensitive to the facts of the case when it is addressing this issue.
I do not find in any of these paragraphs a basis for holding that, as a rule, an accused must have had access to legal advice on the question whether or not he should waive his right to consult a solicitor before being interviewed by the police.
But there are indications in the judgment that, in determining what safeguards are necessary, account should be taken of the importance of the right.
Account should also be taken of the fact that, for a variety of reasons which will vary from case to case and may depend on the gravity of the offences which he is suspected of having committed, the accused may not have appreciated the consequences of his agreeing to be questioned in the absence of a solicitor.
Pishchalnikov is, of course, distinguishable on its facts because the investigator ignored the applicants request for a lawyer.
The court noted in para 80 that there was no evidence that the confessions which the applicant made during his further interrogation had been initiated by him.
It was a blatant example of a person who was facing a serious charge being denied the very right which he had made it plain he wished to exercise.
It was also a case in which the waiver that was in question was an implied waiver.
The decision in Pishchalnikov does not tell us what view the court would have taken if the applicant had been advised by the authorities that he had a right to a lawyer and he had then told them expressly, of his own free will, that he did not wish to exercise that right.
But guidance as to how the court is likely to see a case of that kind is to be found in Yolda v Turkey (Application No 27503/04) (unreported) given 23 February 2010.
The applicant in Yolda was charged with belonging to an illegal organisation.
He was informed of his rights by the public prosecutor and by the judge who placed him on remand.
He signed a form which told him that he had the right to appoint a legal representative who could be present when his statement was taken.
It also told him that he could benefit from the legal assistance of a legal representative appointed by the bar association if he was not in a position to appoint one.
He stated that he understood his rights but that he did not wish to be assisted a lawyer.
The court recalled the declaration in Salduz, para 59 that, in order to be effective for the purposes of the Convention, any waiver of the right to take part in the trial must be established unequivocally and be surrounded by a minimum of guarantees as to its seriousness.
Applying those principles to the facts of the case in para 52, it noted that he had been reminded of his right to legal assistance, that he refused it and that it clearly emerged from his statements taken whilst in custody that his decision to waive his right to legal assistance was freely and voluntarily made: Hence, the applicants waiver of this right was unequivocal and surrounded by a minimum guarantee.
This decision indicates that where it is shown that the accused, having been informed of his rights, states that he does not want to exercise them, his express waiver of those rights will normally be held to be effective.
The minimum guarantees are that he has been told of his right and that the waiver was freely and voluntarily made.
The minority said in their dissenting judgment that a procedural choice made without a lawyer being able to inform and advise him could not be free and informed, but the court did not accept this argument.
The same approach was taken in two other cases in this group.
In Galstyan v Armenia (2007) 50 EHRR 618 the applicant was arrested when he was on his way home from a protest rally.
He was made aware of his rights and expressly declined a lawyer.
The Court held that, as it was his own choice not to have a lawyer, the authorities could not be held responsible for the fact that he was not represented in the proceedings against him.
In para 91 it said that, while the nature of some rights safeguarded by the Convention was such as to exclude a waiver of entitlement to exercise them, the same could not be said of other rights.
A person had a choice under article 6(3)(c) of defending himself in person or through legal assistance, so it would normally not be contrary to the requirements of that article if an accused was self represented in accordance with his own free will.
There was no evidence in that case that his choice was the result of any threats or physical violence or that he was tricked into refusing a lawyer.
In Sharkunov and Mezentsev v Russia (Application No 75330/01) (unreported) given 10 June 2010, in which it held that there had been no violation of the right to legal assistance, the court reiterated at para 106 that neither the letter nor the spirit of article 6 prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial but that, to be effective for Convention purposes, the waiver must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance.
In Paskal v Ukraine (Application No 24652/04) (unreported) given 15 September 2011 the applicant, who had a university degree in law and at the material time was serving as a police officer, was arrested on suspicion of having taken part in a robbery.
He signed a procedural rights notification form and noted that he wished to appoint a lawyer whom he named as his advocate.
He was then questioned, without a lawyer being present, about the robbery just after he had explicitly expressed that wish.
It was argued that this was a case of an implied waiver.
The Court said that it had been mindful in a number of its judgments of the vulnerable position of a suspect vis vis the investigative authorities and had emphasised the paramount importance of access to a lawyer before the first questioning as a means to counter the imbalance between the parties.
Recalling the Grand Chambers observations in Salduz, para 59 that neither the letter nor the spirit of article 6 of the Convention prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial, as long as a waiver of the right is given in an unequivocal manner and was attended by safeguards commensurate to its importance, it addressed the question whether the waiver constituted an act of the applicants free will and informed procedural choice: para 77.
The fact that the applicant was a policeman and a lawyer himself might not mean that he was not vulnerable and in need of an advocates support.
But the level of his expertise could not be discounted in assessing whether his consent to participate in the particular questioning was well informed.
The court concluded that the waiver was effective as he was not coerced to give any statement in defiance of his will: para 78.
But a different view might be taken if there is reason to believe that the applicant was not able to act freely or did not understand his rights.
In Talat Tun v Turkey (Application No 32432/96) (unreported) given 27 March 2007 the applicant did not ask for a lawyer.
But the court noted in para 60 that he had in effect stated that he was not able to act freely because he was being threatened with ill treatment and that it was not possible to hold that he could reasonably have foreseen the consequences of his not requesting the assistance of a lawyer in criminal proceedings where he was at risk of being sentenced to death as he did not have any formal education and was from a humble background: see also Duman v Turkey (Application No 28439/03) (unreported) given 23 March 2010, para 48; Lopata v Russia (Application No 72250/01) (unreported) given 13 July 2010, para 135.
In Plonka v Poland (Application No 20310/02) (unreported) given 31 March 2009 the applicant signed a form acknowledging that she had been informed of her right to be assisted by a lawyer during her questioning by the police and the prosecution authorities.
But it was held that her assertion in the form that she had been reminded of her right to remain silent and to be assisted by a lawyer could not be considered reliable as she was suffering from alcoholism and was in a vulnerable position as the time of her interview: para 37 38.
Bortnik v Ukraine (Application No 39582/04) (unreported) given 27 January 2011 is another case of this type.
In aman v Turkey (Application No 35292/05) (unreported) given 5 April 2011 the applicant, who was accused of being a member of an illegal organisation and faced a heavy penalty, had an insufficient knowledge of Turkish and was without the help of an interpreter.
The Court held that she could not reasonably have appreciated the consequences of accepting to be questioned without the assistance of a lawyer in a criminal case concerning the investigation of particularly grave offences.
The waiver may come too late, as in Zaichenko v Russia (Application No 39660/02) (unreported) given 18 February 2010, where the relevant incriminating statement was made before the applicant was advised of his right to remain silent: see para 53.
No mention was made in this group of cases of a rule that an applicant who has acted of his own free will must have access to legal advice on the question whether or not he should waive his right before he can be held to have waived that right.
But they do show that a different view might be taken if there is reason to believe that the applicant was not able to act freely or that he did not understand the right that was being waived.
Comparative jurisprudence
The main source of comparative jurisprudence on the issue of waiver by a suspect of the right of access to a lawyer while being questioned by the police is to be found in decisions of the US Supreme Court.
Although the Strasbourg court has not referred to Miranda v Arizona 384 US 436 (1966) in any of its judgments, there are signs that it and subsequent cases that the ruling in Miranda have given rise to have influenced the thinking of the Strasbourg court as it develops the principles described in Salduz: see Ambrose v Harris (Procurator Fiscal, Oban) 2011 SLT 1005, paras 52 53.
Judge de Meyer noted in his dissenting opinion in Imbrioscia v Switzerland (1993) 17 EHRR 441, 460 that the expression knowingly and intelligently had been used as long ago as 1966 in Miranda and that the principles there defined belong to the very essence of a fair trial.
The issue of waiver was raised in Miranda in a series of cases where decisions of the courts below were reversed because the accused had not been told of his rights before being questioned while in custody by the police.
At p 475 the court said: 52 54 An express statement that the individual is willing to make a statement and does not want an attorney followed closely by a statement could constitute a waiver.
But a valid waiver will not be presumed simply from the silence of the accused after warnings are given or simply from the fact that a confession was in fact eventually obtained.
A statement we made in Carnley v Cochran, 369 US 506, 516, 82 S Ct 884, 890, 8 L Ed 2d 70 (1962) is applicable here: Presuming waiver from a silent record is impermissible.
The record must show, or there must be an allegation and evidence which show, that an accused was offered counsel but intelligently and understandingly rejected the offer.
At p 479 it summarised the prerequisites for an effective waiver in these terms: [The suspect] must be warned prior to any questioning that he has the right to remain silent, that anything he says can be used against him in a court of law, that he has the right to the presence of an attorney, and that if he cannot afford an attorney one will be appointed for him prior to any questioning if he so desires.
Opportunity to exercise these rights must be afforded to him throughout the interrogation.
After such warnings have been given, and such opportunity afforded to him, the individual may knowingly and intelligently waive these rights and agree to answer questions or make a statement.
But unless and until such warnings and waiver are demonstrated by the prosecutor at trial, no evidence obtained as a result of interrogation can be used against him.
The phrase intelligently and understandingly does not appear in any of the judgments of the Strasbourg court.
But the phrase knowing and intelligent was used in Pishchalnikov, para 77, and it is not far away from Lord Binghams proposition in Millar v Dickson 2002 SC (PC) 30, para 31 that the expression waiver is used to describe a voluntary, informed and unequivocal election by a party not to claim a right or raise an objection which it is open to that party to claim or raise.
In North Carolina v Butler 441 US 369 (1979) at p 373 the Court said that an express written or oral statement of waiver of the right to remain silent or of the right to counsel is usually strong proof of the validity of that waiver, but that it was not inevitably either necessary or sufficient to establish waiver: The question is not one of form, but rather whether the defendant in fact knowingly and voluntarily waived the rights delineated in the Miranda case.
As was unequivocally said in Miranda, mere silence is not enough.
That does not mean that the defendants silence, coupled with an understanding of his rights and a course of conduct indicating waiver, may never support a conclusion that a defendant has waived his rights.
The courts must presume that a defendant did not waive his rights; the prosecutions burden is great; but in at least some cases waiver can be clearly inferred from the actions and words of the person interrogated.
The phrase used here was knowingly and voluntarily.
But the words used in these various formulations of the test all carry with them the idea that the waiver must have been an informed decision, based on an understanding of what the right is that is being waived.
In Edwards v Arizona 451 US 477 (1981) the Court returned to the question what was needed for a valid waiver.
At p 482 it said that it was reasonably clear under its cases that waivers of counsel must not only be voluntary, but must also constitute a knowing and intelligent relinquishment or abandonment of a known right or privilege.
This was a matter which would depend in each case upon the particular facts and circumstances, including the background, experience and conduct of the accused.
At p 483 the trial court was criticised for finding the accuseds admission to have been voluntary, without separately focusing on whether he had knowingly and intelligently relinquished his right to counsel.
At p 484, recalling that in North Carolina v Butler it had strongly indicated that additional safeguards are necessary when the accused asks for counsel, it held that when an accused had invoked his right to have counsel present during custodial interrogation a valid waiver of the right cannot be established simply by showing only that he responded to further police initiated custodial interrogation.
In that case, as Chief Justice Burger noted in a concurring judgment at p 488, when the accused said that he did not wish to speak to anyone he was told by the detention officer that he had to.
The reference in this judgment to the need for additional safeguards can be compared with the Strasbourg courts requirement that a waiver must be attended by minimum safeguards commensurate to its importance which first made its appearance in Salduz, para 59.
In Oregon v Elstad 470 US 298 (1985) the respondent argued that he was unable to give a fully informed waiver of his rights because he was unaware that his unwarned prior statement could not be used against him: p 316.
He suggested that the officer at the Sheriffs headquarters should have added an additional warning to those given to him at the Sheriffs office to cure this deficiency.
Delivering the opinion of the court, Justice OConnor said at p 316 that such a requirement was neither practicable nor constitutionally necessary: Standard Miranda warnings explicitly inform the suspect of his right to consult a lawyer before speaking.
Police officers are ill equipped to pinch hit [i.e. substitute] for counsel, construing the murky and difficult questions of when custody begins or whether a given unwarned statement will ultimately be held admissible This court has never embraced the theory that a defendants ignorance of the full consequences of his decisions vitiated their voluntariness.
At p 316 the Court recalled that in California v Beheler 463 US 1121 (1983) it declined to accept the defendants contention that, because he was unaware of the potential adverse consequences of statements he made to the police, his participation in the interview was not voluntary.
It concluded its discussion of this topic with these words: Thus we have not held that the sine qua non for a knowing and voluntary waiver of the right to remain silent is a full and complete appreciation of all of the consequences flowing from the nature and quality of the evidence in the case.
More recently the word intelligent which was used by the court in Miranda has been brought back into the formula, and the court has explained that as a general rule the test will be satisfied if the choice is made with a full understanding of what the rights are.
In Maryland v Shatzer (2010) 130 S Ct 1213, 1219 Justice Scalia, delivering the opinion of the court, said: To counteract the coercive pressure [of police questioning], Miranda announced that police officers must warn a suspect prior to questioning that he has a right to remain silent, and a right to the presence of an attorney.
After the warnings are given, if the suspect indicates that he wishes to remain silent, the interrogation must cease.
Similarly, if the suspect states that he wants an attorney, the interrogation must cease until an attorney is present.
Critically, however, a suspect can waive these rights.
To establish a valid waiver, the State must show that the waiver was knowing, intelligent and voluntary.
And in Berghuis v Thompkins (2010) 130 S Ct 2250, 2262, Justice Kennedy said: Although Miranda imposes on the police a rule that is both formalistic and practical when it prevents them from interrogating suspects without first providing them with a Miranda warning. , it does not impose a formalistic waiver procedure that a suspect must follow to relinquish those rights.
As a general proposition, the law can presume that an individual who, with a full understanding of his or her rights, acts in a manner inconsistent with their exercise has made a deliberate choice to relinquish the protection those rights afford.
It has not been not suggested by the US Supreme Court in any of these cases that it was essential to a waiver of right to counsel that the accused should have had legal advice on the point as to whether or not he should waive it.
The courts reasoning in Oregon v Elstad and the presumption to which Justice Kennedy referred in Berghuis v Thompkins seem to be in conflict with there being any such requirement.
The Crown has drawn attention to the fact that few jurisdictions approach the question of waiver on the basis that legal advice on the consequences of the waiver is a prerequisite.
The Supreme Court of Canada described what it has called the informational component of the right under section 10(b) of the Charter of Rights and Freedoms to retain and instruct counsel as relatively straightforward: R v Willier [2010] 2 SCR 429, paras 29 31.
A person who waives a right must know what he or she is giving up if the waiver is to be valid.
It is the duty of the police to inform the detainee of his or her right to retain and instruct counsel without delay and of the existence and availability of legal aid and duty counsel.
This ensures that a detainee who persists on waiving the right of access to counsel has the information and will know what he or she is actually giving up: R v Bartle [1994] 3 SCR 173, 206; R v Prosper [1994] 3 SCR 236, 274, per Lamer CJ.
But there is no indication in its decisions that the detainee must have had legal advice as to whether or not the right should be waived before the waiver can be held to be effective.
Information obtained from Eurojust about the position in Member States of the EU suggests that the right to legal advice before being questioned can be waived without prior consultation with a lawyer in Austria, Sweden, Estonia, France and Malta.
The courts in Germany and Poland have not decided whether the suspect needs to consult with a lawyer before a waiver can be held to be effective.
In Bulgaria, the Czech Republic, the Netherlands and Spain the presence of a lawyer during interrogation is in certain circumstances compulsory.
The Strasbourg court found support for the decision it took in Salduz from the fact that the principles which it outlined were in line with the generally recognised international human rights standards which are at the core of the concept of a fair trial: (2009) 49 EHRR 421, para 53.
It appears to be clear that there is no generally internationally recognised human rights standard on the issue of waiver that would support the conclusion that access to legal advice is an essential prerequisite to an effective waiver by a detainee of the right of access to a lawyer when he is being questioned by the police.
Discussion
I do not think that the Strasbourg jurisprudence provides any support for the Lord Justice Clerks statement in Jude v HM Advocate 2011 SLT 722, para 32 that the argument for the Crown that the appellants right of access to a lawyer was capable of being waived failed because their consent to be interviewed was not informed by legal advice.
The court has had the opportunity on a number of occasions to lay down a rule to that effect, but it has not taken it.
The cases of Yolda v Turkey (Application No 27503/04), 23 February 2010, Galstyan v Armenia (2007) 50 EHRR 618, Sharkunov and Mezentsev v Russia (Application No 75330/01) 10 June 2010 and Paskal v Ukraine (Application No 24652/04) 15 September 2011 (see paras 32 34, above) are particularly instructive on this point, as they could not have been decided as they were if there had been a rule to that effect.
The decisions of the US Supreme Court since Miranda do not lend encouragement to any suggestion that it would be appropriate for such a rule to be laid down.
The wording of its observations in Oregon v Elstad 470 US 298 is a strong pointer in the contrary direction.
I would hold therefore that the statements in Jude, paras 32 and 34 which indicate that there is such a rule should be disapproved.
Where the accused, having been informed of his rights, states that he does not want to exercise them, his express waiver of those rights will normally be held to be effective.
The minimum guarantees are that he has been told of his right, that he understands what the right is and that it is being waived and that the waiver is made freely and voluntarily.
There is however a theme that runs through the Strasbourg courts decisions which indicates that access to a lawyer may well be a necessary prerequisite of a valid waiver in some cases.
Talat Tun v Turkey (Application No 32432/96) 27 March 2007 and aman v Turkey (Application No 35292/05) 5 April 2011 (see para 35, above) provide illustrations of this point.
The court must be alive to the possibility that the words of the caution, and advice that the detainee has the right to a private consultation with a solicitor before any questioning begins and at any other time during such questioning which is required by section 15A(3), may not be fully understood by everyone.
Comprehending the Scottish caution: Do offenders understand their right to remain silent? David J Cooke and Lorraine Philip (1998) Legal and Criminological Psychology 13, was written some time ago and does not fully reflect current practice.
But it serves as a warning that it should not be taken for granted that everyone understands the rights that are being referred to.
People who are of low intelligence or are vulnerable for other reasons or who are under the influence of drugs or alcohol may need to be given more than standard formulae if their right to a fair trial is not to be compromised.
Lord Carloway was appointed by the Cabinet Secretary for Justice to review key elements of Scottish criminal law and practice in the light of the decision in Cadder.
The Carloway Review was published on 17 November 2011.
Among the issues with which it deals and about which it makes recommendations is that of waiver: paras 6.1.41 6.1.47.
The Association of Chief Police Officers in Scotland has already produced a manual of guidance of solicitor access: the ACPOS Manual which was published in January 2011.
That guidance too is currently under review.
I am conscious that anything we may say in this case may be overtaken by events, and I would not want in any way to restrict the scope of these reviews.
But I would make two suggestions, while emphasising that in making them I am not intending to suggest that article 6 requires that these steps must, as a rule, be taken in every case.
The first relates to the question whether the accused has been fully informed of the right of access to a lawyer.
I suggest that, to minimise the risk of misunderstanding, the police should follow the practice indicated by para 6.5 of Code C of the Code of Practice for the Detention, Treatment and Questioning of Persons by Police Officers which was introduced in England in the light of the Police and Criminal Evidence Act 1984, as to the background to which see the editorial, Legal advice in police stations: 25 years on, in (2011) Crim LR 1.
Para 6.5 states inter alia: If, on being informed or reminded of [the right of access to legal advice], the detainee declines to speak to a solicitor in person, the officer should point out that the right includes the right to speak to a solicitor on the telephone.
If the detainee continues to waive this right the officer should ask them why and any reasons given should be recorded on the custody record or the interview record as appropriate.
Offering the detainee the right to speak to a solicitor on the telephone may be relevant if the detainee is concerned about delay in securing the attendance of a solicitor at the police station.
The giving of reasons may reveal that, although he has been given the standard caution and advice, the detainee has not fully understood what his rights are.
It will provide an opportunity for any obvious misunderstandings to be corrected.
Failure to do that may be relevant to the question whether the waiver was knowing and intelligent or voluntary, informed and unequivocal, and thus to the question whether, in all the circumstances, the detainee was deprived of his right to a fair trial.
Any reasons that are given should be recorded.
But, as Justice OConnor observed in Oregon v Elstad 470 US 298 (1985) at p 316 (see para 41, above), police officers are ill equipped to substitute for counsel.
So it would seem to be unwise for them to be encouraged to take the further step of offering advice to the detainee.
Lord Kerr has made a powerful case for requiring steps to be taken to ensure that the accused has a clear understanding and insight as to the significance of dispensing with the services of a lawyer.
He would require the steps indicated by para 6.5 of Code C to be taken in every case, because without them a decision to waive cannot be said to have been voluntary, informed and unequivocal: see para 117, below.
I recognise the force of his argument, and there is much to be said for this as a suggestion as to how the current practice should be improved.
But best practice is one thing.
An absolute rule, to which section 57(2) of the Scotland Act must always give effect, is quite another.
I do not think that it can be said that an absolute rule to the effect that Lord Kerr contends for has been clearly identified by the Strasbourg court.
Moreover, as the terms of the reference make clear, we have not been asked to make a declaration to that effect in this case.
What we have been given by Strasbourg, as I see it, is a guiding principle as to what is needed for there to be an effective waiver.
Its application in determining whether there will be, or has been, a fair trial will depend on the facts of each case.
The second suggestion comes from the observation by the US Supreme Court in Miranda v Arizona 384 US 436, at p 473 in paras 41, 42 that, in order fully to apprise a person interrogated of the extent of his right under the system that it was laying down in that case, it is necessary to warn him not only that he has the right to consult with an attorney, but also that if he is indigent a lawyer will be appointed to represent him.
The wording of the advice that, in accordance with the standard practice, the respondent was given when he was told of his right to consult with a solicitor prior to and during his questioning did not go on to advise him of the arrangements that might be made if he wanted to exercise that right and was unable to name a solicitor or was concerned about the cost of employing one.
The fact that the respondent was able in this case to give an appropriate name when he was asked if he wished intimation of his detention to be sent to a solicitor suggests that he was under no misapprehension on this point.
But it might be wise not to rely on assumptions about this, even in the case of those with previous experience of the criminal process.
As for the facts of this case, Mr Scott submitted that the wording of the current safeguards was defective and that the Crown could not show that the respondent waived his rights knowingly and intelligently.
The advocate depute, for her part, referred to various safeguards that were in place to ensure that the waiver met this standard.
She said that there were no grounds for thinking that the respondent was vulnerable or had not been able to understand the caution.
The fact that he had nominated a firm of solicitors with experience of criminal law and procedure showed that he was aware of his rights and of the significance of declining the offer of access to them before and during his questioning.
I do not think that it would right for this court to reach a decision on these competing arguments as Lord Kerr would do.
The issue has come before us as a reference which was directed to a particular issue on which our guidance was sought, and not as an appeal.
It raises questions of fact and degree which ought properly to be dealt with in the trial court.
I would remit the question whether for the Lord Advocate to lead and rely on the evidence of his interview would be incompatible with his Convention right to a fair trial to the sheriff for determination after he has heard all the evidence on this issue.
Conclusion
I would answer the first question in the reference in the negative.
The jurisprudence of the Strasbourg court does not support the proposition that, as a rule, the right of access to legal advice during police questioning can only be waived if the accused has received advice from a lawyer as to whether or not he should do so.
I would remit the second question to the sheriff.
The answer to it must depend on whether, on a consideration of all the facts and circumstances, the sheriff is satisfied that it would be fair for the Lord Advocate to lead and rely upon evidence of the answers that the respondent gave during his police interview.
LORD BROWN
Having had the opportunity of reading in draft the judgments of Lord Hope, Lord Dyson and Lord Hamilton on the one hand and Lord Kerr on the other, I find myself in full agreement with the majority.
I can briefly summarise why by reference to Lord Kerrs judgment at para 127, with much of which I agree but certain parts of which I cannot accept.
At para 127(iii) Lord Kerr concludes that a purported waiver should not be regarded as effective [u]nless it is shown that the suspect had a proper insight into the significance of the decision to waive his right.
This conclusion clearly derives from para 117 of Lord Kerrs judgment where he says that the suspect must have reasonable foresight of the consequences for him of [waiving his right to be advised by a lawyer before or during interview] and adds: I do not suggest that a suspect needs to be aware of every legal nuance that might arise in the course of his interview but he should be aware in a general sense that legal issues might arise and should have consciously decided that he is prepared to forego the advice that a lawyer might give on those issues either before or in the course of the interview.
If by that is meant, as appears to be meant, that the suspect must realise more than that he will be asked questions by the police without the benefit of legal advice, to my mind Lord Kerr is asking too much.
As Lord Hamilton says at para 94 of his judgment: The natural and legitimate inference in circumstances where the suspect has responded with a clear negative to the enquiry [whether he wishes to exercise his right to legal assistance] will be that he or she has a proper understanding, including an appreciation that in light of his or her answer legal assistance will not be made available for the purposes of the interview.
Lord Dyson says much the same thing at para 70 of his judgment.
It is surely obvious that the point of a lawyer is to advise on any legal issues that may arise and that if a suspect chooses to forego this right he will be questioned without the benefit of such advice.
He surely does not have to be told in terms that, in this event, he may say something (or neglect to say something) which a lawyer, had he been present, might have advised him not to say (or, indeed, to say).
At para 106 of his opinion Lord Kerr points to the fact that in Scotland a suspect accused of a sexual offence can supply the necessary corroboration to support an eventual conviction by asserting at interview that the sexual activity was consensual.
But surely no one suggests that the suspect needs to be made aware of specific legal considerations of this nature before he can be said to have waived his right to legal advice.
The other part of para 127 of Lord Kerrs judgment with which I respectfully disagree is the suggestion that within the minimum safeguards necessarily to be provided before a waiver can be regarded as knowing and intelligent, informed and unequivocal, are a question to the suspect as to why he has decided not to exercise his right to legal advice (and the recording of his answer) and informing him that a telephone consultation with a solicitor can be arranged.
As to this I agree with what Lord Hope says at para 49 of his judgment.
There is much to be said for introducing such further steps into the current practice (as in England and Wales) but I cannot accept that Strasbourg jurisprudence has already established an absolute rule to this effect.
All agree that the first question in the reference should be answered in the negative.
In common with the majority I too would remit the second question to the Sheriff for his decision on the facts.
LORD DYSON
I agree entirely with the judgment of Lord Hope.
I add a few words of my own because the waiver issue is as important for the rest of the United Kingdom as it is for Scotland.
The questions that were referred to this court by the Sheriff in the present case raise the issue of what is required by the European Convention on Human Rights (the Convention) for a valid waiver by an accused of the right of access to a lawyer prior to police questioning.
This right, which was established in Salduz v Turkey (2008) 49 EHRR 421, is implicit in the right to a fair trial accorded by article 6 of the Convention.
It is not in doubt that rights accorded by article 6 of the Convention can be waived.
In Salduz itself, the Grand Chamber said: . neither the letter nor the spirit of art 6 of the Convention prevents a person from waiving of his own free will, either expressly or tacitly, the entitlement to the guarantees of a fair trial.
However, if it is to be effective for Convention purposes, a waiver of the right to take part in the trial must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance.
The statement that a waiver is unequivocal and attended by minimum safeguards has been repeated as a mantra by the ECtHR in a number of cases.
The court has given little further explicit guidance as to what is required for a valid waiver.
As so often, in order to determine Strasbourgs approach to this question, it is necessary to examine the courts jurisprudence to see how guidance which has been expressed at a high level of generality is applied in practice.
But it is fair to say that on a number of occasions the court has also said that the right to the assistance of a lawyer at police interview can only be validly waived if the accused could reasonably have foreseen the consequences of his decision.
Thus, for example, in Pishchalnikov v Russia (Application No 7025/04 ) (unreported) 24 September 2009 (para 77), the court said that a waiver once invoked, must not only be voluntary, but must also constitute a knowing and intelligent relinquishment of a right.
Before an accused can be said to have implicitly, through his conduct, waived an important right under article 6, it must be shown that he could reasonably have foreseen what the consequences of his conduct would be.
It is true that Pishchalnikov was not a case of express waiver and the accused had been denied a lawyer although he had requested one.
But there cannot be a relevant difference between an express and an implied waiver; and it is difficult to see why the requirement of reasonable foresight of the consequences of a decision not to have a lawyer should depend on whether or not the accused requested a lawyer.
It is common ground that the ECtHR has not gone so far as to say that there cannot be a valid waiver unless the accused has first been advised by a lawyer of the implications of not having the benefit of the assistance of a lawyer both before and during a police interview.
It is accepted by Mr Scott QC that, although legal advice as to the desirability of having a lawyer to protect the interests of an accused at the interview stage is the most effective way of ensuring that his or her article 6 rights are protected, the Strasbourg jurisprudence does not mandate it.
As Lord Hope points out, the ECtHR has had many opportunities to insist on such a requirement in every case, but has never done so.
But how does a prosecuting authority prove (the burden being on it) that an accused had reasonable foresight of the consequences of a decision to be interviewed without the assistance of a lawyer? It has never been said by the ECtHR that it must be shown that an accused had reasonable foresight of all the consequences of such a decision.
That would be tantamount to saying that no person (except perhaps an accused who has experience and understanding of criminal law and procedure) could waive the right to legal assistance without first having legal advice as to the wisdom of doing so.
But as I have said, it is not in dispute that Strasbourg has never gone so far as to say this and its jurisprudence is not consistent with such an approach.
As Lord Hope points out at paras 32 to 34, there are several decisions of the court where all that was required for the purposes of a valid waiver was proof that the accused had been informed that he had the right to have a lawyer present when he was interviewed and he refused to exercise that right.
Thus in Yolda v Turkey, for example, the accused was informed of his right to be assisted by a lawyer while he was in custody and he refused a lawyers services.
That was enough to persuade the court that the accused had sufficient foresight of the consequences of his decision to refuse the assistance of a lawyer to constitute a valid waiver.
It was not necessary to go further and be satisfied that the accused understood precisely how the lawyer might have been able to assist him and from what pitfalls he might have been able to protect him.
That could not have been done, not least because it would have been impossible to predict what course the interview would take.
On the other hand, if there are reasonable grounds for believing that the accused is vulnerable in some way and that he does not understand in general terms that a lawyer might be able to assist him at the interview, then it is not enough for the police merely to ask him whether he wishes to have the assistance of a lawyer.
Additional safeguards are necessary to ensure that such a person does not waive his right to legal assistance at the interview without a proper understanding of the significance of what he is doing.
The most obvious way of achieving this is by the provision of legal advice on the question of legal assistance.
Depending on the circumstances, however, there may be other ways of ensuring that the accused understands the implications of refusing the assistance of a lawyer at interview.
It will be a question of fact in each case whether the accused can reasonably understand the implications of refusing the assistance of a lawyer at police interview.
The ultimate question is what fairness demands in the particular case.
Lord Hope has referred to a number of cases at para 35 where for one reason or another there were grounds for doubting whether an accused had sufficient understanding of the implications of refusing the assistance of a lawyer.
Another case where the court held that the accused had not waived his article 6 rights because it had not been established that he would have understood the implications of his doing so is Panovits v Cyprus (Application No 4268/04) (unreported) 11 December 2008.
At para 71, the court said: Moreover given the lack of assistance by a lawyer or his guardian, it was also unlikely that he could reasonably appreciate the consequences of his proceeding to be questioned without the assistance of a lawyer in criminal proceedings concerning the
investigation of a murder
The court had earlier emphasised the vulnerability of an accused minor and the imbalance of power to which he is subjected by the very nature of criminal proceedings (para 68).
He was 17 years of age at the material time.
I agree with what Lord Hope says at para 47.
The court must be astute to the possibility that the implications of refusing the assistance of a lawyer may not be understood even by an apparently intelligent person.
It will depend on all the circumstances, including the age, health and apparent intelligence of the person as well as the extent to which he or she appears to be in a state of stress and the likely length and complexity of the interview.
But in a relatively simple case, where the accused appears to be intelligent and not especially vulnerable and he unequivocally and voluntarily refuses the offer of the assistance of a lawyer, the prosecution will usually be able to show that there has been a valid waiver.
It is not necessary to show that the accused understood precisely what assistance could have been given but rejected it nevertheless.
It is sufficient to show that the accused understood that the lawyer would or might be able to provide assistance at the interview stage which would or might be of benefit to him.
The precise nature of the benefit does not matter.
In most cases, this cannot be known in advance of the interview.
It follows that (as is common ground) the first question must be answered in the negative.
I agree with Lord Hope that, for the reasons he gives, the second question should be remitted to the Sheriff.
LORD HAMILTON
The first question in the reference as now adjusted before this court is (read short): Whether it would necessarily be incompatible with articles 6(1) and 6(3)(c) of [the Convention] for the Lord Advocate to lead and rely upon evidence of answers given during a police interview of a suspect in custody who, before being interviewed by the police (a) had been informed by the police officer of his Salduz/article 6 rights of access to legal advice; and (b) without having received advice from a lawyer, had stated that he did not wish to exercise such rights.
It was accepted before us on either hand that the question so formulated fell to be answered in the negative.
Mr Scott for the respondent conceded that on the basis of the jurisprudence of the Strasbourg Court as developed to date it could not be maintained that, in order effectually to waive his right of access to legal advice for the purposes of a police interview, the suspect must first actually have been in receipt of legal advice.
In my view that concession was inevitable.
While the domestic laws of certain of the Convention countries have laid down that, at least in some circumstances, the content of a police interview cannot be received in evidence unless the suspect has prior to the interview (or in its course) been in receipt of legal advice, the jurisprudence of the Court of Human Rights lays down no such requirement.
In so far as the opinion of the Lord Justice Clerk in Jude, Hodgson and Birnie v HM Advocate 2011 SCCR 300; 2011 SLT 722, at paras 32 and 34 may be read (or misread) as laying down that actual receipt of legal advice prior to interview is a precondition of any effectual waiver, that opinion (with which the other judges concurred) is, in my respectful view, unsupported by the authorities apparently relied upon.
The live issue before us is whether the arrangements put in place in Scotland following the amendment of the Criminal Procedure (Scotland) Act 1995 by the insertion of section 15A, an insertion made with effect from 30 October 2010 for the Criminal Procedure (Legal Assistance, Detention and Appeals) (Scotland) Act 2010, are compliant with Convention jurisprudence.
That amendment was itself consequential on the judgment of the Supreme Court in Cadder v HM Advocate 2011 SC (UKSC) 13.
Section 15A provides: 15A Right of suspects to have access to a solicitor (1) This section applies to a person (the suspect) who (a) is detained under section 14 of this Act, (b) attends voluntarily at a police station or other premises or place for the purpose of being questioned by a constable on suspicion of having committed an offence, or is (c) arrested (but not charged) in connection with an (i) offence, and (ii) being detained at a police station or other premises or place for the purpose of being questioned by a constable in connection with the offence. (a) (2) The suspect has the right to have intimation sent to a solicitor of any or all of the following the fact of the suspects (i) detention, (ii) attendance at the police station or other premises or place, or (iii) arrest, (as the case may be), (b) the police station or other premises or place where the suspect is being detained or is attending, and (c) that the solicitors professional assistance is required by the suspect. (3) The suspect also has the right to have a private consultation with a solicitor (a) before any questioning of the suspect by a constable begins, and (b) at any other time during such questioning. (4) Subsection (3) is subject to subsections (8) and (9).
In subsection (3), consultation means consultation by such (5) means as may be appropriate in the circumstances, and includes, for example, consultation by means of telephone. (6) The suspect must be informed of the rights under subsections (2) and (3) (a) on arrival at the police station or other premises or place, and (b) in the case where the suspect is detained as mentioned in subsection (1)(a), or arrested as mentioned in subsection (1)(c), after such arrival, on detention or arrest (whether or not, in either case, the suspect has previously been informed of the rights by virtue of this subsection). (7) Where the suspect wishes to exercise a right to have intimation sent under subsection (2), the intimation must be sent by a constable (a) without delay, or (b) if some delay is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders, with no more delay than is necessary.
In exceptional circumstances, a constable may delay the (8) suspects exercise of the right under subsection (3) so far as it is necessary in the interest of the investigation or the prevention of crime or the apprehension of offenders that the questioning of the suspect by a constable begins or continues without the suspect having had a private consultation with a solicitor. (9) Subsection (3) does not apply in relation to the questioning of the suspect by a constable for the purpose of obtaining the information mentioned in section 14(10) of this Act.
Section 4 of the Manual of Guidance on Solicitor Access (2011) produced by the Association of Chief Police Officers in Scotland (ACPOS)in response to the enactment of section 15A states: 4.1 The [new section 15A] has been considered by many to be one of the most significant changes in Scots law for generations and the provision of solicitor access is at the heart of the change in the law.
The right to access is one which can be waived, but the greatest of care must be taken if the suspect wishes to waive this right.
Any waiver of the rights of a suspect must be an informed waiver, and must be fully recorded. 4.2 To ensure all suspects are fully informed in their decision, ACPOS consider that all suspects should be provided a specimen form of words, standardised in a manner like the common law caution, when offering a suspect their rights of solicitor access, as follows: You have the right to have a solicitor informed of your detention/voluntary attendance/arrest.
Do you wish a solicitor advised of your detention? You also have the right to a private consultation with a solicitor before being questioned by police officers and at any time during questioning.
Do you wish a private consultation with a solicitor before you are questioned? 4.3 Both these questions must be asked. 4.4 should be advised of the following on each occasion: If the answer to either of these questions is Yes, the suspect If you know a solicitor, they can be contacted on your behalf.
Alternatively, another solicitor can be contacted for you.
Which do you prefer? Your right is to a private personal consultation with a solicitor which can be in person or by telephone.
In the first instance you will be provided the opportunity to speak with a solicitor by telephone to instruct them and seek advice.
It is then your decision if you need a further private consultation with the solicitor. 4.5 The foregoing questions and statement are contained in the ACPOS Solicitor Access Recording Forms (SARFs).
Two forms (respectively ACPOS SARF A and B) have been devised for the purpose of recording in writing the responses of the suspect to these enquiries.
It should be acknowledged at the outset that compliance with these arrangements will not suffice in every case.
Where the suspect is a child or a vulnerable adult, special arrangements may require to be put in place to ensure that his or her Convention rights are respected, due regard being had to the youth or vulnerability of the suspect in question.
The Strasbourg jurisprudence also makes plain that, where an adult is vulnerable, the seriousness of the crime or crimes which he or she is suspected of having committed is also relevant.
Where these are of a particularly serious nature (with particularly serious potential consequences in the event of a conviction) special care may be required to ensure that the suspects rights are respected.
I do not endeavour in this opinion to express any view on what might be required in these special circumstances.
It has recently been observed by this court that a national court should not, without strong reason, dilute or weaken the effect of Strasbourg case law; it is its duty to keep pace with it as it evolves over time; there is, on the other hand, no obligation on the national court to do more than that (Ambrose v Harris [2011] UKSC 43, 2011 SLT 1005, per Lord Hope at para 17, referring to the observations of Lord Bingham of Cornhill in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, at para 20).
Lord Bingham had gone on to observe that it was open to member states to provide for rights more generous than those guaranteed by the Convention but that such provision should not be the product of interpretation of the Convention by national courts.
Accordingly, the present task for this court is, by examination primarily of Strasbourg jurisprudence, to identify as best it can the requirements which the Strasbourg Court has set for the making of an effectual waiver of Convention rights, and in particular of the right, implicit in article 6(1) as read with article 6(3)(c), of access to legal advice prior to being questioned by the police as a suspect at a police station.
The broad context in which this task falls to be undertaken is reasonably clear; the difficulty arises in the detailed application of the relative principles.
In Salduz v Turkey (2009) 49 EHRR 421 the Grand Chamber of the Strasbourg Court held that in order for the right to a fair trial to remain sufficiently practical and effective article 6(1) requires that, as a rule, access to a lawyer should be provided as from the first interrogation of a suspect by the police (para 55).
In Cadder v HM Advocate this court held that, notwithstanding other safeguards which Scots law and practice afforded a suspect in custody, application of Salduz in Scotland required that such a suspect, before being questioned by the police, have the right to be afforded legal advice (see especially per Lord Hope at paras 48 51, Lord Rodger at paras 92 93 and Lord Brown at para 108).
The Strasbourg Court has repeatedly stated that the entitlement to the guarantees of a fair trial afforded under article 6, including the right of access to legal advice before questioning, can be waived, either expressly or tacitly (Salduz para 59, citing Kwiatkowska v Italy (Application No 52868/99) (unreported) given 30 November 2000).
In Salduz at para 59 the Grand Chamber observed that if it is to be effective for Convention purposes, a waiver of the right to take part in the trial must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance.
The Court had reiterated at para 50 that it did not follow from the terms of article 6 that that article had no application to pre trial proceedings.
The Court did not, however, identify what these minimum safeguards might be.
There have been a number of subsequent decisions of the Court touching on the issue of the waiver of Salduz rights.
I take them in chronological order.
In Plonka v Poland (Application No 20310/02) (unreported) given 31 March 2009 where the applicant signed a form acknowledging that she had been informed of her rights, including the right to be assisted by a lawyer and the right to refuse to testify (para 7), it was concluded that there had been no express waiver of her right to be represented by a lawyer during police questioning (para 36).
It was observed, under reference to para 59 of Salduz, that the waiver must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance (para 37).
The court noted that one of the specific features of the case was the applicants alcoholism and that she was in a vulnerable position at the time of the interview; the authorities should have taken this into account during questioning and in particular when apprising her of her right to be assisted by a lawyer (para 38).
In these circumstances it was held that there had been no effectual waiver.
In Pishchalnikov v Russia (Application No 7025/04) (unreported) given 24 September 2009 a case concerned with allegedly implied waiver the applicant had expressly requested legal advice but the questioning had proceeded without such legal advice being made available the Court (First Section) acknowledged (para 77) that a person might of his own free will, either expressly or tacitly, waive his article 6 rights.
It continued: However, if it is to be effective for Convention purposes, a waiver of the right must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance A waiver of the right, once invoked, must not only be voluntary, but also constitute a knowing and intelligent relinquishment of a right.
Before an accused can be said to have implicitly, through his conduct, waived an important right under article 6, it must be shown that he could reasonably have foreseen what the consequences of his conduct would be.
That is, in a case where a Convention right had been invoked by the suspect he had made a specific request for legal assistance a valid waiver of that right must be not only voluntary but a knowing and intelligent relinquishment.
The Court continued at para 78: The Court considers that the right to counsel, being a fundamental right among those which constitute the notion of fair trial and ensuring the effectiveness of the rest of the foreseen guarantees of article 6 of the Convention, is a prime example of those rights which require the special protection of the knowing and intelligent waiver standard.
It is not to be ruled out that, after initially being advised of his rights, an accused may himself validly waive his rights and respond to interrogation.
However, the Court strongly indicates that additional safeguards are necessary when the accused asks for counsel because if an accused has no lawyer, he has less chance of being informed of his rights and, as a consequence, there is less chance that they will be respected.
The Court went on to hold (para 79) that on the facts it was not convinced that the applicant, in a knowing, explicit and unequivocal manner, waived his right to receive legal representation during the interrogations .
In Yolda v Turkey (Application No 27503/04) (unreported) given 23 February 2010 the majority of the court (Second Section) noted (para 51) that in order to be effective for the purposes of the Convention any waiver of the right to take part in the trial must be established unequivocally and be surrounded by a minimum of guarantees as to its seriousness.
At para 52 the majority said while [the applicant] was entitled to legal assistance during his custody and although he was reminded of this right, the applicant refused legal assistance.
It also clearly emerges from his statements taken whilst in custody that the interested partys decision to waive his right to legal assistance must be considered to have been freely and voluntarily made.
The minority dissented in the first place on the assessment of the particular circumstances saying: We feel that the majority too easily accepted that the applicant voluntarily waived the guarantee of legal assistance.
Its second ground of dissent that [a]ny procedural choice that a person accused of a crime who is held in custody may make without a lawyer being able to inform and advise him cannot be free and informed is clearly not settled Strasbourg law.
In Duman v Turkey (Application No 28439/03) (unreported) given 23 March 2010 another case of purportedly express waiver the Court referred to the test in Poitrimol v France (1993) 18 EHRR 130 a case concerning the absence of the accused from his trial.
The test for effectual waiver there identified was that it must be established in an unequivocal manner and be attended by minimum safeguards commensurate to its importance see Poitrimol at para 31.
In addressing the particular circumstances (the incriminating statements and participation in reconstructions of events all apparently preceded any purported waiver) the Court said that it was not convinced that the presence of an undated, pre printed and signed document in the case file demonstrates with certainty that the applicant was properly informed of his right to a lawyer and his right to remain silent (para 50).
In Sharkunov and Mezentsev v Russia (Application No 75330/01) (unreported) given 10 June 2010 the Court (First Section) held (at para 107) that the circumstances of the case disclose that the second applicant expressly and unequivocally waived the right to legal assistance .
Emphasis was placed on the contemporaneous recording of that waiver (para 104).
In Bortnik v Ukraine (Application No 39582/04) (unreported) given 27 January 2011 another case of purportedly express waiver the Court (Fifth Section) said that to be effective for Convention purposes a waiver of the right to take part in the trial must be established in an unequivocal manner and be attended by minimum standards commensurate to its importance (para 40).
Reference was again made to Poitrimol.
In Bortnik it was recognised that the applicant was afraid of possible ill treatment (para 41), suffered from chronic alcoholism and belonged to a socially disadvantaged group, factors which could lead to the conclusion that he was particularly vulnerable, legally ignorant and susceptible to outside influence (para 43).
In these circumstances the Court found that the applicants waiver of legal representation at the initial stage (when self incriminating statements had been made) was not genuine (para 44).
In aman v Turkey (Application No 35292/05) (unreported) given 5 April 2011 the applicant was of Kurdish origin and illiterate with limited knowledge of Turkish.
While held in Turkish custody she was, according to the Government, before each questioning reminded of her rights as an accused, including her right to be assisted by a lawyer; she had refused legal assistance (para 28).
She underwent questioning without such assistance.
Although, according to the Government, the applicant had refused legal assistance, the Court appears to have treated the case as one of implied waiver by conduct submitting to questioning without legal assistance (see para 32, though compare para 33).
The essence of the Courts decision (that there had been a violation of article 6) was that the applicant, having an insufficient knowledge of Turkish and being without the help of an interpreter, could not be said to have effectively waived the right to legal assistance whether expressly or tacitly.
This review of the Strasbourg jurisprudence would appear to suggest that the relevant criterion, at least in the case of an express waiver, is whether the waiver is established in an unequivocal manner and is attended by minimum safeguards appropriate to its importance.
This is the formulation used by the Grand Chamber in Salduz and in all other cases in which the effectiveness of an express waiver was in issue.
In Pishchalnikov after recital of that criterion it was observed: A waiver of the right, once invoked, must not only be voluntary, but must also constitute a knowing and intelligent relinquishment of a right.
But that was a case in which the applicant had specifically invoked his right to legal assistance and the issue was whether, having subsequently responded to questioning without having that assistance, he had impliedly waived his right to it.
The need to focus on a knowing and intelligent relinquishment of the right may be more acute where the waiver is founded on an implication from conduct (in particular, conduct apparently inconsistent with a prior specific request) rather than on an express statement.
The criterion, accordingly, against which the current practice in Scotland is, in my view, to be judged is whether the waiver is in an unequivocal manner and is attended by minimum safeguards commensurate to its importance.
I acknowledge immediately that the right to legal assistance for the purposes of police interview is important.
This is not limited to protection against the making of self incriminating responses.
As Mr Scott pointed out, there will be cases in which it is in the interests of a suspect to give a full and early account of matters; this may, if consistent with his account at trial, support his credibility.
On the other hand, an account at trial which is inconsistent with the suspects responses to the police at interview may damage his credibility as a witness at his trial.
Legal advice as to whether to respond may be of real importance in relation to any subsequent trial.
I also recognise that quite apart from any bullying or other coercive conduct by the police at interview (against which the common law provides its own safeguards) presence as a suspect in police custody may, for some at least, be an intimidating experience.
Mr Scott, under reference to para 53 of Salduz and para 68 of Pishchalnikov emphasised the importance of equality of arms between investigating authorities and the accused.
The suspect faced with questioning by the police in the absence of legal assistance of any kind may be at a disadvantage as against his questioners.
It should not too readily be concluded that there has been an effective waiver of such assistance.
There should, accordingly, be close scrutiny of cases where it is asserted that there has been such waiver.
Such scrutiny by the Strasbourg Court is clear from consideration of the cases which have come before it.
Where the alleged waiver is express and is contemporaneously recorded in writing or in some other form, it should not be difficult to decide whether the waiver is unequivocal or not.
Provided the language used to inform the suspect of the right to legal assistance is simple and the subsequent enquiry as to whether or not the suspect wishes to exercise his or her right is likewise simply expressed, it should not in the ordinary case be difficult to conclude that the suspect has understood what he or she has been told and has responded to the enquiry with an understanding of what has been put to him or her.
The natural and legitimate inference in circumstances where the suspect has responded with a clear negative to the enquiry will be that he or she has a proper understanding, including an appreciation that in light of his or her answer legal assistance will not be made available for the purposes of the interview.
Where the suspect is a child or an adult who is vulnerable (whether because of mental difficulties, addiction to incapacitating substances or otherwise) additional safeguards may be required.
Indeed the circumstances of such individuals may in some cases be such that a waiver of the right to legal assistance is not in practical terms possible.
Special measures for such persons may be part of the minimum safeguards required.
Other safeguards include, as mentioned above, that the information given and the question asked are simply expressed and the answer recorded contemporaneously.
It is also to be expected and in the absence of indications to the contrary to be assumed that the oral communications to the suspect are clearly and deliberately expressed, not mumbled or rushed.
In my view both the statement as to the suspects right to legal assistance and the question posed as to whether he wishes to exercise that right as set out in SARF A are clearly expressed.
A negative answer to the question, duly recorded, will give rise in ordinary circumstances to the conclusion that the suspect has unequivocally waived his or her right to have legal assistance for the purposes of the prospective questioning.
The safeguards include the contemporaneous recording of the whole procedure, including the names and ranks of the officer reading the statement and of the corroborating officer, and the informing of the suspect that signing the record in no way prevents him from changing his mind at any time.
Provision is then made for the suspects signature.
There is, in my view, nothing in Strasbourg jurisprudence in so far as developed to date which lays down more demanding minimum safeguards than are provided for in this procedure.
That is not to say that the procedure could not be improved.
A number of suggestions in that regard were made in the hearing before us.
Lord Hope discusses these in his judgment.
With his observations I agree.
I also agree with his proposed disposal of this reference.
The issue of whether or not it would be fair for the Crown to lead and rely upon the respondents answers at interview is, in my view, best decided in the whole relevant circumstances by the sheriff, informed by the judgments delivered in this court.
LORD KERR
Once again, regrettably, I find myself in disagreement with my colleagues about the impact of article 6 of the European Convention on Human Rights and Fundamental Freedoms on the right of suspects in Scotland to legal advice in advance of and during interview by police officers.
At the outset, however, I should make clear that I agree with Lord Hope that there is no absolute rule to be deduced from Strasbourg jurisprudence to the effect that, in order to make a valid waiver of the right to be advised by a lawyer, a person under interrogation by a police officer must have received legal advice on whether he should waive the right.
What Strasbourg jurisprudence makes unmistakably clear, however, is that this is a right of supreme importance and that such a right can only be regarded as waived where the waiver is indubitably given and the consequences of giving it are properly understood.
Various formulae have been used to express this principle.
Thus statements have been made that the waiver must be knowing and intelligent or informed Pfeifer and Plankl v Austria (1992) 14 EHRR 692; Pishchalnikov v Russia (Application No 7025/04) (unreported) given 24 September 2009; that it must be unequivocal Oberschlick v Austria (1991) 19 EHRR 389; Kolu v Turkey (Application No 3581/97) (unreported) 2 August 2005; Sejdovic v Italy (2004) 42 EHRR 360; Pishchalnikov v Russia; that the person purporting to make the waiver must have reasonable foresight of the consequences of the relinquishment of the right Jones v United Kingdom (2003) 37 EHRR CD269; and that it must be accompanied by safeguards commensurate with the importance of the right to access to legal advice Salduz v Turkey (2008) 49 EHRR 421; Pishchalnikov v Russia.
In para 15 of his judgment Lord Hope has said that rights which are waived may vary in importance according to the circumstances of each case.
This is, of course, true but, in my view, Strasbourg jurisprudence is clear that, whatever the level of importance of the right, it can only be waived if the person waiving it has a proper understanding of the implications of the waiver.
I do not understand Lord Hopes suggestion (in para 16) that care is required when considering cases where the right was different from the right to legal assistance to imply that anything less than an understanding of the nature of the right and the possible repercussions of its waiver will suffice for it to be effective.
In any event, there can be no doubt as to the fundamental importance of the right to counsel.
Strasbourg has repeatedly made this clear see for instance para 78 of Pishchalnikov where it was stated that the right to counsel was a fundamental right among those which constitute the notion of a fair trial and ensuring the effectiveness of the rest of the foreseen guarantees of article 6 of the Convention.
The right, according to the court was, a prime example of those rights which require the special protection of the knowing and intelligent waiver standard.
The necessary level of understanding on the part of a person waiving a right of the consequences of the waiver has perhaps not been as explicitly spelled out as it might have been in the many cases in this area which Lord Hope has so fully reviewed.
Perhaps the best statement on the question is to be found in Millar v Dickson 2002 SC (PC) 30.
At para 33 of his opinion Lord Bingham set out a series of propositions which, he said, formed the basis of the High Courts finding that there had been a tacit waiver of the right to be tried by an independent and impartial tribunal.
The second of the propositions was this: If knowledge of some material matter is absent, even an express intention to waive a right may readily be recognised as insufficient to constitute a binding abandonment of the right.
Lord Bingham, in para 34, accepted the correctness of this proposition.
He expressly rejected the third proposition which the High Court had set out.
It was to this effect: In general, regardless of the knowledge or ignorance or misapprehension of an accused or his agent as to the law, knowledge of the law will be imputed to him.
Of that statement, Lord Bingham said that ignorance of the law will not excuse unlawful conduct; but it cannot suffice to found a plea of waiver para 34.
Knowledge of all material matters is therefore a prerequisite to a valid waiver and if the person waiving the right is ignorant of a salient aspect of the law, this will prevent the waiver from being effective.
It was somewhat faintly suggested by the Lord Advocate that knowledge of the consequences of waiving a right was required only in cases of tacit or implied waiver.
There is no logical basis for distinguishing express waiver from implied waiver in relation to this requirement.
It was not suggested that an express waiver should be regarded as effective unless it was properly informed.
In this context, being informed must mean being aware of what will or might happen if the right is not availed of.
As Lord Hope said at para 58 of Millar, Strasbourg jurisprudence shows that, unless the person is in full possession of all the facts, an alleged waiver of the right must be rejected as not being unequivocal.
Mere possession of the facts is not enough, of course.
A clear understanding and insight as to their significance is surely an essential concomitant.
It is not enough that an accused person receive information, he must have the wherewithal to understand what that information means to his case.
Otherwise, the information is of no value.
All of this must be seen against the accepted position that it is for the prosecuting authorities who seek to rely on an alleged waiver to establish that it is effective.
They must show not only that the accused person was made aware of his right to legal counsel; not only that he or she had stated that he did not wish to avail of it or, alternatively, implicitly waived their entitlement to it; not only that he or she was given sufficient information about the circumstances in which legal assistance could be provided; but also that the accused person appreciated what was at stake.
Obviously, direct evidence of the degree of understanding of the accused person will not usually be available.
Conventionally, the prosecuting authorities will seek to establish this by reference to the safeguards that are in place to ensure that this had happened and it is no coincidence that Strasbourg jurisprudence emphasises the need for the presence of safeguards commensurate with the importance of the right.
Before turning to the safeguards which, the Lord Advocate claims, were efficacious to achieve that, I should say something about the assertion of Miss Cherry QC on his behalf that the narrow base of the decision in Salduz should inform the debate as to whether the safeguards are sufficient.
The "narrow base" from which Salduz rights are derived is, Miss Cherry contends, the need to protect the suspect from self incrimination.
The rationale underlying the protection against self incrimination is one of protecting the suspect from coercion of his will by improper compulsion (physical or psychological) by the police authorities.
That rationale of protecting the suspect against coercion of his will provides the context against which the ECtHR's requirements that a waiver of Salduz rights be unequivocal and be attended by minimum safeguards commensurate to its importance should be construed and applied, according to Miss Cherry.
I do not accept these arguments.
At para 52 of the Salduz judgment the court said: National laws may attach consequences to the attitude of an accused at the initial stages of police interrogation which are decisive for the prospects of the defence in any subsequent criminal proceedings.
Now, true it is that in Scotland there is no statutory provision such as exists in the rest of the United Kingdom expressly permitting the tribunal of fact to draw adverse inferences against an accused because of his or her failure to mention in answer to police questioning facts on which they later relied.
But it is not claimed that an accused who seeks to put forward on trial in Scotland a basis of defence that was not foreshadowed in his interviews with the police would not suffer a conspicuous disadvantage in consequence.
Moreover, in Scotland, where corroboration of evidence that a sexual offence has been committed is necessary, a statement by an accused person that there was consensual sexual activity may supply (and, we were given to understand, frequently does supply) the needed corroboration.
This is a paradigm example of national laws attaching consequences to the attitude of an accused at the initial stages of the investigation which have nothing whatever to do with his will being overborne by coercion.
And it is clear that it was precisely this type of situation that was contemplated by the court in Salduz when it emphasised the importance of the need for access to legal advice at the early stage of the investigation.
The narrow base argument is therefore plainly wrong.
The need for a lawyer at the early stage of an investigation goes well beyond protecting the suspect from coercion of his will by improper compulsion.
This much is unmistakably clear from what the court said in Salduz at para 54: the Court underlines the importance of the investigation stage for the preparation of the criminal proceedings, as the evidence obtained during this stage determines the framework in which the offence charged will be considered at the tria1.
At the same time, an accused often finds himself in a particularly vulnerable position at that stage of the proceedings, the effect of which is amplified by the fact that legislation on criminal procedure tends to become increasingly complex, notably with respect to the rules governing the gathering and use of evidence.
In most cases, this particular vulnerability can only be properly compensated for by the assistance of a lawyer whose task it is, among other things, to help to ensure respect of the right of an accused not to incriminate himself. (emphasis supplied)
The efficacy of safeguards to ensure that a waiver of the fundamental right to legal assistance is effective is therefore not to be judged solely by reference to the need to protect a suspect from coercion of his will by improper compulsion.
It must be judged against the backdrop of his need to understand the ways in which the absence of a lawyer might have an impact on the viability of his defence to criminal charges about which he is questioned by police.
The advocate depute relied on the safeguards which currently exist under Scots law and which, she said, were commensurate with the importance of the right to legal assistance.
These included the administration of the caution which, Miss Cherry pointed out, occurred at various stages of the arrest and interview process.
Nothing in the caution advises the suspect of his or her rights to the services of a lawyer, however.
Its focus is on conveying to the suspect the right to remain silent.
In June 2010, pending the judgment of this court in Cadder v HM Advocate, the Lord Advocate issued guidelines to Chief Constables in Scotland as to the steps to be taken to provide a suspect with access to a solicitor prior to and during interview.
The guidelines provided that individuals who attended voluntarily for interview by police, or were detained under section 14 of the Criminal Procedure (Scotland) Act 1995 for that purpose, or were interviewed by police between arrest and charge should first be offered (a) a private consultation with a solicitor prior to interview; and (b) solicitor presence/consultation during the interview.
The Lord Advocate's Guidelines were withdrawn in January 2011 to coincide with the introduction of a new ACPOS Manual of Guidance on Solicitor Access.
Nothing in these guidelines was directed to an investigation of the suspects understanding of the reasons that he might need to have a solicitor.
Nor were they designed to elicit information about why a suspect might choose not to have a solicitor.
Nor did they contain any means of discovering whether the suspect had any appreciation of the implications of waiving his right to a solicitor.
The procedure that they prescribed consisted of a one way form of communication with the suspect contributing only an affirmative or negative response to the imparting of the information that he was entitled to have a solicitor.
The capacity of the caution and the guidelines to supply safeguards commensurate with the right to legal assistance is intrinsically open to question given the absence of meaningful contribution to the process by the suspect.
But the obvious shortcomings of this procedure are demonstrated by research carried out by David J Cooke and Lorraine Philip in 1998 about the level of understanding of suspects of even basic elements of the procedure then adopted by police officers.
Although, as Lord Hope has pointed out, this paper was written some time ago and does not reflect current practice in that the caution then used has been changed, the effect of the results of the survey on the adequacy of the up to date procedure is unmistakable.
The Cooke and Philip research showed that the question customarily posed after the caution had been administered, viz do you understand was valueless because of the tendency of suspects to acquiesce without any real level of understanding.
That was troubling enough but overall it was found that there was a poor level of comprehension of the simple caution and, even when this was broken down into the simplest of sentences, the level of understanding remained low.
The conclusions of the report are sobering: it would appear that within Scotland a significant proportion of young offenders are unlikely to comprehend their legal rights when these are presented to them in the form of the common law caution.
If the purpose of reciting the caution is to truly inform an accused person of his/her rights rather than merely to record some legal niceties then a simplified caution is required.
Simplifying the caution may not be sufficient (Scott, 1996): police officers require to be trained to deliver the caution more effectively.
No challenge to the validity of these findings has been presented nor has it been suggested that they are not eminently relevant to contemporary experience.
There is therefore no reason to suppose that todays suspects will be any more able to appreciate the importance of the right to legal assistance, much less the implications of relinquishing that right, in light of these findings.
Certainly, in the absence of any inquiry whatever (whether of the suspect directly or, if they are capable of revealing it, by examination of the surrounding circumstances) as to why a suspect has decided to waive the right, it is, in my opinion, simply impossible to say that an intelligent, knowing decision has been made.
The Criminal Procedure (Scotland) Act, 1995 was amended with effect from 30 October 2010 and this now provides for the right of a suspect to have a private consultation with a solicitor before and during questioning by a police officer.
The suspect must be informed of this right but there is nothing in the legislation nor in the ACPOS Manual of Guidance on Solicitor Access which requires any contribution from the suspect beyond confirming that he understands that he has the right and indicating whether he wishes to avail of it.
Lord Hope has made suggestions (in paras 49, 51 of the judgment in McGowan) as to how the current procedures might be improved.
The first of these is to follow the practice indicated by para 6.5 of Code C of the Code of Practice for the Detention, Treatment and Questioning of Persons by Police Officers which was introduced in England to meet the requirements of the Police and Criminal Evidence Act 1984 (PACE).
This requires a police officer to tell a suspect that he can speak to a solicitor by telephone if has refused initially to seek legal assistance.
If the suspect continues to waive the right the police officer is then enjoined to ask the reason for this and to record the suspects reply.
There are two obvious purposes behind these requirements in the Code.
The first is to dispel the well known and widespread apprehension that suspects feel that if they elect to consult a solicitor this will delay their interview and prolong the period of their detention.
The second is to obtain some insight into the reasons for not wishing to have the assistance of a lawyer so that misunderstandings can be corrected.
Lord Hope makes it clear that he is not suggesting that these steps be taken in every case but, with respect, why should they not be? How can one have any insight into the reasons for waiving this fundamentally important right, if one does not ask why? If the decision to waive must be knowing and intelligent and, more pertinently, if the prosecuting authorities must be in a position to prove that it was such how can that be established if a bland refusal is all that one has to work on? Put simply, unless one knows why the decision to waive has been made, it cannot be said to be voluntary, informed and unequivocal.
I can further explain my conclusion that some means of ascertaining why a suspect has chosen not to consult a solicitor is vital by reference to those cases emanating from Strasbourg post Salduz where this issue has been considered.
First, Pishchalnikov at para 77 where the court said: A waiver of the right, once invoked, must not only be voluntary, but must also constitute a knowing and intelligent relinquishment of a right.
Before an accused can be said to have implicitly, through his conduct, waived an important right under article 6, it must be shown that he could reasonably have foreseen what the consequences of his conduct would be.
Of course, that statement was made in the context of implied waiver but for the reasons given earlier, foresight of the consequences, if it is necessary in the case of implied waiver, is equally required where the waiver is said to be express.
It is interesting to note the two overlapping aspects of the requirement knowledge and intelligence on the one hand and reasonable foresight of the consequences on the other.
The suspect must know what he is doing; he must be possessed of sufficient intelligence to appreciate the importance of the step that he is taking; and he must have reasonable foresight of the consequences for him of doing it.
Miss Cherry suggested that the last requirement was fulfilled merely by the suspect knowing that he would be asked questions by police officers and that his solicitor would not be present.
That surely cannot be right, if the knowing and intelligent element is to have any significance.
I do not suggest that a suspect needs to be aware of every legal nuance that might arise in the course of his interview but he should be aware in a general sense that legal issues might arise and should have consciously decided that he is prepared to forgo the advice that a lawyer might give on those issues either before or in the course of the interview.
In Yolda v Turkey (Application No 27503/04) (unreported) given 23 February 2010, the court held that the applicant had effectively waived his right to legal assistance.
A careful review of the facts of this case is instructive.
The applicant was 29 years old at the time of his arrest.
After the charges were read to him he was required to sign a form which confirmed that he had been advised of his right to assistance by a lawyer of his choice or a court appointed lawyer.
This happened more than 36 hours after he had been received into the custody of the Turkish police.
Mr Yolda was asked whether he wished to have his family informed but he said that he did not want them to be contacted until he had appeared before the court.
A document containing the handwritten note of this request by the applicant as well as his signature was produced to the court and was not disputed by him.
On 24 December 2003, some six days after Mr Yolda had been taken into custody, the applicant's deposition was drawn up.
According to this document, the applicant's right to remain silent, to have his relative informed, to the assistance of a lawyer and to bring the matter before a judge in order to object to his arrest and his custody were repeated to him.
He stated that he was sorry and wished to benefit from law No 4959 of 29 July 2003 concerning reintegration in society.
He signed his deposition thus drawn up.
On the same date the applicant was referred to the Public Prosecutor, who informed him of his rights as stated in article 135 of the Code of Criminal procedure.
Significantly, the applicant stated that he understood his rights and did not wish to be assisted by a lawyer or for his family to be informed of his situation.
He confirmed his statement made in custody, acknowledged belonging to the organisation in question and having participated in activities as part of this, including armed attacks.
He declared that he wished to benefit from the law on repentance.
He signed the deposition.
Later on the same date, 24 December 2003, Mr Yolda appeared before a judge.
He was reminded by the judge of his right to legal assistance.
The applicant again stated that he understood his rights but did not wish to be assisted by a lawyer and made his deposition alone.
He repeated his previous depositions and signed the deposition made before the court.
Mr Yolda had been informed or reminded therefore on no fewer than four occasions of his right to a lawyer.
This information had been imparted to him by police officers, a public prosecutor and a judge.
He twice asserted that he knew and understood what his rights were.
He was clearly familiar with the law on repentance and re integration into society.
It is clear that these particular circumstances bore heavily on the decision of the European Court that there had been an effective waiver of the applicants rights to legal assistance.
This is especially clear from the opening words of para 52 of the courts judgment: Under the particular circumstances of this case, the Court notes that the applicant had been informed of his right to be assisted by a lawyer whilst in custody.
In this connection the police drew up a report stating his rights during custody, and in particular that of being assisted by a lawyer (paragraph 6 above).
After reading the report, a copy signed by the applicant was delivered to him.
Furthermore, the police also reminded the interested party that he was entitled to see his family.
The applicant stated that he wished to contact his family after appearing before the competent court (paragraph 7 above).
Therefore while he was entitled to legal assistance during his custody and although he was reminded of this right, the applicant refused legal assistance.
It also clearly emerges from his statements taken whilst in custody that the interested party's decision to waive his right to legal assistance must be considered to have been freely and voluntarily made.
Hence, the applicant's waiver of this right was unequivocal and surrounded by a minimum guarantee (a contrario, Padalov v Bulgaria, No 54784/00 para 54, 10 August 2006). (Emphasis supplied)
Lord Hope has said (in para 32 of his judgment in McGowan) that this decision indicates that where it is shown that the accused, having been informed of his rights, states that he does not want to exercise them, his express waiver of those rights will normally be held to be effective.
I do not so read it.
Certainly no statement to that effect is to be found in the text of the judgment and it is replete with references to the importance of the particular facts of the case see paras 48, 50, 52, 53 and 54.
In Galstyan v Armenia (2007) 50 EHRR 618 the European Court found that the applicant had been informed of his right to a lawyer both by police officers and the judge before whom he appeared.
The applicant had chosen to represent himself this was a specific finding of ECtHR para 91.
It was the governments case that he had been advised by police to avail of the services of a lawyer but stated that he did not wish to have one para 16.
The applicant was an authorised election assistant for the main opposition candidate in the presidential election and, when he appeared before the judge, was sufficiently robust to demand justice and lawfulness when asked by the judge what he wanted.
There is nothing in the report which suggests that the presence of a lawyer would have made a significant difference to the outcome.
This is a case from which, I think, it would be difficult to discern any principle of general application.
In Sharkunov and Mezentsev v Russia (Application No 75330/01) (unreported) given 10 June 2010, (referred to by Lord Hope in para 33 of his judgment in McGowan) the first applicant made no statement or admissions after his arrest, and the court did not consider it necessary to make findings in his case on his complaint that there had been a violation of article 6 because he had been denied legal assistance.
So far as the second applicant was concerned, the court found that he had waived his right to legal assistance, and had expressly said that the waiver was not related to a lack of financial means.
Subsequently, when he asked for legal assistance, this was obtained promptly.
Significantly, he did not complain that he was not provided with legal assistance between December 1999 and February 2000.
And the court found (see para 108) that the case file did not disclose that the second applicant made any statement or admission between those dates.
Again, this is a case that is confined to its own facts and upon which no principle of general application can be founded.
Paskal v Ukraine (Application No 24652/04) (unreported) given 15 September 2011 was a case in which the facts were somewhat unusual.
The applicant had a university degree in law.
When under interrogation he was a serving police officer.
He had been arrested on suspicion of having taken part in a robbery.
He signed a procedural rights notification form and noted that he wished to appoint a lawyer whom he named as his advocate.
He was then questioned, without a lawyer being present, about the robbery.
It was argued that this was a case of an implied waiver.
Most significantly, of course, the applicant, when questioned without a lawyer, did not make any incriminating statements see para 75 of the judgment.
The court also observed in that paragraph that because of the applicants educational and professional background as a lawyer and a police officer, his participation in the questioning was rather well informed and deliberate.
In para 76 of Paskal ECtHR stated that the rights of the defence will in principle be irretrievably prejudiced when incriminating statements made during police interrogation without access to a lawyer are used for a conviction, citing Salduz para 55.
It also stated that the very fact of restricting access of a detained suspect to a lawyer may prejudice the rights of the defence even where no incriminating statements were obtained as a result.
These are strong statements which, unlike the cases of Yolda, Galstyan and Sharkunov and Mezentsev, do have general import.
The principle to be derived from them is clear.
As a general rule, incriminating statements given during police interrogation where there has not been access to a lawyer irretrievably prejudice the rights of the defence when they are used to obtain a conviction.
But the courts disapproval of the adducing of evidence given by a suspect who has not had the benefit of legal assistance did not stop there.
At para 79 the court said that the very fact of questioning a suspect without enabling him to consult a lawyer may shift the power balance between the parties in breach of the fair trial guarantees even absent any appearance of negative consequences for the outcome of the proceedings.
This sends a powerful message.
It emphasises the exceptionality of the circumstances in which statements made by suspects who have not had access to a lawyer should be admitted in evidence.
Now, as it happens, the European Court in Paskal decided that there had been an effective waiver of the right to legal assistance and it is on that aspect of the decision that Lord Hope has concentrated.
But I suggest that this conclusion reflects the particular, and somewhat unusual, facts of the case and of far greater significance are the expressions of general principle which it contains and which I have referred to above.
It was because the applicant never raised the matter of the lack of legal assistance during his trial and because, although he complained in his cassation appeal in general terms that his right to defence had been breached, he made no express mention of the questioning that took place in the absence of legal assistance that the court considered that a breach of article 6 had not been established.
The court was also influenced, to some extent, by the applicants background as a law graduate and police officer see paras 78 and 79 of the judgment.
But these are, as I have said, unusual facts.
They do not remotely sound on the issues that arise in these appeals and reference.
They are peculiar to that particular case.
Paskal is a significant case, however, but significant in my view in favour of the arguments advanced on behalf of the respondents in the appeal and on behalf of B in the reference.
It is not particularly easy to assemble a list of coherent principles that should guide consideration by courts of the difficult question of waiver of the right to legal assistance.
With some misgivings, I suggest that the following are, while by no means exhaustive, perhaps useful guidelines to follow: i) Each case must be examined on its own particular facts.
Close scrutiny of the claim that the right has been waived will always be required.
Among the circumstances that will be relevant are the gravity of the offence and the sensitive nature of the charges; ii) The background of the suspect may be relevant, especially if it includes an expertise in legal matters but it should not be assumed that previous experience with police procedures will make it more likely that a waiver is effective; iii) Unless it is shown that the suspect had a proper insight into the significance of the decision to waive his right, the purported waiver should not be regarded as effective; the most obvious and easiest way of showing this is when the suspect has been advised by a lawyer as to whether he should waive the right; iv) A decision to waive the right which is prompted by a desire to get the interview over with or because the suspect does not wish to wait for his solicitor to arrive or because he erroneously believes that he may have to pay for the services of a solicitor are all strong indicators that the waiver is not unequivocal; v) Unless there is clear evidence that the suspect understands the significance of waiving his right to a solicitor, he should be asked why he has decided not to exercise his right; his reasons should be recorded; and any misunderstanding should be corrected.
He should also be informed that a telephone consultation with a solicitor can be arranged. (These minimum safeguards were not present in any of the cases under appeal or the subject of the reference); vi) Simply because a suspect evinces a willingness to answer questions, it is not to be presumed that he has tacitly waived his right to access to legal advice.
Conclusions
I would answer the first question in the negative for the reasons given by Lord Hope.
I would answer the second question in the negative also.
No attempt was made to discover why B had refused to avail of the legal assistance.
I consider that it is impossible to say on the available evidence that his was an unequivocal and informed decision to waive his right under article 6.
In para 58 of his judgment, Lord Brown suggests that it is surely obvious that the point of a lawyer is to advise on any legal issues that may arise and that it is also obvious that if a suspect chooses to forego this right he will be questioned without the benefit of such advice.
I agree.
But knowledge of the obvious is not the same as understanding that this may carry grave implications for the suspect.
Otherwise there would be no need for any examination of the circumstances in which a suspect has declined to avail of legal assistance.
His statement that he did not wish to have a lawyer would determine the issue.
He would be presumed to know the obvious and that would be, in Lord Browns view, an end of the matter.
With respect to Lord Brown, to seek to be sure that the suspect realises that he is foregoing the chance to have a lawyer advise him on legal issues that might bear directly on his defence does not seem to me to ask for too much.
| This is a reference of a devolution issue at the request of the Lord Advocate.
It is directed to the issue of waiver.
The Respondent, B, whose case has not yet gone to trial, has been charged on summary complaint with housebreaking with intent to steal and having in his possession a controlled drug contrary to section 5(2) of the Misuse of Drugs Act 1971.
Before the commencement of a police interview, he was offered legal assistance but declined the offer.
His waiver of the right to legal assistance took place without his having received advice on the point from a solicitor In advance of the trial, Bs solicitor lodged a Devolution Minute stating that Bs right to a fair trial under Article 6(3)(c) of the European Convention on Human Rights would be breached if the Crown were to lead evidence of his police interview since, it was claimed, access to a solicitor should be automatic when someone has been detained in police custody.
The propositions in the Devolution Minute were based on observations of the High Court of Justiciary in Jude v HM Advocate [2011] HCJAC 46, 2011 SLT 722, in which the Lord Justice Clerk (Gill), delivering the unanimous opinion of the Court, had stated that he could not see how a person could waive his right to legal advice when he had not had access to legal advice on the point.
In view of the importance of the question raised by that observation, the Lord Advocate invited the sheriff to refer the issue to the Supreme Court.
The amended reference agreed between the parties sets out the following questions for consideration by the Court: (i) Whether, in principle, it would be incompatible with Article 6(1) and 6(3)(c) for the Lord Advocate to lead and rely upon evidence of answers given during a police interview of a suspect in police custody who, before being interviewed, had been informed of his Salduz/Article 6 rights to legal advice, and, without having received advice from a lawyer, had stated that he did not wish to exercise such rights; (ii) Whether it would be compatible with Bs rights under Articles 6(1) and 6(3)(c) for the Lord Advocate to lead and rely upon evidence of answers given in his police interview.
Both parties agreed that question (i) should be answered in the negative.
The Appellant argued that question (ii) should be answered in the affirmative.
The Respondent disagreed.
The Supreme Court, by a 4 1 majority, answers the first question in the reference in the negative, and remits the second question to the sheriff.
Lord Hope gives the leading judgment.
Lord Kerr gives a separate dissenting judgment.
Article 6 does not expressly state that a person must have had legal advice before he can be taken to have waived the right of access to a lawyer.
However, it is clear that the article is to be interpreted broadly by reading into it a variety of other rights to which the accused person is entitled, so as to give
practical effect to the right to a fair trial [11].
The task for the Supreme Court is to identify as best it can the requirements which the Strasbourg court has set for the making of an effectual waiver of Convention rights.
It may be that the way police interviews are currently conducted in Scotland is in need of improvement.
But that should not be done by giving a more generous scope to the Convention rights than that which is to be found in the jurisprudence of the Strasbourg court or by laying down fixed rules that may impede the prosecution of crime in Scotland unless they have been clearly identified as such by Strasbourg [5, 6].
In order to be effective as a waiver of a Convention right, the acts from which the waiver is to be inferred must be voluntary, informed and unequivocal [21], and must be attended by the minimum safeguards commensurate to the importance of the right [27].
None of the Strasbourg cases indicate that an accused who acts of his own free will in waiving his right to legal assistance must always have access to legal advice before he can be held validly to have waived that right.
This also reflects the position of the Supreme Courts of Canada and the United States [37 44].
There is no generally internationally recognised human rights standard on the issue of waiver that would support the conclusion that access to legal advice is an essential prerequisite to an effective waiver by a detainee of the right of access to a lawyer when he is being questioned by the police [45].
The statements of the Lord Justice Clerk in Jude to the effect that there is a rule requiring legal advice for the purpose of a valid waiver of the right to legal assistance should be disapproved.
Where the detainee, having been informed of his rights, states that he does not want to exercise them, his express waiver of those rights will normally be held to be effective.
The minimum guarantees are that he has been told of his right, that he understands what the right is and that it is being waived and that the waiver is made freely and voluntarily [46].
The Strasbourg decisions indicate, however, that in some cases access to a lawyer may well be a prerequisite of a valid waiver.
In particular, it must not be taken for granted that everyone understands the rights in question.
People who are vulnerable or under the influence of alcohol or drugs may need to be given more than standard formulae if their right to a fair trial is not to be compromised [36 & 47].
What we have been given by Strasbourg is a guiding principle as to what is needed for there to be an effective waiver.
Its application in determining whether there will be, or has been, a fair trial will depend on the facts of each case [50].
Two suggestions are made for the improvement of the practice that is adopted at present: first, in order to minimise the risk of misunderstanding, police should ask the detainee for his reasons for waiving his right to legal assistance, and record the reasons given.
This will provide an opportunity for any obvious misunderstandings to be corrected, though police officers should not go so far as to offer advice to the detainee [49].
Second, police should inform the detainee not only of his right to legal assistance, but also of the arrangements that may be made if he is unable to name a solicitor or is concerned about the cost of employing one [51].
It would not be appropriate to reach a decision on question (ii) in this case.
The issue comes before the Court as a reference and not as an appeal.
It raises questions of fact and degree which ought properly to be dealt with by the sheriff, after hearing all the evidence on this issue [53].
Lord Kerr would have answered both questions in the negative.
No attempt had been made to discover why B had refused to avail himself of legal assistance, and therefore it was impossible to say that this was an unequivocal and informed waiver [128].
Only in exceptional circumstances should statements made by a suspect who has not had access to a lawyer be admitted in evidence [125].
The suggestions made by Lord Hope should be implemented as rules requiring police to obtain reasons from suspects who purport to waive their right to legal assistance.
Unless one knows why the decision to waive has been made, it cannot be said to be voluntary, informed and unequivocal [115].
|
These proceedings arise out of the deaths of three young men who lost their lives while serving in the British Army in Iraq and the suffering by two other young servicemen of serious injuries.
The units in which they were serving were sent to Iraq as part of Operation TELIC.
This operation, which lasted from January 2003 to July 2009, had two distinct phases of military activity.
The first began on 19 March 2003 when Iraq was invaded by coalition forces including those from the United Kingdom.
The second phase began on 1 May 2003 when major combat operations ceased and were replaced by a period of military occupation.
During much of that time there was a constant threat of enemy action by insurgents opposed to the interim Iraqi government.
On 25 March 2003 Corporal Stephen Allbutt, who was the husband of the claimant Ms Deborah Allbutt, Lance Corporal Daniel Twiddy and Trooper Andrew Julien were serving with the Queens Royal Lancers as part of the Royal Regiment of Fusiliers battle group during the fourth day of the offensive by British troops to take Basra.
They were in one of a number of Challenger II tanks which had been placed at a dam in hull down positions to minimise their visibility to the enemy.
Just after midnight a Challenger II tank of the Second Royal Tank Regiment which had been assigned to the 1st Battalion Black Watch battle group and was commanded by Lt Pinkstone crossed over onto the enemy side of a canal to take up a guarding position some distance to the south east of the dam.
At about 0050 hrs Lt Pinkstone identified two hot spots through his thermal imaging sights which he thought might be personnel moving in and out of a bunker.
He described the location to Sgt Donlon who was unable to identify the hot spots for himself because the description he was given was incorrect.
After Lt Pinkstone had identified a further four hot spots in the same area he was given permission to fire by Sgt Donlon.
Lt Pinkstones tank fired a first round of high explosive shell at about 0120 hrs and a second round shortly afterwards.
The hot spots that he had observed were in fact men on top of Cpl Albutts Challenger II tank at the dam.
The first shell landed short of the tank, but the explosion blew off the men who were on top of it including Lance Corporal Twiddy.
The second shell entered the tank and killed Cpl Allbutt, injured Trooper Julien and caused further injury to Lance Corporal Twiddy.
It also killed Trooper David Clarke: see R (Gentle and another) v Prime Minister [2008] UKHL 20, [2008] AC 1356, para 1.
Lt Pinkstone did not know of the presence at the dam of the Royal Regiment of Fusiliers battle group.
He did not realise that he was firing back across the canal, as he was disorientated and believed that he was firing in a different direction.
In 2005 Private Phillip Hewett, who was the son of the claimant Susan Smith, was serving with 1st Battalion the Staffordshire Regiment.
On 10 May 2005 he was deployed to Camp Abu Naji, near the town of Al Amarah in the Maysan Province of Iraq.
He was assigned to a battle group working alongside soldiers from other battalions.
In mid July 2005 there was a substantial threat against Camp Abu Naji from rocket attacks and an operation was launched to counter this threat by restricting the movement of insurgent anti Iraqi forces.
On 15 July 2005 Pte Hewett was assigned to a mobile unit which was sent that evening to patrol around Al Amarah.
The unit consisted of three Snatch Land Rovers.
Snatch Land Rovers are lightly armoured.
Their armour is designed to provide limited protection against ballistic threats, such as those from small arms fire.
It provided no protection, or no significant protection, against improvised explosive devices (IEDs).
It was escorted into, but not around, the town by a Warrior fighting vehicle.
Warriors are heavily armoured and tracked, and are capable of carrying seven or eight personnel as well as the crew.
Pte Hewett was in the lead Snatch Land Rover as its driver with 2nd Lt Richard Shearer.
It had no electronic counter measures (ECMs) to protect it against the threat of IEDs.
At about 0115 hrs on 16 July 2005 an explosion was heard in the vicinity of the stadium in Al Amarah. 2nd Lt Shearer decided to investigate the explosion.
As the Snatch Land Rovers were driving down the single road to the stadium an IED detonated level with the lead vehicle.
Pte Hewett, 2nd Lt Shearer and another soldier who was acting as top cover died in the explosion, and two other occupants of the vehicle were seriously injured.
In 2006 Private Lee Ellis, who was the father of the claimant Courtney Ellis
and the brother of the claimant Karla Ellis, was serving with the 2nd Battalion the Parachute Regiment.
His unit was attached to the Royal Scots Dragoon Guards and was based at Camp Abu Naji.
On 28 February 2006 Pte Ellis was the driver of a Snatch Land Rover in a patrol of three Warriors and two Snatch Land Rovers which made a journey from the Camp to the Iraqi police headquarters in Al Amarah.
Captain Richard Holmes and another soldier were in the same vehicle.
On the return journey from the police headquarters an IED was detonated level with the lead Snatch Land Rover driven by Pte Ellis.
He and Captain Holmes were killed by the explosion and another soldier in the vehicle was injured.
The vehicle had been fitted with an ECM, but a new part of that equipment known as element A was not fitted to it at that time.
Element A was fitted to the other Snatch Land Rovers used in the Camp within a few days of the incident.
The claims
The claims by Ms Deborah Allbutt, Lance Corporal Daniel Twiddy and Trooper Andrew Julien (the Challenger claims) are brought in negligence at common law only.
They make two principal claims.
First, they allege a failure to ensure that the claimants tank and the tanks of the battle group that fired on it were properly equipped with the technology and equipment that would have prevented the incident.
That equipment falls into two categories: target identity devices that provide automatic confirmation as to whether a vehicle is a friend or foe; and situational awareness equipment that permits tank crews to locate their position and direction of sight accurately.
Secondly, they allege that the Ministry of Defence (the MOD) was negligent in failing to provide soldiers with adequate recognition training pre deployment and also in theatre.
The claims by Susan Smith and by Courtney and Karla Ellis (the Snatch Land Rover claims) fall into two parts.
The first, which is common to all three claimants, is that the MOD breached article 2 of the European Convention on Human Rights by failing to take measures within the scope of its powers which, judged reasonably, it might have been expected to take in the light of the real and immediate risk to life of soldiers who were required to patrol in Snatch Land Rovers.
The second, which is brought by Courtney Ellis only, is based on negligence at common law.
The particulars of the Smith claim under article 2 of the Convention are that the MOD (i) failed to provide better/medium armoured vehicles for use by Pte Hewetts commander which, if provided, would have been used for Pte Hewetts patrol, (ii) failed to ensure that any patrol inside Al Amarah was led by a Warrior, (iii) caused or permitted a patrol of three Snatch Land Rovers to proceed inside Al Amarah, especially when there was no ECM on the lead Snatch Land Rover and it knew or ought to have known that ECMs were ineffective against the triggers that were in use by the insurgents and no suitable counter measures had been provided, (iv) permitted the patrol of Snatch Land Rovers to investigate the bomb blast, especially when there was only one road to the decoy bomb site, (v) failed to provide other vehicles for route clearing and route planning ahead of the Snatch Land Rovers, (vi) failed to provide suitable counter measures to IEDs in the light of the death of Lance Corporal Brackenbury, who was killed by an IED while in a Snatch Land Rover on 29 May 2005 and (vii) failed to use means other than patrols to combat the threat posed by the insurgents.
The particulars of the Ellis claim under article 2 and in negligence are that the MOD failed (i) to limit his patrol to better, medium or heavily armoured vehicles, (ii) to provide any or any sufficient better or armoured vehicle for use by Pte Elliss commander which, had they been provided, would or should have been used for his patrol and (iii) to ensure that Element A had been fitted to the ECM on Pte Elliss Snatch Land Rover, without which it should not have been permitted to leave the Camp.
The MODs primary case in reply to the Challenger claims and the Ellis claim in negligence is that they should all be struck out on the principle of combat immunity.
It also pleads that it would not be fair, just or reasonable to impose a duty of care on the MOD in the circumstances of those cases.
Its case for a strike out in reply to the Snatch Land Rover claims under article 2 of the Convention falls into two parts.
First, it submits that at the time of their deaths Pte Hewett and Pte Ellis were not within the jurisdiction of the United Kingdom for the purposes of article 1 of the Convention.
Secondly, it submits that on the facts as pleaded the MOD did not owe a duty to them at the time of their deaths under article 2.
The strike out applications were heard by Owen J, who handed down his judgment on 30 June 2011: [2011] EWHC 1676 (QB), [2011] HRLR 795.
He struck out the Snatch Land Rover claims under article 2 on the ground that Pte Hewett and Pte Ellis were not within the jurisdiction of the United Kingdom for the purposes of article 1 of the Convention when they died: para 48.
He based this decision on R (Smith) v Oxfordshire Assistant Deputy Coroner (Equality and Human Rights Commission intervening) [2010] UKSC 29, [2011] 1 AC 1.
He went on nevertheless, in a carefully reasoned judgment, to address the question whether, if the deceased were within the Convention jurisdiction, the MOD was under a substantive article 2 duty of the kind that the Snatch Land Rover claimants were contending for.
He said that he would not have struck out their claims relating to the supply of equipment: para 80.
But in his judgment there was no sound basis for extending the scope of the implied positive duty under article 2 to decisions made in the course of military operations by commanders: para 81.
Holding that the doctrine of combat immunity should be narrowly construed, he refused to strike out the Challenger claims and the second and third of the three Ellis claims in negligence because he was not persuaded that their equipment and pre deployment training claims were bound to fail: paras 110, 111.
But he struck out the first of the Ellis claims because he was of the opinion that this claim fell squarely within the scope of combat immunity: para 114.
On 19 October 2012 the Court of Appeal (Lord Neuberger MR, Moses and Rimer LJJ) dismissed appeals by the Snatch Land Rover claimants on the question whether the deceased were within the jurisdiction of the United Kingdom for the purposes of article 1 of the Convention: [2012] EWCA Civ 1365, [2013] 2 WLR 27.
It found it unnecessary to deal with the extent of the substantive obligations implicit within that article.
It also dismissed the MODs appeal against the judges refusal to strike out the Challenger claims and the second and third of the Ellis claims in negligence on the ground of combat immunity.
But it allowed a cross appeal by the Ellis claimants against the striking out of the first Ellis claim.
This was because, although the allegation was of failures of the MOD away from the theatre of war, there might be factual questions as to the circumstances in which the decisions were made which would enable the MOD to raise the defence of combat immunity at the trial: para 63.
All these issues are now the subject of appeals by the claimants and a cross appeal by the MOD to this court.
It will be convenient to take first the question whether at the time of their deaths Pte Hewett and Pte Ellis were within the jurisdiction of the United Kingdom for the purposes of article 1 of the Convention.
If they were, I propose to consider next the question whether article 2 imposes positive obligations on the states party to the Convention with a view to preventing the deaths of their own soldiers in active operations against the enemy.
Finally, there are the claims made at common law where the question is whether the allegations of negligence by the Challenger and Ellis claimants should be struck out because they fall within the scope of combat immunity or because it would not be fair, just or reasonable to impose a duty to take care to protect against such death or injury.
I. Jurisdiction: article 1 ECHR
(a) the domestic authorities
Article 1 of the Convention provides as follows: The High Contracting Parties shall secure to everyone within their jurisdiction the rights and freedoms defined in section 1 of this Convention.
In Soering v United Kingdom (1989) 11 EHRR 439 at para 86 the Strasbourg court said that article 1 sets a limit, notably territorial, on the reach of the Convention and that the engagement undertaken by a contracting state is confined to securing the listed rights and freedoms to persons within its own jurisdiction.
It does not govern the actions of states not parties to it, nor does it purport to be a means of requiring the contracting state to impose Convention standards on other states.
The essentially territorial notion of jurisdiction was also emphasised by the Grand Chamber in Bankovic v Belgium (2001) 11 BHRC 435, para 67, where it said that it is only in exceptional cases that acts of the contracting states performed, or producing effects, outside their territories can constitute an exercise of jurisdiction by them within the meaning of article 1 of the Convention.
In Andrejeva v Latvia, (Application No 55707/00), given 18 February 2009, para 56, the Grand Chamber reiterated that the concept of jurisdiction for the purposes of article 1 reflects that terms meaning in public international law and that it is closely linked to the international responsibility of the state concerned.
The question that the Snatch Land Rover claims raise is whether the jurisdiction of the United Kingdom extends to securing the protection of article 2 of the Convention to members of the armed forces when they are serving outside its territory.
For that to be so it would have to be recognised that service abroad by members of the armed forces is an exceptional circumstance which requires and justifies the exercise by the State of its jurisdiction over them extra territorially.
In R (Al Skeini) v Secretary of State for Defence [2007] UKHL 26, [2008]
AC 153 (Al Skeini (HL)) the House of Lords was asked to consider the case of the deaths of six Iraqi civilians which were the result of actions by a member or members of the British armed forces in Basra.
One of them, Mr Baha Mousa, had died as a result of severe maltreatment in a prison occupied and run by British military personnel.
It was argued for the civilians that, because of the special circumstances in which British troops were operating in Basra, the conduct complained of, although taking place outside the borders of the United Kingdom and any other contracting state, fell within the exceptions recognised by the Strasbourg jurisprudence.
The House held that, although one such exception was recognised where a state through effective control of another territory exercised powers normally exercised by the government of that territory, the obligation to secure the Convention rights would arise only where a contracting state had such effective control over an area as to enable it to provide the full package of rights and freedoms guaranteed by article 1 of the Convention to everyone within that area: Lord Rodger of Earlsferry at para 79; Lord Brown of Eaton under Heywood at para 129.
The United Kingdoms presence in Iraq fell far short of such control.
As Lord Rodger put it in para 78, the idea that the United Kingdom was obliged to secure the observance of all the rights and freedoms as interpreted by the European court in the utterly different society of southern Iraq was manifestly absurd.
The Secretary of State accepted that, as the events occurred in a British detention unit, Mr Mousa met his death within the jurisdiction of the United Kingdom for the purposes of article 1 of the Convention: Lord Rodger at para 61.
So far as the other appellants were concerned, the United Kingdom did not have the kind of control of Basra and the surrounding area that would have allowed it to have discharged its obligations, including its positive obligations, as a contracting state under article 2.
Three aspects of the discussion of the issue in that case should be noted at this stage.
First, the appellants were all citizens of Iraq.
They were not state agents of the United Kingdom or otherwise subject to its control or authority.
British servicemen, on the other hand, are under the complete control of the UK authorities and are subject exclusively to UK law.
Secondly, the House was plainly much influenced by the ruling on jurisdiction by the Grand Chamber in Bankovic which emphasised the centrality of territorial jurisdiction, the regional nature of the Convention and the indivisibility of the package of rights in the Convention: Lord Rodger at para 69.
As Lord Brown noted in para 109, Bankovic stood, among other things, for the proposition that the rights and freedoms defined in the Convention could not be divided and tailored.
In para 75 of Bankovic the proposition which attracted these observations was in these terms: . the Court is of the view that the wording of article 1 does not provide any support for the applicants suggestion that the positive obligation in article 1 to secure the rights and freedoms defined in section 1 of this Convention can be divided and tailored in accordance with the particular circumstances of the extra territorial act in question.
In para 65 of its judgment in that case the Grand Chamber said that the scope of article 1 was determinative of the very scope of the contracting parties positive obligations and, as such, of the scope and reach of the entire Convention system of human rights protection.
Thirdly, it was recognised that it was for the Strasbourg court to define the exceptions and evaluate the grounds for departing from the general rule: Lord Bingham of Cornhill at para 29.
As Lord Brown put it at para 105, the ultimate decision on the question must necessarily be for that court.
Lord Rodger referred at para 67 to the problem which the House had to face, which was that the judgments and decisions of the European court did not speak with one voice.
On the one hand there was Issa v Turkey (2004) 41 EHRR 567, where the court said at para 71 that accountability for violation of the Convention rights and freedoms of persons in another state stems from the fact that article 1 of the Convention cannot be interpreted so as to allow a state party to perpetrate violations of the Convention on the territory of the other state which it could not perpetrate on its own territory.
This appeared to focus on the activity of the contracting state, whereas the emphasis in Bankovic was on the requirement that the victim should be within the jurisdiction.
In these circumstances the House was of the view that it would not be proper to proceed beyond the jurisprudence of the European court on jurisdiction as analysed and declared by the Grand Chamber in Bankovic.
The appellants then sought just satisfaction in Strasbourg.
In the meantime the jurisdiction question was considered by the domestic court in two further cases: R (Gentle) v Prime Minister [2008] AC 1356 and R (Smith) v Oxfordshire Assistant Deputy Coroner (Equality and Human Rights Commission intervening) [2010] UKSC 29, [2011] 1 AC 1 (Catherine Smith).
The question in Gentle was whether article 2 of the Convention imposed a substantive duty on the state to take timely steps to obtain reliable legal advice before committing its troops to armed conflict: see para 3.
The claimants were the mothers of two soldiers who were killed while serving in Iraq, one of whom was killed by the same shell as killed Cpl Allbutt and injured Trooper Julien and Lance Corporal Twiddy: see para 3, above.
The issue which the claimants wished to explore was the lawfulness of the military action on which the United Kingdom had been engaged in Iraq before it was legitimised by United Nations Security Council Resolution 1546 of 8 June 2004.
Lord Bingham said at para 8(3) that, although the soldiers were subject to the authority of the United Kingdom, they were clearly not within its jurisdiction as that expression in the Convention had been interpreted in Al Skeini (HL), paras 79 and 129.
But the case was decided on the basis that the claimants were unable to establish the duty which they asserted: see Lord Bingham at para 6.
In para 39 Lord Rodger said article 2 of the Convention did not impose an obligation on the government not to take part in an invasion that was unlawful in international law: see also Baroness Hale of Richmond, para 57.
In para 19 I said that the guarantee in the first sentence of that article was not violated simply by deploying servicemen and women on active service overseas as part of an organised military force which was properly equipped and capable of defending itself, even though the risk of their being killed was inherent in what they were being asked to do.
The issue in Catherine Smith was whether a British soldier in Iraq when outside his base was within the scope of the Convention.
The appellant was the mother of Private Jason Smith who had been mobilised for service in Iraq as a member of the Territorial Army and was stationed at Camp Abu Naji.
He collapsed while working off base.
He was rushed by ambulance to the Camps medical centre but died there almost immediately of heat stroke.
The issue in the case concentrated on the question whether the inquest into his death had to satisfy the procedural requirements of article 2.
The Secretary of State conceded that, as Private Smith was on the base when he died, Mrs Smith was entitled to the relief which she sought.
This meant that the issue had become largely academic, as Lord Phillips recognised in para 2.
But on this occasion the Court decided to examine the question and express its opinion on it.
The Court was divided on the issue by six to three.
The majority held that the contracting states, in concluding the provisions of the Convention, would not have intended it to apply to their armed forces when operating outside their territories.
Lord Collins, who delivered the leading judgment on behalf of the majority, said in para 307 that the case came within none of the exceptions recognised by the Strasbourg court, and that there was no basis in its case law, or in principle, for the proposition that the jurisdiction which states undoubtedly have over their armed forces abroad both in national law and international law means that they are within their jurisdiction for the purposes of article 1.
Repeating a point that had been made by Lord Rodger in Al Skeini (HL), he said that, to the extent that Issa v Turkey stated a principle of jurisdiction based solely on authority and control by state agents, it was inconsistent with Bankovic.
In para 308 he said that there were no policy grounds for extending the scope of the Convention to armed forces abroad, as this would ultimately involve the courts in issues relating to the conduct of armed hostilities which was essentially non justiciable.
The leading judgment for the minority was delivered by Lord Mance, with whom Lady Hale and Lord Kerr agreed.
It is not possible to do justice to it in a brief summary.
But some points that are of particular importance should be noted.
In para 188 he said that, to the extent that jurisdiction under the Convention exists over occupied territory, it does so only because of the occupying states pre existing authority and control over its own armed forces.
An occupying state cannot have any jurisdiction over local inhabitants without already having jurisdiction over its own armed forces, in both cases in the sense of article 1 of the Convention.
In para 194 he said that the United Kingdoms jurisdiction over its armed forces was essentially personal.
It could not be expected to take steps to provide in Iraq the full social and protective framework and facilities which it would be expected to provide domestically.
But the United Kingdom could be expected to take steps to provide proper facilities and proper protection against risks falling within its responsibility or its ability to control or influence when despatching and deploying armed forces overseas.
In paras 195 197 he examined the question whether there would be consequences beyond or outside any that the framers of the Convention could have contemplated and concluded that none of the matters that might give cause for concern justified giving to the concept of jurisdiction a different or more limited meaning to that which in his opinion followed from the guidance that the Strasbourg court had already given in Bankovic.
It is however worth noting that he did not attach the same importance as the majority did to the proposition in Bankovic that the rights and freedoms defined in the Convention could not be divided and tailored, and that he was inclined to give more weight than they were to a principle of jurisdiction based on the authority and control which the contracting state had over its armed forces.
(b) Al Skeini in Strasbourg
The structure of the relevant part of the Grand Chambers judgment, at (2011) 53 EHRR 589, falls into two parts.
First, there is a comprehensive statement of general principles relevant to the issue of jurisdiction under article 1 of the Convention.
Secondly, those principles are applied to the facts of the case.
Although the facts of that case are different from those which are before this Court in these appeals, both parts of the judgment provide important guidance as to how we should resolve the issue with which we have to deal.
The statement of general principles begins in para 130 with the observation that the exercise of jurisdiction, which is a threshold condition, is a necessary condition for a contracting state to be able to be held responsible for acts or omissions imputable to it which give rise to an allegation of the infringement of rights and freedoms set forth in the Convention.
The significance of this observation in the context of these appeals is that it is not disputed that the United Kingdom has authority and control over its armed forces when serving abroad.
It has just as much authority and control over them anywhere as it has when they are serving within the territory of the United Kingdom.
They are subject to UK military law without any territorial limit: Armed Forces Act 2006, section 367(1).
The extent of the day to day control will, of course, vary from time to time when the forces are deployed in active service overseas, especially when troops are in face to face combat with the enemy.
But the legal and administrative structure of the control is, necessarily, non territorial in character.
are set out: In paras 131 132 the general principles relevant to the territorial principle 131 A states jurisdictional competence under article 1 is primarily territorial.
Jurisdiction is presumed to be exercised normally throughout the states territory.
Conversely, acts of the contracting states performed, or producing effects, outside their territories can constitute an exercise of jurisdiction within the meaning of article 1 only in exceptional cases. 132 To date, the Court in its case law has recognised a number of exceptional circumstances capable of giving rise to the exercise of jurisdiction by a contracting state outside its own territorial boundaries.
In each case, the question whether exceptional circumstances exist which require and justify a finding by the Court that the state was exercising jurisdiction extra territorially must be determined with reference to the particular facts.
One can take from these paragraphs two important points.
First, the word exceptional is there not to set an especially high threshold for circumstances to cross before they can justify a finding that the state was exercising jurisdiction extra territorially.
It is there to make it clear that, for this purpose, the normal presumption that applies throughout the states territory does not apply.
Secondly, the words to date in para 132 indicate that the list of circumstances which may require and justify a finding that the state was exercising jurisdiction extra territorially is not closed.
In Catherine Smith, para 303 Lord Collins said that Bankovic made it clear in paras 64 and 65 that article 1 was not to be interpreted as a living instrument in accordance with changing conditions.
That can no longer be regarded as an entirely accurate statement.
The general principles are derived from the application to particular facts of the requirement of jurisdictional competence.
The particular facts to which those principles must now be applied may be the product of circumstances that were not foreseen by the framers of the Convention.
But that is no reason to disregard them if they can be shown to fall within the general principles relevant to jurisdiction under article 1.
The Grand Chamber in Al Skeini then set out to divide the general principles relevant to jurisdiction into three distinct categories: state agent authority and control; effective control over an area; and the Convention legal space.
We are not concerned in the case of the Snatch Land Rover claims with a situation where, as a consequence of military action, the United Kingdom was in effective control of an area outside its territory.
Its presence in Iraq in 2005 and 2006 was to provide security and help with the reconstruction effort in that country pursuant to a request by the Iraqi government.
The local administration was in the hands of the Iraqi government.
Nor are we concerned with the risk of a vacuum in the Convention legal space.
The category relevant to this case is that of state agent authority and control, which is described in paras 133 to 137.
This category is introduced by para 133, which is in these terms: The Court has recognised in its case law that, as an exception to the principle of territoriality, a contracting states jurisdiction under article 1 may extend to acts of its authorities which produce effects outside its own territory: see Drozd and Janousek v France and Spain (1992) EHRR 745, para 91; Loizidou v Turkey (1995) 20 EHRR 99 (preliminary objections), para 62; Loizidou v Turkey (1997) 23 EHRR 513 (merits), para 52; Bankovic v Belgium (2004) 44 EHRR SE75, para 69.
The statement of principle, as it appears in Drozd and the other cases just cited, is very broad: the Court states merely that the contracting partys responsibility can be involved in these circumstances.
It is necessary to examine the Courts case law to identify the defining principles.
There then follow three paragraphs in which the principles are defined by reference to the Courts case law.
The first principle is set out in para 134.
It refers to the acts of diplomatic and consular agents, who are present on foreign territory in accordance with provisions of international law.
This may amount to an exercise of jurisdiction when these agents exert authority and control over others.
The cases cited are X v Federal Republic of Germany (1965) 8 Yearbook of the European Convention on Human Rights 158; X v United Kingdom (1977) 12 DR 73; M v Denmark (1992) 73 DR 193; and Bankovic, para 73, where the Court noted that other recognised instances of the extra territorial exercise of jurisdiction by a state include cases involving the activities of its diplomatic or consular agents abroad and on board craft and vessels registered in, or flying the flag of, that state.
In these specific situations, customary international law and treaty provisions have recognised the extra territorial exercise of jurisdiction by the relevant state.
The second principle is set out in para 135.
It refers to the fact that the Court has recognised the exercise of extra territorial jurisdiction by a contracting state when, through the consent, invitation or acquiescence of the government of that territory, it exercises all or some of the public powers normally to be exercised by that government: Bankovic, para 71.
So, where in accordance with custom, treaty or other agreement, authorities of the contracting state carry out executive or judicial functions on the territory of another state, the contracting state may be responsible for breaches of the Convention that result from their exercise, so long as the acts in question are attributable to it rather than to the state in whose territory the acts take place.
The cases cited are Drozd and Janousek v France and Spain (1992) 14 EHRR 745; Gentilhomme v France (Application Nos 48205, 48207 and 48209), given 14 May 2002; and X and Y v Switzerland (1977) 9 DR 57.
The third principle is set out in para 136.
It refers to the fact that the Courts case law demonstrates that in certain circumstances the use of force by a states agents operating outside its territory may bring the individual thereby brought under control of the states authorities into the states article 1 jurisdiction.
Four examples are given of the application of this principle to cases where an individual was taken into the custody of state agents abroad: calan v Turkey (2005) 41 EHRR 985, where an individual was handed over to Turkish officials outside the territory of Turkey by officials from Kenya; Issa v Turkey (2004) 41 EHRR 567, where the Court indicated in paras 74 77 that if it had been established that Turkish soldiers had taken the shepherds into custody in a nearby cave in Northern Iraq and executed them, the deceased would have been within Turkish jurisdiction by virtue of the soldiers authority and control over them; Al Saadoon v United Kingdom (2009) 49 EHRR SE95 where the Court held that two Iraqi nationals detained in a British controlled prison in Iraq fell within the jurisdiction of the United Kingdom as the United Kingdom exercised total control over the prison and the individuals detained in them; and Medvedyev v France (2010) 51 EHRR 899, where crew members of a Cambodian registered merchant ship suspected of drug smuggling were taken into custody and detained on a French frigate while it was taken to France.
A more recent example of the application of the same principle is to be found in Jamaa v Italy (2012) 55 EHRR 627, where the applicant asylum seekers were detained on an Italian ship after their vessels had been intercepted by the Italian Revenue Police and Coastguard.
The following words are set out at the end of para 136 which sum up the essence of the general principle: The Court does not consider that jurisdiction in the above cases arose solely from the control exercised by the contracting state over the buildings, aircraft or ship in which the individuals were held.
What is decisive in such cases is the exercise of physical power and control over the person in question.
The description of the category of state agent authority and control concludes with an important statement in para 137.
It is in these terms: It is clear that, whenever the state through its agents exercises control and authority over an individual, and thus jurisdiction, the state is under an obligation under article 1 to secure to that individual the rights and freedoms under section 1 of the Convention that are relevant to the situation of that individual.
In this sense, therefore, the Convention rights can be divided and tailored .
I do not read the first sentence of this paragraph as adding a further example to those already listed in paras 134 136.
No further cases are cited in support of it, which the Court would have been careful to do if that were the case.
The point that the Grand Chamber was making in para 137, as is made clear by the last sentence, is that the package of rights in the Convention is not indivisible, as Bankovic, para 75, which is cited here, appeared to indicate.
The Grand Chamber had stated in that paragraph of its judgment in Bankovic that it was of the view that the wording of article 1 did not provide any support for the applicants suggestion that the positive obligation in article 1 to secure the rights and freedoms defined in section 1 of this Convention can be divided and tailored in accordance with the particular circumstances of the extra territorial act in question.
The effect of para 137 of the Al Skeini judgment is that this proposition, which informed much of the thinking of the House of Lords in Al Skeini (HL) and of the majority in Catherine Smith, that the rights in Section 1 of the Convention are indivisible, is no longer to be regarded as good law.
The extra territorial obligation of the contracting state is to ensure the observance of the rights and freedoms that are relevant to the individual who is under its agents authority and control, and it does not need to be more than that.
The dividing and tailoring concept relative to the situation of the individual was applied in the Hirsi Jamaa case to resolve the issue whether the asylum seekers were subject to the jurisdiction of Italy while they were detained on the ship flying the Italian flag: 55 EHRR 627, para 74.
The second part of the judgment of the Grand Chamber applies the principles described in the first part to the facts of the case.
The state of affairs in Iraq during the period when the applicants deaths at the hands of British forces occurred is reviewed in paras 143 to 148.
They were killed on various dates between May and September 2003.
This was during a period when the United States and the United Kingdom were exercising the powers of government for the provisional administration of Iraq through a Coalition Provisional Authority, which had been created for the purpose in May 2003.
They included the maintenance of civil law and order.
That remained the position until 28 June 2004, when full authority for governing Iraq passed from the Coalition Provisional Authority to the Interim Iraqi Government.
In the light of these facts the Court held in para 149 that the United Kingdom, through its soldiers engaged in security operations in Basra during the period in question, exercised authority and control over individuals killed in the course of such security operations.
This established a jurisdictional link between the deceased and the United Kingdom for the purposes of article 1 of the Convention.
The Court does not say which of the general principles led it to this conclusion, but it is reasonably clear that the facts come closest to those referred to in para 135.
The United Kingdom was not exercising public powers through the consent, invitation or acquiescence of the government of Iraq as during the relevant period no such government was in existence.
But it was exercising powers normally to be exercised by that government had it existed.
The case thus fell within the general principle of state authority and control.
It should be noted, however, that the situation in Iraq had changed by the time the incidents that have given rise to the Snatch Land Rover claims occurred.
These incidents took place on 16 July 2005 and 28 February 2006.
By that stage the occupation of Iraq had come to an end and the Coalition Provisional Authority had ceased to exist.
Full authority for governing the country had passed to the Interim Iraqi Government.
The United Kingdom was no longer exercising the public powers normally to be exercised by that countrys government.
(c) discussion
The question whether at the time of their deaths Pte Hewett and Pte Ellis were within the jurisdiction of the United Kingdom for the purposes of article 1 of the Convention does not receive a direct answer from the Grand Chamber in its Al Skeini judgment.
This is not surprising, as that was not the question it had to decide.
As it made clear in para 132, the question whether the state was exercising jurisdiction extra territorially in any given case must be determined with reference to the particular facts of that case.
But the insertion of the words to date at the beginning of that paragraph indicate that one should not be too troubled by the fact that no case has yet come before the Strasbourg court which required it to consider whether the jurisdiction which states undoubtedly have over their armed forces abroad in both national and international law means that they are within their jurisdiction for the purposes of article 1 of the Convention.
Care must, of course, be exercised by a national court in its interpretation of an instrument, the correct interpretation of which can be authoritatively expounded only by the Strasbourg court: R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20 per Lord Bingham.
He had already acknowledged in Brown v Stott [2003] 1 AC 681 that, as an important constitutional instrument, the Convention was to be seen as a living tree capable of growth and expansion within its natural limits (Edwards v Attorney General for Canada [1930] AC 124 at p 136 per Lord Sankey LC).
But he said that those limits will often call for very careful consideration.
As he put it at the end of para 20 in Ullah, the duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time.
Lord Binghams point was that Parliament never intended by enacting the Human Rights Act 1998 to give the courts of this country the power to give a more generous scope to the Convention rights than that which was to be found in the jurisprudence of the Strasbourg court.
To do so would have the effect of changing them from Convention rights, based on the treaty obligation, into free standing rights of the courts own creation.
In Al Skeini (HL), paras 105 106, Lord Brown of Eaton under Heywood saw a greater danger in the national court construing the Convention too generously in favour of an applicant than in construing it too narrowly.
The question before us here, however, is not one as to the scope that should be given to the Convention rights, as to which our jurisprudence is still evolving.
It is a question about the states jurisdictional competence under article 1.
In this context, as the question of jurisdiction is so fundamental to the extent of the obligations that must be assumed to have been undertaken by the contracting states, the need for care is all the greater.
In Catherine Smith, para 93, I endorsed the view expressed by Lord Brown in Al Skeini (HL), para 107 that article 1 should not be construed as reaching any further than the existing Strasbourg jurisprudence clearly shows it to reach.
I would take that as being for us, as a national court, the guiding principle.
It seems to me that three elements can be extracted from the Grand Chambers Al Skeini judgment which point clearly to the conclusion that the view that was taken by the majority in Catherine Smith that the states armed forces abroad are not within its jurisdiction for the purposes of article 1 can no longer be maintained.
The first is to be found in its formulation of the general principle of jurisdiction with respect to state agent authority and control.
The whole structure of the judgment is designed to identify general principles with reference to which the national courts may exercise their own judgment as to whether or not, in a case whose facts are not identical to those which have already been held by Strasbourg to justify such a finding, the state was exercising jurisdiction within the meaning of article 1 extra territorially.
While the first sentence of para 137 does not add a further example of the application of the principle to those already listed in paras 134 136, it does indicate the extent to which the principle relating to state agent authority and control is to be regarded as one of general application.
The words whenever the state through its agents exercises control and authority over an individual, and thus jurisdiction, can be taken to be a summary of the exceptional circumstances in which, under this category, the state can be held to be exercising its jurisdiction extra territorially.
As I said in para 30, above, the word exceptional does not set an especially high threshold for circumstances to cross before they can justify such a finding.
It is there simply to make it clear that, for this purpose, the normal presumption that applies throughout the states territory does not apply.
Lord Collinss comment in Catherine Smith, para 305, that other bases of jurisdiction are exceptional and require special justification should be understood in that sense.
The second is to be found in the way, albeit with a degree of reticence, that this formulation resolves the inconsistency between Issa v Turkey and Bankovic on the question whether the test to be applied in these exceptional cases can be satisfied by looking only at authority and control or is still essentially territorial.
The problem that was created by this inconsistency was articulated most clearly by Lord Rodger in Al Skeini (HL), paras 71 75.
How can one reconcile the decision in Bankovic, which showed that an act which would engage the Convention if committed on the territory of a contracting state does not ipso facto engage the Convention if carried out by that contracting state on the territory of another state outside the Council of Europe, with the test that was described in Issa that required the court to ascertain whether the deceased were under the authority and control of the respondent state? We now know that Issa cannot be dismissed as an aberration because, as Lord Collins said in Catherine Smith, para 307, it is inconsistent with Bankovic.
It is Bankovic which can no longer be regarded as authoritative on this point.
The fact that Issa is included in para 136 as one of the examples of cases that fall within the general principle of state agent authority and control is particularly noteworthy.
It anchors that case firmly in the mainstream of the Strasbourg courts jurisprudence on this topic.
The third is to be found in the way that the Grand Chamber has departed from the indication in Bankovic that the package of rights in the Convention is indivisible and cannot be divided and tailored to the particular circumstances of the extra territorial act in question.
It was always going to be difficult to see how, if that was to be the guiding principle, it could be possible to accept that a states armed forces abroad in whatever circumstances were within their jurisdiction for the purposes of article 1 as its ability to guarantee the entire range of the Convention rights would in many cases be severely limited.
The problem was solved in the case of the actions of Turkish soldiers in northern Cyprus because the Convention rights were also engaged by the acts of the local administration which survived by virtue of Turkish military and other support: Cyprus v Turkey (Application No 25781/94), given 10 May 2001, para 77.
Other cases were likely to be more difficult, and Lord Collins recognised in Catherine Smith, para 302 that cases such as Markovic v Italy (2006) 44 EHRR 1045 suggested that some qualification would have to be made to the principle of indivisibility of Convention rights.
The Grand Chamber has now taken matters a step further.
The concept of dividing and tailoring goes hand in hand with the principle that extra territorial jurisdiction can exist whenever a state through its agents exercises authority and control over an individual.
The court need not now concern itself with the question whether the state is in a position to guarantee Convention rights to that individual other than those it is said to have breached: see Jamaa v Italy 55 EHRR 627.
There is one other point arising from the Grand Chambers Al Skeini judgment that should not pass unnoticed.
The Equality and Human Rights Commission points out in para 49 of its written case that the anterior question that presents itself in state agent cases is whether the state agent himself is within his states jurisdiction within the meaning of article 1.
As Lord Mance observed in Catherine Smith, para 188, to the extent that a states extra territorial jurisdiction over local inhabitants exists because of the authority and control that is exercised over them, this is because of the authority and control that the state has over its own armed forces.
It would seem to follow therefore that an occupying state cannot have any jurisdiction over local inhabitants without already having jurisdiction over its own armed forces, in each case in the sense of article 1 of the Convention.
That this is so has never been questioned by the Strasbourg court, and it may be said that it is the premise from which extra territorial jurisdiction based on state agent authority and control has been developed.
In Cyprus v Turkey (1975) 2 DR 125, which appears to have been the first case in which the concept of state agent authority and control was mentioned (see Al Skeini, para 121), the European Commission of Human Rights observed at p 136, para 8, that authorised agents of a state, including diplomatic or consular agents and armed forces, not only remain under its jurisdiction when abroad but bring other persons or property within the jurisdiction of that state, to the extent that they exercise authority over such person or property.
In so far as, by their acts or omissions, they affect such persons or property, the responsibility of the state is engaged.
The same formulation is to be found in the Commissions decisions in W v Ireland (1983) 32 DR 211, 215 and Vearncombe v Germany and United Kingdom (1989) 59 DR 186, 194.
It no longer appears in references by the Strasbourg court to the acts of diplomatic and consular agents present on foreign territory in accordance with provisions of international law: see X and Y v Switzerland 9 DR 57, para 2; Bankovic, para 73; Al Skeini, para 134.
But it has never been disapproved.
It was quoted without comment or criticism in Chrysostomos v Turkey (1991) 34 Yearbook of the European Convention on Human Rights 35, para 32.
The Grand Chamber in Al Skeini was referred by the applicants to the same passage in the Cyprus judgment: see para 121.
The quotation from it in that paragraph includes the proposition that authorised agents of a state remain under its jurisdiction when abroad.
The Grand Chamber had the opportunity to say that there was something wrong with it, but it did not do so.
The Cyprus case was referred to by Lord Phillips in Catherine Smith, paras 49 50.
He did not attach any significance to it, as it seemed to him that the reasoning of the Commission was far wider than that of the Court when it dealt with Turkeys jurisdiction in Northern Cyprus in Loizidou v Turkey (1995) 20 EHRR 99.
It receives a passing mention also by Lord Collins in para 249 in the course of a brief review of the cases on acts of diplomatic and consular officials abroad.
As matters now stand, given the guidance that has now been given in Al Skeini, it deserves more attention.
The logic which lies behind it, as explained by Lord Mance in Catherine Smith, para 188, is compelling.
It is plain, especially when one thinks of the way the armed forces operate, that authority and control is exercised by the state throughout the chain of command from the very top all the way down to men and women operating in the front line.
Servicemen and women relinquish almost total control over their lives to the state.
It does not seem possible to separate them, in their capacity as state agents, from those whom they affect when they are exercising authority and control on the states behalf.
They are all brought within the states article 1 jurisdiction by the application of the same general principle.
In Demir and Baykara v Turkey (Application No 34503/97), given 12 November 2008, para 74, the Grand Chamber said that in a number of judgments it had used, for the purposes of interpreting the Convention, intrinsically non binding instruments of Council of Europe organs, in particular recommendations and resolutions of the Committee of Ministers and the Parliamentary Assembly.
These resolutions and recommendations constitute agreements within the meaning of article 31(3)(a) of the Vienna Convention, account of which may be taken in the interpretation of a treaty or the application of its provisions.
It is therefore worth noting recommendation 1742 (2006) of the Parliamentary Assembly on the human rights of members of the armed forces of 11 April 2006, which was made in the light of a debate on a report on this issue of its Committee on Legal Affairs and Human Rights (doc 10861).
In para 2 of recommendation 1742 the point was made that members of the armed forces are citizens in uniform who must enjoy the same fundamental freedoms and the same protection of their rights and dignity as any other citizen, within the limits imposed by the specific exigencies of military duties.
In para 3 it was emphasised that members of the armed forces cannot be expected to respect humanitarian law and human rights in their operations unless respect for human rights is guaranteed within the army ranks.
The Parliamentary Assembly recommended that the Committee of Ministers should prepare and adopt guidelines in the form of a new recommendation to member states designed to guarantee respect for human rights by and within the armed forces.
A draft recommendation prepared by a steering committee was adopted by the Committee of Ministers on 24 February 2010 with an explanatory memorandum (CM/Rec (2010) 4) in which it was stated that member states should, so far as possible, apply the principles set out in the recommendation to their armed forces in all circumstances, including in time of armed conflict.
The conclusion which I would draw from the jurisprudence of the Strasbourg court derives further support from these non binding recommendations.
For these reasons I would hold that the decision in Catherine Smith should be departed from as it is inconsistent with the guidance that the Grand Chamber has now given in its Al Skeini judgment.
I would also hold that the jurisdiction of the United Kingdom under article 1 of the Convention extends to securing the protection of article 2 to members of the armed forces when they are serving outside its territory and that at the time of their deaths Pte Hewett and Pte Ellis were within the jurisdiction of the United Kingdom for the purposes of that article.
To do so would not be inconsistent with the general principles of international law, as no other state is claiming jurisdiction over them.
The extent of that protection, and in particular whether the MOD was under a substantive duty of the kind for which the Snatch Land Rover claimants contend, is the question which must now be considered.
The article 2 ECHR claims
Article 2(1) of the Convention provides as follows: Everyones right to life shall be protected by law.
No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law.
The relevant guarantee for the purposes of this case is set out in the first sentence.
It has two aspects: one substantive, the other procedural.
We are not concerned here with the procedural obligation which is implied into the article in order to make sure that the substantive right is effective in practice: see R (Gentle) v Prime Minister [2008] AC 1356, para 5, per Lord Bingham.
The Snatch Land Rover claims, details of which are set out in paras 11 and 12, above, are all directed to the substantive obligation, which requires the state not to take life without justification and also, by implication, to establish a framework of laws, precautions, procedures and means of enforcement which will, to the greatest extent reasonably practicable, protect life: R (Middleton) v West Somerset Coroner [2004] UKHL 10, [2004] 2 AC 182, para 2.
As Owen J pointed out, these claims involve issues of procurement as well as allegations relating to operational decisions made by commanders: [2011] EWHC 1676 (QB), para 51.
(a) preliminary observations
Lord Collins said in Catherine Smith, para 308 that to extend the scope of the Convention to armed forces abroad would ultimately involve the courts in issues relating to the conduct of armed hostilities which are essentially non justiciable.
That some issues relating to the conduct of armed hostilities are non justiciable is not really in doubt.
But in my opinion a finding that in all circumstances deaths or injuries in combat that result from the conduct of operations by the armed forces are outside the scope of article 2 would not be sustainable.
It would amount, in effect, to a derogation from the states substantive obligations under that article.
Such a fundamental departure from the broad reach of the Convention should not be undertaken without clear guidance from Strasbourg as to whether, and in what circumstances, this would be appropriate.
It may be noted in this context that the intervener JUSTICE drew attention to article 15 of the Convention in reply to concerns about the practical consequences of finding that soldiers are within the jurisdiction of the United Kingdom under article 1.
It provides that in time of war or other public emergency threatening the life of the nation any High Contracting Party may take measures derogating from its obligations under the Convention to the extent required by the exigencies of the situation.
But the phrase threatening the life of the nation suggests that the power to derogate under this article is available only in an exceptional situation of crisis or emergency which affects the whole population and constitutes a threat to the organised life of the community of which the state is composed: Lawless v Ireland (No 3) (1961) 1 EHRR 15, para 28.
It will be recalled that in A v Secretary of State for the Home Department [2004] UKHL 56, [2005] 2 AC 68 it was held that the Human Rights Act 1998 (Designed Derogation) Order 2001, which had been made to derogate from the right to personal liberty under article 5(1) to enable the appellants to be detained indefinitely without trial, should be quashed.
And in R (Al Jedda) v Secretary of State for Defence (JUSTICE intervening) [2007] UKHL 58, [2008] AC 332, para 38, Lord Bingham said that it was hard to think that the conditions of article 15 could ever be met when a state had chosen to conduct an overseas peacekeeping operation, however dangerous the conditions, from which it could withdraw.
He also noted that it had not been the practice of states to derogate in situations such as those in Iraq in 2004 and that as subsequent practice in the application of a treaty may, under article 31(3)(b) of the Vienna Convention, be taken into account in interpreting the treaty it seemed proper to regard the power in article 15 as inapplicable.
I do not think therefore that it would be right to assume that concern about the practical consequences in situations such as those with which we are dealing in this case can be answered by exercising the power to derogate.
The circumstances in which that power can properly be exercised are far removed from those where operations are undertaken overseas with a view to eliminating or controlling threats to the nations security.
The jurisprudence of the Strasbourg court shows that there are other ways in which such concerns may be met.
The Strasbourg court has repeatedly emphasised that, when it comes to an assessment of the positive obligations that are to be inferred from the application in any given case of the Convention rights, a fair balance must be struck between the competing interests of the individual and of the community as a whole.
It has also recognised that there will usually be a wide margin of appreciation if the state is required to strike a balance between private and public interests and Convention rights: Hristozov v Bulgaria (Application Nos 47039/11 and 358/12), given 13 November 2012, paras 118, 124.
That was a case about a refusal to authorise an experimental medicinal product which the applicants had wished to be administered to them.
But the competition between the interests of the state and those of the individual is no less acute where issues arise about the risk to life of soldiers in the context of military operations conducted on the states behalf.
The challenge this court faces when dealing with the Snatch Land Rover claims is to determine where the boundary lies between the two extremes in the circumstances that the armed forces were facing in Iraq in 2005 and 2006.
In Gentle, para 19, I said that the proper functioning of an army in a modern democracy includes requiring those who serve in it to undertake the operations for which they have been recruited, trained and equipped, some of which are inherently dangerous, and that the jurisprudence developed from the decision in Soering v United Kingdom (1989) 11 EHRR 439 about decisions taken in this country to send people abroad to places where they face a real risk of being subjected to torture or to inhuman or degrading treatment or punishment does not apply.
The guarantee in the first sentence of article 2(1) is not violated simply by deploying servicemen and women on active service overseas as part of an organised military force which is properly equipped and capable of defending itself, even though the risk of their being killed is inherent in what they are being asked to do.
The other side of the coin, as Lord Mance explained in Catherine Smith, para 195, is that there is nothing that makes the Convention impossible or inappropriate of application to the relationship between the state and its armed forces as it exists in relation to overseas operations in matters such as, for example, the adequacy of equipment, planning or training.
Lord Rodger recognised in the same case at para 126 that, while a coroner will usually have no basis for considering at the outset that there has been a violation of article 2 where a serviceman or woman has been killed by opposing forces in the course of military operations, new information might be uncovered as the investigation proceeds which does point to a possible violation of the article.
He referred to the death of a soldier as a result of friendly fire from other British forces as an extreme example.
And, as I said in Catherine Smith, para 105, one must not overlook the fact that there have been many cases where the death of service personnel indicates a systemic or operational failure on the part of the state, ranging from a failure to provide them with the equipment that was needed to protect life on the one hand to mistakes in the way they are deployed due to bad planning or inadequate appreciation of the risks that had to be faced on the other.
So failures of that kind ought not to be immune from scrutiny in pursuance of the procedural obligation under article 2 of the Convention.
The extent to which the application of the substantive obligation under article 2 to military operations may be held to be impossible or inappropriate will, however, vary according to the context.
Military operations conducted in the face of the enemy are inherently unpredictable.
There is a fundamental difference between manoeuvres conducted under controlled conditions in the training area which can be accurately planned for, and what happens when troops are deployed on active service in situations over which they do not have complete control.
As Lord Rodger observed in Catherine Smith, para 122, the job of members of the armed forces involves their being deployed in situations where, as they well know, opposing forces will be making a determined effort, and using all their resources, to kill and injure them.
The best laid plan rarely survives initial contact with the enemy.
The best intelligence cannot predict with complete accuracy how the enemy will behave, or what equipment will be needed to meet the tactics and devices that he may use to achieve his own ends.
Speed may be essential if the momentum of an attack is to be maintained or to strengthen a line of defence.
But lines of communication may become stretched.
Situations may develop where it is simply not possible to provide troops in time with all they need to conduct operations with the minimum of casualties.
Things tend to look and feel very different on the battlefield from the way they look on such charts and images as those behind the lines may have available to them.
A court should be very slow indeed to question operational decisions made on the ground by commanders, whatever their rank or level of seniority.
Then there is the issue of procurement.
In A v Secretary of State for the Home Department [2005] 2 AC 68, para 29, Lord Bingham said that the more purely political (in a broad or narrow sense) the question is, the more appropriate it would be for political resolution, and the less likely it is to be an appropriate matter for judicial decision.
The allocation of resources to the armed services and as between the different branches of the services, is also a question which is more appropriate for political resolution than it is by a court.
Much of the equipment in use by the armed forces today is the product of advanced technology, is extremely sophisticated and comes at a very high price.
Procurement depends ultimately on the allocation of resources.
This may in turn be influenced as much by political judgment as by the judgment of senior commanders in Whitehall as to what they need for the operations they are asked to carry out.
It does not follow from the fact that decisions about procurement are taken remote from the battlefield that they will always be appropriate for review by the courts.
This, then, is a field of human activity which the law should enter into with great caution.
Various international measures, such as those contained in the 3rd Geneva Convention of 1929 to protect prisoners of war, have been entered into to avoid unnecessary hardship to non combatants.
But subjecting the operations of the military while on active service to the close scrutiny that may be practicable and appropriate in the interests of safety in the barrack block or in the training area is an entirely different matter.
It risks undermining the ability of a state to defend itself, or its interests, at home or abroad.
The world is a dangerous place, and states cannot disable themselves from meeting its challenges.
Ultimately democracy itself may be at risk.
(b) the Strasbourg authorities
Fundamentally, article 2 requires a state to have in place a structure of laws which will help to protect life: Savage v South Essex NHS Trust [2008] UKHL 74, [2009] AC 681, para 19, per Lord Rodger.
As he explained, with reference to the European courts discussion of this issue in Osman v United Kingdom (1998) 29 EHRR 245, para 115, the primary duty is to secure the right to life by putting in place effective criminal law offences backed up by law enforcement machinery.
But the states duty goes further than that.
It may also imply, in certain well defined circumstances, a positive obligation on the authorities to take preventive operational measures to protect the lives of those within their jurisdiction.
In para 88 of its judgment in Keenan v United Kingdom (2001) 33 EHRR 913, the court began by reciting the high level of duty of the state to put in place effective criminal law sanctions to deter the commission of offences against prisoners.
But that was just part of what Lord Rodger described in para 30 of Savage as the tralatician jurisprudence of the court on positive obligations under article 2.
The positive duties on the state operate at various levels, as one idea is handed down to another.
There is a lower level, but still general, duty on a state to take appropriate measures to secure the health and well being of prisoners or people who are in some form of detention.
This in its turn gives rise, at a still lower level, to two general obligations: Savage, para 36; Rabone v Pennine Care NHS Trust (INQUEST and others intervening) [2012] UKSC 2, para 12, per Lord Dyson; neryildiz v Turkey (2004) 41 EHRR 325, para 89.
The first is a systemic duty, to put in place a legislative and administrative framework which will make for the effective prevention of the risk to their health and well being or, as it was put in neryildiz, para 89, effective deterrence against threats to the right to life.
Depending on the facts, this duty could extend to issues about training and the procurement of equipment before the forces are deployed on operations that will bring them into contact with the enemy.
The second, which is also directly in point in this case, is to ensure that, where there is a real and immediate risk to life, preventative operational measures of whatever kind are adopted to safeguard the lives of those involved so far as this is practicable.
The Strasbourg court has not had occasion to examine the extent to which article 2(1) offers protection at any level to a states armed forces when engaged in operations such as those that were being conducted in Iraq in 2005 and 2006.
But there are some straws in the wind which may offer some guidance.
In Engel v The Netherlands (No 1) (1976) 1 EHHR 647, para 54, in a well
known passage, the Court said that, when interpreting and applying the rules of the Convention, the court must bear in mind the particular characteristics of military life and its effect on the situation of individual members of the armed forces.
That was a case about the preservation of military discipline, as were en v Turkey (Application No 45824/99), given 8 July 2003) and Grigoriades v Greece (1997) 27 EHHR 464, where it was observed at p 8 that the extent of the protection given to members of the armed forces must take account of the characteristics of military life, the nature of the activities they are required to perform and of the risk that they give rise to.
These comments, however brief, do seem to make it clear that it would not be compatible with the characteristics of military life to expect the same standard of protection as would be afforded by article 2(1) to civilians who had not undertaken the obligations and risks associated with life in the military.
That is plainly so in the context of the exercise of military discipline over members of the armed forces when they are on active service.
It is hard to see why servicemen and women should not, as a general rule, be given the same protection against the risk of death or injury by the provision of appropriate training and equipment as members of the police, fire and other emergency services.
But it is different when the serviceman or woman moves from recruitment and training to operations on active service, whether at home or overseas.
It is here that the national interest requires that the law should accord the widest measure of appreciation to commanders on the ground who have the responsibility of planning for and conducting operations there.
This approach receives some support from Stoyanovi v Bulgaria (Application No 42980/04), given 9 November 2010, where an application was made under article 2(1) by the family of a soldier who had died during a parachute exercise.
In paras 59 61 the Court examined the difference between the primary positive obligation under that article to establish a framework of laws and procedures to protect life and the obligation to take preventative operational measures to protect the life of an individual which may be imposed by implication, as it was put in Osman v United Kingdom (1998) 29 EHRR 245, para 115, only in certain and well defined circumstances.
In para 59, recalling what was said in para 116 of Osman where the allegation was of a failure to take preventive measures where there was a known risk of a real, direct and immediate threat to the life of an individual posed by another individual, the Court said: Subject to considerations as to the difficulties involved in policing modern societies, the unpredictability of human conduct and the operational choices which must be made in terms of priorities and resources, such an obligation must be interpreted in a way which does not impose an impossible or disproportionate burden on the authorities and which also conforms with the other rights guaranteed by the Convention.
In para 61 it observed that positive obligations will vary in their application depending on the context.
Having noted that the case concerned an accident during a military training exercise and that parachute training was inherently dangerous but an ordinary part of military duties, it said: Whenever a state undertakes or organises dangerous activities, or authorises them, it must ensure through a system of rules and through sufficient control that the risk is reduced to a reasonable minimum.
If nevertheless damage arises, it will only amount to a breach of the states positive obligations if it was due to insufficient regulations or insufficient control, but not if the damage was caused through the negligent conduct of an individual or the concatenation of unfortunate events.
That was a case where the state was in control of the situation, as the accident occurred during a training exercise.
It was not claimed that any specific risk to the life of the deceased should have been foreseen in advance, nor was it argued that the legislative and administrative framework was defective in any general or systemic sense: paras 62 63.
The whole focus of the courts supervision was on the authorities response to the accident.
It was not suggested that there could not have been a breach of the general or systemic duties in such a case.
There is, however, a sharp contrast between that situation and operations undertaken in a situation where it was known or could reasonably have been anticipated that troops were at risk of attacks from insurgents by unconventional means such as by the planting of IEDs.
Regulation and control of the kind contemplated in Stoyanovi is likely to be very difficult, if not impossible, to achieve on the ground in situations of that kind.
Even where those directing operations are remote in place and time from the area in which the troops are operating, great care is needed to avoid imposing a burden on them which is impossible or disproportionate.
Another example of the Strasbourg courts concern not to impose a disproportionate and unrealistic obligation on the state is provided by Giuliani and Gaggio v Italy (Application No 23458/02), given 24 March 2011.
The applicants in that case complained of the death of their son and brother during demonstrations surrounding the G8 summit in Genoa which had degenerated into violence.
The Court held that the Italian authorities did not fail in their obligation to do what could reasonably be expected of them to provide the level of safeguards required during operations potentially involving the use of lethal force.
It drew a contrast between dealing with a precise and identifiable target and the maintenance of order in the face of possible disturbances spread over the entire city as regards the extent to which the officers involved could be expected to be highly specialised in dealing with the tasks assigned to them.
So too, in the case of the armed forces, a contrast can be drawn between their situation in the training area that can be planned for precisely and that which they are likely to encounter during operations when in contact with the enemy.
The same approach is indicated by Finogenov v Russia (Application Nos 18299/03 and 27311/03), given 20 December 2011, para 213, where the Court was prepared to give a margin of appreciation to the domestic authorities, in so far as the military and technical aspects of the situation were concerned, in connection with the storming of a theatre in which many people were held hostage by terrorists, even if with hindsight some of the decisions they took might appear open to doubt.
The guidance which I would draw from the Courts jurisprudence in this area is that the court must avoid imposing positive obligations on the state in connection with the planning for and conduct of military operations in situations of armed conflict which are unrealistic or disproportionate.
But it must give effect to those obligations where it would be reasonable to expect the individual to be afforded the protection of the article.
It will be easy to find that allegations are beyond the reach of article 2 if the decisions that were or ought to have been taken about training, procurement or the conduct of operations were at a high level of command and closely linked to the exercise of political judgment and issues of policy.
So too if they relate to things done or not done when those who might be thought to be responsible for avoiding the risk of death or injury to others were actively engaged in direct contact with the enemy.
But finding whether there is room for claims to be brought in the middle ground, so that the wide margin of appreciation which must be given to the authorities or to those actively engaged in armed conflict is fully recognised without depriving the article of content, is much more difficult.
No hard and fast rules can be laid down.
It will require the exercise of judgment.
This can only be done in the light of the facts of each case. (c) should the claims be struck out?
The circumstances of the Snatch Land Rover cases are not precisely analogous to those of any previous case in which the implied positive obligation under article 2 has been imposed, and the allegations made in each of the claimants particulars of claim (see paras 11 and 12, above) are not identical.
This is because the explosion in which Pte Hewett was killed occurred more than six months before that which killed Pte Ellis.
The claim in Pte Elliss case concentrates on the provision of what is said, in the light of experience, to have been inadequate equipment and a failure to limit his patrol to vehicles which offered better protection or had been fitted with element A. The claims in Pte Hewetts case are less precise and range more widely.
But they too extend to criticism of operational decisions taken by those in charge of the patrols as well as to alleged failures in the provision of appropriate vehicles and equipment in the light of the death of L Cpl Brackenbury in similar circumstances seven weeks previously.
I am conscious, however, of the fact that these particulars are no more than the briefest outline of the case that the claimants seek to make.
Account should also be taken of the fact that the claims were issued in January 2008, in the case of Pte Hewett, and in February 2009, in the case of Pte Ellis.
In both cases this was before the judgment was delivered in Stoyanovi v Bulgaria.
The European Court has now provided greater clarity as to the approach that should be taken to claims of this kind, as has the discussion about the distinct elements that are to be found in the positive duty to protect life that is to be found in Savage and Rabone.
Some of the failures which the claimants allege appear to be of the systemic kind (see para 68, above).
Others are of the operational kind that was described in the Osman case, where there was an implied positive obligation to take preventative operational measures to protect those who were at risk of a real, direct and immediate threat to life.
Measures of that kind could extend to procurement decisions taken on the ground about the provision of vehicles and equipment, as well as to decisions about their deployment.
How precisely the allegations fit into the structure of the duties implied by the article cannot be determined without knowing more about the facts, bearing in mind that it must be interpreted in a way which does not impose an unrealistic or disproportionate burden on the authorities.
The overall aim of the courts procedure must be to achieve fairness, and I think that it would be unfair to the relatives of the deceased to apply too exacting a standard at this stage to the way the claims have been pleaded.
The circumstances in which the various decisions were made need to be inquired into before it can be determined with complete confidence whether or not there was a breach of the implied positive obligation.
The details which are needed to place those circumstances into their proper context will only emerge if evidence is permitted to be led in support of them.
This seems to me to be a classic case where the decision on liability should be deferred until after trial.
I agree with Owen J that the procurement issues may give rise to questions that are essentially political in nature but that it is not possible to decide whether this is the case without hearing evidence.
He said that there was no sound basis for the allegations that relate to operational decisions made by commanders, and for this reason took a different view as to whether they were within the reach of article 2.
But it seems to me that these allegations cannot easily be divorced from the allegations about procurement, and that here too the question as to which side of the line they lie is more appropriate for determination after hearing evidence.
Much will depend on where, when and by whom the operational decisions were taken and the choices that were open to them, given the rules and other instructions as to the use of equipment under which at each level of command they were required to operate.
I would therefore dismiss the MODs appeal against Owen Js decision,
which the Court of Appeal found it unnecessary to consider, that none of these claims should be struck out.
The claimants are, however, on notice that the trial judge will be expected to follow the guidance set out in this judgment as to the very wide measure of discretion which must be accorded to those who were responsible on the ground for the planning and conduct of the operations during which these soldiers lost their lives and also to the way issues as to procurement too should be approached.
It is far from clear that they will be able to show that the implied positive obligation under article 2(1) of the Convention to take preventative operational measures was breached in either case. III.
Combat immunity
(a) background
The Challenger claims proceed on the basis that there is no common law liability for negligence in respect of acts or omissions on the part of those who are actually engaged in armed combat.
So it has not been suggested that Lt Pinkstone or anyone else in the Black Watch battle group was negligent.
Nor, as his decision to fire was taken during combat, would it have been appropriate to do so.
The Challenger claimants concentrate instead on an alleged failure to ensure that the claimants tank and the tanks of the battle group that fired on it were properly equipped with technology and equipment that would have prevented the incident, and an alleged failure to ensure that soldiers were provided with adequate recognition training before they were deployed and also in theatre.
Their case is founded entirely on failings in training and procurement.
The Ellis claim at common law also raises issues about procurement.
The MOD invokes in reply the doctrine of combat immunity, which it says should be given a sufficiently broad scope to cover all acts or omissions that are alleged to have caused death or injury in the course of combat operations.
It is plain that the effect of the doctrine, if it applies, would be to remove the issue of liability for negligence from the jurisdiction of the court altogether.
But the MOD also submits that, if the court does have jurisdiction, it would not be fair, just or reasonable to impose a duty of care on it to protect the soldiers in such circumstances against death or injury.
The justification for these arguments is the same, whichever of the two formulations is adopted.
It is that the interests of the state must prevail over the interests of the individual.
As Mr Eadie QC for the MOD put it, the fair, just and reasonable test chimes with the doctrine of combat immunity.
His appeal against the Court of Appeals decision that the negligence claims should not be struck out was directed primarily to that doctrine.
This may be considered to be an application to given facts of the test as to what is fair, just and reasonable.
But the structure of the law is important and combat immunity is best thought of as a rule, because once a case falls within it no further thought is needed to determine the question whether a duty of care was owed to the claimant.
The scope of this rule deserves attention as a separate issue in its own right.
(b) the authorities
Combat immunity made its first appearance in Shaw Savill & Albion Co Ltd v Commonwealth (1940) 66 CLR 344.
A collision had occurred between HMAS Adelaide and a civilian vessel, the MV Coptic.
It took place on 3 December 1940 while the civilian vessel was on a voyage from Brisbane to Sydney.
The owners of the civilian vessel claimed that the collision had been caused by negligence on the part of the naval authorities and sought damages.
The High Court was adjudicating on the plaintiffs demurrer to the defence and a strike out summons by the Commonwealth.
The defence was that, while in the course of actual operations against the enemy, the forces of the Crown are under no duty of care to avoid loss or damage to private individuals.
Both applications were dismissed and the case proceeded to trial.
The Commonwealth was ultimately found liable on the ground of the captains fault in his navigation of the Adelaide: see Attorney General (New South Wales) v Perpetual Trustee Co Ltd (1952) 85 CLR 237, 252 per Dixon CJ.
Dixon J, with whom Rich ACJ and McTiernan J agreed, said in the demurrer proceedings at p 361 that it could hardly be maintained that during an actual engagement with the enemy the navigating officer of a ship of war was under a common law duty to avoid harm to such non combatant ships as might appear in the theatre of operations: To concede that any civil liability can rest upon a member of the armed forces for supposedly negligent acts or omissions in the course of an actual engagement with the enemy is opposed alike to reason and to policy.
But the principle cannot be limited to the presence of the enemy or to occasions when contact with the enemy has been established.
Warfare perhaps never did admit of such a distinction, but now it would be quite absurd.
The development of the speed of ships and the range of guns were enough to show it to be an impracticable refinement, but it has been put out of question by the bomber, the submarine and the floating mine.
The principle must extend to all active operations against the enemy.
At p 362 he acknowledged that it might not be easy under conditions of modern warfare to say in a given case upon which side of the line an act or omission falls.
But the uniform tendency of the law had been to concede to the armed forces complete legal freedom in the field, that is to say in the course of active operations against the enemy, so that the application of private law by the ordinary courts may end where the active use of arms begins.
Starke J said at pp 355 356 that acts done in the course of operations of war are not justiciable and that this had been decided by Ex P D F Marais [1902] AC 109, where the Judicial Committee of the Privy Council applied the test of whether actual war was raging at the time of the incident.
In Groves v Commonwealth (1982) 150 CLR 113, para 3 Gibbs CJ said that he had no difficulty in accepting the correctness of what was said by Dixon J: To hold that there is no civil liability for injury caused by negligence of persons in the course of an actual engagement with the enemy seems to me to accord with common sense and sound policy.
In Mulcahy v Ministry of Defence [1996] QB 732 Neill LJ said at p 746 that it seemed to have been recognised in the Australian cases that warlike activities fell into a special category.
He concluded at p 748 that an English court should approach a claim of negligence by a soldier who was injured while a gun of whose team he was a member was fired into Iraq during the first Iraq war in the same way as in the High Court of Australia did in the Shaw Savill case.
At pp 749 750 he examined what the position would have been, in the absence of the Australian cases, as to whether it would have been fair, just or reasonable to impose a duty of care on one soldier in his conduct to another when engaging the enemy during hostilities.
Echoing the words of Gibbs CJ in Groves, he reached the same conclusion, as there was no duty on the defendants in battle conditions to maintain a safe system of work.
Sir Iain Glidewell said at p 751 that at common law one soldier does not owe a duty of care to another member of the armed forces when engaging the enemy in the course of hostilities.
In his judgment in this case, at para 93, Owen J referred to his judgment in
Multiple Claimants v The Ministry of Defence [2003] EWHC 1134 (QB) in which he drew from the cases the proposition that the immunity is not limited to the presence of the enemy or the occasions when contact with the enemy has been established.
It extends to all active operations against the enemy in which service personnel are exposed to attack or the threat of attack, including the planning and preparation for the operations in which the armed forces may come under attack or meet armed resistance.
He qualified the latter part of this proposition by saying that the extension of the immunity to the planning of and preparation for military operations applied to the planning of and preparation for the operations in which injury was sustained, and not to the planning and preparation in general for possible unidentified further operations.
(c) discussion: combat immunity
There is not much by way of close reasoning in Shaw Savill and Groves, apart from assertions that where combat immunity applies the doctrine is justified by reason and policy.
But the doctrine itself, as explained in Mulcahy, is not in doubt.
The question is as to the extent of the immunity.
With great respect, I doubt the soundness of the extension of it that in the Multiple Claimants case Owen J drew from the very few cases on this topic.
They included Burmah Oil Co Ltd v Lord Advocate [1965] AC 75, where the House held that the destruction of oil installations to avoid their falling into the hands of the enemy did not fall into the category of damage done during the course of battle.
That was a very unusual case, which does not really bear on the issue we have to decide.
It seems to me that the extension of the immunity to the planning of and preparation for the operations in which injury was sustained that the judge seems to have favoured is too loosely expressed.
It could include steps taken far away in place and time from those operations themselves, to which the application of the doctrine as a particular application of what is just, fair and reasonable would be at the very least questionable.
Such an extension would also go beyond the situations to which the immunity has so far been applied.
In Bici v Ministry of Defence [2004] EWHC 786 (QB), para 90, Elias J noted that combat immunity was exceptionally a defence to the government, and to individuals too, who take action in the course of actual or imminent armed conflict and cause damage to property or death or injury to fellow soldiers or civilians.
It was an exception to the principle that was established in Entick v Carrington (1765) 19 State Tr 1029 that the executive cannot simply rely on the interests of the state as a justification for the commission of wrongs.
In his opinion the scope of the immunity should be construed narrowly.
That approach seems to me to be amply justified by the authorities.
The Challenger claims are about alleged failures in training, including pre deployment and in theatre training, and the provision of technology and equipment.
They are directed to things that the claimants say should have been done long before the soldiers crossed the start line at the commencement of hostilities.
The equipment referred to consists of target identity devices to provide automatic confirmation as to whether a vehicle is a friend or a foe, and situation awareness equipment that would permit tank crews to locate their position and direction of sight accurately.
The claim is that, if the Challenger II tanks that were involved in this incident had been provided with this equipment before they went into action, the claimants tank would not have been fired on.
The training referred to is described as recognition training.
It is said that this should have been provided pre deployment and in theatre.
Here too the essence of the claim is that these steps should have been taken before the commencement of hostilities.
The claimants are careful to avoid any criticism of the actions of the men who were actually engaged in armed combat at the time of the incident.
The question which these claims raise is whether the doctrine of combat immunity should be extended from actual or imminent armed conflict to failures at that earlier stage.
I would answer it by adopting Elias Js point, with which Owen J agreed in para 99 of his judgment in this case, that the doctrine should be narrowly construed.
To apply the doctrine of combat immunity to these claims would involve an extension of that doctrine beyond the cases to which it has previously been applied.
That in itself suggests that it should not be permitted.
I can find nothing in these cases to suggest that the doctrine extends that far.
In the Shaw Savill case the argument for the Commonwealth at the demurrer stage was that at the time of the collision the warship was engaged in active naval operations against the enemy, that those operations were urgently required and necessary for the safety of the realm and that the national emergency called for the taking of the measures that the warship adopted.
Both vessels were said to have been proceeding without any navigation or other lights, in pursuance of instructions from the Australian naval authorities which had been authorised to give them as part of the Crowns function of waging war by sea and protecting vessels from enemy action.
It was not said where the enemy were, or what exactly the warship was doing when the collision occurred.
But the phrase active naval operations against the enemy makes the point that it was assumed that it occurred during, and not before, the vessels engagement in those operations.
The fact that the Commonwealth was ultimately found liable at trial suggests that the judge found that at the material time the warship was not, after all, engaged in actual operations against the enemy.
The accident in Mulcahys case occurred while the gun was being fired into Iraq during, and not before, the actual engagement with the enemy.
Then there is the point that, as was noted in Jones v Kaney [2011] UKSC 13, [2011] 2 AC 398, paras 108 and 161, any extension of an immunity needs to be justified.
It has to be shown to be necessary.
Starke J observed in the Shaw Savill case at p 354 that not every warlike operation done in time of war is an operation or an act of war.
It is to operations or acts of war only that the doctrine extends, on the ground that the armed forces must be free to conduct such operations without the control or interference of the courts of law.
As Dixon J said in the same case at p 361, no one can imagine a court undertaking the trial of an issue as to whether a soldier on the field of battle or a sailor fighting on his ship might reasonably be more careful to avoid causing civil loss or damage.
The principle, as he described it, is not limited to acts or omissions in the course of an actual engagement with the enemy.
It extends to all active operations against the enemy.
While in the course of actually operating against the enemy, the armed forces are under no duty of care to avoid causing loss or damage to those who may be affected by what they do.
But, as Dixon J also said at p 362, there is a real distinction between actual operations against the enemy and other activities of the combatant services in time of war.
He referred by way of example to a warship proceeding to her anchorage or manoeuvring among other ships in a harbour.
At that stage no reason was apparent for treating her officers as under no civil duty of care, remembering always that the standard of care is that which is reasonable in the circumstances.
The same point can be made about the time when the failures are alleged to have taken place in the Challenger claimants case.
At the stage when men are being trained, whether pre deployment or in theatre, or decisions are being made about the fitting of equipment to tanks or other fighting vehicles, there is time to think things through, to plan and to exercise judgment.
These activities are sufficiently far removed from the pressures and risks of active operations against the enemy for it to not to be unreasonable to expect a duty of care to be exercised, so long as the standard of care that is imposed has regard to the nature of these activities and to their circumstances.
For this reason I would hold that the Challenger claims are not within the scope of the doctrine, that they should not be struck out on this ground and that the MOD should not be permitted, in the case of these claims, to maintain this argument.
The Ellis common law claim relates to a different phase of the United Kingdoms engagement in Iraq, but it was a phase during which there was a constant threat of enemy action by insurgents which was liable to cause death or injury.
These claims are less obviously directed to things done away from the theatre in which Pte Ellis was engaged at the time of his death: see para 12, above.
Their wording suggests that at least some of the failures alleged may have been due to decisions taken by local commanders during active operations on the ground.
If that was the situation, it may be open to argument that these claims are within the doctrine.
As Moses LJ recognised in the Court of Appeal, para 63, factual issues of that kind must be left for determination at the trial.
The information that would be needed for a decision either way is lacking at this stage.
As in the case of their claims under article 2 of the Convention, the details that are needed to place the claims in context will only emerge if evidence is permitted to be led in support of them.
So I would hold that it would be premature for these claims to be struck out on the ground of combat immunity.
I would leave this issue open to further argument in the light of the evidence.
(d) discussion: fair, just and reasonable
Mr Eadie QC also renewed the argument that was advanced below that the common law claims should be struck out on the ground that it would not be fair, just and reasonable to impose a duty of care at common law to protect against such death or injury as occurred in these cases.
He referred, for example, to Van Colle v Chief Constable of Hertfordshire Police [2008] UKHL 50, [2009] AC 225, Brooks v Comr of Police of the Metropolis [2005] UKHL 24, [2005] 1 WLR 1495 and Stovin v Wise [1996] AC 923 in support of this part of his argument.
In Brooks, para 30 Lord Steyn affirmed what he described as the core principle in Hill v Chief Constable of West Yorkshire [1989] AC 53, where it was held on grounds of public policy that the police did not owe legal duties to victims or witnesses in the performance of their function in keeping the Queens peace: see also Elguzouli Daf v Commissioner of Police of the Metropolis [1995] QB 335, where Lord Steyn held, also on grounds of public policy, that the Crown Prosecution Service did not owe a duty of care to those whom it was prosecuting; and Hughes v National Union of Mineworkers [1991] ICR 669, where May J held that it would be detrimental to the public interest if police officers charged with deploying of other officers in times of serious public disorder were to have to concern themselves with possible negligence claims from their subordinates.
These can all be seen as cases where, for reasons of public policy, it was not fair, just or reasonable for the defendant to be under a duty of care to avoid injury.
The closest the cases have come to applying that reasoning to cases involving members of the armed forces is Mulcahy v Ministry of Defence [1996] QB 732, where Neill LJ said at p 750 that there was no duty on the defendants in battle conditions to maintain a safe system of work and Sir Iain Glidewell said at p 751 that one soldier does not owe to another a duty of care when engaged in battle conditions.
As in the other cases, the question whether a duty should be held not to exist depends on the circumstances on who the potential claimants are and when, where and how they are affected by the defendants acts.
The circumstances in which active operations are undertaken by our armed services today vary greatly from theatre to theatre and from operation to operation.
They cannot all be grouped under a single umbrella as if they were all open to the same risk, which must of course be avoided, of judicialising warfare.
For these reasons, I think that the question whether the claims in this case fall within the exclusion that was recognised in Mulcahy or any extension of it that can be justified on grounds of public policy cannot properly be determined without hearing evidence.
In Van Colle, para 58 Lord Bingham said that one would ordinarily be surprised if conduct which violated a fundamental right or freedom of the individual under the Convention did not find a reflection in a body of law as sensitive to human needs as the common law.
So Lord Rodgers observation in Catherine Smith, para 126 that there would be reason to believe that the military authorities may have failed in their article 2 duty if a soldier dies as a result of friendly fire from other British forces is capable of being read across as indicating that the question in the case of the Challenger claims is not whether a duty was owed but whether, on the facts, it was breached.
Whether the situation in Iraq at the time of the incidents that gave rise to the Ellis claims was comparable to battle conditions when a nation is at war is a matter that also needs to be investigated.
It needs to be emphasised, however, that the considerations mentioned in paras 64 66 and 76 81, above in the context of the claims made under article 2 of the Convention are just as relevant in the context of the common law claims.
Close attention must be paid to the time when the alleged failures are said to have taken place, and to the circumstances in which and the persons by whom the decisions that gave rise to them were taken.
It will be easier to find that the duty of care has been breached where the failure can be attributed to decisions about training or equipment that were taken before deployment, when there was time to assess the risks to life that had to be planned for, than it will be where they are attributable to what was taking place in theatre.
The more constrained he is by decisions that have already been taken for reasons of policy at a high level of command beforehand or by the effects of contact with the enemy, the more difficult it will be to find that the decision taker in theatre was at fault.
Great care needs to be taken not to subject those responsible for decisions at any level that affect what takes place on the battlefield, or in operations of the kind that were being conducted in Iraq after the end of hostilities, to duties that are unrealistic or excessively burdensome.
The sad fact is that, while members of the armed forces on active service can be given some measure of protection against death and injury, the nature of the job they do means that this can never be complete.
They deserve our respect because they are willing to face these risks in the national interest, and the law will always attach importance to the protection of life and physical safety.
But it is of paramount importance that the work that the armed services do in the national interest should not be impeded by having to prepare for or conduct active operations against the enemy under the threat of litigation if things should go wrong.
The court must be especially careful, in their case, to have regard to the public interest, to the unpredictable nature of armed conflict and to the inevitable risks that it gives rise to when it is striking the balance as to what is fair, just and reasonable.
Conclusion
For these reasons I would allow the Snatch Land Rover claimants appeal against the decision of the Court of Appeal that the soldiers in these cases were not within the United Kingdoms jurisdiction for the purposes of article 2 of the Convention at the time of their deaths.
I would, however, dismiss the MODs application that the Snatch Land Rover claims should be struck out on the ground that the claims are not within the scope of that article.
I would dismiss the MODs application that the Challenger claims should be struck out on the ground of combat immunity and on the ground that it would not be fair, just or reasonable to extend the duty of care to those cases.
I would also dismiss the MODs cross appeal against the decision of the Court of Appeal to dismiss its application to strike out the Ellis claim based on negligence.
LORD MANCE (with whom Lord Wilson agrees)
Introduction
This first issue is whether soldiers in the British army are within the jurisdiction of the United Kingdom when serving both on and off base in Iraq for the purposes of article 1 of the European Convention on Human Rights.
On this issue, I am in complete agreement with Lord Hope.
I have nothing to add to what he says in his paragraphs 17 55.
On this basis, this case raises once again for consideration the difficult line or inter relationship between national law and substantive Convention rights, to which I referred in Rabone v Pennine Care NHS Trust [2012] UKSC 2; [2012] 2 AC 72, para 121.
It is in general terms clear from Strasbourg jurisprudence that article 2 of the Human Rights Convention includes substantive duties on the part of the state, namely (a) a systems or framework duty, viz to establish a framework which is appropriately protective of life and (b) an operational duty, viz in appropriate circumstances, a positive duty to take preventive operational measures to protect an individual whose life is at risk: Watts v United Kingdom (2010) 51 EHRR SE66, para 82.
Although the operational duty was said in Osman v United Kingdom (1998) 29 EHRR 245 to apply in certain well defined circumstances, the subsequent recognition of its application in new sets of circumstances (including by this Court in Rabone) leaves its scope uncertain.
As Lady Hale notes in Rabone, para 97 99, it is conceivable that the Strasbourg jurisprudence accepts or is moving towards a broad principle that engages article 2 and requires the state to react reasonably in any situation where the state knows or ought to know of a real and immediate threat to human life.
It is also unclear how far the two substantive duties are separated, with middle ground between them, or form part of a continuum covering almost every aspect of state activity.
In neryildiz v Turkey (2005) 41 EHRR 325, paras 89 90 the Strasbourg court treated the framework duty as indisputably apply[ing] in the particular context of dangerous activities, where special emphasis must be placed on regulations geared to the special features of the activity in question, adding that They must govern the licensing, setting up, operation, security and supervision of the activity and must make it compulsory for all concerned to take practical measures to ensure the effective protection of citizens whose lives might be endangered by the inherent risks.
On the other hand, there are some circumstances in which death occurs as a result of the activities of state agents, but article 2 is not engaged.
They include casual errors of judgment or acts of negligence (which I described in R (Catherine Smith) v Oxfordshire Assistant Deputy Coroner [2010] UKSC 29; [2011] 1 AC 1, para 201, as operational as opposed to systematic failures), a principle established in the context of medical negligence.
The present appeal concerns the operation and application of the principles of common law negligence and of article 2 in a factual context which is very largely uncharted by previous authority.
The right approach is I believe to take first the common law position.
A primary aspect of the framework duty on states is to have a legislative and administrative framework appropriately protective of life: neryildiz, para 89, quoted in Rabone, para 12.
So article 2 naturally directs attention first to the question whether domestic law provides such a framework, including the recourse to compensation for non pecuniary damages which the Strasbourg court has indicated should in principle be available as part of the range of redress where a state is held responsible for a death: Z v United Kingdom (2001) 34 EHRR 97, para 109.
The claims
I gratefully adopt Lord Hopes summary of the various claims in paras 9 to 12 of his judgment.
Some preliminary observations may be made.
First, although the Challenger claims are based only on allegations of lack of technology, equipment and/or training, the Particulars of Claim alone show that the factual circumstances of these sad deaths would require examination and that failings on the ground of those with command over the firing tank are in fact held directly responsible for such deaths.
In particular, it is alleged that Major McDuff under whose command the firing tank fell was told of the presence of the tanks subsequently fired upon and had such tanks visually identified to him, that he was shown, but refused to accept, the boundaries of responsibility marked on a map which had been given to such tanks and that he failed to communicate any of this information to anyone, with the result that, some 12 hours later, the firing tank wrongly identified the tanks fired on as enemy.
Second, the particulars relied upon in Mrs Smiths claim under article 2 include both decisions or omissions on the ground and equipment and tactical decisions at a higher level.
Third, the particulars relied upon in the Ellis claims in negligence and/or under article 2 relate mainly at least to equipment and tactical decisions at a higher level (although they also embrace allegations as to what equipment should have been used if available).
As pleaded, the complaint regarding the decision to deploy Snatch Land Rovers on the patrol might be read as a complaint about a decision made on the ground.
But their case (para 188) explains that it relates to a decision made well away from the heat of battle at a time when the decision maker was neither under attack nor threat of attack.
It did not form part of the planning of this particular patrol.
Common law
The questions arising are (i) the existence and scope of any common law responsibility on the part of the state towards its soldiers, in particular in respect of deaths in active service and (ii) the nature and scope of any common law doctrine of combat immunity.
The claimants starting point is that the state owes to its soldiers a general duty to take appropriate measures to secure their safety, like that owed by any other employer, and that it must also answer vicariously for any breach of duty by one soldier killing or injuring another.
It is only therefore by virtue of some exceptional immunity that the state can escape liability for breach of any such duty, and the only principle giving any such immunity is a limited principle of combat immunity.
That the Crown is in tort generally in the same position as any employer follows from s.2 of the Crown Proceedings Act 1947, providing Liability of the Crown in tort. (1) Subject to the provisions of this Act, the Crown shall be subject to all those liabilities in tort to which, if it were a private person of full age and capacity, it would be subject: (a) in respect of torts committed by its servants or agents; (b) in respect of any breach of those duties which a person owes to his servants or agents at common law by reason of being their employer; and (c) in respect of any breach of the duties attaching at common law to the ownership, occupation, possession or control of property: Provided that no proceedings shall lie against the Crown by virtue of paragraph (a) of this subsection in respect of any act or omission of a servant or agent of the Crown unless the act or omission would apart from the provisions of this Act have given rise to a cause of action in tort against that servant or agent or his estate.
However, there is authority that where actual war is raging acts done by the military authorities are not justiciable by the ordinary tribunals: Ex p Marais [1902] AC 109, 114.
That was a case of alleged wrongful detention where the Privy Council declared that the principle applied where martial law had been declared, even though the military commander had allowed ordinary courts, before which the claimant might have been brought, to continue in operation.
In Burmah Oil Co Ltd v Lord Advocate [1965] AC 75, Lord Reid recognised (at p 110) an exception (to the Crowns liability to pay compensation for property seized or destroyed) in relation to battle damage consisting of accidental or deliberate damage done in the course of fighting operations.
In Shaw Savill & Albion Co Ltd v Commonwealth (1940) 66 CLR 344, Ex p Marais was cited by Starke and Williams JJ, but all the members of the High Court also assimilated the question of justiciability with the question whether the state owed a legal duty to take care in the particular circumstances.
Starke J stated that it is for the court to determine whether a state of war exists and whether the matters complained of were done or omitted in the conduct of an operation or act of war.
He added (consistently with Ex p Marais) that the immunity arising from conduct of war cannot be confined to the theatre of operations where combatants are actively engaged: it must extend, in modern times, to all theatres in which action on the part of the Kings enemies is imminent.
In terms of the modern law of tort, the right analysis is, I consider, that combat immunity is not so much an entirely separate principle as the result of a general conclusion that it is not fair, just or reasonable to regard the Crown or its officers, soldiers or agents as under a duty of care to avoid injury or death in their acts or omissions in the conduct of an active military operation or act of war.
That is how the matter was seen in Mulcahy v Ministry of Defence [1996] QB 732.
The Court of Appeal there, rightly in my view, followed the approach in Shaw Savill in holding that a gun commander firing live rounds into Iraq during the first Gulf War in 1991 owed the claimant, a serving soldier in the same team, no duty of care for breach of which the Ministry could be held vicariously liable.
It held equally that the Ministry itself owed the claimant no duty to maintain a safe system of work.
Among the points considered in Mulcahy was whether the repeal of the immunity in tort formerly provided by section 10 of the Crown Proceedings Act 1947, subject to the right (never yet utilised) to revive section 10 for all or limited purposes under s.2 of the Crown Proceedings (Armed Forces) Act 1987 bore on the existence or scope of any doctrine of combat immunity.
Neill LJ held it did not, because it was still necessary to consider the common law position.
I agree.
In Bici v Ministry of Defence [2004] EWHC 786 (QB), concerning the killing of two civilians by British soldiers during the course of peace keeping operations in Kosovo, Elias J treated separately the doctrine of combat immunity and the question whether there existed a duty of care, viewing the former as an exclusion of justiciability and so as a doctrine to be strictly confined on constitutional grounds.
But on that basis it was still necessary to consider whether any duty of care existed.
Elias J held it did, because the case involved the single question whether the soldiers were justified in firing on the civilians, and there was no basis for concluding that they did not owe a duty of care in doing so: Troops he said (para 104) frequently have to carry out difficult and sensitive peace keeping functions, such as in Northern Ireland, whilst still being subject to common law duties of care.
The difficulties of their task are reflected in the standard of the duty rather than by denying its applicability.
As Lord Hope has noted, the cases on combat immunity are focused on acts or omissions occurring and causing injury or death in the course of hostilities.
In the present case the Challenger claimants are careful to put their case in a way which relies solely on allegedly negligent conduct occurring prior to and distant from the actual hostilities, and involving failures, in Whitehall or elsewhere, properly to equip and train the soldiers sent to fight in Iraq.
The same applies, at least for the most part, to the Ellis claims.
The question is whether the state, or indeed those of its officers responsible for procurement and training decisions, owe any duty of care in respect of injury or death in the course of combat operations allegedly attributable to their negligence in the performance of such responsibility.
This is a question of public policy about the answer to which Lord Rodger (at para 127), with whom Lord Walker expressly agreed (at para 131), can, I think, have had no doubt in R (Catherine Smith) v Oxfordshire Assistant Deputy Coroner [2010] UKSC 29, [2011] 1 AC 1.
Although they were addressing explicitly the position under article 2, they cannot have thought that their remarks were or could be made irrelevant simply be reformulating a claim in negligence.
It is not difficult to identify situations in which the common law has concluded on policy grounds that no duty of care should exist.
I agree with all that Lord Carnwath has said in this connection in paras 161 to 175 of his judgment.
In Hill v Chief Constable of West Yorkshire [1989] AC 53, the House held that the police had owed no enforceable duty of care with respect to the last victim of the Yorkshire Ripper, properly to investigate the crimes committed by the Yorkshire Ripper before the murder of, and so to save the life of, the last victim.
Lord Keith said, at p 63: From time to time they [the police] make mistakes in the exercise of that function, but it is not to be doubted that they apply their best endeavours to the performance of it.
In some instances the imposition of liability may lead to the exercise of a function being carried on in a detrimentally defensive frame of mind.
The possibility of this happening in relation to the investigative operations of the police cannot be excluded.
Further it would be reasonable to expect that if potential liability were to be imposed it would be not uncommon for actions to be raised against police forces on the ground that they had failed to catch some criminal as soon as they might have done, with the result that he went on to commit further crimes.
While some such actions might involve allegations of a simple and straightforward type of failure for example that a police officer negligently tripped and fell while pursuing a burglar others would be likely to enter deeply into the general nature of a police investigation, as indeed the present action would seek to do.
The manner of conduct of such an investigation must necessarily involve a variety of decisions to be made on matters of policy and discretion, for example as to which particular line of inquiry is most advantageously to be pursued and what is the most advantageous way to deploy the available resources.
Many such decisions would not be regarded by the courts as appropriate to be called in question, yet elaborate investigation of the facts might be necessary to ascertain whether or not this was so.
A great deal of police time, trouble and expense might be expected to have to be put into the preparation of the defence to the action and the attendance of witnesses at the trial.
The result would be a significant diversion of police manpower and attention from their most important function, that of the suppression of crime.
Closed investigations would require to be reopened and retraversed, not with the object of bringing any criminal to justice but to ascertain whether or not they had been competently conducted.
In Brooks v Comr of Police of the Metropolis [2005] 1 WLR 1495, the House applied similar reasoning when holding that the police have no duty of care not to cause by positive acts or omissions harm to victims of serious crime, or witnesses to serious crime, with whom they have contact.
Lord Steyn said (para 30): It is, of course, desirable that police officers should treat victims and witnesses properly and with respect: compare the Police (Conduct) Regulations 2004 (SI 2004/645).
But to convert that ethical value into general legal duties of care on the police towards victims and witnesses would be going too far.
The prime function of the police is the preservation of the Queen's peace.
The police must concentrate on preventing the commission of crime; protecting life and property; and apprehending criminals and preserving evidence: .
A retreat from the principle in Hill's case would have detrimental effects for law enforcement.
Whilst focusing on investigating crime, and the arrest of suspects, police officers would in practice be required to ensure that in every contact with a potential witness or a potential victim time and resources were deployed to avoid the risk of causing harm or offence.
Such legal duties would tend to inhibit a robust approach in assessing a person as a possible suspect, witness or victim.
By placing general duties of care on the police to victims and witnesses the police's ability to perform their public functions in the interests of the community, fearlessly and with despatch, would be impeded.
It would, as was recognised in Hill's case, be bound to lead to an unduly defensive approach in combating crime.
Van Colle v Chief Constable of the Hertfordshire Police (Secretary of State for the Home Department intervening) [2008] UKSC 50, [2009] AC 225 is a further case in which there was in Lord Hopes words a highly regrettable failure to react to a prolonged campaign by Jeffrey threatening the use of extreme criminal violence against Mr Smith, which in the event did culminate in Jeffrey attacking Mr Smith and very severely injuring him.
The House again applied the approach in Hill and Brooks in concluding that there was no actionable duty of care.
In all these cases the existence of a duty of care was negatived, although it could not be said that the police action or inaction occurred in the heat of the moment and the failings occurred over considerable periods when the police had the opportunity to think about and investigate the position and take protective measures.
In Multiple Claimants v Ministry of Defence [2003] EWHC 1134 (QB), it was claimed that the Ministry was in breach of a duty of care to provide service personnel with a safe system of work.
Owen J considered (para 2.C.16) that In aggressive operations the objective will be defeat of the enemy; in defensive operations the successful repulse of the enemy.
In the planning of and preparation for such operations the interests of service personnel must be subordinate to the attainment of the military objective.
In my judgment the military cannot be constrained by the imposition of civil liability in the planning of and preparation for such operations any more than in their execution.
The planning of and preparation for military operations will include decisions as to the deployment of resources.
On that basis, he dismissed a claim that the Ministry had failed to make proper arrangements for psychiatric support in combat on the basis that Decisions as to the deployment of medical resources in operations in which service personnel may engage in hostilities fall within the combat immunity . (para 10.12).
However, he disagreed with the Ministrys more extended submission that no cause of action can arise in relation to injury sustained in combat irrespective of whether the acts or omissions to which such injury is attributable fall within the combat immunity (para 2.C.18).
He reiterated his view on this point in his judgment at first instance in the present cases concerning the Challenger and Ellis claims.
Mr Eadie QC takes issue with Owen J on the point.
However, it was explained by Owen J with an example which suggests that he had in mind a relatively narrow situation not presently relevant.
The explanation was in these terms: If the restriction to the duty of care does not arise on the facts, and a claimant is able to demonstrate breach of duty resulting in injury and consequential loss and damage, it is immaterial that the injury was sustained in the course of combat.
The question with regard to the injury is then simply one of causation; is it attributable to the breach of duty? The point can be illustrated by reference to the claimants' contention that the MoD was under a duty to devise and implement a system for screening recruits so as, and I paraphrase, to eliminate those vulnerable to stress, and that as a result of breach of that duty recruits who should have been rejected were enlisted, and subsequently sustained psychiatric injury when exposed to the trauma of battle.
If that contention is well founded, it will obviously not be open to the MoD to argue that the combat immunity applies to the relevant acts or omissions.
The injury will have been sustained in combat; but the exposure to stress in combat is simply the mechanism by which the breach causes injury.
In considering the Challenger claims and the Ellis claim for negligence, Owen J referred to his previous decision in Multiple Claimants as well as to Elias Js decision in Bici.
He accepted the latter as standing for the proposition that any exception on grounds of combat immunity should be narrowly construed.
He confined the extension of the doctrine of combat immunity, recognised in Multiple Claimants, to the planning and preparation of the particular operations in which injury was sustained, as opposed to planning and preparation made . in general for possible unidentified further military operations (para 94).
He was not persuaded that the fact that the equipment claims were likely to give rise to issues of procurement and allocation of resources demonstrated conclusively that it would not be fair, just and reasonable to impose the duties of care for which the claimants contend (para 107).
He was not persuaded that either the equipment or the claims based on lack of pre deployment training had no real prospect of success.
He thought that different considerations might apply to the claims so far as based on lack of in theatre training, but that this issue would be better determined by the trial judge.
He struck out the Ellis claim for negligence in para 26.1 (failure to limit patrols to other vehicles) as falling squarely within combat immunity.
The Court of Appeal upheld Owen Js conclusion that the equipment and training claims arguably fall outwith the scope of combat immunity, and also allowed the appeal in respect of para 26.1.
Three points arise.
First, in my opinion, the decisions below underestimate the inevitable inter linking of issues relating to the supply of technology and equipment and to training for active service with decisions taken on the ground during active service.
As noted in para 110 above, it is not possible to consider the Challenger claims without considering the conduct of those on the ground.
If it were suggested, as might be possible, that the real cause of the incident was the failings of a local commander, the court would, on the claimants case, find itself having to adjudicate on this suggestion in order to establish whether there was any relevant causative failure regarding the prior supply of equipment or training.
As Lord Hope notes (para 91), the claimants have, quite naturally, been careful not to make any criticism of those actually engaged on the ground.
But that indicates, rather than resolves, the problem.
The proper attribution of responsibility cannot depend upon how a claimant frames his case.
The Ministry of Defence could itself advance a case that the real cause was not the fault of someone responsible for procurement, but of someone on the ground.
In any event, as the present pleadings show, all the facts would be laid before the court, which would have to decide upon causation looking at them as a whole.
Allegations about procurement cannot in the case of the Challenger claims be divorced from consideration of the conduct of those using the equipment on the ground.
Lord Hope recognises this in paragraph 80, but draws the opposite conclusion to that which I would draw.
He considers that all such circumstances must be evaluated with a view to striking a balance between competing considerations (paras 61, 78 80 and 98 99).
I would conclude the opposite that all such circumstances are inter related and essentially non justiciable.
Second, Mr Hermer QC for the Challenger claimants accepts that tactical decisions, wherever taken, are not actionable.
Mr Hermer must on any view be correct, I consider, on this point.
But, if so, it opens the question in relation to the Snatch Land Rover claim by Ms and Mrs Ellis whether a complaint of failure to supply a better armoured or equipped vehicle is not really a complaint about tactics. (In contrast to Mr Hermer, Mr Weir QC for the Smith and Ellis claimants would confine combat immunity so narrowly that it could not embrace in the case of the Ellis claimants either a question why allegedly available equipment (Element A) was not fitted to Private Elliss Snatch Land Rover on the day of the casualty or a question why the patrol to the Iraqi police station was not delayed a day or two to enable it to be fitted.)
Third, both in that connection and more widely, I consider that Owen J was clearly right to conclude in Multiple Claimants that the military cannot be constrained by the imposition of civil liability in the planning of and preparation for such operations any more than in their execution.
The planning of and preparation for military operations will include decisions as to the deployment of resources.
I would also refer to cautionary words of Lord Keith in Rowling v Takaro Properties Ltd [1988] AC 473, 502D F: The third [matter] is the danger of overkill.
It is to be hoped that, as a general rule, imposition of liability for negligence will lead to a higher standard of care in the performance of the relevant type of act; but sometimes not only may this not be so, but the imposition of liability may even lead to harmful consequences.
In other words, the cure may be worse than the disease.
The claims that the Ministry failed to ensure that the army was better equipped and trained involve policy considerations of the same character as those which were decisive in Hill, Brooks and Van Colle.
They raise issues of huge potential width, which would involve courts in examining procurement and training policy and priorities over years, with senior officers, civil servants and ministers having to be called and to explain their decisions long after they were made.
Policy decisions concerning military procurement and training involve predictions as to uncertain future needs, the assessment and balancing of multiple risks and the setting of difficult priorities for the often enormous expenditure required, to be made out of limited resources.
They are often highly controversial and not infrequently political in their nature.
These may well also be influenced by considerations of national security which cannot openly be disclosed or discussed.
Lord Rodger summarised the position in relation to responsibility, accountability and investigation in Catherine Smith (para 127) in terms with which, as I have said, Lord Walker agreed, as I also do: Once it is established, say, that a soldier died because the blast from a roadside bomb penetrated the armour plating on his vehicle, it may well be inferred that he would not have died if the plating had been stronger.
And that simple fact may be worth pointing out as a possible guide for the future.
But questions, say, as to whether it would have been feasible to fit stronger protection, or as to why the particular vehicles were used in the operation or campaign, or as to why those vehicles, as opposed to vehicles with stronger protection, were originally purchased by the Ministry of Defence, or as to whether it would have been better to have more helicopters available etc, all raise issues which are essentially political rather than legal.
That being so, a curious aspect of counsel's submissions before this court was the complete absence of any reference to Parliament as the forum in which such matters should be raised and debated and in which ministers should be held responsible.
Of course, in consequence of pressure brought to bear by Parliament, the government might set up an independent inquiry with wide terms of reference to look into all aspects of a situation, including the political aspects.
Also in Catherine Smith Lord Brown at para 146 asked rhetorically: Is it really to be suggested that even outside the area of the Council of Europe Strasbourg will scrutinise a contracting state's planning, control and execution of military operations to decide whether the state's own forces have been subjected to excessive risk (risk, that is, which is disproportionate to the objective sought) ? May Strasbourg say that a different strategy or tactic should have been adopted perhaps the use of airpower or longer range weaponry to minimise the risk to ground troops notwithstanding that this might lead to higher civilian casualties? The question was asked in the context of jurisdiction, but, jurisdiction having been established under article 1, both the question and Lord Browns evident scepticism remain relevant.
The claimants case is that during or after any war any injured soldier or the relatives or dependants of any soldier killed in combat could sue the state for alleged failures in the preparation or equipping of the armed forces for combat.
Logically, if that is so, then a soldier might, even during the war, complain that his or her equipment or training was inadequate and that it would be a breach of the states common law duty of care and/or duties under the Human Rights Convention even to order him or her to go into combat with it.
If domestic legislation compelled this, then the soldier could seek relief in the Strasbourg court maybe even interim relief prohibiting the further use or giving of orders to use the allegedly defective equipment.
One may also recall the facts of R v Jones (Margaret) [2006] UKHL 16; [2007] 1 AC 136, where protestors sought to disrupt Fairford Airbase in order to prevent intervention in Iraq, and pleaded in defence that they were preventing the international crime of aggression.
Pointing to defective equipment and seeking to ban its use could have a considerable disruptive effect.
Not only would there be a huge potential diversion of time and effort in litigation of such issues in an area of essential national interest (whether before, during or after hostilities).
There must be risks that the threat of exhaustive civil litigation following any active military operation would affect decision making and lead to a defensive approach, both at the general procurement and strategic stages and at the tactical and combat stages when equipment was being deployed.
The duties of care owed by soldiers to civilians during peace keeping operations or by the state to its soldiers in peace are not in issue and raise different considerations.
I examined some of the cases which the Strasbourg court has decided in this area in para 196 of my judgment in Catherine Smith.
When considering whether a duty of care exists, it is always relevant to ask in what context and to avoid what consequences. (Compare in another branch of the law South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 and Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627.) Equipment should at least be safe and training adequate for peacetime training and activities, and its adequacy in the face of enemy action will not be tested in the same way.
But procurement and training decisions and priorities are geared primarily to the needs and risks inherent in active military operations, when enemy activity will be aimed at killing British soldiers in as many unexpected ways as possible.
It is after a death or injury occurring in such operations that, as the present cases show, questions can be raised as to whether different technology, equipment or training or different decisions regarding deployment and use of equipment like vehicles might not have made all the difference to the incidence of the death or injury.
The relevant question for present purposes is therefore whether the state owed a duty of care to avoid the death or injury during the course of active service which actually occurred.
It will often not be difficult with hindsight to point to different decisions that might have been made or preparations made.
Would the disaster of Isandlwana have been avoided had the army command equipped Lord Chelmsfords forces with the heliograph? Or was the cause the failure to form a laager? Or the deployment of troops over too wide a perimeter? Or the lack of screwdrivers to open the ammunition boxes quickly enough? And would many disastrous casualties of the First World War have been avoided if the War Office had recognised the significance of the proposal for a tank put to it in 1912, 1914 and 1916 by the Australian engineer Lancelot de Mole of whom a post war Commission on Awards to Inventors said in 1919: We consider that he is entitled to the greatest credit for having made and reduced to practical shape as far back as the year 1912 a very brilliant invention which anticipated and in some respects surpassed that actually put into use in the year 1916.
It was this claimant's misfortune and not his fault that his invention was in advance of his time, and failed to be appreciated and was put aside because the occasion for its use had not then arisen.
Was the fall of Singapore to numerically inferior forces, with the ensuing slaughter and torture, due to culpable failures to fortify the Malay peninsular or landward side of Singapore or to provide armoured vehicles or aircraft to protect both? Or was it due to failures of military commanders on the ground? Or was it inevitable in the context of what Churchill described as our bitter needs elsewhere?
To offer as a panacea in relation to these points the injunction that courts should be very cautious about accepting such claims is to acknowledge the problem, but to offer no real solution.
Had it been, the same panacea would have been adopted as the solution by the House in Hill, Brooks and Van Colle.
My conclusions do not mean that every death or injury occurring in the course of military conflict falls necessarily outside the scope of any duty of care.
There will be deaths and injuries occurring during active service which are unconnected with the risks of active combat or which arise, as Owen J recognised was possible (para 123 above), from breaches of duty independent of active combat.
An accident arising from a defect in equipment which could just as well have occurred on Salisbury Plain and owed nothing significant to any risk of war would be an example.
Private Smiths sad death in Catherine Smith likewise.
I consider that that the Challenger claims, which are only in common law negligence, should be struck out in their entirety on the basis that the state owes no such duty of care as alleged with regard to the provision of technology, equipment or training to avoid death or injury in the course of an active military operation.
Similarly, with regard to the Ellis claim in negligence, I would hold that there was no such duty of care as alleged regarding the provision of different or differently equipped vehicles or, a fortiori, regarding the deployment on patrol on 28 February 2006 of the Snatch Land Rovers which were deployed.
Moses LJ suggested in the Court of Appeal (para 60) that it was necessary to consider the evidence in order to decide when active operations start and when they finish and that Owen J had recognised that the present cases may not fall within the scope of combat immunity.
But, so far as this suggests that Owen J doubted whether active operations were afoot at the dates relevant to either the Smith claim (16 July 2005) or the Ellis claim (28 February 2006), it is wrong.
No such argument even appears to have been raised before Owen J or before the Court of Appeal, in relation to either claim.
Further, in paras 113 114 of his judgment Owen J expressly struck out the Ellis claim, so far as it relied on the failure to limit the patrol, on the basis that combat immunity did apply as at 28 February 2006.
Before the Supreme Court, the nearest there is to any suggestion is the elliptical statement made in para 186 of the Ellis case in the context of combat immunity that Private Ellis was not engaged in a major combat operation that had ended in May 2003.
He was part of an armed force providing security and stability to a region of Iraq; at the time of his death he was on a patrol returning from a trip to the Iraqi police headquarters in Al Amarah.
It is the Ellis claimants case that this activity should be treated as akin to a peace keeping, police or anti terrorist activity so that the ambit of combat immunity should be very tightly constrained around the actual patrol in question.
Even that statement does not challenge the existence of a combat operation involving the patrol, and in any event there is no basis for allowing an entirely new point, contrary to the basis on which the matter was put before the judge, to be raised at this stage.
I would therefore also hold that the Ellis claim should be struck out in so far as it is made for common law negligence.
Article 2
As stated in para 103 above, article 2 is said to involve two substantive obligations: framework and operational.
In Stoyanovi v Bulgaria (Application No 42980/04) decided 9 November 2010, the Strasbourg court was concerned with an accidental death in a military training exercise a practice parachute jump during which the deceaseds head hit the aircrafts wheel rendering him unconscious and so unable to open his parachute.
The court referred to the operational duty arising, on the authority of Osman v United Kingdom and neryildiz v Turkey, where authorities know or ought to know of a real and immediate risk to life, or of a situation inherently dangerous to life, and to the framework duty in the public health sphere to make regulations compelling hospitals to adopt appropriate measures to protect patients lives and to have an effective independent judicial system to determine the cause of death of patients in hospital and make those responsible accountable.
It then went on, at para 61, Positive obligations will vary therefore in their application depending on their context.
In the present case, which concerns an accident during a military training exercise, the Court notes that while it may indeed be considered that the armed forces' activities pose a risk to life, this is a situation which differs from those dangerous situations of specific threat to life which arise exceptionally from risks posed by violent, unlawful acts of others or man made or natural hazards.
The armed forces, just as doctors in the medical world, routinely engage in activities that potentially could cause harm; it is, in a manner of speaking, part of their essential functioning.
Thus, in the present case, parachute training was inherently dangerous but an ordinary part of military duties.
Whenever a State undertakes or organises dangerous activities, or authorises them, it must ensure through a system of rules and through sufficient control that the risk is reduced to a reasonable minimum.
If nevertheless damage arises, it will only amount to a breach of the State's positive obligations if it was due to insufficient regulations or insufficient control, but not if the damage was caused through the negligent conduct of an individual or the concatenation of unfortunate events (see, for comparison, Kalender v Turkey, Application No 4314/02), 43 47, 15 December 2009).
The courts reasoning appears to have been that, in so far as military life is inherently dangerous, there could be no question of any operational duty to prevent that danger.
This seems fairly self evident, and is certainly consistent with the Strasbourg courts recognition in other cases of the need to bear in mind the particular characteristics of military life and its effects on the situation of individual members of the armed forces (Engel v The Netherlands (No 1) (1976) 1 EHRR 647, para 54), meaning, for example, also that many acts that would constitute degrading or inhuman treatment in respect of prisoners may not reach the threshold of ill treatment when they occur in the armed forces, provided that they contribute to the specific mission of the armed forces in that they form part of, for example, training for battlefield conditions (Chember v Russia, (Application No 7188/03) (unreported) given 3 July 2008, para 49).
However, as the court stated in Stoyanovi, the state must by the same token have a system of rules and sufficient control to reduce the risks to a reasonable minimum.
In Kalender v Tutrkey (Application No 4314/02) (unreported) given 15 December 2009, cited by the court, liability under the substantive aspect of article 2, was held to exist in the light of numerous failings in the structure and operation of a railway station, leading to passengers having, without supervision or warning, to disembark and cross a line used by other trains and being killed in the process.
Accordingly, it appears that the framework duty may in appropriate circumstances operate at a low level.
In domestic contexts where the state is taking armed action affecting or liable to affect third persons, the court has undertaken quite close and in the upshot critical examination of the states conduct.
I cited examples in para 196 of my judgment in Catherine Smith: Such cases start with McCann v United Kingdom (1995) I EHRR 97, relating to the shooting by SAS officers of members of the Provisional IRA suspected of planning to attack the Royal Anglian Regiment in Gibraltar, and include Isayeva, Yusupova and Bazayeva v Russia (Applications Nos 57947/00, 57948/00 and 57949/00), 24 February 2005, and Isayeva v Russia (Application No 57950/00), 24 February 2005, relating to the conduct of military operations by the Russian armed forces against Chechen separatist fighters which led to the deaths of civilians.
In such cases, it appears that the exigencies of military life go to the standard and performance, rather than the existence of, any Convention duty.
The question is whether the Strasbourg court would take a similar attitude to the responsibility of a state for the death of a member of its own armed forces in circumstances alleged to have involved mistaken decisions in the course of an operation or act of war (such as alleged by Mrs Smith in at least paragraphs 26.2 to 26.5 of her claim), or failings in planning or in the equipping or training of such forces (such as alleged by Mrs Smith in paras 26.1 and it seems paras 26.6 and 26.7 of her claim and by the Ellis claimants in probably all three particulars in their para 26).
In this connection it is relevant to bear in mind that the Strasbourg court has curtailed the operational duty, so that it does not embrace mere casual acts of negligence, certainly in the field of health care and, as appears logical, in other fields: see my judgment in Catherine Smith, para 201 and the cases there cited, to which can now be added Stoyanovi v Bulgaria (Application No 42980/04), para 61, where the European Court of Human Rights said that a death occurring during an inherently dangerous training activity (parachute jumping) undertaken by a soldier would not involve any breach of article 2 if caused through the negligent conduct of an individual (see para 138 above).
Mr Weir QC regretted this qualification as deeply unsatisfactory, and as a manifestation of the fact that (in his words) the search for principle has been called off in this area.
An alternative view might be that it would have been better if the Strasbourg court had left the development and application of the law of tort to domestic legal systems, subject to clearly defined criteria, rather than set about creating what amounts in many respects to an independent substantive law of tort, overlapping with domestic tort law, but limited to cases involving death or the risk of death.
Be that as it may be, the exception for casual acts of negligence is relevant to show that liability under article 2 can be tailored and limited in what the Strasbourg court regards as appropriate circumstances.
In the present circumstances, the question arises whether that the Strasbourg court would regard article 2 in its substantive aspect as making the state liable for the death in combat of one soldier due to alleged negligence of his commander or of another soldier.
The prospect of the Strasbourg court reviewing the conduct of combat operations in this way seems to me sufficiently striking, for it to be impossible to give this question a positive answer.
If the European Court considers that the Convention requires it to undertake the retrospective review of armed conflicts to adjudicate upon the relations between a state and its own soldiers, without recognising any principle similar to combat immunity, then it seems to me that a domestic court should await clear guidance from Strasbourg to that effect.
That leaves for consideration whether the framework duty involves an obligation on the part of the state to exercise due care in the course of planning armed operations, and in equipping and training its armed forces, so as to reduce or limit the risks to life involved in such operations.
In my opinion it is not possible to conclude that the Strasbourg court would hold that such matters are justiciable under the Convention, any more than they are at common law.
I am not over enamoured of the cautionary warning to this court that the road to Strasbourg is a one way street, which a claimant can tread if this Court has not gone far enough, but which the state cannot tread if this Court goes too far.
If it is clear from prior authority or this Court is otherwise confident about what Strasbourg will decide, then we should decide the issue as we believe correct.
But in the present very difficult case, two connected considerations lead me to consider that caution is called for.
First, having decided that the common law recognises no such duty or care or claims as the claimants advance, we should not lightly conclude, in so important and sensitive an area of national life, that the Strasbourg court would take a different view.
Second, since I have no confidence about the scope or application of any positive duties which the Strasbourg court might recognise under article 2 in the area, I believe it would be wrong for this Court to advance way ahead of anything that it has yet decided.
It should be for the Strasbourg court to decide whether it will review the procurement and training policy of the British army over recent decades in the context of claims under article 2 for compensation arising from deaths of serving soldiers during active military operations.
Support for the view that the Strasbourg court does recognise areas of policy into which the Convention protection does not stretch is afforded by two cases.
First, in Taylor v United Kingdom (Application No 23412/94) (unreported) 30 August 1994, the Commission held that article 2 did not require the investigation into the killing by Beverley Allitt, a hospital nurse, of child patients to enquire into the responsibility in the NHS for alleged inadequate systems, resource shortages and weak leadership.
In holding the application manifestly ill founded and inadmissible, it stated: The Commission acknowledges that neither the criminal proceedings nor the Inquiry addressed the wider issues relating to the organisation and funding of the National Health Service as a whole or the pressures which might have led to a ward being run subject to the shortcomings apparent on Ward Four.
The procedural element contained in article 2 of the Convention however imposes the minimum requirement that where a state or its agents potentially bear responsibility for loss of life, the events in question should be subject to an effective investigation or scrutiny which enables the facts to become known to the public, and in particular to the relatives of any victims.
The Commission finds no indication that the facts of this case have not been sufficiently investigated and disclosed, or that there has been any failure to provide a mechanism whereby those with criminal or civil responsibility may be held answerable.
The wider questions raised by the case are within the public domain and any doubts which may consequently arise as to policies adopted in the field of public health are, in the Commissions opinion, matters for public and political debate which fall outside the scope of article 2 and the other provisions of the Convention.
The second case concerned article 3 of the Convention.
In Banks v United Kingdom (2007) 45 EHRR SE2, the ECtHR rejected a claim that article 3 required a public inquiry into allegations of torture and inhuman treatment of prisoners at a UK prison.
The Court held that the facts had been sufficiently investigated and that: The wider questions raised by the case as to the background of assaults and the remedial measures apt to prevent any recurrence in a prison in the future are, in the Courts opinion, matters for public and political debate which fall outside the scope of article 3 of the Convention.
In my opinion therefore this Court should proceed on the basis that the policy considerations which guide its domestic law in the present area of national interest will find an echo in Strasbourg, and not invade a field which would involve, in the context of claims for civil compensation, extensive and highly sensitive review with the benefit of hindsight the United Kingdoms countrys policies, strategy and tactics relating to the deployment and use of its armed forces in combat.
The United Kingdoms performance of its investigatory and procedural duties under article 2 is not in doubt, as attested by the sadly numerous inquests (investigating and recording the circumstances of each death) and the still incomplete Chilcot Enquiry (delayed inter alia it is understood by problems relating to the release or use of documents with national security implications).
The issue with which this judgment is concerned is whether deaths and (at common law) injuries in combat fall to be investigated in the civil courts, at whatever level in the armed forces, Whitehall or the government responsibility for them is suggested to arise.
The answer I would give is, no.
The majority approach
I agree with Lord Hope (para 100) about the paramount importance that the work that the armed services do in the national interest should not be impeded by having to prepare for or conduct active operations against the enemy under the threat of litigation if things should go wrong.
But I do not consider that the majority approach reflects or meets this imperative.
In summary, I understand that this approach: (a) recognises at common law a principle of combat immunity, as excluding liability for negligence in respect of any act or omission on the part of those who are actually engaged in active combat (paragraph 82), since no one can imagine a court undertaking the trial of an issue as to whether a soldier on the field of battle or a sailor on his ship might reasonably be more careful to avoid causing civil loss or damage (para 94); (b) recognises allegations as beyond the reach of article 2 . if they relate to things done or not done when those who might be thought to be responsible for avoiding the risk of death or injury to others were actively engaged in direct contact with the enemy (para 76), and extends this to operational decisions made on the ground by commanders, whatever their rank or level of seniority (para 64); but also; (c) suggests that liability (under the Osman v United Kingdom principle, (1998) 29 EHRR 245, para 115) for failure to take preventative operational measures in the face of a real, direct and immediate threat to life could extend to procurement decisions taken on the ground about the provision of vehicles or equipment, as well as to decisions taken about their deployment (para 78); (d) recognises that the more political (in a broad or narrow sense) a decision, the slower a court should be to impose liability at common law and/or under article 2 (para 65), so that it will easy to find that allegations are beyond the reach of article 2 and do not give rise to liability in common law negligence if they concern decisions that were or ought to have been taken about training, procurement or the conduct of operations . at a high level of command and closely linked to the exercise of political judgment and issues of policy (paras 76 and 99).
It is unclear to me whether on this approach liability is said to be beyond the reach of article 2 because of its nature or simply because of an injunction that courts should be very slow to find fault in the areas concerned.
Whatever the position in that respect, I see real difficulties in the undefined boundaries and the suggested middle ground between on the one hand (a) and (b) and on the other (d).
The suggestion in para 78 that Osman type liability could exist as mentioned in point (c) would also appear liable to extend fault based liability to all aspects of decision making during combat operations.
What is the logical distinction between deployment of equipment and of troops? The inter twining of issues of procurement and training with issues relating to the causation of injury or death on the battlefield seems highly likely to lead to a court undertaking the trial of unimaginable issues as to whether a soldier on the field of battle or a sailor on his ship might reasonably have been more careful.
Further, I see little attraction in a scheme according to which the acts or omissions of the man on the ground and the policy maker in Whitehall give rise either to no liability at all or only to liability in egregious cases, but the procurement, training and deployment decisions of a middle rank commander (query, in Whitehall or in local headquarters or both) are subject to scrutiny under conventional principles of fault based liability.
All depends, as I understand it, under article 2 upon balancing private and public interests and Convention rights (para 61); or upon balancing (i) the need to avoid undermining the ability of a state to defend itself, or its interests, at home or abroad (para 66) and the paramount importance of not impeding the armed forces against (ii) the consideration that (at common law) soldiers injured or (at common law and under the Convention) the relatives and dependants of soldiers killed should be able, wherever possible, to benefit by the more substantial civil measure of recovery that fault based liability brings, over and above the no fault compensation available in cases of injury or death as described by Lord Carnwath in para 181 of his judgment.
Still more fundamentally, the approach taken by the majority will in my view make extensive litigation almost inevitable after, as well as quite possibly during and even before, any active service operations undertaken by the British army.
It is likely to lead to the judicialisation of war, in sharp contrast with Starke Js dictum in Shaw Savill (1940) 66 CLR 344 that war cannot be controlled or conducted by judicial tribunals.
No doubt it would be highly desirable if all disputes with international legal implications were to be submitted to international judicial resolution, with those involved abiding by the outcome; and if wars were no more.
But, in the present imperfect world, there is no precedent for claims to impose civil liability for damages on states whose armed forces are killed or injured in armed combat as a result of alleged failures of decision making either in the course of, or in procuring equipment or providing training for, such combat.
All the claims made in these appeals fall in my view within one or other of these areas where the common law should not tread.
Similarly, we should not assume that the European Court of Human Rights would regard it as appropriate to enter such areas under article 2, and there is to my mind wholly insufficient guidance to lead to any conclusion that it would.
We cannot, at least at present, refer a case to Strasbourg to seek its guidance on the proper interpretation of article 2.
But my conclusions as to the common law position and its rationale, the dearth of any authority for any like claim in the Strasbourg jurisprudence and statements in that jurisprudence showing that policy decisions can be non justiciable all lead me to conclude that we should for the present proceed on the basis that the outcome in Strasbourg would in the present areas be no different from the outcome at common law.
Conclusion
The upshot is that, in my opinion, although the soldiers involved in these cases were within the United Kingdoms jurisdiction for the purposes of article 2 of the Convention of Human Rights at the material times, the claims made under article 2 and/or in negligence in respect of their deaths were, in the case of the Smith and Ellis claims, rightly struck out by the courts below and the Ministry of Defences appeal seeking to strike out the Challenger claims should be allowed.
LORD CARNWATH
Introduction
I agree entirely with Lord Hopes treatment of the jurisdiction issue.
There is also much with which I agree in his discussion of the substantive issues, in particular his comment (para 100) on the paramount importance that the preparation for and conduct of active operations should not take place under the threat of litigation if things should go wrong.
However, in agreement with Lord Mance, I do not think it is an adequate response at this level for us simply to send the claims for trial with general injunctions to exercise great caution or special care.
Having heard full argument on all these issues, we should be able to rule whether the claims are in principle viable or not; or at least to give clearer guidance as to what answers to what questions of fact may or may not lead to a favourable result following trial.
I also agree with Lord Mance that, contrary to the approach adopted by Lord Hope, we should first concentrate on the common law aspects of the claims.
In this respect, the balance of the relevant issues may have been distorted by the sequence of submissions at the hearing.
It is understandable, given the importance of the jurisdictional issues arising under the Convention, that much of the oral hearing time was taken up with submissions on that subject, and as a natural extension with arguments about the substantive scope of article 2 itself.
On the latter aspect, I have nothing to add to Lord Mances reasoning and conclusions, with which I agree.
However, like him, I consider that our primary responsibility should be for the coherent and principled development of the common law, which is within our own control.
We cannot determine the limits of article 2.
Indeed, the multiplicity of views expressed by the nine members of this court, when this issue was previously considered in Catherine Smith, shows how difficult and unproductive it can be, even at this level, to attempt to predict how Strasbourg will ultimately draw the lines.
The trial judge will be in no stronger position.
With respect to Lord Hope (para 79), if the problem is a lack of directly relevant guidance from Strasbourg, it is hard to see how, simply by hearing further evidence or finding further facts, he or she will be better able to fill that gap, still less to do so with complete confidence.
Common law the nature of the issues
It is important to recognise that we are being asked to authorise an extension of the law of negligence (as indeed of article 2), into a new field.
We have not been referred to any authority in the higher courts, in this country or any comparable jurisdiction, in which the state has been held liable for injuries sustained by its own soldiers in the course of active hostilities.
Further we are concerned only with duties at common law, rather than under statute.
As the Court of Appeal recognised [2013] 2 WLR 27 (para 38), statutory regulations governing the responsibilities of the Ministry as employers do not apply outside the United Kingdom.
Mr Eadies case, on behalf of the Ministry, was advanced on a broad front.
As formulated in his printed case, this involved a root and branch objection to any form of civil liability in this area.
It was introduced by a lengthy section headed: The difficulties courts would face grappling with the issues raised in these claims (paras 72 92).
Not only were the courts institutionally incompetent to resolve such issues which are essentially matters of political and military judgement; but there are strong reasons both of public policy and democratic accountability for them not seeking to do so.
There is some common ground.
There is no dispute as to the existence in domestic law of a principle known as combat immunity, relating to decisions and actions in the heat of battle.
Furthermore, at the other end of the spectrum Lord Hope accepts, as I understand it, that high level decisions about procurement or conduct of operations are not open to review in the courts.
This dichotomy is most clearly stated in his para 76: It will be easy to find that allegations are beyond the reach of article 2 if the decisions that were or ought to have been taken about training, procurement or the conduct of operations were at a high level of command and closely linked to the exercise of political judgment and issues of policy.
So too if they relate to things done or not done when those who might be thought to be responsible for avoiding the risk of death or injury to others were actively engaged in direct contact with the enemy.
Although this comes as part of his consideration of article 2, he treats it as equally relevant to the common law claims (para 99).
On that view, the difference between us is over the extent (if any) of what he calls the middle ground, and whether its boundaries can only be determined after the finding of further facts.
Here too the balance of the discussion may have been distorted by the course of the submissions at the hearing.
The emphasis of the common law debate was directed mainly to the scope of the combat immunity defence as such, rather than issues arising under the general law of negligence.
No doubt reflecting that emphasis, the wider issues are dealt with relatively shortly at the end of Lord Hopes judgment.
In my view, however, it is within that broader compass that the solution to these difficult questions must be found if not at this preliminary stage, then following the trial.
In truth, the claimants are caught on the horns of a dilemma.
The operational phases of the undertaking, which might otherwise under ordinary principles have been expected to give rise to a duty of care (see eg Wade and Forsyth Administrative Law, 10th ed (2009), p 653ff; Craig Administrative Law, 7th ed (2012), p 908ff) are, as the claimants accept, the very phases which are excluded from review by the combat immunity defence.
On the other hand the further back in time they seek to direct their challenge so as to include issues of planning, procurement, and training, the more they have to confront the competing principle that discretionary decisions about policy and resources are not justiciable.
The issue is whether it is possible to carve out some middle ground of potential liability.
The answer to that question raises issues of principle, policy and practicality.
Mr Weir QC rightly emphasises that the importance of another policy consideration, the principle that where there is a wrong there should be a remedy, described by Lord Dyson JSC as a cornerstone of our system of justice (Jones v Kaney [2011] UKSC 13; [2011] 2 AC 398, para 113).
From that principle he draws the submission that: The default position is one whereby the MoD owes its soldiers an orthodox employers duty of care.
So it falls for the MoD to establish that public policy must operate to deny the existence of that recognised duty of care.
However, that formulation begs a logically prior question.
I agree that it is for the Ministry to make the case for any policy exception to any recognised duty of care.
But the scope and content of any such duty of care are themselves matters for determination.
In the modern law of negligence, the starting point for determining that issue is the application of the familiar three fold test laid down in Caparo Industries plc v Dickman [1990] 2 AC 605, 618 per Lord Bridge.
In that context, the scope of any so called immunity necessarily overlaps with the question, under the third part of that test, whether it is fair, just and reasonable for the law to impose a duty of care at all (see Clerk & Lindsell On Torts 20th ed (2010), para 14 39ff Immunities).
As Lord Browne Wilkinson has said: a holding that it is not fair, just and reasonable to hold liable a particular class of defendants whether generally or in relation to a particular type of activity is not to give immunity from a liability to which the rest of the world is subject.
It is a prerequisite to there being any liability in negligence at all that as a matter of policy it is fair, just and reasonable in those circumstances to impose liability in negligence. (Barrett v Enfield London Borough Council [2001] 2 AC 550, 559)
For that reason I agree with Lord Mance that the scope of combat immunity should now be discussed, not as a separate principle, but as part of the third element of the Caparo analysis.
Equally, in my view, we should not see ourselves as necessarily constrained by the limits illustrated by the existing case law on combat immunity, developed in very different circumstances and (until Mulcahy) without reference to the modern law of negligence.
Working by analogy
In determining whether a duty of care should be imposed in a new factual situation, precedent is an important guide.
In Caparo Lord Bridge proposed that the emphasis should be less on the search for underlying general principles, but rather on the development of the law incrementally and by analogy with established categories (ibid p 618, quoting Brennan J. in the High Court of Australia, Sutherland Shire Council v Heyman (1985) 60 ALR 1, 43 44).
In the present context, apart from the cases on combat immunity as such (discussed by Lord Hope and Lord Mance) the closest analogies in my view are to be found in two lines of authority: first, the sequence of authorities relating to the immunity of the police, culminating in Van Colle v Chief Constable of the Hertfordshire Police (Secretary of State of the Home Department intervening) [2009] AC 225; secondly, in respect of the issue of breach, assuming an actionable duty of care is established, the cases relating to the law of negligence as applied to the emergency services, in particular to claims by employees.
Police immunity
On the issue whether a duty of care should be imposed, the most useful parallel in the modern law, in my view, is to be found in the sequence of authorities dealing with the possible liability of the police for alleged negligence in the course of investigating crime.
In Hill v Chief Constable of West Yorkshire [1989] AC 53 it was held that for reasons of public policy the police owed no actionable duty of care to a victim in such circumstances.
They were said to be immune from actions of this kind (p 64, per Lord Keith).
Initial concerns that this approach might conflict with article 6 of the Convention by precluding consideration of the merits of the claim (see Osman v United Kingdom (1998) 29 EHRR 245) were dispelled by the Strasbourg court in Z v United Kingdom (2001) 34 EHRR 97.
The Grand Chamber, following the lead of Lord Browne Wilkinson (X (Minors) v Bedfordshire County Council [1995] 2 AC 633,751) accepted the legitimate role of policy in determining the limits of liability: the Court is not persuaded that the House of Lords' decision that as a matter of law there was no duty of care in the applicants' case may be characterised as either an exclusionary rule or an immunity which deprived them of access to court the House of Lords was concerned with the issue whether a novel category of negligence, that is a category of case in which a duty of care had not previously been held to exist, should be developed by the courts in their law making role under the common law.
The House of Lords, after weighing in the balance the competing considerations of public policy, decided not to extend liability in negligence into a new area.
In so doing, it circumscribed the range of liability under tort law. (para 96, emphasis added) Echoing that approach, in Brooks v Comr of Police of the Metropolis [2005] UKHL 24; [2005] 1 WLR 1495, the House confirmed but qualified the core principle established in Hill.
In his leading speech Lord Steyn said: since the decision of the European Court of Human Rights in Z v United Kingdom (2001) 34 EHRR 97, 138, para 100, it would be best for the principle in Hills case to be reformulated in terms of the absence of a duty of care rather than a blanket immunity. (para 27)
Finally, in Van Colle v Chief Constable of the Hertfordshire Police [2009] AC 225, the House by a majority held that the same principle applied even where the police were aware of a specific threat to an individual witness.
That is particularly helpful in the present context because it was concerned with the scope of the states liability both at common law and under article 2 of the Convention.
I draw the following points from the judgments: The common law claim was to be considered on its own merits i) (stand on its own feet) rather than assimilated with the article 2 claim (para 82, per Lord Hope; para 136, Lord Brown). ii) The common law analysis began from the three fold test laid down in Caparo by which it must be shown that harm to B was a reasonably foreseeable consequence of what A did or failed to do, that the relationship of A and B was one of sufficient proximity, and that in all the circumstances it is fair, just and reasonable to impose a duty of care on A towards B. (para 42, per Lord Bingham). iii) The majority were able to support an exception based on public policy reasons which were accommodated within the third element of that test, that being accepted as a price to be paid by individuals denied for public policy reasons (as not being fair, just and reasonable within the Caparo principle) a civil claim in the interests of the community as a whole (para 139, per Lord Brown) iv) There was no suggestion that, because the core principle involved an exception to ordinary principles of liability, it should be narrowly construed.
On the contrary, as Lord Brown put it, the wider public interest is best served by maintaining the full width of the Hill principle (para 139). v) The House was able to determine the limits of this principle on the basis of the pleadings.
Again I quote Lord Brown (para 140): In common, I think, with all your Lordships, I regards this issue as plainly one which the House should decide one way or the other on the pleaded facts.
Either a duty of care arises on these facts or it does not.
No useful purpose would be served by allowing the action to go to trial for facts to be found and then for further consideration to be given to the applicable law. vi) Finally, the policy considerations justifying immunity in respect of the polices function of investigating crime were contrasted with civil operational tasks, in relation to which liability had been accepted in some decided cases (Lord Hope, para 79).
Those examples were not regarded as undermining the core principle.
This line of cases shows that it remains a proper function of the court, faced with a potential clash between public and private interests, to determine as a matter of policy the limits of any actionable duty of care, and to do so at the preliminary stage (see also Jonathan Morgan, Negligence into Battle [2013] CLJ 14, commenting on the Court of Appeals reasoning in the present case).
Furthermore, so to determine the limits of liability in negligence in a new area, by balancing competing considerations of public policy, is within the margin allowed to the national courts by Convention law.
Lord Hope acknowledges this line of authority, but declines to apply the same approach to the present context (paras 97 98).
With respect, I find this difficult to understand.
If this was an appropriate exercise in relation to the purely domestic policy concerns arising from police powers of investigation, how much more so in relation to the issues of vital national security raised by the preparation for and conduct of war?
Negligence and the emergency services
Assuming a duty of care is not excluded under the principles considered so far, the closest analogies are to be found in cases relating to the duties owed by employees to their staff in the context of the delivery of emergency services.
King v Sussex Ambulance Service NHS Trust [2002] ICR 1413 contains an authoritative exposition of the relevant principles.
The Court of Appeal dismissed a claim related to injuries sustained by an ambulance technician, who was required in the course of an emergency call to help in carrying a patient downstairs.
Hale LJ, giving the majority judgment, summarised the relevant law (paras 21 23): The starting point is that an ambulance service owes the same duty of care towards its employees as does any other employer.
There is no special rule in English law qualifying the obligations of others towards fire fighters, or presumably police officers, ambulance technicians and others whose occupations in the public service are inherently dangerous: see Ogwu v Taylor [1988] 1 AC 431.
Such public servants accept the risks which are inherent in their work, but not the risks which the exercise of reasonable care on the part of those who owe them a duty of care could avoid.
An employer owes his employees a duty to take reasonable care to provide safe equipment and a safe system of work, which includes assessing the tasks to be undertaken, training in how to perform those tasks as safely as possible, and supervision in performing them.
This was subject to two qualifications: first, the further dimension identified by Denning LJ (Watt v Hertfordshire County Council [1954] 1 WLR 835, 838): It is well settled that in measuring due care you must balance the risk against the measures necessary to eliminate the risk.
To that proposition there ought to be added this: you must balance the risk against the end to be achieved. and secondly (citing Colman J in Walker v Northumberland County Council [1995] ICR 702, 712): what is reasonable may have to be judged in the light of the service's duties to the public and the resources available to it to
perform those duties
In Hughes v National Union of Mineworkers ([1991] 4 All ER 278, cited by Lord Hope, para 97), this approach was taken a stage further so as to deny the existence of a duty of care at all.
The claim was by a police officer who had been injured when, in the course of policing a strike at a colliery, he was knocked to the ground by an advancing crowd of pickets.
He alleged negligence by the police officers on the day, rather than wider issues relating to police deployment generally or training (p 281a).
The claim was rejected.
It was held by May J, applying Caparo principles, and following Hill v Chief Constable of West Yorkshire that public policy requires that senior police officers should not generally be liable to their subordinates who may be injured by rioters or the like for on the spot operational decisions taken in the course of attempts to control serious public disorder.
That, in my judgment, should be the general rule in cases of policing serious public disorders. (p 288d e).
In Multiple Claimants (at para 2.C.17) Owen J treated Hughes as example of the application of the combat immunity defence, noting that it had been cited in that context by the Court of Appeal in Mulcahy v Ministry of Defence [1996] QB 732, ((at pp 747, 751).
He was considering the question: Does the immunity apply to anti terrorist, policing and peace keeping operations of the kind in which British forces were engaged in Northern Ireland and in Bosnia? (para 2.C.17) He gave a qualified yes, concluding that the immunity would apply to peace keeping/policing operations in which service personnel are exposed to the attack or threat of attack (para 2.C.20).
This interpretation seems open to question.
However violent was the situation facing the police during the mineworkers strike, there could be no argument that it had anything to do with the conduct of war, nor was the judges reasoning linked to that group of cases.
While I would not wish to question the actual decision in Hughes, it is in my view better seen as an application of King principles in an extreme situation.
The decisions in both King and Hughes were concerned with the operations, rather than with prior policy decisions about the nature of the service and the resources to be committed to them, or issues such as procurement and training.
To illustrate the possible limits of operational liability in relation to the emergency services, a useful analogy can be found in Rigby v Chief Constable of Northamptonshire [1985] 1 WLR 1242.
The police were held liable by Taylor J for damage caused by firing a gas canister into the plaintiffs premises without having fire fighting equipment available.
On the other hand (relying on Dorset Yacht Co Ltd v Home Office [1970] AC 1004, and cases following it) the judge rejected a claim based on the failure of the Chief Constable to equip the force with an alternative CS gas device, known as Ferret, which did not carry the same fire risk.
In that respect he accepted the submission that the constable was exercising a statutory discretion which could not be impugned if exercised bona fide (pp 1250 1251).
That decision, which is cited by Wade (op cit p 656) as an illustration of the policy operational decision, has not as far as I aware been questioned in later authority.
Statutory intervention
Before drawing some conclusions, and for completeness, although it did not figure prominently in the oral argument, I should address the suggestion that the claim gains at least implicit support from the Crown Proceedings (Armed Forces) Act 1987.
In short, it is said, there is no policy reason to extend the scope of immunity beyond acts or omissions occurring in the heat of battle, given that Parliament has now provided a new statutory framework covering both general liability and the means to secure greater protection where exceptionally it is required.
It was the Crown Proceedings Act 1947 which opened the way generally to proceedings in tort against the Crown.
However, section 10 preserved a specific and precisely defined statutory exception for the armed forces in relation to injury or death on service subject to the conditions outlined in the section, one being a certificate of entitlement to a service pension (see Clerk & Lindsell op cit para 5 08ff).
That exclusion was repealed by the 1987 Act, but (by section 2) subject to a power for the Secretary of State to make an order reviving the effect of section 10 in certain circumstances.
By section 2(2): The Secretary of State shall not make an order reviving the effect of the said section 10 for any purposes unless it appears to him necessary or expedient to do so (a) by reason of any imminent national danger or of any great emergency that has arisen; or (b) for the purposes of any warlike operations in any part of the world outside the United Kingdom or of any other operations which are or are to be carried out in connection with the warlike activity of any persons in any such part of the world.
Although we were not referred by the parties to any background materials relating to that change, the Parliamentary history is of some interest.
A written answer by the Secretary of State for Defence explains that it followed a review of the working of section 10 (Hansard HC Deb 08 December 1986 vol 107 cc85 86W).
He said: Section 10 was included in the 1947 Act on the grounds that members of the Armed Forces, by the very nature of their profession, undertake hazardous tasks which ordinary members of the public do not.
At that time it was believed that this provision would not result in any overall financial penalty against servicemen, because they received benefits, payable regardless of fault, which were in most cases comparable with those which a civilian might expect from the courts.
Our review has, however, shown that damages which courts have awarded in some cases of personal injury have now risen to a level which can considerably exceed the benefits which the serviceman receives.
The Government have concluded that repeal of section 10 is the only satisfactory course which will remove this disadvantage We shall need to be able to reactivate the provisions of section 10 in the event of impending or actual hostilities or grave national emergency.
It was indicated that, while the government did not have time to promote its own legislation within the current programme, it would be ready to support a suitable Bill brought by a private Member.
This invitation was taken up by Mr Winston Churchill MP (HC Deb 13 February 1987 vol 110 cc567 609).
The Parliamentary Under Secretary of State, welcoming the Bill on the part of the government commented: The Bill seeks to retain the power to reactivate section 10 at a time of great national emergency or in the event of actual or impending hostilities.
That is widely accepted by the House.
Indeed, I have not heard any hon.
Member advocate in the debate that section 10 should not be reimposed in time of war.
It is not possible or desirable to draw hard and fast definitions of the circumstances in which the Government might seek to reimpose section 10, but the wording of clause 2 is satisfactory in this respect, making it clear from that the Secretary of State will need to consider it necessary or expedient to make an order to reactivate section 10 by reason of a great national emergency or imminent national danger or in the event of warlike operations or connected activities outside the United Kingdom.
We are talking about a grave situation in Britain or elsewhere, and I draw the attention of the House to the fact that the wording of clause 2 to a large extent mirrors the wording of the provisions of the Reserve Forces Act 1980 dealing with the call up of reserves.
Although there is no intention to create a formal link between, say, mobilisation and the reimposition of section 10, hon Members will recognise that that gives an indication of the gravity of the circumstances in which reimposition of section 10 would arise.
Those passages raise a number of possible issues, on which we have heard no argument, as to either relevance or substance.
One indeed might be the scope of phrase warlike activities (cf Reserve Forces Act 1996, s 54) in its possible application to peace keeping operations such as are in issue in the Snatch claims.
We cannot resolve those questions within the scope of the arguments we have heard, and it is unnecessary to do so.
It should be noted in any event that the provisions for no fault compensation have changed materially since 1987 when that debate took place.
The governing legislation is now the Armed Forces (Pensions and Compensation) Act 2004, with the Armed Forces Compensation Scheme made under it.
Awards are based on a detailed tariff, which is kept under review, and there is provision for appeal to a specialised tribunal.
The scheme was most recently revised in 2011, following a review by Lord Boyce.
However, it was not part of Mr Eadies case that the existence of that scheme, or its overlap with the law of negligence, should affect our consideration of the issues before us.
In my view these two sets of statutory provisions are no more than neutral, and neither assists in establishing the limits of the duty of care in the present context.
It is not argued for the claimants that the 1987 Act impinges in any way on the defence of combat immunity as hitherto understood.
At most it is said to be relevant in determining what is fair, just and reasonable under Caparo principles.
However, there is nothing in the 1987 Act to suggest that it was intended to inhibit the ordinary, and logically prior, function of the court in determining the limits of potential liability under the law of negligence.
It is only in so far as liability is so established that the scope of immunity under the Act becomes relevant.
Finally, under this section, it is of interest to note how similar issues have been dealt with in the USA, although again we have not heard any submissions on this aspect.
Until 1946 claims against the Federal Government without its consent were barred by the doctrine of sovereign immunity.
This position was altered by the Federal Tort Claims Act (FTCA), 28 U.S.C.A 1346(b), which can be seen as the equivalent of the Crown Proceedings Act 1947 in the United Kingdom.
The FTCA abrogated sovereign immunity in relation to the Federal Government in most circumstances.
However, pursuant to 28 U.S.C.A. 2680(j), the sovereign immunity of the Federal Government is not abrogated in respect of [a]ny claim arising out of the combatant activities of the military or naval forces, or the Coast Guard, during time of war.
A further exception relating to injuries incident to service has been developed judicially, known as the Feres doctrine (Feres v United States, 340 U.S. 135 (S.Ct. 1950)).
According to a leading textbook (Speiser, Krause and Gans The American Law of Torts (2010) para 17:5): The critical and lasting rationale of the Feres doctrine is the third one the military disciplinary structure.
The lawsuit cannot require a civilian court to second guess military decisions [see Stencel Aero Engineering Corp v United States, 431 U.S. 666, 673 (1977)], and the suit cannot conceivably impair essential military discipline [see Chappell v Wallace, 462 U.S. 296, 300, 302, 304 (1983) (such complex, subtle and professional decisions as the composition, training . and control of a military force are essentially professional military judgments].
Despite certain confusion in the broad statements of the courts, and notwithstanding critical comments, the Feres doctrine of denial of recovery has displayed a charmed life and continuing vitality.
The cases show that in practice the Feres doctrine has been applied so as to give immunity in a wide range of situations, not directly linked to armed conflict.
Conclusions
I have discussed these issues at some length, albeit in a minority judgment, because in my view they deserve greater attention than they have been given in the oral argument or the majority judgment.
They remain matters which will need to be considered when the case goes to trial.
In this respect I do not regard my analysis as conflicting significantly with the majoritys approach.
The main difference is that I would have preferred to reach decisions at this stage.
In agreement with Lord Mance, and for the same reasons, I would have struck out the Challenger claims.
As I have said, in considering the scope of any actionable duty of care relating to the preparation for or conduct of war activities in the modern law of negligence, I do not think we should regard ourselves as constrained by the limits of combat immunity as established in the earlier cases.
The proper application of Caparo principles, as illustrated by the sequence of authorities on police liability, enables us to extend and adapt those limits within the scope of the modern law of negligence, and to hold that there is no middle ground of potential liability in relation to the preparation for, or conduct of, war.
As I understand Lord Hopes judgment, it leaves the trial judge free, albeit after further factual inquiry, to reach the same conclusion.
In my view, differing from Lord Mance in this respect only, we should apply different considerations to the later Snatch claims.
They occurred in July 2005 and February 2006, after the time (May 2003) when (as Lord Hope explains: para 1) major combat operations ceased and were replaced by a period of military occupation.
Now that the cases are to go to trial, I would not regard consideration of this issue as necessarily constrained by the shape of the arguments in the lower courts or before us.
It is not surprising that Owen J drew no such distinction since, as I have noted, he had already held in Multiple Claimants that such operations were in principle within the scope of the combat immunity defence.
The Court of Appeal did not address this issue in detail, but as I understand their judgment left it as raising questions of fact to be decided at trial.
If as I believe the policy reasons for excluding liability are related to the special features of war or active hostilities, it would be wrong in my view to apply the same approach to peace keeping operations, however intrinsically dangerous.
The ordinary principles of negligence, as illustrated by cases such as Hughes and Rigby, can when necessary be sufficiently restrictive to ensure that most such claims, whether relating to advance procurement and training, or decisions on the ground, will be doomed to failure.
On the other hand, the pleaded claims in the present cases go further.
It is alleged, as I understand, that there was an unjustified failure, following earlier incidents, to take readily available steps to deal with a known and preventable risk.
I would not regard such claims as necessarily excluded as a matter of general policy, either at common law or under article 2.
Since all the issues will now have to be considered at trial, it is unnecessary and probably undesirable for me to say more.
| These proceedings concern three sets of claims which arise out of the deaths of three young British servicemen and the serious injuries of two other young British servicemen in Iraq.
The first set (the Challenger claims) arise from a friendly fire incident involving British tanks which caused the death of Cpl Stephen Allbutt and the serious injury of Lance Cpl Daniel Twiddy and Tpr Andrew Julien.
They are brought in negligence and allege failures by the Ministry of Defence (the MoD) to properly equip the tanks involved and to give soldiers adequate recognition training.
The second set (the Snatch Land Rover claims) arise from the deaths of Pte Phillip Hewett (son of the claimant Susan Smith) and Pte Lee Ellis (father of the claimant Courtney Ellis and brother of the claimant Karla Ellis) by the detonation of improvised explosive devices level with the Snatch Land Rovers in which the soldiers were travelling.
The claimants all claim that the MoD breached the implied positive obligation in article 2 of the European Convention on Human Rights (the Convention) to take preventive measures to protect life in the light of the real and immediate risk to life of soldiers who were required to patrol in Snatch Land Rovers.
The third (the Ellis negligence claim) is brought by Courtney Ellis in negligence and is based on various alleged failures on the part of the MoD [1 12].
The MoD argued that the Snatch Land Rover claims under article 2 of the Convention should be struck out because at the time of their deaths Pte Hewett and Pte Ellis were not within the jurisdiction of the UK for the purposes of the Convention, and because on the facts as pleaded the MoD did not owe a duty to them at the time of their deaths under article 2.
It also argued that the Challenger claims and the Ellis negligence claim should all be struck out (1) on the principle of combat immunity (which operates to exclude liability for negligence in respect of the acts or omissions of those engaged in active operations against the enemy), and (2) because it would not be fair, just or reasonable to impose a duty of care on the MoD in the circumstances of those cases [13].
The High Court and Court of Appeal considered these arguments.
The effect of the Court of Appeals judgment was that: (1) the Snatch Land Rover claims under article 2 of the Convention should be struck out because the deceased were outside the jurisdiction of the UK for the purposes of the Convention and there was no basis for extra territorial jurisdiction; and (2) the Challenger claims and the Ellis negligence claim should proceed to trial [15].
The following issues were before the Supreme Court. (1) In relation to the Snatch Land Rover claims, whether at the time of their deaths Pte Hewett and Pte Ellis were within the jurisdiction of the UK for the purposes of the Convention. (2) If they were, whether and if so, the extent to which article 2 imposes positive obligations on the UK with a view to preventing the deaths of its own soldiers in active operations against the enemy. (3) In relation to the Challenger claims and the Ellis negligence claim, whether the allegations of negligence should be struck out because they fall within the scope of combat immunity or because it would not be fair, just or reasonable to impose a duty to take care to protect against death or injury in the circumstances [16].
The Court unanimously holds that, in relation to the Snatch Land Rover claims, Pte Hewett and Pte Ellis were within the UKs jurisdiction for the purposes of the Convention at the time of their deaths.
By a majority (Lords Mance, Wilson and Carnwath dissenting), the Court holds that: (i) the Snatch Land Rover claims should not be struck out on the ground that the claims are not within the scope of article 2 of the Convention; and (ii) the Challenger claims and Ellis negligence claim should not be struck out on the ground of combat immunity or on the ground that it would not be fair, just or reasonable to extend the MoDs duty of care to those cases [101].
The effect of the Courts decision is that all three sets of claims may proceed to trial.
Issue 1: Convention jurisdiction: In its judgment of July 2011 in the Al Skeini case, the European Court of Human Rights decided that six Iraqi civilians who had died as a result of the actions of British armed forces in Iraq were within the UKs jurisdiction for the purposes of the Convention.
The judgment does not answer issue 1 directly, but elements can be extracted from it which point clearly to the conclusion that the Court reaches in this case.
It formulates a relatively general principle that extra territorial jurisdiction can exist whenever a state through its agents exercises authority and control over an individual.
It also indicated that Convention rights can be divided and tailored to the particular circumstances of the extra territorial act in question, as opposed to being an indivisible package.
A states extra territorial jurisdiction over local inhabitants exists because of the authority and control that is exercised over them as a result of the authority and control that the state has over its own armed forces.
They are all brought within the states jurisdiction by the application of the same general principle [42 52].
Issue 2: Snatch Land Rover claims under article 2 of the Convention: In this area, the court must fully recognise the wide margin of appreciation to be given to the state and avoid imposing obligations which are unrealistic or disproportionate.
But it must give effect to those obligations where it would be reasonable to expect the individual to be protected by article 2.
Policy decisions made at a high level of command and things done on the battlefield will fall outside the scope of article 2.
But whether claims which are between these two categories are within the scope of article 2 will require the exercise of judgment in the light of the facts of each case [76].
The present claims provide only brief outlines of the claimants cases and they pre date developments in relevant case law on article 2.
The circumstances in which the various decisions were made need to be inquired into before it can be determined with complete confidence whether or not there was a breach of article 2.
However, given the Courts guidance on the margin of appreciation to be given to the state, it is far from clear that the claimants will be able to demonstrate such a breach [78 81].
Issue 3: Challenger claims and Ellis negligence claim: The doctrine of combat immunity should be construed narrowly and should not be extended beyond its established scope to the planning of and preparation for active operations against the enemy.
The Challenger claims are not within the scope of the doctrine because they relate to decisions which are sufficiently far removed from the pressures and risks of active operations against the enemy.
The Ellis negligence claim is less obviously directed to things done away from the theatre of battle so it is arguably within the doctrine.
It would be premature for these claims to be struck out and the issue should be open to further argument in the light of the evidence [89 96].
The circumstances in which active operations are undertaken by the UKs armed services today vary greatly and cannot all be grouped under a single umbrella as if they were all open to the same risk of judicialising warfare.
However, considerations similar to those affecting the Snatch Land Rover claims under article 2 arise in relation to whether it would be fair, just and reasonable to impose a duty of care on the MoD in this area.
The question whether the negligence claims in this case entail subjecting the MoD to duties that are unrealistic or excessively burdensome cannot properly be determined without hearing evidence [98 100].
Minority judgments: Lord Mance (with whom Lord Wilson agrees) would have struck out all three sets of claims in their entirety, essentially because they are not suitable for resolution by a court [125 137, 146, 150 152].
For the same reasons, Lord Carnwath would have struck out the Challenger claims.
However, he considered that the Snatch Land Rover claims were not necessarily excluded, because major combat operations had ceased by the time of the relevant incidents [156, 186 188].
|
The over arching issue in this case is the weight to be given to the best interests of children who are affected by the decision to remove or deport one or both of their parents from this country.
Within this, however, is a much more specific question: in what circumstances is it permissible to remove or deport a non citizen parent where the effect will be that a child who is a citizen of the United Kingdom will also have to leave? There is, of course, no power to remove or deport a person who is a United Kingdom citizen: see Immigration Act 1971, section 3(5) and (6).
They have a right of abode in this country, which means that they are free to live in, and to come and go into and from the United Kingdom without let or hindrance: see 1971 Act, sections 1 and 2.
The consistent stance of the Secretary of State is that UK citizens are not compulsorily removed from this country (eg Phil Woolas, Hansard, Written Answers, 15 June 2009).
However if a non citizen parent is compulsorily removed and agrees to take her children with her, the effect is that the children have little or no choice in the matter.
There is no machinery for consulting them or giving independent consideration to their views.
The facts
The facts of this case are a good illustration of how these issues can arise.
The mother is a national of Tanzania who arrived here in December 1995 at the age of 20.
She made three unsuccessful claims for asylum, one in her own identity and two in false identities.
In 1997 she met and formed a relationship with a British citizen.
They have two children, a daughter, T, born in 1998 (who is now 12 years old) and a son, J, born in 2001 (who is now nine).
The children are both British citizens, having been born here to parents, one of whom is a British citizen.
They have lived here with their mother all their lives, nearly all of the time at the same address.
They attend local schools.
Their parents separated in 2005 but their father continues to see them regularly, visiting approximately twice a month for 4 to 5 days at a time.
In 2007 he was diagnosed with HIV.
He lives on disability living allowance with his parents and his wife and is reported to drink a great deal.
The tribunal nevertheless thought that there would not necessarily be any particular practical difficulties if the children were to go to live with him.
The Court of Appeal very sensibly considered this open to criticism as having no rational basis.
Nevertheless, they upheld the tribunals finding that the children could reasonably be expected to follow their mother to Tanzania: [2009] EWCA Civ 691, para 27.
They also declined to hold that there was no evidence to support the tribunals finding that the father would be able to visit them in Tanzania, despite his fragile health and limited means: para 32.
As it happens, this Court has seen another illustration of how these issues may arise, in the case of R (WL) (Congo) v Secretary of State for the Home Department [2010] 1 WLR 2168 (Supreme Court judgment pending).
Both father and mother are citizens of the Democratic Republic of Congo.
Their child, however, is a British citizen.
The Secretary of State intends to deport the father under section 3(5) of the 1971 Act and also served notice of intention to deport both mother and child.
There is power to deport non citizen family members of those deported under section 3(5) but there is no power to deport citizens under that or any other provision of the 1971 Act.
It is easy to see how a mother served with such a notice might think that there was such a power and that she had no choice.
Fortunately, it appears that the notice was not followed up with an actual decision to deport in that case.
These proceedings
This mothers immigration history has rightly been described as appalling.
She made a claim for asylum on arrival in her own name which was refused in 1997 and her appeal was dismissed in 1998, shortly after the birth of her daughter.
She then made two further asylum applications, pretending to be a Somali, both of which were refused.
In 2001, shortly before the birth of her son, she made a human rights application, claiming that her removal would be in breach of article 8 of the European Convention on Human Rights.
This was refused in 2004 and her appeal was dismissed later that year.
Also in 2004 she and the children applied for leave to remain under the one off family concession which was then in force.
This was refused in 2006 because of her fraudulent asylum claims.
Meanwhile in 2005 she applied under a different policy known as the seven year child concession.
This too was refused, for similar reasons, later in 2006 and her attempts to have this judicially reviewed were unsuccessful.
After the fathers diagnosis in 2007, fresh representations were made.
The Secretary of State accepted these as a fresh claim but rejected it early in 2008.
The mothers appeal was dismissed in March 2008.
However an application for reconsideration was successful.
In May 2008, Senior Immigration Judge McGeachy held that the immigration judge had not considered the relationship between the children and their father (it being admitted that there was no basis on which he could have found that they could live here with him), the fact that they had been born in Britain and were then aged nine and seven and were British.
It was a material error of law for the immigration judge not to have taken into account the rights of the children and the effect of the mothers removal upon them.
Nevertheless at the second stage of the reconsideration, the tribunal, having heard the evidence, dismissed the appeal: Appeal Number IA/01284/2008.
They found that there was family life between the mother and the children and between the father and the children, although not between the parents, and also that the mother had built up a substantial private life in this country (para 5.3).
Removal to Tanzania, if the children accompanied the Appellant, would substantially interfere with the relationship with their father; staying behind would substantially interfere with the relationship with their mother (para 5.4).
Removing the mother would be in accordance with the law for the purpose of protecting the rights and freedoms of others.
The only question was whether it would be proportionate (para 5.5).
The Tribunal found the mother to be seriously lacking in credibility.
She had had the children knowing that her immigration status was precarious.
Having her second child was demonstrably irresponsible (para 5.8).
However, the children were innocent of their parents shortcomings (para 5.9).
The parents now had to choose what would be best for their children: We do not consider that it can be regarded as unreasonable for the respondents decision to have that effect, because the eventual need to take such a decision must have been apparent to them ever since they began their relationship and decided to have children together. (para 5.10).
The Tribunal found it a distinct and very real possibility that the children might remain here with their father (para 5.11).
This might motivate him to overcome his difficulties.
People with HIV can lead ordinary lives.
The daughter was of an age when many African children were separated from their parents and sent to boarding schools.
The son, had he been a Muslim, would have been regarded as old enough to live with his father rather than his mother.
Hence the tribunal could not see any particular practical difficulties if the children were to go and live with their father (para 5.15).
Equally, it would be a very valid decision for the children to go and live with their mother in Tanzania (para 5.16).
It is not an uncivilised or an inherently dangerous place.
Their mother must have told them about it.
There were no reasons why their father should not from time to time travel to see the children there.
They did not accept that either his HIV status or his financial circumstances were an obstacle.
Looking at the circumstances in the round, therefore, neither of the potential outcomes of the appellants removal which we have outlined above would represent such an interference with the family life of the children, or either of them, with either their mother on the one hand or their father on the other as to be disproportionate, again having regard to the importance of the removal of the appellant in pursuance of the system of immigration control in this country (para 5.20).
They had earlier said that this was of very great importance and considerable weight must be placed upon it (para 5.19).
Permission to appeal was initially refused on the basis that, even if the Tribunal had been wrong to think that the children could stay here with their father, they could live in Tanzania with their mother.
Ward LJ eventually gave permission to appeal because he was troubled about the effect of their leaving upon their relationship with their father: how are we to approach the family rights of a broken family like this? Before the Court of Appeal, however, it was argued that the British citizenship of the children was a trump card preventing the removal of their mother.
This was rejected as inconsistent with the authorities, and in particular with the principle that there is no hard edged or bright line rule, which was enunciated by Lord Bingham of Cornhill in EB (Kosovo) v Secretary of State for the Home Department [2008] UKHL 41, [2009] 1 AC 1159, and is quoted in full at para 15 below.
Mr Manjit Gill QC, on behalf of the appellant mother, does not argue in this Court that the citizenship of the children should be dispositive in every case.
But he does argue that insufficient weight is given to the welfare of all children affected by decisions to remove their parents and in particular to the welfare of children who are British citizens.
This is incompatible with their right to respect for their family and private lives, considered in the light of the obligations of the United Kingdom under the United Nations Convention on the Rights of the Child.
Those obligations are now (at least partially) reflected in the duty of the Secretary of State under section 55 of the Borders, Citizenship and Immigration Act 2009.
The Secretary of State now concedes that it would be disproportionate to remove the mother in the particular facts of this case.
But she is understandably concerned about the general principles which the Border Agency and appellate authorities should apply.
The domestic law
This is the mothers appeal on the ground that her removal will constitute a disproportionate interference with her right to respect for her private and family life, guaranteed by article 8 of the European Convention on Human Rights: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence. 2.
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
However, in Beoku Betts v Secretary of State for the Home Department [2008] UKHL 39, [2009] AC 115, the House of Lords held that both the Secretary of State and the immigration appellate authorities had to consider the rights to respect for their family life of all the family members who might be affected by the decision and not just those of the claimant or appellant in question.
Lord Brown of Eaton under Heywood summarised the argument which the House accepted thus, at para 20: Together these members enjoy a single family life and whether or not the removal would interfere disproportionately with it has to be looked at by reference to the family unit as a whole and the impact of removal upon each member.
If overall the removal would be disproportionate, all affected family members are to be regarded as victims.
I added this footnote at para 4: To insist that an appeal to the Asylum and Immigration Tribunal consider only the effect upon other family members as it affects the appellant, and that a judicial review brought by other family members considers only the effect upon the appellant as it affects them, is not only artificial and impracticable.
It also risks missing the central point about family life, which is that the whole is greater than the sum of its individual parts.
The right to respect for the family life of one necessarily encompasses the right to respect for the family life of others, normally a spouse or minor children, with whom that family life is enjoyed.
When dealing with the relevant principles in EB (Kosovo) v Secretary of State for the Home Department [2008] UKHL 41, [2009] AC 1159, Lord Bingham of Cornhill said this, at para 12: Thus the appellate immigration authority must make its own judgment and that judgment will be strongly influenced by the particular facts and circumstances of the particular case.
The authority will, of course, take note of factors which have, or have not, weighed with the Strasbourg court.
It will, for example, recognise that it will rarely be proportionate to uphold an order for removal of a spouse if there is a close and genuine bond with the other spouse and that spouse cannot reasonably be expected to follow the removed spouse to the country of removal, or if the effect of the order is to sever a genuine and subsisting relationship between parent and child.
But cases will not ordinarily raise such stark choices, and there is in general no alternative to making a careful and informed evaluation of the facts of the particular case.
The search for a hard edged or bright line rule to be applied in the generality of cases is incompatible with the difficult evaluative exercise which article 8 requires.
Thus, of particular importance is whether a spouse or, I would add, a child can reasonably be expected to follow the removed parent to the country of removal.
Miss Monica Carss Frisk QC, for the Secretary of State, was content with the way I put it in the Privy Council case of Naidike v Attorney General of Trinidad and Tobago [2004] UKPC 49, [2005] 1 AC 538, at para 75: The decision maker has to balance the reason for the expulsion against the impact upon other family members, including any alternative means of preserving family ties.
The reason for deporting may be comparatively weak, while the impact on the rest of the family, either of being left behind or of being forced to leave their own country, may be severe.
On the other hand, the reason for deporting may be very strong, or it may be entirely reasonable to expect the other family members to leave with the person deported.
The Strasbourg cases
These questions tend to arise in two rather different sorts of case.
The first relates to long settled residents who have committed criminal offences (as it happens, this was the context of WL (Congo) v Secretary of State for the Home Department, above).
In such cases, the principal legitimate aims pursued are the prevention of disorder and crime and the protection of the rights and freedoms of others.
The Strasbourg court has identified a number of factors which have to be taken into account in conducting the proportionality exercise in this context.
The leading case is now ner v The Netherlands (2007) 45 EHRR 421.
The starting point is, of course, that states are entitled to control the entry of aliens into their territory and their residence there.
Even if the alien has a very strong residence status and a high degree of integration he cannot be equated with a national.
Article 8 does not give him an absolute right to remain.
However, if expulsion will interfere with the right to respect for family life, it must be necessary in a democratic society and proportionate to the legitimate aim pursued.
At para 57, the Grand Chamber repeated the relevant factors which had first been enunciated in Boultif v Switzerland (2001) 33 EHRR 50 (numbers inserted): the length of the applicants stay in the country from which he the time elapsed since the offence was committed and the the nature and seriousness of the offence committed by the [i] applicant; [ii] or she is to be expelled; [iii] applicants conduct during that period; the nationalities of the various persons concerned; [iv] the applicants family situation, such as the length of the [v] marriage, and other factors expressing the effectiveness of a couples family life; [vi] whether the spouse knew about the offence at the time when he or she entered into a family relationship; [vii] whether there are children of the marriage, and if so, their age; and [viii] the seriousness of the difficulties which the spouse is likely to encounter in the country to which the appellant is to be expelled.
Significantly for us, however, the Grand Chamber in ner went on, in para 58, to make explicit two criteria which may already be implicit in the above (again, numbers inserted): [ix] the best interests and well being of the children, in particular the seriousness of the difficulties which any children of the applicant are likely to encounter in the country to which the applicant is to be expelled; and the solidity of social, cultural and family ties with the host [x] country and with the country of destination.
The importance of these is reinforced in the recent case of Maslov v Austria [2009] INLR 47, para 75 where the Grand Chamber emphasised that for a settled migrant who has lawfully spent all or the major part of his or her childhood and youth in the host country, very serious reasons are required to justify expulsion.
This is all the more so where the person concerned committed the offences underlying the expulsion measure as a juvenile.
The second sort of case arises in the ordinary immigration context, where a person is to be removed because he or she has no right to be or remain in the country.
Once again, the starting point is the right of all states to control the entry and residence of aliens.
In these cases, the legitimate aim is likely to be the economic well being of the country in controlling immigration, although the prevention of disorder and crime and the protection of the rights and freedoms of others may also be relevant.
Factors (i), (iii), and (vi) identified in Boultif and ner are not relevant when it comes to ordinary immigration cases, although the equivalent of (vi) for a spouse is whether family life was established knowing of the precariousness of the immigration situation.
It was long ago established that mixed nationality couples have no right to set up home in whichever country they choose: see Abdulaziz v United Kingdom (1985) 7 EHRR 471.
Once they have done so, however, the factors relevant to judging the proportionality of any interference with their right to respect for their family lives have quite recently been rehearsed in the case of Rodrigues da Silva, Hoogkamer v Netherlands (2007) 44 EHRR 729, at para 39: .
Article 8 does not entail a general obligation for a state to respect immigrants choice of the country of their residence and to authorise family reunion in its territory.
Nevertheless, in a case which concerns family life as well as immigration, the extent of a states obligations to admit to its territory relatives of persons residing there will vary according to the particular circumstances of the person involved and the general interest [the reference is to Gl v Switzerland (1996) 22 EHRR 93, at [38]].
Factors to be taken into account in this context are the extent to which family life is effectively ruptured, the extent of the ties in the contracting state, whether there are insurmountable obstacles in the way of the family living in the country of origin of one or more of them, whether there are factors of immigration control (eg a history of breaches of immigration law) or considerations of public order weighing in favour of exclusion [the reference is to Solomon v The Netherlands, App No 44328/98, 5 September 2000].
Another important consideration will also be whether family life was created at a time when the persons involved were aware that the immigration status of one of them was such that the persistence of that family life within the host state would from the outset be precarious.
The Court has previously held that where this is the case it is likely only to be in the most exceptional circumstances that the removal of the non national family member will constitute a violation of Article 8 [the reference is to Mitchell v United Kingdom, App No 40447/98, 24 November 1998; Ajayi v United Kingdom, App No 27663/95, 22 June 1999].
Despite the apparent severity of these words, the Court held that there had been a violation on the facts of the case.
A Brazilian mother came to the Netherlands in 1994 and set up home with a Dutch national without ever applying for a residence permit.
In 1996 they had a daughter who became a Dutch national.
In 1997 they split up and the daughter remained with her father.
It was eventually confirmed by the Dutch courts that it was in her best interests to remain with her father and his family in the Netherlands even if this meant that she would have to be separated from her mother.
In practice, however, her care was shared between the mother and the paternal grandparents.
The court concluded at para 44 that, notwithstanding the mothers cavalier attitude to Dutch immigration rules, In view of the far reaching consequences which an expulsion would have on the responsibilities which the first applicant has as a mother, as well as on her family life with her young daughter, and taking into account that it is clearly in Rachaels best interests for the first applicant to stay in the Netherlands, the Court considers that in the particular circumstances of the case the economic well being of the country does not outweigh the applicants rights under article 8, despite the fact that the first applicant was residing illegally in the Netherlands at the time of Rachaels birth.
It is worthwhile quoting at such length from the Courts decision in Rodrigues de Silva because it is a relatively recent case in which the reiteration of the courts earlier approach to immigration cases is tempered by a much clearer acknowledgement of the importance of the best interests of a child caught up in a dilemma which is of her parents and not of her own making.
This is in contrast from some earlier admissibility decisions in which the Commission (and on occasion the Court) seems to have concentrated more on the failings of the parents than upon the interests of the child, even if a citizen child might thereby be deprived of the right to grow up in her own country: see, for example, O and OL v United Kingdom, App No 11970/86, 13 July 1987; Sorabjee v United Kingdom, App No 23938/94, 23 October 1995; Jaramillo v United Kingdom, App No 24865/94, 23 October 1995, and Poku v United Kingdom, App No 26985/95, 15 May 1996.
In Poku, the Commission repeated that in previous cases, the factor of citizenship has not been considered of particular significance.
These were, however, cases in which the whole family did have a real choice about where to live.
They may be contrasted with the case of Fadele v United Kingdom, App No 13078/87, in which British children aged 12 and 9 at the date of the decision had lived all their lives in the United Kingdom until they had no choice but to go and live in some hardship in Nigeria after their mother died and their father was refused leave to enter.
The Commission found their complaints under articles 3 and 8 admissible and a friendly settlement was later reached (see Report of the Commission, 4 July 1991).
The UNCRC and the best interests of the child
It is not difficult to understand why the Strasbourg Court has become more sensitive to the welfare of the children who are innocent victims of their parents choices.
For example, in Neulinger v Switzerland (2010) 28 BHRC 706, para 131, the Court observed that the Convention cannot be interpreted in a vacuum but must be interpreted in harmony with the general principles of international law.
Account should be taken . of any relevant rules of international law applicable in the relations between the parties and in particular the rules concerning the international protection of human rights.
The Court went on to note, at para 135, that there is currently a broad consensus including in international law in support of the idea that in all decisions concerning children, their best interests must be paramount.
The Court had earlier, in paras 49 to 56, collected references in support of this proposition from several international human rights instruments: from the second principle of the United Nations Declaration on the Rights of the Child 1959; from article 3(1) of the Convention on the Rights of the Child 1989 (UNCRC); from articles 5(b) and 16(d) of the Convention on the Elimination of All Forms of Discrimination against Women 1979; from General Comments 17 and 19 of the Human Rights Committee in relation to the International Covenant on Civil and Political Rights 1966; and from article 24 of the European Unions Charter of Fundamental Rights.
All of these refer to the best interests of the child, variously describing these as paramount, or primordial, or a primary consideration.
To a United Kingdom lawyer, however, these do not mean the same thing.
For our purposes the most relevant national and international obligation of the United Kingdom is contained in article 3(1) of the UNCRC: In all actions concerning children, whether undertaken by public or private social welfare institutions, courts of law, administrative authorities or legislative bodies, the best interests of the child shall be a primary consideration.
This is a binding obligation in international law, and the spirit, if not the precise language, has also been translated into our national law.
Section 11 of the Children Act 2004 places a duty upon a wide range of public bodies to carry out their functions having regard to the need to safeguard and promote the welfare of children.
The immigration authorities were at first excused from this duty, because the United Kingdom had entered a general reservation to the UNCRC concerning immigration matters.
But that reservation was lifted in 2008 and, as a result, section 55 of the Borders, Citizenship and Immigration Act 2009 now provides that, in relation among other things to immigration, asylum or nationality, the Secretary of State must make arrangements for ensuring that those functions are discharged having regard to the need to safeguard and promote the welfare of children who are in the United Kingdom.
Miss Carss Frisk acknowledges that this duty applies, not only to how children are looked after in this country while decisions about immigration, asylum, deportation or removal are being made, but also to the decisions themselves.
This means that any decision which is taken without having regard to the need to safeguard and promote the welfare of any children involved will not be in accordance with the law for the purpose of article 8(2).
Both the Secretary of State and the tribunal will therefore have to address this in their decisions.
Further, it is clear from the recent jurisprudence that the Strasbourg Court will expect national authorities to apply article 3(1) of UNCRC and treat the best interests of a child as a primary consideration.
Of course, despite the looseness with which these terms are sometimes used, a primary consideration is not the same as the primary consideration, still less as the paramount consideration.
Miss Joanna Dodson QC, to whom we are grateful for representing the separate interests of the children in this case, boldly argued that immigration and removal decisions might be covered by section 1(1) of the Children Act 1989: When a court determines any question with respect to (a) the upbringing of a child; or (b) the administration of a childs property or the application of any income arising from it, the childs welfare shall be the courts paramount consideration.
However, questions with respect to the upbringing of a child must be distinguished from other decisions which may affect them.
The UNHCR, in its Guidelines on Determining the Best Interests of the Child (May 2008), explains the matter neatly, at para 1.1: The term best interests broadly describes the well being of a child.
The CRC neither offers a precise definition, nor explicitly outlines common factors of the best interests of the child, but stipulates that: the best interests must be the determining factor for specific actions, notably adoption (Article 21) and separation of a child from parents against their will (Article 9); the best interests must be a primary (but not the sole) consideration for all other actions affecting children, whether undertaken by public or private social welfare institutions, courts of law, administrative authorities or legislative bodies (Article 3).
This seems to me accurately to distinguish between decisions which directly affect the childs upbringing, such as the parent or other person with whom she is to live, and decisions which may affect her more indirectly, such as decisions about where one or both of her parents are to live.
Article 9 of UNCRC, for example, draws a distinction between the compulsory separation of a child from her parents, which must be necessary in her best interests, and the separation of a parent from his child, for example, by detention, imprisonment, exile, deportation or even death.
Nevertheless, even in those decisions, the best interests of the child must be a primary consideration.
As Mason CJ and Deane J put it in the case of Minister for Immigration and Ethnic Affairs v Teoh [1995] HCA 20, (1995) 183 CLR 273, 292 in the High Court of Australia: A decision maker with an eye to the principle enshrined in the Convention would be looking to the best interests of the children as a primary consideration, asking whether the force of any other consideration outweighed it.
As the Federal Court of Australia further explained in Wan v Minister for Immigration and Multi cultural Affairs [2001] FCA 568, para 32, [The Tribunal] was required to identify what the best interests of Mr Wans children required with respect to the exercise of its discretion and then to assess whether the strength of any other consideration, or the cumulative effect of other considerations, outweighed the consideration of the best interests of the children understood as a primary consideration.
This did not mean (as it would do in other contexts) that identifying their best interests would lead inexorably to a decision in conformity with those interests.
Provided that the Tribunal did not treat any other consideration as inherently more significant than the best interests of the children, it could conclude that the strength of the other considerations outweighed them.
The important thing, therefore, is to consider those best interests first.
That seems, with respect, to be the correct approach to these decisions in this country as well as in Australia.
However, our attention was also drawn to General Comment No 6 of the United Nations Committee on the Rights of the Child (2005), on the Treatment of Unaccompanied and Separated Children Outside their Country of Origin.
The context, different from ours, was the return of such children to their countries of origin even though they could not be returned to the care of their parents or other family members (para 85).
At para 86, the Committee observed: Exceptionally, a return to the home country may be arranged, after careful balancing of the childs best interests and other considerations, if the latter are rights based and override best interests of the child.
Such may be the case in situations in which the child constitutes a serious risk to the security of the State or to the society.
Non rights based arguments such as those relating to general migration control, cannot override best interests considerations.
A similar distinction between rights based and non rights based arguments is drawn in the UNHCR Guidelines (see, para 3.6).
With respect, it is difficult to understand this distinction in the context of article 8(2) of the ECHR.
Each of the legitimate aims listed there may involve individual as well as community interests.
If the prevention of disorder or crime is seen as protecting the rights of other individuals, as it appears that the CRC would do, it is not easy to see why the protection of the economic well being of the country is not also protecting the rights of other individuals.
In reality, however, an argument that the continued presence of a particular individual in the country poses a specific risk to others may more easily outweigh the best interests of that or any other child than an argument that his or her continued presence poses a more general threat to the economic well being of the country.
It may amount to no more than that.
Applying these principles
Applying, therefore, the approach in Wan to the assessment of proportionality under article 8(2), together with the factors identified in Strasbourg, what is encompassed in the best interests of the child? As the UNHCR says, it broadly means the well being of the child.
Specifically, as Lord Bingham indicated in EB (Kosovo), it will involve asking whether it is reasonable to expect the child to live in another country.
Relevant to this will be the level of the childs integration in this country and the length of absence from the other country; where and with whom the child is to live and the arrangements for looking after the child in the other country; and the strength of the childs relationships with parents or other family members which will be severed if the child has to move away.
Although nationality is not a trump card it is of particular importance in assessing the best interests of any child.
The UNCRC recognises the right of every child to be registered and acquire a nationality (Article 7) and to preserve her identity, including her nationality (Article 8).
In Wan, the Federal Court of Australia, pointed out at para 30 that, when considering the possibility of the children accompanying their father to China, the tribunal had not considered any of the following matters, which the Court clearly regarded as important: (a) the fact that the children, as citizens of Australia, would be deprived of the country of their own and their mothers citizenship, and of its protection and support, socially, culturally and medically, and in many other ways evoked by, but not confined to, the broad concept of lifestyle (Vaitaiki v Minister for Immigration and Ethnic Affairs [1998] FCA 5, (1998) 150 ALR 608, 614); (b) the resultant social and linguistic disruption of their childhood as well as the loss of their homeland; (c) the loss of educational opportunities available to the children in Australia; and (d) their resultant isolation from the normal contacts of children with their mother and their mothers family.
Substituting father for mother, all of these considerations apply to the children in this case.
They are British children; they are British, not just through the accident of being born here, but by descent from a British parent; they have an unqualified right of abode here; they have lived here all their lives; they are being educated here; they have other social links with the community here; they have a good relationship with their father here.
It is not enough to say that a young child may readily adapt to life in another country.
That may well be so, particularly if she moves with both her parents to a country which they know well and where they can easily re integrate in their own community (as might have been the case, for example, in Poku, para 20, above).
But it is very different in the case of children who have lived here all their lives and are being expected to move to a country which they do not know and will be separated from a parent whom they also know well.
Nor should the intrinsic importance of citizenship be played down.
As citizens these children have rights which they will not be able to exercise if they move to another country.
They will lose the advantages of growing up and being educated in their own country, their own culture and their own language.
They will have lost all this when they come back as adults.
As Jacqueline Bhaba (in The Mere Fortuity of Birth? Children, Mothers, Borders and the Meaning of Citizenship, in Migrations and Mobilities: Citizenship, Borders and Gender (2009), edited by Seyla Benhabib and Judith Resnik, at p 193) has put it: In short, the fact of belonging to a country fundamentally affects the manner of exercise of a childs family and private life, during childhood and well beyond.
Yet children, particularly young children, are often considered parcels that are easily movable across borders with their parents and without particular cost to the children.
We now have a much greater understanding of the importance of these issues in assessing the overall well being of the child.
In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration.
This means that they must be considered first.
They can, of course, be outweighed by the cumulative effect of other considerations.
In this case, the countervailing considerations were the need to maintain firm and fair immigration control, coupled with the mothers appalling immigration history and the precariousness of her position when family life was created.
But, as the Tribunal rightly pointed out, the children were not to be blamed for that.
And the inevitable result of removing their primary carer would be that they had to leave with her.
On the facts, it is as least as strong a case as Edore v Secretary of State for the Home Department [2003] 1 WLR 2979, where Simon Brown LJ held that there really is only room for one view (para 26).
In those circumstances, the Secretary of State was clearly right to concede that there could be only one answer.
Consulting the children
Acknowledging that the best interests of the child must be a primary consideration in these cases immediately raises the question of how these are to be discovered.
An important part of this is discovering the childs own views.
Article 12 of UNCRC provides: 1.
States Parties shall assure to the child who is capable of forming his or her own views the right to express those views freely in all matters affecting the child, the views of the child being given due weight in accordance with the age and maturity of the child. 2.
For this purpose, the child shall in particular be provided the opportunity to be heard in any judicial and administrative proceedings affecting the child, either directly, or through a representative or an appropriate body, in a manner consistent with the procedural rules of national law.
There are circumstances in which separate representation of a child in legal proceedings about her future is essential: in this country, this is so when a child is to be permanently removed from her family in her own best interests.
There are other circumstances in which it may be desirable, as in some disputes between parents about a childs residence or contact.
In most cases, however, it will be possible to obtain the necessary information about the childs welfare and views in other ways.
As I said in EM (Lebanon) v Secretary of State for the Home Department [2008] UKHL 64, [2009] 1 AC 1198, at para 49: Separate consideration and separate representation are, however, two different things.
Questions may have to be asked about the situation of other family members, especially children, and about their views.
It cannot be assumed that the interests of all the family members are identical.
In particular, a child is not to be held responsible for the moral failures of either of his parents.
Sometimes, further information may be required.
If the Child and Family Court Advisory and Support Service or, more probably, the local childrens services authority can be persuaded to help in difficult cases, then so much the better.
But in most immigration situations, unlike many ordinary abduction cases, the interests of different family members are unlikely to be in conflict with one another.
Separate legal (or other) representation will rarely be called for.
The important thing is that those conducting and deciding these cases should be alive to the point and prepared to ask the right questions.
We have been told about a pilot scheme in the Midlands known as the Early Legal Advice Project (ELAP).
This is designed to improve the quality of the initial decision, because the legal representative can assist the caseowner in establishing all the facts of the claim before a decision is made.
Thus cases including those involving children will be offered an appointment with a legal representative, who has had time to collect evidence before the interview.
The Secretary of State tells us that the pilot is limited to asylum claims and does not apply to pure article 8 claims.
However, the two will often go hand in hand.
The point, however, is that it is one way of enabling the right questions to be asked and answered at the right time.
In this case, the mothers representatives did obtain a letter from the childrens school and a report from a youth worker in the Refugee and Migrant Forum of East London (Ramfel), which runs a Childrens Participation Forum and other activities in which the children had taken part.
But the immigration authorities must be prepared at least to consider hearing directly from a child who wishes to express a view and is old enough to do so.
While their interests may be the same as their parents this should not be taken for granted in every case.
As the Committee on the Rights of the Child said, in General Comment No 12 (2009) on the Right of the Child to be Heard, at para 36: in many cases . there are risks of a conflict of interest between the child and their most obvious representative (parent(s)).
If the hearing of the child is undertaken through a representative, it is of utmost importance that the childs views are transmitted correctly to the decision maker by the representative.
Children can sometimes surprise one.
Conclusion
For the reasons given, principally in paragraphs 26 and 30 to 33 above, I would allow this appeal.
I am in full agreement with the reasons that Lady Hale has given for
LORD HOPE
allowing this appeal.
It seems to me that the Court of Appeal fell into error in two respects.
First, having concluded that the childrens British citizenship did not dispose of the issues arising under article 8 (see [2010] EWCA Civ 691, paras 16 22), they did not appreciate the importance that was nevertheless to be attached to the factor of citizenship in the overall assessment of what was in the childrens best interests.
Second, they endorsed the view of the tribunal that the question whether it was reasonable to expect the children to go with their mother to Tanzania, looked at in the light of its effect on the father and the mother and in relation to the children, was to be judged in the light of the fact that both children were conceived in the knowledge that the mothers immigration status was precarious: para 26.
The first error may well have been due to the way the mothers case was presented to the Court of Appeal.
It was submitted that the fact that the children were British citizens who had never been to Tanzania trumped all other considerations: para 16.
That was, as the court recognised, to press the point too far.
But there is much more to British citizenship than the status it gives to the children in immigration law.
It carries with it a host of other benefits and advantages, all of which Lady Hale has drawn attention to and carefully analysed.
They ought never to be left out of account, but they were nowhere considered in the Court of Appeals judgment.
The fact of British citizenship does not trump everything else.
But it will hardly ever be less than a very significant and weighty factor against moving children who have that status to another country with a parent who has no right to remain here, especially if the effect of doing this is that they will inevitably lose those benefits and advantages for the rest of their childhood.
The second error was of a more fundamental kind, which lies at the heart of this appeal.
The tribunal found that the mother knew full well that her immigration status was precarious before T was born.
On looking at all the evidence in the round, it was not satisfied that her decisions to have her children were not in some measure motivated by a belief that having children in the United Kingdom of a British citizen would make her more difficult to remove.
It accepted that the children were innocent of the mothers shortcomings.
But it went on to say that the eventual need to take a decision as to where the children were to live must have been apparent both to the father and the mother ever since they began their relationship and decided to have children together.
It was upon the importance of maintaining a proper and efficient system of immigration in this respect that in the final analysis the tribunal placed the greatest weight.
The best interests of the children melted away into the background.
The Court of Appeal endorsed the tribunals approach.
When it examined the effect on the family unit of requiring the children to go with the mother to Tanzania, it held that this had to be looked at in the context of the fact that the children were conceived when the mothers immigration status was precarious: para 26.
It acknowledged that what was all important was the effect upon the children: para 27.
But it agreed with the tribunal that the decision that the children should go with their mother was a very valid decision.
The question whether this was in their best interests was not addressed.
There is an obvious tension between the need to maintain a proper and efficient system of immigration control and the principle that, where children are involved, the best interests of the children must be a primary consideration.
The proper approach, as was explained in Wan v Minister for Immigration and Multicultural Affairs [2001] FCA 568, para 32, is, having taken this as the starting point, to assess whether their best interests are outweighed by the strength of any other considerations.
The fact that the mothers immigration status was precarious when they were conceived may lead to a suspicion that the parents saw this as a way of strengthening her case for being allowed to remain here.
But considerations of that kind cannot be held against the children in this assessment.
It would be wrong in principle to devalue what was in their best interests by something for which they could in no way be held to be responsible.
I have read and agree with the judgments of Lady Hale and Lord Hope.
LORD KERR
the reasons they have given, I too would allow the appeal.
It is a universal theme of the various international and domestic instruments to which Lady Hale has referred that, in reaching decisions that will affect a child, a primacy of importance must be accorded to his or her best interests.
This is not, it is agreed, a factor of limitless importance in the sense that it will prevail over all other considerations.
It is a factor, however, that must rank higher than any other.
It is not merely one consideration that weighs in the balance alongside other competing factors.
Where the best interests of the child clearly favour a certain course, that course should be followed unless countervailing reasons of considerable force displace them.
It is not necessary to express this in terms of a presumption but the primacy of this consideration needs to be made clear in emphatic terms.
What is determined to be in a childs best interests should customarily dictate the outcome of cases such as the present, therefore, and it will require considerations of substantial moment to permit a different result.
The significance of a childs nationality must be considered in two aspects.
The first of these is in its role as a contributor to the debate as to where the childs best interests lie.
It seems to me self evident that to diminish a childs right to assert his or her nationality will not normally be in his or her best interests.
That consideration must therefore feature in the determination of where the best interests lie.
It was also accepted by the respondent, however, (and I think rightly so) that if a child is a British citizen, this has an independent value, freestanding of the debate in relation to best interests, and this must weigh in the balance in any decision that may affect where a child will live.
As Lady Hale has said, this is not an inevitably decisive factor but the benefits that British citizenship brings, as so aptly described by Lord Hope and Lady Hale, must not readily be discounted.
| This is a mothers appeal to the Supreme Court on the ground that her removal from the United Kingdom will constitute a disproportionate interference with her right to respect for her private and family life, guaranteed by article 8 of the European Convention on Human Rights.
The over arching issue is the weight to be given to the best interests of children who are affected by the decision to remove or deport one or both of their parents from this country.
Within this is a more specific question: in what circumstances is it permissible to remove or deport a non citizen parent where the effect will be that a child who is a citizen of the United Kingdom will also have to leave? There is no power to remove or deport a person who is a United Kingdom citizen: see Immigration Act 1971, section 3(5) and (6).
They have a right of abode in this country, which means that they are free to live in, and to come and go into and from the United Kingdom without let or hindrance: see 1971 Act, sections 1 and 2.
The consistent stance of the Secretary of State is that UK citizens are not compulsorily removed from this country.
However, if a non citizen parent is compulsorily removed and agrees to take her children with her, the effect is that the children have little or no choice in the matter.
There is no machinery for consulting them or giving independent consideration to their views.
The mother is a national of Tanzania who arrived in the UK in December 1995.
She made three unsuccessful claims for asylum, one in her own identity and two in false identities.
In 1997 she formed a relationship with a British citizen.
They have two children, now aged 12 and 9, who are both British citizens and have lived here all their lives.
The parents separated in 2005 but the father continues to see the children regularly.
After the fathers diagnosis with HIV in 2007, the mother made further representations to the Secretary of State.
These representations were accepted as a fresh claim but were rejected.
The mothers appeal was dismissed by the Asylum and Immigration Tribunal and by the Court of Appeal.
The Court of Appeal upheld the tribunals finding that the children could reasonably be expected to follow their mother to Tanzania.
The Supreme Court unanimously allows the appeal.
Lady Hale gives the leading judgment.
The best interests of the child broadly means the well being of the child.
A consideration of where these best interests lie will involve asking whether it is reasonable to expect the child to live in another country.
An important part of discovering the best interests of the child is to discover the childs own views. [29], [34] [37]
Although nationality is not a trump card it is of particular importance in assessing the best interests of any child.
The children in this case are British not just through the accident of being born here, but by descent from a British parent; they have an unqualified right of abode here; they have lived here all their lives; they are being educated here; they have other social links with the community here; they have a good relationship with their father here.
It is not enough to say that a young child may readily adapt to life in another country. [30] [31] The intrinsic importance of citizenship should not be played down.
As citizens these children have rights which they will not be able to exercise if they move to another country.
They will lose the advantages of growing up and being educated in their own country, their own culture and their own language.
They will have lost all this when they come back as adults. [32] In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration.
This means that they must be considered first.
They can, of course, be outweighed by the cumulative effect of other considerations.
In this case, the countervailing considerations were the need to maintain firm and fair immigration control, coupled with the mothers appalling immigration history and the precariousness of her position when family life was created.
But the children were not to be blamed for that.
And the inevitable result of removing their primary carer would be that they had to leave with her.
In those circumstances, the Secretary of State was clearly right to concede that there could only be one answer. [33] Lord Hope observed that the fact of British citizenship will hardly ever be less than a very significant and weighty factor against moving children who have that status to another country with a parent who has no right to remain here, especially if the effect of doing this is that they will inevitably lose the benefits and advantages of this citizenship for the rest of their childhood.
The fact that the mothers immigration status was precarious when the children were conceived cannot be held against the children in the assessment of whether their best interests are outweighed by the strength of any other considerations.
It would be wrong in principle to devalue what was in their best interests by something for which they could in no way be held to be responsible. [41], [44] Lord Kerr stated that the fact that a child is a British citizen also has an independent value, freestanding of the debate in relation to best interests, and this must weigh in the balance in any decision that may affect where a child may live. [46] [47]
|
This appeal concerns the procedure for collective proceedings introduced by amendment to the Competition Act 1998 (the Act) for the purpose of enabling small businesses and consumers more easily to bring claims for what may loosely be described as anti competitive conduct in breach of the provisions of the Act.
Where the harmful impact of such conduct affects consumers, it may typically cause damage to very large classes of claimants.
Proof of breach, causation and loss is likely to involve very difficult and expensive forensic work, both in terms of the assembly of evidence and the analysis of its economic effect.
Viewed from the perspective of an individual consumer, the likely disparity between the cost and effort involved in bringing such a claim and the monetary amount of the consumers individual loss, coupled with the much greater litigation resources likely to be available to the alleged wrongdoer, means that it will rarely, if ever, be a wise or proportionate use of limited resources for the consumer to litigate alone.
The procedure for collective proceedings introduced by the Act applies to claims by two or more persons for damages, money or an injunction in respect of a breach of specified provisions of statutory competition law: see sections 47A(2) and 47B(1) of the Act.
It enables whole classes of consumers to vindicate their rights to compensation and the large cost of the necessary litigation to be funded, before an expert tribunal, the Competition Appeal Tribunal (CAT), which is given exclusive jurisdiction over collective proceedings.
The prospect that the rights of consumers can be vindicated in that way also serves to act as a disincentive to unlawful anti competitive behaviour of a type likely to harm consumers generally.
But collective proceedings may not proceed beyond the issue and service of a claim form without the permission of the CAT in the form of certification by a Collective Proceedings Order (CPO) under section 47B of the Act.
At issue in the appeal are the legal requirements for certification.
There are (at least for present purposes) three key features of collective proceedings.
The first is that claims by any number of claimants may be pursued on their behalf by a single representative who may, but need not, be a member of the class.
The claims need not be identical, and they need not all be against all the defendants, but they must all raise the same, similar or related issues of fact or law.
Secondly, the remedy sought may, but need not always, be the award of what are called aggregate damages.
This type of damages provides just compensation for the loss suffered by the claimant class as a whole, but the amount need not be computed by reference to an assessment of the amount of damages recoverable by each member of the class individually.
Thirdly, the CAT has a discretion as to how aggregate damages (if recovered) are to be distributed among members of the class.
Any unclaimed residue of an aggregate award is to be given to a charity specified by the Lord Chancellor, or used to meet the litigation costs and expenses of the representative.
The CAT is given an important screening or gatekeeping role over the pursuit of collective proceedings.
First, collective proceedings may not be pursued beyond the issue and service of a claim form without the CATs permission, in the form of a CPO, for which the representative must apply.
The obtaining of a CPO is called certification.
Secondly, collective proceedings may be terminated by the CAT at any stage by the revocation of that CPO.
Thirdly, the CAT may accede to an application by one or more defendants to strike out collective proceedings if they disclose no reasonable cause of action (or are otherwise abusive) or to an application for defendants summary judgment, just as in any ordinary civil proceedings.
The process of certification requires the CAT to be satisfied as to two main criteria, in relation to any particular collective proceedings.
First, it must be just and reasonable for the person seeking to act as representative to be authorised to do so.
Secondly, the claims must be eligible for inclusion in collective proceedings.
This means that they must all raise the same, similar or related issues of fact or law and be suitable to be brought in collective proceedings.
In the present case the CAT decided that the claims were not suitable to be brought in collective proceedings and therefore refused a CPO.
The representative, Mr Walter Merricks, appealed successfully to the Court of Appeal.
The defendants, companies in the Mastercard group, appeal to this court, seeking to reinstate the decision of the CAT.
This is the first collective proceedings case of this kind to reach this court, or the Court of Appeal, and it raises important questions about the legal framework within which the CAT should exercise its undoubted expertise in granting or refusing certification.
The Facts
The appellant defendants (collectively Mastercard) are three members of the Mastercard group of companies, the first two of which are registered in Delaware, USA, and the third in Belgium.
At the relevant time Mastercard operated the well known Mastercard payment card scheme, by the use of which consumers with banking facilities are able to purchase goods and services from retailers otherwise than by the use of cash or cheques.
The scheme includes both credit and debit cards and operates as a four party scheme in accordance with the diagram shown below.
The consumer is the card holder.
The retailer is called the merchant.
The consumers bank issues the card used by the consumer to make payment and is therefore called the issuer.
The retailers bank is called the acquirer.
The scheme rules, laid down by Mastercard, require both the issuer and the acquirer to pay fees to Mastercard for being licensed to use the scheme.
But the rules also provide for an interchange fee (IF) to be paid by the acquirer to the issuer for each transaction paid by the use of a Mastercard, which is debited from the payment made by the issuer to the acquirer on the card holders behalf.
The acquirer then credits the net amount, less its own fee, to the account of the merchant.
The combined deduction of the IF and the acquirers own fee is called the merchant service charge (MSC).
Thus it is common ground that the acquirer passes on the whole of the IF to the merchant.
This may be illustrated by a notional sale of goods (or services) by the merchant to the card holder for 100, where the IF is 1% and the MSC is 1.2% (ie the IF of 1% and the acquirers own fee of 0.2%).
The card holder pays 100, which the issuer deducts from his account.
The issuer pays 99 to the Acquirer and the acquirer pays 98.80 to the merchant.
The IF may be bilaterally agreed between the issuer and the acquirer, or they may both be the same bank.
But otherwise the IF is paid at a default rate set by the scheme rules, known as the multilateral interchange fee (MIF).
There are various different rates of MIF, depending on the type of card used (eg debit or credit) and the places where respectively the card is issued and the merchant carries on business.
Thus there was a domestic UK MIF where the card was issued in the UK and the merchant carried on business there.
There was also an Intra EEA MIF where the two respective places were in different member states of the EEA.
Following an investigation, the European Commission decided in December 2007 that the default level set by Mastercard since May 1992 for its Intra EEA MIF amounted to a restriction of competition by effect, contrary to article 81 EC (now article 101 TFEU) and article 53 of the EEA Agreement.
It is common ground that this was a form of unlawful anti competitive behaviour sounding in damages for breach of statutory duty under section 47A of the Act.
The Intra EEA MIF applied to a large number of purchase transactions by UK card holders, using cards issued in the UK to make purchases from merchants in other EEA states, and to purchases from UK merchants where the card holders were using cards issued in other EEA states.
A very much larger series of transactions by UK card holders during the same period attracted the domestic UK MIF.
It is alleged in the present proceedings, but it is not common ground, that the level of the UK MIF was affected by the level of the infringing Intra EEA MIF, so that the loss said to result from the UK MIF was therefore caused by the infringement.
The Commissions decision (the EC Decision) stated at recital 411 that: A further consequence of this restriction of price competition is that customers making purchases at merchants who accept payment cards are likely to have to bear some part of the cost of Mastercards MIF irrespective of the form of payment the customers use.
This is because depending on the competitive situation merchants may increase the price for all goods sold by a small margin rather than internalising the cost imposed on them by a MIF.
Mastercard challenged the Commissions decision in the European courts, but without success, and now accepts that it is bound by the finding of breach, for the whole of the period from May 1992 until December 2007 (the Infringement Period).
The Proceedings
In September 2016 the respondent Mr Walter Merricks CBE issued a collective proceedings claim form against Mastercard, seeking to represent claims by all UK resident adult consumers of goods and services purchased in the UK during the almost 16 year Infringement Period from merchants accepting Mastercard.
The size of the represented class was estimated in the claim form to be 46.2m people.
It was not a condition of class membership that members either had owned or used a Mastercard for their purchases.
It was alleged that any price increases by which merchants passed on the cost of the MIF was applied to all purchasers, not just purchasers using cards.
Business customers of merchants using the Mastercard scheme are not included in the claimant class.
The essential structure of the claim was as follows: a.
The infringing Intra EEA MIF set an unlawfully high minimum level of IF.
But for the infringement identified by the EC Decision, IFs both for cross border and domestic transactions would have been charged at a lower level, the difference between that lower level and both the Intra EEA MIF and the domestic UK MIF representing an unlawful element of overcharge. b.
That unlawful overcharge was passed on by acquirers to their merchants in full, via the MSC. c.
All or a substantial part of the unlawful overcharge was then passed on by merchants operating the Mastercard scheme to their consumer customers, by way of higher prices than would otherwise have been charged for goods and services, thereby causing loss to consumers as a class, equivalent to the amount of the unlawful overcharge passed on.
This is a follow on claim which is sought to be brought on an opt out basis.
A follow on claim is one which is based upon an existing decision establishing breach, here the EC Decision, which is binding on the domestic tribunal: see section 58A of the Act.
Section 47B of the Act makes provision for collective proceedings to be brought on an opt in or opt out basis.
Leaving aside non domiciled claimants, an opt out basis means that the proceedings are brought on behalf of every person within the class definition who does not opt out from membership of the class: see section 47B(11).
Mr Merricks seeks an award of aggregate damages under section 47C of the Act and proposes that the proceeds of any award should be distributed broadly equally among members of the class on a per capita basis for each separate year of the Infringement Period.
He justifies this on the ground that any attempt to differentiate between members on the basis of individual loss would be disproportionate having regard to the modest amounts at stake for each individual, and the forensic difficulties in any reliable basis for discrimination, after the passage of time, within such a huge class.
Save that Mastercard admits, as it must, the breach of statutory duty identified by the EC Decision in relation to the Intra EEA MIF and accepts that the whole of any relevant MIF was passed on in full by acquirers to merchants, Mastercard challenges every aspect of the claim.
It denies that its excessive Intra EEA MIF caused any unlawful increase in domestic UK MIFs (which dominated the relevant transactions during the Infringement Period), or that IFs would have been any lower than in fact they were, but for the infringement.
Thus it denies unlawful overcharge: (the overcharge issue).
More importantly for present purposes Mastercard does not accept that merchants passed on all or any part of any overcharge to their customers: (the merchant pass on issue).
I use the phrase does not accept rather than deny advisedly.
There are now pending some hundreds of claims by merchants against Mastercard, alleging loss by reason of having incurred the cost of the overcharge as part of the MSC passed on by their acquirer banks, without having passed it, or at least all of it, on to their customers.
In at least some of those cases Mastercard has sought to defend by alleging that the merchants did pass on all or part of any overcharge to their customers, and therefore, or at least to that extent, suffered no loss.
Mr Merricks sought to support his case that the claims were eligible for collective proceedings by describing both the overcharge issue and the merchant pass on issue as common issues affecting all the claims.
Mastercard persuaded the CAT that the merchant pass on issue was not a common issue.
But the Court of Appeal held that it was, and their conclusion has not been challenged in this court.
The potential quantum of the claims, on the basis of full success on the main issues, was provisionally estimated in written evidence by Mr Merricks expert team at more than 14 billion for the class as a whole.
But the likely average individual recovery after a distribution on the basis proposed has been very roughly estimated at only 300 each, even on a full success basis.
It became reasonably clear during the hearing before the CAT that the aggregate damages figure was very likely to prove to be a considerable over estimate, with the consequence that the likely individual recoveries would also be reduced.
On any view however the proceedings involve a disparity in size between collective and individual recovery on a scale which is, in the current experience of the UK courts and tribunals, completely unique.
Mastercard objected to certification on both the main criteria, submitting that Mr Merricks could show neither that it was reasonable for him to be authorised to act as representative nor that the claims were eligible for collective proceedings.
The CAT rejected the first of those objections, but upheld the second, and Mastercard did not pursue its objection to Mr Merricks as representative in the Court of Appeal.
The result is that this appeal concerns solely the legal requirements for eligibility.
Before considering the CATs analysis and the Court of Appeals reasons for finding that it was wrong in law, it is convenient to set out the relevant provisions in the Act, the relevant rules and the CATs published guidance.
The statutory framework for certification
The structure for collective proceedings of this type is an entirely statutory creation.
Its relative novelty means that it has yet to attract a body of authoritative UK case law about its operation, although there is significant Canadian jurisprudence about pre existing similar (although not identical) statutory schemes there which has been much relied upon in these proceedings.
As will appear it will be necessary to set the bones of the statutory structure in its context as a part (albeit specialised) of the UKs civil and tribunal procedure.
Although now forming part of the Competition Act 1998, the statutory part of the structure for collective proceedings was introduced, by amendment, in two stages.
The first was in the Enterprise Act 2002, but it only permitted opt in proceedings and was unsuccessful.
The second was in the Consumer Rights Act 2015.
This followed a public consultation by the Department for Business, Innovation and Skills.
In its paper published in April 2012, it was announced that the government wished to bring forward proposals to improve the regime for bringing private actions for redress for anti competitive behaviour.
At paragraph 3.6 under the heading Aims the paper stated: The aim of these proposals is therefore two fold: Increase growth, by empowering small businesses to tackle anti competitive behaviour that is stifling their business.
Promote fairness, by enabling consumers and businesses who have suffered loss due to anti competitive behaviour to obtain redress.
Under the heading Why is reform needed? the paper recognised, at paragraph 3.11, the widespread view that private actions were the least satisfactory aspect of the competition regime, so that there was wide recognition of the need to improve access to redress and dispute resolution.
At paragraph 3.12 it stated: Currently it is rare for consumers and SMEs to obtain redress from those who have breached competition law, and it can be difficult and expensive for them to go to court to halt anti competitive behaviour.
At paragraph 3.13 it continued: A further difficulty is that competition cases may involve large sums but be divided across many businesses or consumers, each of whom has lost only a small amount.
This means that a major case, with aggregate losses in the millions or tens of millions of pounds, can nevertheless lack any one individual for whom pursuing costs makes economic sense.
Paragraph 3.14 contained a brief review of the shortcomings of the then current procedural frameworks, including the representative action under the English and Welsh Civil Procedural Rules.
Under the heading Proposals the paper proposed both the establishment of the CAT as a major venue for competition actions across the UK and to: Introduce an opt out collective actions regime for competition law to allow consumers and businesses to collectively bring a case to obtain redress for their losses.
Section 47A of the Act (introduced by the Enterprise Act 2002 and amended by the Consumer Rights Act 2015) identifies the types of claim which, under section 47B(1), may now be brought as collective proceedings.
The present claims are included at section 47A(2) and (6)(c), because they are based upon a decision of the Commission that there has been an infringement of the prohibition in article 101(1).
But collective proceedings are not the only type of proceedings which may be brought, even before the CAT, and the CAT does not have exclusive jurisdiction for claims falling within section 47A.
As section 47A(2) recognises, such claims may in theory at least be brought by means of any available type of civil proceedings within the UK.
Collective proceedings are however within the exclusive jurisdiction of the CAT, and subject to the Competition Appeal Tribunal Rules 2015 (SI 2015/1648) (the Rules).
Section 47B provides as follows: (1) Subject to the provisions of this Act and Tribunal rules, proceedings may be brought before the Tribunal combining two or more claims to which section 47A applies (collective proceedings). (2) Collective proceedings must be commenced by a person who proposes to be the representative in those proceedings. (3) The following points apply in relation to claims in collective proceedings (a) it is not a requirement that all of the claims should be against all of the defendants to the proceedings, (b) the proceedings may combine claims which have been made in proceedings under section 47A and claims which have not, and (c) a claim which has been made in proceedings under section 47A may be continued in collective proceedings only with the consent of the person who made that claim. (4) Collective proceedings may be continued only if the Tribunal makes a collective proceedings order. (5) The Tribunal may make a collective proceedings order only (a) if it considers that the person who brought the proceedings is a person who, if the order were made, the Tribunal could authorise to act as the representative in those proceedings in accordance with subsection (8), and (b) inclusion in collective proceedings. in respect of claims which are eligible for (6) Claims are eligible for inclusion in collective proceedings only if the Tribunal considers that they raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings. (7) A collective proceedings order must include the following matters (a) authorisation of the person who brought the proceedings to act as the representative in those proceedings, (b) description of a class of persons whose claims are eligible for inclusion in the proceedings, and (c) specification of the proceedings as opt in collective proceedings or opt out collective proceedings (see subsections (10) and (11)). (8) The Tribunal may authorise a person to act as the representative in collective proceedings (a) whether or not that person is a person falling within the class of persons described in the collective proceedings order for those proceedings (a class member), but (b) only if the Tribunal considers that it is just and reasonable for that person to act as a representative in those proceedings. (9) The Tribunal may vary or revoke a collective proceedings order at any time. (10) Opt in collective proceedings are collective proceedings which are brought on behalf of each class member who opts in by notifying the representative, in a manner and by a time specified, that the claim should be included in the collective proceedings. (11) Opt out collective proceedings are collective proceedings which are brought on behalf of each class member except any class member who opts out by notifying the (a) representative, in a manner and by a time specified, that the claim should not be included in the collective proceedings, and (b) any class member who
Section 47C deals with damages and costs in collective proceedings.
It provides, so far as is relevant: is not domiciled in the United Kingdom at (i) a time specified, and (ii) does not, in a manner and by a time specified, opt in by notifying the representative that the claim should be included in the collective proceedings. (12) Where the Tribunal gives a judgment or makes an order in collective proceedings, the judgment or order is binding on all represented persons, except as otherwise specified. (13) The right to make a claim in collective proceedings does not affect the right to bring any other proceedings in respect of the claim. (14) In this section and in section 47C, specified means specified in a direction made by the Tribunal. (2) The Tribunal may make an award of damages in collective proceedings without undertaking an assessment of the amount of damages recoverable in respect of the claim of each represented person. (3) Where the Tribunal makes an award of damages in opt out collective proceedings, the Tribunal must make an order providing for the damages to be paid on behalf of the represented persons to the representative, or such person other than a represented person as (a) (b) the Tribunal thinks fit. (4) Where the Tribunal makes an award of damages in opt in collective proceedings, the Tribunal may make an order as described in subsection (3).
Subsections (5) and following provide for the distribution of unclaimed collective damages to charity or to meet the representatives costs and expenses, as already mentioned.
Section 49 makes provision for appeals from the CAT in relation to (inter alia) collective proceedings.
It is common ground in this court that an appeal from a certification decision of the CAT lies only on a point of law.
Section 47B(1) expressly makes the right to bring collective proceedings subject to the Rules.
They provide, at rule 2(2), that the Rules are to be applied and interpreted in accordance with the governing principles in rule 4.
Rule 4(1) (2) states that cases are to be decided justly and at proportionate cost.
This is a modified version of the well known overriding objective enshrined in the Civil Procedure Rules of England and Wales and with parallels in most modern codes of civil procedure both in the UK and around the common law world, including Canada.
Rules 41 and 43 provide for the CAT, on the application of a party or of its own initiative, to have power to strike out all or part of a claim or to give summary judgment in relation to a claim or an issue in a claim against a claimant or defendant.
These powers are fully applicable to collective proceedings, both generally and at the time of the hearing of an application for a CPO: see rule 79(4).
They enable the CAT to prevent collective proceedings going to a (probably very expensive) trial in cases where they, or parts of them, disclose no reasonable cause of action, are abusive or do not raise triable issues.
In short, they enable the CAT to exercise a merits based control over collective proceedings on lines similar to those available in civil proceedings generally.
Rules 75 to 81 make detailed provision for the commencement and certification of collective proceedings.
For present purposes rule 77, headed Determination of the application for a collective proceedings order and rule 79, headed Certification of the claims as eligible for inclusion in collective proceedings, are of primary importance.
They provide as follows: 77(1) The Tribunal may make a collective proceedings order, after hearing the parties, only (a) if it considers that the proposed class representative is a person who, if the order were made, the Tribunal could authorise to act as the class representative in those proceedings in accordance with rule 78; and (b) in respect of claims or specified parts of claims which are eligible for inclusion in collective proceedings in accordance with rule 79. (2) If the Tribunal makes a collective proceedings order it may attach such conditions to the order or give such directions as it thinks fit, including (a) directions for filing and service of the order, pleadings and any other document in relation to the collective proceedings; and (b) directions regarding any class member who is a child or person who lacks capacity. 79(1) The Tribunal may certify claims as eligible for inclusion in collective proceedings where, having regard to all the circumstances, it is satisfied by the proposed class representative that the claims sought to be included in the collective proceedings are brought on behalf of an identifiable class of raise common issues; and are suitable to be brought in collective (a) persons; (b) (c) proceedings.
In determining whether the claims are suitable to be (2) brought in collective proceedings for the purposes of paragraph (1)(c), the Tribunal shall take into account all matters it thinks fit, including the costs and the benefits of continuing the (a) whether collective proceedings are an appropriate means for the fair and efficient resolution of the common issues; (b) collective proceedings; (c) whether any separate proceedings making claims of the same or a similar nature have already been commenced by members of the class; (d) the size and the nature of the class; (e) whether it is possible to determine in respect of any person whether that person is or is not a member of the class; (f) whether the claims are suitable for an aggregate award of damages; and the availability of alternative dispute resolution (g) and any other means of resolving the dispute, including the availability of redress through voluntary schemes whether approved by the CMA under section 49C of the 1998 Act or otherwise.
In determining whether collective proceedings should (3) be opt in or opt out proceedings, the Tribunal may take into account all matters it thinks fit, including the following matters additional to those set out in paragraph (2) the strength of the claims; and (a) (b) whether it is practicable for the proceedings to be brought as opt in collective proceedings, having regard to all the circumstances, including the estimated amount of damages that individual class members may recover. (4) At the hearing of the application for a collective proceedings order, the Tribunal may hear any application by the defendant (a) under rule 41(1), to strike out in whole or part any or all of the claims sought to be included in the collective proceedings; or (b) under rule 43(1), for summary judgment. (5) Any member of the proposed class may apply to make submissions either in writing or orally at the hearing of the application for a collective proceedings order.
A CPO is not either the beginning or the end of the measures whereby the CAT may case manage collective proceedings.
Under rule 76(9) the CAT must convene a case management conference for the management of the application for a CPO.
Rule 85 contains wide powers for the CAT to stay collective proceedings or to vary or revoke a CPO, including power to add, remove or substitute parties and power to order the amendment of the claim form.
Rule 88 confers wide powers of case management, exercisable at any time, while rule 89 confers power to order disclosure, in the widest possible form.
Finally, rule 115(3) empowers the president of the CAT to issue practice directions.
The current Guidance (published by the CAT in 2015) has the force of a practice direction.
Paragraph 6.13 provides that: The proposed class representative should send with the collective proceedings claim form any evidence relied on in support of the application for a CPO.
That may include, for example, a witness statement by or on behalf of the proposed class representative addressing the considerations raised by rules 78 and 79; and an experts report regarding the way in which the common issues identified in the claim form may suitably be determined on a collective basis.
Paragraph 6.39 deals with the requirement in rule 79(3)(a) to consider the strength of the claims when deciding whether collective proceedings should be opt in or opt out.
It provides: Strength of the claims (rule 79(3)(a)) Given the greater complexity, cost and risks of opt out proceedings, the Tribunal will usually expect the strength of the claims to be more immediately perceptible in an opt out than an opt in case, since in the latter case, the class members have chosen to be part of the proceedings and may be presumed to have conducted their own assessment of the strength of their claim.
However, the reference to the strength of the claims does not require the Tribunal to conduct a full merits assessment, and the Tribunal does not expect the parties to make detailed submissions as if that were the case.
Rather, the Tribunal will form a high level view of the strength of the claims based on the collective proceedings claim form.
For example, where the claims seek damages for the consequence of an infringement which is covered by a decision of a competition authority (follow on claims), they will generally be of sufficient strength for the purpose of this criterion.
Paragraph 6.43 of the Guidance provides that defendants applications to strike out or for summary judgment made before the certification hearing will generally be dealt with at that hearing, together with any application for security for costs.
The decision of the CAT to refuse certification
In a reserved judgment the CAT refused Mr Merricks a CPO upon two
distinct but related grounds, both relating to the eligibility criterion under section 47B(5)(b) and (6) of the Act: [2017] CAT 16; [2018] Comp AR 1.
This was not because the claims failed to raise the same, similar or related issues, even though the CAT held that the merchant pass on issue was not a common issue in that sense.
The overcharge issue was a common issue, so their conclusion that the merchant pass on issue was not common was not fatal to the application.
Rather the refusal of a CPO was because the claims were not suitable to be brought in collective proceedings.
The first reason was that the claims were not suitable for an aggregate award of damages, within rule 79(2)(f).
This was sufficient on its own to require refusal of a CPO.
The second reason was that Mr Merricks proposals for distribution of any aggregate award did not respond in any way to the compensatory principle which the CAT regarded, on common law principles, as an essential requirement of any distributive scheme.
This was not a requirement mentioned in the Act, the Rules or the Guidance, but it was regarded by the CAT as a relevant matter under rule 79(2), also sufficient on its own to require a CPO to be refused.
The first reason requires some unpacking.
Mr Merricks supported his application by an expert report from Dr Veljanovski, an economist, and Mr Dearman, a forensic accountant, which sought to explain (inter alia) the methodology by which it was proposed to support an award of aggregate damages for the losses cumulatively suffered by an enormous class over the Infringement Period.
That methodology included dividing the retail goods and services market into some 11 sectors, seeking to establish the degree of merchant pass on in each and then deriving a weighted average across the retail market as a whole.
Expressed as a fraction or percentage, that average could be used to estimate the amount of the overcharge (separately identified) passed on to consumers, and therefore the amount of the overcharge which represented the aggregate loss of the consumers, as opposed to the merchants, as a separate class.
After a hearing which included questioning of the experts by the members of the CAT and some cross examination by counsel for Mastercard, the CAT concluded that the experts had not demonstrated a sufficient likelihood of there being available at trial sufficient data for all those sectors across the whole of the Infringement Period to enable that methodology to generate a sufficiently reliable result.
The CAT did not by this conclusion mean that they regarded it as impossible, or even unlikely, for Mr Merricks to be able to prove at trial that the class had suffered some loss.
Rather, their concern was as to the probable unreliability of the quantification of that loss, on a class wide basis as permitted by the procedure for an award of aggregate damages.
Their conclusion is encapsulated in this extract from para 78 of the judgment: . we are unpersuaded on the material before us that there is sufficient data available for this methodology to be applied on a sufficiently sound basis.
It follows that we are not satisfied, and indeed very much doubt, that the claims are suitable for an aggregate award of damages: see rule 79(2)(f).
The CATs second reason is, in a sense, self explanatory.
When a class is constituted by all consumers who, during a 16 year period, purchased goods and services from one or more of the half million or so merchants which operated the Mastercard scheme, it is obvious that there will be wide divergences in the impact of any overcharge upon each one of them, viewed individually, even if all of them will probably have suffered some loss, because of the virtual impossibility of a consumer entirely avoiding a merchant operating Mastercards scheme for any of their purchases.
These divergences will only be partly mitigated by adoption of the proposed annual basis of per capita distribution.
Even within a single year, the effect of an overcharge upon individual consumers will depend upon sectoral variations in merchant pass on, the particular focus of the consumers spending, and the relative wealth of each consumer.
The CAT regarded it as axiomatic, in accordance with the basic common law principle that damages had to be compensation for loss, that if an estimation of aggregate damages was adopted which was not itself based in any way upon an assessment of individual loss, then: Such an approach can only be permissible, in our view, if there is then a reasonable and practicable means of getting back to the calculation of individual compensation. (para 79) In the CATs view, a per capita per annum basis of distribution of aggregate damages entirely failed to satisfy that requirement.
At para 84 they said: The problem in the present case is that there is no plausible way of reaching even a very rough and ready approximation of the loss suffered by each individual claimant from the aggregate loss calculated according to the applicants proposed method.
At para 88 the CAT concluded that a method of distribution which did not serve the compensatory principle could not be a reasonable basis for the distribution of aggregate damages.
The Court of Appeal
On Mr Merricks appeal the Court of Appeal (Patten, Hamblen and Coulson LJJ) concluded, in a judgment of the court, that the CATs decision to refuse a CPO had been vitiated by five errors of law: [2019] EWCA Civ 674; [2019] Bus LR 3025.
First, as already noted, the CAT had wrongly regarded the merchant pass on issue as not being a common issue.
Secondly, the CAT had in its approach to the issue as to the likely availability of data for the quantification of merchant pass on set an illegitimately high merits threshold at the certification stage.
Thirdly, for that purpose the CAT conducted in effect a mini trial, involving the cross examination of experts, whereas they should have confined themselves to the question whether, on the documents, the claim form disclosed a real prospect of success.
Fourthly the CAT had been wrong to conclude that aggregate damages could not be distributed by a method which paid no regard to differing levels of individual loss.
Finally, it had been premature for the CAT to reach a final, and adverse, conclusion about the proposed method of distribution at the certification stage, and to use that conclusion as a self standing reason for refusing certification at all.
Both the CAT and the Court of Appeal treated as highly persuasive some dicta in the leading Canadian case on certification, Pro Sys Consultants Ltd v Microsoft Corpn [2013] SCC 57.
The CAT purported to rely upon them as the basis for their conclusion that the claims were unsuitable for aggregate damages.
The Court of Appeal treated the same (and other) Canadian dicta as the foundation for their decision that the merits threshold for certification was lower than the hurdle which the CAT had applied.
It is convenient at this stage to summarise the Canadian jurisprudence, and to set it in its own statutory and procedural context.
The Canadian Jurisprudence on Certification of Collective Proceedings
Many Canadian provinces and territories developed a statutory structure for collective proceedings (there called class proceedings) both earlier, and comprehending a more general range of potential claims, than in the UK.
For present purposes it is sufficient to consider the regime enacted in British Columbia.
By its Class Proceedings Act 1996 (the CPA) opt out class proceedings for civil claims generally were introduced subject to a certification procedure, with provision for the award of aggregate damages.
Ontario had adopted a similar structure in 1992.
The Canadian structures were regarded by the UK government as the best model for the collective proceedings regime introduced in 2015 (see para 194 of the Departments Final Impact Assessment published in January 2013, following the consultation referred to above).
There are many similarities and some differences between the Canadian and UK statutory structures.
Both operate within a civil procedural framework based upon common law principles and which is guided by a similar form of overriding objective: see eg rule 1 3 of British Columbias Supreme Court Civil Rules, BC Regulation 168/2009.
Both may be said to serve broadly the same statutory purpose of providing effective access to justice for claimants for whom the pursuit of individual claims would be impracticable or disproportionate.
In Hollick v Toronto (City) 2001 SCC 68; [2001] 3 SCR 158, Chief Justice McLachlin described the beneficial purposes of class action procedure in these terms, at para 15, speaking of the Ontario Class Proceedings Act 1992: The Act reflects an increasing recognition of the important advantages that the class action offers as a procedural tool class actions provide three important advantages over a multiplicity of individual suits.
First, by aggregating similar individual actions, class actions serve judicial economy by avoiding unnecessary duplication in fact finding and legal analysis.
Second, by distributing fixed litigation costs amongst a large number of class members, class actions improve access to justice by making economical the prosecution of claims that any one class member would find too costly to prosecute on his or her own.
Third, class actions serve efficiency and justice by ensuring that actual and potential wrongdoers modify their behaviour to take full account of the harm they are causing, or might cause, to the public.
In proposing that Ontario adopt class action legislation, the Ontario Law Reform Commission identified each of these advantages In my view, it is essential therefore that courts not take an overly restrictive approach to the legislation, but rather interpret the Act in a way that gives full effect to the benefits foreseen by the drafters.
Section 4(1) of the British Columbia CPA requires the court to certify claims as class proceedings where all the following requirements are met: a.
The pleadings disclose a cause of action, b. There is an identifiable class, c.
The claims raise common issues, d. A class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues, and e. There is a suitable representative plaintiff.
Section 4(2) requires the court to address the question whether a class proceeding would be preferable by reference to all relevant matters, including a list of five which are loosely similar to those in the CATs rule 79(2).
Power to award aggregate damages in class proceedings is conferred by section 29, but the suitability of the case for an award of aggregate damages is not one of the relevant factors listed in section 4(2).
The leading case on the certification of class proceedings in Canada is the decision of the Canadian Supreme Court in Pro Sys Consultants Ltd v Microsoft Corpn [2013] SCC 57 in 2013, on appeal from British Columbia.
The Supreme Court restored an order for the certification of class proceedings made at first instance, which had been set aside by the BC Court of Appeal.
The claims were brought on behalf of the ultimate consumers of computer software after an alleged unlawful overcharge by Microsoft which it was claimed had been passed on by the intermediate merchants.
For present purposes there were two relevant conclusions.
The first was that the threshold test for establishing that the pleadings disclosed a cause of action was the equivalent of the strike out test in English civil procedure.
The second was that the threshold for the establishment of the other conditions for certification was that there should be some basis in fact for a conclusion that the requirement was met.
This low threshold, derived from the Supreme Courts earlier decision in the Hollick case, was not a merits test, applied to the claim itself.
Rather the question was whether the applicant could show that there was some factual basis for thinking that the procedural requirements for a class action were satisfied, so that the action was not doomed to failure at the merits stage by reason of a failure of one or more of those requirements: see per Rothstein J at paras 99 to 105.
The standard of proof at the certification stage came nowhere near a balance of probabilities.
One of the many issues in the Microsoft case was whether the requirement for common issues was satisfied.
In a passage which has come to assume a central place in the submissions in this case, at all levels, Rothstein J said this, at para 118, about the expert methodology put forward in support of the claim: In my view, the expert methodology must be sufficiently credible or plausible to establish some basis in fact for the commonality requirement.
This means that the methodology must offer a realistic prospect of establishing loss on a class wide basis so that, if the overcharge is eventually established at the trial of the common issues, there is a means by which to demonstrate that it is common to the class (ie that passing on has occurred).
The methodology cannot be purely theoretical or hypothetical but must be grounded in the facts of the particular case in question.
There must be some evidence of the availability of the data to which the methodology is to be applied.
Subsequent reported decisions in Canada have fortified this low threshold approach to meeting the conditions for certification.
In Ewert v Nippon Yusen Kabushiki Kaisha [2019] BCCA 187, paras 105 to 109 the BC Court of Appeal warned against imposing an excessive burden on the provision of expert evidence about the likely availability of data at the certification stage, in particular because it necessarily preceded the processes of disclosure which would become available after certification.
The some basis in fact test required only a minimum evidentiary basis and was not an onerous one.
As recently as September 2019 the Supreme Court of Canada affirmed the approach taken to certification in the Microsoft case, in Pioneer Corpn v Godfrey [2019] SCC 42, paras 106 to 108.
I regard the Canadian jurisprudence as persuasive in the UK not only because of the greater experience of their courts in the conduct of class actions but also because of the substantial similarity of purpose underlying both their legislation and ours.
Nonetheless in the analysis which follows I base myself firmly on the true construction of the UK legislation, set against the background of the common law and civil procedure against which it falls to be construed.
The Parties Submissions
The main submissions of counsel for Mastercard were that the CATs judgment disclosed no error of law, that its treatment of the issue as to the suitability of the claims for aggregate damages was both expressly and in substance based upon the Microsoft criteria, and that the CAT was entitled to take into account at the certification stage the fact that Mr Merricks distribution method did nothing to implement the compensatory principle in its application to individual consumers.
In particular the CAT was entitled to identify each of the two particular factors (suitability for aggregate damages and distribution method) as sufficient on its own to require certification to be refused.
Further the CAT was entitled to ask questions of Mr Merricks experts and to permit limited cross examination for the purpose of clarifying their proposed methodology in this very large and complex case.
For their part counsel for Mr Merricks broadly supported the criticisms made of the CATs judgment by the Court of Appeal.
In addition they sought to rely upon supplementary expert evidence, served after the hearing before the CAT, which the Court of Appeal had found it unnecessary to consider.
This court looked at the material de bene esse but I have not found it necessary to consider it either.
Analysis
An appreciation of the legal requirements of the certification process, and in particular their level of severity, needs to be derived from setting the express statutory provisions of the Act and the Rules in their context as a special part of UK civil procedure, with due regard paid to their purpose.
Collective proceedings are a special form of civil procedure for the vindication of private rights, designed to provide access to justice for that purpose where the ordinary forms of individual civil claim have proved inadequate for the purpose.
The claims which are enabled to be pursued collectively could all, at least in theory, be individually pursued by ordinary claim, in England and Wales under the CPR, under the protection of the Overriding Objective.
It follows that it should not lightly be assumed that the collective process imposes restrictions upon claimants as a class which the law and rules of procedure for individual claims would not impose.
The issues which gave rise to the forensic difficulties which led to the CATs refusal of certification in the present case all relate to the quantification of damages, both at the class level (where the claims were held to be unsuitable for aggregate damages) and at the individual level (where the method of distribution was found to pay insufficient respect to the compensatory principle).
In this follow on claim Mr Merricks and the class he seeks to represent already have a finding of breach of statutory duty in their favour.
All they would need as individual claimants to establish a cause of action would be to prove that the breach caused them some more than purely nominal loss.
In order to be entitled to a trial of that claim they would (again individually) need only to be able to pass the strike out and (if necessary) summary judgment test: ie to show that the claim as pleaded raises a triable issue that they have suffered some loss from the breach of duty.
Where in ordinary civil proceedings a claimant establishes an entitlement to trial in that sense, the court does not then deprive the claimant of a trial merely because of forensic difficulties in quantifying damages, once there is a sufficient basis to demonstrate a triable issue whether some more than nominal loss has been suffered.
Once that hurdle is passed, the claimant is entitled to have the court quantify their loss, almost ex debito justitiae.
There are cases where the court has to do the best it can upon the basis of exiguous evidence.
There are cases, such as general damages for pain and suffering in personal injury claims, where quantification defies scientific analysis, where the court has to apply general tariffs developed over many years by the common law, and now enshrined in the Judicial College Guidelines for the Assessment of General Damages in Personal Injury.
In many cases the court unashamedly resorts to an element of guesswork: see generally McGregor on Damages, 20th ed (2017), paras 10 001 to 10 007.
A resort to informed guesswork rather than (or in aid of) scientific calculation is of particular importance when (as here) the court has to proceed by reference to a hypothetical or counterfactual state of affairs.
The loss may have to be measured by reference to what the court thinks a claimant would have done if the defendant had not committed the wrong complained of.
Sometimes the quantification depends upon what a third party would have done, and the court has to evaluate the claimants loss of a chance.
Chaplin v Hicks [1911] 2 KB 786 is a famous example.
At p 792 Vaughan Williams LJ said this: In early days when it was necessary to assess damages, no rules were laid down by the courts to guide juries in the assessment of damages for breach of contract; it was left to the jury absolutely.
But in course of time judges began to give advice to juries; as the stress of commerce increased, let us say between the reigns of Queen Elizabeth and Queen Victoria, rule after rule was suggested by way of advice to juries by the judges when damages for breach of contract had to be assessed.
But from first to last there were, as there are now, many cases in which it was difficult to apply definite rules.
In the case of a breach of a contract for the delivery of goods the damages are usually supplied by the fact of there being a market in which similar goods can be immediately bought, and the difference between the contract price and the price given for the substituted goods in the open market is the measure of damages; that rule has been always recognized.
Sometimes, however, there is no market for the particular class of goods; but no one has ever suggested that, because there is no market, there are no damages.
In such a case the jury must do the best they can, and it may be that the amount of their verdict will really be a matter of guesswork.
But the fact that damages cannot be assessed with certainty does not relieve the wrong doer of the necessity of paying damages for his breach of contract Fletcher Moulton LJ emphasised the entitlement of the claimant to an assessment, at p 796: The present case is a typical one.
From a body of 6,000, who sent in their photographs, a smaller body of 50 was formed, of which the plaintiff was one, and among that smaller body 12 prizes were allotted for distribution; by reason of the defendants breach of contract she has lost all the advantage of being in the limited competition, and she is entitled to have her loss estimated.
I cannot lay down any rule as to the measure of damages in such a case; this must be left to the good sense of the jury.
This principle of entitlement to quantification notwithstanding forensic difficulty has stood the test of time and outlasted the involvement of civil juries in the assessment of damages.
In Davies v Taylor [1974] AC 207, 212, Lord Reid said: There can be no question of proving as a fact that she would have received a certain amount of benefit.
No one can know what might have happened had he not been killed.
But the value of the prospect, chance or probability of support can be estimated by taking all significant factors into account.
But, perhaps on an application of the de minimis principle, speculative possibilities would be ignored.
I think that must apply equally whether the contention is that for some reason or reasons the support might have increased, decreased or ceased altogether.
The court or jury must do its best to evaluate all the chances large or small, favourable or unfavourable.
For a practical example of the application of this principle in the context of infringement of intellectual property rights see Experience Hendrix LLC v Times Newspapers Ltd [2010] EWHC 1986 (Ch), paras 204 205 per Blackburne J.
This unavoidable requirement for quantification in order to do justice is not limited to damages.
There are occasions where the court has to quantify or value some right or species of property and does not allow itself to be put off by forensic difficulties, however severe.
For example a rateable value may have to be assessed in relation to property, such as a stately home, where there are no real comparables at all, and it has never been let.
Or a market rent may have to be assessed as at a date when there are no remotely contemporaneous comparables.
Assisted by experts, the court makes use of the best evidence available, often by making quite broad assumptions about market movements over a long period of time.
See generally Dennard v PricewaterhouseCoopers [2010] EWHC 812 (Ch), para 182 per Vos J and Capita Alternative Fund Services (Guernsey) Ltd v Drivers Jonas (A Firm) [2012] EWCA Civ 1417, para 43 per Gross LJ.
Sometimes the court has to determine the beneficial shares of cohabitees in co owned residential property, where there is no reliable evidence of the parties intentions.
In such cases the court now broadly applies the maxim that equality is equity: see Stack v Dowden [2007] UKHL 17; [2007] 2 AC 432.
In none of these cases does the court throw up its hands and bring the proceedings to an end before trial because the necessary evidence is exiguous, difficult to interpret or of questionable reliability.
In relation to damages, this fundamental requirement of justice that the court must do its best on the evidence available is often labelled the broad axe or broad brush principle: see Watson Laidlaw & Co Ltd v Pott Cassels & Williamson (A Firm) 1914 SC (HL) 18, 29 30 per Lord Shaw.
It is fully applicable in competition cases.
ASDA Stores Ltd v Mastercard Inc [2017] EWHC 93 (Comm) was a claim by an individual merchant arising out of (inter alia) the same breach as in these proceedings.
After citing the Watson Laidlaw case Popplewell J said, at para 306: The broad axe metaphor appears to originate in Scotland in the 19th century.
The more creative painting metaphor of a broad brush is sometimes used.
In either event the sense is clear.
The court will not allow an unreasonable insistence on precision to defeat the justice of compensating a claimant for infringement of his rights.
There is European guidance to the same effect.
In a Commission Staff Working Document entitled Practical Guide on Quantifying Harm in Actions for Damages based on articles 101 and 102, C (2013) 3440, the Commission said: 16.
It is impossible to know with certainty how a market would have exactly evolved in the absence of the infringement of article 101 or 102 TFEU.
Prices, sales volumes, and profit margins depend on a range of factors and complex, often strategic interactions between market participants that are not easily estimated.
Estimation of the hypothetical non infringement scenario will thus by definition rely on a number of assumptions.
In practice, the unavailability or inaccessibility of data will often add to this intrinsic limitation. 17.
For these reasons, quantification of harm in competition cases is, by its very nature, subject to considerable limits as to the degree of certainty and precision that can be expected.
There cannot be a single true value of the harm suffered that could be determined, but only best estimates relying on assumptions and approximations.
Applicable national legal rules and their interpretation should reflect these inherent limits in the quantification of harm in damages actions for breaches of articles 101 and 102 TFEU in accordance with the EU law principle of effectiveness so that the exercise of the right to damages guaranteed by the Treaty is not made practically impossible or excessively difficult.
There is an unresolved question, when there remains uncertainty which cannot be fully resolved, whether the benefit of the doubt should be given to the claimant or to the defendant.
It is unnecessary to deal with it on this appeal, and the court did not seek, or have, the parties submissions on it.
But it is clear from the above citations that justice requires that the damages be quantified for the twin reasons of vindicating the claimants rights and exacting appropriate payment by the defendant to reflect the wrong done.
In the present context that second reason is fortified by the perception that anti competitive conduct may never be effectively restrained in the future if wrongdoers cannot be brought to book by the masses of individual consumers who may bear the ultimate loss from misconduct which has already occurred.
There is nothing in the statutory scheme for collective proceedings which suggests, expressly or by implication, that this principle of justice, that claimants who have suffered more than nominal loss by reason of the defendants breach should have their damages quantified by the court doing the best it can on the available evidence, is in any way watered down in collective proceedings.
Nor that the gatekeeping function of the CAT at the certification stage should be an occasion when a case which has not failed the strike out or summary judgment tests should nonetheless not go to trial because of difficulties in the quantification of damages.
On the contrary, as the Court of Appeal observed at para 59, a refusal of certification of a case like the present is likely to make it certain that the rights of consumers arising out of a proven infringement will never be vindicated, because individual claims are likely to be a practical impossibility.
The evident purpose of the statutory scheme was to facilitate rather than to impede the vindication of those rights.
As Mr Paul Harris QC for Mr Merricks submitted, it is useful to ask whether the forensic difficulties which the CAT considered made the class claim unsuitable for aggregate damages, would have been any easier for an individual claimant to surmount.
His answer, with which I would agree, was they would not be.
The particular difficulties identified by the CAT lay in establishing the overall proportion of any overcharge passed on by merchants to consumers, by means of a weighted average of merchant pass on in each sector of the retail market for goods or services, due to the probable dearth of relevant data for some sectors of the market.
That overall amount is equivalent to the loss suffered by consumers as a class.
But an individual consumer would still have to address the same issue, at least for the years in which he or she was making purchases from merchants, in every sector of the retail market in which that consumer was active.
If that is right why, one asks, should a forensic difficulty in quantifying loss which would not stop an individual consumers claim going to trial (assuming it disclosed a triable issue) stop a class claim at the certification stage?
The answer depends to some extent upon the meaning of suitable as descriptive of claims both generally under section 47B in the phrase suitable to be brought in collective proceedings and under rule 79(2)(f) in the phrase suitable for an aggregate award of damages.
It might mean (i) suitable in the abstract, or (ii) suitable in a relative sense: ie suitable to be brought in collective proceedings rather than individual proceedings, and suitable for an award of aggregate rather than individual damages.
The British Columbia CPA solves this conundrum by using the word preferable instead of suitable, a word plainly asking the question preferable to what?.
The different words used, as between BC and the UK, are at first sight striking.
But a reflection upon the central purpose of the collective proceedings structure, which has substantially the same purpose in the UK as in BC, suggests that suitable to be brought in collective proceedings has the second of those two meanings.
This is because collective proceedings have been made available as an alternative to individual claims, where their procedure may be supposed to deal adequately with, or replace, aspects of the individual claim procedure which have been shown to make it unsuitable for the obtaining of redress at the individual consumer level for unlawful anti competitive behaviour.
The same analysis leads to the same conclusion about the meaning of suitable for an award of aggregate damages under rule 79(2)(f).
The pursuit of a multitude of individually assessed claims for damages, which is all that is possible in individual claims under the ordinary civil procedure, is both burdensome for the court and usually disproportionate for the parties.
Individually assessed damages may also be pursued in collective proceedings, but the alternative aggregate basis radically dissolves those disadvantages, both for the court and for all the parties.
In general, although there may be exceptions, defendants are only interested in the quantification of their overall (ie aggregate) liability.
For the claimants the choice between individual or aggregate assessment will usually be a question of proportionality.
Another basic feature of the law and procedure for the determination of civil claims for damages is of course the compensatory principle, as the CAT recognised.
It is another important element of the background against which the statutory scheme for collective proceedings and aggregate awards of damages has to be understood.
But in sharp contrast with the principle that justice requires the court to do what it can with the evidence when quantifying damages, which is unaffected by the new structure, the compensatory principle is expressly, and radically, modified.
Where aggregate damages are to be awarded, section 47C of the Act removes the ordinary requirement for the separate assessment of each claimants loss in the plainest terms.
Nothing in the provisions of the Act or the Rules in relation to the distribution of a collective award among the class puts it back again.
The only requirement, implied because distribution is judicially supervised, is that it should be just, in the sense of being fair and reasonable.
Moving away from the general background of the law and procedure for civil claims, the following points need emphasis about the statutory structure itself.
First, the Act and Rules make it clear that, subject to two exceptions, the certification process is not about, and does not involve, a merits test.
This is because the power of the CAT, on application by a party or of its own motion, to strike out or grant summary judgment is dealt with separately from certification.
The Rules make separate provision for strike out and summary judgment in rules 41 and 43 respectively, which applies to collective proceedings as to other proceedings before the CAT.
There is no requirement at the certification stage for the CAT to assess whether the collective claim form, or the underlying claims, would pass any other merits test, or survive a strike out or summary judgment application, save that the CAT may, as a matter of discretion, hear such an application at the same time as it hears the application for a CPO: see rule 89(4).
This is the first exception, but inapplicable in the present case because no such application was made.
The second exception is that rule 79(3)(a) makes express reference to the strength of the claims, but only in the context of the choice between opt in and opt out proceedings.
It does so in terms which, by the use of the words the following matters additional to the matters set out in paragraph (2), confirm that the factors relevant to whether the claims are suitable to be brought in collective proceedings do not include a review of the merits.
By contrast with the conditions for certification in British Columbia, which do require that the pleadings disclose a cause of action, not even this basic merits threshold is prescribed in the UK by the Act or the Rules.
Secondly, the listing of a number of factors potentially relevant to the question whether the claims are suitable to be brought in collective proceedings in rule 79(2), within the general rubric all matters it thinks fit shows that the CAT is expected to conduct a value judgment about suitability in which the listed and other factors are weighed in the balance.
The listed factors are not separate suitability hurdles, each of which the applicant for a CPO must surmount.
The hurdles (ie preconditions to eligibility under section 47B(5)(b) and (6)) are only that the claims are brought on behalf of an identifiable class, that they raise common issues and that they are suitable to be brought in collective proceedings: see also rule 79(1).
In particular it is not a condition that the claims are suitable for an award of aggregate damages.
That is only one of many relevant factors in the suitability assessment under rule 79(2).
Thirdly, although the existence of common issues is a hurdle under section 47B(6) and rule 79(1)(b), in the sense that if none is raised the CAT may not make a CPO, it is also a factor relevant to suitability under rule 79(2).
There the question is not whether there are common issues but whether collective proceedings are an appropriate means for the fair and efficient resolution of such common issues as are identified.
At first sight this second inclusion of the common issues question under rule 79(2)(a) seems a little odd.
It may contemplate a situation where a common issue may more fairly and economically be resolved by a procedure other than collective proceedings, perhaps by an individual test case.
But it may also be a potential plus factor in the balance, where a common issue is ideal for determination in collective proceedings, or where all the big issues in a particular dispute are common issues.
However that may be, it must certainly require the CAT first to determine, as it tried to do, what are the main issues in a particular case, and whether or not they are common issues.
Unfortunately, the CAT got the common issue question wrong in relation to one of the two main issues in the present dispute, namely the merchant pass on issue, finding that it was not a common issue at all.
That was the very issue about which the forensic difficulties identified by the CAT led it to refuse certification.
Thus, both the two main issues in the present dispute are common issues, whereas the CAT considered that only one of them was.
Error of law
With the assistance of that analysis I turn to the question whether the refusal of a CPO in the present case by the CAT was vitiated by an error of law.
I do so bearing well in mind that the CAT has unique expertise in making sophisticated economic analysis of a wide variety of data in competition cases, that it is an expert tribunal constituted for that purpose, with economists as well as lawyers on its panels of judges, and that it is the tribunal to which Parliament has entrusted both the exclusive jurisdiction over collective proceedings and, in particular, the conduct of the task of certification, with wide discretionary power for that purpose.
In my judgment the CATs decision was vitiated by error of law.
My reasons largely but not entirely concur with those of the Court of Appeal, but it is appropriate that I set out my own reasoning in full.
I will do so mainly by separate treatment of the CATs two reasons for refusing certification (aggregate damages and distribution method), but I regard the question of certification as involving a single, albeit multi factorial, balancing exercise in which too much compartmentalisation may obscure the true task.
In summary: a. The CAT got the common issue question wrong in relation to the merchant pass on issue, and therefore inevitably failed to include, as an important plus factor in the balance, the fact that this issue, and indeed both the main issues in the case, were common issues.
That was an issue of law. b.
The CAT treated the suitability of the claims for aggregate damages as if it were a hurdle rather than merely a factor to be weighed in the balance.
That was wrong in law, because it misconstrued rule 79(2). c.
In any event the CAT failed to construe suitability (in both of the respects in which it played a part in the process) in the relative sense, and thereby failed to take into account the need to consider whether individual proceedings were a relevant alternative, which they plainly were not, and whether the same difficulties as affected quantification in a collective claim would in any event afflict an individual claimant. d.
The CAT did not take into account the general principle that the court must do what it can with the evidence available when quantifying damages, and therefore allowed undoubted forensic difficulties and shortcomings in the likely availability of data to lead it to a conclusion that claimants with a real prospect of (some) success should be denied a trial by the only procedure available to them in practice. e.
The CAT was wrong in law to regard respect for the compensatory principle as an essential element in the distribution of aggregate damages. f.
By contrast I would not criticise the CAT, as did the Court of Appeal, for having conducted a trial within a trial at the certification stage. g.
Nor do I regard it as inevitably premature for the CAT to have regard to a proposed distribution method at the certification stage.
Common Issues
Having decided that the merchant pass on issue was not a common issue, the CAT continued, at para 67: However, that in itself does not mean that this case is unsuitable for a CPO.
There is no requirement that all the significant issues in the claims should be common issues, or indeed and by contrast with the position under the Federal Rules of Civil Procedure in the United States that the common issues should predominate over the individual issues.
What is required, in the words of section 47(6) CA, is that the claims are nonetheless suitable to be brought in collective proceedings.
Here, the applicant seeks to address the problem of pass through by submitting that the Tribunal can arrive at an aggregate award of damages, which would then be distributed to the class members.
At the beginning of this passage the CAT correctly addresses the common issues requirement as a certification hurdle (under section 47B(6)).
It had already correctly concluded that there was nonetheless another common issue (the overcharge issue), sufficient to surmount the common issues hurdle.
But it then treated the assertion (which it later rejected) that the case was suitable for aggregate damages as a sort of substitute for Mr Merricks failure to show that the merchant pass on issue was a common issue.
Had the CAT concluded (as the Court of Appeal held and which is not appealed) that the merchant pass on issue was a common issue, then this would, or should, have been a powerful factor in favour of certification, under rule 79(2)(a).
As already noted it meant that both the main issues in the case were common issues.
In my view the remainder of the balancing exercise conducted by the CAT never recovered from a starting point in which, far from being treated as a major plus factor, the presence of common issues was regarded as being at the low level sufficient only to surmount the eligibility hurdle.
On any view, it was a sufficiently important error to require the assessment of suitability to be carried out again.
Suitability for Aggregate Damages Not a Hurdle
The CAT concluded its review of the suitability of the case for aggregate damages at para 78.
There follows a section on Distribution on which Mr Merricks also failed (paras 79 to 91) and a section on Authorisation of the Class Representative on which he succeeded (paras 92 to 104).
There is then the stark conclusion at para 141(a) that certification should be refused.
There is no express balancing of factors for or against certification, and the reader is, as the parties both agreed, left to assume that the CAT regarded both the unsuitability of the case for aggregate damages and the failure of the distribution proposal to accord with the compensatory principle as each being, separately, enough to require certification to be refused.
Mr Mark Hoskins QC for Mastercard submitted, correctly, that a tribunal charged with a multi factorial balancing exercise may perfectly properly regard one factor among many as sufficient to compel a particular outcome.
But in such a case, and in particular where some factors are statutory hurdles and others are not, I consider it incumbent upon a tribunal which regards a factor which is not a statutory hurdle but is nonetheless decisive to make that clear in express terms.
Suitability of a case for aggregate damages is plainly not a hurdle.
It is just one of many factors relevant to suitability of the claims for collective proceedings under rule 79(2).
It may well be that it was the CATs failure to recognise that the merchant pass on issue was a common issue that led to it treating the aggregate damages question as being of decisive importance.
The two factors are closely linked because it was the forensic difficulties attending the resolution of the extent of merchant pass on which led the CAT to the conclusion that the case was unsuitable for aggregate damages.
Relative Suitability
I have set out at length why I regard the suitability test as being best understood in a relative rather than abstract sense.
It is clear that the CAT did not make any comparison between collective and individual proceedings when assessing the forensic difficulties lying in the path of the resolution of the merchant pass on issue.
In my view it is clear that they would have been equally formidable to a typical individual claimant, seeking compensation for increased retail prices over the sectors of the market in which he or she was accustomed to make purchases.
That was Mr Harriss submission, and Mr Hoskins had no cogent answer to it.
If those difficulties would have been insufficient to deny a trial to an individual claimant who could show an arguable case to have suffered some loss, they should not, in principle, have been sufficient to lead to a denial of certification for collective proceedings.
Quantifying Damages the Tribunal must do what it can with the available
evidence
I regard the CATs failure to give effect to this basic principle of civil procedure as the most serious of the errors of law discernible in its judgment.
I start by acknowledging the expertise of the CATs factual review of the difficulties.
At the risk of over simplification it may be summarised in this way.
Mr Merricks expert team proposed to deal with the merchant pass on issue by deriving a weighted average pass on percentage from a review of each relevant market sector during the whole of the Infringement Period.
For that purpose they proposed to divide the retail market into some 11 sectors.
But the CAT reviewed a report from RBB Economics entitled Cost pass through: theory, measurement, and potential policy implications prepared for the Office of Fair Trading in 2014, which concluded that, although in some sectors there was reliable data, in many others the data was incomplete and difficult to interpret.
Further, although it might be that litigation between retailers and Mastercard might yield further data by way of disclosure in these proceedings, that would be unlikely to cover the earlier part of the Infringement Period and would involve a very burdensome and hugely expensive exercise.
But the CATs assessment fell well short of suggesting that Mr Merricks would be unable at trial to deploy data sufficient to have a reasonable prospect of showing that the represented class had suffered any significant loss.
The fact that data is likely to turn out to be incomplete and difficult to interpret, and that its assembly may involve burdensome and expensive processes of disclosure are not good reasons for a court or tribunal refusing a trial to an individual or to a large class who have a reasonable prospect of showing they have suffered some loss from an already established breach of statutory duty.
In the context of suitability for collective proceedings or aggregate damages, it is no answer to say that members of the class can bring individual claims.
They would face the same forensic difficulties in establishing merchant pass on, and insuperable funding obstacles on their own, litigating for small sums for which the cost of recovery would be disproportionately large.
The incompleteness of data and the difficulties of interpreting what survives are frequent problems with which the civil courts and tribunals wrestle on a daily basis.
The likely cost and burden of disclosure may well require skilled case management.
But neither justifies the denial of practicable access to justice to a litigant or class of litigants who have a triable cause of action, merely because it will make quantification of their loss very difficult and expensive.
The present case may well present difficulties of those kinds on a grand scale, but they are difficulties which the CAT is probably uniquely qualified to surmount.
It may be that gaps in the data will in some instances be able to be bridged by techniques of extrapolation or interpolation, and that some gaps will be unbridgeable, so that nothing is recovered in relation to particular market sectors or for parts of the Infringement Period.
Nonetheless it is a task which the CAT owes a duty to the represented class to carry out, as best it can with the evidence that eventually proves to be available.
Nor can it be ignored that ADR may help, either in relation to narrowing the issues, or towards an overall settlement.
The Court of Appeal responded to the same aspect of the CATs reasoning by concluding that it amounted to the imposition of an inappropriately high merits threshold at the certification stage.
While I would agree that such a merits threshold should not be applied, beyond the strike out or summary judgment levels, I would prefer to regard this part of the CATs analysis as more directed to the issue about suitability for collective proceedings.
But the boundary between issues as to the likely availability of data at trial and issues as to the merits is by no means easy to define, or to identify in practice.
That is why I have described my reasons for concluding that the CAT erred in law as closely allied with those of the Court of Appeal.
Compensatory principle not essential in distribution of aggregate damages
I have already noted that section 47C of the Act radically alters the established common law compensatory principle by removing the requirement to assess individual loss in an aggregate damages case, and that nothing in the Act or the Rules puts it back again, for the purposes of distribution.
The CAT took the opposite view.
At para 79 it said that in a case where the quantification of aggregate damages takes no account of individual loss, then the process of distribution must, in some way, put it back.
Speaking of aggregate damages determined in that way, the CAT said: Such an approach can only be permissible, in our view, if there is then a reasonable and practicable means of getting back to the calculation of individual compensation.
At para 88 the CAT continued: . even if it were possible to determine with some broad degree of accuracy the weighted average for pass through and thus to estimate the aggregate loss for the class each year, it is the significance of the individual issues remaining which mean that it is impossible in this case to see how the payments to individuals could be determined on any reasonable basis. this application for over 46m claims to be pursued by collective proceedings would not result in damages being paid to those claimants in accordance with that governing principle at all.
For reasons already given, I consider that this approach discloses a clear error in law.
A central purpose of the power to award aggregate damages in collective proceedings is to avoid the need for individual assessment of loss.
While there may be many cases in which some approximation towards individual loss may be achieved by a proposed distribution method, there will be some where the mechanics will be likely to be so difficult and disproportionate, eg because of the modest amounts likely to be recovered by individuals in a large class, that some other method may be more reasonable, fair and therefore more just.
For that purpose the statutory scheme provides scope for members within the class to be heard about the proposed distribution method.
In many cases the selection of the fairest method will best be left until the size of the class and the amount of the aggregate damages are known.
Trial within a trial
The Court of Appeal regarded the questioning and cross examination of Mr Merricks experts at the certification hearing as an inappropriate trial within a trial, indicative of the imposition of an overly high merits threshold.
I would not criticise the CAT on that account.
The CATs own questioning of the experts achieved both greater clarity and a considerable improvement in the quantification methodology then being proposed on Mr Merricks behalf, in a case of unprecedented size and complexity.
It was by no means hostile or adversarial, and the limited cross examination by counsel for Mastercard was closely supervised by the CAT.
It may well be that questioning and cross examination of experts both should and will be a rare occurrence at certification hearings.
But the present case is in my view one where an exception was justified.
Prematurity
Finally, the Court of Appeal regarded any consideration of distribution proposals at, and for the purposes of, the certification stage as premature.
I agree that this will generally be true, not least because issues about distribution mainly engage the interests of the represented class inter se, rather than those of the proposed defendant.
But there may be cases where the issues as to suitability of the claims for collective proceedings will be better addressed when the whole of the representatives proposed scheme, including distribution proposals, are looked at in the round.
In the present case there was nothing in the proposals for distribution I would therefore dismiss the appeal.
I agree with the Court of Appeal that which militated against certification, and an inappropriate element in the distribution proposals would normally be better dealt with at a later stage.
Disposition
the application for a CPO should be remitted to the CAT.
Lord Kerr presided at the hearing of this appeal, participated fully in the deliberations which followed the hearing and oversaw the preparation and discussion of the judgments.
He agreed that the appeal should be dismissed for the reasons set out in this judgment prior to his retirement on 30 September 2020.
There was a delay between the completion of the judgments and their being handed down to allow, in accordance with the Courts practice, the law reporters and counsel an opportunity to check the judgments for typographical errors and minor inaccuracies, and to enable a press summary of the judgments to be prepared.
The judgments were accordingly circulated in draft to the parties legal advisers, with Lord Kerr and Lord Thomas recorded as agreeing with this judgment, and a consequent majority of three to two in favour of dismissing the appeal.
After those administrative steps had been completed, and three days before judgment was due to be handed down, Lord Kerr sadly died.
Following his death Lord Reed as President of the Supreme Court directed under section 43(4) of the Constitutional Reform Act 2005 that the panel for this appeal be re constituted as consisting of myself, Lord Sales, Lord Leggatt and Lord Thomas.
Lord Sales and Lord Leggatt explain in their joint judgment why they agree that, in these circumstances, this appeal should be dismissed, notwithstanding their disagreement with the reasoning in this judgment.
LORD SALES AND LORD LEGGATT:
The Competition Appeal Tribunal (CAT) declined to certify these proceedings as a class action (or collective proceedings, in the language of the applicable legislation) for two distinct reasons: first, because in the CATs assessment the class of claims was not suitable for an aggregate award of damages and in those circumstances not suitable to be brought in collective proceedings; and second, because the class representative, Mr Merricks, did not propose to distribute any damages awarded in a way which would reflect the individual losses suffered by the members of the class.
We agree with Lord Briggs and the Court of Appeal that the CATs second reason was unsound.
However, in our view its first reason was legitimate.
We consider that the CATs assessment that the claims were not suitable for an aggregate award of damages, and on that account not suitable to be brought in collective proceedings, was lawful and the Court of Appeal should not have interfered with it.
We recognise, however, that ours is the minority view.
Lord Kerr, well before his untimely death on 1 December 2020, had expressed his agreement with the final version of the judgment of Lord Briggs and would have been recorded as agreeing with it.
Were the result of his death now to be that the court is left evenly divided, the case would have to be re argued before a different constitution.
As well as being hugely wasteful of resources, this would not be a just outcome.
It would be a consequence simply of the happenstance of Lord Kerrs death occurring during the interval between the completion of the judgments and the date when they were formally handed down: a circumstance which has no bearing on the just decision of this appeal.
We therefore agree that the appeal should be dismissed.
We nevertheless explain the reasons why, had our view been shared by the other members of the court, we would have allowed Mastercards appeal.
Class actions
A new class action regime was introduced in the United Kingdom in 2015 as part of a wider set of reforms of private actions for breaches of competition law.
The central rationale for any class action regime is that it enables claimants to benefit from the same economies of scale as are already naturally enjoyed by the defendant as a single litigant.
It does so by allowing numerous individual claims to be combined into a single claim brought on behalf of a class of persons.
Such a procedural device is especially valuable where a defendants wrongful conduct has caused harm to many people but each individual claim is too small to justify the expense of a separate lawsuit.
Without such a device what may in aggregate be very substantial harm is likely to go unredressed.
As Judge Posner put it in Carnegie v Household International Inc (2004) 376 F 3d 656, 661, a decision of the US Seventh Circuit Court of Appeals: The realistic alternative to a class action is not 17m individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.
This problem has historically impeded the bringing of private actions to seek redress for breaches of competition law in the UK.
As the Government observed in explaining its decision to introduce a class action regime in this field: Breaches of competition law, such as price fixing, often involve very large numbers of people each losing a small amount, meaning it is not cost effective for any individual to bring a case to court.
Allowing actions to be brought collectively would overcome this problem, allowing consumers and businesses to get back the money that is rightfully theirs as well as acting as a further deterrent to anyone thinking of breaking the law.
See Private Actions in Competition Law: A consultation on options for reform government response (January 2013), p 6, para 2.
Experience in other jurisdictions, however, has also shown that a class action regime presents risks.
In particular, there is a risk that speculative actions may be brought claiming large amounts of damages even where there is no realistic prospect of recovering such damages, but where the size of the claims and the heavy costs of defending the action may be used as a threat to induce defendants to settle.
In introducing the new regime in the UK, the Government was alert to this risk.
Immediately after the passage quoted above, its response to the consultation on options for reform continued: Recognising the concerns raised that this could lead to frivolous or unmeritorious litigation, the Government is introducing a set of strong safeguards These strong safeguards were said to include strict judicial certification of cases so that only meritorious cases are taken forward.
This appeal concerns the proper test for such certification and the nature and degree of the scrutiny which it is permissible for the CAT to undertake in operating this safeguard in the collective proceedings regime.
Key features of the collective proceedings regime
The regime was established by the Consumer Rights Act 2015, which made amendments to the Competition Act 1998 (the Act), and by new rules applicable to proceedings before the CAT: the Competition Appeal Tribunal Rules 2015 (SI 2015/1648).
The amendments to the Act and the new rules (the CAT Rules) came into force at the same time on 1 October 2015.
The regime is limited in scope to claims to which section 47A of the Act applies.
These are, broadly speaking, claims for redress for loss or damage caused by an infringement or alleged infringement of competition law.
Section 47B makes provision for collective proceedings whereby two or more such claims may be combined in one action brought before the CAT.
Although claims to which section 47A applies can be brought in the CAT or in the courts, collective proceedings can only be brought in the CAT.
It is clear from the terms of the Act and the CAT Rules that Parliament intended that the CAT should have a substantive role to play in deciding whether claims seeking redress for breaches of competition law may be pursued as collective proceedings and in actively managing such claims.
The CAT is a specialist tribunal which is particularly well suited for this role.
Each panel includes an economist and its legal members have extensive experience in the field.
The CAT has considerable experience and expertise in assessing matters such as evidence from expert economists, economic data and the likely impact and practical workability of economic theories in addressing claims alleging anti competitive conduct.
Group actions which enable a (potentially large) number of claimants to litigate common issues together, allowing them to share costs and obtain one judgment which is binding in relation to all their claims, have long been possible in England and Wales.
Collective proceedings brought under section 47B of the Act, however, have two notable potential advantages for claimants compared to such group actions.
They allow the legal rights of a class of people to be determined without the express consent of the members of the class; and they enable liability to be established and damages recovered without the need to prove that individual members of the class have suffered loss it being sufficient to show that loss has been suffered by the class viewed as a whole.
Each of these features requires some amplification.
Opt out collective proceedings
Generally, legal proceedings may only be brought with the authority of the persons whose rights are sought to be enforced.
Proceedings brought without such authority may be struck out and the person responsible for commencing them held liable to the defendant in damages.
A significant innovation of the collective proceedings regime is the provision in section 47B(11) of the Act for opt out collective proceedings.
These are proceedings brought by a representative on behalf of all the members of a class except any member who opts out by notifying the representative, in a manner and by a time specified, that his or her claim should not be included in the collective proceedings.
This means that a person may become a claimant in collective proceedings without taking any affirmative step and, potentially, without even knowing of the existence of the proceedings and the fact that he or she is a claimant in them.
This arrangement (which applies only to class members domiciled in the UK) is designed to facilitate access to legal redress for those who lack the awareness, capability or resolve required to take the positive step of opting in to legal proceedings.
Aggregate damages
A second major innovation (in terms of UK law) is effected by section 47C(2) of the Act, which provides: The tribunal may make an award of damages in collective proceedings without undertaking an assessment of the amount of damages recoverable in respect of the claim of each represented person.
Such an award of damages is referred to in the CAT Rules as an aggregate award of damages: see rule 73(2).
As pointed out by Professor Rachel Mulheron in an illuminating discussion of the present proceedings, there are two functions which a provision allowing damages to be awarded on an aggregate basis may in principle fulfil: see R Mulheron, Revisiting the Class Action Certification Matrix in Merricks v Mastercard Inc (2019) 30 Kings LJ 396, 412 417.
The first concerns the quantification of loss.
Where the liability of the defendant to the members of a class has been established, such a provision enables damages to be assessed by quantifying the loss suffered by the class as a whole, without the need to determine what loss each individual member of the class has suffered.
This involves a departure from the normal compensatory principle, whereby the object of an award of damages for a civil wrong is to put the claimant (as an individual) in the same financial position as if the wrong had not occurred.
It is clear that section 47C(2) is intended to serve this purpose.
A provision for aggregate damages may, however, go further and serve an additional purpose.
It may also permit liability to be established on a class wide basis without the need for individual members of the class to prove that they have suffered loss, even though this would otherwise be an essential element of their claim.
As Professor Mulheron notes, the nature of a claim for a breach of competition law is that it constitutes a claim in tort for a breach of statutory duty.
Under the general law such a claim is not actionable without proof of loss.
In other words, a defendant commits no wrong and incurs no liability towards a claimant unless its anti competitive behaviour causes that claimant to suffer financial harm.
An aggregate damages provision may dispense with this requirement by permitting liability towards all the members of a class to be established by proof that the class as a whole has suffered loss without the need to show that any individual member of the class has done so.
The Canadian legislation referred to by Lord Briggs has not been interpreted as allowing liability, as well as the quantum of loss, to be established on a class wide basis.
The British Columbia Class Proceedings Act 1996, section 29(1), provides that a court may make an aggregate monetary award if (amongst other requirements) no questions of fact or law other than those relating to the assessment of monetary relief remain to be determined .
In Pro Sys Consultants Ltd v Microsoft Corpn [2013] SCC 57 (Microsoft), paras 128 134, the Supreme Court of Canada held that this provision could not be used to establish proof of loss where this is an essential element of proving liability.
Rothstein J said (at para 133): The [British Columbia legislation] was not intended to allow a group to prove a claim that no individual could.
Rather, an important objective of the [legislation] is to allow individuals who have provable individual claims to band together to make it more feasible to pursue their claims.
The UK legislation is not limited in this way.
Section 47C(2) of the Act contains no wording comparable to that of section 29(1)(b) of the British Columbia Class Proceedings Act, quoted above.
Section 47C(2) is phrased in broad terms and is properly read as dispensing with the requirement to undertake an assessment of the amount of damages recoverable in respect of the claim of each represented person for all purposes antecedent to an award of damages, including proof of liability as well as the quantification of loss.
Such an interpretation better accords both with the language used and with the statutory objective of facilitating the recovery of loss caused to consumers by anti competitive behaviour.
Certification
A class action procedure which has these features provides a potent means of achieving access to justice for consumers.
But it is also capable of being misused.
The ability to bring proceedings on behalf of what may be a very large class of persons without obtaining their active consent and to recover damages without the need to show individual loss presents risks of the kind already mentioned, as well as giving rise to substantial administrative burdens and litigation costs.
The risk that the enormous leveraging effect which such a class action device creates may be used oppressively or unfairly is exacerbated by the opportunities that it provides for profit.
As the Court of Appeal observed in the present case, the power to bring collective proceedings was obviously intended to facilitate a means of redress which could attract and be facilitated by litigation funding: [2019] EWCA Civ 674; [2019] Bus LR 3025, para 60.
Those who fund litigation are, for the most part, commercial investors whose dominant interest is naturally to make money on their investment from the fruits of the litigation.
As noted earlier, to ensure that the substantive legal advantages afforded by the collective proceedings regime are conferred only in appropriate cases, the regime contains a control mechanism of requiring collective proceedings to be certified by the CAT.
Collective proceedings cannot be brought as of right and the CAT is given a broad discretion in deciding whether, and if so in what form, collective proceedings may be pursued.
Thus, section 47B(4) of the Act provides that collective proceedings may be continued only if the CAT makes a collective proceedings order (CPO).
Section 47B(5) lays down two necessary conditions for making a CPO: (i) the person who brings the proceedings must be a person who could be authorised by the CAT to act as the representative claimant in those proceedings, and (ii) the CPO is in respect of claims which are eligible for inclusion in collective proceedings.
Pursuant to section 47B(6), claims are eligible for inclusion in collective proceedings only if two conditions are fulfilled.
These are that the CAT considers that the claims (i) raise the same, similar or related issues of fact or law (the common issues requirement), and (ii) are suitable to be brought in collective proceedings (the suitability requirement).
The meaning and scope of the suitability requirement is central to this appeal.
The CAT rules
Section 47B(1) provides that collective proceedings may be brought [s]ubject to the provisions of this Act and Tribunal rules.
Rule 2(2) of the CAT Rules requires that the rules to be applied by the CAT are interpreted in accordance with the governing principles set out in rule 4.
Rule 4 is in similar terms to Part 1 of the Civil Procedure Rules 1998, which requires courts to seek to give effect to the overriding objective of dealing with cases justly and at proportionate cost and also requires the active management of cases.
Rule 4(2) provides that dealing with a case justly and at proportionate cost includes, so far as is practicable: ensuring that it is dealt with expeditiously and fairly; (d) (e) allotting to it an appropriate share of the Tribunals resources, while taking into account the need to allot resources to other cases;
By virtue of section 47B(1) and the co ordinated introduction of the CAT Rules in tandem with the collective proceedings provisions in the Act, it is clear that the provisions in the Act and the rules are to be read together and as subject to the same general principles.
In applying and exercising its powers under the collective proceedings provisions in the Act, the CAT must therefore seek to ensure that claims are dealt with justly and at proportionate cost, reading that objective in the light of the particular reforms effected by the primary legislation to which we have referred.
Part 5 of the CAT Rules is concerned specifically with collective proceedings and collective settlements.
Rule 75 deals with the contents of a collective proceedings claim form and provides that it shall contain, among other things, a summary of the basis on which it is contended that the criteria for certification and approval in rule 79 are satisfied (rule 75(3)(e)) and a statement of the relief sought including where applicable, an estimate of the amount claimed in damages, including whether an aggregate award of damages is sought, supported by an explanation of how that amount has been calculated (rule 75(3)(i)(i)).
Rule 76(9) provides that as soon as practicable the CAT will hold a case management conference to give directions in relation to the application for a CPO.
This recognises that collective proceedings are an unusual form of litigation which are likely to require careful management by the CAT and indicates that the CAT has a substantive role above and beyond being a mere rubber stamp for the issuing of collective proceedings.
This is also recognised by the requirement in rule 77(1) to hear the parties before a CPO may be made.
Rule 77(1) tracks section 47B(5) of the Act in specifying the two conditions which must be satisfied before the CAT may make a CPO the first being that the CAT considers that the proposed class representative is a person who could be authorised to act in that capacity in accordance with rule 78, and the second that the order is in respect of claims or parts of claims which are eligible for inclusion in collective proceedings in accordance with rule 79.
Authorisation of the class representative
Rule 78 deals with authorisation of the class representative.
An applicant may be authorised to act as the class representative only if the CAT considers this to be just and reasonable (rule 78(1)).
This is to be assessed by reference to a number of factors, including whether that person would fairly and adequately act in the interests of the class members (rule 78(2)(a)); if there is more than one applicant seeking authorisation to act as class representative, which of them would be the most suitable (rule 78(2)(c)); and whether the applicant will be able to pay the defendants recoverable costs if ordered to do so (rule 78(2)(d)).
In determining whether the applicant would act fairly and adequately in the interests of the class members, the CAT is required to take into account all the circumstances, including whether the proposed class representative is a member of the class, and if so, its suitability to manage the proceedings (rule 78(3)(a)).
It is clear that in these sub rules, the word suitable or suitability means suitable to fulfil the purpose which a class representative is intended to fulfil in the context of the collective proceedings regime.
This is consistent with the meaning of the suitability requirement in rule 79, to which we now come.
Eligibility of claims
Rule 79 deals with the certification of claims as eligible for inclusion in collective proceedings.
Lord Briggs has set out the full text.
For present purposes, the following parts of it are relevant.
Rule 79(1) states that the CAT may certify claims as eligible for inclusion in collective proceedings where, having regard to all the circumstances, it is satisfied that three conditions are fulfilled, namely that the proceedings are (a) brought on behalf of an identifiable class of persons; (b) raise common issues; and (c) are suitable to be brought in collective proceedings.
Three points arise from this.
First, the rule makes clear that the question of suitability is distinct from the question whether the claims raise common issues.
Second, by using the phrase where it is satisfied rather than simply stating the three conditions, the rule emphasises that deciding whether the conditions are fulfilled is a matter for the judgment of the CAT.
Third, the rule requires the CAT in making that decision to adopt a very wide frame of reference, in that it is to have regard to all the circumstances.
Rule 79(2) reinforces these points.
It is central to this appeal.
It provides as follows: (2) In determining whether the claims are suitable to be brought in collective proceedings for the purposes of paragraph (1)(c), the Tribunal shall take into account all matters it thinks fit, including (a) whether collective proceedings are an appropriate means for the fair and efficient resolution of the common issues; (b) collective proceedings; the costs and the benefits of continuing the (c) whether any separate proceedings making claims of the same or a similar nature have already been commenced by members of the class; the size and the nature of the class; (d) (e) whether it is possible to determine in respect of any person whether that person is or is not a member of the class; (f) whether the claims are suitable for an aggregate award of damages; and (g) the availability of alternative dispute resolution and any other means of resolving the dispute, including the availability of redress through voluntary schemes whether approved by the [Competition and Markets Authority] under section 49C of the 1998 Act or otherwise.
This provision focuses on the suitability requirement as a distinct condition for the making of a CPO.
It again emphasises the substantive rather than merely checking role for the CAT in making the relevant judgment whether claims are suitable to be brought in collective proceedings and again emphasises the wide frame of reference to be adopted, by saying that the CAT shall take into account all matters it thinks fit, and providing a non exhaustive list of matters which the CAT might think fit to consider and place weight upon.
The width of the frame of reference in itself shows that the CATs judgment as to suitability is central, since the very wide range of matters to which the CAT might have regard, the disparity in their nature and their incommensurability means that there may often be wide scope for reasonable differences of view about what relevance or weight should be given to what factors and what overall conclusion should be drawn on the suitability issue.
The Act and the CAT Rules identify the CAT as the body whose judgment matters for this purpose.
Rule 79(3) identifies additional factors to those set out in rule 79(2) which the CAT may take into account if it thinks fit in deciding whether collective proceedings should be opt in or opt out proceedings, including the strength of the claims.
This indicates that the strength of the claims is likely to be a matter of particular significance in determining whether proceedings are suitable to be brought as opt out proceedings, but it does not give rise to an inference that the strength of the claims can never be relevant for the purposes of rule 79(2).
The explicit language used in rule 79(2) that the CAT should take into account all matters it thinks fit allows it to do so in an appropriate case.
Clearly, if the CAT thinks it relevant when deciding on suitability to have regard in any way to the strength of the claims, it has to bear in mind that it would be wholly inappropriate at the preliminary stage of deciding whether claims may proceed by way of collective proceedings to hold a mini trial.
Furthermore, since the object of the collective proceedings regime is to facilitate access to justice for those with small but potentially meritorious claims, it would also be wrong in principle to make any consideration of the merits of the claims at the CPO stage excessively demanding, thereby preventing claimants from having enhanced access to the judicial process under the collective proceedings regime without a sufficiently good reason.
This point is further underlined by rule 79(4), which provides that a strike out application under rule 41 or a summary judgment application under rule 43 may be heard at the hearing of an application for a CPO.
The CAT has the usual powers to strike out a claim, including if it considers that there are no reasonable grounds for making it (rule 41), and to give summary judgment for a claimant or a defendant if it considers that either of them has no real prospect of success (rule 43).
Given these powers, the suitability requirement should not be interpreted as involving a test of the substantive merits of the claims which is comparable to but higher than the test that would be applicable under these rules.
The suitability requirement
A critical issue on this appeal is: what is the suitability requirement concerned with? What makes claims suitable to be brought in collective proceedings, over and above the fact that they raise common issues?
In our view, the word suitable in this context means suitable to be grouped together and determined collectively in accordance with the regime established by the Act and the CAT Rules.
Applying this criterion requires the tribunal to focus on the special features of this regime and the objects which collective proceedings under the regime are intended to fulfil.
This includes consideration of whether collective proceedings offer a reasonable prospect of achieving a just outcome.
It also calls for an assessment of proportionality: is combining these claims and determining them collectively in accordance with the collective proceedings regime likely to achieve the fair determination of the claims at proportionate cost?
If other forms of proceeding are in contemplation, either by way of a group action or some different collective proceeding, it may be relevant to assess which form of proceeding is better suited to securing justice at proportionate cost when deciding whether, overall, the proceedings for which certification is sought are suitable.
We cannot agree with Lord Briggs, however, that the suitability requirement is relative and solely a question of whether claims are suitable to be brought in collective proceedings rather than individual proceedings.
First of all, this is not what the Act says.
If the intention had been to make the test inherently comparative, it would have been easy to do so by using language such as that used in the British Columbia Class Proceedings Act, section 4(1)(d), which imposes a test of whether a class proceeding would be the preferable procedure.
As Lord Briggs observes, the use of that term implicitly poses the question preferable to what?.
By contrast, the UK legislature has not chosen to formulate the criterion as one of comparative merit or suitability.
Second, it does not follow that, because collective proceedings are an alternative to conventional proceedings brought by or on behalf of individuals, they are intended to be available in any case where they would be less unsatisfactory than such individual proceedings.
As we have noted, collective proceedings confer substantial legal advantages on claimants and burdens on defendants which are capable of being exploited opportunistically.
In the absence of wording which says so, we cannot accept that demonstrating that the members of the proposed class would face greater difficulties pursuing their claims individually must be regarded as sufficient to justify allowing their claims to be brought as a collective proceeding, with the advantages that this confers.
Such an approach would very significantly diminish the role and utility of the certification safeguard.
Third, in so far as comparisons are relevant, the choice is not in any case a binary one.
The question is not whether some form of collective proceeding is preferable to individual proceedings; it is whether the claims sought to be included in the collective proceedings which the tribunal is asked to certify are suitable to be combined in such proceedings.
Answering that question in the negative does not mean that there is no other class of claims which is suitable to be brought as collective proceedings.
There may well be.
Suitability for aggregate damages
In determining whether the claims sought to be combined in collective proceedings are suitable to be brought in such proceedings, one of the matters specifically identified in rule 79(2) is whether the claims are suitable for an aggregate award of damages.
In some cases this is likely to be a critical consideration.
As we noted earlier, the potential for an aggregate award of damages is a major innovative feature of the collective proceedings regime which, in cases where it is available, has substantive legal effects.
Such an award dispenses not only with the legal requirement to calculate damages on an individual basis but also with the legal requirement for a claimant to prove individual loss in order to establish liability.
Contrary to the position spelled out by Rothstein J in the Microsoft case (quoted earlier), it allows a group to prove a claim even though individuals within the group might well not be able to do so.
In our view, suitable has a similar meaning in considering whether the claims are suitable for an aggregate award of damages to its meaning in considering the more general question of whether the claims are suitable to be brought in collective proceedings.
In determining whether a class of claims is suitable for an aggregate award of damages, the focus is on whether the claims are suitable to be grouped together as a unit for the purpose of proving and assessing loss, justly and at proportionate cost.
This calls for an assessment of whether there is, or is likely to be if the proceedings are authorised to continue as collective proceedings, a method available which can be used to assess loss suffered by the class as a whole with a reasonable degree of accuracy.
In making this judgment, the CAT will naturally have in mind the broad axe principle emphasised by Lord Briggs.
The common law recognises that, even where the loss suffered by a claimant is purely financial and is in principle a precise sum of money, determining this sum accurately may be practically impossible or achievable only at disproportionate cost.
The law does not require unreasonable precision from the claimant: see eg Sainsburys Supermarkets Ltd v Visa Europe Services Llc [2020] UKSC 24; [2020] Bus LR 1196, paras 217 223.
At the same time, justice to a defendant requires that it should not be ordered to pay damages which are not based on a reasonable estimate of loss (all the more so if what may be a very large sum of damages is being awarded without requiring the proof of individual loss which is normally a condition of liability).
The object at the certification stage is not of course to quantify the loss suffered by the proposed class.
But in order to be satisfied that the proposed class of claims is suitable for an aggregate award of damages, the CAT is entitled to require the class representative to demonstrate that there is a method which is capable of establishing loss in a reasonable and just way, and at proportionate cost, on a class wide basis.
Again, we do not accept that the test of suitability is relative.
Showing that claims would be difficult or impossible to prove or quantify if pursued individually does not by itself make them suitable for an award of aggregate damages, let alone establish whether the class of claims for which certification is sought is suitable for such an award.
These proceedings
The number of claims sought to be included in these proceedings is by any standard vast.
Mr Merricks (the applicant) applied to the CAT to make a CPO in respect of the following class: Individuals who between 22 May 1992 and 21 June 2008 purchased goods and/or services from businesses selling in the UK that accepted Mastercard cards, at a time at which those individuals were both (1) resident in the UK for a continuous period of at least three months, and (2) aged 16 years or over.
It is to be noted that the class is not limited to individuals who, at any time during the specified 16 year period, possessed or used a Mastercard credit or debit card: it includes anyone (resident in the UK for at least three months and aged 16 or over at any relevant time) who purchased any goods or services from any business selling in the UK that accepted Mastercard cards during this entire period.
The number of such businesses rose from about 500,000 at the start of the period to about 800,000 at the end.
These businesses (the merchants) spanned the whole of the UK economy and operated in very disparate markets.
In consequence, the class in respect of which the CPO was sought was, in substance, the whole of the adult consumer population of the UK during the 16 year claim period, which was about 46.2m people.
As described in more detail by Lord Briggs, the proposed claim relies on a decision of the European Commission in December 2007 as a basis for contending that the merchant service charge paid on transactions by the merchants who participated in the Mastercard payment card scheme was, throughout the claim period, higher than it should have been as a result of a breach by Mastercard of competition law.
The breach involved fixing a default fee called the multilateral interchange fee (MIF) charged (unless otherwise agreed) by the cardholders bank to the merchants bank on payments made using the card.
This fee was included in the merchant service charge deducted from payments by the merchants bank.
It typically accounted for the vast majority of the service charge (eg 1% out of a total charge of 1.3% of a credit card payment).
The allegation made by the applicant was that the merchants had passed on the element of unlawful overcharge included in the merchant service charge to all their customers (whether those customers used a Mastercard card or not) by charging higher prices for goods or services than they would otherwise have done.
The present proceedings were brought on an opt out basis and claimed (as the only relief sought) an aggregate award of damages in a sum estimated in the collective proceedings claim form at around 14 billion.
The proposed method of establishing loss
At the hearing of the application for a CPO, the applicant adduced expert evidence to explain the basis for the class action and how he proposed to establish that the class as a whole had suffered loss and the amount of such loss if the action was allowed to proceed.
The experts methodology involved three steps.
The first step was to calculate the total value of payments made by customers using Mastercard cards in the UK in each year of the claim period.
This has been referred to as the volume of commerce.
It should be possible to calculate the volume of commerce using Mastercards own records.
The second step would be to estimate the amount by which the merchant service charge paid by merchants on the volume of commerce was higher than it would otherwise have been because of the overcharge resulting from the MIF.
There were in fact a number of different MIFs and these changed over the 16 years of the claim period.
It was not in dispute, however, that the amount of the overcharge was capable of assessment, as the MIFs which applied at different times were known and it was common ground that 100% of the MIFs was passed on to the merchants through the merchant service charge.
The third step in the experts proposed method was to estimate the extent to which the overcharge was passed on by merchants to their customers in the form of increased retail prices.
It was in relation to this step that problems arose.
The extent to which merchants might have passed on the overcharge to their customers rather than absorbing it themselves will depend on the markets in which they operated and on their own business strategies: see Sainsburys Supermarkets Ltd v Visa Europe Services Llc; Sainsburys Supermarkets Ltd v Mastercard Inc [2020] UKSC 24; [2020] Bus LR 1196, para 205.
Thus, the experts instructed by the applicant recognised that there will not have been one common rate of pass on which was applied by merchants across the board.
Their proposed approach was to arrive at a global figure by calculating weighted average rates of pass on over time for different sectors of the economy.
They produced a table which broke down the UK economy into 11 broad sectors: food and drink, mixed business, clothing, household, other retailers, motoring, entertainment, hotels, travel, financial and other services.
As the experts accepted, however, when questioned by the tribunal, and as the CAT found, within each of these broad sectors there is a wide variety of businesses which may have had quite different rates of pass on.
For example, the motoring sector covered fuel, new vehicle sales, car rental, and garage repair.
In food and drink, the extent of pass on by major supermarket chains may be significantly different from the rate for local greengrocers, butchers etc.
It was also accepted that rates of pass on may have varied geographically across the UK, as well as over time during the 16 year claim period.
The antiquity of the claim period beginning over 25 years ago and ending in 2008 exacerbated the difficulties, particularly in relation to the availability of data.
The CATs decision
At para 57 of its judgment the CAT correctly observed that an application for a CPO is not a mini trial and that the applicant does not have to establish his case in anything like the way he would at trial.
However, it noted that the applicant had to do more than show that he had an arguable case on the pleadings, meaning that he had also to satisfy the requirement that the claims of all the enormous class of persons whom the applicant was seeking to represent were suitable to be brought as a collective proceeding.
The CAT observed that, although collective proceedings on an opt out basis can bring great benefits for the class members which could not otherwise be achieved, like other substantial competition damages claims such proceedings can be very burdensome and expensive for defendants and under section 47B(6) it is the CATs role to scrutinise an application for a CPO to ensure that only appropriate cases proceed.
In considering the expert evidence relied on by the applicant to seek to satisfy the CAT that the claims were suitable for determination in collective proceedings, the CAT decided that the approach it should adopt could appropriately be drawn from the following passage in the judgment of Rothstein J in the Supreme Court of Canada in the Microsoft case (at para 118): the expert methodology must be sufficiently credible or plausible to establish some basis in fact for the commonality requirement.
This means that the methodology must offer a realistic prospect of establishing loss on a class wide basis so that, if the overcharge is eventually established at the trial of the common issues, there is a means by which to demonstrate that it is common to the class (ie that passing on has occurred).
The methodology cannot be purely theoretical or hypothetical, but must be grounded in the facts of the particular case in question.
There must be some evidence of the availability of the data to which the methodology is to be applied.
Neither party sought to argue before the CAT that this was not an appropriate approach for the CAT to adopt (see paras 58 59 of the CATs judgment).
It was not in dispute that the methodology identified by the applicants experts was a valid theoretical approach to estimating loss on a class wide basis for the class of over 46m people represented by the applicant.
The argument before the CAT turned on the availability of the data which would be required to enable the methodology to be applied in practice.
As mentioned, the method proposed by the experts relied on being able to estimate a weighted average rate of pass on of the relevant overcharge by merchants to their customers for each sector of the economy during each of the 16 years of the claim period.
The experts expressed the view that it should be possible to acquire the data necessary for this analysis from a combination of three sources: (a) information derived from claims which have been brought against Mastercard by retailers in a variety of sectors; (b) disclosure from third parties; and (c) publicly available data.
The CAT considered each of these proposed sources and found that they could not realistically be expected to yield sufficient data to enable the claimants methodology to be applied on a sufficiently sound basis to calculate the loss sustained by the class as a whole (paras 69 78).
The first potential source of data was information derived from claims brought by retailers against Mastercard.
However, these claims relate to periods commencing in 2006, so there is minimal overlap with the claim period in the present proceedings.
The CAT found that [i]t would be impossible to extrapolate back from any findings or expert analyses of pass through in around 2006 to derive meaningful figures for much of the claims period in the present action (para 73).
The CAT was clearly entitled to make this assessment on the evidence before it.
We would add that still less could it be thought that such information could provide a basis for extrapolation to allow any meaningful or reliable assessment to be made regarding the rate of pass on in the many sectors and sub sectors of the UK economy which are not represented in the retailer claims brought against Mastercard.
As regards the second potential source, the CAT noted that in theory requests could be made for disclosure of evidence from third party retailers in the various different sectors of the economy to gather data to calculate their various rates of pass on at relevant times.
But it observed that in view of the number of markets to be considered, the long period involved, and the wide range of data required to arrive at a meaningful estimate, this would be a very burdensome and hugely expensive exercise; merchants could be expected to resist providing such information; the costs budget filed with the application for the CPO made no provision for the cost of this exercise; and in sum, in the CATs view, such extensive third party disclosure is wholly impractical as a way forward (para 74).
Again, the CAT was clearly entitled to make this assessment on the evidence before it.
As to published data, a report by RBB Economics relied on by the experts itself made clear that the publicly available data were incomplete and difficult to interpret.
Apart from that report, the CAT noted that no real attempt appears to have been made to consider what data are available for each of the broad sectors over the relevant period (para 75).
Again, on the material before it, the CAT was clearly entitled to conclude that it was not satisfied that there were sufficient publicly available data to allow the proposed methodology to be implemented.
The CAT stated its conclusion on the question whether the claims were suitable for an award of aggregate damages at paras 77 78 of its judgment: 77.
We accept that in theory calculation of global loss through a weighted average pass through, as explained in the evidence and as summarised above, is methodologically sound.
But making every allowance for the need to estimate, extrapolate and adopt reasonable assumptions, to apply that method across virtually the entire UK retail sector over a period of 16 years is a hugely complex exercise requiring access to a wide range of data.
We certainly would not expect that analysis to be carried out for the purpose of a CPO application, but a proper effort would have had to be made to determine whether it is practicable by ascertaining what data is reasonably available.
Given the massive size of the claim, a difference of even 10% in the average pass through rate makes a very substantial difference in financial terms. 78.
Accordingly, applying the Microsoft test we are unpersuaded on the material before us that there is sufficient data available for this methodology to be applied on a sufficiently sound basis.
It follows that we are not satisfied, and indeed very much doubt, that the claims are suitable for an aggregate award of damages: see rule 79(2)(f).
The CAT also gave a second and separate reason for concluding that the claims were not suitable to be brought in collective proceedings.
This was that, even if the total loss to the whole class was capable of calculation in the manner proposed, there was no reasonable and practicable means of estimating the loss suffered by each individual claimant.
The experts accepted that this was so.
The method put forward by the applicant for distributing any award of aggregate damages was to divide any damages awarded in respect of each year of the claim period equally between each member of the class for that year.
The CAT did not consider this approach acceptable, stating (at para 88): The governing principle of damages for breach of competition law is restoration of the claimants to the position they would have been in but for the breach.
The restoration will often be imprecise and may have to be based on broad estimates.
But this application for over 46m claims to be pursued by collective proceedings would not result in damages being paid to those claimants in accordance with that governing principle at all.
The CAT went on to consider whether the applicant met the requirements for authorisation to act as the class representative and concluded that he did.
However, since, in the CATs view, the claims were not suitable to be brought in collective proceedings, the application for a CPO was dismissed.
The Court of Appeals decision
When the applicant sought to appeal from the CATs decision, a preliminary issue arose as to whether the Court of Appeal had jurisdiction to entertain an appeal.
Under section 49(1A)(a) of the Act an appeal lies on a point of law from a decision of the CAT in collective proceedings as to the award of damages.
The Court of Appeal held that the decision of the CAT to refuse to make a CPO fell within this provision because it had the effect of barring the claim to an award of aggregate damages under section 47C(2), which was the only type of relief sought in the collective proceedings and is a unique remedy not otherwise obtainable: see [2018] EWCA Civ 2527; [2019] Bus LR 1287, paras 20, 27, 28.
On the substantive appeal, the Court of Appeal decided that both reasons given by the CAT for refusing to make a CPO involved errors of law.
On the question whether the claims were suitable to be brought in collective proceedings (and, in particular, for an aggregate award of damages), the Court of Appeal considered that the approach taken by the CAT to the expert evidence was based on a misdirection as to the correct test to be applied.
In the Court of Appeals view, in assessing the availability of data to establish a claim for aggregate damages, the CAT had demanded too much of the applicant at the certification stage: [2019] EWCA Civ 674; [2019] Bus LR 3025, paras 48 54.
On the question of distribution, the Court of Appeal considered both that it was premature for the CAT to take account of the proposed method of distributing any aggregate award of damages at all at the certification stage and that the CAT was wrong to regard it as a requirement that any award must be distributed in a way which corresponds, even if only approximately, to individual loss: see paras 56 62.
Mastercard on this further appeal contests the conclusion reached by the Court of Appeal on each of these two issues.
The distribution issue
It is convenient to deal with the distribution issue first.
We can do so briefly, as we agree with Lord Briggs on this issue.
The dispute is a narrow one, as Mastercard accepts that there is no legal requirement that an award of aggregate damages must be distributed to class members in a way which attempts to compensate them for their individual losses; and the applicant accepts that the CAT is entitled to treat the way in which it is proposed that an award of aggregate damages should be distributed as a relevant factor when considering whether the suitability requirement is satisfied in order for a CPO to be made.
But the applicant objects that the CAT went further than this and treated the existence of a significant degree of correspondence between the proposed distribution and losses suffered by individuals as a mandatory legal requirement which must be met before a CPO can be made.
In our view, Mastercard was right to accept the first point.
We think it clear that, under the legislative scheme, where an aggregate award of damages is made, that award is the means by which compensation is achieved: that is to say, by providing compensation for loss suffered by the class of represented persons as a whole.
As discussed earlier, section 47C of the Act dispenses with the requirement that would ordinarily apply to undertake an assessment of the losses suffered by individual members of the class.
How such an award of damages is distributed is a further and separate question.
There is no necessity at that stage to try to estimate loss: only to adopt a method of distribution which is fair.
Other things being equal, a fair method will no doubt be one which gives a larger share of the award of damages to someone who can be shown to have suffered a greater individual loss.
But it may be impractical or disproportionate to adopt such a method of distribution, particularly where the size of the class is large and the amount of damages awarded small, considered on a per capita basis.
We can see nothing wrong in principle with a conclusion that the fairest method of distribution is, in the circumstances of a particular case, an equal division among all the members of the class (or, as proposed by the applicant in this case, an equal division among all the relevant class members of the damages referable to each year of the claim period).
Like Lord Briggs, we do not think it is necessarily premature to have regard at the certification stage to any proposal made by the applicant provisional though it would necessarily be as to how an aggregate award of damages would be distributed among the class of persons represented.
However, the fact that it is not practicable and reasonable, and therefore not proposed, to adopt a method of distribution which reflects individual loss is not a reason which requires the CAT to refuse to make a CPO as a matter of law.
Contrary to Mastercards submission, we think it clear that the CAT did consider that it is only permissible to make an award of aggregate damages if there is a reasonable and practicable means of distributing the damages to the members of the class in a way which seeks to compensate them for their individual losses.
That was an error of law on the part of the CAT.
There was nothing legally objectionable about the approach to the distribution of damages proposed by the applicant.
This ground of the CATs decision to decline to make a CPO therefore cannot be sustained.
That error does not, however, affect the separate reason given by the CAT for its decision: namely, that it was not satisfied that the claims sought to be included in the proceedings were suitable for an aggregate award of damages.
In relation to that conclusion, two questions arise: (i) did the CAT err in law in reaching that conclusion; and (ii) if not, was the CAT entitled on that basis to decide that the claims were not suitable to be brought in collective proceedings?
Suitability for aggregate damages
As noted, in determining whether the class of claims sought to be brought in these proceedings is suitable for an award of aggregate damages, the CAT adopted a test articulated by the Supreme Court of Canada in the Microsoft case (quoted at para 135 above).
In the relevant passage (at para 118 of the judgment) Rothstein J was not addressing the question of the suitability of claims for an aggregate award of damages (which is not a criterion under the applicable Canadian legislation), but whether the issue of loss was capable of being resolved on a common basis and was therefore appropriate for certification as a common issue.
For this purpose, it was not necessary for the class representative at the certification stage to quantify the damages in question; it was sufficient to demonstrate that there was a method capable of doing so on a class wide basis.
What this requirement meant was elaborated in para 118 of the judgment.
Although it was formulated in a different legislative context, the CAT was in our view entitled to treat the Microsoft test as providing an appropriate standard to apply for the purpose of determining the suitability of a class of claims for an aggregate award of damages under section 47C(2) of the Act.
Not only did the Court of Appeal endorse that approach (at para 40), but it has been common ground between the parties at all levels in the CAT, in the Court of Appeal and in this court that it was appropriate for the CAT to apply this test.
In any event, it seems to us to provide sensible guidance as to how to approach the question whether a class of claims is suitable to be grouped together for the purpose of estimating loss.
The approach stated by Rothstein J reflects the broad axe principle, and adoption of it in the present context gives appropriate recognition to that principle in the context of the collective proceedings regime in the Act.
The principle cannot be invoked as a way of circumventing the suitability requirement in the Act and the CAT Rules.
If the applicant could not show that there was a realistic prospect that his experts proposed methodology would be capable of application in a reasonable and fair manner across the whole width of the proposed class, then (i) there would be a significant risk that a claim of this magnitude could unfairly be held over Mastercards head in terrorem to extract a substantial settlement payment without a proper basis for it; (ii) there would be a significant risk that, if carried forward towards trial, the collective proceeding, as framed by the CPO obtained at the outset, would at some stage run into the sand and be found not to be viable, so that it would have given rise to a great waste of expense and resources for no good effect; (iii) the risk referred to in (ii) would not just relate to potential waste of the resources of the defendant, but also to waste of the resources of the CAT, which could be better allocated elsewhere (see rule 4(2)(e)); and (iv) there would be a significant risk that, if the methodology were applied to the class at trial on the basis of inadequate data and unjustified extrapolations from available data sets, the outcome would be unjust and one in which one could have no confidence, because of the margin for error in calculating pass through rates for all sectors of the economy over a 16 year period and the potentially very substantial effects of such errors being made, by reason of the large sums being claimed (the point made in para 77 of the CATs judgment).
We accordingly consider that the Court of Appeal, in agreement with the parties and the CAT, was correct to hold that what the applicant in this case had to do was to satisfy the CAT that the expert methodology was capable of assessing the level of pass on to the represented class and that there was, or was likely to be, data available to operate that methodology (para 44).
The Court of Appeals criticisms
We disagree, however, with the Court of Appeals view that the CAT did not in fact apply this test.
There seem to us in the Court of Appeals judgment to be three particular criticisms made of the CATs approach.
One is that the CAT wrongly required the applicant to establish more than a reasonably arguable case (para 52) or to be satisfied that the collective claim has more than a real prospect of success (paras 44 and 54).
In our view, this criticism is misplaced in that it treats the assessment of whether the claims in question are suitable for an aggregate award of damages as if it were an assessment of whether the claims are of sufficient merit to survive a strike out application.
However, as we have emphasised (and understand to be common ground between the parties on this appeal), the eligibility requirements including the question of suitability for aggregate damages are directed to ascertaining whether it is appropriate to combine individual claims into collective proceedings and not to the question whether the claims are sufficiently arguable as a matter of their substantive merits to be allowed to proceed.
In particular, in relation to aggregate damages, the question for the CAT was not whether the claims had a real prospect of success; it was whether the proposed methodology offered a realistic prospect of establishing loss on a class wide basis.
This turned, in the context of this case, on whether there was, or was likely to be, data available to operate that methodology (as the Court of Appeal had itself recognised at para 44).
That was the question which the CAT addressed.
We therefore think it clear that the CAT asked itself, and answered, the correct question and that the CAT was right to say (at para 57 of its judgment) that the applicant had to do more than simply show that he has an arguable case on the pleadings, as if, for example, he was facing an application to strike out.
The second criticism made by the Court of Appeal was that the CAT had, in effect, carried out a form of mini trial, which involved cross examination of the applicants experts at a pre disclosure stage in the proceedings about their ability to prove the claim at trial by reference to sources of evidence which they had identified but had not yet been able fully to analyse or assess (para 52).
It was said that the certification hearing therefore exposed the claim to a more vigorous process of examination than would have taken place at a strike out application (para 53).
We have already explained why we consider the comparison with a strike out application to have been misplaced.
We nevertheless agree with the Court of Appeal that an application for a CPO should not involve a mini trial.
The CAT expressly recognised this at para 57 of its judgment and we do not accept that it failed to follow the direction that it expressly gave itself.
In particular, we can see nothing wrong in principle, where the credibility or capability of expert methodology is of importance as it was here, with asking questions of the experts in order to clarify and better understand their proposed approach.
That does not amount to anything approaching a mini trial.
That is what occurred at the hearing before the CAT in this case.
The consideration of the experts evidence by the CAT was not adversarial.
The questioning was led by the tribunal, not Mastercard.
To the extent that counsel for Mastercard was permitted to ask questions, it was only by way of clarification rather than by way of challenge to their evidence.
Mastercard did not submit any expert evidence.
The CAT was not engaged in weighing up competing expert evidence nor in seeking to resolve any disputed points of fact or expert opinion; it merely sought to understand and clarify the methodology proposed by the experts and the availability of the data necessary to apply that methodology.
The tribunals questions gave the experts the opportunity to explain and expand on their proposed method.
Providing this opportunity was an advantage, not a disadvantage, to the applicant, as is apparent from para 76 of the CATs judgment where the CAT observed that the methodology put forward by the experts in their oral evidence, in response to the tribunals questioning, is considerably more sophisticated and nuanced than that set out, rather briefly, in their experts report.
Indeed, for the purposes of his submissions before the CAT, the Court of Appeal and in this court, the applicant positively sought to rely on the contents of the evidence given by his experts as amplified by their oral explanations in answers given at the hearing before the CAT.
There was in these circumstances no procedural impropriety or error of law in the CATs approach.
The third criticism made by the Court of Appeal was that the CAT demanded too much in terms of the availability of data at what was still an early stage of the proceedings.
It is said that the experts had identified expected sources of data and it was not appropriate at the certification stage to require the proposed representative and his experts to specify in detail what data would be available for each of the relevant retail sectors in respect of the infringement period (para 51).
In our view, this criticism is also misplaced.
The CAT did not require the applicant or his experts to specify in detail what data would be available for each of the relevant retail sectors in respect of the infringement period.
It applied an appropriately low threshold of whether there was evidence that data were available which could offer a realistic prospect of the applicant being able to apply his proposed economic methodology across the whole range, or substantially the whole range, of the class claim.
On the evidence before it, the CAT was entitled to make the assessment at paras 69 75 of its judgment that the applicant had failed to show that appropriate data were or were likely to be available across that range such as would mean that his proposed methodology could be applied in a meaningful or reasonable way to make an aggregate award of damages assessed on a class wide basis: see paras 138 141 above.
The Court of Appeal also suggested that, if it later transpired that the applicant was unable to access sufficient data to enable the experts method of calculating the rate of pass on to be performed, the CPO could be revoked; and that a decision of that kind is much more appropriate to be taken once the pleadings, disclosure and expert evidence are complete and the court is dealing with reality rather than conjecture (para 53).
We do not consider this a permissible approach.
The fact that there is a power to vary or revoke a CPO at any time under section 47B(9) of the Act does not relieve the CAT of the obligation only to make a CPO if it considers that the statutory conditions are satisfied and not otherwise.
The CAT may not make a CPO on a speculative basis, in the hope that the claims might later become suitable to be brought as collective proceedings but that, if they do not, the order can be revoked, no doubt after a great deal of resources have been expended on the litigation.
The applicant applied in this court for permission to adduce additional evidence regarding the availability of data to that adduced before the CAT.
We would refuse that application.
Any such evidence is not capable of disclosing a legal error on the part of the CAT, which was obliged to make its decision on the basis of the evidence before it.
In any case, having looked at the additional material as we were invited to do by Mr Harris QC on behalf of the applicant, we are not persuaded that it shows a realistic possibility of filling the large gaps in the available data that were identified by the CAT.
In our view, the CATs decision that it was not satisfied that the claims sought to be brought as collective proceedings were suitable for an aggregate award of damages cannot be impugned as unlawful.
Suitability for collective proceedings
If, as we consider, that decision was not wrong in law, then, in the circumstances of this case, it follows that the CAT was also entitled to conclude that the claims were not suitable to be brought in collective proceedings.
As mentioned earlier, an aggregate award of damages under section 47C(2) of the Act was the only type of relief sought in these proceedings.
The applicant has not suggested that it would be feasible or practicable to estimate the losses suffered by members of the proposed class individually.
Indeed, the proposed method of distributing any damages recovered was founded on the premise that there is no reasonable or practicable means of establishing loss on an individual basis (see eg para 91 of the CATs judgment).
In these circumstances, if the claims are not suitable for an aggregate award of damages, it is common ground that they are not suitable for any award of damages (or other relief).
There is accordingly no basis on which the proceedings as they have been framed could properly be continued.
Lord Briggs has emphasised that whether the claims are suitable for an aggregate award of damages is only one factor in the list of matters identified in rule 79(2) as potentially relevant to the issue of overall suitability.
He criticises the CAT for treating this particular factor as if it were a hurdle rather than merely one factor to be weighed in the balance along with others in determining whether the claims are suitable to be brought in collective proceedings.
This is not an argument which the applicant has made and we are not able to agree with it.
It was not incumbent on the CAT to treat the factors in rule 79(2) (or for that matter the factors in rule 4) as a check list which it had to work through and address one by one.
The position is the same as where a court makes a procedural decision under the Civil Procedure Rules and has to comply with the overriding objective in CPR Part 1: see Khrapunov v JSC BTA Bank [2018] EWCA Civ 819, para 46.
Furthermore, while the structure of rule 79 makes it clear that satisfying the CAT that the claims are suitable for an aggregate award of damages is not a separate hurdle or pre condition for certifying claims as eligible for inclusion in collective proceedings, that does not prevent this factor from being in practice decisive in the circumstances of a particular case, given the way in which the proceedings have been framed.
For the reasons indicated, that was the case here.
For the same reasons, the CATs error (as we agree that it was) in failing to recognise that whether or to what extent merchants passed on the MIFs to their customers was a common issue did not affect its analysis of suitability.
The reasons given by the CAT for remaining unpersuaded that the claims of the proposed class members were suitable for an aggregate award of damages did not depend in any way on whether the extent of merchant pass on is regarded as a common issue.
Since an aggregate award of damages was the only relief sought by the applicant and said by the applicant to be appropriate, it followed from the conclusion that the claims were not suitable for such relief that the claims were not suitable to be brought in collective proceedings.
Whether the extent of merchant pass on is a common issue has no bearing on that.
Mr Harris for the applicant emphasised that the difficulties in establishing the extent of any merchant pass on would have been equally formidable for a typical individual claimant, seeking compensation for increased retail prices over the sectors of the market in which he or she was accustomed to make purchases.
He submitted that, if those difficulties would have been insufficient to deny a trial to an individual claimant, they should not, in principle, have been sufficient to lead to a denial of certification for collective proceedings.
This argument seems to us to make the error already discussed of confusing the requirements for certification of claims as eligible for inclusion in collective proceedings with a summary judgment or strike out test.
Whether an individual claimant has a claim that is sufficiently strong to go to trial is a different question, involving a different test, from whether a class of claims is eligible to be brought as a collective proceeding.
It does not follow that, just because claims are capable of being pursued individually without being struck out, they must also be suitable to be brought in collective proceedings.
Nor does it follow that, because a group of claimants would have greater difficulties (practical or legal) in pursuing their claims individually than they would if the claims are brought in collective proceedings, that of itself makes the claims suitable to be brought in collective proceedings.
For the reasons stated earlier, the suitability requirement is not relative in this way.
Conclusion
For the reasons given, the CAT was in our opinion entitled to take the view that the claims which the applicant was seeking to bring as a class action were not suitable to be brought in collective proceedings when the CAT was not satisfied that there was a realistic prospect of the applicant being able to apply its proposed economic methodology across the whole width, or substantially the whole width, of the proposed class.
This is not to say that none of the claims which the applicant was seeking to combine had a real prospect of success.
The CAT was right to treat the issue of suitability as distinct from the question whether the class action might be struck out on the merits under rule 41 or rule 43.
We think it would not have been possible for the CAT to strike out or give summary judgment on the claims covered by the proposed CPO because some of them are very likely to have merit.
But it was a separate question whether it was suitable for them to proceed as a collective proceeding, with the substantive legal advantages that this would give to the claimants, where the applicant could not show that data existed or were likely to exist which would make the action viable across the whole width of the class.
Finally, it should be emphasised that the CATs approach does not undermine the efficacy of the collective proceedings regime.
The test which the CAT applied in looking to see whether the relevant data were or might become available was a low one.
It was open to the applicant to seek a CPO in relation to a class of claims which was framed less ambitiously for example, in relation to particular sectors of the economy where the relevant data needed to make the applicants economic methodology workable in a meaningful and fair way could be shown to be available or likely to be available.
However, the applicant did not put forward any alternative proposal.
The only application made was to certify as suitable to be brought in collective proceedings a massive class of claims brought on behalf of more than 46m people everyone domiciled in the UK who when over the age of 16 had been resident in the UK for more than three months at any time during a 16 year period between 1992 and 2008.
The fact that this gargantuan class action was found unsuitable to proceed did not rule out the possibility of pursuing in collective proceedings a more focused class of claims.
| This appeal concerns the procedure for collective proceedings in competition damages claims.
This is the first collective proceedings case of this kind to reach the Supreme Court.
It addresses important questions about the correct legal requirements for certification of a claim.
Mr Merricks claim arises out of the European Commissions decision in December 2007 that the appellants (Mastercard) breached competition law by fixing a default interchange fee as part of their payment card schemes between May 1992 and December 2007 (the Commission Decision).
These payment card schemes allow consumers to purchase goods and services from retailers by card.
The details of the scheme are at [6 8] and they were also considered by the Supreme Court earlier this year ([2020] UKSC 24).
Mr Merricks issued a collective proceedings claim form against Mastercard under section 47B(1) of the Competition Act 1998 as amended (the Act).
In the claim form, Mr Merricks argues that the difference between the interchange fee banks would have paid but for Mastercards breach of competition law, and the interchange fee that they did in fact pay, is an overcharge which retailers paid to their banks and crucially, which retailers then passed onto their customers.
As a result, he argues that consumers paid higher prices for goods and services than they would otherwise have done.
Mr Merricks seeks to bring the collective proceedings as the class representative on behalf of all UK resident adult consumers of goods and services purchased in the UK during the infringement period from retailers accepting Mastercard, unless the consumer opts out (the class).
He seeks an award of damages for the whole class (an aggregate award), rather than damages for the claim of each class member [11 13].
To proceed with his collective proceedings claim, Mr Merricks needs the Competition Appeal Tribunal (the CAT) to certify the claim by making a Collective Proceedings Order (CPO) under section 47B of the Act.
To certify a claim, the CAT must be satisfied that two main criteria have been met.
First, that it is just and reasonable for Mr Merricks to act as the class representative (sections 47B(5)(a) of the Act).
Second, that the claims are eligible for inclusion in collective proceedings (section 47B(5)(b) of the Act), which means that the claims all raise common issues of fact or law and are suitable to be brought in collective proceedings (section 47B(6) of the Act).
The CAT refused to make a CPO as the claims failed this second requirement because: (1) the claims were not suitable for an aggregate award of damages per rule 79(2)(f) of the Competition Appeal Tribunal Rules 2015 (the CAT Rules) (the suitability for aggregate damages issue); and (2) Mr Merricks proposed distribution of any award did not satisfy the compensatory principle in common law, which the CAT considered relevant under rule 79(2) of the CAT Rules (the distribution issue).
The Court of Appeal allowed Mr Merricks appeal, finding that the CAT had made five errors of law.
Mastercard appealed to the Supreme Court.
The Supreme Court dismisses Mastercards appeal.
It agrees with the Court of Appeal that the CATs decision is undermined by error of law and sends Mr Merricks application for a CPO back to the CAT.
Lord Briggs gives the main judgment, with which Lord Thomas agrees.
Lord Kerr had agreed that the appeal should be dismissed for the reasons set out in Lord Briggs judgment prior to his retirement on 30 September 2020.
Three days before the judgment was initially due to be handed down, Lord Kerr sadly died.
The President of the Supreme Court re constituted the panel under section 43(4) of the Constitutional Reform Act 2005 to consist of Lord Briggs, Lord Sales, Lord Leggatt and Lord Thomas.
Lord Sales and Lord Leggatt give a combined separate judgment in which they disagree with Lord Briggs reasoning in part.
They do not dissent as they recognise that they were in the minority and the pure happenstance that Lord Kerr died after completion of the judgments, but just before they could be handed down, should not mean that the case has to be re heard due to an evenly divided panel [82 83].
Collective proceedings are a special form of civil procedure.
They are designed to provide access to justice and ensure the vindication of private rights where an ordinary individual civil claim would be inadequate for that purpose.
This purpose helps interpret the legal requirements of the certification process [45].
An important element of the background to collective proceedings is that courts frequently have to deal with difficult issues in calculating damages.
Courts do not deprive an individual claimant of a trial merely because of these quantification issues, provided there is a triable issue that the claimant has suffered more than nominal loss [46 47].
If these issues would not have prevented an individual consumers claim from proceeding to trial, the CAT should not have stopped the collective proceedings claim at the certification phase [56].
This fundamental requirement of justice that the court must do its best on the available evidence in relation to damages is the broad axe principle and it applies to competition cases [51].
Justice requires that damages be quantified in order to vindicate a claimants rights and to ensure that a defendant pays to reflect the wrong done, especially where anti competitive conduct may never otherwise be restrained if individual consumers are unable to bring claims [53 54].
Another important element is to understand the meaning of suitable, both under section 47B(6) of the Act which requires the claims to be suitable to be brought in collective proceedings, and in rule 79(2)(f) which says that they must be suitable for an aggregate award of damages.
Suitable means suitable relative to individual proceedings.
Therefore, the CAT should have asked itself whether the claims were suitable to be brought in collective proceedings as compared to individual proceedings, and suitable for an award of aggregate damages as compared to individual damages [56 57].
Against this background, the Supreme Court finds that the CAT made five errors of law [64].
First, it failed to recognise that in addition to overcharge, the merchant pass on issue was also a common issue (as the Court of Appeal had found and which was not appealed to the Supreme Court).
This should have been a powerful factor in favour of certification (rule 79(2)(a) of the CAT Rules) [66].
Second, the CAT placed great weight on its decision that the case was not suitable for aggregate damages.
This is a relevant factor for certification, but it is not a condition [61, 67 69].
Third, the CAT should have applied a test of relative suitability.
If the forensic difficulties would have been insufficient to deny a trial to an individual claimant, they should not have been sufficient to deny certification for collective proceedings [70 71].
Fourth (the most serious error), the CAT was wrong to consider that difficulties with incomplete data and interpreting the data are a good reason to refuse certification.
Civil courts and tribunals frequently face problems with quantifying loss and the CAT owes a duty to the class to carry out the task in a case of proven breach of statutory duty coupled with a realistically arguable case that some loss was suffered [72 74].
Fifth, the CAT was wrong to require Mr Merricks proposed method of distributing aggregate damages to take account of the loss suffered by each class member.
A central purpose of the power to award aggregate damages in collective proceedings is to avoid the need for individual
assessment of loss and the Act expressly modifies the ordinary requirement for the separate assessment of each claimants loss [58, 77].
Lord Sales and Lord Leggatt agree with Lord Briggs that the CAT was wrong to refuse certification on the distribution issue [148 150].
However, they disagree on the suitability for aggregate damages issue.
They consider that the CAT applied the test to determine the suitability of a class of claims for an aggregate award of damages under section 47C(2) of the Act correctly and thus the CAT was entitled to conclude that the claims were not suitable to be brought in collective proceedings [167 169].
Their key reasons are at [111, 116 119, 121, 124, 153, 156 166].
|
These appeals raise a number of points, some technical, others fundamental, relating to the requirements of and consequences of non compliance with the short and inflexible time limits introduced by the Extradition Act 2003.
Parts 1 and 2 of that Act deal with extradition to respectively category 1 territories in practice other member states of the European Union party to the Council Framework Decision of 13 June 2002 (2002/584/JHA) introducing the European Arrest Warrant, to which Part 1 gives effect and category 2 territories in relation to which a different and more traditional scheme applies.
Each of the schemes contained in Part 1 and 2 leads to the person whose extradition is requested being brought before a judge.
The judge then decides, by considering a series of questions laid down in the Act, whether or not, in the case of Part 1, to order extradition or, in the case of Part 2, to send the case to the Secretary of State for his decision whether to extradite.
Depending upon the judges decision, there are rights of appeal to the High Court on law and fact.
These are given under Part 1 to the individual (section 26) or to the authority issuing the warrant (section 28) and under Part 2 to the individual (section 103) or the authority acting on behalf of the category 2 territory seeking extradition (section 105).
Rights of appeal also exist under Part 2, if the Secretary of State orders extradition (sections 108(1) and 110(1)).
These rights of appeal must all be exercised within short time limits, described as the permitted periods.
Thus, section 26(4) provides in the case of an order for extradition to a Part 1 territory that: Notice of an appeal under this section must be given in accordance with rules of court before the end of the permitted period, which is seven days starting with the day on which the order is made.
Section 28(4) gives the authority a parallel right in the case of an order for discharge, providing for a like seven day permitted period starting with the day on which the order for the persons discharge is made.
Sections 103, 105, 108 and 110 provide for appeals from a judges order sending a case to the Secretary of State for his decision whether a person is to be extradited and from any order subsequently made by the Secretary of State for extradition.
In each case the permitted period within which notice of an appeal must be given in accordance with rules of court is 14 days starting with the day on which the Secretary of State informs the person affected or the person acting on behalf of the category 2 territory (as the case may be) of the order.
In Mucelli v Government of Albania; Moulai v Deputy Public Prosecutor in Creteil, France [2009] UKHL 2; [2009] 1 WLR 276, the House of Lords held by a majority (Lord Rodger dissenting) that the requirement in sections 26(4) and 103(9) that notice of an appeal be given within the relevant permitted period meant that it had both to be filed in the High Court and served on all respondents to the appeal within such period.
A similar requirement must necessarily exist under sections 28, 105, 108 and 110.
The Supreme Court was asked on the present appeal to revisit and reverse that decision.
The House in Mucelli distinguished between the requirement to give notice of an appeal within the permitted period and the requirement that such notice should be given in accordance with the rules.
Failure to comply with the mandatory requirement (interpreted in Mucelli as involving both filing and service) is on this basis fatal to any appeal, since the statutory language only permits appeals within the permitted periods with no possibility of extension.
Failure to comply with the rules can, on the other hand, be cured by the court in the exercise of its discretion under (in England) CPR 3.9 and 3.10.
The result is similar to that achieved in Pollard v The Queen [1995] 1 WLR 1591, where the Privy Council held that a notice of appeal which was required by statute to be given "in such manner as may be directed by rules of court", but which did not comply with such rules because it was not signed by the appellant personally, was nonetheless a notice within the meaning of the relevant statutory provision, at least once the irregularity was waived by the court, and that such waiver validated the notice from the date of its lodging and did not merely bring into existence for the first time a valid notice.
The House in Mucelli further held that the rules of court were incapable of cutting down the statutory permitted period; thus, CPR 3.6 providing (at the relevant time) that any document served after 16.00 should be deemed to be served on the next day was incapable of rendering out of time a notice of appeal served by Mr Moulai after 16.00 on the seventh and last day of the permitted period.
Subsequent case law in the High Court shows the distinction between requirements of the statute and of the rules to have proved contentious.
One line of authority has taken a relaxed view of the statutory requirements.
In Office of Public Prosecutor of Hamburg, Germany v Hughes [2009] EWHC 279 (Admin), the court, rightly in my view, treated as a mere procedural error, which could be corrected, the endorsement in a notice of appeal of a wrong date of arrest (the effect of such endorsement being that, on the face of the notice, the 40 day period allowed for the court to begin to hear the substance of the appeal would have expired a month early).
In a series of further cases, the court accepted that service of an unsealed notice of appeal was, at most, a procedural error: Pawel Sciezka v Court in Sad Okregowy, Poland [2009] EWHC 2259 (Admin), Dunne v High Court Dublin [2009] EWHC 2003 (Admin), Arunthavaraga v Administrative Court Office [2009] EWHC 18921 (Admin) and R (Kane) v Trial Court No 5 Marbella, Spain [2011] EWHC 824 (Admin); [2012] 1 WLR 375.
In Kaminski v Judicial Authority of Poland [2010] EWHC 2772 (Admin) the court refused to strike out appeals where no or only plainly inadequate grounds were stated in the notice of appeal.
It did so on the basis that the inclusion of grounds was a matter for rules (in which connection the court also thought that the rules made no provision for grounds).
Other courts have taken a more stringent line.
In Regional Court in Konin, Poland v Walerianczyk [2010] EWHC 2149 (Admin); [2012] 1 WLR 363, service of an unsealed copy notice of appeal was held insufficient to satisfy the statutory requirement under section 28 a decision which meant that it was the Polish authority that was out of time to appeal.
In R (Bergman) v District Court in Kladno, Czech Republich [2011] EWHC 267 (Admin), a notice of appeal was prepared by an unrepresented defendant who had been remanded in custody, and was then faxed in draft to the judicial authority and filed, all within the 7 day period, but no stamped copy was served, or indeed received back by the defendant, until much later.
Following Walerianczyk, it was held that there could be no appeal, although Irwin J, at para 10, recorded his "concern that unrepresented litigants who are in custody will often find it very hard to comply with the necessary requirements, despite every effort on the part of the court staff".
In Szelagowski v Regional Court of Piotrkow Trybunalski Poland [2011] EWHC 1033 (Admin), a clerk was instructed, after filing a notice of appeal, to serve it on the Crown Prosecution Service with a letter on which he wrote the relevant Crown Office reference.
The letter was expressed to cover the delivery of the appellants notice and grounds and to request a signature by way of receipt, and the Crown Prosecution Service gave such a receipt.
But the clerk handed over the wrong accompanying package.
Nothing in the package handed over or in the covering letter could be described as a notice of appeal.
There was held to be no valid appeal.
Sullivan LJ observed (para 18) that: this case demonstrates how a rigid statutory time limit which cannot be extended under any circumstances can work injustice in practice, but the statutory scheme is very clear.
In the cases of Lukaszewski, Pomiechowski and Rozanski [2011] EWHC 2060 (Admin); [2012] 1 WLR 391, now before the Supreme Court, each of the appellants is a Polish citizen who is the subject of a European Arrest Warrant issued by the Polish court on the basis that he is wanted in order to serve an existing sentence, and, in the case of Mr Lukaszewski, that he is also wanted to stand trial on ten charges of fraud.
The appellants were arrested and brought before the City of Westminster Magistrates Court, where their extradition was ordered on (respectively) 28th January 2011, 2nd March 2011 and 4th March 2011.
Mr Lukaszewski and Mr Rozanski had each only been arrested on the day before such order.
Mr Pomiechowski was also brought before the court on the day after his arrest, but his case was twice adjourned and he was remanded in custody until 2nd March 2011.
He was then refused a further adjournment, and his extradition was ordered.
Westminster Magistrates Court is the dedicated court for extradition proceedings, with three of its ten court rooms apparently being devoted to that purpose.
It is a busy court.
Article 11(2) of the Framework Decision stipulates that a person arrested for the purpose of the execution of a European Arrest Warrant shall have a right to be assisted by a legal counsel and by an interpreter in accordance with the national law of the executing Member State.
At the City of Westminster Magistrates Court, such legal assistance is provided by duty solicitors before though not, it appears, after an extradition order is made by a magistrate.
On Mr Lukaszewskis (untested) account, he was able to speak to the duty solicitor only briefly for two or three minutes through the glass of the dock immediately before the hearing with the security guard by him, and was not aware that the matter would proceed straight to a decision.
Mr Pomiechowski was, in contrast, provided after his first appearance with a solicitor, and wished to oppose extradition on the grounds of delay, but on his account the solicitor had not produced a skeleton on this point by the 2nd March 2011, when a further adjournment was refused.
In the event, none of these three appellants argued any substantive points before the magistrate in opposition to extradition.
It is not difficult to see how, under such circumstances, the statutory right of appeal might prove relevant.
Having regard to the dates on which their extradition was ordered, the permitted periods for Mr Lukaszewski, Mr Pomiechowski and Mr Rozanski to give notices of an appeal expired at midnight on respectively 3rd February, 8th March and 10th March 2011.
Each appellant was remanded in custody (Mr Rozanski because he was unable to meet a condition of bail that he lodge security of 1,500), and taken to HMP Wandsworth.
All three had been made aware, by the magistrate and/or the relevant duty solicitor or legal representative, at least in general terms of the permitted period of 7 days for appealing.
Each had at this point no legal assistance, but each was assisted by a prison officer working in the prisons Legal Services Department to complete a Form N161 notice of appeal.
Officers working in the prison legal services department have no legal background, but have completed a three day training course, which does not include extradition training.
They seek to help unrepresented prisoners and to facilitate their appeals against extradition.
For completeness, I record that Mr Lukaszewski sought to raise issues relating to his mental health, put later as involving a risk of suicide and as entitling him to protection from extradition under sections 25 and 21 of the 2003 Act.
Mr Pomiechowskis grounds are not before the court, but appear to have invoked the delay elapsed since he left Poland in 2000.
Mr Rozanski invoked compassionate grounds and inhuman conditions that he said that he would face in a Polish prison.
However, no point arises or has been raised at this stage on the contents or merits of these appellants notices of appeal.
The points before the Supreme Court are points of principle, which affect the admissibility of appeals, however good or bad.
The legal services department faxed the notices of appeals to the Administrative Court for filing and stamping.
The Administrative Court faxed a copy of the sealed front page back to the legal services department.
The legal services department then faxed to the Crown Prosecution Service (as the legal representatives of the judicial authority of the state requesting surrender) a copy of the sealed front page together with a cover sheet.
In the case of each of these three appellants all this occurred within the seven day permitted period.
In the case of Mr Lukaszewski, the cover sheet faxed on 2nd February 2011 bore the words Sealed copy and his name with the explanation extradition appeal, and in the case of Mr Pomiechowski the cover sheet faxed on 8th March 2011 identified the copy as sealed and said see attached front page of Extradition paperwork for Mr Pomiechowski.
Objection was not at once taken to the service only of a sealed front page.
But, once taken, it was accepted by the High Court.
It was also only after the course of events recounted in the previous paragraphs that the solicitors now acting for Mr Lukaszewski, Mr Pomiechowski and Mr Rozanski first became involved.
In the cases of Lukaszewski and Pomiechowski, [2012] 1 WLR 391, para 20, Laws LJ and Kenneth Parker J held on 15th June 2011 that, in order [to] be or purport to be a notice of appeal, the document must (a) identify the appellant, (b) identify the decision against which he seeks to appeal and (c) pace Ouseley J in Kaminksi v Judicial Authority of Poland [2010] EWHC 2772, set out at least the gist of the basis on which the appeal is sought to be presented.
Laws LJ reasoned that: So much is, I think, inherent in any sensible understanding of a notice of appeal.
A document without statement of any grounds at all could not support an appeal.
The absence of grounds from the notice at the beginning of the process will, I think, be apt to lengthen that process by later procedural contests.
The case of Rozanski came on later, on 17th November 2011, before Moore Bick LJ who followed the decision in Lukaszewski and Pomiechowski.
The fourth appellant before the court is Mr Halligen, a British citizen whose extradition is sought to the United States of America under Part 2 of the 2003 Act to face allegations of wire fraud and money laundering.
He was arrested and brought before the City of Westminster Magistrates Court which on 4th November 2010 ordered that the case be sent to the Secretary of State for her to decide whether Mr Halligen should be extradited, and remanded Mr Halligen in custody.
Mr Halligens extradition was ordered by the Secretary of State under section 93 on 22nd December 2010.
The order and a letter setting out the Secretary of States reasons were sent not only by post, but also by fax (timed at either 15.48 or 16.48) to Mr Halligens solicitors on the same day.
The Secretary of States letter addressed an objection which Mr Halligen had raised with reference to alleged national security grounds (see section 208 of the 2003 Act).
It also informed Mr Halligen of his right under section 108 to give notice of appeal within 14 days to the High Court, pointing out explicitly that the giving of such notice requires both filing and service of the appellants notice within such 14 days and that under the rules any papers filed at the High Court must also be served upon the Home Office and the Crown Prosecution Service.
Mr Halligen had solicitors.
Evidently, they were quick to prepare grounds of appeal, since those attached to the notice of appeal are dated 23rd December 2010.
The notice of appeal (by which he sought to pursue his alleged national security points by reference to the Secretary of States failure to exercise her powers under section 208 of the 2003 Act) was filed and stamped on prescribed form N161 on 29th December 2010.
This was well within the fourteen day permitted period.
If one takes 22nd December 2010 as the date on which the Secretary of State informed Mr Halligen of his decision, that period expired at midnight on 4th January 2011.
Also on 29th December 2010, Mr Halligen himself wrote from prison by fax to the Home Office, asking them to accept this letter as notice & service of my intent to appeal that decision, and adding that My solicitors have been duly instructed and this letter is only necessitated by the imposed due date of 4th January 2011 and my inability to make contact with them given the restrictions imposed by HMP Wandsworth.
His apparent concern was justified, since his solicitors let him down.
It was only on 5th January 2011 that they sent the notice of appeal to the Crown Prosecution Service by fax and to the Home Office by post, reaching the latter on 6th January 2011.
On 25th February 2011 the Treasury Solicitor wrote stating that there would be an application to have the appeal dismissed accordingly.
In the ensuing High Court proceedings and before the Supreme Court, Mr Halligen has been represented by different solicitors to those to whom reference has been made in this paragraph.
The High Court on 19th April 2011 accepted it had no jurisdiction to hear Mr Halligens appeal.
Applying Mucelli Stadlen J, giving a judgment with which Laws LJ agreed, rejected a submission that the court had power to dispense with service.
The High Court rejected a submission that Mr Halligens letter dated 29th December 2010 constituted or purported to constitute a notice of appeal to the Secretary of State.
It rejected a submission that, assuming that the fax of 22nd December 2010 was sent at 16.48 (rather than 15.48), the Secretary of State should be treated as having informed Mr Halligen of her decision only on 23rd December 2010, with the result that the fax sent to the Crown Prosecution Service on 5th January 2011 would have been in time.
This submission was advanced on the basis that it was only open to the Secretary of State to inform someone of an extradition decision within normal working hours, which could in turn be regarded as ending at 16.30, by analogy with CPR 6.26, governing documents to be served in accordance with the CPR or any Practice Direction.
Finally, it rejected more general submissions that the court should under section 3 of the Human Rights Act 1998 read the mandatory requirements of section 108(4) of the 2003 Act as subject to an implied qualification and/or to the power of relief contained in CPR 3.10, in order to cater for the large number of public holidays that occurred during the relevant 14 day period and/or to avoid the loss of the right of appeal which would otherwise follow from Mr Halligens solicitors failings.
Nevertheless Stadlen J commented (para 31): It would seem to offend basic principles of fairness that a person served with a notice of extradition should be deprived of a statutory right of appeal through no fault of his own.
The first question is whether the Supreme Court should apply or decline to follow the Houses decision in Mucelli.
Lord Rodgers dissenting approach in that case was that all that the statute required was filing, and not service, within the statutory period.
I understand the attraction of preferring this dissenting approach, in so far as to do so would enable all the current hard cases to be resolved quite easily in the appellants favour.
That would not itself be a good reason for adopting such an approach.
It would also not resolve other hard cases, for example those which could well arise if a negligent solicitor failed to file notice of appeal with the court within the permitted period, or if a prison riot or a defendants collapse and illness following receipt of information about an extradition decision prevented him giving any instructions to lodge notice of appeal (see in this connection para 70 of Lord Neubergers speech in Mucelli).
Further, it would not address the very real considerations which led the majority in Mucelli to their decision.
The structure of the relevant sections, with the distinctions drawn between appealing, or bringing an appeal, to the High Court and giving notice of an appeal within the relevant permitted periods, is itself difficult to reconcile with any conclusion that some form of notice to the respondents is not required (a point to which Lord Neuberger referred at para 65).
I would not therefore depart from Mucelli in so far as it requires not merely filing of an appeal, but also some form of notice of an appeal being given to the respondents, both within the permitted period.
The question remains what form of notice of an appeal is required.
In Mucelli the argument and majority judgments proceeded on the basis that what was required was service of the notice of appeal.
It was however recognised, and was one plank of Lord Rodgers dissent, that in Scotland the requirement is that a note of appeal should be served (necessarily in draft) before lodging with the court (Mucelli, para 19).
Mucelli concerned the question whether the statute (as opposed to the rules) required notice of an appeal to be given to all respondents within the permitted period.
The House spoke of a statutory requirement of service.
But the question what sort of notice was required by the statute (as opposed to the rules) was not the focus of decision.
The statute requires notice of an appeal to be given in accordance with rules of court, so any failure to comply with the rules of court requires the appellant to seek relief from the court to cure the irregularity.
But this does not answer the question what constitutes giving notice of an appeal to the respondents which, if not in accordance with the rules, nonetheless satisfies the statutory requirement and is capable of being cured.
In my view, a generous view can and should be taken of this, bearing in mind the shortness of the permitted period and the fact that what really matters is that an appeal should have been filed and all respondents should be on notice of this, sufficient to warn them that they should not proceed with extradition pending an appeal.
This should not however be taken as a licence to appellants to give informal notices of appeal.
Any potential appellant serving anything other than a complete copy of the sealed Form N161 will need to seek and will depend upon obtaining the courts permission to cure the position under the rules.
However, it follows from the foregoing that I cannot agree with Laws LJs reasoning in the cases of Lukaszewski and Pomiechowski.
To have any prospect of success an appeal must at some point be supported by grounds.
Rules may provide that such grounds must be stated or summarised in the appeal notice, and do in fact do so: CPR 52.4, read with note 52.4.4, prescribed form N161 section 6 and Practice Direction Appeal, para 3.2 at 52PD.5.
Non constat however that a purported notice of appeal is a nullity unless accompanied from the outset by grounds.
If, contrary to rules of court, it is not, that is an irregularity, but one which can in an appropriate case be cured under CPR 3.9 and 3.10.
This is the position in principle.
As a matter of practice also, there is no attraction in a conclusion whereby a notice without any grounds would be a nullity incapable of grounding any appeal, whereas a notice with palpably inadequate grounds would be merely irregular and capable of cure by amendment.
The front page of the notices of appeal returned by the court and served by fax in the cases of Lukaszewski, Pomiechowski and Rozanski showed the relevant High Court references and stamps with the dates of filing as well as the names and addresses of the appellants and the respondent Polish court.
The subsequent pages which were not returned or served identified matters such as the decision appealed (though in current extradition practice this would be a decision of the Westminster Magistrates Court), its date, the grounds and a statement of belief.
The irregularity involved in their absence was capable of cure, and on the present facts certainly merited this.
The Crown Prosecution Service can have had no difficulty in identifying the decision being appealed, and it would be disproportionate if the practice followed by the court and the prison Legal Services Department should lead to these appellants losing any right of appeal.
I would therefore allow the appeals in all three Polish cases, and remit the appeals against the relevant extradition decisions to the High Court to be heard there.
The position in Halligen is more problematic.
Again his notice of appeal was filed with the court in time, but notice was required to both the Secretary of State and the Crown Prosecution Service.
Taking the Secretary of State first, Mr Halligen has to rely on his letter dated 29th December 2010, which he asked the Home Office Extraditions Section to accept as notice & service of my intent to appeal.
In terms of the rules, this was a highly irregular notice of any appeal, and, although it was dated the same date as his solicitors in fact filed notice of appeal with the court on his behalf, it was framed as notice of my intent to appeal, rather than as notice of an actual appeal.
Nonetheless, the statute is capable of embracing the Scottish practice, whereby a draft note of an appeal is served before being lodged with the court.
It follows that notice of an intent to appeal must be within the statutory language.
I would regard Mr Halligens letter as notice to the Secretary of State of an appeal within the statute, albeit that the letter was highly irregular in terms of the rules.
Provided it counts as a notice within the statute, the court is able to cure the irregularity if it thinks fit.
The circumstances again militate strongly in favour of doing this.
However, Mr Halligen faces the further difficulty that he has to show that notice of an appeal was given to the Crown Prosecution Service.
The first submission made on his behalf in this connection is that the Secretary of State informed him on 23rd rather than 22nd December 2010.
Like the High Court, and for the same reasons, I am unable to accept this submission.
Making the assumption in Mr Halligens favour, in the absence of any evidence either way, that the relevant fax was timed at 16.48 rather than 15.48 on 22nd December 2010, there is no basis for applying, directly or by analogy, CPR 6.26 which only governs documents to be served in accordance with the CPR or any Practice Direction.
I add that, even if it were relevant (which it is not in my view) to consider whether the notice was transmitted at an hour when it would be expected to come to the attention of someone responsible in the receiving solicitors firm, there would be no basis for treating 16.48 as not being such an hour.
Indeed, as far as anyone knows, the fax was immediately read and addressed, and some support for this may be found in the dating of the grounds in the notice of appeal on the next day (23rd December 2010).
It was also faintly submitted that the fourteen day period should be extended by reference to the large number of public holidays occurring during it.
But, contrary to the situation considered by Lord Neuberger in Mucelli at paras 83 84, the last day of the fourteen day period was not a public holiday.
Lord Neubergers approach allows for the human propensity to think about things at the last moment, but I do not think that it should be extended to situations where the last moment is a business day on which the intended appellant could have filed and served a notice of appeal.
It follows that no notice of an appeal was given to the Crown Prosecution Service within the permitted period, and Mr Halligens appeal is on its face impermissible as against both respondents.
It is therefore necessary to consider whether the apparently inflexible time limits for appeals in the 2003 Act are subject to any qualification or exception.
The appellants in the cases of Lukaszewski, Pomiechowski and Rozanski have in particular sought to rely on article 5(4) of the Human Rights Convention, read with section 3 of the Human Rights Act 1998.
Section 3 requires the court, so far as it is possible to do so, to read the relevant sections in a way which is compatible with the Convention.
Article 5(4) reads that Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.
The appellants submit that, in so far as the 2003 Act provides rights of appeal, such rights cannot consistently with article 5(4) be made subject to limitations which restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired and that any such restriction must pursue a legitimate aim and there must be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved: Tolstoy Miloslavsky v United Kingdom (1995) 20 EHRR 442, para 59.
Tolstoy was a case concerning appeals in a context to which Article 6(1) applied, but the appellants in invoking article 5(4) rely by analogy upon the case law under article 6(1).
The difficulty which these appellants face in relying upon article 5(4) is that their grievance relates to the extradition decision, rather than the fact, incidental to that decision, that they were remanded in custody pending extradition.
In MT (Algeria) v Secretary of State for Home Department [2009] UKHL 10; [2010] 2 AC 110, the House was concerned with challenges to deportation decisions upheld in partly closed proceedings before the Special Immigration Appeals Tribunal (SIAC).
The appellants were by reason of such decisions detained with a view to deportation, and submitted on that basis that the proceedings before SIAC were subject to article 5(4).
The House did not accept the submission.
Lord Phillips noted that the European Court of Human Rights had held in Chahal v United Kingdom (1996) 23 EHRR 413 that the lawfulness of the detention of a person with a view to deportation did not depend upon whether the underlying decision to deport could be justified, and that the appellants had not made an independent challenge of [sic] his detention as opposed to the decision to deport him (paras 89 90).
Lord Hoffmann noted, at para 173, that the European court in Chahal had decided that an alien who was detained pending deportation was entitled by virtue of article 5(4) to a substantial measure of procedural justice in proceedings to determine the lawfulness of his detention (paragraph 131) but not to a judicial tribunal to review whether the underlying decision to expel could be justified under national or Convention law (paragraph 128).
Lord Hope and Lord Brown and I all expressed our agreement with these parts of Lord Phillips and Lord Hoffmanns speeches (paras 226, 252 and 262).
In Chahal, para 128, the European Court in fact said this: 128.
The Court refers again to the requirements of Article 5 para. 1 (article 5 1) in cases of detention with a view to deportation (see paragraph 112 above).
It follows from these requirements that Article 5 para. 4 (article 5 4) does not demand that the domestic courts should have the power to review whether the underlying decision to expel could be justified under national or Convention law.
The present appellants suggest that the conclusion and reasoning in MT (Algeria) requires reconsideration in the light of other authority in which article 5(4) has been relied upon as indicating that a court must have jurisdiction to consider whether an extradition decision involves an abuse of process.
In R (Kashamu) v Governor of Brixton Prison [2002] QB 887, the Divisional Court (Rose LJ and Pitchford J) was faced with a series of pre Human Rights Act decisions at the highest level: Atkinson v United States of America [1971] AC 197, R v Governor of Pentonville Prison, Ex p Sinclair [1991] 2 AC 64 and In re Schmidt [1995] 1 AC 339.
These cases had held that, despite the development in other fields of a general power on the part of a court to intervene on the grounds of abuse of process, any challenge on such grounds to the lawfulness of a decision ordering a persons extradition and detention with a view to extradition was a matter for the Secretary of State rather than the courts: the courts could become involved at most only on a subsequent application for judicial review of the Secretary of States decision.
In Kashamu the Divisional Court relied upon section 6(1) of the Human Rights Act 1998 and upon article 5(4) to hold that such decisions could no longer be applied, and that it was, under schedule 1 to the Extradition Act 1989, incumbent on the district judge to consider whether there had been abuse of process rendering the detention unlawful under article 5(4), rather than to leave this issue for a minister to consider.
The abuse of process alleged is only briefly outlined in relation to one of the three persons concerned in Kashamu.
In relation to him it consisted of a prior arrest, conceded to have been irregular due to non disclosure (para 11).
It seems clear that the abuse asserted would have affected not only any detention pending extradition but also, more fundamentally, any possibility of extradition.
Under para 6(1) of Schedule 1 to the Extradition Act 1989, the district judge in Kashamu had had the same powers, as near as may be, . as if the proceedings were the summary trial of an information against him for an offence committed in England and Wales.
On a summary trial, those powers would have included considering and applying article 5(4) in relation to any issue whether detention was justified.
In these circumstances, I am not surprised that the Divisional Court held that the district judge had the power to investigate the possibility of abuse, which earlier authority had confined to the High Court by way of judicial review.
The decision in Kashamu was followed and approved by the Privy Council in Fuller v Attorney General of Belize [2011] UKPC 23.
There was in Fuller no equivalent provision to para 6(1) to Schedule 1 to the Extradition Act 1989, and the Board simply treated article 5(4) and its Belizean analogue, section 5(2)(d) of the Constitution, as applicable to detention for the purpose of extradition.
As the Board made clear the abuse alleged went, in that case also, to the extradition as much as to any prior detention: paras 5 and 53 54.
Indeed, Mr Fuller had been released on bail, although it is established for the purposes of a challenge to extradition under domestic law that an applicant for habeas corpus is to be treated as effectively in custody, even if released on bail: R v Secretary of State for the Home Department, Ex p Launder (No 2) [1998] QB 994, 1000G 1001G and 1011G H.
Where detention and the extradition proceedings as a whole stand and fall together, according to whether or not they involve an abuse of process, then Fuller suggests that article 5(4) may be an effective means by which a root and branch challenge to extradition may be pursued.
The decision in MT (Algeria) was not however cited in Fuller, and both Kashamu and Fuller were concerned with a question whether the previous restriction on an extradition courts ordinary power to restrain proceedings conducted in abuse of process should continue to be recognised.
It is unsurprising that the courts should conclude that this limitation was no longer appropriate.
There is no suggestion of any abuse of process at the root of the present extradition proceedings.
The present appeals concern the single question whether proceedings to challenge an extradition decision are subject to the procedural guarantee contained in article 5(4).
Proceedings to challenge an extradition decision are capable of raising a whole range of issues which have nothing to do with abuse of process or, indeed, with the question whether the person concerned is actually detained in the sense clearly envisaged in article 5(4).
For example, they may raise questions whether the alleged offence is an extradition offence (section 10), whether extradition is barred by the rule against double jeopardy, extraneous considerations, the passage of time, age, hostage taking considerations, speciality, earlier extradition to the United Kingdom or earlier transfer to the International Criminal Court (sections 11 to 19A) and whether extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998 (section 21).
The reasoning in Kashamu and Fuller does not suggest, or justify a conclusion, that all such questions engage the procedural guarantee contained in article 5(4).
This is so whether the person concerned is in custody or whether, even if he is not, he is to be treated as if he were for the domestic law purposes of a challenge to the proceedings by writ of habeas corpus.
I do not therefore consider that either Kashamu or Fuller affects the careful distinction drawn by the European Court of Human Rights in Chahal between challenges to detention and to the underlying decision to remove an alien from the jurisdiction.
The same careful distinction was followed in MT (Algeria), which in my view governs the present situation of a challenge made essentially to an extradition decision.
I would therefore hold that article 5(4) did not apply and that the present appellants were not entitled to a judicial decision under article 5(4).
Article 5(4) is not however the only potential string in the appellants bow.
Mr Halligen also invokes article 6(1).
The respondent, the Secretary of State, in reply submits that it is clear that article 6(1) has no application to decisions to expel or extradite.
She cites a number of decisions of the European Court.
H. v Spain (Application no. 10227/82) concerned an American citizen whose extradition from Spain was sought by the United States and who complained that he had had inadequate legal representation and interpretation before the Audiencia Nacional.
The Commission held the complaint inadmissible on the ground that extradition proceedings do not involve the determination of a criminal charge within article 6(1), because in this context the word determination involves the full process of the examination of an individuals guilt or innocence of an offence.
E.G.M. v Luxembourg (Application No 24015/94) concerned a Colombian national whose extradition from Luxembourg was sought by the United States.
He complained that the extradition proceedings in Luxembourg violated the principle ne bis in idem and his rights of defence.
The Commission held that the former principle was not guaranteed by the Convention, in the context of different criminal proceedings in different states, and that the rights and freedoms recognised in the Convention do not include any right not to be extradited.
It referred in the latter connection to a prior statement to this general effect in G.K. and B.J.F. v The Netherlands (Application No 12543/86), based in turn on a similar general statement in X v Belgium (Application No 7256/75).
Another case in which a similar statement appears is Salgado v Spain (Application No 65964/01).
These were all again cases concerning aliens, in the first and third complaining that he would be ill treated in the requesting country and in the second that his extradition violated the terms of an extradition treaty.
Lastly, the Commission in E.G.M. v Luxembourg referred to its established case law whereby the words determination . of a criminal charge . relate to the full process of the examination of an individuals guilt or innocence, and not merely to the process of determining whether or not a person may be extradited to another country, citing H v Spain and Kirkwood v United Kingdom (Application No 10479/83), (1984) 37 DR 158.
In Kirkwood the applicant, a United States national, claimed that the proceedings for his extradition from the United Kingdom to the United States infringed article 6(3)(d), because he was not permitted to cross examine the witnesses against him in the United Kingdom.
The Commission held that, although the tasks of the Magistrates' Court included the assessment of whether or not there was, on the basis of the evidence, the outline of a case to answer against the applicant and [t]his necessarily involved a certain, limited, examination of the issues which would be decisive in the applicant's ultim[at]e trial, nevertheless, these proceedings did not in themselves form part of the determination of the applicant's guilt or innocence, which will be the subject of separate proceedings in the United States which may be expected to conform to standards of fairness equivalent to the requirements of article 6, including the presumption of innocence, notwithstanding the committal proceedings.
In these circumstances the Commission concluded that the committal proceedings did not form part of or constitute the determination of a criminal charge within the meaning of Article 6 of the Convention (para 9).
The House of Lords cited and applied para 9 of the Commissions ruling in Kirkwood, when rejecting similar claims to rely on article 6(3)(d) by the appellants in R (Al Fawwaz) v Governor of Brixton Prison [2001] UKHL 69 [2002] 1 AC 556.
In Maaouia v France (2001) 33 EHRR 42, a Tunisian citizen sought to resist his exclusion from France on the ground that the length of the proceedings had been unreasonable and excessive.
He failed emphatically, for reasons which emphasised his position as an alien.
The Court said: 37.
The Court therefore considers that by adopting Article 1 of Protocol No.7 containing guarantees specifically concerning proceedings for the expulsion of aliens the States clearly intimated their intention not to include such proceedings within the scope of Article 6(1) of the Convention. 38.
In the light of the foregoing, the Court considers that the proceedings for the rescission of the exclusion order, which form the subject matter of the present case, do not concern the determination of a "civil right" for the purposes of Article 6(1).
The fact that the exclusion order incidentally had major repercussions on the applicant's private and family life or on his prospects of employment cannot suffice to bring those proceedings within the scope of civil rights protected by Article 6(1) of the Convention. 39.
The Court further considers that orders excluding aliens from French territory do not concern the determination of a criminal charge either.
In that connection, it notes that their characterisation within the domestic legal order is open to different interpretations.
In any event, the domestic legal order's characterisation of a penalty cannot, by itself, be decisive for determining whether or not the penalty is criminal in nature.
Other factors, notably the nature of the penalty concerned, have to be taken into account.
On that subject, the Court notes that, in general, exclusion orders are not characterised as criminal within the Member States of the Council of Europe.
Such orders, which in most States may also be made by the administrative authorities, constitute a special preventive measure for the purposes of immigration control and do not concern the determination of a criminal charge against the applicant for the purposes of Article 6(1).
The fact that they are imposed in the context of criminal proceedings cannot alter their essentially preventive nature.
It follows that proceedings for rescission of such measures cannot be regarded as being in the criminal sphere either. 40.
The Court concludes that decisions regarding the entry, stay and deportation of aliens do not concern the determination of an applicant's civil rights or obligations or of a criminal charge against him, within the meaning of Article 6(1) of the Convention.
In Mammatkulov and Askarov v Turkey (2005) 41 EHRR 494, in the context of complaints about the fairness of Turkish extradition proceedings, the European Court reiterated, at para 82, that decisions regarding the entry, stay and deportation of aliens do not concern the determination of an applicant's civil rights or obligations or of a criminal charge against him, within the meaning of Article 6(1) of the Convention.
This examination of Strasbourg case law shows that the Commission and Court have stood firm against any suggestion that extradition as such involves the determination of a criminal charge or entitles the person affected to the procedural guarantees provided in the determination of such a charge under article 6(1) or 6(3).
The cases involved are all also cases involving the extradition of aliens.
The last two decisions emphasise that proceedings for the extradition of aliens do not involve the determination of any civil rights within the meaning of article 6(1).
By the same token they underline a potential difference in this respect between aliens and citizens.
Both in international law and at common law British citizens enjoy a common law right to come and remain within the jurisdiction, and Mr Halligen is such a citizen.
Blackstone (Commentaries on the Laws of England 15th ed (1809) vol 1, p 137) stated: But no power on earth, except the authority of Parliament, can send any subject of England out of the land against his will; no, not even a criminal.
This passage was cited and approved by Lord Hoffmann in R (Bancault) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61; [2009] AC 453, para 44.
In R v Bhagwan [1972] AC 60, 77G Lord Diplock spoke of the common law rights of British subjects . to enter the United Kingdom when and where they please and on arrival to go wherever they like within the realm.
In Case 41/74 Van Duyn v Home Office [1975] Ch 358, para 22, the European Court of Justice recognised that: it is a principle of international law, which the EEC Treaty cannot be assumed to disregard in the relations between member states, that a state is precluded from refusing its own nationals the right of entry or residence.
The principle is the necessary corollary of a states right (subject to obligations undertaken by e.g. the Geneva Refugee Convention and the European Convention on Human Rights) to refuse aliens permission to enter or stay in its territory.
Were it otherwise, the Flying Dutchman would be no fleeting phantom.
In these circumstances, Mr Halligen enjoyed a common (or civil) law right to enter and remain in the United Kingdom as and when he pleased.
The next question is whether proceedings under the Extradition Act 2003, in that they may affect his freedom to remain in the United Kingdom at least for the duration of American criminal proceedings, involve the determination of that civil right.
The 2003 Act has the authority of Parliament, and to that extent Mr Halligens right to remain in the United Kingdom is potentially qualified.
But under the Act it is only through domestic extradition proceedings that this right can be affected and suspended for the purpose and period of any American proceedings and of any sentence which might thereafter be passed on him, if found guilty.
In so far as it may be suspended, the extradition proceedings determine whether Mr Halligen may continue to enjoy his common law right for whatever proves to be the relevant period.
A claim to extradite him does not involve the determination of a criminal charge, and he is not entitled to any full process of examination of his guilt or innocence, or to the procedural guarantees which would attend that.
But he is entitled to a fair determination as to his common law right to remain within the jurisdiction.
In these circumstances, it follows in my view that the extradition proceedings against Mr Halligen fall within article 6(1).
In so far as the proceedings involve under the statute a right of appeal against any extradition decision, article 6(1) also requires that it be free of limitations impairing the very essence of the right, pursue a legitimate aim and involve a reasonable relationship of proportionality between the means employed and the aim sought to be achieved in accordance with the standard identified in Tolstoy Miloslavsky v United Kingdom, cited in para 22 above.
I cannot regard the provisions regarding appeals contained in the 2003 Act as meeting the standard set in Tolstoy Miloslavsky.
Indeed I note that the Review of the United Kingdoms Extradition Arrangements of 30 September 2011 identified the time limits as an unsatisfactory feature about the appeals process, and mentioned a number of trenchant judicial criticisms, some already set out, as well as the particular difficulties posed for those remanded in custody.
In the end, however, after identifying as possible mechanisms for alleviating potential injustice either extending the time limit for Part 1 from seven to fourteen days or giving the court a discretion to extend the time limit in the interests of justice, the Review said that On the whole we prefer the former, as this is an area in which certainty and finality is important.
Finality and certainty are important legal values.
But, although the cases to date may not be large in absolute numerical terms, they indicate that neither finality nor certainty has been achieved to date.
Even on the more relaxed view of the statutory conditions which I consider appropriate, the statute will be capable of generating considerable unfairness in individual cases, unless some further relief is available.
More importantly, it is not sufficient under article 6(1) if in most or nearly all cases the right of appeal can be or should be capable of being exercised in time.
The very essence of the right may be impaired in individual cases and there may still be no reasonable relationship of proportionality between the means employed and the aim sought to be achieved.
It has been held, in the public law context of removal from the jurisdiction of an alien, that a litigant must answer for the failings of his legal advisers, with the result that he was unable to obtain the reopening of an adjudicators decision on the ground of such advisers negligent failure to inform him of the hearing: R v Secretary of State for the Home Department, Ex p Al Mehdawi [1990] 1 AC 876.
Any other decision would, it was said, come at the cost of opening such a wide door which would indeed seriously undermine the principle of finality in decision making: per Lord Bridge, at p 901E.
In Ex p Al Mehdawi there was however a residual discretion in the Secretary of State to refer the matter back to an adjudicator.
In contrast, in an asylum context where no such residual discretion existed, the Court of Appeal in FP (Iran) v Secretary of State for the Home Department [2007] EWCA Civ 13 held ultra vires immigration rules deeming a party to have received notice of a hearing served on the most recent addresses notified to the relevant tribunal and requiring the tribunal to proceed in the partys absence if satisfied that such notice had been given.
The solicitors acting for the asylum seekers in FP (Iran) had failed to give the tribunal new addresses to which the asylum seekers had been moved by the National Asylum Support Service.
Distinguishing Ex p Al Mehdawi, the Court of Appeal held that there was no universal surrogacy principle which (reformulated) rules would have to depart from in order to operate justly (para 46).
The rules were framed so as to be productive of irremediable procedural unfairness.
Both the appellants were among those affected by this deficiency, because both have lost the opportunity to be heard through the default of their legal representatives and not through their own fault (para 48).
This decision (reached in the context of aliens) turned on common law principles regarding access to justice, though reference was made by analogy to the position under the European Convention on Human Rights.
The position is a fortiori in so far as article 6(1) is directly applicable in Mr Halligens case.
It is clear that the statutory provisions regarding the permitted periods for appeals may in individual cases impair the very essence of the right of appeal.
The previous judicial expressions of concern are eloquent about the potential and actual unfairness of the position in which prisoners find themselves in trying to meet the statutory requirements, with such aid as the prison legal services department or legal advisers can, under difficult conditions, provide.
The problems of communication from prison with legal advisers in the short permitted periods of seven and fourteen days are almost bound to lead to problems in individual cases.
It is no satisfactory answer that a person wrongly extradited for want of an appeal as a result of failings of those assisting him might, perhaps, be able to obtain some monetary compensation at some later stage.
Strict application of the surrogacy principle would be potentially unjust.
I am not persuaded that the interests of finality and certainty outweigh the interests of ensuring proper access to justice by appeal in the limited number of extradition cases where this would otherwise be denied.
There would not be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.
What then does this mean for Mr Halligen? The opposed possibilities are, on the one hand, that the statute can be read in a manner consistently with the Convention rights, pursuant to the courts duty under section 3 of the Human Rights Act so to read it so far as it is possible to do so, and, on the other hand, that the statutory time limits are simply incompatible with article 6(1).
The former solution may involve reading in words, provided that they are compatible with the underlying thrust of the legislation and do not go against the grain of the legislation: Ghaidan v Godin Mendoza [2004] UKHL 30, [2004] 2 AC 557, paras 33, per Lord Nicholls, and 121, per Lord Rodger; and see R v A (No 2) [2001] UKHL 25, [2002] 1 AC 45, where statutory restrictions on cross examination were read as subject to a further implied exception to enable a fair trial under article 6(1), and Connolly v Director of Public Prosecutions [2007] EWHC 237 (Admin), [2008] 1 WLR 276, para 18, where the High Court was prepared to read a statutory prohibition on sending another person certain material as subject to an implied provision that this was not to apply where the prohibition would involve a breach of the senders Convention rights under article 10.
In the present case, there is no reason to believe that Parliament either foresaw or intended the potential injustice which can result from absolute and inflexible time limits for appeals.
It intended short and firm time limits, but can only have done so on the basis that this would in practice suffice to enable anyone wishing to appeal to do so without difficulty in time.
In these circumstances, I consider that, in the case of a citizen of the United Kingdom like Mr Halligen, the statutory provisions concerning appeals can and should all be read subject to the qualification that the court must have a discretion in exceptional circumstances to extend time for both filing and service, where such statutory provisions would otherwise operate to prevent an appeal in a manner conflicting with the right of access to an appeal process held to exist under article 6(1) in Tolstoy Miloslavsky.
The High Court must have power in any individual case to determine whether the operation of the time limits would have this effect.
If and to the extent that it would do so, it must have power to permit and hear an out of time appeal which a litigant personally has done all he can to bring and notify timeously.
The position of others who are not British citizens of the United Kingdom and do not enjoy the protection of article 6(1) is not, as it happens, relevant to the outcome of any of the appeals now before the Supreme Court.
However, their position, as well as that of persons enjoying the protection of article 6(1), would, on the information before the court, appear to deserve attention.
This includes specifically whether they are currently provided with meaningful and effective legal assistance in relation to the whole extradition process, including any appeal they may wish to bring.
For the reasons I have explained, I would allow Mr Halligens appeal and remit his case, as well as those of Mr Lukaszewski, Pomiechowski and Rozanski (see paragraph 19 above), to the High Court for the hearing of all their four appeals against the relevant extradition decisions.
LADY HALE
I agree that these appeals should be allowed for the reasons given by Lord Mance.
They have highlighted a number of aspects of the present law which may be thought unsatisfactory.
First, section 26(4), section 103(9) and section 108(4) of the Extradition Act 2003 lay down tight deadlines within which the requested person must give notice of appeal against, respectively, an extradition order under Part 1 of the 2003 Act, a decision to send the case to the Secretary of State under Part 2, and the Secretary of States extradition order under Part 2.
Sections 35 and 117 lay down tight deadlines within which the person must be extradited if no notice of appeal is given before the end of the permitted period.
In Mucelli v Government of Albania [2009] UKHL 2, [2009] 1 WLR 276, therefore, the House of Lords proceeded on the assumption that, unless the appellant gave notice to the respondent(s) within the permitted period, the extraditing authorities would not know whether the clock had stopped.
We now know that that assumption is incorrect, for two reasons.
The first is that the respondent(s) to the appeals are not the extraditing authorities for this purpose.
The respondents will be those acting on behalf of the issuing judicial authority (in Part 1) or the requesting authority and the Secretary of State (in Part 2).
The extraditing authority is the Serious Organised Crime Agency (SOCA) in Part 1 and the Secretary of State in Part 2.
So giving notice to the respondent(s) is not, in itself, sufficient for the extraditing authority to know that the clock has stopped.
Secondly, the uncontradicted evidence of Mr Evans, solicitor for the first two appellants, is that Westminster Magistrates Court informs SOCA by email when an extradition order is made and that the High Court emails SOCA when an appeal is filed.
That is what alerts SOCA to the fact that it is no longer obliged, or indeed entitled, to extradite the requested person within the required period.
This undermines a substantial part of the reasoning of the majority in Mucelli at least in relation to Part 1 cases.
The best point remaining is the linguistic difference between an appeal . may be brought in section 26(3), section 103(4), (7) and (8)(b), and section 108(4), and notice of an appeal . must be given in section 26(4), section 103(9) and section 108(4).
But there is no magic in those words.
Different terms are used for the process of bringing an appeal in the three different jurisdictions which make up the United Kingdom.
In Lord Rodgers view, the draftsman has just chosen a familiar form of words for referring to the bringing of an appeal [14].
It would have been so easy for the draftsman to have said filed and served if that is what he had meant but he did not.
Be that as it may, this court is not constituted to depart from the decision in Mucelli and there is no need for it to do so in the Polish cases.
However, the new information does underline the fact that there is no good practical reason for the court to construe what is meant by giving notice to the respondents in a demanding way.
The clock will have stopped, but if the rules about service have not been properly complied with, the court has power either to grant an extension or to impose sanctions, including the sanction of striking out the appeal, as appropriate.
Secondly, however, the court does have to contend with Mucelli in the case of Mr Halligen.
We can treat his letter to the Secretary of State as notice for this purpose, but we cannot treat his notice to Crown Prosecution Service as arriving in time.
There are two possible ways of solving the problem, should we think this result to be unnecessary and unjust.
One is to depart from Mucelli.
For the reasons indicated earlier, we could conclude that it was not the intention of Parliament that there should be no jurisdiction to entertain an appeal in such circumstances.
The other is to employ the obligation of conforming interpretation in section 3(1) of the Human Rights Act 1998 in cases where the ordinary interpretation produces results which are incompatible with the Convention rights of the requested person.
Section 3(1) requires that So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.
As is now well established, this requires the court (and others) to read (and give effect to) legislation compatibly with the Convention rights even if this is not what, on ordinary principles of construction, Parliament intended, so long as it is possible to do so.
The appellants and the Secretary of State consider that it is possible in this case.
The respondents consider that it is not, and if (which they do not accept) the strict application of the time limit for service is incompatible, the only course would be a declaration of incompatibility under section 4 of the 1998 Act.
The right of a person to enter and remain in the country of which he is a national is the most fundamental right of citizenship.
The United Kingdom has signed but not ratified Protocol No 4 to the ECHR, article 3 of which makes this right crystal clear.
But, as Lord Mance has demonstrated, it has been part of United Kingdom law for centuries.
It is perhaps more questionable whether it counts as a civil right for the purpose of the right to a fair hearing in article 6(1) of the Convention.
As originally conceived, this did not apply to the rights enforceable only in public law.
But that limitation has been steadily eroded: see the jurisprudence discussed by Lord Hope in Ali v Birmingham City Council [2010] UKSC 8, [2010] 2 AC 39, [28] to [49].
And in any event, this right is not like a claim to a social security benefit (which is a civil right) or to a social service (which currently is not), for these can only be enforced as provided for by the statute or by judicial review.
Should the need arise, this right could be claimed in ordinary civil proceedings against a person who was denying it.
I therefore agree with Lord Mance that the extradition proceedings against Mr Halligen involve the determination of his civil rights for the purpose of article 6(1).
I also agree that to insist upon the time limit for service in the particular circumstances of his case is a disproportionate limitation upon his right of access to the appeal process.
I further agree that it is possible to read and give effect to section 108(4) and, it would necessarily follow, section 26(4) and section 103(9) in the manner which Lord Mance suggests at paragraph 39.
However, it does seem to me unsatisfactory that we are taking this course, rather than the more straightforward course of departing from Mucelli.
There is very good reason to think that the House decided Mucelli on a mistaken factual assumption.
There were very good reasons, trenchantly expressed in Lord Rodgers dissenting opinion, to think that the intention of Parliament was to insist only on filing, rather than on service, of the notice of appeal before the deadline.
For my part, I consider it more satisfactory to comply with the actual intention of Parliament than to resort to the obligation of conforming interpretation (whether under the European Communities Act 1972 or the Human Rights Act 1998).
Resorting to section 3 of the 1998 Act, although two of the parties consider this possible, produces two distortions in the extradition process.
It discriminates between nationals and aliens.
It also discriminates between the requested persons and the requesting authorities, for the latter can have no convention rights which mandate a compatible interpretation.
Thus section 28(4), section 105 (5) and section 110(5), which impose the same time limits upon appeals against discharge by the first instance court or by the Secretary of State, cannot be read down so as to forgive such trivial failures as these on the part of the requesting authorities.
Thirdly, however, whichever of the above courses is taken in this case, recognition that the right of a citizen to remain in this country is a civil right for the purposes of article 6(1) of the ECHR leaves open the possibility that section 26(4) and also section 103(9) and section 108(4) would also have to be read down if the rigid time limits for the filing of a notice of appeal were to be held a disproportionate limitation on a citizens right of access to the appeal process.
There was talk during the hearing of riots, strikes or fires at the prison to which the requested person was remanded making the service of notice impossible, but such extraordinary events might also make the filing of a notice of appeal impossible.
As things currently stand, a requested person who is remanded in custody does not always have access to a lawyer who can protect his interests.
While we know that HMP Wandsworth has a Legal Services Department staffed by prison officers who provide assistance, we do not know whether similar facilities are available to requested persons who are remanded to other prisons.
We do know that, given the pace of proceedings, quite properly arguable grounds for resisting extradition or the execution of a European arrest warrant may not have been put before the district judge.
I do not, of course, say that it would indeed be possible to read down the legislation in such circumstances, but merely that our decision in this case makes the argument possible.
Had other members of the court been of the same mind, therefore, I would have allowed all these appeals, but for reasons other than those given by Lord Mance.
But those reasons are not incompatible with the reasons which he gives and with which I am also content to agree.
| Lukaszewski (L), Pomiechowski (P) and Rozanski (R) are Polish citizens who are each the subject of a European Arrest Warrant (EAW) issued by the Polish court.
Each is wanted in order to serve an existing sentence.
L is wanted, in addition, to stand trial on ten charges of fraud.
The fourth appellant, Halligen (H), is a British citizen whose extradition is sought to the USA under Part 2 of the Extradition Act 2003 (the Act) to face allegations of wire fraud and money laundering.
All four appellants were arrested and brought before Westminster Magistrates Court.
L, P and Rs extradition were ordered on (respectively) 28th January 2011, 2nd March 2011 and 4th March 2011.
Hs case was sent to the Secretary of State for her to decide whether H should be extradited.
On 22nd December 2010, Hs extradition was ordered by the Secretary of State, and the order and a letter setting out the Secretary of States reasons were sent by post and fax (at either 15.48 or 16.48) to Hs solicitors on that same day.
All four appellants were remanded in custody at HMP Wandsworth pending extradition.
The permitted time period for giving notice of appeal against an extradition order was 7 days in the case of L, P and R, and 14 days in the case of H. L, P and R were each assisted by a prison officer working in the legal services department at HMP Wandsworth to complete a notice of appeal.
The legal services department faxed the notices of appeal to the Administrative Court for filing and stamping, which faxed back a copy of the sealed front page to the legal services department.
The legal services department then faxed to the Crown Prosecution Services (CPS), as legal representatives of the judicial authority of the state requesting surrender, a copy of the sealed front page together with a cover sheet.
In the case of each of L, P and R, all this occurred within the 7 day permitted period.
However, in each case, the CPS was not served with a full copy of the notice of appeal, sealed or unsealed, until after the 7 day time limit had expired.
The High Court held it had no jurisdiction to hear the appeals.
A notice of appeal had to be both filed and served within the non extendable permitted period, and must (a) identify the appellant, (b) identify the decision against which he seeks to appeal, and (c) set out at least the gist of the basis on which the appeal is sought to be presented.
Accordingly, the purported notices of appeal were invalidly constituted and served out of time.
Hs solicitors prepared a notice of appeal, attaching grounds of appeal, on 23rd December 2010.
The notice of appeal was filed and stamped on 29th December 2011, well within the 14 day permitted period which expired at midnight on 4th January 2011.
However, only on 5th January 2011 did Hs solicitors send the notice of appeal to the CPS by fax and to the Home Office by post (reaching the latter on 6th January 2011).
H himself had written from prison by fax to the Home Office on 29th December 2010 asking them to accept the letter as notice & service of my intent to appeal that decision and stating that he had instructed solicitors for that purpose.
The High Court held it had no jurisdiction to hear Hs appeal, that Hs letter of 29th December 2011 did not constitute a valid notice of appeal, and the Secretary of State should be treated as having informed H of her decision on 22nd
December, not 23rd December, 2011, so that the purported notice of appeal was in any event served out of time.
All four appellants appealed the decisions of the High Court to the Supreme Court.
The Supreme Court allows all four appeals unanimously.
Lord Mance gives the leading judgment of the Court.
Lady Hale gives a separate concurring judgment.
The requirement under the Act that a notice of an appeal be given within the relevant permitted period meant that it had to be filed in the High Court and served on all respondents to the appeal within such period (following the decision of the House of Lords in Mucelli v Government of Albania [2009] UKHL 2) [5], [17].
However, a generous view should be taken of this requirement, bearing in mind the shortness of the permitted periods under the Act and that what really matters is that an appeal should have been filed and that all respondents be on notice of this, sufficient to warn them that they should not proceed with extradition pending an appeal [18].
In the cases of L, P and R, the irregularity involved in the absence of pages following the sealed front page of their notices of appeal was capable of cure.
The CPS, having received in time the sealed front page of each notice of appeal, can have had no difficulty in identifying the decisions being appealed.
It would be disproportionate if the practice followed by the court and the prison legal services department should lead to the appellants losing their right of appeal [19].
The Court regards Hs letter as notice to the Secretary of State of an appeal within the Act, albeit that the letter was highly irregular in its form [20].
However, even if it is accepted that Hs solicitors only received the relevant fax from the Secretary of State at 16.48, there was no basis for deeming the fax to have been received the following day.
It follows that no notice of an appeal was given to the CPS within the permitted period, and Hs appeal is on its face impermissible as against both respondents [21].
In these circumstances, the question for the Court is whether the apparently inflexible time limits for appeals within the Act are subject to any qualification or exception [22].
Under Article 6(1) of the Human Rights Convention, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law in the determination of his civil rights and obligations or of any criminal charge against him.
The Court is satisfied that extradition does not involve the determination of a criminal charge [31].
However, H, as a UK citizen, enjoyed a civil right to enter and remain in the UK as and when he pleased [32].
Proceedings under the Act, in that they may affect Hs freedom to remain in the UK, at least for the duration of foreign extradition proceedings, involve the determination of that civil right [32].
It follows that the extradition proceedings against H fall within Article 6(1) [33].
In the case of a UK citizen, the statutory provisions concerning appeals can and should be read (pursuant to the obligation of conforming interpretation under section 3(1) of the Human Rights Act 1998) as being subject to the qualification that the court must have a discretion in exceptional circumstances to extend time for both filing and service, where such statutory provisions would otherwise operate to prevent an appeal in a manner conflicting with the right of access to an appeal process under Article 6(1).
Accordingly, the Court allows all four appeals and remits each appeal against extradition to the High Court to be heard there [19], [41].
|
The main issue in this appeal concerns the meaning and effect of a short, innocent sounding, phrase in article 221(4) of the (now superseded) Customs Code of the EU, contained in Council Regulation (EEC) No 2913/92 of 12 October 1992.
The Customs Code regulated the collection of, and accounting for, customs duty throughout the EU (in 1992, the EEC).
As is spelt out in the recitals to Regulation No 2913/92, the purposes of the Customs Code include securing a balance between the needs of the customs authorities in ensuring the correct application of customs legislation, on the one hand, and the rights of traders to be treated fairly, on the other, the establishment of uniform rules and procedure within the internal market, and the prevention of fraud or irregularity which would be liable adversely to affect the General Budget of the EU.
In order to understand the main issue about the meaning and effect of article 221(4) as inserted by Council Regulation (EC) No 2700/2000 of 16 November 2000, it is necessary first to explain some of the basic concepts used within the Customs Code.
At the heart of it lies the concept of customs debt which is defined in article 4(9), in relation to imports, as follows: Customs debt means the obligation on a person to pay the amount of the import duties (customs debt on importation) or export duties (customs debt on exportation) which apply to specific goods under the Community provisions in force.
By article 4(12) debtor means any person liable for payment of a customs debt.
In relation to imports, article 201(2) provides that a customs debt shall be
incurred at the time of acceptance of the customs declaration in question, and article 201(3) identifies as the debtor the person making the declaration, and (if relevant) the person on whose behalf the declaration is made.
Recovery of the amount of the customs debt is governed by Chapter 3 of the Customs Code.
Section 1 deals with entry of the debt in the accounts and communication of the amount of duty to the debtor (in both cases by the customs authority of each member state).
Articles 218 to 220 lay down strict time limits for the accounting by customs authorities for customs debts including, in article 220, correcting the accounts where a customs debt has originally been entered at a level lower than the amount legally owed.
Article 221 provides for the communication to the debtor of the amount of duty as soon as it has been entered into the accounts.
Section 2, which begins with article 222, provides time limits and procedures for payment of the duty by the debtor.
Those time limits run from the date of communication to the debtor of the amount of duty owed.
Thus, although the debtor incurs a customs debt at the time of importation (when making the customs declaration), liability to pay it occurs only upon receipt of communication of the amount by the relevant customs authority.
Returning to article 221, it provided (at the material time) so far as is relevant as follows: Article 221 1.
As soon as it has been entered in the accounts, the amount of duty shall be communicated to the debtor in accordance with appropriate procedures. 2. 3.
Communication to the debtor shall not take place after the expiry of a period of three years from the date on which the customs debt was incurred.
This period shall be suspended from the time an appeal within the meaning of article 243 is lodged, for the duration of the appeal proceedings. 4.
Where the customs debt is the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings, the amount may, under the conditions set out in the provisions in force, be communicated to the debtor after the expiry of the three year period referred to in paragraph 3.
I have italicised the phrase which falls to be interpreted and applied on this appeal.
By article 4(23) provisions in force include both Community and national provisions.
The issue may be summarised as follows.
For the importer FMX Food Merchants Import Export Co Ltd, the respondent, which is the relevant customs debtor, it is said that article 221(4) confers an option on each member state to provide, in advance, an alternative fixed time limit in substitution for the three year time limit for communication of the amount of duty, where the qualifying condition (namely an act which was liable to give rise to criminal court proceedings) is satisfied.
I will call it the criminal proceedings condition.
If the member state does not do so (and the UK did not) then the three year time limit provided by article 221(3) remains in force, because any other outcome would offend against the EU principle of legal certainty.
For HMRC, the appellant, it is submitted that the three year time limit in article 221(3) is automatically displaced wherever the criminal proceedings condition is satisfied.
In such a case the requirement for legal certainty may be met either by a member states provision of a substitute fixed time limit, or by the combination of a number of specific provisions of the national law which, together, satisfy the requirement for legal certainty or, as a last resort, by the general requirement of EU law that the communication should take place within a reasonable time.
The relevant provisions of national law, it is argued, include one or more of the UKs provisions about abuse of process, the equitable doctrine of laches, or the provisions of the Limitation Act 1980.
Thus far, FMXs arguments have been broadly accepted by the First tier Tribunal (the FtT) and by the Court of Appeal, whereas the Upper Tribunal (the UT) found in favour of HMRC.
The Facts
The facts which gave rise to the present dispute are not (now at least) contentious and may be briefly stated.
Between August 2003 and January 2004, FMX imported ten consignments of garlic, which were declared to be of Cambodian origin, thus purportedly entitling them to exemption from all import duties under the Everything But Arms amendment to the EUs generalised system of preferences made in favour of, amongst other countries, Cambodia in 2001.
In fact, the consignments all originated in China, so that (being outside the relevant quota for fresh garlic) they were subject both to ad valorem duty of 9.6% and additional anti dumping duty of 120 per 100kg.
The duty which should have been paid was 503,577.63.
The false declarations as to origin came to light in the course of HMRCs investigation of later imports, occurring after January 2004, leading to post clearance demands in February 2007 for duty of 370,872.50 issued within three years from the relevant importations.
The FtT dismissed FMXs appeal against those demands in December 2010, holding that the imports had all originated in China.
Following that outcome HMRC issued the post clearance demand for duty in respect of the August 2003 January 2004 series of imports in March 2011, long after the expiry (if applicable) of the three year time limit for communication in article 221(3), but only just over three months after the FtTs decision about the later imports.
It was found by the FtT and is now common ground that, in relation to the 2003 04 imports, all the garlic originated in China, that the makers of the certificates of origin knew that they were false, and would be used for the purposes of UK import declarations, that FMX presented these certificates to HMRC and that, although not implicated in the underlying fraud, FMX thereby committed an act that was liable to give rise to criminal court proceeding under section 167(3) of the Customs and Excise Management Act 1979, which creates a strict liability offence.
The result of those factual findings is that the criminal proceedings condition for disapplication of the three year time limit for communication set out in article 221(4) was satisfied.
It is, in passing, common ground that it is not necessary for HMRC to show that criminal court proceedings actually ensued or that the customs debtor was the person who or which committed the relevant criminal act: see Gilbert Snauwaert v Belgium (Joined Cases C 124/08 and C 125/08) [2009] ECR I 6793.
Conditions set out in the provisions in force
It is common ground that this phrase is apt to describe both EU provisions and applicable provisions of any relevant member state.
The UK has not in fact enacted or prescribed any provisions taking the form of a substitute time limit for communicating a customs debt where the criminal proceedings condition in article 221(4) is satisfied.
The UK has, of course, a substantial body of statutory limitation provisions, now consolidated in the Limitation Act 1980 (for England and Wales), but section 37(2)(a) provides that the 1980 Act shall not apply to any proceedings by the Crown for the recovery of any tax or duty, or interest thereon.
The result is that there were no provisions in force in England and Wales at the material time which imposed any specific or fixed time limit for the communication of a customs debt in circumstances where the criminal proceedings condition in article 221(4) applied.
If, as FMX contends, article 221(4) gives member states the option to prescribe a substitute time limit, failing which the three year time limit in article 221(3) remains in force, that option has not been exercised in respect of England and Wales.
The principle of legal certainty
In Test Claimants in the FII Group Litigation v Revenue and Customs Comrs (formerly Inland Revenue Comrs) [2012] UKSC 19; [2012] 2 AC 337, 394, Lord Sumption, after mentioning the EU principles of effectiveness and equivalence, continued at para 146: There is a third principle which features less prominently in the case law on this subject but is of considerable importance because it informs the approach of the Court of Justice to the first two.
This is the principle of legal certainty, which lies at the heart of the EU legal order and entails (among other things) that those subject to EU law should be able clearly to ascertain their rights and obligations.
Later, at para 149, he continued: The implications of these principles for the operation of rules of limitation in national systems of law is the subject of a considerable body of case law in the Court of Justice.
Not only is limitation a feature of every national legal system of the EU, but the recognition of national rules of limitation as both necessary and desirable is treated as part of the principle of legal certainty in EU law.
In Rewe I [1976] ECR 1989, one of the first cases to come before the Court of Justice about the application of limitation periods to claims to enforce directly effective rights in the area of tax, the court observed, at para 5, that the laying down of such time limits with regard to actions of a fiscal nature is an application of the fundamental principle of legal certainty protecting both the taxpayer and the administration concerned.
This is so, notwithstanding that the effect of that rule is to prevent, in whole or in part, the repayment of those charges: Haahr Petroleum Ltd v Abenra Havn (Case C 90/94) [1997] ECR I 4085, para 45.
Subject to the overriding principles of effectiveness and equivalence, EU law recognises the public interest in orderly national budgeting and equity between generations of taxpayers, which will generally require rules for establishing clear limits beyond which tax accounts may not be reopened.
Two potentially conflicting strands of EU jurisprudence have been identified by the parties to this appeal as emerging from decisions of the Court of Justice of the European Union (the CJEU).
The first is that, where the provisions in force appear to have a lacuna which, because of the absence of any time limit, would appear to permit a relevant body to pursue a claim or take action against a person without any limit of time, then the principle of legal certainty will require that the claim be made or action be taken within a reasonable time.
The second strand is that where the principle of legal certainty calls for the provision of a time limit, or permits a member state to prescribe a time limit of its own by way of derogation from an EU wide time limit, then nothing other than a time limit which is both fixed in its duration, and laid down in advance, will do.
Central to the outcome of this appeal is the question which of those strands of EU jurisprudence best illuminates the meaning and effect of article 221(4).
The earliest case which the court was shown in the first strand of EU authority is Sanders v Commission of the European Communities (Case T 45/01) [2004] ECR II 3315, CFI (Sanders).
This was a claim for damages for loss sustained as a result of the alleged failure to recruit the applicants as temporary servants of the European Communities during the time they worked for the Joint European Torus (JET) Joint Undertaking.
It was, in essence, a complaint of discrimination by the Commission made by 95 of its employees.
The procedural rules governing such an application, contained in the Staff Regulations of Officials of the European Communities, imposed no time limit for the bringing of such claims.
Nonetheless, the court held that the applicants were under a duty to do so within a reasonable time after becoming aware of the relevant facts, and that this duty arose from the general principles of Community Law, in particular the principle of legal certainty: see paras 59 61 and 66 of the judgment.
At para 59 it was held that: There is an obligation to act within a reasonable time in all cases where, in the absence of any statutory rule, the principles of legal certainty or protection of legitimate expectation preclude Community institutions and natural persons from acting without any time limits, thereby threatening, inter alia, to undermine the stability of legal positions already acquired.
At para 60, the court held that, for Community institutions, the duty to act within a reasonable time is an aspect of good administration and derives from the fundamental need for legal certainty.
In Allen v Commission of the European Communities (Case T 433/10)
EU:T:2011:744, EGC (Allen), another case about the JET project, 110 employees brought discrimination claims under the Staff Regulations of Officials of the European Communities, which were dismissed by the European Union Civil Service Tribunal (First Chamber) as having been brought out of time.
On appeal to the General Court, the applicants argued that there was no time constraint for the bringing of such claims.
In rejecting that argument the court held, at para 26, as follows: In that regard, it must be held that the appellants argument that the absence of a time limit automatically means that it is possible to bring a claim for damages without any time limit cannot succeed.
It should be noted on that point that, contrary to what the appellants contend, there is an obligation to act within a reasonable time in all cases except those where the legislature has expressly excluded or expressly laid down a specific time limit.
The legal basis for setting a reasonable time limit, in the absence of any statutory rule, is the principle of legal certainty, which precludes institutions and natural persons from acting without any time limits, thereby threatening to undermine the stability of legal positions already acquired Thus, in the absence of any statutory rule, it is for the judicature to decide on the length of the reasonable period for submitting a claim for damages, in the light of the
circumstances of the case
Nencini v European Parliament (Case C 447/13P) EU:C:2014:2372 (Nencini) was a case about recovery of expenses over claimed by an MEP, by the European Parliament.
Although the relevant procedural rules imposed a five year limitation period running from the notification of such a claim to an MEP, no time limit was specified for the making of that notification itself.
The communication was made to the MEP more than five years after the Parliament had become aware of the relevant facts.
The General Court and the Second Chamber on appeal held that the reasonable time principle applied to the communication by the Parliament of such a claim, because the fundamental requirement of legal certainty prevented Community institutions from indefinitely delaying the exercise of their powers.
The CJEU concluded that, in the circumstances, a delay of more than five years from becoming aware of the relevant facts, before communicating the claim, was to be presumed to be unreasonable, in the absence of special facts, such as conduct by the debtor causing delay or other time wasting manoeuvres or bad faith.
I turn now to the cases cited to this court in the second strand of EU authority, again in chronological order.
The most important of those, heavily relied upon by the Court of Appeal in the present case, is Ze Fu Fleischhandel GmbH v Hauptzollamt Hamburg Jonas (Joined Cases C 201/10 and C 202/10) [2011] ECR I 3545, CJEU (Fleischhandel).
It concerned the interpretation of article 3(1) and (3) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests and of the principles of proportionality and legal certainty.
The underlying claim was for repayment by Fleischhandel of wrongly claimed export refunds in relation to goods which had been cleared for export to Jordan but, in fact, transported to Iraq.
Article 3 of Regulation No 2988/95 provided (so far as relevant) as follows: 1.
The limitation period for proceedings shall be four years as from the time when the irregularity referred to in article 1(1) was committed.
However, the sectoral rules may make provision for a shorter period which may not be less than three years. 3.
Member states shall retain the possibility of applying a
period which is longer than that provided for in [paragraph] 1
The exports in question had taken place in 1993, and the claim for repayment was made, in proceedings in the German courts, in 1999, after the discovery of the true export destination during an inspection carried out early in 1998.
The first instance court, the Finanzgericht Hamburg, decided that the claim was out of time under article 3(1) of Regulation No 2988/95, but the Bundesfinanzhof stayed the proceedings of the Hauptzollamts appeal, and referred the matter to the CJEU.
The referring courts provisional view was that a general 30 year limitation period in German law could be applied by analogy and, if unreasonably long, could in principle be reduced by judicial decision, but not so as to have rendered the claim in that case time barred.
The CJEU held that, in principle, a national limitation period as long as 30 years would not offend the principle of legal certainty, but that it would be disproportionately long.
If the national court sought to reduce a disproportionate period to one which satisfied the requirements of proportionality this would not satisfy the principle of legal certainty unless the reduced period was fixed in advance so as to be sufficiently foreseeable by a person affected by it: see para 52 of the judgment.
The result was that, no such reduced period having been laid down by the German courts in advance, there was no national limitation period which satisfied the principles of legal certainty and proportionality sufficient to displace the four year period prescribed by article 3(1) of Regulation No 2988/95, by reference to article 3(3).
It was not argued in that case that there was a lacuna which could be filled by
an obligation on the claimant to proceed within a reasonable time, no doubt because, in accordance with the clear language of article 3, the four year limitation period prevailed in the absence of any shorter or longer period which complied with the requirements of EU law.
Firma Ernst Kollmer Fleischimport und export v Hauptzollamt Hamburg Jonas (Case C 59/14) EU.C:2015:660 (Kollmer) was also about article 3 of Regulation No 2988/95.
At para 30 of his opinion Advocate General Cruz Villaln said that: If a four year limitation period were to appear, from the national authorities point of view, too short to enable them to bring proceedings in respect of irregularities displaying a certain complexity, it would always be open to the national legislature to adopt a longer limitation rule suited to irregularities of that type, which would have to meet the requirements of foreseeability and proportionality deriving from the principle of legal certainty.
He thus analysed article 3(3) as conferring a form of option enabling member states to substitute the four year period with a longer period of their own choosing, provided that the longer period was compliant with the principle of legal certainty.
Failing a compliant exercise of that option, the four year period would prevail.
Valsts iemumu dienests v Veloserviss SIA (Case C 427/14) EU:C:2015:803 was relied upon by the Court of Appeal and by FMX in this court as affording some additional support for the proposition that a taxpayer or customs debtor is entitled, under the principle of legal certainty, not to have his position open to challenge indefinitely: see para 31 of the judgment.
It was a case about the Customs Code, but it was more concerned with national rules about the time for the conduct of post clearance examinations, than time limits for the communication of a customs debt.
Article 221(4) of the Customs Code is referred to in passing, but it is not a case in which the criminal proceedings condition for the application of article 221(4) was satisfied.
The importer in that case was neither implicated in the false declaration of Cambodian origin of the bicycles concerned, nor found to have acted otherwise than in good faith (ie, in the context, without reasonable care).
There was therefore no issue as to whether the three year time limit for communication of a customs debt was inapplicable in the circumstances.
I must finally mention Agra Srl v Agenzia Dogane Ufficio delle Dogane di Alessandria (Case C 75/09) [2010] ECR I 5595.
Although it does not fall squarely into either of the streams of European authority to which I have thus far referred, it is specifically about article 221(4) of the Customs Code, and sheds some light on the purpose behind the criminal proceedings exception from the generally applicable three year time limit for the communication of customs debts.
The case concerned an irregular import declaration made by Agra for the purpose of obtaining licences for the import of frozen boned meat, submitted in June 2002, which was found to have been false during an inspection in 2007, leading to a subsequent criminal investigation, and communication of a reassessment of the duty payable in March 2008.
The relevant provisions of the Italian Customs Code in force at the time provided for a five year limitation period for the recovery of customs duties but, where the failure to pay duties had its origins in a criminal offence, time for the purposes of that period was to run from the date on which the order or judgment in the criminal proceedings became final.
The question referred to the CJEU was whether a time limit prescribed to run from the date of the conclusion of the criminal proceedings complied with article 221(3) and (4) of the Customs Code.
The CJEU ruled that it did.
At paras 34 35 of the judgment the CJEU held: 34.
Secondly, it should be observed that, by merely referring to the conditions set out in the provisions in force article 221(4) of the Customs Code defers to national law as regards the rules governing the extinction of the customs debt through the passage of time, where that debt arises as a result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings. 35.
Accordingly, in so far as EU law does not lay down common rules in this field, it is for each member state to determine the rules governing the extinction, through the passage of time, of customs debts which it has not been possible to assess because of an act which could give rise to criminal court proceedings (see, by analogy, Case C 91/02 Hannl Hofstetter [2003] ECR I 12077, paras 18 to 20, and Molenbergnatie, para 53).
That was, of course, a case in which a national provision in force dealt in express terms with the time limit for pursuing a customs debt in circumstances where the criminal proceedings condition in article 221(4) applied rather than, as in the present case, where there is no such specific national provision in force.
It may readily be supposed that, if what may loosely be called the Fleischhandel test had by then been enunciated, the Italian provision would have complied with it even though the limitation period was set to run from a date (namely when the criminal proceedings became final) which could not be ascertained by the taxpayer in advance of factual matters specific to his case.
Nonetheless it is of some assistance that the language chosen by the CJEU speaks in terms of the complete disapplication of any community wide time limit (or other common rules) where the act creating the customs debt could give rise to criminal court proceedings, treating the matter as entirely governed by the rules put in place by the relevant member state.
In short, the disapplication of the three year time limit in article 221(3) is treated as the automatic result of the likelihood of criminal court proceedings, rather than the result of an election by a member state to choose a different time limit for that already prescribed by the EU as appropriate for those circumstances.
Analysis
The starting point for an understanding of the meaning and effect of article 221(4) is an examination of its purpose.
It describes the second of two circumstances in which the ordinary three year time limit for communication of a customs debt is not to apply.
The first, in article 221(3), is where the liability for duty is subject to an appeal, within the meaning of article 243.
Then, the three year period is suspended for the duration of the appeal proceedings.
The second is where the debt is the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings.
The purpose of the first exception is because, in the event of an appeal, the amount of the customs debt has not been finally determined as it would otherwise be by its amount being entered in the accounts.
The purpose of the second exception is not so clear.
Under the legal systems of some member states it may be that the amount of the customs debt arising from the potentially criminal act may be determined in the criminal proceedings themselves, with a similar consequence in the unsuitability of the ordinary three year time limit as would flow from the lodging of an appeal.
In other member states, and in the UK in particular, it may be because civil proceedings for the determination of the amount of the debt may be liable to be stayed until the determination of the criminal proceedings, so as to preserve the integrity of the criminal process.
This would render the ordinary three year period equally inappropriate, but would not necessarily make a simple suspension of the period until the end of the criminal proceedings a satisfactory substitute.
It is easy to see why, there being likely divergences in the consequences of
criminal proceedings as between different member states, that the decision was taken to leave the conditions (including time limits) for communication of a customs debt, where the criminal proceedings condition applies, to each member state.
The important point for present purposes is that it is reasonably clear from the language and purpose of article 221(4), read in its context, that the three year period in article 221(3) is regarded as inappropriate for cases where there is a prospect of criminal court proceedings, rather than as a prima facie appropriate period from which, nonetheless, member states are given the option to depart.
This is consistent with a plain reading of the language of article 221(4), which simply provides that communication of the debt may be made after the expiry of the three year period, where the debt is the result of an act which was liable to give rise to criminal court proceedings.
The permission given to communicate such a debt after the expiry of the three year period is, nonetheless, subject to any relevant conditions in the provisions in force which, as appears from article 4(23), includes Community or national provisions.
There is a sharp difference therefore between this case and the circumstances under review in the Fleischhandel and Kollmer cases, both of which concerned article 3 of Regulation No 2988/95.
There, member states had the possibility of applying a longer period than the four year EU wide time limit, not in special circumstances where that time limit was disapplied, but in every situation to which it did apply, namely the commission of a relevant irregularity.
The disapplication of the EU wide time limit was therefore triggered precisely by the exercise of an option conferred upon member states to prescribe a longer time limit.
If that option was not exercised in accordance with EU law then, leaving aside the provision for a shorter period in article 3(1), there is nothing in that article, or elsewhere in Regulation No 2988/95, which would make it appropriate to disapply the four year time limit in favour of a longer one.
There was therefore no lacuna in the provisions in force which needed to be filled by reference to an obligation to act within a reasonable time.
Returning to the present case, the next question is whether there was any provision of UK law in force sufficient to prevent communication of the customs debt arising from the false declaration of origin of the garlic being able to be given without any limit of time, contrary to the principle of legal certainty which the existence of such a liberty on the part of HMRC would involve.
In my view, there is none.
In the UT Birss J considered that there were relevant provisions.
At para 34 he said: The common law (and rules of equity) already equip the courts to prevent procedural unfairness in proper cases and, for example, go as far striking out a claim as abusive as a result of inordinate delay which would make a fair trial impossible.
To take an extreme example, if HMRC knew all the relevant facts but still waited a further 20 years before issuing a communication and seeking to enforce the debt claim, that sort of conduct would very likely make a fair trial impossible and would be abusive.
Such a case would very probably be struck out.
In para 35 he identified the relevant UK law principles as being abuse of process and laches, and HMRC has supported that analysis in its submissions to this court.
I respectfully disagree.
Both abuse of process and laches are concerned with the conduct of, or delayed institution of, legal proceedings.
But this case is concerned with the need, recognised by the EU principle of legal certainty, for there to be some control upon the timing of the communication of a customs debt, rather than upon the institution of subsequent legal proceedings if, after communication of it, the debt has not paid.
The doctrine of laches suffers from the additional difficulty that it relates to the pursuit of equitable relief: see Snells Equity, 33rd ed (2015), para 5 011.
The recovery of a post clearance customs debt is far removed from the class of equitable claims.
An attempt was made by HMRC to argue that, if UK law was otherwise deficient it would be necessary to reinstate the protection to debtors afforded by the Limitation Act 1980, by disapplying section 37(2)(a) of that Act, which renders the Act inapplicable to tax or duty claims by the Crown.
Again, I disagree.
There are two difficulties with that analysis.
The first is whether, even if the provisions of the Limitation Act 1980 were by that route to be re instated for the purpose of protecting debtors from late claims for post clearance customs duty, they would in fact serve that purpose.
The second is whether, even if they would, section 37(2)(a) would be sufficiently inconsistent with the requirements of EU law for it to have to be disapplied.
The Limitation Act 1980 provides limitation periods under which (subject to suspension or postponement) time runs against claimants from the moment when they have a complete cause of action.
The Act is, in short, about limitation of action, rather than time limits for the taking of steps which make the claimants cause of action complete, or steps which would remove a procedural bar to the taking of proceedings.
In the present context the ability to take proceedings for recovery of a post clearance customs debt depends upon the communication of the debt, followed by non payment during the period prescribed for payment thereafter: see articles 221, 222 and 232 of the Customs Code.
While it is true that the debt is incurred at the time of the acceptance of the relevant declaration under article 201(2), I consider it unreal to suppose that HMRC is therefore entitled to sue for or enforce the debt before the time when, under the Customs Code as summarised above, it becomes due and payable, and timely payment has not been made.
Furthermore it would be strange indeed for the Customs Code to have made detailed provision in relation to the time permitted for communication of the debt, if the relevant national customs authority of a member state could nonetheless sue for it regardless of communication, and, in particular, where communication had been made out of time.
The provision for communication to be made in a timely fashion in article 221 must at least have been designed to prevent the debtor from exposure to liability to proceedings for the enforcement of a debt which had not been communicated to him at all.
But the existence of a requirement to take certain steps before bringing proceedings for the enforcement of a statutory debt does not always mean that there is no cause of action until those steps have been taken: see Swansea City Council v Glass [1992] QB 844.
Whether the taking of those steps is a part of the cause of action or simply a procedural requirement is a question of construction of the statute in question; see per Taylor LJ at p 852B C, applying Coburn v Colledge [1897] 1 QB 702 and Sevcon Ltd v Lucas CAV Ltd [1986] 1 WLR 462.
In written submissions at the courts request following the hearing, both
parties were of one accord in asserting that the cause of action in the present case was complete on the date when, pursuant to article 201(1), the customs debt was incurred, rather than upon, or following, the communication of it under article 221.
I am not at all sure that this is correct, and there may have been tactical reasons behind what, on FMXs case, would appear to amount to a concession.
It seems to me to be well arguable that communication of the debt to the debtor is part of the cause of action for recovery, so that HMRC would have to plead both communication of the debt and (perhaps) non payment within the prescribed time, as part of its cause of action for recovery.
This is, in particular, because article 222(1) speaks not merely of the right of HMRC to take proceedings for recovery, but of the obligation of the debtor to pay, as following upon the communication of the debt.
But for the purposes of what follows I will assume that the parties agreement about this is correct.
Plainly, on that basis, the application of the Limitation Act 1980 would go some way to alleviate the otherwise open ended ability of HMRC to recover the debt at any time, where article 221(4) disapplies the three year time limit.
Communication of the debt, as a procedural pre condition to bringing proceedings, would have to be made within the relevant limitation period.
But section 37(2)(a) of the Act is not lightly to be disapplied.
There must be a real inconsistency with EU law: see Fleming (trading as Bodycraft) v Revenue and Customs Comrs [2008] UKHL 2; [2008] 1 WLR 195, para 25, per Lord Walker of Gestingthorpe.
Plainly no process of construction can be employed to make section 37(2)(a) mean the exact opposite of what it plainly says.
The supposed inconsistency with EU law is said to be that, without the three year time limit in article 221(3) HMRC could delay until the crack of doom before communicating the debt, there being no provisions in force to the contrary.
But EU law has its own remedy for the filling of just such a lacuna, namely the requirement that communication be made within a reasonable time, if otherwise the principle of legal certainty would be offended.
It is precisely to fill such a lacuna that the EU law requirement to take relevant steps within a reasonable time exists, as is explained and exemplified in the Sanders, Allen and Nencini cases which I have summarised above.
It was submitted for FMX that this solution had been created only for cases between institutions and national authorities, so that it had no application to a claim by a national authority against a private person such as a customs debtor.
Again, I disagree.
That analysis is not born out by those authorities, which apply the duty to act within a reasonable time not only to EU institutions, but also to private individuals, such as employees bringing a discrimination claim against the Commission for which there is no prescribed time limit.
Since the principle of legal certainty is one of those fundamental principles of general application in EU law I can see no good reason why it should not be generally applicable to fill any lacuna constituted by the absence of a sufficient time limit in relevant provisions in force, whether that is attributable to a failure by EU legislators to provide one (as in the discrimination cases) or to what I regard as a failure by the UK to provide one in the context of the Customs Code, where the prospect of criminal court proceedings leads to the disapplication of the three year time limit in article 221(3).
It follows that there is no need or requirement to disapply section 37(2)(a) of
the Limitation Act 1980 to remedy an inconsistency with EU law.
If, as I conclude, EU law has its own way of dealing with the need to avoid communication of the debt being delayed to an extent which undermines the principle of legal certainty, by the imposition of the requirement that it be made within a reasonable time, then there is no inconsistency in the Limitation Act 1980 regime being made unavailable, by section 37(2)(a), for that purpose.
Disposition
I would allow the appeal.
I have considered whether this court should make a reference to the CJEU but in my view the above analysis demonstrates a clear answer to the question how article 221(4) is to be interpreted and applied in a situation where there are no national provisions in force which limit the time for the communication to the debtor of the amount of duty, where the three year time limit in article 221(3) is displaced.
The communication must be made within a reasonable time.
I have also considered whether the question whether this communication was made within a reasonable time needs to be referred back to the FtT or to the UT so that it can be decided.
It has yet to be decided as a discrete issue, at any level, because the Court of Appeal and the tribunals all decided the appeal on different grounds.
Neither of the parties invited this court to take that course, in the event that the reasonable time analysis should prevail.
Furthermore, it is not a case in which further facts need to be decided.
HMRC made the relevant communication within four months of the outcome of the related appeal to the FtT concerning the post January 2004 imports, which raised similar issues about their provenance.
It has not been suggested by FMX that this was outside a reasonable time for such a communication and, in my view, it clearly was not.
It was reasonable for HMRC to delay issuing a communication under article 221 in relation to the pre January 2004 imports while the closely related litigation about the later imports remained on foot.
The result is that I would restore the decision of the UT, albeit for slightly different reasons.
LADY ARDEN:
I agree with Lord Briggs that this appeal should be allowed but, as appears below, in part by a different route, which places more reliance on domestic law.
The starting point, as I see it, is the interpretation of article 221(4) of the Customs Code as in force at the material time, set out at para 5 above.
This does not require member states to adopt legislation extending the three year period for communicating the amount of a customs debt if it is the result of an act which when committed was liable to give rise to criminal court proceedings.
In this Lord Briggs and I agree: see the final sentence of para 31 above.
It would be odd if member states had to decide to extend the period for communicating a post clearance customs demand resulting from a potentially criminal act since the purpose of article 221(4) is to protect the finances of the EU on whose behalf member states collect customs duties: see, in this connection, the last recital to the Customs Code which states that when adopting measures to implement the Code, the utmost care must be taken to prevent any fraud or irregularity liable to affect adversely the General Budget of the European Communities.
Article 221(4) provides that such communication may take place, semble without there having to be any enabling member state legislation, under the conditions set out in the provisions in force.
That means that a communication of a post clearance customs debt is not permitted if it does not comply with the conditions for a valid communication set out in the relevant national law or in EU law.
Those conditions can trump the extension of time.
EU law therefore defers to national law.
For these conditions to apply, there must be some provision of EU law or national law which prevents the communication from taking place with operative effect.
That would be the case if under national law the customs debt had been extinguished by effluxion of time, for example because of some general provision of the law preventing the state from pursuing claims after a specified period: see Agra Srl v Agenzia Dogane Ufficio delle Dogane di Alessandria (Case C 75/09) [2010] ECR I 5595 (Agra), paras 34 and 35, set out at para 30 above.
These paragraphs are very important because in them the Court of Justice of the European Union (the CJEU) takes what may be thought to be an unusual step of stating in terms that EU law defers to national law.
The structure of article 221(4) is quite distinct from the equivalent provision of Regulation No 2988/95 in issue in Ze Fu Fleischhandel GmbH v Hauptzollamt Hamburg Jonas (Joined Cases C 201/10 and C 202/10) [2011] ECR I 3545 (Fleischhandel) (para 23 above), which gave member states the option of providing a limitation period and so the principles of EU law applied to any exercise of that member state option.
Lord Briggs makes this point, and other points with which I agree, at paras 32 to 37 of his judgment.
Contrary to FMXs submission, it is in my judgment beyond the reach of a purposive interpretation to read a similar provision into article 221(4).
The principle of legal certainty applies to acts done by EU institutions and member states in exercise of the powers conferred by them under EU rules: see Valsts iemumu dienests v Veloserviss SIA (Case C 427/14) EU:C:2015:803 (Veloserviss), para 30 and see Test Claimants in the FII Group Litigation v Revenue and Customs Comrs (formerly Inland Revenue Comrs) [2012] UKSC 19; [2012] 2 AC 337, para 146 per Lord Sumption.
Legal certainty may apply to the imposition of criminal offences when done under a power conferred by the treaties or EU legislation: see Hannl + Hofstetter Internationale Spedition GmbH v Finanzlandesdirektion fr Wien, Niedersterreich und Burgenland (Case C 91/02) [2003] ECR I 12077 which contrary to the submission of FMX, is therefore distinguishable from article 221(4).
Proceedings to recover payments exacted in breach of EU law also stand in a different category because they are required by EU law to give effect to EU law.
On that basis, I would distinguish the decisions of the CJEU in Test Claimants in the FII Group Litigation v Revenue and Customs Comrs (formerly Inland Revenue Comrs) (Case C 362/12) [2014] AC 1161, Marks & Spencer plc v Customs and Excise Comrs (Case C 62/00) [2003] QB 866 and Halifax plc v Customs and Excise Comrs (Case C 255/02) [2006] Ch 387, on which FMX relies as showing that EU principles apply even to domestic proceedings.
It follows that the Court of Appeal were wrong to extract from Fleischhandel
a principle of EU law that, where a remedy was left to domestic law, there always had to be a finite limitation period fixed in advance.
Firma Ernst Kollmer Fleischimport und export v Hauptzollamt Hamburg Jonas (Case C 59/14) EU:C:2015:660, discussed by Lord Briggs in para 28 above, is similarly distinguishable.
Article 221(4) leaves it to domestic law to determine whether the communication of a post clearance demand under that sub article is valid.
The provisions referred to in article 221(4) include provisions contained in EU law as well as national law (article 4(23) of the Customs Code).
Moreover, the term provisions has an extended meaning and is not limited to provisions in legislation.
This may be seen from article 221(1).
One of the conditions applying to the communications is that they must follow appropriate procedures (see article 221(1)).
In Belgische Staat v Molenbergnatie NV (Case C 201/04) [2006] ECR I 2049, para 53 the CJEU held that, in the absence of EU legislation or national law setting out appropriate procedures, the competent authorities in the member states had to ensure that the communication would allow persons liable for customs debts to have full knowledge of their rights.
That decision clearly indicates that the provisions mentioned in article 221(4) need not be rules of law but may be administrative practices.
But there still has to be a provision: a principle of EU law is not enough because EU law under article 221(4) defers to national law.
section 37(2)(a) of the Limitation Act 1980 (para 15 above).
The CJEU has accepted that national law may not impose a limitation period in the context of the recovery of state aid: see, for example, Italian Republic v Commission of the European Communities (Case C 298/00 P) [2004] ECR I 4087, paras 82 to 91.
There is no reason to suggest that it would not similarly accept the notion in other areas.
Likewise the Court of Appeal in Revenue and Customs Comrs v GMAC (UK) plc [2016] EWCA Civ 1015; [2017] STC 1247, para 150 (a decision in which the leading judgment was given by Floyd LJ, with which Theis J and I agreed) held that, where proceedings were governed by national law, it was possible for there to be no period of limitation.
I do not accept FMXs submission that this holding is inapplicable because the case concerned a claim by the taxpayer and not one, as here, by the state since, as HMRC points out, the need for certainty would exist so far as the taxpayer is concerned in both situations.
In England and Wales, there is no statutory limitation period because of
There was a further ruling by the Court of Appeal in GMAC (UK) plc which is not relevant in this case.
The court concluded, in agreement with the earlier decision of the Court of Appeal in British Telecommunications plc v Revenue and Customs Comrs [2014] EWCA Civ 433; [2014] STC 1926, that the EU reasonable time rule could not be applied to defeat the taxpayers claims for recovery of overpaid VAT because HMRC had invalidly imposed a condition that the taxpayer had to prove in an insolvency in order to claim bad debt relief and there was no indication in the domestic legislation that a reasonable time limit for making a claim was being imposed.
That ruling turned on the domestic law provisions and has no resonance for this appeal.
Contrary to Lord Briggs at para 29 above, I consider that some minor assistance can be gained in the present case from Veloserviss since at para 37 the CJEU made it clear that customs authorities could act under article 221(4) after expiry of the three year period, and made no reference to the need for any limitation period in domestic law.
Even applying the extended meaning of provision explained above, there is, so far as this court has been informed, no relevant provision of EU law stipulating the limit of the period within which a communication must be made.
As the CJEU held in Agra, EU law defers to domestic law.
Contrary to FMXs submissions, nothing in that case requires a member state to adopt a limitation period.
All the CJEU holds is that the question of the effect of the elapse of time is a matter for national law.
The timeliness of a communication of the post clearance demand is only a relevant issue in connection with proceedings for enforcement of the customs debt, and therefore logically it falls to be determined for that purpose under the domestic law governing the time bar.
It follows that it is not, as I see it, relevant whether there was any finding of fact in these proceedings as to reasonable time or whether a reasonable time rule fulfils the EU principle of legal certainty.
So far as the law of England and Wales is concerned, it has been said that there is a general duty to exercise statutory powers within a reasonable time: see R (S) v Secretary of State for the Home Department [2007] EWCA Civ 546; [2007] Imm AR 781, para 51 per Carnwath LJ.
However, reasonableness is a flexible standard.
If HMRC were to delay unreasonably in communicating a customs debt, it might also be said that its failure to make a decision was irrational in judicial review proceedings: see, for example, R v Inland Revenue Comrs, Ex p Opman International UK [1986] 1 WLR 568.
It is not necessary to express a final view on these points and there may be a difference of approach between myself and Lord Briggs on this point (cf paras 38 to 39 above).
It follows that, for the purpose of determining whether HMRC is time barred from recovering a post clearance customs debt under domestic law, I consider that the reasonable time principle in Sanders v Commission of the European Communities (Case T 45/01) [2004] ECR II 3315 (cf paras 45 to 46 above) is inapplicable.
Under the principle of conferral, the reasonable period principle of EU law can only apply to any incidental issue of law concerning that communication to which EU law applies.
It cannot restrict the operation of a domestic law to which EU law has been held by the CJEU to defer.
Thus, in my judgment, it does not so apply in the circumstances under consideration.
There may be other control mechanisms under domestic law, such as that of judicial review, as already mentioned.
This may be one of the reasons why article 221(4) has now been revised.
I need not question the parties agreement as to when the cause of action for a customs debt is complete (cf para 43 above).
The question does not arise because there is no limitation period.
Nor do I consider that any question of disapplying section 37(2)(a) arises (cf paras 40 44 above).
In conclusion, for the reasons given above, which differ in part from those given by Lord Briggs, it is no answer to HMRCs case that they have duly communicated a post clearance customs debt for FMX, which seeks to uphold the decision of the Court of Appeal, to contend that in breach of EU law there is no limitation period fixed by the law of England and Wales for communicating a post clearance customs debt under article 221(4) of the Customs Code.
I would also therefore allow this appeal.
| Customs duty is usually paid around the time goods are imported.
In some situations, Her Majestys Revenue and Customs (HMRC) may issue a post clearance demand to require payment at a later date.
This appeal is about the time limits for making such demands under a previous version of the EUs Customs Code, Council Regulation (EEC) No 2913/92 as amended. (The issues in this appeal do not arise under the current version of the Customs Code, Council Regulation (EU) No 952/2013.) FMX imported ten consignments of garlic to the UK in 2003 and 2004.
It declared the garlic came from Cambodia and claimed exemption from import duties under the EUs Generalised System of Preferences.
In 2007, following an investigation, the European Anti Fraud Office (OLAF) concluded that the garlic was actually from China.
If the garlic was Chinese, FMX would be liable for import duties and anti dumping duties totalling 503,577.63.
In March 2011, HMRC issued a post clearance demand for 503,577.63 on the basis that the garlic originated in China.
FMX argued it was too late to issue demands due to a three year time limit set out in article 221(3) of the old Customs Code.
HMRC relied on article 221(4) which provides that, where the debt arises from activity which is liable to give rise to criminal court proceedings, the amount may, under the conditions set out in the provisions in force, be communicated to the debtor after the expiry of the three year period.
The First tier Tribunal accepted the false import declarations were liable to give rise to criminal proceedings for the purposes of article 221(4) even though FMX was not involved in the underlying fraud.
However, it held that HMRC could not rely on article 221(4) because the UK had no provisions in force extending the three year time limit.
The Upper Tribunal disagreed and accepted HMRCs argument.
It held that article 221(4) of the old Customs Code automatically displaces the three year time limit in cases involving criminality, even if the relevant member state has not enacted provisions which provide an alternative time limit.
The Court of Appeal reinstated the First tier Tribunals decision, considering the Upper Tribunals approach violated the EU law principle of legal certainty and would expose taxpayers to stale demands without any time limit.
HMRC appealed to the Supreme Court.
The issue before the Supreme Court is (in summary) whether HMRC can rely on article 221(4) to displace the normal three year time limit even though the United Kingdom has not enacted a finite alternative time limit.
The Supreme Court unanimously allows the appeal, giving judgment in favour of HMRC.
Lord Briggs gives the main judgment.
Lady Arden agrees the appeal should be allowed, but for different reasons.
Article 221(4) states that HMRC may communicate a customs debt after the expiry of the three year period in article 221(3) if the debt results from an act which was liable to give rise to criminal court proceedings.
Its purpose is to preserve the integrity of the criminal process whilst leaving the conditions (including time limits) for communication of a customs debt to each member state.
Therefore, the disapplication of the three year time limit is the automatic result of the likelihood of criminal court proceedings.
It does not require the selection by a member state of a different time limit [31]; [34] [36]; [51] [52].
The next question is whether this would allow HMRC to issue demands without any time limit, and whether this would breach the fundamental principle of legal certainty in EU law [38].
The majority considers a number of options suggested by the parties, and by the courts below, to mitigate the risk of late demands: (1) The domestic law doctrines of abuse of process and laches do not assist because they concern the conduct of legal proceedings, not the communication of a customs debt [39]. (2) The Limitation Act 1980 cannot be invoked because this would require the Court to disapply section 37(2)(a) of that Act (which provides that the Act does not apply to customs debts) on the basis that it was inconsistent with EU law.
There is no real inconsistency with EU law because its requirement for legal certainty is adequately met by the reasonable time principle at (3) below [40] [44]; [46]. (3) There is a strand of EU jurisprudence to the effect that, where the provisions in force appear to allow legal action without any time limit, then the principle of legal certainty requires it to be done within a reasonable time: e.g. Sanders v Commission [2004] ECR II 3315 [18]; [20] [22].
The majority applies this approach and concludes that HMRC was obliged to issue its post clearance demands within a reasonable time [45].
On the facts, HMRC did act within a reasonable time [48].
Since this analysis gives a clear answer to the question how article 221(4) applies where there are no national provisions in force, it is unnecessary to make a reference to the Court of Justice of the European Union [47].
Lady Arden adopts different reasoning for allowing the appeal.
She holds that the effect of EU jurisprudence concerning the old Customs Code is that EU law defers to national law and therefore does not require members states to enact a definite time limit [64]; [67].
She expresses the view that domestic public law may impose a requirement for HMRC to act within a reasonable time which may be enforced by judicial review [66] but rejects the majoritys reliance on EU decisions such as Sanders v Commission on the basis that the old Customs Code leaves the question of time limits to individual member states.
This may be one of the reasons why article 221(4) has now been revised [67].
Therefore, the communication of the post clearance demand in the present case was not subject to a time limit [68] [69].
|
The respondent Mr Frank Perry is a retired miner.
Like very many of his colleagues he had, by the time he ceased working underground in 1994, been afflicted with a condition known as Vibration White Finger (VWF) , which is a particular type of a wider species of condition affecting the hand and the upper limbs collectively known as Hand Arm Vibration Syndrome (HAVS), caused by excessive exposure to the effects of using vibratory tools.
One symptom of these conditions can be a reduction in grip strength and manual dexterity in the fingers.
A common although not invariable consequence is that the sufferer from these conditions becomes unable, without assistance, to carry out routine domestic tasks such as gardening, DIY or car maintenance.
A group of test cases, representative of some 25,000 similar claims, established that there had been negligence on the part of the National Coal Board, later British Coal, in failing to take reasonable steps to limit the exposure of employed miners to VWF from the excessive use of vibratory tools: see Armstrong v British Coal Corpn [1998] EWCA Civ1359 [1998] CLY 975.
As a result, the Department for Trade and Industry (which had by then assumed responsibility for British Coals relevant liabilities) set up a scheme (the Scheme) in 1999 to provide tariff based compensation to miners who had been exposed to excessive vibration and had therefore suffered from VWF.
The Scheme was administered pursuant to a Claims Handling Arrangement (CHA) dated 22 January 1999, and made between the DTI and a group of solicitors firms representing claimant miners suffering from VWF.
The central objective of the CHA was to enable very large numbers of similar claims, having a common originating cause in British Coals systemic negligence, to be presented, examined and resolved both effectively and at proportionate cost.
The Scheme contemplated the making of two main types of compensatory award to miners suffering from VWF, corresponding broadly with general and special damages for personal injuries.
Pursuant to a Services Agreement dated 9 May 2000, the special damages could include a Services Award to qualifying miners.
This depended upon the claimant establishing what has come to be known as the factual matrix, namely: That before he developed VWF he undertook one or more of six i) routine domestic tasks (the six tasks), without assistance; ii) That he could no longer undertake those tasks without assistance by reason of his VWF; and iii) That he had received the necessary assistance with those tasks from others.
The six tasks may be summarised as: 1) Gardening 2) Window cleaning 3) DIY 4) Decorating 5) Car washing
6) Car maintenance
Qualification for a general damages award required the claimant miner to undertake a medical interview and examination designed to establish, against an internationally recognised scale, the severity of his VWF.
Those shown to be sufferers at certain high levels of severity were then also entitled to a rebuttable presumption, in their favour, that they satisfied the qualifying requirements for a Services Award, but they were required nonetheless to demonstrate, by completion of a standard form questionnaire, which of the six tasks they had undertaken without assistance before developing the VWF, and which of the tasks they were no longer able to undertake without assistance.
The Scheme provided for a relatively light touch system of checking claims for Services Awards by the claims handlers, which included questionnaires to be filled in by those assisting the claimant in performing the six tasks and short telephone interviews, usually with one or more of the assistants, rather than with the claimant himself.
Compensation was then payable to qualifying claimants in accordance with a detailed index linked tariff.
Proportionate deductions from the tariff amounts were also liable to be made if the claimants reduced ability to perform the six tasks unaided was caused in part by other contributory medical conditions.
For this purpose, claimants were required to undertake a further medical examination for the purpose of the assessment of co morbidity, as it was described.
Again, the amount of the reductions (if any) from the full Services Award was determined in accordance with a tariff based upon the medical examiners certification of relevant co morbid conditions on a scale ranging between nil, material, moderate, serious and complete.
Mr Perrys claim
Mr Perry retained the appellant solicitors firm Raleys to pursue a VWF claim on his behalf in October 1996, before the setting up of the Scheme.
Following the making of the CHA, his claim continued under the Scheme.
In October 1997 Professor Kester reported, after an interview and examination of Mr Perry, that he suffered from VWF, with ratings (or stagings in the jargon of the Scheme) of 3V and 3Sn bilaterally (that is, in both hands).
Those stagings were sufficient both for Mr Perry to obtain general damages and to have entitled him to a presumption in his favour, of the type described above, in the event that he chose to seek a Services Award.
In the event however, Mr Perry settled his claim in November 1999 for payment of general damages only, in the sum of 11,600, and made no claim for a Services Award within the available time frame.
Much later, in February 2009, he issued professional negligence proceedings against Raleys, claiming that by reason of their negligent failure to give him appropriate advice, he had lost the opportunity to claim a Services Award, in respect of all of the six tasks, which he quantified in the sum of 17,300.17 plus interest.
He asserted that he had performed all the six tasks without assistance before developing VWF, and that he had needed assistance with all those tasks thereafter, which had been provided by his two sons and his wife.
In response, Raleys denied a breach of duty and separately denied that any breach (if proved) would have caused Mr Perry any loss.
They alleged also that Mr Perrys claim against them was statute barred.
Breach of duty was admitted shortly before the trial.
The trial judge, Judge Saffman, rejected the limitation defence on its merits.
After a two day trial, which included cross examination of Mr Perry, his wife and his two sons, the judge concluded that Mr Perry had failed to prove that Raleys admitted negligent advice had caused him any loss.
This was because, in summary, the judge found that the VWF from which Mr Perry was suffering when he settled his claim had not caused him any significant disability in performing any of the six tasks without assistance, sufficient to have enabled him to make an honest claim for a Services Award.
He therefore dismissed Mr Perrys claim with costs.
In his detailed and lucid reserved judgment (circulated to the parties within ten days of the trial) Judge Saffman explained that it was Mr Perrys complete lack of credibility as a witness that had led to his finding that he would not have been able to make an honest claim for a Services Award.
His evidence that he was unable to perform the six domestic tasks without assistance was undermined by his medical records, which showed that he had made no complaint of lack of manual dexterity at the relevant time, by evidence (including photographs) of him engaging in fishing at a time when he said he had given it up due to his manual disability, and by his failure to offer any credible explanation of those disparities between his case and that evidence, when cross examined about them at length.
The judge found that the evidence from his family lacked sufficient credibility to rescue Mr Perry from his difficulties, and that the medical evidence, while supportive of his case, was insufficient to swing the balance in Mr Perrys favour.
The judge nonetheless thought it appropriate to assist by setting out the findings which he would have made as to the quantum of Mr Perrys claim, if he had been wrong in rejecting his case on causation.
He did so, no doubt, with a view to minimising the risk that an expensive re trial would be necessary if an appellate court concluded that causation had been established.
A main plank in Raleys defence had been that, even if Mr Perry was to a significant extent incapacitated in performing the six domestic tasks without assistance at the relevant time, this was the result of a chronic back problem, rather than VWF.
A single joint medical expert, Mr Tennant, had advised that in his view the contribution made to Mr Perrys relevant disability by back troubles lay between moderate and mild, on the co morbidity scale adopted by the Scheme.
On the assumption that he had been wrong in his primary finding that Mr Perry was not hindered by VWF in performing the six tasks unaided, he held that he would not depart from Mr Tennants co morbidity assessment.
Finally, and again on the same assumption that he had been wrong about causation, the judge assessed the prospects of success in a Services Award claim, after being discounted by co morbidity in accordance with the Schemes tariff, at 80%.
On Mr Perrys appeal the Court of Appeal reversed the trial judge on causation, and concluded that his alternative findings as to quantum were sufficiently reliable to make it unnecessary to direct a re trial: [2017] EWCA Civ 314.
Accordingly, they assessed Mr Perrys damages in the same amount as the judge would have assessed them, had he been wrong about causation, namely 14,556.15 plus interest, plus additional amounts pursuant to CPR Part 36.
The Court of Appeal reversed the judge on four grounds, two of which amounted in their view to errors of law, and the remaining two to shortcomings in his appraisal of, and conclusions based upon, the evidence.
It is convenient to take the errors of law first.
The Court of Appeal held first that the judge had, in addressing the issue of causation, wrongly conducted a trial within a trial of the very question which would have arisen if Mr Perry had made a claim for a Services Award, namely whether in fact (after he ceased work as a miner) he needed assistance, due to his VWF, in carrying out the six domestic tasks which he had previously been able to carry out unaided.
Secondly, the Court of Appeal concluded that the judge wrongly imposed the burden upon Mr Perry to prove that fact on the balance of probabilities.
This approach was, in the view of the Court of Appeal, contrary to well settled authority about the burden upon a claimant in relation to causation, following a breach by a professional person of a duty of care.
The Law about Causation in Professional Negligence cases
The assessment of causation and loss in cases of professional negligence has given rise to difficult conceptual and practical issues which have troubled the courts on many occasions.
The most recent example at the level of this court is Gregg v Scott [2005] UKHL 2; [2005] 2 AC 176 in which the House of Lords had to wrestle with the intractable question whether negligent medical advice, which reduced the patients prospects of long term survival from cancer from 42% to 25%, sounded in damages when, probably, he would have died anyway, even if competently treated.
Commonly, the main difficulty arises from the fact that the court is required to assess what if any financial or other benefit the client would have obtained in a counter factual world, the doorway into which assumes that the professional person had complied with, rather than committed a breach of, his duty of care.
The everyday task of the court is to determine what, in fact, happened in the real world rather than what probably would have happened in a what if scenario generally labelled the counter factual.
Similar difficulties arise where the question of causation or assessment of damage depends upon the court forming a view about the likelihood of a future rather than past event.
In both those types of situation (that is the future and the counter factual) the court occasionally departs from the ordinary burden on a claimant to prove facts on the balance or probabilities by having recourse to the concept of loss of opportunity or loss of a chance.
Sometimes the court makes such a departure where the strict application of the balance of probability test would produce an absurd result, for example where what has been lost through negligence is a claim with substantial but uncertain prospects of success, where it would be absurd to decide the negligence claim on an all or nothing basis, giving nothing if the prospects of success were 49%, but full damages if they were 51%: see Hanif v Middleweeks (a firm) [2000] Lloyds Rep PN 920 per Mance LJ at para 17.
A further reason why this is a generally unrealistic approach is that most claims with evenly balanced prospects of success or failure are turned into money by being settled, rather than pursued to an all or nothing trial.
Sometimes it is simply unfair to visit upon the client the same burden of proving the facts in the underlying (lost) claim as part of his claim against the negligent professional.
This may be because of the passage of time following the occasion when, with competent advice, the underlying claim would have been pursued.
Sometimes it is because it is simply impracticable to prove, in proceedings against the professional, facts which would ordinarily be provable in proceedings against the third party who would be the defendant to the underlying claim.
Disclosure and production of relevant documents might be impossible, and the obtaining of relevant evidence from witnesses might be impracticable.
The same departure from the practicable likelihood that the underlying claim would have been settled rather than tried is inherent in any such process of trial within a trial.
But none of this means that the common law has simply abandoned the basic requirement that a claim in negligence requires proof that loss has been caused by the breach of duty, still less erected as a self standing principle that it is always wrong in a professional negligence claim to investigate, with all the adversarial rigour of a trial, facts relevant to the claim that the client has been caused loss by the breach, which it is fair that the client should have to prove.
For present purposes the courts have developed a clear and common sense dividing line between those matters which the client must prove, and those which may better be assessed upon the basis of the evaluation of a lost chance.
To the extent (if at all) that the question whether the client would have been better off depends upon what the client would have done upon receipt of competent advice, this must be proved by the claimant upon the balance of probabilities.
To the extent that the supposed beneficial outcome depends upon what others would have done, this depends upon a loss of chance evaluation.
This sensible, fair and practicable dividing line was laid down by the Court of Appeal in Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602, a decision which received surprisingly little attention in either of the courts below (although, in fairness, the trial judge cited another authority to similar effect: namely Brown v KMR Services [1995] 4 All ER 598).
Allied Maples had made a corporate takeover of assets and businesses within the Gillow group of companies, during which it was negligently advised by the defendant solicitors in relation to seeking protection against contingent liabilities of subsidiaries within the vendors group.
Allied Maples would have been better off, competently advised, if, but only if: (a) it had raised the matter with Gillow and sought improved warranties and (b) Gillow had responded by providing them.
The Court of Appeal held that Allied Maples had to prove point (a) on a balance of probabilities, but that point (b) should be assessed upon the basis of loss of the chance that Gillow would have responded favourably.
The Court of Appeal (Stuart Smith, Hobhouse and Millett LJJ) were unanimous in that statement of legal principle, although they differed as to the outcome of its application to the facts.
It was later approved by the House of Lords in Gregg v Scott, at para 11 by Lord Nicholls and para 83 by Lord Hoffmann.
The Allied Maples case was about the loss, due to negligence, of the opportunity to achieve a more favourable outcome in a negotiated transaction, rather than about the loss of an opportunity to institute a legal claim.
But there is no sensible basis in principle for distinguishing between the two, and none was suggested in argument.
In both cases the taking of some positive step by the client, once in receipt of competent advice, is an essential (although not necessarily sufficient) element in the chain of causation.
In both cases the client will be best placed to assist the court with the question whether he would have taken the requisite initiating steps.
He will not by the defendants breach of duty be unfairly inhibited in proving at a trial against his advisor that he would have done so, save perhaps where there is an unusual combination of passage of time and scarcity of other probative material, beyond his own unaided recollection.
Two important consequences flow from the application of this balance of probabilities test to the question what the client would have done, in receipt of competent advice.
The first is that it gives rise to an all or nothing outcome, in the usual way.
If he proves upon the narrowest balance that he would have brought the relevant claim within time, the client suffers no discount in the value of the claim by reason of the substantial possibility that he might not have done so: see Stuart Smith LJ in the Allied Maples case at [1995] 1 WLR 1602, 1610G H.
By the same token, if he fails, however narrowly, to prove that he would have taken the requisite initiating action, the client gets nothing on account of the less than 50% chance that he might have done so.
The second consequence flows directly from the first.
Since success or failure in proving on the balance of probabilities that he would have taken the necessary initiating step is of such fundamental importance to the clients claim against his advisor, there is no reason in principle or in justice why either party to the negligence proceedings should be deprived of the full benefit of an adversarial trial of that issue.
If it can be fairly tried (which this principle assumes) then it must be properly tried.
And if (as in this case) the answer to the question whether the client would, properly advised, have taken the requisite initiating step may be illuminated by reference to facts which, if disputed, would have fallen to be investigated in the underlying claim, this cannot of itself be a good reason not to subject them to the forensic rigour of a trial.
As will appear, this has an important bearing on the extent of the general rule that, for the purpose of evaluating the loss of a chance, the court does not undertake a trial within a trial.
Applied to the present case, the principle that the client must prove on the balance of probabilities that he would have taken any necessary steps required of him to convert the receipt of competent advice into some financial (or financially measurable) advantage to him means that Mr Perry needed to prove that, properly advised by Raleys, he would have made a claim to a Services Award under the Scheme within time.
To this the judge added that it would have to have been an honest claim.
He made this addition upon the basis of a concession to that effect by counsel on Mr Perrys behalf, from which Mr Watt Pringle QC for Mr Perry (who did not appear at the trial) invited this court to permit him to resile, so that the question whether the honesty of the claim was a requirement of Mr Perrys cause of action could be properly argued.
Having heard commendably concise argument on the point, I consider that the concession was rightly and properly made.
In Kitchen v Royal Air Force Association [1958] 1 WLR 563 the plaintiffs husband, a member of the RAF, was electrocuted and killed in the kitchen of his house.
His widow lost the opportunity to bring a claim under the Fatal Accidents Act in time due to the negligence of the defendant solicitors.
In a leading judgment on the evaluation of the loss of a chance, Lord Evershed MR said this, at p 575: I would add, as was conceded by Mr Neil Lawson, that in such a case it is not enough for the plaintiff to say: Though I had no claim in law, still, I had a nuisance value which I could have so utilised as to extract something from the other side and they would have had to pay something to me in order to persuade me to go away.
If nuisance value claims fall outside the category of lost claims for which damages may be claimed in negligence against professional advisors, then so, a fortiori, must dishonest claims.
That simple conclusion might be thought by many to be too obvious to need further explanation, but it may be fortified in any of the following ways.
First, a client honestly describing his condition to his solicitor when considering whether to make a personal injuries claim would not be advised to do so if the facts described did not give rise to a claim.
On the contrary, he would be advised not to waste his own money and time upon the pursuit of pointless litigation.
Secondly, the court when appraising the assertion that the client would, if properly advised, have made a personal injuries claim, may fairly presume that the client would only make honest claims, and the client would not be permitted to rebut that presumption by a bald assertion of his own propensity for dishonesty.
Thirdly, the court simply has no business rewarding dishonest claimants.
The extent of dishonest claims for minor personal injuries such as whiplash (which are difficult to disprove) in road traffic accident cases is already such a blot upon civil litigation that Parliament has considered it necessary to intervene to limit that abuse.
Applied to the present case, Mr Perry could only have brought an honest claim for a Services Award if he believed that: a) He had, prior to developing VWF, carried out the six tasks, or some of them, without assistance, b) After developing VWF, he needed assistance in carrying out all or some of those tasks, and c) The reason for his need for that assistance was a lack of grip or manual dexterity in his hands, brought on by VWF.
While the question whether a perceived lack of grip or manual dexterity on his part was caused by VWF might be said to be a matter of expert medical opinion, the presence or absence of all the other elements necessary for making an honest claim to a Services Award fell squarely within Mr Perrys own knowledge.
He would not, for example, need a doctor to tell him whether he needed assistance in changing the sparking plugs on his car engine and, if he did, whether his difficulty arose from lack of ability to grip or manipulate the requisite spanner, or rather from chronic back pain.
Simple facts of that kind, plainly relevant to the question whether Mr Perry could have brought an honest claim if competently advised, do not in themselves fall within either of those categories of futurity or counter factuality which have traditionally inclined the court to adopt a loss of a chance type of assessment.
They are facts about Mr Perrys actual physical condition at the relevant time (that is when he could have made a claim for a Services Award under the Scheme if properly advised), and about his habitual patterns in going about the six types of domestic task.
Furthermore, it is the common understanding of medical experts that VWF, once developed, is a relatively stable condition.
It gets neither worse nor better once the miner ceases to use vibrating machinery.
If one asks without reference to authority whether there would be any unfairness subjecting his assertion that he would have made a claim for a Services Award to forensic analysis including questions about his then manual grip and dexterity and about the extent to which he was assisted in the performance of the relevant domestic tasks, the answer would be no.
Nor would it be, on the face of it, unfair to subject his oral evidence about those matters, and that of his alleged family assistants, to a searching comparison with other evidence about his own concerns about his medical condition at the relevant time, to be derived from GP records.
The question remains however whether any of the authorities relied upon by counsel for Mr Perry on this appeal, or by the Court of Appeal in its conclusion that a forensic investigation of that kind at a trial was contrary to principle, really establish any such proposition, where the facts being investigated are relevant to the issue, to be proved by the claimant on the balance of probabilities, whether he would have taken the essential step of bringing an honest claim, upon receipt of competent advice.
On analysis, they establish no such proposition.
All they do show is that, where the question for the court is one which turns upon the assessment of a lost chance, rather than upon proof upon the balance of probabilities, it is generally inappropriate to conduct a trial within a trial.
Taking the cases in chronological order, the earliest relevant decision is the Kitchen case already mentioned.
There, the plaintiffs husband had been killed by electrocution and the claim which the solicitors negligence disabled her from making was against the electricity company.
It was never suggested that, if properly advised, she could not have made an honest claim.
It was clearly more than a nuisance value claim.
The precise circumstances which led to the husbands electrocution were, as the Court of Appeal said, shrouded in mystery, and were not within the plaintiffs knowledge.
Accordingly, the well known advice of the Court of Appeal, that in those circumstances the court should focus upon the chose in action constituted by the lost claim and determine its value as best it can, without necessarily conducting a trial within a trial, was not directed to the question whether the plaintiff would have brought a claim.
Nor indeed had it by then been established, in the Allied Maples case, that such a question required proof on the balance of probabilities.
Mount v Barker Austin [1998] PNLR 493 is the first of a series of cases in which the Court of Appeal sought to extract from the Kitchen and Allied Maples cases principles applicable to the determination of negligence claims against solicitors who had through their negligence allowed their clients pending claim to be struck out, either for failure to comply in time with a procedural step, or more generally for want of prosecution.
They may all be distinguished from the present case because, by the time when the negligent conduct occurred, the client already had a pending claim which could be treated as something of potential value, thereafter lost because of the solicitors negligence.
By contrast with the Allied Maples case and indeed this case, there was nothing which the client had to prove, on the balance of probabilities, that he would have done, had his solicitors acted competently, to bring such a pending claim into existence.
Simon Brown LJ sought to lay out the relevant principles at pp 510 511, in four propositions which have been frequently followed and applied.
In summary, they require the claimant only to prove that the lost claim had a real and substantial, rather than merely negligible, prospect of success, following which the court was obliged to conduct an evaluation of the prospect of success, rather than a trial within a trial of the underlying claim.
But those principles all fall on that side of the dividing line established in the Allied Maples case in which the court is concerned to value the loss of a chance, rather than to enquire whether the client has proved, on the balance of probabilities, that he would have done something relevant to the existence of a chain of causation between the solicitors negligence and the clients loss.
The Court of Appeal, and counsel for Mr Perry in his submissions to this court, placed Hanif v Middleweeks (supra) squarely in the forefront of their criticism of the judge in conducting what they described as a trial within a trial.
It was a professional negligence action in which the client was the co owner of a nightclub which had been destroyed by fire.
The insurers had issued proceedings for a declaration of non liability, on the ground (among others) that the fire had been started deliberately by Mr Hanifs co owner.
Mr Hanif counterclaimed for an indemnity under the insurance policy, but his counterclaim was struck out for want of prosecution because of the negligence of the defendant solicitors.
The trial judge had assessed the prospects of Mr Hanif resisting the insurers allegation of arson by his co owner at 25% and the Court of Appeal, applying both the Allied Maples and Kitchen cases, held that he had been right to adopt a loss of chance approach, rather than to decide, in a trial within a trial, whether or not the fire had been started deliberately.
A submission that, in the light of the 25% finding, the fire probably had been deliberate, so that the claim should have been dismissed as being contrary to public policy was rejected, not least because it had been neither pleaded nor argued in the court below.
The Hanif case did not, therefore, involve any question about what the client would have done had he obtained competent advice.
He had already given instructions for the making of the counterclaim, and it would have gone to trial but for the solicitors negligence in allowing it to be struck out for want of prosecution.
There was, therefore, nothing which Mr Hanif had to prove, on the balance of probabilities, that he would have done in order to have benefitted from a competent discharge by the solicitors of their duty of care.
The questions relevant to the lost counterclaim therefore fell squarely within the category identified in the Allied Maples case as calling for an evaluation of a lost chance, rather than proof upon the balance of probabilities.
Furthermore, there was no suggestion, at trial or in the Court of Appeal, that Mr Hanif could not honestly have brought or pursued his counterclaim, even though the judge found that he had only a 25% prospect of resisting the allegation of arson by his co owner.
In sharp contrast with Mr Perrys knowledge of his own manual grip and dexterity, it was not suggested that Mr Hanif had personal knowledge of the facts relevant to the question whether the fire had been started deliberately.
The case is therefore a conventional example of the correct application of the dividing line established in the Allied Maples case between those matters to be proved by the client on the balance of probabilities, and those to be addressed by reference to the assessment of the value of the lost opportunity.
But it does not begin to establish some principle that it is always wrong for the court to try an issue relevant to causation in a professional negligence case, merely because that same issue would have fallen for determination in the trial of the underlying claim, lost due to the solicitors negligence.
The question whether any given issue should or should not be tried in the negligence proceedings depends upon whether it is one upon which the client must prove his case on the balance of probabilities, or only one which should be subjected to the valuation of a lost chance.
Treating the question as determined by asking whether the same issue would fall to be tried in the lost claim puts the cart before the horse.
Sharif v Garrett & Co [2001] EWCA Civ 1269; [2002] 1 WLR 3118 is another case in which the negligence in question consisted of solicitors allowing a pending claim to be struck out for want of prosecution.
The underlying claim (which had been struck out) was a negligence claim against insurance brokers, following the destruction of the claimants business premises by fire.
There was no suggestion that it was a dishonest claim, or indeed a hopeless claim, although there was a wide disagreement about its value.
It was also a case in which the reason why the underlying claim had been struck out for want of prosecution was that, because of the inordinate delay, it could no longer be fairly tried.
The criticism of the trial judges approach which prevailed in the Court of Appeal was that he should not have conducted a trial of issues which would have arisen in the underlying claim in circumstances where the court had already concluded that no fair trial of that claim was possible, as a result of the solicitors negligence in its prosecution.
But the case is, like the Hanif case, another conventional application of the dividing line established in the Allied Maples case.
The client had started his claim and needed to prove nothing about what he would have done, on the balance of probabilities, in order to have benefited from his solicitors careful conduct of the proceedings.
In Dixon v Clement Jones [2005] PNLR 6, the underlying claim was a negligence action against accountants for failing to advise the claimant against what turned out to be a disastrous transaction, which her solicitors allowed to be struck out for failure to serve Particulars of Claim in time.
The solicitors alleged that, even if their client had received competent advice from the accountants, she would still have entered into the disastrous transaction so that she would, applying principles from the Allied Maples case, have failed to prove a necessary element in her case on causation, on the balance of probabilities.
The question for the Court of Appeal was whether, in those circumstances, the client was obliged in the negligence claim against the solicitors also to prove, on the balance of probabilities, that aspect of her case on causation in the underlying claim.
In agreement with the trial judge, they concluded that she did not, because causation issues in the underlying claim fell to be evaluated on a loss of chance basis in the same way as all other issues in the underlying claim, when considering the value of that claim which had been lost by reason of the solicitors negligence.
It is unnecessary to express a concluded view about that analysis.
A rigid application of the Allied Maples test, namely whether the fact in issue was something that the claimant rather than a third party would have done, might lead to the opposite conclusion.
But the client had already given instructions for the bringing of the underlying claim, so there was nothing which she needed to prove that she would have done, had the solicitors acted competently and served the Particulars of Claim in time, in order to bring into existence a chose in action which the court could value.
Nor, unsurprisingly, was it suggested that the underlying claim had not itself been honestly brought.
It is sufficient to say that it does not address the question for decision in the present case, namely whether the client must prove, on the balance of probabilities that, competently advised, he would have brought an honest claim so as to establish causation between the solicitors negligence and his alleged loss.
The Judges Approach to the Law
It was not, therefore, wrong in law or in principle for Judge Saffman to have conducted a trial of the question whether Mr Perry would (or indeed could) have brought an honest claim for a Services Award, if given competent advice by Raleys.
That was something which Mr Perry had to prove on the balance of probabilities, and which Raleys were entitled to test with all the forensic tools available at an ordinary civil trial, and by proof or challenge of alleged facts relevant to that question, even if the same facts would have formed part of the matters in issue, either at a trial of the underlying claim, or upon its adjudication or settlement pursuant to the Scheme.
But the Court of Appeals criticism of the judges approach to the issue of causation went further.
They held that his reserved judgment disclosed that he wrongly imposed upon Mr Perry the burden of proving not merely that he would, properly advised, have brought an honest claim, but also a successful claim.
Viewed across the generality of claims that may never be pursued because of a solicitors negligent advice, it may well be that the burden of proving that the claim would have succeeded is higher than the burden of proving that it could or would have been honestly made.
That is because, in the ordinary case, success will depend upon a raft of factual and legal matters, all of which are liable to be subjected to full adversarial examination at a trial, or at least to the disclosure and examination by an opponent of the claimants documents before an attempt at settlement.
By contrast, claims for Services Awards under the Scheme by persons already in possession of a medical opinion that they suffered from VWF, at a level sufficient to entitle them to general damages, would not under the claims handling processes provided for by the CHA be subject to any such adversarial procedures.
As already described, the claimant miner would only have to complete a questionnaire, identify his alleged assistants, and have one or more of them subjected to a short, non adversarial interview on the telephone by a claims handler, and undergo medical examination limited to the question of co morbidity, before his claim would be assessed and, in all probability, made the subject of an offer of an amount sufficient for the claim to be treated as having been successful.
As an experienced judge in this specialised field, Judge Saffman may be assumed to have been well aware of this, and the expression in his reserved judgment of the burden which Mr Perry needed to surmount for the purposes of establishing causation needs to the read in that light, in the context of a long and careful reserved judgment, considered as a whole.
There are four occasions in the judges judgment where he directly addressed the causation hurdle facing Mr Perry.
First, when dealing with the issues for trial, he said, at para 15: In short therefore the issues for determination are; a.
Whether the claim is statute barred, b.
If not, whether the admitted breach of duty caused or materially contributed to the claimants alleged loss.
In the context of this case did the breach cause the claimant to settle his claim at an undervalue because, on balance, if properly advised, and on the assumption that he acted honestly, he would have made a claim for a Services Award? . c.
Has the claimant lost something of value in the sense that his prospects of success in a claim for a Services Award were more than negligible? d.
If the claimant has lost a claim with more than a negligible prospect of success what is a realistic assessment of what the prospects of success were? e.
What is an appropriate assessment of the likely value of the claim having taken account of the prospects of success? Then, at para 88, under the heading Causation: he continued: The onus is on the claimant to establish causation on the balance of probabilities.
The claimant therefore must establish on balance that he would have acted differently if properly advised and a lack of opportunity to do so has caused him loss.
In other words the claimant must establish that the breach of duty actually caused him loss.
Under the heading Other aspects of Causation he continued at para 114: I therefore now turn to the issue of whether the breach caused the claimant to settle his claim at an undervalue because, on balance, if properly advised and on the assumption that he was acting honestly he would have acted differently and made a successful claim for a Services Award.
At para 119 the judge said: That is a question of credibility.
Am I satisfied that the claimant originally undertook the services but could no longer do so without assistance? As Mr Quiney put it, has the claimant succeeded in persuading the court that he actually suffered sufficient disability that he could honestly say I cannot carry out these services?
Finally, he expressed his conclusion at para 133, as follows: I am not satisfied that the evidence of Mrs Perry or Scott Perry is sufficiently cogent to dissuade me from my conclusion that the claimant has not established that he honestly met the factual matrix by reason of his VWF either in respect of what tasks he used to do and those which he could not do without assistance at the time of settlement of his original claim.
Indeed I go further, I am satisfied that in so far as the burden is on the defendant to establish its assertion that the claimant did not meet the matrix, it has discharged that burden.
The judge was using the phrase the factual matrix in the way described above, namely having a sufficient disability in his hands, caused by VWF, that he could no longer carry out, without assistance, tasks that he had previously carried out on his own.
While it is true that, at para 114, the judge did use language which, read on its own, might appear to suggest that he imposed upon Mr Perry the additional burden, beyond proving that he would have made an honest claim, that it would have been successful, his analysis of causation, derived from all the passages quoted above, taken together, and in the context of the judgment as a whole, makes it clear that he was not thereby imposing some additional burden upon Mr Perry, beyond proof, on the balance of probabilities, that he would have brought an honest claim.
His reference to a successful claim may have been no more than shorthand for his earlier reference to the requirement upon Mr Perry to show that his claim had a more than negligible prospect of success.
Accordingly, and contrary to the view of the Court of Appeal, the judges determination of the case was not vitiated by any error of law.
The Judges Determination of the Facts
It is necessary therefore also to address the question whether the Court of Appeal was right to conclude that, quite separately from supposed errors of law, the judge went sufficiently wrong in his determination of the facts to enable an appellate court to intervene.
The Court of Appeal expressed its positive conclusion on that issue under two headings, at para 26, namely: iii) he demonstrably failed to consider, or misunderstood, relevant evidence, and iv) his decision (that Mr Perry could not honestly have claimed in 1999 and thereafter that he was unable to perform the relevant tasks without assistance) cannot reasonably be explained or justified.
Those are strong conclusions about a fact finding exercise at trial by an experienced judge, but the Court of Appeal made them after reminding themselves of the very real constraints facing an appellate court when invited to overturn a judges findings of fact at trial.
For that purpose they referred to Grizzly Business Ltd v Stena Drilling Ltd [2017] EWCA Civ 94, Henderson v Foxworth Investments Ltd [2014] UKSC 41; [2014] 1 WLR 2600 and McGraddie v McGraddie [2013] UKSC 58; [2013] 1 WLR 2477.
In the Henderson case the Supreme Court had said, at para 62: It does not matter, with whatever degree of certainty, that the appellate court considers that it would have reached a different conclusion.
What matters is whether the decision under appeal is one that no reasonable judge could have reached.
In the McGraddie case Lord Reed said this, at paras 3 4:
The reasons justifying that approach are not limited to the fact, emphasised in Clarkes case and Thomas v Thomas, that the trial judge is in a privileged position to assess the credibility of witnesses evidence.
Other relevant considerations were explained by the United States Supreme Court in Anderson v City of Bessemer (1985) 470 US 564 (1985), 574 575: The rationale for deference to the original finder of fact is not limited to the superiority of the trial judges position to make determinations of credibility.
The trial judges major role is the determination of fact, and with experience in fulfilling that role comes expertise.
Duplication of the trial judges efforts in the court of appeals would very likely contribute only negligibly to the accuracy of fact determination at a huge cost in diversion of judicial resources.
In addition, the parties to a case on appeal have already been forced to concentrate their energies and resources on persuading the trial judge that their account of the facts is the correct one: requiring them to persuade three more judges at the appellate level is requiring too much.
As the court has stated in a different context, the trial on the merits should be the main event rather than a try out on the road.
For these reasons, review of factual findings under the clearly erroneous standard with its deference to the trier of fact is the rule, not the exception.
Similar observations were made by Lord Wilson in In re B (a Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 WLR 1911, para 53. 4.
Furthermore, as was stated in observations adopted by the majority of the Canadian Supreme Court in Housen v Nikolaisen [2002] 2 SCR 235, para 14: The trial judge has sat through the entire case and his ultimate judgment reflects this total familiarity with the evidence.
The insight gained by the trial judge who has lived with the case for several days, weeks or even months may be far deeper than that of the Court of Appeal whose view of the case is much more limited and narrow, often being shaped and distorted by the various orders or rulings being challenged.
The Court of Appeal, at para 24, also reminded themselves of the following dicta of Lewison LJ in Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5: (iv) In making his decisions the trial judge will have regard to the whole of the sea of evidence presented to him, whereas an appellate court will only be island hopping. (v) The atmosphere of the courtroom cannot, in any event, be recreated by reference to documents (including transcripts of evidence). (vi) Thus even if it were possible to duplicate the role of the trial judge, it cannot in practice be done.
The question in the present case is not whether the Court of Appeal misstated those constraints.
They may be summarised as requiring a conclusion either that there was no evidence to support a challenged finding of fact, or that the trial judges finding was one that no reasonable judge could have reached.
Rather, the question is whether the Court of Appeal were correct in concluding, as they did, that there were errors in the judges factual determination which satisfied those very stringent requirements.
For that purpose it is necessary to address each of the Court of Appeals criticisms in turn, but with the caveat that it is not possible entirely to disentangle some of them from what, for reasons already given, was the Court of Appeals incorrect approach to the burden imposed by the common law upon Mr Perry to prove causation.
The Court of Appeals first conclusion was that the judge had failed to appreciate that, on the question whether Mr Perry could have made an honest claim for a Services Award, the burden of proof in relation to any question of dishonesty lay squarely upon Raleys.
More importantly, the Court of Appeal concluded that it had not been fairly put to Mr Perry in cross examination at trial that, for him to have instructed Raleys to pursue a claim for a Services Award would have involved dishonesty on his part, in suggesting that he suffered from the requisite underlying manual disability.
As to that, for the reasons already given, the burden lay on Mr Perry to prove that he would have made an honest claim.
Since his written evidence was that he would indeed have made a claim for a Services Award, it was incumbent upon counsel for Raleys to bring home to Mr Perry in cross examination and by any other relevant means that his honesty in making that assertion was being challenged, and to do so in a way which took properly into account Mr Perrys relative lack of sophistication.
The judge reminded himself at some length of the need to take account of Mr Perrys relatively unsophisticated background, at paras 16 18 and 136 of his judgment.
He satisfied himself, at paras 74 75, that Mr Perry and his advisors were in no doubt that Raleys were alleging that he was promoting a dishonest claim.
At para 133 the judge made it clear that his conclusion that, in asserting that he suffered from the requisite manual disability in carrying out the relevant tasks unaided, Mr Perry was not telling the truth was one which he reached regardless of the incidence of a burden of proof.
The question whether it had been sufficiently brought home to Mr Perry, by cross examination or otherwise, that the court was being invited to conclude that he was lying in his evidence about his inability to carry out the domestic tasks without assistance was pre eminently a matter for the trial judge, and it is clear, as noted above, that he concluded, after hearing submissions from counsel on the point, that it had been.
The question for an appellate court is therefore whether there was material upon which the judge could reasonably reached that affirmative conclusion.
Having read those parts of the cross examination to which this court was directed by counsel, there clearly was such material.
It consisted, in the main, of counsel for Raleys putting in considerable detail to Mr Perry aspects of his documented medical history, and evidence (including photographic evidence) of fishing and gardening activities after his retirement as a miner which were, as the judge held, wholly inconsistent with his evidence about his disability in carrying out the relevant tasks.
The judge was entitled to conclude that this sufficiently brought home to Mr Perry that he was being accused of lying about it.
The fact that an appellate judge might, if trying the case at first instance, have preferred or required the matter to be put to Mr Perry differently or more directly, is, with respect, neither here nor there.
Linked to this criticism was the conclusion, at para 46 of the judgment of Gloster LJ, that the judge placed far too much weight on the detail of the inadequate answers which were given by the appellant in this respect .
But again, the weight to be given to evidential material in forming a conclusion whether Mr Perrys evidence lacked all credibility (as the judge found) was a matter for the trial judge.
The second and main criticism by the Court of Appeal was that the judge had disregarded, without giving proper reasons, the evidence, broadly supportive of Mr Perrys case, from Professor Kester and from the single joint expert Mr Tennant, in particular because the latter was not called to be cross examined.
Professor Kesters task, under the Scheme, was to advise whether, and with what degree of severity, Mr Perry suffered from VWF.
He noted that Mr Perry reported a loss of manual dexterity and clumsiness of an intermittent nature, but his detailed examination of Mr Perry was directed to the presence or absence of the VWF in his hands rather than to their grip or dexterity.
By contrast, Mr Tennants opinion was directed towards Mr Perrys ability to carry out the relevant domestic tasks unaided.
Again however, much of his reasoning was based upon information provided to him by Mr Perry during interview, in particular in relation to each of the six relevant tasks, although Mr Tennant appears to have carried out a grip strength test and some simple tests of manual dexterity.
The judge did, at paras 116 118 and 122 123 of his judgment, remind himself of the opinions of Professor Kester and Mr Tennant, of their findings as to the severity of Mr Perrys VWF, of the presumption thereby arising in favour of a Services Award, and accepted that Mr Perry suffered from VWF to a high degree.
At para 118, he said: I acknowledge that the staging of two doctors supports the view that he has a significant loss of function, but I repeat that the question is whether the claimant has established that in reality any loss of function manifested itself in an inability to carry out the tasks.
This was what, in the passage already quoted above, the judge described as a question of credibility.
The trial judge was not merely entitled but obliged to weigh in the evidential balance his perception that Mr Perry was lying about his ability to perform, unaided, the relevant tasks against the opinion, in particular of Mr Tennant, that he suffered from shortcomings in manual dexterity which made it likely that he suffered from such a disability.
Corroborative expert evidence not infrequently transforms testimony which on its own appears most unlikely into something credible.
The judges conclusion that Mr Tennants opinion did not prevail over Mr Perrys thoroughgoing lack of credibility cannot be described as either lacking in reasoning or trespassing beyond the range of reasonable conclusions available to a trial judge.
While it might have been better if Mr Tennant had been called for cross examination, the judge was not obliged to prefer the experts opinion, based as it was to a significant extent upon what Mr Perry had told him, to that which the judge was entitled to form, on the basis of the evidence as a whole, about whether Mr Perry was telling the truth about his supposed disability.
In the end, the Court of Appeals criticism amounted to a supposed failure to give sufficient weight to the medical evidence: see per Gloster LJ at para 52.
But questions as to the weight of competing evidence are pre eminently a matter for the trial judge.
The next criticism was that the judge had misunderstood, or failed to apply, a principle fundamental to the Scheme, namely that a claimant did not have to be disabled entirely from carrying out a task in order to be entitled to a Services Award: see per Gloster LJ at para 54.
She said that the impression given by the judge was that he wrongly considered that unless Mr Perry could not carry out any aspects of a task without assistance, he was not entitled to claim in respect of that task.
No such error appears from perusal of the judges careful judgment.
In particular, at para 132, he acknowledged that inability or reduced ability to carry out the services tasks would be sufficient to support a claim to a Services Award.
The final criticism made by the Court of Appeal was that the judge could not rationally have reached the conclusion that Mr Perry, his wife and two sons had all given false evidence: see per Gloster LJ at para 55.
It is a very strong thing for an appellate court to say, from a review of the paper records of a trial , that the trial judge was irrational in concluding that witnesses were not telling the truth, all the more so when the trial judge gives detailed reasons for that conclusion in a lengthy reserved judgment, and those reasons do not disclose any failure by him to consider relevant materials, or any disabling failure properly to understand them.
The credibility (including honesty) of oral testimony is, of all things, a matter for the trial judge.
It is unnecessary to address in detail the reasons given by Gloster LJ for that finding of irrationality against the judge.
It is sufficient to say that, while they constitute persuasive and forcefully expressed views about why she and her colleagues in the Court of Appeal, faced with the same materials, would have come to a different conclusion, they do not, separately or in conjunction, support a conclusion of irrationality as the only explanation for the judges contrary view.
As the judge said, the question whether Mr Perry needed assistance in the performance of the relevant tasks following his retirement from mining was pre eminently a matter to be proved, or not proved, by his oral evidence, with such support as he could muster from the oral evidence of his wife and two sons.
It was, as the judge put it, a question of credibility.
While there undoubtedly are cases where surviving documents point so clearly to the correct answer to issues of fact that the oral testimony of relevant witnesses is of subordinate importance, this is not one of them.
Furthermore the surviving documents were, as was demonstrated during cross examination, generally hostile to Mr Perrys case.
Mr Watt Pringle sought to support the Court of Appeals criticisms of the judges findings with specific submissions about aspects of the detail.
They did not, separately or together, amount to a case sufficient to support either a conclusion that there was no evidence to support the judges adverse findings about credibility or a conclusion that no reasonable judge could have decided as he did.
In particular Mr Watt Pringle pointed to the relative brevity of the cross examination of Mr Perrys wife and two sons, being, he submitted, insufficient to justify the conclusion that any of them was lying.
But it is impossible to tell, without having been present at the trial, whether a short or a long cross examination of a witness was necessary in order to undermine his or her credibility.
Mr Watt Pringle also pointed to the fact that the central thrust of Raleys case at trial was not so much that Mr Perry suffered from no disability in performing the relevant tasks unaided, (although that was part of Raleys case) but rather that his back problem was the only significant cause of such disability as in fact affected him.
He pointed to the fact that, in the concluding part of his judgment, the judge rejected Raleys case that Mr Perrys back problems were of that degree of significance, preferring in that respect the evidence to the contrary of Mr Tennant.
But he did so expressly on the conditional basis that he might be wrong in his primary conclusion that Mr Perry was lying about having any relevant inability to perform those tasks unaided: see para 137 of his judgment.
In conclusion therefore, none of the grounds upon which the Court of Appeal considered that this was one of those rare cases where it was appropriate to reverse the trial judges findings on issues of fact is established, to the requisite high degree.
Accordingly, this appeal should be allowed, and the judges order restored.
| The respondent, Mr Perry, is a retired miner.
By the time he stopped working, he was suffering from a condition known as Vibration White Finger (VWF).
Common symptoms include a reduction in grip strength and manual dexterity, often leading to an inability to carry out routine domestic tasks unaided.
In the late 1990s, a group of test cases established that the National Coal Board (later British Coal) had been negligent in failing to take reasonable steps to limit the exposure of its miners to VWF from the excessive use of vibratory tools.
In 1999, the Department for Trade and Industry (DTI) set up a scheme (the Scheme) to provide tariff based compensation (i.e. based on the severity of the injury) to miners suffering from VWF following exposure to excessive vibration.
The Scheme was administered under a Claims Handling Arrangement dated 22 January 1999 made between the DTI and solicitors firms representing miners.
The Scheme contemplated the making of two main types of compensatory award to such miners, which broadly reflected general and special damages for personal injuries.
Pursuant to a Services Agreement dated 9 May 2000, special damages could include a Services Award to qualifying miners.
This depended on establishing what became known as the factual matrix.
In summary: (1) prior ability to undertake one or more of six defined routine domestic tasks (the six tasks) without assistance; (2) current inability to undertake those tasks without assistance because of VWF; and (3) current receipt of the necessary assistance with those tasks from others.
The six tasks were gardening, window cleaning, DIY, decorating, car washing, and car maintenance.
Qualification for a general damages award required affected miners to undertake a medical interview and examination designed to assess the severity of their VWF.
Sufferers at certain high levels of severity also became entitled to a rebuttable presumption that they qualified for a Services Award.
The Scheme provided for relatively light touch checks of Services Award claims.
Compensation was payable to qualifying claimants according to an index linked tariff.
Proportionate deductions could be made if a further medical examination showed that there were other contributing medical conditions.
Mr Perry engaged the appellant law firm, Raleys, to pursue a VWF claim in October 1996.
His claim ultimately fell within the Scheme.
In October 1997, he was given medical ratings (stagings) sufficient both for him to obtain general damages and for a Services Award to be presumed.
However, Mr Perry settled his claim in November 1999 for the payment of general damages only (11,600) and made no claim for a Services Award within the specified time.
He made a professional negligence claim against Raleys in February 2009, claiming that the firms negligent failure to give him competent legal advice deprived him of the chance to claim a Services Award.
His estimated loss was 17,300.17 plus interest.
At trial in the County Court, Raleys ultimately admitted breach of duty, but denied causation of loss.
It also alleged that his claim was time barred.
The trial judge, Judge Saffman, rejected the limitation defence, but held that Mr Perry had not proved that Raleys breach of duty had caused him any loss.
This conclusion was based on the finding that Mr Perrys VWF had not caused him any significant disability in performing any of the six tasks without assistance, such that he could not have been able
to make an honest claim for a Services Award.
The judge dismissed the claim, but nonetheless proceeded to make findings on the assessment of damages.
The Court of Appeal reversed the finding on causation and concluded that the alternative findings on quantum meant a re trial was unnecessary.
It granted Mr Perry loss of chance damages of 14,556.15 plus interest.
Raleys appealed to the Supreme Court, seeking restoration of Judge Saffmans order.
The Supreme Court allows the appeal and restores the order of the County Court judge.
Lord Briggs gives the sole judgment, with which all members of the Court agree.
Loss of chance damages have been developed by the courts to deal with the difficulties arising from the assessment of counter factual and future events [16].
In both types of situation, the courts at times depart from the ordinary burden on a claimant to prove the facts required for a successful claim on the balance of probabilities (i.e. more likely than not) standard [17 18].
However, this does not mean that the basic requirement that a negligence claim requires proof that loss has been caused by the breach of duty is abandoned [19].
The correct approach, following Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602 (CA), is to require a claimant to prove what he or she would have done on the balance of probabilities, while what others would have done (if relevant) depends on a loss of chance evaluation [20 21].
These principles apply equally to negligence claims based on loss of the opportunity to achieve a better outcome in a negotiated transaction and ones, as in this case, based on loss of the chance to bring a legal claim [22].
It is not unfair to subject medical and oral evidence as to facts within the claimants own knowledge to forensic analysis on the balance of probabilities standard [30].
The case law only establishes that, where the question for the court is one which turns on the assessment of a lost chance, it is generally inappropriate to conduct a trial within a trial [31].
It does not establish a principle that it is always wrong to try an issue relevant to causation in a professional negligence case, merely because that issue would have fallen for determination in the underlying claim (lost due to alleged negligence) [35 37].
Whether an issue should be tried to the usual standard depends on whether it concerns the claimants conduct (where it should be) or third party conduct (only requiring a real and substantial chance) [37].
Applying this approach, Mr Perry needed to prove that, properly advised by Raleys, he would have made a claim to a Services Award under the Scheme within time [25].
Further, the judge was correct to impose the additional requirement of the claim having to be an honest claim [25].
A concession in the courts below had been rightly made as to the honest claim requirement, because: (1) a claimant giving an honest description of his or her condition to a solicitor would not be advised to bring a claim if the facts were insufficient; (2) a court may fairly presume that the client would only make honest claims; and (3) it is not the proper role of the courts to reward dishonest claimants [25 27].
On the facts, Mr Perry had to believe the following to bring an honest claim: (1) before developing VWF, he had carried out all or some of the six tasks without assistance; (2) after developing VWF, he needed assistance in carrying out all or some of those tasks; and (3) the need for assistance was due to complications from VWF [28].
Question (3) might require expert medical opinion, but all the other necessary elements fell within his own knowledge [29].
Such facts do not raise issues of counter factuality or futurity which engage loss of chance principles [30].
Accordingly, Judge Saffman had made no legal error in conducting a trial of the issue whether Mr Perry would (or could) have brought an honest claim for a Services Award [41].
Further, the judge did not (wrongly) apply a second causation hurdle requiring Mr Perry to prove that his claim would have been successful (not merely honest) [42 48].
In addition, the Court of Appeal wrongly interfered with the judges factual determination the very stringent test for appellate court interference was not met in this case [49 66].
|
This appeal raises two issues as to the common law privilege against self incrimination.
The first issue is as to the meaning of the words proceedings for infringement of rights pertaining to intellectual property in section 72(2)(a) of the Senior Courts Act 1981 (the 1981 Act).
The second issue is whether, on the footing that the appellant, Mr Glenn Mulcaire, would by complying with an order of Mann J made on 19 November 2010 tend to expose himself to criminal proceedings for conspiracy, such proceedings would or would not be for a related offence within the meaning of section 72(5) of the 1981 Act.
The facts
These issues arise in the context of the interception of mobile phone messages, at present a topic of widespread interest and concern.
The respondent, the claimant in the proceedings, is Ms Nicola Phillips.
She worked for Max Clifford Associates (MCA), the corporate vehicle of Mr Max Clifford, the well known public relations consultant.
Her responsibilities included both trying to place in the media favourable stories about clients of MCA, and trying to prevent the placing in the media of unfavourable stories about them.
Mr Mulcaire was during 2005 and 2006 working as a private investigator.
He was often engaged by staff on the News of the World, then a Sunday newspaper published by News Group Newspapers Ltd (NGN).
NGN is a party to the proceedings but did not appear before the Court of Appeal or in this Court.
During the same period Mr Clive Goodman was employed by NGN as a reporter on the News of the World with responsibility for news about the royal family and household.
After an investigation by the Metropolitan Police Mr Mulcaire and Mr Goodman were charged with one count of conspiracy to intercept communications, contrary to section 1(1) of the Criminal Law Act 1977 (the 1977 Act).
This charge related to voicemail messages of three members of the royal household.
Mr Mulcaire was also charged with five further counts under section 1(1) of the Regulation of Investigatory Powers Act 2000, one relating to voicemail messages on Max Cliffords mobile phone.
In November 2006 Mr Mulcaire pleaded guilty to all these counts, and Mr Goodman pleaded guilty to the count of conspiracy.
In January 2007 Mr Mulcaire was sentenced to a total of six months imprisonment, and Mr Goodman to four months.
During 2008, 2009 and 2010 a large number of civil claims were commenced by individuals who claimed that messages on their mobile phones had been unlawfully intercepted.
These claims were brought against NGN, and sometimes against Mr Mulcaire as well.
They were often referred to as phone hacking claims.
Case management of the claims was undertaken by Vos J. Many of the claims have already been compromised.
On 10 May 2010 Ms Phillips commenced proceedings against NGN (initially as the only defendant).
Part of her case (set out in particulars within her re amended particulars of claim, para 8.5) is as follows: Ms Phillipss clients often leave voicemail messages on her mobile phone and she on theirs.
In addition to dealing with their commercial affairs, Ms Phillips often develops amicable relationships with her clients over the course of time.
Accordingly, voicemail messages left by Ms Phillipss clients sometimes contain factual information, some of which is private information and some of which is commercially confidential information.
This includes private and/or confidential information relating to her clients personal lives and relationships, health, finances, incidents in which the police have become involved, personal security or publicity issues, commercial business transactions, professional relationships and future career plans.
The first issue, in more concrete terms, is whether the information described in this pleading is technical or commercial information falling within the definition of intellectual property in section 72(5) of the 1981 Act.
Paragraphs 9, 10 and 11 of her re amended particulars of claim plead facts on the basis of which it is contended that Mr Mulcaire and NGN owed Ms Phillips an equitable duty of confidence and a duty of privacy in respect of her incoming and outgoing voicemail messages.
The pleading also states (para 15) that Mr Mulcaire was at the time a contracted employee of NGN (though counsel did not treat that as relevant to the issues in this appeal).
Ms Phillips claims an injunction, detailed disclosure of information, delivery up of documents, and an inquiry as to damages or (at her election) an account of profits.
She does not claim that the alleged interception of her emails has caused her personal financial loss.
Her pleaded case is verified by her appended statement of truth and a short witness statement by her solicitor, Mr James Heath.
On 12 October 2010 Ms Phillips applied for an order that Mr Mulcaire should be joined as a defendant in the proceedings and that he should serve a witness statement disclosing information under several heads.
Mr Mulcaire did not resist being joined as a party, but he did resist the order for disclosure on the ground of his privilege against self incrimination.
Against that Ms Phillips relied on section 72 of the 1981 Act as excluding the privilege.
She was successful before Mann J, who gave judgment on 17 November 2010 [2010] EWHC 2952 (Ch).
The Court of Appeal dismissed Mr Mulcaires appeal on 1 February 2012 [2012] EWCA Civ 48, [2012] 2 WLR 848.
At the same time it dismissed a similar appeal from Vos J in proceedings brought by Mr Stephen Coogan, the well known comedian.
Mr Mulcaire appeals to the Supreme Court with permission granted on 14 February 2012.
In the meantime Mr Ian Edmondson, an employee of NGN, has been joined as a third defendant in the proceedings.
Section 72 of the 1981 Act
Section 72, as amended in immaterial respects by the Copyright, Designs and Patents Act 1988 and the Civil Partnership Act 2004, is in the following terms: (1) In any proceedings to which this subsection applies a person shall not be excused, by reason that to do so would tend to expose that person to proceedings for a related offence or for the recovery of a related penalty (a) from answering any questions put to that person in the first mentioned proceedings; or (b) from complying with any order made in those proceedings. (2) Subsection (1) applies to the following civil proceedings in the High Court, namely (a) proceedings for infringement of rights pertaining to any intellectual property or for passing off; (b) proceedings brought to obtain disclosure of information relating to any infringement of such rights or to any passing off; and (c) proceedings brought to prevent any apprehended infringement of such rights or any apprehended passing off. (3) Subject to subsection (4), no statement or admission made by a person (a) in answering a question put to him in any proceedings to which subsection (1) applies; or (b) in complying with any order made in any such proceedings, shall, in proceedings for any related offence or for the recovery of any related penalty, be admissible in evidence against that person or (unless they married or became civil partners after the making of the statement or admission) against the spouse or civil partner of that person. (4) Nothing in subsection (3) shall render any statement or admission made by a person as there mentioned inadmissible in evidence against that person in proceedings for perjury or contempt of court. (5) In this section intellectual property means any patent, trade mark, copyright, design right, registered design, technical or commercial information or other intellectual property; related offence, in relation to any proceedings to which subsection (1) applies, means (a) in the case of proceedings within subsection (2)(a) or (b) (i) any offence committed by or in the course of the infringement or passing off to which those proceedings relate; or (ii) any offence not within sub paragraph (i) committed in connection with that infringement or passing off, being an offence involving fraud or dishonesty; (b) in the case of proceedings within subsection (2)(c), any offence revealed by the facts on which the plaintiff relies in those proceedings; related penalty, in relation to any proceedings to which subsection (1) applies means (a) in the case of proceedings within subsection (2)(a) or (b), any penalty incurred in respect of anything done or omitted in connection with the infringement or passing off to which those proceedings relate; (b) in the case of proceedings within subsection (2)(c), any penalty incurred in respect of any act or omission revealed by the facts on which the plaintiff relies in those proceedings. (6) Any reference in this section to civil proceedings in the High Court of any description includes a reference to proceedings on appeal arising out of civil proceedings in the High Court of that description.
The section was introduced as an amendment to the Bill which became (under its original name) the Supreme Court Act 1981.
Its legislative purpose must be found within the four corners of the section; it is not part of any wider legislative scheme.
But it is common ground that it was enacted as Parliaments response to the decision of the House of Lords in Rank Film Distributors Ltd v Video Information Centre [1982] AC 380.
That was a case of large scale infringement of copyright by making and marketing unauthorised video copies of feature films made and distributed by the Rank Organisation.
It was the first case in which the House of Lords considered Anton Piller orders: Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55.
Such orders have been put on a statutory basis by section 7 of the Civil Procedure Act 1997 and are now called search orders.
The House of Lords cast no doubt on the courts jurisdiction to grant such orders but held, reluctantly, that such an order could not be made because of the defendants potential exposure to a charge of conspiracy to defraud: see Lord Wilberforce at p 441 and Lord Fraser of Tullybelton at pp 445 446.
The other Law Lords agreed with one or both of Lord Wilberforce and Lord Fraser.
Lord Russell of Killowen observed (p 448): Inasmuch as the application of the privilege in question can go a long way in this and other analogous fields to deprive the owner of his just rights to the protection of his property I would welcome legislation somewhat on the lines of section 31 of the Theft Act 1968: the aim of such legislation should be to remove the privilege while at the same time preventing the use in criminal proceedings of statements which otherwise have been privileged.
Section 31 of the Theft Act 1968 is only one of numerous statutory provisions by which Parliament has thought it right to restrict the privilege against self incrimination, while providing alternative means of protection in criminal proceedings, in order to avoid the injustice of victims of crime being deprived of an effective civil remedy.
Mr Beloff QC (appearing with Mr Jeremy Reed for Ms Phillips) provided the Court with a list of no fewer than 25 statutory provisions, apart from section 72 of the 1981 Act, which qualify the privilege.
A further list specifies a number of cases (including the decisions of both the Court of Appeal and the House of Lords in Rank and in AT & T Istel Ltd v Tully [1993] AC 45, the latter case being one which it will be necessary to return to) in which some very distinguished judges have criticised the privilege against self incrimination as it may operate in cases of serious commercial fraud or piracy.
For the present it is sufficient to cite what Lord Neuberger MR said in the Court of Appeal in this case, [2012] 2 WLR 848, para 18.
After referring to some of the earlier criticisms he observed: I would take this opportunity to express my support for the view that PSI has had its day in civil proceedings, provided that its removal is made subject to a provision along the lines of section 72(3).
Whether or not one has that opinion, however, it is undoubtedly the case that, save to the extent that it has been cut down by statute, PSI remains part of the common law, and that it is for the legislature, not the judiciary, to remove it, or to cut it down.
The second sentence of this paragraph must carry no less weight than the first.
In relation to the correct general approach to the construction of section 72 Lord Neuberger stated (para 26): The purpose of section 72 is self evidently to remove PSI in certain types of case, namely those described in section 72(2).
While there have been significant judicial observations doubting the value of PSI in civil proceedings, it would be wrong to invoke them to support an artificially wide interpretation of the expression, as it is clear that Parliament has decided that section 72 should contain only a limited exception from the privilege.
On the other hand, in the light of the consistent judicial questioning as to whether PSI is still appropriate in civil proceedings, it would be rather odd for a court to interpret such a provision narrowly.
Further, the fact that PSI is an important common law right does not persuade me that the expression should be given a particularly narrow meaning.
He then referred with approval to some observations of Moore Bick LJ in Kensington International Ltd v Republic of Congo [2007] EWCA Civ 1128, [2008] 1 WLR 1144, para 36, as to the significance of the removal of the privilege being largely, if not entirely, balanced by the disclosed material being made inadmissible in criminal proceedings.
Mr Millar QC (for Mr Mulcaire) submitted that the correct approach was to be found in cases like Sociedade Nacional de Combustiveis de Angola UEE v Lundqvist [1991] 2 QB 310, 337 (Beldam LJ) and R v Director of Serious Fraud Office, Ex p Smith [1993] AC 1.
Committee agreed) said at p 40, In the latter case Lord Mustill (with whom the rest of the Appellate That there is strong presumption against interpreting the statute as taking away the right of silence, at least in some of its forms, cannot in my view be doubted.
Recently, Lord Griffiths (delivering the opinion in the Privy Council in Lam Chi ming v The Queen [1991] 2 AC 212, 222) described the privilege against self incrimination as deep rooted in English law, and I would not wish to minimise its importance in any way.
Nevertheless it is clear that statutory interference with the right is almost as old as the right itself.
Since the 16th century legislation has established an inquisitorial form of investigation into the dealings and assets of bankrupts which is calculated to yield potentially incriminating material, and in more recent times there have been many other examples, in widely separated fields, which are probably more numerous than is generally appreciated.
These statutes differ widely as to their aims and methods.
In the first place, the ways in which the overriding of the immunity is conveyed are not the same.
Sometimes it is made explicit.
More commonly, it is left to be inferred from general language which contains no qualification in favour of the immunity.
Secondly, there are variations in the effect on the admissibility of information obtained as a result of the investigation.
The statute occasionally provides in so many terms that the information may be used in evidence; sometimes that it may not be used for certain purposes, inferentially permitting its use for others; or it may be expressly prescribed that the evidence is not to be admitted; or again, the statute may be silent.
Since then Parliament has (by section 59 of and Schedule 3 to the Youth Justice and Criminal Evidence Act 1999) amended a considerable number of different statutory provisions of this type so as to introduce a prohibition on material disclosed under compulsion being used in evidence in criminal proceedings.
This was no doubt in anticipation of the coming into force of the Human Rights Act 1998.
I have some reservations as to whether the existence of a balancing provision of this sort alters the need for clear words if the privilege is to be removed or curtailed.
As Moore Bick LJ acknowledged, there is not a perfect balance; material disclosed under compulsion may point to a line of inquiry producing evidence which is admissible in criminal proceedings, to the detriment of the accused.
But I respectfully agree with Lord Neuberger that in a case where Parliament has left no room for doubt that it intends the privilege to be withdrawn, there is no need for the Court to lean in favour of the narrowest possible construction of the reach of the relevant provision.
As already noted, an important part of the legislative purpose of these provisions is to reduce the risk of injustice to victims of crime, and that purpose might be frustrated by an excessively narrow approach.
The structure and language of section 72
Section 72(1) contains the heart of the section.
It provides (so far as relevant to this appeal) that in civil proceedings to which it applies, a person is not to be excused from answering any questions put to him, or from complying with any order, by reason that to do so would tend to expose that person to proceedings for a related offence.
It is not suggested by either side that the meaning of the phrase tends to expose in the subsection is any different from its traditional meaning, which goes back at least to R v Boyes (1861) 1 B & S 311, and is now given statutory form in section 14 of the Civil Evidence Act 1968.
The classic statement in R v Boyes, at p 330, was cited by Mann J in para 23 of his judgment.
Subsection (2), in conjunction with the definition of intellectual property in subsection (5), raises the first issue: are the proceedings taken by Ms Phillips proceedings for infringement of rights pertaining to any intellectual property? The definition of related offence in subsection (5) raises the second issue: would a charge of conspiracy to commit offences under section 1(1) of the 1977 Act be the charge of an offence (i) committed by or in the course of the infringement to which Ms Phillipss civil proceedings relate, or (ii) committed in connection with that infringement . being an offence involving fraud or dishonesty? If such a conspiracy would not be a related offence, Mr Mulcaire is entitled to rely on his privilege against self incrimination, regardless of the fact that he might also be charged with another offence or offences which are related offences.
A reasonable apprehension of being charged with a single non related offence would be enough to preserve the claim to privilege.
In Rank [1982] AC 380, 441, Lord Wilberforce recognised the need to consider the practical probabilities (rather than theoretical possibilities) of what charges might be brought, and concluded on the facts of that case that a charge of conspiracy to defraud was the most likely charge so that (subject to a final escape route which was closed off) privilege must inevitably attach.
These observations may possibly have had some influence on the drafting of the definition of related offence in section 72(5).
Section 72(3) contains the balancing provision in a form which mirrors the structure of subsection (1).
It is qualified (in relation to proceedings for perjury or contempt of court) by subsection (4).
The definition of intellectual property
Mr Millar, and to a lesser extent Mr Beloff, placed before the Court a variety of definitions of the expression intellectual property, some taken from statutes and some from the works of legal scholars.
They are not particularly helpful because, as Vos J put it succinctly in his judgment on Mr Coogans claim, and another linked claim, reported as Gray v News Group Newspapers Ltd [2011] EWHC 349 (Ch), [2011] 2 WLR 1401, para 77: A review of intellectual property textbooks shows that there is no universal definition of the term, which is no doubt why Parliament has adopted a variety of definitions for different situations.
The starting point must be the language of the definition in section 72(5).
Bennion on Statutory Interpretation, 5th ed (2008) quotes this definition, at p 570, as an example of what he terms a clarifying definition, the purpose of which is to avoid doubt as to whether the term does or does not include certain matters: A common remedy is to specify the main ingredients, and rely for any others on the potency of the term defined.
This greatly reduces the danger area.
The form is T means A, B, C or D, or any other manifestation of T.
The term potency is explained at pp 562 564, with a citation of what Lord Hoffmann said in MacDonald v Dextra Accessories Ltd [2005] UKHL 47, [2005] 4 All ER 107, para 18: a definition may give the words a meaning different from their ordinary meaning.
But that does not mean that the choice of words adopted by Parliament must be wholly ignored.
If the terms of the definition are ambiguous, the choice of the term to be defined may throw some light on what they mean.
Here there is no particular potency about the expression intellectual property because there is a general consensus as to its core content (patents for inventions, literary, dramatic, musical and artistic copyright, copyright in recordings, films and broadcasts, registered and unregistered design rights and trademarks, all now governed by national statutes and international treaties), but no general consensus as to its limits.
The sweeping up words at the end of the definition (or other intellectual property) no doubt include new and specialised statutory rights akin to those in the core content, such as plant breeders rights under the Plant Varieties Act 1997 and database rights under the Copyright and Rights in Databases Regulations 1997 (SI 1997/3032).
But for present purposes the essential point is that the definition in section 72(5) contains the words technical or commercial information.
Parliament has made plain that information within that description is, for the purposes of section 72, to be regarded as intellectual property, whether or not it would otherwise be so regarded.
Such limited potency as there is in the expression intellectual property (and more generally, the legislative purpose of section 72 in enhancing protection against unlawful trade competition) may be of assistance in determining the meaning of technical or commercial information.
It must be something in which a civil claimant has rights capable of being infringed, since infringement of rights pertaining to intellectual property is what section 72(2)(a) is concerned with.
The fact that technical and commercial information ought not, strictly speaking, to be described as property (the majority view of the House of Lords in Boardman v Phipps [1967] 2 AC 46, 89 90, 103 and 127 128; cf 107 and 115) cannot prevail over the clear statutory language.
Whether or not confidential information can only loosely, or metaphorically, be described as property is simply irrelevant.
I cannot therefore accept Mr Millars submission that the natural meaning of technical or commercial information is limited (in practice, it would be almost nullified) by the sweeping up words or other intellectual property.
Nor do I accept that that construction is supported by what Lord Lowry said in AT & T Instel Ltd v Tully [1993] AC 45, 64 65.
Lord Neuberger went very fully into that point at paras 41 to 44 of his judgment in the Court of Appeal, and I respectfully and completely agree with his analysis.
What Lord Lowry said was not obiter, but his use of the Latin phrase ejusdem generis tended to obscure the real point that he was making.
That was that the case was not a claim for infringement of either intellectual property rights or rights in respect of confidential information.
Istel (the first plaintiff) had bought control of Abbey (the second plaintiff) from the first two (of 25) defendants, and then discovered that under their control Abbey, a supplier of computer services, had perpetrated a large scale fraud on the Wessex Health Authority.
They obtained an ex parte order for disclosure of a range of information and documents, which was then set aside on the ground of the first and second defendants privilege against self incrimination.
This was upheld, with considerable reluctance, by the Court of Appeal and the House of Lords.
It was not open to the first instance judge, Buckley J to attempt, as he did, to replace the privilege with some alternative protection of his own devising.
Section 72 (which seems to have been the plaintiffs last ditch argument) was not in point at all because the claim was for equitable compensation for a breach of fiduciary duty and damages for fraud.
The point that Lord Lowry was making was put more simply by Lord Donaldson MR in the Court of Appeal [1992] QB 315, 325: If section 72 were to avail the plaintiffs, they would have to show that they had brought proceedings to obtain disclosure of information relating to an infringement of rights pertaining to commercial information.
In fact they are seeking information relating to alleged breaches of quite different rights, namely, the rights to damages for fraud or breach of trust in the various respects alleged in the statement of claim.
Technical or commercial information
The meaning of technical or commercial information is a more difficult point.
Again, there is no doubt general consensus as to its core content.
In Faccenda Chicken Ltd v Fowler [1987] Ch 117, a case concerned with the extent of an ex employees duty of confidence, Neill LJ said at p 136: It is clear that the obligation not to use or disclose information may cover secret processes of manufacture such as chemical formulae (Amber Size and Chemical Co Ltd v Menzel [1913] 2 Ch 239), or designs or special methods of construction (Reid & Sigrist Ltd v Moss & Mechanism Ltd (1932) 49 RPC 461), and other information which is of a sufficiently high degree of confidentiality as to amount to a trade secret.
He also said at p 138: It is clearly impossible to provide a list of matters which will qualify as trade secrets or their equivalent.
Secret processes of manufacture provide obvious examples, but innumerable other pieces of information are capable of being trade secrets, though the secrecy of some information may be only short lived.
Whatever the difficulties of exhaustive enumeration, it is clear that the scope of trade secrets extends not only to products and processes, but also to a wide range of financial information about the management and performance of a business, and plans for its future.
Mr Millar reminded the Court that the definition in section 72(5) does not refer in terms to confidential information.
Not all technical or commercial information is confidential.
Huge amounts of technical and commercial information are available to anyone with a personal computer.
Businessmen may, especially when faced with losing a valued employee, seek to push out the boundaries of commercial confidentiality.
Hoffmann J commented on this in Lock International plc v Beswick [1989] 1 WLR 1268, 1281, a case that warned against abuse of the Anton Piller jurisdiction: Many [employers] have great difficulty in understanding the distinction between genuine trade secrets and skill and knowledge which the employee may take away with him .
Judges dealing with ex parte applications are usually also at a disadvantage in dealing with alleged confidential knowledge of technical processes described in technical language, such as the electric circuitry in this case.
It may look like magic but turn out merely to embody a principle discovered by Faraday or Ampere.
It is only if the information is indeed confidential in the eyes of the law that a claim for breach of confidence (that is, infringement of a right of confidence) can arise.
Conversely not all confidential information can, in normal usage, be described as technical or commercial.
A secret about a persons private life (for instance, to give an example already mentioned, a life threatening disease which the sufferer does not wish to disclose) is not naturally described in those terms, even if it could (where the individual involved is a celebrity) be turned to financial advantage by disclosing it, in breach of confidence, to the media.
In para 32 of his judgment Lord Neuberger recognised this: As a matter of ordinary language, just as technical information means information of a technical nature, it seems to me that commercial information means information which is commercial in character, rather than information which, whatever its nature, may have a value to someone.
In other words, the word commercial appears to be a description of the character of the information rather than the fact that it has value.
But he went on to consider, in paras 45 to 52, whether confidential information about a persons private life might instead come in as other intellectual property.
This was a point that Mann J (para 48) had noted and regarded as arguable, but said no more about.
Vos J in Gray and Coogan [2011] 2 WLR 1401, para 84, noted that this point had been raised but received less and less emphasis in the argument of Mr Reed (who then appeared for both claimants).
Vos J commented that it would be stretching the statutory definition far too widely to hold that it included confidential private information even where such information could be protected by action.
It may not be strictly necessary to decide this point in order to dispose of this appeal, since there is evidence that many of the voicemails on Ms Phillipss mobile phone were both confidential and of a commercial nature.
But the point is of general importance and may well be determinative of other claims which are focused on confidential information of a private and personal nature.
On this point I respectfully disagree with Lord Neuberger and the other members of the Court of Appeal.
In para 45 Lord Neuberger takes as the starting point of his discussion a proposition that I regard as the obviously correct conclusion: At first sight, it might seem that the answer [to the question: can personal information be other intellectual property?] is no, as the draftsman of the definition limited its ambit to technical and commercial information.
He then considers a number of arguments leading towards the opposite conclusion.
I have to say that I do not find these arguments at all convincing.
Paras 46 to 52 make and develop the point that when section 72 was enacted in 1981, the law of confidence was routinely invoked in connection with trade secrets, but rarely in connection with personal secrets.
Duchess of Argyll v Duke of Argyll [1967] Ch 302 was an isolated exception.
That is so, but it is, with respect, simply confirmation of the natural reading of the definition.
The legislative purpose of section 72 was to prevent remedies against commercial piracy, including in particular Anton Piller search orders, from being frustrated by the privilege against self incrimination.
Then it is said (para 51) that it would be surprising if the privilege could be invoked by a defendant in relation to a claim for breach of confidence relating to private information of a personal nature, but not a claim for breach of confidence in respect of trade secrets or other information of a commercial nature.
This is really the same point put in a different way.
The numerous statutory exceptions to the privilege have been introduced in a fairly random way.
They are something of a patchwork.
The central purpose of section 72 is to fortify remedies against unlawful trading practices, not to cover the whole of the law of confidence, bifurcated as it now is.
The last point (para 52) is that the same information could be commercial in one persons hands and personal in the hands of another.
This is a point of considerable interest but I do not think that it leads to the conclusion that Lord Neuberger draws.
In Douglas v Hello! Ltd (No 3), reported with OBG Ltd v Allan and Mainstream Properties Ltd v Young [2007] UKHL 21, [2008] AC 1, Lord Hoffmann discussed the point in considering the unauthorised photographs taken at the wedding in New York of Michael Douglas and Catherine Zeta Jones.
He said at para 118: Whatever may have been the position of the Douglases, who, as I mentioned, recovered damages for an invasion of their privacy, OK!s claim is to protect commercially confidential information and nothing more.
So your Lordships need not be concerned with Convention rights.
OK! has no claim to privacy under article 8 nor can it make a claim which is parasitic on the Douglases right to privacy.
The fact that the information happens to have been about the personal life of the Douglases is irrelevant.
It could have been information about anything that a newspaper was willing to pay for.
What matters is that the Douglases, by the way they arranged their wedding, were in a position to impose an obligation of confidence.
They were in control of the information.
This may be a pointer to some further development in the law.
But it is not an argument for an unnatural construction of the definition in section 72(5).
It is a recognition that in the world of celebrities (which is very much the milieu in which MCA and Ms Phillips were operating) there is commercial value in even the most intimate personal information, subject only to the restraints imposed by the developing law of privacy.
For a few celebrities, their colourful private lives are part of their stock in trade.
The implication is that, if the definition in section 72 remains in its present form, the court may have some difficult borderline cases as to the meaning of commercial information.
But that is not a reason for adopting an unnatural construction of the definition as a whole.
Lord Neuberger considered (para 53) that the difficulties of what he called mixed messages would be far greater if his construction were not adopted.
But there is in my view no great difficulty about that point in this appeal.
Ms Phillipss pleading, verified by her statement of truth and her solicitors witness statement, is to the effect that the voicemail messages left by her clients contained commercially confidential information, including information about finances, incidents in which the police have become involved, personal security or publicity issues, commercial business transactions, professional relationships and future career plans.
Neither the pleading nor the witness statement attempts to quantify the proportions of personal and commercial information, but there was no reason to suppose that the latter was not significant.
It is also pleaded, rather repetitively, that Ms Phillips regularly spoke on her mobile phone (para 6 of the re amended particulars of claim) to clients, predominantly entertainers and celebrities, many of whom are well known; individuals who are suddenly caught up in a breaking news story; newspapers and journalists; producers, editors, researchers, and journalists from various sectors of the media, including TV, radio, newspapers and magazines.
I would therefore uphold, although for more limited reasons, the Court of Appeals conclusion that Ms Phillips proceedings are proceedings for rights pertaining to intellectual property within the meaning of section 72 of the 1981 Act.
Related offence: the authorities
There must be a sufficient connection between the subject matter of the claimants civil proceedings and the offence with which, under the test in R v Boyes (1861) 1 B & S 311, the defendant (as the person required to make disclosure under compulsion) has a reasonable apprehension of being charged.
The requisite connection is defined, so far as now relevant, by section 72 (5)(a): (i) any offence committed by or in the course of the infringement . to which those proceedings relate; or (ii) any offence not within sub paragraph (i) committed in connection with that infringement . , being an offence involving fraud or dishonesty.
So the offence must be committed by or in the course of the infringement, unless the offence involves fraud or dishonesty, in which case a looser connection (not further defined in the statute) is sufficient.
In forming a view as to whether any criminal proceedings are likely to be commenced, and if so on what charges, the civil court has to proceed on a realistic assessment of what charges are likely in practice, rather than possible in theory.
In Rank [1982] AC 380, 441, Lord Wilberforce noted that the Copyright Act 1956 created a number of criminal offences, each punishable by a maximum fine (for a first offence) of 50.
In practice prosecutions were very rare.
Lord Wilberforce thought that that potential liability should be disregarded.
But there was a real likelihood of a charge of conspiracy to defraud: A charge of conspiracy to defraud, so far from being, as it sometimes is, a contrived addition to other charges, is here an appropriate and exact description of what is being done.
So far from it being contrived, fanciful or imagined, it is the charge on which [an associate of the individual defendants] is to stand trial.
Similar views were expressed in the cases mentioned in the next two paragraphs.
The point has arisen several times in relation to section 31 of the Theft Act 1968.
In Sociedade Nacional [1991] 2 QB 310, in which large quantities of crude oil had been sold at an undervalue by a dishonest consultant and his associates, the Court of Appeal held that a conspiracy was not an offence under the Theft Act, and that privilege was available because a charge of conspiracy was probable.
Sir Nicolas Browne Wilkinson V C (at p 338) expressed the hope that Parliament would extend the scope of section 31.
In Tate Access Floors Inc v Boswell [1991] Ch 512 privilege was relied on as a defence to an application for a Mareva freezing order and an Anton Piller search order in a case in which senior employees were suspected of misappropriating the plaintiff companies funds.
The Vice Chancellor recognised that a single count of conspiracy would be a proper course for the prosecution to take.
In consequence privilege was available and the stayed ex parte Anton Piller order was set aside.
In Renworth Ltd v Stephansen [1996] 3 All ER 244 there was a full discussion of the authorities, including Khan v Khan [1982] 1 WLR 513, in which the Court of Appeal, in order to avoid what it saw as a monstrous result, took a fairly robust view of what the charges were in substance.
In Renworth the defendant was an interior designer with responsibility for subcontractors engaged on the expensive refurbishment of a house.
After she had submitted bills for about 670,000 the architect became suspicious and civil proceedings were taken against her.
On an interlocutory application she claimed privilege and her counsel suggested six separate types of conspiracy with which she might be charged.
The Court of Appeal upheld the disclosure order, taking the view that she was more likely to be charged, if at all, with substantive offences under the Theft Act.
Neill LJ (who gave the leading judgment) preferred not to put his decision on the in substance approach taken in Khan v Khan.
Related offence: discussion and conclusions
The related offence point was not taken before Mann J, or before Vos J in Mr Coogans case.
It was raised for the first time, without objection by Ms Phillipss counsel, in the Court of Appeal.
Even then (so far as appears from Lord Neubergers judgment) Mr Millar was not relying on the likelihood of Mr Mulcaire being charged with conspiracy.
The law report shows that Khan v Khan, Tate Access and Renworth were cited in the Court of Appeal, but none of them is mentioned in the judgment.
The appellants written case in this court states (para 79) that the Master of the Rolls considered that the conspiracy took place in the course of the infringement.
I have not found any reference to conspiracy in this part of Lord Neubergers judgment.
The discussion in para 66 was addressing liability as an accessory, not conspiracy.
In the Court of Appeal Mr Millars argument (as summarised in the judgment) seems to have been based on a supposed need for the disclosure order to be limited to matters occurring in the course of the infringement of Ms Phillipss right to confidentiality.
That argument shows some confusion of thought as to the way section 72 works, and I am not surprised that Lord Neuberger did not accept it.
He held that the claimant had a gateway under para (a)(i) of the definition, but not under para (a)(ii) or para (b).
For practical purposes, therefore, the conspiracy issue is raised as a new issue in this court.
It has to be said that it has not been fully explored in the parties written and oral submissions.
The appellants written case cites Renworth [1996] 3 All ER 244, and in particular a passage in the judgment of Neill LJ at pp 248 249.
But section 31 of the Theft Act refers simply to an offence under this Act, and it was clear that conspiracy (whether statutory or at common law) was not such an offence.
Para (a)(i) of the definition in section 72 takes a different form, referring to any offence committed by or in the course of the relevant infringement which is, in Ms Phillipss case, a series of infringements occurring every time confidential information of a commercial character was intercepted on her voicemail.
The respondents written case does not press any argument on para (a)(ii) or para (b).
It submits that the language of para (a)(i) encompasses the infringement from conception to death and that any agreement which amounted to a criminal conspiracy to intercept messages is sufficiently wrapped up with the interception to come within para (a)(i).
Neither the respondents written case nor Mr Beloffs oral submissions cited any authority in support of these metaphorical propositions.
But there is authority which provides such support.
It is well established that conspiracy is a continuing offence.
While the offence is committed as soon as the unlawful agreement is made, the conspiracy continues until the point when the agreement is terminated by completion, abandonment or frustration.
Viscount Dilhorne explained this principle in Director of Public Prosecutions v Doot [1973] AC 807, 825, which was concerned with territorial jurisdiction in an international drug smuggling case: though the offence of conspiracy is complete when the agreement to do the unlawful act is made and it is not necessary for the prosecution to do more than prove the making of such an agreement, a conspiracy does not end with the making of the agreement.
It continues so long as the parties to the agreement intend to carry it out.
It may be joined by others, some may leave it.
Similarly Lord Pearson stated (p 827): A conspiracy involves an agreement express or implied.
A conspiratorial agreement is not a contract, not legally binding, because it is unlawful.
But as an agreement it has its three stages, namely (1) making or formation (2) performance or implementation (3) discharge or termination.
When the conspiratorial agreement has been made, the offence of conspiracy is complete, it has been committed, and the conspirators can be prosecuted even though no performance has taken place: R v Aspinall (1876) 2 QBD 48, per Brett JA, at pp 58 59.
But the fact that the offence of conspiracy is complete at that stage does not mean that the conspiratorial agreement is finished with.
It is not dead.
If it is being performed, it is very much alive.
So long as the performance continues, it is operating, it is being carried out by the conspirators, and it is governing or at any rate influencing their conduct.
The conspiratorial agreement continues in operation and therefore in existence until it is discharged (terminated) by completion of its performance or by abandonment or frustration however it may be.
If Mr Mulcaire conspired with one or more persons to intercept messages on mobile phones, an offence was committed when the unlawful agreement was made.
But the offence continued so long as the agreement was being performed.
Every interception pursuant to the unlawful agreement would be in the course of the infringement, and Renworth and other cases on section 31 of the Theft Act 1968 are distinguishable.
For these reasons I would dismiss this appeal.
| This appeal arises out of what has become known as the phone hacking scandal.
During 2005 6 the Appellant, Mr Glenn Mulcaire, worked as a private investigator, often engaged by staff on the News of the World newspaper, then published by News Group Newspapers Ltd (NGN).
During that period, Mr Clive Goodman was employed by NGN as a reporter on the News of the World with responsibility for news about the royal family and household.
In January 2007, Mr Mulcaire and Mr Goodman pleaded guilty to offences relating to the interception of voicemail messages of the royal household and were sentenced to six and four months imprisonment respectively.
During 2008 10 a large number of civil claims were brought by individuals against NGN and, some against Mr Mulcaire, claiming that messages on their mobile phones had been unlawfully intercepted. [3] [5].
On 10 May 2010, the Respondent, Ms Nicola Phillips, began proceedings against NGN in relation to voicemail messages left on her mobile phone [6].
Ms Phillips worked for Max Clifford Associates (MCA), the corporate vehicle of the well known public relations consultant, Max Clifford.
Her responsibilities included trying both to place favourable stories and to prevent the placing of unfavourable stories in the media about MCAs clients [2].
Part of her case was that the contents of voicemail messages left by clients on her mobile included factual information, some of which is private information and some of which is commercially confidential information, including that relating to her clients personal lives and relationships, health, finances, incidents in which the police have become involved, personal security or publicity issues, commercial business transactions, professional relationships and future career plans [6].
On 12 October 2010, Ms Phillips applied to add Mr Mulcaire as a defendant and for an order that he serve a witness statement disclosing information under several heads, including the identity of the person instructing him to intercept the messages.
He opposed the order for disclosure relying on privilege against self incrimination, that is, on the basis that he could not be required to disclose that information as to do so would tend to expose him to prosecution.
Against that, Ms Phillips relied on s.72 of the Senior Courts Act 1981 (the Act) as excluding the privilege [8].
That section applies to, among others, proceedings for infringement of rights pertaining to any intellectual property and, when it applies, it excludes the privilege if the offence to which the person would tend to be exposed is a related offence [9].
The High Court and Court of Appeal considered that both of these conditions were made out.
Mr Mulcaire therefore could not rely on the privilege and he was ordered to provide the requested information.
The issues on this appeal are therefore: (i) whether information left in voicemail messages on Ms Phillipss mobile is technical or commercial information within the definition of intellectual property such that the proceedings are for infringement of rights pertaining to any intellectual property; and (ii) whether, on
the footing that Mr Mulcaire would expose himself to a charge of conspiracy in providing the information ordered, such proceedings would be for a related offence within the meaning of s.72(5) [1].
The Supreme Court unanimously dismisses Mr Mulcaires appeal.
S.72 of the Act excludes his privilege against self incrimination: the proceedings brought by Ms Phillips are proceedings forrights pertaining tointellectual property and the conspiracy proceedings to which Mr Mulcaire would expose himself on disclosure of the information amount to a related offence.
Lord Walker gives the leading judgment with which Lords Hope, Kerr, Clarke and Dyson agree.
Where Parliament has left no room for doubt that it intends the privilege to be withdrawn, there is no need for the Court to lean in favour of the narrowest possible construction of the reach of the relevant provision.
An important part of the legislative purpose of these provisions is to reduce the risk of injustice to victims of crimes.
That purpose might be frustrated by an excessively narrow approach [14].
Various definitions of intellectual property were put before the Court but they are not particularly helpful because there is no universal definition of the term [18].
The starting point must be the language of the definition in s.72(5).
For present purposes the essential point is that the definition in s.72(5) contains the words technical or commercial information.
The meaning of those words must be something in which a civil claimant has rights capable of being infringed.
The fact that technical and commercial information ought not, strictly speaking, to be described as property cannot prevail over the clear statutory language.
Whether or not confidential information can only loosely, or metaphorically, be described as property is simply irrelevant [19] [20].
Not all technical or commercial information is confidential [23].
Conversely a secret about a persons private life is not naturally described in normal usage as technical or commercial, even if it could be turned to financial advantage by disclosing it, in breach of confidence, to the media. [24].
Purely personal information is not other intellectual property within the meaning of s.72(5).
The purpose of s.72 was to prevent remedies against commercial piracy from being frustrated, not to cover the whole of the law of confidence [28] [29].
While there may be commercial value in personal information and this may lead to some difficult borderline cases, it is not a reason for adopting an unnatural construction of the definition [31].
On the facts pleaded in this appeal there is no great difficulty as to mixed messages, where some of the information is commercial and some is not.
Ms Phillipss pleading is to the effect that the voicemail messages left by her clients contained commercially confidential information.
There is no reason to suppose that the commercial information was not significant [32].
There must be a sufficient connection between the subject matter of the claimants civil proceedings and the offence with which the defendant has a reasonable apprehension of being charged.
Pursuant to s.72(5) the offence must be committed by or in the course of the infringement to which the proceedings relate unless the offence involves fraud or dishonesty, in which case a looser connection is sufficient [34].
It is well established that conspiracy is a continuing offence.
While the offence is committed as soon as the unlawful agreement is made, the conspiracy continues until the point when the agreement is terminated by completion, abandonment or frustration [43].
If Mr Mulcaire conspired to intercept messages on mobile phones, an offence was committed when the unlawful agreement was made.
But the offence continued so long as the agreement was being performed.
Every interception pursuant to the unlawful agreement would be in the course of the offence [45].
|
This appeal is concerned with the interpretation of a solicitors professional indemnity insurance policy (the Policy) written by AIG Europe Ltd (AIG).
It raises a legal question of general public importance both because it concerns a term of an insurance policy, which is, or is similar to, terms in all professional indemnity insurance policies for solicitors in England and Wales, and also because it is important to the business model by which many solicitors have funded litigation since state funded legal aid for civil cases was significantly reduced.
As described more fully below, the respondent, Impact Funding Solutions Ltd (Impact) entered into an arrangement with solicitors, Barrington Support Services Ltd (Barrington), by which Impact, by entering into loan agreements with Barringtons clients, provided funds to Barrington to hold on behalf of its clients and to use to make disbursements in the conduct of its clients litigation in pursuit of damages for industrial deafness.
Barrington failed to perform its professional duties towards its clients in the conduct of litigation, both through its failure adequately and timeously to investigate the merits of their claims and also through the misapplication of funds provided by Impact, and so breached its duty of care to them.
Barrington thereby put itself in breach of a warranty in its contract with Impact that it would perform its professional duties towards its clients.
Barringtons clients were not able to repay their loans.
Impact sought to recover from Barrington the losses which it suffered on those loans by seeking damages for the breach of the warranty.
In an admirable judgment dated 30 May 2013, His Honour Judge Waksman QC awarded Impact damages of 581,353.80, which represented the principal elements of the loans which would not have been made if Barrington had not breached its contract with Impact.
On Barringtons insolvency, Impact seeks in this action to recover those losses from Barringtons professional indemnity insurers, AIG, under the Third Parties (Rights against Insurers) Act 1930.
In another impressive judgment dated 13 December 2013 His Honour Judge Waksman QC analysed the nature of the arrangements between Impact and Barrington and, construing the words of the Policy, held that Impacts claim against AIG for an indemnity failed.
Impact appealed to the Court of Appeal.
In a judgment dated 3 February 2015 the Court of Appeal, [2015] 4 All ER 319; [2016] Bus LR 91 allowed the appeal.
The Court of Appeal, by standing back from the detail and asking itself what was the essential purpose of the exclusion clause in question, concluded that the loans which Impact gave to cover disbursements in intended litigation were inherently part of the solicitors professional practice and that the liabilities which Barrington incurred under its warranties to Impact were liabilities professionally incurred which came within the cover of the Policy.
AIG appeals to this court.
Impact supports the conclusion which the Court of Appeal reached.
It refers to the wide terms of the cover (para 8 below) and submits that the subsequent exclusions (para 10 below) should be construed strictly.
In particular, the fact that Barrington obtained a commercial benefit from its agreement with Impact did not mean that Impact was providing services to Barrington within the terms of the exclusion.
I do not accept that this is the correct way to read the exclusion clause in this insurance contract and set out my reasons below.
Questions of construction
In determining the appeal, the court has, first, to construe the relevant terms of the Policy against its factual matrix and, secondly, to construe the relevant terms of the disbursements funding master agreement (DFMA) between Impact and Barrington once again against its factual matrix.
This approach to construction is well established.
The court looks to the meaning of the relevant words in their documentary, factual and commercial context: Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, para 21 per Lord Clarke of Stone cum Ebony; Arnold v Britton [2015] AC 1619, para 15 per Lord Neuberger of Abbotsbury.
As I see no ambiguity in the way that the Policy defined its cover and as the exclusion clause reflected what The Law Society of England and Wales as the regulator of the solicitors profession had authorised as a limitation of professional indemnity cover, I see no role in this case for the doctrine of interpretation contra proferentem.
As Lindley LJ stated in Cornish v Accident Insurance Co Ltd (1889) 23 QBD 453, 456: in a case of real doubt, the policy ought to be construed most strongly against the insurers; they frame the policy and insert the exceptions.
But this principle ought only to be applied for the purpose of removing a doubt, not for the purpose of creating a doubt, or magnifying an ambiguity, when the circumstances of the case raise no real difficulty.
The extent of AIGs liability is a matter of contract and is ascertained by reading together the statement of cover and the exclusions in the Policy.
An exclusion clause must be read in the context of the contract of insurance as a whole.
It must be construed in a manner which is consistent with and not repugnant to the purpose of the insurance contract.
There may be circumstances in which in order to achieve that end, the court may construe the exclusions in an insurance contract narrowly.
The judgment of Carnwath LJ in Tektrol Ltd (formerly Atto Power Controls Ltd) v International Insurance Co of Hanover Ltd [2006] 1 All ER (Comm) 780, to which counsel for Impact referred, is an example of that approach.
But the general doctrine, to which counsel also referred, that exemption clauses should be construed narrowly, has no application to the relevant exclusion in this Policy.
An exemption clause, to which that doctrine applies, excludes or limits a legal liability which arises by operation of law, such as liability for negligence or liability in contract arising by implication of law: Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, 850 per Lord Diplock.
The relevant exclusion clause in this Policy is not of that nature.
The extent of the cover in the Policy is therefore ascertained by construction of all its relevant terms without recourse to a doctrine relating to exemption clauses.
The insurance policy
AIG wrote the Policy for Barrington for the period from 1 October 2009 to 30 September 2010.
The cover was stated in broad terms.
It provided: The Insurer will pay on behalf of any Insured all Loss resulting from any Claim for any civil liability of the Insured which arises from the performance of or failure to perform Legal Services.
Legal Services were defined broadly to include the provision of services
in private practice as a solicitor or Registered European Lawyer .
On p 6 of the Policy there is a clause which sets out what is excluded from cover.
It provides so far as relevant: This policy shall not cover Loss in connection with any Claim or any loss: arising out of, based upon, or attributable to any: (i) trading or personal debt incurred by an Insured, (ii) breach by any Insured of terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of providing Legal Services; and (iii) guarantee, indemnity or undertaking by any Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to that Insured. (emphasis added)
Solicitors in England and Wales were required to take out and maintain professional indemnity insurance in accordance with the Solicitors Indemnity Insurance Rules 2009 (the 2009 Rules), which were made by The Law Society in exercise of a statutory power under section 37 of the Solicitors Act 1974.
There was thus a scheme of compulsory professional indemnity insurance which Parliament had authorised.
The Law Society in Appendix 1 of the 2009 Rules laid down the minimum terms and conditions of professional indemnity insurance for solicitors and registered European Lawyers in England and Wales (the Minimum Terms).
The Minimum Terms defined the scope of cover, so far as relevant, in these terms: The insurance must indemnify each Insured against civil liability to the extent that it arises from Private Legal Practice
in connection with the Insured Firms Practice
Clause 6 provided: trading or personal debt of any Insured; or The insurance must not exclude or limit the liability of the Insurer except to the extent that any Claim or related Defence Costs arise from the matters set out in this clause 6. 6.6 Any: (a) (b) breach by any Insured of the terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of the Insured Firms Practice; or (c) guarantee, indemnity or undertaking by any particular Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to that insured.
The Policy provides that: In any dispute in connection with the terms, conditions, exclusion or limitations it is agreed and understood that the Minimum Terms and Conditions will take precedence over any terms, conditions, exclusions or limitations contained herein.
But, as can be seen by comparing the texts in paras 8 and 10 above, the exclusion is substantially the same in the Policy and in the Minimum Terms and the minor differences in drafting are of no significance.
Lord Brightman in Swain v The Law Society [1983] 1 AC 598, 618 described the context of the statutory scheme of compulsory insurance: In exercising its power under section 37 The Law Society is performing a public duty, a duty which is designed to benefit, not only solicitor principals and their staff, but also solicitors clients.
The scheme is not only for the protection of the premium paying solicitor against the financial consequences of his own mistakes, the mistakes of his partners and the mistakes of his staff, but also, and far more importantly, to secure that the solicitor is financially able to compensate his client.
Indeed, I think it is clear that the principal purpose of section 37 was to confer on The Law Society the power to safeguard the lay public and not professional practitioners, since the latter can look after themselves.
Thomas J took the same view in Kumar v AGF Insurance Ltd [1999] 1 WLR 1747, 1752A C, where he said that one must approach the construction of this sort of professional indemnity policy against the regulatory background which aimed to make sure that protection was provided to the clients of solicitors.
As a general rule, solicitors, when performing work on behalf of their clients, owe no duty of care to third parties whose interests are affected by that work: White v Jones [1995] 2 AC 207, 256C D per Lord Goff of Chieveley.
It is, nonetheless, well known and not disputed in this case that the professional indemnity policy protected not only clients of the solicitors but also those third parties to whom solicitors have been held to owe duties of care in their performance of legal services and to whom they have incurred liability in negligence, such as those who have acted in reliance on negligent misstatements or beneficiaries disappointed as a result of negligence in the preparation or execution of a will.
In addition, as Lord Toulson points out (para 42), solicitors professional liability may include undertakings given to third parties in the course of acting for their clients.
A reader of the Policy ascertains the boundaries of AIGs liability by construing the broad statement of cover (para 8 above) and also the broad exclusions (para 10 above) in the context of the regulatory background.
The exclusion in para 10 above requires the reader to look to the category of the claim and, in this case, ask whether the claim or loss arises out of, is based upon, or is attributable to a breach by Barrington of a term or terms of a contract or arrangement for the supply of services to it in the course of its provision of legal services.
Prima facie, if Impacts cause of action was a breach of a term of a contract or arrangement by which Impact supplied such services to Barrington, the clause would exclude cover, notwithstanding that Impacts loss could be said to have arisen from Barringtons failure to perform legal services for its clients.
Two questions therefore arise: the first is whether the contract between Impact and Barrington was of such a nature; the second is whether it is necessary to imply a restriction into the relevant exclusion clause limiting its effect in order to make it consistent with the purpose of the Policy.
The Disbursements Funding Master Agreement
Barrington entered into two successive DFMAs with Impact, dated 8 June 2007 and 10 March 2008.
The relevant terms of the two agreements were in substance the same.
Like Judge Waksman and the Court of Appeal, I refer in my discussion below to the 2008 DFMA.
In order to understand the provisions of the DFMA it is necessary to present that contract in its commercial context.
It formed part of a scheme by which clients who did not qualify for legal aid and who could not otherwise afford to litigate were provided with access to legal services to pursue claims without exposing them to financial risk.
Normally a client who has not got legal aid has to pay (a) fees to the instructed solicitor for legal services, (b) that solicitors disbursements, and (c) in the event that the claim fails, the other sides recoverable legal costs.
A significant proportion of (a) and (b) may be recovered from the other side if the claim succeeds.
But the failure of the claim is a serious financial risk.
Under the scheme, the instructed solicitors fees were covered by a conditional fee agreement (CFA), which was authorised initially by section 58 of the Courts and Legal Services Act 1990, by which the client paid for the lawyers work only if the case was won and the client received compensation.
The client, by taking out a legal expenses insurance policy, obtained indemnity against the other sides legal costs, his or her own solicitors disbursements and the premium paid on the policy in the event that the claim failed.
While the claim was being pursued, the solicitor would have to disburse funds, for example to obtain GP records and medical reports.
Unless otherwise funded, the solicitor had either to obtain funds in advance from the client or spend his or her own funds and later obtain reimbursement from the client.
Impact provided funding for such disbursements through the DFMA.
Judge Waksman described how the funding scheme operated in paras 5 to 18 of his judgment dated 13 December 2013.
I can therefore summarise the arrangements briefly.
Claims management companies identified potential claimants.
A company, which was associated with Impact, operated a data management and administration system called Veracity.
Claims management companies put details of potential claims onto Veracity and solicitors, including Barrington, would access Veracity to assess particular claims and either accept or reject a claim.
Before accepting a claim, solicitors ought to have verified the information provided through Veracity and investigated the merits of the claim so as to enable them to enter into a CFA and to enable legal expenses insurance to be obtained.
If the solicitors provisionally accepted a claim, Veracity required them to indicate whether they required Impact to provide a loan to the client to cover disbursements and the premium on the legal expenses insurance.
The solicitors provided the relevant details so that Veracity could calculate the amount of the loan.
Veracity then automatically generated a draft loan agreement and sent an email to the relevant claims management company instructing them to progress the matter.
The claims management company, as the solicitors agent, took a package of documents for the lay client to sign.
The pack included an engagement letter, the CFA release forms, data protection documentation, the loan agreement with Impact and the proposal for the legal expenses insurance.
Once executed, the documents would be sent to the solicitors who would forward the executed loan agreement to Impact.
Once the solicitors confirmed that they accepted the claim, the legal expenses insurers were notified that the claim should be put on cover.
On obtaining the insurers confirmation, the solicitors would draw down Impacts loan to pay disbursements and to pay the balance into the solicitors client account to fund future disbursements.
The legal expenses insurance policies required (a) that the claim had to be assessed as having a reasonable prospect of success, which in one policy was stated as 55%, and (b) that there remained in force a valid CFA.
This arrangement was reflected in the first recital of the DFMA which stated: [Impact] facilitates the presentation of PI claims to A. solicitors through its online claims introduction and tracking service, Veracity and provides funding for disbursements under Credit Agreements in respect of those PI Claims.
In clause 2.1 Impact offered credit facilities to clients selected by Barrington in its discretion, up to a specified aggregate sum, but, being a framework agreement, did not commit Impact to advance any sums.
If Impact advanced sums to a client, Barrington was obliged by clause 2.2 to pay an administration fee to Impact on Impacts execution of each credit agreement and also a quarterly monitoring fee.
The Administration Fee was defined in the DFMA (clause 1) as: a fee in respect of each Credit Agreement in the sum as notified by [Impact] to the Firm from time to time and payable by the Firm, together with Value Added Tax (if applicable) by way of remuneration for the services of [Impact].
The DFMA contained undertakings by each party about how each would behave during the currency of the agreement.
Impact founds its claim against Barrington on clauses 6.1 and 13.1 of the DFMA.
In clause 6.1 each party undertook that: it shall comply with all applicable laws, regulations and codes of practice from time to time in force and each party indemnifies the other against all loss, damages, claims, costs and expenses which the other party may suffer or incur as a result of any breach by it of this undertaking.
In clause 13.1 Barrington represented and warranted to Impact that: the services provided or to be provided by the Firm to the Customer shall be provided to the Customer in accordance with their agreement with the Customer as set out in the relevant Conditional Fee Agreement.
Judge Waksman held that Barrington, by failing to give advice and properly to assess the merits of the compensation claims, breached those provisions of the DFMA.
That finding has not been challenged.
Barrington also undertook personal liability to repay the loans which Impact made to its clients.
In clause 7.1 Barrington undertook to pay to Impact the sums due by the client under the credit agreement out of the clients damages under the claim or (in the event of the claim failing) out of the legal expenses insurance.
More onerously, in clause 7.2 Barrington undertook to pay to Impact all sums due by the customer under the credit agreement (ie the client) if the customer breached the credit agreement, if circumstances arose that entitled Impact to terminate the credit agreement or if the credit agreement was unenforceable as a result of an act or omission by Barrington.
The provision of loans to Barringtons clients as envisaged by the DFMA was undoubtedly the provision of financial services to the clients.
But were the DFMA and the resulting loans to clients also a service which Impact provided to Barrington? In my view they were, for the following four reasons.
First, Barrington contracted as a principal with Impact and not as agent for its clients.
A contract between two principals might have provided for a service to be given to a third party alone.
But that is not what happened in this contract.
This is because, secondly, Barrington clearly obtained a benefit from the funding of its disbursements.
Solicitors are personally responsible for paying the persons whom they instruct to do work or provide services in relation to a particular case, whether or not they receive funds from their clients.
But for that funding from Impact, Barrington would have had to obtain funds from its clients, who might not have been able to afford to pay, thus making pursuit of the claim impossible, unless Barrington itself funded the disbursements in the hope of recovering its outlays through success in the claim.
Impacts loans were available to fund not only the disbursements but also the premiums on the legal expenses insurance, thereby enabling the litigation to be fully funded.
Thirdly, this was not an incidental or collateral benefit to Barrington derived from a service provided to its clients but was part of a wider arrangement which I have described in paras 20 22 above, by which solicitors were able to take up claims, which their clients could not otherwise fund, and earn fees and success fees if the claim succeeded.
Fourthly, it was a service for which Barrington paid the administration fee under clause 2 of the DFMA, undertook the onerous obligation to repay Impact if a client breached the credit agreement (clause 7.2), and entered into the obligation under clause 6.1 and gave the warranty in clause 13.1, on which Impact won its claim for damages against Barrington.
I therefore conclude that the DFMA was a contract for the supply of services to Barrington.
Impact contracted to supply those services to Barrington in the course of Barringtons provision of legal services.
Impacts claim against Barrington arose out of the latters breach of that contract.
Prima facie, therefore, the exclusion which I have set out in para 10 above applies to defeat Impacts claim against AIG, unless there is a basis for implying a restriction into that exclusion.
I turn then to that question.
Can one imply a restriction on the exclusion?
I see no basis for implying additional words into the exclusion in order to limit its scope.
In Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742 this court confirmed that a term would be implied into a detailed contract only if, on an objective assessment of the terms of the contract, the term to be implied was necessary to give the contract business efficacy or was so obvious that it went without saying (paras 15 31 per Lord Neuberger).
This court also held that the express terms of the contract must be interpreted before one can consider any question of implication (para 28).
In my view, it cannot be said that the Policy would lack commercial or practical coherence if a term restricting the scope of the exclusion were not implied.
I would allow the appeal.
In the present case it is fairly said that the breach of duty in the warranty on which Impact relies is a breach of duty by Barrington to its clients.
But Impacts claim is not a claim which is derived from the clients claims.
Defences which Barrington might be able to plead against its clients cannot be advanced against Impact.
For example, if a client were careless in informing Barrington of the circumstances of the injury on which his or her claim was based, and Barrington also was negligent in failing properly to investigate and prosecute the claim, which then failed, the clients claim might be met with a defence of contributory negligence.
No such defence would arise out of those circumstances in relation to a claim by Impact against Barrington.
Thus Impacts entitlement under the warranty would not be the same as the clients claim in all cases and might be larger in some cases.
In short, Impacts cause of action under the DFMA is an independent cause of action.
Excluding such a claim creates no incoherence in the Policy, as it is the combination of the opening clause and the exclusions that delimits AIGs contractual liability.
Indeed, it would be consistent with the purpose of the Policy suggested by the context, which I discussed in paras 16 and 17 above, if such a claim were excluded from that liability.
Conclusion
LORD TOULSON: (with whom Lord Mance, Lord Sumption and Lord Hodge agree)
Under the Third Parties (Rights against Insurers) Act 1930, Impact is entitled to enforce any right of indemnity which Barrington had against AIG in respect of the judgment which Impact obtained against Barrington.
Impacts argument that Barrington was entitled to such indemnity under its professional liability policy, which AIG underwrote, is founded on two propositions.
First, it is argued that the clause relied on by AIG to deny liability is an exclusion clause, which must be narrowly construed in accordance with ordinary principles of contract law.
Secondly, it is argued that the exclusion is well capable of being interpreted in a way which does not exclude cover under the policy.
Both points are important.
The first raises a point of general importance about the proper approach to the interpretation of a professional liability policy which is of a familiar kind.
The second is important because the particular clause is a standard form of wording in solicitors professional liability policies.
I take the points in turn.
The fact that a provision in a contract is expressed as an exception does not necessarily mean that it should be approached with a pre disposition to construe it narrowly.
Like any other provision in a contract, words of exception or exemption must be read in the context of the contract as a whole and with due regard for its purpose.
As a matter of general principle, it is well established that that if one party, otherwise liable, wishes to exclude or limit his liability to the other party, he must do so in clear words; and that the contract should be given the meaning it would convey to a reasonable person having all the background knowledge which is reasonably available to the person or class of persons to whom the document is addressed. (See, among many authorities, Dairy Containers Ltd v Tasman Orient Line CV [2005] 1 WLR 215, para 12, per Lord Bingham.) This applies not only where the words of exception remove a remedy for breach, but where they seek to prevent a liability from arising by removing, through a subsidiary provision, part of the benefit which it appears to have been the purpose of the contract to provide.
The vice of a clause of that kind is that it can have a propensity to mislead, unless its language is sufficiently plain.
All that said, words of exception may be simply a way of delineating the scope of the primary obligation.
The Law Commission and the Scottish Law Commission gave a homely illustration in their joint report on Exemption Clauses, 1975, Law Com No 69, para 143: If a decorator agrees to paint the outside woodwork of a house except the garage doors, no one can seriously regard the words of exception as anything but a convenient way of defining the obligation; it would surely make no difference if the promise were to paint the outside woodwork with a clear proviso that the contractor was not obliged to paint the garage doors, or if there were a definition clause brought to the promisees attention saying that outside woodwork did not include the garage doors.
Such provisions do not deprive the promisee of a right of a kind which social policy requires that he should enjoy, nor do they give the promisor the advantage of appearing to promise more than he is in fact promising.
This approach was reflected in the Law Commissions Bill which passed into law as the Unfair Contract Terms Act 1977.
Section 3 brought under statutory control, in cases where one party deals with the other as a consumer or on the others standard terms of business, a term which excludes or restricts the others liability for breach, or a term which entitles the other to render a contractual performance substantially different from that which was reasonably expected of him.
The Act does not apply to insurance contracts (Schedule 1, paragraph 1), but it is nonetheless instructive to note the types of exemption clause which the Law Commissions saw as potentially suspect in consumer contracts.
In the case a non consumer contract (with which we are concerned, albeit that consumer protection was an important end purpose), Photo Production Ltd v Securicor Transport Ltd is authority that business people capable of looking after their own affairs should be free between themselves to apportion risks as they choose: [1980] AC 827, 843 (Lord Wilberforce) and 851 (Lord Diplock).
That brings me to the contract in the present case.
The policy schedule and the policy wording are both headed in large letters Solicitors Professional Liability.
Lord Hodge has set out its material terms, but it is convenient to repeat the key parts.
Under the heading Cover appear the words: The Insurer will pay on behalf of any Insured all Loss resulting from any Claim for any civil liability of the Insured which arises from the performance or failure to perform Legal Services (which are themselves broadly defined).
Under the heading Exclusions a number of heads of claims or loss are excluded: bodily/psychological injury; directors and officers liability; employment breaches and discrimination; fines and penalties; fraud or dishonesty; partnership disputes; prior claims; property damage; trade debts; and war/terrorism.
We are concerned with the clause 6.6, which in the minimum terms is headed Debts and Trading Liabilities.
These are defined to include any claim or loss arising out of: breach by any Insured of the terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of providing Legal Services.
There are two points to highlight about the nature and purpose of the policy.
One is that the relevant terms replicate the minimum terms of the cover which Barrington was required to maintain under the Solicitors Indemnity Insurance Rules 2009.
As the House of Lords recognised in Swain v The Law Society [1983] 1 AC 598, 610, the paramount purpose of The Law Society being given statutory power to require solicitors to maintain insurance cover against professional liability was the protection of that section of the public that makes use of the services of solicitors (Lord Diplock).
The second, and related point, is that the policy describes itself as a professional liability policy.
These matters are important when considering its scope.
What sort of liabilities are commonly understood as professional liabilities of solicitors or, in Lord Diplocks language, what is the sector of the public that makes use of their services? First, and most obviously, there are the liabilities which solicitors may incur to their clients as a result of their professional retainer.
Secondly, in connection with acting for their clients, they may give undertakings to third parties.
As officers of the court solicitors are expected to abide by undertakings given by them professionally, and if they do not do so they may be called upon summarily to make good their defaults (John Fox v Bannister, King & Rigbeys (Note) [1988] 1 QB 925, 928, per Nicholls LJ).
That is plainly a form of professional liability.
Exceptionally, there are also other cases where a solicitor has been held liable to a quasi client, as in White v Jones (the disappointed beneficiary under a will) [1995] 2 AC 207.
There is a detailed treatment of the scope of solicitors professional liability to third parties in Jackson & Powell on Professional Liability, 2011, 7th ed, paras 11 043 & ff.
It is a developing topic and the boundaries are not entirely clear.
In laying down the minimum terms of professional liability cover required to be maintained by solicitors, it would have been possible for the drafting committee to have attempted to structure them by defining in positive terms the scope of a solicitors professional liability for which indemnity cover was required, but it opted to delineate the liability against which solicitors should be required to maintain cover for public protection by a process of elimination, which involved combining an insuring clause far broader than any ordinary understanding of a solicitors professional liability with a list of exclusions.
It is important to recognise that list for what it is, namely an attempt to identify the types of liability against which solicitors are not required by law to be covered by way of professional liability insurance.
I would reject the first stage of Impacts argument about the way in which this policy and the list of exceptions are to be approached.
It treats the minimum terms set by the Law Society as requiring, through the opening clause, a far broader scope of cover than would have been necessary for the protection of clients and third parties to whom they may undertake professional responsibilities, subject only to exceptions which (it is argued) are to be construed as narrowly as possible.
That involves a misapprehension of the true nature and purpose of the minimum terms.
This brings me to the second point, which is the meaning of the language of clause 6.6.
The Court of Appeal approached the clause by saying that it was necessary to stand back from it and consider its essential purpose.
I do not disagree, but I would make two further comments.
First, the essential purpose of the clause has to be seen in the context of the essential purpose of the policy, as to which I have expressed my view.
Secondly, there is substance in AIGs complaint that the court omitted to grapple with the language of the clause.
I agree with Lord Hodge that the DFMA was a contract for the provision of services to Barrington, for the reasons given by him and by Judge Waksman QC in his impressive judgment.
I would add that this conclusion to my mind accords well with the essential purpose of clause 6.6.
Barrington and Impact made a commercial agreement as principals for their mutual benefit, as well as for the benefit of Barringtons clients.
Impact was not a client or quasi client of Barrington, and the promise by Barrington which led to the judgment obtained by Impact was part of the commercial bargain struck by them.
It did not resemble a solicitors professional undertaking as ordinarily understood, and it falls aptly within the description of a trading liability which the minimum terms were not intended to cover.
For those reasons, as well as the reasons given by Lord Hodge with which I fully agree, I too would allow the appeal and restore the judgment of Judge Waksman QC.
LORD CARNWATH: (dissenting)
The issue in this appeal is a narrow issue of construction of an exclusion clause in a solicitors professional indemnity policy.
The facts have been set out by Lord Hodge.
As he explains, the arrangements between the funder (Impact) and the solicitors (Barrington) were governed by two Disbursement Funding Master Agreements (DFMAs).
The DFMAs were in effect framework agreements providing the machinery for the making of loans to clients of Barrington to meet disbursements in litigation to be funded by CFAs.
In breach of its duties to its clients, and consequently also to Impact under the DFMAs, Barrington failed to exercise proper care in selecting cases, with the result that the disbursements were irrecoverable, either from the defendants or the ATE or LEI insurers.
Barrington is now in liquidation.
Having obtained judgment against it for 581,353.80, Impact has brought proceedings against Barringtons insurers, AIG Europe Ltd (AIG) under the Third Parties (Rights Against Insurers) Act 1930.
The short question is whether the DFMAs fell within the expression any contract or arrangement for the supply to, or use by, any insured of goods or services in the course of (Barringtons) Practice under the exclusion clauses in the AIG policy.
It is common ground that Barringtons liability to repay the loans made by Impact by way of disbursements fell in principle within the general cover provided by clause 1 of that policy.
The question is whether that liability is excluded by sub clause 6 of clause 6 of the Minimum Terms applicable to the policy: 6.
The insurance must not exclude or limit the liability of the insurer except to the extent that any claim or related Defence Costs arise from the matters set out in this clause 6 6.6 Debts and Trading Liabilities Any trading or personal debt of any insured, or (a) (b) breach by any insured of the terms of any contract or arrangement for the supply to, or use by, any insured of goods or services in the course of the Insured Firms Practice (c) guarantee, indemnity or undertaking by any particular Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to that Insured.
There is a similar exclusion clause in the policy itself under the heading Trade Debts.
Nothing turns on any difference between the two clauses.
In the High Court, His Honour Judge Waksman QC, held that the exclusion applied.
He accepted that Impact did not provide financial services to Barrington: A loan might properly be described as a kind of financial service.
But it cannot be said that by the Funding Agreement Impact made, or agreed to make, loans to Barrington, for the borrowers were the lay clients even if Barrington agreed to guarantee repayment by them.
Nor can it be said that the loan moneys were for the use of Barrington in any real sense.
The fact that Barrington was the conduit for the moneys and distributed them for the purpose of paying disbursements and insurance premiums on behalf of the clients does not mean that the moneys were for its use in any beneficial sense. (para 49) However, he thought that the overall facility provided to the firm could properly be described as a service within the meaning of the clause: Impact was making available to Barrington a valuable facility at Barringtons option, namely claims whose disbursement element (including the all important ATE insurance) was fully funded leaving the solicitors to provide their services under the CFA.
The fact that the funding is made by way of loans to the clients does not affect the fact that the overall facility is provided to Barrington and it is properly described as a service and one which, if used, enables it to trade by bringing in more cases. (para 54)
Longmore LJ (with the agreement of the other members of the Court of Appeal) took a different view.
He held that the purpose of the exclusion was more limited: To my mind the essential purpose of the exclusion is to prevent insurers from being liable for what one might call liabilities of a solicitor in respect of those aspects of his practice which affect him or her personally as opposed to liabilities arising from his professional obligations to his or her clients.
Thus if a solicitor incurs liability to the supplier of, for example, a photocopier, insurers do not cover that liability nor would they cover obligations to a company providing cleaning services for the solicitors offices.
If the office premises are leased by the partnership or held subject to a mortgage to a bank, the obligations under such lease or mortgage (or any guarantee of such lease or mortgage) would not be covered either.
It is these sort of personal obligations (which may nevertheless be part of a solicitors practice as a solicitor) which are not intended to be covered.
These obligations are to be distinguished from the obligations which are incurred in connection with the solicitors duty to his clients which are intended to be covered. (para 19) The obligations arising out of the loans made to cover disbursements in intended litigation were essentially part and parcel of the obligations assumed by a solicitor in respect of his professional duties to his client rather than obligations personal to the solicitor (para 21), and not therefore within the scope of the exclusion.
Mr Cannon QC for AIG submits that Longmore LJ was wrong to depart from the reasoning of the trial judge.
He asked himself the wrong question.
The key question was whether Barrington received services under the DFMAs, not the nature of their obligations to Impact or to their clients.
He adopted an intuitive approach to what he thought to be the purpose of the agreement, rather than interpreting and applying the words of the agreement itself.
Mr Cannon points to the following valuable benefits, or services, received by Barrington each time a loan was made to a client: (i) payment of such part of the loan as it directed Impact to pay to third party suppliers (ie to persons who were owed money in respect of disbursements which had already been incurred) (clause 3.1); (ii) payment of the balance into Barringtons client account where it was to be used to fund disbursements (clauses 3.2 and 4.l(a)); and (iii) the ability to take on the clients case and so to earn fees.
He emphasises that a solicitor is liable to pay disbursements whether or not he is put in funds by his client.
Part of the service provided to Barrington was the ability to take on the case without having to fund the disbursements or take the financial risk that they would not be recovered.
For Impact, Mr Dutton QC submits that an exclusion clause is to be construed strictly (citing Lewison Interpretation of Contracts 6th ed (2015), para 12.04, and, in relation to insurance exclusion clauses, Tektrol Ltd (formerly Atto Power Controls Ltd) v International Insurance Co of Hanover Ltd [2005] EWCA Civ 845; [2006] 1 All ER (Comm) 780).
Longmore LJ was right to treat the exclusion as directed to liabilities arising out of contracts in respect of goods or services utilised by Barrington in the course of its practice, that is for the purpose of carrying out legal work for its client.
Typical examples would be contracts for supply of photocopiers or office cleaning services.
The mere fact that Barrington derived a commercial benefit from the DFMA was not enough to bring it within the exclusion.
Of the three categories identified by Mr Cannon, the first two were funds provided to the clients not beneficially to Barrington.
As Judge Waksman rightly held, this was not affected by the fact that Barrington was the conduit for the money (para 49).
The third, Barringtons ability to take on the cases, was an incidental benefit of the DFMAs but not their purpose, and too general to come within the words of the exclusion.
Discussion
Interpretation of a contract turns on the meaning of the relevant words in their documentary, factual and commercial context (per Lord Neuberger, Arnold v Britton [2015] AC 1619, para 15).
It is a fair criticism of Longmore LJs judgment, with respect, that having stood back from the detail of the contract (para 19) he never returned to the actual words of the exclusion clause.
On the other hand, those words seen in context do in my view support a narrower approach than that taken by the judge.
The clause directs attention to the purpose of the contract or arrangement: what was it for, not what were its by products or its consequences.
Furthermore the word services does not stand alone.
The composite phrase goods or services implies that the services will be supplied to or used in the practice in a way comparable to that in which goods are supplied or used.
It is not enough that they are of benefit to the firm.
That view is reinforced by the contrast with the much wider words in the following sub clause: other benefit or advantage directly or indirectly to that Insured.
As to the three services identified by Mr Cannon, I agree with Mr Duttons response.
The essential service provided by the DFMA, as the judge found, was the provision of loans to Barringtons clients, not to Barrington.
No doubt, as Mr Cannon submits, it had the incidental benefits to Barrington of enabling it to take on cases and so earn fees, and of protecting it against potential default by its clients.
To that extent perhaps it can be seen, in the judges words, as a facility for Barrington, which can loosely be described as a service.
But that was not the essential purpose of the contract, nor was it a service comparable in any way to the supply of goods or services for use in the practice.
There is a helpful parallel with Tektrol, relied on by Mr Dutton, in which the Court of Appeal had to interpret an exclusion clause referring to erasure loss distortion or corruption of information on computer systems caused deliberately by malicious persons.
It was held that the words did not cover loss of a software code as a result of the theft of the only computer on which it was stored.
Although the word loss taken on its own might have been wide enough to cover that event, the context, and the other words with which it was associated, showed that it was limited to loss due to interference by electronic means (noscitur a sociis: see paras 28 29, per Sir Martin Nourse).
In the same way in this clause the juxtaposition of goods and services, taken with the references to supply and use in the practice, suggests something more specific than a general facility or benefit such as that identified by the judge.
For completeness, I should mention to dismiss three points which were raised in oral argument: i) Whether the liabilities incurred by Barrington to Impact were different in kind from those incurred to the clients.
While the two are inevitably related, they are in principle separate causes of action.
In any event this issue throw no light on the issue in the appeal which is concerned with the purpose of the contract, rather than the characterisation of the liabilities which may arise under it. ii) The administration fee.
Under clause 2.2, on the signing of a credit agreement with a client, Barrington was required to pay an administration fee to Impact.
This was defined as a fee by way of remuneration for the services of (Impact) (clause 1.1).
It was faintly suggested that this might throw some light on whether the contract was for supply of a service under the exclusion.
This point was not raised in argument below, and the judge made no findings on it.
We were told by Mr Dutton that the administration fee was, as appears from the context, no more than a fee connected with the particular service of drawing up of the credit agreements.
In any event, it throws no light on the purpose of the contract as a whole, or whether the benefits enjoyed under it fell within the words of the exclusion. iii) Comparisons with the treatment of goods and services under VAT law.
The Court of Appeal invited submissions on whether any useful guidance could be drawn from cases concerning services to third parties under VAT law, (see now in Airtours Holidays Transport Ltd v Commissioners for Her Majestys Revenue and Customs [2016] 4 WLR 87).
That seems to me to introduce a further complication without any countervailing illumination.
Longmore LJ was right to conclude that, given the very different legal context, no assistance could be gained from that source.
In conclusion, in respectful disagreement with my colleagues, I would uphold
the decision of the Court of Appeal and dismiss the appeal.
| Impact Funding Solutions (Impact) entered into a disbursements funding master agreement (DFMA) with solicitors, Barrington Support Services Ltd (Barrington), by which Impact, by entering into loan agreements with Barringtons clients, provided funds to Barrington to hold on behalf of its clients and to use to make disbursements in the conduct of its clients litigation in pursuit of damages for industrial deafness.
Barrington failed to perform its professional duties towards its clients in the conduct of the litigation, by not investigating the merits of their claims adequately and through the misapplication of funds provided by Impact, breaching their duty of care to them.
Barrington thereby put itself in breach of a warranty in its contract with Impact.
Barringtons clients were not able to repay their loans.
Impact sought to recover from Barrington the losses which it suffered on those loans by seeking damages for the breach of the warranty.
On 30 March 2013, the High Court awarded Impact damages of 581,353.80, which represented the principal elements of the loans that would not have been made if Barrington had not breached its contract with Impact.
On Barringtons insolvency, Impact seeks in this action to recover those losses from Barringtons professional indemnity insurers AIG Europe Ltd (AIG), under the Third Parties (Rights against Insurers) Act 1930.
The issue in the appeal concerns the construction of an exclusion clause in Barringtons professional indemnity policy (the Policy).
The relevant part of the exclusion clause provided that This policy shall not cover Loss in connection with any Claim or any loss: arising out of, based upon, or attributable to any breach by any Insured of terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of providing Legal Services.
The question is whether the DFMA falls within the scope of this exclusion clause, and as a result, the Policy excludes cover in relation to Impacts cause of action.
On 13 December 2013, the High Court held that Impacts claim against AIG for an indemnity failed.
In a judgment dated 3 February 2015 the Court of Appeal allowed Impacts appeal.
AIG now appeals to the Supreme Court.
The Supreme Court allows AIGs appeal by a majority of 4 to 1.
Lord Hodge gives the lead judgment (with which Lord Mance, Lord Sumption and Lord Toulson agree).
Lord Toulson gives a concurring judgment (with which Lord Mance, Lord Sumption and Lord Hodge agree).
Lord Carnwath gives a dissenting judgment.
Questions of Construction The general doctrine that exemption clauses should be construed narrowly, has no application to the relevant exclusion in this Policy.
The extent of the cover in the Policy is therefore ascertained by construction of all its relevant terms without recourse to a doctrine relating to exemption clauses [7].
The insurance policy The boundaries of AIGs liability are ascertained by construing the broad statement of cover and also the broad exclusions in the context of the regulatory background [18].
Two questions arise: (i) whether the contract between Impact and Barrington was a contract by which Impact supplied services to Barrington in the course of Barringtons provision of legal services; and (ii) whether it is necessary to imply a restriction into the relevant Policy exclusion clause limiting its effect in order to make it consistent with the purpose of the Policy [18].
The DFMA and the resulting loans to Barringtons clients were a service which Impact provided to Barrington for four reasons.
Firstly, Barrington contracted as a principal with Impact and not as agent for its clients.
Secondly, Barrington clearly obtained a benefit from the funding of its disbursements.
Thirdly, this was not an incidental or collateral benefit to Barrington derived from a service provided to its clients, but was part of a wider arrangement.
Fourthly, it was a service for which Barrington paid the administration fee, undertook the onerous obligation to repay Impact if a client breached the credit agreement, entered into the obligation to indemnify Impact and gave the warranty to Impact on which Impact won its claim for damages against Barrington [29].
Therefore, the DFMA was a contract for the supply of services to Barrington [30, 46].
That conclusion accords well with the essential purpose of the Solicitors Indemnity Insurance Rules 2009 to protect the section of the public that makes use of the services of solicitors, the relevant clause in the 2009 Rules being substantially the same as the exclusion clause [46].
There is no basis for implying additional words into the exclusion in order to limit its scope.
Marks & Spencer plc v BNP Paribas Securities Services [2015] 3 WLR 1843 confirmed that a term would be implied into a detailed contract only if, on an objective assessment of the terms of the contract, the term to be implied was necessary to give the contract business efficacy or was so obvious it went without saying [31].
Impacts cause of action under the DFMA is an independent cause of action.
Excluding such a claim creates no incoherence in the Policy.
Indeed, it would be consistent with the purpose of the Policy of ensuring that protection was provided to the clients of solicitors if such a claim were excluded [32].
In a dissenting judgment, Lord Carnwath would have dismissed the appeal, finding that the essential service provided by the DFMA was the provision of loans to Barringtons clients, not to Barrington.
It may have had incidental benefits to Barrington, but that was not the essential purpose of the contract, nor was it a service comparable in any way to the supply of good or services for use in the practice [56].
|
The first Star Wars film (later renamed Star Wars Episode IV A New Hope in order to provide for prequels as well as sequels) was released in the United States in 1977.
It was an enormous commercial success.
It won an Oscar for best costume design.
This appeal is concerned with intellectual property rights in various artefacts made for use in the film.
The most important of these was the Imperial Stormtrooper helmet to which the trial judge (Mann J) referred in his judgment ([2008] EWHC 1878 (Ch), [2009] FSR 103, paras [2] and [121]): One of the most abiding images in the film was that of the Imperial Stormtroopers.
These were soldiers clad in white armour, including a white helmet which left no part of the face uncovered.
The purpose of the helmet was that it was to be worn as an item of costume in a film, to identify a character, but in addition to portray something about that character its allegiance, force, menace, purpose and, to some extent, probably its anonymity.
It was a mixture of costume and prop.
The parties are agreed that for the purposes of this final appeal the helmet can be taken as the paradigm case that will be decisive of the outcome.
The facts are set out in the judges clear and thorough judgment.
For present purposes a brief summary will suffice.
The films story line and characters were conceived by Mr George Lucas.
Between 1974 and 1976 Mr Lucass concept of the Imperial Stormtroopers as threatening characters in fascist white armoured suits was given visual expression in drawings and paintings by an artist, Mr Ralph McQuarrie, and three dimensional form by Mr Nick Pemberton (a freelance scenic artist and prop maker) and Mr Andrew Ainsworth (who is skilled in vacuum moulding in plastic).
Mr Pemberton made a clay model of the helmet, which was adapted several times until Mr Lucas was happy with it.
Mr Ainsworth produced several prototype vacuum moulded helmets.
Once Mr Lucas had approved the final version Mr Ainsworth made 50 helmets for use in the film.
These events all took place in England.
Although Mr Lucas and his companies are based in California he had come to live in England while the film was made at Elstree (there was also filming on location in Tunisia).
The first appellant is a Californian corporation owned by Mr Lucas.
The second appellant is an English company owned by Mr Lucas.
The third appellant is a Californian corporation responsible for the groups licensing activities; it is wholly owned by the first appellant.
Between them these three companies own copyrights in the artistic works created for the Star Wars films, and they can be referred to generally as Lucasfilm.
Apart from the huge commercial success of the Star Wars films, Lucasfilm has built up a successful licensing business which includes licensing models of Imperial Stormtroopers and their equipment.
This litigation has come about because in 2004 Mr Ainsworth, the principal respondent in this appeal, used his original tools to make versions of the Imperial Stormtrooper helmet and armour, and other artefacts that it is not necessary to detail, for sale to the public.
The second respondent is a private company owned by Mr Ainsworth but for practical purposes Mr Ainsworth can be treated as the only respondent.
Mr Ainsworth sold some of the goods that he produced (to the value of at least $8,000 but not more than $30,000) in the United States.
In 2005 Lucasfilm sued Mr Ainsworth in the United States District Court, Central District of California, and in 2006 it obtained a default judgment for $20m, $10m of which represented triple damages under the Lanham Act.
The whole judgment remains unsatisfied.
Lucasfilm also commenced proceedings in the Chancery Division of the English High Court.
The re amended particulars of claim put forward a variety of claims under English law, including infringement of copyright (paras (1) to (10) of the prayer for relief); a claim for enforcement of the United States judgment to the extent of $10m (para (11)); and claims under United States copyright law (paras (12) to (17)).
The trial occupied 17 days during April and May 2008.
In his judgment delivered on 31 July 2008 Mann J dismissed all Lucasfilms claims based on English copyright law (together with some other claims that are no longer pursued).
He held that the helmet made by Mr Ainsworth was a substantial reproduction of original work carried out by Mr McQuarrie and other persons working for Lucasfilm.
But the English copyright claims failed because the helmet was not a work of sculpture and Mr Ainsworth had defences (to a claim that he was reproducing Mr McQuarries work) under sections 51 and 52 of the Copyright Designs and Patents Act 1988 (the 1988 Act).
The judge also dismissed Mr Ainsworths counterclaim based on his own claim to copyright in the helmet.
The judge held that the United States judgment was unenforceable for want of personal jurisdiction over Mr Ainsworth and his company.
But he held that Lucasfilms United States copyright claims were justiciable in England and that Mr Ainsworth and his company had infringed those rights.
The Court of Appeal ([2009] EWCA Civ 1328, [2010] Ch 503) agreed with the judge that the United States judgment is unenforceable, and there is no further appeal on that point.
The Court of Appeal also agreed with the judge that any intellectual property rights in the helmet belong to Lucasfilm, and this Court has refused Mr Ainsworth permission to cross appeal on that point.
The issues that are open in this Court are whether the helmet was a sculpture and the defences under sections 51 and 52 of the 1988 Act (on all of which the Court of Appeal agreed with the judge) and justiciability in England of the United States copyright claims (on which the Court of Appeal disagreed with the judge).
The issues on sections 51 and 52 arise only if the helmet was a sculpture (and so an artistic work) within the meaning of the 1988 Act.
In the Court of Appeal Lucasfilm abandoned its alternative contention that the helmet qualified as an artistic work because it was a work of artistic craftsmanship.
Part I: English copyright law issues
Current statutory provisions
The Court has been taken to the full legislative history but it is better to start with the current legislation, that is the 1988 Act.
Under section 1(1)(a) copyright is a property right which subsists in original literary, dramatic, musical or artistic works.
Other works, including films, come in under section 1(1)(b) and (c).
By section 4(1) artistic work means, for copyright purposes, (a) a graphic work, photograph, sculpture or collage, irrespective of artistic quality, (b) a work of architecture being a building or a model for a building, or (c) a work of artistic craftsmanship.
By section 4(2) sculpture includes a cast or model made for purposes of sculpture.
Sections 51 and 52 are in Part I, Chapter III of the 1988 Act (acts permitted in relation to copyright works).
Chapter III contains a variety of exemptions from liability on general grounds, including fair dealing (sections 29 31) and educational, archival and other public purposes (sections 32 50).
Section 62 contains a general exemption for buildings, sculpture and works of artistic craftsmanship on permanent public display.
Section 51 (design documents and models) as amended provides as follows: (1) It is not an infringement of any copyright in a design document or model recording or embodying a design for anything other than an artistic work or a typeface to make an article to the design or to copy an article made to the design. (2) Nor is it an infringement of the copyright to issue to the public, or include in a film or communicate to the public, anything the making of which was, by virtue of subsection (1), not an infringement of that copyright. (3) In this section design means the design of any aspect of the shape or configuration (whether internal or external) of the whole or part of an article, other than surface decoration; and design document means any record of a design, whether in the form of a drawing, a written description, a photograph, data stored in a computer or otherwise.
Section 52 (effect of exploitation of design derived from artistic work) provides as follows: (1) This section applies where an artistic work has been exploited, by or with the licence of the copyright owner, by (a) making by an industrial process articles falling to be treated for the purposes of this Part as copies of the work, and (b) marketing such articles, in the United Kingdom or elsewhere. (2) After the end of the period of 25 years from the end of the calendar year in which such articles are first marketed, the work may be copied by making articles of any description, or doing anything for the purpose of making articles of any description, and anything may be done in relation to articles so made, without infringing copyright in the work. (3) Where only part of an artistic work is exploited as mentioned in subsection (1), subsection (2) applies only in relation to that part. (4) The Secretary of State may by order make provision (a) as to the circumstances in which an article, or any description of article, is to be regarded for the purposes of this section as made by an industrial process; (b) excluding from the operation of this section such articles of a primarily literary or artistic character as he thinks fit. (5) An order shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (6) In this section (a) references to articles do not include films; and (b) references to the marketing of an article are to its being sold or let for hire or offered or exposed for sale or hire.
These two sections operate so as to limit (in different ways) the influence of literary or artistic copyright on other persons freedom to make and market three dimensional objects.
Section 51 applies where the end product of a design document or model is not an artistic work.
It provides a more principled answer to the problem to which the House of Lords gave a radical and controversial solution in British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577 while the Bill which became the 1988 Act was before Parliament.
Section 52 applies (subject to exceptions specified by the Secretary of State) where there is an artistic work, but that work has been exploited (with the consent of the copyright owner) by industrial production of copies to be marketed.
The Copyright (Industrial Process and Excluded Articles) (No 2) Order 1989 (SI 1989/1070) (the 1989 Order), made under section 52(4) of the 1988 Act, provides (para 2) for an article to be regarded as made by an industrial process if it is one of more than 50 articles which are to be treated as copies of a particular artistic work (and are not together a set).
The Order also provides (para 3(1)(a)) for the exclusion from section 52 of works of sculpture, other than casts or models used or intended to be used as models or patterns to be multiplied by any industrial process.
Legislative history: before the 1911 Act
These provisions (and especially sections 51 and 52) are difficult to understand without reference to their legislative history.
Unfortunately the history is itself quite complicated.
The Copyright Act 1911 (the 1911 Act) was (as Lord Bridge observed in British Leyland [1986] AC 577, 619) the first attempt to provide a comprehensive code of copyright protection.
Section 1(1) of the 1911 Act was in terms similar to those of section 1(1)(a) of the 1988 Act, (except that the words irrespective of artistic quality did not appear in the 1911 Act), and it may give the impression of embodying a well proportioned symmetrical principle providing equal protection to every form of human creativity.
Any such impression would be misleading.
When the 1911 Act was passed there had already been two centuries of legislative history, starting with the Copyright Act 1709 (the 1709 Act), and for most of that time it was the protection of printed words published literary works that was the laws principal concern.
Moreover the original legislative purpose of laws on literary copyright was the protection of the commercial interests of stationers (the early publishers) and booksellers, and the control of unlicensed (and possibly subversive) publications, rather than the vindication of the legal and moral rights of authors.
There are useful summaries of the history of English copyright law in Copinger and Skone James on Copyright, 16th ed (2010), paras 2 08 to 2 42, and Cornish, Llewelyn and Aplin, Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights, 7th ed (2010), paras 10 01 to 10 41.
The 1709 Act protected literary works, books and other writings.
During the 18th century protection was extended (by statute) to engravings and (by a liberal interpretation of the 1709 Act) to musical and dramatic compositions.
Three dimensional works of art were brought within the scope of copyright by a statute enacted in 1798, 38 Geo III c 71, but it was very badly drafted and offered little practical protection (Lord Ellenborough said in Gahagan v Cooper (1811) 3 Camp 111, 113 that The statute seems to have been framed with a view to defeat its own object).
This Act was replaced by the Sculpture Copyright Act 1814 (the 1814 Act).
The class of protected works was described in discursive terms, starting with any new and original sculpture, or model, or copy, or cast of the human figure or human figures, or of any bust or busts, or of any part or parts of the human figure, clothed in drapery or otherwise, and continuing in broader terms, referring to any matter being subject of invention in sculpture.
The sculpture was required to bear the makers name and the date when it was made.
Paintings, drawings and photographs were not protected until the Fine Arts Copyright Act 1862 (the 1862 Act).
The 1862 Act required registration as a condition of protection.
Architectural works were not protected until the 1911 Act (which also introduced works of artistic craftsmanship into the definition of artistic work in section 35 of that Act).
The 1814 Act remained in force until the coming into force of the 1911 Act, and was until then the only statute that gave long term copyright protection to any three dimensional works.
During the 19th century the rapid expansion of mechanical mass production produced an obvious need for industrial designers and manufacturers to be protected against unfair competition by copying of their designs.
Parliament decided that protection should be provided by a new right which was (rather confusingly, as the Court of Appeal said in para [24] of its judgment) called copyright, but which differed in two respects from literary and artistic copyright.
First, the proprietor was required to register his design.
Second, the period of protection was much shorter.
Those were the essential features of the scheme introduced by the Copyright of Designs Act 1839, repealed and replaced by the Designs Act 1842.
Earlier legislation granting copyright to the design of a range of printed textiles was repealed and replaced by the new system of registration, but copyright in sculpture under the 1814 Act was preserved.
The law as to registered designs was amended by the Copyright of Designs Act 1850, was further amended and consolidated by Part III of the Patents, Designs and Trade Marks Act 1883 (the 1883 Act) and finally (as regards legislation before the 1911 Act) was further amended by the Patents and Designs Act 1907 (the 1907 Act).
Most of the detail of this history is irrelevant for present purposes.
But it is to be noted that although the periods of protection for registered designs were progressively extended, they were always much shorter than the period for literary or artistic copyright.
It is also to be noted that after an uncertain start in the early statutes, a design for a work of sculpture was excluded from the statutory definition of design (section 60 of the 1883 Act and section 93 of the 1907 Act).
Only one judicial decision on the 1814 Act calls for mention, that is Britain v Hanks Bros & Co (1902) 86 LT 765.
Wright J held that copyright protection as sculpture was available to what the report refers to as toy metal models of soldiers on horseback, or mounted yeomen.
The models were designed and made by William Britain, a partner in the plaintiff firm.
The report does not say how large the models were, but they were evidently large enough for each to have stamped on it the makers name and the date of its manufacture.
There was expert evidence, which the judge accepted, that the models were artistic productions, in that the anatomy is good, and that the modelling shows both technical knowledge and skill.
The judge seems to have regarded the case as near the borderline, but was prepared to hold that the models were entitled to protection.
The Court of Appeal observed (para [59]) that it is difficult . to take too much from this case.
A minor point in the appellants case is that that is just what the Court did (para [82]) in describing the Britain models as highly crafted models designed to appeal to the collector but which might be played with by his children.
Legislative history: the 1911 Act and afterwards
The introduction by the 1911 Act of full copyright protection for a work of artistic craftsmanship was ascribed by Lord Simon, in George Hensher Ltd v Restawile Upholstery (Lancs) Ltd [1976] AC 64, 89 91, to the influence of the Arts and Crafts movement inspired by William Morris and John Ruskin.
Lord Simons view (at p 91) was that the expression is a composite phrase which must be construed as a whole, and that view has had recent support from the High Court of Australia (Swarbrick v Burge (2007) 232 CLR 336).
Section 22 of the 1911 Act provided as follows: (1) This Act shall not apply to designs capable of being registered under the Patents and Designs Act 1907, except designs which, though capable of being so registered, are not used or intended to be used as models or patterns to be multiplied by any industrial process. (2) General rules under section 86 of the Patents and Designs Act 1907 may be made for determining the conditions under which a design shall be deemed to be used for such purposes as aforesaid.
The test for production by an industrial process was (by rule 89 of the Designs Rules 1920, and so far as now material) the same as that in the 1989 Order (mentioned in para [13] above).
The effect of the double negative in section 22(1) can be more easily understood, as Viscount Maugham observed in King Features Syndicate Inc v O & M Kleeman Ltd [1941] AC 417, 427, if it is rewritten: This Act shall apply to designs capable of being registered under [the 1907 Act], which are not used or intended to be used as models or patterns to be multiplied by any industrial process.
With that exception this Act shall not apply to designs capable of being registered under [the 1907 Act].
The main issue in that case (which was concerned with Popeye dolls derived from published comic strips enjoying artistic copyright) was the time at which the intention of use for industrial production had to be formed.
The Lords decided that the intention must have been there from the start.
The Patents and Designs Act 1919 amended the 1907 Act by substituting for the definition in section 93 of the 1907 Act a new definition of design which referred to features applied by any industrial process and did not make an express exception for a design for a sculpture.
Because of the way that section 22 of the 1911 Act was framed, this had the effect of withdrawing from works of sculpture their specially privileged position in relation to mass production of copies.
Its effect was illustrated by Pytram Ltd v Models (Leicester) Ltd [1930] 1 Ch 639.
The Boy Scouts Association commissioned a model of a wolf cubs head which was to be used to produce a permanent mould for the production of large numbers of papier mach models to be attached to the top of wooden poles.
Clauson J dismissed the plaintiffs claim to copyright in the original model.
He accepted that the model was a work of sculpture, but it was not automatically exempt from registration under the 1907 Act as amended, and it did not come within the exception in section 22(1) because (p 647) The whole point in the preparation of this model was to enable the plaintiffs to supply totem poles in large quantities.
After the second world war there was a legislative shift back again.
In 1947 the Swan Committee recommended that works of sculpture should again be excluded from registrable designs.
The Registered Designs Act 1949 provided (section 1(3) and (4)) for exclusions from registration of articles which were primarily literary or artistic in character.
Rule 26(1) of the Designs Rules 1949 (SI 1949/2368) excluded works of sculpture other than casts or models used or intended to be used as models or patterns to be multiplied by any industrial process.
This wording (now reproduced in the 1989 Order) followed section 22(1) of the 1911 Act and must be construed in line with the House of Lords decision on that section in King Features.
The 1911 Act was repealed by the Copyright Act 1956 (the 1956 Act).
Section 10 of the 1956 Act (special exception in respect of industrial designs) restated the boundaries between copyright and design right.
As amended by the Design Copyright Act 1968, section 10(3) set a 15 year limit on copyright protection for any work in respect of which a corresponding design could have been registered under the 1949 Act.
But section 10(4) made an exception for designs excluded from registration by rules made under the 1949 Act; and rule 26 of the Designs Rules 1949 has now been replicated by rule 26 of the Registered Designs Rules 1989.
The 1956 Act introduced the words irrespective of artistic quality into para (a) of its definition of artistic work in section 3(1).
This was, it seems, as a result of maps, charts and plans being reclassified by the 1956 Act as artistic rather than literary works.
The new wording sits rather uneasily with works of artistic craftsmanship in para (c) of the same definition.
In Hensher [1976] AC 64, 94, Lord Simon suggested an explanation which some may not find wholly convincing.
But it is common ground that in copyright cases the court is not concerned with passing judgment on the merits of either literary or artistic works.
The Court of Appeal drew two general conclusions from its own survey of the legislative history (which occupies paras [21] to [39] of the judgment).
The first ([40] and [41]) was that there is little or no assistance as to the meaning of sculpture in the 1988 Act to be derived from the relationship between copyright and registered design rights.
The second ([42] and [43]) is that design and artistic work are different concepts.
Apart from unregistered design right (introduced by Part III of the 1988 Act), design right statutes are concerned with features that have visual appeal.
Copyright protection depends on a work falling within a particular category specified in the 1988 Act: It does not depend upon a further analysis or identification of its design features.
The meaning of sculpture
Both the judge and the Court of Appeal undertook a full review of English and Commonwealth authority as to the meaning of sculpture.
They rightly concluded that some first instance decisions gave them no real assistance, and it is unnecessary to go into them again.
The judgments that call for discussion are (in chronological order) those of the Court of Appeal of New Zealand in Wham O Manufacturing Co v Lincoln Industries Ltd [1985] RPC 127, [1984] 1 NZLR 641; of Falconer J in Breville Europe Plc v Thorn EMI Domestic Appliances Ltd [1995] FSR 77; of Laddie J in Metix (UK) Ltd v G H Maughan (Plastics) Ltd [1997] FSR 718; and of Angel J (sitting in the Supreme Court of the Northern Territory) in Wildash v Klein (2004) 61 IPR 324.
Before discussing these four cases it is appropriate to make a further brief reference to the decision of the House of Lords in Hensher [1976] AC 64.
Since Lucasfilm is no longer contending that the helmet is a work of artistic craftsmanship it is unnecessary to make much further reference to Hensher, which Mann J discussed at some length, drawing attention to the difficulty of identifying the true principle of the decision.
The reason why that contention has been abandoned is stated (para 22(2) of the appellants printed case) to be that section 4(1)(c) of the 1988 Act is intended to comprise articles whose purpose is primarily functional, and which cannot therefore qualify as sculpture.
The relative significance of the functional and the artistic is central to this appeal.
The speeches in Hensher, difficult though they are, show a general inclination to start with the ordinary meaning of the words of the statute (see Lord Reid at p 78, Lord Morris at p 81, Viscount Dilhorne at pp 86 87, Lord Simon at p 91 and Lord Kilbrandon at p 97), however much they differed as to the application of that principle.
The same approach is called for in relation to the meaning of sculpture.
In Wham O the Court of Appeal of New Zealand was concerned with frisbees (light plastic discs used in outdoor games because of their aerodynamic qualities).
Lincoln made and marketed in New Zealand frisbees which were alleged to infringe Wham Os copyright in design drawings, wooden models, moulds and the final plastic moulded products.
The relevant parts of the Copyright Act 1962 of New Zealand were similar but not identical to those of the 1988 Act.
At first instance Moller J held that the wooden models were copyright as sculptures and that the moulds and final products were engravings.
The Court of Appeal upheld this result, while holding that the final products were not sculptures (a point left open by the judge).
Much of the judgment is taken up with reasoning leading to the rather surprising conclusion that the moulds and final products were engravings.
The finding that the wooden model of a frisbee and that alone was a sculpture seems to have been based mainly on the fact that only the model had been made by hand, and the moulds and final products had been made industrially.
Davison CJ stated ([1985] RPC 127, 157): It seems to us inappropriate to regard utilitarian objects such as plastic flying discs, manufactured as toys, by an injection moulding process, as items of sculpture for the purposes of the Copyright Act.
The Breville case was concerned with sandwich toasters.
Copyright was claimed for plaster shapes made for the production of die cast moulds of the heating plates (which were required to have the same scalloped shape as was to be impressed on the toasted sandwiches).
Falconer J held that there had been no infringement, but went on to express the view that the plaster shapes were protected by copyright.
He stated (at p 94): I do not see why the word sculpture in section 3 of the Copyright Act 1956 should not receive its ordinary dictionary meaning except in so far as the scope of the word is extended by section 48(1) which provides that sculpture includes any cast or model made for purposes of sculpture.
In reaching this conclusion he relied on the part of the Wham O decision which recognised copyright in the wooden model of a frisbee.
He also relied on the Concise Oxford Dictionarys definition of sculpture: Art of forming representations of objects etc or abstract designs in the round or in relief by chiselling stone, carving wood, modelling clay, casting metal, or similar processes; a work of sculpture.
Falconer J was a very experienced intellectual property judge but in Breville he seems to have overlooked the significance of the words for purposes of sculpture in the statute and the significance of the first word, Art, in the dictionary definition.
That was the view of the Court of Appeal (para [66]): The same [far removed from the creation of expressive form] goes for the plastic shapes considered by Falconer J in the Breville case [1995] FSR 77.
No ordinary citizen indeed no ordinary lawyer would regard a sandwich toaster or any part of it as a work of sculpture even if it did produce scalloped sandwiches.
So why should a copyright lawyer take a different view? A total or almost total emphasis on the manner of creation, as in the Breville case and Wham O case [1985] RPC 127 produces a result which offends common sense and in our view is wrong.
There must, as Mann J said, be some element of artistic expression however unsuccessful.
The point about for purposes of sculpture is underlined by some observations earlier in the judgment of the Court of Appeal (paras [49] and [50], and again at para [70]) as to the word sculpture being applicable both to a process and to a product (terms familiar to intellectual property lawyers).
Over the centuries statues and other works of art cast in metal have been produced by what is basically a three stage process: first by making a model in clay or some other malleable material; then by taking a mould from the model; and then by casting, that is, pouring molten metal into the mould to produce the work of art (followed no doubt by appropriate finishing).
Copyright protection is therefore extended (currently by section 4(2) of the 1988 Act) to a cast or model made for purposes of sculpture.
But not every product of industrial casting or moulding is sculpture.
As the Court of Appeal observed (para [50]): Casting or moulding is an industrial process commonly used where the end product is made of plastic or metal of some kind.
It is used in the production of millions of ordinary household objects, none of which would usually be described as sculptures.
A motor car is but one obvious example.
Some would have qualified for protection as registered designs so as to be excluded under section 22(1) of the 1911 Act.
But would they have qualified as sculpture?.
Metix can be taken more shortly.
It was a case in which Laddie J rightly rejected a claim to artistic copyright in moulds used for making cartridges used in conjunction with flow mixers (the judge described them as looking like double barrelled hyperdermic syringes).
Laddie J, another very experienced intellectual property judge made some general observations (at pp 721 722): The law has been bedevilled by attempts to widen out the field covered by the Copyright Acts.
It is not possible to say with precision what is and what is not sculpture, but I think Mr Meade was close to the heart of the issue.
He suggested that a sculpture is a three dimensional work made by an artists hand.
It appears to me that there is no reason why the word sculpture in the 1988 Act, should be extended far beyond the meaning which that word has to ordinary members of the public.
Mr Meades formulation as recorded by Laddie J seems to be the only suggested definition or near definition that has not attracted adverse comment from any quarter.
Wildash v Klein (2004) 61 IPR 324, like Metix, is of interest not so much for what it decides as for its discussion of general issues (including the notion of copying of part, which is not an issue here).
The case was an unfortunate dispute between two women, each of whom made craftwork depicting local wildlife for sale at markets.
Initially they cooperated but later each accused the other of copyright infringement.
The craftworks were made of wire but also (and here the summaries in the judgments below are rather sparse) glass rods, glass nuggets, copper foil and other materials.
The judge held that they were sculptures or, alternatively, works of artistic craftsmanship.
The judge cited the Court of Appeal of New Zealand in Wham O (sculpture should in some way express in three dimensional form an idea of the sculptor) and also Laddie J in Metix.
In connection with copying the judge also cited Lord Hoffmanns cryptic observation about foxes and hedgehogs in Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416, 2423, describing it as an allusion to an essay written in 1953 by Sir Isaiah Berlin; in fact Sir Isaiah was alluding, as has Professor Ronald Dworkin in his latest book, Justice for Hedgehogs (2011), to a saying attributed to Archilochus in the 7th century BC , (the fox knows many things, but the hedgehog one big thing.)
The judgments of Mann J and the Court of Appeal
It was primarily from these authorities that Mann J derived what he called guidelines, not rigid requirements as to the meaning of sculpture in the 1988 Act.
These are set out in nine numbered sub paragraphs in para 118 of his judgment.
The Court of Appeal quoted this paragraph in full, [2010] Ch 503, para [54], and was generally in agreement with it.
As the guidelines are readily accessible we will not quote them again.
The first three note (as did the House of Lords in Henscher [1976] AC 64) that normal English usage is important, though not determinative.
The fourth guideline (no judgment is to be made about artistic worth) is in the text of section 4(1)(a) of the 1988 Act, and is common ground.
The Court is not to set itself up as an arbiter of artistic merit.
But it is concerned with artistic purpose (the artists hand).
The fifth guideline (not every three dimensional representation of a concept can be regarded as a sculpture) is also uncontroversial, at any rate if concept is understood as covering any idea, functional as well as artistic (Mr Bloch QC challenged it in the Court of Appeal, but it is consistent with the appellants printed case in this Court, especially paras 7 and 14).
In the courts below as in the parties written and oral submissions in this Court, the argument has centred on the right approach to three dimensional objects that have both an artistic purpose (of some sort) and a utilitarian function (of some sort).
These issues are addressed in the rest of the judges guidelines.
The appellants printed case gives some world famous examples: the caryatids which form part of the Erectheion at Athens; the Medici tombs in the sacristy of San Lorenzo in Florence; the Trevi fountain in Rome.
These seem to be rather special cases, not because of their outstanding merit but because they all have a strong architectural element, and the fact that a work of architecture is functional does not disqualify it from copyright protection.
Other artefacts mentioned in the case, such as the Ribchester helmet in the British Museum or a decorated medieval suit of armour, would come more naturally under the head of works of artistic craftsmanship, together with fine furniture, musical instruments, silverware and ceramics.
But the appellants have made clear that it is no longer part of their case that the Imperial Stormtrooper helmet was a work of artistic craftsmanship.
Instead, the appellants contend that the helmet had no practical function at all.
Their case is that it is sculpture because its purpose is wholly artistic.
Para 7 of their printed case puts it in these terms: In the present case, the question of functionality does not arise, because the articles in question have no functional purpose whatever.
The Stormtroopers helmets and armour did not exist in order to keep their wearers warm or decent or to protect them from injury in an inter planetary war.
Their sole purpose was to make a visual impression on the filmgoer.
They are therefore artistic works.
Mann J saw it differently.
He stated (para [121], and here we are picking up the quotation in the first paragraph in this judgment): It was a mixture of costume and prop.
But its primary function is utilitarian.
While it was intended to express something, that was for utilitarian purposes.
While it has an interest as an object, and while it was intended to express an idea, it was not conceived, or created, with the intention that it should do so other than as part of character portrayal in the film.
That, in my view, does not give it the necessary quality of artistic creation inherent in the test suggested by Laddie J.
The Court of Appeal took the same view (paras [79] and [80]): Mr Bloch seeks to avoid our example of a real soldiers helmet being used as a prop in a film by stressing the fictional and imaginary nature of the stormtroopers and what they were .
But that argument confuses the fictional nature of the stormtrooper with his physical depiction in the film.
Although invented, the helmet and armour are still recognisable as such and have a function within the confines of the film as the equipment of the stormtrooper.
Discussion
In this Court the appellants have challenged the reasoning of the judge and the Court of Appeal.
Mr Sumption QC said that it was eccentric of the judge to describe the helmets purpose as utilitarian, and that the Court of Appeal could find it to have a functional purpose only by treating it as having the same functional purpose as a real helmet within the confines of a film.
This is quite a puzzling point.
The Star Wars films are set in an imaginary, science fiction world of the future.
War films set in the past (Paths of Glory, for instance, depicting the French army in the first world war, or Atonement depicting the British Expeditionary Force at Dunkirk) are at least based on historical realities.
The actors and extras in the trenches or on the beaches may be wearing real steel helmets, or (because real steel helmets of the correct style are unobtainable in sufficient numbers) they may be wearing plastic helmets painted khaki.
In either case the helmets are there as (in the judges words) a mixture of costume and prop in order to contribute to the artistic effect of the film as a film.
They are part of a production process, as Laddie J said in Metix at p 721, citing Whitford J in Davis (J & S)(Holdings) Ltd v Wright Health Group Ltd [1988] RPC 403, 410 412.
In this case the production process was the making of a full length feature film.
It would not accord with the normal use of language to apply the term sculpture to a 20th century military helmet used in the making of a film, whether it was the real thing or a replica made in different material, however great its contribution to the artistic effect of the finished film.
The argument for applying the term to an Imperial Stormtrooper helmet is stronger, because of the imagination that went into the concept of the sinister cloned soldiers dressed in uniform white armour.
But it was the Star Wars film that was the work of art that Mr Lucas and his companies created.
The helmet was utilitarian in the sense that it was an element in the process of production of the film.
Those were the concurrent findings of both the judge and the Court of Appeal, in paras [121] and [80] of their respective judgments.
The type of judgmental conclusion that often has to be reached in intellectual property cases on issues such as obviousness, inventiveness, and copying are matters on which appellate courts should be slow to interfere with the judgment of the trial judge.
In Designers Guild [2000] 1 WLR 2416, 2423 2424, Lord Hoffmann observed that there were two reasons for this.
The first is that the judge has, and the appellate court has not, seen and heard the witnesses.
Lord Hoffmann continued, Secondly, because the decision involves the application of a not altogether precise legal standard to a combination of features of varying importance, I think that this falls within the class of case in which an appellate court should not reverse a judges decision unless he has erred in principle: see Pro Sieben Media AG v Carlton UK Television Ltd [1991] 1 WLR 605, 612 613.
I agree with Buxton LJ in Norowzian v Arks Ltd (No 2) [2000] FSR 363, 370 when he said: where it is not suggested that the judge has made any error of principle a party should not come to the Court of Appeal simply in the hope that the impression formed by the judges in this court, or at least two of them, will be different from that of the trial judge.
That applies with extra force in the case of a second appeal.
To the same effect are Lord Hoffmanns observations in Biogen Inc v Medeva plc [1997] RPC 1, 45, which are too well known to need repetition.
The Court of Appeal (para [78]) relied on Lord Hoffmanns observations in Designers Guild, and in our view it was right to do so.
During the 17 days of the trial Mann J heard evidence about the helmet and the other artefacts from numerous different witnesses.
Long and thorough as his judgment is, he may not have recorded every nuance that contributed to his conclusion.
He did not err in law or reach an obviously untenable conclusion, and the Court of Appeal was right to uphold his decision on this point.
We would uphold the judgments below very largely for the reasons that they give.
But (at the risk of appearing humourless) we are not enthusiastic about the elephant test in para [77] of the Court of Appeals judgment (knowing one when you see it).
Any zoologist has no difficulty in recognising an elephant on sight, and most could no doubt also give a clear and accurate description of its essential identifying features.
By contrast a judge, even one very experienced in intellectual property matters, does not have some special power of divination which leads instantly to an infallible conclusion, and no judge would claim to have such a power.
The judge reads and hears the evidence (often including expert evidence), reads and listens to the advocates submissions, and takes what the Court of Appeal rightly called a multi factorial approach.
Moreover the judge has to give reasons to explain his or her conclusions.
There is one other matter to which the Court of Appeal attached no weight, but which seems to us to support the judges conclusion.
It is a general point as to the policy considerations underlying Parliaments development of the law in order to protect the designers and makers of three dimensional artefacts from unfair competition.
After reviewing the legislative history the Court of Appeal took the view (para [40]) that there was no assistance to be obtained from the relationship between copyright and registered design right.
We respectfully disagree, especially if the relatively new unregistered design right is also taken into account.
It is possible to recognise an emerging legislative purpose (though the process has been slow and laborious) of protecting three dimensional objects in a graduated way, quite unlike the protection afforded by the indiscriminate protection of literary copyright.
Different periods of protection are accorded to different classes of work.
Artistic works of art (sculpture and works of artistic craftsmanship) have the fullest protection; then come works with eye appeal (AMP Inc v Utilux Pty Ltd [1971] FSR 572); and under Part III of the 1988 Act a modest level of protection has been extended to purely functional objects (the exhaust system of a motor car being the familiar example).
Although the periods of protection accorded to the less privileged types have been progressively extended, copyright protection has always been much more generous.
There are good policy reasons for the differences in the periods of protection, and the Court should not, in our view, encourage the boundaries of full copyright protection to creep outwards.
Sections 51 and 52
The appellants accept that if the helmet did not qualify as a sculpture within the meaning of the 1988 Act, then Mr Ainsworth had a defence under section 51 to any infringement claim based on Mr McQuarries graphics, and section 52 does not arise.
The Court of Appeal dealt with these sections, for completeness, in paras 83 to 98 of its judgment.
It is unnecessary to cover the same ground again.
We would dismiss the appeal so far as it is based on the English law of copyright.
Part II: Whether a claim against a defendant domiciled in England for infringement of a foreign copyright is justiciable
The decision of the Court of Appeal and the issue on the appeal
The issue on this aspect of the appeal is a narrow one, whether the English court may exercise jurisdiction in a claim against persons domiciled in England for infringement of copyright committed outside the European Union in breach of the copyright law of that country.
That issue has raised two questions.
The first question is whether a claim for infringement of a foreign copyright is non justiciable.
The second question only arises if the answer to the first question is in the affirmative: the question would then arise whether the English court is in any event required to accept jurisdiction by virtue of Council Regulation (EC) No 44/2001 on jurisdiction and the enforcement of judgments in civil and commercial matters (the Brussels I Regulation), article 2, which provides that, subject to the terms of the Regulation, persons domiciled in a Member State shall be sued in the courts of that Member State.
The Court of Appeal decided that the claim for breach of the United States copyright was non justiciable.
It held that the rule in British South Africa Co v Companhia de Moambique [1893] AC 602 that the English court has no jurisdiction to entertain an action for the determination of the title to, or the right to possession of, foreign land, or the recovery of damages for trespass to such land, was an example of a general principle which applied not only to foreign land, but also to claims for infringement of foreign intellectual property rights, including copyright, irrespective of whether issues of title or validity were involved; and irrespective of whether the rights required registration (such as trade marks or registered designs) or not.
It also held that article 2 of the Brussels I Regulation did not require the English court to exercise jurisdiction.
The substantial question on this aspect of the appeal is whether, as Lucasfilm contends, the Court of Appeal was wrong, as a matter of law and policy, to extend to foreign copyrights the common law rule in the Moambique case that actions for damages for infringement or invasion of property rights in foreign land are not justiciable.
The foreign land rule and its application to intellectual property: British South
Africa Co v Companhia de Moambique and Potter v Broken Hill Pty Co Ltd
Some legal archaeology is necessary for an understanding of how the law developed to the point where the English courts, at first instance and in the Court of Appeal, decided that claims for infringement of foreign copyright were not justiciable in England.
British South Africa Co v Companhia de Moambique
The decision in the Moambique case is the authoritative foundation for the rule that the English court has no jurisdiction to entertain an action for (1) the determination of the title to, or the right to the possession of, any immovable situate out of England or (2) the recovery of damages for trespass to such immovable (Dicey, Conflict of Laws, 1st ed (1896), pp 214 215, Rule 39).
The rule has for long been subject to an exception where there is a contract, or an equity, between the parties, which the courts of equity will enforce: ibid, p 216; Penn v Lord Baltimore (1750) 1 Ves Sen 444.
As the House of Lords noted, in the United States there is a similar local action rule (based on Livingston v Jefferson, 15 Fed Cas 660 (CCD Va, 1811), Marshall CJ on circuit) for actions to determine title: see Hay, Borchers & Symeonides, Conflict of Laws, 5th ed (2010), para 7.7.
But the current prevailing view in the United States is that the local action rule does not apply to actions for trespass to foreign land: Restatement Second, Conflict of Laws, section 87 (1971).
It seems also that that part of the rule which denies jurisdiction for trespass to foreign land had no counterpart outside common law countries (Rabel, Conflict of Laws: A Comparative Study, 2nd ed, (1960) vol 2, p 47; Wolff, Private International Law, 2nd ed (1950), p 92; and for the position in France see Audit, Droit International Priv, 6th ed (2010), para 346), and, as will be seen, although the House of Lords refused to reconsider the trespass rule, it no longer applies at least as regards land in other Member States of the European Union.
The speeches of Lord Herschell LC and Lord Halsbury (and, in the Court of Appeal, of Lord Esher MR, whose dissenting judgment was upheld in the House of Lords) are substantially based on Storys Conflict of Laws.
The essence of the decision is that jurisdiction in relation to land is local (that is, the claim has a necessary connection with a particular locality) as opposed to transitory (where such a connection is not necessary) and that it is contrary to international law, or comity, for one state to exercise jurisdiction in relation to land in another state.
Lord Esher MR said ([1892] 2 QB 358, 398): an action quare clausum fregit cannot be entertained by an English Court in respect of an alleged wrongful entry on land situated abroad; and the ground of the inability is no consent of other nations by way of comity to the exercise of such jurisdiction can be inferred.
Lord Herschell LC and Lord Halsbury relied in particular on Storys quotation (Story, Conflict of Laws, section 553, from the 1st edition in 1834 to the 8th edition in 1883) of a translation of a passage in Vattels Droit des Gens, which concluded that, in the case of an action relating to an estate in land, or to a right annexed to such an estate: [1893] AC at 622, 631: in such a case, inasmuch as property of the kind is to be held according to the laws of the country where it is situated, and as the right of granting it is vested in the ruler of the country, controversies relating to such property can only be decided in the state in which it depends.
In Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508 Lord Wilberforce said (at p 537) that the foreign land rule involved possible conflict with foreign jurisdictions, and the possible entry into and involvement with political questions of some delicacy; and Viscount Dilhorne said (at p 541) that: Questions of comity of nations may well be involved.
The leading cases all involved unusual factual situations in which the claim had major political ramifications, and in which, therefore, issues of international law and comity were engaged.
The Moambique company was a Portuguese company (with substantial British ownership) effectively in control of Mozambique and Cecil Rhodes British South Africa Co was effectively in control of Southern Rhodesia.
The Moambique case was a battle between them over mines in territories which were claimed by Portugal.
In Hesperides Hotels the plaintiffs were Greek Cypriot hotel owners who were seeking to establish that their hotels in Northern Cyprus had been illegally requisitioned by the authorities of the unrecognised Turkish Federated State of North Cyprus.
Similarly, in the leading case on the related, and more general, principle that the courts will not adjudicate upon the transactions of foreign sovereign states, Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, Occidental Petroleum was endeavouring to establish that Buttes and the Ruler of Sharjah had fraudulently deprived Occidental of the benefit of its oil concession in the neighbouring emirate of Umm al Qaywayn.
Potter v Broken Hill Pty Co Ltd
It is inevitable that any discussion of the justiciability of claims for infringement of foreign intellectual property rights must begin with the influential decision in Potter v Broken Hill Pty Co Ltd [1905] VLR 612, affd (1906) 3 CLR 479, which is generally (but not entirely accurately) regarded as based on an extension of the Moambique rule to actions for infringement of patents.
At a time when patents were granted by the several States in Australia, Potter obtained a patent in Victoria for the separation of metals from sulphide ores and a patent for the same process in New South Wales.
Potter claimed that (as well as a threatened infringement of the Victorian patent in Victoria) the defendant company (now BHP Billiton) had infringed the New South Wales patent at its mine in New South Wales.
Broken Hill denied novelty and utility, but also said that an action for the infringement in New South Wales of a New South Wales patent was not justiciable in the Victorian courts.
The question of justiciability was argued as a preliminary matter before the Full Court of the Supreme Court of Victoria, which decided by a majority that the claim was not justiciable, and an appeal to the High Court of Australia was dismissed.
As already mentioned, the decision is generally regarded as based on the Moambique rule.
Although the Moambique rule is one of the elements in the conclusion of the High Court, an examination of the way in which the case was argued, and of the reasoning of the High Court, shows that it is a decision extending the act of state doctrine to foreign patents.
There are four strands to the conclusions reached by the Full Court and the High Court of Australia.
The first strand is in the judgment of Hodges J (with whom Hood J concurred) in the Full Court.
That strand is based on that aspect of the Moambique rule which turns on the distinction between local and transitory actions.
He considered that the patent had a definite locality: Potter claimed in effect that in no building and on no land in New South Wales could the company use his invention.
It was a claim made in respect of a defined area, the whole of which was outside the jurisdiction of the court in Victoria.
The second strand is found only in the judgment of Hood J in the Full Court, but it finds an echo in later English decisions, and that is that the action was precluded by what became known as the first branch of the rule in Phillips v Eyre (1870) LR 6 QB 1, namely that an act done abroad was only actionable in England if it was actionable as a tort according to English law, that is, was an act, which if done in England, would be a tort.
The rule as then understood showed what became the first limb of the rule as the second limb in these terms: An act done in a foreign country is a tort if it is both (1) wrongful according to the law of the country where it was done, and, (2) wrongful according to English law, ie, is an act which, if done in England, would be a tort (Dicey, Conflict of Laws, 1st ed (1896), Rule 175, p 659).
Hood J considered that the rule was not satisfied because Potter could not show that, if the act had been committed in Victoria, it would have been actionable there, because infringement of a New South Wales patent in Victoria was not actionable in Victoria: the act of Broken Hill, using and working certain alleged inventions in New South Wales even though it be wrong by the law of that State, would not be actionable if committed here (at p 631).
The third strand is found in the reliance on the Moambique case by the High Court of Australia.
Both Griffiths CJ and Barton J said that the question did not depend on the distinction between local and transitory actions.
They (and the third member of the court, OConnor J) took their inspiration from those parts of the speeches in the House of Lords, and of the dissenting judgment of Lord Esher MR in the Court of Appeal, which emphasised that rights in immovables were created by the exercise of the sovereign power of the State, and that controversies relating to such property could only be decided in that State.
So also, they reasoned, the comity of nations required a similar rule for patents: especially (1906) 3 CLR 479, 495, 502.
The appeal was first argued in November 1905, but the report shows (at p 486) that on 27 February 1906: The matter was, at the desire of the Court, further argued on the point whether the Courts of one State can enquire into the propriety or validity of an attempted exercise of the sovereign power of another State.
As a result there is a fourth, and decisive, strand in the decision, namely the act of state doctrine.
The classic statement of the act of state doctrine was enunciated by Fuller CJ in the United States Supreme Court in Underhill v Hernandez, 168 US 250, 252 (1897): Every sovereign State is bound to respect the independence of every other sovereign State, and the Courts of one country will not sit in judgment on the acts of the government of another done within its own territory.
Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves.
This principle had its origin, as appears clearly from the decision of the lower court in that case, in the decision of the House of Lords in Duke of Brunswick v Duke of Hanover (1848) 2 HLC I, 17, in which it was said: the courts of this country cannot sit in judgment upon an act of a sovereign, effected by virtue of his sovereign authority abroad . : see Underhill v Hernandez, 65 F 577 (2d Cir 1895).
As re stated by the United States Supreme Court, the act of state doctrine was re imported into English law in Luther v Sagor [1921] 3 KB 532 (CA).
All three members of the High Court of Australia quoted and applied Underhill v Hernandez and it is the act of state doctrine, rather than the Moambique rule, which is the essential foundation of the judgments in the High Court.
Thus Griffith CJ said that if a government had granted a monopoly in respect of an alleged invention which was not new, the government must have been misled: at pp 498 499.
Barton J thought that the whole subject matter of the action was excluded from the cognizance or competence of Victoria, and its courts could not sit in judgment to determine whether such rights were validly granted: at p 503.
O'Connor J said that a court could not enquire into the validity of a patent, any more than it could enquire into the validity of a concession granted by the Czar: at p 513.
Consequently the effect of the decision in Potter v Broken Hill Pty Co Ltd was to apply the Moambique rule and, especially, the act of state doctrine to actions for patent infringement.
It received no attention in the English case law until it was mentioned by Lord Wilberforce in Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508, 536 as authority for the proposition that the Moambique rule applied in Australia.
It was only from the 1980s that it came to be regarded as a significant authority in the field of transnational intellectual property litigation: Def Lepp Music v Stuart Brown [1986] RPC 273; Tyburn Productions Ltd v Conan Doyle [1991] Ch 75 (both copyright cases).
Subsequent developments
There have been major developments since the decisions in the Moambique case and Potter v Broken Hill Pty Co Ltd, which have to a significant extent undermined them, and to which it is now necessary to turn.
The questions to which these developments are relevant are these: (1) whether there is a distinction between actions to determine title and/or validity and actions for infringement of rights; (2) whether there is a distinction between actions for infringement which raise issues of title and/or validity and actions for infringement which do not; (3) whether there is a distinction between intellectual property rights which require registration or prior examination and those which do not, and in particular whether there is a relevant distinction between copyright and other intellectual property rights, especially patents; (4) whether the conflict of laws rules relating to tortious conduct abroad have undermined the older decisions; and (5) whether the act of state doctrine has any relevance to actions for infringement of intellectual property rights.
The Moambique rule
To the extent that the principles in Potter v Broken Hill Pty Co Ltd were based on that part of the rule in the Moambique case which precluded actions for damages for infringement of property rights (in that case damages for trespass), they have been fatally undermined so far as English law is concerned.
That part of the rule was confirmed by the House of Lords in Hesperides Hotels Ltd v Aegean Turkish Holidays Ltd [1979] AC 508.
The House of Lords not only refused an invitation to depart from that part of the rule, but also extended it by holding that it applied when no question of title was involved.
Lord Wilberforce said (at p 541) that questions of comity might well be involved, and it had to be for Parliament to change the law.
That invitation was taken up, and that part of the Moambique rule was abolished by section 30(1) of the Civil Jurisdiction and Judgments Act 1982, which came into force in 1982, and provides: The jurisdiction of any court in England . to entertain proceedings for trespass to, or any other tort affecting, immovable property shall extend to cases in which the property in question is situated outside that part of the United Kingdom unless the proceedings are principally concerned with a question of the title to, or the right to possession of, that property.
There was a parallel development in European law which also confirms, broadly, that the foreign land principle in the European Union is concerned only with actions to establish title.
That development began with the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, which was signed in 1968 and came into force for the six original EEC Member States in 1973.
The Brussels Convention was enacted into United Kingdom law by the 1982 Act and the relevant provisions came into force in 1987, and are now contained in the Brussels I Regulation (Council Regulation (EC) No 44/2001).
The effect is that the Moambique rule has been superseded, as regards land in other Member States, by what is now Article 22(1) of the Brussels I Regulation.
Article 22(1) (formerly article 16(1)(a) of the Brussels Convention) provides that the courts of the Member State in which the property is situated have exclusive jurisdiction, regardless of domicile, in proceedings which have as their object rights in rem in immovable property or tenancies of immovable property.
The European Court has confirmed that what is now article 22(1) must not be given an interpretation broader than is required by its objective: and that actions for damages based on infringement of rights in rem or on damage to property in which rights in rem exist do not fall within its scope: Case C 343/04 Land Obersterreich v EZ as [2006] ECR I 4557, para [26] et seq.
The consequence is that in the United Kingdom the trespass aspect of the Moambique rule has no application as regards land in other Member States, and (subject to the controversial question of the applicability of article 2) can only apply to land outside the Member States where a question of title is involved: see Dicey, Morris & Collins, Conflict of Laws, 14th ed (2006), vol 2 paras 23 02523 027.
The rule in Phillips v Eyre
As has been seen, in Potter v Broken Hill Pty Co Ltd, in the Full Court of the Supreme Court of Victoria, Hood J considered that the action was precluded by the first branch of the rule in Phillips v Eyre, ie that Potter could not show that, if the act had been committed in Victoria, it would have been actionable there, because infringement of a New South Wales patent in Victoria was not actionable in Victoria.
The effect of the first limb of the rule in intellectual property cases was expressed in Dicey & Morris, Conflict of Laws, 12th ed (1993) (the last edition before the law was changed), vol 2, at p 1516: Nor can the holder of a French patent, trade mark or copyright sue in England for its infringement in France.
Since the French patent, trade mark or copyright is territorial in its operation and the act complained of would not be a tort if committed in England, it cannot be brought within [the first limb of the rule in Phillips v Eyre].
In consequence it was held in Tyburn Productions Ltd v Conan Doyle [1991] Ch 75 that it was not possible to bring an action in England for infringement (or, as in that case, an action for a declaration of non infringement) of United States copyright.
The first limb of the rule in Phillips v Eyre was also employed by Sir Nicolas Browne Wilkinson V C in Def Lepp Music v Stuart Brown [1986] RPC 273 to deny a claim in England for breach of a United Kingdom copyright in the Netherlands, but a shorter answer to the claim would have been that United Kingdom copyrights are purely territorial and do not, by United Kingdom law, confer any rights abroad: see, eg Norbert Steinhardt & Son Ltd v Meth (1960) 105 CLR 440.
But the rule in Phillips v Eyre was first eroded by case law and then abolished by statute.
Following the lead of Lord Wilberforce and Lord Hodson in Boys v Chaplin [1971] AC 356, in Red Sea Insurance Co Ltd v Bouygues SA [1995] 1 AC 190 the Privy Council decided that the first limb of the rule in Phillips v Eyre could be displaced so that an issue might be governed by the law of the country which with respect to that issue had the most significant relationship with the occurrence and with the parties.
That exception was applied in Pearce v Ove Arup Partnership Ltd [2000] Ch 403, in which the Court of Appeal held that a claim in England for infringement of a Dutch copyright was not defeated by the first limb of the rule in Phillips v Eyre, because the issues had the most significant relationship with the Netherlands.
Accordingly, the court held that Dutch law was the applicable law and not the combination of English law and Dutch law required by Phillips v Eyre.
In KK Sony Computer Entertainment v Van Veen (2006) 71 IPR 179 (High Court of New Zealand), MacKenzie J held (in reasoning which is not entirely clear) that, in a claim for infringement of United Kingdom and Hong Kong copyrights, the first limb of the rule in Phillips v Eyre was satisfied.
The rule in Phillips v Eyre was abolished by the Private International Law (Miscellaneous Provisions) Act 1995.
In principle the law of the place of infringement applies: 1995 Act, section 11(1).
Consequently, so far as English proceedings are concerned, that basis for the decisions in Potter v Broken Hill Pty Co Ltd and Tyburn Productions Ltd v Conan Doyle has disappeared, and the rule in Phillips v Eyre is no impediment to actions in England for infringement of foreign intellectual property rights.
The act of state doctrine
In the United States the act of state doctrine has been used as a basis for non justiciability of foreign trade mark and patent rights.
The Court of Appeals for the Second Circuit held in Vanity Fair Mills Inc v T Eaton Co Ltd, 234 F 2d 633, 646 (2d Cir 1956), cert den, 352 US 871 (1956) that a United States federal court should not rule on the validity of a Canadian trade mark because (among other reasons) the act of state doctrine precluded determination of the acts of a foreign sovereign done within its own territory, and to rule on validity would create conflicts with Canadian administrative and judicial officers.
The act of state doctrine was also invoked more recently in the United States as a ground for refusing to allow the addition of claims for infringement of parallel foreign patents to claims for infringement of United States patents, in litigation in which validity was in issue: Voda v Cordis Corp, 476 F 3d 887 (Fed Cir 2007).
The majority of the court (Gajarsa CJ, Prost CJ concurring) said (at p 904): the act of state doctrine may make the exercise of supplemental jurisdiction over foreign patent infringement claims fundamentally unfair.
As a principle of decision binding on federal and state courts alike, the act of state doctrine requires that, in the process of deciding, the acts of foreign sovereigns taken within their own jurisdictions shall be deemed valid.
W S Kirkpatrick & Co, Inc v Envtl Tectonics Corp, Intl, 493 U.S. 400, 406, 409 (1990) In this case, none of the parties or amicus curiae have persuaded us that the grant of a patent by a sovereign is not an act of state.
Therefore, assuming arguendo that the act of state doctrine applies, the doctrine would prevent our courts from inquiring into the validity of a foreign patent grant and require our courts to adjudicate patent claims regardless of validity or enforceability.
The act of state doctrine was held not to apply where, in a dispute arising out of a patent licence, the issue was one of interpretation of the patent, and not of validity: Fairchild Semiconductor Corpn v Third Dimension (3D) Semiconductor Inc, 589 F Supp 2d 84, 98 (D Me 2008).
So also, in the case of copyright infringement, it has been held that the act of state doctrine has no application because there is no need to pass on the validity of acts of foreign government officials.
In London Film Productions, Ltd v Intercontinental Communications, Inc, 580 F Supp 47, 49 (SDNY 1984) the District Court held that the plaintiff could sue for infringement of its foreign copyright in films.
The court accepted Professor Nimmers view that the act of state doctrine was not engaged: in adjudicating an infringement action under a foreign copyright law there was no need to pass upon the validity of acts of foreign governmental officials, since foreign copyright laws did not generally incorporate administrative formalities which had to be satisfied to create or perfect a copyright.
In Frink America, Inc v Champion Road Machinery Ltd, 961 F Supp 398 (NDNY 1997) it was held that dismissal of a claim for infringement of Canadian copyright was not warranted because US and Canada were signatories to the Berne Convention, which bars administrative formalities, and therefore there was no question of passing on acts of foreign government.
Contrast ITSI TV Productions, Inc v California Authority of Racing Fairs, Inc, 785 F Supp 854, 866 (ED Cal 1992).
But in the Commonwealth Potter v Broken Hill Pty Co Ltd appears to stand alone in using the act of state doctrine as an impediment to actions for infringement of foreign intellectual property rights.
In Voda v Cordis Corpn, above, Circuit Judge Newman, dissenting, rightly pointed out (at p 914) that not every governmental action and not every ministerial activity is an act of state.
In Mannington Mills, Inc v Congoleum Corpn, 595 F 2d 1287, 129394 (3d Cir 1979) the Court of Appeals for the Third Circuit was unable to accept the proposition that the mere issuance of patents by a foreign power constitutes an act of state.
It has been said that the grant of a national patent is an exercise of national sovereignty (Jenard Report on the Brussels Convention (OJ 1979 C59 pp 1, 36), and the European Court has emphasised that the issue of patents necessitates the involvement of the national administrative authorities (Case C 4/03 Gesellschaft fr Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) [2006] ECR I 6509, para [23]).
But in England the foreign act of state doctrine has not been applied to any acts other than foreign legislation or governmental acts of officials such as requisition, and it should not today be regarded as an impediment to an action for infringement of foreign intellectual property rights, even if validity of a grant is in issue, simply because the action calls into question the decision of a foreign official.
European law and intellectual property rights
Two important developments in European law have undermined any argument that there is a substantial policy reason for the view that actions for infringement of intellectual property rights cannot be brought outside the State in which they are granted or subsist.
First, article 22(4) of the Brussels I Regulation (formerly article 16(4) of the Brussels Convention) provides that, in proceedings concerned with the registration or validity of patents, trade marks, designs, or other similar rights required to be deposited or registered, the courts of the Member State in which the deposit or registration has been applied for, has taken place or is deemed to have taken place, have exclusive jurisdiction irrespective of the domicile of the defendant.
This is an exception to the general domicile rule of jurisdiction, and has to be construed strictly.
It applies only to intellectual property rights which are required to be deposited or registered, and does not apply to infringement actions in which there is no issue as to validity.
The European Court has emphasised that article 22(4) is only concerned with cases in which a question of validity arises.
It has made the following points: the basis for article 22(4) is that the courts of the Contracting State in which the deposit or registration has been applied for or made are best placed to adjudicate upon cases in which the dispute itself concerns the validity of the patent or the existence of the deposit or registration; but it does not apply in proceedings which do not concern the validity of the intellectual property right or the existence of the deposit or registration and these matters are not disputed by the parties, for example, a patent infringement action, in which the question of the validity of the patent allegedly infringed is not called into question; it would apply if the question of validity were raised by way of defence in infringement proceedings; the concern for the sound administration of justice is all the more important in the field of patents since, given the specialised nature of this area, a number of Contracting States have set up a system of specific judicial protection, to ensure that these types of cases are dealt with by specialised courts; the exclusive jurisdiction is also justified by the fact that the issue of patents necessitates the involvement of the national administrative authorities: Case C 4/03 Gesellschaft fr Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) [2006] ECR I 6509, para [16] et seq.
Article 22(4) does not in terms apply to intellectual property rights outside the Member States.
It is not necessary for present purposes to delve into the question whether it may be applied by analogy (or reflexively) to non Member States.
What it shows is that there is a fundamental distinction between intellectual property claims which involve the registration or validity of intellectual property rights which are required to be deposited or registered, and those which are not.
The second relevant piece of European legislation does not apply to the present proceedings because it came into force only on 11 January 2009, but it also shows clearly that there is no European public policy against the litigation of foreign intellectual property rights.
Regulation (EC) No 864/2007 of the European Parliament and of the Council on the law applicable to non contractual obligations (Rome II) applies wherever in the world a tort was committed.
It plainly envisages that actions may be brought in Member States for infringement of foreign intellectual property rights, including copyright.
Recital (26) states: Regarding infringements of intellectual property rights, the universally acknowledged principle of the lex loci protectionis should be preserved.
For the purposes of this Regulation, the term intellectual property rights should be interpreted as meaning, for instance, copyright, related rights, the sui generis right for the protection of databases and industrial property rights.
As regards choice of law, article 8 provides: Infringement of intellectual property rights 1.
The law applicable to a non contractual obligation arising from an infringement of an intellectual property right shall be the law of the country for which protection is claimed. 2.
In the case of a non contractual obligation arising from an infringement of a unitary Community intellectual property right, the law applicable shall, for any question that is not governed by the relevant Community instrument, be the law of the country in which the act of infringement was committed.
Other proposals
These developments in European law are mirrored in proposals within the American Law Institute, which favour adjudication of foreign intellectual property rights, at least where issues of validity are not in issue.
The American Law Institutes Intellectual Property: Principles Governing Jurisdiction, Choice of Law, and Judgments in Transnational Disputes (2008) apply to transnational civil disputes which involve (inter alia) copyrights, patents, trademarks, and other intellectual property rights (section 102) and note the controversy over the question of the justiciability of intellectual property rights (Reporters Notes 4 and 5).
Section 211 provides that the court must have subject matter and personal jurisdiction.
Comment b states: There is substantial sentiment that issues regarding the validity of a registered right, particularly a patent right, should be adjudicated in the courts of the State in which the right is registered.
Only this State is competent to cancel the registration.
Nonetheless, the Principles do not include a blanket prohibition on the adjudication of matters involving a foreign States registered rights, because separating adjudication of validity from infringement can have substantive ramifications.
Separate resolutions can prevent a court from hearing all of the evidence relevant to the action and from using its understanding of how a technology is utilized to inform its decision on the scope of the right.
Bifurcating validity and infringement can also increase the parties costs.
The draft Principles for Conflict of Laws in Intellectual Property, 2011, prepared by the European Union Max Planck Group on Conflict of Laws in Intellectual Property contain no specific provision for actions for infringement of foreign rights abroad, but it is implicit in the Principles that they envisage such actions: (a) the primary rule of jurisdiction in the Principles is habitual residence (Part 2, section 1), and (b) the primary law applicable to infringement is the law of the State for which protection is sought (Part 3, section 6).
The English and foreign authorities on justiciability of intellectual property
claims
A number of distinguished judges have expressed the view that the English court cannot, or should not, exercise jurisdiction in claims for infringement of foreign intellectual property rights, such as patents (Mlnlycke AB v Procter & Gamble Ltd [1992] 1 WLR 1112, 1118, per Dillon LJ; Plastus Kreativ AB v Minnesota Mining and Manufacturing Co [1995] RPC 438, 447, per Aldous J) or trade marks (LA Gear Inc Ltd v Gerald Whelan & Sons Ltd [1991] FSR 670, 674, per Mummery J).
But prior to the decision of the Court of Appeal in the present proceedings the only directly relevant decisions were the decisions of Vinelott J in Tyburn Productions Ltd v Conan Doyle [1991] Ch 75, of Laddie J in Coin Controls Ltd v Suzo International (UK) Ltd [1999] Ch 33, and of the Court of Appeal in Pearce v Ove Arup Partnership Ltd [2000] Ch 403.
In Tyburn Productions Ltd v Conan Doyle [1991] Ch 75 Vinelott J applied the Moambique rule in the light of Potter v Broken Hill Pty Co Ltd to what was in effect a prospective negative declaration relating to potential copyright infringement in the United States.
The action was by a television company for a declaration that the daughter of Sir Arthur Conan Doyle had no rights under the copyright, unfair competition, or trademark laws of the United States to prevent the company from distributing a Sherlock Holmes television film.
It was conceded on behalf of the television company that no distinction could be drawn for the purpose of the case law between patents and other intellectual property rights including copyright.
Vinelott J also supported his conclusion by reliance on the first limb of the rule in Philips v Eyre: infringement of an American copyright was not a tort in English law and the first limb could not be satisfied.
In R Griggs Group Ltd v Evans [2004] EWHC 1088 (Ch), [2005] Ch 153, Vinelott Js decision was criticised by Mr Peter Prescott QC, sitting as a Deputy High Court judge, who distinguished it by applying the exception to the Moambique rule whereby jurisdiction could be exercised if there were a contract or an equity between the parties: the judge allowed an amendment to a pleading on the basis that the court in the exercise of its equitable in personam jurisdiction could order a person who had acquired property situate abroad with sufficient notice of an earlier obligation to transfer the property to another to assign that property to its equitable owner, and that it would not be a breach of comity to adjudicate in personam on rights to foreign intellectual property (copyright) arising out of a contract.
Patents were the subject of the decision of Laddie J in Coin Controls Ltd v Suzo International (UK) Ltd [1999] Ch 33, in which he held that the court had no jurisdiction to try claims for infringement of German and Spanish patents for two reasons: the first was that the claims were not justiciable under the Moambique/Potter v Broken Hill Pty Co Ltd principles.
The second was that the claims were concerned with validity and within what is now article 22(4) of the Brussels I Regulation.
In Pearce v Ove Arup Partnership Ltd [2000] Ch 403 Mr Pearce claimed that the defendants had infringed his English and Dutch copyrights in his drawings and plans for a town hall by copying them in designing the Kunsthal in Rotterdam.
There was no issue about existence or validity of the copyrights.
The sole factual question was whether his drawings and plans had been copied.
On the question of the justiciability of the claim for infringement of the Dutch copyright, the court had personal jurisdiction over the defendants by virtue of their domicile in England (because they were additional parties for the purposes of what is now article 6(1) of the Brussels I Regulation).
It was not suggested that what is now article 22(4) applied, since the proceedings were for infringement of copyright and no question of deposit or registration arose.
The effect of what is now article 22(1)) was that the Moambique rule no longer applied within the Member States, and that where proceedings in relation to intellectual property fell outside what is now article 22(1), the general rules of jurisdiction applied, and there was no room for an objection of non justiciability.
The common law rule of choice of law applied because the relevant events occurred before section 11 of the Private International law (Miscellaneous Provisions) Act 1995 came into force in 1996, but (as mentioned above) the court disapplied the first limb of the rule in Phillips v Eyre in favour of the law of the country which with respect to that issue had the most significant relationship with the occurrence and with the parties, which was Dutch law.
Foreign authorities
In the United States the local action rule has been used as a ground for refusal to add claims for infringement of foreign patents to a United States patent infringement action: Voda v Cordis Corp, 476 F 3d 887 (Fed Cir 2007), discussed above in connection with the act of state doctrine.
The majority said (at pp 901 902): the local action doctrine informs us that exercising supplemental jurisdiction in this case appears to violate our own norms of what sovereigns ordinarily expect.
Courts derived the local action doctrine from the distinction between local and transitory actions beginning with Livingston v Jefferson, written by Justice John Marshall riding Circuit. 15 F. Cas. 660 (C.C.D.Va. 1811). [T]he local action doctrine served to prevent courts from adjudicating claims for trespass or title to real property.
The territorial limits of the rights granted by patents are similar to those conferred by land grants.
A patent right is limited by the metes and bounds of the jurisdictional territory that granted the right to exclude.
Therefore, a patent right to exclude only arises from the legal right granted and recognized by the sovereign within whose territory the right is located.
It would be incongruent to allow the sovereign power of one to be infringed or limited by another sovereign's extension of its jurisdiction.
Claims for infringement of foreign copyright have been held in New Zealand and South Africa to be non justiciable.
In Atkinson Footwear Ltd v Hodgskin International Services Ltd, (1994) 31 IPR 186 (High Court of New Zealand) Tipping J followed the Tyburn Productions Ltd decision and in Gallo Africa Ltd v Sting Music (Pty) Ltd [2010] ZASCA 96, 2010 (6) SA 329 the Supreme Court of Appeal of South Africa applied the decision of the Court of Appeal in the present case.
But in KK Sony Computer Entertainment v Van Veen (2006) 71 IPR 179 MacKenzie J in the High Court of New Zealand declined to follow Atkinson Footwear and held that a claim for infringement of foreign intellectual property rights (in that case breach of United Kingdom and Hong Kong copyright in PlayStation 2) was justiciable if no question of the existence or validity of those rights was in issue.
Conclusions on the justiciability question
The issue on this appeal is a very narrow one because the appellants do not take issue with the application of the Moambique rule to intellectual property so far as it is limited to patents and other intellectual property rights dependent on the grant or authority of a foreign State, and to cases where what is in issue is the validity of the patent, as opposed to its infringement.
As recorded by Mann J, the trial judge ([2008] EWHC 1878 (Ch), [2009] FSR 103, at [272]), the dispute relating to the United States copyright was as follows.
The subsistence of copyright and ownership of all drawings was accepted by Mr Ainsworth, although the existence of some drawings was disputed.
Infringement was denied so far as some drawings are concerned, on the footing that they were not copied, or not copied closely enough.
Because three dimensional items were produced, it was argued that under United States law there was no infringement because copyright in the drawings would not be infringed by the production of a utilitarian or functional device.
Lucasfilm claimed copyright in physical helmets and armour, which was disputed by Mr Ainsworth because they were said to be functional or utilitarian.
According to the judge, at one stage it had also been suggested that if there was copyright it was vested in Mr Ainsworth and not in Lucasfilm, but this point was not ultimately persisted in.
Although at trial the infringement arguments sometimes merged into a subsistence argument, the substantial dispute has always been about the ownership of the relevant copyrights and their infringement rather than about their subsistence.
Were these claims justiciable? Mr Ainsworth argued that the principle behind the Moambique rule (as extended in Hesperides to include actions in which no issue of title arises) still subsists and applies to claims for infringement of all foreign intellectual property rights, including copyright, because such claims are essentially local and must be brought in the place where the rights have been created, irrespective as to whether there is any claim to title.
But to describe the claims as local is simply to beg the question whether as a matter of law they must be brought in the place where the rights originate and are effective.
We have come to the firm conclusion that, in the case of a claim for infringement of copyright of the present kind, the claim is one over which the English court has jurisdiction, provided that there is a basis for in personam jurisdiction over the defendant, or, to put it differently, the claim is justiciable.
It is clear that much of the underpinning of the Moambique rule and the decision in Potter v Broken Hill Pty Co Ltd has been eroded.
All that is left of the Moambique rule (except to the extent that it is modified by the Brussels I Regulation) is that there is no jurisdiction in proceedings for infringement of rights in foreign land where the proceedings are principally concerned with a question of the title, or the right to possession, of that property.
So also article 22(1) of the Brussels I Regulation does not apply to actions for damages for infringement of rights in land.
The basis for what remains of the rule was said by the House of Lords in the Moambique case to be that controversies should be decided in the country of the situs of the property because the right of granting it was vested in the ruler of the country and in the Hesperides case to be the maintenance of comity and the avoidance of conflict with foreign jurisdictions.
It is possible to see how the rationale of the Moambique rule can be applied to patents, at any rate where questions of validity are involved.
For example the claims might touch on the validity of patents in sensitive areas, such as armaments, and that no doubt is part of the rationale for article 22(4) of the Brussels I Regulation.
But it is very difficult to see how it could apply to copyright.
It is true that copyright can involve delicate political issues.
Thus in a very different context Brightman J had to deal with the international consequences for copyright protection of the samizdat circulation in the Soviet Union of Solzhenitsyns August 1914 without having been passed by the Soviet censor: Bodley Head Ltd v Flegon [1972] 1 WLR 680.
But such cases can be dealt with by an application of the principles of public policy in appropriate cases.
Nor do the additional matters relied on in Potter v Broken Hill Pty Co Ltd lead to any different conclusion.
The rule in Phillips v Eyre has gone.
There is no room for the application of the act of state doctrine in relation to copyright in this case, even if (contrary to the view expressed above) actions of officials involved with registration and grant of intellectual property rights were acts of state.
The requirement to apply for copyright registration in the United States is limited to the copyright in any United States work which in practice means that published works first published outside the United States are exempted from compliance with US registration provisions.
In the present case the copyrights were treated as United States works and were registered.
Registration is a pre requisite to proceedings in the United States: United States Copyright Act, section 411.
But the unchallenged evidence before the judge in this case was that registration was not a prerequisite to subsistence but only to suit, and it was possible to register at the time of suit.
Consequently the provision is purely procedural.
That has been confirmed recently by the United States Supreme Court, which has held that federal courts have subject matter jurisdiction to approve a class action settlement where some of the authors are not registered, because section 411 is not a jurisdictional rule: Reed Elsevier Inc v Muchnick, 130 S Ct 1237 (2010).
There is no doubt that the modern trend is in favour of the enforcement of foreign intellectual property rights.
First, article 22(4) of the Brussels I Regulation only assigns exclusive jurisdiction to the country where the right originates in cases which are concerned with registration or validity of rights which are required to be deposited or registered and does not apply to infringement actions in which there is no issue as to validity.
This can rarely, if ever, apply to copyright.
Second, the Rome II Regulation also plainly envisages the litigation of foreign intellectual property rights and, third, the professional and academic bodies which have considered the issue, the American Law Institute and the Max Planck Institute, clearly favour them, at any rate where issues of validity are not engaged.
There are no issues of policy which militate against the enforcement of foreign copyright.
States have an interest in the international recognition and enforcement of their copyrights, as the Berne Convention on the International Union for the Protection of Literary and Artistic Works shows.
Many of the points relied on by the Court of Appeal to justify the application of the Moambique rule in this case as a matter of policy would apply to many international cases over which the English court would have jurisdiction and would in principle exercise it, especially the suggestion that questions of foreign law would have to be decided.
It was also said by the Court of Appeal that enforcement of foreign intellectual property law might involve a clash of policies such that a defendant may be restrained by injunction from doing acts in this country which are lawful in this country.
But such an injunction will be granted only if the acts are anticipated to achieve fruition in another country, and there is no objection in principle to such an injunction.
Nor is there any objection in principle, as the Court of Appeal thought, to a restraint on acts in another country.
Extra territorial injunctions are commonly granted here against defendants subject to the in personam jurisdiction.
The Court of Appeal also thought that it was relevant that there was no international regime for the mutual recognition of copyright jurisdiction and of copyright judgments, but this is no reason for the English court refusing to take jurisdiction over an English defendant in a claim for breach of foreign copyright.
It follows that Tyburn Productions Ltd v Conan Doyle was wrongly decided and that on this aspect the decision of the Court of Appeal in these proceedings cannot stand.
The Owusu v Jackson point
If the Court of Appeal was right to hold that the claim was in principle non justiciable, a further question would arise whether nevertheless, in the light of the decision of the European Court in Case C 281/02 Owusu v Jackson [2005] ECR I 1383, the English court must grant a remedy against Mr Ainsworth, who is domiciled in England for the purposes of what is now Article 2 of the Brussels I Regulation.
In Owusu v Jackson the European Court decided that an action in England arising out of events in Jamaica could not be stayed as against an English defendant in favour the Jamaican courts on the ground of forum non conveniens.
That was because the English defendant was domiciled in a Member State for the purposes of article 2, and the assignment of jurisdiction to that State applied also as between Contracting and non Contracting States (now Member and non Member States).
In this case the Court of Appeal distinguished Owusu v Jackson on the basis that it did not apply to cases where the English court held that it had no subject matter jurisdiction.
Lucasfilm argues that it would be inconsistent with the Owusu principle for the English court to decline to decide a particular issue on the ground that it is not justiciable under English law, because (in particular) the Brussels I Regulation is concerned with subject matter jurisdiction as well as personal jurisdiction; it is concerned with achieving the uniform application of common principles regarding jurisdiction across the European Community, and it would not be consistent with that object if national courts were able to decline jurisdiction on principles of non justiciability.
Although in argument it was stressed that the argument was one of lack of jurisdiction rather than non justiciability, in substance the real point of the argument is that if Lucasfilm were right, then the Brussels I Regulation would require the English court to adjudicate on other matters which have hitherto been regarded as non justiciable, such as the transactions of foreign sovereign states which were held to be non justiciable in Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888, 931; and that to require the English court to so adjudicate would be contrary to international law (or, perhaps more accurately, put the United Kingdom in breach of international law).
In view of the conclusion on the main point, this issue (on which a reference to the European Court might be required) does not arise and there is no need to express a view on it.
We would therefore allow the appeal on the justiciability issue.
LORD MANCE
For the reasons given by Lord Walker and Lord Collins in their combined judgment, I agree that the appeal fails on the first issue (sculpture) and succeeds on the second (justiciability of a claim for infringement of a foreign copyright).
I express no view about the application or scope of the doctrine of act of state in relation to issues of validity of foreign intellectual property rights which (unlike copyright) may be said to depend upon state grant.
| The appeal raises two distinct legal issues: (1) The definition of sculpture in the Copyright, Designs and Patents Act 1988, and, in particular, the correct approach to three dimensional objects that have both an artistic purpose and a utilitarian function; (2) Whether an English court may exercise jurisdiction in a claim against persons domiciled in England for infringement of copyright committed outside the European Union in breach of the copyright law of that country? This appeal is concerned with intellectual property rights in various artefacts made for use in the first Star Wars film, Star Wars Episode IV A New Hope.
The most important was the Imperial Stormtrooper helmet.
It has been treated as decisive for the outcome of the case.
As the trial judge put it, one of the most abiding images in the film was that of the Imperial Stormtroopers.
The films story line and characters were conceived by George Lucas.
Between 1974 and 1976 his concept of the Imperial Stormtroopers as threatening characters in fascist white armoured suits was given visual expression in drawings and paintings by an artist, Mr Ralph McQuarrie, and eventually three dimensional form by Mr Andrew Ainsworth.
He produced several prototype vacuum moulded helmets.
Once Mr Lucas had approved the final version, Mr Ainsworth made 50 helmets for use in the film.
The Appellants (here referred to collectively as Lucasfilm) own copyrights in the artistic works created for the Star Wars films.
They have built up a successful licensing business, including licensing models of Imperial Stormtroopers.
In 2004 Mr Ainsworth used his original tools to make versions of the Imperial Stormstrooper helmet and armour for sale to the public. (The second respondent is a company owned by Mr Ainsworth; for practical purposes, he can be treated as the sole respondent).
He sold between $8,000 and $30,000 of the goods in the United States.
Lucasfilm obtained judgment against him in the United States.
It also commenced proceedings in the English High Court, including claims for infringement of English copyright and claims under US copyright law.
By the time of the Supreme Court hearing, Lucasfilm claimed only that the helmets qualified for copyright protection under English law as sculptures and not as works of artistic craftsmanship.
In terms of section 4 of the Copyright Designs and Patents Act 1988, copyright subsists in, amongst other things, original artistic works, which includes a sculpture, irrespective of artistic quality.
Whether a helmet was a sculpture is significant for two reasons.
If it is, any copying of the helmets which Mr Ainsworth had originally produced would infringe Lucasfilms copyright.
It is also relevant for the defences which are available.
To produce a helmet by working from a drawing of it infringes copyright in the drawing.
However, it is not an infringement of any copyright in a design document which records a design for anything other than an artistic work to make an article to the design or to copy an article made to the design: section 51 1988 Act.
If the helmet did not qualify as sculpture, and was therefore not an artistic work, Mr Ainsworth had a defence to an English copyright action based on infringement of Mr McQuarries graphics.
The High Court dismissed the claims for infringement of English copyright: the helmet was not a work of sculpture and therefore Mr Ainsworth had a defence under section 51.
It held, however, that the United States copyright claims were justiciable and that US copyright had been infringed.
The Court of Appeal allowed Mr Ainsworths appeal.
It agreed that the helmet was not a work of sculpture but held that the US copyright claims were not justiciable.
Lucasfilm appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
It holds that the helmets were not sculptures but that the US copyright claims were justiciable in English proceedings.
Lord Walker and Lord Collins give a joint opinion, with which the other members of the Court agree.
Sculpture issue The court reviews the legislative history of the current statutory provisions and previous authorities as to the meaning of sculpture: [14] [35].
In the High Court, the judge had formulated various guidelines as to the meaning of sculpture.
For example, some regard must be had to the normal use of the word sculpture.
The concept can apply to things going beyond what one would normally expect to be art, but it is inappropriate to stray too far from what would normally be regarded as sculpture.
Not every three dimensional representation of a concept qualifies: [36] [37].
Lucasfilm contended that the helmet was sculpture as it had no practical function at all.
Its purpose was wholly artistic, to make a visual impression on the filmgoer.
That was not, however, how the trial judge and the Court of Appeal had viewed matters.
Mann J found the helmets to be a mixture of costume and prop and that their primary function was utilitarian, namely to express an idea as part of character portrayal in the film.
He held that this lacked the necessary quality of artistic creation required of a sculpture.
This type of judgmental conclusion was one with which appellate courts should be slow to interfere, as Lord Hoffmann observed in Designers Guild Ltd v Russell Williams (Textiles) Ltd [2000] 1 WLR 2416: [40] [45].
The judge did not err in law or reach an obviously untenable conclusion: [46].
It would not accord with the normal use of language to apply the term sculpture to, for example, a 20th century military helmet used in the making of a film, however great its contribution to the artistic effect of the finished film.
The argument for applying the term to an Imperial Stormtrooper helmet was stronger, because of the imagination that went into the concept of the Stormtroopers.
But it remained the Star Wars film itself that was the work of article The helmet was utilitarian in the sense that it was an element in the process of production of the film: [44].
The Court noted that the law did not apply an elephant test, but instead a multi factoral approach: [47].
Justiciability of foreign copyright claim The Court of Appeal had held that the common law rule in British South Africa Co v Companhia de Moambique [1893] AC 602 that an English court had no jurisdiction to entertain an action for the determination of title to, or the right of possession of, foreign land, or the recovery of damages for trespass to such land, was an example of a general principle which applied to claims for infringement of foreign intellectual property rights.
The Supreme Court concludes that, provided there is a basis for in personam jurisdiction over the defendant, an English court does have jurisdiction to try a claim for infringement of copyright of the kind involved in the present action: [105].
|
Where an international commercial contract contains an agreement to resolve disputes by arbitration, at least three systems of national law are engaged when a dispute occurs.
They are: the law governing the substance of the dispute; the law governing the agreement to arbitrate; and the law governing the arbitration process.
The law governing the substance of the dispute is generally the law applicable to the contract from which the dispute has arisen.
The law governing the arbitration process (sometimes referred to as the curial law) is generally the law of the seat of the arbitration, which is usually the place chosen for the arbitration in the arbitration agreement.
These two systems of law may differ from each other.
Each may also differ from the law which governs the validity and scope of the arbitration agreement.
The central issue on this appeal concerns which system of national law governs the validity and scope of the arbitration agreement when the law applicable to the contract containing it differs from the law of the seat of the arbitration.
This is an issue which has long divided courts and commentators, both in this country and internationally.
On one side there are those who say that the law that governs a contract should generally also govern an arbitration agreement which, though separable, forms part of that contract.
On the other side there are those who say that the law of the chosen seat of the arbitration should also generally govern the arbitration agreement.
There have been Court of Appeal decisions falling on either side of this divide: Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102 and C v D [2007] EWCA Civ 1282; [2008] Bus LR 843.
In its judgment in the present case [2020] EWCA Civ 574, the Court of Appeal considered that the time has come to seek to impose some order and clarity on this area of the law (para 89) and held that, unless there has been an express choice of the law that is to govern the arbitration agreement, the general rule should be that the arbitration agreement is governed by the law of the seat, as a matter of implied choice, subject only to any particular features of the case demonstrating powerful reasons to the contrary (para 91).
On this appeal the appellant argues that this conclusion is heterodox and wrong and that the correct approach is that, in the absence of strong indications to the contrary, a choice of law for the contract is a choice of that law to govern the arbitration agreement.
The appellant contends that in the present case the parties have chosen Russian law to govern the construction contract between them and that the implication that they intended the arbitration agreement included in that contract to be governed by Russian law is not displaced by their choice of London as the seat of arbitration.
If that issue is decided in its favour, the appellant goes on to argue that the Court of Appeal was wrong to grant an injunction to restrain it from pursuing proceedings in Russia in alleged breach of the arbitration agreement.
The appellants case is that, because the arbitration agreement is governed by Russian law, the Russian courts are best placed to decide whether or not the arbitration agreement applies to the claim which the appellant has brought against the respondent in Russia and that, as a matter of comity or discretion, the English courts ought not to interfere with those proceedings by granting an anti suit injunction. II.
Factual background
(i) The construction contract
On 1 February 2016 a power plant situated at Berezovskaya in Russia was severely damaged by fire.
The appellant (Chubb Russia) is a Russian insurance company which had insured the owner of the power plant, a company now named PJSC Unipro (Unipro), against such damage.
Chubb Russia is part of the Chubb Group, which is the worlds largest publicly traded property and casualty insurer.
The company responsible for the design and construction of the power plant under a contract made with Unipro in May 2011 was a Russian company called CJSC Energoproekt.
The respondent (Enka) was engaged by Energoproekt as one of many sub contractors involved in the construction project.
Enka is a global engineering and construction company incorporated and based in Turkey with a substantial presence and history of operations in Russia, amongst other countries.
The contract between Energoproekt and Enka dated 27 June 2012 (the construction contract) is a substantial document running to 97 pages, with around 400 pages of attachments.
It was executed in parallel Russian and English versions (though it provides that the Russian language version has precedence).
The construction contract contains, in article 50, a dispute resolution clause in these terms: Resolution of disputes 50.1.
The Parties undertake to make in good faith every reasonable effort to resolve any dispute or disagreement arising from or in connection with this Agreement (including disputes regarding validity of this agreement and the fact of its conclusion (hereinafter Dispute) by means of negotiations between themselves.
In the event of the failure to resolve any Dispute pursuant to this article within 10 (ten) days from the date that either Party sends a Notification to the opposite Party containing an indication of the given Dispute (the given period may be extended by mutual consent of the Parties) any Party may, by giving written notice, cause the matter to be referred to a meeting between the senior managements of the Contractor and Customer (in the case of the Contractor senior management shall be understood as a member of the executive board or above, in the case of Customer, senior management shall be understood as general directors of their respective companies).
The parties may invite the End Customer to such Senior Management Meeting.
Such meeting shall be held within fourteen (14) calendar days following the giving of a notice.
If the matter is not resolved within twenty (20) calendar days after the date of the notice referring the matter to appropriate higher management or such later date as may be unanimously agreed upon, the Dispute shall be referred to international arbitration as follows: the Dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce, appointed in accordance with these Rules, language, and the Dispute shall be settled by three arbitrators the arbitration shall be conducted in the English the place of arbitration shall be London, England. in 50.2.
Unless otherwise explicitly stipulated this Agreement, the existence of any Dispute shall not give the Contractor the right to suspend Work. 50.3.
Not used. 50.4.
Not used. 50.5.
All other documentation such as financial documentation and cover documents for it must be presented in Russian.
On 21 May 2014 Energoproekt transferred its rights and obligations under the construction contract to Unipro pursuant to an assignment agreement made between Energoproekt, Unipro and Enka.
By clause 7.5 of that agreement, the parties agreed that disputes between Unipro and Enka were to be finally and exclusively resolved by arbitration in accordance with the provisions of article 50.1 of the construction contract.
After the fire in February 2016 Chubb Russia paid 26.1 billion roubles (approximately US$400m) to Unipro under its property insurance policy and thereby became subrogated to any rights of Unipro to claim compensation from third parties for the damage caused by the fire.
(ii) The Russian proceedings
On 25 May 2019 Chubb Russia filed a claim in the Moscow Arbitrazh (ie commercial) Court against Enka and ten other defendants whom it claimed were jointly liable for the damage caused by the fire.
Chubb Russia was required by the Moscow court to provide further details of its claims, following which the claims were accepted by the court on 3 September 2019.
On 17 September 2019 Enka filed a motion in the Russian proceedings to have Chubb Russias claim against it dismissed (or left without consideration) pursuant to article 148(5) of the Arbitrazh Procedure Code, which is intended to give effect to Russias obligations under article II(3) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) to refer to arbitration parties who have agreed to submit to arbitration a dispute of which a court of a contracting state is seized.
Enka argued that the claim against it fell within the scope of the arbitration agreement contained in article 50.1 of the construction contract and ought therefore to be resolved, not by the Russian courts, but by an arbitration conducted in accordance with that provision in London.
The Moscow court decided to deal with Enkas motion at the same time as the merits of Chubb Russias claims at a hearing fixed for 22 January 2020.
Following that hearing, which continued on two later dates, on 18 March 2020 the judge in the Russian proceedings announced her decisions (a) not to grant Enkas motion to refer the claim against it to arbitration and (b) to dismiss Chubb Russias claims against all the defendants on the merits.
The reasons for those decisions were given in a written judgment handed down on 6 May 2020.
Chubb Russia and Enka have both filed appeals in the Russian proceedings (in relation to the decision on the merits and the decision to refuse Enkas application, respectively).
(iii) The English proceedings
Meanwhile, Enka had on 16 September 2019 brought an arbitration claim in the Commercial Court in London seeking an anti suit injunction to restrain Chubb Russia from further pursuing the Russian proceedings against Enka on the ground that this was a breach of the arbitration agreement in article 50.1 of the construction contract.
Enka also sought injunctions against other members of the Chubb Group said to be caught up in Chubb Russias breach of the arbitration agreement, namely Chubb UK Ltd, Chubb European Group SE (Chubb Europe) and the ultimate parent company of the Chubb Group which is incorporated in Switzerland.
On 15 October 2019 Carr J declined to grant an interim anti suit injunction but gave directions for an expedited trial.
The trial took place on 11 and 12 December 2019 before Andrew Baker J. He gave judgment on 20 December 2019, dismissing Enkas claims against all the defendants.
His primary reason for doing so was that he considered the appropriate forum to decide whether Chubb Russias claim against Enka falls within the arbitration agreement to be the Moscow Arbitrazh Court and not the English Commercial Court.
Enka applied to the Court of Appeal for permission to appeal from this decision as it applied to Chubb Russia (alone).
The application was granted on 6 February 2020 and the appeal was heard on 7 and 8 April 2020.
On 29 April 2020 the Court of Appeal (Flaux, Males and Popplewell LJJ) allowed Enkas appeal and issued an anti suit injunction restraining Chubb Russia from continuing the Russian proceedings.
(iv) The arbitration proceedings
On 10 January 2020 Enka gave notice to Chubb Russia and Chubb Europe of a Dispute under article 50 of the construction contract.
This was followed on 11 March 2020 by a request for arbitration filed with the International Chamber of Commerce (ICC) in which Enka sought a declaration that Chubb Russias claims in the Russian court fall within the scope of the arbitration agreement and damages.
On 22 May 2020 Chubb Russia and Chubb Europe filed their answer to the request for arbitration in which they challenged the jurisdiction of the arbitrators and denied that Enka is entitled to any of the relief claimed.
On 12 June 2020 the ICC notified the parties of the appointment of Mr Michael Brindle QC as president of the arbitral tribunal.
The other members of the tribunal are Lord Hoffmann, nominated by Enka, and Lord Mance, nominated by Chubb Russia and Chubb Europe (without prejudice to their objections to the jurisdiction of the tribunal).
(v) This appeal
On 26 May 2020 Chubb Russia applied to the Supreme Court for permission to appeal from the decision of the Court of Appeal.
On 5 June 2020 this court granted permission to appeal and also stayed the anti suit injunction upon Chubb Russia giving suitable undertakings to protect Enkas position pending the outcome of the appeal.
The appeal was expedited and heard over two days on 27 and 28 July 2020.
It is a striking feature of the English proceedings that the trial, the appeal to the Court of Appeal and the appeal to the Supreme Court have all been heard in just over seven months.
This is a vivid demonstration of the speed with which the English courts can act when the urgency of a matter requires it. III.
The English conflict of laws rules
(i) The Rome I Regulation
Where a court of England and Wales has to decide which system of national law governs a contract, the court must normally apply the provisions of the Rome I Regulation (a shorthand for Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations).
By article 1(1), the Rome I Regulation applies, in situations involving a conflict of laws, to contractual obligations in civil and commercial matters.
Article 1(2)(e), however, excludes from its scope arbitration agreements and agreements on the choice of court.
Pursuant to article 3, a contract to which the Rome I Regulation applies is governed by the law chosen by the parties, where the choice is made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case.
In determining whether the parties have made a choice of law, the court should adopt a broad Regulation based approach, not constrained by national rules of contractual interpretation: see eg Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 32 048.
Article 4 contains rules for determining the law applicable to the contract to the extent that no such choice has been made.
Article 4(1) sets out presumptions or prima facie rules that apply in relation to particular types of contract.
However, where it is clear from the circumstances of the case that the contract is manifestly more closely connected with another country, or where none of the prima facie rules applies, articles 4(3) and 4(4) respectively provide for the contract to be governed by the law of the country with which it is most closely connected.
(ii) The common law rules
Because the Rome I Regulation does not apply to arbitration agreements, an English court which has to decide which system of law governs the validity, scope or interpretation of an arbitration agreement must apply the rules developed by the common law for determining the law governing contractual obligations.
Those rules are that a contract (or relevant part of it) is governed by: (i) the law expressly or impliedly chosen by the parties; or (ii) in the absence of such choice, the law with which it is most closely connected: see eg Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), rule 64(1).
In view of the similarity between the common law rules and the rules provided by the Rome I Regulation, cases in which the two regimes would yield different results are likely to be rare.
But in principle, where an English court has to determine which law governs an arbitration agreement incorporated in a contract, it is the common law rules alone which because of the exclusion of arbitration agreements from the scope of the Rome I Regulation by article 1(2)(e) the court must apply.
(iii) Party choice
The starting point at common law (as under the Rome I Regulation) is that contracting parties are free to choose the system of law which is to govern their contract, provided only that their choice is not contrary to public policy.
The court must therefore construe the contract to see whether the parties have agreed on a choice of law to govern it.
As Lord Diplock explained in Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, 603: The first stage, therefore, when any question arises between parties to a contract as to the proper law applicable to it, is to determine whether the parties intended by their contract to exercise any choice at all and, if they did, to determine what was the system of law which they selected.
In determining this the English court applies the ordinary rules of English law relating to the construction of contracts.
The exclusion of arbitration agreements from the scope of the Rome I Regulation by article 1(2)(e) does not prevent an arbitration clause from being taken into consideration for the purposes of article 3 in determining whether there has been a choice of the law applicable to other parts of the contract, as noted in Giuliano and Lagarde, Council Report on the Convention on the law applicable to contractual obligations (OJ EU No C 282 1) at p 12.
By the same token, the fact that other parts of the contract are within the scope of the Rome I Regulation does not prevent them from being taken into consideration in determining in accordance with the English common law rules of construction whether the parties have agreed on a choice of law to govern the arbitration clause.
Like any question of contractual interpretation, this is a unitary exercise which requires the court to construe the contract, including the arbitration clause, as a whole.
(iv) Law of the forum
Where an English court has to decide whether a contract which is said to be governed by a foreign system of law is valid, the court applies the putative applicable law, in other words the law which would govern the contract if it were validly concluded.
At the prior stage, however, of determining what is the applicable law or putative applicable law of the contract, all the leading authorities proceed on the basis that it is English rules of law which apply, as stated by Lord Diplock in the passage quoted above.
In the Tunisienne case, for example, a contract for the transport of oil in several shipments contained a provision (clause 13) that the contract shall be governed by the laws of the flag of the vessels carrying the goods .
The first question which the House of Lords had to decide was whether, in the circumstances of the case which included the fact that vessels flying different flags were used to ship the oil, this clause conveyed a choice of French law to govern the contract, as the shipowners argued.
To answer that question the House did not apply the rules of French law governing the interpretation of contracts, but (only) those of English law.
The same approach was adopted in Whitworth Street Estates (Manchester) Ltd v James Miller & Partners Ltd [1970] AC 583, where the House of Lords held that subsequent conduct of the parties could not be looked at to construe a contract in order to decide whether it was intended to be governed by English (rather than Scottish) law.
The exclusion of subsequent conduct as an aid to interpretation is a consequence of the objective principle of interpretation in English law, which searches not for what the parties subjectively thought or intended the effect of their contract to be but for what reasonable people in their position would be understood to have meant by the language used.
Although in the Whitworth Street Estates case English law was one putative applicable law of the contract, there is no suggestion in the speeches that this was the basis for applying English principles of contractual interpretation.
In our view, it is both consistent with authority and sound in principle to apply English law as the law of the forum to ascertain whether the parties have agreed on the law which is to govern their contract (and, if not, what law governs it in the absence of agreement).
To apply any other law for this purpose would introduce an additional layer of complexity into the conflict of laws analysis without any clear justification and could produce odd or inconsistent results.
As the authors of Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012) observe, at para 32 036, by reference to a case in which subsequent conduct was taken into account to construe a contract found to be governed by Chilean law because it was admissible under that law: But it would be very odd if when a question arose as to whether a contract was governed by English law or Chilean law, subsequent conduct would not be taken into account in determining whether a choice of English law could be inferred, but it could be taken into account in determining whether Chilean law applied.
The Court of Appeal in the present case asserted (although without explanation) that, in construing the contract to determine whether a choice of governing law applies to an arbitration agreement within it, the court should apply the principles of construction of the main contract law if different from English law (see paras 90 and 105(2) of the judgment).
We do not consider this to be correct.
As we have indicated, the proper approach in determining whether there has been a choice of law is to apply English law as the law of the forum.
Where the question is whether there has been a choice of the law applicable to an arbitration clause, the relevant English law rules are the common law rules which require the court to interpret the contract as a whole applying the ordinary English rules of contractual interpretation.
The main contract law, if different, has no part to play in the analysis.
(v) Express or implied choice
Many of the cases applying the common law rules distinguish between a choice of law which is express or implied.
Article 3 of the Rome I Regulation draws a similar distinction in referring to a choice which is made expressly or clearly demonstrated.
The terminology is useful in reflecting the fact that an agreement on a choice of law to govern a contract, like any contractual term, may be explicitly articulated or may be a matter of necessary implication or inference from other terms of the contract and the surrounding circumstances.
The distinction, however, is not a sharp one: language may be more or less explicit and the extent to which a contractual term is spelt out in so many words or requires a process of inference to identify it is a matter of degree.
Determining whether the parties have agreed on a choice of law to govern their contract is in every case a question of interpretation.
It is also important to keep in mind that whether a choice is described as express or implied is not a distinction on which any legal consequence turns.
An implied choice is still a choice which is just as effective as a choice made expressly.
(vi) The default rule
Where a choice of law cannot be identified by interpreting the contract, the approach of the common law was at one time to presume that the parties must nevertheless have intended their contract to be governed by some particular system of national law and to impute a relevant intention to them.
This is reflected, for example, in the first edition of Diceys treatise on the conflict of laws, which defined the law governing a contract as the law or laws to which the parties intended, or may fairly be presumed to have intended, to submit themselves: Dicey, A Digest on the Law of England with reference to the Conflict of Laws, 1st ed (1896), rule 143.
In the second half of the 20th century, however, the test of presumed intention came gradually to be superseded by an acknowledgement that at this stage of the analysis the court is no longer concerned with intention at all and is applying a positive rule of law, with the rule being that the contract is governed by the system of law with which it has its closest and most real connection: see Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), paras 32 006 32 007; Hellenic Steel Co v Svolamar Shipping Co Ltd (The Komninos S) [1991] 1 Lloyds Rep 370, 374 (Bingham LJ).
Lord Diplock stated the modern position clearly in the Tunisienne case, at pp 603 604: If, applying these rules [sc the ordinary rules of English law relating to the construction of contracts], the court reaches the conclusion that the parties did not intend to exercise any choice of proper law, or is unable to identify what their choice was, it becomes necessary for the court to proceed to the second stage, of determining itself what is the proper law applicable.
In doing so, the court applies the English rule of the conflict of laws that the proper law is that system of law with which the transaction has its closest and most real connection: Bonython v Commonwealth of Australia [1951] AC 201, 219.
My Lords, this is applied as a positive rule of English law.
It is applied not because it is the choice of the parties themselves but because they never intended to exercise their liberty to make a choice or, if they did, they have failed to make their choice clear.
Whether the parties have agreed on a choice of law is a matter which inevitably may sometimes give rise to differences of opinion.
In the Tunisienne case three members of the House of Lords appellate committee (Lord Morris of Borth y Gest, Viscount Dilhorne and Lord Diplock) held that clause 13 (quoted earlier) was in its context to be construed as an agreement that French law was to govern the contract.
The other two members of the committee (Lord Reid and Lord Wilberforce) did not consider that the clause could be so construed but still concluded at the second stage of the analysis that French law was the governing law.
In Amin Rasheed Shipping Corpn v Kuwait Insurance Co (The Al Wahab) [1984] AC 50, Lord Diplock (with whose speech three of the other law lords agreed) applied the principles he had identified in the Tunisienne case to determine whether an insurance contract was governed by English law or the law of Kuwait.
He concluded (at p 62) that on their proper construction the provisions of the contract, taken as a whole, by necessary implication point ineluctably to the conclusion that the intention of the parties was that their mutual rights and obligations under it should be determined in accordance with the English law of marine insurance.
Lord Wilberforce reached the same result on the basis that English law was the system of law with which the contract had the closest and most real connection.
(vii) Splitting the contract
English common law (along with other legal systems) recognises the possibility that different parts of a contract may be governed by different laws a concept known in conflict of laws theory as dpeage.
This is also expressly provided for in the Rome I Regulation.
Article 3(1) includes the statement: By their choice the parties can select the law applicable to the whole or to part only of the contract.
There are many English cases in which courts have contemplated that different obligations in the same contract may be governed by different laws.
The earliest such case to which we were referred was the decision of the Court of Appeal in Jacobs, Marcus & Co v Crdit Lyonnais (1884) 12 QBD 589.
There appear to be few cases, however, in which such a situation has been found to exist (although one such case is Libyan Arab Foreign Bank v Bankers Trust [1989] QB 728, 746 747).
No doubt this is because, as Lord MacDermott said in Kahler v Midland Bank Ltd [1950] AC 24 at 42, the courts of this country will not split the contract in this sense readily or without good reason.
It is generally reasonable to assume that parties would intend or expect their contract to be governed by a single system of law.
To apply different systems of law to different parts of a contract has the potential to give rise to inconsistency and uncertainty.
This is particularly so where questions about the validity or enforceability of contractual obligations arise.
As observed in Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012) at para 32 026: Even if different parts of a contract are said to be governed by different laws, it would be highly inconvenient and contrary to principle for such issues as whether the contract is discharged by frustration, or whether the innocent party may terminate or withhold performance on account of the other partys breach, not to be governed by a single law.
The assumption that, unless there is good reason to conclude otherwise, all the terms of a contract are governed by the same law applies to an arbitration clause, as it does to any other clause of a contract.
As Mustill J said in Black Clawson International Ltd v Papierwerke Waldhof Aschaffenburg AG [1981] 2 Lloyds Rep 446, 456: In the ordinary way, this [sc the law of the arbitration agreement] would be likely to follow the law of the substantive contract.
An arbitration clause may, however, more readily than other clauses be governed by a different law.
One reason for this is that an arbitration clause has a different subject matter and purpose from the rest of the contract.
It is concerned not with establishing substantive rights and obligations of the parties but with providing a mechanism by which a dispute about such rights and obligations will be resolved.
A second reason flows from the principle of separability of the arbitration agreement.
This is a cardinal principle of arbitration law, codified in section 7 of the Arbitration Act 1996.
Section 7 provides that, unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement shall not be regarded as invalid, non existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement.
As counsel for Chubb Russia emphasised, the principle of separability is not a principle that an arbitration agreement is to be treated as a distinct agreement for all purposes but only that it is to be so treated for the purpose of determining its validity or enforceability.
That is clear from the words for that purpose in section 7 of the 1996 Act.
Thus, the separability principle does not require that an arbitration agreement should be treated as a separate agreement for the purpose of determining its governing law.
Nevertheless, the principle is relevant to the conflict of laws analysis because it alleviates the difficulty identified by Dicey, Morris & Collins in the passage quoted at para 39 above in treating different parts of a contract as governed by different laws.
Where the separability principle is recognised by the putative applicable law of the arbitration agreement, no inconsistency will arise from treating issues such as whether the contract is discharged by frustration, or whether the innocent party may terminate or withhold performance on account of the other partys breach, or whether the contract has been rescinded for misrepresentation, as governed by a different law from the law of the arbitration agreement, as the resolution of those issues will not affect the validity or enforceability of the arbitration agreement.
The possibility that an arbitration agreement may be governed by a different system of law from the contract of which it forms part is also implicitly recognised by the exclusion of arbitration agreements from the scope of the Rome I Regulation, with the consequence that the law applicable to an arbitration agreement and the law applicable to the rest of the contract must be determined independently by different conflict of laws regimes. IV.
Choice of law for the whole contract Significance of a governing law clause (i)
It is rare for the law governing an arbitration clause to be specifically identified (either in the arbitration clause itself or elsewhere in the contract).
It is common, however, in a contract which has connections with more than one country (or territory with its own legal system) to find a clause specifying the law which is to govern the contract.
A typical clause of this kind states: This Agreement shall be governed by and construed in accordance with the laws of [name of legal system].
Where the contract also contains an arbitration clause, it is natural to interpret such a governing law clause, in the absence of good reason to the contrary, as applying to the arbitration clause for the simple reason that the arbitration clause is part of the contract which the parties have agreed is to be governed by the specified system of law.
As stated in Redfern and Hunter: Law and Practice of International Commercial Arbitration, 6th ed (2015) at para 3.12: Since the arbitration clause is only one of many clauses in a contract, it might seem reasonable to assume that the law chosen by the parties to govern the contract will also govern the arbitration clause.
If the parties expressly choose a particular law to govern their agreement, why should some other law which the parties have not chosen be applied to only one of the clauses in the agreement, simply because it happens to be the arbitration clause?
This approach is supported by other leading commentaries.
For example, Merkin on Arbitration Law, Issue 84 (2020), para 7.12, states that: even if there is no express contractual statement to that effect, a choice of law clause for the entire agreement is likely to be construed as extending to the arbitration clause.
There are numerous decisions to this effect However, that presumption may be ousted in appropriate circumstances See also Dicey, Morris & Collins on The Conflicts of Laws, 15th ed (2012) at para 16 017: If there is an express choice of law to govern the contract as a whole, the arbitration agreement may also be governed by that law.
(ii) Domestic case law
There is a considerable body of English case law which proceeds on the assumption that a choice of law for the contract will normally apply to an arbitration clause in the contract.
The approach was summarised by Colman J in Sonatrach Petroleum Corpn (BVI) v Ferrell International Ltd [2002] 1 All ER (Comm) 627 at para 32: Where the substantive contract contains an express choice of law, but the agreement to arbitrate contains no separate express choice of law, the latter agreement will normally be governed by the body of law expressly chosen to govern the substantive contract.
It has not generally been considered to make any difference in this regard that the arbitration clause provides for arbitration to take place in a different country from the country whose law has been chosen to govern the contract.
Examples of decisions in which a choice of law clause in the contract has been treated as applying to the arbitration agreement despite the seat of arbitration being in a different jurisdiction include: Cia Maritima Zorroza SA v Sesostris SAE (The Marques De Bolarque) [1984] 1 Lloyds Rep 652, 653; Union of India v McDonnell Douglas Corpn [1993] 2 Lloyds Rep 48, 49 50; Sumitomo Heavy Industries Ltd v Oil and Natural Gas Commission [1994] 1 Lloyds Rep 45, 57; Deutz AG v General Electric Co (Thomas J, 14 April 2000) at p 17; Peterson Farms Inc v C&M Farming Ltd [2004] EWHC 121 (Comm); [2004] 1 Lloyds Rep 603, paras 43 46; Leibinger v Stryker Trauma GmbH [2005] EWHC 690 (Comm), para 38; and Svenska Petroleum Exploration AB v Government of the Republic of Lithuania [2005] EWHC 2437 (Comm); [2006] 1 All ER (Comm) 731, paras 76 77.
A different view was expressed in XL Insurance Ltd v Owens Corning [2001] 1 All ER (Comm) 530, a case concerning a policy of insurance on Bermuda form terms which provide for New York law to govern the policy but for disputes to be determined by arbitration in London.
The English court granted an injunction to restrain the insured from pursuing a claim against the insurers in the courts of Delaware.
The insured argued that the choice of New York law to govern the policy included the arbitration agreement and that this agreement was invalid under the Federal Arbitration Act which formed part of New York law.
Toulson J rejected that argument and concluded that, by stipulating for arbitration in London under the provisions of the 1996 Act, the parties had impliedly chosen English law to govern the arbitration agreement (see p 543b).
We will consider his reasoning later in this judgment.
In C v D [2007] EWCA Civ 1282; [2008] Bus LR 843, another case concerning a Bermuda form insurance policy, the Court of Appeal likewise expressed the view (obiter) that the arbitration agreement was governed by English law.
In C v D, however, Longmore LJ (with whom the other members of the court agreed) reached this conclusion, not on the basis of implied choice, but on the basis that there was no choice of law for the arbitration agreement so that it was necessary to identify the law with which it was most closely connected.
He considered this to be the law of the place where the parties had chosen to arbitrate rather than the law of the insurance contract (paras 25 26).
Many commentaries and authorities, including XL Insurance and C v D, were considered by the Court of Appeal in Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102.
In a judgment with which the other members of the court agreed, Moore Bick LJ said (at para 11): It is common for parties to make an express choice of law to govern their contract, but unusual for them to make an express choice of the law to govern any arbitration agreement contained within it; and where they have not done so, the natural inference is that they intended the proper law chosen to govern the substantive contract also to govern the agreement to arbitrate.
Moore Bick LJ expressed reservations about the dicta of Longmore LJ in C v D, noting that the court in that case did not have the benefit of full citation of authority and that a rule that an arbitration agreement is governed by the law of the seat even where there is a choice of law clause in the contract cannot easily be reconciled with the earlier authorities or with the established principles for determining the proper law (para 24).
His conclusion (at para 26) was in the following terms: In the absence of any indication to the contrary, an express choice of law governing the substantive contract is a strong indication of the parties intention in relation to the agreement to arbitrate.
A search for an implied choice of proper law to govern the arbitration agreement is therefore likely (as the dicta in the earlier cases indicate) to lead to the conclusion that the parties intended the arbitration agreement to be governed by the same system of law as the substantive contract, unless there are other factors present which point to a different conclusion.
These may include the terms of the arbitration agreement itself or the consequences for its effectiveness of choosing the proper
law of the substantive contract
This approach was followed in Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 (Comm); [2013] 2 All ER (Comm) 1.
In that case a contract contained clauses providing that it was to be governed by the laws of India and that disputes were to be settled by arbitration in London.
It was held that, as a matter of construction, the parties had chosen Indian law to govern the arbitration agreement.
Recently, in Kabab Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2020] EWCA Civ 6; [2020] 1 Lloyds Rep 269 the Court of Appeal similarly construed a clause in a contract which stated This Agreement shall be governed by and construed in accordance with the laws of England as meaning that all the terms of the contract were governed by English law including an arbitration clause which provided for arbitration in France.
This conclusion was reinforced by the fact that the contract included a clause which stated that This Agreement consists of the terms of agreement set forth herein below .
(iii) Considerations of principle
A number of further considerations confirm the reasonableness of, as a general rule, construing a choice of law to govern the contract as applying to an arbitration agreement set out in a clause of the contract, even where the law chosen to govern the contract differs from that of the place chosen as the seat of the arbitration: i) This approach provides a degree of certainty.
The parties can be assured that an agreement as to the governing law will generally be an effective choice in relation to all of their contractual rights and obligations and to all of their disputes. ii) It achieves consistency.
The same system of law governs all the parties rights and obligations.
It can be unsatisfactory for potentially closely related issues such as the identity of the contracting parties or the proper approach to the interpretation of their bargain to be governed by different systems of law, depending on whether it relates to the main contract or the arbitration agreement. iii) It avoids complexities and uncertainties.
As soon as the relationship between the parties is subject to two systems of law, problems can arise as to where and how to draw the boundaries between them.
This is exemplified by the increasing prevalence of multi tier dispute resolution clauses.
If the arbitration agreement is governed by a different system of law from the main body of the contract, provisions that require negotiation and/or mediation and/or expert determination in advance of arbitration raise potentially difficult questions as to whether they are governed by the law applicable to the arbitration agreement or by the law generally applicable to the contract, and indeed as to whether those questions should be answered by applying the common law rules or the Rome I Regulation.
Article 50.1 of the construction contract is an example of such a clause.
Although we explain later how these difficulties may be addressed, if there is only one system of law then no such difficulties arise. iv) It avoids artificiality.
The principle that an arbitration agreement is separable from the contract containing it is an important part of arbitration law but it is a legal doctrine and one which is likely to be much better known to arbitration lawyers than to commercial parties.
For them a contract is a contract; not a contract with an ancillary or collateral or interior arbitration agreement.
They would therefore reasonably expect a choice of law to apply to the whole of that contract. v) It ensures coherence.
It is consistent with the treatment of other types of clauses whose validity is also insulated from challenges to the contract, such as choice of law or choice of court clauses.
Such clauses are generally presumed to be governed by the law of the contract of which they form part: see Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012) at paras 12 103 and 12 109.
As a matter of principle and authority there are therefore strong reasons why an agreement on a choice of law to govern a contract should generally be construed as applying to an arbitration agreement set out or otherwise incorporated in the contract.
(iv) The international perspective
As to the international perspective, although there is no uniformity, there are many commentators on international arbitration who support such an approach, at least where there is an express choice of governing law for the contract.
Examples to which we were referred include: Bantekas, The Proper Law of the Arbitration Clause: A Challenge to the Prevailing Orthodoxy (2010) 27 Journal of International Arbitration 1, 1 2; Born, International Commercial Arbitration, 2nd ed (2014), p 592; Grover, Dilemma of the Proper Law of the Arbitration Agreement: An Approach Towards Unification of Applicable Laws (2014) 32 Sing L Rev 227, 255; Choi, Choice of Law Rules Applicable for International Arbitration Agreements (2015) 11 Asian International Arbitration Journal 105, 108 109; Khatchadourian, Fortifying the Arbitration Clause in Ziad (ed), Festschrift Ahmed Sadek El Kosheri (2015), pp 53 56; and Miles and Goh, A Principled Approach Towards the Law Governing Arbitration Agreements in Kaplan and Moser (eds), Jurisdiction, Admissibility and Choice of Law in International Arbitration: Liber Amicorum Michael Pryles (2018) Chapter 24, p 393.
This is also said to be the approach generally adopted by ICC arbitrators (see Lew, The Law Applicable to the Form and Substance of the Arbitration Clause: 40 Years of Application of the New York Convention in van den Berg (ed), Improving the Efficiency of Arbitration Agreements and Awards, (1998) ICCA Congress Series Vol 9, pp 143 144).
It would appear that the same approach has been adopted in a number of common law and civil law jurisdictions.
These include Singapore, India, Pakistan, Germany and Austria.
According to Chubb Russia they also include Hong Kong, Australia and Switzerland, although this was questioned by Enka.
Singapore provides an instructive example.
In FirstLink Investments Corpn Ltd v GT Payment Pte Ltd [2014] SGHCR 12 it was held that the law of the seat should generally apply to the arbitration agreement.
In BCY v BCZ [2016] SGHC 249; [2016] 2 Lloyds Rep 583 Steven Chong J disagreed and held that the approach in Sulamrica should be followed as it is supported by the weight of authority and is, in any event, preferable as a matter of principle (para 49).
Having set out detailed reasons why that was so, he concluded that, as the arbitration agreement in that case was contained in a contract expressly governed by New York law, the presumption was that New York law governed the arbitration agreement and this presumption was not displaced by the choice of Singapore as the seat of arbitration.
BCY v BCZ has been approved by the Singapore Court of Appeal see BNA v BNB [2020] 1 Lloyds Rep 55, para 44, where it was accepted by both parties as a correct statement of the law.
The approach of the Court of Appeal
(i) The Court of Appeals judgment
The Court of Appeal reached a contrary conclusion in the present case.
Leaving aside cases in which, exceptionally, a choice of the law governing the arbitration agreement is specified in the arbitration agreement itself, Popplewell LJ (with whom Flaux and Males LJJ agreed) was prepared to accept that an express choice of the law applicable to the contract containing the arbitration agreement may sometimes, as a matter of construction, amount to an express choice of the law applicable to the arbitration agreement (para 90).
But he considered that this conclusion would follow only in a minority of cases and that in all other cases there is a strong presumption that the parties have impliedly chosen the law of the seat of the arbitration to govern the arbitration agreement.
This was said to be the general rule, subject only to any particular features of the case demonstrating powerful reasons to the contrary (para 91).
(ii) Separability
Our first difficulty with this proposed general rule is that we do not agree that it is only in a minority of cases that an express choice of law to govern the contract should properly be construed as being a choice of law to govern an arbitration agreement included in the contract.
As we have discussed, a clause such as This Agreement is to be governed by and construed in accordance with the laws of [a named country] is naturally and sensibly understood to mean that the law of that country should govern and determine the meaning and effect of all the clauses in the contract which the parties signed including the arbitration clause.
It is unclear to us why more should be needed or what more on the Court of Appeals approach is required to make it clear that a phrase such as This Agreement means the whole agreement and not just part of it.
The Court of Appeal justified its approach on the ground that a choice of law to govern the contract has little if anything to say about the [arbitration agreement] law choice because it is directed to a different and separate agreement (para 92).
This was said to follow from the doctrine that an arbitration agreement is separable from the rest of the contract.
In our view, this puts the principle of separability of the arbitration agreement too high.
For reasons given earlier, the requirement that an arbitration clause is to be treated as a distinct agreement for the purpose of determining its validity, existence and effectiveness makes it more amenable than other parts of a contract to the application of a different law.
The rationale underlying the separability principle is also relevant, as we will mention later, in cases where applying the governing law of the contract to the arbitration clause would render the arbitration agreement invalid or ineffective.
But it does not follow from the separability principle that an arbitration agreement is generally to be regarded as a different and separate agreement from the rest of the contract or that a choice of governing law for the contract should not generally be interpreted as applying to an arbitration clause.
Descriptions of an arbitration clause as, for example, collateral to the main contract in which it is incorporated (Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal (The Hannah Blumenthal) [1983] 1 AC 854, 917, per Lord Diplock) or a separate contract, ancillary to the main contract (Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corpn Ltd [1981] AC 909, 998, per Lord Scarman) need to be seen in their context as ways of expressing the doctrine that the discharge by frustration (or for other reasons) of the substantive obligations created by the contract will not discharge the parties agreement to arbitrate.
The arbitration clause is nonetheless part of the bundle of rights and obligations recorded in the contractual document.
So, for example, an assignment of the contract will include an arbitration clause without the need for any separate or additional assignment: see Schiffahrtsgesellschaft Detlev von Appen GmbH v Voest Alpine Intertrading GmbH (The Jay Bola) [1997] 2 Lloyds Rep 279, 285; Shayler v Woolf [1946] Ch 320; and Cockett Marine Oil DMCC v ING Bank NV (The M/V Ziemia Ciesznska) [2019] EWHC 1533 (Comm); [2019] 2 Lloyds Rep 541.
As Colman J put it in construing the words any clause of this Agreement as including an arbitration clause in JSC Zestafoni G Nikoladze Ferroalloy Plant v Ronly Holdings Ltd [2004] EWHC 245 (Comm); [2004] 2 Lloyds Rep 335, para 31: There is nothing in the intrinsic character of an arbitration agreement as having an attribute of separability which prevents it from being included in that phrase.
Moore Bick LJ summed up the position clearly when he said in the Sulamrica case at para 26: The concept of separability itself, however, simply reflects the parties presumed intention that their agreed procedure for resolving disputes should remain effective in circumstances that would render the substantive contract ineffective.
Its purpose is to give legal effect to that intention, not to insulate the arbitration agreement from the substantive contract for all purposes.
In his lead judgment in the Court of Appeal Popplewell LJ quoted this passage (at para 93) and appeared there to recognise that it is wrong to characterise an arbitration clause generally as a separate agreement.
He went on, however, to make a more specific point that one of the purposes for which an arbitration agreement is treated as separate and severable is that of applying the curial law which, where the parties have chosen a different arbitration seat and hence curial law from the law applicable to their contract, is distinct from the latter system of law.
The rhetorical question was posed, at para 94: Why then should [the law applicable to the contract] have anything to say about the closely related aspect of the very same arbitration agreement, namely the [law which governs it] (absent express language to that effect so as to give rise to an express choice of [the arbitration agreement] law)? Leaving aside what should count as express language in this regard, this argument rests on the premise that the curial law which governs the arbitration process is so closely related to the law governing the arbitration agreement that a choice of law to govern the contract should generally be presumed not to apply to an arbitration clause when the parties have chosen a different curial law.
It is to this argument, which was central to the Court of Appeals reasoning, that we therefore turn.
(iii) The overlap argument
This argument, which we will call the overlap argument, seems to have made its first appearance in XL Insurance Ltd v Owens Corning [2001] 1 All ER (Comm) 530, mentioned earlier, where Toulson J considered that, by stipulating for arbitration in London under the provisions of the Arbitration Act 1996, the parties had impliedly chosen English law to govern the validity of the arbitration agreement despite the choice of New York law as the governing law of the policy (see p 543b).
His essential reasoning (at p 541e) was that the substance and process of arbitration are closely intertwined and that the 1996 Act contains various provisions which could not readily be separated into boxes labelled substantive arbitration law or procedural law, because that would be an artificial division.
The Court of Appeal in the present case endorsed and elaborated on this reasoning, concluding that the overlap between the scope of the curial law and that of the [arbitration agreement] law strongly suggests that they should be the same (para 96).
They further considered that, given this overlap and the fact that the curial law which regulates the arbitration process is a matter of choice which comes with an express choice of seat, it seems natural to regard a choice of seat as an implied choice of the law applicable to the arbitration agreement (para 101).
On this basis they held that there is a strong presumption that a choice of seat is an implied choice of the law which is to govern the arbitration agreement (para 105(3)).
(iv) Choice of curial law
On this appeal Chubb Russia disputed the initial premise that a choice of seat for an arbitration involves any choice of law at all, procedural or substantive.
Counsel for Chubb Russia submitted that the application of the curial law of the seat is something that follows automatically from a choice of place of arbitration rather than being itself a matter of choice.
They cited as an analogy a hypothetical case postulated by Redfern and Hunter: Law and Practice of International Commercial Arbitration, 6th ed (2015), para 3.63, of an English motorist who takes her car to France.
Redfern and Hunter comment that: it would be an odd use of language to say that this notional motorist had opted for French traffic law; rather, she has chosen to go to France and the applicability of French law then follows automatically.
It is not a matter of choice.
We agree that it would be inapt to describe the tourist in this example as having made a choice to be regulated by French traffic law.
But as Mr Dicker QC for Enka submitted, it is difficult to conceive that a persons decision to visit France might be informed by a desire to be governed by French traffic law.
By contrast, the nature and scope of the jurisdiction exercised by the courts of a country over an arbitration which has its seat there is a highly material consideration in choosing a seat for the arbitration.
That is reinforced by the fact that the seat of an arbitration is a legal concept rather than a physical one.
A choice of place as the seat does not dictate that hearings must be held, or that any award must actually be issued, in that place.
As the Court of Appeal observed (at para 46), it is perfectly possible to conduct an arbitration with an English seat at any convenient location, anywhere in the world.
Furthermore, under section 53 of the Arbitration Act 1996, unless otherwise agreed by the parties, where the seat of an arbitration is in England and Wales, any award in the proceedings shall be treated as made there, regardless of where it was signed, despatched or delivered to any of the parties (see also article 31(3) of the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985).
The point of agreeing a seat is to agree that the law and courts of a particular country will exercise control over an arbitration which has its seat in that country to the extent provided for by that countrys law.
A choice of seat can in these circumstances aptly be regarded as a choice of the curial law.
As noted at the beginning of this judgment, however, the curial law which applies to the arbitration process is conceptually distinct from the law which governs the validity and scope of the arbitration agreement.
Whether a choice of the curial law carries any implication that the parties intended the same system of law to govern the arbitration agreement and, if so, the strength of any such implication must depend on the content of the relevant curial law.
(v) Relationship between curial law and arbitration agreement law
In Carpatsky Petroleum Corpn v PJSC Ukrnafta [2020] EWHC 769 (Comm); [2020] Bus LR 1284, the claimant applied to enforce in England and Wales an arbitration award made in Sweden.
Enforcement was resisted on the ground (among others) that there was no valid arbitration agreement in the contract between the parties.
This argument depended on the assumption that the validity of the arbitration agreement was governed by the law of Ukraine.
The contract provided for the law of substance of Ukraine to apply on examination of disputes.
Butcher J held (at paras 67 71) that this was not a choice of Ukrainian law to govern the arbitration agreement and that, in the circumstances, the choice of Stockholm as the seat for any arbitration demonstrated an implied choice that the validity and interpretation of the arbitration agreement should be governed by Swedish law.
His reasons were that: (1) it was reasonable to infer that the parties had deliberately chosen a neutral forum to resolve their disputes and hence intended the law of that jurisdiction to determine issues as to the validity and ambit of that choice; and (2) by choosing Sweden as the seat for the arbitration, the parties agreed to the application of the Swedish Arbitration Act, including section 48 which provides that, in the absence of agreement on a choice of law to govern an arbitration agreement with an international connection, the arbitration agreement shall be governed by the law of the country in which, by virtue of that agreement, the arbitration proceedings have taken place or will take place.
It follows that, by providing for a Swedish seat, the parties were impliedly agreeing that Swedish law should govern the arbitration agreement.
A similar inference could also be drawn where a contract contains an agreement for arbitration in Scotland.
Section 6 of the Arbitration (Scotland) Act 2010 provides: Where (a) the parties to an arbitration agreement agree that an arbitration under that agreement is to be seated in Scotland, but (b) law which is to govern it, the arbitration agreement does not specify the then, unless the parties otherwise agree, the arbitration agreement is to be governed by Scots law.
There is, however, no similar provision in the Arbitration Act 1996.
The argument made by Enka, and accepted by the Court of Appeal, is that the 1996 Act contains provisions which are substantive as well as provisions which are procedural in nature, and that there is no clear division between the two.
In these circumstances it is argued that, by choosing an English seat in the knowledge that the Arbitration Act 1996 will apply where the seat of the arbitration is in England, the parties are by implication choosing English law to govern at least some aspects of their substantive rights under the arbitration agreement.
Furthermore, as suggested by Toulson J in the XL Insurance case, the provisions which affect substantive rights are intertwined with, and cannot readily be separated from, procedural provisions of the Act.
The natural inference is said to be that the parties intended all their rights under the arbitration agreement to be governed by English law.
(vi) Section 4(5) of the 1996 Act
We agree that there is a close relationship between provisions of the Arbitration Act concerned with the arbitration agreement and provisions of the Act concerned with the arbitration process and that the distinction between them is not always clear or easy to draw.
But we do not accept that this justifies the conclusion that a choice of an English seat of arbitration is an implied choice that the arbitration agreement will be governed by English law.
In our view, a conclusive answer to that argument lies in a point raised by Chubb Russia on this appeal which was not fully developed in the Court of Appeal.
The point in short is that almost all the provisions of the 1996 Act relied on to support the overlap argument are non mandatory and, where the arbitration agreement is governed a foreign law, by reason of section 4(5) the non mandatory provisions of the Act which concern arbitration agreements do not apply to it.
As the legislation contemplates and specifically provides for a situation in which the arbitration agreement will be governed by a foreign law even though English law governs the arbitration process, no necessary inference can be drawn that, by choosing an English seat and with it English law as the curial law, parties are also impliedly choosing English law to govern their arbitration agreement.
Section 4(5) of the 1996 Act states: The choice of a law other than the law of England and Wales or Northern Ireland as the applicable law in respect of a matter provided for by a non mandatory provision of this Part is equivalent to an agreement making provision about that matter.
For this purpose an applicable law determined in accordance with the parties agreement, or which is objectively determined in the absence of any express or implied choice, shall be treated as chosen by the parties.
The clear meaning and effect of this provision is that, where a foreign law is applicable to an arbitration agreement (whether by choice or as determined in the absence of choice by the closest connection test), that fact alone is enough to disapply any non mandatory provision of the Act in so far as it would otherwise affect a matter governed by the law applicable to the arbitration agreement.
This is because the applicability of a foreign law is treated as equivalent to an agreement to make contrary provision about a matter.
It is not necessary to inquire whether or not the foreign law does in fact make such contrary provision.
Even if there were otherwise considered to be any ambiguity in the meaning of section 4(5), it is dispelled by the Supplementary Report on the Arbitration Act 1996, dated January 1997, produced by the Departmental Advisory Committee on Arbitration (the DAC), which explains the genesis of the provision.
As originally drafted, clause 2 of the Bill provided: (1) The provisions of this Part apply where the law of England and Wales or Northern Ireland is applicable, or the powers of the court are exercisable, in accordance with the rules of the conflict of laws. (2) They apply, in particular (a) to matters relating to or governed by the arbitration agreement, where the applicable law is the law of England and Wales or Northern Ireland; and (b) to matters governed by the law applicable to the arbitral proceedings, where the seat of the arbitration is in England and Wales or Northern Ireland.
The DAC Supplementary Report, at para 7(ii), observed that the purpose of clause 2(2) was to avoid the danger that all the provisions of Part I of the Act would be imported if English law was found to govern one particular aspect of an arbitration.
For example: an arbitration may have a French seat, with French law governing the procedure, but English law governing the arbitration agreement.
In such a situation, only those provisions of the Act which concern arbitration agreements should apply.
It would be quite wrong to apply provisions of the Act which concern arbitral procedure, as this would be governed by French law.
Plainly, this reasoning applies equally in reverse to an arbitration with an English seat and English law governing the procedure, but French law governing the arbitration agreement.
In such a situation, only those provisions of the Act which concern arbitral procedure should apply and not those which concern the arbitration agreement, as this would be governed by French law.
The clause as drafted, however, was considered unworkable in practice (although sound in principle) one reason being that, to apply clause 2(2), it would have been necessary individually to characterise and separate all those provisions of the Act which concerned the arbitration agreement, as distinct from all those that concerned the arbitral procedure (see para 9(ii) of the DAC Supplementary Report).
It was noted that the attempt to do this had proved an extremely difficult and complex exercise.
Furthermore: Many provisions concern both arbitration agreements and arbitral procedure, and there appeared to be a divergence of view with respect to many others.
In the light of these difficulties, the DAC decided to recommend recasting
the whole provision so as to establish in section 2(1) the basic rule that Part I of the Act applies to arbitrations which have their seat in England and Wales or Northern Ireland (see paras 10 11 of the DAC Supplementary Report).
In such a case, however, as explained in para 12: If a foreign law has been chosen to govern any particular aspect of the arbitration, such as the arbitral procedure or the arbitration agreement, or is otherwise applicable to any such aspect, this is catered for by section 4(5).
Therefore, reference may be made to this Act in the first instance, and then back to another law with respect to a specific issue.
Whilst a process of characterisation may still have to be done, the combination of section 2 and section 4(5) avoids the dangers that: a choice of English law with respect to one part of an arbitration will import other parts of the Act that concern other aspects of the arbitration; a choice of England as the seat of the arbitration will necessarily entail the imposition of every provision of the Act.
We observe that the recasting carried out on the recommendation of the DAC did not remove the need individually to characterise the provisions of the Act as substantive or procedural (or partly substantive and partly procedural) whenever the applicable law is in issue an exercise described by the DAC as extremely difficult and complex.
Nevertheless, the legislative history confirms that sections 2 and 4(5) of the 1996 Act as enacted were intended to have the effect that, where England is chosen as the seat of an arbitration but the arbitration agreement is governed by a foreign law, the non mandatory provisions of the Act do not apply to any matter concerning the parties substantive rights and obligations under the arbitration agreement.
The fact that the Act contains some provisions which are substantive, or partly substantive, cannot therefore where those provisions are non mandatory support an inference that, by choosing an English seat of arbitration, parties must be taken to have contemplated and intended that the validity and scope of their arbitration agreement should be governed by English law.
The only mandatory provisions of the 1996 Act are sections 12, 13 and 66 to 68.
Section 12 gives the court power to extend time for beginning an arbitration where there is a contractual time limit.
This could only have any bearing on the law applicable to the arbitration agreement if the arbitration agreement includes a contractual time limit (which the relevant clause in this case does not).
Section 13 applies the Limitation Acts to arbitrations.
As these Acts include the Foreign Limitation Periods Act 1984, which applies foreign limitation law to any substantive obligation governed by foreign law, this cannot support an inference that the arbitration agreement is governed by English law.
Sections 66 to 68 are concerned with enforcement of the award and applications to the court to challenge an award.
They are procedural in nature and cannot be said to determine the law applicable to the arbitration agreement.
The provisions of the Arbitration Act 1996 therefore do not justify any general inference that parties who choose an English seat of arbitration thereby intend their arbitration agreement to be governed by English law. (vii) Enkas case on section 4(5)
Enka put forward three responses to this reasoning, none of which we have found persuasive.
First, counsel for Enka submitted that section 4(5) is concerned only with a choice of foreign law as the curial law for the arbitration process, and not with a choice of foreign law to govern the arbitration agreement.
This, however, is not a tenable reading of section 4(5), which is manifestly not limited in this way and expressly applies whenever a foreign law is applicable in respect of a matter provided for by a non mandatory provision of the Act.
As emphasised on Enkas own case, the matters provided for by non mandatory provisions of the Act include some matters which concern the substance of the arbitration agreement as well as matters of procedure.
Nor does section 4(4) support a different interpretation, as suggested in Enkas written case.
Section 4(4) provides that it is immaterial whether or not the law applicable to the parties agreement is the law of England and Wales .
This makes it clear that, if the parties have made arrangements by agreement in place of any non mandatory provision of the Act, it is irrelevant whether or not that agreement is governed by English law.
There is no inconsistency between that provision and the rule established by section 4(5) that a choice of foreign law in respect of a matter is equivalent to an agreement making provision about that matter.
The second argument advanced by Enka is that, if as we think clear section 4(5) is not confined to a choice of curial law and also covers cases where a foreign law is applicable to the arbitration agreement, section 4(5) nevertheless applies only where the arbitration agreement makes specific reference to the matter provided for by a non mandatory provision of the Act.
As authority for this restrictive interpretation, Enka relied on a dictum of Lord Steyn in Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2006] 1 AC 221.
That case involved an attempted challenge under section 68 of the 1996 Act to a decision by an arbitral tribunal to award interest under section 49(3) on principal sums awarded.
The challenge failed because the House of Lords held that substantial injustice had not been established, as required to invoke section 68.
However, Lord Steyn, who gave the leading speech, went on to point out that the challenge had also faced other formidable difficulties.
In particular, the power under section 49(3) to award interest was prima facie available: the only question was whether there had been an agreement to the contrary for the purpose of section 49(2).
In that context Lord Steyn noted (at para 37) that the judge at first instance had appeared to take the view that the law of Lesotho, as the law applicable to the construction contract under which the claim arose, might be relevant presumably on the basis that it constituted an agreement to the contrary.
In relation to this, Lord Steyn remarked: Ignoring for the moment the fact that one does not know what the law of Lesotho is, this view comes up against the difficulty that only an agreement in writing as defined in the Act can qualify as an agreement to the contrary under section 49: section 5(1).
The law of Lesotho is not an agreement to the contrary in writing.
Lord Steyn made no mention of section 4(5) of the Act: the point that he made was based on section 5(1), which states that an agreement between the parties as to any matter is effective for the purposes of this Part only if in writing.
Nevertheless, in C v D, at para 19, Longmore LJ treated Lord Steyns dictum as supporting the view that section 4(5) requires a choice of law with regard to the specific provision of the [1996] Act which the parties agree is not to apply.
This statement was in turn relied on by Burton J in National Iranian Oil Co v Crescent Petroleum Co International Ltd [2016] EWHC 510 (Comm); [2016] 2 Lloyds Rep 146, paras 12 17, to conclude that a choice of Iranian law to govern an arbitration agreement was not sufficient to disapply section 7 of the 1996 Act, which codifies the principle of separability of the arbitration agreement, and that nothing less than an agreement expressly disapplying section 7 or the English law governing separability would have sufficed for that purpose.
The notion that section 4(5) applies only where parties have specifically excluded a non mandatory provision of the Act by the terms of their arbitration agreement cannot, in our view, be accepted.
It is not consistent with the language of section 4(5).
The words in respect of a matter provided for by a non mandatory provision require only that the matter governed by the foreign law should be a matter provided for by a non mandatory provision of the Act.
They cannot reasonably be read as requiring the parties specific agreement that the foreign law and not the non mandatory provision will govern the matter.
Apart from anything else, the second paragraph of section 4(5) makes it explicitly clear that no choice or agreement of the parties at all is required for section 4(5) to apply.
The interpretation contended for by Enka is also inconsistent with the legislative intent, as explained in the DAC Supplementary Report.
Furthermore, as the late Mr VV Veeder QC observed, if correct, it would make a practical nonsense of the 1996 Act by requiring parties choosing a foreign law to govern an agreement for arbitration in England to analyse and identify individually in their agreement each of the 35 or so non mandatory provisions of the 1996 Act which they wish to disapply.
We agree with Mr Veeders comment that the absurd consequences of such an interpretation speak for themselves: see Kaplan and Moser (eds), Jurisdiction, Admissibility and Choice of Law in International Arbitration: Liber Amicorum Michael Pryles (2018), Chapter 23, p 382.
We do not think it credible that Lord Steyn in the Lesotho case intended to endorse such an interpretation of section 4(5), and to do so without giving any reasons or even mentioning that provision of the Act at all.
The likely reason why no reference was made to section 4(5) is that it was not relevant to the power to award interest.
The Court of Appeal in the Lesotho case characterised the power to award interest under section 49(3) of the 1996 Act as discretionary and procedural a characterisation which Lord Steyn seems to have endorsed when referring to the reasoning of the Court of Appeal in para 38 of his speech.
The fact that section 49(3) was treated by both the Court of Appeal and the House of Lords in the Lesotho case as procedural in nature was later relied on by the Court of Appeal in Maher v Groupama Grand Est [2009] EWCA Civ 1191; [2010] 1 WLR 1564, para 38, to support a similar characterisation of the power of a court to award interest under section 35A of the Senior Courts Act 1981.
Because section 49(3) is procedural, the choice of the law of Lesotho to govern substantive contractual rights was not in respect of a matter provided for by section 49(3) and therefore did not engage section 4(5).
As it was not in doubt that the curial law governing the arbitration process was English law, to disapply section 49(3) would accordingly have required a specific agreement (in writing), as Lord Steyn observed.
Whether or not Lesotho law contained any equivalent procedural power was in these circumstances not relevant.
Even if it did, the law of Lesotho concerning that matter could not amount to an agreement to the contrary.
This is, we think, how Lord Steyns dictum should be understood.
But whether this was what was meant or not, we are satisfied that section 4(5) does not require a specific agreement to disapply a non mandatory provision of the Act.
It follows that Longmore LJs statement to that effect in C v D was erroneous and that the National Iranian Oil Co case was wrongly decided on this point.
The third response of Enka was to contend that the consequences of giving section 4(5) what we consider to be its unambiguous meaning would be as far reaching as they are surprising because it would cause numerous non mandatory provisions, which parties to a London arbitration are unlikely to have intended to exclude, nonetheless to be excluded.
To support this contention, Enka relied as examples on sections 5, 7, 30 and 58 of the 1996 Act.
Of these provisions, only section 7 which codifies the principle of separability concerns the validity or scope of the arbitration agreement.
Section 5, which states that Part I of the Act applies only where the arbitration agreement is in writing, is not concerned with the validity or scope of the arbitration agreement but with the circumstances in which the provisions of the Act will apply.
If the requirement of writing is not met, Part I of the Act will not apply to the arbitration agreement but it will be regulated by, and will still be valid at, common law (see section 81).
Section 30, which empowers the arbitral tribunal to rule on its own jurisdiction, is procedural.
It does not deal with the parties substantive rights under the arbitration agreement but with the competence of the tribunal to determine the validity and scope of those rights.
Section 58, which provides for the finality of an arbitral award, is also procedural in nature. (For that reason, the insurers argument in C v D that, as a result of section 4(5), section 58 was disapplied by a choice of New York law to govern the arbitration agreement was misconceived.) These and other procedural non mandatory provisions will only be excluded in the unusual event that the parties have chosen a foreign procedural law for an English seated arbitration: see Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1 All ER (Comm) 514, para 31; C v D [2007] EWHC 1541 (Comm); [2007] 2 All ER (Comm) 557, paras 25 26 (Cooke J); Sterling v Rand [2019] EWHC 2560 (Ch); [2019] 2 Lloyds Rep 577, para 58.
As observed in the DAC Supplementary Report, para 7(ii) (quoted at para 77 above), in such a case it would be wrong to apply non mandatory provisions of the Act which concern arbitral procedure, as this would be governed by foreign law.
We accept that characterising individual provisions of that Act as procedural or substantive can, as recognised by the DAC, be a difficult and complex exercise.
But we are satisfied that giving section 4(5) its plain meaning does not lead to surprising or untoward consequences and is inconsistent with the contention that choosing English law as the curial law of an arbitration involves an implied choice of English law as the law applicable to the arbitration agreement.
For these reasons, we do not consider the overlap argument as accepted by the Court of Appeal to be well founded.
While a choice of seat and curial law is capable in some cases (based on the content of the relevant curial law) of supporting an inference that the parties were choosing the law of that place to govern the arbitration agreement, the content of the Arbitration Act 1996 does not support such a general inference where the arbitration has its seat in England and Wales. VI.
Avoiding invalidity
(i) The validation principle
It is a well established principle of contractual interpretation in English law, which dates back at least to the time of Sir Edward Coke (see Coke upon Littleton (1628) 42a), that an interpretation which upholds the validity of a transaction is to be preferred to one which would render it invalid or ineffective.
In the days when Latin was commonly used in the courts, it was expressed by the maxim verba ita sunt intelligenda ut res magis valeat quam pereat translated by Staughton LJ in Lancashire County Council v Municipal Mutual Insurance Ltd [1997] QB 897, 910, as the contract should be interpreted so that it is valid rather than ineffective.
This principle may apply if, in determining whether the parties have agreed on a choice of governing law, a putative governing law would render all or a part of the contract ineffective.
For example, in In re Missouri Steamship Co (1889) 42 Ch D 321 a contract for the carriage of cattle by sea from Boston to England contained a clause that the carrier should not be liable for the negligence of the master or crew of the ship.
The clause was valid under English law but void under the law of Massachusetts as being against public policy.
The cattle were lost by the negligence of the master and crew, and the shipper claimed against the carrier for the loss.
In concluding that the parties intended the contract to be governed by English law, the judge and the Court of Appeal placed reliance on the presumption that, in the words of Fry LJ at p 341, the law which would make the contract valid in all particulars was the law [intended] to regulate the conduct of the parties.
In that case the potential invalidity of a significant clause in a contract was relied on as indicating the law intended to govern the entire contract.
Where the clause in question is an arbitration clause, because of its severable character its putative invalidity may support an inference that it was intended to be governed by a different law from the other provisions of the contract or may at least negate an inference that the law generally applicable to the contract was intended to apply to the arbitration clause.
(ii) Hamlyn v Talisker
An early but authoritative instance of such reasoning is the decision of the House of Lords in Hamlyn & Co v Talisker Distillery [1894] AC 202.
A contract between an English company and a Scottish company, to be performed in Scotland, contained the following provision: Should any dispute arise out of this contract, the same to be settled by arbitration by two members of the London Corn Exchange, or their umpire, in the usual way.
It was common ground that this arbitration clause was valid according to English law but invalid according to the law of Scotland because the arbitrators were not named.
The Court of Session held that the contract was governed by Scottish law as the law of the place of performance of the contract and that, in consequence, the arbitration clause was invalid.
The House of Lords unanimously reversed that decision.
As Lord Wilberforce subsequently noted in the Tunisienne case (at p 596), the only question decided by the House of Lords was whether the arbitration clause was governed by Scottish law or by English law.
The members of the appellate committee were careful to limit their opinions to that question and to express no view on which law governed the other provisions of the contract.
Two reasons were given for concluding that the arbitration clause was governed by English law.
One reason, most fully expressed by Lord Watson (at pp 212 213), was that the language of the arbitration clause showed that the parties were contracting with reference to English law, as the clause required the arbitrators to be members of a commercial body in London and to decide disputes in the usual way in other words, in the manner customary in London.
This reasoning did not, however, as it seems to us, justify treating the arbitration clause itself as governed by English law irrespective of which law governed the rest of the contract.
It was a reason for inferring that the parties intended the arbitrators to apply English law in deciding any dispute under the contract and therefore for regarding the parties substantive contractual obligations as governed by English law.
The question whether the arbitration clause was valid determined whether the arbitrators had jurisdiction, which was not at that time a matter that the arbitrators themselves were seen as competent to decide.
This reasoning is therefore an early example of an approach we will consider shortly which treats a choice of seat of arbitration as an implied choice of law to govern the contract as a whole.
The principal enduring significance of Hamlyn v Talisker lies in the second reason given for the decision, which was clearly articulated by Lord Herschell LC and Lord Ashbourne.
It was this reason which justified treating the arbitration clause as potentially governed by a different law from rest of the contract.
In Lord Herschells words (at p 208): the contract with reference to arbitration would have been absolutely null and void if it were to be governed by the law of Scotland.
That cannot have been the intention of the parties; it is not reasonable to attribute that intention to them if the contract may be otherwise construed; Lord Ashbourne made the same point, stating graphically (at p 215) that the arbitration clause becomes mere waste paper if it is held that the parties were contracting on the basis of the application of the law of Scotland, which would at once refuse to acknowledge the full efficacy of a clause so framed.
He continued: It is more reasonable to hold that the parties contracted with the common intention of giving entire effect to every clause, rather than of mutilating or destroying one of the most important provisions.
(iii) The decision in Sulamrica
It was this reasoning which led the Court of Appeal in the Sulamrica case to conclude that the arbitration clause in that case was governed by English law despite, as discussed earlier, starting from the position that an express choice of law to govern the contract is normally intended to apply to the arbitration clause.
In the Sulamrica case claims were made by Brazilian companies involved in a construction project in Brazil under two insurance policies.
Each policy contained an express choice of Brazilian law to govern the policy and a clause conferring exclusive jurisdiction on the courts of Brazil, but also mediation and arbitration clauses.
These provided that any dispute should be referred to mediation and that, if the parties failed to agree the amount to be paid under the policy through mediation, the dispute should then be referred to arbitration in London.
The insurers commenced arbitration proceedings in London and applied successfully to the English court for an interim injunction to restrain the insured from pursuing proceedings in the courts of Brazil.
An appeal by the insured was dismissed by the Court of Appeal.
The insureds case was that the contract, including the arbitration agreement, was governed by Brazilian law and that under Brazilian law the arbitration agreement was not enforceable against them without their consent.
As noted earlier, Moore Bick LJ (with whom Hallett LJ and Lord Neuberger MR agreed) accepted that the choice of Brazilian law to govern the contract was a strong indication that the parties intended that system of law to govern the arbitration agreement.
However, Moore Bick LJ identified two factors pointing the other way.
The first was the overlap argument which we have just discussed: that by choosing London as the seat of arbitration, the parties must have foreseen and intended that the provisions of the Arbitration Act 1996 should apply to any arbitration, including those provisions which are more substantive than procedural in nature (para 29).
For the reasons already given, we do not think that this argument is sound, as it overlooks the fact that, if the arbitration agreement was governed by Brazilian law, the non mandatory substantive provisions of the Act would be excluded by section 4(5).
It was the second factor, however, which the Court of Appeal regarded as decisive.
This was the possible existence of a rule of Brazilian law which would render the arbitration agreement enforceable only with the insureds consent (para 30).
Moore Bick LJ reasoned that, given the terms of the mediation and arbitration clauses, the parties could not have intended to choose a system of law that either would, or might well, have that effect (para 31).
As he also put it, Brazilian law could not have been intended to govern the arbitration agreement when there is at least a serious risk that a choice of Brazilian law would significantly undermine that agreement.
In these circumstances it was necessary to identify the system of law with which the arbitration agreement was most closely connected.
On this point Moore Bick LJ said (at para 32) that: an agreement to resolve disputes by arbitration in London, and therefore in accordance with English arbitral law, does not have a close juridical connection with the system of law governing the policy of insurance, whose purpose is unrelated to that of dispute resolution; rather, it has its closest and most real connection with the law of the place where the arbitration is to be held and which will exercise the supporting and supervisory jurisdiction necessary to ensure that the procedure is effective.
On this basis he concluded that the arbitration agreement was governed by English law.
Although reasoning of this kind was not relied on in the XL Insurance case where, as discussed earlier, Toulson J relied on the overlap argument it provides in our view a better justification for the result reached in that case.
The fact that the arbitration clause would arguably have been invalid under New York law was itself a strong reason for interpreting the choice of New York law to govern the insurance policy as not extending to the arbitration agreement.
(iv) Commercial purpose of an arbitration clause
The principle that contracting parties could not reasonably have intended a significant clause in their contract, such as an arbitration clause, to be invalid is a form of purposive interpretation, which seeks to interpret the language of the contract, so far as possible, in a way which will give effect to rather than defeat an aim or purpose which the parties can be taken to have had in view.
The strength of the inference that an interpretation of the contract would defeat an aim of the parties is, however, a matter of degree.
An interpretation which would without doubt mean that an arbitration clause is void and of no legal effect at all gives rise to a very powerful inference that such a meaning could not rationally have been intended.
That was the position in Hamlyn v Talisker, where it was common ground that, if the arbitration clause were governed by Scottish law, it would have been (in Lord Herschells words [1894] AC 202, 208) absolutely null and void.
In the Sulamrica case the inference was weaker.
There was a serious risk but not a certainty that, if Brazilian law applied to the arbitration clause, it would render the agreement to arbitrate enforceable only with the insureds consent.
That would not have meant that the arbitration clause was of no effect at all.
As Moore Bick LJ acknowledged, although most arbitration agreements permit either party to refer disputes to arbitration, some provide for arbitration only at the option of one or other party.
He did not think it reasonable, however, to attribute to the parties in that case an intention to enter into a one sided arrangement of that kind (para 30).
In Fiona Trust & Holding Corpn v Privalov [2007] UKHL 40; [2007] Bus LR 1719, the House of Lords affirmed the principle that the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal (see para 13, per Lord Hoffmann).
Contrary to a submission made on behalf of Chubb Russia, this is not a parochial approach but one which, as the House of Lords noted in the Fiona Trust case, has been recognised by (amongst other foreign courts) the German Federal Supreme Court (Bundesgerichtshof), the Federal Court of Australia and the United States Supreme Court and, as stated by Lord Hope at para 31, is now firmly embedded as part of the law of international commerce.
In his monumental work on International Commercial Arbitration, 2nd ed (2014), p 1403 Gary Born summarises the position as follows: In a substantial majority of all jurisdictions, national law provides that international arbitration agreements should be interpreted in light of a pro arbitration presumption.
Derived from the policies of leading international arbitration conventions and national arbitration legislation, and from the parties likely objectives, this type of presumption provides that a valid arbitration clause should generally be interpreted expansively and, in cases of doubt, extended to encompass disputed claims.
That is particularly true where an arbitration clause encompasses some of the parties disputes and the question is whether it also applies to related disputes, so that all such controversies can be resolved in a single proceeding (rather than in multiple proceedings in different forums).
To the extent that a putative applicable law fails to recognise this presumption that arbitration has been chosen as a one stop method of dispute resolution, it is inherently less likely that reasonable commercial parties would have intended that law to determine the validity and scope of their agreement to arbitrate (rather than litigate) disputes.
What degree of impairment to the commercial purpose of an arbitration agreement will be enough to negate the assumption that a choice of law to govern the contract is intended to apply to the arbitration agreement is not a question which can be answered in the abstract.
As with any question of construction, it will be necessary to have regard to the particular words used in the contract and the surrounding circumstances, as well as the nature and extent of the risk that the purpose of the arbitration agreement would be undermined if its validity and scope were governed by the relevant system of law.
We cannot improve on the formulation of Moore Bick LJ in the Sulamrica case, para 31, that commercial parties are generally unlikely to have intended a choice of governing law for the contract to apply to an arbitration agreement if there is at least a serious risk that a choice of that law would significantly undermine that agreement.
Relevance of the arbitration seat to the main contract law
During the 20th century a line of authority developed which treated a choice of place of arbitration, where there was no express choice of governing law clause in the contract, as a strong indication that the parties intended the contract to be governed by the law of that place.
This inference hardened into a rule of law and reached its high water mark in Tzortzis v Monark Line A/B [1968] 1 WLR 406, where the Court of Appeal held that a London arbitration clause gave rise to an implication that the parties intended English law to govern their contract which could only be rebutted by an express provision to the contrary.
In the Tunisienne case the House of Lords held that this put the strength of the implication too high and that the implication stemming from a choice of arbitral forum could be overridden by contrary indications derived from the express provisions of the contract or relevant surrounding circumstances.
Nevertheless, Lord Wilberforce (at p 596B) described the inference that the parties intended the law of the place of arbitration to govern their contract as a sound general rule.
Lord Diplock went further and said (at p 609E) that he did not wish to throw any doubt upon the proposition that an arbitration clause is generally intended by the parties to operate as a choice of the proper law of the contract as well as the curial law and should be so construed unless there are compelling indications to the contrary .
As is apparent from, for example, the submissions of Robert Goff QC in defence of this approach in the Tunisienne case (at p 579D), its rationale was that contracting parties, by agreeing to arbitration in a particular place, must normally be taken to have expected the arbitrators to be resident in that place and to apply the law with which they are familiar.
Lord Wilberforce expressed some reservation about this reasoning, observing (at p 596C): I venture to think that in commercial matters, at the present time, this may give insufficient recognition to the international character of the City of London as a commercial centre the reason, rather than any preference for English rules, for which arbitration in London is selected.
In the half century since the Tunisienne case was decided international arbitration has undergone major evolution and exponential growth.
This has been accompanied by the development of international arbitral institutions such as the ICCs International Court of Arbitration, the International Centre for Dispute Resolution established by the American Arbitration Association and the London Court of International Arbitration.
The primary reason for selecting London as a place of arbitration is no longer the international character of London as a commercial centre but its attractiveness specifically as a forum in which to arbitrate international disputes.
In some cases where the parties have chosen English law as the governing law of their contract, the ready availability of expert English lawyers may be a relevant factor in choosing London as the arbitration venue.
But even in the kinds of arbitration where the members of the arbitral tribunal are chosen for their legal expertise (rather than solely or mainly for their commercial experience), there is nothing to prevent the appointment of lawyers qualified in other jurisdictions to act as arbitrators in a London seated arbitration, or English lawyers to act as arbitrators in a foreign seated arbitration, and such appointments are frequently made.
Furthermore, experienced international arbitrators qualified as lawyers in England and Wales or in other jurisdictions are perfectly familiar with applying systems of law other than their own.
There can in these circumstances be no general implication that a choice of London (or any other major arbitration centre) as the seat of arbitration demonstrates an intention that the parties contractual obligations will be governed by the law of that place.
This is equally so whether the question of implied choice is governed by article 3 of the Rome I Regulation (in relation to the main body of the contract) or the common law conflict rules (in relation to the arbitration agreement).
There are still cases in which an arbitration clause providing for arbitration in London by, for example, English maritime arbitrators, or by London brokers, or by a local association or exchange, may in combination with other factors be regarded as conveying an implied choice of law.
An example is Egon Oldendorff v Libera Corpn (No 2) [1996] 1 Lloyds Rep 380, where an arbitration clause in a charterparty made between Japanese owners and German charterers provided for arbitration in London by arbitrators appointed by the London Maritime Arbitrators Association.
Also relevant to Clarke Js decision that the parties intended English law to govern the charterparty were: (1) the fact that it was made on a well known standard form containing clauses with well known meanings in English law; and (2) that having agreed a neutral forum, the parties intended that forum to apply a neutral law, namely English law and not German or Japanese law.
In such cases that implied choice of law will equally apply to the arbitration agreement: see Habas Sinai Ve Tibbi Gazlar Istihsal v VSC Steel Co Ltd [2013] EWHC 4071 (Comm); [2014] 1 Lloyds Rep 479, para 102.
Such a situation may be contrasted with one in which the arbitration clause, although it specifies a place of arbitration, does not provide for a method of identifying the arbitrators except through appointment by an international arbitral body such as the ICC.
As Andrew Baker J observed in his judgment in this case (at para 62), the ICC is a quintessentially and deliberately supranational institution, with its own internal, and so again supranational, supervisory apparatus of the International Court of Arbitration and its Secretary General and Secretariat.
In a case of this kind the parties could not reasonably assume that the selection of London as the seat of arbitration, even where it is a neutral forum, points ineluctably by necessary implication to a choice of English law to govern the contract so as to make the express designation of a governing law unnecessary.
Enka did not seek to argue on this appeal that the choice of London as the seat of arbitration in this case implies that the parties intended the construction contract as a whole to be governed by English law.
But counsel for Enka submitted that, even though such an inference cannot be drawn in relation to the law intended to govern the parties substantive contractual obligations, it can nevertheless be drawn in relation to the arbitration agreement itself.
We do not accept this.
Where there is insufficient reason to infer that the parties chose London as the seat of arbitration because they wanted the arbitrators to be versed in English law, that applies as much to any issues concerning the validity or scope of the arbitration agreement which the arbitrators might be asked to decide as it does to the substance of any dispute.
Nor can any necessary implication be drawn from the possibility that issues concerning the validity or scope of the arbitration agreement might have to be decided by the English courts in the exercise of their supervisory jurisdiction.
Questions of foreign law are dealt with in the English Commercial Court on a daily basis the trial of the present case being an example and, as Steyn LJ said in Star Shipping AS v China Shipping Foreign Trade Transportation Corpn (The Star Texas) [1993] 2 Lloyds Rep 445, 451 452, even an express choice of jurisdiction does not by itself give rise to an implied choice of law.
We therefore do not consider that a choice of the seat of arbitration can by itself be construed as an implied choice of the law applicable to the arbitration agreement.
VIII Applying the closest connection test
So far we have been considering the question whether the parties to a contract have chosen the law applicable to the arbitration agreement, either specifically or by choosing a system of law to govern the contract as a whole including the arbitration agreement.
We now turn to the situation in which no such choice has been made.
As discussed earlier (see para 36 above), the court must in these circumstances determine, objectively and irrespective of the parties intention, with which system of law the arbitration agreement has its closest connection.
This exercise is different in nature from the attempt to identify a choice (whether express or implied), as it involves the application of a rule of law and not a process of contractual interpretation.
Even where the parties have not agreed what law is to govern their contract, it is reasonable to start from an assumption for reasons given earlier that all the terms of the contract, including an arbitration clause, are governed by the same system of law.
Where, however, the parties have selected a place for the arbitration of disputes, there is authority for, as a general rule, regarding the law with which the arbitration agreement is most closely connected as the law of the seat of arbitration.
As we have seen, this was the approach adopted by the Court of Appeal in the Sulamrica case (see para 104 above).
It was also endorsed by the Court of Appeal in C v D (see para 48 above), albeit that in that case insufficient reason was given, in our opinion, for rejecting the inference that the law chosen to govern the insurance contract was intended to apply to the arbitration clause.
Among commentators, this rule notably has the support of Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), rule 64(1)(b) and para 16 016; see also Russell on Arbitration, 24th ed, (2015) at para 2 121.
There are a number of reasons of principle and policy which in our opinion justify as a general rule regarding the law of the place chosen as the seat of arbitration as the law most closely connected with the arbitration agreement which in the absence of choice will apply by default.
(i) The place of performance
The starting point is that the seat of arbitration is the place where (legally, even if not physically) the arbitration agreement is to be performed.
In identifying the system of law with which a contract (or relevant part of it) has its closest and most real connection, the place where the transaction is to be performed is the connecting factor to which the common law has long attached the greatest weight (since the place where the contract was concluded ceased to be seen as significant): see eg Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 32 073.
This is justified by the fact that states have an interest in regulating transactions taking place within their territory and by the consequent natural assumption that the law of the territory in which a transaction is taking place will govern it in the absence of a contrary indication.
By agreeing to a seat of arbitration the parties submit themselves to the jurisdiction of the courts of that place and to its law and coercive powers for the purposes of deciding any issue relating to the validity or enforceability of their arbitration agreement.
Thus, as we discuss later in this judgment (see Part XI below), the courts of the seat have jurisdiction to grant an injunction to restrain proceedings brought in breach of the agreement to arbitrate.
The parties also by their choice of seat impliedly agree to bring any claim for a remedy relating to the existence or scope of the arbitrators jurisdiction (including any issue as to the validity or scope or the arbitration agreement), and any challenge to an arbitral award, in the courts of that place: see C v D [2007] EWHC 1541 (Comm); [2007] 2 All ER (Comm) 557, paras 29 34 (Cooke J); C v D [2007] EWCA Civ 1282; [2008] Bus LR 843, para 17 (CA); Minister of Finance (Inc) v International Petroleum Investment Co [2019] EWCA Civ 2080; [2020] Bus LR 45, paras 36 49; Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 16 036.
The seat of arbitration is in these circumstances the place to whose system of law the arbitration agreement is most closely attached.
By contrast, there is no reason to regard the place of performance of the substantive obligations created by the contract as a significant connection for the purpose of determining the law applicable to the arbitration agreement (as opposed to for the purpose of determining what law the arbitrators should apply in deciding a dispute).
This is because (as noted at para 40 above) the subject matter and purpose of an arbitration agreement are different from those of the contract in which it is incorporated.
The irrelevance of the place of performance of the main contract is illustrated by the fact that seats of arbitration are frequently chosen which have no connection with where the parties substantive obligations are to be performed (or otherwise with the contract) and sometimes precisely because they have no such connection.
Other factors connecting the main contract to a country or its laws are equally irrelevant in regard to the arbitration agreement.
For example, article 4 of the Rome I Regulation adopts a presumption that the contract is most closely connected with the country where the party required to effect the characteristic performance of the contract has his habitual residence.
There is no reason to regard this as a factor which should have any bearing on the law applicable to the arbitration agreement.
We therefore agree with the view of Moore Bick LJ in the Sulamrica case quoted at para 104 above and also with statement of Longmore LJ in C v D [2007] EWCA Civ 1282; [2008] Bus LR 843, para 26, that: an agreement to arbitrate will normally have a closer and more real connection with the place where the parties have chosen to arbitrate than with the place of the law of the underlying contract in cases where the parties have deliberately chosen to arbitrate in one place disputes which have arisen under a contract governed by the law of another place.
We do not consider that the importance of the connection between the law governing the arbitration agreement and the law of the seat is undermined by the fact that some national laws, such as the Arbitration Act 1996 in England and Wales, allow the parties a wide degree of freedom to make their own arrangements, either by choosing another system of law to govern their arbitration agreement or arbitral procedure (see section 4(5) of the 1996 Act, discussed earlier) or by agreeing to the application of institutional rules made by an arbitral body such as the ICC (see section 4(3) of the 1996 Act).
The extent to which the parties are free to make such arrangements is itself a matter for the law of the seat.
Furthermore, any national law is likely to include mandatory provisions, described in section 1(b) of the 1996 Act as such safeguards as are necessary in the public interest, which have effect notwithstanding any agreement to the contrary.
As noted earlier, in the 1996 Act these include sections 66 to 68, which govern any challenge to an award made in England including any challenge to the substantive jurisdiction of the arbitrators on grounds that the arbitration agreement is invalid or unenforceable or does not cover the dispute referred to arbitration.
Such provisions of themselves establish a close nexus between the law determining the validity and scope of the arbitration agreement and the law of the seat of arbitration.
(ii) Consistency with international law and legislative policy
A second, and in our view compelling, reason for treating an arbitration agreement as governed by the law of the seat of arbitration in the absence of choice is that such a rule accords with international law as embodied in the 1958 New York Convention and other international instruments, as well as with the national law which gives effect to the New York Convention in England and Wales.
The New York Convention, to which the United Kingdom became a party in 1975 and which more than 160 states have now signed, has been described as the single most important pillar on which the edifice of international arbitration rests, and as perhaps the most effective instance of international legislation in the entire history of commercial law: see Redfern and Hunter: Law and Practice of International Commercial Arbitration, 6th ed (2015), para 2.11, quoting Wetter, The present status of the International Court of Arbitration of the ICC: An appraisal (1990) 1 Am Rev Intl Arb 91, p 93, and Mustill, Arbitration: History and background (1989) 6 J Intl Arb 43, p 49.
The essential aim of the Convention was to establish a single uniform set of international legal standards for the recognition and enforcement of arbitration agreements and awards.
Its success is reflected in the fact that, according to Born, International Commercial Arbitration, 2nd ed (2014), p 113, the New York Convention has been implemented through national legislation in virtually all contracting states.
Article V(1)(a) of the Convention specifies, among the limited circumstances in which recognition or enforcement by the courts of a Convention state of an award made in another Convention state may be refused, proof that the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.
As stated in Dicey, Morris & Collins on The Conflict of Laws, 15th ed (2012), para 16 014: In the light of the pervasive reach of the New York Convention in modern times, this rule, although not itself prescribing a choice of law rule of general application,
nevertheless provides a strong indication of one
Article V(1)(a) enacted into English law by section 103(2)(b) of the Arbitration Act 1996 has two limbs, which are intended to be treated as uniform international conflict of laws rules: see Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2008] EWHC 1901 (Comm); [2009] 1 All ER (Comm) 505, para 78 (Aikens J); and [2010] UKSC 46; [2011] 1 AC 763, para 123 (Lord Collins).
The first, and primary, rule is that the validity of the arbitration agreement is governed by the law to which the parties [have] subjected it in other words the law chosen by the parties.
The second, default rule, which applies where no choice has been indicated is that the applicable law is that of the country where the award was made.
Where the parties have chosen the seat of arbitration, this will be (or be deemed to be) the law of the seat.
In English law this is expressly provided by section 100(2)(b) of the 1996 Act.
There is a division of opinion among commentators over whether the first limb of article V(1)(a) applies only where there is an express choice of law to govern the arbitration agreement or whether it also encompasses a choice that is implied for example from a choice of law to govern the contract in general: compare van den Berg, The New York Arbitration Convention of 1958 (1981), p 293 and Born, International Commercial Arbitration, 2nd ed (2014), pp 564 565.
We think the latter is the better view.
As discussed earlier, a choice of law for the arbitration agreement may be clearly indicated by a choice of law for the contract of which it forms part and a choice conveyed impliedly is just as much a choice entitled to respect in accordance with the principle of party autonomy as a choice stated expressly.
Furthermore, the broader interpretation is supported by the language of article V(1)(a), which applies the default rule only failing any indication of the law to which the parties have subjected the arbitration agreement.
Where proceedings are brought in a court of a contracting state in respect of a matter covered by an arbitration agreement to which the New York Convention applies, article II(3) of the Convention requires the court, at the request of one of the parties, to refer the parties to arbitration, unless the agreement is null and void, inoperative or incapable of being performed.
Article II does not itself specify rules for identifying the law by which the validity of the arbitration agreement is to be determined.
There is, however, a strong and widely accepted argument that the Convention is to be interpreted as requiring the same conflict rules to be applied in relation to article II(3) as are specifically required at the stage of enforcement by article V(1)(a).
Thus, Professor van den Berg, a leading authority on the New York Convention, has written: A systematic interpretation of the Convention, in principle, permits the application by analogy of the conflict rules of article V(1)(a) to the enforcement of the agreement.
It would appear inconsistent at the time of the enforcement of the award to apply the Conventions uniform conflict rules and at the time of the enforcement of the agreement to apply possibly different conflict rules of the forum.
It could lead to the undesirable situation of the same arbitration agreement being held to be governed by two different laws: one law determined according to the conflict rules of the forum at the time of the enforcement of the agreement, and the other determined according to article V(1)(a) at the time of enforcement of the award. van den Berg, The New York Arbitration Convention of 1958 (1981), p 126 7; and see Born, International Commercial Arbitration, 2nd ed (2014), pp 494, 495 499; Lew & Mistelis, Comparative International Commercial Arbitration (2003), para 6 55; Schramm, Geisinger & Pinsolle, Article II in Kronke, Nacimiento et al (eds), Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention (2010), p 55.
This approach is also supported by other international instruments.
The 1961 European Convention on International Commercial Arbitration adopts the conflict rules set out in article V(1)(a) of the New York Convention and, by article VI(2), provides for those rules to be applied at any stage when a court of a contracting state is required to rule on the existence or validity of an arbitration agreement in other words, whether the question arises pre or post award.
Article 36 of the Model Law adopted by the United Nations Commission on International Trade Law (UNCITRAL) on 21 June 1985 parallels article V of the New York Convention in its list of grounds (set out in article 36) on which recognition or enforcement of an arbitral award may be refused.
The Model Law takes this a step further in article 34 by restricting any challenge to an arbitral award to an application brought in the state in which the award was made and by limiting the grounds on which an award may be set aside to those on which recognition or enforcement of a foreign award may be refused.
The primary reason for the exclusion of arbitration agreements from the Rome I Regulation was that such agreements were already adequately regulated by international conventions: see McParland, The Rome I Regulation on the Law Applicable to Contractual Obligations (2015), paras 7 126 7 127.
The exclusion can accordingly be seen as a recognition of the fact that arbitration agreements are already subject to international uniform conflict rules derived, in particular, from the 1958 New York Convention and the 1961 European Convention.
Although the United Kingdom has not signed the 1961 European Convention and has not in all respects adopted the UNCITRAL Model Law, the rules laid down in article V of the New York Convention (and article 36 of the Model Law) relating to the recognition or enforcement of awards have been directly incorporated into English law by section 103 of the 1996 Act.
Thus, under section 103(2)(b) the grounds on which recognition or enforcement of an award made in another Convention state may be refused include proof that: the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made;
While this provision only applies directly in proceedings brought to enforce an award made in another Convention state, it would be illogical to apply different conflict rules to determine which law governs the validity of the arbitration agreement where the arbitration is seated (and the award therefore treated as made) in England.
Thus, in cases where the parties have not chosen the law of the arbitration agreement but have chosen the seat of arbitration, it would be illogical if the English courts were to treat the validity of the arbitration agreement as governed by the law of the seat if the parties have chosen a foreign seat but by the law of the main contract if they have been chosen an English seat of arbitration.
Such an approach would be all the more incoherent given that, if proceedings were brought in another Convention state to enforce an award made in England, the foreign court would apply the law of the seat (and not the law of the main contract, if different) to determine the validity of the award as required by article V(1)(a) of the Convention.
As pointed out by Professor van den Berg in the passage quoted at para 130 above, it would be equally illogical if the law governing the validity of the arbitration agreement were to differ depending on whether the question of validity is raised before or after an award has been made.
To ensure consistency and coherence in the law, the same law should be applied to answer the question in either case.
Again, the incoherence that would result if English common law were to adopt a different conflict rule from the New York Conventions uniform rule would be compounded when the international perspective is considered.
As one commentator has observed: It is fair to say that today, the conflict rule contained in article V(1)(a) New York Convention has developed into a truly transnational conflict rule for the determination of the law governing the substantive validity of the arbitration agreement.
This rule has been applied in numerous international arbitral awards, is favoured by international arbitral doctrine and has been accepted by domestic courts.
See Berger, Re examining the Arbitration Agreement: Applicable Law Consensus or Confusion?, in Van den Berg (ed), (2006) ICCA Congress Series Vol 13, 301, pp 316 317.
It is not desirable that, when a question about the enforceability of the same arbitration agreement arises in different national courts, different conflict rules should be applied to determine the governing law.
This point is well made by Gary Born in his work on International Commercial Arbitration, 2nd ed (2014), p 498: The international arbitral process aspires towards a maximally uniform approach by national courts presented with disputes about the substantive validity of a particular international arbitration agreement.
A lack of uniformity on this issue would result in some courts referring parties to arbitration, and others refusing to do so, under the same arbitration agreement; that makes no sense and results in unnecessary litigation, forum shopping and uncertainty.
Rather, insofar as possible, it is much more desirable for all national courts to reach the same conclusion as to the validity (or invalidity) of a particular arbitration agreement.
Exactly the same points apply to the approach taken by national courts to the scope of an international arbitration agreement.
As with questions of validity, issues about whether a dispute falls within the scope of the arbitration agreement may arise at any stage from when a party wishes to refer a dispute to arbitration to the stage of seeking to enforce an award.
Article V(1)(c) of New York Convention provides that recognition and enforcement may be refused if [t]he award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration .
Section 103(2)(d) of the 1996 Act contains an almost identical provision, as does article 36(i)(a)(iii) of the UNCITRAL Model Law and article IX(1)(c) of the European Convention.
The general approach in the conflict of laws, adopted by both the common law and the Rome I Regulation, is to treat the validity and scope of a contract (as well as other issues such as the consequences of breach and ways of extinguishing obligations) as governed by the same applicable law.
This makes good sense, not least because the boundary between issues of validity and scope is not always clear.
Thus, it is logical to apply the law identified by the conflict rules prescribed by article V(1)(a) of the New York Convention and section 103(2)(b) of the 1996 Act to questions about the scope or interpretation of the arbitration agreement as well as disputes about its validity.
This also accords with the approach taken by the American Law Institute in the final draft of the Restatement (Third) of the US Law of International Commercial and Investor State Arbitration (24 April 2019).
Section 2.14 of the draft Restatement recommends a rule that a court should determine whether an international arbitration agreement is null and void in accordance with: (1) the law to which the parties have subjected the arbitration agreement; or (2) in the absence of such a choice of law, the law of the seat of arbitration.
This approach is consistent with article V(1)(a) of the New York Convention.
The comment on the applicable law explains: On balance, the present section favors ensuring symmetry between pre arbitration and post award standards for determining the validity of an arbitration agreement.
There is no reason in principle why a court should answer that question differently depending on the stage of the proceedings, and doing so would inject unnecessary uncertainty and complexity into the analysis.
Section 2.15 of the draft Restatement adopts the same rule for the purpose of determining whether a matter falls within the scope of an arbitration agreement, taking the position that the law applicable to determining the scope of an agreement to arbitrate should parallel the law applicable to determining whether the agreement is valid.
Accordingly, whatever merit there might be, if one were designing a system of law from scratch, in a conflicts rule which treated the law of the main contract as applicable to the arbitration agreement in the absence of choice, it would in our view be wrong for the English common law to adopt a rule out of step with both the legislative policy of the 1996 Act and the underlying uniform rule established by the New York Convention.
The court should apply the same conflict rules to identify the governing law irrespective of whether the arbitration has a domestic or foreign seat and irrespective of the stage at which an issue about the validity or scope of the arbitration agreement is raised.
Internal coherence of English law, as well as harmony with international law and practice, is achieved by treating the applicable law in all cases, in the absence of a choice by the parties, as the law of the seat of arbitration.
(iii) Giving effect to commercial purpose
A third reason for applying the law of the seat as a default rule is that it is likely to uphold the reasonable expectations of contracting parties who have chosen to settle their disputes by arbitration in a specified place but made no choice of law for their contract.
This is particularly so where, as is often the case in contracts made between parties of different nationalities, a popular seat of international arbitration has been chosen as a neutral forum with which neither party is connected.
In such circumstances, if the parties had been required to make a common choice of law to govern their arbitration agreement at the time of contracting, it is inherently unlikely that they would have agreed on either of their national systems of law and much more likely that they would have settled on the law of the place which they had chosen as the seat of arbitration.
Not only does this provide a neutral choice of law but it is already the law of that place which in countries which have implemented the Model Law or are parties to the New York Convention will determine the validity of an award if an application is made to set it aside or if its enforcement in the other partys home state is resisted.
Countries frequently chosen as neutral seats of arbitration can also be expected to have legal regimes which are supportive of arbitration and which seek to give effect to the parties intention that they do not wish to have their disputes decided by a court.
That is the case for all the most preferred seats of international arbitration which, according to the most recent 2018 international arbitration survey conducted by the School of International Arbitration at Queen Mary University of London, are London, Paris, Singapore, Hong Kong and Geneva.
As discussed earlier, it is reasonable to assume that parties who have chosen to settle their disputes by international arbitration want an arbitration that resolves all (and not only some) disputes through an award that is binding and enforceable and which is immune from collateral attacks, particularly in the home country of one of the parties.
As a general rule, applying the law of the chosen seat of arbitration is calculated to achieve that purpose.
(iv) Legal certainty
Finally, there is merit is recognising a clear default rule in the interests of legal certainty.
Applying a general rule that, in the absence of choice, an arbitration agreement is governed by the law of the seat of arbitration (where a seat has been designated) enables the parties to predict easily and with little room for argument which law the court will apply by default.
The benefits of certainty are further enhanced if the same law is applied irrespective of the country in which the proceedings are brought and whether the question of the validity or scope of the arbitration agreement is raised before or after an award has been made.
Certainty might not be a sufficient reason to recognise a clear and uniform rule if the rule interfered with party choice.
But here there is no risk of such interference because we are concerned with the situation in which the parties have not exercised their freedom to choose the law to be applied so that the court must make the selection for them.
It is desirable that parties should be able to know with certainty what law a court will apply in this situation.
If they do not like the default option, they can always choose a system of law that they prefer.
(v) Conclusion on the default rule
Chubb Russia did not argue against the contention that the law most closely connected with the arbitration agreement, which in the absence of choice will apply by default, will in general be the law of the seat of the arbitration.
Indeed, leading counsel for Chubb Russia at one point in oral argument volunteered the suggestion that an appropriate default rule would be that the arbitration agreement is governed by the law of the seat.
He noted that such a rule would have the advantages of certainty and consistency with article V(1)(a) of the New York Convention.
Counsel later withdrew that suggestion and in reaching our conclusion on this issue we have placed no reliance on the fact it was made.
But it was in our view no more than a realistic acknowledgement of the overwhelming case for recognising such a general rule.
A case can be made for recognising an exception to the ordinary default rule where the arbitration agreement would be invalid under the law of the seat but not under the law governing the rest of the contract: see eg Merkin & Flannery on The Arbitration Act 1996, 6th ed (2019), para 46.10.5 and Born, International Commercial Arbitration, 2nd ed (2014), pp 542 549; for a contrary view, see Glick and Venkatesan, Choosing the Law Governing the Arbitration Agreement in Kaplan and Moser (eds), Jurisdiction, Admissibility and Choice of Law in International Arbitration: Liber Amicorum Michael Pryles (2018), Chapter 9, pp 148 149.
Since the issue does not arise in the present case, it is not necessary to decide whether such an exception should be recognised.
Even if there be no such exception, where the law of the seat is English law an arbitration agreement will only be invalid in limited circumstances and for good reason.
Where the law of the seat is not English law, an award made under an arbitration agreement invalid under that law is liable in any event to be set aside by the courts of the seat, whose decision would normally be followed by the English courts: see the discussion by Lord Mance in Arbitration a law unto itself? (2016) 32 Arbitration International 223.
There can also be cases where no seat has been designated, where it may be appropriate to apply the law applicable to the rest of the contract.
But such exceptional cases apart, we consider that the law of the seat will apply by default.
IX The law applicable to the arbitration agreement in article 50.1
Applying the principles discussed above to the present case, it is common ground that the parties have not chosen a system of law specifically to govern the arbitration agreement contained in article 50.1 of the construction contract.
Chubb Russia, however, contends that the parties have chosen Russian law to govern the contract as a whole including the arbitration agreement.
Enka disputes this.
Enka accepts that the main body of the construction contract is governed by Russian law but maintains that this is so only because of the connections between the construction contract and the law of Russia and not as a matter of choice.
(i) No choice of law
The first thing to note is that the construction contract does not contain a choice of governing law clause.
Amongst almost 100 pages of primary text and another 400 pages of appendices, there is no provision which says that the contract shall be governed by or interpreted in accordance with a specified system of law.
In a detailed and professionally drafted commercial contract made between substantial organisations based in different countries, such a clause is an entirely standard clause, almost invariably included along with a clause specifying the forum in which any dispute is to be resolved.
It is difficult to conceive that the omission of such a clause in this case despite the inclusion of a detailed provision dealing with the resolution of disputes was accidental.
We agree with counsel for Enka that an obvious explanation for its absence is that the parties were not able to agree on a choice of the governing law.
Chubb Russia contends that a choice of Russian law can nonetheless be discerned from the use in the construction contract of the term Applicable Law, taken together with the definition of that term in Attachment 17 as: Law of the Russian Federation, including legislation of the Russian Federation, all regulatory legal acts of the State Authority Federal Bodies, State Authorities of the constituent entities of the Russian Federation, legislation of the constituent entities of the Russian Federation, regulatory legal acts by Local Authorities and any other applicable regulatory legal acts.
There are numerous references throughout the body of the contract to the Applicable Law, as well as other references to the law or laws of the Russian Federation.
Counsel for Chubb Russia submitted that, read as a whole, the language of the construction contract makes it clear that the parties were contracting by reference to Russian law and chose Russian law as the law applicable to their agreement.
Had it been the parties choice, however, that the construction contract should be governed by the Applicable Law as defined in Attachment 17, it would have been simple to say so.
Yet, as noted, there is no clause which states this.
Rather, the term Applicable Law is used in specific provisions of the contract which impose obligations on the contractor to comply with laws and regulations applicable in the country where the construction work was to take place.
As the Court of Appeal observed (at para 107), it is a common technique in international construction contracts to define such an applicable law or laws and to impose an obligation to comply with them separately from any choice of the law that is to govern the validity and interpretation of the parties contractual rights and obligations.
As evidence of this practice, the Court of Appeal cited a leading text on the widely used standard forms of international construction contract issued by the International Federation of Consulting Engineers (FIDIC): see Baker Mellors Chalmers and Lavers on FIDIC Contracts: Law and Practice, 5th ed (2009), paras 2.126, 2.140 and 2.145.
Counsel for Chubb Russia pointed out that the contract in this case was not made on a FIDIC standard form and, unlike contracts made on FIDIC forms, does not contain a governing law clause.
They observed that the technique employed in drafting FIDIC contracts is to select a governing law and then to apply a different law (usually the local law) expressly to certain provisions in such a way that the contractor will be obliged to comply with that law.
That was not done here, where the only law specified was the Applicable Law.
The drafting technique to which the Court of Appeal referred is not, however, peculiar to FIDIC standard forms.
Authoritative texts cited by counsel for Enka confirm that other standard forms of international construction contract also typically include provisions which require the contractor to comply with applicable laws or with laws of the country where the works are carried out: see Huse, Understanding and Negotiating Turnkey and EPC Contracts, 4th ed (2020), paras 4 110 4 112; Bailey, Construction Law, 2nd ed (2016), para 18.11.
The clear purpose of such provisions is to protect the employer against the risk of incurring liability through failure by the contractor to comply with local laws such as building regulations, health and safety and environmental laws, tax laws and other applicable regulatory requirements.
The rationale for including such provisions is not affected by the presence or absence of a governing law clause in the contract.
There is no necessary inference that the validity and interpretation of a contractual obligation requiring compliance with a law or laws of a particular country is itself to be determined by applying the contract law of that country.
This is underlined by the point which Chubb Russia itself makes that the law chosen to govern a contract made on a FIDIC standard form (or, we would add, other forms of international construction contract) may and often does differ from the applicable law with which the contractor is required to comply in performing the contract.
In any case the contractual obligations of Enka were not limited to compliance with the Applicable Law.
Article 4.1 of the construction contract provides: The Contractor shall ensure performance of the Work in accordance with: a) The requirements of this Agreement (including references to the non mandatory rules of Applicable Law but to the extent the provisions of the Agreement are not at variance with mandatory rules of Applicable Law); b) Applicable Law (including the Mandatory Technical Rules constituting a part of such Applicable Law); c) An Implied Covenant of Good Faith and Fair Dealing.
The definition in Attachment 17 of the phrase Implied Covenant of Good Faith and Fair Dealing imports standards applied by experienced international contractor organisations engaged in similar projects.
As well as such standards, the construction contract and its attachments set out many specific requirements for the work which do not form part of the Applicable Law.
Quite apart from this, there are numerous rights and obligations established by the construction contract which make no reference to the Applicable Law (or to laws of the Russian Federation).
Examples are clauses dealing with the consequences of delay (article 26), force majeure (article 31), payment of the price (article 33) and termination (article 43).
In these circumstances, it cannot be said that the parties have in the construction contract expressly selected a system of law to govern the validity and interpretation of their contractual obligations nor that the terms of the contract construed in their context point ineluctably to the conclusion that the parties intended Russian law to apply.
To the contrary, the obvious inference from the fact that the parties have not anywhere in the contract stated what system of law is to govern any of their contractual obligations as opposed to creating obligations to comply with applicable laws is that they have not agreed (for whatever reason) on a choice of governing law.
This inference applies to the arbitration agreement as much as to the rest of the contract.
(ii) Closest connection
In the absence of any choice of the law that is to govern the arbitration agreement, it is necessary to fall back on the default rule and identify the system of law with which the arbitration agreement is most closely connected.
In accordance with our earlier analysis, this will generally be the law of the seat chosen by the parties, which in this case is London.
As already mentioned, Chubb Russia did not actively oppose this conclusion if it is necessary to identify the law with which the arbitration agreement is most closely connected.
Chubb Russias case has been put solely on the basis that the parties chose Russian law as the law governing the contract including the arbitration agreement.
No alternative argument has been advanced that, if this is wrong, Russian law nevertheless applies as the law most closely connected with the arbitration agreement.
Chubb Russia has put forward an argument, however, about the proper interpretation of particular terms of the construction contract which it remains relevant to consider.
This argument is that the agreement to arbitrate disputes is embedded in a clause of the contract (article 50) dealing with dispute resolution which contains other obligations in addition to the obligation to arbitrate and which itself is, as Mr Bailey QC put it, buried deep inside the contract and inextricably connected to other provisions of it.
It is said that in these circumstances the parties must have intended all the obligations in article 50, including the arbitration agreement, to be governed by the same system of law as each other and as the rest of the contract.
For the purpose of this argument, it is necessary to determine the law applicable to the main body of the construction contract.
As discussed earlier, for that purpose the court must apply the Rome I Regulation.
(iii) The law applicable to the main contract
Although it would be a mistake to interpret the Rome I Regulation through the prism of the common law, there does not appear to be any substantial difference (save possibly in relation to the admissibility of subsequent conduct) between the approach of the common law to determining whether there has been an express or implied choice of law and the approach to be followed in deciding whether a choice has been made expressly or clearly demonstrated for the purpose of article 3 of the Rome I Regulation.
Thus, in Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd [2013] EWCA Civ 365; [2013] 2 Lloyds Rep 98, para 33, the Court of Appeal held that the test of whether a choice has been clearly demonstrated is objective and is equivalent to Lord Diplocks formulation of the common law test, requiring the court to be satisfied that the only reasonable conclusion to be drawn from the circumstances is that the parties should be taken to have intended the putative law to apply.
For the reasons already given when considering the position at common law, the parties have not in this case expressly made or clearly demonstrated a choice of law to govern the construction contract but are, as it seems to us, reasonably to be understood as having not agreed on a choice of law.
The governing law is therefore to be determined by applying article 4 of the Rome I Regulation.
Under the construction contract Enka was engaged to install a boiler and auxiliary equipment, with the equipment and materials (except for consumable materials) to be supplied by Energoproekt as customer.
The contract was therefore, at least predominantly, a contract for the provision of services by Enka.
Article 4(1)(b) of the Rome I Regulation establishes a prima facie rule that, to the extent that the law applicable to it has not been chosen in accordance with article 3, a contract for the provision of services shall be governed by the law of the country where service provider has his habitual residence.
This rule points towards the law of Turkey as the country where the contractor, Enka, had its place of central administration and therefore habitual residence (see article 19(1)).
However, the other party to the contract, Energoproekt, was a Russian company, as was the End Customer, Unipro.
The contract was for the performance of construction work in Russia and required compliance with Russian laws and regulations.
It is written in the Russian language (as the authoritative version); notifications under it were likewise required to be written in Russian and English but with the Russian version taking precedence and, when sent to the contractor, were to be sent to its Moscow office.
The price for the work, although calculated in US dollars, was to be paid in roubles to a Russian bank account.
The fact that the dispute resolution clause provides for arbitration in London is not a sufficient connection to indicate that English law should govern the contractual obligations of the parties.
It is clear from all the circumstances of the case that the main body of the construction contract is manifestly more closely connected with Russia than with any other country.
Pursuant to article 4(3) of the Rome I Regulation, it is therefore governed by Russian law.
(iv) The dispute resolution clause
Chubb Russias argument that the arbitration agreement cannot reasonably be detached from the rest of the contract in terms of its governing law has two aspects.
The first is that article 50.1, which contains the arbitration agreement, must be governed by a single law.
The second is that it makes no sense for that law to differ from the law applicable to the rest of the construction contract.
Article 50.1 sets outs a series of procedures of increasing formality which the parties have agreed to follow for resolving any dispute, with arbitration being the last resort.
Thus, where a Dispute as defined in the first sentence of article 50.1 arises, the parties are first of all obliged to make in good faith every reasonable effort to resolve it by negotiations.
If the Dispute is not resolved within ten days of either party sending a Notification (a term defined in article 51.2 of the contract) to the opposite party containing an indication of the Dispute, either party may then give a written notice causing it to be referred to a meeting between the parties senior managements.
It is only if the matter is not resolved within a further 20 calendar days that the obligation arises to refer the Dispute to international arbitration.
Enka accepts that article 50.1 can only reasonably be interpreted as governed by a single system of law, as it is clearly intended to establish a single, staged dispute resolution process and it would make no sense for the meaning or scope of a Dispute as defined in the earlier part the clause to be determined by applying a different system of law from the law governing the validity and scope of the obligation to arbitrate.
But it is Enkas case that the implication in terms of governing law flows in the opposite direction from that contended for by Chubb Russia, and that it follows from the identification of English law as the law which (on Enkas case) governs the arbitration agreement that English law applies to the whole of article 50.1.
That conclusion should be reached, Enka contends, either by applying the common law rules to the whole of article 50.1 on the basis that the whole of that clause constitutes an arbitration agreement within the meaning of article 1(2)(e) of the Rome I Regulation or by applying the principle of dpeage and treating article 50.1 as a severable part of the contract for the purpose of the Rome I Regulation.
Mr Bailey QC for Chubb Russia drew attention to connections between article 50.1 and other parts of the contract: in particular the use of capitalised terms such as Notification which are defined elsewhere.
He also pointed out that article 42.2 of the contract includes provision for referring disputes arising out of the operation of the change control procedure to arbitration pursuant to article 50.
He submitted that the dispute resolution clause is not hermetically sealed from the rest of the contract but is inextricably bound up with it, and that this points strongly to the conclusion that the arbitration agreement and the other obligations contained within the contract must all be governed by the same system of law.
This contention could be formulated on the basis of implied choice or by reference to the closest connection test.
As to the former, no doubt parties could in principle agree that the whole of their contract, including an arbitration agreement within it, should be governed by a single system of law even though they have not agreed on what that law should be.
But this does not seem to us an inherently likely agreement for contracting parties to make.
To establish such an agreement a clearer demonstration of intent would be necessary than the mere fact that the arbitration agreement forms part of a wider dispute resolution clause which is referred to elsewhere and uses terms defined elsewhere in the contract.
In terms of connections, we agree with both parties that article 50.1 makes sense only as an integrated whole governed by one system of law.
But we do not regard the connections to which Chubb Russia drew attention between article 50.1 and the rest of the contract as particularly strong or sufficient to require the application of the same law in circumstances where no choice of law has been made by the parties.
There is no difficulty in principle in using within a contract or clause of a contract governed by a particular system of law a term defined in another part of the contract or in a separate instrument governed by a different system of law.
In such a case the term will carry its defined meaning by agreement.
The reference in article 50.1 to a Notification can readily operate in this way.
Likewise, the cross reference in article 42.2 of the construction contract to the dispute resolution clause does not require both clauses to be governed by the same system of law.
It has become increasingly common for commercial parties to include in their contracts provisions which require other forms of dispute resolution, such as good faith negotiation or mediation, to be undertaken without success before a dispute is referred to arbitration.
We find it difficult to see how, as a matter of principle or policy, the fact that such an approach is adopted can justify the application of a different law to determine the validity or scope of the arbitration agreement.
All the reasons that we have identified for, as a general rule, regarding the law governing the arbitration agreement in the absence of choice as the law of the seat of arbitration apply equally and with equal force where the arbitration agreement is contained in a wider dispute resolution clause (or integrated set of clauses) as where it is self contained.
We do not think that reasonable commercial parties would expect the law applied to determine the validity and scope of their arbitration agreement to depend on which form of dispute resolution procedure is chosen.
Rather, it is reasonable to expect that, where a multi tiered procedure is chosen, the law which determines the validity and scope of the arbitration agreement will determine the validity and scope of the whole dispute resolution agreement.
The fact that two conflict of laws regimes are potentially in play complicates the analysis but provides no reason to alter the result.
Where, as in this case, an obligation to arbitrate disputes is embedded in a single dispute resolution agreement which provides for other steps to be undertaken before the obligation to arbitrate arises, we do not think it unreasonable to regard the whole dispute resolution agreement as an arbitration agreement for the purpose of article 1(2)(e) of the Rome I Regulation.
On this basis, applying the common law conflict of laws rules, article 50.1 of the construction contract is governed by English law.
X Conclusions on applicable law
It may be useful to summarise the principles which in our judgment govern the determination of the law applicable to the arbitration agreement in cases of this kind: i) Where a contract contains an agreement to resolve disputes arising from it by arbitration, the law applicable to the arbitration agreement may not be the same as the law applicable to the other parts of the contract and is to be determined by applying English common law rules for resolving conflicts of laws rather than the provisions of the Rome I Regulation. ii) According to these rules, the law applicable to the arbitration agreement will be (a) the law chosen by the parties to govern it or (b) in the absence of such a choice, the system of law with which the arbitration agreement is most closely connected. iii) Whether the parties have agreed on a choice of law to govern the arbitration agreement is ascertained by construing the arbitration agreement and the contract containing it, as a whole, applying the rules of contractual interpretation of English law as the law of the forum. iv) Where the law applicable to the arbitration agreement is not specified, a choice of governing law for the contract will generally apply to an arbitration agreement which forms part of the contract. v) The choice of a different country as the seat of the arbitration is not, without more, sufficient to negate an inference that a choice of law to govern the contract was intended to apply to the arbitration agreement. vi) Additional factors which may, however, negate such an inference and may in some cases imply that the arbitration agreement was intended to be governed by the law of the seat are: (a) any provision of the law of the seat which indicates that, where an arbitration is subject to that law, the arbitration will also be treated as governed by that countrys law; or (b) the existence of a serious risk that, if governed by the same law as the main contract, the arbitration agreement would be ineffective.
Either factor may be reinforced by circumstances indicating that the seat was deliberately chosen as a neutral forum for the arbitration. vii) Where there is no express choice of law to govern the contract, a clause providing for arbitration in a particular place will not by itself justify an inference that the contract (or the arbitration agreement) is intended to be governed by the law of that place. viii) In the absence of any choice of law to govern the arbitration agreement, the arbitration agreement is governed by the law with which it is most closely connected.
Where the parties have chosen a seat of arbitration, this will generally be the law of the seat, even if this differs from the law applicable to the parties substantive contractual obligations. ix) The fact that the contract requires the parties to attempt to resolve a dispute through good faith negotiation, mediation or any other procedure before referring it to arbitration will not generally provide a reason to displace the law of the seat of arbitration as the law applicable to the arbitration agreement by default in the absence of a choice of law to govern it.
Applying these principles, we have concluded that the contract from which a dispute has arisen in this case contains no choice of the law that is intended to govern the contract or the arbitration agreement within it.
In these circumstances the validity and scope of the arbitration agreement (and in our opinion the rest of the dispute resolution clause containing that agreement) is governed by the law of the chosen seat of arbitration, as the law with which the dispute resolution clause is most closely connected.
We would therefore affirm albeit for different reasons the Court of Appeals conclusion that the law applicable to the arbitration agreement is English law.
We have not found it necessary to consider arguments made by Enka that, if the arbitration agreement were governed by the law of Russia as the place of performance of the construction project and country with which the parties substantive contractual obligations have their closest connection, there would be a serious risk that the parties intention of having their disputes finally settled by arbitration in a neutral forum would be defeated.
This was disputed by Chubb Russia, but in the light of the conclusion we have reached there is no need to resolve this further issue.
XI The anti suit injunction
If, as we have held, the arbitration agreement is governed by English law, Chubb Russia does not dispute that it was legitimate for the Court of Appeal to exercise its discretion whether to grant an anti suit injunction afresh and does not contend that it erred in so doing.
Its challenge to the order made by the Court of Appeal rests on the assumption that the arbitration agreement is governed by Russian law.
Chubb Russia contends that the English courts ought in these circumstances to defer to the decision of the Russian courts on whether their dispute must be referred to arbitration or may be resolved by litigation in the Russian courts.
On Chubb Russias case the English courts approach to the grant of anti suit injunctions should differ according to whether the arbitration agreement is governed by English law or a foreign law.
As we have held that the arbitration agreement is governed by English and not Russian law, it is not necessary to address this further ground of appeal.
Nevertheless, given that it has been fully argued and the importance of the issues raised, we shall briefly address it.
As already noted, by choosing a seat of arbitration the parties are choosing to submit themselves to the supervisory and supporting jurisdiction of the courts of that seat over the arbitration.
A well established and well recognised feature of the supervisory and supporting jurisdiction of the English courts is the grant of injunctive relief to restrain a party from breaching its obligations under the arbitration agreement by bringing claims which fall within that agreement in court proceedings rather than, as agreed, in arbitration.
A promise to arbitrate is also a promise not to litigate.
As explained by Lord Hoffmann in West Tankers Inc v RAS Riunione Adriatica di Sicurt SpA (The Front Comor) [2007] UKHL 4; [2007] 1 Lloyds Rep 391, at paras 20 22: 20.
Of course arbitration cannot be self sustaining.
It needs the support of the courts Different national systems give support in different ways and an important aspect of the autonomy of the parties is the right to choose the governing law and seat of the arbitration according to what they consider will best serve their interests. 21.
The Courts of the United Kingdom have for many years exercised the jurisdiction to restrain foreign court proceedings as Colman J did in this case: see Pena Copper Mines Ltd v Rio Tinto Co Ltd (1911) 105 LT 846.
It is generally regarded as an important and valuable weapon in the hands of a court exercising supervisory jurisdiction over the arbitration.
It promotes legal certainty and reduces the possibility of conflict between the arbitration award and the judgment of a national court. it saves a party to an arbitration agreement from having to keep a watchful eye upon parallel court proceedings in another jurisdiction, trying to steer a course between so much involvement as will amount to a submission to the jurisdiction and so little as to lead to a default judgment.
That is just the kind of thing that the parties meant to avoid by having an arbitration agreement. 22.
Whether the parties should submit themselves to such a jurisdiction by choosing this country as the seat of their arbitration is, in my opinion, entirely a matter for them.
The courts are there to serve the business community rather than the other way round.
No one is obliged to choose London.
The existence of the jurisdiction to restrain proceedings in breach of an arbitration agreement clearly does not deter parties to commercial agreements.
On the contrary, it may be regarded as one of the advantages which the chosen seat of arbitration has to offer.
In the same case Lord Mance stated at paras 31 32:
The purpose of arbitration (enshrined in most modern arbitration legislation) is that disputes should be resolved by a consensual mechanism outside any court structure, subject to no more than limited supervision by the courts of the place of arbitration.
Experience as a commercial judge shows that, once a dispute has arisen within the scope of an arbitration clause, it is not uncommon for persons bound by the clause to seek to avoid its application.
Anti suit injunctions issued by the courts of the place of arbitration represent a carefully developed and, I would emphasise, carefully applied tool which has proved a highly efficient means to give speedy effect to clearly applicable arbitration agreements. 32.
It is in practice no or little comfort or use for a person entitled to the benefit of a London arbitration clause to be told that (where a binding arbitration clause is being however clearly disregarded) the only remedy is to become engaged in the foreign litigation pursued in disregard of the clause.
Engagement in the foreign litigation is precisely what the person pursuing such litigation wishes to draw the other party into, but is precisely what the latter party aimed and bargained to avoid.
In granting an anti suit injunction the English courts are seeking to uphold
and enforce the parties contractual bargain as set out in the arbitration agreement.
In principle it should make no difference whether that agreement is governed by English law or by a foreign law.
In both cases the enquiry is whether there has been a breach of the arbitration agreement and whether it is just and convenient to restrain that breach by the grant of an anti suit injunction.
The detail of the enquiry may differ, but its nature is the same.
Chubb Russia contends that as a matter of discretion the considerations to be taken into account are different where the arbitration agreement is governed by foreign law.
It submits that issues of scope and breach of the arbitration agreement are generally best left to the foreign court which has the requisite expertise in the applicable foreign law.
The judges view was that different considerations arise where the arbitration agreement is governed by foreign law by reason of the doctrine of forum conveniens.
We agree with the Court of Appeal that forum conveniens, which is a matter that goes to the courts jurisdiction, is not relevant.
By agreeing to arbitrate in London the parties were agreeing to submit to the supervisory and supporting jurisdiction of the English courts, including its jurisdiction to grant anti suit injunctions.
Chubb Russias principal argument is that considerations of comity nevertheless make it appropriate to defer to the foreign court as a matter of discretion.
Comity, however, has little if any role to play where anti suit injunctive relief is sought on the grounds of breach of contract.
As Millett LJ stated in Aggeliki Charis Cia Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyds Rep 87, 96: in my judgment there is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them.
The courts in countries party to the New York Convention, are accustomed to the concept that they may be under a duty to decline jurisdiction in a particular case because of the existence of an arbitration clause.
I cannot accept the proposition that any court would be offended by the grant of an injunction to restrain a party from invoking a jurisdiction which he had promised not to invoke and which it was its own duty to decline.
Although The Angelic Grace concerned an arbitration agreement governed by English law, that was not material to the reasoning of the Court of Appeal.
The rationale for the courts approach was the fact of the promise made, not the law by which it was governed.
That accords with principle.
Nor does article II(3) of the New York Convention make any difference.
As noted earlier, under this article a court of a Convention state is required to refer the parties to arbitration when it is seized of a matter which the parties have agreed to arbitrate (unless the arbitration agreement is null and void, inoperative or incapable of being performed).
The New York Convention is concerned with recognition and enforcement of arbitration agreements and awards, not jurisdiction see, for example, Shashoua v Sharma [2009] EWHC 957 (Comm); [2009] 2 All ER (Comm) 477, paras 36 38.
If a court is seized of jurisdiction under its own law or rules, article II(3) obliges it to exercise that jurisdiction to enforce arbitration agreements.
It does not purport to nor does it confer any primacy over the jurisdiction of the courts of the seat.
The grant of an anti suit injunction is always a matter of discretion.
There may be circumstances in which it would be appropriate to await a decision of a foreign court.
If, for example, the scope of the arbitration agreement was about to be determined by the highest court in the country of the governing law in unrelated proceedings, then it might be sensible for the English court to await that decision.
Where, however, the issue arises in proceedings brought in alleged breach of the arbitration agreement, deference to the foreign court should generally give way to the importance of upholding the parties bargain and restraining a party to an arbitration agreement from doing something it has promised not to do.
We therefore agree with the Court of Appeal that the principles governing the grant of an anti suit injunction in support of an arbitration agreement with an English seat do not differ according to whether the arbitration agreement is governed by English law or foreign law.
Forum conveniens considerations are irrelevant and comity has little if any role to play.
The courts concern will be to uphold the parties bargain, absent strong reason to the contrary, and the courts readiness to do so is itself an important reason for choosing an English seat of arbitration.
It follows that if the agreement to arbitrate disputes contained in article 50.1 of the construction contract had been governed by Russian law, it would have been necessary for the English court to determine whether under the law of Russia the agreement is valid and the claim which Chubb Russia is seeking to pursue in Russia falls within its scope.
If those questions were answered in the affirmative, it would in any event have been appropriate to grant an anti suit injunction.
XII Overall conclusion
Although our approach to the determination of the law applicable to the arbitration agreement differs from that taken by the Court of Appeal, we have similarly concluded that the arbitration agreement in this case is governed by English law.
It is common ground that in these circumstances the arbitration agreement is valid, the dispute between the parties falls within it and that the injunction granted by the Court of Appeal to restrain Chubb Russia from proceeding against Enka in Russia was properly granted.
It follows that we would dismiss the appeal.
Introduction LORD BURROWS: (dissenting) (with whom Lord Sales agrees) 1.
In this case, we are presented with an intriguing question of law which courts and commentators have been grappling with for many years.
What is the proper law (in the English common law conflicts of law) of an arbitration agreement where there is no express choice of law clause in the arbitration agreement? In particular, should the proper law of the arbitration agreement be the law of the main contract in which the arbitration agreement is contained or should it be the law of the seat of arbitration? In shorthand, should one determine the proper law of the arbitration agreement by the main contract approach or the seat approach? In this case, the seat of the arbitration is England but the proper law of the main construction contract, in which the arbitration agreement is contained, is Russian law (although there is a dispute as to the precise reason for that).
Although the ultimate question for this court is whether to issue an anti suit injunction to stop proceedings in Russia it is first helpful, and arguably essential, to determine the proper law of the arbitration agreement.
That proper law issue is of wide public importance and this (dissenting) judgment is almost entirely devoted to it.
A bare outline of the facts will here be sufficient.
The claimant and respondent to this appeal (Enka) is a Turkish engineering company that had been engaged as a subcontractor in construction work at a power plant in Russia.
The head contractor (CJSC Energoproekt) assigned its rights against Enka to the owner and developer (PJSC Unipro).
There was an arbitration agreement (in article 50.1) in the construction contract (the main contract) between Enka and the head contractor that disputes would be determined by way of International Chamber of Commerce (ICC) arbitration with London seat.
Following a massive fire at the power plant, the Russian first defendant insurer and the appellant in this appeal, OOO Insurance Company Chubb (which I shall refer to throughout as Chubb Russia), paid an insurance claim made by the owner and was subrogated to any rights the owner had against Enka.
Chubb Russia brought a claim against Enka (and others) in Russia.
Enka contended that those proceedings were in breach of the arbitration agreement and applied to the Russian court to dismiss Chubb Russias claim.
It also brought a claim in England for an anti suit injunction against the defendants, all members of the Chubb group of companies.
At first instance, Andrew Baker J declined to reach a decision on the proper law of the arbitration agreement but dismissed Enkas claim for an anti suit injunction on the ground of forum non conveniens: [2019] EWHC 3568 (Comm).
Subsequently Enkas claim in Russia to dismiss the Russian proceedings, as being in breach of the arbitration agreement, failed although Chubb Russias claim on the merits against Enka also failed.
Both Enka and Chubb Russia are appealing that decision to the Russian appeal court (and the appeal is set for late October 2020).
Meanwhile the Court of Appeal here (Flaux, Males and Popplewell LJJ) ([2020] EWCA Civ 574) allowed Enkas appeal against Andrew Baker Js decision.
It held that the proper law of the arbitration agreement was English and granted Enka an anti suit injunction to stop any Russian appeal going ahead as being in breach of the arbitration agreement.
Chubb Russia applied to the Supreme Court for permission to appeal from the decision of the Court of Appeal.
This court granted permission to appeal and also stayed the anti suit injunction upon Chubb Russia giving suitable undertakings to protect Enkas position pending the outcome of this expedited appeal.
It will be helpful to set out immediately the arbitration agreement.
This appears within article 50.1 of the main construction contract in the following terms: Resolution of disputes 50.1.
The Parties undertake to make in good faith every reasonable effort to resolve any dispute or disagreement arising from or in connection with this Agreement (including disputes regarding validity of this agreement and the fact of its conclusion (hereinafter Dispute) by means of negotiations between themselves.
In the event of the failure to resolve any Dispute pursuant to this article within 10 (ten) days from the date that either Party sends a Notification to the opposite Party containing an indication of the given Dispute (the given period may be extended by mutual consent of the Parties) any Party may, by giving written notice, cause the matter to be referred to a meeting between the senior managements of the Contractor and Customer (in the case of the Contractor senior management shall be understood as a member of the executive board or above, in the case of Customer, senior management shall be understood as general directors of their respective companies).
The parties may invite the End Customer to such Senior Management Meeting.
Such meeting shall be held within fourteen (14) calendar days following the giving of a notice.
If the matter is not resolved within twenty (20) calendar days after the date of the notice referring the matter to appropriate higher management or such later date as may be unanimously agreed upon, the Dispute shall be referred to international arbitration as follows: the Dispute shall be settled by three arbitrators the Dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce, appointed in accordance with these Rules, language, and the arbitration shall be conducted in the English in the place of arbitration shall be London, England. 50.2.
Unless otherwise explicitly stipulated this Agreement, the existence of any Dispute shall not give the Contractor the right to suspend Work. 50.3.
Not used. 50.4.
Not used. financial 50.5.
All other documentation such as documentation and cover documents for it must be presented in Russian.
This judgment builds up to answering the question as to the proper law of the arbitration agreement by initially clearing the ground in three sections.
The first sets out some clear or undisputed points of law, the second explains that the issue in this case concerns interpretation not invalidity, and the third clarifies why the proper law of the main contract is Russian.
There is then an overview of the case law on the proper law of the arbitration agreement before I come to the central sections of the judgment on determining the proper law of the arbitration agreement in this case and generally.
The analysis enables me to provide a statement of the common law on the proper law of an arbitration agreement that is principled, straightforward, clear and easy to apply.
Clear or undisputed points of law
A number of important matters of law relevant to deciding the proper law of the arbitration agreement are not in dispute (or are clear) and are worth setting out immediately.
They are: (i) The seat of the arbitration is England as set out in article 50.1. (ii) The proper (or applicable) law of the main construction contract, which is determined by applying the Rome I Regulation (EC) No 593/2008 (laying down the EU and therefore English conflict of law rules to determine the proper law for contractual obligations), is Russian law.
But there is a dispute as to how that conclusion is reached.
The relevant provisions of the Rome I Regulation are as follows: Article 3 Freedom of choice 1.
A contract shall be governed by the law chosen by the parties.
The choice shall be made expressly or clearly demonstrated by the terms of the contract or the circumstances of the case.
By their choice the parties can select the law applicable to the whole or to part only of the contract.
Article 4 Applicable law in the absence of choice 1.
To the extent that the law applicable to the contract has not been chosen in accordance with article 3 , the law governing the contract shall be determined as follows: (b) a contract for the provision of services shall be governed by the law of the country where the service provider has his habitual residence; 2.
Where the contract is not covered by paragraph 1 or where the elements of the contract would be covered by more than one of points (a) to (h) of paragraph 1, the contract shall be governed by the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence. 3.
Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. 4.
Where the law applicable cannot be determined pursuant to paragraphs 1 or 2, the contract shall be governed by the law of the country with which it is most closely connected.
David Bailey QC, for Chubb Russia, submitted that the proper law of the main contract is Russian because, applying article 3(1) of Rome I, the choice of Russian law has been made expressly or clearly demonstrated.
Robin Dicker QC, for Enka, denied that there has been an express or implied (ie clearly demonstrated) choice of Russian law.
Mr Dicker accepted that Russian law is the proper law by reason of article 4 of Rome I but he did not pinpoint why that was so (but because Enka, as the service provider, is Turkish this must presumably be because Russia is the country with which the contract is manifestly more closely connected than Turkey). (iii) Although there is no bar to having different proper laws applying to different clauses of the same contract (the so called concept of dpeage), the general position taken at common law (not least on grounds of practical convenience) is that a contract has a single proper law.
See, for example, Kahler v Midland Bank [1950] AC 24, 42 (per Lord MacDermott); Libyan Arab Foreign Bank v Bankers Trust Co [1989] QB 728, 747 (per Staughton J); Dicey, Morris & Collins, The Conflict of Laws, 15th ed (2012), para 32 026.
It is worth stressing that the arbitration agreement here is contained in the main contract.
We are not concerned with a free standing arbitration agreement (see para 230 below). (iv) The Rome I Regulation does not apply (directly) to an arbitration agreement because of an exclusion from the Regulation of arbitration agreements and agreements on the choice of court in article 1(2)(e) of the Regulation.
The proper law of the arbitration agreement must therefore (in an English court) be determined by applying English common law conflict of laws rules.
They require a court to look for (applying English law) an express choice, an implied choice or, if neither of those applies, the system of law with which the arbitration agreement has its closest and most real connection: Bonython v Commonwealth of Australia [1951] AC 201, 219; Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102, paras 9 and 25.
The first two of those stages are both concerned with ascertaining the parties objective intentions.
One can regard the exercise as being one of interpretation of the main contract and the arbitration agreement.
There is no express choice of law clause in the arbitration agreement in this case, ie there is no mention of choice of law in article 50.1 of the contract. (v) Mr Bailey at one stage in oral argument appeared to concede that, if the proper law of the arbitration agreement was not Russian by reason of an express or implied choice, it must be English because, as the seat of the arbitration was England, one could not decide that the arbitration agreement had its closest and most real connection to Russia.
But he later withdrew that concession.
I consider that he was correct to do so (I return to this in para 256 below). (vi) What is commonly referred to as the curial law is, according to Mustill and Boyd, Commercial Arbitration, 2nd ed (1989), pp 60 62, 64 68, the law dealing with the manner in which the parties and the arbitrator are required to conduct the reference of a particular dispute (p 60) and includes the procedural powers and duties of the arbitrator (p 62).
The curial law is (almost) invariably the law of the seat of the arbitration.
As the law of the seat is England, the curial law here is English.
Inextricably linked to this is what may be referred to as the curial or supervisory jurisdiction of the courts.
This is concerned with the courts jurisdiction to support and enforce the arbitration.
It includes, for example, the power to remove or replace an arbitrator, to enforce or set aside an arbitral award, and to grant injunctions to support the arbitration including anti suit injunctions.
Like the curial law, the curial or supervisory jurisdiction of the courts is (almost) invariably determined by the seat of the arbitration.
Here, therefore, it is not in doubt that the English courts have curial or supervisory jurisdiction in relation to the arbitration and this includes the jurisdiction to grant an anti suit injunction in this case to restrain the Russian proceedings.
In summary, as Popplewell LJ expressed it in the Court of Appeal at para 46, The significance of the choice of a seat is a legal one as to the curial law and the curial court. (vii) If the proper law of the arbitration agreement is determined to be English, the anti suit injunction ordered by the Court of Appeal is appropriate.
This was conceded by Mr Bailey.
The dispute as to whether an anti suit injunction should be ordered therefore arises only if the proper law of the arbitration agreement is determined to be Russian. 3.
A preliminary important point: the dispute concerns the interpretation
(or scope) of the arbitration agreement not its validity
The reason why the parties respectively favour Russian or English law as the proper law of the arbitration agreement is because English law may take a wider interpretation of the arbitration agreement in this case than Russian law.
The precise basis for this is not entirely clear.
The most obvious basis is that English law regards tort as well as contractual claims between the parties to be included within the scope of the disputes covered by the arbitration agreement (see Aggeliki Charis Cia Maritima SA v Pagnan SpA (The Angelic Grace) [1995] 1 Lloyds Rep 87), whereas Russian law may interpret disputes as applying only to contractual disputes between the parties.
However, it may be that the true basis is slightly more complex than that and involves Russian law tending to interpret the arbitration agreement as not covering joint tortious liability whereas English law appears to include that.
Whatever the precise basis for respectively favouring Russian or English law, the important point is that the issue between the parties is as to the scope or interpretation of the arbitration agreement.
It is not about the validity of the arbitration agreement.
Andrew Baker J recognised this in his judgment at paras 11 12 (and also at para 88).
He said: 11. [I]t is common ground that there exists between Enka and Chubb Russia a valid and binding arbitration agreement.
That is so even though Chubb Russia is suing in Moscow, and is therefore sued here, as subrogated insurer of Enkas original contractual counterparty.
Whether Russian law or English law governs that question, it is common ground that such an insurer is bound by its insureds applicable arbitration agreement.
The dispute between the parties, then, again as it was in The Angelic Grace, is whether the claim being pursued in the target proceedings is a claim in tort that falls outside the scope of the agreement to arbitrate. 12.
The detail is more complex than it was in The Angelic Grace, however, because in that case there was no dispute but that the claim as brought in Italy was a claim in tort, and it was common ground that the question whether it fell within the scope of the arbitration agreement was governed by English law.
Here the law applicable to the question of the scope of the arbitration agreement is disputed; and it is also contentious between the parties whether the claim as brought under Russian law in the Moscow Claim is a claim in tort, or, more strictly, whether it is viable as such.
Furthermore, it is effectively common ground that if the question of the scope of the arbitration agreement is governed by English law, then that claim, however it is to be characterised under Russian law, is within that scope.
The defendants argument that the claim, if rightly characterised as a claim in tort, falls outwith the scope of the arbitration agreement, only arises at all if they are right that scope is a matter of Russian law.
That interpretation or scope, not validity, is in issue is borne out by the decision of the Russian court on 6 May 2020 which decided a preliminary question as to whether, applying Russian law, the court proceedings should go ahead despite the arbitration clause.
The Russian court made clear that the issue was as to the interpretation or scope of the arbitration agreement and not the validity of the arbitration agreement.
The Courts short judgment on this preliminary question was as follows: So it is article 965 of the Russian Federation Civil Code that establishes the right of the claimant to file against the persons liable for the losses, regardless of what served as the grounds for their occurrence.
Therefore, the arbitration clause to which Enka refers does not encompass this dispute and does not extend to it, as the participants are not Enka alone, but also the other ten co defendants who did not enter into an arbitration clause, and the subject of the dispute is the general obligation of all 11 co defendants to indemnify the losses caused.
On the basis of the above, the arbitral clause set out in point 50.1 of the contract is not applicable and because of this the motion declared by defendant 11 that the claim should be left on file should not be granted. (Emphasis added)
However, Mr Dicker has now submitted that there is also an issue about the validity of the arbitration agreement under Russian law that does not arise under English law.
He referred to a Russian decision on 8 February 2018 (in an unrelated matter) on enforcement of an arbitral award under this type of arbitration agreement.
The decision was that the arbitration agreement was too uncertain to be enforceable under Russian law apparently because of uncertainty about whether there should have been a reference in the arbitration agreement to the International Court of Arbitration.
It was submitted by Mr Bailey in Chubb Russias written case (at para 22) that there is no question of the arbitration agreement being invalid under Russian law; and, as we have seen in the last paragraph, such an argument about invalidity played no part in the reasoning of the Russian court in the 6 May 2020 decision.
In any event, our attention was drawn to a note on the website of Debevoise & Plimpton LLP, dated 7 January 2019, indicating that the February 2018 decision in Russia is inconsistent with the usual approach of the Russian Supreme Court and is not a binding authority.
Although Mr Dicker submitted that, in the light of that case, there is a serious risk (to use the language in Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102, para 31: see below para 217) that the arbitration agreement would be struck down as invalid under Russian law, that is not a submission that I can accept without having been provided with proper evidence as to the Russian law on the point.
One can accept that there may be a triable issue as to whether there is a serious risk of invalidity in this case by reason of that 2018 case.
However, we must decide the issue before us as to the proper law of the arbitration agreement on the evidence presented and on the matters pleaded (which do not include this invalidity point).
In any event, the arbitration agreement in question in this case was entered into in 2012 and it would seem that, for the purpose of determining the proper law of the arbitration agreement, we must assess the parties intentions and all other relevant factors as at that point in time unaffected by subsequent legal developments in 2018.
Why is it an important point that the dispute concerns the interpretation or scope of the arbitration agreement not its validity? There are two linked reasons.
First, it is a general principle within the English conflict of laws that, as between two possible proper laws, the courts should favour the proper law that would uphold the validity of an agreement rather than one that would invalidate it (see, for example, In re Missouri Steamship Co (1889) 42 Ch D 321, 341; South African Breweries Ltd v King [1899] 2 Ch 173, 181; Coast Lines Ltd v Hudig and Veder Chartering NV [1972] 2 QB 34, 44 (per Lord Denning MR), 48 (per Megaw LJ); Chitty on Contracts, 33rd ed (2018), para 30 12).
Mr Bailey referred to this (in reliance on the work of Gary Born, International Commercial Arbitration, 2nd ed (2014), pp 542 549, and Robert Merkin and Louis Flannery, The Arbitration Act 1996, 6th ed (2019), para 46.10.5) as the validation principle.
It rests on the rational assumption that parties would prefer to have an agreement upheld than not.
But if it is correct that there is no dispute about the validity of the arbitration agreement in this case, the validation principle is not a reason here for favouring English law over Russian law as the proper law of the arbitration agreement.
Secondly, Mr Dicker submitted that, even if the dispute goes to the interpretation of the arbitration agreement and not its validity, the rational assumption is that parties would prefer to have all their disputes referred to arbitration rather than just some ie that rational businessmen are likely to have intended (using Lord Hoffmanns words in Fiona Trust & Holding Corpn v Privalov [2007] UKHL 40; [2007] Bus LR 1719, para 13) that a wider rather than a narrower interpretation of disputes which should be arbitrated was intended.
However, there is an important difference between, on the one hand, upholding as valid an undisputed agreement which the parties have reached and, on the other hand, determining the correct interpretation or scope of the agreement where the very question at issue is what is it that the parties have agreed.
Without empirical evidence about what rational businessmen, one Russian and one Turkish, concluding a contract for work to be carried out in Russia, would be likely to have intended, I am reluctant to place weight on the idea that these parties would have intended a wider rather than a narrower interpretation of their arbitration agreement.
The rational assumption is that the parties intended their agreement to be interpreted in such a way that matches what they agreed.
Rationally they do not want to be held to have agreed something which is outside their agreement.
And one cannot say that, just because English law may adopt a wider rather than a narrower approach to interpretation of an arbitration agreement than Russian law, that will ensure the correct interpretation of the arbitration agreement.
I therefore agree with Mr Baileys written submission on this point where he said: [T]here is no suggestion of invalidity in this case, so as to engage the validation principle.
The argument is simply that English law should be taken to apply because it construes AAs [ie arbitration agreements] more liberally.
That point only has to be articulated to reveal its parochialism.
It is impossible to say that just because Russian law takes a narrower view of AAs than English law does that the parties must have intended English law to apply.
That is results based reasoning that ignores the fact that there are legitimate reasons for adopting a narrower approach (such as, in this very case, that a broad interpretation of AAs can lead to an undesirable fragmentation of disputes and proceedings where many different parties are involved). 4. Why is the proper law of the main contract Russian?
As I have explained in para 193(ii), while it is not in dispute that the proper law of the main construction contract is Russian, the route to that conclusion through the Rome I Regulation is disputed.
This matter is of central importance because it has a significant impact on determining the proper law of the arbitration agreement.
As we have seen in para 193(ii), the Rome I Regulation provides in article 3.1 that the governing law is that chosen by the parties where a choice is made expressly or is clearly demonstrated by the terms of the contract or the circumstances of the case.
In the absence of such choice article 4 provides that in a contract for the provision of services the governing law is prima facie that of the habitual residence of the service provider but that the law of another country applies where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with [that] country.
Mr Bailey submitted that Russian law had been expressly chosen as the proper law.
He relied on the definition of Applicable Law in Attachment 17 to the contract which reads: Law of the Russian Federation, including legislation of the Russian Federation, all regulatory legal acts of the State Authority Federal Bodies, State Authorities of the constituent entities of the Russian Federation, legislation of the constituent entities of the Russian Federation, regulatory legal acts by Local Authorities and any other applicable regulatory legal acts.
Although this was not a classic choice of law clause of the type This Agreement is governed by Russian law Mr Bailey submitted that it had the same effect.
I am not persuaded by that.
The applicable law article (Attachment 17) does not say This Agreement is governed by the Applicable law.
Rather article 1 of the contract provides that The terms used in this Agreement shall have the definitions set forth in Attachment No 17 to this Agreement.
Admittedly, the term Applicable Law is used in a large number of specific provisions.
But Mr Dicker submitted that one is here talking about an incorporation by reference of relevant legislative provisions and that that is how the phrase Applicable law is used in international construction contracts (and he here referred us to a major practitioner work on standard contracts issued by the International Federation of Consulting Engineers (FIDIC): Baker Mellors Chalmers and Lavers on FIDIC Contracts, Law and Practice at paras 2.126, 2.140, 2.145).
Mr Dicker took as a typical article in the main contract, article 4.1(b) which provides that Enka shall ensure performance of the work in accordance with the Applicable Law.
This ensures that, incorporated into the contract, are local laws and regulations, such as those governing planning, health and safety, labour laws, taxes and customs.
Admittedly the main contract was not a FIDIC contract.
And it may be thought odd to incorporate, where specified, all the relevant law of the Russian Federation (as the first phrase of Attachment 17 requires) including presumably the Russian law of contract in the Russian Civil Code, if all one is concerned with are particular mandatory regulations.
My view is that, although there is some ambiguity about the role of the Applicable Law definition, Mr Dicker is correct that Attachment 17 does not constitute an express choice of law clause.
However, Attachment 17 is not alone.
There are many other additional references to Russian law in the contract.
So, for example, at article 24.2 there is reference to the provisions of the Russian Civil Code, there is reference to RF law in article 4.15, and there are numerous references (eg at articles 4.5, 4.26, 19.2 and 36.1) to law which, in the context, are clearly references to Russian law.
It is helpful here to refer to Title II, article 3, para 3 of the Giuliano Lagarde Report on the Convention on the law applicable to contractual obligations which was the report that lay behind the Rome Convention which was the predecessor of the Rome I Regulation (and had the same wording as article 3.1 except that the formulation was The choice must be expressed or demonstrated with reasonable certainty rather than The choice shall be made expressly or clearly demonstrated): The choice of law by the parties will often be express but the Convention recognizes the possibility that the court may, in the light of all the facts, find that the parties have made a real choice of law although this is not expressly stated in the contract.
For example . references in a contract to specific articles of the French Civil Code may leave the court in no doubt that the parties have deliberately chosen French law, although there is no expressly stated choice of law. (OJ C282/17)
One can add to those express words in the contract, several other circumstances.
The head contractor in the contract with Enka was Energoproekt, a Russian company and the owner and end customer, Unipro, was also Russian.
The place of performance was Russian.
The effects of any breach would be suffered in Russia.
The primary language of the contract was Russian.
And the price for the work was to be paid in Russian currency to a Russian bank account.
Indeed, the only non Russian elements of the contract are that Enka is a Turkish company and that the seat of the arbitration is England.
My conclusion, therefore, is that, applying article 3.1 of the Rome I Regulation, Russian law is the proper law of the main contract chosen by the parties because, even though not expressly chosen, that choice has been clearly demonstrated by the terms of the contract or the circumstances of the case.
The most powerful argument to the contrary is that the parties could easily have inserted a choice of law clause into the contract and yet failed to do so.
Mr Dicker submitted that, in the context of a professionally drafted, detailed, and long contract, the most obvious explanation for that was that the parties could not agree on which law should be the governing law.
But we have seen no evidence as to the circumstances in which this contract was drawn up and it seems to me more plausible as an objective interpretation of the parties intentions that, given that there was some ambiguity over the role of the Applicable Law definition, the parties thought it was clear, and did not need to be further stated, that Russian law was the proper law.
Although there may be marginal differences as between article 3.1 of the Rome I Regulation and the first two stages (express or implied choice) of the common law test for the proper law, they are very closely aligned: see Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd [2013] EWCA Civ 365; [2013] 2 Lloyds Rep 98.
In my view, English common law, which I here refer to by analogy, would in this case regard there as having been an implied choice of Russian law.
Even though there was no express term to that effect, the correct objective interpretation of the contract is that Russian law has been chosen by the parties.
I should stress that the lower courts did not decide this question as to why Russian law was the proper law of the main contract.
Andrew Baker J, at paras 91 93, simply said that whether there was a choice of Russian law as the proper law is far from clear in Enkas favour (ie it was not clear that no choice had been made).
The Court of Appeal decided that there was no express choice of proper law but appeared to leave open whether there had nevertheless been a clearly demonstrated choice under article 3(1) of the Rome I Regulation.
The case law on the proper law of the arbitration agreement
In the Court of Appeal in this case, Popplewell LJ said, at para 89, In my view the time has come to seek to impose some order and clarity on this area of the law, in particular as to the relative significance to be attached to the main contract law on the one hand, and the curial law of the arbitration agreement on the other, in seeking to determine the AA law.
The current state of the authorities does no credit to English commercial law which seeks to serve the business community by providing certainty.
As this passage suggests, the English cases on this question, which appear to have been proliferating in recent years, do not speak with one voice.
Certainly in seeking to provide the clarity which Popplewell LJ was rightly seeking, one cannot simply examine the relevant cases and hope to find in them a definitive answer to our question.
With reasoning and decisions going both ways, the major purpose of looking at past cases is rather to put the task facing us in context and to ensure that all relevant considerations have been borne in mind.
But ultimately, and without any authority binding this court, the way forward rests on a re examination of principle.
It also follows that no attempt is here being made to cover all relevant cases.
Rather I shall focus on the most important cases to which we were referred by counsel.
The earliest case we were referred to was the House of Lords decision in Hamlyn & Co v Talisker Distillery [1894] AC 202.
This concerned a contract between an English and Scots firm, made in London but to be performed in Scotland, with an arbitration clause for arbitration by two members of the London Corn Exchange, or their umpire, in the usual way.
It was held that the interpretation of the arbitration clause was governed by English law (ie in modern terminology, the proper law of the arbitration agreement was English).
But in determining the respective weights of the proper law of the main contract and the proper law of the seat of the arbitration, the case does not take one very far for two reasons.
First, the proper law of the main contract was not clarified and indeed it seemed to be assumed that the proper law of the arbitration agreement would also be the proper law of the main contract.
In the words of Lord Herschell LC, at p 209: I see no difficulty whatever in construing the language used as an indication that the contract, or that term of it [ie the arbitration agreement], was to be governed and regulated by the law of England.
Secondly, it was regarded as an important consideration that the arbitration clause was invalid in Scotland because the arbitrators were not named but valid in England.
It was for this reason that Mr Bailey submitted that this case was an example of the application of the validation principle.
In Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, the House of Lords was deciding on the proper law of the main contract (a contract for the carriage of goods by sea) in a context where that proper law was specified as being governed by the laws of the flag of the vessel carrying the goods.
There was an arbitration clause with London as the seat.
It was held that the proper law of the main contract was French.
The majority (Lords Morris, Dilhorne and Diplock) reasoned that this was because there was a choice of French law as the proper law (because, on the true construction of the choice of law clause, the relevant flag was French).
Lords Reid and Wilberforce reasoned that, although there was no operative choice of law clause (because the dispute could not be related to a specific vessel or shipment), the rest of the contract and the relevant surrounding facts meant that the contract had the closest connection with France (the majority preferred to treat this as an alternative reason for their decision).
Their Lordships placed considerable weight on the seat of the arbitration as a strong indication of the proper law of the main contract (and implicitly the proper law of the arbitration agreement) but held that that strong indication was here negatived by the choice of law clause (per the majority) or by the other factors linking the contract most closely to French law (per Lords Reid and Wilberforce).
Lord Diplocks analysis of the curial law is particularly helpful.
He said the following at p 604: My Lords, it is possible for parties to a contract to choose one system of law as the proper law of their contract and a different system of law as the curial law.
Although they may want their mutual rights and obligations under the contract to be ascertained by reference to the system of law of a country with which the transaction has some close and real connection, they may nonetheless consider that the arbitral procedure adopted in some other country, or the high reputation and commercial expertise of arbitrators available there, make the curial law of that country preferable to the curial law of the country whose system of law they have chosen as the proper law.
It is not now open to question that if parties to a commercial contract have agreed expressly upon the system of law of one country as the proper law of their contract and have selected a different curial law by providing expressly that disputes under the contract shall be submitted to arbitration in another country, the arbitrators must apply as the proper law of the contract that system of law upon which the parties have expressly agreed.
But the cases which have given rise to difficulty are those where the parties have made a choice of curial law by a clause of their contract expressly agreeing to arbitration in a particular country but have made no express provision as to the proper law applicable to the contract.
We were then referred to two judgments of Lord Mustill, who was the co author, with Stewart Boyd QC, of Commercial Arbitration (the first edition of which appeared in 1982 with a second edition in 1989).
In Black Clawson International Ltd v Papierwerke Waldhof Aschaffenburg AG [1981] 2 Lloyds Rep 446 Mustill J as he then was said, at p 455: Where the laws diverge at all, one will find in most instances that the law governing the continuous agreement [sc the arbitration agreement] is the same as the substantive law of the contract in which it is embodied And at p 456: In the ordinary way, this [sc the proper law of the arbitration agreement] would be likely to follow the law of the substantive contract.
These statements offer support to the proper law of the arbitration agreement being the same law as the main contract rather than being the law of the seat.
This is consistent with the approach favoured in Mustill and Boyd, Commercial Arbitration, 2nd ed (1989), at p 63: The starting point is to determine the proper law of the contract in which the arbitration is embodied.
As a general rule the arbitration agreement will be governed by the same law, since it is part of the substance of the underlying contract.
However, in the Black Clawson case itself, the force of Mustill Js support for the main contract approach is somewhat diminished because he went on to treat the parties choice of Zurich as the place of arbitration as indicating an intention that the law governing the arbitration agreement should be the law of Zurich.
Subsequently, we see Lord Mustill favouring the main contract approach in the House of Lords in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334.
At p 357, Lord Mustill said: It is by now firmly established that more than one national system of law may bear upon an international arbitration.
Thus, there is the proper law which regulates the substantive rights and duties of the parties to the contract from which the dispute has arisen.
Exceptionally, this may differ from the national law governing the interpretation of the agreement to submit the dispute to arbitration.
Less exceptionally it may also differ from the national law which the parties have expressly or by implication selected to govern the relationship between themselves and the arbitrator in the conduct of the arbitration: the curial law of the arbitration, as it is often called. (Emphasis added)
In XL Insurance Ltd v Owens Corning [2001] 1 All ER (Comm) 530 Toulson J was concerned with an insurance policy which (to simplify slightly) had a New York governing law clause and an arbitration clause with a London seat which included reference to the Arbitration Act 1996.
It was alleged that the arbitration agreement was unenforceable because it was not in the correct written form under New York law.
It was held, inter alia, that the enforceability of the arbitration agreement should be governed by English law as the law of the seat.
Although Toulson Js reasoning is open to various possible interpretations and certainly his reasoning lends support to hiving off arbitration from the rest of the main contract as dealing with a particular method of resolving disputes (at 541e) one interpretation is that, as he was satisfied that the parties had made an arbitration agreement, the validation principle was being applied so as to ensure that that arbitration agreement was upheld.
The primary importance of C v D [2007] EWCA Civ 1282; [2008] Bus LR 843 is obiter dicta of Longmore LJ supporting the seat approach.
The case dealt with an insurance contract governed by New York law with an English arbitration clause (ie an English seat).
The question was which law, New York or English, governed challenges to the arbitral award.
It was held that English law applied to determine that question.
That seems straightforward because that question was one of curial law and curial jurisdiction and the seat of arbitration (here England) almost invariably determines that law.
The proper law of the arbitration agreement and the proper law of main contract were irrelevant in this case.
However, Longmore LJ went on, in obiter dicta, to look at the proper law of the arbitration agreement and said this, at para 22: The question then arises whether, if there is no express law of the arbitration agreement, the law with which that agreement has its closest and most real connection is the law of the underlying contract or the law of the seat of arbitration.
It seems to me that if (contrary to what I have said above) this is a relevant question, the answer is more likely to be the law of the seat of arbitration than the law of the underlying contract.
It is worth interjecting here that, in line with Longmore LJs obiter dicta, the 15th edition of Dicey, Morris & Collins, The Conflict of Laws, published in 2012 has the following main rule (rule 64(1)): the law expressly or impliedly chosen by the The material validity, scope and interpretation of an arbitration agreement are governed by its applicable law, namely: (a) parties; or, (b) in the absence of such choice, the law which is most closely connected with the arbitration agreement, which will in general be the law of the seat of the arbitration.
We then come to what can probably be regarded as the leading case: Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102.
Moore Bick LJs leading judgment (with which Hallett LJ and Lord Neuberger MR agreed) was cited by both Mr Bailey and Mr Dicker in support of their submissions.
Claims were brought by Brazilian companies under two insurance policies covering construction work in Brazil.
The insurers denied liability on the basis of an exclusion clause and material non disclosure.
There was an express choice of Brazilian law as the governing law in the insurance contracts and an exclusive jurisdiction clause in favour of Brazilian courts.
However, the arbitration clause specified England as the seat.
In the insurers application for an anti suit injunction, the central question was what was the proper law of the arbitration agreement.
Under Brazilian law, there was a serious risk (per Moore Bick LJ at para 31) that the insured was not bound by the arbitration clause as the insured may not have specifically consented to its enforcement.
The Court of Appeal held that English law was the proper law of the arbitration agreement.
But it is not easy to determine whether Moore Bick LJs judgment supports the main contract or seat approach.
The following passage, at para 26, supports the main contract approach provided there is an express choice of law clause in the main contract: where the arbitration agreement forms part of a substantive contract an express choice of proper law to govern that contract is an important factor to be taken into account.
In the absence of any indication to the contrary, an express choice of law governing the substantive contract is a strong indication of the parties intention in relation to the agreement to arbitrate.
A search for an implied choice of proper law to govern the arbitration agreement is therefore likely to lead to the conclusion that the parties intended the arbitration agreement to be governed by the same system of law as the substantive contract, unless there are other factors present which point to a different conclusion.
These may include the terms of the arbitration agreement itself or the consequences for its effectiveness of choosing the proper law of the substantive contract.
Moore Bick LJ went on to decide that there were two conflicting indications (para 31) that meant that the parties had not impliedly chosen Brazilian law as the proper law of the arbitration agreement.
The first was that England was the seat, which inevitably imported English law, and hence the provisions of the Arbitration Act 1996, relating to the conduct and supervision of the arbitration (ie the curial law was English and the English courts had supervisory jurisdiction).
The second was the serious risk that the arbitration agreement might not be binding, as against the insured, under Brazilian law.
He then turned to the third stage of the common law approach and, in a passage which supports the seat approach he said this at para 32: One then has to consider with what system of law the agreement has the closest and most real connection.
Although [counsel for the appellant] submitted that the agreement has a close and real connection with the law of Brazil, being the law governing the substantive contract in which the arbitration agreement itself is embedded, I think his argument fails adequately to distinguish between the substantive contract and the system of law by which it is governed.
No doubt the arbitration agreement has a close and real connection with the contract of which it forms part, but its nature and purpose are very different.
In my view an agreement to resolve disputes by arbitration in London, and therefore in accordance with English arbitral law, does not have a close juridical connection with the system of law governing the policy of insurance, whose purpose is unrelated to that of dispute resolution; rather, it has its closest and most real connection with the law of the place where the arbitration is to be held and which will exercise the supporting and supervisory jurisdiction necessary to ensure that the procedure is effective.
Its closest and most real connection is with English law.
I therefore agree with the judge that the arbitration agreement is governed by English law.
Subsequent to Sulamrica, there have been two significant first instance decisions.
In Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 (Comm); [2013] 2 All ER (Comm) 1, Andrew Smith J was faced with an express choice of Indian law in the main contract and an arbitration agreement with a London seat.
Distinguishing Sulamrica, because there were no indications conflicting with the express choice of law, he held that the proper law of the arbitration agreement was Indian law.
Then we come to the valiant attempt by Hamblen J (as he then was) in Habas Sinai Ve Tibbi Gazlar Istihsal Endustrisi AS v VSC Steel Co Ltd [2013] EWHC 4071 (Comm); [2014] 1 Lloyds Rep 479, to set out, as clearly as possible, the relevant principles to be derived from the cases in this tangled area.
In relation to the question of the proper law of the arbitration agreement it was assumed that there was no choice of law in the main contract but that it was governed by Turkish law as the law with which it was most closely connected.
The parties had agreed (as found by Hamblen J) a London arbitration clause.
It was held that the proper law of the arbitration agreement was English.
At para 101, Hamblen J said: 101.
The leading authority is the recent Court of Appeal decision in Sul Amrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] 1 Lloyds Rep 671.
Moore Bick LJ (with whom Hallett LJ and Lord Neuberger MR agreed), summarised the test for determining the law applicable to arbitration agreements at paras 26 32.
The Court of Appeals decision was considered but distinguished by Andrew Smith J in Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2013] 1 Lloyds Rep 235.
The guidance provided by these authorities may be summarised as follows: (1) Even if an arbitration agreement forms part of a matrix contract (as is commonly the case), its proper law may not be the same as that of the matrix contract. (2) The proper law is to be determined by undertaking a three stage enquiry into: (i) express choice; (ii) implied choice; and (iii) the system of law with which the arbitration agreement has the closest and most real connection. (3) Where the matrix contract does not contain an express governing law clause, the significance of the choice of seat of the arbitration is likely to be overwhelming.
That is because the system of law of the country seat will usually be that with which the arbitration agreement has its closest and most real connection. (4) Where the matrix contract contains an express choice of law, this is a strong indication or pointer in relation to the parties intention as to the governing law of the agreement to arbitrate, in the absence of any indication to the contrary. (5) The choice of a different country for the seat of the arbitration is a factor pointing the other way.
However, it may not in itself be sufficient to displace the indication of choice implicit in the express choice of law to govern the matrix contract. (6) Where there are sufficient factors pointing the other way to negate the implied choice derived from the express choice of law in the matrix contract the arbitration agreement will be governed by the law with which it has the closest and most real connection.
That is likely to be the law of the country of seat, being the place where the arbitration is to be held and which will exercise the supporting and supervisory jurisdiction necessary to ensure that the procedure is effective. 102.
In relation to point (3), I would add that the terms of the arbitration clause may themselves connote an implied choice of law.
It is recognised that they may operate as an implied choice of law for the matrix contract itself see, for example, Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, Lord Wilberforce at p 596 and Lord Diplock at pp 604 605; In such cases they must surely equally operate as an implied choice of law for the arbitration agreement. 103.
The present case is one where there is no express choice of law in the matrix contract.
In such a case the Sul Amrica decision is clear authority that the applicable law will be that of the country of seat.
This was acknowledged by Habas who reserved the right to challenge the decision should this case go further.
The reference to overwhelming in point (3) appears to refer to the words of Moore Bick LJ in the Sulamrica case, at para 26, but it should be noted that Moore Bick LJ was using that description in the context of a free standing agreement to arbitrate not an arbitration agreement contained in a main contract.
Hamblen Js summary represents clear support for the seat approach: unless there is an express choice of law clause in the main contract, the seat will very likely determine the proper law of the arbitration agreement; and even where there is such an express choice of law clause, there may be sufficient factors pointing towards the seat determining the arbitration agreements proper law.
I interject at this point that there was a careful analysis of these issues by Steven Chong J (as he then was) in BCY v BCZ [2016] SGHC 249; [2016] 2 Lloyds Rep 583 in the High Court of Singapore.
In a judgment which favoured the main contract approach, he said at para 65: where the arbitration agreement is part of the main contract, I would hold, adopting Sul Amrica, that the governing law of the main contract is a strong indicator of the governing law of the arbitration agreement unless there are indications to the contrary.
The choice of a seat different from the law of the governing contract would not in itself be sufficient to displace that starting point.
The approach in the BCY case was subsequently assumed to be the correct law in Singapore by the Singaporean Court of Appeal (Sundaresh Menon CJ, Judith Prakash JA, and Steven Chong JA), and by the parties, in BNA v BNB [2019] SGCA 84; [2020] 1 Lloyds Rep 55, paras 44 95.
Popplewell LJs approach in the Court of Appeal in the present case may be regarded as somewhat similar to that of Hamblen Js in the Habas case.
At para 91, Popplewell LJ said that, subject to an express choice of law in the main contract, the general rule should be that the arbitration agreement law is the curial law, as a matter of implied choice, subject only to any particular features of the case demonstrating powerful reasons to the contrary.
And at para 105, he said the following: I would therefore summarise the principles applicable to determining the proper law of an arbitration agreement, what I have called the AA law, when found in an agreement governed by a different system of law, as follows: (1) The AA law is to be determined by applying the three stage test required by English common law conflict of laws rules, namely (i) is there an express choice of law? (ii) if not, is there an implied choice of law? (iii) if not, with what system of law does the arbitration agreement have its closest and most real connection? (2) Where there is an express choice of law in the main contract it may amount to an express choice of the AA law.
Whether it does so will be a matter of construction of the whole contract, including the arbitration agreement (3) In all other cases there is a strong presumption that the parties have impliedly chosen the curial law as the AA law.
This is the general rule, but may yield to another system of law governing the arbitration agreement where there are powerful countervailing factors in the relationship between the parties or the circumstances of the case. 6.
What is the proper law of the arbitration agreement? (1) The proper law of the arbitration agreement is Russian law by
reason of an implied choice
We are now in a position to decide what is the proper law of the arbitration agreement.
As I have said at para 193(iv) above, this is to be resolved by the common law choice of law rules ie one is looking for an express choice, an implied choice or, if neither of those applies, the system of law with which the arbitration agreement has its closest and most real connection.
In this case, the three most important factors in deciding this issue are: (i) There is no express choice of law clause in the arbitration agreement here ie there is no mention of choice of law in article 50.1 of the main construction contract. (ii) The seat of the arbitration, as laid down in the arbitration agreement, is England. (iii) The proper law of the main construction contract, as we have established at paras 200 208 above, is Russian law by reason of the implied choice of the parties.
It is my view that that combination of factors leads to the conclusion that, under English common law, the proper law of the arbitration agreement is, by reason of an implied choice, Russian law.
As the parties have impliedly chosen Russian law for the main contract it is natural, rational and realistic to regard that choice for the main contract as encompassing, or carrying across to, the arbitration agreement.
That implied choice is simply the correct objective interpretation of the parties main contract and arbitration agreement.
Although the decision as to the proper law of the arbitration agreement turns on the interpretation of the main contract and the arbitration agreement, there are a number of general reasons (ie reasons that do not turn on the interpretation of these particular contracts) which support the view that, absent an express choice of law in the arbitration agreement, there is a presumption (or general rule) that the proper law of the main contract is also the proper law of the arbitration agreement; and there is no such presumption (or general rule) that the law of the seat is the proper law of the arbitration agreement.
In short, these are reasons for favouring the main contract rather than the seat approach.
I should make clear at the outset that, everything that is here said, relates to an arbitration agreement that is contained in a main contract.
While a free standing arbitration agreement entered into at the same time would not be treated differently, a free standing arbitration agreement entered into at a different time and under different circumstances would require a different analysis. (2) Reasons why, absent an express choice of law in the arbitration agreement, there is a presumption (or general rule) that the proper law of the main contract is also the proper law of the arbitration agreement
(i) Dpeage is the exception not the rule
If one were to treat the arbitration agreement in the same way as all the other clauses in the main contract, the general rule would be that the same proper law would apply throughout.
Dpeage is the exception not the rule.
See para 193(iii) above.
(ii) The rationale of the separability doctrine
Under the separability doctrine, an arbitration agreement is viewed for certain purposes, both at common law and under section 7 of the Arbitration Act 1996, as a separate contract from the main contract.
The reason for that is in order to ensure that the arbitration agreement is effective despite the non existence, invalidity, termination or rescission of the main contract.
In other words, it stops the argument that the parties have not agreed to arbitration to deal with disputes about the non existence, invalidity or initial ineffectiveness of the main contract; and it also stops the argument that the arbitration agreement cannot deal with disputes once the main contract has been terminated or rescinded.
This explains the wording of section 7 of the Arbitration Act 1996: Separability of arbitration agreement Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement. (Emphasis added)
This statutory wording makes clear that the separability doctrine has been devised for a particular purpose.
For that purpose, it treats (one might say somewhat fictionally) the arbitration agreement as a separate agreement when, in reality, it is not a free standing agreement but is merely part of the main contract.
However, that purpose does not extend to working out the conflict of laws rules applicable to an arbitration agreement.
It follows that in deciding on the proper law of the arbitration agreement, the arbitration agreement should be regarded as part of the main contract.
I therefore agree with the characteristically clear and helpful exposition by Adrian Briggs, Private International Law in English Courts (2014), paras 14.37 14.38: If the agreement to arbitrate is a term of a larger contract, the law which governs the contract as a whole will generally determine the scope of the terms of that contract.
For even though the arbitration agreement is for some important purposes notionally severable from the substantive contract, those purposes do not include the need for its governing law to be separate or different from that of the substantive contract in which the arbitration agreement is contained.
It would be perverse to deduce from the principle of severability a rule that the law governing the agreement to arbitrate should be identified without reference to the substantive contract in which the parties included it as a term.
The autonomy of the arbitration agreement is one thing; its hermetic isolation would be quite another.
To put the point yet another way: the agreement to arbitrate is severable, but that does not mean it is separate.
Prior to any severance it will have been governed by the law which governs the contract; after severance, it must remain governed by the same law, for otherwise it is not being severed; something else is instead being created.
The result is that if the law which governs the substantive contract is identified by the Rome I Regulation, that law is very likely to govern the agreement to arbitrate, and will therefore also be used by the court to determine the validity, meaning and scope of the arbitration agreement.
The fact that the Rome I Regulation makes no claim to identify the applicable law for arbitration agreements does not prevent the common law rules of private international law applying their own solution to the question, which is that the agreement to arbitrate is generally governed by the law of the contract of which it is a term if it is a term of a substantive contract. (footnotes omitted) (iii) Dividing the arbitration agreement from the rest of the contract
be problematic
There may sometimes be practical problems in drawing the line for proper law purposes between the arbitration agreement and the rest of the main contract.
This case provides an excellent example.
This is because the arbitration agreement is itself part of a wider dispute resolution clause, ie article 50.1 (set out at para 191 above) includes an obligation to resolve the dispute in good faith and for there to be a meeting of senior management and only after that should the dispute, if still unresolved, be referred to international arbitration.
It would be very odd and inconvenient to apply one proper law to interpret the earlier sentences in article 50.1 and a different proper law to interpret the later sentences.
Moreover, the terms notification and written notice are used in article 50.1 and therefore impact on the time when the matter can be referred to arbitration and the meaning of those terms is set out in article 51.4 of the main contract.
It might be said that the whole of article 50.1 should be separated off from the main contract for the purposes of deciding the proper law.
But while that would avoid the difficulty of different proper laws applying within the same dispute resolution clause, it creates the problem of how to ensure consistency with other terms of the main contract, such as article 51.4 (or another example, article 51.2 which is an entire agreement clause).
To have a different proper law applying to the definitional article 51.4 than applies to article 50.1 would be problematic.
All these difficulties would be avoided if the proper law of the arbitration agreement were the same as the proper law of the main contract.
Let us further assume that, instead of putting the arbitration agreement in a dispute resolution clause, the contract, as is often the case, had two separate clauses: a dispute resolution clause operative prior to arbitration and an arbitration agreement.
Surely using two clauses instead of one cannot make all the difference to the proper law issue.
Yet on the face of it that is what the seat approach would require.
One can envisage other examples of the difficulties that this division of the proper law would cause.
Take, for example, the English law rule of interpretation that pre contractual negotiations are not to be taken into account.
Let us assume (as appears to be the case) that that is different from the law on interpretation in New York.
Then, let us assume, that there is a main contract governed by New York law which includes an arbitration agreement with London as the seat.
There may be pre contractual negotiations that are relevant to understanding the contract including the arbitration agreement.
It would be most odd to take those negotiations into account in interpreting the main contract (governed by New York law) but to exclude them when interpreting the arbitration agreement (governed by English law).
Again that problem is avoided if the same proper law applies across the board.
Another problematic example arises because of different possible approaches to a no oral modification clause.
Such a clause is effective to prevent subsequent oral variations of a contract in English law (as laid down in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24; [2019] AC 119).
Let us assume, as appears to be the case, that the contrary position is taken under New York law.
Let us then assume that there is a contract containing a no oral modification clause and an arbitration agreement.
The main contract is governed by New York law but London is the seat of the arbitration.
If one applies different proper laws to the main contract and to the arbitration agreement, that would appear to produce the odd result that a subsequent oral variation, which might affect the arbitration agreement, would be effective in relation to the main contract but would be ineffective in relation to the arbitration agreement.
Again there would be no such problem if the proper law that applied to the main contract applied also to the arbitration agreement.
No doubt one can envisage many other such practical problems arising from the division required by the seat approach.
They indicate the underlying truth that, in contrast to the main contract approach, the seat approach cuts across a principled way forward. (iv) arbitration
In past cases excessive weight has been given to the seat of
It is not easy to pinpoint why, in several past cases (as we have seen in paras 209 226 above) the seat of arbitration has been thought to be of such major importance in determining the proper law of the arbitration agreement.
True it is that the seat of arbitration (almost) invariably carries with it the curial law and the courts curial or supervisory jurisdiction (see para 193(vi) above).
So in this case it is not in dispute that the curial law of the arbitration agreement here is England and that the English courts have curial or supervisory jurisdiction.
It may be, therefore, that in the past there has sometimes been a failure to distinguish between, on the one hand, the curial law and the curial/supervisory jurisdiction of the courts which are (almost) invariably determined by the law of the seat and, on the other hand, the proper law of the arbitration agreement.
As Adrian Briggs has written in Private International Law in English Courts (2014), para 14.41: [T]he identification of the seat is a reliable indicator of the law which was intended or expected by the parties to apply to the proceedings before the arbitral tribunal, to their support, supervision, and control, but it is not a statement of the law which will govern the initial validity and scope of the agreement to arbitrate.
The parties may say that they wish to have arbitration in London, and it may well be true that they expect the Arbitration Act 1996 to provide the template for the procedure which will be followed once the arbitration is underway.
But it does not follow, or does not need to follow, that the validity of the contract by means of which that agreement was or [was] not made must also be understood to be governed by English law, for that is another question entirely.
Another possible explanation for the weight given to the seat in older cases is that this has rested on the now outdated assumption (given the way modern international arbitration works) that arbitrators at the seat would only be comfortable applying their own law.
In Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, the House of Lords reasoned that the choice of seat in an arbitration clause was an indicator as to the proper law of the main contract.
A submission put forward in support of that was that a reason for choosing an English seat was because English arbitrators would be most familiar with English law.
Lord Wilberforce rejected that submission.
He said, at 596, I venture to think that in commercial matters, at the present time, this may give insufficient recognition to the international character of the City of London as a commercial centre the reason, rather than any preference for English rules, for which arbitration in London is selected.
In this case the arbitrators had no difficulty in finding for French law and I do not suppose they would find ascertainment of the French law as to damages any more difficult than the English law of anticipatory breach.
And as Popplewell LJ said in the Court of Appeal in this case, at para 72: I doubt that [that submission] would now be accorded significant weight in the context of most international arbitration in England, in which English arbitrators are often asked to decide questions under a foreign governing law and are regarded as equipped to do so.
A fortiori it is inapplicable to a case such as the present involving arbitration under the ICC Rules which commonly involves appointment of foreign arbitrators from different legal traditions and disciplines notwithstanding that the seat of the arbitration is in London.
Mr Dicker submitted that the seat might often be chosen to ensure neutrality.
However, the desire for neutrality is surely normally concerned with the quality and integrity of the decision makers and rarely has anything to do with the proper law to be applied (ie the relevant neutrality is referring to the decision maker not the proper law to be applied by that decision maker).
There may have been an implication in Mr Dickers submission that the parties in this case precisely chose England as the seat because they did not trust the Russian courts.
Certainly one can readily accept that neutrality away from home courts may be a reason why parties choose international arbitration, and that the curial or supervisory jurisdiction of the courts at the seat may be significant.
But the desire for neutrality does not explain why the parties would choose the law of the seat rather than the law of the main contract as the proper law of the arbitration agreement.
Moreover, in this case if the parties really did not trust the Russian courts, one would have expected there to have been an exclusive jurisdiction clause (requiring any litigation to come before the English courts) in the main contract.
In any event, we were supplied with no evidence to support any suggestion that the parties in the present case did not trust the Russian courts.
Clearly they preferred to resolve the matter by arbitration rather than litigation but that is a different point.
In past cases insufficient weight has traditionally been given to the (v)
implied choice of the parties
Although it is very difficult to rationalise all past cases, the apparent rationalisation given by the Court of Appeal in this case (mirroring other judicial attempts), in seeking to put the law on a sound footing, with respect places insufficient weight on the implied choice of the parties.
That approach was to say that, in general, the proper law of the arbitration agreement was dictated by the seat chosen for the arbitration unless there was an express choice of proper law in the main contract (see Popplewell LJs judgment at paras 90 91 and 105 and above para 226).
But why should only an express choice of proper law in the main contract have this effect? As Mr Bailey persuasively submitted, in his written case, it is the fact that the parties have made a choice which matters, not the way in which that choice was manifested.
In other words, it makes no rational sense to place heavy weight on an express choice in the main contract while placing little weight on an implied choice in the main contract. (vi) The curial law and curial jurisdiction can be separated out from the
proper law of the arbitration agreement
A central submission of Mr Dicker, in line with the views of Popplewell LJ in the Court of Appeal at paras 96 to 99, is that one cannot properly separate out the curial law of the arbitration from the proper law of the arbitration agreement.
They are intertwined.
It follows, so the submission goes, that the parties are unlikely to have intended the proper law of the arbitration agreement to be different from the curial law (and we know that the latter is English by reason of the choice of seat).
While in general terms, the curial law may be said to be dealing with arbitral procedure, and the proper law of the arbitration agreement with the substance of the parties arbitration agreement (its existence, validity and scope), one cannot in this context neatly divide procedure and substance.
This is illustrated, so the submission goes, by the provisions of the Arbitration Act 1996.
If the seat is England, the provisions of that Act apply whatever the proper law of the arbitration agreement; and many of these provisions (for example, sections 5, 7, 12, 28(1), 58, 60, 71(4), 79 and 82(2)) are substantive not procedural.
Looked at in the overall context of the English rules on the conflict of laws, this may be thought a surprising submission.
This is because it has long been recognised that, while there may be issues at the margins in drawing the distinction, there is an important difference between matters of procedure that are governed by the law of the forum and matters of substance that are governed by the particular proper law; and in modern times it would not be suggested that the forum chosen, governing procedure, would be a decisive, or even an important, factor in deciding on the proper law determining the substantive rights of the parties.
It should also be noted that one would face the same issue of separating out the curial law from the proper law of the arbitration agreement if there were an express choice of law clause in the main contract specifying a different proper law than the curial law.
Yet there is wide acceptance that an express choice of law clause in the main contract would override the choice of seat in determining the proper law of the arbitration agreement.
Moreover, as regards the Arbitration Act 1996, I accept the submissions of Chubb Russia, put forward so persuasively on this matter by Toby Landau QC, that Mr Dickers submissions (and the reasoning of Popplewell LJ on this) are incorrect for the following two reasons: (i) Almost all the provisions of the Arbitration Act 1996 being referred to as substantive not procedural are non mandatory.
And in relation to such non mandatory provisions, section 4(5) of the 1996 Act lays down (as one would expect in any event) that a foreign proper law for the arbitration agreement means that the non mandatory provisions of the 1996 Act do not apply.
This provision was not relied on by Chubb Russia in the Court of Appeal and was not mentioned in the Court of Appeals judgment.
Section 4 reads as follows: Mandatory and non mandatory provisions (1) The mandatory provisions of this Part are listed in Schedule 1 and have effect notwithstanding any agreement to the contrary. (2) The other provisions of this Part (the non mandatory provisions) allow the parties to make their own arrangements by agreement but provide rules which apply in the absence of such agreement. (3) The parties may make such arrangements by agreeing to the application of institutional rules or providing any other means by which a matter may be decided. (5) The choice of a law other than the law of England and Wales or Northern Ireland as the applicable law in respect of a matter provided for by a non mandatory provision of this Part is equivalent to an agreement making provision about that matter.
For this purpose an applicable law determined in accordance with the parties agreement, or which is objectively determined in the absence of any express or implied choice, shall be treated as chosen by the parties.
As the Supplemental Report of the Departments Advisory Committee on Arbitration Law (DAC) said, at para 12, section 4(5) avoids the dangers that a choice of England as the seat of the arbitration will necessarily entail the imposition of every provision of the Act. (ii) The remaining provisions of the 1996 Act relied on by Mr Dicker (sections 12 13 and 66 68) appear to be procedural not substantive (they are concerned with extending time limits for beginning arbitration proceedings, limitation periods, and the enforcement and setting aside of an award).
But even if one regards them as substantive (see Popplewell LJ at para 96) it is clear that, in themselves, they cannot be regarded as having any bearing on the proper law of the arbitration agreement. (vii) Section 103(2)(b) of the Arbitration Act 1996 (codifying article
V(1)(a) of the 1958 New York Convention) is neutral
Mr Dicker sought to pray in aid article V(1)(a) of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which has been codified in what is now section 103(2)(b) of the Arbitration Act 1996.
This statutory provision (which is materially identical to article V(1)(a) of the 1958 New York Convention) reads as follows: 103.
Refusal of recognition or enforcement. (1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases. (2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves (a) that a party to the arbitration agreement was (under the law applicable to him) under some incapacity; that the arbitration agreement was not valid under (b) the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made; This statutory provision therefore deals with the refusal of recognition or enforcement of a non domestic arbitral award (ie an award made in a territory outside the UK in a state which is a party to the New York Convention: Arbitration Act 1996 section 100(1)) where an arbitration agreement is invalid under the law to which the parties subjected it or, failing any indication thereon, under the law of the seat.
True it is that that constitutes legislative acceptance of the relevance of the law of the seat.
But this provision is only directly concerned with the enforcement or recognition of arbitral awards.
It is not directly concerned with the validity of an arbitration agreement prior to any question as to its enforcement or recognition although Mr Dicker submitted (relying on Albert van den Berg, The New York Convention of 1958 (1981), pp 126 128) that what is relevant at the end should also be relevant at the start.
Mr Baileys response was that, even if one were to regard this provision as having relevance at the pre enforcement stage, the provision tended to support his case because the relevance of the law of the seat is only at the default level: where the parties have chosen the proper law of the arbitration agreement, including impliedly, the law of the seat does not apply.
In other words, his submission was that this statutory provision was simply irrelevant where there has been an implied choice (as on the facts of this case).
I agree with that.
However, it is important to add that the statutory provision is irrelevant to this case for a wider reason: as I have made clear at paras 194 199 above, this case is concerned with the interpretation of an arbitration agreement and not with its validity.
It should also be stressed that the award in this case, because the seat is England, would be a domestic award to which section 103(2)(b) does not apply.
Nevertheless, I am here concerned to articulate reasons that apply generally to favour the main contract as opposed to seat approach.
On the face of it, the statutory provision (and article V(1)(a) of the New York Convention) does offer support in relation to the validity of the arbitration agreement and, at least at the enforcement and recognition stage, for applying the law of the seat where there has been no choice of law, express or implied, made by the parties.
One may say that it represents a legislative policy, and a policy of international arbitration, which the common law should respect.
However, in so far as one might apply this provision so as to make a practical difference to the determination of the proper law of the arbitration agreement (ie where one would be applying, as the proper law of the arbitration agreement, at the pre enforcement stage, the law of the seat rather than the law of the main contract) there is a difficulty with reconciling that provision with the validation principle.
We have explained in para 198 above that that principle is the general principle whereby the courts favour the proper law that would uphold an arbitration agreement rather than one that would invalidate it; and this can be seen to rest on the assumption that rational parties would prefer to have an agreement upheld than not.
It follows that, unless one is to accept the unfortunate conclusion that the legislative provision may (sometimes) override the validation principle (of course sometimes it will be consistent with it), one will need to interpret the provision in such a way that, where the arbitration agreement would be invalid under the law of the seat but valid under the law of the main contract, the law of the seat will give way to the law of the main contract.
The most obvious way of achieving this is to recognise that the provision confers a discretion.
The relevant statutory words are that recognition or enforcement of the award may be refused.
Assuming there is such a discretion, it should be exercised to accommodate the validation principle.
The consequence would be that any practical difference, as to validity, between the proper law of the seat and the proper law of the main contract would be nullified.
Ardavan Arzandeh and Jonathan Hill, Ascertaining the Proper Law of an Arbitration Clause under English Law (2009) Journal of Private International Law 425, 442, stress, correctly in my view, that, while superficially attractive, it is problematic to decide the proper law of the arbitration agreement by reading across from article V(1)(a) of the New York Convention (and hence from section 103(2)(b) of the 1996 Act): Although international harmonisation of choice of law rules on the basis of the rules enshrined in article V(1)(a) of the New York Convention is superficially attractive, it is not wholly unproblematical.
If a national court may, in the exercise of discretion, order enforcement of an award notwithstanding the fact that the underlying arbitration clause is invalid according to the law specified by article V(l)(a), it is legitimate to question whether it would be logical or sensible to treat the choice of law rules endorsed by article V(l)(a), as interpreted by van den Berg, as being automatically applicable in contexts other than the enforcement of arbitral awards, contexts in which the element of discretion is absent.
The overall position, therefore, is that not only does section 103(2)(b) have no direct relevance to the facts of this case (because we are concerned with interpretation not validity and the award would be a domestic award), it also has no direct relevance to our general enquiry because we are not concerned with the enforcement or recognition of an award.
This is in line with the view of Robert Merkin, Arbitration Law (Issue 84, 2020) para 7.15 that the provision has a more limited effect than may at first sight appear.
In any event, it would appear that the provisions support for the seat approach can, and should, be limited so as to adhere to the validation principle (thereby nullifying any practical difference, as to validity, between the proper law of the seat and the proper law of the main contract).
For all these reasons, it seems reasonable to regard section 103(2)(b) of the Arbitration Act 1996 as an essentially neutral consideration that should not be regarded as inconsistent with, or as standing in the way of, a principled solution.
(viii) The analogy to an exclusive jurisdiction clause
In deciding on a principled approach to the proper law of an arbitration agreement, it is helpful to think of the analogy between an arbitration agreement and an exclusive jurisdiction clause.
Say one has a contract governed by Russian law but with a jurisdiction clause giving the English courts exclusive jurisdiction.
What is the proper law of the exclusive jurisdiction agreement? Although Mr Dicker submitted that that clause would be governed (presumptively) by English law as the courts (and place) chosen by the parties he was not able to support that submission with any convincing references.
It would be surprising if, at least normally, the proper law of the jurisdiction clause is anything other than the same as the proper law of the main contract.
Certainly that is the position favoured by Dicey, Morris & Collins, The Conflict of Laws, 15th ed (2012), para 12.103: [A]s a matter of common law, normally a jurisdiction agreement (like arbitration agreements, which are also excluded by article 1(2)(e) from the application of the Rome I Regulation) is governed by the law applicable to the contract of which it forms a part.
Accordingly, and as a matter of the common law principles of the conflict of laws, the law which governs the contract will also generally govern the jurisdiction agreement.
This means that this law governs the construction and interpretation of the agreement
(ix) Conclusion
Taken together, these reasons provide a convincing case for favouring the main contract as opposed to seat approach to determining the proper law of the arbitration agreement.
They should be viewed as supporting a presumption (or general rule) that the proper law of the main contract is also the proper law of the arbitration agreement.
In this case, they support the conclusion that the proper law of the arbitration agreement is Russian law by reason of an implied choice. (3) The proper law of the arbitration agreement is Russian law even if there
has been no implied choice
I would arrive at the same conclusion that the proper law of the arbitration agreement is Russian law for the reasons that have been set out in paras 231 255 above, even if the proper law of the main contract was Russian under article 4, rather than under article 3(1), of Rome I Regulation at least if the reason for that was that Russia is the country with which the contract is most closely connected.
That would then carry across to the third stage of the common law approach and would mean that, despite the seat for the arbitration being England, the arbitration agreement also has the closest and most real connection with Russia.
That one arrives at the same result at common law whether applying the implied choice or the default rule is unsurprising.
It has long been recognised that there is a thin distinction between those two stages: they represent the distinction between implied and imputed intention.
In Amin Rasheed Shipping Corpn v Kuwait Insurance Co [1984] AC 50 the majority, led by Lord Diplock, decided that English law was the proper law by necessary implication whereas Lord Wilberforce came to the same conclusion applying the closest and most real connection test while recognising, at p 69, that the two merge into each other.
But although, in general terms, it is important to recognise that one would arrive at the same conclusion if one applied the third stage of the common law approach, this case can be decided without going beyond the choice of the parties.
The proper law of the arbitration agreement is Russian because that is the law which they have impliedly chosen.
(4) Stating the common law on the proper law of an arbitration agreement
The reasoning above enables me to state the common law on the proper law of an arbitration agreement (contained in a main contract) in the following straightforward and principled way which (had this view found favour) would have been easy to apply and would have been one way of providing the clarity that Popplewell LJ was rightly seeking: (i) The proper law of the arbitration agreement is to be determined by applying the three stage common law test.
Is there an express choice of law? If not, is there an implied choice of law? If not, with what system of law does the arbitration agreement have its closest and most real connection? (ii) Where there is an express proper law clause in the arbitration agreement (which is rare) that will be determinative. (iii) Where there is no such clause, there is a presumption or general rule that the proper law of the main contract is also the proper law of the arbitration agreement.
That presumption or general rule can assist the enquiry at any of the three stages of the common law approach. (It is most appropriate to use the language of a presumption where one is considering the parties choice at the first two stages of the enquiry ie it is a presumption of the parties intentions and to use the language of a general rule where one is considering the third stage of the closest and most real connection.) (iv) That presumption may most obviously be rebutted, or there is an exception to that general rule, where the standard validation principle (of the English conflict of laws) applies ie where the law of the seat (or another relevant jurisdiction) would treat the arbitration agreement as valid whereas the proper law of the main contract would treat the arbitration agreement as invalid (or, as in the Sulamrica case, not binding on one of the parties).
In very rare cases that presumption would also be rebutted where it is clear that the parties have chosen the law of the seat as the proper law of the arbitration agreement even though there is no express proper law clause in the arbitration agreement.
The above statement of the common law on the proper law of an arbitration agreement does not undermine the well established and uncontroversial position that the curial law and curial jurisdiction are (almost) invariably determined by the seat chosen for the arbitration.
Concluding remarks on the proper law of an arbitration agreement
We were referred to the writings of many commentators on this issue.
Several (for example, Gary Born, International Commercial Arbitration, 2nd ed (2014), Chapter 4; and Julian Lew, The Law Applicable to the Form and Substance of the Arbitration Clause in Albert van den Berg (ed) Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention, (1998) ICCA Congress Series Vol 9, 114, 114 145) refer to the international context and I have been very conscious throughout that it would be inappropriate to lay down an approach for the English common law that would be inconsistent with accepted principles of international arbitration law.
Although the commentators, as with the judges, do not speak with one voice on the issue facing us, I have found illuminating most of the writings to which we were referred.
I have derived particular help from the work I have earlier mentioned of Lord Mustill and Stewart Boyd, Gary Born, Robert Merkin and Louis Flannery, Albert van den Berg, Adrian Briggs, and Ardavan Arzandeh and Jonathan Hill.
In addition, I have been helped by an excellent case note on the Court of Appeal decision in this case by Edwin Peel, The Proper Law of an Arbitration Agreement (2020) 136 LQR 534.
It will be clear from all that I have said above that, while there are large measures of agreement between us (for example, that (at least in general) an express or implied choice of the proper law for the main contract carries across to be the proper law of the arbitration agreement, irrespective of the specified seat of arbitration) I cannot agree, with great respect, with the overall approach or conclusion in this case of my colleagues, Lords Hamblen and Leggatt (with whom Lord Kerr agrees).
In their view, the proper law of the arbitration agreement is here English law because there has been no choice of law for the arbitration agreement, express or implied, and the arbitration agreement has the closest and most real connection to England as the seat of the arbitration.
Their decision would have been different had the proper law of the main contract been Russian law by reason of an express or implied choice.
But because the proper law of the main contract is, in their view, Russian law, only because it has the closest and most real connection to Russia, that means that the proper law of the arbitration agreement is English law.
That is to rest crucially different consequences on a divide between the choice and default stages of the Rome I Regulation and between the second and third stages of the common law approach in a way that, with respect, I do not believe to be justified in principle.
I also consider that that approach produces undesirable practical and unprincipled consequences (especially by forcing a division of the proper laws) such as those set out in paras 235 239 above.
I also have misgivings about the idea that the English common law should depart from a principled solution on the basis of a supposed but in my view unproven consensus as to international arbitration policy favouring the seat approach (in the absence of choice).
My view is that the proper law of the arbitration agreement is Russian.
That is because the proper law of the main contract is Russian by implied choice and that implied choice encompasses, or carries across to constitute, an implied choice of Russian law for the arbitration agreement.
Even if my reasoning on the proper law of the main contract is wrong and the proper law of the main contract is Russian by reason of Russia having the closest and most real connection rather than by implied choice I would still regard the proper law of the arbitration agreement as being Russian law by reason of the arbitration agreement having the closest and most real connection with Russian law.
This is to apply the general rule, to which there is here no exception, that the proper law of the main contract is also the proper law of the arbitration agreement.
The anti suit injunction
Had my conclusion on the proper law of the arbitration agreement prevailed that the proper law of the arbitration agreement is Russian the following question would have arisen.
Should this matter be remitted to the English Commercial Court to decide if an anti suit injunction should be granted or, as Mr Bailey submitted, should the matter be left to the Russian courts by refusing an anti suit injunction (overturning the Court of Appeal)? It is not in dispute that the English courts, because England is the seat of the arbitration, have curial or supervisory jurisdiction to support and enforce the arbitration agreement (see para 193(vi) above).
It is also clear that the English Commercial Court has the means and experience, relying on expert evidence on Russian law, to decide on the correct interpretation of the arbitration agreement applying Russian law.
I consider that, in these circumstances, had my view on the proper law of the arbitration agreement been the majority view, the appropriate course would have been for the question as to whether an anti suit injunction should be ordered to be remitted to the English Commercial Court which would have been required to determine whether, applying Russian law to interpret the arbitration agreement, the proceedings in Russia constituted a breach of the arbitration agreement.
That court would also have been required to determine, if Enka had been given permission to plead the point, whether, applying Russian law, there was a serious risk of the arbitration agreement being held invalid under Russian law as at the time this arbitration agreement was entered into (see para 197 above).
Had my view on the proper law prevailed, the stay of execution of the anti suit injunction would not therefore have been lifted and the undertakings given by the parties, pending the outcome of this appeal, would have had to be extended to protect Enkas position.
9. Conclusion
Contrary to the joint judgment of Lord Hamblen and Lord Leggatt (with whom Lord Kerr agrees), it is therefore my view that, on the main issue in the case, Chubb Russia is correct that the proper law of the arbitration agreement is Russian, not English, law; and, on that basis, I would have remitted the question, whether an anti suit injunction should be ordered, to the English Commercial Court.
LORD SALES:
I agree with the judgment of Lord Burrows.
In relation to determining the proper law of an arbitration agreement contained in a main contract my view is that the main contract approach should be preferred to the seat approach.
I add a short judgment of my own to explain my position in relation to the points on which there is a difference of view within the court and to indicate the areas where I am in agreement with the judgment of Lord Hamblen and Lord Leggatt.
The court is taking this opportunity to clarify the position regarding the approach to determining the proper law of an arbitration agreement which is a provision within a main contract.
The main contract may or may not contain a provision stating the proper law of the contract.
Where the main contract contains such a provision, it is not usual for the parties also to include a distinct term to state the proper law of the arbitration agreement embedded in the main contract.
According to English conflict of laws rules, the proper law of the main contract will usually be determined by application of the Rome I Regulation, but that does not apply in relation to the arbitration agreement.
In relation to the arbitration agreement, the proper law is determined by reference to the conflict of laws rules of the common law: the proper law is that chosen by the parties (i) expressly or (ii) by implication, according to the terms of any agreement between them, and (iii) in the absence of such choice is the law of the jurisdiction with which the arbitration agreement has the closest and most real connection.
Choice of the parties
Where the main contract includes a provision stating the proper law of that contract, I agree with Lord Hamblen and Lord Leggatt that the ordinary effect of the provision is that this indicates that the parties have chosen the same proper law for the arbitration agreement.
I further agree with Lord Hamblen and Lord Leggatt that for these purposes there is not necessarily a sharp division between an express choice of law and an implied choice of law.
The point can be illustrated by the decision in Sulamrica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638; [2013] 1 WLR 102 (Sulamrica).
That case concerned an arbitration agreement contained in a main contract which included a term stating that the proper law of the contract was Brazilian.
In his judgment, Moore Bick LJ assumed that what was in issue was whether the parties had thereby made an implied choice of law in relation to the arbitration agreement, and held that by virtue of the application of the validation principle the choice of law term could not be interpreted as having that effect: paras 25 26 and 31.
However, one might analyse the effect of the proper law provision in the main contract by asking whether on the true construction of its express terms the statement that the proper law of the contract was Brazilian law extended to cover the arbitration agreement which was part of that contract.
Again, application of the validation principle would indicate that in the particular circumstances of the case the parties did not intend that statement to extend so far.
Stages (i) and (ii) of the common law rule are aligned with the test in article 3(1) of the Rome I Regulation.
The first main point of difference between the judgment of Lord Burrows and the judgment of Lord Hamblen and Lord Leggatt is whether in the circumstances of the present case the parties impliedly chose Russian law as the law governing the main contract, including the arbitration agreement.
On that question, I agree with Lord Burrows that they did.
Although the parties did not include an express choice of law statement in the main contract, they included many references in the main contract to make it clear that they intended that Russian law should govern their relationship.
In the circumstances of the case, and given the nature of the task to be performed by Enka, it would have been bizarre for them to assume that any other law was to apply.
The guidance in the report by Giuliano and Lagarde on the Rome Convention which later became the Rome I Regulation (para 203 above) is strong support for this view.
Unlike in Sulamrica, there was no good countervailing reason to indicate that the parties intended that the choice of law they had made for their contract should not extend to the arbitration agreement which was part of it.
Where the parties to a main contract include an arbitration agreement as part of that contract, then in general terms there are strong grounds to infer that they intend their choice of the law to govern that contract to cover the arbitration agreement as well, as Lord Hamblen and Lord Leggatt point out: para 53 above.
There is a presumption that in ordinary circumstances a contract has a single proper law since otherwise a serious element of uncertainty would be introduced into mercantile agreements: Jacobs, Marcus & Co v Credit Lyonnais (1884) 12 QBD 589, 602 603 per Bowen LJ; see also Kahler v Midland Bank [1950] AC 24, 42 (Lord MacDermott).
A contract contains a unified package of rights and obligations, created in the same set of circumstances, so the usual and natural inference is that the parties intend, on an objective basis, that the same proper law should apply in relation to it.
An arbitration agreement contained in the main contract imposes an obligation to take disputes to arbitration in certain circumstances, as part of the package of rights and obligations created by and set out in the main contract.
In usual circumstances, I can see no good reason to infer that the parties to the main contract intended the interpretation of the obligation to arbitrate to be governed by any different system of law than the system of law which governs the interpretation of all the other obligations in their contract.
Applying the same system of law to govern the construction of the whole of the contract the parties have made ensures simplicity and coherence in its interpretation.
It avoids the uncertainty associated with subjecting different parts of the contract to interpretation according to different systems of law.
Any national system of law may be expected to have internal coherence, which will not be the case when two national systems of law are set side by side or are overlaid.
Each will have an internal logic and in dealing with particular matters which is at variance from the internal logic of the other.
Each may have different solutions to practical problems which are coherent within that system, but are opposed to the solutions given by the other system according to what is coherent within that other system.
The presumption that a contract has a single proper law thus reflects the usual expectations of the parties to a contract, since it is a reasonable inference that they prefer certainty, coherence and simplicity in working out the practical implications of their agreement.
In my view, these points underlie the observation by Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, 357 358, that it would be exceptional for the proper law of the arbitration agreement to be different from the proper law of the main contract.
Lord Mustills opinion in this area carries great weight.
He also pointed out that it is less unusual for the curial law in relation to an arbitration to be different from the proper law of the main contract (and the proper law of an arbitration agreement contained in the main contract).
The explanation for this is that the curial law follows the choice of seat.
When the parties choose a particular seat, their reasons for doing so include the relationship stipulated by the law of the jurisdiction of the seat as to the grounds on which the courts of that jurisdiction may interfere with the arbitral process or its outcome and the extent to which those courts may take action positively to support the arbitral process and uphold the agreement to arbitrate, including by the grant of injunctive relief.
These reasons apply whatever the proper law of the main contract or the arbitration agreement may be.
Hence I do not consider that ordinarily the choice of the seat provides any sound basis to infer what the parties intended or might have expected the proper law of the main contract or the arbitration agreement to be.
Two comments may be made about this.
First, many decades ago it was understood that when the parties stipulated that the seat for their arbitration would be in a particular jurisdiction their intention was that the arbitrators would be local lawyers chosen for their expertise in the law of that jurisdiction, so that the inference could be drawn that the parties intended that they would apply that law in determining issues in dispute, including as to the proper interpretation of the arbitration agreement and the main contract.
But changes in the way international arbitration was conducted meant that such an inference was already suspect by 1970, as Lord Wilberforce explained in Cie Tunisienne de Navigation SA v Cie dArmement Maritime SA [1971] AC 572, 596.
Under modern conditions of international arbitration, in which arbitrators may be drawn from different jurisdictions and are regularly expected to receive evidence about and to apply foreign law, it is now no longer a plausible inference.
Secondly, parties may sometimes choose arbitration for resolution of their disputes with a seat in a neutral jurisdiction because one or other of them does not have complete trust in the impartiality of the courts of the state of the other.
But a preference for a neutral seat does not support any inference as to the parties intentions as to the law which the arbitrators should apply when interpreting the main contract or the arbitration agreement.
Arbitrators can be expected to apply any relevant law, of whichever legal system is appropriate, in an impartial way and the courts of the neutral jurisdiction will be impartial in applying the curial law.
If an inference is sought to be drawn as to the proper law of the main contract or the arbitration agreement, something more is required: an indication that the parties wished the law to be applied to govern the interpretation of their contract to be neutral in the sense that it is not aligned with the home jurisdiction of either of them.
Exceptionally, the circumstances may support such an inference: see eg Egon Oldendorff v Libera Corpn [1995] 2 Lloyds Law Rep 64, 69 and see para 114 above.
However, the circumstances of the present case show that no such inference can be drawn here.
The parties have stipulated that Enkas obligations under the main contract should incorporate norms of Russian law.
Accordingly, it is my view that Lord Hamblen and Lord Leggatt overstate the significance of the choice of the seat in this case.
The choice of curial law associated with the choice of the seat is directed to a different subject matter (regulation of the relationship between the courts of place of the seat and the arbitral process) than the rules directed to determining the proper law of a contract for the purpose of interpreting it, so it is not appropriate to use the former as a basis for establishing what the latter should be.
The inference that the parties who made the contract in the present case intended that the interpretation of the whole of it should be governed by Russian law is especially strong, since the arbitration agreement is contained in a complex main contract with many interacting parts which have to live together in a coherent relationship.
In particular, the parties intention, judged objectively, is that the obligation to arbitrate set out in the arbitration agreement contained in article 50.1 of the main contract should be interpreted in a way which makes it coherent with the other obligations in the same provision to seek to negotiate in good faith to find a resolution for disputes.
I can see no reason why the interpretation of the latter set of obligations is not governed by Russian law, like all the other obligations in the main contract.
The obligation to arbitrate in article 50.1 is likewise just another obligation set out in the main contract and it is so closely related to the other dispute resolution obligations in the main contract that the obvious inference is that the parties intended the interpretation of the whole of the provision to be governed by the same law, ie Russian law.
The separability principle which exists in relation to an arbitration agreement contained within a main contract does not alter this analysis.
That principle has limited significance.
As reflected in section 7 of the Arbitration Act 1996, it allows for the survival of an arbitration agreement contained in a main contract if the validity, existence or effectiveness of the main contract is called in question, so that the arbitrators can rule on such matters.
This tells one nothing about the legal system which the parties intended or might reasonably have expected to govern the interpretation of the arbitration agreement as part of the main contract.
By contrast, the validation principle, as illustrated by Hamlyn & Co v Talisker Distillery [1894] AC 202 and Sulamrica, does allow one to draw an inference as to the system of law which the parties intended should govern the interpretation of the arbitration agreement.
The principle can provide a basis for distinguishing the proper law of the arbitration agreement from that of the main contract or, where the proper law of the main contract is uncertain, it may provide a basis for an inference also to be drawn that the proper law of the main contract is intended to follow the choice of proper law for the arbitration agreement (in Hamlyn v Talisker Lord Herschell LC referred to this possibility at p 209).
In my view, the validation principle is an aspect of the general objective approach to determining the intention of the parties to a contract ut res magis valeat quam pereat (so that the main object of the agreement is upheld and not destroyed).
Where the main contract contains an arbitration agreement, it will be clear that the parties intend that the obligation to arbitrate as set out in the arbitration agreement should be valid and effective.
The parties are presumed to know the state of the law at the time they contract.
If it appears that according to the law which governs the main contract the arbitration agreement would be invalid, then it can be inferred that the parties intended that a different law should govern the arbitration agreement in order to uphold its validity and effect.
The same is true if it appears that according to the law which governs the main contract the arbitration agreement would be subject to a serious risk of being found to be invalid or that its binding force would be destroyed (as in Sulamrica), since the inference is that the parties would choose certainty rather than uncertainty in upholding the effectiveness of this part of their contract.
Usually, since the legal system which governs the main contract is ruled out by this reasoning, the obvious conclusion is that the parties intended the law of the jurisdiction of the seat which they have stipulated to apply instead.
The terms of the arbitration agreement, set against the background of the state of the law in the two candidate jurisdictions, show that the parties intended the law of the jurisdiction of the seat to apply in this sort of case.
This reasoning does not apply where what is in issue is the choice of the proper law to determine the scope of the arbitration agreement rather than whether it would be invalid or would not impose a binding obligation to go to arbitration if one system of law were applied rather than another.
In Sulamrica, Moore Bick LJ rightly held that the validation principle
applied so as to negative any choice of Brazilian law as the proper law of the arbitration agreement.
He seems to have drawn the conclusion that this meant that the parties had formed no intention regarding what was to be the proper law of the arbitration agreement (see para 31) and so proceeded to analyse the position by reference to the common law default rule at stage (iii), in order to conclude that English rather than Brazilian law governed the arbitration agreement contained in the main contract.
However, in my opinion, following the reasoning above, the better view is that the validation principle showed that the parties intended that English law should govern the arbitration agreement.
This conclusion should have been reached at stage (i)/stage (ii) of the common law analysis.
In the present case, subject to one argument introduced by Enka for the first time on the appeal to this court (see para 197 above), the validation principle has no application.
Up to the hearing in this court, it has been common ground that under Russian law the arbitration agreement in article 50.1 is valid and binding in its effect; the issue that has divided the parties is the effect that application of Russian law would have regarding the interpretation of its scope.
As to Enkas new argument that the validation principle does in fact apply, I agree with Lord Burrows that if our view regarding the proper law of the arbitration agreement had prevailed the case should have been remitted to the Commercial Court and that it would have been for that court to consider whether the new argument could be introduced and, if it were, then to rule upon it alongside the other issue of Russian law which is in dispute between the parties, namely whether the interpretation of article 50.1 according to Russian law would be narrower or the same as that given by English law.
The second main area of disagreement appearing from the judgment of Lord Burrows and the judgment of Lord Hamblen and Lord Leggatt relates to the operation of the common law default rule at stage (iii), if the parties have made no choice at stage (i) or stage (ii).
On the analysis of Lord Burrows, with which I agree, the parties to the main contract impliedly intended that the interpretation of the AA in that contract should be governed by Russian law, at stage (ii).
If that were right, stage (iii) would not be reached.
However, the majority do not agree about this.
On their analysis it is necessary to consider the position on the footing that the parties have made no choice at stage (i) or stage (ii).
The default rule
In the early formulation of the common law rule by Dicey in 1896 (para 36 above), the difference between stage (i)/stage (ii) and stage (iii) was described as one between what the parties (actually) intended and what they may fairly be presumed to have intended.
Obviously, imputed choice is something different from actual choice.
Later, the common law default rule at stage (iii) was formulated in terms of the system of law with which the contract has its closest and most real connection.
But this does not mark a radical change.
Rather, focusing on the closest and most real connection serves the same underlying policy, which is to seek to reflect the likely expectations of the parties as businesspeople, by producing an outcome which is reasonable and coherent in its own terms and does not place excessive emphasis on the boundary between stage (ii) and stage (iii).
If, on analysis, the parties have not made a choice of proper law themselves perhaps because they did not think about it or they chose to leave matters unclear in the interests of arriving at an agreement without having to argue about it and in the hope that a dispute might never arise which required a determination of the issue the policy of the common law, as expressed in the default rule at stage (iii), is to produce the answer which it is plausible to think businesspeople in the position of the parties, acting reasonably, would have been likely to have chosen for themselves if they had to confront the issue.
Many of the factors relevant to an argument that an implied choice of proper law can be identified at stage (ii) will also be relevant to the alternative argument based on the default rule at stage (iii).
In broad terms, businesspeople would expect them to be likely to produce similar outcomes.
That has certainly been the judicial approach until fairly recently, as illustrated by the decision of the House of Lords in Amin Rasheed Shipping Corpn v Kuwait Insurance Co [1984] AC 50.
In that case, the majority of the Appellate Committee determined the proper law of the contract by reference to stage (ii), while Lord Wilberforce reached the same conclusion by reference to the test at stage (iii), for closely similar reasons.
Similarly, in the Cie Tunisienne case all members of the Appellate Committee arrived at the same conclusion regarding the proper law of the contract, but they did so by different routes; some found that the parties had made a choice, others that the default rule in stage (iii) applied.
In the leading authorities referred to in the Cie Tunisienne case, Bonython v Commonwealth of Australia [1951] AC 201, and In re United Railways of Havana and Regla Warehouses Ltd [1961] AC 1007, the test applied to determine the proper law of the contract was that stated by Lord Simonds in Bonython, at p 219: the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connexion, which elides the question of party choice and the default rule, and deliberately so.
The close alignment of the approach under stage (ii) and that under stage (iii) was traced by Toulson LJ in Lawlor v Sandvik Mining and Construction Mobile Crushers and Screens Ltd [2013] 2 Lloyds Law Rep 98, paras 20 27.
Since the boundary between stage (ii) and stage (iii) is by no means crystal clear and there is scope for eminent judges to reach different views about which stage of the common law analysis supplies the answer in any given case, it would risk the appearance of arbitrariness to adopt a default rule at stage (iii) which was radically at variance in the results it produced by comparison with stage (i) and stage (ii).
Further, if the common law adopted a radically divergent default rule, so that significant differences in outcome turned on this, that would be an incentive for parties to litigate the question of whether a case was to be analysed as falling within stage (i)/ stage (ii) or within stage (iii).
This would be contrary to the interest of businesspeople to avoid expensive litigation to resolve disputes, so far as possible.
If the parties appreciate that all roads lead to Rome, so to speak, the need for litigation to decide which road should be taken is avoided.
This analysis prompts a further comment on Sulamrica.
Having held (contrary to my view at para 278 above) that the application of the validation principle meant that the parties had made no choice as to the proper law of the arbitration agreement within the main contract, Moore Bick LJ proceeded to apply the default rule at stage (iii) (para 32).
However, in doing so he took the view that the arbitration agreement had its closest and most real connection with the law of the place of the seat (England); and this despite the fact that, subject to the application of the validation principle, he thought that at stage (ii) the parties impliedly intended that the proper law of the main contract (Brazilian law) would also apply to the arbitration agreement (paras 26 27).
I think it is evident that Moore Bick LJs analysis at both stage (ii) and stage (iii) was rightly designed to give effect to the validation principle and to uphold the effective binding force of the arbitration agreement in that case in line with the parties intention.
But unfortunately in doing so he proposed a solution which, if taken at face value and generalised, would give rise to the kind of radical divergence of outcome between stage (i)/stage (ii) and stage (iii) which the common law default rule in fact seeks to avoid, and which does not reflect the previous authorities referred to above.
The court in Sulamrica did not need to take the step of saying that the arbitration agreement had its closest and most real connection with the law of the place of the seat in order to produce the appropriate result, which was to uphold the binding effect of the arbitration agreement in line with the parties intention by application of the validation principle: see para 278 above.
One might also say that the validation principle is capable of operating at stage (iii) as well as at stage (i)/stage (ii), as an aspect of the common law default rule, as an expression of the policy of the common law to uphold the validity and binding effect of an arbitration agreement which the parties have chosen to enter into.
But again, that would mean that the law of the place of the seat (England) was applicable as the proper law of the arbitration agreement as the only remaining candidate once Brazilian law had been eliminated as a candidate by application of the validation principle.
At the end of this process of analysis, it could be said that the arbitration agreement had its closest and most real connection with the law of the place of the seat; but that is only in the very limited sense that this was the only system of law with which the arbitration agreement could be said to have any connection, if the validation principle was to be given effect.
However, the way in which Moore Bick LJ explains his reasoning at para 32 makes it sound as though the general starting point, if the analysis at stage (i)/stage (ii) does not give a result, is always that the arbitration agreement contained in the main contract has as its proper law the law of the place of the seat rather than generally following the proper law of the main contract.
In my respectful opinion, that approach is erroneous and contrary to principle and authority.
In my view, the powerful points which Lord Hamblen and Lord Leggatt make at para 53 of their judgment regarding the expectations of businesspeople to the effect that their contractual arrangements should have internal coherence (so that if the parties have chosen the proper law of the main contract they would ordinarily expect the same proper law to apply in relation to an arbitration agreement contained within it) also apply in relation to the operation of the default rule at stage (iii) where the circumstances mean that it is clear what the proper law of the main contract is, even when that is not as a result of the exercise of choice within the meaning of article 3(1) of the Rome I Regulation.
The main contract carries with it the legal system which governs its interpretation and application.
Accordingly, the need for and expectation that there will be coherence between the main contract and the arbitration agreement contained within it means that the arbitration agreement has its closest and most real connection with the legal system which constitutes the proper law of the main contract in which it is contained.
By contrast, it is my opinion that the argument for a connection between the arbitration agreement and the law of the place of the seat is much weaker.
The parties obtain the benefits of the curial law of the place of the seat in any event, whatever the proper law of the arbitration agreement: see para 271 above.
Therefore the choice of seat does not point to any particular connection with the arbitration agreement in terms of providing guidance as to its proper law.
To the extent that the courts of the place of the seat exercise a supervisory function in relation to the arbitration, for example to ensure that the arbitrators act within the scope of the arbitration agreement according to its true construction, they can readily do that by reference to evidence about any foreign law which is identified as the proper law of the arbitration agreement.
In the present case, Enka disputes that there has been a choice of proper law within article 3(1) of the Rome I Regulation for the main contract but accepts that article 4, as the default rule set out in the Regulation, has the effect that the proper law of the main contract is Russian.
This concession must be based on an acceptance that it is clear from all the circumstances that the main contract is manifestly more connected with Russia than with any other country (including the country where Enka is habitually resident, Turkey): see article 4(3).
The assessment under article 4(3) involves inquiring into the country with which the contract taken as a whole has its closest connection.
Where, in this case, following this path of analysis, the main contract taken as a whole manifestly has its closest connection with Russia so that Russian law is taken to be its proper law, it seems to me that the reasoning above indicates that the arbitration agreement contained in the main contract similarly has its closest and most real connection with Russian law.
There is no good reason to conclude that the law of the seat is more closely connected or provides a better guide for the purposes of application of a rule designed to identify the law which is to govern the interpretation of the arbitration agreement.
In their judgment, in relation to stage (iii) of the common law rule Lord Hamblen and Lord Leggatt rely on article V(1)(a) of the New York Convention and section 103(2)(b) of the Arbitration Act 1996 in support of their view that at that stage the arbitration agreement in the main contract has its closest and most real connection with the law of the seat (England) rather than with the law which governs the main contract.
In my opinion, this is to give those provisions excessive weight in analysing the application of the common law rule.
As I have sought to show, the policy of the common law as reflected in the default rule at stage (iii) is to align that rule with the likely result the parties would have wished to achieve to produce reasonable coherence across their whole contractual relationship.
Application of article V(1)(a) would defeat that policy, because it would produce a radical divergence between the effect of stage (i)/stage (ii) and stage (iii) of the common law rule.
Another way of putting this is to say that the points made by Lord Hamblen and Lord Leggatt at para 53 of their judgment do not drop out of the analysis for the purposes of the common law at stage (iii), but continue to have validity and force at that stage as well.
By contrast, when one is applying article V(1)(a) those points do drop out of the picture and have no force, precisely because the New York Convention legislates for a rule which excludes them from being relevant.
Moreover, article V(1)(a) does not provide a good guide as to the application of the common law rule.
Article V(1)(a) sets out a default rule within the scheme of the Convention which is different from the default rule under the common law and which, if applied, would undermine the validation principle when it is applied by the common law as an aspect of stage (iii) (see para 285 above).
The provision states that, in the absence of a choice by the parties, recognition of an arbitral award may be refused if the arbitration agreement is not valid under the law of the country where the award was made.
That seems to say that recognition may be refused if the arbitration agreement is invalid according to the law of the place of the seat; but under the common law in such a case the validation principle would apply and the court would identify another system of law as the proper law of the arbitration agreement in order to uphold and give effect to the arbitration agreement.
Article V(1)(a) thus sets out what can fairly be described as a very simple and inflexible default rule for the purposes of the Convention regime which is different from the more flexible and nuanced common law default rule of closest and most real connection and should not be taken to displace that rule.
Within the Convention regime, the rationale for the choice of a simple test is not difficult to understand.
It is a clear rule by reference to which it is reasonably easy to judge whether the actions of states party to the Convention comply with it or not.
By contrast, the common law default rule has been established for a very long period of time, well before international policy arguably came to crystallise in line with article V(1)(a) of the New York Convention, and it reflects different policy objectives, as set out above.
So far as choice of proper law for an arbitration agreement is concerned (as distinct from regulation of the recognition of foreign arbitral awards, which is governed by section 103(2)(b) of the 1996 Act), article V(1)(a) of the New York Convention is part of an unincorporated treaty and it is unclear by what process of legal reasoning it could be taken to have displaced the well established common law default rule.
None of the leading common law authorities give any weight to article V(1)(a) in the formulation or application of the common law rule.
For present purposes, it is not necessary to determine the position where it is not article 4(3) but one of the other more mechanical rules in article 4 which determines the proper law of the main contract.
It suffices to say that I think there is force in the argument that the analysis above tends to indicate that also in that sort of case the proper law of the main contract will usually provide the best indication of the proper law of an arbitration agreement contained within it, at stage (iii) of the common law rule.
Again, the points made by Lord Hamblen and Lord Leggatt at para 53 of their judgment should not drop out of the picture here.
This approach would reflect how the parties are likely to have approached matters themselves, by starting with their agreement on the substantive aspects of the main contract and then adding the arbitration agreement into that framework, with the general intention and expectation that the main contract and the arbitration agreement would form a coherent whole.
It would also have the merit of making the analysis in any case as simple and clear as possible.
One would start by identifying the proper law of the main contract according to the choice of the parties pursuant to article 3 of the Rome I Regulation and, in default of any choice, by reference to the rules in article 4 of the Regulation, and then the presumption would be that the proper law of the arbitration agreement is the same.
The anti suit injunction
Finally, if the interpretation of article 50.1 were governed by Russian law, as Lord Burrows and I think it is, and a Russian court is about to pronounce on the interpretation of that provision according to Russian law in the parallel proceedings between the parties in Russia, the question arises whether this makes it inappropriate for the English court to issue an anti suit injunction in favour of Enka, whether on grounds of forum non conveniens, comity or otherwise.
On that issue, I agree with section IX of the judgment of Lord Hamblen and Lord Leggatt, which is in line with Lord Burrows judgment.
The English court, as the court of the place of the seat of the arbitration chosen by the parties, has a particular responsibility to ensure that the arbitration agreement is upheld and applied in accordance with its terms.
On the basis of expert evidence of foreign law adduced in the usual way, the English court could determine the meaning of article 50.1 according to Russian law.
If article 50.1, so construed, imposes an obligation on Chubb Russia to proceed by way of arbitration rather than by litigation, the English court could and should enforce that obligation by way of an anti suit injunction.
| The central issue on this appeal is how the governing law of an arbitration agreement is to be determined when the law applicable to the contract containing it differs from the law of the seat of the arbitration, the place chosen for the arbitration in the arbitration agreement.
On 1 February 2016, a power plant in Russia was severely damaged by fire.
The appellant Russian company (Chubb Russia) had insured the owner of the power plant (the owner) against such damage.
The owner had entered into a contract with another company (the head contractor), in relation to construction work to be carried out at the plant.
In turn, the head contractor engaged the respondent (Enka), a Turkish engineering company, as a sub contractor in the construction project.
The contract made between the head contractor and Enka included an agreement that disputes would be determined through arbitration proceedings in London.
In May 2014, the head contractor transferred its rights and obligations under the contract to the owner.
After the fire in February 2016, Chubb Russia paid an insurance claim by the owner and, by doing so, assumed any rights of the owner to claim compensation from third parties, including Enka, for damage caused be the fire.
In May 2019, Chubb Russia brought a claim against Enka in Russia.
In response, in September 2019 Enka brought an arbitration claim in the High Court in London arguing that, by proceeding in the Russian court, Chubb Russia was in breach of the arbitration agreement and seeking an anti suit injunction to restrain Chubb Russia from pursuing the Russian claim.
At first instance, the High Court dismissed Enkas claim on the primary ground that the appropriate forum to determine to scope of the arbitration agreement was the Russian court.
On appeal, the Court of Appeal overturned the judges decision.
It held that, unless there has been an express choice of the law that is to govern the arbitration agreement, the general rule should be that the arbitration agreement is governed by the law of the seat, as a matter of implied choice; that there was no express choice of law in this case and that the arbitration agreement was therefore governed by English law; and that it was appropriate to grant an anti suit injunction to restrain Chubb Russia from pursuing the Russian claim.
Chubb Russia appeals to the Supreme Court.
By a majority the Supreme Court dismisses the appeal.
The judgment is given by Lord Hamblen and Lord Leggatt with whom Lord Kerr agrees.
Lord Burrows delivers a dissenting judgment, with which Lord Sales agrees.
Lord Sales also gives his own judgment.
Where an English court must decide which system of law governs an arbitration agreement, it should apply the English common law rules for resolving conflicts of laws rather that the provisions of the Rome I Regulation, as the latter excludes arbitration agreements from its scope [25] [28].
According to the common law rules, the law applicable to the arbitration agreement will be: (i) the law expressly or impliedly chosen by the parties; or (ii) in the absence of such choice, the system of law most closely connected to the arbitration agreement [27].
In determining whether the parties have made a choice of law, the court should construe the arbitration agreement and the contract containing it by applying rules of contractual interpretation of English law as the law of the forum [29] [34].
Where the parties have not specified the law applicable to the arbitration agreement, but they have chosen the law to govern the contract containing the arbitration agreement, this choice will generally apply to the arbitration agreement [43] [52].
This general rule encourages legal certainty, consistency and coherence while avoiding complexity and artificiality [53].
The Court of Appeal was wrong to find that there is a strong presumption that the parties have, by implication, chosen the law of the seat of the arbitration to govern the arbitration agreement [59] [64].
Any overlap between the law of the seat and that of the arbitration does not justify such a presumption [64] [94].
While a choice of seat can lead to such an inference in some cases, the content of the Arbitration Act 1996, particularly section 4(5), does not support such a general inference [73] [82].
Where there is no express choice of law to govern the contract, a choice of the seat of the arbitration does not by itself justify an inference that the contract (or the arbitration agreement) is intended to be governed by the law of the seat [110] [117].
Where the parties have made no choice of law to govern the arbitration agreement, either specifically or by choosing the law which is to govern the contract as a whole, the court must determine the law with which the arbitration agreement is most closely connected.
In general, the arbitration agreement will be most closely connected with the law of the seat of arbitration. [118] [119].
This default rule is supported by the following considerations: (i) the seat is where the arbitration is to be performed (legally, if not physically) [121] [124]; (ii) this approach maintains consistency with international law and legislative policy [125] [141]; (iii) this rule is likely to uphold the reasonable expectations of contracting parties who specify a location for the arbitration without choosing the law to govern the contract [142] [143]; and (iv) this approach provides legal certainty, allowing parties to predict easily which law the court will apply in the absence of choice [144].
The majority holds that the contract in this case contains no choice of the law that is intended to govern the contract or the arbitration agreement within it.
In these circumstances the validity and scope of the arbitration agreement is governed by the law of the chosen seat of arbitration, as the law with which the dispute resolution clause is most closely connected [171].
The seat of the arbitration is London.
Therefore, the majority upholds the Court of Appeals conclusion that English law governs the arbitration agreement, albeit for different reasons [171].
Chubb Russia does not dispute that, if the arbitration agreement is governed by English law, it was legitimate for the Court of Appeal to grant an anti suit injunction in this case. [173].
The Supreme Court, however, affirms the Court of Appeals decision that, in principle, it makes no difference whether the arbitration agreement is governed by English or foreign law, as the inquiry in both cases remains the same: whether there been a breach of the agreement and, if so, whether it is just and convenient to grant an injunction to restrain that breach [178] [182].
While there may be circumstances in which it would be appropriate to await a decision of a foreign court before granting an injunction, deference to foreign courts should generally give way to upholding the importance of the parties bargain [183].
Lord Burrows and Lord Sales agree with the majority that, if the parties have expressly or impliedly chosen the law of the contract, this choice applies to the arbitration agreement [266].
They dissent on what the default position should be in the absence of such choice.
They consider that it should be that the law with which the main contract is most closely connected governs the arbitration agreement, as this is the law with which in their view the arbitration agreement is also most closely connected [257].
They also dissent on whether the parties have in this case chosen the law that is to govern the contract.
In their view, the parties impliedly chose Russian law to govern the construction contract and also,
therefore, the arbitration agreement [228].
They agree with the majority that whether it is appropriate to grant an anti suit injunction does not depend on what law governs the arbitration agreement but only on whether pursuing the foreign proceedings is a breach of that agreement.
As they conclude that Russian law governs the arbitration agreement, they would remit the question of whether there has been a breach of the arbitration agreement so as to justify the grant of an anti suit injunction to the Commercial Court.
|
When the law extinguishes obligations as a result of the effluxion of time it is important that there is certainty as to when the clock is started.
Yet many within the legal profession in Scotland have been unsure about this important matter.
This is another appeal about the meaning of the provisions of the Prescription and Limitation (Scotland) Act 1973 (the 1973 Act) concerning the short negative prescription.
Counsel for the appellants informed the court that several cases have been sisted in the Court of Session to await the outcome of this appeal.
This appeal proceeds on facts which the parties have agreed solely for the purpose of determining the question of prescription and which may be summarised briefly.
The appellants (the trustees) are the trustees of the inter vivos trust of the late William Strathdee Gordon (the trust).
The trust owns farmland, comprising three fields near the village of Killearn, which the trustees acquired because of its long term potential for residential development.
The three fields are a grazing field, a field of about 40 acres and a field of about 50 acres.
The grazing field was originally let out by the trust by a series of seasonal grazing lets to a farming partnership of Messrs A & J C Craig (the farming partnership) which had two partners.
This lease continued by tacit relocation from about 1983.
The 40 acre and 50 acre fields were let out to the farming partnership under separate leases in 1981 and 1983 respectively.
After the expiry of the original terms of let of those fields the trust entered into various minutes of agreement, which were prepared by their solicitors, who were the predecessor firm to the respondents in this appeal.
Those minutes of agreement purported to continue the original leases of those fields.
In about August 1992 the solicitors became aware that Mr Andrew Craig, one of the two partners, had retired from the farming partnership.
Notwithstanding that knowledge, the minutes of agreement in 1992 and 1998 described the tenant as the farming partnership and John Campbell Craig the sole proprietor and trustee for the firm.
Under the 1998 agreements the ish (expiry date) of the lease of each of the two fields was 10 November 2003.
It is a matter of agreement that by 2003 the leases for all three fields were agricultural holdings for the purposes of the Agricultural Holdings (Scotland) Act 1991 (the 1991 Act).
In 2003 the trustees instructed Mr McGill, who was both a trustee of the trust and a partner in the firm of solicitors, to serve on the tenant notices to quit the three fields at the term of 10 November 2003.
The tenant served counter notices under the 1991 Act.
After receiving advice from counsel that the notices to quit the 40 acre field and 50 acre field were ineffective as they did not give the period of notice which the 1991 Act required, the solicitors served further notices to quit in respect of the three fields dated 8 November 2004 requiring the tenant to remove on 10 November 2005.
In each of those notices to quit the tenant was identified as the firm of Messrs A & J C Craig and John C Craig, sole proprietor of and trustee for said firm.
The notice to quit the 40 acre field described it as being subject to a lease dated 22 September and 7 and 8 October 1981 as amended by subsequent agreements.
Similarly the notice to quit the 50 acre field described it as being subject to a lease dated 5 January and 14 February 1983 as so amended.
On 1 December 2004 Mr Richard Leggett, a partner of the solicitors, wrote a long letter to Mr William Gordon, one of the trustees, in which he explained that the solicitors had to withdraw from acting for the trust because of a conflict of interest caused by difficulties which might result from a failure to terminate the leases of the fields before their expiry dates which had allowed the tenant to continue to occupy the fields by tacit relocation.
The solicitors suggested that those difficulties might require the payment of money to Mr John Craig to get him to cede possession of the fields.
In response, the trustees did not require the solicitors to cease acting for them and continued to instruct them.
But, after the tenant did not cede possession of the fields on 10 November 2005, the solicitors wrote to the trustees on the same day to withdraw from acting for the trust in relation to the leases at Killearn, again citing the difficulties which they foresaw would arise from their earlier failure to prevent tacit relocation.
Thereafter Mr McGill resigned as a trustee.
The trustees then instructed Anderson Strathern LLP, who on 9 February 2006 applied to the Scottish Land Court seeking the removal of the tenant from each of the three fields.
It is an agreed fact that by 17 February 2006, at the latest, the trustees had incurred material expense in instructing Anderson Strathern to pursue those applications.
The tenant defended the applications.
In a decision dated 24 July 2008 the Scottish Land Court gave effect to the notice to quit in relation to the grazing field but refused to give effect to the notices to quit relating to the other two fields, because the notices were inaccurate in their description of both the tenant and the relevant lease.
As a result, the 40 acre field and the 50 acre field remain subject to leases that are agricultural holdings, thus preventing the trustees from developing them.
The legislation
As is well known, section 6 of the 1973 Act, when read with sections 9 and 10 of that Act, creates the short negative prescription by providing that if an obligation has subsisted for a continuous period of five years after the appropriate date without the creditor or someone on his behalf having made a relevant claim or the debtor or someone on his behalf having relevantly acknowledged the subsistence of the obligation, the obligation is extinguished at the expiration of that period.
Section 6(3) provides that the appropriate date in relation to an obligation arising from a breach of contract is a reference to the date when the obligation became enforceable.
This appeal is concerned with section 11 of the 1973 Act, which defines when an obligation to make reparation becomes enforceable.
It provides: (1) Subject to subsections (2) and (3) below, any obligation (whether arising from any enactment, or from any rule of law or from, or by reason of any breach of, contract or promise) to make reparation for loss, injury or damage caused by an act, neglect or default shall be regarded for the purposes of section 6 of this Act as having become enforceable on the date when the loss, injury or damage occurred. (2) Where as a result of a continuing act, neglect or default loss, injury or damage has occurred before the cessation of the act, neglect or default the loss, injury or damage shall be deemed for the purposes of subsection (1) above to have occurred on the date when the act, neglect or default ceased. (3) In relation to a case where on the date referred to in subsection (1) above (or as the case may be, that subsection as modified by subsection (2) above) the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware. (Emphasis added)
The court proceedings
On 17 May 2012 the trustees commenced a legal action against the respondents by serving on them a summons seeking damages for breach of an implied term of the contract between the trustees and the solicitors, that the latter would exercise the degree of knowledge, skill and care expected of a reasonably competent solicitor.
The breach which the trustees allege is that the solicitors failed to identify correctly both the tenant and the applicable lease in the notices to quit dated 8 November 2004 relating to the 40 acre field and the 50 acre field.
Among the sums claimed by the trustees in this action are the fees and outlays paid to the solicitors and to Anderson Strathern relating to the attempt to obtain vacant possession of the two fields and damages for the enhanced value of the land and the opportunity for the trust to exploit the fields potential for development both of which were lost through the failure to recover possession of them.
The respondents pleaded that any obligation on them to make reparation had prescribed because the trustees had not raised the action within five years of the date when they had suffered loss, which, the respondents submitted, was when the solicitors served the defective notice to quit in November 2004 or in any event when the tenant failed to remove from the fields on 10 November 2005.
They submitted that the trustees had had knowledge of having suffered loss when they learned that the tenant would not voluntarily cede possession of the fields.
After hearing evidence in a preliminary proof on prescription at which the parties had agreed that the averments of breach of contract and loss were to be treated as proven, Lord Jones upheld the plea of prescription in an opinion dated 25 March 2015 ([2015] CSOH 31).
In so doing, he rejected the trustees argument that the prescriptive period did not begin until the Scottish Land Court issued its decision (ie 24 July 2008), which, according to the trustees, was the date on which they first knew that they had suffered loss.
He held that the prescriptive period began when the trustees knowingly became liable for legal fees and outlays in pursuit of vacant possession of the fields.
As it was agreed that the trustees had incurred material expense in relation to the Scottish Land Court application by 17 February 2006, the five year prescriptive period had run its course before they commenced the legal proceedings against the respondents (on 17 May 2012).
Lord Jones therefore absolved the respondents from the trustees claims.
On 8 March 2016 an Extra Division of the Inner House (Lady Paton, Lord Bracadale and Lord Malcolm) refused the trustees appeal.
Lord Malcolm wrote the leading opinion and the other judges wrote concurring opinions ([2016] CSIH 16; 2016 SC 548).
In his opinion, Lord Malcolm analysed the judgment of the Supreme Court in David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd 2014 SC (UKSC) 222; [2014] UKSC 48 (Morrison v ICL) which I discuss below.
He concluded that section 11(3) of the 1973 Act postponed the start of the prescriptive period only when the damage was latent by requiring that the creditor should have actual or constructive knowledge of the occurrence of damage or expenditure, which was viewed as an objective fact.
He held that the prescriptive period ran from the time the trustees incurred liability for legal fees notwithstanding that they did not then know that their application to the Scottish Land Court would fail.
In a short judgment with which Lord Bracadale agreed, Lady Paton added that the trustees had gained sufficient knowledge that they had suffered loss when they received the solicitors letter of 10 November 2005.
The trustees appeal to this court with the permission of the Inner House, which it granted on 1 June 2016.
Discussion
(i) The legislation
It is clear from the opening phrase of section 11(1) (Subject to subsections (2) and (3) below) that that subsection sets out the general rule that an obligation to make reparation becomes enforceable when the loss, injury or damage occurred.
Subsections (2) and (3) modify the general rule in the circumstances in which they apply.
It is also clear that in each of the subsections Parliament has chosen to use the same words loss, injury or damage to describe the detriment suffered by the creditor.
The House of Lords and this court have considered those words in their statutory context in ascertaining the appropriate date for the commencement of the five year prescription in two cases.
First, in Dunlop v McGowans 1980 SC (HL) 73, which concerned the failure by solicitors timeously to serve a notice to quit on a tenant, Lord Keith of Kinkel in the leading speech (p 81) explained that the obligation to make reparation for loss, injury or damage is a single and indivisible obligation and that that obligation arose as soon as there was the concurrence of a legal wrong and loss resulting from that wrong.
In that case the obligation to make reparation became enforceable on the date when, but for the solicitors omission, the client landlord would have obtained vacant possession of his premises.
The prescriptive period under section 11(1) of the 1973 Act began to run then although the landlords losses, which resulted from the failure to get vacant possession, could only be estimated at that date.
Secondly, in Morrison v ICL, which concerned observable physical damage to Morrisons shop caused by an explosion in the neighbouring business premises of ICL, this court held that, for the prescriptive period to begin under section 11(3) of the 1973 Act, the creditor needed to be aware (actually or constructively, if the creditor could with reasonable diligence have been aware) only of the occurrence of the loss or damage and not of its cause.
In other words, section 11(3) applies in the case of latent damage, by postponing the start of the prescriptive period until the creditor is aware of the physical damage to his property.
The focus of the courts judgment in that case was on the words caused as aforesaid in subsection (3).
They are a reference back to subsection (1) which speaks of loss, injury or damage caused by an act, neglect or default.
The phrase caused as aforesaid thus connects the loss to the cause of action.
But the phrase is adjectival; it does not require additional knowledge on the part of the creditor.
The subsection falls to be read as if it said: the creditor was not aware that loss, injury and damage, which had been caused as aforesaid, had occurred; thus it, like subsections (1) and (2), focuses on the occurrence and timing of loss (viz Lord Reed paras 16 and 25, Lord Neuberger para 47).
In Morrison v ICL this court did not have to address the question which this appeal raises, namely whether in section 11(3) the creditor must be able to recognise that he has suffered some form of detriment before the prescriptive period begins.
In Morrison v ICL the property damage was manifest on the date of the explosion.
But where a client of a professional adviser suffers financial loss by incurring expenditure in reliance on negligent professional advice, the client, when spending the money, will often be unaware that that expenditure amounts to loss or damage because of circumstances, existing at the date he or she spends the money, of which the client has no knowledge.
A question which the current appeal raises is whether section 11(3) starts the prescriptive clock when the creditor of the obligation is aware that he or she has spent money but does not know that that expenditure will be ineffective.
The answer to that question lies in interpreting the words loss, injury or damage in subsection (3) in the context of section 11 as a whole.
In section 11(1) the phrase loss, injury or damage, which I have emphasised in para 9 above, is a reference to the existence of physical damage or financial loss as an objective fact.
Thus if a persons building is damaged in an explosion, or a garden wall is damaged as a result of subsidence, there is physical damage which is enough to start the clock under that subsection, unless either or both of subsections (2) or (3) apply.
No question arises under subsection (1) as to the creditors knowledge of that objective fact.
As Lord Keith stated in Dunlop v McGowans (p 81): The words loss, injury or damage in the last line of the subsection refer back to the same words in the earlier part and indicate nothing more than the subject matter of the single and indivisible obligation to make reparation.
Thus if, as a result of a breach of contract, a person purchases defective goods, incurs expenditure or fails to regain possession of his property when he or she wished to do so, the section 11(1) clock starts when the person acquires the goods, the expenditure is incurred or when the person fails to obtain vacant possession of the property.
Section 11(3), which postpones the start of the prescriptive period, is concerned with the awareness of the creditor.
But that which the creditor must actually or constructively be aware of before the prescriptive period begins is the same loss, injury or damage of which section 11(1) speaks, because subsection (3) uses the same language and also refers back to subsection (1) when it speaks of loss, injury or damage caused as aforesaid.
The phrase loss, injury or damage must have the same meaning in each of the subsections of section 11.
There is therefore no scope for reading any additional meaning into those words in subsection (3).
It follows that section 11(3) does not postpone the start of the prescriptive period until a creditor of an obligation is aware actually or constructively that he or she has suffered a detriment in the sense that something has gone awry rendering the creditor poorer or otherwise at a disadvantage.
The creditor does not have to know that he or she has a head of loss.
It is sufficient that a creditor is aware that he or she has not obtained something which the creditor had sought or that he or she has incurred expenditure.
This approach is harsh on the creditor of the obligation, where the creditor has incurred expenditure which turns out to be wasted or fails to achieve its purpose, because the circumstances when the prescriptive period begins may not prompt an enquiry into the existence or likelihood of such loss.
Thus a person may begin a legal action and incur expenditure on legal fees on the basis of negligent legal advice or he or she may purchase a house at an over value as a result of the negligent advice of a surveyor.
In each case the person may be aware of the expenditure but not that it entails the loss.
But it offers certainty, at least with the benefit of hindsight.
The trustees formulation by contrast would create uncertainty.
If it were necessary in order for the prescriptive period to begin that the creditor be aware that something had gone awry and that he or she has suffered a detriment in the form of wasted expenditure, would an adverse judgment at first instance be sufficient to establish such an awareness of detriment if there were strong grounds for an appeal? The result might be prolonged uncertainty.
Further, a requirement that there be an awareness of a head of loss would involve knowledge of the factual cause of the loss, which is an interpretation that this court has rejected in Morrison v ICL.
It is not clear that the interpretation set out in para 21 above is what the Scottish Law Commission envisaged in its Report on the Reform of the Law Relating to Prescription and Limitation of Actions (1970) (Scot Law Com No 15), which led to the 1973 Act and in which it recommended (para 97) that: the [prescriptive] period should commence (c) if the fact that pecuniary loss or damage to property has been caused by the delict or quasi delict is not immediately ascertainable, from the date when the fact that the aggrieved party has suffered pecuniary loss or damage is, or could with reasonable diligence have been, ascertained by him.
In its Report on Prescription and Limitation of Actions (Latent Damage and Other Related Issues) (1989) (Scot Law Com No 122) the Commission at para 2.7 described its policy in the 1970 Report as being that the starting point for the running of prescription should be the date when that damage is or could with reasonable diligence have been discovered by the claimant.
This courts decision in Morrison v ICL is consistent with that policy because the physical damage to property was manifest but it is questionable whether section 11(3) is so consistent in circumstances where the claimant suffers financial loss rather than observable damage to his physical property.
As I state in para 25 below, the Commission has revisited the topic since this court decided Morrison v ICL and has made further recommendations for reform.
(ii) Application to the facts
I am not able to accept the submission of Mr Howie QC, who appears for the trustees, that time did not begin to run against the trustees until they received the decision of the Scottish Land Court which demonstrated both that the sums which they had spent on pursuing the application to gain vacant possession of the 40 acre field and the 50 acre field could not be recovered from the tenant and that they had lost the opportunity to develop those fields.
Before they received that decision, the trustees may have regarded the tenants refusal to remove from those fields on 10 November 2005 as unjustified and may have pursued the application to the Scottish Land Court to remove him in the belief that it was likely to succeed.
They may, as a result, have believed that the expenditure on legal fees and outlays, which they incurred in so doing, would ultimately be recovered from the tenant in large measure when their application succeeded.
But any such understanding on their part is irrelevant.
On an objective assessment, the trustees suffered loss on 10 November 2005 when they did not obtain vacant possession of those fields and therefore could not realise their development value.
It does not matter whether the loss resulted from the tenants intransigence, as the trustees may have believed, or from someone elses acts or omissions.
It was also possible that the defects in the notices to quit would not have caused loss if the tenant had later waived his right to challenge them or had otherwise surrendered possession of the fields.
But he did neither, and with the benefit of hindsight the failure to obtain vacant possession on 10 November 2005 can be seen as having caused loss to the trustees.
At that moment, as in Dunlop v McGowans, the prescriptive period began to run under section 11(1), unless it was postponed by subsection (3).
But there was no postponement under the latter subsection: the trustees were aware on 10 November 2005 that they had not obtained vacant possession of those fields.
That was a detriment.
They were in any event actually or constructively aware by 17 February 2006 that they had incurred expense in legal proceedings to obtain such possession.
As the trustees did not commence legal proceedings against the respondents until 17 May 2012, it follows that the respondents obligation to make reparation to them has prescribed.
(iii) The future
This conclusion, as Lord Malcolm recognised in the concluding paragraph of his opinion, may suggest that hard cases may be more common than it was previously thought.
But there are live proposals for law reform.
The Scottish Law Commission has published its Report on Prescription (Scot Law Com No 247) in July 2017, following its Discussion Paper (No 160) in which it invited views on, among other things, the discoverability test in section 11(3) of the 1973 Act in the light of Morrison v ICL decision.
In its report the Commission recommends (para 3.21) that in relation to the obligation to pay damages section 11(3) should be amended so that, before the five year prescriptive period begins to run, the creditor must be aware, as a matter of fact, (i) that loss, injury or damage has occurred, (ii) that the loss, injury or damage was caused by a persons act or omission, and (iii) of the identity of that person.
Whether the creditor is aware that the act or omission that caused the loss, injury or damage is actionable in law should be irrelevant.
This formula is included in the draft Bill annexed to the Report in section 5(1), (4) and (5).
As the Commission has observed, it is an approach which is well represented in both civil law and common law jurisdictions (Discussion Paper No 160, para 4.8).
The First Minister has announced on 5 September 2017 that the Scottish Government intends to bring forward a Bill to reform the law of prescription as part of its legislative programme.
It will be the task of the Members of the Scottish Parliament to decide whether they agree with the Scottish Law Commissions recommendation for the reform of the discoverability test achieves a fair balance between the interests of the creditor and the debtor in the obligation to make reparation.
Conclusion
I would dismiss the appeal.
| The appellants (the trustees) are the trustees of the Inter Vivos Trust of the late William Strathdee Gordon (the trust).
The trust owns farmland comprising three fields (a grazing field, a 40 acre field and a 50 acre field) which were acquired due to their long term development potential.
Each field was let out under separate leases at various times to a farming partnership.
By 2003, the leases for all three fields were agricultural holdings for the purposes of the Agricultural Holdings (Scotland) Act 1991.
In 2003, the trustees instructed a firm of solicitors (the predecessor firm to the respondents) to serve on the farming partnership notices to quit the three fields at the term of 10 November 2003.
Thereafter, due to defects in the notices relating to the 40 acre field and the 50 acre field, the solicitors served further notices to quit in respect of the three fields dated 8 November 2004 requiring removal by 10 November 2005.
The tenant did not give up possession of the fields on 10 November 2005.
On the same day, the solicitors wrote to the trustees to withdraw from acting for the trust.
The trustees then instructed another firm of solicitors who applied to the Scottish Land Court to seek removal of the tenant.
By 17 February 2006, at the latest, the trustees had incurred material expense in instructing the new firm.
On 24 July 2008, the Scottish Land Court gave judgment which refused to give effect to the notices to quit relating to the 40 acre and 50 acre field as the notices were inaccurate in their description of both the tenant and the relevant lease.
As a result, both the 40 acre and the 50 acre field remain subject to leases which are agricultural holdings, thus preventing development.
Under the Prescription and Limitation (Scotland) Act 1973 (the 1973 Act), where an obligation has subsisted for a continuous period of five years after the appropriate date, and no claim is made, the obligation ceases.
Section 6(3) of the 1973 Act provides that, in cases of contractual breach, the appropriate date is the date when the obligation became enforceable.
Under s11(1) of the 1973 Act, an obligation arising from a breach of contract becomes enforceable on the date when loss, injury or damage occurred.
Section 11(3) qualifies this by specifying that where the creditor is not aware, or could not with reasonable diligence have been aware, that loss, injury or damage has been caused, an obligation becomes enforceable when the creditor first became so aware.
On 17 May 2012, the trustees commenced legal action against the respondents.
The respondents contended that any obligation on them to make reparation to the trustees as a result of the defective notices had expired because the trustees had not raised the action within five years of the date when the trustees had suffered loss which was upon service of the notices on 8 November 2004 or, alternatively, when the tenant failed to quit the land on 10 November 2005.
The trustees argued that they were first aware of their loss when the Scottish Land Court issued its decision on 24 July 2008.
The Outer House upheld the respondents plea of prescription.
The Inner House refused the trustees appeal.
It held that
s11(3) of the 1973 Act postponed the start of the prescriptive period only when the damage was latent by requiring that the creditor should have actual or constructive knowledge of the occurrence of damage or expenditure, which was viewed as an objective fact.
The prescriptive period ran from the time the trustees incurred liability for legal fees notwithstanding that they didnt then know that their application to the Scottish Land Court would fail.
The Supreme Court unanimously dismisses the trustees appeal.
Lord Hodge gives the lead judgment with which the other Justices agree.
In Morrison v ICL [2014] UKSC 48, the Supreme Court determined that, in terms of s11(3) of the 1973 Act, the creditor needed to be aware only of the occurrence of the loss or damage and not of its cause [17] but in that case the Court was not required to address the question raised by this appeal i.e. whether under s11(3) the creditor must be able to recognise that he or she has suffered some form of detriment before the prescriptive period begins.
This appeal raises the question of whether s11(3) starts the prescriptive clock when the creditor is aware that he or she has spent money (e.g. on a professional advisor) but does not know that that expenditure will be ineffective [18].
The phrase loss, injury or damage must be interpreted consistently throughout s11 of the 1973 Act. [19 20].
It therefore follows that s11(3) does not postpone the start of the prescriptive period until a creditor of an obligation is aware, actually or constructively, that he or she has suffered a detriment in the sense that something has gone awry which renders the creditor poorer or otherwise at a disadvantage [21].
This approach may be harsh to a creditor where he or she is aware of incurred expenditure but not that it entails the loss.
However, the alternative approach suggested by the trustees would create uncertainty and a requirement for awareness of a head of loss would involve knowledge of the factual cause of the loss, which is an interpretation rejected in Morrison [22].
Any understanding on the part of the trustees that the expenditure they incurred in pursuing the claim in the Scottish Land Court would ultimately be recovered from the tenant when their claim was successful was irrelevant.
On an objective assessment, the trustees suffered loss on 10 November 2005 when they did not obtain vacant possession.
At that moment, the prescriptive period began to run under s11(1) unless it could be postponed by s11(3).
There was no postponement under s11(3) because the trustees were aware that they had suffered detriment when they did not obtain vacant possession on 10 November 2005.
In any event, they were actually or constructively aware that they had incurred legal expenses to obtain such possession by 17 February 2006.
The trustees did not begin proceedings until 17 May 2012.
It follows that the respondents obligation to make reparation had by that time prescribed [24].
Whilst this conclusion may lead to hard cases being common, there are live proposals for law reform.
Following a Scottish Law Commission report, the First Minister of Scotland announced on 5 September 2017 that the Scottish Government intended to bring forward a Bill to reform the law of prescription in Scotland.
It will be for the Scottish Parliament to decide whether the Commissions proposals for reform of the discoverability test in s11(3) of the 1973 Act should be adopted [25].
|
The seventh chapter of Deuteronomy records the following instructions given by Moses to the people of Israel, after delivering the Ten Commandments at Mount Sinai: 1.
When the Lord thy God shall bring thee into the land whither thou goest to possess it, and hath cast out many nations before thee, the Hittites, and the Girgashites, and the Amorites, and the Canaanites, and the Perizzites, and the Hivites, and the Jebusites, seven nations greater and mightier than thou; 2 And when the Lord thy God shall deliver them before thee; thou shalt smite them, and utterly destroy them; thou shalt make no covenant with them, nor show mercy unto them: 3.
Neither shalt thou make marriages with them; thy daughter thou shalt not give unto his son, nor his daughter shalt thou take unto thy son. 4.
For they will turn away thy son from following me, that they may serve other gods: so will the anger of the Lord be kindled against you, and destroy thee suddenly.
The third and fourth verses appear to be a clear commandment against intermarriage lest, at least in the case of a Jewish man, the foreign bride persuade her husband to worship false gods.
It is a fundamental tenet of Judaism, or the Jewish religion, that the covenant at Sinai was made with all the Jewish people, both those then alive and future generations.
It is also a fundamental tenet of the Jewish religion, derived from the third and fourth verses that I have quoted, that the child of a Jewish mother is automatically and inalienably Jewish.
I shall describe this as the matrilineal test.
It is the primary test applied by those who practise or believe in the Jewish religion for deciding whether someone is Jewish.
They have always recognised, however, an alternative way in which someone can become Jewish, which is by conversion.
Statistics adduced in evidence from the Institute for Jewish Policy Research (the Institute) show that in the first half of the 20th century over 97% of the Jews who worshipped in this country did so in Orthodox synagogues.
Since then there has been a diversification into other denominations, and a minority of Jews now worship in Masorti, Reform and Progressive synagogues.
The Institute records a significant decline in the estimated Jewish population in the United Kingdom, which now numbers under 300,000, of which about 70% are formally linked to a synagogue and 30% unaffiliated.
Those who convert to Orthodox Judaism in this country number only 30 or 40 a year.
The requirements for conversion of the recently formed denominations are less exacting than those of Orthodox Jews.
Lord Jonathan Sacks, Chief Rabbi of the United Hebrew Congregation of the Commonwealth and leader of the Orthodox Jews in this country, issued a paper about conversion, through his office (the OCR) on 8 July 2005.
In it he stated that conversion was irreducibly religious.
He commented: Converting to Judaism is a serious undertaking, because Judaism is not a mere creed.
It involves a distinctive, detailed way of life.
When people ask me why conversion to Judaism takes so long, I ask them to consider other cases of changed identity.
How long does it take for a Briton to become an Italian, not just legally but linguistically, culturally, behaviourally? It takes time.
A Jew by conversion is a Jew for all purposes.
Thus descent by the maternal line from a woman who has become a Jew by conversion will satisfy the matrilineal test.
JFS is an outstanding school.
For many years far more children have wished to go there than there have been places in the school.
In these circumstances it has been the policy of the school to give preference to those whose status as Jews is recognised by the OCR.
That is to children whose mothers satisfy the matrilineal test or who are Jews by conversion by Orthodox standards.
The issue raised by this appeal is whether this policy has resulted in an infringement of section 1 of the Race Relations Act 1976 (the 1976 Act).
These proceedings were brought on the application of E in relation to M, his 13 year old son.
E wished to send M to JFS and M wished to go there.
He was refused admission because he was not recognised as a Jew by the OCR.
His father is recognised as such but the OCR does not regard that as relevant.
What matters is whether his mother was a Jew at the time of his birth.
She is Italian by birth.
As she was not born of a Jewish mother she could only have been recognised by the OCR as a Jew and as capable of conferring Jewish status on M if she had converted to Judaism before M was born.
She had undergone a course of conversion to Judaism before Ms birth under the auspices of a non Orthodox Synagogue, not in accordance with the requirements of Orthodox Jews.
The result is that, while her conversion is recognised by Masorti, Reform and Progressive Jews, it is not recognised by the OCR.
E and his wife are divorced.
They practise the Jewish faith and worship at a Masorti synagogue.
E failed in these judicial review proceedings in which he challenged the admissions policy of JFS before Munby J, but succeeded on an appeal to the Court of Appeal.
The question of Ms admission has already been resolved between the parties, but the Governing Body of JFS is concerned at the finding of the Court of Appeal that the schools admissions policy infringes the 1976 Act, as are the United Synagogue and the Secretary of State for Children, Schools and Families.
Indeed this case must be of concern to all Jewish faith schools which have admissions policies that give preference to Jews.
While the court has appreciated the high standard of the advocacy addressed to it, it has not welcomed being required to resolve this dispute.
The dissatisfaction of E and M has not been with the policy of JFS in giving preference in admission to Jews, but with the application of Orthodox standards of conversion which has led to the OCR declining to recognise M as a Jew.
Yet this appeal necessarily raises the broader issue of whether, by giving preference to those with Jewish status, JFS is, and for many years has been, in breach of section 1 of the 1976 Act.
The implications of that question extend to other Jewish faith schools and the resolution of the bone of contention between the parties risks upsetting a policy of admission to Jewish schools that, over many years, has not been considered to be open to objection.
This demonstrates that there may well be a defect in our law of discrimination.
In contrast to the law in many countries, where English law forbids direct discrimination it provides no defence of justification.
It is not easy to envisage justification for discriminating against a minority racial group.
Such discrimination is almost inevitably the result of irrational prejudice or ill will.
But it is possible to envisage circumstances where giving preference to a minority racial group will be justified.
Giving preference to cater for the special needs of a minority will not normally involve any prejudice or ill will towards the majority.
Yet a policy which directly favours one racial group will be held to constitute racial discrimination against all who are not members of that group see, for instance, Orphanos v Queen Mary College [1985] AC 761 at p. 771.
Nothing that I say in this judgment should be read as giving rise to criticism on moral grounds of the admissions policy of JFS in particular or the policies of Jewish faith schools in general, let alone as suggesting that these policies are racist as that word is generally understood.
Direct discrimination
I propose in the first instance to consider whether the admissions policy of the JFS has led it to discriminate directly against M on racial grounds.
The relevant provisions of the 1976 Act are as follows.
Racial discrimination (1) A person discriminates against another in any circumstances relevant for the purposes of any provision of this Act if (a) On racial grounds he treats the other less favourably than he treats or would treat other persons 3.
Meaning of racial grounds (1) In this Act, unless the context otherwise requires racial grounds means any of the following grounds, namely colour, race, nationality or ethnic or national origins; racial group means a group of persons defined by reference to colour, race, nationality, or ethnic or national origins; (2) The fact that a racial group comprises two or more distinct racial groups does not prevent it from constituting a particular racial group for the purposes of this Act.
Section 17 deals with educational establishments and provides that it is unlawful for the governors of a maintained school, such as JFS, to discriminate against a person in the terms on which it offers to admit him to the establishment as a pupil.
It is common ground that JFS discriminated against M in relation to its terms of admission to the school.
The issue of whether this amounted to unlawful direct discrimination on racial grounds depends on the answer to two questions: (1) What are the grounds upon which M was refused entry? (2) Are those grounds racial?
Grounds
In the phrase grounds for discrimination, the word grounds is ambiguous.
It can mean the motive for taking the decision or the factual criteria applied by the discriminator in reaching his decision.
In the context of the 1976 Act grounds has the latter meaning.
In deciding what were the grounds for discrimination it is necessary to address simply the question of the factual criteria that determined the decision made by the discriminator.
This approach has been well established by high authority.
In R v Birmingham City Council, Ex p Equal Opportunities Commission [1989] AC 1155 the entry criteria applied by the Council for admission to selective single sex grammar schools was in issue.
More places were available in boys schools than in girls schools.
The result was that girls had to obtain higher marks in the entry examination than boys.
The motive for the disparity was, no doubt, that this was necessary to ensure that entry to the schools was determined on merit.
The House of Lords held, none the less, that the disparity constituted unlawful discrimination contrary to the Sex Discrimination Act 1975 which prohibited discrimination against a woman on the ground of her sex.
Lord Goff of Chieveley, with whom the other members of the Committee agreed, said at p. 1194: There is discrimination under the statute if there is less favourable treatment on the ground of sex, in other words if the relevant girl or girls would have received the same treatment as the boys but for their sex.
The intention or motive of the defendant to discriminate, though it may be relevant so far as remedies are concerned (see section 66(3) of the Act of 1975), is not a necessary condition of liability; it is perfectly possible to envisage cases where the defendant had no such motive, and yet did in fact discriminate on the ground of sex.
Indeed, as Mr. Lester pointed out in the course of his argument, if the councils submission were correct it would be a good defence for an employer to show that he discriminated against women not because he intended to do so but (for example) because of customer preference, or to save money, or even to avoid controversy.
In the present case, whatever may have been the intention or motive of the council, nevertheless it is because of their sex that the girls in question receive less favourable treatment than the boys, and so are the subject of discrimination under the Act of 1975.
The difference between the motive for discrimination and the factual criteria applied by the discriminator as the test for discrimination lay at the heart of the division between the majority and the minority of the House of Lords in James v Eastleigh Borough Council [1990] 2 AC 751, another case where sex discrimination was in issue.
The Council discriminated between men and women, aged between 60 and 65, in relation to the terms on which they were admitted to swim in a leisure centre run by the Council.
Women in this age band were admitted free whereas men had to pay an entry charge.
The motive for this discrimination could perhaps be inferred by the manner in which this rule was expressed, namely that those of pensionable age were to be admitted free of charge; women became of pensionable age when they were 60, men when they were 65.
Counsel for the Council explained at p. 758 that the councils reason for giving free access to those of pensionable age was that their resources were likely to have been reduced by retirement.
The Court of Appeal had treated this motive as being the relevant ground for discriminating in favour of women and against men rather than the factual criterion for discrimination, which was plainly the sex of the person seeking admission to the centre.
Lord Bridge, delivering the first opinion of the majority, held that the reasoning of the Court of Appeal was fallacious and that the Councils policy discriminated on the ground of sex.
At p. 764 he said of their judgment: The Court of Appeals attempt to escape from these conclusions lies in construing the phrase on the ground of her sex in section 1(1)(a) as referring subjectively to the alleged discriminators reason for doing the act complained of.
As already noted, the judgment had earlier identified the councils reason as to give benefits to those whose resources would be likely to have been reduced by retirement and to aid the needy, whether male or female.
But to construe the phrase, on the ground of her sex as referring to the alleged discriminators reason in this sense is directly contrary to a long line of authority confirmed by your Lordships House in Reg. vs Birmingham City Council, Ex parte Equal Opportunities Commission.
Having cited the passage from Lord Goffs judgment that I have set out at paragraph 12 above, he commented, at p 765: Lord Goffs test, it will be observed, is not subjective, but objective.
Adopting it here the question becomes: Would the plaintiff, a man of 61, have received the same treatment as his wife but for his sex? An affirmative answer is inescapable.
This but for test was another way of identifying the factual criterion that was applied by the Council as the basis for their discrimination, but it is not one that I find helpful.
It is better simply to ask what were the facts that the discriminator considered to be determinative when making the relevant decision.
Lord Ackner, concurring, remarked at pp. 769 770: There might have been many reasons which had persuaded the council to adopt this policy.
The Court of Appeal have inferred that the councils reason for giving free swimming to those of pensionable age was to give benefits to those whose resources would be likely to have been reduced by retirement: per Sir Nicolas Browne Wilkinson V. C. [1990] 1 Q.B. 61, 73D. I am quite prepared to make a similar assumption, but the councils motive for this discrimination is nothing to the point: see the decision of this House in Reg. vs Birmingham City Council, Ex parte Equal Opportunities Commission [1989] AC 1155.
Lord Griffiths, giving the first of the minority opinion, took a different view.
He said at p. 768: The question in this case is did the council refuse to give free swimming to the plaintiff because he was a man, to which I would answer, no, they refused because he was not an old age pensioner and therefore could presumably afford to pay 75p to swim.
In a lengthy opinion Lord Lowry concurred with Lord Griffiths.
The essence of
his reasoning appears in the following passage at pp. 775 776: section 1(1)(a) refers to the activities of the discriminator: the words on the ground of his sex provide the link between the alleged discriminator and his less favourable treatment of another.
They introduce a subjective element into the analysis and pose here the question Was the sex of the appellant a consideration in the councils decision? Putting it another way, a ground is a reason, in ordinary speech, for which a person takes a certain course.
He knows what he is doing and why he has decided to do it.
In the context of section 1(1)(a) the discriminator knows that he is treating the victim less favourably and he also knows the ground on which he is doing so.
In no case are the discriminators thought processes immaterial.
The contrast between the reasoning of the majority and of the minority in this case is, I believe, clear.
I find the reasoning of the majority compelling.
Whether there has been discrimination on the ground of sex or race depends upon whether sex or race was the criterion applied as the basis for discrimination.
The motive for discriminating according to that criterion is not relevant.
The observations of Lord Nicholls in Nagarajan v London Regional Transport [2000] 1 AC 501 and Chief Constable of West Yorkshire Police v Khan [2001] 1 WLR 1947, cited by Lord Hope at paragraphs 193 and 194 of his judgment, throw no doubt on these principles.
Those observations address the situation where the factual criteria which influenced the discriminator to act as he did are not plain.
In those circumstances it is necessary to explore the mental processes of the discriminator in order to discover what facts led him to discriminate.
This can be illustrated by a simple example.
A fat black man goes into a shop to make a purchase.
The shop keeper says I do not serve people like you.
To appraise his conduct it is necessary to know what was the fact that determined his refusal.
Was it the fact that the man was fat or the fact that he was black? In the former case the ground of his refusal was not racial; in the latter it was.
The reason why the particular fact triggered his reaction is not relevant to the question of the ground upon which he discriminated.
In Nagarajan, Lord Nicholls approved the reasoning in both the Birmingham City Council case and the Eastleigh Borough Council case.
At p. 511 he identified two separate questions.
The first was the question of the factual basis of the discrimination.
Was it because of race or was it because of lack of qualification? He then pointed out that there was a second and different question.
If the discriminator discriminated on the ground of race, what was his motive for so doing? That question was irrelevant.
When, at para 29 in Khan, Lord Nicholls spoke of a subjective test he was speaking of the exercise of determining the facts that operated on the mind of the discriminator, not his motive for discriminating.
The subjective test, described by Lord Nicholls, is only necessary as a seminal step where there is doubt as to the factual criteria that have caused the discriminator to discriminate.
There is no need for that step in this case, for the factual criteria that governed the refusal to admit M to JFS are clear.
The JFS Admissions Policy
The admissions policy published by JFS for the 2007/8 academic year began as follows: 1.1 It is JFS (the School) policy to admit up to the standard admissions number children who are recognised as being Jewish by the Office of the Chief Rabbi of the United Hebrew Congregation of the Commonwealth (OCR) or who have already enrolled upon or who have undertaken, with the consent of their parents, to follow any course of conversion to Judaism under the approval of the OCR.
The passage that I have placed in italics was introduced in the 2007/8 year for the first time.
No candidate has yet satisfied that criterion, and for present purposes it can be disregarded.
In recent years there have been more applicants for entry to JFS who were recognised as Jewish by the OCR than there were places in the school.
The admissions policy, somewhat confusingly, describes this as a situation where the school is oversubscribed.
Further criteria are laid down for establishing priority in this situation.
Here also there has recently been a significant change.
Children in care and children with a sibling in the school were and are given priority; the change comes at the next stage.
Up to the 2007/8 year priority was next given to applicants who had attended a Jewish primary school.
This has now been changed so that these are pro rated with children who have attended a non Jewish primary school.
The former criterion would have been likely to favour Jewish children who were being brought up in the Jewish faith.
We were not told the reason for this change, and it has no direct bearing on the issues raised by this appeal.
The criteria whose application debarred M from entry to JFS are readily identified.
They are the criteria recognised by the OCR as conferring the status of a Jew.
The child will be a Jew if at the time of his birth his mother was a Jew.
His mother will be a Jew if her mother was a Jew or if she has converted to Judaism in a manner that satisfies the requirements of the Orthodox religion.
M does not satisfy those criteria because of his matrilineal descent.
His mother was not born of a Jewish mother and had not at the time of his birth complied with the requirements for conversion, as laid down by the OCR.
Accordingly M does not satisfy the Orthodox test of Jewish status.
Are the grounds racial?
In answering this question it is important to distinguish between two different, albeit not wholly independent, considerations.
The first is the reason or motive that leads the OCR to impose these criteria.
The second is the question of whether or not the criteria are characteristics of race.
The reason why the OCR has imposed the criteria is that the OCR believes that these are the criteria of Jewish status under Jewish religious law, established at and recognised from the time of Moses.
This is not the end of the enquiry.
The critical question is whether these requirements of Jewish law are racial, as defined by section 3 of the 1976 Act.
Do the characteristics define those who have them by reference to colour, race, nationality or ethnic or national origins?
The JFS case
I shall summarise the case advanced by Lord Pannick QC for JFS in my own words.
There exists a Jewish ethnic group.
Discrimination on the ground of membership of this group is racial discrimination.
The criteria of membership of this group are those identified by Lord Fraser of Tullybelton in Mandla v Dowell Lee [1983] 2 AC 548.
In that case a declaration was sought that refusing admission to a school of a Sikh wearing a turban was indirect racial discrimination.
The critical question was whether Sikhs comprised a racial group for the purposes of the 1976 Act.
It was common ground that they were not a group defined by reference to colour, race, nationality or national origins.
It was contended, however, that they were a group defined by ethnic origins.
In considering the meaning of this phrase, Lord Fraser at pp 561 562 referred to a meaning of ethnic given by the Supplement to the Oxford English Dictionary (1972): pertaining to or having common racial, cultural, religious, or linguistic characteristics, esp. designating a racial or other group within a larger system.
His comments in relation to this definition have been set out in full by Lord Mance at paragraph 83 of his judgment and as Lord Mance remarked they merit reading in full.
It suffices, however, to cite the passage at p. 562 where Lord Fraser set out the seven characteristics, some of which he held would be shared by, and would be the touchstone of, members of an ethnic group: The conditions which appear to me to be essential are these: (1) a long shared history, of which the group is conscious as distinguishing it from other groups, and the memory of which it keeps alive; (2) a cultural tradition of its own, including family and social customs and manners, often but not necessarily associated with religious observance.
In addition two essential characteristics the following characteristics are, in my opinion, relevant; (3) either a common geographical origin, those to or descent from a small number of common ancestors; (4) a common language, not necessarily peculiar to the group; (5) a common literature peculiar to the group; (6) a common religion different from that of neighbouring groups or from the general community surrounding it; (7) being a minority or being an oppressed or a dominant group within a larger community, for example a conquered people (say, the inhabitants of England shortly after the Norman conquest) and their conquerors might both be ethnic groups.
A group defined by reference to enough of these characteristics would be capable of including converts, for example, persons who marry into the group, and of excluding apostates.
Provided a person who joins the group feels himself or herself to be a member of it, and is accepted by other members, then he is, for the purposes of the Act, a member.
The Orthodox test of who is a Jew focuses on matrilineal descent.
Discrimination on the basis of descent simpliciter is not necessarily discrimination on racial grounds.
To discriminate against someone because he is not the son of a peer, or the son of a member of the SOGAT printing union, is not racial discrimination.
Under the Orthodox test the Jewish woman at the head of the maternal line may be a convert of any nationality and from any ethnic background.
Furthermore, because the Orthodox test focuses exclusively on the female line, any Jewish national or ethnic blood can become diluted, generation after generation, by the blood of fathers who have no Jewish characteristics of any kind.
This is likely to happen if a Jewish woman marries out of and abandons the Jewish faith.
It is possible today to identify two different cohorts, one by the Mandla criteria and one by the Orthodox criteria.
The cohort identified by the Mandla criteria forms the Jewish ethnic group.
They no longer have a common geographical origin or descent from a small number of common ancestors, but they share what Lord Fraser regarded as the essentials, a long shared history, of which the group is conscious as distinguishing it from other groups and the memory of which it keeps alive and a cultural tradition of its own, including family and social customs and manners, often but not necessarily associated with religious observance.
The man in the street would recognise a member of this group as a Jew, and discrimination on the ground of membership of the group as racial discrimination.
The Mandla group will include many who are in the cohort identified by the Orthodox criteria, for many of them will satisfy the matrilineal test.
But there will be some who do not.
So far as the cohort identified by the Orthodox test is concerned, many of these will also fall within the Mandla group.
But there will be some, indeed many, who do not.
Most of these will be descendants from Jewish women who married out of and abandoned the Jewish faith.
They will not satisfy the two vital criteria identified by Lord Fraser.
Indeed, they may be unaware of the genetic link that renders them Jewish according to the Orthodox test.
Thus, in Lord Pannicks submissions the Orthodox test is not one that necessarily identifies members of the Jewish ethnic group.
It is a test founded on religious dogma and discrimination on the basis of that test is religious discrimination, not racial discrimination.
Discussion
Initially I found Lord Pannicks argument persuasive, but on reflection I have concluded that it is fallacious.
The fallacy lies in treating current membership of a Mandla ethnic group as the exclusive ground of racial discrimination.
It ignores the fact that the definition of racial grounds in section 3 of the 1976 Act includes ethnic or national origins (my emphasis).
Origins require one to focus on descent.
Lord Pannick is correct to submit that descent simpliciter is not a ground of racial discrimination.
It will only be such a ground if the descent in question is one which traces racial or ethnic origin.
This leads me to a further argument advanced on behalf of JFS, which found favour with Munby J and is accepted by Lord Hope.
This is that the matrilineal test is a religious test and that discrimination on the basis of that test is religious, not racial.
This argument falls into two parts: (i) the matrilineal test is a test laid down by Jewish religious law; (ii) the matrilineal test is not a test of ethnic origin or ethnic status but a test of religious origin and religious status.
The first part of this argument focuses, as has Lord Hope, on the reason why the matrilineal test is applied.
The reason is that the JFS and the OCR apply the test for determining who is a Jew laid down by Orthodox Jewish religious law.
What subjectively motivates them is compliance with religious law, not the ethnicity of the candidates who wish to enter the school.
My reaction to this argument will already be clear.
It is invalid because it focuses on a matter that is irrelevant the motive of the discriminator for applying the discriminatory criteria.
A person who discriminates on the ground of race, as defined by the Act, cannot pray in aid the fact that the ground of discrimination is one mandated by his religion.
The second argument requires more detailed analysis.
It is that the criteria applied by the matrilineal test are religious criteria.
They identify the religious status of the woman at the head of the maternal line and the religious status of the child at the end of the line.
They have nothing to do with ethnicity.
Lord Hope suggests that the validity of this argument can be demonstrated by contrasting the position of a person descended from a woman converted a century ago in an Orthodox synagogue with the position of a person descended from a woman converted a century ago in a non Orthodox synagogue.
JFS would recognise the former as having Jewish status, but not the latter but the discrimination would result from the application of religious criteria.
This example illustrates the fact that today, although not a century ago, in the very small number of cases where the question of whether someone is Jewish depends upon conversion, there is a possibility that different denominations will, as a result of differences between the criteria that they require for conversion, differentiate between them.
If so, identifiable sub groups of Jews may develop, distinguished by religious criteria.
This does not, however, help to determine whether the sub groups are sub groups of those who share the Jewish religion or sub groups of those who share Jewish ethnicity, or indeed both.
Conversion has, for millennia, been accepted by all Jews as one of the ways in which a person can become a Jew, and the evidence that we have seen does not suggest that different tests of conversion have been applied until recent times.
One of the difficulties in this case lies in distinguishing between religious and ethnic status.
One of the criteria of ethnicity identified by Lord Fraser is a shared religion.
In the case of Jews, this is the dominant criterion.
In their case it is almost impossible to distinguish between ethnic status and religious status.
The two are virtually co extensive.
A woman who converts to Judaism thereby acquires both Jewish religious status and Jewish ethnic status.
In the Chief Rabbis paper about conversion that I quoted at the beginning of this judgment he says: What is conversion? People often refer to the case of Ruth the Moabite, whose story is told with such beauty in the book that bears her name.
It is from Ruths reply to her mother in law Naomi that the basic principles of conversion are derived.
She said: Where you go, I will go.
Where you stay, I will stay.
Your people will be my people, and your God my God.
That last sentence a mere four words in Hebrew defines the dual nature of conversion to this day.
The first element is an identification with the Jewish people and its fate (Your people will be my people).
The second is the embrace of a religious destiny, the covenant between Israel and God and its commands (Your God will be my God).
I also found helpful in this context a passage in the response to a request for information from the Treasury Solicitor by Rabbi Dr Tony Bayfield, the head of the movement for Reform Judaism.
It is headed Background Information and I do not believe it to be controversial: I believe that you are correct in your understanding of the OCRs criteria for determining whether a child is Jewish.
This definition is, in essence, shared by the entire Jewish world both in Britain and globally.
There are nuances the most significant of which is that the Liberal Movement (Liberal Judaism) in Britain regards as Jewish a child either of whose parents is Jewish (Liberal Judaism represents about 8% of synagogue affiliations; the other 92% of affiliations are to groupings which follow the tradition of the maternal line).
However, all Jewish institutions worldwide as far as I know would say that Jewish identity is determined by either descent or conversion.
There is a verse in the Book of Deuteronomy (Ch 29 v14) which describes the covenant between God and the Jewish people made at Sinai as being made both with those who stood there [at the foot of Sinai on] that day and also with those who were not there that day.
Tradition defines those who were not there as descendants and converts.
Conversion has been a feature of Jewish life for thousands of years.
It has been most prolific when Jews have lived in tolerant, open societies and least prolific when Jews have been persecuted and state law has prohibited conversion to Judaism.
But it has always taken place and means that Jews exhibit a range of facial features any visit to Israel will reveal Jews of different skin colours and appearance.
Jews are not a race within any accepted or acceptable definition of the word.
The phrase ethnic group is sometimes suggested but since ethnic can mean either cultural or racial or a mixture of the two, it is not very helpful.
The best definition or description that I know is that Jews are a people bound together by ties of history and culture.
Which brings us back to the verse from Deuteronomy.
Jews are a people defined by the Sinai myth (not a pejorative term) of descent, of a continuous chain made up of descendants and converts, the latter becoming parts of the chain, indistinguishable from those who are Jewish by descent, inheriting the history, the culture (at core a religious culture) and at once becoming part of it.
So, the OCRs definition of Jewish status is, in its essence, universal descent or conversion.
This passage demonstrates a number of matters.
First that the test of descent is not restricted to Orthodox Jewry but is a universal test applied by those who consider themselves to be Jews.
Secondly that, whatever their racial, national and ethnic background, conversion unquestionably brings the convert within the Mandla definition of Jewish ethnicity.
She becomes a member of the Jewish people.
See also the comparison made by the Chief Rabbi between conversion and changing nationality in my earlier quotation.
Thirdly the passage demonstrates that the religious test of matrilineal descent does not apply an idiosyncratic criterion that has no connection to race.
It is a test which focuses on the race or ethnicity of the woman from whom the individual is descended.
Where a Jew is descended by the maternal line from a woman who has converted to Judaism, the matrilineal link is with an ethnic Jew.
There is this further important point.
Focusing on conversion ignores the fact that the matrilineal test is not restricted to descent from Jews by conversion.
The Jews to whom Moses spoke at Mount Sinai would have shared all seven of the characteristics of ethnic identity itemised by Lord Fraser in Mandla.
The passage in Deuteronomy to which Jews look as the basis of the matrilineal test plainly focuses on race.
Many Jews are highly conscious of their particular geographical and national roots.
We had evidence of Cohens who trace their ancestry back to the servants at the Temple and who, for that reason, are prohibited from marrying a convert.
For these reasons it is plain that the relevant characteristics of the relative to whom the maternal line leads are not simply religious.
The origin to which the line leads can be racial and is, in any event, ethnic.
Thus we are not here dealing with descent from a peer, or from a member of SOGAT, but a woman whose race, possibly, and her ethnicity, certainly, as well as her religion, are Jewish.
David Frei, the Registrar of the London Beth Din, states in his witness statement that matrilineal descent is a criterion of Jewish identity, that being Jewish is a matter of religious status under Jewish religious law and that in orthodoxy, Jewish status is solely and irreducibly a religious issue.
I take these statements to mean that the test of Jewish status is a test laid down exclusively by religion.
It would not be right to read them as meaning that the only thing that matrilineal descent does is to identify religious status, whether of the ancestor at the head of the line or of the descendant at the other.
This would not be consistent with the first element of the dual nature of conversion, as described by the Chief Rabbi.
Nor would it be consistent with the fact that the matrilineal test embraces racial origin.
To the Jew the matrilineal descendant is a member of the Jewish family and a member of the Jewish religion.
The two are inextricably intertwined.
The descendant will not necessarily be a member of a Mandla Jewish ethnic group; that is the group that has the essential criteria identified by Lord Fraser.
He may, indeed, have none of the seven criteria in the list.
The gentile in the street would not identify such a person as a Jew.
Equally, he would not identify such a person as a member of the Jewish religion.
Membership of a religion or faith normally indicates some degree of conscious affiliation with the religion or faith on the part of the member.
The question of the status of the matrilineal descendant may thus depend upon whether one is applying the subjective viewpoint of a Jew or the objective Mandla test.
But one thing is clear about the matrilineal test; it is a test of ethnic origin.
By definition, discrimination that is based upon that test is discrimination on racial grounds under the Act.
Lord Pannick is correct to say that it is possible to identify two different cohorts, or groups, with an overlapping membership, those who are descended by the maternal line from a Jew, and those who are currently members of the Jewish ethnic group.
Discrimination against a person on the grounds that he or she is, or is not, a member of either group is racial discrimination.
JFS discriminates in its admission requirements on the sole basis of genetic descent by the maternal line from a woman who is Jewish, in the Mandla as well as the religious sense.
I can see no escape from the conclusion that this is direct racial discrimination.
The consequences of the majority decision.
The website of the JFS states that Whilst two thirds or more of our students have attended Jewish primary schools, a significant number of our year 7 intake has not attended Jewish schools and some enter the school with little or no Jewish education.
Many come from families who are totally committed to Judaism and Israel; others are unaware of Jewish belief and practice.
Initially this gave me the impression that successful candidates for entry to JFS included a significant number who had no connection with Judaism other than a matrilineal link with a Jewish woman, so that they fell outside the Mandla ethnic Jewish group.
On reflection I found this an unlikely scenario.
Any parents who apply to send their children to JFS relying on matrilineal Jewish descent must, at least, have an awareness of that link with Judaism.
Evidence from the JFS suggests rather more than this.
The schools information sheet which is sent to prospective teaching staff states: The modern JFS serves almost the whole breadth of the Anglo Jewish community in Greater London.
About 85% of its students come from Barnet, Harrow, Brent and Hertsmereour students come from the widest possible range of social, economic and religious backgrounds.
Our parents represent a very broad range of society.
They all, however, share two things in common; a strong sense of Jewish identity and, in almost all cases, a keen sense of ambition for their children (emphasis added).
This suggests that those who decide to send their children to JFS satisfy the Mandla criteria for belonging to an ethnic group, even though some of them do not attend a synagogue.
They live in the same part of London, they are conscious of the wifes Jewish descent, and they have a strong sense of Jewish identity.
This is likely to include an appreciation of Jewish history and culture.
If this is correct, then the reality is that the JFS, in common with other Jewish faith schools, is in practice discriminating in favour of a sub group of Mandla ethnic Jews, who also satisfy the matrilineal requirement.
The fact that the JFS conditions of admission would give precedence to candidates who satisfy the descent requirement but do not satisfy the Mandla test of Jewish ethnicity is of no practical significance.
This appeal has been concerned with what has, in practice, been only the threshold test for admission to the JFS; matrilineal descent.
For at least the last ten years the JFS has been oversubscribed with candidates for admission who satisfy this test.
The problem has been how to choose between them.
The evidence does not suggest that anyone has challenged the matrilineal test in principle.
It is, after all, a test that has general acceptance as the criterion of being a Jew.
Apart from Ms challenge, evidence has been given of two others, but each of these was a challenge on the ground of a failure to recognise the mothers conversion, not a challenge against the admission criteria themselves.
Concern has been expressed that the majority decision will compel Jewish faith schools to admit children whom the Jewish religion does not recognise as being Jewish, that is children who are not descended from Jews by the maternal line.
It is not clear that this is so.
As a result of the decision of the Court of Appeal the JFS has published a new admission policy for admission in September 2010.
This applies a test of religious practice, including synagogue attendance, Jewish education and/or family communal activity.
As matrilineal descent or conversion is the requirement for membership of the Jewish faith according to the law of that faith, those who satisfy a practice test are likely to satisfy this requirement.
Thus, instead of applying the matrilineal descent test by way of direct discrimination, the school will be applying a test that will indirectly discriminate in favour of those who satisfy the matrilineal descent test.
It is not clear that the school will now be faced with applications from those who do not satisfy the test.
Indirect discrimination
Having decided that there has been in this case direct racial discrimination, it would be possible to go on to consider the hypothetical question of whether, if JFSs admissions policy had constituted indirect discrimination, it would have been justifiable.
I do not propose to embark on that exercise, which would involve, among other considerations, an analysis of the policy underlying the exception made for faith schools in relation to religious discrimination by section 50 of the Equality Act 2006.
I have not found it necessary to consider the provisions of that Act, for they have no bearing on the issue of direct racial discrimination.
For the reasons that I have given I would dismiss the substantive appeal.
The United Synagogue has appealed against the order for Costs made by the Court of Appeal.
I concur in the basis upon which Lord Hope has held that this appeal should be allowed.
Submissions in writing as to the appropriate order in respect of the costs of both appeals to the Supreme Court should be submitted within 14 days.
LADY HALE
No one in this case is accusing JFS (as the Jews Free School is now named) or the Office of the Chief Rabbi of discrimination on grounds of race as such.
Any suggestion or implication that they are racist in the popular sense of that term can be dismissed.
However, the Race Relations Act 1976 caters also for discrimination on grounds of colour, nationality or ethnic or national origins: see s 3(1).
This case is concerned with discrimination on account of ethnic origins.
And the main issue is what that means specifically, do the criteria used by JFS to select pupils for the school treat people differently because of their ethnic origins?
My answer to that question is the same as that given by Lord Phillips, Lord Mance, Lord Kerr and Lord Clarke and for the same reasons.
That we have each written separate opinions underlines the fact that we have each reached the same conclusion through a process of independent research and reasoning.
It is only because the debate before us and between us has called in question some fundamental principles of discrimination law that I feel it necessary to underline them yet again.
First, the Race Relations Act 1976 creates two different statutory torts, direct and indirect discrimination.
It also creates two different forms of indirect discrimination, the original form provided for in section 1(1)(b) and the later form derived from the European Directive (2000/43 EC), provided for in section 1(1A).
The later form applies to the discrimination prohibited by section 17, in admission to educational establishments, which is the context here: see s 1(1B)(b).
If the later form applies, the original form does not: see s 1(1C).
The basic difference between direct and indirect discrimination is plain: see Mummery LJ in R (Elias) v Secretary of State for Defence [2006] EWCA 1293, [2006] 1 WLR 3213, para 119.
The rule against direct discrimination aims to achieve formal equality of treatment: there must be no less favourable treatment between otherwise similarly situated people on grounds of colour, race, nationality or ethnic or national origins.
Indirect discrimination looks beyond formal equality towards a more substantive equality of results: criteria which appear neutral on their face may have a disproportionately adverse impact upon people of a particular colour, race, nationality or ethnic or national origins.
Direct and indirect discrimination are mutually exclusive.
You cannot have both at once.
As Mummery LJ explained in Elias, at para 117, The conditions of liability, the available defences to liability and the available defences to remedies differ.
The main difference between them is that direct discrimination cannot be justified.
Indirect discrimination can be justified if it is a proportionate means of achieving a legitimate aim.
But it is significant that section 57(3) provides that, in respect of the earlier form of indirect discrimination under section 1(1)(b), no award of damages shall be made if the respondent proves that the requirement or condition in question was not applied with the intention of treating the claimant unfavourably on racial grounds.
We are concerned with the later form of indirect discrimination, under section 1(1A), to which section 57(3) does not apply, but the fact that this exception to the available remedies was made suggests that Parliament did not consider that an intention to discriminate on racial grounds was a necessary component of either direct or indirect discrimination.
One can act in a discriminatory manner without meaning to do so or realising that one is.
Long standing authority at the highest level confirms this important principle.
The leading case on direct discrimination is R v Birmingham City Council, ex p Equal Opportunities Commission [1989] 1 AC 1155.
So far as I am aware, it has never previously been suggested that it set the law on the wrong track: quite the reverse.
As is well known, there were more grammar school places for boys than for girls in Birmingham with the result that girls had to do better than boys in the entrance examination in order to secure a place.
The council did not mean to discriminate.
It bore the girls no ill will.
It had simply failed to correct a historical imbalance in the places available.
It was nevertheless guilty of direct discrimination on grounds of sex.
Lord Goff of Chieveley said this, at p 1194A: There is discrimination under the statute if there is less favourable treatment on the ground of sex, in other words if the relevant girl or girls would have received the same treatment as the boys but for their sex.
The intention or motive of the defendant to discriminate, although it may be relevant so far as remedies are concerned . is not a necessary condition of liability; it is perfectly possible to envisage cases where the defendant had no such motive, and yet did in fact discriminate on the ground of sex.
Indeed, . if the councils submission were correct it would be a good defence for an employer to show that he discriminated against women not because he intended to do so but (for example) because of customer preference, or to save money, or even to avoid controversy.
In the present case, whatever may have been the intention or motive of the council, nevertheless it is because of their sex that the girls in question receive less favourable treatment than the boys, and so are the subject of discrimination under the Act of 1975.
He went on to point out that this was well established in a long line of authority, citing Jenkins v Kingsgate (Clothing Productions) Ltd [1981] 1 WLR 1485, 1494, per Browne Wilkinson J; R v Secretary of State for Education and Science, Ex parte Keating (1985) 84 LGR 469, 475, per Taylor J; and Ministry of Defence v Jeremiah [1980] QB 87, 98, per Lord Denning MR.
The but for test was endorsed again by the House in the rather more controversial case of James v Eastleigh Borough Council [1990] 2 AC 751.
Again, the facts are well known.
A husband and wife, both aged 61, went to their local swimming pool.
The husband was charged 75 pence and the wife was let in free.
Once again the council had the best of motives.
People who had reached pensionable age were let in free.
But pensionable age directly discriminated between men and women on grounds of their sex.
It followed that the swimming pool admission charges did so too.
As Lord Bridge of Harwich said, at pp 765 6, the purity of the discriminators subjective motive, intention or reason for discriminating cannot save the criterion applied from the objective taint of discrimination on the ground of sex.
Lord Ackner was to the same effect, at p 769: The policy itself was crystal clear if you were a male you had, vis vis a female, a five year handicap.
The reason why this policy was adopted can in no way affect or alter the fact that the council had decided to implement and had implemented a policy by virtue of which men were to be treated less favourably than women, and were to be so treated on the ground of, i.e. because of, their sex.
Lord Goff of Chieveley amplified what he had said in Birmingham, at p 774: Whether or not the treatment is less favourable in the relevant sense, i.e. on the ground of sex, may derive either from the application of a gender based criterion to the complainant, or from selection by the defendant of the complainant because of his or her sex; but, in either event, it is not saved from constituting unlawful discrimination by the fact that the defendant acted from a benign motive.
However, in the majority of cases, I doubt if it is necessary to focus upon the intention or motive of the defendant in this way.
This is because, as I see it, cases of direct discrimination under section 1(1)(a) can be considered by asking the simple question: would the complainant have received the same treatment from the defendant but for his or her sex.
Although this decision was clearly on all fours with the Birmingham case, it was reached only by a majority.
Lord Lowry preferred a subjective rather than an objective approach to on grounds of sex.
Lord Griffiths, interestingly, pointed out that to impose a retirement age of 60 on women and 65 on men was discriminatory on the grounds of sex.
It would result in women being less well off than men at 60.
But what I do not accept is that an attempt to redress the result of that unfair act of discrimination by offering free facilities to those disadvantaged by the earlier act of discrimination is, itself, necessarily discriminatory on grounds of sex (p 768).
Lord Griffiths was there challenging the concept of symmetrical formal equality: that it is just as discriminatory to treat a man less favourably than a woman, even though the object is to redress the impact of previous less favourable treatment of a woman.
But there can be no doubt that the original sex and race discrimination legislation intended, through the mechanism of direct discrimination, to achieve symmetrical formal equality between men and women, black and white, rather than to redress any historic disadvantage of one against the other.
Attempts to do so, for example by quotas or all women shortlists, are still highly controversial.
Despite this difference of opinion, the decisions in Birmingham and James have been applied time and time again.
They were affirmed by the House of Lords in the victimisation case of Nagarajan v London Regional Transport [2000] 1 AC 501.
As Lord Nicholls of Birkenhead said, at p 511: Racial discrimination is not negatived by the discriminators motive or intention or reason or purpose (the words are interchangeable in this context) in treating another person less favourably on racial grounds.
In particular, if the reason why the alleged discriminator rejected the complainants job application was racial, it matters not that his intention may have been benign.
However, Lord Nicholls had earlier pointed out that there are in truth two different sorts of why question, one relevant and one irrelevant.
The irrelevant one is the discriminators motive, intention, reason or purpose.
The relevant one is what caused him to act as he did.
In some cases, this is absolutely plain.
The facts are not in dispute.
The girls in Birmingham were denied grammar school places, when the boys with the same marks got them, simply because they were girls.
The husband in James was charged admission to the pool, when his wife was not, simply because he was a man.
This is what Lord Goff was referring to as the application of a gender based criterion.
But, as Lord Goff pointed out, there are also cases where a choice has been made because of the applicants sex or race.
As Lord Nicholls put it in Nagarajan, in every case it is necessary to inquire why the complainant received less favourable treatment.
This is the crucial question.
Was it on grounds of race? Or was it for some other reason, for instance, because the complainant was not so well qualified for the job? Save in obvious cases, answering the crucial question will call for some consideration of the mental processes of the alleged discriminator (pp 510 511).
In James, Lord Bridge was not to be taken as saying that the discriminators state of mind is irrelevant when answering the crucial, anterior question: why did the complainant receive less favourable treatment?
The distinction between the two types of why question is plain enough: one is what caused the treatment in question and one is its motive or purpose.
The former is important and the latter is not.
But the difference between the two types of anterior enquiry, into what caused the treatment in question, is also plain.
It is that which is also explained by Lord Phillips, Lord Kerr and Lord Clarke.
There are obvious cases, where there is no dispute at all about why the complainant received the less favourable treatment.
The criterion applied was not in doubt.
If it was based on a prohibited ground, that is the end of the matter.
There are other cases in which the ostensible criterion is something else usually, in job applications, that elusive quality known as merit.
But nevertheless the discriminator may consciously or unconsciously be making his selections on the basis of race or sex.
He may not realise that he is doing so, but that is what he is in fact doing.
As Lord Nicholls went on to say in Nagarajan, An employer may genuinely believe that the reason why he rejected an applicant had nothing to do with the applicants race.
After careful and thorough investigation of a claim members of an employment tribunal may decide that the proper inference to be drawn from the evidence is that, whether the employer realised it at the time or not, race was the reason why he acted as he did .
Conduct of this nature by an employer, when the inference is legitimately drawn, falls squarely within the language of section 1(1)(a) (p 512).
This case is not in that category.
There is absolutely no doubt about why the school acted as it did.
We do not have to ask whether they were consciously or unconsciously treating some people who saw themselves as Jewish less favourably than others.
Everything was totally conscious and totally transparent.
M was rejected because he was not considered to be Jewish according to the criteria adopted by the Office of the Chief Rabbi.
We do not need to look into the mind of the Chief Rabbi to know why he acted as he did.
If the criterion he adopted was, as in Birmingham or James, in reality ethnicity based, it matters not whether he was adopting it because of a sincerely held religious belief.
No one doubts that he is honestly and sincerely trying to do what he believes that his religion demands of him.
But that is his motive for applying the criterion which he applies and that is irrelevant.
The question is whether his criterion is ethnically based.
So at long last I arrive at what, in my view, is the only question in this case.
Is the criterion adopted by the Chief Rabbi, and thus without question by the school, based upon the childs ethnic origins? In my view, it clearly is.
M was rejected because of his mothers ethnic origins, which were Italian and Roman Catholic.
The fact that the Office of the Chief Rabbi would have over looked his mothers Italian origins, had she converted to Judaism in a procedure which they would recognise, makes no difference to this fundamental fact.
M was rejected, not because of who he is, but because of who his mother is.
That in itself is not enough.
If M had been rejected because his mother shopped in Waitrose rather than Marks and Spencer, that would not have been because of her or his ethnicity.
But it was because his mother was not descended in the matrilineal line from the original Jewish people that he was rejected.
This was because of his lack of descent from a particular ethnic group.
In this respect, there can be no doubt that his ethnic origins were different from those of the pupils who were admitted.
It was not because of his religious beliefs.
The school was completely indifferent to these.
They admit pupils who practise all denominations of Judaism, or none at all, or even other religions entirely, as long as they are halachically Jewish, descended from the original Jewish people in the matrilineal line.
There is no doubt that the Jewish people are an ethnic group within the meaning of the Race Relations Act 1976.
No Parliament, passing legislation to protect against racial discrimination in the second half of the twentieth century, could possibly have failed to protect the Jewish people, who had suffered so unspeakably before, during and after the Holocaust.
If Parliament had adopted a different model of protection, we would not be here today.
Parliament might have adopted a model of substantive equality, allowing distinctions which brought historically disadvantaged groups up to the level of historically advantaged groups.
But it did not do so.
It adopted a model of formal equality, which allows only carefully defined distinctions and otherwise expects symmetry.
A man must be treated as favourably as a woman, an Anglo Saxon as favourably as an African Caribbean, a non Jew as favourably as a Jew.
Any differentiation between them, even if it is to redress historic disadvantage, must be authorised by legislation.
This means that it is just as unlawful to treat one person more favourably on the ground of his ethnic origin as it is to treat another person less favourably.
There can be no doubt that, if an employer were to take exactly the same criterion as that used by the Office of the Chief Rabbi and refuse to employ a person because the Chief Rabbi would regard him as halachically Jewish, the employer would be treating that person less favourably on grounds of his ethnic origin.
As Lord Kerr explains, there can be no logical distinction between treating a person less favourably because he does have a particular ethnic origin and treating him less favourably because he does not.
Some may feel that discrimination law should modify its rigid adherence to formal symmetry and recognise a greater range of justified departures than it does at present.
There may or may not be a good case for allowing Jewish schools to adopt criteria which they believe to be required by religious law even if these are ethnically based.
As far as we know, no other faith schools in this country adopt descent based criteria for admission.
Other religions allow infants to be admitted as a result of their parents decision.
But they do not apply an ethnic criterion to those parents.
The Christian Church will admit children regardless of who their parents are.
Yet the Jewish law has enabled the Jewish people and the Jewish religion to survive throughout centuries of discrimination and persecution.
The world would undoubtedly be a poorer place if they had not.
Perhaps they should be allowed to continue to follow that law.
But if such allowance is to be made, it should be made by Parliament and not by the courts departing from the long established principles of the anti discrimination legislation.
The vehicle exists in the Equality Bill, which completed its committee stage in the House of Commons in the 2008 09 session and will be carried over into the 2009 10 session.
The arguments for and against such a departure from the general principles of the legislation could then be thoroughly debated.
The precise scope of any exception could also be explored.
We know from the helpful intervention of the Board of Deputies of British Jews that the Masorti, Reform and Liberal denominations of Judaism have welcomed the result, if not the reasoning, of the decision of the Court of Appeal and would not wish for the restoration of the previous admission criteria.
That is a debate which should not be resolved in court but by Parliament.
We must not allow our reluctance to enter into that debate, or to be seen to be imposing our will upon a well meaning religious body, to distort the well settled principles of our discrimination law.
That is to allow the result to dictate the reasoning.
This was, in my view, a clear case of direct discrimination on grounds of ethnic origin.
It follows that, however justifiable it might have been, however benign the motives of the people involved, the law admits of no defence.
It also follows that it cannot be a case of indirect discrimination.
There is indeed some difficulty in fitting this case into the model of indirect discrimination.
The discriminator has to apply to the complainant a provision, criterion or practice which he applies or would apply equally to persons not of the same race or ethnic or national origins as [the complainant].
But if the criterion we are talking about is being halachically Jewish, then it is not applied equally between those who are and those who are not.
And there is no question of those who are not being at a particular disadvantage when compared with others persons in the sense that more of the others can comply than they can.
None of the non halachically Jewish can comply, while all of the halachically Jewish can do so.
There is an exact correspondence between compliance and the criterion, just as there was in the Birmingham and James cases.
This too suggests, although it does not prove, that the criterion is itself ethnically based.
If not, I would agree with Lord Mance on this issue.
I have tried only to explain how the long established principles of discrimination law apply in this case.
In agreement with the more ample reasoning of Lord Phillips, Lord Mance, Lord Kerr and Lord Clarke on the facts of the case, I would dismiss the appeal of JFS on the main issue.
On the United Synagogues costs appeal, I agree with the reasoning and conclusions of Lord Hope.
LORD MANCE
Introduction
Two issues arise: whether the admissions policy adopted by JFS for 2007/08 involved direct discrimination, and, if not, whether it involved indirect discrimination, in each case against M, represented by his respondent father, E. M applied for admission to year 7 at JFS commencing in September 2007.
The school was over subscribed and by letter dated 13 April 2007 it refused, because the school has not received evidence of [Ms] Jewish status, to consider M for a place unless and until all those applicants whose Jewish status has been confirmed have been offered places.
An appeal to the independent admission appeal panel for JFS failed on 11 June 2007.
The schools admissions policy (determined by its governing body pursuant to the School Standards and Framework Act 1998, ss.88 and 88C) treated an applicant in Ms position less favourably than other persons.
The policy was to admit children recognised as being Jewish by the Office of the Chief Rabbi of the United Hebrew Congregation of the Commonwealth (OCR) or who have already enrolled upon or who have undertaken, with the consent of their parents, to follow any course of conversion to Judaism under the approval of the OCR.
In the event of oversubscription, only children satisfying this test were to be considered for admission, in the following order: looked after children, those with one or more siblings attending JFS and then other applicants (the last category on a pro rata basis within each ability band according to the numbers of applicants attending respectively Jewish and non Jewish primary schools).
The OCR, applying the Orthodox Jewish test, recognises as Jewish children who can show an Orthodox Jewish mother or ancestress in the matrilineal line.
The mother or matrilineal ancestress can be Orthodox Jewish by birth or by conversion prior to the birth of her relevant child.
The respondent is unable to show such descent, because his mother was a non Jewish Italian by birth and converted to Judaism before Ms birth not in the Orthodox tradition, but with the assistance of a non Orthodox Rabbi.
The respondent and his father, with whom he now lives, practise Masorti Judaism, and M is recognised as Jewish by Reform and Masorti synagogues. (Before the late eighteenth century, the Court was told, these distinctions in Jewish observance did not exist.)
The first question is whether the respondents less favourable treatment was on the grounds of his ethnic origins within s.1(1)(a) of the Race Relations Act 1976.
JFS supported by the United Synagogue and the Secretary of State for Children, Schools and Families as interveners submit that M was treated as he was not on ethnic, but on purely religious grounds, while E and M, supported by the Equality and Human Rights Commission and the British Humanist Association as interveners submit that, although the schools motivation was and is religious, the treatment derived from a test which was, or was substantially, based on inherently ethnic grounds.
JFS is a school designated as having a religious (Jewish) character under the School Standards and Framework Act 1998, s.69(3), and is accordingly exempted by the Equality Act 2006, s.50(1) from the prohibition against discrimination on the grounds of religion or belief which would otherwise apply under ss.45 and 47 of that Act.
But this exemption does not affect the pre existing prohibition of discrimination on the grounds of ethnic origin, under the 1976 Act.
The difficulty of the present case is that the word Jewish may refer to a people, race or ethnic group and/or to membership of a religion.
In the case of JFS, JFS submits that it refers only to the latter.
Munby J found that common to all Jewish denominations is a belief that being Jewish is a matter of status, defined in terms of descent or conversion, and not a matter of creed or religious observance (para. 21).
However, JFS exists as an Orthodox Jewish institution, and (while Judaism is not a proselytising religion those who are not Jews can still earn salvation) Education about the Jewish faith is considered by Orthodox Jews to be a fundamental religious obligation on all Jews .
An understanding and appreciation of the Jewish faith takes many years .
This is one of the primary purposes of schools such as JFS, which seek to help those who are Jewish (or who are undergoing conversion) understand, learn about and follow their faith (the words come from a statement of Dayan Gelley dated 26 February 2008 approved by the Chief Rabbi, and were quoted by Munby J in para. 13).
JFSs Instrument of Government, with which its governing body, when determining its admissions policy, was obliged to comply under Education Act 2002 s.21(4), records the schools ethos as being to preserve and develop its religious character in accordance with the principles of Orthodox Judaism, under the guidance of the Chief Rabbi of the United Hebrew Congregations .
JFS has further explained in answers dated 17 December 2007 (to questions put by Ms solicitors in a letter dated 17 August 2007 written pursuant to the judicial review protocol and s.65(2) of the Race Relations Act) that JFSs admission criteria seek to maintain the schools religious ethos.
In his statement dated 8 February 2008, para. 27, the chair of JFSs admissions committee described the admissions policy as pursuing a legitimate aim because it is developing the religious character of JFS in accordance with the principles of Orthodox Judaism.
The same aim was reflected in para. 14 of a determination dated 27 November 2007, made by an Adjudicator appointed under the School Standards and Framework Act 1998 to consider Es objection to JFSs admissions policy.
The Adjudicator added the further explanation that the legitimate aim being pursued is seeking to ensure that those children who are Jewish (applying Orthodox Jewish principles) are admitted to the school.
While many who are eligible for and obtain admission to JFS as Orthodox Jews do not practise and may profess no or a different religious faith, the schools aim is to inculcate the ethos and, so far as possible, encourage the practice and observance of Orthodox Judaism in and by all who attend.
In formulating the schools admissions policy, it was also the governing bodys duty under s.84(3) of that Act to act in accordance with the relevant provisions of the code for school admissions prepared under s.84(1) by the Secretary of State.
The Secretary of States Schools Admissions Code for 2003 stated that schools like JFS designated as having a religious character might give preference in their admission arrangements to members of a particular faith or denomination , providing this does not conflict with other legislation, such as race relations legislation (para. 3.9), and that, where they do, their admissions arrangements should make clear whether a statement of religious affiliation or commitment would be sufficient, or whether it is to be tested and if so how and what if any references from a religious leader will be required.
The Code for 2007 permits priority in case of over subscription to children who are members of, or who practise, their faith or denomination (para. 2.41) and states that It is primarily for the relevant faith provider group or religious authority to decide how membership or practice is to be demonstrated (para 2.43).
Quite apart from the fact that they are subject to the application of the Race Relations Act 1976, the references to membership in the Codes do not specifically address descent based membership which may exist in the eyes of the faith provider or religious authority, while not doing so in the eyes of the child or his or her parents.
Direct discrimination
Direct discrimination can arise in one of two ways: because a decision or action was taken on a ground which was, however worthy or benign the motive, inherently racial within the meaning of s.1(1)(a), or because it was taken or undertaken for a reason which was subjectively racial: R v Birmingham City Council, ex p Equal Opportunities Commission [1989] AC 1155, 1194C D per Lord Goff of Chieveley, James v Eastleigh Borough Council [1990] 2 AC 751, 772B G per Lord Goff, and Nagarajan v London Regional Transport [2000] 1 AC 501, 511A per Lord Nicholls of Birkenhead and 520H 521B per Lord Steyn.
In the Birmingham City Council case, girls were required to achieve a higher standard than boys for grammar school entry because of a disparity in the number of grammar school places available for boys and girls.
Whatever may have been the intention or motive of the council, nevertheless it [was] because of their sex that the girls in question receive[d] less favourable treatment than the boys, and so [were] the subject of discrimination: per Lord Goff at p.1194C D.
It was for the council to find some way of avoiding this, e.g. by balancing the places available.
In James the motive for adopting as the test for free entry to the swimming pool to people who had reached state pension age was no doubt benign (it was probably because they were perceived as more likely to be needy).
But being of pensionable age is not to be equated with ceasing to work or being in receipt of a pension, and the difference between the ages (65 and 60 respectively) at which men and women became of pensionable age made the test inherently discriminatory on the ground of sex.
In Nagarajan at p.511A Lord Nicholls noted that Save in obvious cases, answering the crucial question will call for some consideration of the mental processes of the alleged discriminator, while Lord Steyn at pp.520H 521B approved the statements in the Birmingham City Council and James cases.
The allegation in the present case is that a decision or action was taken on inherently ethnic grounds within s.1(1)(a), although the schools subjective motivation was its purely religious convictions.
I appreciate that even the first part of this allegation involves what may be described as a subjective element a question of fact in Lord Nicholls words in Chief Constable of West Yorkshire Police v Khan [2001] UKHL 48, [2001] 1 WLR 1947, para, 29 in so far as it requires an answer to the question: why in fact was M refused a place? But there is here no room for doubt about the answer.
He was refused a place by reason of the application of the admissions policy set out in para 74 above.
With that answer, the next, relevant question is simply whether that policy, religiously motivated as it was, involved grounds for admission or refusal of admission which were in their nature inherently ethnic.
Lord Pannick submits that, taking the test of an ethnic group recognised by the House of Lords in Mandla v Dowell Lee [1983] 2 AC 548, Jews constitute an ethnic group, but a group which embraces, on the one hand, a wide spectrum of Jewish observance (including that practised by the respondent) and excludes, on the other hand, many individuals who would, on Orthodox Jewish principles, be regarded as Jewish (e.g. a lapsed Jew who had converted to Catholicism or an atheist with a matrilineal Orthodox Jewish ancestress).
There is thus no complete identity between a Jew in the sense suggested by that test and an Orthodox Jew according to Orthodox Jewish principles.
He relies upon this as reinforcing his submission that JFSs admissions policy is based, and based solely, on religious grounds.
I do not, however, consider that this submission resolves the issue.
First, Mandla was a case of alleged indirect discrimination under s.1(1)(b) of the Act, which addresses differential treatment between persons of different racial groups.
The test under s.1(1)(a) is whether a person has treated another person less favourably on racial grounds, defined by s.3 as meaning on any of the following grounds, namely colour, race, nationality or ethnic or national origins.
This test is not expressed to be limited by reference to a need to identify a difference in treatment of persons currently members of different ethnic groups.
Further, subsequent to the enactment by the European Community of Council Directive 2000/43/EC of 29th June 2000, which addresses both direct and indirect discrimination without using the concept of racial group in either connection, and since the consequent introduction of s.1(1A) of the Race Relations Act 1976 which equally omits any such concept, it seems to me inappropriate to read s.1(1)(a) as importing any such concept.
All that is required is discrimination on grounds of a persons ethnic origins.
A second, point, based on the international legal background and of possible relevance to the construction of s.1(1)(a), derives from the International Convention on the Elimination of All Forms of Racial Discrimination (CERD), in force since 1969, to which the United Kingdom is party and to which Directive 2000/43/EC recites that it was intended to give effect.
Article 1(1) of CERD defines racial discrimination to mean any distinction, exclusion, restriction or preference based on race, colour, descent, or national or ethnic origin which has the purpose or effect of nullifying or impairing the recognition, enjoyment or exercise, on an equal footing, of human rights and fundamental freedoms in the political, economic, social, cultural or any other field of public life.
The reference to descent (although not explicitly repeated after the general prohibition on racial discrimination in article 5) is, on its face, very pertinent in the present case.
However, it is suggested that, having been introduced on a proposal by India, the word descent is limited to caste, but India itself disputes this, and it has been forcefully suggested that the background to its introduction indicates that it was not concerned with caste at all: Caste based Discrimination in International Human Rights Law, David Keane (Brunel University, Ashgate Publishing Ltd., 2007, chap. 5).
Nevertheless, the Committee established to monitor implementation of CERD under article 8 has itself treated descent as including caste in its General Recommendation XXIX A/57/18 (2002) 111, where it recommended, in para 1, that states take steps to identify those descent based communities under their jurisdiction who suffer from discrimination, especially on the basis of caste and analogous systems of inherited status.
Whether or not descent embraces caste, the concepts of inherited status and a descent based community both appear wide enough to cover the present situation.
That in turn tends to argue for a wide understanding of the concept of discrimination on grounds of ethnic origins, although the point is a marginal one.
Thirdly, and in any event, the Mandla test is broad, flexible and judgmental.
It was adopted in order to embrace a group such as the Sikhs, of whom it could not be said that they were a different race in any narrow sense.
There is some irony in the fact that, prior to the decision of the House in Mandla, there would have been little doubt that a narrow test based on birth or descent would have been regarded as required in order for there to be discrimination on the ground of ethnic origins.
That was the gist of the judgments in the early case of Ealing London Borough Council v Race Relations Board [1972] AC 342.
Unlike Mandla, the Ealing case was a case of alleged direct discrimination under s.1(1)(a), and in it statements were made to the effect that discrimination on account of race, or ethnic or national origins involved consideration of a persons antecedents (per Viscount Dilhorne at p.359E), that Origin, in its ordinary sense, signifies a source, someone or something from which someone or something has descended (per Lord Simon of Glaisdale at p.363H) and that national origins normally indicated a connection arising because the parents or one of the parents are or is identified by descent with the nation in question, but it may also sometimes arise because the parents have made their home among the people in question (per Lord Cross of Chelsea at p.365E F).
The Court of Appeal in Mandla [1983] QB 1 picked up this approach in relation to indirect discrimination.
It identified an ethnic group as one with common ancestral origins, however remote (see per Lord Denning MR at p.10A B and p.11B, expressly instancing Jews as an ethnic group, and per Kerr LJ at p.22B E), and on that basis excluded Sikhs on the ground that they constituted essentially a religious and cultural group.
The House disagreed and developed the wider test, but there may still, in my view, be discrimination on grounds of ethnic origin in the narrower and more traditional sense, even under s.1(1)(b), let alone under the differently worded s.1(1)(a).
The following passage in which Lord Fraser of Tullybelton developed the test in Mandla [1983] 2 AC 548, 561 563 is also worth quoting in full: I turn, therefore, to the third and wider meaning which is given in the Supplement to the Oxford English Dictionary (1972).
It is as follows: 'pertaining to or having common racial, cultural, religious, or linguistic characteristics, esp. designating a racial or other group within a larger system . ' Mr Irvine, for the appellants, while not accepting the third (1972) meaning as directly applicable for the present purpose, relied on it to this extent, that it introduces a reference to cultural and other characteristics, and is not limited to racial characteristics.
The 1972 meaning is, in my opinion, too loose and vague to be accepted as it stands.
It is capable of being read as implying that any one of the adjectives, 'racial, cultural, religious or linguistic', would be enough to constitute an ethnic group.
That cannot be the sense in which 'ethnic' is used in the Act of 1976, as that Act is not concerned at all with discrimination on religious grounds.
Similarly, it cannot have been used to mean simply any 'racial or other group'.
If that were the meaning of 'ethnic', it would add nothing to the word group, and would lead to a result which would be unacceptably wide.
But in seeking for the true meaning of 'ethnic' in the statute, we are not tied to the precise definition in any dictionary.
The value of the 1972 definition is, in my view, that it shows that ethnic has come to be commonly used in a sense appreciably wider than the strictly racial or biological.
That appears to me to be consistent with the ordinary experience of those who read newspapers at the present day.
In my opinion, the word 'ethnic' still retains a racial flavour but it is used nowadays in an extended sense to include other characteristics which may be commonly thought of as being associated with common racial origin.
For a group to constitute an ethnic group in the sense of the Act of 1976, it must, in my opinion, regard itself, and be regarded by others, as a distinct community by virtue of certain characteristics.
Some of these characteristics are essential; others are not essential but one or more of them will commonly be found and will help to distinguish the group from the surrounding community.
The conditions which appear to me to be essential are these: (1) a long shared history, of which the group is conscious as distinguishing it from other groups, and the memory of which it keeps alive (2) a cultural tradition of its own, including family and social customs and manners, often but not necessarily associated with religious observance.
In addition to those two essential characteristics the following characteristics are, in my opinion, relevant; (3) either a common geographical origin, or descent from a small number of common ancestors (4) a common language, not necessarily peculiar to the group (5) a common literature peculiar to the group (6) a common religion different from that of neighbouring groups or from the general community surrounding it (7) being a minority or being an oppressed or a dominant group within a larger community, for example a conquered people (say, the inhabitants of England shortly after the Norman conquest) and their conquerors might both be ethnic groups.
A group defined by reference to enough of these characteristics would be capable of including converts, for example, persons who marry into the group, and of excluding apostates.
Provided a person who joins the group feels himself or herself to be a member of it, and is accepted by other members, then he is, for the purposes of the Act, a member.
That appears to be consistent with the words at the end of section 3(1) 'references to a person's racial group refer to any racial group into which he falls.' In my opinion, it is possible for a person to fall into a particular racial group either by birth or by adherence, and it makes no difference, so far as the Act of 1976 is concerned, by which route he finds his way into the group.
This view does not involve creating any inconsistency between direct discrimination under paragraph (a) and indirect discrimination under paragraph (b).
A person may treat another relatively unfavourably 'on racial grounds' because he regards that other as being of a particular race, or belonging to a particular racial group, even if his belief is, from a scientific point of view, completely erroneous.
This passage makes clear that Lord Fraser was not excluding the relevance of descent from a small number of common ancestors.
It was one among a number of factors which included, he considered essentially, a long shared history distinguishing a group from other factors and a shared cultural tradition, but which could also include a common geographical origin, language and/or religion and a status as a minority group.
The whole passage emphasises the flexibility of the test adopted, and it is consistent with this that its application should depend on the context.
A fourth, important point appears from the final sentence in the passage quoted from Lord Frasers speech: A person may treat another relatively unfavourably 'on racial grounds' because he regards that other as being of a particular race, or belonging to a particular racial group, even if his belief is, from a scientific point of view, completely erroneous.
Lord Fraser probably had in mind a situation such as that where A, who dislikes Sikhs, discriminates against B in the (in fact erroneous) belief that B is a Sikh.
Whether the victim actually has the sexual orientation or racial origins on the ground of which he or she is treated less favourably is irrelevant: English v Thomas Sanderson Blinds Ltd. [2008] EWCA Civ 1421; [2009] ICR 543 (where the majority also held it to be irrelevant whether the discriminator believed the victim to have, or whether the victim thought that the discriminator believed the victim to have, the relevant sexual orientation on the ground of which he was harassed).
If A, applying his own view of the relative significance of the various factors mentioned by the House in Mandla, identifies a particular group of people as an ethnic group and discriminates against them on that ground that would, in my view (and as Lord Pannick accepted, with the proviso that there would have to be some basis in the Mandla criteria) be embraced by s.1(1)(a) of the Act.
Any definition of an ethnic group applying the Mandla criteria is on this basis also flexible, whether the definition is undertaken for religious, charitable or educational purposes or, as happened only too terribly in Nazi Europe, for entirely malign purposes.
In the present case, many of Lord Frasers factors could be seen as pointing without more to a conclusion that Orthodox Judaism should be regarded as a separate ethnic group or sub group including the sharing of a long history distinguishing themselves from other groups, a shared cultural tradition, a common religion and a separate status within any wider Jewish community.
Others, such as a common geographical origin and a common language, they share with that wider community.
Munby Js reasons for rejecting any suggestion that Orthodox Jews could be regarded as a separate ethnic group or sub group were that there was no evidence that they had separate ethnic origins from other, or most other, Jews.
That may be said to focus purely on ethnic origins in a way which the Mandla test was intended to discourage.
But, assuming that Orthodox Jews are not a separate ethnic group or sub group for the purposes of indirect discrimination (the relevant subsection for that purpose being now s.1(1A), rather than s.1(1)(b)), I consider that the Orthodox Jewish test of descent in the matrilineal line must still be regarded as a test based on ethnic origins, for the purposes of direct discrimination under s.1(1)(a) of the Act.
On the evidence, it is at its core a test by which Orthodox Judaism identifies those to be regarded today as the descendants of a particular people, enlarged from time to time by the assimilation of converts, that is the Jewish people whose ancestor was the patriarch Jacob (Israel) and with whom the covenant of Mount Sinai was made through Moses upon the Exodus from Egypt.
That the Jewish people was from its outset also defined by its religion does not lead to a different conclusion.
A test of membership of a religion that focuses on descent from a particular people is a test based on ethnic origins.
Whether matrilineal descent was originally chosen because it was an easy and secure way of identifying ancestry or because some other special significance was attached to womens role is not relevant.
Other tests identifying a people by drawing on descent or ancestry can of course exist, for example, a test based on patrilineal origins, or on the origins of both parents.
Some other Jewish denominations, the Court was told, have other tests, e.g. looking, or looking also, at the patrilineal line.
But all such tests look, in one way or another, at ethnic origins.
They merely take different views as to the form of descent or birth link by reference to which a persons origins in a particular (here biblical) people can be defined.
I find instructive in this connection and generally the Background Information provided by Rabbi Dr Tony Bayfield which Lord Phillips quotes in paragraph 40.
If a school admissions policy identifying Jews by descent is inadmissible, this will be the case in relation to any denomination of Jewish school applying such a policy, however the relevant descent is identified.
This case cannot therefore be viewed as a mere disagreement between different Jewish denominations, for example about the criteria for conversion.
It turns, more fundamentally, on whether it is permissible for any school to treat one child less favourably than another because the child does not have whatever ancestry is required, in the schools view, to make the child Jewish.
Fifthly, there is, not surprisingly in the circumstances, also material tending positively to confirm that there is in the eyes of JFS no distinction between Jewishness in the religious sense and Jewishness on account of ethnic origins.
The Agreed Statement of Facts records that M was refused admission for the year 2007 8, on the ground that he was not recognised as being Jewish by the Office of the Chief Rabbi .
The same answer (that this child cannot be recognised as Jewish) was given by the OCR in relation to the child of the marriage of a Cohen (member of the Jewish priestly class) and an English woman who had undertaken conversion with an Orthodox Jewish Beth Din in Israel, on the ground that she had intended to marry her future husband at the time of her conversion, contrary to a prohibition on the marriage of Cohens with converts, with the consequence that her conversion could not have been sincere and was accordingly invalid in the eyes of the OCR.
By their letter dated 17 August 2007 Ms solicitors asked JFS, with reference to the time when children applied and/or when a decision on admission was taken, how many children were Jewish on account of their race and/or ethnic origins and how many were not.
The schools answer given through its solicitors on 17 December 2007 was that Those children confirmed as Halakhically Jewish were treated as Jewish by the school and those not so confirmed were treated as not Jewish.
M set out this answer in his further response dated 19 December 2007 to the appellants notice of acknowledgement of service, in support of a plea that the appellants now belatedly, but rightly, accept that Halakhical Jewish status is synonymous with membership of a racial group for the purposes of section 3 of the Act a plea to which there was no response before the matter came to court.
Further, according to a statement quoted in the respondents case, which JFS has not challenged or controverted, the Chair of JFSs Governors responded to fears about the opening in future of new Jewish schools (including or consisting of non Orthodox Jewish schools), by saying: If we are going to be able to maintain the three [existing Orthodox Jewish] schools, we are going to need to supply children out of thin air.
The only way to fill all of those places would be to open the doors to children who are not Jewish by ethnicity or not at all.
The inference is that the school recognises no distinction even today between Jewishness in a religious and in an ethnic sense.
The one dictates the other.
When Lord Pannick said on behalf of JFS that JFS does not dispute that there are thousands with Jewish ethnic claims in the Mandla sense who fail the test for a religious reason, that may be the effect of the Mandla test, applied objectively; if so, it is a conclusion about English law which no one could sensibly gainsay.
But it does not follow that JFS or the Chief Rabbi themselves concur with or take the view of ethnicity which would follow from applying the Mandla test and the passages which I have quoted indicate that they do not (quite apart from the fact that the Mandla test was not directed to the present issue of less favourable treatment on the ground of ethnic origins).
Apart from descent a person may become an Orthodox Jew by conversion.
Conversion, in accordance with the principles of Orthodox Judaism, is recognised by Orthodox Judaism as making a person an Orthodox Jew.
Some of the greatest figures in Jewish history have been converts, starting with Ruth the Moabite, great grandmother of King David, and Onkelos, Rabbi Akiva and other sages.
From conversion, a convert is treated as an Orthodox Jew, and so too is any child of a female convert born after the completion of the mothers conversion (although some distinction exists between converts and other Orthodox Jews: witness the prohibition on the former marrying a Cohen, to which reference is made above).
The Chief Rabbi has in 2005 compared conversion with acquiring a changed, foreign identity, while adding that the analogy is imperfect: Converting to Judaism is a serious undertaking, because Judaism is not a mere creed.
It involves a distinctive, detailed way of life.
When people ask me why conversion to Judaism takes so long, I ask them to consider other cases of changed identity.
How long does it take for a Briton to become an Italian, not just legally but linguistically, culturally, behaviourally? It takes time.
The analogy is imperfect, but it helps to explain the most puzzling aspect of conversion today the sometimes different standards between rabbinical courts in Israel and Britain.
Several decades ago an Israeli Chief Rabbi argued that Israeli rabbinical courts should be more lenient than their counterparts in the Diaspora.
His reasons were technical, but they make sense.
It is easier to learn Italian if you are living in Italy.
In Israel, many aspects of Jewish identity are reinforced by the surrounding culture.
Its language is the language of the Bible.
Its landscape is saturated by Jewish history.
Shabbat is the day of rest.
The calendar is Jewish.
The reason for Ms ineligibility can be said to be that his mother converted to Judaism under a procedure and principles other than those accepted by Orthodox Jews.
However, M remains at a disadvantage because of his descent, and, speaking generally, the test for admission of any child to JFS is for practical purposes one of descent.
The possibility of a child applying to JFS being him or herself a convert, or even in the course of converting, appears negligible.
JFS in its answers dated 17 December 2007 believed there never to have been any such child in the three years preceding the answers.
Further, discrimination may be on an ethnic ground, even though this is not the sole ground for the decision, so long as an ethnic ground was a cause, the activating cause, a substantial and effective cause, a substantial reason, an important factor: Nagarajan, per Lord Nicholls at pp.512H 512B.
As Miss Rose QC for E pointed out, an organisation which admitted all men but only women graduates would be engaged in direct discrimination on the grounds of sex.
Similar reasoning would apply here to any suggestion that the possibility of conversion eliminated any possibility of direct discrimination on ethnic grounds.
Finally, I also consider it to be consistent with the underlying policy of s.1(1)(a) of the Act that it should apply in the present circumstances.
The policy is that individuals should be treated as individuals, and not assumed to be like other members of a group: R (European Roma Rights Centre) v Immigration Officer at Prague Airport [2005] 2 AC 1, paras 82 and 90, per Baroness Hale of Richmond and R (Gillan) v Commissioner of Police for the Metropolis [2006] 2 AC 307, paras. 44 and 90 per Lords Hope of Craighead and Brown of Eaton under Heywood.
To treat individual applicants to a school less favourably than others, because of the happenstance of their respective ancestries, is not to treat them as individuals, but as members in a group defined in a manner unrelated to their individual attributes.
JFS, supported on this point by the British Board of Deputies, argue that respect for religious freedom under article 9(1) of the European Convention on Human Rights and the importance attaching to the autonomous existence of religious communities (emphasised for example in Lffelmann v Austria (Application no. 42967/98, 12 March 2009, para 47) militate in favour of a conclusion upholding JFSs admissions policy.
But freedom to manifest one's religion or beliefs is, under article 9(2) of the Convention, subject to such limitations as are prescribed by law and are necessary in a democratic society for the protection of the rights and freedoms of others.
Under the United Nations Convention on the Rights of the Child 1989, article 3, it is the best interests of the child which the United Kingdom is obliged to treat as a primary consideration.
Under Protocol 1, article 2 to the European Convention on Human Rights, it is the right of parents to ensure education and teaching in conformity with their own religions and philosophical convictions that the state must ensure in the exercise of any functions which it assumes in relation to education and to teaching. (I note in parenthesis that this has, since the hearing before the Supreme Court, been emphasised by the second section of the European Court of Human Rights in its judgment in Affaire Lautsi c. Italie (Requte no. 30814/06, 3 November 2009, paras. 47(b) and (c)).
I express no further view on the reasoning or decision in that case, which may well go to the Grand Chamber.
To treat as determinative the view of others, which an applicant may not share, that a child is not Jewish by reason of his ancestry is to give effect not to the individuality or interests of the applicant, but to the viewpoint, religiously and deeply held though it be, of the school applying the less favourable treatment.
That does not seem to me either consistent with the scheme or appropriate in the context of legislation designed to protect individuals from discrimination.
I accept that parental responsibility and choice relating to a child can determine the extent to which children are treated as having certain attributes, e.g. membership of a particular religion in the case of Christian baptism.
But neither parental birth nor the fact that a mother has not converted to Orthodox Judaism at a time prior to a childs birth can be regarded as within the concept of parental responsibility and choice.
Emphasis was put in submissions on difficulties which Orthodox or indeed other Jewish schools face in adopting any admissions policy other than that based on Jewish status.
It was not, and could not, be suggested that these present any absolute legal answer to Ms case, but rather that they should cause any court to think very hard about whether the legislation can really require the result for which E and M contend and which the Court of Appeal accepted.
How far such difficulties exist is contentious.
Just before the hearing in the Supreme Court, statements were tendered by two interveners, in the case of the British Board of Deputies a statement dated 15 October 2009 from its chief executive, Mr Jon Benjamin, and in the case of the United Synagogue a statement dated 18 October 2009 from its chief executive, Mr Jeremy Jacobs.
These came too late for proper investigation or answer and their contents are in issue, though there is evidence of Orthodox Jewish schools which in addition to a test based on Orthodox Jewish descent also apply tests based on religious observance.
What can be said is that, since the Court of Appeals judgment, JFS and other Orthodox Jewish schools have instituted admissions policies based, in one way or another, on religious observance, but they have done so very reluctantly, and submit that its introduction is inconsistent with such schools missions to all Orthodox Jews.
However, as I have said, such considerations cannot be decisive either way.
For the reasons I have given, the Court of Appeal in my view reached the correct conclusion, when it held that as a matter of law the admissions policy followed by JFS was inherently discriminatory, contrary to s.1(1)(a) of the 1976 Act, although the policy was adopted by the school for the most benign, religious motives.
On that basis, the issue of indirect discrimination cannot arise.
However, I will address some words to it.
This must, necessarily, be on the hypothesis that a different answer is given on the issue of direct discrimination to that which I have given.
Indirect discrimination
The relevant statutory provision governing indirect discrimination is s.1(1A).
This was introduced into the 1976 Act by the Race Relations Act 1976 (Amendment) Regulations (SI 2003/1626), in order to implement in Great Britain Council Directive 2000/43/EC of 29th June 2000 (which contains a number of references showing its intended application to education).
Subsequent Regulations (SI 2008/3008) have added the presently immaterial words or would put in s.1(1A)(b).
The first question arising under s.1(1A) is whether JFSs admissions policy involved a provision, criterion or practice which puts persons of the same race or ethnic origins at a particular disadvantage when compared with other persons.
Lord Pannick submits not.
He accepts that the policy had the effect of putting at a disadvantage applicants with no ethnic link with Judaism.
But, in his submission, it did not discriminate against M, because both M and those eligible for admission had the same Jewish ethnic origin, and the distinction drawn between them by the policy was on the basis of their religious, not ethnic status.
Here too, the Mandla test of ethnicity is relied upon to assimilate M and those eligible for admission.
As I have pointed out, Mandla was decided under s.1(1)(b) of the Race Relations Act 1976.
Since the introduction of s.1(1A) to give effect to Council Directive 2000/43/EC of 29th June 2000, Lord Pannick accepts that any allegation of indirect discrimination falls to be considered primarily (and in reality, despite s.1(1C), almost certainly only) under s.1(1A).
Assuming, contrary to my view, that the Mandla test of ethnic grouping controls the question whether there has been direct discrimination on ethnic grounds within s.1(1)(a), I do not consider that it can do so under s.1(1A).
I see no reason under Community law to suppose that the Directive is limited to discrimination against ethnic groups in the Mandla sense, and s.1(1A) should, so far as possible, be construed consistently with the Directive.
The language of s.1(1A) is general (although in one respect, the effect if any of which I need not consider, it adopts less exhaustive terminology than s.1(1)(a) and (b), in so far as it omits express reference to colour and nationality).
On any ordinary understanding, Ms ethnic origins differed from those of most Orthodox Jews, because he had a non Jewish Italian mother.
As Munby J said (para. 34), M is in Es eyes, and doubtless in the eyes of many who would consider themselves Jews, of mixed Jewish and (through the maternal line) Italian ethnic origins.
True, some Orthodox Jews become such by conversion rather than birth, and some children of non Jewish Italian mothers can be Orthodox Jews by virtue of their mothers conversion according to Orthodox Jewish principles before their birth.
But, both in general terms and in the case of M in particular, his mothers non Jewish Italian birth and so his ethnic origins led to M being at a particular disadvantage when compared with persons recognised as Orthodox Jews by JFS and by Orthodox Jewish authorities.
The next question is whether JFS has shown that the disadvantage at which M was put was a proportionate means of achieving a legitimate end.
Munby J in para. 192 of his judgment summarised the aim or objective of JFS as spelled out in the materials before him (and indicated out in paragraph 76 above) as being: to educate those who, in the eyes of the [Office of the Chief Rabbi] are Jewish, irrespective of their religious beliefs, practices or observances, in a school whose culture and ethos is that of Orthodox Judaism.
The Court of Appeals reasoning on indirect discrimination appears to have been influenced by this characterisation.
The Court of Appeal thought, with some justification, that the aim or objective as so advanced was circular.
Sedley LJ, in paras. 45 47, described the schools admissions criteria as explicitly related to ethnicity and as having an ethnic component in character and said that an aim of which the purpose or inevitable effect is to make and enforce distinctions based on race or ethnicity cannot be legitimate.
That is no doubt so.
But, on the evidence, the truth which Munby Js characterisation can be read as omitting or perhaps obscuring is that, in Orthodox Jewish belief, anyone who is regarded by Orthodox Judaism as a Jew by birth is also regarded as being under a religious duty to educate him or herself about and to observe the tenets of Orthodox Judaism: see the statement of Dayan Gelley dated 26 February 2008 referred to in paragraph 76 above, and also that of Registrar Frei of the London Beth Din dated 6 February 2008.
JFSs mission was to encourage and assist children regarded by Orthodox Judaism as being Jews to do this as far as possible.
For that reason, the admission to the school of a range of pupils, who are Orthodox Jewish in the schools eyes, but who do not actually practise Orthodox Judaism or necessarily any religion at all, was and would still be regarded as a very positive feature, even if their or their parents actual motivation for seeking their admission to the school were to have been its excellent academic record.
On the basis of this explanation of the thinking underlying the schools policy, it is possible to identify a legitimate aim, founded in the schools Orthodox Jewish character and the religious convictions of those responsible for its admissions policy; and the circularity which the Court of Appeal thought existed no longer does.
The question thus arises, which the Court of Appeal thought it unnecessary to address, whether JFS as the alleged discriminator can show the differential treatment to be a proportionate means of achieving a legitimate aim: s.1(1A)(c).
JFS accepts that its admissions policy treated the schools religious aim as an over riding absolute.
Prior to the Court of Appeals decision, it had not considered or sought to weigh the practical implications or effect of adopting either it or any alternative policy, though it was aware both that the school included many non observing pupils and that there were many ineligible pupils who were intensely religious.
No information is in these circumstance available as to the extent to which children admitted to the school were or became interested in learning to observe Orthodox Judaism, or to which the schools policy excluded other children who would be deprived of Jewish based schooling which they were keen for religious reasons to pursue.
Munby J recorded (para. 8) that until the 1940s over 97% of synagogue membership was of Orthodox (United Synagogue) synagogues, but that by 2000, according to a report A Community of Communities, published under the auspices of the Institute for Jewish Policy Research, current membership of Jews affiliated to a synagogue consisted of 60.7% Orthodox, 10.5% Strictly Orthodox (Haredi), 27.3% Progressive (Reform and |Liberal), and 1.5% Masorti (Conservative), while 30% of all Jews were not affiliated to any synagogue at all.
There has been and is a paucity of available and accessible Jewish schools other than Orthodox Jewish schools it appears that 29 of the total of 36 Jewish schools in England are Orthodox Jewish and applied a similar admissions policy to JFSs.
JFS also regarded as irrelevant when formulating the admissions policy whether it might lead to unhappiness in relations between adherents to different Jewish denominations.
The standard set in s.1(1A)(c) is a high one, adopting the more exacting EC test of proportionality: R (Elias) v Secretary of State for Defence [2006] 1 WLR 3213, para. 151, per Mummery LJ.
The Directive also provides, in article 2(2)(b) that any indirectly discriminatory provision, criterion or practice is only justifiable if it is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary, but it refers to the European Convention on Human Rights and the language used equates with the test of proportionality which appears in s.1(1A)(c) of the 1976 Act.
An ex post facto justification for a measure which is prima facie indirectly discriminatory can prove difficult to show: Elias, para.129 per Mummery LJ.
It is for the school to show, in the circumstances, that its aim or objective corresponds to a real need and that the means used are appropriate and necessary to achieving that aim, and any decision on these points must weigh the need against the seriousness of the detriment to the disadvantaged group: Elias, para. 151 per Mummery LJ.
The interests of society must also be considered: Huang v Secretary of State for the Home Department [2007] UKHL 11; [2007] 2 AC 167, para. 19, per Lord Bingham of Cornhill.
In the case of JFS, as an educational establishment maintained by a local education authority, its general duty was supplemented by specific duties under s.71 of the 1976 Act, according to which it was incumbent on its governing body in carrying out its functions, [to] have due regard to the need (a) to eliminate unlawful racial discrimination; and (b) to promote equality of opportunity and good relations between persons of different racial groups.
Munby J held that the school had, despite the good intentions and work which had gone into its race equality policy, failed to comply in full with s.71 of the 1976 Act.
The schools race equality policy, which indicated that the school would disregard considerations based upon colour, disability, ethnic or racial origins, gender, marital status, nationality or religion except as provided for in the Schools authorised Admissions Policy, showed that it had in a general sense considered matters of racial discrimination.
But it had not specifically considered either of the goals mentioned in s.71(1)(a) and (b) or, more particularly, specific ways in which these goals might be achieved (Munby J, para. 213).
Nonetheless, Munby J considered that the schools policy satisfied the requirements of s.1(1A)(c), saying at paras. 199 202, first, that JFSs admissions policy was not, properly analysed, materially different from that which gives preference in admission to a Muslim school to those who were born Muslim or preference in admission to a Catholic school to those who have been baptised and, secondly, that some alternative admissions policy based on such factors as adherence or commitment to Judaism (even assuming that such a concept has any meaning for this purpose in Jewish religious law) would not be a means of achieving JFSs aims and objectives; on the contrary it would produce a different school ethos.
JFS exists as a school for Orthodox Jews.
If it is to remain a school for Orthodox Jews it must retain its existing admissions policy; if it does not, it will cease to be a school for Orthodox Jews.
On that basis, Munby J held that the policy constituted a proportionate means of achieving a legitimate aim, and that the claim of indirect discrimination failed.
Munby J also thought it quite idle to imagine that the fullest and most conscientious compliance with s.71 would have led to any difference either in the crucial part of JFSs admissions policy or in its application in Ms case (para. 214).
On the evidence before the Court, and in the absence of any actual consideration or weighing of the need [to pursue the schools aim] against the seriousness of the detriment to the disadvantaged group (see Elias [2006] 1 WLR 3213, para 151), I find it impossible to reach the same conclusion.
There is, as I have indicated, no information about the extent to which the school succeeds in its stated aim of inculcating Orthodox Judaism in the minds and habits not only of those who already practise it, but also of those pupils who gain admission as Orthodox Jews in the eyes of Orthodox Judaism.
The latter may not on entry practise or have any interest in practising Orthodox Judaism.
They or their parents may adhere in religious observance to a Jewish denomination other than the Orthodox Jewish and be concerned that their children receive a, rather than no, Jewish education; or they or their parents may be seeking entry for reasons associated with the schools acknowledged educational excellence, and may be themselves agnostic or atheist.
The schools policy was formulated without considering the extent to which others professing the Jewish faith, but not in the Orthodox Jewish tradition, were separated by it from friends and from the general Jewish community by the schools admissions policy, or about the extent to which this might cause grief and bitterness in inter or intra community relations matters about which some evidence was tendered before the Court.
It would, in parenthesis, also appear difficult to regard a school not considering such matters as complying with the School Admissions Code 2007, para. 2.48, which requires that admission authorities for faith schools should consider how their particular admission arrangements impact on the communities in which they are physically based and those faith communities which they serve.
It was submitted that the school would become less diverse in a practising religious sense, if it admitted pupils only by reference to a test of Jewish religious observance.
This could be so, but no consideration has been given to any possibility of ensuring continuing diversity on a structured basis, rather than simply excluding, by reference essentially to birth link criteria, all those not regarded by Orthodox Judaism as Orthodox Jews.
Paragraph 1.4 of the schools existing admissions policy already provides that The School recruits from the whole range of ability, and this policy has the objective of securing a balanced, comprehensive, co educational intake.
The schools Information Sheet for staff describes the modern JFS as serving almost the whole breadth of the Anglo Jewish community in Greater London and its admissions policy (not further detailed in this connection) as reflect[ing] positive selection to ensure a truly comprehensive ability intake.
It continues: We aim to achieve a balanced intake across four ability bands.
In addition to a thoroughly comprehensive spread of ability, our students come from the widest possible range of social, economic and religious backgrounds.
On the information available, it is not shown that inability to select on the basis of birth link criteria will prevent the school from serving the wider community and achieving diversity in accordance with these stated aims.
I would also not be as confident as Munby J was with regard to s.71.
But, in any event, the test is not what the school would have done in the past if it had fully and properly considered its obligations under s.71.
The test is whether objectively it can justify its present policy under s.1(1A)(c), once the test set by that subsection is fully and properly addressed.
Munby Js comparison in para. 200 with the position of Catholic or Muslim children would, if exact, be no more than another way of stating the issue, but in reality it is not exact, at least if one takes the parental choice to baptise.
His other reason echoes the schools case that its policy of giving preference to those regarded as Orthodox Jews by Orthodox Jews must, in case of over subscription, prevail over all other considerations, with which I have already dealt.
It must, furthermore, be an exaggeration to say that the school would cease (or, presumably, with the introduction of its new policy after the Court of Appeals decision, has ceased) to be a school for Orthodox Jews (para. 214).
If and when the number of places exceeds the number of those applying who are regarded by the school as Orthodox Jews, the school is anyway obliged under the legislation and paragraph 1.3 of its own admissions policy to admit other pupils.
Until the matter came before the Adjudicator, Appendix A to its admissions policy in fact indicated that the remaining places would be filled according to the following criteria in this order: (1) looked after children, (2) children with one Jewish parent, (3) children with one or more Jewish grandparents and, finally, (4) all other applicants. (The Adjudicator by his Determination of 27 November 2007 held that criteria (2) and (3) involved indirect ethnic discrimination by reference to ancestry, which could not be justified by any presumption that children with one Jewish parent or one or more Jewish grandparents were more likely to be receptive or sympathetic to the schools Jewish Orthodox ethos than children of other parentage or grand parentage, and required the deletion of those two criteria on that basis.
He rejected a suggestion that criteria (2) and (3) involved direct discrimination on the ground that they were based on religious grounds not racial grounds, despite the absence of any apparent basis in Orthodox Judaism for attaching any significance to fatherhood or grand parentage, except in the matrilineal line.
Miss Rose QC for E submits, correctly in my view as I have already indicated, that the Adjudicator should logically have gone further by recognising criteria (2) and (3) as involving direct discrimination).
In my view and (I emphasise) on the material before the Court, JFS has not and could not have justified its admissions policy.
Accordingly, had the matter arisen for decision, I would have held that its admissions policy discriminated against M in a way which was not justified under s.1(1A), and was invalid accordingly.
However, for reasons given earlier, I conclude that the policy was directly discriminatory, because it depended on birth link criteria which led to M being less favourably treated on ethnic grounds within s.1(1)(a) and 3(1) of the 1976 Act, and invalid on that basis.
I would therefore dismiss the schools appeal.
On the United Synagogues appeal in respect of costs, I agree with the reasoning and conclusions of Lord Hope.
LORD KERR
This case gives rise to perplexing issues of law.
It involves an examination of the interface between religion and legal principle.
It requires a close scrutiny of the statutory definition of racial discrimination.
At its heart, however, lies the simple issue of a young boys desire to attend a particular school; his familys earnest wish that he be educated there; and the reasons that he was refused admission.
That JFS is the school of choice for very many Jewish families is not in the least surprising.
As well as achieving excellent academic results for its pupils, it promotes indeed embodies the values that most, if not all, practising Jews regard as central to their faith.
It is therefore inevitably and regularly oversubscribed, that is to say, it attracts many more applicants for places than it can accommodate.
The criteria for admission to the school are of intense interest to aspiring pupils and their parents.
Those who devise and apply those criteria have a formidable, not to say daunting, responsibility.
This situation is by no means unique.
All over the United Kingdom and, no doubt, in many other parts of the world, every year, conscientious parents, anxious for their childrens continuing education at secondary level, pore over the entrance requirements for schools that they hope their sons and daughters will attend and strive to bring their childrens circumstances and in many instances, their own within the stipulated standards.
Where JFS is unique, however, is in its imposition of a criterion that can only be achieved by an accident of birth or by conversion to the Orthodox Jewish faith.
Apart from conversion, a child who wishes to be educated at JFS must be born of an Orthodox Jewish mother or have a female antecedent who is recognised as an Orthodox Jew by the Office of the Chief Rabbi (OCR).
That condition of Orthodox Jewishness is normally acquired by the female by reason of the circumstances in which she herself was born; less commonly, it arises by her conversion to Judaism before the childs birth.
In the latter case the circumstances of her conversion must be such as to satisfy the requirements of the OCR.
Common to both situations, however, is the unalterable requirement that, at the moment of birth, the child must be a Jew as the Chief Rabbi, in his application of what he considers to be the requirements of Jewish law, defines that status.
Central to the question of direct discrimination in this case is the breadth of meaning to be given to the phrase ethnic origins.
The conventional meaning of origin is something from which anything arises or is derived.
It also means ancestry, parentage, or extraction.
Although ethnic is normally used as pertaining to or characteristic of a people or a group, clearly there can be mixed ethnic origins that do not fall neatly into one group or category.
Thus, in this case, it is undeniable that M has mixed ethnic origins.
He has derived these, as everyone derives their ethnicity, from his parents.
At the moment of birth we are all endowed with characteristics that are as inalienable as they are inevitable.
Our DNA is inescapable.
Our parentage and the ancestry that it brings are likewise fixed and irreversible.
These are part and parcel of our ethnic origins.
M is not simply a Jew.
His ethnic origins comprehend much more than his Jewishness.
He is born of an Italian.
He is, in the colloquial, half Italian.
He would be recognised indeed, no doubt, claimed as such by his mothers family.
He cannot disavow his mothers former Catholicism.
That is as much part of his undeniable ethnic make up as is his fathers Masorti Jewishness and Englishness.
M is, therefore, half English and half Italian; he is a Masorti Jew with an Italian mother who was once Catholic.
All of these are aspects of his ethnic origins.
And those origins are defined as much by what they do not contain as they are by what they include.
What, of course, Ms ethnic origins do not and can never include is a matrilineal connection to Orthodox Jewry.
That is an unchangeable aspect of his parentage, of his origins and of his ethnicity.
He cannot be categorised as and can never claim to be born of an Orthodox Jewish mother as recognised by OCR.
That this forms part of his ethnic origins can perhaps best be illustrated by comparing his situation with that of someone whose mother is recognised by OCR as Jewish.
An assertion by such a person that this matrilineal feature formed part of his ethnic origins could surely not be challenged.
Logically, therefore, the absence of such a feature from Ms heritage cannot be denied, and must be accepted, as a defining characteristic of his ethnicity.
Direct discrimination
The basic question that arises on the issue of direct discrimination can be simply stated.
It is, Was M treated less favourably on racial grounds? Racial grounds being defined (in section 3 (1) of the Race Relations Act 1976) as including ethnic origins, and there being no dispute between the parties that he was treated less favourably than those who, by reason of their matrilineal connection to an Orthodox Jewish mother, were admitted to the school, the basic question can be refined to the following formulation, Was M refused admission to the school on grounds of his ethnic origins?
It has been strongly asserted that the Chief Rabbi was not remotely interested in Ms ethnic origins for other than religious reasons.
This is no doubt true, but the decision to refuse M entry to the school was unquestionably bound up with those origins.
It was because of what was missing from Ms ethnic origins; because they did not include the indispensable matrilineal connection to Orthodox Judaism that the less favourable treatment occurred.
Does this mean that he was discriminated against on ethnic grounds? Or does the fact that the refusal to admit him to the school was based on a decision on a religious issue remove the case from the sphere of racial discrimination altogether?
These questions focus attention on the problematical issue of what is meant by discrimination on racial grounds.
As Lord Hope has observed, the opinions in cases such as R v Birmingham City Council, Ex p Equal Opportunities Commission [1989] AC 1155 and James v Eastleigh Borough Council [1990] 2 AC 751 tended to dismiss as irrelevant any consideration of the subjective reasons for the alleged discriminator having acted as he did unless it was clear that the racial or sex discrimination was overt.
A benign motivation on the part of the person alleged to have been guilty of discrimination did not divest the less favourable treatment of its discriminatory character if he was acting on prohibited grounds.
Later cases have recognised that where the reasons for the less favourable treatment are not immediately apparent, an examination of why the discriminator acted as he did may be appropriate.
In Nagarajan v London Transport [2000] 1 AC 501, 511A, Lord Nicholls of Birkenhead, having identified the crucial question as why did the complainant receive less favourable treatment, said this: Save in obvious cases, answering the crucial question will call for some consideration of the mental processes of the alleged discriminator.
It is, I believe, important to determine which mental processes Lord Nicholls had in mind in making this statement.
It appears to me that he was referring to those mental processes that are engaged when the discriminator decides to treat an individual less favourably for a particular reason or on a particular basis.
That reason or the basis for acting may be one that is consciously formed or it may operate on the discriminators subconscious.
In my opinion Lord Nicholls was not referring to the mental processes involved in the alleged discriminator deciding to act as he did.
This much, I believe, is clear from a later passage of his opinion, at p 511B where he said: The crucial question just mentioned is to be distinguished sharply from a second and different question: if the discriminator treated the complainant less favourably on racial grounds, why did he do so? The latter question is strictly beside the point when deciding whether an act of racial discrimination occurred.
This latter passage points clearly to the need to recognise the distinction between, on the one hand, the grounds for the decision (what was the basis on which it was taken) and on the other, what motivated the decision maker to make that decision.
The need for segregation of these two aspects, vital to a proper identification of the grounds on which the decision was made, is well illustrated, in my view, by the circumstances of this case.
The school refused entry to M because an essential part of the required ethnic make up was missing in his case.
The reason that they took the decision on those grounds was a religious one OCR had said that M was not a Jew.
But the reason that he was not a Jew was because of his ethnic origins, or more pertinently, his lack of the requisite ethnic origins.
The basis for the decision, therefore, or the grounds on which it was taken, was Ms lack of Jewishness.
What motivated the school to approach the question of admission in this way was, no doubt, its desire to attract students who were recognised as Jewish by OCR and that may properly be characterised as a religious aspiration but I am firmly of the view that the basis that underlay it (in other words, the grounds on which it was taken) was that M did not have the necessary matrilineal connection in his ethnic origin.
This conclusion appears to me to be inescapable from Lord Nicholls analysis of the two aspects of decision making and to chime well with a later passage in his speech where he said: Racial discrimination the is not negatived by discriminators motive or intention or reason or purpose (the words are interchangeable in this context) in treating another person less favourably on racial grounds.
In particular, if the reason why the alleged discriminator rejected the complainants job application was racial, it matters not that his intention may have been benign.
In the present case, the reason why the school refused M admission was, if not benign, at least perfectly understandable in the religious context.
But that says nothing to the point.
The decision was made on grounds which the 1976 Act has decreed are racial.
The recognition of Jewishness a religious question?
As Lord Brown has pointed out, all Jews define membership of their religion by reference to descent or conversion.
It is therefore quite logical to describe the decision, taken as a matter of Jewish law, as to whether one is or is not a Jew, as a religious one.
Descent is employed as a means of determining an essentially religious question.
But, when the answer to that religious question has consequences in the civil law sphere, its legality falls to be examined.
If the decision has consequences that are not permitted under the law, the fact that it was taken for a religious purpose will not save it from the condition of illegality.
In this case the OCR decision that M was not a Jew had profound consequences for him since he was denied admission to an educational establishment that he wished to attend.
The fact that the decision not to admit him was based on the determination of a religious issue cannot, of itself, insulate it from the charge of discrimination on racial grounds.
Once it is recognised that Ms ethnic origins underpinned the conclusion on the religious issue, it becomes plain that it cannot be characterised as an exclusively religious question.
The terminus for OCR was a decision on a matter of religion but the route to that terminus was one of ethnic origin.
Ethnic groups
It is unquestionably true that Jews, whether they be Orthodox, Masorti, Liberal or Progressive, constitute an ethnic group.
It is also undoubtedly the case that M belongs to that ethnic group.
He is an ethnic Jew.
But, belonging to that group is not comprehensive of his ethnicity.
As I have said (at 109 above) Ms ethnic origins extend well beyond the fact that he is a Jew.
The circumstance that he is an ethnic Jew in the Mandla [Mandla v Dowell Lee [1983] 2 AC 548] sense does not assist, in my opinion, in determining whether he has been discriminated against on racial grounds.
Although those who receive the more favourable treatment (in being admitted to the school) belong to the same racial or ethnic group as M, this does not, of itself, preclude a finding that he has been treated less favourably on account of his ethnic origins.
This might be so if his ethnic origins were confined to his Jewishness.
They are not.
It is because of his lack of the requisite feature of Jewishness that he has received less favourable treatment.
That perceived deficiency is as much part of his ethnic make up as is the fact that he is an ethnic Jew in the Mandla sense.
Indirect discrimination
Since I have reached the conclusion that this is a case of direct discrimination, it is unnecessary to say anything about the alternative case made on Ms behalf on indirect discrimination, particularly in light of Lord Mances discussion of that subject.
I find myself in complete agreement with all that he has had to say on that issue and, incidentally, with all that he has had to say on the issue of direct discrimination.
Conclusion
One can have sympathy with the school authorities in their wish to pursue what must have seemed to them an entirely legitimate religious objective.
It is plain that the Chief Rabbi and the governors of JFS are entirely free from any moral blame.
That they have fallen foul of the 1976 Act does not involve any reprehensible conduct on their part for it is accepted on all sides that they acted on sincerely and conscientiously held beliefs.
Their motives are unimpeachable.
The breach of the legislation arises because of the breadth of its reach.
The grounds on which the rejection of M was made may well be considered perfectly reasonable in the religious context but it is because they amount to ethnic grounds under the legislation that a finding against the school became, in my opinion, inescapable.
I would dismiss the appeal.
LORD CLARKE
The division of opinion in this court and in the courts below demonstrates that this appeal raises issues which are difficult to resolve.
The issues have been discussed in detail in all the above judgments.
I have reached the same conclusion as Lord Phillips, Lady Hale, Lord Mance and Lord Kerr, essentially for the reasons they have given.
Rather against my general principle, which is that there should be fewer judgments in the Supreme Court and not more, I add a judgment of my own in order to explain my own reasons for agreeing that the appeal should be dismissed.
Direct discrimination
The facts have been fully set out by others.
I therefore refer only to those facts which seem to me to be critical.
The policy of JFS, when oversubscribed, was to admit children who are recognised as being Jewish by the Office of the Chief Rabbi (OCR) or who have already enrolled upon or undertaken, with the consent of their parents, to follow a course of conversion to Orthodox Judaism under the approval of the OCR.
As I understand it, nobody has ever been enrolled at JFS under the second head.
Leaving adopted children on one side, children recognised by the OCR as being Orthodox Jewish are only those with a biological mother who is either Orthodox Jewish by birth or who has converted to Orthodox Judaism before the birth of the child by a process approved by the OCR.
As I see it, the sole question for decision is whether those criteria offend section 1(1)(a) of the 1976 Act (as amended) by discriminating against some children (here M) on racial grounds, which, by section 3, include ethnic origin.
On the facts of this case I prefer to ask whether the criteria offend against some children on the ground of their ethnic origin.
To my mind the answer to that question does not depend upon the subjective state of mind of the Chief Rabbi or anyone else.
Moreover, I do not think that the correct question to ask is whether OCRs guidance was given either on grounds of ethnic origin or on grounds of religion.
That is because, so formulated, the test suggests that, if the guidance was given on the grounds of religion, it was not given on the grounds of ethnic origin.
So formulated, the question could have only one answer because I entirely accept that the guidance was given on grounds of religion.
That is clear from the guidance itself and indeed from a wealth of evidence before the court.
Moreover, I fully understand that it can in one sense be said that those not recognised by the criteria as Orthodox Jews are, as Lord Brown puts it, being treated less favourably, not because of their ethnic origins, which he says are a matter of total indifference to the OCR, but rather because of their religion because they are not members of the Orthodox Jewish religion.
However, again as Lord Brown puts it, the reason they are not members of the Orthodox Jewish religion is that their forbears in the matrilineal line were not recognised as Jewish by Orthodox Jews and in this sense their less favourable treatment is determined by their descent.
Thus the ground upon which the OCR criteria defined those children to be admitted was that their forbears in the matrilineal line must be recognised as Jewish by Orthodox Jews.
As I see it, in agreement with Lord Phillips, Lady Hale, Lord Mance and Lord Kerr, that is an ethnic ground, so that the discrimination was on both ethnic grounds and religious grounds.
It is, in my opinion, wrong in principle to treat the question as an either/or question because that excludes the possibility that there were two grounds for the decision to exclude M, one religious and the other ethnic.
If the religious ground was itself based upon an ethnic ground, then in my opinion the question asked by section 1(1)(a) of the 1976 Act, namely, whether M was discriminated against on ethnic grounds must be answered in the affirmative.
It would be too narrow a construction of section 1(1)(a) to hold that that was not to discriminate on ethnic grounds.
M was excluded because his mother was not Orthodox Jewish, whether by birth or conversion.
That conclusion does not depend upon the state of mind of the OCR, but follows from an examination of the criteria laid down by the OCR.
The question is not whether the guidance was given on religious grounds but whether the admitted discrimination was on ethnic grounds.
In my opinion the answer is that the discrimination was on both religious and ethnic grounds because the criteria were arrived at on religious grounds but, since those religious grounds involved discrimination on ethnic grounds, it follows that the admissions policy of JFS was contrary to section 1(1)(a) because it discriminated against M and others on racial grounds.
To hold that there were two grounds for the discrimination, both religious and ethnic, is not in my opinion to reduce, as Lord Rodger suggests, the religious element to the status of a mere motive.
It is to recognise that the ethnic element is an essential feature of the religious ground.
If Ms mother had been born a Masorti Jew (because someone in her matrilineal line been converted to Masorti Judaism) and had not been converted to Orthodox Judaism before Ms birth, Ms application would have been rejected because his mother was not, in the relevant sense, Jewish by birth.
As I see it, for the reasons given in much more detail by others (and in particular Lord Mance) that would be discrimination on the ground of his ethnicity.
To my mind the same is true on the facts of this case since at the time of Ms birth his mother was not, in the relevant sense, Jewish because she had not been converted to Orthodox Judaism in the manner accepted by the OCR.
In both cases, as Lord Kerr puts it, the problem would be that M does not have the necessary matrilineal connection in his ethnic origin.
Again as Lord Kerr puts it, the terminus for the OCR was a decision on a matter of religion but the route to that terminus was one of ethnic origin.
In my opinion the state of mind of JFS, the Chief Rabbi and the OCR are all irrelevant to the determination of the critical question under section 1(1)(a).
I agree with Lord Mance that there are two ways in which direct discrimination can be established.
The first is where, whatever the motive and whatever the state of mind of the alleged discriminator, the decision or action was taken on a ground that was inherently racial and the second is where the decision or action was taken on a ground that was subjectively racial.
Until now this distinction has not perhaps been as clearly identified in the authorities as it should be.
The first class of case was established by R v Birmingham County Council ex p Equal Opportunities Commission [1989] AC 1155, where (as Lord Mance puts it) girls were required to achieve a higher standard than boys for grammar school entry because of a disparity in the number of grammar school places for boys and girls.
Lord Goff, with whom the other members of the appellate committee agreed, made it clear at page 1194B that the question was simply whether there was less favourable treatment on the ground of sex, in other words if the relevant girl or girls would have received the same treatment as the boys but for their sex.
The intention or motive of the council was not a necessary condition of liability.
That was a question of fact and it was held by Lord Goff in the passage quoted by Lord Mance from page 1194C D that whatever may have been the intention or motive of the council, nevertheless it is because of their sex that the girls in question receive less favourable treatment than the boys, and so are the subject of discrimination under the Act of 1975.
In James v Eastleigh Borough Council [1990] 2 AC 751, the swimming pool case, it was held that the test for free entry to the swimming pool at pensionable age unlawfully discriminated against men because men did not reach pensionable age until 65 whereas women reached it at 60.
It is true that the House of Lords divided three to two but that seems to me to be irrelevant.
The simple question was again a question of fact, namely whether men and women were treated differently.
It was held that they were, even though, as Lord Mance has suggested, the test was probably adopted because it was thought that those of pensionable age would be more needy.
Lord Goff said much the same as he had said in the Birmingham case.
He put it thus at page 772B G: I turn to that part of the Vice Chancellor's reasoning which is based upon the wording of section 1(1)(a).
The problem in the present case can be reduced to the simple question did the defendant council, on the ground of sex, treat the plaintiff less favourably than it treated or would treat a woman? As a matter of impression, it seems to me that, without doing any violence to the words used in the subsection, it can properly be said that, by applying to the plaintiff a gender based criterion, unfavourable to men, which it has adopted as the basis for a concession of free entry to its swimming pool, it did on the ground of sex treat him less favourably than it treated women of the same age and in particular Mrs. James.
In other words, I do not read the words on the ground of sex as necessarily referring only to the reason why the defendant acted as he did, but as embracing cases in which a gender based criterion is the basis upon which the complainant has been selected for the relevant treatment.
Of course, there may be cases where the defendant's reason for his action may bring the case within the subsection, as when the defendant is motivated by an animus against persons of the complainant's sex, or otherwise selects the complainant for the relevant treatment because of his or her sex.
But it does not follow that the words on the ground of sex refer only to case where the defendants reason for his action is the sex of the complainant; and, in my opinion, the application by the defendant to the complainant of a gender based criterion which favours the opposite sex is just as much a case of unfavourable treatment on the ground of sex.
Such a conclusion seems to me to be consistent with the policy of the Act, which is the active promotion of equal treatment of men and women.
Indeed, the present case is no different from one in which the defendant adopts a criterion which favours widows as against widowers, on the basis that the former are likely to be less well off; or indeed, as my noble and learned friend, Lord Bridge of Harwich has pointed out, a criterion which favours women between the ages of 60 and 65, as against men between the same ages on the same basis.
It is plain to me that, in those cases, a man in either category who was so treated could properly say that he was treated less favourably on the ground of sex, and that the fact that the defendant had so treated him for a benign motive (to help women in the same category, because they are likely to be less well off) was irrelevant.
Lord Bridge and Lord Ackner said much the same.
For example, Lord Bridge said at page 763H that the use of the statutory criterion for pensionable age, being fixed at 60 for women and 65 for men, was to use a criterion which directly discriminated between men and women.
See also per Lord Bridge at page 765G.
Lord Ackner said at page 769F H that the formula used was inherently discriminatory.
He noted that no evidence had been given in the county court as to why the council had decided on the policy.
He said that such evidence would have been irrelevant because, as he put it, the policy was crystal clear.
If you were a woman you could swim at 60 without payment whereas if you were a man you had to wait until you were 65.
The reason why the policy was adopted could in no way affect or alter the fact that the council had decided to implement a policy by virtue of which men were to be treated less favourably than women and were to be treated on the ground of, ie by reason of, their sex.
In my opinion that analysis applies here.
Just as in that case the admissions criteria were gender based and thus discriminatory on the ground of sex contrary to section 1(1)(a) of the Sex Discrimination Act 1975, so here the JFS admissions criteria were based on ethnicity and thus discriminatory on racial grounds as defined in section 1(1)(a) of the 1976 Act.
For my part I do not accept that more recent decisions of the House of Lords call for a more nuanced approach than that stated in the Birmingham and Eastleigh cases.
As I read the later cases, they simply accept, as Lord Goff accepted in the passage from his speech in the Eastleigh case quoted above, that there may be cases where the defendant's reason for his action may bring the case within the subsection, as when the defendant is motivated by an animus against persons of the complainant's sex, or otherwise selects the complainant for the relevant treatment because of his or her sex or (I am sure he would have added) because of his or her race or ethnicity.
As I see it, this is a separate basis on which direct discrimination can be established.
It does not involve any alteration to the principle stated by Lord Goff, Lord Bridge and Lord Ackner and set out above.
In Nagarajan v London Regional Transport [2000] 1 AC 501 the House of Lords was concerned with an allegation of alleged unlawful victimisation under section 2 of the 1976 Act.
It applied the same principles as those applicable under section 1(1)(a).
The leading speech was given by Lord Nicholls, Lord Steyn made a concurring speech, Lord Hutton and Lord Hobhouse agreed with Lord Nicholls and Lord Steyn, and Lord Browne Wilkinson dissented.
Lord Steyn said at page 520H that the Birmingham and Eastleigh cases established the principle that conscious motivation is not required for direct discrimination.
In these circumstances it is inherently unlikely that there is any distinction between the principles established by those cases and the reasoning in Nagarajan.
In my opinion there is not.
Reliance was placed on part of the speech of Lord Nicholls.
Read in context, the relevant passage is in these terms at pages 510H 511E: The first point raised is whether conscious motivation is a prerequisite for victimisation under section 2 of the Act.
Section 2 should be read in the context of section 1.
Section 1(1)(a) is concerned with direct discrimination, to use the accepted terminology.
To be within section 1(1)(a) the less favourable treatment must be on racial grounds.
Thus, in every case it is necessary to inquire why the complainant received less favourable treatment.
This is the crucial question.
Was it on grounds of race? Or was it for some other reason, for instance because the complainant was not so well qualified for the job? Save in obvious cases, answering the crucial question will call for some consideration of the mental processes of the alleged discriminator.
Treatment, favourable or unfavourable, is a consequence which follows from a decision.
Direct evidence of a decision to discriminate on racial grounds will seldom be forthcoming.
Usually the grounds of the decision will have to be deduced, or inferred, from the surrounding circumstances.
The crucial question just mentioned is to be distinguished sharply from a second and different question: if the discriminator treated the complainant less favourably on racial grounds, why did he do so? The latter question is strictly beside the point when deciding whether an act of racial discrimination occurred.
For the purposes of direct discrimination under section 1(1)(a), as distinct from indirect discrimination under section 1(1)(b), the reason why the alleged discriminator acted on racial grounds is irrelevant.
Racial discrimination is not negatived by the discriminator's motive or intention or reason or purpose (the words are interchangeable in this context) in treating another person less favourably on racial grounds.
In particular, if the reason why the alleged discriminator rejected the complainant's job application was racial, it matters not that his intention may have been benign.
For instance, he may have believed that the applicant would not fit in, or that other employees might make the applicant's life a misery.
If racial grounds were the reason for the less favourable treatment, direct discrimination under section 1(1)(a) is established. (My emphasis)
Lord Nicholls then added at page 511E H that this law, which is well established was confirmed by the House of Lords in the Birmingham and Eastleigh cases as described above.
He said that in the Birmingham case the answer to the crucial question was plain because, as a matter of fact, girls received less favourable treatment than boys.
It followed that there was direct sex discrimination and the reason for it was irrelevant.
The same was true in Eastleigh because the reduction in swimming pool charges was geared to a criterion which was itself gender based.
It is true that Lord Nicholls added this: Lord Bridge of Harwich, at p 765, described Lord Goff's test in the Birmingham case as objective and not subjective.
In stating this he was excluding as irrelevant the (subjective) reason why the council discriminated directly between men and women.
He is not to be taken as saying that the discriminator's state of mind is irrelevant when answering the crucial, anterior question: why did the complainant receive less favourable treatment?
The essence of Lord Nicholls view can be seen in the italicised passages in the quotation at para 139 above.
If, viewed objectively, the discriminator discriminated against the claimant on racial grounds the reason why he did so is irrelevant.
Thus in Birmingham and Eastleigh the sex discrimination was objectively plain from the criteria adopted.
Once that was established, the state of mind of the discriminator was, as Lord Nicholls put it, strictly beside the point.
That, as I see it, is this case.
This is a plain or obvious case of the kind Lord Nicholls had in mind because the position is clear from the OCRs criteria.
When he said in the first of the italicised passages that, save in obvious cases, answering the crucial question will call for some consideration of the mental processes of the alleged discriminator, he had in mind, not this kind of case, which he would have regarded as obvious, but the kind of case he had just mentioned namely where the claimant was discriminated against but it was not clear whether that was because of unlawful discrimination on the ground of, say, race or sex, or for some other reason, for instance, because the complainant was not so well qualified for the job.
This is not such a case.
In this connection I cannot agree with Lord Hopes analysis of the passage quoted at para 194 from page 512 of Lord Nicholls speech in Nagarajan.
Lord Nicholls was there considering the question of unconscious motivation.
He was doing so because that was not a case of discrimination inherent in the relevant rules such as existed in Birmingham, Eastleigh and this case.
In these circumstances it is not, in my opinion, possible to draw from that passage in Lord Nicholls speech the proposition that if, after careful and thorough investigation, the tribunal were to conclude that the employers actions were not racially motivated, in the sense that race was not the reason why he acted as he did, it would be entitled to draw the inference that the complainant was not treated less favourably on racial grounds.
It would not be so entitled for the reasons given in Birmingham and Eastleigh, namely that this is a case of inherent discrimination.
Equally, when Lord Nicholls said in Chief Constable of West Yorkshire Police v Khan [2001] 1 WLR 1947, para 29 that the question was why the discriminator acted as he did or, put another way, what consciously or unconsciously was his reason, Lord Nicholls was not considering this kind of case.
For the same reason I do not think that the decision in Shamoon v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 11, [2003] ICR 337, is of any assistance in this kind of case.
In these circumstances I agree with Lord Hope at para 195 that at the initial stage, when the question is whether or not the discrimination was on racial grounds, the alleged discriminators motivation may not only be relevant but also necessary, in order to reach an informed decision as to whether or not this was a case of racial discrimination.
However, I emphasize the word may because, for the reasons I have already given, the discriminators motivation or subjective reasoning is not in my opinion relevant in every case.
The authorities, namely Birmingham, Eastleigh and Nagarajan show that it is not relevant where the criteria adopted or (in Lord Ackners words) the formula used are or is inherently discriminatory on ethnic grounds.
Lord Nicholls has however shown that it is relevant in other cases where, without investigating the state of mind of the alleged discriminator, it is not possible to say whether the discrimination was on ethnic grounds or not.
The question arises what considerations are relevant in answering the question whether the criteria were inherently racial.
I entirely accept (and there is indeed no dispute) that JFS, the Chief Rabbi and the OCR are, as Lord Hope puts it at para 201, thoughtful, well intentioned and articulate and that, as Lord Pannick submitted, the Chief Rabbi was not in the least interested in Ms ethnicity.
It is true that, if the Chief Rabbi were asked why he acted as he did, he would say that his reason was that this was what was required of him by fundamental Orthodox Jewish religious law.
Again as Lord Hope puts it, Jewishness based on matrilineal descent from Jewish ancestors has been the Orthodox religious rule for many thousands of years, subject only to the exception for conversion.
I agree so far.
However, I do not agree that to say that his ground was a racial one is to confuse the effect of the treatment with the ground itself.
The reason I disagree with Lord Hope (or perhaps the ground on which I do so) is that his opinion depends upon the state of mind of the Chief Rabbi.
Thus in the passage in Lord Nicholls speech to which Lord Hope refers Lord Nicholls was considering the kind of case in which it is necessary to consider the mental processes of the alleged discriminator.
Lord Hope makes it clear at para 201 that to categorise the criteria as based on racial grounds might be justified if there were reasons for doubting the Chief Rabbis frankness or good faith.
However, to my mind it does not follow that the criteria were not based on racial grounds because neither the Chief Rabbi nor the OCR thought that they were.
If the religious grounds were themselves based on racial (or ethnic) grounds then one of the grounds upon which there was discrimination based on the criteria was ethnic.
This appears from both the Birmingham and the Eastleigh cases.
I have already expressed the view that the principles in those cases apply here.
Lord Rodger however says that they do not come into the picture.
As I see it, that could only be on the basis that the issue is resolved by the subjective state of mind of the Chief Rabbi, the OCR and the governors of JFS.
It is said that the governors were not asked to consider and, did not actually consider, Ms ethnic origins and, if they had done so, that they would have regarded them as irrelevant.
However, they considered the criteria which Orthodox Judaism had applied for very many years and, although I entirely accept that they did so for religious reasons, I do not accept they were not considering Ms ethnic origins or making a decision on ethnic grounds.
Such a view would be to take too narrow a view of the concept of ethnic origins or of the meaning of ethnic origin in sections 1(1)(a) and 3 of the 1976 Act.
As I see it, once it is accepted (as Lord Brown does) that the reason M is not a member of the Jewish religion is that his forbears in the matrilineal line were not Orthodox Jews and that, in that sense his less favourable treatment is determined by his descent, it follows that he is discriminated against on ethnic grounds.
It makes no difference whether the reason M is not acceptable is that neither his mother nor anyone in his matrilineal line was born Jewish or that his mother was not converted to Orthodox Judaism.
The question is, in my opinion, not that espoused by Lord Rodger, but whether it is discrimination on ethnic grounds to discriminate against all those who are not descended from Jewish women.
In my opinion it is.
Lord Phillips, Lady Hale, Lord Mance and Lord Kerr have explained in detail why in their view the criteria were indeed discriminatory on ethnic and therefore racial grounds.
I agree with their reasoning and do not wish further to add to it.
In short, it is not in dispute that the decision in Ms case was taken on the basis of the criteria laid down by the OCR and followed by JFS.
It follows that, if the criteria involved discrimination based on ethnic grounds, the decision was taken on a ground that was inherently racial and there was direct discrimination within section 1(1)(a) of the 1976 Act.
If that is so, as I see it, the fact that the discrimination was also on religious grounds is irrelevant, as are both the fact that the religious grounds have been adopted for thousands of years and the fact that the Chief Rabbi and the OCR (and therefore JFS) concentrated wholly on the religious questions.
In the Court of Appeal at para 30 Sedley LJ, with whom Smith LJ and Rimer LJ agreed, expressed the view that if that were not so, a person who honestly believed, as the Dutch Reformed Church of South Africa until recently believed, that God had made black people inferior and had destined them to live separately from whites, would be able to discriminate openly against them without breaking the law.
I agree.
It is to my mind no answer to say that the discrimination invited by the belief, on the grounds of colour, was overtly racist.
It is true that such discrimination would be overtly on racial grounds but that is because the criteria were inherently based on racial grounds and not because of the subjective state of mind of the members of the Dutch Reformed Church or because of some principle of public policy.
However, the 1976 Act banning direct discrimination is an application of public policy, rather like the decision of the of the United States Supreme Court in Bob Jones University v United States 461 US 574 (1983).
I would however add that if, contrary to the views I have expressed, the state of mind of the Chief Rabbi and the OCR are relevant they must surely have subjectively intended to discriminate against applicants like M on the grounds set out in the criteria so that, again, if the criteria are based on ethnic grounds contrary to section 1(1)(a), they must surely have subjectively intended that result, however much the reason they did so was, as they saw it, religious.
Finally, under the heading of direct discrimination, I would like to identify some of the aspects of the argument that I regard as irrelevant to the resolution of the single question whether the OCR criteria discriminate against applicants who do not meet the criteria on ethnic, and thus racial, grounds contrary to section 1(1)(a) of the 1976 Act.
They include the following. i) It is suggested that the 1976 Act does not outlaw discrimination by an ethnic group against the same ethnic group.
However, as I see it, the question is simply whether the discrimination is on ethnic grounds.
The discrimination is not in dispute.
I do not see that the identity of the discriminator is of any real relevance to the answer to the question.
There is certainly nothing in the language or the context of section 1 of the Act or in its statutory purpose to limit the section in that way. ii) Like any statutory provision, the language of section 1(1)(a) should be construed in its context and having regard to its statutory purpose.
Parliament decided to distinguish between direct and indirect discrimination.
Adopting that approach, I am not persuaded that it is appropriate to construe section 1(1)(a) narrowly because it is not possible to justify the discrimination outlawed by it.
Parliament could, like the European Convention on Human Rights, have permitted justification but, for policy reasons, chose not to. iii) For whatever reason, the question of construction of section 1(1)(a) has not arisen before.
I do not, however, think that it can be relevant to that question that, if the respondents argument is correct, JFS has been acting unlawfully for more than thirty years.
The question is the same now as it would have been if it had been raised thirty years ago.
The provisions of the Equality Act 2006 are irrelevant for the same reasons.
I accept that this case is curious in that both M and E are Masorti Jews who, like Orthodox Jews, recognise those whose mothers or others in the matrilineal line were Jews by descent or conversion.
The real complaint is that the OCR does not accept conversion as practised by Masorti Jews because otherwise M would have qualified.
I take Lord Browns point at para 248, (a) that E is not really seeking to prevent JFS from adopting oversubscription criteria which give priority to Jews but rather for JFS to define Jews more expansively than Orthodox Jews in fact do, and (b) that on the respondents argument it is strictly immaterial that E is Jewish or that Ms mother converted to Judaism, so that the policy could by struck down by anyone excluded by the application of the criteria.
I recognise that there is an irony here but I do not see that that fact is relevant in answering the question posed by the statute, namely whether the discrimination is on ethnic grounds.
I do not regard the consequences of the conclusion that the OCR criteria discriminate on ethnic grounds as relevant to the question whether they do or not.
I am in any event not persuaded that they are anything like as serious as was suggested in argument. iv) v)
It follows that I too would dismiss the appeal.
Indirect discrimination
Like Lord Kerr, I entirely agree with the reasoning and conclusion of Lord Mance on this issue, although if the appeal is dismissed on the direct discrimination issue, the issue of indirect discrimination does not arise.
I agree with Lord Hopes reasoning and conclusions on costs.
Postscript
I wish to stress that nothing in the reasoning which has led me (or I believe others) to the conclusion that the criteria adopted by JFS discriminated against applicants on ethnic grounds is based on the view that the Chief Rabbi, the OCR or JFS acted in a racist way.
In this regard I entirely agree with Lord Phillips and Lady Hale that any suggestion that they acted in a racist way in the popular sense of that term must be dismissed.
Finally I direct the reader to the final paragraph in the judgment of Lord Kerr, at para 124 above, with which I am in complete agreement.
The Minority Judgments
LORD HOPE
It has long been understood that it is not the business of the courts to intervene in matters of religion.
In R v Chief Rabbi of the United Hebrew Congregations of Great Britain and the Commonwealth, ex p Wachmann [1992] 1 WLR 1036, 1042 1043, Simon Brown J observed that the court was hardly in a position to regulate what was essentially a religious function in that case, the determination whether someone was morally and religiously fit to carry out the spiritual and pastoral duties of his office.
As he put it, the court must inevitably be wary of entering so self evidently sensitive an area, straying across the well recognised divide between church and state.
This too is the approach of the legislature, as Hoffmann LJ said in R v Disciplinary Committee of the Jockey Club, ex p Aga Khan [1993] 1 WLR 909, 932: religion is something to be encouraged but it is not the business of government.
It is just as well understood, however, that the divide is crossed when the parties to the dispute have deliberately left the sphere of matters spiritual over which the religious body has exclusive jurisdiction and engaged in matters that are regulated by the civil courts.
In Percy v Board of National Mission of the Church of Scotland [2005] UKHL 73, [2006] 2 AC 28, for example, the appellant was employed by the Board of Mission under a contract personally to execute work within the meaning of section 82(1) of the Sex Discrimination Act 1975.
The articles declaratory of the constitution of the Church of Scotland set forth in the Schedule to the Church of Scotland Act 1921 contain an assertion that the civil authority has no right of interference in the proceedings and judgments of the Church within the sphere of its spiritual government and jurisdiction.
But it was held that by entering into a contract binding under the civil law the parties had put themselves within the jurisdiction of the civil courts and that the appellants claim of sex discrimination could not be regarded as a spiritual matter.
The same approach to arguments based on religious doctrine has been adopted by the Supreme Court of Israel.
In No'ar K'halacha v The Ministry of Education, HCJ 1067/08, 6 August 2009 the Court held that, although religious affiliation as a basis for treating students differently was recognised by Israeli law, it was not an absolute claim and could not prevail over the overarching right to equality.
The school in question had established a two tier, ethnically segregated system by which students of Ashkenazi descent were automatically assigned to one group and those of Sephardi descent were assigned to another.
Although this was purportedly on religious grounds, the thinly disguised subtext was that the Ashkenazi group were superior to the Sephardi and that, as they were the elite, their education should be organised accordingly.
The Supreme Court rejected the schools argument that this was due to religious considerations, holding that they were a camouflage for discrimination cloaked in cultural disparity.
It ordered the school to end all discriminatory practices against students who were of Sephardi ethnic origin.
It is accepted on all sides in this case that it is entirely a matter for the Chief Rabbi to adjudicate on the principles of Orthodox Judaism.
But the sphere within which those principles are being applied is that of an educational establishment whose activities are regulated by the law that the civil courts must administer.
Underlying the case is a fundamental difference of opinion among members of the Jewish community about the propriety of the criteria that the Office of the Chief Rabbi of the United Hebrew Congregation of the Commonwealth (the OCR) applies to determine whether a person is or is not Jewish.
It is not for the court to adjudicate on the merits of that dispute.
But the discrimination issue is an entirely different matter.
However distasteful or offensive this may appear to be to some, it is an issue in an area regulated by a statute that must be faced up to.
It must be resolved by applying the law laid down by Parliament according to the principles that have been developed by the civil courts.
By far the most important issue in the appeals which are before this court is whether it is unlawful direct or indirect race discrimination for a faith school to adopt oversubscription criteria which give priority to children who are recognised by the OCR to be Jewish according to Orthodox Jewish principles.
There is also an appeal by the United Synagogue in relation to a costs order made against it by the Court of Appeal, which I shall deal with briefly at the end of this opinion.
Almost everything that I wish to say will be devoted to the main issue.
I should make it clear at the outset that I agree with everything that Lord Rodger and Lord Brown say on the issue of direct discrimination.
With much regret, I differ from them on the indirect discrimination issue.
But I differ from them only when I reach the final step in that part of the argument.
On both issues I agree entirely with Lord Walker.
As for the facts, I have dealt with them more fully than would normally be appropriate in a minority judgment.
I hope that, by doing so, I will have made it easier for all other members of the court to concentrate on the issues of law that arise in this case.
The facts
JFS, formerly the Jewish Free School, is a voluntary aided comprehensive secondary school which is maintained by the local authority, the London Borough of Brent.
It has a long and distinguished history which can be traced back to 1732.
It has over 2000 pupils, and for more than the past 10 years it has been over subscribed.
It regularly has twice the number of applicants for the places that are available.
Clause 8 of its Instrument of Government dated 18 October 2005 provides: Statement of School Ethos Recognising its historic foundation, JFS will preserve and develop its religious character in accordance with the principles of orthodox Judaism, under the guidance of the Chief Rabbi of the United Hebrew Congregations of the Commonwealth.
The School aims to serve its community by providing education of the highest quality within the context of Jewish belief and practice.
It encourages the understanding of the meaning of the significance of faith and promotes Jewish values for the experience of all its pupils.
Further information is given by the school on its website, which states: The outlook and practice of the School is Orthodox.
One of our aims is to ensure that Jewish values permeate the School.
Our students reflect the very wide range of the religious spectrum of British Jewry.
Whilst two thirds or more of our students have attended Jewish primary schools, a significant number of our Year 7 intake has not attended Jewish schools and some enter the School with little or no Jewish education.
Many come from families who are totally committed to Judaism and Israel; others are unaware of Jewish belief and practice.
We welcome this diversity and embrace the opportunity to have such a broad range of young people developing Jewish values together.
The culture and ethos of the school is Orthodox Judaism.
But there are many children at JFS whose families have no Jewish faith or practice at all.
Prior to the decision of the Court of Appeal in this case the principal admissions criterion of JFS was that, unless undersubscribed, it would admit only children who were recognised as being Jewish by the OCR.
Its policy for the year 2008/09, which can be taken to be the same as that for the year in question in this case, was as follows: It is JFS (the School) policy to admit up to the standard admissions number children who are recognised as being Jewish by the Office of the Chief Rabbi of the United Hebrew Congregation of the Commonwealth (OCR) or who have already enrolled upon or who have undertaken, with the consent of their parents, to follow any course of conversion to Judaism under the approval of the OCR.
The Chief Rabbi is the head of the largest groups of Orthodox synagogues in the United Kingdom.
But he does not represent all Orthodox communities, nor does he represent the Masorti, Reform and Progressive Jewish communities.
In accordance with Jewish law, the OCR recognises as Jewish any child who is descended from a Jewish mother.
The mother herself must be descended from a Jewish mother or must have been converted to Judaism before the birth of the child in a manner recognised as valid by the OCR.
Such a child is recognised by the OCR as Jewish regardless of the form of Judaism practised by the family (Orthodox, Masorti, Reform or Progressive).
He is so recognised even if the entire family has no Jewish faith or observance at all.
A family may be entirely secular in its life and outlook.
Its members may be atheists or even be practising Christians or practising Muslims.
Yet, if the child was himself born of a Jewish mother, he will be recognised as Jewish by the OCR and eligible for a place at JFS.
These proceedings have been brought in relation to a child, M on the application of his father, E. Ms father is of Jewish ethnic origin.
Ms mother is Italian by birth and ethnic origin.
Before she married E she converted to Judaism under the auspices of a non Orthodox synagogue.
Her conversion is recognised as valid by the Masorti, Reform and Progressive Synagogues.
But it was undertaken in a manner that is not recognised by the OCR.
She and E are now divorced and M lives mainly with his father.
He and his father practise Judaism, and they are both members of the Masorti New London Synagogue.
M practices his own Jewish faith, prays in Hebrew, attends synagogue and is a member of a Jewish Youth Group.
But the OCR does not recognise him as of Jewish descent in the maternal line.
His mother is not recognised as Jewish by the OCR and he has not undergone, or undertaken to follow, a course of approved Orthodox conversion.
Consequently he was unable to meet the schools criterion for admission.
In April 2007 he was refused a place at JFS for year 7 in the academic year 2007 2008.
The effect of this decision on M and his family was profound and it was distressing.
There was no other Jewish secondary school in London to which he could be admitted.
So he was denied the opportunity of obtaining a Jewish secondary education in accordance with the familys religious beliefs and preference.
On 15 April 2007 E notified JFSs Admission Appeals Panel that he wished to appeal.
After a hearing on 5 June 2007, the Appeal Panel dismissed his appeal.
In its decision letter of 11 June 2007 the Appeal Panel said that a challenge to the admissions criteria was outside its remit.
On 2 July 2007 E referred his objection to the Schools Adjudicator, challenging JFSs admissions criteria for both under subscription and oversubscription.
On 27 November 2007 the Schools Adjudicator upheld his complaint about the under subscriptions criteria, but he dismissed it in relation to the oversubscription criteria with which this case is concerned.
E then raised proceedings for judicial review of JFSs decision to refuse M a place at the school and of the decision of the Appeal Panel to dismiss his appeal.
In separate proceedings he sought judicial review of the decision of the Schools Adjudicator.
On 3 July 2008 Munby J dismissed both claims for judicial review, except for Es claim that the Governing Body of JFS was in breach of its duty under section 71 of the Race Relations Act 1976 to have due regard to the need to eliminate racial discrimination and to promote equality of opportunity and good race relations: [2008] EWHC 1535 (Admin); [2008] ELR 445.
He rejected Es argument that there had been direct discrimination on the grounds of race or ethnic origins, holding that it was based on religion: para 174.
He also rejected his argument that there was indirect race discrimination, holding that, as JFS exists as a school for Orthodox Jews, its admissions policy of giving preference to children who were Jewish by reference to Orthodox Jewish principles was a proportionate means of achieving a legitimate aim within the meaning of section 1(1A)(c) of the 1976 Act: paras 201 202.
He made a declaration to the effect that JFS was in breach of section 71.
But in para 214 of his judgment he said that even the fullest and most conscientious compliance with that section would not have led to any difference in the crucial part of the admissions policy or its application in Ms case.
On 25 June 2009 the Court of Appeal (Sedley, Smith and Rimer LJJ) allowed the appeal by E in both sets of proceedings: [2009] EWCA Civ 626; [2009] 4 ALL ER 375.
Sedley LJ said that the courts essential difference with Munby J was that what he characterised as religious grounds were, in its judgment, racial grounds notwithstanding their theological motivation: para 48.
As that observation indicates, the point at issue in this case is how the grounds are to be characterised.
It is, in the end, a very narrow one.
But it is by no means a simple one to resolve, as the division of opinion in this court indicates.
The Race Relations Act 1976
Section 1 of the Race Relations Act 1976 defines race discrimination.
It was amended by the Race Relations Act 1976 (Amendment) Regulations 2003 (SI 2003/1626) which, implementing Council Directive 2000/43 EC of 29 June 2000, rewrote in European terms the concept of indirect discrimination.
So far as material it provides as follows: (1) A person discriminates against another in any circumstances relevant for the purposes of any provision of this Act if (a) on racial grounds he treats that other less favourably than he treats or would treat other persons (1A) A person also discriminates against another if, in any circumstances relevant for the purposes of any provision referred to in subsection (1B), he applies to that other a provision, criterion or practice which he applies or would apply equally to persons not of the same race or ethnic or national origins as that other, but (a) which puts or would put persons of the same race or ethnic or national origins as that other at a particular disadvantage when compared with other persons, (b) which puts or would put that other at that disadvantage, and (c) which he cannot show to be a proportionate means of achieving a legitimate aim. (1B) The provisions mentioned in subsection (1A) are (b) section 17;
(c) section 19B
Section 3 of the 1976 Act provides: (1) In this Act, unless the context otherwise requires racial grounds means any of the following grounds, namely colour, race, nationality or ethnic or national origins; racial group means a group of persons defined by reference to colour, race, nationality or ethnic or national origins, and references to a persons racial group refer to any racial group into which he falls. (2) The fact that a racial group comprises two or more distinct racial groups does not prevent it from constituting a particular racial group for the purposes of this Act. (4) A comparison of the case of a person of a particular racial group with that of a person not of that group under section 1(1) or (1A) must be such that the relevant circumstances in the one case are the same, or not materially different, in the other.
Section 17 makes it unlawful for the governing body of a maintained school to discriminate against a person in the terms that it offers to admit him to the establishment as a pupil, or by refusing or deliberately omitting to accept an application for his admission to the establishment as a pupil.
Section 19B(1) provides that it is unlawful for a public authority in carrying out any functions of the authority to do any act which constitutes discrimination.
These provisions make it clear that the sphere within which the OCR was providing guidance to JFS was firmly within the jurisdiction of the civil courts.
The admission arrangements
The context in which JFSs admissions criteria must be examined is provided by statute.
The functioning of publicly funded schools is governed by the School Standards and Framework Act 1998 (the 1998 Act).
Schools maintained by local authorities are referred to as maintained schools.
They include voluntary aided schools such as JFS: section 20(1)(c).
Section 20(1) of the Education Act 2002 provides that for every maintained school there shall be an instrument of government which determines the constitution of the governing body and other matters relating to the school.
Section 69 of the 1998 Act imposes duties in regard to the provision of religious education in community, foundation and voluntary schools.
Section 69(3) provides that a foundation or voluntary school has a religious character if it is designated as a school having such a character by an order made by the Secretary of State.
Section 69(4) requires such an order to state the religion or religious denomination in accordance with whose tenets religious education is, or may be, required to be provided at the school.
Under the Religious Character of Schools (Designation Procedure) Regulations 1998 (SI 1998/2535) the Secretary of State is required to designate the religion or religious denomination he considers relevant, following consultation with the schools governing body.
By the Designation of Schools Having a Religious Character (England) Order 1999 (SI 1999/2432) the Secretary of State designated JFS as having a religious character which is Jewish.
Some other schools have been designated as Orthodox Jewish.
By the Designation of Schools Having a Religious Character (Independent Schools) (England) (No 2) Order 2003 (SI 2003/3284) two schools were designated under this description.
Part 2 of the Equality Act 2006 introduced a prohibition on discrimination on grounds of religion or belief in the provision of goods and services.
Section 49 provides that it is unlawful for the responsible body of, among others, a school maintained by a local education authority to discriminate against any person by, among other things, refusing to accept an application to admit him as a pupil.
Section 50 contains a list of exceptions to section 49, among which is one in favour of a school designated under 69(3) of the 1998 Act.
As Munby J pointed out, this provision does no more than immunise the school from liability for religious discrimination under the 2006 Act: para 137.
It does not immunise it from any liability for racial discrimination that it may have under the Race Relations Act 1976.
Section 84 of the 1998 Act provides that the Secretary of State shall issue, and may from time to time revise, a code of practice for the discharge of their functions under Chapter 1 of Part III of the Act by, among others, the governing bodies of maintained schools and that the governing bodies must act in accordance with the code.
Paragraphs 2.41 2.43 of the School Admissions Code for 2007 deals with faith based oversubscription criteria.
Paragraph 2.41 states that schools designated by the Secretary of State as having a religious character (faith schools) are permitted by section 50 of the Equality Act 2006 to use faith based oversubscription criteria in order to give priority in admission to children who are members of, or who practise, their faith or denomination.
It also states that faith based criteria must be framed so as not to conflict with other legislation such as equality and race relations legislation.
Paragraph 2.43 of the 2007 Code states: It is primarily for the relevant faith provider group or religious authority to decide how membership or practice is to be demonstrated, and, accordingly, in determining faith based oversubscription criteria, admission authorities for faith schools should only use the methods and definitions agreed by their faith provider group or religious authority.
Paragraph 2.47 states: Religious authorities may provide guidance for the admission authorities of schools of their faith that sets out what objective processes and criteria may be used to establish whether a child is a member of, or whether they practise, the faith.
The admission authorities of faith schools that propose to give priority on the basis of membership or practice of their faith should have regard to such guidance, to the extent that the guidance is consistent with the mandatory provisions and guidelines of this Code.
Section 88C(2) and (3) of the 1998 Act provides that Regulations may prescribe who should be consulted by the admission authority about admission arrangements.
Regulation 12 of and Schedule 2 to the School Admissions (Admission Arrangements) (England) Regulations 2008 (SI 2008/3089) provide that the person that the governing body of JFS must consult about the admission arrangements for JFS for the academic year 2010 2011 is the Chief Rabbi.
The regulations that were in force in 2007 when M was seeking admission to JFS were the Education (Determination of Admission Arrangements) Regulations 1999 (SI 1999/126) as amended which, by Regulation 5ZA and the Schedule, introduced provisions similar to those in the 2008 Regulations.
The Chief Rabbi was the person to be consulted at the time when Ms application for admission was being considered.
Provision has been made under section 88H (formerly section 90) of the 1998 Act for parents of a child of primary school age to refer an objection to a schools admission arrangements to the Schools Adjudicator.
The procedure for determining admission arrangements is governed by section 88C of the 1998 Act, formerly (as regards England) section 89.
It states that the admission arrangements are to be determined by the admission authority.
For a voluntary aided school the governing body is the admission authority: see section 88(1).
The governing body of JFS adopted an admissions policy which set out the schools over subscription criteria.
The policy that was in force in 2007 stated: 1.1 It is JFS (the School) policy to admit up to the standard admissions number children who are recognised as being Jewish by the Office of the Chief Rabbi of the United Hebrew Congregation of the Commonwealth (OCR) or who have already enrolled upon or who have undertaken, with the consent of their parents, to follow any course of conversion to Judaism under the approval of the OCR. 1.2 In the event that the School is oversubscribed then only children who satisfy the provisions of paragraph 1.1 above will be considered for admission, in accordance with the oversubscription criteria set out in Section 2 below.
JFS cannot be criticised for basing its oversubscription criteria on the guidance that it received from the OCR.
But this does not excuse it from liability for racial discrimination under the Race Relations Act 1976 if the guidance that it received was itself racially discriminatory.
The OCR's guidance
In connection with JFSs admissions for the year 2009 an application form, Application for Confirmation of Jewish Status, was issued by the OCR.
Parents were required to select from the following options: (a) I confirm that the childs biological mother is Jewish by birth. (b) I confirm that the childs biological mother has converted to Judaism. (c) I confirm that the child is adopted [in which case the childs Jewish status must be separately verified].
The guidance notes to the application form state: Jewish status is not dependent on synagogue affiliation per se, though Jewish status will not be confirmed if the child, or any of his/her maternal antecedents, converted to Judaism under non orthodox auspices.
If the childs parents were not married under orthodox auspices, further investigation will be necessary before confirmation of Jewish status is issued.
This usually entails obtaining additional documentary evidence down the maternal line.
If the childs mother was not herself born to a Jewish mother but converted to Judaism before the birth of the child, further inquiries are undertaken by the OCR before it is prepared to recognise the child as Jewish.
The OCR does not recognise the validity of conversions carried out by non Orthodox authorities, as they do not require converts to subscribe fully to the tenets of Orthodox Judaism.
The exacting process that is indicated by the wording of the application form is firmly rooted in Orthodox Jewish religious law.
Religious status is not dependent on belief, religious practice or on attendance at a synagogue.
It is entirely dependent upon descent or conversion.
It depends on establishing that the person was born to a Jewish mother or has undergone a valid conversion to Judaism.
That is a universal rule that applies throughout all Orthodox Judaism.
Ms ineligibility for admission to JFS was due to the fact that different standards are applied by the Chief Rabbi from those applied by the Masorti, Reform and Progressive communities in the determining of a persons religious status.
Nothing that I say in this opinion is to be taken as calling into question the right of the OCR to define Jewish identity in the way it does.
I agree with Lord Brown that no court would ever dictate who, as a matter of Orthodox religious law, is to be regarded as Jewish.
Nor is it in doubt that the OCRs guidance as to the effect of Orthodox Jewish religious law was given in the utmost good faith.
The question that must now be faced is a different question.
It is whether it discriminates on racial grounds against persons who are not recognised by the OCR as Jewish.
The Jewish race and ethnicity
It is common ground that for the purposes of the Race Relations Act 1976 Jews can be regarded as belonging to a group with common ethnic origins.
As Lord Brown says (see paras [245] and [250]), it is possible (leaving aside those with no connection with Judiasm at all) to regard those who are being treated less favourably and those being treated more favourably by JFSs admissions policy as being all in the same ethnic group since they are all Jews.
Lord Mance says (see paras 79, 80 and 86) that Orthodox Jews according to Orthodox Jewish principles and Jews who are not Orthodox should be regarded as forming separate ethnic groups or subgroups for present purposes.
But the evidence in this case shows that it all depends on the context.
Out on the shop floor, for example, all Jews are Jews and an employer who discriminates against them because they are Jews will be in breach of the Act.
The problem in this case is that the Chief Rabbi does not recognise as a Jew anyone who is not a Jew according to Orthodox Jewish principles.
So far as he is concerned and his concern is only with the Jewish religion there is no division of Jews into separate ethnic groups.
I agree with Lord Brown that the difficulty in this case arises because of the overlap between the concepts of religious and racial discrimination and, in the case of Jews, the overlap between ethnic Jews and Jews recognised as members of the Jewish religion.
The case does not fit easily into the legislative pattern.
It was designed to deal with obvious cases of discrimination on racial grounds.
Of course, as we are dealing in this case with faith schools, the religious test has come under scrutiny in the educational context.
But the test that is employed is nevertheless a religious one, as that is what faith schools are expected to do.
An approach to this case which assumes that Jews are being divided into separate subgroups on the grounds of ethnicity is an artificial construct which Jewish law, whether Orthodox or otherwise, does not recognise.
The Act invites this approach, as it is clear that M was being treated less favourably than other persons and this raises the question whether this was on racial grounds.
But it must be handled with very great care.
As both Lord Phillips in para 9 and Lady Hale in para 54 have emphasised, no one in this case is suggesting that the policy that JFS has adopted is racist.
The choice of words is important, and I too would wish to avoid that appalling accusation.
The use of the word racial is inevitable, however, although the discrimination that is perceived in this case is on grounds of ethnicity.
In DH v Czech Republic (2007) 47 EHRR 59, para 176, the European Court said: Discrimination on account of, inter alia, a persons ethnic origin is a form of racial discrimination.
Racial discrimination is a particularly invidious kind of discrimination and, in view of its perilous consequences, requires from the authorities special vigilance and a vigorous reaction.
It is for this reason that the authorities must use all available means to combat racism, thereby reinforcing democracys vision of a society in which diversity is not perceived as a threat but as a source of enrichment.
One has to ask whether, on the facts of this case, we really are in that territory.
The problem is that section 1(1) of the 1976 Act which prescribes direct discrimination does not distinguish between discrimination which is invidious and discrimination which is benign.
A defence of justification is not available.
In Mandla v Dowell Lee [1983] 2 AC 548 Lord Fraser of Tullybelton discussed the meaning of the word ethnic in the context of the refusal by a private school to admit a Sikh pupil whose religion and culture would not permit him to comply with the schools rules on uniform.
At p 562 he said: For a group to constitute an ethnic group in the sense of the 1976 Act, it must, in my opinion, regard itself, and be regarded by others, as a distinct community by virtue of certain characteristics.
Some of these characteristics are essential; others are not essential but one or more of them will commonly be found and will help to distinguish the group from the surrounding community.
The conditions which appeared to him to be essential were (1) a long shared history, of which the group is conscious as distinguishing it from other groups, and the memory of which it keeps alive; (2) a cultural tradition of its own, including family and social customs and manners, often but not necessarily associated with religious observance.
At p 564 he quoted with approval a passage from the judgment of Richardson J in King Ansell v Police [1979] 2 NZLR 531, 543, where he said: a group is identifiable in terms of its ethnic origins if it is a segment of the population distinguishable from others by a sufficient combination of shared customs, beliefs, traditions and characteristics derived from a common or presumed common past, even if not drawn from what in biological terms is a common racial stock.
It is that combination which gives them an historically determined social identity in their own eyes and in the eyes of those outside the group.
They have a distinct social identity based not simply on group cohesion and solidarity but also on their belief as to their historical antecedents.
It is not disputed that the group or groups to which Jews belong are ethnic according to this analysis.
They have a shared history which extends back for over three thousand years.
Their traditions and practices are maintained with much devotion and attention to detail, in a manner that is designed to keep the memory of that shared history alive.
Less favourable treatment of a person because he is, or is thought to be Jewish may therefore be regarded as discrimination against him on racial grounds: see, for example, Seide v Gillette Industries Ltd [1980] IRLR 427, paras 21 22, per Slynn J.
In that case the Employment Appeal Tribunal upheld the tribunals decision that the anti semitic comments that were made by Mr Seides fellow worker were made because he was a member of the Jewish race, not because of his religion.
The same would be true if he were to be discriminated against because he is, or is thought to be, of a particular Jewish ethnic origin.
In Mandla v Dowell Lee at p 562 Lord Fraser said that the 1976 Act is not concerned at all with discrimination on religious grounds.
But a finding that a person was treated less favourably on religious grounds does not exclude the possibility that he was treated in that way on racial grounds also.
I agree with Lord Clarke that it would be wrong in principle to treat this as an either/or question.
Direct discrimination
At one level there is no dispute about the reason why M was denied admission to JFS.
The schools admissions policy was based on the guidance which it received from the OCR.
Thus far the mental processes of the alleged discriminator do not need to be examined to discover why he acted as he did.
The dispute between the parties is essentially one of categorisation: was the OCRs guidance given on grounds of race, albeit for a religious reason, or was it solely on religious grounds? For JFS, Lord Pannick QC submits that M failed only because JFS was giving priority to members of the Jewish faith as defined by the religious authority of that faith, which was a religious criterion.
That was the ground of the decision.
The Court of Appeal was wrong to hold that the ground was that M was not regarded as of Jewish ethnic origin, and that the theological reasons for taking this view was the motive for adopting the criterion: para 29.
For E, Ms Rose submits that Lord Pannicks submissions confused the ground for the decision with its motive.
The ground spoke for itself.
It was that M was not regarded according to Orthodox Jewish principles as Jewish.
This meant that he was being discriminated against on grounds relating to his ethnicity.
This was racial discrimination within the meaning of the statute.
These contradictory assertions must now be resolved.
I wish to stress again that the issue is not simply whether M is a member of a separate ethnic group from those who are advantaged by JFSs admissions policy.
That is not where the argument in this case stops.
I agree with Lord Rodger that the decision of the majority which, as it respectfully seems to me, does indeed stop there leads to extraordinary results.
As he puts it in para 226, one cannot help feeling that something has gone wrong.
Lord Brown makes the same point when, in para 247 he stresses the importance of not expanding the scope of direct discrimination and thereby placing preferential treatment which could be regarded as no more than indirectly discriminatory beyond the reach of possible justification.
The crucial question is whether M was being treated differently on grounds of that ethnicity.
The phrase racial grounds in section 1(1)(a) of the 1976 Act requires us to consider what those words really mean whether the grounds that are revealed by the facts of this case can properly be described as racial.
Only if we are satisfied that this is so would it be right for this Court to hold that this was discrimination on racial grounds.
The development of the case law in this area has not been entirely straightforward.
The problem is that, in a new and difficult field, the need for the court to clarify one issue may result in a principle being stated too broadly.
This may make it more difficult for it to resolve other different but interlocking issues when they arise at a later date.
In Ealing London Borough Council v Race Relations Board [1972] AC 342 the House of Lords considered the phrase on the ground of colour, race or ethnic or national origins in section 1(1) of the Race Relations Act 1968 in the context of an application for housing by a Polish national It held (Lord Kilbrandon dissenting) that national origins meant something different from nationality and that it did not include it since, as Viscount Dilhorne put it at p 358, the word national in national origins means national in the sense of race and not citizenship.
There was no discussion of the meaning of the word ethnic.
Lady Hale has commented that Lord Simon of Glaisdales speech at p 364 is an interesting example of stereotyping which might raise judicial eyebrows today: The Judicial House of Lords (2009), p 578, fn 32.
The House of Lords returned to this topic in Mandla v Dowell Lee [1983] 2 AC 548.
By then nationality had been included in the definition of racial grounds in section 3(1) of the Race Relations Act 1976.
There was still no statutory prohibition of discrimination on religious grounds.
A Sikh schoolboy had been refused a place at a private school because he would not agree to cut his hair and stop wearing a turban.
The question was whether this was discrimination on grounds of race as defined in section 3(1).
The essential issue was how wide a meaning should be given to ethnic origins.
Lord Fraser, with the agreement of the other members of the Appellate Committee, gave these words a wide meaning: see para 185, above.
The next important case, which as this case shows may have sent the laws development off in the wrong direction, was R v Birmingham City Council, Ex p Equal Opportunities Commission [1989] AC 1155.
The council had three grammar schools for girls and five grammar schools for boys.
This was a historical fact, and it was not the councils policy to discriminate.
But the House held that it was unlawful for it to provide fewer grammar school places for girls than for boys.
The decision was plainly right.
But the reasons given by Lord Goff of Chieveley, with whom the other members of the Appellate Committee agreed, have led to difficulty in other cases.
At p 1194 he said: The intention or motive of the defendant to discriminate, though it may be relevant so far as remedies are concerned is not a necessary condition of liability; it is perfectly possible to envisage cases where the defendant had no such motive, and yet did in fact discriminate on the ground of sex.
That decision was applied in James v Eastleigh Borough Council [1990] 2 AC 751.
This was a case about a municipal swimming pool where there was free swimming for children under three years of age and for persons who had reached the state pension age, which was then 65 for men and 60 for women.
Mr James and his wife, who were both aged 61, went swimming and he alone was charged a sum of money for doing so.
He complained of sex discrimination.
The House of Lords, by a majority of three to two, reversed the Court of Appeal and upheld his complaint.
It held that the Court of Appeal had been wrong to treat this as a case of indirect discrimination since the councils policy was, as Lord Ackner put it at p 769, inherently discriminatory.
Lord Goff in James deprecated the use, in the present context, of words such as intention, motive, reason and purpose: p 773.
He added, at pp 773 774, that: taking the case of direct discrimination under section 1(1)(a) of the Act, I incline to the opinion that, if it were necessary to identify the requisite intention of the defendant, that intention is simply an intention to perform the relevant act of less favourable treatment.
Whether or not the treatment is less favourable in the relevant sense, ie on the ground of sex, may derive either from the application of a gender based criterion to the complainant, or from selection by the defendant of the complainant because of his or her sex; but in either event, it is not saved from constituting unlawful discrimination by the fact that the defendant acted from a benign motive.
More recent decisions of the House of Lords show, however, that where the facts are not so clear cut a more nuanced approach may be called for.
The need to establish an objective link between the conduct of the alleged discriminator and the unequal treatment complained of does not exclude the need to explore why the alleged discriminator acted as he did.
As the division of Jews into separate subgroups is in itself such an artificial concept (see paras 183 and 184 above), that seems to me to be the real issue in this case.
In Nagarajan v London Regional Transport [2000] 1 AC 501, 510 511 Lord Nicholls of Birkenhead made an important statement of principle which has often been cited and applied: Thus, in every case it is necessary to inquire why the complainant received less favourable treatment.
This is the crucial question.
Was it on grounds of race? Or was it for some other reason, for instance, because the complainant was not so well qualified for the job? Save in obvious cases, answering the crucial question will call for some consideration of the mental processes of the alleged discriminator.
Treatment, favourable or unfavourable, is a consequence which follows from a decision.
Direct evidence of a decision to discriminate on racial grounds will seldom be forthcoming.
Usually the grounds of the decision will have to be deduced, or inferred, from the surrounding circumstances.
Having thus identified the ground of the decision the reason why as the crucial question, he went on to deal with the question of motive: The crucial question just mentioned is to be distinguished sharply from a second and different question: if the discriminator treated the complainant less favourably on racial grounds, why did he do so? The latter question is strictly beside the point when deciding whether an act of racial discrimination occurred.
For the purposes of direct discrimination under section 1(1)(a), as distinct from indirect discrimination under section 1(1)(b), the reason why the alleged discriminator acted on racial grounds is irrelevant.
Racial discrimination is not negatived by the discriminators motive or intention or reason or purpose (the words are interchangeable in this context) in treating another person less favourably on racial grounds.
In particular, if the reason why the alleged discriminator rejected the complainants job application was racial, it matters not that his intention may have been benign.
As for Lord Goffs test in Birmingham, which Lord Bridge had described as objective and not subjective, Lord Nicholls said however that: He is not to be taken as saying that the discriminators state of mind is irrelevant when answering the crucial, anterior question: why did the complainant receive less favourable treatment? [my emphasis] Developing the same point in Chief Constable of West Yorkshire Police v Khan [2001] UKHL 48, 1 WLR 1947, para 29, Lord Nicholls said that the question was: [W]hy did the alleged discriminator act as he did? What, consciously or unconsciously, was his reason? Unlike causation, this is a subjective test.
At p 512 in Nagarajan Lord Nicholls, considering the question of subconscious motivation, added these words: Many people are unable, or unwilling, to admit even to themselves that actions of theirs may be racially motivated.
An employer may genuinely believe that the reason why he rejected an applicant had nothing to do with the applicants race.
After careful and thorough investigation of a claim members of an employment tribunal may decide that the proper inference to be drawn from the evidence is that, whether the employer realised it at the time or not, race was the reason why he acted as he did.
Conduct of this nature by an employer, when the inference is legitimately drawn, falls squarely within the language of section 1(1)(a).
The employer treated the complainant less favourably on racial grounds.
I would draw from this passage the proposition that if, after careful and thorough investigation, the tribunal were to conclude that the employers actions were not racially motivated that race was not the reason why he acted as he did it would be entitled to draw the inference that the complainant was not treated less favourably on racial grounds.
The use of the words motivated and reason in the passage which I have just quoted appears at first sight not to be in harmony with the passage which I have quoted from p 511 where he said that racial discrimination is not negatived by the discriminators motive or intention or reason or purpose (the words are interchangeable in this context) in treating another person less favourably on racial grounds.
But I do not think that, if these passages taken together are properly analysed, there is any inconsistency.
The point that he was making on p 512 was that an examination of the employers motivation, or the reason why he acted as he did, may be highly relevant to a determination of the crucial question: was this discrimination on racial grounds.
On the other hand, once that conclusion has been reached, the fact that there may have been a benign reason for the discrimination is beside the point.
In other words, the statutory ground of discrimination, once it has been established, is unaffected by the underlying motive for it.
This may be misguided benevolence as in James, or passive inertia as in Birmingham or racial hatred as in Seide.
In the Birmingham case neither the reason nor the underlying motive left much room for argument.
It was enough that the council was responsible for the continuation of the discriminatory system of grammar school education.
In James there was a worthy underlying motive but, as the sole criterion that had been chosen was the unequal pension ages for men and women, the reason was clearly gender based.
But where the complaint is that a black or female employee has not been selected for promotion, or has been taken off some particular duty, there will usually be a disputed issue as to the reason.
This will require the tribunal to inquire more closely into the mind of the alleged discriminator.
This is illustrated by Nagarajan and also by Shamoon v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 11, [2003] ICR 337.
I would hold therefore that Lord Goffs rejection of a subjective approach was expressed too broadly.
The proposition that the alleged discriminators motive, or reason, is irrelevant needs therefore to be reformulated.
It all depends on the stage of the enquiry at which these words are being used.
At the initial stage, when the question is whether or not this was discrimination on racial grounds, an examination of the alleged discriminators motivation may be not only relevant but also necessary, to reach an informed decision as to whether this was a case of racial discrimination.
As the issue is a subjective one, his mental processes will, as Lord Nicholls said at p 511, call for some consideration.
Everything that may have passed through his mind that bears on the decision, or on why he acted as he did, will be open to consideration.
But once it has been determined that this was a case of racial discrimination, that is an end of the matter.
The treatment cannot be excused by looking beyond it to why he decided to act in that way.
I regret the fact that Lord Clarke does not agree with this analysis.
As I understand his position, he prefers a test which makes the state of mind of the alleged discriminator irrelevant where the criteria he adopts are inherently discriminatory: see paras 127, 132.
The question which divides us is whether his approach is supported by Lord Nicholls statements in Nagarajan and later in Khan.
Lord Clarkes reading of the passage in Nagarajan which he has highlighted in para 139 of his opinion is that in the obvious cases, where discrimination is inherent, there is a prohibition on looking at the motivation of the alleged discriminator: see also his para 142.
But Lord Nicholls does not say this.
He makes no mention of any such prohibition.
It may be that the tribunal will not need to look at the alleged discriminators mental processes in obvious cases, as his mental state is indeed obvious.
But he does not say that the tribunal is precluded from doing so.
Lord Steyn said in Nagarajan at pp 520H 521A that conscious motivation is not required.
But, as he made clear, this does not mean that the alleged discriminators state of mind is always irrelevant.
Confirmation that this is not Lord Nicholls approach is to be found in the last full paragraph on p 511 of Nagarajan, where he explains Lord Bridges description of the test which Lord Goff adopted in Birmingham.
Lord Bridge described it as objective.
But Lord Nicholls said that he is not to be taken as saying that there is no investigation into the mind of the alleged discriminator.
He does not draw any distinctions here between cases like Birmingham and James, which Lord Clarke describes as cases of inherent discrimination (see para 142, above), and other types of cases.
The point that he is making is that even in obvious cases such as Birmingham the tribunal is not precluded from looking at the state of mind of the discriminator.
The passage from his speech in Khan to which I refer in para 193 supports this conclusion.
He describes the test as a subjective one.
Here again he does not distinguish between different types of cases.
I believe therefore that an accurate reading of what Lord Nicholls actually said, and did not say, supports my analysis.
There are few reported cases in which the tribunal has had to decide as between two prohibited reasons, such as race and gender or (since 2006) race and religion or belief.
The only authority referred to by the parties was Seide v Gillette Industries Ltd [1980] IRLR 427.
The appeal turned on the question of causation relating to the aftermath of a series of incidents of anti Semitic abuse of Mr Seide by a fellow worker.
The report does not give any details of the content of the abuse.
The only relevant passage in the judgment is at paras 21 22, recording that it was common ground that Jewish could refer to a member of an ethnic group or to a member of a religious faith, and that the tribunals decision, which it was entitled to reach on the facts, was that Mr Seide was subjected to anti Semitic abuse because of his Jewish origin.
It is reasonable to infer that it would have been open to the members of the tribunal to conclude that the abuse was as much on the ground of ethnicity as on the ground of religion and that that was enough to constitute discrimination on a prohibited ground.
This would be consistent with the principle that this is not an either/or question.
As for this case, it is as different from Seide as it is possible to imagine.
This was not a case of foul mouthed anti Semitic abuse.
Those who are said to have been responsible for the discrimination, whether at the level of the school authorities, the OCR or the Chief Rabbi himself, are thoughtful, well intentioned and articulate.
I would accept Lord Pannicks submission that the Chief Rabbi was not in the least interested in Ms ethnicity.
The OCR has left us in no doubt as to why it was acting as it did.
If the Chief Rabbi were to be asked the question that was framed by Lord Nicholls, he would say his reason was that this was what was required of him by fundamental Orthodox Jewish religious law.
The question whether or not M was Jewish in the secular sense was of no interest to him at all.
His advice was based simply and solely on his understanding of Jewish law.
Jewishness based on matrilineal descent from Jewish ancestors has been the Orthodox religious rule for many thousands of years, subject only to the exception for conversion.
To say that his ground was a racial one is to confuse the effect of the treatment with the ground itself.
It does have the effect of putting M into an ethnic Jewish group which is different from that which the Chief Rabbi recognises as Jewish.
So he has been discriminated against.
But it is a complete misconception, in my opinion, to categorise the ground as a racial one.
There is nothing in the way the OCR handled the case or its reasoning that justifies that conclusion.
It might have been justified if there were reasons for doubting the Chief Rabbis frankness or his good faith.
But no one has suggested that he did not mean what he said.
As Lord Rodger points out, to reduce the religious element to the status of a mere motive is to misrepresent what he is doing.
This case is quite different too from the example of the Dutch Reformed Church that was referred to by Sedley LJ in the Court of Appeal, para 30, and referred to again during the argument in this court.
The discrimination that its belief invited, on grounds of colour, was overtly racist.
A court would have no difficulty in dismissing the religious belief as providing no justification for it at all; see also Bob Jones University v United States, 461 US 574 (1983), where the US Supreme Court upheld the decision of the Inland Revenue Service to revoke the Universitys tax exempt status because, while permitting unmarried people who were black to enrol as students, it had adopted a racially discriminatory policy of denying admission to applicants engaged in an interracial marriage or known to advocate interracial marriage or dating although it had been based on sincerely held religious beliefs.
Beliefs of that kind are not worthy of respect in a democratic society or compatible with human dignity: Campbell and Cosans v United Kingdom (1982) 4 EHRR 293, para 36.
Here the discrimination between those who are, and those who are not, recognised as Jewish was firmly and inextricably rooted in Orthodox Jewish religious law which it is the duty of the Chief Rabbi to interpret and apply.
The Chief Rabbis total concentration on the religious issue, to the exclusion of any consideration of ethnicity, can be illustrated by two contrasting examples.
Several similar examples were referred to in the course of argument.
A is the child of parents, and the grandchild of grandparents, all of whom led wholly secular lives similar to those of their largely secular neighbours.
They never observed Jewish religious law or joined in the social or cultural life of the Jewish communities where they lived, but there is unimpeachable documentary evidence that more than a century ago the mother of As maternal grandmother was converted in an Orthodox synagogue.
To the OCR A is Jewish, despite his complete lack of Jewish ethnicity.
By contrast B is the child of parents, and the grandchild of grandparents, all of whom have faithfully observed Jewish religious practices and joined actively in the social and cultural life of the Jewish community, but there is unimpeachable documentary evidence that more than a century ago the mother of Bs maternal grandmother was converted in a non Orthodox synagogue.
To the OCR B is not Jewish, despite his obvious Jewish ethnicity.
Descent is only necessary because of the need, in these examples, to go back three generations.
But having gone back three generations, the OCR applies a wholly religious test to what has been identified as the critical event.
For the reasons given by Lord Rodger, the part that conversion plays in this process is crucial to a proper understanding of its true nature.
It cannot be disregarded, as Lady Hale suggests in para 66, as making no difference.
It shows that the inquiry is about a religious event to be decided according to religious law.
For these reasons I would hold that the decision that was taken in Ms case was on religious grounds only.
This was not a case of direct discrimination on racial grounds.
On this issue, in respectful agreement with Lord Rodger, Lord Walker and Lord Brown, I would set aside the decision reached by the Court of Appeal.
Indirect discrimination
An examination of the question whether the application of the oversubscription policy to M amounted to indirect discrimination within the meaning of section 1(1A) of the Race Relations Act 1976 falls into two parts: (1) did the policy put persons of the same race or ethnic or national origins as M at a particular disadvantage when compared with other persons: section 1(1A)(a) and (b); and, if so, (2) can JFS show that the policy was a proportionate means of achieving a legitimate aim: section 1(1A)(c).
Lord Pannick did not seek to argue that the first question should be answered in the negative.
I think that he was right not to do so, as it is clear that M and all other children who are not of Jewish ethnic origin in the maternal line, together with those whose ethnic origin is entirely non Jewish, were placed at a disadvantage by the oversubscriptions policy when compared with those who are of Jewish ethnic origin in the maternal line.
They may in theory gain entry to the school by undergoing a process of conversion that is approved by the OCR, but this in itself is a severe disadvantage.
It appears that no child has ever been admitted to JFS on this basis.
The issue on this branch of the case, therefore, is whether JFS can show that the policy had a legitimate aim and whether the way it was applied was a proportionate way of achieving it.
The burden is on JFS to prove that this was so: R (Elias) v Secretary of State for Defence [2006] EWCA Civ 1293, [2006] 1 WLR 3213, per Mummery LJ at paras 131 132.
The Court of Appeal accepted the submission that the admission criteria were explicitly related to ethnicity and so incapable of constituting or forming part of a legitimate aim and that it was not possible to justify indirect discrimination by reliance on the very thing that made the test discriminatory: para 45.
But I think that is to misapply the test that the Act lays down.
I agree with Lord Brown that there was a failure by the Court to address the questions of legitimate aim and proportionality on the assumption that the admissions policy was not directly discriminatory.
For E, Ms Rose submitted that if the aim pursued was itself related to the ethnic origins of the pupils it was not capable of being a legitimate aim.
This was how Lord Fraser put it in Mandla v Dowell Lee [1983] 2 AC 548, 566; see also Orphanos v Queen Mary College [1985] AC 761, 772.
Those were indirect discrimination cases, but they were decided under section 1(1)(b) of the 1976 Act which has now been superseded by section 1(1A): see para [170], above.
An aim which is itself discriminatory in character cannot be legitimate for the purposes of sections 1(1A).
So the assumption on which the argument about indirect discrimination proceeds is that, for the reasons I have given, JFSs admission criteria did not discriminate on grounds of ethnicity.
The question is whether, given that persons of given ethnic origins were at a particular disadvantage when compared with other persons, the school nevertheless had an aim which was legitimate.
That is a different question.
In the Administrative Court Munby J said that the aim was to educate those who, in the eyes of the OCR, are Jewish, irrespective of their religious beliefs, practices or observances, in a school whose culture and ethos is that of Orthodox Judaism: para 192.
Developing this argument, Lord Pannick submitted that it was legitimate for a faith school to give preference to those children who are members of the faith as recognised by the OCR.
If children in Ms position were admitted to the school there would inevitably be fewer places for those recognised as Jewish by the OCR.
The policy of the government was to allow schools to give priority to those of the religion for which they have been designated.
It was open to the school, under the 2007 Code, to adopt criteria based on membership or practice.
As its ethos was that of Orthodox Judaism, which the Chief Rabbi seeks to promote, membership was a legitimate criterion.
If that criterion was not adopted it would open the door to children who were not recognised as Jewish and virtually exclude those who were.
As against this, Ms Rose submitted that it was impossible to ignore the close relationship between the criterion of membership and the ethnic origins of the children.
This made it impossible for JFS to justify the criterion as legitimate.
In my opinion, however, it is necessary to look at all the circumstances to test the issue of legitimacy.
The assumption on which section 1(1A)(c) proceeds it that the treatment is open to the objection that it puts a person at a disadvantage in comparison with persons not of his race or ethnic or national origins.
The question is whether treatment which has that effect can nevertheless be shown to have a legitimate aim.
Questions about the motive and aims of the alleged discriminator come in at this stage.
An aim may be held to be legitimate even though it discriminates in the ways referred to in section 1(1A)(a) and (b).
In my opinion, for the reasons that Lord Brown gives in paras 252 253, JFS has shown that its aim is a legitimate one.
The essential point is that a faith school is entitled to pursue a policy which promotes the religious principles that underpin its faith.
It is entitled to formulate its oversubscriptions criteria to give preference to those children whose presence in the school will make it possible for it to pursue that policy.
The legitimacy of the policy is reinforced by the statutory background.
It has not emerged out of nowhere.
It has been developed in accordance with the Code which permits faith schools to define their conditions for admission by reference either to membership of the faith or to practice.
The justification for the Code lies exclusively in a belief that those who practise the faith or are members of it will best promote the religious ethos of the school.
In Orphanos v Queen Mary College [1985] AC 761, 772 773 Lord Fraser said that a typical example of a requirement which could be justified without regard to the nationality or race of the person to whom it was applied was Panesar v Nestl Co Ltd (Note) [1980] ICR 144, where it was held that a rule forbidding the wearing of beards in the respondents chocolate factory was justifiable on hygienic grounds notwithstanding that the proportion of Sikhs who could conscientiously comply with it was considerably smaller than the proportion of non Sikhs who could comply with it.
It was, he said, purely a matter of public health and nothing whatever to do with racial grounds.
I would apply the same reasoning to this case.
This leaves, however, the question of proportionality.
The Court of Appeal, having concluded that the criterion did not have an aim that was legitimate, did not attempt to examine this issue: para 47.
Before Munby J it was submitted by Ms Rose that JFSs admissions policy did not properly balance the impact of the policy on those like M adversely affected by it and the needs of the school: para 199.
He rejected this argument for two reasons.
One was that the kind of policy that is in question in this case is not materially different from that which gives preference in admission to a Muslim school to those who were born Muslim or preference in admission to a Catholic school to those who have been baptised.
The other was that an alternative admissions policy based on such factors as adherence or commitment to Judaism would not be a means of achieving JFSs aims and objectives: paras 200 201.
In my opinion these reasons miss the point to which Ms Roses submission was directed.
The question is whether putting M at a disadvantage was a proportionate means of achieving the aim of the policy.
It was for JFS to show that they had taken account of the effect of the policy on him and balanced its effects against what was needed to achieve the aim of the policy.
As Peter Gibson LJ noted in Barry v Midland Bank plc [1999] ICR 319, 335 336 the means adopted must be appropriate and necessary to achieving the objective.
I do not think that JFS have shown that this was so.
Lord Pannick submitted that there was no other way of giving effect to the policy.
If the school were to admit M, this would be to deny a place to a child who was regarded as Jewish by the OCR.
This was inevitable as the school was oversubscribed.
But what is missing is any sign that the schools governing body addressed their minds to the impact that applying the policy would have on M and comparing it with the impact on the school.
As Ms Rose pointed out, the disparate impact of the policy on children in Ms position was very severe.
They are wholly excluded from the very significant benefit of state funded education in accordance with their parents religious convictions, whereas there are alternatives for children recognised by the OCR although many in the advantaged group do not share the schools faith based reason for giving them priority.
The school claimed to serve the whole community.
But the way the policy was applied deprived members of the community such as M, who wished to develop his Jewish identity, of secondary Jewish education in the only school that is available.
There is no evidence that the governing body gave thought to the question whether less discriminatory means could be adopted which would not undermine the religious ethos of the school.
Consideration might have been given, for example, to the possibility of admitting children recognised as Jewish by any of the branches of Judaism, including those who were Masorti, Reform or Liberal.
Consideration might have been given to the relative balance in composition of the schools intake from time to time between those recognised as Jewish by the OCR who were committed to the Jewish religion and those who were not, and as to whether in the light of it there was room for the admission of a limited number of those committed to the Jewish religion who were recognised as Jewish by one of the other branches.
Ms Rose said that the adverse impact would be much less if a different criterion were to be adopted.
But the same might be true if the criterion were to be applied less rigidly.
There may perhaps be reasons, as Lord Brown indicates (see para 258), why solutions of that kind might give rise to difficulty.
But, as JFS have not addressed them, it is not entitled to a finding that the means that it adopted were proportionate.
There are cases, of which R(SB) v Governors of Denbigh High School [2006] UKHL 15, [2007] 1 AC 100 and Belfast City Council v Miss Behavin Ltd [2007] UKHL 19, [2007] 1 WLR 1420 are the best examples, where it can be said in the human rights context that the fact that the public authority had applied its mind to the issue is immaterial.
This is because in that context the issue is one of substance, not procedure.
Lord Hoffmann in Governors of Denbigh High School, para 68, gave this explanation: In domestic judicial review, the court is usually concerned with whether the decision maker reached his decision in the right way rather than whether he got what the court might think to be the right answer.
But article 9 [of the European Convention on Human Rights] is concerned with substance, not procedure.
It confers no right to have a decision made in any particular way.
What matters is the result: was the right to manifest a religious belief restricted in a way which is not justified under article 9(2)?
The problem that JFS faces in this case is a different one, as the context is different.
Under section 1(1A)(c) of the Race Relations Act 1976 the onus is on it to show that the way the admissions policy was applied in Ms case was proportionate.
It is not for the court to search for a justification for it: see Mummery LJs valuable and instructive judgment in R (Elias) v Secretary of State for Defence [2006] 1 WLR 3213, paras 131 133.
JFS failed to discharge its duty under section 71 of the Act to have regard to the need to eliminate discrimination.
It is having to justify something that it did not even consider required justification.
The question, as to which there is no obvious answer either way, was simply not addressed.
As a result the court does not have the statistical or other evidence that it would need to decide whether or not the application of the policy in Ms case was proportionate.
It may well be, as Lord Brown indicates, that devising a new oversubscriptions policy that is consistent with the schools legitimate aim would be fraught with difficulty.
But it was for JFS to explore this problem and, having done so, to demonstrate that whatever policy it came up with was proportionate.
So, although I do not arrive at this conclusion by the same route as Lord Mance, I agree with him that on the material before the Court the admissions policy cannot be held to have been justified.
I would hold that, by applying the oversubscription criteria to M in a way that put him at a particular disadvantage when compared with others not of the same ethnicity by reason of matrilineal descent, JFS discriminated against him in breach of section 1(1A) of the Race Relations Act 1976, and that E is entitled to a declaration to that effect.
The appeals on costs
In its order for costs the Court of Appeal directed that the United Synagogue and the Secretary of State must each pay 20% of Es costs in the Court of Appeal and below, and that the Schools Adjudicator must pay 10% of those costs.
The United Synagogue and the Secretary of State have both appealed, the United Synagogue formally and the Secretary of State informally, against that order to this court.
I did not understand Mr Linden QC, who appeared for the Secretary of State, to press his informal appeal and, as it has no merit, I would dismiss it.
But Mr Jaffey for the United Synagogue did make submissions in support of its appeal.
His point was that the United Synagogue had intervened in the Administrative Court on the express basis that it would not be found liable in costs which was not challenged by any other party, and that the basis for its intervention had been endorsed by Munby J when he allowed it to intervene.
He submitted that his client ought not to have been found liable by the Court of Appeal for the costs incurred at first instance, nor should it have been found liable for costs in the Court of Appeal as there was no appeal against the basis on which it had been permitted to intervene.
The situation is more complicated than that brief summary might suggest.
The nature of the United Synagogues intervention was transformed when the case reached the Court of Appeal.
Lord Pannick QC, who had not appeared below, was instructed on its behalf and assumed much responsibility for presenting the case on behalf of JFS so much so, that when the case reached this court, he appeared for JFS and not for the United Synagogue.
In that situation, as it had assumed a role that went well beyond that of an intervener, the Court of Appeal cannot be faulted for finding it liable for a share of the costs in that court.
But I do not think that what happened in the Court of Appeal should deprive the United Synagogue of the protection against an order for costs that it sought and was granted in the Administrative Court.
So I would recall that part of the Court of Appeals order.
I would replace it by a finding that the United Synagogue must pay 20% of Es costs in the Court of Appeal but not below, and that 20% of Es costs at first instance must be borne by JFS in addition to the 50% that it has already been ordered to pay.
Conclusion
I would allow the appeal by JFS against the Court of Appeals finding that the Chief Rabbis criteria discriminated directly against M on racial grounds.
I would however dismiss its appeal against the Court of Appeals finding that this was a case of indirect discrimination, although on different grounds.
I would allow the appeal by the United Synagogue against the Court of Appeals order for costs to the extent that I have indicated.
I would dismiss the Secretary of States appeal.
LORD RODGER
The claimant, E, is Jewish by matrilineal descent.
By conviction, he is a Masorti Jew.
Masorti Judaism differs in certain respects from what is generally called Orthodox Judaism.
Masorti Jews adhere to a set of beliefs and practices which have their origins in Orthodox Judaism but which are not now the same.
In particular, while both Masorti and Orthodox Judaism believe that the written and oral Torah (from which the halakhah is derived) are unchangeable and bind Jews today, they differ in their interpretation of some parts of the halakah.
Es wife converted to Judaism in an independent synagogue.
At the risk of some slight imprecision, her conversion can be described as having taken place under non Orthodox auspices.
Since the requirements for Orthodox conversion reflect Orthodox rather than Progressive or Masorti teachings and practices, her conversion is recognised by the Masorti authorities, but is not recognised by the Office of the (Orthodox) Chief Rabbi.
Therefore, while the Masorti authorities recognise her son, M, as Jewish, the Office of the Chief Rabbi does not.
But, of course, both E and M consider that M is Jewish, on the basis that his mother was Jewish when he was born.
JFS is designated by the Secretary of State under the School Standards and Framework Act 1998 as having a Jewish religious character.
The relevant regulations provide that the Schools governing body (the governors) must consult the Chief Rabbi about its admission arrangements.
Having done so, the governors adopted an admissions policy which provided that, if the School were oversubscribed, then only children who were recognised as being Jewish by the Office of the Chief Rabbi would be considered for admission.
E wanted to get M into the School.
It has an excellent reputation and has been oversubscribed for many years.
So, when E applied to have M admitted, hardly surprisingly, his application was rejected because the Office of the Chief Rabbi would not have recognised M as being Jewish.
Indeed the point was so clear that E did not apply to the London Beth Din for a determination of Ms status in Orthodox Jewish law.
In theory, the School would have considered admitting him if he had undertaken to convert under Orthodox auspices.
But the process would have taken several years and have involved M adhering to a set of beliefs that are materially different from those of Masorti Judaism.
E and M decided not to pursue that option.
The purpose of designating schools as having a religious character is not, of course, to ensure that there will be a school where Jewish or Roman Catholic children, for example, can be segregated off to receive good teaching in French or physics.
That would be religious discrimination of the worst kind which Parliament would not have authorised.
Rather, the whole point of such schools is their religious character.
So the whole point of designating the Jewish Free School as having a Jewish character is that it should provide general education within a Jewish religious framework.
More particularly, the education is to be provided within an Orthodox religious framework.
Hence the oversubscription admission criteria adopted after consulting the Chief Rabbi.
The Schools policy is to give priority to children whom the Orthodox Chief Rabbi recognises as Jewish.
From the standpoint of Orthodoxy, no other policy would make sense.
This is because, in its eyes, irrespective of whether they adhere to Orthodox, Masorti, Progressive or Liberal Judaism, or are not in any way believing or observant, these are the children and the only children who are bound by the Jewish law and practices which, it is hoped, they will absorb at the School and then observe throughout their lives.
Whether they will actually do so is, of course, a different matter.
The dispute can be summarised in this way.
E, who is himself a Masorti Jew, wants his son, whom he regards as Jewish, to be admitted to the School as a Jewish child.
He complains because the School, whose admission criteria provide that only children recognised as Jewish by the Office of the (Orthodox) Chief Rabbi are to be considered for admission, will not consider admitting his son, who is recognised as Jewish by the Masorti authorities but not by the Chief Rabbi.
If anything, this looks like a dispute between two rival religious authorities, the Office of the Chief Rabbi and the Masorti authorities, as to who is Jewish.
But E claims and this Court will now declare that, when the governors refused to consider M for admission, they were actually treating him less favourably than they would have treated a child recognised as Jewish by the Office of the Chief Rabbi on racial grounds: Race Relations Act 1976, section 1(1)(a).
The decision of the majority means that there can in future be no Jewish faith schools which give preference to children because they are Jewish according to Jewish religious law and belief.
If the majority are right, expressions of sympathy for the governors of the School seem rather out of place since they are doing exactly what the Race Relations Act exists to forbid: they are refusing to admit children to their school on racial grounds.
That is what the Courts decision means.
And, if that decision is correct, why should Parliament amend the Race Relations Act to allow them to do so? Instead, Jewish schools will be forced to apply a concocted test for deciding who is to be admitted.
That test might appeal to this secular court but it has no basis whatsoever in 3,500 years of Jewish law and teaching.
The majoritys decision leads to such extraordinary results, and produces such manifest discrimination against Jewish schools in comparison with other faith schools, that one cant help feeling that something has gone wrong.
The crux of the matter is whether, as the majority hold, the governors actually treated M less favourably on grounds of his ethnic origins.
They say the governors did so, but for a bona fide religious motive.
If that is really the position, then, as Lord Pannick QC was the first to accept on their behalf, what the governors did was unlawful and their bona fide religious motive could not make the slightest difference.
But to reduce the religious element in the actions of those concerned to the status of a mere motive is to misrepresent what they were doing.
The reality is that the Office of the Chief Rabbi, when deciding whether or not to confirm that someone is of Jewish status, gives its ruling on religious grounds.
Similarly, so far as the oversubscription criteria are concerned, the governors consider or refuse to consider children for admission on the same religious grounds.
The only question is whether, when they do so, they are ipso facto considering or refusing to consider children for admission on racial grounds.
Lady Hale says that M was rejected because of his mothers ethnic origins which were Italian and Roman Catholic.
I respectfully disagree.
His mother could have been as Italian in origin as Sophia Loren and as Roman Catholic as the Pope for all that the governors cared: the only thing that mattered was that she had not converted to Judaism under Orthodox auspices.
It was her resulting non Jewish religious status in the Chief Rabbis eyes, not the fact that her ethnic origins were Italian and Roman Catholic, which meant that M was not considered for admission.
The governors automatically rejected M because he was descended from a woman whose religious status as a Jew was not recognised by the Orthodox Chief Rabbi; they did not reject him because he was descended from a woman whose ethnic origins were Italian and Roman Catholic.
As in any complaint of racial discrimination, the point can be tested by reference to the appropriate comparator.
The starting point is that both E and M believe M to be Jewish by descent.
So E applied to the School to admit M on the basis that he was Jewish because his Italian Catholic mother had converted to Judaism before he was born.
The mothers Jewish status as a result of her conversion was accordingly the only issue which the governors were asked to consider or did consider.
They refused Es application because her conversion had been under non Orthodox auspices.
Therefore the appropriate comparator is a boy with an Italian Catholic mother whom the governors would have considered for admission.
He could only be a boy whose mother had converted under Orthodox auspices.
The question then is: did the governors treat M, whose mother was an Italian Catholic who had converted under non Orthodox auspices, less favourably than they would have treated a boy, whose mother was an Italian Catholic who had converted under Orthodox auspices, on grounds of his ethnic origins? Plainly, the answer is: no.
The ethnic origins of the two boys are exactly the same, but the stance of the governors varies, depending on the auspices under which the mothers conversion took place.
Faced with a boy whose mother had converted under Orthodox auspices, the governors would have considered him for admission without pausing for a single second to enquire whether he or his mother came from Rome, Brooklyn, Siberia or Buenos Aires, whether she had once been a Roman Catholic or a Muslim, or whether he or she came from a close knit Jewish community or had chosen to assimilate and disappear into secular society.
In other words, the ethnic origins of the child or his mother in the Mandla v Dowell Lee [1983] 2 AC 548 sense would not have played any part in the governors decision to admit him.
All that would have mattered was that his mother had converted under Orthodox auspices.
Equally, in Ms case, the governors did not refuse to consider admitting him on grounds of his Mandla ethnic origins.
Even supposing that the governors knew about his origins, they were quite irrelevant and played no part in their decision.
The governors were simply asked to consider admitting him as the son of a Jewish mother.
They declined to do so because his mother had not converted under Orthodox auspices.
It was her non Orthodox conversion that was crucial.
In other words, the only ground for treating M less favourably than the comparator is the difference in their respective mothers conversions a religious, not a racial, ground.
Since, therefore, when applying the religious test, the governors were not asked to consider, and did not actually consider, Ms ethnic origins, James v Eastleigh Borough Council [1990] 2 AC 751 and all the other cases to which the majority refer simply do not come into the picture.
For these reasons, which are essentially those set out so clearly in the judgment of Munby J, and in agreement with the opinion of Lord Brown, I would hold that the governors did not discriminate against M directly on racial grounds.
So far as indirect discrimination is concerned, again I agree with Lord Brown and indeed with Munby J.
The aim of the School, to instil Jewish values into children who are Jewish in the eyes of Orthodoxy, is legitimate.
And, from the standpoint of an Orthodox school, instilling Jewish values into children whom Orthodoxy does not regard as Jewish, at the expense of children whom Orthodoxy does regard as Jewish, would make no sense.
That is plainly why the Schools oversubscription policy allows only for the admission of children recognised as Jewish by the Office of the Chief Rabbi.
I cannot see how a court could hold that this policy is a disproportionate means of achieving the Schools legitimate aim.
I would accordingly allow the Governing Bodys appeal and restore the order of Munby J.
On the United Synagogues costs appeal, I agree with Lord Hope.
LORD WALKER
I respectfully agree with Lord Hope that this was a case of indirect, but not direct discrimination on grounds of ethnic origins contrary to section 1 of the Race Relations Act 1976 as amended.
I do not wish to make any addition or qualification to the reasons set out in Lord Hopes judgment.
But I do wish to express my respectful agreement with much of Lady Hales judgment, although we reach different conclusions.
In particular I agree with her references to the conspicuously clear and thoughtful judgment of Mummery LJ in R (Elias) vs Secretary of State for Defence [2006] 1 WLR 3213.
Lord Hope has rightly referred to Mummery LJs treatment (at paras 128 to 133, in the context of justification of indirect discrimination) of the significance of a failure to address the issue of potential discrimination, especially when section 71 of the Race Relations Act 1976 applies.
But the whole of Mummery LJs discussion of the boundary between direct and indirect discrimination (paras 60 to 123) merits close attention.
The division of opinion in this Court illustrates that the separateness and mutual exclusivity of direct and indirect discrimination, although immovably established as part of the law (for all the reasons given by Mummery LJ at paras 114 to 122), is sometimes elusive in practice.
In consequence the sharp distinction between the impossibility of justifying direct discrimination in any circumstances, and the possibility of justifying indirect discrimination, sometimes seems a little arbitrary.
LORD BROWN
Jews of all denominations define membership of the Jewish religion by reference to descent or conversion.
The question is one of status: you are a Jew if, whether by descent or conversion, your mother (or anyone else up the matrilineal line) was a Jew or if you yourself convert to Judaism.
Orthodox Jews require that the conversion be recognised by the Office of the Chief Rabbi (OCR).
Other denominations of Jewry (Masorti, Reform and Liberal) apply less exacting criteria for conversion.
It is that which has given rise to the underlying dispute between the parties in this case.
JFSs oversubscription admissions policy gives priority to those recognised by the OCR as Jewish.
M, because his mother converted to Judaism under the auspices of a non Orthodox rabbi and not an orthodox rabbi, is not so recognised.
There is much debate within the Jewish community about the proper standards to apply to conversion and many would like JFS to include within their admissions policy anyone recognised as Jewish by any of the denominations.
Ms real complaint here is that in deciding who is a Jew the OCRs approach to conversion is misguided.
That, however, is not an issue which is, or ever could be, before the Court.
No court would ever intervene on such a question or dictate who, as a matter of orthodox religious law, is to be regarded as Jewish.
Thus it is that this legal challenge has nothing to do with the standards of conversion to Judaism and who shall be recognised under religious law as Jews but instead, somewhat surprisingly at first blush, invites the Court to decide questions of racial discrimination.
Is JFSs policy of giving priority in admissions to those recognised by the OCR as Jewish to be characterised and outlawed as direct racial discrimination contrary to section 1(1)(a) of the Race Relations Act 1976? Is the school on racial grounds (defined by section 3 of the Act to include the ground of ethnic origins) treating others less favourably? That is the central issue before the Court.
Ms father (E), supported by the Equality and Human Rights Commission and the British Humanist Society, submits that those not recognised by JFS as Jews are being treated less favourably than those recognised as Jews (so much is obvious) on the ground of the ethnic origins of those not recognised i.e. because no one in their matrilineal line is recognised as Jewish.
Integral to the argument is that any definition of Jewish status based on descent is necessarily dependent on ethnic origin and therefore to be regarded as racially discriminatory.
In this case the argument arises in the context of an orthodox Jewish school and at the suit of a child who would be regarded as Jewish according to all other Jewish denominations.
But the same argument could arise equally in the context of schools giving priority to children recognised as Jews by any other Jewish denomination.
I repeat, all Jews define membership of their religion by reference to descent (or conversion).
The contrary argument, advanced by JFS, United Synagogue, the Secretary of State for Children, Schools and Families, and the Board of Deputies of British Jews, is that those not recognised by the school as Jews are being treated less favourably not because of their ethnic origins a matter of total indifference to the OCR but rather because of their religion: they are not members of the Jewish religion whereas those preferred are.
Of course, the reason they are not members of the Jewish religion is that their forebears in the matrilineal line (or, in the case of Liberal Jews, either ancestral line) were not Jews and in this sense their less favourable treatment is determined by their descent.
The ground for their less favourable treatment, however, is religion, not race.
Both arguments are to my mind entirely coherent and entirely respectable.
Only one, however, can be correct.
The difficulty in the case arises because of the obvious overlap here between the concepts respectively of religious and racial discrimination.
If the ground for discrimination is racial, it is unlawful.
If however the ground (and not merely the motive) is religious, that is lawful.
The Equality Act 2006 for the first time outlawed religious discrimination inter alia with regard to school admissions but not in the case of oversubscribed designated faith schools like JFS.
Plainly the 2006 Act cannot operate to legitimise what would otherwise be racial discrimination under the 1976 Act.
One may note, however, that if Ms argument is correct, JFS (and all other Jewish schools, whether maintained or independent, whose admissions criteria similarly depend upon the child being recognised under religious law as Jewish) have been operating an unlawful directly racially discriminatory policy for upwards of 30 years.
There can be no doubt that Jews, including those who have converted to Judaism, are an ethnic group.
That, since the decision of the House of Lords in Mandla v Dowell Lee [1983] 2 AC 548, is indisputable.
And it is plain too why the courts have given a wide definition to the phrase ethnic origins so as to provide comprehensive protection to those suffering discrimination on racial grounds.
Manifestly Jews and those perceived by discriminators to be Jews have welcomed such an approach and benefit from it.
It by no means follows, however, that to discriminate against a person on the ground that he or someone else either is or is not Jewish is therefore to discriminate against him on racial grounds (as the Court of Appeal concluded at paragraph 32 of its judgment).
That to my mind is a considerable over simplification of an altogether more difficult problem.
This is perhaps best illustrated by reference to Ms position relative to those benefited under JFSs admissions policy.
True, M was refused admission because his mother, and therefore he himself, although plainly both ethnically Jewish in the Mandla sense, were not recognised by the OCR as Jewish.
But those granted admission under the policy were admitted for the very reason that they were recognised as Jewish.
Does the 1976 Act really outlaw discrimination in favour of the self same racial group as are said to be being discriminated against? I can find no suggestion of that in any of the many authorities put before us.
Nor can I see a parallel between the present case and the example apparently thought indistinguishable by the Court of Appeal of the Dutch Reformed Church of South Africa who until recently honestly believed that God had made black people inferior and had destined them to live separately from whites.
The discrimination there was plainly against blacks and in favour of whites self evidently, therefore, on the ground of race and irredeemable by reference to the Churchs underlying religious motive.
Ethnic Jews and Jews recognised as members of the religion, distinguishable as groups though they are, clearly overlap.
Not so blacks and whites.
What I am suggesting here is that it is quite unrealistic, given that those being treated less favourably and those being treated more favourably by JFSs policy are all (save, of course, for those who have no connection with Judaism whatsoever) in the same ethnic group, to regard the policy as discriminatory on racial rather than religious grounds.
I recognise, of course, that under section 3(2) of the 1976 Act a particular racial group within a wider racial group still enjoys protection under the Act.
The point I am making, however, is that the differential treatment between Jews recognised by the OCR and those not so recognised within the wider group of ethnic Jews (no less obviously than the differential treatment between the former and those with no connection whatever to Judaism) is plainly on the ground of religion rather than race.
Still less does it seem to me that this case is covered by the House of Lords decision in James v Eastleigh Borough Council [1990] 2 AC 751.
Once it was recognised that the Council there might just as well have said that entry to its swimming pools was free to women, but not men, in the 60 65 age group, the direct discrimination against men became indisputable.
The condition of pensionability was itself patently gender based.
The position would surely have been different had the policy been instead to admit free, say, those who were in fact retired.
That would not have involved direct discrimination and, if challenged as indirect discrimination, would surely have been capable of justification, certainly if free admittance was granted not only to those retired but also if the applicant could otherwise establish that he or she was of limited means.
Mandatory retirement age and sex were there precisely coterminous.
Even then, the case was decided only by the narrowest majority of the House overturning a unanimous Court of Appeal.
The 1976 Act, unlike, for example, article 14 of the European Convention on Human Rights, draws a distinction between direct and indirect discrimination, only the latter being capable of justification.
It therefore seems to me of the greatest importance not to expand the scope of direct discrimination and thereby place preferential treatment which could well be regarded as no more than indirectly discriminatory beyond the reach of possible justification.
This is especially so where, as here, no one doubts the Chief Rabbis utmost good faith and that the manifest purpose of his policy is to give effect to the principles of Orthodox Judaism as universally recognised for millennia past.
There is not the same exact correlation between membership of the Jewish religion and membership of the group regarded on the Mandla approach as being of Jewish ethnicity as there was between retirement age and sex in James v Eastleigh and I for my part would regard the Court of Appeals judgment as going further than that decision and as impermissibly expanding the scope of direct discrimination beyond its proper limits.
As I have already indicated, E is not really seeking to prevent JFS from adopting oversubscription criteria which give priority to Jews but rather is asking for JFS to define Jews more expansively than Orthodox Jews in fact do.
But it is, of course, the logic of his argument that JFSs policy must be regarded as racially discriminatory not merely because it rules out ethnic Jews like M who are not recognised as Jews by the OCR but also because it rules out all other racial groups whether or not they have any connection with Judaism at all.
On this argument, it is strictly immaterial that E is Jewish or that Ms mother converted to Judaism.
This policy could as well have been struck down at the suit of anyone desiring admission to the school.
If the argument succeeds it follows that Jewish religious law as to who is a Jew (and as to what forms of conversion should be recognised) must henceforth be treated as irrelevant.
Jewish schools in future, if oversubscribed, must decide on preference by reference only to outward manifestations of religious practice.
The Court of Appeals judgment insists on a non Jewish definition of who is Jewish.
Jewish schools, designated as such by the Minister and intended to foster a religion which for over 3000 years has defined membership largely by reference to descent, will be unable henceforth even to inquire whether one or both of the applicant childs parents are Jewish. (Yet is that so very different from a Catholic school asking if the child has been baptised? It is hardly likely to have been unless one at least of its parents was a Christian).
The root question for the Court is simply this: can a Jewish faith school ever give preference to those who are members of the Jewish religion under Jewish law.
I would answer: yes, it can.
To hold the contrary would be to stigmatise Judaism as a directly racially discriminating religion.
I would respectfully disagree with that conclusion.
Indeed I would greatly regret it.
On this issue of direct discrimination my views coincide entirely with those of Lord Rodger.
I turn to the question of indirect discrimination.
As already noted, it is obvious
that JFSs policy involves those not recognised by the OCR as Jews being treated less favourably than those who are so recognised.
It is rather less obvious, however, that this policy puts persons of the same race or ethnic or national origins as [M] at a particular disadvantage when compared with other persons and that it puts [M] at that disadvantage (section 1(1A)(a) and (b) of the 1976 Act).
After all, as already observed, M is himself, although personally disadvantaged by the policy, a member of the very same ethnic group as the policy advantages.
The view could, therefore, be taken that M is disadvantaged not by his ethnic origins but by his inability to satisfy the Orthodox religious test.
Put that aside, however, and suppose that section 1(1A) is here engaged and that JFS must establish that its policy is a proportionate means of achieving a legitimate aim pursuant to section 1(1A)(c) as certainly they would need to do were this challenge brought, as theoretically it could have been, at the suit of a child in no way of Jewish ethnic origin.
The legitimacy of JFSs aim is surely clear.
Here is a designated faith school, understandably concerned to give preference to those children it recognises to be members of its religion, but so oversubscribed as to be unable to admit even all of these.
The School Admissions Code expressly allows admission criteria based either on membership of a religion or on practice.
JFS have chosen the former.
Orthodox Jews regard education about the Jewish faith as a fundamental religious obligation.
Unlike proselytising faiths, however, they believe that the duty to teach and learn applies only to members of the religion, because the obligations in question bind only them.
JFSs purpose is to develop in those recognised by the OCR as Jewish an understanding and practice of the faith.
The fact that many of those admitted do not practise the Jewish faith on their admission is intended and, indeed, welcomed.
Such children are admitted and taught alongside children already committed to the Orthodox Jewish faith so as to enhance their level of religious knowledge and observance and in the hope and expectation that they may come to practise it.
In short, to impose a religious practice test, besides being felt by many to be invasive, difficult to measure and open to abuse, would be contrary to the positive desire of schools like JFS to admit non observant as well as observant Jewish children.
Ironically, moreover, to impose such a test would narrow, rather than widen, the character of the schools intake so as to make it appear more, rather than less, discriminatory.
As the Court of Appeal itself noted (at para 44), those presently admitted come from a wide disparity of religious and cultural family backgrounds . even . from atheist or Catholic or Moslem families.
Inevitably too, it would require the school to educate those not recognised as Jewish by Orthodox Jewish law at the expense of those who are.
The Court of Appeals conclusion that the aim of JFSs admissions policy is illegitimate was based on its view that its purpose or inevitable effect is to make and enforce distinctions based on race or ethnicity (para 46), essentially a repetition of its earlier finding of direct race discrimination.
In truth the Court of Appeal never addressed the questions of legitimate aim and proportionality on the assumption (the only basis on which indirect discrimination would fall to be considered) that the policy is not directly discriminatory.
I turn finally, then, to the question of proportionality.
Given JFSs legitimate aim of educating children recognised to be Jewish, is their policy of invariably giving preference to these children over those not so recognised a proportionate means of achieving that aim? Answering that question in the affirmative, Munby J, in the course of a lengthy, impressive and to my mind convincing judgment, said this: 200.
Two quite separate considerations drive me to this conclusion.
In the first place, the kind of admissions policy in question here is not, properly analysed, materially different from that which gives preference in admission to a Moslem school to those who were born Moslem or preference in admission to a Catholic school to those who have been baptised.
But no one suggests that such policies, whatever their differential impact on different applicants, are other than a proportionate and lawful means of achieving a legitimate end.
Why, [counsel] asks rhetorically, should it be any different in the case of Orthodox Jews? .
I agree.
Indeed, the point goes even wider than the two examples I have given for, as [counsel] submits, if Es case on this point is successful then it will probably render unlawful the admission arrangements in a very large number of faith schools of many different faiths and denominations. 201.
The other point is that made both by the Schools Adjudicator and by [counsel for JFS].
Adopting some alternative admissions policy based on such factors as adherence or commitment to Judaism (even assuming that such a concept has any meaning for this purpose in Jewish religious law) would not be a means of achieving JFSs aims and objectives; on the contrary it would produce a different school ethos.
If JFSs existing aims and objectives are legitimate, as they are, then a policy of giving preference to children who are Jewish applying Orthodox Jewish principles is, they say, necessary and proportionate indeed, as it seems to me, essential to achieve those aims .
JFS exists as a school for Orthodox Jews.
If it is to remain a school for Orthodox Jews it must retain its existing admissions policy; if it does not, it will cease to be a school for Orthodox Jews. Precisely.
To this argument there is, and can be, no satisfactory answer.
I find myself in full agreement with all of that.
To ask why JFS should give preference to a Jewish child with little or no interest in Judaism whilst rejecting a committed child like M is to misunderstand the essential aim of an Orthodox Jewish school.
This, as I have explained, is to fulfil its core religious duty: the education of members of its religion in the Orthodox faith, whether or not they practise it or will ever come to do so.
It can no more be disproportionate to give priority to a Jewish child over that of a child, however sincere and committed, not recognised as Jewish than it would be to refuse to admit a boy to an oversubscribed all girls school.
Whilst I respectfully agree with Lord Hopes judgment on the direct discrimination issue, I regretfully find myself differing from his conclusion on indirect discrimination.
For my part I would have allowed JFSs appeal in its entirety.
I understand Lord Hope to conclude that JFS have never addressed the question of
proportionality and must now do so and devise a fresh policy allowing applications for admission by those not recognised as Jewish to be considered on an individual basis.
Quite apart from the fact that this approach to my mind runs counter to the schools central aim, it seems to me fraught with difficulty.
Quite how such a policy will be formulated and applied on a consistent basis is not easy to discern.
That said, I regard it as altogether preferable to the new policy presently dictated by the Court of Appeals judgment: the imposition of a test for admission to an Orthodox Jewish school which is not Judaisms own test and which requires a focus (as Christianity does) on outward acts of religious practice and declarations of faith, ignoring whether the child is or is not Jewish as defined by Orthodox Jewish law.
That outcome I could not contemplate with equanimity.
On the United Synagogues costs appeal I agree entirely with Lord Hope.
| E challenged JFSs (formerly the Jews Free School) refusal to admit his son, M, to the school.
JFS is designated as a Jewish faith school.
It is over subscribed and has adopted as its oversubscription policy an approach of giving precedence in admission to those children recognised as Jewish by the Office of the Chief Rabbi of the United Hebrew Congregation of the Commonwealth (the OCR).
The OCR only recognises a person as Jewish if: (i) that person is descended in the matrilineal line from a woman whom the OCR would recognise as Jewish; or (ii) he or she has undertaken a qualifying course of Orthodox conversion.
E and M are both practising Masorti Jews.
E is recognised as Jewish by the OCR but Ms mother is of Italian and Catholic origin and converted to Judaism under the auspices of a non Orthodox synagogue.
Her conversion is not recognised by the OCR.
Ms application for admission to JFS was therefore rejected as he did not satisfy the OCR requirement of matrilineal descent.
E challenged the admissions policy of JFS as directly discriminating against M on grounds of his ethnic origins contrary to section 1(1)(a) of the Race Relations Act 1976 (the 1976 Act).
Alternatively, E claimed that the policy was indirectly discriminatory.
The High Court rejected both principal claims.
The Court of Appeal unanimously reversed the High Court, holding that JFS directly discriminated against M on the ground of his ethnic origins.
JFS appealed to the Supreme Court.
The United Synagogue also appealed a costs order made against it by the Court of Appeal.
The Supreme Court has dismissed the appeal by The Governing Body of JFS.
On the direct discrimination issue, the decision was by a majority of five (Lord Phillips, Lady Hale, Lord Mance, Lord Kerr and Lord Clarke) to four (Lord Hope, Lord Rodger, Lord Walker and Lord Brown).
The Majority held that JFS had directly discriminated against M on grounds of his ethnic origins.
Lords Hope and Walker in the minority would have dismissed the appeal on the ground that JFS had indirectly discriminated against M as it had failed to demonstrate that its policy was proportionate.
Lords Rodger and Brown would have allowed JFSs appeal in its entirety.
The Supreme Court unanimously allowed in part the United Synagogues appeal on costs.
The Majority Judgments The judgments of the Court should not be read as criticising the admissions policy of JFS on moral grounds or suggesting that any party to the case could be considered racist in the commonly understood, pejorative, sense.
The simple legal question to be determined by the Court was whether in being denied admission to JFS, M was disadvantaged on grounds of his ethnic origins (or his lack thereof) (paras [9], [54], [124] and [156]).
Direct Discrimination General Principles In determining whether there is direct discrimination on grounds of ethnic origins for the purposes of the 1976 Act, the court must determine, as a question of fact, whether the victims ethnic origins are the factual criterion that determined the decision made by the discriminator (paras [13], [16], [20] and [62]).
If so, the motive for the discrimination and/or the reason why the discriminator considered the victims ethnic origins significant is irrelevant (paras [20], [22], [62] and [142]).
Where the factual criteria upon which discriminatory treatment is based are unclear, unconscious or subject to dispute the court will consider the mental processes of the discriminator in order to infer as a question of fact from the available evidence whether there is discrimination on a prohibited ground (paras [21], [64], [115] and [133]).
It is only necessary to consider the mental processes of the discriminator where the factual criteria underpinning the discrimination are unclear (para [114]).
To treat an individual less favourably on the ground that he lacks certain prescribed ethnic origins constitutes direct discrimination.
There is no logical distinction between such a case and less favourable treatment predicated upon the fact that an individual does possess certain ethnic origins (paras [9] and [68]).
Direct discrimination does not require that the discriminator intends to behave in a discriminatory manner or that he realises that he is doing so (para [57]).
There is no need for any consideration of mental processes in this case as the factual criterion that determined the refusal to admit M to JFS is clear: the fact that he is not descended in the matrilineal line from a woman recognised by the OCR as Jewish.
The subjective state of mind of JFS, the OCR and/or the Chief Rabbi is therefore irrelevant (paras [23], [26], [65], [78], [127], [132], [136], [141] and [147] [148]).
The crucial question to be determined is whether this requirement is properly characterised as referring to Ms ethnic origins (paras [27], [55] and [65]).
Application in This Case The test applied by JFS focuses upon the ethnicity of the women from whom M is descended.
Whether such women were themselves born as Jews or converted in a manner recognised by the OCR, the only basis upon which M would be deemed to satisfy the test for admission to JFS would be that he was descended in the matrilineal line from a woman recognised by the OCR as Jewish (para [41] per Lord Phillips).
It must also be noted that while it is possible for women to convert to Judaism in a manner recognised by the OCR and thus confer Orthodox Jewish status upon their offspring, the requirement of undergoing such conversion itself constitutes a significant and onerous burden that is not applicable to those born with the requisite ethnic origins this further illustrates the essentially ethnic nature of the OCRs test (para [42] per Lord Phillips).
The test of matrilineal descent adopted by JFS and the OCR is one of ethnic origins.
To discriminate against a person on this basis is contrary to the 1976 Act (para [46] per Lord Phillips).
The reason that M was denied admission to JFS was because of his mothers ethnic origins, which were not halachically Jewish.
She was not descended in the matrilineal line from the original Jewish people.
There can be no doubt that the Jewish people are an ethnic group within the meaning of the 1976 Act.
While JFS and the OCR would have overlooked this fact
if Ms mother had herself undergone an approved course of Orthodox conversion, this could not alter the fundamental nature of the test being applied.
If Ms mother herself was of the requisite ethnic origins in her matrilineal line no conversion requirement would be imposed.
It could not be said that M was adversely treated because of his religious beliefs.
JFS and the OCR were indifferent to these and focussed solely upon whether M satisfied the test of matrilineal descent (paras [66] and [67] per Lady Hale).
Direct discrimination on grounds of ethnic origins under the 1976 Act does not only encompass adverse treatment based upon membership of an ethnic group defined in the terms elucidated by the House of Lords in Mandla v Dowell Lee [1983] 2 AC 548.
The 1976 Act also prohibits discrimination by reference to ethnic origins in a narrower sense, where reference is made to a persons lineage or descent (paras [80] [84] per Lord Mance).
The test applied by JFS and the OCR focuses on genealogical descent from a particular people, enlarged from time to time by the assimilation of converts.
Such a test is one that is based upon ethnic origins (para [86] per Lord Mance).
This conclusion is buttressed by the underlying policy of the 1976 Act, which is that people must be treated as individuals and not be assumed to be like other members of a group: treating an individual less favourably because of his ancestry ignores his unique characteristics and attributes and fails to respect his autonomy and individuality.
The UN Convention on the Rights of the Child requires that in cases involving children the best interests of the child are the primary consideration (para [90] per Lord Mance).
The reason for the refusal to admit M to JFS was his lack of the requisite ethnic origins: the absence of a matrilineal connection to Orthodox Judaism (para [112] per Lord Kerr).
Ms ethnic origins encompass, amongst other things, his paternal Jewish lineage and his descent from an Italian Roman Catholic mother.
In denying M admission on the basis that he lacks a matrilineal Orthodox Jewish antecedent, JFS discriminated against him on grounds of his ethnic origins (paras [121] [122] per Lord Kerr).
It might be said that the policy adopted by JFS and the OCR was based on both ethnic grounds and grounds of religion, in that the reason for the application of a test based upon ethnic origins was the conviction that such a criterion was dictated by Jewish religious law.
The fact that the rule adopted was of a religious character cannot obscure or alter the fact that the content of the rule itself applies a test of ethnicity (paras [129] [131] per Lord Clarke).
The fact that a decision to discriminate on racial grounds is based upon a devout, venerable and sincerely held religious belief or conviction cannot inoculate or excuse such conduct from liability under the 1976 Act (paras [35], [92], [113] and [119] [120]).
Further Comments It is not clear that the practice based test adopted by JFS following the Court of Appeals judgment will result in JFS being required to admit children who are not regarded by Jewish by one or more of the established Jewish movements (para [50] per Lord Phillips).
It may be arguable that an explicit exemption should be provided from the provisions of the 1976 Act in order to allow Jewish faith schools to grant priority in admissions on the basis of matrilineal descent; if so, formulating such an exemption is unquestionably a matter for Parliament (paras [69] [70] per Lady Hale).
Indirect Discrimination As the case is one of impermissible direct discrimination it is unnecessary to address the claim of indirect discrimination (para [51] per Lord Phillips).
Direct and indirect discrimination are mutually exclusive; both concepts cannot apply to a single case concurrently.
As this case is one of direct discrimination it could not be one of indirect discrimination (para [57] per Lady Hale).
Ex hypothesi, if the case was not direct discrimination, then the policy was indirectly discriminatory (para [103]).
The policy pursued the legitimate aim of effectuating the obligation imposed by Jewish religious law to educate those regarded by the OCR as Jewish (paras [95] [96]).
However, JFS had not, and on the basis of the evidence before the court could not, demonstrate that the measures it adopted, given the gravity of their adverse effect upon
individuals such as M, were a proportionate means of pursuing this aim (paras [100] [103], [123] and [154]).
The Minority Judgments Direct Discrimination In identifying the ground on which JFS refused to admit M to the school the Court should adopt a subjective approach which takes account of the motive and intention of JFS, the OCR and the Chief Rabbi (para [195] [197] per Lord Hope).
In the instant case JFS, the OCR and the Chief Rabbi were subjectively concerned solely with Ms religious status, as determined by Jewish religious law.
There is no cause to doubt the Chief Rabbis frankness or good faith on this matter (para [201] per Lord Hope).
The availability of conversion demonstrates that the test applied is inherently of a religious rather than racial character (para [203] per Lord Hope).
It is inapt to describe the religious dimension of the test being applied by JFS as a mere motive (paras [201] per Lord Hope; [227] per Lord Rodger).
The appropriate comparator for M in this case is a child whose mother had converted under Orthodox Jewish auspices.
The ground of difference in treatment between M and such a child would be that the latters mother had completed an approved course of Orthodox conversion (paras [229] [230] per Lord Rodger).
Indirect Discrimination Lords Hope and Walker Clearly, children who were not of Jewish ethnic origin in the matrilineal line were placed at a disadvantage by JFSs admission policy relative to those who did possess the requisite ethnic origins (para [205]).
JFSs policy pursued the legitimate aim of educating those regarded as Jewish by the OCR within an educational environment espousing and practising the tenets of Orthodox Judaism (para [209]).
The 1976 Act placed the onus on JFS to demonstrate that in formulating its policy it had carefully considered the adverse effect of its policy on M and other children in his position and balanced this against what was required to give effect to the legitimate aim which it sought to further (para [210]).
There is no evidence that JFS considered whether less discriminatory means might be adopted which would not undermine its religious ethos: the failure to consider alternate, potentially less discriminatory, admission policies means that JFS is not entitled to a finding that the means which it has employed are proportionate (paras [212] and [214]).
Lords Rodger and Brown The objective pursued by JFSs admission policy educating those children recognised by the OCR as Jewish was irreconcilable with any approach that would give precedence to children not recognised as Jewish by the OCR in preference to children who were so recognised.
JFSs policy was therefore a rational way of giving effect to the legitimate aim pursued and could not be said to be disproportionate. (para [233] per Lord Rodger; para [256] per Lord Brown).
The United Synagogue Costs Appeal The United Synagogue must pay 20 per cent. of Es costs from the Court of Appeal but not those incurred in the High Court.
The 20 per cent. of Es costs in the High Court previously allocated to the United Synagogue must be borne by JFS in addition to the 50 per cent. that it has already been ordered to pay (para [217]).
|
This appeal arises out of an unfortunate but isolated oversight in the offices of the West London Mental Health NHS Trust.
It occurred over the New Year period at the end of 2010.
The consequences have long since ceased to have any practical significance for any of the parties.
No relief, financial or otherwise, is now sought in these proceedings against the trust itself.
The appeal has been pursued to this court solely against the Secretary of State, on the basis that it raises a question of general importance.
That question is formulated by Mr Gordon QC, in his printed case as follows: As: (i) a public body with obligations in public law and (ii) a public authority under the Human Rights Act 1998 'HRA' can the Secretary of State for Health 'the S/S' lawfully refuse to refer a patient's case to the First tier Mental Health Review Tribunal 'MHRT' under section 67(1) of the Mental Health Act 1983 'MHA' in circumstances where the MHRT has unlawfully declined to hear that patient's application to it under section 66(1) (2) and where the patient requests that there be a section 67(1) referral?
Factual and procedural background
The facts can be shortly stated.
Mrs Modaresi, who suffers from schizophrenia, was admitted to hospital on 20 December 2010 for assessment under section 2 of the Mental Health Act 1983, which permits detention for a limited period not exceeding 28 days.
By section 66(1)(a) she had a right to apply to the First tier Tribunal within 14 days to review her detention and if appropriate obtain an order for her discharge.
Under the rules applying to an application under section 66(1)(a), the tribunal would have been obliged to arrange a hearing within seven days of receiving the application (SI 2008/2699, rule 37(1)).
On the afternoon of 31 December 2010 she gave a completed application form to a member of staff on her ward, who faxed it to the appropriate office of the trust.
Unfortunately, the relevant administrator was out of the office that day and the form was not seen by others in the office.
The office was closed over the New Year holiday until 4 January 2011, when the form was found and faxed immediately to the tribunal.
Officials in the tribunals office determined that it was out of time, and they wrote to her solicitors to that effect on 5 January.
That letter was received by the solicitors on 7 January 2011.
On the preceding day Mrs Modaresis status had changed.
She had ceased to be detained for assessment under section 2, but instead became detained for treatment under section 3.
As such she was entitled to make a separate application to the tribunal under section 66(1)(b).
Under that provision there is no specific time limit for holding the hearing.
Her solicitors wrote immediately to the Secretary of State asking him to exercise his discretion to refer the case to the tribunal under section 67.
They referred to her detention under section 2.
They explained that she had completed the application form to the tribunal within the 14 day time limit, but that as a result of the bank holiday weekend it had not been faxed to the tribunal until 4 January, which was then outside the 14 day time limit, and that it had been rejected by the tribunal as invalid.
The application to the Secretary of State was made on the basis that this had come about through absolutely no fault of our client, and due to no procedures being in place at the hospital for applications to be submitted when no Mental Health Act administrator is on duty.
Of her change of status the letter said: While our client is now detained under section 3 and therefore is eligible to submit a new application for a First tier Tribunal, to do this would deprive our client of her hearing to which she was entitled as a section 2 patient.
Should the Secretary of State agree to make the requested referral, this will ensure that our client will retain her right of application under section 3 in due course.
The Secretary of State replied on 10 January, declining to make a reference under section 67.
This is the decision now under review.
According to the letter, it was not thought that a reference must invariably be made where a patient has failed to exercise her right to apply for a hearing within 14 days: The 14 day limit exists for a purpose.
The Act makes no special provision for public or bank holidays or other non working days.
The letter noted, without disagreement, the claim that the time limit had been missed due to the lack of appropriate arrangements within the trust.
However the Secretary of State having considered all the information before him had decided not to exercise his power to refer: In reaching his decision, he took into account that as Ms Modaresi is now detained under section 3 of the Act, she can make her own application to the First tier Tribunal.
In the event that Ms Modaresi did not make an application, the hospital managers would have to make a reference under section 68 of the Act as of 20 June 2011, when Ms Modaresi would have been detained under the MHA for more than six months.
However, should Ms Modaresi make an application to the First tier Tribunal and the tribunal panel were to uphold her detention under the Act, the Secretary of State would consider any further request for a section 67 reference submitted during her current period of detention.
Mrs Modaresi did not take up that suggestion.
Instead, on 17 January 2011, she began proceedings for judicial review against the three agencies concerned: against the tribunal for unlawfully declining to entertain her application as out of time; against the Secretary of State for unlawfully declining to refer her case to the tribunal under section 67; and against the trust for its failure to have in place lawful arrangements. so as to comply with the requirements of article 5(4) European Convention on Human Rights.
On 26 January 2011 Cox J granted permission to apply for judicial review, following which, on 1 February 2011, the Secretary of State reconsidered his position and made a referral under section 67 as requested.
Before the application was heard by the tribunal, on 18 February 2011 she became the subject of a Community Treatment Order, with the result that her detention came to an end.
She nonetheless pursued her claim for judicial review.
It was heard by
Edwards Stuart J on 22 February 2011 and dismissed for reasons given in a judgment dated 3 March 2011.
He held in summary that the tribunal had been correct to treat the original application as out of time; that the Secretary of State's decision was neither unreasonable nor in breach of her rights under the Convention; and that an isolated failure by the trust did not give rise to a breach of article 5(4).
Her appeal to the Court of Appeal was dismissed on 23 November 2011, for reasons given by Black LJ, with whom the other members of the court agreed.
By that time attention had been drawn by the court itself to the decision of the House of Lords in Mucelli v Government of Albania [2009] 1 WLR 276, dealing with the latitude to be allowed where time for service expires on a bank holiday.
Following that authority, the court held that the application to the tribunal should have been treated by it as in time (as indeed is now common ground).
The claim against the trust accordingly failed, as its oversight had not resulted in the deadline being missed.
The claim against the Secretary of State was also dismissed.
Black LJ held that he had been under no separate duty to check the time limit for himself, no doubt having been raised on that point in the solicitors letter.
In relation to article 5(4) the only suggested disadvantage of her right to apply under section 3, as compared to section 2, was the potential loss of the right to make a further application within six months, which had been properly addressed in the Secretary of States offer to reconsider the use of section 67 in the future.
Statutory provisions
Sections 2 and 3 come within Part II of the Act, headed Compulsory admission to hospital and guardianship.
Section 66(1)(a) and (b) provide, respectively, for applications to the First tier Tribunal on admission to hospital for either assessment (under section 2) or treatment (under section 3).
Section 72 requires the tribunal to direct the discharge of the patient if not satisfied that the detention is justified under the criteria there set out.
Procedure is governed by rules made under the Tribunals, Courts and Enforcement Act 2007.
By section 11 of that Act, a decision of the First tier Tribunal is subject to a right of appeal, with permission, to the Upper Tribunal.
Alternatively, the tribunal may review its own decision, if for example a clear error has been made (section 9; for the practice see R (RB) v First tier Tribunal [2010] UKUT 160 (AAC)).
It is unnecessary to set out the relevant provisions in detail, since there is no issue about their effect in this case.
In particular it is not in dispute (i) that, even if the Secretary of State had agreed to refer the application on 10 January, the seven day limit would have had no direct application, and the timing of the hearing would have been in the discretion of the tribunal; (ii) that the application would have been heard in accordance with the criteria applicable under section 3, not section 2; but (iii) that these would have been no less favourable from her point of view.
Section 67(1) which is central to the appeal provides: The Secretary of State may, if he thinks fit, at any time refer to the appropriate tribunal the case of any patient who is liable to be detained under Part II of this Act
The appellants submissions
As Mr Gordon rightly submits, the apparently unrestricted terms in which section 67 is expressed must be read subject to the ordinary constraints which apply to statutory discretions.
It must be exercised in accordance with the purposes of the statute (Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997), and not in such a way as adversely affects the legal rights of the citizen or the basic principles on which the law of the United Kingdom is based (R v Secretary of State for the Home Department, Ex p Pierson [1998] AC 539, 575D per Lord Browne Wilkinson).
It must also (under the Human Rights Act 1998) be exercised consistently
with the relevant provisions of the European Convention on Human Rights.
Mr Gordon relies in particular on article 5(4) of the Convention, by which: Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.
Further, Strasbourg case law emphasises the importance of this protection for vulnerable people such as mental health patients.
Thus it has been held that article 5 lays down a positive obligation on the state to protect the liberty of its citizens, and to provide effective protection for vulnerable persons (Storck v Germany (2005) 43 EHRR 96, para 102); and that special procedural safeguards may be needed to protect the interests of those who on account of their mental disabilities, are not fully capable of acting for themselves (Winterwerp v The Netherlands (1979) 2 EHRR 387, para 60).
Although he puts his submissions in a number of different ways, his central point as I understand it is a short one.
It is that, where as here, through no fault of her own, the appellant has been deprived of her fundamental right, under the statute and the Convention, of speedy access to a court or tribunal to review her detention, the discretion under section 67 becomes in effect a duty.
Failure to exercise it in the circumstances of this case was a breach of that duty, whether viewed by reference to the Human Rights Act, to constitutional norms, or to ordinary public law principles.
Discussion
So far as the appellants case relies on fundamental principles of access to the court, under article 5(4) or otherwise, there is in my view a short answer.
She was not deprived of her right of access to a court or tribunal to review her detention.
She had such a right under section 3.
The issue was not the existence of the right, but how speedily it might be exercised and whether it was as advantageous as might have been the case if her original application had been accepted.
It is notable that speed of access was not an issue raised by the letter to the
Secretary of State.
Nor is it one which can, in my view, arise on the case as it stands.
It is common ground that section 67 did not enable the Secretary of State to insist on a hearing in seven days, as would have been required on an application under section 2.
The timing would have been in the discretion of the tribunal, as it would under section 3 and section 66(1)(b).
Mr Gordon hinted that the intervention of the Secretary of the State might have been more persuasive in that respect.
There is, however, no evidence to support such a submission.
An application could have been made to the tribunal under section 3 with a request for an urgent hearing, supported by explanation of the circumstances in which she had lost her right under the rules through no fault of her own.
I see no reason to think that the tribunal would not have viewed it sympathetically, but in any event it is not clear what additional weight could have been given to such a request by the Secretary of State.
On the face of it, a direct approach to the tribunal would have offered the prospect of a much speedier resolution than the roundabout procedure actually adopted.
So far as appeared from the solicitors letter, the only practical reason for inviting an application under section 67 was to avoid the loss of her right to make a second reference, if needed, at a time chosen by her.
On that point I cannot do better than repeat Black LJs words, with which I agree: What article 5(4) requires is that a patient should have the entitlement to take proceedings to have the lawfulness of his or her detention decided speedily by a court; the appellant had that entitlement under section 66(1) in association with her detention under section 3.
Article 5(4) does not prescribe further than that.
If there came a time when having unsuccessfully used up her section 3 application at an early stage, the appellant wished to make a further application to the tribunal, she was entitled to ask the Secretary of State again to refer her case to the tribunal under section 67 and he had indicated that he would consider so doing.
Of course, that was not a guarantee that he would refer it and to that extent the appellant's position was less favourable than it would have been had she not had to use her section 3 application in the first place.
But the Secretary of State is bound to exercise his discretion under section 67 in accordance with normal public law principles and judicial review would be available to the appellant should he fail to do so, thus ensuring that there would be no breach of article 5(4).
Accordingly, I do not consider that the disadvantage to the appellant of having to use up her section 3 application at an early stage was such as to make it unlawful for the Secretary of State to decline to exercise his section 67 power in the expectation that she would do so. (para 43)
I would emphasise, as Black LJ recognised, that section 67 may in certain
circumstances have a significant role in ensuring compliance with the Convention.
That is well illustrated by the decision of the House of Lords in R (H) v Secretary of State for Health [2006] 1 AC 441, on which Mr Gordon also relied.
In that case, the appellant, who had been detained for assessment under section 2, was too disabled to make an application to the court on her own behalf.
There was a dispute between her mother, as her nearest relative, and the responsible medical officer over her treatment, following which an application was made to the county court under section 29 for the functions of the nearest relative to be exercised by an approved social worker rather than the mother.
This had the effect (under section 29(4)) of extending the period of detention until that application was disposed of.
At the mothers request, the Secretary of State then exercised his power under section 67 to refer the case to the tribunal, which heard the case but declined to discharge her.
She brought judicial review proceedings challenging the compatibility of section 29(4) with article 5(4).
In rejecting that contention, Lady Hale commented on the nature of the Secretary of States role under section 67, and the advantages of section 67 over the alternative route through the county court: This is preferable because mental health review tribunals are much better suited to determining the merits of a patient's detention and doing so in a way which is convenient to the patient, readily accessible, and comparatively speedy.
As already seen, a reference is treated as if the patient had made an application, so that the patient has the same rights within it as she would if she herself had initiated the proceedings.
It can, of course, be objected that this solution depends upon the Secretary of State being willing to exercise her discretion to refer.
But the Secretary of State is under a duty to act compatibly with the patient's Convention rights and would be well advised to make such a reference as soon as the position is drawn to her attention.
In this case this happened at the request of the patient's own lawyers.
Should the Secretary of State decline to exercise this power, judicial review would be swiftly available to oblige her to do so. (para 30) I would only add that the advantages of convenience and accessibility to which she referred have been reinforced by the changes in the legal and administrative structures of the tribunal following the 2007 Act.
That passage provides additional support for Black LJs approach.
Given the appellants right to apply under section 3, there was no present conflict with article 5(4).
The Secretary of State was entitled to proceed on that basis.
The position might well have been different, as Mr Eadie QC seemed inclined to accept, if she had continued to be detained under section 2, and had not acquired a separate right under section 3.
In circumstances where she had lost her right of immediate access to the tribunal wholly through the fault of the trust, itself an agent of the state for these purposes, it could well be said that the Secretary of State had a positive duty to remedy the position.
It is however unnecessary to decide that point, which does not arise on the facts before us.
As things were, given the existence of her section 3 right, the risk of a breach would only arise if and when her first application had failed, and her circumstances had changed sufficiently to make a second application realistic.
It is true that the Secretary of State had not promised to make a reference at that stage.
Section 67 gave him no power to commit himself in that way.
All he could do was to agree to consider the use of that power if and when it became necessary.
But that discretion would, as Black LJ said, be underpinned by his duty to avoid a breach of article 5(4).
Finally, I should briefly address Mr Gordons alternative submission, not so fully developed, that the Secretary of States decision was vitiated in any event by his error over the applicable time limit, even if that error was shared at the time with everyone else, including the appellants solicitor.
Nonetheless, it is said, that was an error of law, and as such was sufficient in itself to render the decision liable to be set aside.
I find this a surprising argument.
A competent tribunal had made a decision on a procedural matter, and the claimant had both a right of appeal and access to solicitors advice on its merits.
The Secretary of State was under no duty to do the solicitors work for him, even if it would have been appropriate for him to second guess the decision of the tribunal on this point.
It had been open to the appellant to ask the tribunal to review its decision, if thought wrong, or to appeal.
Failing such a challenge, it is hard to see why the Secretary of State was not entitled to proceed on the basis of that decision of a competent tribunal.
In any event the argument does not lead anywhere.
If the Secretary of States decision were to be set aside solely on the basis that the original application was in fact made in time, it would not help the appellant.
Rather it would further undermine her case against the Secretary of State under article 5(4) or analogous common law principles, since it would show that there had been a right of access to the tribunal all along, and therefore no breach by the Secretary of State of any implied duty to provide one under section 67.
Conclusion
Notwithstanding Mr Gordons forceful submissions, in my view, this case turns on its own facts and raises no point of general principle.
In the particular circumstances, the Secretary of States response to the solicitors letter of 7 January 2011 was both lawful and reasonable.
Accordingly, in agreement with the reasoning of the Court of Appeal, I would dismiss the appeal.
LADY HALE
I entirely agree that this appeal should be dismissed for the reasons which Lord Carnwath gives.
However, the appellant has undoubtedly been let down by the system through no fault of her own and there are some important lessons to be learnt.
Under article 5(4) of the European Convention on Human Rights, she had the right to take proceedings by which the lawfulness of [her] detention shall be decided speedily by a court and [her] release ordered if the detention is not lawful.
Under article 5(1), her detention was only lawful if it was in accordance with a procedure prescribed by law.
The Mental Health Act 1983 gave her the right to apply to the First tier Tribunal within 14 days of her detention on 20 December 2010.
Had her application of 31 December 2010 been processed as it should have been, her case would have been heard by the tribunal within seven days after its receipt, that is no later than 11 January (as required by rule 37(1) of the tribunal rules).
The tribunal would have had a duty to discharge her if it was not satisfied that the criteria for detention were satisfied and the power to discharge her even if they were (section 72(1)).
As by that date her detention under section 2 had been replaced by detention under section 3, it is common ground that the more exacting criteria for section 3 detention would have applied to her case.
The system let her down in a number of ways.
First, the hospital failed to transmit her application to the tribunal on the day that it was made.
The judge held that, if the hospital trust had a reasonable system in place for transmitting these applications, an isolated failure would not give rise to a remedy by way of judicial review (para 65).
He also held that, if the trust believed that the tribunal would calculate time from the date when the application was signed, as opposed to the date when it was received, then it was not unreasonable for it to have a system which did not provide for applications made outside normal hours to be transmitted without delay to the tribunal (para 81).
Once it became aware that the tribunal would calculate time from the date on which an application was received, such a system would not be reasonable (para 82).
Further, even if it had no reasonable grounds for its belief that the tribunal would calculate time from when the form was signed, it would not have been unreasonable to have the system that it did, provided that it explained, in the information given to patients, that applications would have to be made during normal working hours (para 83).
On appeal, as is recorded by Black LJ, the appellant wished to argue (1) that in order to comply with article 5(4), the hospital trust had a duty to have in operation a system that enabled patients to make applications to the tribunal in time; (2) that the judge was wrong to consider that failing to transmit an application in time because of an oversight or neglect could excuse the hospital from responsibility; and (3) that the judge was wrong to consider that the system actually in place was reasonable.
The Court of Appeal held that it was the tribunal, and not the hospital, which had created the problem, by wrongly refusing to accept an application which it had, in fact, received in time.
Hence the court declined to entertain further argument on these points, on the ground that, if these arguments were to be deployed, it would be better that this is done in a case in which they would have the potential to affect the outcome of the proceedings (para 33).
There has been no appeal to this court against the dismissal of the proceedings against the hospital trust.
We have therefore heard no argument on these issues.
But in my view it would be unwise for hospitals to conduct themselves on the basis that the judge was correct in his approach.
These proceedings were brought by way of judicial review, but it was alleged that the patient had been unlawfully deprived of her liberty, in other words that her Convention rights had been violated.
It is the hospital which deprives the patient of her liberty.
It is incumbent upon the hospital to do this in accordance both with the domestic law and with the patients Convention rights.
A failure which deprives the patient of the right of access to a tribunal which the law provides may well (I put it no higher) be a breach of the patients Convention rights.
The only safe course is to have a system which ensures that this does not happen.
The Mental Health Act 1983 Code of Practice (Department of Health, 2008) reminds hospitals that patients must be told, both orally and in writing, of their right to apply to the tribunal and how to do so (para 2.17).
This is a statutory duty under section 132(1) of the Act.
The Code also advises that hospital managers should ensure that patients are offered assistance to make an application to the tribunal (para 2.18).
It would be helpful if the Code were also to advise that the hospital should ensure that tribunal applications which are given to hospital staff are transmitted to the tribunal without delay.
A detained patient is in no position to ensure that her application reaches the tribunal unless the hospital affords her the facilities for it to do so.
Secondly, the tribunal let her down by failing to accept her application when it arrived.
This may be understandable, given that her lawyers and the judge both made the same mistake (see [2011] EWHC 417 (Admin), para 45).
But it is a little surprising.
As Mr Gordon pointed out, the House of Lords did not make new law in Mucelli v Government of Albania [2009] 1 WLR 276.
At para 84, they adopted what had already been decided 40 years ago by the Court of Appeal in Pritam Kaur v S Russell & Sons Ltd [1973] QB 336: that when an Act of Parliament prescribes a period for doing an act which can only be done if the court office is open on the day when time expires then, if it expires on a day when the court office is not open, the time is extended to the next day on which it is open.
No doubt that message has now been heard loud and clear in the tribunal offices and the same mistake will not be made again.
That is another good thing to have come out of these proceedings.
Had either of those two mistakes not been made, the patient should have had her tribunal hearing on or before 11 January 2011 (the tribunal has a more than 90 per cent record in achieving this).
We cannot know what the result would have been.
Given that she was in fact placed on a community treatment order on 18 February 2011, it is not impossible that it would have been successful.
Instead of bringing these proceedings, however, she might have made an application immediately following the replacement of her admission for assessment under section 2 with an admission for treatment under section 3 on 6 January 2011.
No deadline for hearing section 3 applications is laid down in the tribunal rules, and the normal target time is six to eight weeks.
But it is always possible to ask for an early or urgent hearing.
In a case where a patient has, for whatever reason, just missed the deadline for a section 2 application, the tribunal might well be sympathetic to such a request.
In any event, the patient would be more likely to obtain the speedy hearing of her case before a tribunal with power to discharge her than by the roundabout route of applying to the Secretary of State for a reference under section 67 and bringing judicial review proceedings if he refused.
Thirdly, therefore, the Secretary of State did not let her down.
He dealt promptly and sensibly with the request for a reference.
As with a section 3 application, there is no deadline within which the tribunal must hear such references.
The Secretary of State might request expedition but one hopes that if there is a good case for expedition (as in this case) the tribunal would be as likely to grant it at the request of the patient or her representatives as it would be at the request of the Secretary of State.
Furthermore, a reference inevitably involves additional procedures as there are more parties involved, so it is likely to take longer to be heard than an ordinary application.
For all those reasons, although these proceedings have been unsuccessful, and the patient would have been better served by a different route, they have not been entirely in vain.
| The appeal arises out of an unfortunate but isolated oversight in the offices of the West London Mental Health NHS Trust at the end of 2010.
Mrs Modaresi, who suffers from schizophrenia, was detained under s.2 of the Mental Health Act 1983 (the Act) on 20 December 2010 for assessment.
By s.66(1)(a) of the Act she had a right to apply to the First tier Tribunal within 14 days to review her detention.
The tribunal would have been obliged to arrange a hearing within 7 days of receiving the application.
On the afternoon of 31 December 2010 she gave a completed application form to a member of the hospital staff who faxed it to the appropriate office within the Trust.
The administrator was out the office that day and the form was not seen by others in the office.
The office was closed over the New Year holiday until 4 January 2011, when the form was found and faxed immediately to the tribunal.
Officials in the tribunals office deemed it to be out of time.
On 6 January 2011 Mrs Modaresi ceased to be detained under section 2 but became detained for treatment under s.3 of the Act.
As such, she was entitled to make a separate application to the tribunal under s.66(1)(b) of the Act, which has no time limit for holding a hearing.
Her solicitors wrote to the Secretary of State asking him, in the circumstances, to exercise his discretion under section 67(1) of the Act, which permits the Secretary of State, if he thinks fit, at any time to refer a patient detained under the Act to the tribunal.
The Secretary of State noted that the reason for the delay was no fault of Mrs Modaresi, but having considered all the information, refused the application and suggested that she made a separate application as she was now detained under s.3.
However, Mrs Modaresi did not pursue that course, and instead issued proceedings for judicial review against the Secretary of State for unlawfully declining to refer the case under s.67.
The claim for judicial review was dismissed by the High Court and the Court of Appeal dismissed the appeal.
The Supreme Court unanimously dismisses the appeal.
Lord Carnwath gives the lead judgment and Lady Hale adds a concurring judgment.
Mrs Modaresi was not deprived of her right of access to a court or tribunal to review her detention.
She had such a right under s.3 of the Act.
The issue was not the existence of the right but how speedily it might be exercised and whether it was as advantageous as might have been the case if her original application had been accepted [17].
S.67 did not enable the Secretary of State to insist on a hearing in 7 days, as would have been required under s.2.
The timing was in the discretion of the tribunal, as it would be under s.3 and s.66(1)(b).
There was no evidence to support the submission that the Secretary of State could have been more persuasive in that respect.
An application could have been made under
s.3 with a request for an urgent hearing in the circumstances.
A direct approach to the Tribunal offered a much speedier resolution than the roundabout procedure actually adopted [18].
The practical advantage of a s.67 application was to avoid losing a right to make a second reference under s.3.
However, Article 5(4) only required that a patient should have an entitlement to take proceedings to have the lawfulness of his or her detention decided speedily by the court.
Mrs Modaresi had this entitlement under s.66(1) in respect of her detention under s.3.
If there came a time when having unsuccessfully used up her s.3 application, Mrs Modaresi wanted to make a further application, she was entitled to ask the Secretary of State again under s.67, which he indicated that he would consider doing.
The Secretary of State had a discretion under s.67 which it needed to exercise in accordance with normal public law principles and judicial review was available [19].
A reference under s.67 also had the advantages of convenience and accessibility over an alternative route [21, 35].
Lady Hale noted that Mrs Modaresi had undoubtedly been let down by the system through no fault of her own and there were some important lessons to be learnt [27].
The hospital failed to transmit her application to the tribunal on the day it was made [29].
The hospitals failure deprived the patient of the right of access to a tribunal which the law provides, and may well be a breach of the patients Convention rights, and the only safe course is to have a system which ensures this does not happen [31].
The tribunal also failed to accept her application when it arrived.
The authorities show that when an Act of Parliament prescribes a period for doing an act which can only be done on a day when the court office is closed, the time is extended to the next day on which it is open [33].
|
The claimant Kevin Nunn was convicted in November 2006 of the murder of his girlfriend following the ending of their relationship.
His application for leave to appeal to the Court of Appeal (Criminal Division) was refused after hearing counsels written and oral representations on his behalf.
He continues to protest that his conviction was wrong.
The present proceedings for judicial review raise the question of the extent of any continuing duty of the police and the Crown Prosecution Service to assist him in gathering and examining evidence with a view to a further challenge to his conviction, which he asserts was a miscarriage of justice.
It is common ground, and well understood, that while his trial was pending the Crown owed him the statutory duties of disclosure which are set out in sections 3 and 7A of the Criminal Procedure and Investigations Act 1996.
That meant that it was the Crowns duty to disclose to him anything which had become known to it and which might reasonably be considered capable either of undermining the prosecution case or of assisting his own.
At the heart of the submissions of Mr Southey QC for the claimant is the contention that this duty remains in existence in exactly the same form after as well as before his trial ended with his conviction.
Whilst the statutory duties of disclosure are expressly framed as continuing only until the end of the trial, Mr Southey contends that those duties are only statutory enactments of the common law duty which pre-existed the 1996 Act, and that accordingly this common law duty remains binding on the Crown indefinitely.
The basis for it, he argues, lies in the necessity of detecting and correcting any miscarriage of justice which may have occurred.
Kevin Nunn had been the boyfriend of the deceased, Dawn Walker, for about two years prior to February 2005.
They did not live together and she may have had other boyfriends during this period.
It was agreed that on the evening of Wednesday 2 February their relationship was brought to an end in the course of a discussion between them at her home.
The Crown case was that there was a noisy argument, overheard by the neighbours and seen by one, and that Dawn had ended the affair against Nunns wishes.
His case by contrast was that it had been a matter of amicable agreement; there had been no argument and he had left well before the time spoken of by the neighbours.
After that evening Dawn was not seen alive again.
Her body was found by a river two days later on Friday 4 February.
Attempts had been made to set fire to it at a different place near the river and at some stage it had been immersed in water.
It had then been disposed in a sexually degrading position, unclothed except for a fleece over a sweatshirt pulled up above her breasts, which garments had been put on after death and burning in other clothes.
The exact cause of death could not be determined.
Her head and pubic hair had been shaved off, her ankles and Achilles tendon had been lacerated, and a length of reed had been inserted into her anus.
The body must have been somewhere else during Wednesday night and Thursday, for it would have been seen if then by the river.
In barest outline, the Crown case against the claimant relied upon (i) the motive afforded by Dawns rejection of him, (ii) evidence that he was of a jealous disposition and had stalked both Dawn and a previous partner, (iii) his admitted presence with her on the evening of her disappearance, (iv) the argument which the neighbours said that they had heard that night, (v) his having provided himself with a key to her home without her knowledge, which would have afforded access both to items found where the body had been burned and to a petrol can apparently removed from her shed for use in the burning, (vi) his having told her employers the next day that she was not at work because unwell, and (vii) the evidence of a neighbour who knew him and who said that she had seen him, with an accomplice, removing a large wrapped object, consistent with a body, from Dawns house in the small hours of the night before she was found.
By contrast, the claimants case was that he had left Dawn in good health and had thereafter been elsewhere.
He pointed to a telephone record of her mobile telephone calling his at 04.55 on the night of 2/3 February; he denied that he had made the call himself to lay a false trail, and he explained the absence on his own phone of the voicemail message which he said she had left by saying that he had accidentally deleted it.
He said that footprints consistent with his boots near the riverbank burning site were there because he had gone looking for Dawn the day after she disappeared; he had walked the river bank but had not seen various items connected with her which others had seen there.
He advanced the positive case that Dawn had been murdered by one, or perhaps another, of her previous boyfriends, to one of whom she was perhaps hoping to return.
Both were called and cross examined on his behalf before the jury, as was the girlfriend of one of those men, who provided that alleged murderer with an alibi.
The claimant pointed to the presence of traces of sperm (four cells) on Dawns inner thigh and pubic area (but not in her vagina) which, since he had had a vasectomy, were unlikely to derive from him; unless they had got there by secondary or tertiary transfer or unknown past sexual contact via clothing these, he suggested, were an indication of a killer other than him.
These and other issues were all fully investigated at a trial which lasted some six weeks.
In the course of it the jury heard and was able to judge the evidence of the claimant and of the identifying neighbour, as well as of the two men whom the claimant accused.
The jurys verdict of guilty was returned on 20 November 2006.
The Court of Appeal refused the application for leave to appeal against conviction on 17 October 2007.
The claimant continued to protest his innocence.
Beginning in January 2008, he made a series of written applications to the police for supply of all their records of the investigation.
These will, for an investigation such as this, have been very voluminous; they were logged in detail under the normal police computerised system for major enquiries (HOLMES).
He sought everything, including officers notebooks, computer files, incident logs, CID journals and the like, together with all photographs and forensic science records.
The applications were framed under either the Freedom of Information Act 2000 or the Data Protection Act 1998.
Whether or not the claimant fully appreciated the law, even if there was anything which could be obtained under these two statutes, these blanket applications were misconceived (see, inter alia, section 30 of the former and section 29 of the latter), quite apart from the fact that there is no suggestion that anything relevant had not been disclosed to the defendant, through his trial solicitors, before the trial.
By February 2010, however, the claimant had instructed fresh solicitors, who had not represented him at his trial.
He will have been entitled to call for the case papers, including unused prosecution material, from his trial solicitors to give to his new representatives.
On 8 February 2010 the new solicitors wrote the first of a number of letters to the police seeking information.
They said: We should be most obliged if you could serve upon us some relevant and as yet undisclosed material in relation to the finances of the deceased, Dawn Walker.
The purpose of this enquiry is to ascertain whether Ms Walker had any undisclosed source of income which might indicate any form of economic activity which was not disclosed to the defence.
This enquiry is necessitated in part by the conclusion drawn from the available facts that Ms Walker was living at a standard way beyond the income which she earned at [her employers].
.. We should also like to know whether the keys to the shed at Dawn Walkers home and her mobile phone can be made accessible to our expert, probably at the forensic science laboratory for the purpose of DNA testing.
There is no sign that Ms Walkers finances had been thought by anybody to have any relevance at all to the trial or to the question of who had murdered her.
The enquiry clearly indicated a wish to start afresh investigating the case.
Nor was the request for anything specific; it was a request for the police to exhume all the investigation records, a little over three years after the end of the trial, and to review anything bearing on this new topic.
By now the investigation documents were all in storage and some officers concerned had moved on to other postings.
In the event, some research was undertaken and a positively worded letter from the CPS responded that the author had ascertained that the deceased had certainly not been living beyond her means.
Nothing more seems to have been heard of this line of enquiry.
Other requests, however, followed, some specific and some not.
They included a request for sight of the notes of any forensic scientist who had worked on the case so that an independent expert could check their adequacy, and they sought access to various exhibits for further testing as and when their expert so advised.
The solicitors made it clear that they were undertaking a full review of the case to determine what lines of enquiry may turn up fresh evidence.
They referred to wanting to review material relating to DNA, pathology, soil composition, pollens and diatoms.
In November 2010 an itemised list of requests for information was sent to the police.
It asked a variety of questions which would have entailed a detailed review of the investigation documents.
It included the question, described as relating to an obvious possibility, whether the murder of Dawn Walker had been linked to a series of high profile murders of prostitutes in Ipswich.
The several letters made it clear that other requests would be likely to follow as the general review of the case proceeded.
On 1 February 2011 the police replied formally, repeating what had already been said in correspondence, to the effect an obligation was accepted to disclose any material which came to light after the conviction and which might cast doubt on the safety of the conviction, but not to facilitate a general trawl through a finished case.
The claimants application for judicial review followed.
It sought: (a) A declaration that the defendant's 1 February 2011 refusal to grant the claimant access to prosecution evidence is unlawful being in breach of his rights under domestic common law, under articles 5 and 6 of the ECHR and/or under section 7 of the Data Protection Act 1998; and (b) a mandatory order requiring the Chief Constable to grant the claimant access to the prosecution evidence, together with such other declaratory relief as might be appropriate.
The Divisional Court (Sir John Thomas P and Haddon-Cave J) refused the application.
This is the claimants appeal from that refusal.
It should be recorded that after the lodging of the claim for judicial review, and again between the hearing before the Divisional Court and that in this court, the apparent target of the claimants present requests has been narrowed.
It seems that nothing is now made of the suggested obvious possibility that this murder was linked to the murders of prostitutes in Ipswich; the several important differences between the two cases which have been explained may have been taken on board.
The focus is now upon (i) access to the working papers of the forensic scientists who advised the Crown and/or gave evidence and (ii) requests for re-testing, or first testing, of various exhibits recovered in the course of the investigation.
At the trial, the scientific evidence was, in most respects, inconclusive as to the identity of the killer.
The Crown did not rely on it to support the case against the claimant, as the trial judge carefully reminded the jury early in her summing up.
There were the footprints near the river which were consistent with boots which the claimant wore, but they were not uniquely so, and he admitted walking there at the material time.
DNA testing of various items found either on the body or where it had been burned provided nothing to associate them either with the claimant or with any of the other males who figured in the case.
The scientific evidence of the presence of traces of sperm on the deceased was not disputed, and evidence was given about the possible ways in which, by secondary or tertiary transfer, such material might arrive where it was found.
The claimant called expert evidence relating to the consequences of his vasectomy.
What other scientific advice he had cannot, in the absence of waiver of privilege, be known.
No forensic science report available to him at trial has ever been disclosed by him; there is of course no obligation upon a defendant to disclose such a report unless he proposes to rely upon it.
A great many defendants decide, on advice, that there is nothing in the reports obtained for them which will help them or that the best use to which they can be put is to inform cross-examination of the Crown scientists without exposing points on which the reporting expert agrees.
Some time after the claim for judicial review was lodged, the claimant provided the police and CPS with a full report from an independent forensic scientist who had clearly been instructed by the new solicitors some while beforehand, though long after the trial.
While appeal to this court was pending, a further statement from a different forensic scientist has also been lodged, dealing with advances in DNA testing techniques over the period since the trial; this was admitted without objection before this court.
Nevertheless, whilst the focus of the now current application to the police has narrowed, it is plain from the sequence of the requests made that what the claimant seeks is a full re-investigation, and access from time to time to whatever he thinks necessary to review any point which he wishes.
Consistently with this, the appeal has been argued before this court at the general level of the extent of the duty, after conviction and exhaustion of appeal, to which the Crown and the police remain subject in relation to the products of the police enquiry.
The question of law of general public importance which the Divisional Court certified at Mr Southeys request is: Whether the disclosure obligations of the Crown following conviction extend beyond a duty to disclose something which materially may cast doubt upon the safety of a conviction, so that the [Chief Constable] was obliged to disclose material sought by the claimant in these proceedings ?
As is apparent from the summarised history of applications set out above, what this claimant chiefly seeks is not disclosure of something which has been withheld from him, but inspection of material which was fully and properly disclosed during the trial process.
Disclosure and inspection are related, and governed by similar principles, but it does not at all follow that the exact content of the Crowns duty in a particular case can be understood without adverting where necessary to the difference between them.
As Mr Southey rightly submits, the Crowns duty of disclosure and inspection was formulated by the common law in the second half of the twentieth century.
There were parallel developments of rules of disclosure in other common law jurisdictions: see for example Brady v Maryland 373 US 83 (1963) in the United States of America.
The precise extent of the duty in England and Wales before and during trial is not in issue in the present case and calls for no more than a summary.
Early decisions, such as R v Bryant and Dickson (1946) 31 Cr App R 146 and Dallison v Caffery [1965] 1 QB 348 recognised the Crowns duty to disclose to a defendant the existence of a witness who can give material evidence.
Later decisions expanded the rule into a general duty to disclose evidence of any kind which might reasonably be thought capable of assisting a defendant, in large part in response to a few notorious cases in which trials went wrong because defendants were unaware of such material although it was in the hands of the prosecution.
R v Ward [1993] 1 WLR 619 is a well-known example, where wholesale failure to disclose scientific material bearing on the reliability of scientific evidence at the centre of the Crown case made it necessary to quash convictions for bomb-setting some twenty years after the event.
A defendants right to have disclosed evidential material inspected on his behalf will generally go with the duty of disclosure.
For example, R v Mills [1998] AC 382 held that a material witness statement should be provided for inspection as well as the existence of the witness disclosed.
There are, however, inevitably additional considerations associated with inspection of evidential material other than witness statements.
Occasionally, material may have had to be destroyed for reasons of safety, or may unavoidably have been used up in a testing process.
If it remains available, inspection must be on terms that it is properly preserved and, if scientific, not exposed to risk of contamination.
Particular issues may arise in relation to the cost of handling or preserving some kinds of material.
There are special rules for material falling within the Sexual Offences (Protected Material) Act 1997 designed to prevent it from being put into the possession of individual defendants.
In practice, in many cases, inspection is likely reasonably to be restricted to nominated and trusted professional or expert persons.
What will be reasonable will vary from case to case.
The Criminal Procedure and Investigations Act 1996 put the common law prosecution duty of disclosure into statutory form.
It recognised a two-stage process of disclosure, initially under section 3 and continuing under what is now section 7A. It also inaugurated a duty of defence disclosure, which, although one of imperfect obligation, is connected to the prosecution duty since the defence statement required by section 5 and the advance notices required by sections 6C and 6D help to define the issues and thus to identify material which may be relevant to the duty of continuing disclosure.
The Act somewhat modified the test for disclosure from that variously articulated in R v Ward and in R v Keane [1994] 1 WLR 746 at 752, whilst maintaining its purpose.
Both the initial duty under section 3 and the continuing duty under section 7A are couched in the same terms.
They apply to any material which the prosecution has or has inspected and which: .might reasonably be considered capable of undermining the case for the prosecution against the accused or of assisting the case for the accused.
The Act dealt specifically with the timing of the duties which it created.
In this and generally it gave effect to the recommendation of the Royal Commission on Criminal Justice (the Runciman Commission) (1993) (Cm 2263) which had expressed concern that the common law risked requiring detailed disclosure of matters whose potential relevance is speculative in the extreme and about the impracticability of the sheer bulk of disclosure which might be within the principle (chapter 6, p 95, at para 49).
The Act met those concerns firstly by providing the test for disclosure set out above.
By section 21, where the statutory duties created by the Act apply, they displace the former common law duties which cease to operate.
The Act then recognised the two-stage disclosure procedure described above and it defined the period during which its statutory duties of disclosure are imposed.
For trials on indictment, the duty begins with the arrival of the case (by whatever route) in the Crown Court: section 1(2).
It ends with the end of the trial, whether by conviction, acquittal or the Crown discontinuing proceedings: section 7A(1)(b).
It follows that the duty of disclosure created by the Act does not apply to the present claimant.
The end of the trial is, however, not always the end of the criminal process.
Any convicted defendant has the right to appeal to the Court of Appeal (Criminal Division) if he can show an arguable case that his conviction is not safe.
If that fails, a defendant cannot mount a second appeal, because the court is functus officio.
But, again in response to the recommendations of the Runciman Commission, the law of England and Wales (and also of Northern Ireland and Scotland) has put in place a separate body, the Criminal Cases Review Commission (CCRC), which has the power to review any conviction and which is charged, if it thinks that there is a real possibility that the Court of Appeal might quash the conviction, with the power to refer the case back to that court for, exceptionally, the hearing of a second appeal and on any grounds, whether the same as before or different.
Such a referral by- passes the requirement for leave to appeal.
An arguable case is assumed.
The Court thereupon has the duty to investigate the safety of the conviction and must quash it if it is unsafe.
The CCRCs extensive investigative powers include the power to require the production to it of any material in the hands of the police or any other public body, to appoint an investigator with all the powers of a police officer, and to assemble fresh evidence not before the court of trial.
As summarised above, Mr Southeys essential submission is that the common law duty of disclosure was developed with the purpose of preventing miscarriages of justice.
Whilst the common law duty is displaced where the Act applies, it remains in force, he submits, for periods before and after the Crown Court trial.
In particular, it remains in force after conviction for the purpose of exposing and correcting any miscarriage of justice which may have occurred.
Hence, he contends, the duty of the Crown in the present case is exactly the same now as it was while the claimants case was pending in the Crown Court.
It follows, he says, that the police, as the custodians of the exhibits and the other products of the investigation, must afford the claimant such access as he seeks so that he can, if material emerges which supports him, challenge his conviction.
Mr Southey accepts, as he must, that any such challenge can now only be brought to court if the CCRC decides to refer the conviction to the Court of Appeal (Criminal Division).
But he contends that in order to demonstrate to the CCRC that this is a proper case in which it should launch a review, the claimant needs, via his solicitors, to re-investigate the several matters which they have identified and perhaps more.
The principled origin of the duty of disclosure is fairness.
Lord Bingham put it in this way in R v H [2004] UKHL 3; [2004] 2 AC 134, at para 14, speaking in the context of the proper procedure for handling claims to withhold disclosure on public interest grounds: Fairness ordinarily requires that any material held by the prosecution which weakens its case or strengthens that of the defendant, if not relied on as part of its formal case against the defendant, should be disclosed to the defence.
Bitter experience has shown that miscarriages of justice may occur where such material is withheld from disclosure.
There is no doubt that this principle of fairness informs the duty of disclosure at all stages of the criminal process.
It does not, however, follow, that fairness requires the same level of disclosure at every stage.
The terms of section 7A of the statute plainly suggest otherwise.
So, on inspection, does the jurisprudence.
The common law of England and Wales has proved capable of adapting the duty of disclosure to the different stages of the criminal process.
In R v Director of Public Prosecutions, Ex p Lee [1999] 1 WLR 1950 the Divisional Court dealt with the position before committal to the Crown Court, and thus before the statutory duties under the Criminal Proceedings and Investigations Act apply.
It held that some disclosure was indeed required at that early stage but not what Kennedy LJ described, at p 1963, as the full blown version applicable under the Act once Crown Court proceedings are under way.
Examples of material which ought to be disclosed before committal would include evidence which bears on a bail application, or which is relevant to an application to stay for abuse, or which relates to unused eye witnesses whose evidence might be less effective unless promptly proofed.
That illustrates the proposition that the common law duty did not remain the same throughout.
Rather, it was tailored to the needs of the stage of the proceedings in question.
Similarly, although the duties laid down by the Act cease on conviction, some continuing common law duty is recognised to apply pending sentence, but only in relation to material relevant to that stage.
The Attorney-General has issued guidelines on disclosure for prosecutors.
They recognise at para 58 that prosecutors must consider disclosing in the interests of justice any material relevant to sentence, such as information not known to the defendant which might assist him in placing his role in the offence in the correct context vis--vis other offenders.
That correctly gives effect to the common law duty which at this point is limited to material not known to the defendant which might assist him in relation to sentence.
In the same way, while an appeal is pending, a limited common law duty of disclosure remains.
Its extent has not been analysed in English cases, but plainly it extends in principle to any material which is relevant to an identified ground of appeal and which might assist the appellant.
Ordinarily this will arise only in relation to material which comes into the possession of the Crown after trial, for anything else relevant should have been disclosed beforehand under the Act.
But if there has been a failure, for whatever reason, of disclosure at trial then the duty after trial will extend to pre-existing material which is relevant to the appeal.
This was the case, for example in R v Makin [2004] EWCA Crim 1607, to which Mr Southey referred the court, where the complaint was of a failure of disclosure at trial, and disclosure pending appeal was necessary to enable the complaint to be investigated by the court, albeit on examination the court rejected it.
A similar result was reached in McDonald v HM Advocate [2008] UKPC 46; 2010 SC (PC) 1 in relation to Scottish law (where the content of the duty of disclosure was then in a transitional state).
The Judicial Committee of the Privy Council accepted that if there had been a failure of disclosure at trial, the duty on appeal was to make available what should have been provided at trial as well as material relevant to existing grounds of appeal.
However, it roundly rejected the contention that at the appellate stage there arose a duty on the prosecution to re-perform the entire disclosure exercise, so that the appellant could see whether anything might emerge which could be used to devise some additional ground of appeal.
Lord Rodger observed at para 71 that that was an extravagant proposition.
He went on to explain why, at para 74: Not only would such an obligation be unduly burdensome, but it would often be quite inappropriate at the appeal stage.
By then, the real issues in contention between the parties will have been focused at the trial.
In this new situation material which might have seemed to be of potential significance for the defence before the trial (for instance as weakening the identification evidence of a witness to a murder) may now be seen to have actually been irrelevant (because for instance the accused admitted that he killed the deceased but pleaded self-defence).
In other words, what fairness requires varies according to the stage of the proceedings under consideration.
This conclusion is consistent with that reached in other common law jurisdictions.
In the New Zealand case of The Queen v Nepia (unreported) 3 October 2000, the Court of Appeal found the source of the disclosure rule at the pre-appeal stage in the power of that court under section 389(a) of the Crimes Act to order production of any document exhibit or thing which appears to be necessary for the determination of the case (a provision equivalent to section 23 of the England and Wales Criminal Appeal Act 1968).
It held that this jurisdiction, exercisable on appeal, is not part of an investigatory procedure and should not be used as part of a general fishing expedition.
It held that a realistic evidential foundation will in general have to be laid before it is used.
In the recent case of Cant v The Queen [2013] NZCA 321, again a pending appeal, the Court of Appeal similarly held that questions of the Crown were not appropriate, and that requests for disclosure must have a material bearing on an articulated ground of appeal.
A similar approach was adopted in the Court of Appeal of Ontario in The Queen v Trotta [2004] CanLII 600114 (ON CA).
Canadian law recognises a duty of disclosure for the purposes of trial which is equivalent to that imposed in England and Wales: R v Stinchcombe [1991] 3 SCR 326.
Trotta held that in principle disclosure obligations continued into the appellate process.
The court observed that the protection of the innocent is as important on appeal as it is prior to conviction.
But it drew attention to the fundamental differences between the two stages when it comes to the content of the duty.
The convicted person is no longer to be presumed innocent.
He has exhausted his right to make full answer and defence.
The duty of disclosure at this stage was held to extend to any information in the possession of the Crown where the accused can show that there is a reasonable possibility that it could assist him in the prosecution of his appeal.
In that case, there had arisen since the trial some suggestions of lack of balance in the evidence given in other cases by the Crown pathologist.
The Court held that there would be a duty to disclose this material to the appellant if there were any reason suggested to doubt the evidence which the pathologist had given in the instant case.
Since there was not, the material was irrelevant and the request for it speculative.
This is a good illustration of the difference between the two stages.
There can be no doubt that, if it had then been in existence, the material affecting the pathologist would have been disclosable pre-trial, for at that stage it would not have been known whether there was or was not any challenge to his findings.
The important differences between the pre-trial and post-conviction stages were similarly emphasised by the US Supreme Court in District Attorneys Office (Third Judicial District) v Osborne 557 US 52 (2009).
The court divided 5:4 upon the jurisdictional question whether a complaint of denial of access to DNA testing post-conviction raised a constitutional issue, and thus on whether the issue was a proper one for the Supreme Court rather than for the federal or State courts.
There was also disagreement on whether there was a right to such access in a case where it was agreed that the testing would be conclusive of guilt or innocence.
But there was agreement that the position of a convicted person was not generally analogous to that of a person on trial.
All the judges agreed that the disclosure rules applicable prior to and during trial, set out in Brady v Maryland 373 US 83, did not continue unaltered after conviction.
Roberts CJ, giving the judgment of the majority, said this: Osbornes right to due process is not parallel to a trial right, but rather must be analysed in light of the fact that he has already been found guilty at a fair trial, and has only a limited interest in postconviction relief.
Brady is the wrong framework.
The minority opinion, delivered by Justice Stevens, agreed on this.
It included approval of Luttig Js statement in the earlier case of Harvey v Horan 285 F 3d (2002) 298 at 305 that: no-one would contend that fairness, in the constitutional sense, requires a post-conviction right of access or a right to disclosure anything approaching in scope that which is required pre-trial Whilst the jurisdictional question was later resolved in favour of a different appellant in Skinner v Switzer 562 US (2011) nothing in that decision bears on the distinction between disclosure pending trial and disclosure post-conviction.
There is thus no basis for saying that the common law ever recognised a duty of disclosure/inspection after conviction which was identical to that prevailing prior to and during the trial, and no case, whether in this jurisdiction or any other, has been found to suggest it.
All the stages thus far considered are ones at which the criminal justice process remains afoot, with either trial or sentence or appeal to be catered for.
When it comes to the position after the process is complete, the Attorney Generals guidelines deal specifically with disclosure of something affecting the safety of that conviction.
The relevant paragraph in the most recent edition (2013), echoing the same principle in earlier editions, says this: Post conviction.
72.
Where, after the conclusion of proceedings, material comes to light that might cast doubt upon the safety of the conviction, the prosecutor must consider disclosure of such material.
The guideline must mean that not only should disclosure of such material be considered, but that it should be made unless there is good reason why not.
Thus read, it is entirely consistent with the principle reflected in the position set out in the paragraphs above in relation to the pre-Crown Court stage, to the pending sentence stage and to the pending appeal stage.
Mr Southeys submission entails the argument that the guidelines greatly understate the duty in the circumstances of the present claimant.
He is entitled, if Mr Southey is right, to the full extent of the duty which the Crown had had during his trial.
That would mean a duty to give active consideration, presumably continuously, to the state of the evidence.
And, as the requests made of the police in the present case illustrate, it would mean a duty to respond from time to time to any requests for information, or for access to material, which the convicted defendant makes.
The argument appears to be that his right to the performance of that duty endures indefinitely, or certainly whilst he, or perhaps anyone else, asserts that the conviction was wrong.
The fallacy in this argument lies in the implicit assumption that the common law duty, as it evolved, was identical before and after conviction.
As has been seen, it was not.
Moreover, it does not at all follow from the fact that the common law developed the Crowns duty of disclosure with the object of minimising the risk of miscarriages of justice that a convicted defendant such as the claimant, who asserts that his conviction was wrong, is or ever was entitled to the same duty continuing indefinitely after that conviction.
The common law developed the duty as an incident of the trial process, to ensure that that process was fair to defendants.
It was designed to avoid trials creating miscarriages of justice, not as a means of investigating alleged miscarriages after a proper trial process has been completed.
It was not devised in order to equip convicted persons such as the claimant with a continuing right to indefinite re-investigation of their cases, and the fact that some such persons assert that their convictions were miscarriages of justice does not mean that it was.
The position of a convicted defendant is different in kind from that of a defendant on trial.
The latter is presumed innocent until he is proved guilty, as he may never be.
The former has been proved guilty.
He is presumed guilty, not innocent, unless and until it be demonstrated not necessarily that he is innocent, but that his conviction is unsafe.
The defendant on trial must have the right to defend himself in any proper way he wishes, and to make full answer to the charge.
The convicted defendant has had this opportunity.
The public interest until conviction is in the trial process being as full and fair as it properly can be made to be.
After conviction, there is of course an important public interest in exposing any flaw in the conviction which renders it unsafe and in quashing any unsafe conviction, but there is also a powerful public interest in finality of proceedings.
All concerned, including witnesses, complainants, the relatives of the deceased and others, have a legitimate interest in knowing that the legal process is at an end, unless there be demonstrated to be good reason for re-opening it.
A duty such as that suggested by Mr Southey should not be assumed to be straightforward of performance.
The products of a major investigation are typically voluminous, far more so than the evidence adduced at trial, extensive though that often is.
Whilst they are generally catalogued on computer, many will be paper material.
In smaller cases, in which the same duty would apply, there may be very little retained.
Generally, materials will often be archived after the appeal process is exhausted.
To make an informed or useful search of them requires them to be mastered.
Police officers move on to other appointments, or retire; it cannot be assumed that the investigating officers will remain in the same place where they formerly were, or that they will continue to have regular access to the material.
If the material is actively to be managed and re-considered, officers will have to be diverted to the task from other investigations.
The evidence of the detective inspector in the present case was, for example, that reviewing the stored evidence in order to deal with the claimants subject access request under the Freedom of Information Act occupied approximately four man-days of police time.
If there is demonstrated to be a good reason for this kind of review of a finished case, then the resource implications must be accepted.
There is, however, a clear public interest that in the contest for the finite resources of the police current investigations should be prioritised over the re-investigation of concluded cases, unless such good reason is established.
If, then, there is no basis for Mr Southeys principal submission, that the duty of disclosure remains the same after conviction as before, the question remains what the duty does entail at that stage.
There can be no doubt that if the police or prosecution come into possession, after the appellate process is exhausted, of something new which might afford arguable grounds for contending that the conviction was unsafe, it is their duty to disclose it to the convicted defendant.
Simple examples might include a new (and credible) confession by someone else, or the discovery, incidentally to a different investigation, of a pattern, or of evidence, which throws doubt on the original conviction.
Sometimes such material may appear unexpectedly and adventitiously; in other cases it may be the result of a re-opening by the police of the enquiry.
In either case, the new material is likely to be unknown to the convicted defendant unless disclosed to him.
In all such cases, there is a clear obligation to disclose it.
Para 72 of the Attorney Generals guidelines, quoted above, correctly recognises this.
This is, however, plainly different from an obligation not to reveal something new, but to afford renewed access to something disclosed at time of trial, or to undertake further enquiries at the request of the convicted defendant.
Miscarriages of justice may occur, however full the disclosure at trial and however careful the trial process.
A convicted defendant clearly has a legitimate interest, if continuing to assert his innocence, to such proper help as he can persuade others to give him: see R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, where a prisoners right, for this purpose, to a visit by, and oral interview with, an investigative journalist was recognised.
Quite apart from the defendants interest, the public interest is in such miscarriages, if they occur, being corrected.
There is no doubt that there have been conspicuous examples of apparently secure convictions which have been demonstrated to be erroneous through the efforts of investigative journalists, or of solicitors acting on behalf of convicted persons or, sometimes, of other concerned persons.
This court was referred to R v Hodgson [2009] EWCA Crim 490 as a particularly graphic illustration.
There, the defendants conviction for rape and murder, based essentially upon the apparently compelling detail of his own circumstantial confessions, was, some twenty seven years later, demonstrated to have been wrong by the advances in science, and despite no one concerned with the investigation or trial having done anything which could be criticised.
This was possible because samples of semen recovered from vaginal and anal swabs taken from the deceased could be analysed for DNA in a way which had not been possible at the time.
A solicitor who was recently instructed on behalf of the defendant made the enquiry of the CPS and/or the police whether the samples remained in existence despite the passage of time.
When it was found that they did, analysis of them by modern methods was immediately commissioned by the police and prosecution, with a view to immediate disclosure of the outcome.
The semen could only have come from the rapist/murderer.
The results excluded the defendant.
A rapid joint submission to the CCRC followed, with an immediate reference by that body to the court.
In quashing the conviction, the Court of Appeal, Criminal Division, gave appreciative recognition to the efforts of solicitor, police and prosecutor and to the level of co-operation between them.
It does not, however, follow from cases such as this that the law ought to impose a general duty on police forces holding archived investigation material to respond to every request for further enquiry which may be made of them on behalf of those who dispute the correctness of their convictions.
Indeed, the potential for disruption and for waste of limited public resources would be enormous if that duty were to be accepted.
The claimants initial requests in the present case for investigation of the finances of the deceased, as well as his earlier applications for sight of the entire investigation files, afford good illustrations of the kind of speculative enquiry which such a rule would encourage.
There is no such duty.
If the duty of disclosure pending appeal is limited, as it plainly is, to material which can be demonstrated to be relevant to the safety of the conviction, it is all the clearer that after the appellate rights which the system affords are exhausted the continuing obligation cannot be greater than that stated in the Attorney Generals guidelines, read as explained in para 30 above.
The safety net in the case of disputed requests for review lies in the CCRC.
That body does not, and should not, make enquiries only when reasonable prospect of a conviction being quashed is already demonstrated.
It can and does in appropriate cases make enquiry to see whether such prospect can be shown.
It has ample power, for example, to direct that a newly available scientific test be undertaken.
R v Shirley [2003] EWCA Crim 1976, a DNA case not unlike Hodgson, appears to be a case in which it did exactly that.
What it ought not to do is to indulge the merely speculative.
It is an independent body specifically skilled in examining the details of evidence and in determining when and if there is a real prospect of material emerging which affects the safety of a conviction.
This exercise involves a detailed scrutiny of the other evidence in the case and a judgment on the likely impact of whatever it is suggested the fresh enquiries may generate.
Whilst in principle the court retains control, via the remedy of judicial review, of the duty laid upon the police and prosecutors after the appeal process is exhausted, it is likely to determine, unless good reason for not doing so is provided, that relief by that route is inappropriate until the CCRC has had the opportunity to make a reasoned decision.
The advances of science mean that from time to time it will become possible to undertake tests which were not available earlier.
This possibility presents just one example of the approach set out above.
Sometimes such tests will be potentially determinative of guilt, as they were in Hodgson.
In other cases they will be simply speculative, either because there is great uncertainty about whether any result can be obtained or because any result will be consistent both with guilt and innocence.
The difference between the two cases has given rise in the USA to debate about the extent of any right to re-testing especially if it is likely to be conclusive.
Osborne, referred to above, records some of the debate and the fact that a large number of US states have made legislative provision for such testing in defined circumstances.
There is, however, no body such as the CCRC in the United States, which can decide in an appropriate case to require testing.
Here, there is.
None of this means that the work of solicitors and others in the interests of convicted persons may not be of great value.
There is no doubt that the CCRC is much assisted by informed legal analysis and presentation if an application for review is made to it, and not only because its funding is not unlimited, but also because accurate legal formulation focuses the mind correctly.
Sometimes, such solicitors or others can usefully undertake enquiries of their own, respecting of course the interests of third parties.
On other occasions they may well, by their arguments and presentations, enlist the co-operation of the police, or the prosecution, or both: Hodgson was just such a case.
The police and prosecutors ought to exercise sensible judgment when representations of this kind are made on behalf of convicted persons.
If there appears to be a real prospect that further enquiry will uncover something which may affect the safety of the conviction, then there should be co-operation in making it.
It is in nobodys interests to resist all enquiry unless and until the CCRC directs it.
It is enough to determine the instant appeal that after conviction there is no indefinitely continuing duty on the police or prosecutor either in the same form as existed pre-trial or to respond to whatever enquiries the defendant may make for access to the case materials to allow re-investigation.
The duty is properly stated at para 72 of the Attorney Generals guidelines, read as explained in para 30 above, with the addition that if there exists a real prospect that further enquiry may reveal something affecting the safety of the conviction, that enquiry ought to be made.
The Divisional Court held that there was no basis for concluding that any of the enquiries made in the present case go beyond the simply speculative and satisfy this latter condition.
This court has, rightly, been pressed with argument chiefly on the principled point of law rather than on the facts of this case.
This appeal ought not, however, to be left without the observation that the fact that DNA testing is one of the things sought does not by itself answer the question whether the request has a real prospect of uncovering material affecting the safety of the conviction.
The request for sight of all forensic science working papers so that the scientists work could be checked was plainly speculative.
The report provided by the claimant states specifically that there is no reason to query any of the work done or conclusions arrived at.
The report also makes it clear in some instances that the request for testing of items which were not previously tested is made simply because the claimant or his family would like it done; those requests have the plain appearance of being likewise speculative.
In the case of some of the testing proposed it seems likely that some alteration of the samples would be involved, by consolidating them; if this kind of operation is in question, there is a further decision to be made whether re-testing would rule out any future use of the material.
There may be a separate question concerning the new possibilities of undertaking modern, and better, DNA testing of certain swabs, especially those from the thigh and genital region.
Even there, however, the forensic science report now relied upon concludes that even if a match were found to one of the men under discussion in the case, that would not necessarily exclude the claimant as the killer.
The killer may or may not have deposited traceable DNA.
Although it is suggested for the claimant that if DNA attributable to one of these men were to be found, that would provide good evidence that he might be the killer, it must also be the case that any DNA which is found need not be related to the killing, particularly if the deceased had an association with the man in question.
It is plain that the presence of a very few unattributed spermatozoa was known at the trial and the possibilities for innocent transfer were fully investigated.
On the limited information presently available it seems unclear that a real prospect is established of material emerging affecting the safety of the conviction.
However, any further request for access to the sample should be tested on the principles explained above, in the first instance by the police and if necessary by the CCRC.
For these reasons, this appeal should be dismissed.
| Mr Nunn was convicted in November 2006 of killing his girlfriend following the end of their relationship.
Her body was found by a river two days after that end, having been subjected to various indignities and abuses.
Evidence was given at trial that he had rowed noisily with her on the night she disappeared, and had been seen carrying what appeared to be a body out of her house.
Small traces of sperm were found on her inner thigh and pubic area.
Mr Nunn consistently asserted his innocence before, during, and following his trial.
He pointed to the sperm presence as indicating another killer, since he had had a vasectomy.
Following his conviction Mr Nunn sought to appeal, which was refused.
In January 2008 Mr Nunn began to make written applications to the police for supply of all of their records of the investigation into his case.
By February 2010 he had instructed fresh solicitors, who made further applications to the police on his behalf.
They initially sought the investigation records and requested fresh enquiries to be made into Mr Nunns girlfriends finances.
Some research was undertaken, and the CPS responded saying that the deceased had not been living beyond her means.
A number of other requests followed, including a request for notes of the forensic scientists working on the case, and various items of evidence.
The police formally replied, stating that their only obligation was to disclose material which might cast doubt on the safety of the conviction.
Mr Nunn judicially reviewed that decision, arguing that the police were required to provide, after conviction, the same disclosure as is required of them pending trial and appeal.
The Divisional Court rejected that application.
Mr Nunn appealed to the Supreme Court, arguing that there is an enforceable common law disclosure obligation requiring the police to provide, in his case, at least: (i) Access to the working papers of the forensic scientists who advised the Crown and/or gave evidence, and (ii) Requests for re testing or first testing of various items of evidence recovered in the course of the investigation.
The Supreme Court unanimously dismisses the appeal.
Lord Hughes gives the only reasoned judgment, with which the other members of the Court agree.
The common law duty of disclosure exists in addition to the statutory duty of trial disclosure created by the Criminal Procedure and Investigations Act 1996 (CPIA 1996).
The basis of the common law duty is fairness, and what fairness requires varies depending on the stage reached by the proceedings.
There is no basis for the submission that the full trial duty of disclosure and investigation continues indefinitely: this would be contrary to the public interest in finality and to the need for finite police resources to be appropriately applied.
The extent of the common law duty post appeal is correctly stated in the Attorney Generals guidelines: any material coming to light that might cast doubt on the safety of the conviction
should be disclosed.
However, the Criminal Cases Review Commission can, in appropriate cases, make enquiry to see whether a reasonable prospect of a conviction being quashed can be demonstrated, which includes a power to direct new scientific tests and similar.
Moreover, the police and prosecutors can choose to accede to representations for further enquiry made on behalf of convicted persons, and should exercise sensible judgment in relation to such representations.
The Crowns duty of disclosure and inspection was formulated by the common law in the second half of the twentieth century, mirroring parallel developments in other common law jurisdictions.
A general duty was formulated to disclose any evidence reasonably thought capable of assisting a defendant [16].
Inspection would generally go with disclosure, though there were additional considerations in this sphere [17].
The CPIA 1996 put the duty of disclosure on a statutory footing, displacing the common law duties within its sphere of operation, and applying to any material which might reasonably be considered capable of undermining the case for the prosecution or of assisting the case for the accused.
That statutory duty is temporally limited: for Crown Court cases, it applies between the arrival of the case in the Crown Court to the end of the trial [18 20].
Thus it does not apply to Mr Nunn.
The basis of the common law duty of disclosure is fairness.
However, fairness does not require the same level of disclosure at every stage of the process [22].
Before committal, the duty is limited to evidence that might be relevant at that stage [23].
Similarly, pending sentence, the duty is only to disclose material relevant to sentence [24] and, pending appeal, to disclose material relevant to the appeal [25].
That conclusion is consistent with the approach reached in other common law jurisdictions: New Zealand, Canada and America [26 28].
Therefore there is no basis for finding a temporally limitless duty of disclosure post conviction identical to that subsisting during trial [29].
During trial, the defendant is presumed innocent: post conviction he/she is proved guilty.
There is an important public interest in exposing any flaw in the conviction, but there is also a powerful public interest in finality of proceedings [32], and in ensuring that the polices finite resources are applied to current investigations, unless there is a good reason for review [33].
The remaining question was what the post conviction duty of disclosure does entail [34].
Clearly, if the police or prosecution come into possession of evidence affording arguable grounds for contending that the conviction was unsafe, it is their duty to disclose it to the convicted defendant [35].
This was the limit of the duty of disclosure [38].
There are however additional safety nets: o The CCRC has a power to review any conviction and refer a conviction it considers unsafe to the Court of Appeal.
It has extensive investigative powers including powers to require production of evidence held by public bodies, to appoint investigators, and to assemble fresh evidence [20].
Its powers include making enquiries to see whether a prospect of a reasonable conviction can be shown, which includes a power to direct new scientific tests [39]. o It is always open to police and prosecutors to accede to representations made on behalf of convicted persons.
Police and prosecutors should exercise sensible judgment when such representations are made and, if there appears to be a real prospect that further enquiry will uncover something of real value, there should be co operation in making those further enquiries [41].
|
A mother appeals against an order of the Court of Appeal (Thorpe, Longmore and McFarlane LJJ), [2011] EWCA Civ 1385, dated 14 December 2011, that she should forthwith return her son, WS (whom I will call W), and who was born on 13 November 2009 so is aged two, to Australia.
The order was made pursuant to article 12 of the Convention on the Civil Aspects of International Child Abduction signed at The Hague on 25 October 1980 (the Convention) and to section 1(2) of the Child Abduction and Custody Act 1985 which gives the Convention the force of law.
In making its order the Court of Appeal set aside an order of Charles J, made in the High Court, Family Division, [2011] EWHC 2624 (Fam), dated 30 August 2011, that the application of Ws father for an order for his return forthwith to Australia pursuant to the Convention should be dismissed.
In this court the mother is therefore the appellant and the father is the respondent.
But there is now also an Intervener, namely Reunite International Child Abduction Centre (Reunite).
The mother and father have not been married.
The mother is British but now also has Australian citizenship.
The father is Australian.
They lived with W in Sydney until, on 2 February 2011, the mother removed W to England, specifically to the home of her mother, where they have since remained.
So Australia was the state in which W was habitually resident immediately prior to his removal.
In removing W from Australia the mother lacked both the fathers consent and the permission of an Australian court.
In such circumstances her removal of W was in breach of rights of custody attributed to the father in relation to him under Australian law and it was therefore wrongful for the purpose of article 3 of the Convention.
The only defence raised by the mother to the fathers application for an order for the summary return of W to Australia under the Convention was that provided by article 13(b) of it, namely that: there is a grave risk that his . return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation.
Statistics published by the Permanent Bureau of the Hague Conference on Private International Law indicate that article 13(b) provides the defence against an order for summary return which succeeds more often than any other: see A Statistical Analysis of Applications made in 2008 under the 1980 Hague Convention, Lowe and Stephens, Cardiff Law School/The Permanent Bureau.
Technically the establishment by a respondent of the grave risk identified in article 13(b) confers upon the court only a discretion not to order the childs return.
In reality, however, it is impossible to conceive of circumstances in which, once such a risk is found to exist, it would be a legitimate exercise of the discretion nevertheless to order the childs return: see In re D (A Child) (Abduction: Rights of Custody) [2006] UKHL 51, [2007] 1 AC 619, para 55 (Baroness Hale).
Nine months ago, in In re E (Children) (Abduction: Custody Appeal) [2011] UKSC 27, [2012] 1 AC 144, this court delivered a judgment in which it attempted to set out in clear terms the proper approach to a defence under article 13(b).
It held, at paras 31 and 52, that the terms of the article were plain; that they needed neither elaboration nor gloss; and that, by themselves, they demonstrated the restricted availability of the defence.
The court did not expect so soon to entertain a second appeal about the effect of article 13(b).
It granted permission for the bringing of the present appeal largely out of provisional concern that, by the judgment delivered by Thorpe LJ (with which Longmore and McFarlane LJJ agreed), the Court of Appeal had expressed what it called the crucial question in terms which arguably represented not only a fresh gloss on the meaning of the article but one which happened to run directly counter to this courts analysis of its meaning in In Re E. Following announcement of this courts grant to the mother of permission to appeal, Reunite made its application for permission to intervene.
In explaining the basis of its application, Reunite expressed identical concern about the Court of Appeals formulation of the crucial question; and it postulated the risk of confusion about the proper approach to a defence under article 13(b) in the absence of clarification by this court.
B: THE CONDUCT OF THE PARTIES
In her evidence, which, in that Charles J did not receive oral evidence, was only in writing, the mother sought to explain in great detail why, as she alleged, her life with the father in Sydney had become so intolerable that on 2 February 2011 she had returned, with W, to her country of origin.
In doing so she made a large number of serious allegations against the father; but she linked her allegations against the father with important evidence about the state of her psychological health while she had been living in Australia.
One of the unfortunate features of the proceedings in the Court of Appeal seems to this court to have been an erroneous assumption that the mothers allegations against the father were in effect entirely disputed and thus that, in the absence of oral evidence, an assessment of their truth had lain beyond the judges reach.
In fact, however, the careful study by Charles J of the witness statements, and in particular of about 300 text messages and emails passing between the parents from January until June 2011, which were attached to them, revealed that a number of important allegations made by the mother against the father were admitted or at least, in the light of what he had said in the texts and emails, could not, as his counsel had conceded, realistically be denied.
It was in 2005 that, with her British husband, the mother had gone to live in Australia.
They were both nurses; indeed the mother has specialist qualifications in cancer and palliative care.
They had no children; separated in 2007; and were divorced in Australia in 2008.
In October 2008 the mother began her cohabitation with the father.
It is agreed that, at an early stage in their relationship, the father informed the mother that between 1994 and 1998 he had been a heroin addict and had contracted Hepatitis C.
Unfortunately the beginning of their relationship, and of the mothers pregnancy in February 2009, was a period of impending financial disaster for the father; and in May 2009 his import business finally collapsed with massive debts.
Indeed the fathers mother had offered her house as security for the debts and ultimately, a few months after the mothers departure, his mother reluctantly accepted the need for her house to be sold; she now occupies rented accommodation.
Following the collapse of his business the father found poorly paid work as an estate agent.
From then onwards he contributed little to the parents finances and the burden of meeting their household expenditure fell largely on the mother who, other than for several months following Ws birth, was working as a specialist clinical nurse in Sydney.
But the parties got into debt; and the mother still remains liable to an Australian bank in a sum equal to about 8000.
It is agreed that the fathers grave financial problems led to serious alcohol and drug relapses on his part during the two years from early in 2009 until the mothers departure.
The extent of his relapses is formally in issue but his emails to the mother impel a conclusion that his formal admission in a witness statement of alcohol abuse only on several occasions and of use of cocaine only on three occasions during that period is far from frank.
The texts and emails begin in January 2011 when the relationship between the parents was breaking down.
The fathers messages to the mother on 13 January 2011 to get fucked, bitch and Ill . belt ya were sent when, in fairness to him, he may not have been fully in control of his faculties.
On the following day he wrote that he had made terrible mistakes.
On 18 January he offered to submit to drug testing.
On any view the evening of 19 January was a crucial day in the breakdown.
The mother contends that she found the father injecting himself in the car in their garage and that such was the reason why, as is agreed, she called the police and told him not to enter their flat again.
The father admits only that he had been out drinking that day.
But, in some of his 14 texts sent to the mother that day, the father offered to go to meetings of Alcoholics Anonymous and/or Narcotics Anonymous every night if necessary; pleaded for another chance; asked for forgiveness and threatened to kill himself.
A month later, from England, the mother wrote to the father: Those last few weeks in Sydney were literally hell.
I was terrified and devastated as well as penniless.
You left me with not even enough money to buy nappies for [W].
But you managed to get cash from your credit cards to buy drugs.
Even the birth of your son was never enough to stop you drinking and using drugs.
That night I found you using in the garage you could have come upstairs and done anything to us that is why I called the police. [W] deserves to be safe and so do I.
The fathers reply was: I understand all that but I still need my family and my son needs his father.
On 27 January 2011 the Australian police obtained on the mothers behalf, without formal notice to the father, an Apprehended Violence Order in the local court.
It is analogous to our non molestation order.
On 30 January they served it on the father and, during the following three days until the mothers departure, he was not in significant breach of it.
In addition to the incontrovertible evidence before Charles J about the fathers substantial descent into abuse and his inability to make a proper financial contribution to the family, there were allegations by the mother of occasions of serious violence on the part of the father towards her (including a threat to kill her) and counter allegations of violence on her part towards him.
The text and email traffic between February and June 2011 demonstrated to Charles J not only how hurt the mother had been by the collapse of her relationship with the father but how desolate he had been as a result of the mothers removal, with W, to England.
Although it was inappropriate as well as impossible for the judge to make any assessment of his qualities as a parent, the fathers love for W as well as for the mother and his pain at their loss were manifest.
On 26 May 2011 he told the mother that he had driven to The Gap, which is Sydneys equivalent of our Beachy Head, and had come as close as ever to committing suicide; and, in evidence, he confirmed that he had indeed genuinely contemplated suicide.
Understandably the father also demonstrated anger.
On 27 June, following receipt of the mothers first witness statement, he wrote to her that he was constantly on the edge of a nervous breakdown.
He also wrote: Who are you to decide that I am no longer eligible to be in [Ws] life.
I hate you.
You are evil.
I want a court ordered mental health assessment for you when youre back.
I dont want you hurting my son.
Awful despicable evil person.
Also before Charles J were numerous emails to the mother from the fathers father, his mother and his sister, and copies to her of emails from them to the father himself, all sent during the months following the mothers departure.
They expressed unequivocal sympathy for the mothers plight in Australia in the light of the fathers condition and at length lamented his renewed descent into addiction.
When, however, the mother attached their emails to a witness statement, the fathers mother and sister signed statements in which they protested that she had substantially misled them about the extent of his problems.
C: THE MOTHERS PSYCHOLOGICAL HEALTH
The mother put before Charles J letters from Dr McGrath, her GP in Sydney.
Dr McGrath wrote that the mother had been her patient since January 2007; that she had then prescribed anti depressant medication in order to combat the mothers anxiety and depression related to separation from her husband; that the mother had continued to take the medication until (as the mother was to clarify in her evidence) she became pregnant in February 2009; that she had seen the mother on 24 January 2011 when she was tearful and agitated; and that, in the light of the mothers depression, which in her opinion might easily recur in a stressful situation, she considered that her health would suffer greatly if she was required to return to Australia.
But the mother put in further medical evidence of a feature which is highly unusual in applications under the Convention.
It was to the effect that the mother had had extensive psychotherapy in Australia.
The evidence, in the form of a report by Ms MacKenzie, a psychologist, was that, from June 2010, she had seen the mother face to face on eleven occasions in order to address her chronic anxiety symptoms and to offer her cognitive behavioural therapy and supportive interpersonal therapy; and that, following the mothers removal to England, she had conducted nine further sessions of counselling with her by telephone.
Charles J was understandably critical of Ms MacKenzie for stating as facts the allegations about the father which the mother had made to her and indeed for venturing even a provisional clinical opinion about him.
But Ms MacKenzies professional conclusions about the mother, born of extensive attendance upon her, remained of great relevance.
She wrote that, from childhood, the mother had had an underlying and chronic anxiety condition; that she was subject to panic attacks; that she had seen the mother unravel; that the mothers affect of fear overwhelmed her; that fear of the fathers mental instability, added to the stress of isolation in Australia from her family, might well undermine the mothers capacity to hold herself together; that her likely clinical depression could diminish her secure attachment to W; and that, in that (so Ms MacKenzie said) the father was capable of being impulsive and dangerous towards her, the mother would be in a constant state of hypervigilance, this being the very condition which would trigger an anxiety state.
Ms MacKenzie wrote: Should [the mother] be forced to return to Australia, I am concerned her anxiety will become crippling.
There was to be still more evidence about the mothers psychological health: see para 25.
D: THE PRELIMINARY ISSUE
In In re E this court said: 36.
There is obviously a tension between the inability of the court to resolve factual disputes between the parties and the risks that the child will face if the allegations are in fact true. [Counsel] submits that there is a sensible and pragmatic solution.
Where allegations of domestic abuse are made, the court should first ask whether, if they are true, there would be a grave risk that the child would be exposed to physical or psychological harm or otherwise placed in an intolerable situation.
If so, the court must then ask how the child can be protected against the risk.
The appropriate protective measures and their efficacy will obviously vary from case to case and from country to country.
Without such protective measures the court may have no option but to do the best it can to resolve the disputed issues.
Among directions given by consent on 30 June 2011 in the fathers application for an order under the Convention, issued 15 days earlier, Coleridge J appointed a hearing on 27 July 2011 (a) for consideration of whether, taken at their highest, the allegations made by the mother would come within the article 13(b) exception having the proposed regard undertakings/protective measures; (b) . (c) subject to the courts conclusion as to (a). above, [for] summary disposal or directions to enable a further hearing with such oral evidence as the court considers appropriate to take place.
At first sight the direction appears to be a reasonable attempt by counsel, endorsed by Coleridge J, to follow the guidance set by this court in In re E.
It met, however, with criticism both by Charles J and, in arrestingly vehement terms, by Thorpe LJ, who observed that it had bedevilled the hearing before Charles J and that, if a practice of making such a direction had arisen, it should be immediately stifled.
Although this court is less clear that the direction had any such dramatic ill effects, it accepts that, for two reasons, to both of which Charles J referred, it would have been better for the direction not to have been given.
First, at a general level, the approach commended in In re E should form part of the courts general process of reasoning in its appraisal of a defence under the article and does not require formal identification as a preliminary point.
Second, and more importantly, the guidance given in para 36 of In re E relates to factual disputes and to resolution of the disputed issues.
At the time of the hearing before Coleridge J, prior among other things to the adduction by the mother of any medical evidence, counsel may well have supposed that all the material to be relied on by the mother in aid of her defence would be disputed.
Such a supposition may have endured long after the invalidity of it should have been recognised; and, as we will demonstrate, it seems to have lulled even the Court of Appeal into considering the defence as resting merely on disputed allegations by the mother, albeit as countered, in its view, by adequate protective measures offered by the father.
E: THE FURTHER EVIDENCE
On 28 July 2011 Charles J adjourned the hearing until 30 August 2011.
He did so because he considered that in two respects he needed further evidence.
The first was a more detailed presentation by the father of the practical and financial safeguards which would be available to the mother and [W] in the event of their return to Australia.
The second was a report by a psychiatrist, to be instructed by both parties, upon: (i) the mothers current psychiatric or psychological condition; (ii) the psychiatric or psychological impact on the mother of a return to Australia; (iii) what if any protective measures, such as psychological interventions, accommodation the address of which was unknown to the father, support from the mothers close family, or any other measure, would it be necessary to put in place to safeguard the effect on the mothers mental health of a return to Australia?
At the adjourned hearing on 30 August 2011 the father duly put forward, by undertakings, a comprehensive raft of measures suggested to be protective of the mother and W in the event of a return to Australia.
He undertook to pay for their flights and, in advance of their return, to deposit a sum which would cover the rent of their reasonable accommodation for two months.
Additionally, until an Australian court should otherwise order, he undertook (a) (b) (c) (d) to make a specified contribution towards their further rent and by way of periodical payments for W; to comply with the terms of the Apprehended Violence Order, which had been expressed to continue until 27 January 2012; not to remove W from the mothers care save for the purpose of any agreed contact with him; not to approach within 250 metres of their accommodation save as might be agreed in writing for the purpose of any contact with W; and not to seek to contact the mother save through lawyers. (e) The father further undertook to lodge a signed copy of his undertakings with his local family court in advance of the return of the mother and W.
The jointly instructed psychiatrist was Dr Kampers who interviewed the mother and wrote a report dated 10 August 2011.
He suggested that, on the basis of the written evidence and of the long history which the mother gave him orally, much of which he set out, the mother had, when in Australia, suffered Battered Womens Syndrome, being a form of Post Traumatic Stress Disorder, followed, after 19 January 2011, by an acute stress reaction.
His report on the first point identified in the order of Charles J was as follows: [The mothers] current psychiatric and psychological condition is stable and healthy and she does not display any current features of depression, nor of Post Traumatic Stress Disorder.
Her symptoms of acute stress have resolved.
His report on the second point identified in the order was as follows: The likely psychiatric and psychological impact on [the mother] of a return to Australia is significant and severe.
The source of her stress ([the father]) is in Australia.
Contact with this source of stress (re exposure to [him]) puts her at risk for further Acute Stress and Post Traumatic Stress.
She has a prior history of anxiety and depression which not only lowers her threshold for acute stress and Post Traumatic Stress but also increases the likelihood of a recurrence of her anxiety and depression.
The case has proceeded on the basis that Dr Kampers failed to address the question which represented the third point identified in the judges order.
We are not convinced, however, that he failed to do so.
For, following his reports on the first and second points, he referred to the need for a partners abuser to undergo specialised counselling; observed that, given that both alcohol and drug addictions figured in his history, the father should also be treated for them; and concluded by saying the most protective measure would be psychological intervention for the father, as detailed.
We think therefore that there are grounds for concluding that Dr Kampers answer to the judges question about necessary protective measures such as psychological interventions. was that it was necessary for the father to get treatment.
We accept, however, that Dr Kampers could more clearly have addressed the question.
Following receipt of the report, neither side asked him to clarify his answer to it; indeed they joined in telling him that he was no longer required to attend the adjourned hearing.
The decision on behalf of the father not to ask him to clarify his answer was tactical; and the decision on behalf of the mother was at any rate partly tactical.
Each was apparently fearful of collecting an unhelpful response.
But the burden of establishing her defence rested upon the mother; and her advisers were perhaps taking a substantial risk in choosing not to ask Dr Kampers to do so.
The parties might also have anticipated that, at the adjourned hearing, Charles J would insist upon an immediate and clearer answer by Dr Kampers to his question, for example by email.
In the event the judge did not insist on it but expressed regret about the absence of Dr Kampers from court.
F: SUBJECTIVE PERCEPTIONS
In In re E this court considered the situation in which the anxieties of a respondent mother about a return with the child to the state of habitual residence were not based upon objective risk to her but nevertheless were of such intensity as to be likely, in the event of a return, to destabilise her parenting of the child to the point at which the childs situation would become intolerable.
No doubt a court will look very critically at an assertion of intense anxieties not based upon objective risk; and will, among other things, ask itself whether they can be dispelled.
But in In re E it was this courts clear view that such anxieties could in principle found the defence.
Thus, at para 34, it recorded, with approval, a concession by Mr Turner QC, who was counsel for the father in that case, that, if there was a grave risk that the child would be placed in an intolerable situation, the source of it is irrelevant: eg, where a mothers subjective perception of events lead to a mental illness which could have intolerable consequences for the child.
Furthermore, when, at para 49, the court turned its attention to the facts of that case, it said that it found no reason to doubt that the risk to the mothers mental health, whether it be the result of objective reality or of the mothers subjective perception of reality, or a combination of the two, is very real.
In the present proceedings considerable reference was made to the mothers subjective perceptions both of past events and no doubt linked yet importantly different of future risks.
It began in the interlocutory judgment, [2011] EWHC 2625 (Fam), dated 28 July 2011, in which Charles J twice referred to the mothers perception of the fathers attitude and likely reaction.
In his substantive judgment dated 30 August 2011 Charles J sought faithfully to follow the guidance given by this court at para 36 of its judgment in In re E, set out in para 20 above.
Thus (a) he began by assuming that the mothers allegations against the father were true; (b) he concluded that, on that assumption, and in the light of the fragility of the mothers psychological health, the protective measures offered by the father would not obviate the grave risk that, if returned to Australia, W would be placed in an intolerable situation; so (c) he proceeded to consider, as best he could in the light of the absence of oral evidence and the summary character of the inquiry, whether the mothers allegations were indeed true; and (d) following a careful appraisal of the documentary evidence, including the mass of emails between the parents, he concluded that, as counsel for the father had been constrained to acknowledge, the mother had made out a good prima facie case that she was the victim of significant abuse at the hands of the father (italics supplied).
In the light of his conclusion at (d), which on any view was open to him, it seems to us that it was unnecessary for Charles J to have continued to address the mothers subjective perceptions.
For the effect of his conclusion was that the mothers anxieties were based on objective reality.
So it added nothing for him to refer, as in effect he did in three separate paragraphs of his substantive judgment, to the mothers genuine conviction that she has been the victim of domestic abuse, by which he implied that she was convinced about something that might or might not be true.
The only reference by the Court of Appeal to the history between the parents was in the judgment of Thorpe LJ as follows: 4.
The parents relationship was a stormy one and, on the mothers case, the father behaved very badly towards her.
In January 2011 the mother called the police who took out an Apprehended Domestic Violence Order against the father on 27 January.
There was no reference in his judgment to: (a) the fathers descent into alcohol abuse; (b) his descent back into drug abuse; (c) the absence of evidence that he had surmounted these problems; (d) the likely effect of them on his ability to comply with Australian court orders and, to which Charles J had referred, the possible need for the mother to take enforcement proceedings; (e) his contemplation of suicide; (f) his failure to maintain the family properly; (g) the likely effect of his failure on the ability of the Australian courts to devise a secure financial foundation for the household of the mother, with child care responsibilities, in Australia; (h) the many admissions made by the father in the texts and emails; (i) (j) the judges finding, on the necessarily provisional basis, that the mother had indeed been the victim of significant domestic abuse at the hands of the father; and the fact, to which Charles J had also referred, that, however effective the steps to be taken by the Australian courts to protect the mother, she and the father would probably need to have a degree of personal communication for the purposes of his contact with W and of her likely application for permission to remove him back to England.
Thus, with respect to them, the hard pressed judges in the Court of Appeal made an entirely inadequate address of the mothers case.
Instead they treated the foundation of her defence as being merely her subjective perception of risks which might lack any foundation in reality.
Thus, in para 26 of his judgment, Thorpe LJ described the fathers first ground of appeal as being that Charles J had erred in concluding that the effect of the judgment in In re E was to raise the bar against applicants seeking a return order where the respondent relied on a subjective perception of the risks and consequences of return.
We should add that Charles J had nowhere said that the effect of that judgment had been to raise the bar and we do not agree that it did so.
Nor, for that matter, do we agree with the suggestion of Thorpe LJ in paras 34 and 36 that the judgment in In re E had been no more than a restatement of the law of the Convention: it was primarily an exercise in the removal from it of disfiguring excrescence.
But, as we have shown in para 27 above, the court did recognise the possibility that a respondents merely subjective perception of risks could, as a matter of logic, found the defence.
Unfortunately in the present case the Court of Appeal found difficulty in accepting that part of the decision in In re E.
Thus Thorpe LJ said: 43.
Nor would I accept Mr Turners submission that his recorded concession in paragraph 34 of the judgment in Re E is authoritive [sic] for the proposition that it is unnecessary for the court to weigh objective reality of asserted anxiety.
The crucial question for the judge remained: were these asserted risk, insecurities and anxieties realistically and reasonably held in the face of the protective package the extent of which would commonly be defined not by the applicant but by the court? And Thorpe LJ added: 49.
This is a paradigm case for a return order to achieve the objectives of the Convention.
Although Mr Turner asserts that the effect of a respondents clearly subjective perception of risks on return leading to an intolerable situation for the child is a permissible ground for refusing a return order he has been able to cite no reported case with that characteristic.
In the light of these passages we must make clear the effect of what this court said in In re E.
The critical question is what will happen if, with the mother, the child is returned.
If the court concludes that, on return, the mother will suffer such anxieties that their effect on her mental health will create a situation that is intolerable for the child, then the child should not be returned.
It matters not whether the mothers anxieties will be reasonable or unreasonable.
The extent to which there will, objectively, be good cause for the mother to be anxious on return will nevertheless be relevant to the courts assessment of the mothers mental state if the child is returned.
G: CONCLUSION
As we have explained, the Court of Appeal failed to appreciate that the mothers fears about the fathers likely conduct rested on much more than disputed allegations.
Equally it paid scant regard to the unusually powerful nature of the medical evidence about the mother, in particular of her receipt of regular psychotherapy while in Australia.
This conferred an especial authority on Ms MacKenzies report, of which the court scarcely made mention.
Overarchingly, however, it failed to recognise that the judgement about the level of risk which was required to be made by article 13(b) was one which fell to be made by Charles J and that it should not overturn his judgement unless, whether by reference to the law or to the evidence, it had not been open to him to make it.
Charles J was right to give central consideration to the interim protective measures offered by the father.
But his judgement was that, in the light of the established history between the parents and of the mothers acute psychological frailty for which three professionals vouched, they did not obviate the grave risk to W.
It must have been a difficult decision to reach but, in the view of this court, it was open to him to make that judgement; and so it was not open to the Court of Appeal to substitute its contrary view.
The fact that Charles J had not received oral evidence did not deprive his judgment of its primacy in that sense.
The decision of the House of Lords in In re J (A Child) (Custody Rights: Jurisdiction) [2005] UKHL 40, [2006] 1 AC 80, concerned the Court of Appeals reversal of a judges discretionary dismissal of an application under the Children Act 1989 for a specific issue order that a child be summarily returned to Saudi Arabia.
Baroness Hale, with whose speech all the other members of the committee agreed, said: 12.
Too ready an interference by the appellate court, particularly if it always seems to be in the direction of one result rather than the other, risks robbing the trial judge of the discretion entrusted to him by the law.
In short, if trial judges are led to believe that, even if they direct themselves impeccably on the law, make findings of fact which are open to them on the evidence, and are careful, as this judge undoubtedly was, in their evaluation and weighing of the relevant factors, their decisions are liable to be overturned unless they reach a particular conclusion, they will come to believe that they do not in fact have any choice or discretion in the matter.
On that ground alone.
I would allow this appeal.
This court allows the appeal and restores the order of Charles J.
H: POSTSCRIPT
In In re E this court addressed a decision of the Grand Chamber of the European Court of Human Rights (the ECtHR) which it understood had caused widespread concern and even consternation about such approach to the determination of an application under the Hague Convention as was necessary in order to avoid infringement of the rights of the child and/or of the parents under article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms.
The decision was Neulinger and Shuruk v Switzerland [2011] 1 FLR 122.
In particular, as this court pointed out at para 21 of its judgment in In re E, the Grand Chamber had suggested, at para 139, that article 8 required the court to which an application under the Hague Convention was made [to conduct] an in depth examination of the entire family situation and of a whole series of factors, in particular of a factual, emotional, psychological, material and medical nature, and [to make] a balanced and reasonable assessment of the respective interests of each person.
In In re E, building on helpful comments about the decision which had been made extrajudicially by the then President of the ECtHR, this court stressed, at paras 22 to 27, that it had been the very object of the Hague Convention to avoid an in depth examination of the childs future in the determination of an application for a summary order for return to the State of the childs habitual residence; that a properly careful determination of such an application did not equate to the in depth examination described in para 139 of the judgment in the Neulinger case; that the reference to an in depth examination should not be taken out of context and applied generally; and that it would be most unlikely that a proper application of the Hague Convention would infringe the rights of any members of the family under article 8.
In the present appeal Reunite has drawn to this courts attention that on 13 December 2011, in X v Latvia (Application No.27853/09), the ECtHR (Third Section) has unfortunately reiterated, at para 66, in terms identical to those in para 139 of the Neulinger case, the suggested requirement of an in depth examination in the determination of applications under the Hague Convention.
With the utmost respect to our colleagues in Strasbourg, we reiterate our conviction, as Reunite requests us to do, that neither the Hague Convention nor, surely, article 8 of the European Convention requires the court which determines an application under the former to conduct an in depth examination of the sort described.
Indeed it would be entirely inappropriate.
| A mother appeals against an order of the English Court of Appeal that she should immediately return her son, WS (hereafter W), who is aged two, to Australia.
The order was made pursuant to Article 12 of the Convention on the Civil Aspects of International Child Abduction signed at The Hague on 25 October 1980 (the Convention) and to section 1(2) of the Child Abduction and Custody Act 1985, which incorporates the Convention into domestic law [1].
The mother is British, with Australian citizenship; the father is Australian [4].
The parents, who were not married, lived with W in Sydney [4].
In 2005 the mother had moved to Australia with her British husband; her marriage failed and she was divorced in 2008 [8].
In October 2008 Ws parents began to cohabit [8].
Between 1994 and 1998 the father had been a heroin addict and unfortunately, the beginning of their relationship and of the mothers pregnancy in February 2009, was a period of impending financial disaster for him, which ended in the collapse of his business with massive debts [9].
The father later took work as an estate agent, but contributed little to the household expenditure, which was largely met by the mother who was employed as a specialist clinical nurse [9].
The grave financial problems led to serious alcohol and drug relapses on the fathers part between 2009 and 2011 [10].
The mother suffered mental health problems, including anxiety and depression relating to separation from her husband in 2007, for which she took medication until she became pregnant in 2009 [17].
From June 2010 the mother had had extensive psychotherapy in Australia, which continued after her return to the UK [17], for a chronic anxiety condition [18].
In January 2011 the relationship between the parents began to break down.
On 19 January 2011 the mother contends that she found the father injecting himself in the car in the garage and so she called the police and told him not to enter the flat again; the father admits only to drinking that day [11], although subsequently in reply to emails from the mother he did not deny the drug taking [11].
In light of the many text and emails that were to pass between the parents from January and June 2011, the mothers serious allegations against the father were admitted or could not be realistically be denied [7].
On 27 January 2011 the Australian police obtained on the mothers behalf, without notice, an Apprehended Violence Order (similar to a non molestation order) [12].
On 2 February 2011 the mother removed W to England, without the fathers consent or the permission of an Australian court.
The removal was therefore in breach of the fathers rights of custody under Australian law and so it was wrongful for the purpose of Article 3 of the Convention.
The only defence raised by the mother to the fathers application for an order for the summary return of W to Australia under the Convention was under Article 13(b) that there is a grave risk that his return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation [5].
The evidence of the mothers psychologist was that, in the event of a return of W, with the mother, to Australia, her fear of the fathers mental state and of his impulsive actions towards her together with the stress of isolation in Australia from her family would be likely to cause clinical depression, which in turn could diminish her secure attachment to W [18].
Further evidence from the jointly instructed psychiatrist was that the mother had suffered from Battered Womens Syndrome, a form of Post Traumatic Stress Disorder, followed by an acute stress reaction [25].
The psychiatrist appeared to consider that the necessary protective measures mainly comprised treatment for the father, but his evidence could, however, have been clearer on whether the protective measures suggested by the father would, in the event of return, protect W against the risk of physical or psychological harm [26].
At first instance, Charles J had declined to order Ws return to Australia.
The Court of Appeal ordered Ws immediate return.
The issue in this appeal was whether that Court should have proceeded on the basis that that there were nothing more than disputed allegations to support the mothers defence.
A question also arose about the correct approach to the subjective perceptions of risk held by a parent.
The Supreme Court unanimously allows the mothers appeal; Lord Wilson gives the judgment of the Court.
In Re E (Children) (Abduction: Custody Appeal) [2011] UKSC 27 the Supreme Court held that the terms of Article 13(b) of the Convention were plain, that they needed neither elaboration nor gloss; and that, by themselves, they demonstrated the restricted availability of the defence [6].
In that case, the Court held that where disputed allegations of domestic abuse are made, the court should first ask whether, if they are true, there would be a grave risk that the child would placed in an intolerable situation; and if so, the court must then ask how the child can be protected against the risk [20].
If the child cannot be protected, the court should seek to determine the truth of the disputed allegations.
Following a careful appraisal of the documentary evidence, Charles J had held that a number of serious allegations made by the mother against the father were admitted or could not sensibly be denied and that, in respect of her other allegations, she had made out a good prima facie case that she was the victim of significant abuse at the hands of the father [29].
In light of this conclusion, it was unnecessary for Charles J to continue to address the mothers subjective perceptions, as her anxieties had been based on objective reality [29].
The Court of Appeal referred briefly to the nature of the parents relationship but did not refer to the many facts that provided the foundation of the mothers defence [30 31].
The Court of Appeal failed to appreciate that the mothers fears about the fathers likely conduct rested on more than disputed allegations and to have regard to the importance of the medical evidence [35].
The Court of Appeal had specified the crucial question as being whether the mothers anxieties were realistically and reasonably held.
In In re E, however, the court held that a defence under Article 13(b) could be founded upon the anxieties of a parent about a return with the child to the state of habitual residence, which were not based upon objective risk to her, but were nevertheless of such intensity as to be likely to destabilise the parenting of that child to the point at which the childs situation would become intolerable [27].
No doubt a court will look very critically at an assertion of intense anxieties not based upon objective risk and will also ask whether they can be dispelled [27].
The critical question is what will happen if the parent and child are returned [34].
If, upon return, the parent will suffer such anxieties that their effect on the parents mental health will create a situation that is intolerable for the child, then the child should not be returned.
It matters not whether the parents anxieties will be reasonable or unreasonable.
The extent to which there will be good cause for those anxieties will nevertheless be relevant to the courts assessment of the parents mental state if the child is returned [34].
The judgment as to the level of risk had been one for the judge at first instance, and should not have been overturned unless, whether by reference to the law or to the evidence, it had not been open to the judge to make it [35].
Charles J had been entitled to hold that the interim protective measures offered by the father in the event of a return to Australia did not obviate the grave risk to W and it was not open to the Court of Appeal to substitute its contrary view [35].
In the recent case of X v Latvia (Application no. 27853/09) the ECtHR (Third Section) had reiterated its apparent suggestion in Neulinger and Shuruk v Switzerland [2011] 1 FLR 122 that in a Hague Convention case an in depth examination of the issues was mandated by the parties Article 8 ECHR rights to respect for family and private life.
The Supreme Court considers that neither the Convention nor, surely, the ECHR requires such an in depth examination.
|
The appellant, Ms Samuels, was an assured shorthold tenant of 18 Dagger Lane, West Bromwich, Birmingham, where she lived with four children.
In July 2011, having fallen into rent arrears, she was given notice to leave.
She later applied to the respondent council as homeless under Part VII of the Housing Act 1996.
But it was decided that she was intentionally homeless, on the ground that the accommodation at Dagger Lane was affordable and reasonable for her to continue to occupy, and that its loss was the result of her deliberate act in failing to pay the rent.
That decision was ultimately confirmed on review by the council in a letter dated 11 December 2013.
The central issue in this appeal is whether the council adopted the correct approach in determining that the accommodation was affordable for those purposes.
Ms Samuelss appeal to the County Court against the councils decision was dismissed by H H Judge Worster on 10 June 2014, and her further appeal was dismissed by the Court of Appeal (Richards, Floyd, and Sales LJJ) [2016] PTSR 558 on 27 October 2015.
She appeals to this court with permission granted by the court on 19 February 2018. (The notice of appeal recorded that the very substantial delay in bringing the case to this court was caused by funding problems, related to the refusal of legal aid, and the need to proceed by way of conditional fee agreement.
Legal Aid was reinstated after permission to appeal had been granted by this court.
We were told that in the meantime she and her family have been living in temporary accommodation provided by the council.)
The statutory framework
The relevant statutory provisions are in Part VII of the 1996 Act.
The authority becomes under a full duty to secure accommodation to a person found homeless, if they find certain conditions satisfied, one of which is that they are not satisfied that she became homeless intentionally (section 193(1)).
That in turn depends on whether she deliberately did or failed to do anything in consequence of which she ceased to occupy accommodation which was available for her occupation and which it would have been reasonable for [her] to continue to occupy (section 191(1)).
The initial decision is made under section 184 of the 1996 Act; section 202 confers a right to request a review by the authority itself; section 204 confers a right of appeal to the County Court on a point of law.
Section 177(3) enables the Secretary of State by order to specify matters to be taken into account or disregarded in determining the question under section 191(1).
The Homelessness (Suitability of Accommodation) Order 1996 (SI 1996/3204) (the 1996 Order), made in the exercise of that power, provided: 2.
Matters to be taken into account In determining whether it would be, or would have been, reasonable for a person to continue to occupy accommodation there shall be taken into account whether or not the accommodation is affordable for that person and, in particular, the following matters the financial resources available to that person, (a) including, but not limited to, salary, fees and other remuneration; social security benefits; (i) (ii) the costs in respect of the accommodation, (b) including, but not limited to, (i) payments of, or by way of, rent; (d) that persons other reasonable living expenses.
Section 182(1) requires the authority to have regard to guidance given by the Secretary of State.
The relevant guidance at the time was the Homelessness Code of Guidance for Local Authorities (the Code).
It was issued in 2006, replacing earlier versions dated 1999 and 2002.
Paragraph 17.39 of the Code set out article 2 of the 1996 Order, with additional italicised comments.
It stated inter alia that account must be taken of: the financial resources available to him or her (ie all (a) forms of income), including, but not limited to: (i) salary, fees and other remuneration (from such sources as investments, grants, pensions, tax credits etc); social security benefits (such as housing benefit, (ii) income support, income based Jobseekers Allowances or Council Tax benefit etc) On the expenses side, the reference to rent was expanded: payments of, or by way of, rent (including rent default/property damage deposits).
There were no italicised additions to the reference to that persons other reasonable living expenses.
Paragraph 17.40 read: In considering an applicants residual income after meeting the costs of the accommodation, the Secretary of State recommends that housing authorities regard accommodation as not being affordable if the applicant would be left with a residual income which would be less than the level of income support or income based jobseekers allowance that is applicable in respect of the applicant, or would be applicable if he or she was entitled to claim such benefit.
This amount will vary from case to case, according to the circumstances and composition of the applicants household.
A current tariff of applicable amounts in respect of such benefits should be available within the authoritys housing benefit section.
Housing authorities will need to consider whether the applicant can afford the housing costs without being deprived of basic essentials such as food, clothing, heating, transport and other essentials (Emphasis added)
As will be seen, an important issue in the appeal is whether the reference to use of income support as a guide is to be treated as extending also to benefits in respect of children, in particular child tax credit.
It is helpful in this context to refer to Humphreys v Revenue and Customs Comrs [2012] UKSC 18; [2012] 1 WLR 1545, where Lady Hale explained the change.
Having noted that income support was a means tested benefit at the officially prescribed subsistence level, she described the introduction of child tax credit (CTC): Child tax credit and working tax credit were introduced by the Tax Credits Act 2002.
Child tax credit replaced the separate systems for taking account of childrens needs in the tax and benefits systems.
Previously, people in work (or otherwise liable to pay income tax) might claim the childrens tax credit to set off against their income.
This was administered by the tax authorities.
People out of work (or otherwise claiming means tested benefits) might claim additions to their income support or income based jobseekers allowance to meet their childrens needs.
This was administered by the benefits authorities.
Under the new system, a single tax credit is payable in respect of each child, irrespective of whether the claimant is in or out of work, and is administered by Her Majestys Revenue and Customs.
Child tax credit is like income support and jobseekers allowance, in that it is a benefit rather than a disregard and it is means tested, so that the higher ones income the less the benefit, until eventually it tapers out altogether. (paras 3 4)
Ms Samuels income and expenditure
For the purpose of comparing her income and expenditure at the relevant time, the evidence provided to the authority, and recorded by the county court judge (paras 15ff), presented a somewhat confusing picture, not assisted by the varying estimates presented by or on behalf of Ms Samuels.
On the income side, at the time that she left 18 Dagger Lane Ms Samuels was dependent entirely on social security benefits, amounting in total to a monthly income of 1,897.84, made up of: i) housing benefit (548.51) ii) income support (290.33); iii) child tax credit (819.00); iv) child benefit (240.00).
Excluding housing benefit, therefore, the total available for other living expenses was 1,349.33.
On the expenses side, her rent was 700 per month, leaving a shortfall compared to her housing benefit taken alone of 151.49.
Her estimates of her non housing expenses had varied in the course of her exchanges with the council.
Her initial estimate had been only 380 per month (including 150 food/household items).
By the time of the review decision, a revised schedule had been submitted by her solicitors on 1 November 2013, giving a total estimate of 1,234.99, consisting of: i) 750 food/household items; ii) 80 electricity; iii) 100 gas; iv) 50 clothes; v) 43.33 TV licence; vi) 43.33 school meals; vii) 108.33 travel; viii) 20 telephone; ix) 40 daughters gymnastics.
No supporting information was provided.
The accompanying letter said: It is impossible for our client, who as you are aware has learning difficulties to remember precise details, we are confident that these figures are reasonably accurate.
It will be seen that, on an overall view (including housing benefit and rent), her monthly income amounted to 1,897.84 entirely from benefits, and her expenses amounted to 1,934.99, giving a shortfall of about 37 per month.
According to the authoritys inquiries of her landlords, she also had arrears of rent of 1,600, although she claimed it was only one months rent (700).
This difference was left unresolved by the judge (para 23).
Although these figures were accepted as common ground in the lower courts, Ms Garnham for the Child Poverty Action Group (CPAG) has pointed to some apparent discrepancies in respect of benefits.
She explains in her witness statement of 11 January 2019, para 68: I note that in para 11 of the judgment of the Court of Appeal the appellant gives her income at the relevant time as child tax credits of 189 a week (ie 819 a month), income support of 67 a week (ie 290.33 a month) and child benefit of 240 a month.
The correct amount of child tax credits would in fact be 206.15 a week.
Assuming the figures given by the appellant are correct, it is likely that the tax credit award was in fact being paid at a lower rate to recover a previous overpayment.
The other figures given for income support are out by 0.50 per week (so monthly should be 292.50) and for child benefit the figure given is a four weekly figure rather than the calendar month figure of 262.16.
I record this evidence for completeness and in case the differences may become material hereafter.
However, it is not directly relevant to the appeal, which is in principle limited to points of law arising from the original decision of the council, and taking into account the information then before it.
The councils decision
The councils final position on affordability in the present case appears from their review decision letter dated 11 December 2013.
The letter, written by the case officer, was long and detailed, and dealt with other issues which are no longer in dispute.
It began by referring in general terms to various sources considered, including the Code of Guidance (see para 6 above), but there was no specific reference to the paragraphs dealing with affordability.
The officer first addressed, and rejected, a suggestion that her last settled accommodation should be treated as her ex partners address, where she went for a period after leaving 18 Dagger Lane.
The officer then turned to the treatment of affordability, which was dealt with relatively briefly.
He referred to the shortfall in respect of monthly rent (151.49), and the monthly income, apart from housing benefit, of 1,349.33 (see above).
He noted that on the expenditure figures originally submitted there would have been a significant amount of disposable income from which to fund your shortfall.
Referring to the amended figures, he commented: It is now asserted that contrary to the provided figure of 150 for housekeeping, the actual figure was 750 per month, or 173 per week.
This figure seems to me to be excessive for a family of your size, given that this is purported to only account for food and household items, with utilities and travel expenses accounted for elsewhere.
I accept that a figure of 150 per month for food and household bills for a family of your size is equally likely to be inaccurate, but I consider that it is a matter of normal household budgeting that you would manage your household finances in such a way to ensure that you were able to meet your rental obligation.
I cannot accept that there was not sufficient flexibility in your overall household income of in excess of 311 per week to meet a weekly shortfall in rent of 34. [The figures of household income (311) and shortfall in rent (34) given in the letter appear to be the (rounded) weekly equivalents of the monthly figures given earlier in the letter (1,349.33 and 151.49 respectively).] The officer noted that, in spite of some learning difficulties, she had confirmed her ability to pay her bills on time and manage her finances.
It was concluded accordingly that the accommodation at 18 Dagger Lane was affordable for her.
The appeal
In the County Court counsel for Ms Samuels raised a number of grounds of appeal, including the alleged failure of the reviewing officer to have regard to paragraph 17.40 of the Code of Guidance.
The Judge rejected this submission (para 54).
He referred to Balog v Birmingham City Council [2013] EWCA Civ 1582; [2014] HLR 14, in which a similar submission had been rejected by the Court of Appeal.
He accepted counsels submission for the authority that the Code was a recommendation; the Code had been referred to in the letter, and it was reasonable to assume that the decision was made having considered its provisions.
He added that if paragraph 17.40 was not fully considered, it was an error which does not invalidate the decision.
The reasons did not need to set out every aspect of the decision making process.
The appeal was dismissed by the Court of Appeal.
Giving the sole judgment, Richards LJ noted the submission by Mr Stark for Ms Samuels that when an applicant is reliant entirely on benefits, regard should be had to the fact that such benefits are set at subsistence level and are not designed to give a level of income that allows flexibility to spend outside maintaining a very basic standard of living, and that income support, child tax credits and child benefit are not intended to cover housing costs; it is the purpose of housing benefit to cover those costs (para 24).
He did not accept that there was such a necessary starting point: The 1996 Order and the guidance make clear that account should be taken of all forms of income (including social security benefits of all kinds) and of relevant expenses (including rent and other reasonable living expenses).
This suggests that a judgment has to be made on the basis of income and relevant expenses as a whole.
It does not suggest that benefits income is to have any special status or treatment in that exercise, let alone that one should adopt the starting point formulated by Mr Stark. (para 25)
With regard to the alleged failure to have regard to paragraph 17.40, he noted (para 34) the comment of Kitchin LJ in Balog v Birmingham City Council [2014] HLR 14, para 49 that review officers are not obliged to identify each and every paragraph of the guidance which bears upon the decision they have to make.
Referring to the comparison with income support he said: It is true that the review decision did not address that point in terms.
It did, however, take into account the payment of income support, and on the face of it the appellants residual income after the cost of her accommodation (ie after deduction of the shortfall in her rent) was well in excess of the level of her income support.
At the hearing of the appeal Mr Stark did not suggest otherwise He did submit that the child tax credits should also be taken into account in this part of the exercise, but that is not what paragraph 17.40 says (para 36)
He also referred to a new point which Mr Stark had sought to introduce in post hearing written submissions related to changes in the relative treatment of income support and child tax credit.
So far as he understood it, this seemed to him to depend on a strained and implausible construction of the guidance itself, but in any event he accepted the authoritys submission that it was too late to raise it (para 37).
The submissions in this court
For the appellant, Mr Stark, with the support of Mr Westgate QC for the interveners, asks the court to look at the issues in this case against a background in which shortfalls between contractual rent and maximum levels of housing benefit have become common for a number of reasons, in both the private and social rented sectors, because of developments in social security policy.
These include the local housing allowance size criteria and the social sector size criteria (the spare room subsidy / bedroom tax rules); contractual rent exceeding local broad rent levels for local housing allowance, originally set at the 50th centile of local reference rents but reduced to the 30th centile in 2011; the freezing of local reference rent rates from 2012 to 2013, and 2016 to 2020; and the benefit cap.
He refers to evidence of the increasing incidence of homelessness linked to inability to afford rents.
For example, the National Audit Office report, Homelessness (HC 308, 2017) identified a threefold increase since 2010 2011 in the number of applicants as a result of the ending of an assured shorthold tenancy.
The report observed: 1.16.
In all cases front line staff said that the key reason why people were presenting as homeless was the end of tenancies in the private rented sector.
They said that this was due to increases in rents in the private sector, and a decline in peoples ability to pay these rents.
This decline in ability to pay was said to be partly due to welfare reforms.
Against this background, although he makes a number of related points, Mr Starks underlying submission is that it was wrong in principle for the council to treat Ms Samuels non housing benefit as containing a surplus which could be treated as available to make up shortfalls in housing benefits.
More specifically he submits (in the words of his written case): The respondent failed to correctly apply the 1996 Order.
Rather than add all income and subtract all reasonable expenditure, it treated the appellants housing benefit as hypothecated for rent, then asked whether the gap between
housing benefit and rent could be bridged from other income
Linked to this was a submission (supported by the interveners) that the council had failed to pay regard to paragraph 17.40, as correctly interpreted.
It was submitted that the reference to a residual income less than the level of income support must be taken as not limited to income support in the strict sense, but as including amounts available in respect of the children, by way of child benefit or child tax credit.
This, he says, is necessary to give effect to the obvious policy of the guidance, which is apparent also from the reference to the amount varying according to the composition of the applicants household.
It would make no sense to recommend the use of her income support on its own, as a recommended guide to the reasonable family expenditure which must take account of the needs of the children.
This interpretation is also necessary, it is said, to avoid arbitrary differences between different claimants.
In this respect paragraph 17.40 must be understood against the background of changes in the treatment of benefits for claimants with children such as Ms Samuels.
These changes occurred since the Code was first issued in 1999, and re issued in 2002, with paragraph 17.40 in substantially the same form. (The only change from 2002 was the omission of the word significantly before the words less than the level of income support).
The changes are described in detail in the evidence of Ms Garnham, Chief Executive of CPAG.
I can conveniently take the summary from Mr Westgate QCs submission for the interveners: Prior to April 2004, income support recipients with children would have received family premiums and dependent child additions as part of their claim (old style support).
After April 2004, new income support recipients with children would no longer receive these additional payments in respect of children as part of their income support award but would instead have received Child Tax Credit instead (new style support).
It was stated Government policy that there should be an equivalence between old style income support rates for children and child tax credit rates.
The shift was not intended to disadvantage families who receive new style support, ie income support for the parent and child tax credit for each of the children.
This change did not affect those who had been continuously receiving income support.
According to the official statistics cited by Mr Stark, in 2006 when the Code was issued, the majority of claimants were still receiving income support including amounts for children.
For that group, it would have been clear that the full amount of income support, including the amounts for children, would be taken into account.
Although the proportion of claimants on the old arrangements had reduced to 1 in 20 by 2011, the wording of paragraph 17.40 remained the same.
But it cannot have been intended that the advice in the paragraph should apply in a different way to the two groups, simply because of a change in the way their benefits were presented.
Indeed to do so would be both irrational and discriminatory (in terms of articles 8 and 14 of the Human Rights Convention).
More generally, Mr Stark submits that the benefits are intended as no more than the officially prescribed subsistence level (see Humphreys v Revenue and Customs Comrs [2012] UKSC 18; [2012] 1 WLR 1545, para 3 per Lady Hale).
They are designed to cover necessary living expenses of the family.
They cannot properly be treated as notionally available to make up a shortfall between housing benefit and rent.
Thus in Mathieson v Secretary of State for Work and Pensions [2015] UKSC 47; [2015] 1 WLR 3250, para 15 (which concerned the cost occasioned by the prolonged stay in hospital of a disabled child, in a case where the family were receiving income support with child benefits and child tax credit), Lord Wilson observed that income support brought the familys economy up to, but not beyond, subsistence level; and that the Secretary of State had conceded that there would have been no surplus available to meet such extra expenditure as the family might incur as a result of [their child being admitted to hospital].
He relies also on what was said by Henderson J in Burnip v Birmingham City Council [2012] EWCA Civ 629; [2013] PTSR 117, para 45: it is necessary to draw a clear distinction between the benefits which Mr Burnip was entitled to claim for his subsistence, and those which he was entitled to claim in respect of his housing needs.
It would therefore be wrong in principle, in my judgment, to regard Mr Burnips subsistence benefits as being notionally available to him to go towards meeting the shortfall between his housing related benefits and the rent he had to pay.
Although these statements were made specifically with reference to income support, it cannot have been intended that benefits related to children would be treated less favourably.
Further, to do so would be inconsistent with the authoritys duty to have regard to the need to safeguard and promote the welfare of children (Children Act 2004 section 11(2); and see Nzolameso v Westminster City Council (Secretary of State for Communities and Local Government intervening) [2015] UKSC 22; [2015] PTSR 549, paras 22 30).
In support of these submissions Mr Westgate refers to more recent statements in the government White Paper Universal Credit: welfare that works (DWP, November 2010 CM 7957).
He refers to chapter 2 (Universal Credit: a new approach to welfare) which states: The personal amount is the basic building block of Universal Credit as it is in existing benefits.
The purpose of the personal amount is to provide for basic living costs.
It will broadly reflect the current structure of personal allowances in Income Support, Jobseekers Allowance and the assessment phase of Employment and Support Allowance, with single people and couples getting different rates. (para 19) The Government is committed to providing the financial support less well off families need to cover childrens living costs.
We will therefore include fixed amounts within Universal Credit to provide for these costs.
The amounts will be based on those currently provided through Child Tax Credit.
They will be additional to Child Benefit. (para 38, emphasis added) Thus says Mr Westgate the personal allowance provides for no more than basic living costs while the amounts for children provide the support which the families need to cover (their) living costs.
Although those passages are related directly to Universal Credit, the passages make clear that the policy approach as respects the purpose, and the level of, benefits has not changed from the previous system.
Finally, Mr Westgate relies on the evidence of Polly Neate, Chief Executive of Shelter, as to the lack of any generally accepted guidance for authorities to assess the reasonableness of living expenses under the Suitability Order.
Shelters research shows a wide variety of practice among housing authorities, and the absence of any transparent or evidence based guidance for that purpose.
According to her evidence, 60% of authorities told Shelter that they have no internal guidance to assist them; only 17 of the 246 authorities who responded to Shelters Freedom of Information Act requests provided any training to housing decision makers on affordability assessment; and 43 of the 105 authorities who had some form of guidance or policy relied on one of three published guides on expenditure: (i) the Standard Financial Statement (SFS); (ii) the Common Financial Statement (CFS); or (iii) the Association of Housing Advice Services (AHAS) guideline figures.
According to Ms Neate, none of these is designed for assessing affordability under the Housing Act, and they are subject to other concerns described in her evidence.
In response to the appellants submissions, Mr Manning for the council adopts the reasoning of the Court of Appeal.
The review officer correctly applied the approach of the 1996 Order, which required him to consider all sources of income, including social security benefits of all kinds.
There was nothing in the Order, or any other policy statement, to support Mr Starks central thesis that non housing welfare benefits cannot be used to meet housing costs, nor taken into account in assessing the affordability of rented accommodation.
Had it been intended that any category of non housing benefits should be excluded from consideration, it would have been easy so to provide.
In the absence of such provision, it is not for the authority to investigate the policy from time to time behind particular benefits.
The arguments based on the history of paragraph 17.40 of the Code, he submits, are not supported by the wording of the paragraph.
The specific reference to tax credits in paragraph 17.39 shows that the author had the changes well in mind.
The authoritys duty to have regard to the Code does not require, or entitle, it to search for interpretations which are not clear on a natural reading of the wording, nor to assume a meaning of income support based on a previous version of benefits law.
Statements in the authorities to the effect that income support was set at subsistence level were made in different statutory contexts.
In any event, child tax credit and child benefit are not subsistence benefits in that sense (see Humphreys supra para 22; R (PO) v Newham London Borough Council [2014] EWHC 2561 (Admin), paras 45 46).
Discussion
It is unfortunate that the submissions for the appellant, and in particular the arguments based on the interpretation of paragraph 17.40, seem to have been fully developed for the first time in this court.
We do not therefore have the full benefit of the experience in this field of the Court of Appeal.
Although Mr Westgates submissions and the supporting evidence for the interveners have provided some valuable background to the legal issues, we must bear in mind that this is an appeal relating to a particular decision, made more than five years ago, on the information then available to the council, not a general review of the law and policy in this field.
There is an attraction in the argument that references to income support in paragraph 17.40 should be understood in the sense in which that expression was apparently used at the time of the earlier versions of the Code.
It seems surprising, even nonsensical, that the level of income support should be maintained as a guide to affordability, but without regard to the changes which excluded from income support any allowance for the children of the family.
However, those issues are not in my view critical to the resolution of this appeal.
I would start from the terms of the 1996 Order itself.
On the one side it requires the authority to take into account all sources of income, including all social security benefits.
I agree with Mr Manning that there is nothing in the Order which requires or justifies the exclusion of non housing benefits of any kind.
On the other side it requires a comparison with the applicants reasonable living expenses.
Assessment of what is reasonable requires an objective assessment; it cannot depend simply on the subjective view of the case officer.
Furthermore, as Mr Stark submits, affordability has to be judged on the basis that the accommodation is to be available indefinitely (see R (Aweys) v Birmingham City Council [2009] WLR 1506; [2009] UKHL 36).
Guidance is provided by paragraph 17.40, where the Secretary of State recommends authorities to regard accommodation as unaffordable if the applicants residual income would be less than the level of income support (para 6 above).
Even if that recommendation in respect of income support is not interpreted as extending to benefits for children, the lack of a specific reference does not make the level of those benefits irrelevant.
As the authorities referred to by Mr Stark (para 26 above) show, benefit levels are not generally designed to provide a surplus above subsistence needs for the family.
If comparison with the relevant benefit levels is material to the assessment of the applicant, it is difficult to see why it should be any less material in assessing what is reasonable by way of living expenses in relation to other members of the household.
Relevant also is the duty under the Children Act to promote and safeguard the welfare of children.
The guidance makes clear, as one would expect, that amounts will vary according to the circumstances and composition of the applicants household.
Further, it is to be noted that, immediately after the reference to the household, there is a reference to a current tariff in respect of such benefits (plural), which suggests that the tariff may be looked at in respect of benefits other than income support, and is at least a good starting point for assessing reasonable living expenses.
That was not how the review officer dealt with Ms Samuels case.
He asked whether there was sufficient flexibility to enable her to cope with the shortfall of 151.49 between her rent and her housing benefit.
However, the question was not whether, faced with that shortfall, she could somehow manage her finances to bridge the gap; but what were her reasonable living expenses (other than rent), that being determined having regard to both her needs and those of the children, including the promotion of their welfare.
The amount shown in the schedule provided by her solicitors (1,234.99) was well within the amount regarded as appropriate by way of welfare benefits (1,349.33).
In the absence of any other source of objective guidance on this issue, it is difficult to see by what standard that level of expenses could be regarded as other than reasonable.
For these reasons in my view the appeal should be allowed and the review decision must be quashed.
Mr Stark has not in his submissions invited us to give any further relief at this stage.
I would however add that, in the light of the law as I have endeavoured to explain it, and on the information available to us, I find it hard to see on what basis the finding of intentional homelessness could be properly upheld.
I therefore express the hope that, five years on, the process can be short circuited, and the council will on reconsideration be able to accept full responsibility under Part VII for Ms Samuels and her family.
Postscript more recent developments
For completeness, since this judgment may be relevant in future cases, I note that in the time since the councils decision there have been significant changes to the law and policy in this area.
The Welfare Reform Act 2012 effected a radical overhaul of the benefits system, with the introduction of Universal Credit.
When fully in force it will replace the existing system of means tested benefits and tax credits with a single payment.
Awards under the new scheme comprise a standard allowance, with additional amounts for children, housing and other particular needs.
Another significant change in 2017 was the Homelessness Reduction Act 2017, which among other things was designed to involve authorities at an earlier stage in preventing homelessness.
In connection with the new legislation the government undertook a review of the Homelessness Code of Guidance, for which purpose it consulted on a revised draft published in October 2017.
Under affordability, paragraph 17.40 was replaced by the following much shorter version: 17.45 Housing authorities will need to consider whether the applicant can afford the housing costs without being deprived of basic essentials such as food, clothing, heating, transport and other essentials specific to their circumstances.
There was no reference to the use of welfare benefits as a guide.
The governments consultation response dated February 2018 recorded a significant number of requests from all stakeholder groups for further guidance on assessing the affordability of accommodation, and that it had been decided to include additional information on assessing affordability for a person based on Universal Credit standard allowances in chapter 17.
The revised paragraph of the 2018 Code as issued reads: 17.46 Housing authorities will need to consider whether the applicant can afford the housing costs without being deprived of basic essentials such as food, clothing, heating, transport and other essentials specific to their circumstances.
Housing costs should not be regarded as affordable if the applicant would be left with a residual income that is insufficient to meet these essential needs.
Housing authorities may be guided by Universal Credit standard allowances when assessing the income that an applicant will require to meet essential needs aside from housing costs, but should ensure that the wishes, needs and circumstances of the applicant and their household are taken into account. (Emphasis added) It will be noted that this is no longer a recommendation but merely something which may be used as guidance; and that the suggested comparison is with Universal Credit standard allowances.
The court did not hear argument on whether this is limited to a standard allowance payable to adults or whether it includes amounts payable in respect of children.
It is not clear from the consultation response whether the new form of wording followed any discussion of the issues raised in this appeal or highlighted in the interveners evidence.
That evidence shows what appears to be an unfortunate lack of consistency among housing authorities in the treatment of affordability, and a shortage of reliable objective guidance on reasonable levels of living expenditure.
It is to be hoped that, in the light of this judgment, the problem will be drawn to the attention of the relevant government department, so that steps can be taken to address it and to give clearer guidance to authorities undertaking this very difficult task.
| The appellant, Ms Samuels, was an assured shorthold tenant of a property in West Bromwich, Birmingham, where she lived with four children.
In July 2011, having fallen into rent arrears, she was given notice to leave.
She later applied to the respondent council to be treated as homeless under Part VII of the Housing Act 1996 (the 1996 Act).
A local housing authority becomes under a duty to secure accommodation to a person found homeless if certain conditions are satisfied.
One condition is that they are not satisfied that the person became homeless intentionally.
That depends on whether she deliberately did or failed to do anything which caused her to leave accommodation that was available and would have been reasonable for her to continue to occupy.
Article 2 of the Homelessness (Suitability of Accommodation) Order 1996 provided that, in determining whether it would be reasonable for a person to continue to occupy accommodation, the local authority will take into account whether that accommodation is affordable.
That includes consideration of the financial resources available to that person, including social security benefits, and consideration of the persons other reasonable living expenses.
The local authority is required to have regard to guidance given by the Secretary of State, which at the time was the Homelessness Code of Guidance for Local Authorities (the Code) issued in 2006.
Paragraph 17.40 of the Code stated: In considering an applicants residual income after meeting the costs of the accommodation, the Secretary of State recommends that housing authorities regard accommodation as not being affordable if the applicant would be left with a residual income which would be less than the level of income support or income based jobseekers allowance that is applicable in respect of the applicant, or would be applicable if he or she was entitled to claim such benefit. [] The council decided that Ms Samuels was intentionally homeless, on the grounds that the accommodation in West Bromwich was affordable and reasonable for her to continue to occupy, and that its loss was the result of her deliberate act in failing to pay the rent.
In concluding that the accommodation was affordable, the council found that the shortfall in rent could have been met by greater flexibility in the household budgeting.
Ms Samuelss appeal to the County Court against the councils decision was dismissed and her further appeal was dismissed by the Court of Appeal.
The central issue in her appeal to the Supreme Court is
whether the council adopted the correct approach in determining that the accommodation was affordable for the purposes of the 1996 Act.
The Supreme Court unanimously allows the appeal and quashes the councils decision.
Lord Carnwath gives the judgment of the court.
The 1996 Order requires the authority to take into account all sources of income, including all social security benefits.
There is nothing in it to require or justify the exclusion of non housing benefits of any kind.
It also requires consideration of the applicants reasonable living expenses, which necessitates an objective assessment, not simply the subjective view of the case officer [34].
Even if the recommendation in paragraph 17.40 of the Code in respect of income support is not interpreted as extending to benefits for children, the lack of a specific reference does not make the level of those benefits irrelevant.
Benefit levels are not generally designed to provide a surplus above subsistence needs for the family.
If comparison with relevant benefit levels is material to the assessment of the applicant, it should not be any less material in assessing what is reasonable by way of living expenses in relation to other members of the household.
The duty to promote and safeguard the welfare of children under the Children Act 1989 is also relevant [35].
As one would expect, the guidance makes clear that the amount of an applicable benefit will vary according to the circumstances and composition of the applicants household.
It also refers to the current tariffin respect of such benefits (plural), implying that the tariff may be looked at in respect of benefits other than income support, and is at least a good starting point for assessing reasonable living expenses [35].
The review officer in Ms Samuels case asked whether there was sufficient flexibility to enable her to cope with the shortfall between her rent and her housing benefit.
But the question ought to have been what her reasonable living expenses were (other than rent), to be determined having regard to both her needs and those of the children.
The total expenses shown in the schedule provided by her solicitors (1,234.99) was well within the amount regarded as appropriate by way of welfare benefits (1,349.33).
It is difficult to see by what standard those expenses could be regarded as unreasonable [36].
The appeal is therefore allowed, and the review decision quashed.
In light of the information available to the Court, Lord Carnwath finds it hard to see on what basis the finding of intentional homelessness could be properly upheld.
He therefore hopes that on reconsideration the council will be able to accept full responsibility under Part VII of the 1996 Act for Ms Samuels and her family [37].
|
The central issue in this case is whether Ms Tamara Gubeladze (the respondent), a Latvian national living in the United Kingdom, is entitled to receive state pension credit, a means tested benefit.
She relies on regulation 5(2) of the Immigration (European Economic Area) Regulations 2006 (SI 2006/1003) (the 2006 Regulations), which implements article 17(1)(a) of Directive 2004/38/EC (the Citizens Directive), as a worker or self employed person who has ceased activity.
By a Treaty signed at Athens on 16 April 2003 (the Athens Treaty), ten Accession States became member states of the EU with effect from 1 May 2004.
The Act of Accession, annexed to the Athens Treaty, set out the conditions of admission and the adjustments to the [EU] Treaties on which the Union is founded, entailed by such admission (article 1(2)).
The Act of Accession permitted the existing member states to apply national measures regulating access to their labour markets by nationals of the eight most populous Accession States (the A8 States) which included Latvia.
Annex VIII of the Act of Accession required the existing member states to apply for an initial period of two years from the date of accession national measures or those resulting from bilateral agreements, regulating access to their labour markets by Latvian nationals.
The existing member states were permitted to continue to apply such measures until the end of the five year period following the date of the accession (para 2).
An existing member state maintaining national measures or measures resulting from bilateral agreements at the end of the five year period was permitted, in case of serious disturbances of its labour market or threat thereof and after notifying the Commission to continue to apply these measures until the end of the seven year period following the date of accession (para 5).
Other annexes contained identical provisions in respect of nationals of the other A8 States.
The Act of Accession was given effect in the domestic law of the United Kingdom by the European Union (Accessions) Act 2003 and the Accession (Immigration and Worker Registration) Regulations 2004 (SI 2004/1219) (the 2004 Regulations).
The 2004 Regulations established the Worker Registration Scheme (WRS) which obliged any national of an A8 State to register before starting employment and before taking up any new employment.
Each registration incurred a fee of 90 and the obligation to register continued until the worker had worked for 12 months.
Failure to register work in accordance with the WRS would mean that the individual would not derive from that work a right to reside in the United Kingdom.
The WRS ran initially for five years, from 1 May 2004 to 30 April 2009.
In Zalewska v Department for Social Development (Child Poverty Action Group intervening) [2008] UKHL 67; [2008] 1 WLR 2602, the House of Lords considered the legality of the WRS.
The House of Lords held unanimously that any requirements of the WRS were imposed pursuant to provisions permitting derogation from EU rights and so had to be proportionate to a legitimate aim.
It held further, by a majority, that the requirements of the WRS met that test and were, therefore, lawful.
In 2009 HM Government asked the Migration Advisory Committee (MAC) to advise it in relation to the continuation of the WRS.
In the light of the MACs advice, the Government decided to exercise the power conferred by the Act of Accession to extend the derogations applicable to nationals of the A8 States for a further two years.
Having notified the Commission, it made the Accession (Immigration and Worker Registration) (Amendment) Regulations 2009 (SI 2009/892) (the Extension Regulations) which extended the operation of the WRS for a period of two years from 1 May 2009 to 30 April 2011.
The respondent is a national of Latvia who came to the United Kingdom in 2008 and worked for various employers here between September 2009 and November 2012.
In the periods when she was not working she was a jobseeker.
She was issued with a registration certificate under the WRS on 20 August 2010.
Her employment before that date was not covered by the certificate.
On 24 October 2012, the respondent made a claim for state pension credit.
Entitlement was conditional on her having a right to reside in the United Kingdom.
The basis of her claim was that she had a right of residence in the United Kingdom under regulation 5(2) of the 2006 Regulations as a person who had retired, having pursued activities as a worker for at least a year in the United Kingdom, and having resided continuously in the United Kingdom for three years.
The Secretary of State for Work and Pensions (the Secretary of State) rejected her claim on the ground that the requirement of three years continuous residence required three years continuous legal residence which meant a right of residence under the Citizens Directive.
Since the respondents asserted right of residence during that time was as a worker, but she had not been registered under the WRS for part of that period, the Secretary of State considered that she had not resided in the United Kingdom pursuant to a right of residence conferred by the Citizens Directive and therefore did not meet the three year residence requirement in regulation 5(2) of the 2006 Regulations.
Her claim for state pension credit was accordingly refused.
The respondents appeal to the First tier Tribunal was dismissed on jurisdictional grounds.
On appeal to the Upper Tribunal, it held that the First tier Tribunal had had jurisdiction to hear the appeal but, with the consent of the parties, the Upper Tribunal retained the appeal and itself re made the substantive decision.
It allowed the respondents appeal on two grounds.
First, it held that article 17 of the Citizens Directive, and therefore regulation 5(2)(c) of the 2006 Regulations, did not require that the three years continuous residence be in exercise of rights under the Citizens Directive.
Actual residence was sufficient.
Secondly, the decision to extend the WRS in 2009 was disproportionate and therefore unlawful.
Accordingly, the respondent was not disqualified by her failure to meet the requirements of the WRS from demonstrating three years continuous residence with a right of residence under the Citizens Directive.
The Secretary of State appealed to the Court of Appeal (Rupert Jackson, Lindblom and Peter Jackson LJJ) which on 7 November 2017 dismissed the appeal [2017] EWCA Civ 1751; [2018] 1 WLR 3324: (1) The Secretary of State succeeded on the construction of the Citizens Directive.
The word reside in article 17(1)(a) meant legally reside which in this context meant residence in the exercise of rights under the Citizens Directive.
As a result, the Court of Appeal did not need to rule on a new argument advanced by the respondent for the first time in the Court of Appeal, namely that even if resided in article 17(1)(a) of the Citizens Directive means legally resided, that word has a wider meaning in regulation 5(2)(c) of the 2006 Regulation where it means actual residence, with or without any right to remain.
The Court of Appeal was, however, inclined to the view that resided in regulation 5(2)(c) of the 2006 Regulations has the same meaning as in the Citizens Directive. (2) There was no error of law in the Upper Tribunals conclusion that the extension of the WRS was disproportionate and therefore incompatible with EU law.
On 19 June 2018 the Supreme Court granted permission to appeal on condition that the Secretary of State pay the respondents costs in any event.
Permission to the Secretary of State to appeal included permission to argue a new ground which had not been advanced in the Court of Appeal, namely that a national measure adopted pursuant to a transitional provision in the Act of Accession is not subject to proportionality review at all.
So to hold would involve departing from the reasoning of the House of Lords in Zalewska.
Accordingly, a seven Justice panel has been convened for this appeal.
The following issues therefore arise for decision on this appeal: Is the decision to extend the WRS open to challenge on grounds of (1) proportionality? (2) If the decision to extend the WRS is open to challenge on grounds of proportionality, did the Upper Tribunal and the Court of Appeal err in their approach and conclusion on this issue? (3) If the Secretary of State succeeds on Issue (1) or Issue (2), does article 17(1)(a) of the Citizens Directive require a person to show that, throughout the period of continuous residence, she enjoyed a right of residence under the Citizens Directive? (4) actual residence sufficient for the purposes of the 2006 Regulations? If article 17 of the Citizens Directive requires lawful residence, is Relevant EU instruments
Treaty establishing the European Community
At the material time, the Treaty establishing the European Community (TEC) provided in relevant part: Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited. 1.
Citizenship of the Union is hereby established.
Every person holding the nationality of a member state shall be a citizen of the Union.
Citizenship of the Union shall complement and not replace national citizenship.
Article 12 Article 17 2.
Citizens of the Union shall enjoy the rights conferred by this Treaty and shall be subject to the duties imposed thereby. 1.
Every citizen of the Union shall have the right to move and reside freely within the territory of the member states, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it effect.
Article 18 Article 39 Freedom of movement for workers shall be secured 1. within the Community.
Such freedom of movement shall entail the abolition of 2. any discrimination based on nationality between workers of the member states as regards employment, remuneration and other conditions of work and employment. 3.
It shall entail the right, subject to limitations justified on grounds of public policy, public security or public health: to accept offers of employment actually made; to move freely within the territory of member (a) (b) states for this purpose; (c) to stay in a member state for the purpose of employment in accordance with the provisions governing the employment of nationals of that state laid down by law, regulation or administrative action; (d) to remain in the territory of a member state after having been employed in that state, subject to conditions which shall be embodied in implementing regulations to be drawn up by the Commission.
Article 49 Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of member states who are established in a state of the Community other than that of the person for whom the services are intended.
Regulation (EEC) No 1612/68
Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (Regulation 1612/68) sets out in articles 1 to 6 within Title I EU rules on eligibility for employment.
Within Title II (Employment and Equality of Treatment) article 7 provides in relevant part: Article 7 1.
A worker who is a national of a member state may not, in the territory of another member state, be treated differently from national workers by reason of his nationality in respect of any conditions of employment and work, in particular as regards remuneration, dismissal, and should he become unemployed, reinstatement or re employment;
The Accession Treaty
The Athens Treaty states in the sixth recital that the Contracting States: HAVE DECIDED to establish by common agreement the conditions of admission and the adjustments to be made to the Treaties on which the European Union is founded, Article 1(1) provides that the Accession States: hereby become members of the European Union and Parties to the Treaties on which the Union is founded as amended or supplemented.
Article 1 continues: 2.
The conditions of admission and the adjustments to the Treaties on which the Union is founded, entailed by such admission, are set out in the Act annexed to this Treaty.
The provisions of that Act shall form an integral part of this Treaty. 3.
The provisions concerning the rights and obligations of the member states and the powers and jurisdiction of the institutions of the Union as set out in the Treaties referred to in paragraph 1 shall apply in respect of this Treaty.
Article 2(2) provides that the Treaty shall enter into force on 1 May 2004.
The Act of Accession annexed to the Athens Treaty provides in relevant part: From the date of accession, the provisions of the original Treaties and the acts adopted by the institutions and the European Central Bank before accession shall be binding on the new member states and shall apply in those states under the conditions laid down in those Treaties and in this Act.
The application of the original Treaties and acts adopted by the institutions shall, as a transitional measure, be subject to the derogations provided for in this Act.
Article 2 Article 10 Article 24 The measures listed in Annexes V, VI, VII, VIII, IX, X, XI, XII, XIII and XIV to this Act shall apply in respect of the new member states under the conditions laid down in those Annexes.
Annex VIII to the Act of Accession sets out the transitional measures in respect of Latvia.
Section 1 of Annex VIII, which deals with free movement of persons, provides in relevant part: 1.
Article 39 and the first paragraph of article 49 of the EC Treaty shall fully apply only, in relation to the freedom of movement of workers and the freedom to provide services involving temporary movement of workers as defined in article 1 of Directive 96/71/EC between Latvia on the one hand, and [the existing member states] on the other hand, subject to the transitional provisions laid down in paragraphs 2 to 14. 2.
By way of derogation from articles 1 to 6 of Regulation (EEC) No 1612/68 and until the end of the two year period following the date of accession, the present member states will apply national measures, or those resulting from bilateral agreements, regulating access to their labour markets by Latvian nationals.
The present member states may continue to apply such measures until the end of the five year period following the date of the accession.
Latvian nationals legally working in a present member state at the date of accession and admitted to the labour market of that member state for an uninterrupted period of 12 months or longer will enjoy access to the labour market of that member state but not to the labour market of other member states applying national measures.
Latvian nationals admitted to the labour market of a present member state following accession for an uninterrupted period of 12 months or longer shall also enjoy the same rights.
The Latvian nationals mentioned in the second and third subparagraphs above shall cease to enjoy the rights contained in those subparagraphs if they voluntarily leave the labour market of the present member state in question.
Latvian nationals legally working in a present member state at the date of accession, or during a period when national measures are applied, and who were admitted to the labour market of that member state for a period of less than 12 months shall not enjoy these rights. 3.
Before the end of the two year period following the date of accession the Council shall review the functioning of the transitional provisions laid down in paragraph 2, on the basis of a report from the Commission.
On completion of this review, and no later than at the end of the two year period following the date of accession, the present member states shall notify the Commission whether they will continue applying national measures or measures resulting from bilateral agreements, or whether they will apply articles 1 to 6 of Regulation (EEC) No 1612/68 henceforth.
In the absence of such notification, articles 1 to 6 of Regulation (EEC) No 1612/68 shall apply. 4.
Upon Latvias request one further review may be held.
The procedure referred to in paragraph 3 shall apply and shall be completed within six months of receipt of Latvias request. 5.
A member state maintaining national measures or measures resulting from bilateral agreements at the end of the five year period indicated in paragraph 2 may, in case of serious disturbances of its labour market or threat thereof and after notifying the Commission, continue to apply these measures until the end of the seven year period following the date of accession.
In the absence of such notification, articles 1 to 6 of Regulation (EEC) No 1612/68 shall apply.
The Citizens Directive
The preamble to the Citizens Directive provides in material part: Citizenship of the Union confers on every citizen of the Union a primary and individual right to move and reside freely within the territory of the member states, subject to the limitations and conditions laid down in the Treaty and to the measures adopted to give it effect. (recital (1)) The free movement of persons constitutes one of the fundamental freedoms of the internal market, which comprises an area without internal frontiers, in which freedom is ensured in accordance with the provisions of the Treaty. (recital (2)) Union citizenship should be the fundamental status of nationals of the member states when they exercise their right of free movement and residence.
It is therefore necessary to codify and review the existing Community instruments dealing separately with workers, self employed persons, as well as students and other inactive persons in order to simplify and strengthen the right of free movement and residence of all Union citizens. (recital (3)) Enjoyment of permanent residence by Union citizens who have chosen to settle long term in the host member state would strengthen the feeling of Union citizenship and is a key element in promoting social cohesion, which is one of the fundamental objectives of the Union.
A right of permanent residence should therefore be laid down for all Union citizens and their family members who have resided in the host member state in compliance with the conditions laid down in this Directive during a continuous period of five years without becoming subject to an expulsion measure. (recital (17)) In order to be a genuine vehicle for integration into the society of the host member state in which the Union citizen resides, the right of permanent residence, once obtained, should not be subject to any conditions. (recital (18)) Certain advantages specific to Union citizens who are workers or self employed persons and to their family members, which may allow these persons to acquire a right of permanent residence before they have resided five years in the host member state, should be maintained, as these constitute acquired rights, conferred by Commission Regulation (EEC) No 1251/70 of 29 June 1970 on the right of workers to remain in the territory of a member state after having been employed in that state and Council Directive 75/34/EEC of 17 December 1974 concerning the right of nationals of a member state to remain in the territory of another member state after having pursued therein an activity in a self employed capacity. (recital (19))
The Directive lays down the conditions governing the exercise of the right of free movement and residence within the territory of the member states by Union citizens and their family members, their right of permanent residence in the territory of the member states and the limits placed on these rights on grounds of public policy, public security or public health (article 1).
Within Chapter III, article 6 confers a right of residence on the territory of another member state for up to three months without any conditions or any formalities other than the requirement to hold a valid identity card or passport.
Article 7 confers on all Union citizens the right of residence on the territory of another member state for a period of longer than three months if, inter alia, they are workers or self employed persons in the host member state.
Article 14 provides that Union citizens and their family members shall have the right of residence provided for in article 6, as long as they do not become an unreasonable burden on the social assistance system of the host member state (article 14(1)), and the right of residence provided for in article 7 as long as they meet the conditions set out therein (article 14(2)).
Article 16 provides: General rule for Union citizens and their family members 1.
Union citizens who have resided legally for a continuous period of five years in the host member state shall have the right of permanent residence there.
This right shall not be subject to the conditions provided for in Chapter III.
Article 16
Article 17 provides in material part: Article 17 2.
Paragraph 1 shall apply also to family members who are not nationals of a member state and have legally resided with the Union citizen in the host member state for a continuous period of five years. 3.
Continuity of residence shall not be affected by temporary absences not exceeding a total of six months a year, or by absences of a longer duration for compulsory military service, or by one absence of a maximum of 12 consecutive months for important reasons such as pregnancy and childbirth, serious illness, study or vocational training, or a posting in another member state or a third country. 4.
Once acquired, the right of permanent residence shall be lost only through absence from the host member state for a period exceeding two consecutive years.
Exemptions for persons no longer working in the host member state and their family members 1.
By way of derogation from article 16, the right of permanent residence in the host member state shall be enjoyed before completion of a continuous period of five years of residence by: (a) workers or self employed persons who, at the time they stop working, have reached the age laid down by the law of that member state for entitlement to an old age pension or workers who cease paid employment to take early retirement, provided that they have been working in that member state for at least the preceding 12 months and have resided there continuously for more than three years.
Article 18 provides: Article 18 Acquisition of the right of permanent residence by certain family members who are not nationals of a member state Without prejudice to article 17, the family members of a Union citizen to whom articles 12(2) and 13(2) apply, who satisfy the conditions laid down therein, shall acquire the right of permanent residence after residing legally for a period of five consecutive years in the host member state.
In order to understand the Citizens Directive it is also relevant to set out certain parts of Commission Regulation (EEC) No 1251/70 on the right of workers to remain in the territory of a member state after having been employed in that state (Regulation 1251/70), which is one of the instruments referred to in recital (19) to the Citizens Directive.
Regulation 1251/70 provides as follows: Whereas it is important, in the first place, to guarantee to the worker residing in the territory of a member state the right to remain in that territory when he ceases to be employed in that state because he has reached retirement age or by reason of permanent incapacity to work; whereas, however, it is equally important to ensure that right for the worker who, after a period of employment and residence in the territory of a member state, works as an employed person in the territory of another member state, while still retaining his residence in the territory of the first state (recital (4)) Article 1 The provisions of this Regulation shall apply to nationals of a member state who have worked as employed persons in the territory of another member state and to members of their families, as defined in article 10 of Council Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community.
Article 2 1.
The following shall have the right to remain permanently in the territory of a member state: (a) a worker who, at the time of termination of his activity, has reached the age laid down by the law of that member state for entitlement to an old age pension and who has been employed in that state for at least the last 12 months and has resided there continuously for more than three years; Article 4 1.
Continuity of residence as provided for in article 2(1) may be attested by any means of proof in use in the country of residence.
It shall not be affected by temporary absences not exceeding a total of three months per year, nor by longer absences due to compliance with the obligations of military service.
Regulation 1251/70 was repealed by Commission Regulation (EC) No 635/2006 of 25 April 2006 (Regulation 635/2006) with effect from 30 April 2006, in anticipation of the implementation of the Citizens Directive into national laws with effect from the following day.
We set out recital (1) to Regulation 635/2006 in our discussion of Issue (3) below.
Relevant domestic legislation
The Accession (Immigration and Worker Registration) Regulations 2004
The 2004 Regulations, as in force on 30 April 2007, provided in relevant part: 2. accession state worker Accession state worker requiring registration (1) Subject to the following paragraphs of this regulation, requiring registration means a national of a relevant accession state working in the United Kingdom during the accession period. (2) A national of a relevant accession state is not an accession state worker requiring registration if on 30 April 2004 he had leave to enter or remain in the United Kingdom under the 1971 Act and that leave was not subject to any condition restricting his employment. 4.
Right of residence of work seekers and workers from relevant acceding states during the accession period (1) This regulation derogates during the accession period from article 39 of the Treaty establishing the European Community, articles 1 to 6 of Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community and Council Directive 2004/38/EC of the European Parliament and of the Council on the right of citizens of the Union and their family members to move and reside freely within the territory of the member states, insofar as it takes over provisions of Council Directive (EEC) No 68/360 on the abolition of restrictions on movement and residence within the Community for workers of member states and their families. (2) A national of a relevant accession state shall not be entitled to reside in the United Kingdom for the purpose of seeking work by virtue of his status as a work seeker if he would be an accession state worker requiring registration if he began working in the United Kingdom. (3) Paragraph (2) is without prejudice to the right of a national of a relevant accession state to reside in the United Kingdom under the 2006 Regulations as a self sufficient person whilst seeking work in the United Kingdom. (4) A national of a relevant accession state who is seeking employment and an accession state worker requiring registration shall only be entitled to reside in the United Kingdom in accordance with the 2006 Regulations as modified by regulation 5. 5.
Application of 2006 Regulations in relation to accession state worker requiring registration (1) The 2006 Regulations shall apply in relation to a national of a relevant accession state subject to the modifications set out in this regulation. (2) A national of a relevant accession state who is seeking employment in the United Kingdom shall not be treated as a jobseeker for the purpose of the definition of qualified person in regulation 6(1) of the 2006 Regulations and an accession state worker requiring registration shall be treated as a worker for the purpose of that definition only during a period in which he is working in the United Kingdom for an authorised employer. 7.
Requirement for an accession state worker requiring registration to be authorised to work (1) By way of derogation from article 39 of the Treaty establishing the European Community and articles 1 to 6 of Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community, an accession state worker requiring registration shall only be authorised to work in the United Kingdom for an authorised employer. (2) An employer is an authorised employer in relation to a worker if (c) the worker has received a valid registration certificate authorising him to work for that employer and that certificate has not expired under paragraph (5); Regulation 7(5)(b) provided that a registration certificate expired on the date on which the worker ceased working for that employer.
The Immigration (European Economic Area) Regulations 2006
The 2006 Regulations transposed some of the provisions of the Citizens Directive into domestic law.
At the relevant time they provided in material part: Worker or self employed person who has ceased 5. activity (1) In these Regulations, worker or self employed person who has ceased activity means an EEA national who satisfies the conditions in paragraph (2), (3), (4) or (5). (2) A person satisfies the conditions in this paragraph if he terminates his activity as a worker or self (a) employed person and has reached the age at which he is (i) entitled to a state pension on the date on which he terminates his activity; or (ii) in the case of a worker, ceases working to take early retirement; (b) pursued his activity as a worker or self employed person in the United Kingdom for at least 12 months prior to the termination; and (c) the United Kingdom in resided continuously for more than three years prior to the termination. 15.
Permanent right of residence (1) The following persons shall acquire the right to reside in the United Kingdom permanently (c) a worker or self employed person who has ceased activity;
The State Pension Credit Act 2002 provides for conditions of entitlement to state pension credit, including a condition that the claimant is in Great Britain (section 1(2)(a)).
The State Pension Credit Regulations 2002 (SI 2002/1792) made under that Act set out detailed provisions regarding who qualifies as a person in Great Britain for these purposes.
According to those Regulations, so far as relevant, a person so qualifies if she is habitually resident in the United Kingdom pursuant to a right to reside which is not expressly excluded as a relevant right (regulation 2).
A right of residence arising pursuant to article 17 of the Citizens Directive is not excluded.
Accordingly it is common ground that if the respondent enjoyed a right of permanent residence pursuant to article 17 she would be entitled to claim state pension credit.
Issue (1): Is the decision to extend the WRS open to challenge on grounds of proportionality?
It is common ground between the parties that decisions to apply transitional measures under the Act of Accession, such as the decision to extend the WRS, cannot be challenged by A8 nationals as a disproportionate restriction on their free movement rights under the EU Treaties or legislation made under them.
That is not the basis of the respondents case.
On the contrary, she seeks to challenge the proportionality of the measures adopted by the United Kingdom within the context of the transitional provisions established in EU law.
In particular, she challenges as disproportionate the decision of the United Kingdom in April 2009 to make the residence rights of A8 nationals contingent on compliance with the WRS beyond the expiry of the initial five year accession period.
Before the Court of Appeal, it was accepted on behalf of the Secretary of State in the light of Zalewska that the decision to extend the requirement of compliance with the WRS was subject to proportionality review.
However, before the Supreme Court and with its permission Mr Martin Chamberlain QC, who has argued the case for the Secretary of State with great skill and determination, now maintains that the decision cannot be challenged on grounds of proportionality and identifies this as the central question in this appeal.
He accepts that the transitional provisions in Annex VIII were designed to protect the labour markets in the existing member states from the impact of large numbers of nationals arriving from the eight most populous new member states and that this was to be achieved by a derogation from the ordinary application of the relevant Treaty provisions on free movement of workers (Vicoplus SC PUH v Minister van Sociale Zaken en Werkgelegenheid (Joined Cases C 307/09 to C 309/09) [2011] ECR I 453 at para 34; Prefeta v Secretary of State for Work and Pensions (Case C 618/16) [2019] 1 WLR 2040 at para 41).
As a result, the Accession Treaty established a carefully calibrated and comprehensive suite of derogations from the ordinary operation of the provisions in the EU Treaties governing free movement of workers.
However, he submits, nationals of the A8 States had never enjoyed rights under the Treaties or under EU legislation and the effect of the derogations was to place substantive limits, which in some cases depended on decisions by member states, on the rights they would acquire by virtue of accession.
In circumstances where the primary provisions of EU law did not apply to nationals of the new member states, they had, for the purposes of EU law, no protected interest in that respect during the transitional period.
Accordingly, he submits, the extension of the WRS did not interfere with or derogate from any pre existing protected interest and it was, therefore, not subject to any requirement of proportionality.
It was sufficient that it fell within the scope of the permitted derogation in paragraph 5 of Annex VIII to the Act of Accession and was notified to the Commission.
The respondent submits that the Secretary of States submission is wrong as a matter of EU law and of national law.
The decision to extend the WRS is a national decision to limit fundamental EU law rights of free movement pursuant to a transitional provision in the Act of Accession and is, therefore, subject to proportionality review as a matter of EU law.
In addition, the decision to limit enjoyment of state pension credit for those who would otherwise enjoy it, by reason of extension of the WRS, is a discriminatory infringement of the rights to property of an A8 national, and falls to be justified under article 14 of the European Convention of Human Rights (ECHR) read with article 1 Protocol 1 to that Convention (A1P1) by virtue of section 6 of the Human Rights Act 1998.
The Secretary of States submission is in direct conflict with the decision of the House of Lords in Zalewska v Department for Social Development which upheld the legality of the WRS in the initial phase of its operation from 2004.
That appeal related to the provisions in Annex XII to the Act of Accession concerning national measures regulating access to labour markets within existing member states by Polish nationals.
The House of Lords approached the matter on the basis that derogation by the United Kingdom from article 39 pursuant to paragraph 2 of Part II of Annex XII to the Act of Accession precluded direct reliance on article 39 by nationals of Poland and instead required compliance during the transitional period with the national measures governing such access.
However, the House unanimously concluded that the powers in the United Kingdom to impose conditions on Polish nationals were required to be exercised in accordance with the Community principle of proportionality.
It proceeded on the basis that the UK measures were a derogation from the rights which would otherwise be enjoyed.
Lord Hope of Craighead stated the matter in the following terms (at para 30): The proposition that I cannot accept however is that the national measures that the United Kingdom selects have nothing to do with Community law, so the issue as to whether they are proportionate is irrelevant.
The only authority that the United Kingdom has to introduce national measures to give access to nationals of an A8 state to its labour market in place of article 39 EC and Title I of Council Regulation (EEC) No 1612/68 is that which is given to it by paragraph 2 of Part 2 of Annex XII.
As article 10 of the Act of Accession makes clear, this derogation from the application of the original Treaties and Acts adopted by the institutions of the Community was agreed to by the member states under the umbrella of Community law.
Furthermore, the fact that the derogation does not extend to article 7 of the Regulation shows that where the national measures of an existing member state give the status of worker to an A8 state national he is entitled to all the rights in that state that Community law gives to workers.
It is not possible to detach the opportunity that is given to the member states to apply national measures from its Community law background.
The conclusion that any national measures that the member states introduce under the authority of paragraph 2 must be compatible with the authority given to them by the Treaty of Accession and with the Community law principle of proportionality seems to me to be inescapable.
Similarly, Baroness Hale of Richmond explained (at para 46) that the appeal was concerned with the restrictive effect of national measures implementing EU law on the fundamental right of free movement of workers.
The national implementing regulations had been made under section 2(2) of the European Communities Act 1972 for the purpose of implementing Community law and in the exercise of powers conferred by section 2 of the European Union (Accessions) Act 2003, which is headed Freedom of movement for workers.
As a result, any national measures had to be compatible with the principle of proportionality in EU law.
The House held by a bare majority that the national measures there under consideration (namely, requirements under the WRS that nationals of A8 accession states apply for a registration certificate for their first employment in the United Kingdom and re register if they changed employment within a stipulated period) were not disproportionate.
Mr Chamberlain does not shrink from submitting that Zalewska was wrongly decided.
He does not suggest, as was submitted in Zalewska, that the national measures have nothing to do with EU law.
He accepts that the national measures fall within the scope of EU law and that they are required to comply with the terms of the derogations permitted by EU law.
He suggests, rather, that Lord Hopes underlying premise in para 30 of his speech, set out above, is flawed in that the EU principle of proportionality can have no application where there is no antecedent interest requiring protection.
On his case, nationals of the A8 States enjoyed no rights at all under the EU Treaties at the point of accession and the only rights they enjoyed in this regard during the transitional period were those permitted by the UK measures.
On this basis he submits that it is circular to argue that the national measures affect the interests of Latvian nationals in free movement and entitlement to social security payments as workers because these are not conferred until the requirements of the national measures have been met.
Mr Chamberlain is correct in his submission that the principle of proportionality necessarily involves, as an essential component, an assessment of the degree to which the impugned measure interferes with a protected interest.
Thus, in R (British Sugar plc) v Intervention Board for Agricultural Produce (Case C 329/01) [2004] ECR I 01899 the Court of Justice of the European Union observed (at para 59): It cannot be maintained that rules which do not themselves interfere with protected interests are capable of infringing the principle of proportionality.
As a result, a measure the sole purpose of which was to allow the correction of errors did not give rise to any interference with the manufacturers interests in issue in that case and could not, therefore, constitute a breach of the principle of proportionality.
The British Sugar case was referred to by Lord Reed and Lord Toulson in R (Lumsdon) v Legal Services Board [2015] UKSC 41; [2016] AC 697 (at para 25) where they reiterated that the principle of proportionality only applies to measures interfering with protected interests.
The point is also well made by Professor Tridimas in The General Principles of EU Law (2nd ed, OUP: 2006) where he states (at p 139): The court assesses the adverse consequences that the measure has on an interest worthy of legal protection and determines whether those consequences are justified in view of the importance of the objective pursued.
Similarly, Professors Craig and De Brca in EU Law: Text, Cases, and Materials (6th ed, OUP: 2015) state (at p 551): In any proportionality inquiry the relevant interests must be identified, and there will be some ascription of weight or value to those interests, since this is a necessary condition precedent to any balancing operation.
The question arises whether the Act of Accession created relevant protectable interests by conferring rights of EU citizenship on the new EU citizens from the A8 States subject to initial, tapering exceptions imposed by the existing member states, or whether it should be regarded as providing for only such rights as may be conferred by the existing member states during the transitional period.
This question lies at the heart of Issue (1).
The House of Lords in Zalewska took the former view.
This reading is supported by the scheme of the relevant instruments.
The Treaty of Accession provides (article 1(1)) that the Accession States hereby become members of the European Union and Parties to the Treaties on which the Union is founded as amended or supplemented.
The Act of Accession provides (article 2) that [f]rom the date of accession, the provisions of the original Treaties shall be binding on the new member states and shall apply in those states under the conditions laid down in those Treaties and in this Act.
Article 10 of the Act of Accession then provides that [t]he application of the original Treaties and acts adopted by the institutions shall, as a transitional measure, be subject to the derogations provided for in this Act.
Article 24 provides that the measures listed in Annex VIII shall apply in respect of Latvia under the conditions there laid down.
Paragraph 1 of Annex VIII provides that articles 39 and 49(1) TEC shall fully apply only, in relation to the freedom of movement of workers and the freedom to provide services involving temporary movement of workers as defined in article 1 of Directive 96/71/EC between Latvia and the existing member states, subject to the transitional provisions laid down in paragraphs 2 to 14.
Paragraph 2 then provides that, during the initial two year period, the existing member states will apply national measures, or those resulting from bilateral agreements regulating access to their labour markets by Latvian nationals [b]y way of derogation from articles 1 to 6 of Regulation (EEC) No 1612/68.
The use of the word derogation in this context is itself an indication that A8 nationals are regarded as having significant relevant interests under EU law from the moment of accession, subject to limitation only by action taken by member states which will be subject to the general principle of proportionality in the usual way.
The transitional provisions are a derogation from the principle that the provisions of EU law apply immediately and fully to new member states and their nationals (see Vicoplus per Advocate General Bot at para 46).
The provisions of the Citizens Directive are also relevant in this regard.
The preamble emphasises in recitals (1) to (3) that citizenship of the Union confers on every citizen of the Union a primary and individual right to move and reside freely within the territory of the member states, subject to the limitations and conditions laid down in or pursuant to the Treaty; that such a right of free movement is one of the fundamental freedoms of the internal market; and that Union citizenship should be the fundamental status of nationals of the member states as regards the exercise of their right of free movement and residence.
Every A8 national became a citizen of the EU on 1 May 2004 and these recitals indicate that it is by virtue of their status as such that EU law contemplates that they have a protectable interest which came into existence on that date so far as concerns rights of free movement.
The Directive lays down the conditions governing the exercise of the right of free movement and residence within the territory of the member states by Union citizens and their family members (article 1).
It seems clear, therefore, that the effect of Annex VIII to the Act of Accession is, during the transitional period, to derogate from the rights which Latvian nationals would otherwise enjoy in their newly established status as EU citizens.
The application of these derogating provisions is clearly subject to the principle of proportionality in EU law.
The same conclusion is arrived at when one has regard to the substance of the matter.
Nationals of the A8 States were to enjoy rights as EU citizens from accession, subject to the derogating transitional provisions.
The purpose of the transitional provisions was to protect labour markets in existing member states from the impact of large numbers of workers arriving from the eight most populous new member states.
This aim was to be achieved by requiring or permitting existing member states to derogate temporarily from the normal application of EU rules on free movement of workers.
There was no intention to confer an unfettered right to derogate from general principles of freedom of movement.
On the contrary, derogation must be subject to the principle of proportionality in EU law.
In the course of his submissions, Mr Chamberlain placed considerable reliance on the decision of the CJEU in Vicoplus, which post dated the decision of the House of Lords in Zalewska and which, he maintained, demonstrated that the EU principle of proportionality had no application in circumstances such as the present.
That case concerned Annex XII to the Act of Accession, relating to Poland, which was materially identical to Annex VIII.
The appellants had been fined for posting Polish workers to the Netherlands without having first obtained work permits.
On a reference for a preliminary ruling the Raad van State (Netherlands) asked whether, with a view to protecting the domestic labour market, the requirement of a work permit under national law for the provision of a service consisting in making workers available was a proportionate measure in the light of articles 56 and 57 TFEU, in view also of the reservation in Chapter 2, paragraph 2 of Annex XII to the Act of Accession with regard to the free movement of workers.
At paras 21 25 of its judgment the Second Chamber of the CJEU reformulated the question.
It explained (at para 24) that if national legislation is justified pursuant to that transitional measure in Annex XII, the question of compatibility with articles 56 and 57 TFEU can no longer arise.
It observed (at para 25) that it was therefore necessary to examine whether legislation such as that at issue in the main proceedings is covered by that transitional measure.
The Chamber considered that an undertaking which was engaged in making labour available, although a supplier of services, carried on activities which were specifically intended to enable workers to gain access to the labour market of the host member state.
In its view, it followed that the national legislation in issue must be considered to be a measure regulating access of Polish nationals to the labour market of the Netherlands within the meaning of Chapter 2, paragraph 2 of Annex XII.
Moreover, a purposive interpretation of that provision led to the same conclusion.
Mr Chamberlain submits that notwithstanding a reference clearly framed in terms of proportionality, the CJEU reformulated the question and failed entirely to address the issue of proportionality.
This, he submits, demonstrates that proportionality has no part to play when deciding whether the subject matter was covered by that transitional measure.
In his submission it is simply necessary to determine that the measure falls within the scope of the derogating provision.
The difficulty with this submission is that, although the question referred to proportionality, the case seems to have had nothing to do with proportionality.
The essential question was whether the express exception in Chapter 2, paragraph 2 of Annex XII to the Act of Accession permitted an existing member state to make the hiring out of manpower on its territory conditional on having a licence during the transitional period.
The CJEU focused on this issue and concluded that the derogation extended so as to permit both measures with regard to employment and measures with regard to the provision of services which made labour available.
It was assumed in the circumstances of that case that if the Dutch measure fell within the scope of the derogation, as properly interpreted, then it was of a character which would satisfy the principle of proportionality.
This explains the shift in the language used in the judgment from explaining that the referring court was unsure whether the permit regime for Polish workers can be justified in the light of [the derogation in Chapter 2, paragraph 2 of Annex XII] (para 23) and the statement (in para 24) that if national legislation is justified pursuant to that transitional derogation then the question of the compatibility of that legislation with articles 56 and 57 TFEU can no longer arise, to asking (in para 25) whether the legislation in question is covered by that transitional derogation.
The word justified indicates that the Chamber in fact considered that a usual process of justification according to the principle of proportionality is applicable, whereas the language used in para 25 indicates that it assumed that in the circumstances of the particular case the justification issue would be resolved if the Dutch regime fell within the scope of the transitional derogation, as properly interpreted.
In this respect the judgment follows the approach of Advocate General Bot in his opinion.
The case was concerned with the compatibility of a work permit regime with the transitional provision in Chapter 2, paragraph 2 of Annex XII.
A work permit regime is inherently capable of having a major effect as a national measure restricting or preventing access to the labour market of the host member state which adopts it, by contrast with the monitoring regime adopted by the UK.
The Advocate General treated the case as concerned simply with the interpretation of Chapter 2, paragraph 2 of Annex XII (see points 3 5, 25 and 57 of his opinion) and in addressing that question emphasised that both in the case of direct access to the employment market of member states of A8 nationals as workers and in the case of the access of such nationals to that market through their employment by an undertaking which hires out manpower there are potentially large movements of workers which, following new accessions, risk disturbing the employment market of the member states and that the transitional provision should be interpreted as covering both kinds of access in order to preserve its effectiveness (points 51 52).
The judgment and the Advocate Generals opinion give no support to the submission that there is no scope for the application of the principle of proportionality in the context of adoption of national measures by a member state in reliance on the transitional derogating provisions in the Annexes to the Act of Accession.
In particular, neither the judgment nor the opinion refers to the absence of any relevant protectable interest.
If it had been the intention of the CJEU or the Advocate General to rule that the principle of proportionality had no part to play in the context of derogation under the transitional provisions in the Annexes to the Act of Accession, they would surely have said so in terms and would have explained that that was why the question referred proceeded on a false basis.
The Secretary of State also relies on a passage in the judgment of the Second Chamber of the CJEU in Valeko v Klagenfurt (Case C 140/05) [2006] ECR I 10025.
That case concerned another provision in the Act of Accession which provided a transitional derogation from EU Treaty provisions and legislation governing excise duties.
Austrian legislation purportedly made under that derogation limited the exemption for the import of cigarettes in personal luggage to 25 cigarettes.
On a preliminary reference, the Independent Finance Tribunal, Klagenfurt Division, asked whether the Austrian legislation was compatible with Treaty provisions governing the free movement of goods and customs duties (now contained in articles 28, 30 and 31 TFEU).
Mr Chamberlain places particular reliance on the following passage in the judgment of the court (at para 74): Since that national legislation is justified in the light of one of the measures referred to in article 24 of the Act of Accession, in this case the transitional measure provided for in section 6(2) of Annex XIII to that Act, the question of the compatibility of that legislation with other provisions of primary law, such as articles 23 EC, 25 EC and 26 EC, can no longer arise.
Here, the court was saying no more than that once national legislation is justified for the purposes of the derogating transitional measures, it is not necessary to justify it in addition in the wider context of the principles governing free movement of goods.
Again, we consider that the courts use of the word justified is significant.
It indicates that the court contemplated that a usual process of justification under EU law, including by reference to the principle of proportionality, would be required in relation to reliance on the transitional provision referred to.
We were also referred by Mr Chamberlain to the decision of the Supreme Court in Mirga v Secretary of State for Work and Pensions [2016] UKSC 1; [2016] 1 WLR 481.
There the claimants failed to establish that domestic regulations violated their rights under article 18 and article 21(1) TFEU, respectively.
Lord Neuberger of Abbotsbury, with whom the other members of the Supreme Court agreed, held that those rights were qualified and, in particular, that those of Ms Mirga under article 21(1) were subject to the limitations and conditions laid down in the Treaties and the measures adopted to give them effect.
Those measures included the 2003 Accession Treaty and the Citizens Directive.
Clearly, the more general Treaty provisions must be read subject to those qualifications or derogations arising under transitional provisions such as those in the Act of Accession.
Lord Neuberger then rejected a further submission founded on a lack of proportionality.
Mr Chamberlain drew our attention in particular to the following passage (at para 69): Where a national of another member state is not a worker, self employed or a student, and has no, or very limited, means of support and no medical insurance , it would severely undermine the whole thrust and purpose of the [Citizens] Directive if proportionality could be invoked to entitle that person to have the right of residence and social assistance in another member state, save perhaps in extreme circumstances.
It would also place a substantial burden on a host member state if it had to carry out a proportionality exercise in every case where the right of residence (or indeed the right against discrimination) was invoked.
As appears from its final words, however, this passage appears in the context of a submission by the claimants that the determination of the authorities, courts and tribunals below had failed to give consideration to the proportionality of refusing each of them social assistance on a case by case basis, taking into account all the particular circumstances of their respective cases.
It has no bearing on the issue of whether national legislation derogating from rights or prospective rights under EU law is required to be proportionate and it provides no support for the Secretary of States case on this issue.
Mr Chamberlain is correct in his submission that, if a national measure is adopted pursuant to a transitional provision in the Act of Accession, no question of its compatibility with any provision of EU primary law can arise.
In the present case, the compatibility of national measures with EU law will have to be assessed, not in the wider context of the principles of free movement of workers, but in the particular context of the transitional provisions.
However, it does not follow that the national measure does not have to satisfy the EU principle of proportionality.
On the contrary, measures adopted pursuant to a temporary derogation from the law and the rights of EU citizens which would otherwise apply do require to be justified in accordance with the principle of proportionality.
Furthermore, there is no basis for the submission on behalf of the Secretary of State that this would confer in substance the same rights of free movement which the Act of Accession provides do not apply during the transitional period; rather, it will simply require that the measure is suitable and necessary to achieve the particular objective identified by the provision authorising the transitional derogation and that the burden imposed is, having regard to that specific objective, not excessive.
We consider, therefore, that there is no good reason to depart from the decision of the House of Lords in Zalewska as regards the applicability of the principle of proportionality in the present context.
As Lord Reed and Lord Toulson pointed out in their judgment in the Lumsdon case, at para 24, proportionality is a general principle of EU law.
There is no basis for saying that it has no application in the context of reliance by a member state on a derogating provision such as that in paragraph 5 of Annex VIII.
We consider that it is clear to the acte clair standard that the measures taken by the United Kingdom in issue in this case are required to satisfy the EU principle of proportionality.
In these circumstances there is no need to address the respondents alternative submission based on article 14 of the ECHR, A1P1 and the Human Rights Act 1998.
Issue (2): If the decision to extend the WRS is open to challenge on grounds of proportionality, did the Upper Tribunal and the Court of Appeal err in their approach and conclusion on this issue?
In April 2009 the Secretary of State had a limited, binary choice to make pursuant to paragraph 5 of Annex VIII.
The UK had instituted the WRS at the time the Accession Agreements came into effect as its sole relevant national measure regulating access to its labour market under paragraph 2 of Annex VIII, by way of derogation from articles 1 to 6 of Regulation 1612/68.
The UK had exercised its discretion under paragraph 2 of Annex VIII to continue to apply that measure until the end of the five year period following the date of the accession and had notified the EU Commission of this under paragraph 3 of that Annex.
It is common ground that in 2009 there were serious disturbances of the UKs labour market or threat thereof, owing to the financial crisis.
Accordingly, pursuant to paragraph 5 of Annex VIII the Secretary of State had to consider whether to continue to apply the WRS for an additional two years, as the sole relevant national measure in place at the time, or not.
The question of the proportionality of the WRS as extended in 2009 has to be assessed in this context, as Judge Ward in the Upper Tribunal and the Court of Appeal correctly understood.
The WRS had originally been introduced in 2004 as a measure to allow the monitoring of the impact of migration into the UK of workers who were A8 nationals and to safeguard the UKs social security system from exploitation by people who wished to come to the UK not to work but to live off benefits: see Zalewska at paras 34 35 per Lord Hope.
It was as a measure having those objectives that it was held to be proportionate and lawful by a bare majority in the House of Lords in the Zalewska case.
However, in 2009 the Secretary of State had to consider under paragraph 5 of Annex VIII whether the WRS could properly be maintained in place for an additional two years as a measure to address and ameliorate serious disturbances of the UKs labour market or the threat thereof.
Put shortly, in 2009 did the WRS have a deterrent effect to moderate the in flow of A8 nationals as workers which might exacerbate the serious disturbance of the labour market then being experienced and, if so, would it be proportionate to continue to maintain it in place for that purpose?
In the context of the decision to be made pursuant to paragraph 5 of Annex VIII, Mr Chamberlain accepts that the protection of the benefits system was not itself any longer a valid objective.
Although the MAC in its report stated that it thought there might be a small impact of savings in spending on benefits if the WRS was retained, it also made it clear that its recommendation that the WRS be retained was not based on this.
It is significant that for her case on proportionality of the extension of the WRS in 2009 for two years, the Secretary of State has simply relied upon what is said in the MAC report of April 2009.
In effect she has adopted the MACs reasoning.
She has not filed evidence to explain any distinct reasoning of her own as to why the extension of the WRS was justified, nor to point to any additional relevant factors other than those taken into account by the MAC in its report.
This poses problems for the Secretary of State.
The MAC was not asked to consider whether an extension of the WRS would be proportionate in terms of EU law and it expressed no view about that.
Instead, the MAC was asked to consider, first, whether there was at the time a serious disturbance to the UK labour market.
It concluded that there was a serious disturbance, as the UK economy was in recession and there had been a rise in unemployment and redundancies.
That conclusion is not put in issue in these proceedings.
The MAC was also asked to consider what the likely labour market impact of relaxing transitional measures [for A8 nationals] would be and whether it would be sensible to do so.
In addressing these questions the MAC summarised its views at the start of its report as follows (pp 6 7): Would retaining the WRS help to address the disturbance? A8 immigration has increased rapidly since the date of accession and studies show that its impact on UK employment and unemployment rates to date has been negligible.
These studies relate to a period of sustained economic growth prior to the current recession.
Examination of the potential labour market impacts and review of the evidence available suggests that removing the WRS would not result in substantial increases in flows of A8 immigrants.
It is, however, plausible to argue that it would probably result in a small positive impact on immigration flows relative to what would happen otherwise.
In the current economic climate, we are concerned that these additional flows would have a small negative impact on the labour market, thus exacerbating the serious labour market disturbance already occurring.
We emphasise that any effects of ending the WRS would be small in relation to the overall negative labour market consequences of the economic downturn.
Nonetheless, we believe that it would be sensible to retain the WRS for two more years due to the possibility of small but adverse labour market impacts from abolishing it.
In the body of the report the MAC emphasised problems with the available evidence base and the difficulties this posed for analysis of what was likely to happen if the WRS was not extended (para 5.3).
However, it considered that there was sufficient information available for it to draw broad conclusions regarding the advisability, or otherwise, of retaining the WRS (para 5.4).
At para 5.16 the MAC said this: In conclusion, it is very unlikely that removing the WRS would result in any substantial change in A8 immigrant inflows.
However, it is possible that some factors, including the 90 registration fee, could have a small effect at the margin.
The effect of maintaining the WRS will be to slightly reduce flows relative to what would otherwise be observed.
We argue in this report that this slight dampening effect on flows is a positive phenomenon in the current economic circumstances, which is why we have not given detailed consideration to the option of relaxing the WRS by keeping the scheme but abolishing the 90 fee.
It is right to observe that the conclusion of the MAC regarding the impact of removal of the WRS on the flow of workers into the UK from the A8 States was tentative and hedged about with qualifications.
But on a fair reading of the report the MAC was clear that such removal would have a small effect in increasing the likely flow of such workers into the UK and that this would exacerbate the prevailing serious disturbance of the labour market.
The MAC was a body with the relevant experience and expertise to make an assessment of this kind.
This was a legitimate conclusion for it to reach.
Although the WRS had originally been introduced for the purpose of monitoring rather than deterring the flow of workers from the A8 States, that does not mean that in the circumstances obtaining in 2009 the scheme was incapable of having the small deterrent effect which the MAC found that it did.
In Chapter 6 of the report, entitled Conclusions, the MAC stated that it recognised that the Government would want to weigh the slight reduction in the inward flow to the UK of A8 nationals as workers if the WRS were retained against the longer term aim of free movement of labour within the EU and the spirit of the Treaty of Accession (para 6.7).
It also said (para 6.8): it is clear that the WRS creates burdens for employers and immigrants.
While we do not wish to trivialise these, they need to be assessed against the benefits of the scheme.
This was not an exercise the MAC attempted to undertake itself.
The Secretary of State has not adduced any evidence as to how she sought to balance the small impact on the labour market in the UK from retention of the WRS against the significant detriments resulting from the continued implementation of the WRS for employers and A8 nationals in the UK as workers.
Whilst we do not consider that this disables the Secretary of State from contending that the retention of the WRS is to be regarded as a proportionate measure, it does mean that it is difficult to say that any significant weight or respect should be given to the Secretary of States (unexplained) assessment that it was right to extend the WRS when conducting a proportionality review.
The leading decision of this court on the principle of proportionality in EU law is now Lumsdon.
The judgment of Lord Reed and Lord Toulson, with which the other members of the court agreed, authoritatively sets out the approach to be adopted.
At para 33 Lord Reed and Lord Toulson summarised the test of proportionality in EU law as follows: Proportionality as a general principle of EU law involves a consideration of two questions: first, whether the measure in question is suitable or appropriate to achieve the objective pursued; and secondly, whether the measure is necessary to achieve that objective, or whether it could be attained by a less onerous method.
There is some debate as to whether there is a third question, sometimes referred to as proportionality stricto sensu: namely, whether the burden imposed by the measure is disproportionate to the benefits secured.
In practice, the court usually omits this question from its formulation of the proportionality principle.
Where the question has been argued, however, the court has often included it in its formulation and addressed it separately, as in R v Minister for Agriculture, Fisheries and Food, Ex p Fedesa (Case C 331/88) [1990] ECR I 4023.
For reasons which appear below, it should be emphasised that Lord Reed and Lord Toulson in this passage have made it clear that the third question, regarding proportionality stricto sensu, does indeed constitute an aspect of the EU law principle of proportionality.
It is identified as such by the Court of Justice whenever it is necessary for it to do so.
Lord Reed and Lord Toulson then went on at paras 34 and following to give guidance regarding the appropriate intensity of review in applying the proportionality standard.
This depends on context.
It ranges from intervening on the basis that a measure is manifestly inappropriate (the usual standard applied in proportionality review of measures taken by EU institutions or of national measures implementing EU measures, at least where these reflect political, economic or social choices and a complex assessment of such factors: paras 40 and 73 respectively) to more demanding standards of review which may be relevant in relation to national measures falling within the scope of EU law which derogate from fundamental freedoms, including free movement of workers (paras 50 72).
Also, as Lord Reed and Lord Toulson point out at para 74, where a member state relies on a reservation or derogation in a Directive in order to introduce a measure which is restrictive of one of the fundamental freedoms guaranteed by the Treaties, the measure is likely to be scrutinised in the same way as other national measures which are restrictive of those freedoms.
As a result of this analysis, at paras 75 82 Lord Reed and Lord Toulson were critical of the reasoning of the English Court of Appeal in R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437; [2012] QB 394, in which the less intrusive manifestly inappropriate standard of review was applied in relation to a national measure restricting the free movement of goods.
As we have held above, Judge Ward correctly concluded that it was necessary to conduct a proportionality review of the 2004 Regulations at the time when they were given extended effect in 2009 for a further two years.
His judgment was delivered before the decision in the Lumsdon case was handed down.
In the section of his judgment in which he carried out this review, Judge Ward first considered at paras 82 to 103 the appropriate intensity of review to be applied, particularly in the light of the decision of the Court of Appeal in the Sinclair Collis case.
Following the guidance given by Lord Neuberger MR in that case regarding factors which affect the intensity of proportionality review, Judge Ward characterised the decision as one involving economic or social choice, as a factor tending to expand the area of discretion available to the Secretary of State under the proportionality test, albeit the choice was limited in its range by the binary nature of the decision to be made and was not one involving a political dimension to any significant degree (since the Secretary of State had in effect sub contracted consideration of the issue of extension of the WRS to a technical body, the MAC, and there was only limited Parliamentary scrutiny of the extension decision under the negative resolution procedure) (para 98); and the judge had regard to the difficulties of assessment of the evidence regarding the effects of maintaining the WRS in place, as a factor again tending to expand the area of discretion for the Secretary of State (para 99).
But Judge Ward also took into account a series of factors which in his view tended to reduce that area of discretion: that the measure was adopted by delegated legislation and subject only to the negative resolution procedure, and in reliance on a report which the MAC itself considered to be rushed (para 100); that the Secretary of State adduced no evidence of having conducted his own proportionality analysis, despite the limitations in the question put to the MAC and the need, identified by the MAC, for its answer to the Secretary of State to be weighed against other factors (para 101); and the fact that the measure in question was a national measure in derogation from the principle of the free movement of workers, in relation to which a court should be astute to ensure that the national government has not unduly sought to favour its national interest at the expense of EU principles (para 102).
His conclusion was that the relevant degree of intensity of review was not confined to the manifestly appropriate test which appears in some cases, but was significantly more intrusive than that, albeit with allowance for some margin of appreciation for the Secretary of State (para 103).
In the next section of his judgment, at paras 104 to 121, Judge Ward considered whether the Extension Regulations promulgated in 2009 in relation to the WRS passed the proportionality test.
He came to the conclusion that the fee and registration requirements in those Regulations were disproportionate and contrary to EU law.
He reached this conclusion on two distinct grounds: i) the fee was set to defray the costs of an administrative scheme aimed at monitoring migrant inflows which does not itself materially help to address the disturbance [of the labour market], so the WRS could not be regarded as an appropriate tool for proportionality purposes for addressing the serious disturbance to the UK labour market in that it relies effectively on payment of a sum of money by A8 nationals, while not otherwise affecting their access to it (para 112).
Therefore, the Secretary of States case on proportionality failed to satisfy the first stage of the proportionality test; and in any event, even if that was wrong, ii) the WRS failed to comply with proportionality stricto sensu, at the third stage of the test.
Regulation 9 of the 2004 Regulations created a criminal offence if an employer employed an A8 national who was not registered as required under the WRS, subject to certain defences.
Accordingly, the judge found that the WRS created a burden on employers, even if little research had been done to examine its scale (para 114).
In addition, the judge referred at para 115 to the impact of the WRS in relation to A8 nationals who came to work in the UK, paid taxes here and participated actively in UK society.
He noted that the MAC report indicated that for language and other reasons there was a significant rate of non registration by A8 nationals working in the UK which could be up to 33%, and further noted that failure by an A8 national to register under the WRS had significant adverse consequences for such a person in terms of exclusion from welfare benefits, no matter how unforeseeable the circumstances which have caused them to be in need of them, and it prevented them from relying on time spent working in the UK whilst unregistered as a contribution to the five years needed to establish a right of permanent residence here under article 16 of the Citizens Directive.
The judge found that these detriments constituted a very real downside for A8 nationals who did not register, noting that this had been characterised as severe by Baroness Hale at para 57 of her speech in Zalewska.
Moreover, for those A8 nationals who did comply with the registration requirement under the WRS, the fee they had to pay was a sum equivalent to around 1% of annual gross pay for someone working at the national minimum wage for a 35 hour week for 48 weeks (as noted in para 5.9 of the MAC report).
The judge found that the small and speculative advantage in respect of reducing the inward flow of A8 nationals as workers from extending the WRS was wholly outweighed by the disadvantage to A8 nationals and employers in the UK and the limitation on Treaty principles of free movement (para 117).
That was the judges view in light of the conclusion he had reached at para 103 regarding the appropriate intensity of review, as referred to above.
But he went on to hold that even if the appropriate standard of review was the manifestly inappropriate test, which allows a wider margin of discretion to the relevant decision maker, he would have come to the same conclusion (para 118).
The Secretary of State challenged this assessment in the Court of Appeal.
The Lumsdon judgment had now been handed down and the Court of Appeal analysed the position with reference to the guidance it contains.
Rupert Jackson LJ gave the leading judgment, with which the other members of the court agreed.
At paras 57 to 63 he accepted a submission for the Secretary of State that Judge Ward at para 98 of his judgment had gone too far in discounting the political aspect of the decision to promulgate the Extension Regulations when he assessed the intensity of review to be applied; but Rupert Jackson LJ still held that whilst the degree of scrutiny should not be intense, it was not a case in which the more generous manifestly disproportionate test applied (para 63).
In the event, the modest difference between Rupert Jackson LJ and Judge Ward regarding the precise intensity of review to be applied was immaterial, because Judge Ward had come to the view that the Extension Regulations were disproportionate even if the manifestly disproportionate test was applied.
Rupert Jackson LJ pointed out that the Upper Tribunal is a specialist tribunal whose decision deserves respect, and that it can only be interfered with if the tribunal has erred in law: see section 13 of the Tribunals, Courts and Enforcement Act 2007.
He set out paras 111 to 115 in the judgment of Judge Ward and said that he could find no fault with his reasoning in those paragraphs.
Therefore, Rupert Jackson LJ dismissed the Secretary of States challenge to the Upper Tribunals assessment that the Extension Regulations were disproportionate.
The Secretary of State appeals to this court on this issue.
Mr Chamberlain submits that Judge Ward erred in relation to both the grounds on which he found that the Extension Regulations were disproportionate and that the Court of Appeal erred in endorsing his assessment.
We consider that there is force in Mr Chamberlains criticism of the first ground relied on by Judge Ward at paras 112 and 113 of his judgment, in relation to the first question that arises on a proportionality review (whether the measure is suitable or appropriate to achieve the objective pursued).
Mr Chamberlain submits that, as found by the MAC in its report, extending the WRS in 2009 would have a small effect in reducing the inward flow of workers as compared to what would happen if it were not extended, and to that (admittedly small) extent it would prevent the then existing serious disturbance of the labour market from getting worse.
Therefore, the extension of the WRS pursuant to paragraph 5 of Annex VIII was a measure appropriate to achieve the relevant objective, namely alleviation of the disturbance in the labour market as compared with the position which would obtain if the WRS were not extended, even if only to a small degree.
Moreover, under paragraph 5 of Annex VIII, by virtue of the binary choice that it imposed on the UK in 2009, that was the only measure available to the Secretary of State to take at that time to alleviate the general disturbance in the national labour market.
It could not be said that there was any less onerous method of achieving that objective.
Mr Thomas de la Mare QC for the Interveners submitted that in order for the Secretary of State to satisfy the first stage of the proportionality test he had to be able to show that the extension of the WRS was materially capable of tackling or mitigating the serious disturbances to the labour market referred to in paragraph 5 of Annex VIII.
He further submitted that the Secretary of State could not show that this was the case.
We did not understand Mr Chamberlain to dispute the first of these submissions, save that he emphasised that the idea of materiality in this context is not a demanding one, and would only exclude measures which were immaterial or wholly de minimis in relation to their effect in tackling or mitigating the serious disturbances to the labour market in question.
We agree.
Mr Chamberlain took issue with the second submission.
He was right to do so.
The MAC report showed that extending the WRS would have a material, though small, effect in mitigating the serious disturbances to the UK labour market by reducing the flow of workers from A8 States which would otherwise occur, which would have the effect of exacerbating those disturbances.
However, we cannot accept Mr Chamberlains wider submission that Judge Ward and the Court of Appeal erred in their assessment regarding the third stage of the proportionality analysis (proportionality stricto sensu).
The position was stark.
The extension of the WRS would have only a small and rather speculative mitigating effect in relation to the serious disturbances in the UKs labour market, as found by the MAC, whereas the burdens and detriments it would impose on employers and A8 nationals working in the UK were substantial and serious.
We should say that we have some reservations about whether Rupert Jackson LJ was right to criticise the level at which Judge Ward pitched the intensity of review which he considered to be appropriate in this case.
Although, obviously, Judge Ward did not have the benefit of the analysis by this court in Lumsdon when he made his assessment, we think that in broad terms the level of intensity he judged to be appropriate in this case is compatible with the guidance given in Lumsdon.
In particular, the extension of the WRS was rightly regarded by Judge Ward as a national measure which was restrictive of the fundamental freedom of movement for A8 nationals as protected by the Treaties, taken in reliance on a reservation or derogation in an EU instrument, in relation to which a relatively demanding intensity of review is appropriate: see Lumsdon at para 74.
However, this is not a case which turns on the precise calibration of the intensity of review to be applied in relation to the decision to extend the WRS in 2009.
Both Judge Ward and the Court of Appeal considered that this measure failed to pass muster even if the markedly more generous manifestly inappropriate test was applied.
In our view, they were plainly entitled to come to that conclusion in the circumstances of this case, particularly in the absence of any attempt by the Secretary of State to explain why the very limited and rather speculative benefits associated with the extension of the WRS in addressing labour market disturbances outweighed the considerable detriments for employers and workers from A8 States associated with the scheme.
We agree with their conclusion.
In arriving at this view, we have noted that in the Zalewska case in the House of Lords it was held, by a majority, that it was not disproportionate for the WRS to be introduced and implemented from 2004 as a monitoring measure in the initial phase of the expansion of the European Union by the accession of the A8 States.
That conclusion does not provide a relevant guide for the outcome of the proportionality analysis in the present case.
By contrast with the proportionality review in Zalewska, the analysis in this case has to be undertaken in the very different legal context set out in paragraph 5 of Annex VIII.
In order to justify the extension of the WRS in 2009, the Secretary of State has to be able to say that this is a measure which is proportionate having regard to the objective of mitigating serious disturbances in the labour market.
Factors which were relevant to the assessment in the Zalewska case, including a desire to protect against additional and inappropriate demands on the UKs social security system (see paras 35 36 per Lord Hope), are no longer relevant in the present context.
In Zalewska, the Governments position was that the WRS was intended to be a monitoring measure and was not expected to be a barrier to those who wanted to work (see para 34 per Lord Hope), whereas in the present context this position is reversed: the justification of the extension of the WRS is said to be that it does provide, to a degree, a barrier to A8 nationals who might otherwise come to work in the UK and the justification does not rely upon the effect of the WRS as a monitoring measure.
The result of the analysis relevant in the present case is that the extension of the WRS in 2009 was a disproportionate measure which was unlawful under EU law.
As we have come to the clear conclusion that the decision to extend the WRS in 2009 was required to conform with the principle of proportionality in EU law and as the CJEU would take the view that the application of that principle to the facts is a matter for the national court, these matters are acte clair and this court is not required to make a preliminary reference to the CJEU.
Issue (3): If the Secretary of State succeeds on Issue 1 or Issue 2, does article 17(1)(a) of the Citizens Directive require a person to show that, throughout the period of continuous residence, she enjoyed a right of residence under that Directive?
The conclusion on the proportionality issue above means that the Secretary of States appeal falls to be dismissed, as happened in the Court of Appeal.
However, Ms Helen Mountfield QC on behalf of the respondent contends that there is another, alternative reason why the Secretary of States appeal should be dismissed, even if the extension of the WRS in 2009 was proportionate and lawful.
On her alternative case the respondent submits that as a result of her residence in the UK from 2008 and working here from 14 September 2009 she had acquired the right of permanent residence by virtue of article 17(1)(a) of the Citizens Directive and regulation 5(2)(c) of the 2006 Regulations by the time she made her claim for state pension credit on 24 October 2012 and was for that reason entitled to claim that benefit.
Although, on the hypothesis that the extension of the WRS was lawful, she did not qualify as a worker with a right of residence under article 7 of the Citizens Directive in the period before she registered for a certificate to work on 20 August 2010, that does not matter.
Article 17(1)(a) confers the right of permanent residence on workers or self employed persons who reach the age of retirement provided that they have been working in that member state for at least the preceding 12 months and have resided there continuously for more than three years; the relevant requirement of residence in this provision is residence in fact, rather than residence pursuant to the provisions set out in the Citizens Directive; and the respondent can show that by the time of her claim for state pension credit she had resided in the UK for more than three years.
The Secretary of State disputes this alternative argument of the respondent.
She submits that the concept of residence in article 17(1)(a) is to be read in the light of article 16(1) of the Citizens Directive, from which it is said to derogate.
Article 16(1) provides that Union citizens who have resided legally in a host member state for a stipulated continuous period will acquire a right of permanent residence there.
Similarly, although article 17(1)(a) uses the term resided without the adverb legally, it should be taken to be referring to the same concept of legal residence.
The case law of the CJEU has established that legal residence in the context of article 16(1) means residence in accordance with article 7 of the Citizens Directive: see, in particular, the judgment in Ziolkowski v Land Berlin (Joined Cases C 424/10 and C 425/10) EU:C:2011:866; [2014] All ER (EC) 314, paras 31 51.
The respondent cannot show that her period of residence in the UK was legal in this sense; in particular, since she did not comply with the requirement of registration under the WRS until 20 August 2010, she cannot show that before that date she was resident here as a worker or self employed person within the scope of article 7(1)(a) of the Citizens Directive.
On this issue, Judge Ward accepted the submission of the respondent, whereas the Court of Appeal accepted the submission of the Secretary of State.
Resolution of the dispute on this issue is not necessary for the determination of the present appeal, because the Secretary of State has lost on the proportionality issue in relation to the extension of the WRS.
However, since the issue regarding the interpretation of article 17(1)(a) may be important in other cases and we are of the view the Court of Appeal has erred on this point, we consider that we should deal with it.
It is unnecessary to decide whether the position is acte clair, because by reason of our conclusion on the proportionality issue there is no need for a reference to the CJEU.
Recital (17) to the Citizens Directive explains the purpose of article 16.
Recital (19) explains the purpose of article 17.
Recital (17) is explicit in stating that the right of permanent residence which article 16 provides for should be laid down for all Union citizens and their family members who have resided in the host member state in compliance with the conditions laid down in this Directive during a continuous period of five years .
Recital (19) is in different terms.
It does not refer to residence in compliance with the conditions laid down in the Citizens Directive.
It refers to, among others, workers who have resided in the host member state who have acquired rights under Regulation 1251/70.
Article 1 of Regulation 1251/70 stipulates that the Regulation shall apply to nationals of a member state who have worked as employed persons in the territory of another member state, and it uses the term worker in this sense.
Article 2(1)(a) of Regulation 1251/70 provides for a right to remain permanently in the territory of a host member state for a worker who satisfies certain conditions, including where she has been employed in that state for at least the last 12 months and has resided there continuously for more than three years.
Article 4 provides that continuity of residence may be attested by any means of proof in use in the country of residence.
Accordingly, Regulation 1251/70 uses the term worker in a simple factual sense and similarly refers to continuous residence in a simple factual sense.
By contrast with the Citizens Directive, the Regulation contains no reference to lawful residence which could be taken to inform the meaning of continuous residence.
The reference in Recital (19) to the Citizens Directive to rights of permanent residence acquired under Regulation 1251/70 is a strong indication that the EU legislature intended the concept of continuous residence as used in article 17(1)(a) of the Directive to reflect the concept of continuous residence as used in article 2(1)(a) of the Regulation.
Accordingly, both in its text, which contrasts with the text of recital (17), and by reason of its reference back to rights acquired under Regulation 1251/70, Recital (19) indicates that the concept of residence as referred to in article 17(1)(a) is factual residence, as the respondent contends.
We consider that recital (3) to the Citizens Directive reinforces this interpretation of article 17(1)(a).
It explains that the EU legislature intended to codify and review the existing EU instruments dealing with workers and others in order to simplify and strengthen the right of free movement and residence of all Union citizens.
Thus, it was part of the purpose of the Directive to enhance existing rights of free movement and residence, such as those which had arisen under Regulation 1251/70, and not to subject them to new restrictive conditions.
The same point emerges from recital (1) to Regulation 635/2006, which repealed Regulation 1251/70, as follows: [The Citizens Directive] consolidated in a single text the legislation on the free movement of citizens of the Union.
Article 17 thereof includes the main elements of [Regulation 1251/70] and amends them by granting beneficiaries of the right to remain a more privileged status, namely that of the right of permanent residence.
There are in addition two textual features of article 17(1)(a) which in our view point strongly in favour of the interpretation arrived at by Judge Ward.
First, the text in article 17(1) essentially tracks that in article 2 of Regulation 1251/70, with appropriate minor modifications.
Secondly, the language used in article 17 (residence; have resided continuously) is in marked contrast to that used in article 16 and again in article 18 (have resided legally and after residing legally).
This has every appearance of being deliberate, and the underlying purpose of article 17 as set out in recital (19) and the correspondence of its text with article 2 of Regulation 1251/70 confirms that impression.
It is also noteworthy that in the CJEUs analysis in the Ziolkowski judgment of the meaning of legal residence in article 16 and article 18, which itself turns on a close textual analysis of the Directive, the court did not suggest that the term residence in article 17 had to be interpreted as having the same meaning.
Furthermore, since article 17(1) is concerned with preserving and protecting rights already acquired under Regulation 1251/70, it seems impossible to read it as referring to legal residence in the sense given by the Ziolkowski judgment.
When the Citizens Directive first came into force in 2004 and when it was first implemented at national level throughout the EU within two years after that as required by article 40, no one could have built up any period of continuous residence pursuant to their rights under article 7 of the Directive, let alone the three years of continuous residence referred to in article 17(1)(a).
Yet individuals could in principle have rights under article 17(1) as soon as implementation of the Directive took effect.
Accordingly, it seems necessary to interpret the concept of continuous residence in article 17(1)(a) as referring to factual residence rather than legal residence as that term is used in article 16.
The meaning of continuous residence in article 17 cannot change over time, so it is no answer to the respondents claim to be entitled to a right of permanent residence in the UK under article 17(1)(a) that she had not herself acquired rights under Regulation 1251/70 in the UK prior to the coming into force of the Citizens Directive and the domestic regulations which implemented it in domestic law.
Mr Chamberlain emphasised the introductory sentence in article 17(1), which states that the provision applies By way of derogation from article 16 and refers to acquisition of a right of permanent residence before completion of a continuous period of five years of residence by the persons then specified in the sub paragraphs.
He submitted that the reference back to article 16 meant that residence in article 17(1) was being used in the same sense as residence in article 16, that is to say legal residence.
However, we do not consider that the opening words of article 17(1) can bear the weight which Mr Chamberlain sought to place on them.
In itself the use of the word residence in the opening part of article 17(1) is neutral on the question of what form of residence is referred to in the sub paragraphs which follow.
It is those sub paragraphs which set out positively the conditions which have to be satisfied for an individual to acquire the right of permanent residence under that provision.
For a right of permanent residence to arise under article 16(1) a five year period of residence which has the quality of being legal in the requisite sense is required.
In order to indicate that article 17(1) sets out a right of permanent residence which departs from, and is more generous than, the right conferred under article 16(1), it was sufficient for the drafter to state that the right under article 17(1) arises where there is a period of residence of less than five years, without needing to refer also to whether the residence in question had to be legal or not.
Further, it is natural for the drafter simply to speak of residence in the opening words of article 17(1) if it is the concept of factual residence rather than legal residence which is employed in the following sub paragraphs in that provision.
In any event, the indications from the text of article 17(1) and its purpose as set out in recital (19), as discussed above, appear to us to have far greater weight than any indication to be derived from the opening words of the provision.
Mr Chamberlain also relied on other judgments of the CJEU, but they were not concerned with the interpretation of article 17(1), nor did they involve any attempt to examine the purpose of that provision.
In particular, Mr Chamberlain referred to the judgments in Alarape v Secretary of State for the Home Department (Case C 529/11) [2013] 1 WLR 2883 and in FV (Italy) v Secretary of State for the Home Department and B v Land Baden Wrttenberg (Joined Cases C 424/16 and C 316/16) [2019] QB 126.
However, these judgments do not support his interpretation of article 17(1).
In the Alarape case the CJEU addressed the question whether periods of residence completed pursuant to article 12 of Regulation 1612/68, which provides a right for the child of a worker to be admitted to educational courses in the host member state, could count towards the five years of legal residence required for acquisition of a right of permanent residence under article 16(1) of the Citizens Directive.
The CJEU applied its ruling in the Ziolkowski judgment regarding the meaning of legal residence in article 16(1) and held that residence pursuant to article 12 of Regulation 1612/68, but which did not comply with article 7 of the Citizens Directive, did not count for the purposes of article 16(1).
In our view, this does not support Mr Chamberlains interpretation of article 17(1) of the Citizens Directive.
If anything, it tends to support Judge Wards interpretation of that provision.
That is because, following the guidance in the judgments in Ziolkowski and Alarape, residence in a host member state pursuant to rights under Regulation 1251/70 and Directive 75/34/EEC likewise would not count as legal residence for the purpose of article 16(1) of the Citizens Directive; but it is rights acquired by residence pursuant to Regulation 1251/70 and Directive 75/34/EEC which are intended to be respected and protected by article 17 of the Citizens Directive: see recital (19) to that Directive.
FV (Italy) concerned the interpretation of article 28(3)(a) of the Citizens Directive, which provides for enhanced protection against expulsion of EU citizens if they have resided in the host member state for the previous ten years: in such a case the host member state may only decide to expel them on imperative grounds of public security.
The CJEU held that article 28 had to be read as a whole, as creating steadily increasing protection for EU citizens according to their integration in the society of the host member state.
Therefore, the protection in article 28(3) was to be taken to be conditional on the EU citizen having a right of permanent residence in the host member state, as referred to in article 28(2): see paras 40 61 in the judgment.
In answer to the first question referred by this court, the CJEU held at para 61 that article 28(3)(a) must be interpreted as meaning that it is a prerequisite of eligibility for the protection against expulsion provided for in that provision that the person concerned must have a right of permanent residence within the meaning of article 16 and article 28(2) of [the Citizens] Directive.
Again, the ruling in Ziolkowski regarding the interpretation of article 16(1) was applied: see para 59.
In FV (Italy) there was no question of acquisition of a right of permanent residence pursuant to article 17 of the Citizens Directive, so the question referred did not mention that provision: see para 39.
The CJEU made no reference to it in its judgment.
Since article 28(2) refers in general terms to Union citizens or their family members who have the right of permanent residence, if an individual had acquired such a right by virtue of article 17 rather than by virtue of article 16 of the Citizens Directive it seems entirely possible that by extension of its reasoning in FV (Italy) the CJEU would hold that such an individual likewise enjoys enhanced protection under article 28(3)(a).
The important point, however, is that the judgment in FV (Italy) does not support Mr Chamberlains submission regarding the proper interpretation of article 17(1).
Mr Chamberlain also relied on observations by Advocate General Trstenjak in her opinion in Secretary of State for Work and Pensions v Lassal (Case C 162/09) [2011] 1 CMLR 31, at points 68 69, to the effect that article 16(1) and article 17(1) of the Citizens Directive are closely connected and that therefore it must in principle be assumed that the two factual elements whose wording is almost identical a continuous period of five years of residence in the host member state in article 16(1) of the Directive and resided continuously in the host member state for more than two years in article 17(1)(b) of the Directive are to be interpreted in the same way.
However, this part of the Advocate Generals reasoning was not endorsed by the CJEU in its judgment.
Moreover, as Judge Ward pointed out in his judgment at para 58, the Advocate Generals recitation of the text in the two provisions contains an unfortunate and highly significant misquotation, in that she omits the critical phrase, have resided legally, in article 16(1).
Also, the Advocate Generals view is not supported by any positive reasoning, other than to point out the linkage between article 16 and article 17(1) which appears from the opening sentence of article 17(1) as to which, see above.
Accordingly, we do not consider, with respect, that Advocate General Trstenjaks opinion on this point represents a sound guide to the interpretation of article 17(1).
For the reasons set out above, in our judgment the Court of Appeal erred in its interpretation of article 17(1).
Judge Ward arrived at a correct interpretation of that provision, in holding that residence in article 17(1) refers to factual residence rather than legal residence as required under article 16(1), as interpreted by the CJEU in the Ziolkowski judgment.
Issue (4): If article 17 of the Citizens Directive requires legal residence in the relevant sense, is actual residence sufficient for the purposes of the 2006 Regulations?
As we would hold that the term residence in article 17(1)(a) has the meaning set out above, no question arises regarding a possible difference of meaning between article 17(1)(a) and regulation 5(2)(c) of the 2006 Regulations which implements that article in domestic law by using the phrase resided in the United Kingdom continuously for more than three years prior to the termination [of employment or self employment].
Therefore the fourth issue on the appeal does not arise.
Conclusion
For the reasons we have set out, we would dismiss the Secretary of States appeal.
| By a Treaty signed at Athens on 16 April 2003 (the Athens Treaty), ten Accession States became member states of the EU.
The Act of Accession, annexed to the Athens Treaty, permitted the existing member states to apply national measures regulating access to their labour markets by nationals of the eight most populous Accession States (the A8 States) which included Latvia.
It required the existing member states to apply measures, for an initial period of two years from the date of accession, regulating access to their labour markets by Latvian nationals.
The existing member states were permitted to continue to apply such measures until the end of the five year period following the date of the accession.
An existing member state maintaining such measures at the end of the five year period was permitted, in case of serious disturbances of its labour market or threat thereof and after notifying the Commission to continue to apply these measures until the end of the seven year period following the date of accession.
The Act of Accession was given effect in the domestic law of the UK by the European Union (Accessions) Act 2003 and the Accession (Immigration and Worker Registration) Regulations 2004 (SI 2004/1219) (the 2004 Regulations).
The 2004 Regulations established the Worker Registration Scheme (WRS) which obliged any national of an A8 State to register before starting employment and before taking up any new employment.
Each registration incurred a fee of 90 and the obligation to register continued until the worker had worked for 12 months.
Failure to register work in accordance with the WRS would mean that the individual would not derive from that work a right to reside in the UK.
In 2009 HM Government asked the Migration Advisory Committee (MAC) to advise it in relation to the continuation of the WRS.
In the light of the MACs advice, the Government decided to extend the measures applicable to nationals of the A8 States for a further two years.
The central issue in this case is whether Ms Tamara Gubeladze (the respondent), a Latvian national living in the UK, is entitled to receive state pension credit.
The respondent came to the UK in 2008 and worked for various employers between September 2009 and November 2012.
In the periods when she was not working she was a jobseeker.
She was issued with a registration certificate under the WRS on 20 August 2010.
Her employment before that date was not covered by the certificate.
On 24 October 2012, the respondent made a claim for state pension credit.
The basis of her claim was that she had a right of residence in the UK under regulation 5(2) of Immigration (European Economic Area) Regulations 2006 (SI 2006/1003), (the 2006 Regulations), which implement article 17(1)(a) of Directive 2004/38/EC (the Citizens Directive), as a person who had retired, having pursued activities as a worker for at least a year in the UK, and having resided continuously in the UK for three years.
The Secretary of State for Work and Pensions (the Secretary of State) rejected her claim on the ground that the requirement of three years continuous residence required three years continuous
residence which meant a right of residence under the Citizens Directive.
Since the respondents asserted right of residence during that time was as a worker, but she had not been registered under the WRS for part of that period, the Secretary of State considered that she had not resided in the UK pursuant to a right of residence conferred by the Citizens Directive and therefore did not meet the three year residence requirement in regulation 5(2) of the 2006 Regulations.
The respondents appeal to the First tier Tribunal was dismissed on jurisdictional grounds.
On appeal to the Upper Tribunal, it held that the First tier Tribunal had had jurisdiction to hear the appeal and it re made the substantive decision.
It allowed the respondents appeal on two distinct grounds.
First, it held that article 17 of the Citizens Directive, and therefore regulation 5(2)(c) of the 2006 Regulations, did not require that the three years continuous residence be in exercise of rights under the Citizens Directive.
Actual residence was sufficient.
Secondly, it held that the decision to extend the WRS in 2009 was disproportionate and therefore unlawful.
On that footing, the respondents residence in the UK at the relevant time had not involved any breach of any applicable valid domestic law and so was to be regarded as legal residence for the purposes of the 2006 Regulations.
The Secretary of State appealed to the Court of Appeal which dismissed the appeal.
In the Court of Appeal, the Secretary of State succeeded in her appeal in relation to the first point, with the Court holding that the word reside in article 17(1)(a) of the Citizens Directive meant legally reside in the requisite sense; but the Court held that the extension of the WRS was disproportionate and therefore incompatible with EU law.
The Secretary of State appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
Lord Lloyd Jones and Lord Sales give the sole judgment with which the other Justices agree.
(1) Is the decision to extend the WRS open to challenge on grounds of proportionality? The Secretary of State submits that the extension of the WRS did not interfere with or derogate from any pre existing protected interest, so it was not subject to any requirement of proportionality under EU law [27].
The Court considers that the question at the heart of this issue is whether the Act of Accession created relevant protectable interests by conferring rights of EU citizenship on the new EU citizens from the A8 States subject to initial, tapering exceptions imposed by the existing member states, or whether it should be regarded as providing for only such rights as may be conferred by the existing member states during the transitional period.
The House of Lords in Zalewska v Department for Social Development [2008] UKHL 67 took the former view [32].
The Court agrees.
It considers that there was no intention under the Act of Accession to confer an unfettered right to derogate from general principles of freedom of movement.
On the contrary, derogation from those principles must be subject to the principle of proportionality in EU law [35].
This conclusion is supported by the scheme of the relevant instruments [33] and the purpose of the measures [35]. (2) If the decision to extend the WRS is open to challenge on grounds of proportionality, did the Upper Tribunal and the Court of Appeal err in their approach and conclusion on this issue? It is significant that the Secretary of State has simply relied upon what is said in the MAC report of April 2009.
She has not filed evidence to explain any distinct reasoning as to why the extension of the WRS was justified, nor to point to any additional relevant factors other than those taken into account by the MAC in its report [49].
This poses problems for the Secretary of State because the MAC was not asked to consider whether an extension of the WRS would be proportionate in terms of EU law and it expressed no view about that [50].
The leading decision of this Court on the principle of proportionality in EU law is now R (Lumsdon) v Legal Services Board [2015] UKSC 41 [57].
This explains that the principle applies according to a three stage test.
As regards the first stage of this test, the Court considers that the continuation of the WRS is suitable or appropriate to achieve the objective pursued [66].
The MAC report showed that extending the WRS would have a material, though small, effect in mitigating the serious disturbances to the UK labour market by reducing the flow of workers from A8 States which would otherwise occur [68].
No issue arises in relation to the second stage.
However, the Court finds that the third stage of the
proportionality analysis (sometimes called proportionality stricto sensu) is not satisfied.
According to the assessment in 2009 the extension of the WRS would have only a small and rather speculative mitigating effect in relation to the serious disturbances in the UKs labour market, as found by the MAC, whereas the burdens and detriments it would impose on employers and A8 nationals working in the UK were substantial and serious [70].
The result is that the extension of the WRS in 2009 was a disproportionate measure which was unlawful under EU law [74].
On the basis of the Courts rulings on Issues 1 and 2, the appeal falls to be dismissed. (3) If the Secretary of State succeeds on Issue 1 or Issue 2, does article 17(1)(a) of the Citizens Directive require a person to show that, throughout the period of continuous residence, she enjoyed a right of residence under that Directive? Although resolution of this issue is not necessary for the determination of the present appeal, the Court considers that it should deal with it since the interpretation of article 17(1)(a) may be important in other cases [79].
The Court concludes that, on a textual interpretation of the relevant provisions, the concept of residence as referred to in article 17(1)(a) is factual residence [81].
This interpretation is reinforced by the purpose of the Citizens Directive, which is to enhance existing rights of free movement and residence and not to subject them to new restrictive conditions [82].
For these reasons, the Upper Tribunal arrived at a correct interpretation of article 17(1) in holding that residence in article 17(1) refers to factual residence rather than legal residence in the specific sense which that term bears in the context of the Citizens Directive [92]. (4) If article 17 of the Citizens Directive requires legal residence in the relevant sense, is actual residence sufficient for the purposes of the 2006 Regulations? As the Court holds that the term residence in article 17(1)(a) has the meaning set out above, this issue does not arise [93].
For the reasons set out in the judgment, the Court would dismiss the Secretary of States appeal [94].
|
The appellant, Mr Campbell, was employed by the company (the first respondent) as an apprentice joiner.
The second respondent, Mr Gordon, was the sole director of the company and responsible for its day to day operation.
On 28 June 2006 the appellant suffered an injury whilst working with an electric circular saw.
Although the company had employers liability insurance policy, the policy (surprisingly for a business of this kind) excluded claims arising from the use of woodworking machinery powered by electricity.
It therefore excluded any claim arising out of Mr Campbells accident.
The companys failure to have in place appropriate insurance was a breach of its obligations under section 1(1) of the Employers Liability (Compulsory Insurance) Act 1969.
The company itself went into liquidation in 2009.
Mr Campbell now seeks to hold Mr Gordon, as director, liable in damages for the companys failure to provide adequate insurance cover.
Mr Gordon himself is recently bankrupt.
We were told by Mr Smith QC, appearing for Mr Campbell, that there are discussions with him with a view to obtaining an assignation of any rights he may have against the broker who arranged the inadequate insurance.
However, the sole issue for us is whether civil liability attaches to Mr Gordon for that failure.
The claim was upheld by the Lord Ordinary, but dismissed by the Inner House by a majority (Lord Brodie and Lord Malcolm, Lord Drummond Young dissenting).
In this respect they arrived at the same conclusion, albeit not by identical reasoning, as the English Court of Appeal in Richardson v Pitt Stanley [1995] QB 123 (Russell and Stuart Smith LJJ, Sir John Megaw dissenting).
The foundation of the claim has to be found in the 1969 Act.
The primary duty to insure is placed on the employer by section 1, which provides: 1.
Insurance against liability for employees.
Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business Section 4 provides for regulations governing the issue of certificates of insurance and their display for the information of employees and production on demand to inspectors duly authorised by the Secretary of State.
These also are obligations placed on the employer.
Section 5 which is at the heart of the appeal provides, as amended: 5.
Penalty for failure to insure.
An employer who on any day is not insured in accordance with this Act when required to be so shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale; and where an offence under this section committed by a corporation has been committed with the consent or connivance of, or facilitated by any neglect on the part of, any director, manager, secretary or other officer of the corporation, he, as well as the corporation shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. (emphasis added)
On its face that is an unpromising basis for Mr Campbells present claim.
This provision does not in terms impose any duty to insure on a director or other officer as such, let alone any civil liability for failure to do so.
The duty rests on the corporate employer.
The veil of incorporation is pierced for a limited purpose.
It arises only where an offence is committed by the company, and then in defined circumstances imposes equivalent criminal liability on the director or other officer on the basis, not that he is directly responsible, but that he is deemed to be guilty of the offence committed by the company.
For the appellant Mr Smith relies on well established principles governing civil liability in respect of statutory obligations.
He accepts that as a general rule, where a statute imposes an obligation and imposes a criminal penalty for failure to comply, there is no civil liability; but that is subject to exceptions, including where upon the true construction of the Act it is apparent that the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of the Factories Acts and similar legislation (per Lord Diplock, Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, at 185)
There are many examples of this exception in practice, dating back more than 100 years, for example (in England) to Groves v Lord Wimborne [1898] 2 QB 402, relating to the Factory and Workshop Act 1878, and in Scotland in Black v Fife Coal Co Ltd, 1912 SC (HL) 33; [1912] AC 149, concerning the Coal Mines Regulation Act 1887.
In the latter case, Lord Kinnear said (pp 45 and 165 166): We are to consider the scope and purpose of the statute, and in particular for whose benefit it is intended.
Now the object of the present statute is plain.
It was intended to compel mine owners to make due provision for the safety of the men working in their mines, and the persons for whose benefit all these rules are to be enforced are the persons exposed to danger.
But when a duty of this kind is imposed for the benefit of particular persons, there arises at common law a correlative right in those persons who may be injured by its contravention.
Therefore I think it is quite impossible to hold that the penalty clause detracts in any way from the prima facie right of the persons for whose benefit the statutory enactment has been passed to enforce the civil liability.
The same principle was applied to a failure to insure, in the context of motor insurance, in Monk v Warbey [1935] 1KB 75.
Section 35 of the Road Traffic Act 1930 made it illegal to use or to cause or permit any other person to use a motor vehicle on a road unless there was in force in relation to the user of the vehicle a policy of insurance against third party risks that complied with the requirements of the Act.
It was held by the Court of Appeal that, where the owner of a car permitted its use by a person uninsured against third party risks and injury to a third party was caused by the negligent driving of that person, the owner was liable in damages to that third party for breach of his statutory duty to insure.
That was followed in Scotland in Houston v Buchanan, 1940 SC (HL) 17, [1940] 2 All ER 17.
Mr Smith submits that Lord Diplocks words are directly applicable to this case.
The duty in question was imposed for the protection of employees such as Mr Campbell, and the context is identical to that of the Factories Acts.
In its application to the duty to insure, he submits, the case is indistinguishable from Monk v Warbey.
As a cross check of the appropriateness of such liability, he relies on the tri partite test set out by Lord Bridge in Caparo Industries plc v Dickman [1990] AC 605, 617 618 for a duty of care in negligence, including foreseeability, proximity and fairness.
He relies also on the statement of Lord Bingham in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32, 67, referring to the strong policy argument in favour of compensating those who have suffered grave harm, at the expense of their employers who owed them a duty to protect them against that very harm and failed to do so.
Mr Smith submits that the contrary conclusion arrived at by the English Court of Appeal in Richardson was based on a flawed analysis, not least the view of Stuart Smith LJ (p 131E H) that the duty to insure was for the benefit of the employer rather than the employee.
He relies on the detailed criticism of that decision by Lord Drummond Young in the Inner House.
In the court below, and in argument before this court, there was some discussion whether Lord Diplocks statement of the exception represented the modern law.
Lord Brodie thought that it needed to be seen in the light of more recent judicial statements of high authority, which he read as placing less emphasis on definitive presumptions, and more on the need to ascertain the intention of Parliament in enacting the particular provision (paras 10, 20).
He referred in particular to statements by Lord Rodger in Morrison Sports Ltd v Scottish Power UK Plc 2011 SC (UKSC) 1 (at paras 28 29, 41), citing in turn the judgment of Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 731 732; and by Lord Jauncey in R v Deputy Governor of Parkhurst, Ex p Hague [1992] 1 AC 58, 170H 171A.
This view finds some academic support in Professor Stantons work on Statutory Torts (2003), paras 2 019 2 020.
For my part I find it unnecessary in this appeal to engage in discussion of the extent to which Lord Diplocks formulation has been modified by later authorities.
I would only observe that the statements of Lord Browne Wilkinson and Lord Jauncey referred to by Lord Brodie were made in the context of cases concerning liability of public authorities, which may raise rather different issues.
I am content to assume (without deciding) that Lord Diplocks words remain a reliable guide at least in relation to statutory duties imposed for the benefit of employees.
I would also proceed on the basis (agreeing in this respect with Sir John Megaw in the Richardson case: p 135C D) that the duty of the employer under section 1 of the 1969 Act was imposed for the benefit of the employees, in the sense indicated by Lord Diplock.
This however is not enough for the appellant.
The essential starting point for Lord Diplocks formulation is an obligation created by statute, binding in law on the person sought to be made liable.
There is no suggestion in that or any other authority that a person can be made indirectly liable for breach of an obligation imposed by statute on someone else.
It is no different where the obligation is imposed on a company.
There is no basis in the case law for looking through the corporate veil to the directors or other individuals through whom the company acts.
That can only be done if expressly or impliedly justified by the statute.
Comparison with Monk v Warbey is instructive.
The statute in that case (Road Traffic Act 1930, section 35) provided by subsection (1) that it was not lawful for any person to use, or to cause or permit any other person to use a motor vehicle on the road unless insured; and by subsection (2) imposed a criminal penalty on any person acting in contravention of the section.
It was held that civil liability was not excluded by the separate provision creating a criminal offence.
Far from supporting Mr Smiths arguments, this analogy points in the opposite direction.
In that case Parliament dealt specifically with both the user, and any person causing or permitting the use, and determined to impose direct responsibility on each.
The 1969 Act imposes direct responsibility only on the employer.
The equivalent issue would be whether that is to be treated as giving rise to civil liability on the employer for failure to insure, notwithstanding the criminal liability imposed on him by section 5.
That issue (on which there were differences in the courts below) does not arise in this appeal.
However, there is no analogy with the position of a director or officer.
Parliament has recognised that a director or officer may bear some responsibility for the failure to insure, but has dealt with it, not by imposing direct responsibility equivalent to that of the company, but by a specific and closely defined criminal penalty, itself linked to the criminal liability of the company.
I would accept that the adoption of a particular statutory model is not necessarily critical.
Lord Brodie (para 12) referred to the decision of the Court of Appeal in Rickless v United Artists Corpn [1988] QB 40, in which it was held that a provision which on its face did no more than classify a specified act as a criminal offence did indeed create civil liability.
The relevant provision was section 2 of the Dramatic and Musical Performers Protection Act 1958, by which if a person knowingly makes a cinematograph film from a dramatic or musical work without the consent in writing of the performers he shall be guilty of an offence Giving the leading judgment Sir Nicholas Browne Wilkinson V C accepted that the form of the provision pointed against civil liability: although this point is far from decisive, it is easier to spell out a civil right if Parliament has expressly stated the act is generally unlawful rather than merely classified it as a criminal offence. (p 51G H) However, he held that other factors showed an intention to create civil liability, including the clear purpose of providing protection for performers, and the need to comply with this countrys obligations under the relevant international conventions (p 53A).
This accordingly was a somewhat special case.
But there was no suggestion that civil liability could be imposed other than on those made directly responsible by statute for compliance with the primary obligation.
Lord Drummond Young gave a number of reasons for extending civil liability to the directors.
A corporate employer could only act through its officers who accordingly had a duty to ensure so far as possible that the company fulfils its statutory duties.
In that way he thought it is apparent that section 1, by itself, has the effect of imposing a duty on the directors (para 43).
He relied also on the common law rules governing liability of directors for acts of the company, citing for example the relevant principle as stated by Atkin LJ in Performing Right Society Ltd v Ciryl Theatrical Syndicate [1924] 1 KB 1, pp 14 15: Prima facie a managing director is not liable for tortious acts done by servants of the company unless he himself is privy to the acts, that is to say unless he ordered or procured the acts to be done.
I conceive that express direction is not necessary.
If the directors themselves directed or procured the commission of the [wrongful] act they would be liable in whatever sense they did so, whether expressly or impliedly. (Emphasis added) Consent, connivance and facilitation through neglect were the criteria for the imposition of criminal liability under section 5 of the Act; on general common law principles they are also sufficient to render the director civilly liable for the companys breach of section 1 (paras 44 45).
He saw nothing unfair in imposing such liability, given that the director may have ignored or deliberately disregarded the existence of the statutory duty and so incurred personal liability, and that, if he has relied on professional advice from an insurance broker, he will have a right of recourse against the broker (para 46).
He criticised the majority for an approach which frustrated the policy of the Act through an over literal construction and an excessively conceptual approach.
In his opinion, the objectives of the Act demanded that a director who has consented to or who has been complicit in a breach of the duty to obtain insurance, or who has facilitated such a breach through neglect, should incur civil liability.
This substantive point should prevail over structural niceties. (para 47)
With respect to him, I do not find these observations helpful in resolving the issue before us, which depends not on general questions of fairness, but on the interpretation of a particular statutory scheme in its context.
The fact that the company can only act through its officers tells one nothing about their potential liability to third parties for its acts or failures.
The judgment of Atkin LJ to which he refers affirms the rule (supported by reference to a statement of Lord Buckmaster in Rainham Chemical Works v Belvedere Guano Co [1921] 2 AC 465, 476) that directors are not in general liable for the tortious actions of the company.
The scope of a potential common law claim against a director for ordering or procuring such a tortious act is not in issue in this case, which turns entirely on alleged liability under the statute.
This requires the court to pay due respect to the language and structure used by Parliament, rather than to preconceptions of what its objectives could or should have been.
My view of the provisions is reinforced by a factor which was not addressed in the courts below or the written cases, but was drawn to our attention by Mr Dunlop QC for the respondent in the course of oral submissions.
This concerned the statutory background of the wording of section 5.
It seems that provisions in similar form, imposing criminal liability on directors and other officers for offences by their companies, have a long history.
We were told that a Westlaw search (looking for statutory provisions using all three of the words consent, connivance and neglect) had disclosed more than 900 examples of this type of formula, all apparently in the context of corporate offences (although, as Mr Smith pointed out, examples of precisely the same wording are much rarer).
This general picture has been confirmed by a similar exercise carried out by legal assistants for the court.
We have received nothing from the appellant since the hearing to suggest otherwise.
A typical example is found in the Companies Act 2006 itself.
Section 1255 (repeating a provision first introduced in this form in 1981) provides: (1) Where an offence under this Part committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, an officer of the body, or a person purporting to act in any such capacity, he as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.
A much earlier example to which Mr Dunlop referred us (dating from before the 1969 Act) comes from the Interpretation Act (Northern Ireland) 1954.
This is of general application to all corporate offences created by subsequent statutes in Northern Ireland.
Section 20(2) provides: Where an offence under any enactment passed after the commencement of this Act has been committed by a body corporate the liability of whose members is limited, then notwithstanding and without prejudice to the liability of that body, any person who at the time of such commission was a director, general manager, secretary or other similar officer of that body or was purporting to act in any such capacity shall, subject to sub section (3), be liable to be prosecuted as if he had personally committed that offence and shall, if on such prosecution it is proved to the satisfaction of the court that he consented to, or connived at, or did not exercise all such reasonable diligence as he ought in the circumstances to have exercised to prevent the offence, having regard to the nature of his functions in that capacity and to all the circumstances, be liable to the like conviction and punishment as if he had personally been guilty of that offence. (emphasis added)
There are differences of wording between the three statutes.
The 1954 statute talks not of neglect, as in the 1969 Act and the Companies Act, but of failure to exercise reasonable diligence.
On the other hand the reference to liability as if he had personally been guilty seems to anticipate the language of deemed criminal liability in the 1969 Act, but is not replicated in the Companies Act.
However, the general pattern is the same in these and in the other examples to which we have been referred.
In spite of the apparent frequency of the use of this formula, the researches of counsel and our own legal assistants have not disclosed any reported authority in which its significance or meaning has been considered, nor any previous suggestion that it might be treated as giving rise to civil liability.
I would be reluctant to attach too much weight to a point which has emerged so late in the day.
Without more substantial research it is impossible to know to what extent this formula has been used in comparable contexts involving protection of employees.
However, to my mind it tends to confirm the view that the language of section 5 was deliberately chosen and is intended to mean what it says.
The formula is specifically directed at criminal liability, and as far as we know has always been used in that context.
Where Parliament has used such a well established formula, it is particularly difficult to infer an intention to impose by implication a more general liability of which there is no hint in its actual language.
For all these reasons, I would agree with the conclusion reached by the majority of the Inner House and dismiss the appeal.
LORD TOULSON: (dissenting) (with whom Lady Hale agrees)
The issue before the court is a) whether Mr Gordon breached a statutory provision intended for the protection of a particular class including Mr Campbell and b) if so, whether Mr Gordon should be held liable for Mr Campbells resulting loss.
Lord Carnwath has set out sections 1 and 5 of the 1969 Act.
The object of the Act is that a companys employees should have the protection, in the event of suffering an illness or injury arising out of their employment for which the company is liable, of the liability being covered by insurance up to a specified sum.
Failure by the company to arrange and maintain such insurance carries a penal sanction.
But the pool of those bearing legal responsibility for seeing that such protection is in place is not confined to the company itself.
It extends to the companys relevant officer or officers.
In order to bring such persons within the pool, the drafter has used the device of a deeming provision.
The form of the drafting device is that a director, manager, secretary or other officer of the company who consents to, connives at or by neglect facilitates, a failure to maintain the requisite insurance is deemed to be guilty of the same offence as the company.
The effect in substance is to place on such an officer a legal obligation not to cause or permit the company to be without the required insurance by consent, connivance or neglect, on pain of a criminal penalty.
To say that the imposition of criminal responsibility for a specified act (or omission) carries with it a legal obligation not to act (or omit to act) in such a way is to state the obvious.
The two are opposite sides of the same coin.
The language of deeming involves artificiality.
In addressing sub issue a), the court has a choice whether to adopt a formalistic approach or to look through the artificiality and consider the function, substance and effect of the provision in real terms.
The answer to the question What does it really do? is that the provision is a concise means of extending statutory responsibility for seeing that the company is properly insured to the companys appropriate officer(s), backed by a penal sanction.
As an alternative, the drafter might have used words such as It shall be illegal for any director, manager, secretary or other officer of a corporation which is an employer carrying on business in the United Kingdom to consent to, connive at or by neglect facilitate a failure by the corporation to insure (etc), and any such person shall be liable on summary conviction (etc).
This would have been longer but the practical result would have been the same: the director or officer would have been liable to a criminal penalty for his wrongful act or omission, imposed for the protection of employees.
Sir John Megaw made a similar point.
He said: In his dissenting judgment in Richardson v Pitt Stanley [1995] QB 123, 135, With great respect, I find it difficult to believe that the parliamentary draftsman would have intended to make provision that there should be no civil right or remedy by using the formula of section 1 of the Employers Liability (Compulsory Insurance) Act 1969, shall insure, followed by section 5 shall be guilty of an offence; as contrasted with the formula of declaring an act or omission to be unlawful and then separately providing a criminal penalty for the breach.
I agree.
The approach which commends itself to the majority concentrates on the form of the language.
It is argued that the structure of the Act is such that the only duty created by it is explicitly placed on the company by section 1(1), and that the mechanism by which a director or other officer of the company is deemed to be guilty of a breach of that duty is consistent with and supports that proposition.
I have set out the alternative approach, which looks at the function and substantive effect of the deeming provision in real terms.
The choice between a formal approach and a functional approach in the interpretation and application of statutory language is an aspect of the choice between formalism and realism which has been a fruitful subject since as long ago as the publication of Holmess The Common Law in 1881.
In deciding which approach is preferable, the context matters.
The present context is legislation for the protection of a vulnerable group, a companys employees.
In that context I regard the functional approach as more appropriate.
I cannot improve on Lord Drummond Youngs pithy statement, in his dissenting opinion in this case, that in the context of legislation aimed at employee protection the formalist approach is excessively conceptual; it focuses on differences of structure that do not reflect the basic objectives of the statute (para 47).
If, however, a formalist approach is preferred, there should be no half measure about it.
On the formalist approach, the director in the eyes of the law is himself guilty of committing an offence under sections 1 and 5.
The language of the Act does not impose an accessory liability on the director.
It would be unnecessary for that purpose.
Rather, it explicitly deems him to be himself guilty of the offence of failing to insure and maintain insurance, etc.
As a matter of insurance law, it is of course the insurer who insures and someone else (usually the insured) who procures the insurance, but the meaning of shall insure, and maintain insurance in section 1 is clear enough.
The effect of the deeming provision is that in the eye of the law the director is guilty as a principal of failing to insure and maintain the necessary insurance.
Logic and justice would not permit the director to say that his criminal liability is in substance and reality a form of accessory liability, if one is living in formality land, for, as I have stressed, on the formalists approach the director is in law guilty as a principal of failing to insure.
On either approach Mr Gordon breached a statutory provision intended for the protection of a particular class, employees, of which Mr Campbell was a member, but I prefer the former approach for the reasons which I have given.
As to sub issue b), legislation for the protection of employees began in the Victorian age.
From the outset the courts have consistently held that breaches of provisions in that class of legislation are actionable at the suit of an employee who suffers from the breach.
This was established in Groves v Lord Wimborne [1898] 2 QB 402, a case under the Factory and Workshop Act 1878.
Rigby LJ said at pp 414 415: The provisions of section 5 are intended for the protection from injury of a particular class of persons, who come within the mischief of the Act.
The plaintiff is one of those persons, the possibility of injury to whom through neglect to fence machinery the section contemplates.
That being so, the only question seems to be whether the provisions of the Act with regard to the imposition of fines for neglect of the duty created by the section reasonably lead to the conclusion that the Legislature intended that such fines should be the only remedy for breach of that duty.
I think that, when those provisions are examined, it is impossible to arrive at that conclusion.
The maximum fine that can be imposed in any case, however serious the injury may be, is one of 100.
It seems monstrous to suppose that it was intended that in the case of death or severe mutilation arising through a breach of the statutory duty, the compensation to the workman or his family should never exceed 100.
Again, section 82 does not provide that the fine imposed under it shall necessarily go to the workman if he be injured, or to his family if he be killed; but only that the Secretary of State may, if he thinks fit, order that the fine or part of it shall do so.
Looking at the purview of the whole Act, I cannot think it reasonable to suppose that the Legislature intended the penalty imposed by section 82 to be the only remedy for injury occasioned by breach of the absolute statutory duty created by the Act.
The reference to the purview of the whole Act came from the speech of Lord Cairns LC in Atkinson v Newcastle and Gateshead Waterworks Co (1877) 2 Ex D 441, 448.
The maximum fine for an offence under the 1969 Act was originally 200.
An offence is committed on any day that a company is not insured in accordance with the Act.
Groves v Lord Wimborne was approved by the House of Lords in Butler (or Black) v Fife Coal Co Ltd [1912] AC 149.
Lord Kinnear said at 165 166: We are to consider the scope and purpose of the statute and in particular for whose benefit it is intended.
Now the object of the present statute is plain.
It was intended to compel mine owners to make due provision for the safety of the men working in their mines, and the persons for whose benefit all these rules are to be enforced are the persons exposed to danger.
But when a duty of this kind is imposed for the benefit of particular persons, there arises at common law a correlative right in those persons who may be injured by its contravention.
Therefore I think it is quite impossible to hold that the penalty clause detracts in any way from the prima facie right of the persons for whose benefit the statutory enactment has been passed to enforce the civil liability.
This passage was cited as a statement of general principle by Lord Simonds and Lord Normand in Cutler v Wandsworth Stadium Ltd [1949] AC 398, 407 408, 413 414, and by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, 185.
As Lord Kinnears statement indicates, the cause of action is at common law (except in cases where a statute expressly creates a civil right of action).
The cause of action which was held to exist in Groves v Lord Wimborne was created by the court.
It was founded on a statute but it was the court that determined that breach of the provisions of the Act should be actionable at the suit of the injured party for whose protection the provisions were intended.
The conventional jurisprudence is that the courts function is to ascertain as a matter of interpretation whether Parliament intended that there should be civil liability, but that understates the role of the courts in cases where the legislation is silent on the point.
In such cases the judges face hieroglyphs without a Rosetta Stone, to borrow a metaphor of Judge Richard Posner writing extra judicially (Divergent Paths The Academy and the Judiciary, Harvard University Press, 2016, p 172).
Judge Posner candidly and correctly states that the judges role in such cases is the active role of filling gaps left by the legislature.
The courts use a combination of methods for this purpose.
They examine the whole purview of the legislation and they employ default rules, with which parliamentary drafters may be taken to be familiar.
Lord Du Parcq spelt this out in Cutler v Wandsworth Stadium Ltd [1949] AC 410 411.
After a plea that Parliament should reveal its intention in plain words, he said: Parliament must be taken to have known that if it preferred to avoid the crudity of a blunt statement and to leave its intention in that regard to be inferred by the courts, the general rule would prevail unless the scope and language of the Act established the exception.
It cannot be supposed that the draftsman is blind to the principles which the courts have laid down for their own guidance when it becomes necessary for them to fill in such gaps as Parliament may choose to leave in its enactments.
The default rules were summarised by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, 185: The sanctions Order thus creates a statutory prohibition upon the doing of certain classes of acts and provides the means of enforcing the prohibition by prosecution for a criminal offence which is subject to heavy penalties including imprisonment.
So one starts with the presumption laid down originally by Lord Tenterden CJ in Doe d Murray v Bridges (1831) 1 B & Ad 847, 859, where he spoke of the general rule that where an Act creates an obligation, and enforces the performance in a specified manner that performance cannot be enforced in any other manner a statement that has frequently been cited with approval ever since, including on several occasions in speeches in this House.
Where the only manner of enforcing performance for which the Act provides is prosecution for the criminal offence of failure to perform the statutory obligation or for contravening the statutory prohibition which the Act creates, there are two classes of exception to this general rule.
The first is where upon the true construction of the Act it is apparent that the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of the Factories Acts and similar legislation.
As Lord Kinnear put it in Butler (or Black) v Fife Coal Co Ltd (I have cited the passage which followed.)
In his opinion in the present case Lord Brodie said (at para 10) that statements of Lord Kinnear and Lord Diplock are not the modern law.
For this (to my mind startling) proposition, Lord Brodie relied on the speech of Lord Jauncey in R v Deputy Governor of Parkhurst, Ex p Hague [1992 1 AC 58, 170 171, and a passage in the speech of Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 731, cited by Lord Rodger in Morrison Sports Ltd v Scottish Power UK plc 2011 SC (UKSC) 1, para 28, in a judgment with which the other members of the court (including Lady Hale) agreed.
Those three cases were far removed from the area of legislation for the protection of employees.
In the passage from X (Minors) v Bedfordshire County Council, cited in Morrison Sports Ltd v Scottish Power UK plc, by Lord Rodger, Lord Browne Wilkinson began by describing the principles for determining whether a statutory breach gives rise to a cause of action as well established.
He went on to refer to the trilogy of Groves v Lord Wimborne, Cutler v Wandsworth Stadium Ltd and Lonrho Ltd v Shell Petroleum Co Ltd (No 2).
He did not suggest that he considered those cases to be not the modern law; quite the opposite.
Had he intended to depart from long standing authority, including decisions of the House of Lords, there can be no doubt that he would have said so.
Lord Brown Wilkinson referred to R v Deputy Governor of Parkhurst Prison, Ex p Hague, but only to give it as an example of legislation which was treated not as being passed for the benefit of a particular class of persons (those serving prison sentences), but for the benefit of society in general.
It provides an illustration of the need for a purview of the whole legislation in question in order to determine whether it is to be regarded as passed for the intended benefit of a particular class.
Lord Brodie and Lord Malcolm each cited Lord Jaunceys statement in the Parkhurst case, at pp 170 171, that The fact that a particular provision was intended to protect certain individuals is not of itself sufficient to confer private law rights of action upon them, something more is required to show that the legislature intended such conferment.
But that sentence should not be taken in isolation.
It needs to be understood in its context.
The claim in that case was brought by a prisoner who had been deprived for a time of rights of association, by an order of the deputy governor which was held to be in breach of rules under the Prison Act 1952.
In addressing the question whether the breach entitled the claimant to damages, the House of Lords held that it was necessary to consider not only the benefit of the rule to the claimant, but the wider purpose of the legislative scheme.
In the paragraph immediately following the words quoted above, Lord Jauncey described the objects of the legislation as far removed from those of legislation such as the factories and coal mines Acts whose prime concern is to protect the health and safety of those who work therein (emphasis added).
In the present case the Act has no purpose other than the protection of employees.
The principles summarised by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) are no more than general principles or default rules, but they have stood the test of time and I would hold that they continue to be the law unless and until the Supreme Court makes a conscious decision otherwise.
In particular, where legislation is passed for the protection of employees, in accordance with Lord Diplocks first exception, a breach will ordinarily give rise to a potential cause of action, unless the language of the legislation points clearly in the opposite direction.
In this case the legislation was plainly intended for the protection of employees and I do not consider that the form of the language employed by the drafter takes the case in relation to Mr Gordon outside Lord Diplocks first exception.
I would allow the appeal.
LADY HALE:
The question for this court is whether in 1969, when Parliament passed the sections 1 and 5 of the Employers Liability (Compulsory Insurance) Act, it was intended that breach of those sections should give rise, not only to criminal liability, but also to civil liability towards an employee who had been injured by the employers breach of duty towards him and who, because of the failure to insure, would otherwise not receive the compensation for his injuries to which he was entitled.
In my view, it is absolutely plain that Parliament did intend there to be such civil liability.
Parliament is presumed to legislate in the knowledge of the current state of the law when it is doing so.
In 1969, the law had been clearly laid down in Groves v Lord Wimborne [1898] 2 QB 402, approved by the House of Lords in Butler (or Black) v Fife Coal Co Ltd [1912] AC 149, and again in Cutler v Wandsworth Stadium Ltd [1949] AC 398.
Statutory duties imposed upon employers for the benefit of employees who suffer injury as a result of their breach give rise to civil as well as criminal liability, absent a clear statutory intent to the contrary.
That is still the law.
Parliament understood this when it passed the Health and Safety at Work etc Act 1974, section 47 of which made clear which breaches did not give rise to civil liability, and amended it in 2013, further to restrict the extent of civil liability.
Quite apart from the fact that we are concerned with the Parliamentary intention in 1969, it is quite wrong to suggest (as the majority in the lower House did) that a trilogy of more recent cases have changed the law as it has long been understood to be.
The traditional understanding was reaffirmed in the House of Lords by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, 185.
It was reaffirmed yet again in the House of Lords by Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 732 one of the trilogy.
The other two are R v Deputy Governor of Parkhurst Prison, Ex p Hague [1992] 1 AC 58 and Morrison Sports Ltd v Scottish Power UK plc [2011] SC 1.
In none of the three is there any suggestion that the approach of the courts to deciding whether the breach of a statutory duty gives rise to civil liability in damages has changed.
In X v Bedfordshire, the principles applicable were said to be well established, albeit difficult to apply (p 731).
Those difficulties arise in novel situations rather than in well established situations like this.
In X v Bedfordshire, Lord Browne Wilkinson stressed that in no previous case had [it] been held that statutory provisions establishing a regulatory system or a scheme of social welfare for the benefit of the public at large gave rise to a right of action for damages (p 731).
Although individuals might in fact be protected, the legislation was for the benefit of society in general and not just a particular class.
The cases where civil liability had been imposed were very limited and specific as opposed to general administrative functions imposed on public bodies and involving the exercise of administrative discretions (p 732).
Cutler, being concerned with the regulation of betting at dog races, was an example of such a scheme, which did not give rise to civil liability.
Hague, being concerned with the management of prisons, was another.
Something more should be said about Morrisons Sports, as it is a recent decision of this court, to which I was a party.
It was concerned with whether there was civil liability for breach of the Electricity Supply Regulations, made in 1988 but to be treated as if made under the power in section 29 of the Electricity Act 1989.
Section 29(3) provided that the Regulations might impose criminal penalties for their contravention; but it also provided that nothing in this subsection shall affect any liability of any such person to pay compensation in respect of any damage or injury which may have been caused by the contravention.
Much of the judgment is devoted to explaining why the view of the Inner House that this wording was apt to impose civil liability, as opposed to acknowledging it if it existed, was untenable.
When Lord Rodger (with whom the other members of the court agreed) turned to whether the regulations did indeed impose civil liability for breach, he cited the above passage from the speech of Lord Browne Wilkinson in X v Bedfordshire, which referred to, and cast no doubt upon, the law on employers liability as decided in Groves v Lord Wimborne.
There is no suggestion in Morrisons Sports that that is no longer the law.
The judgment goes on to look at the overall legislative scheme for regulating the supply of electricity.
While this clearly contemplated that there might be civil liability, it did not expressly provide for it.
Looked at as a whole the scheme of the legislation, with its carefully worked out provisions for various forms of enforcement on behalf of the public, points against individuals having a private right of action for damages (para 37).
It was also difficult to identify any limited class of the public for whose protection the Regulations were intended (para 38).
In short, this was a general regulatory scheme intended for the benefit of the whole population.
The difference between that case and this could hardly be greater.
This is a very specific statutory duty imposed upon employers, and also imposed upon specified officers where the employer is a limited company.
There can be no difference in substance between imposing criminal liability for failing to do something and imposing a duty to do it.
The purpose was to protect a very specific class of people, namely employees who might be injured by the employers breach of duty (whether arising by statute or at common law).
The protection intended was that they should be compensated for their injuries even if, for whatever reason, the employer was unable to do so.
Failure to insure means that the employee is denied the very thing that the legislation is intended to provide for him.
For these reasons, as well as for the fuller reasons given by Lord Toulson, I would allow this appeal and let the case go to proof.
| The Appellant, Mr Campbell, was employed as an apprentice joiner by a company whose sole director was Mr Gordon, the Respondent.
The Respondent was responsible for the day to day operation of the company.
The Appellant suffered an injury whilst working with an electric saw on 28 June 2006.
The companys employers liability policy excluded claims arriving from the use of woodworking machinery powered by electricity, and thus excluded any claim arising out of the Appellants accident.
The companys failure to have in place appropriate assurance was a breach of its obligations under section 1(1) of the Employers Liability (Compulsory Insurance) Act 1969 (the 1969 Act).
The company went into liquidation in 2009.
The issue for the court is whether the Respondents failure, as director of the company, to provide adequate insurance, makes him liable personally in damages to the Appellant.
The Appellants claim was upheld by the Lord Ordinary but dismissed by a majority of the Inner House.
The Supreme Court dismisses Mr Campbells appeal by a majority of three to two.
Lord Carnwath gives the majority judgment, with which Lord Mance and Lord Reed agree.
Lord Toulson gives a dissenting judgment, with which Lady Hale agrees in a separate dissent.
Lord Carnwath holds that there is no authority for the proposition that a person can be made indirectly liable for breach of an obligation imposed by statute on someone else, and that it is only possible to pierce the corporate veil to impose liability on a director or other individual through whom the company acts, if it is expressly or impliedly justified by the statute [13].
In section 5 of the 1969 Act, Parliament has imposed a specific and closely defined criminal penalty on a director bearing responsibility for a failure to insure, which is linked to the criminal liability of the company [14].
Lord Carnwath finds that in determining statutory liability, the court must pay due respect to the language and structure of the statute, rather than to preconceptions as to what its objectives could or should have been [18].
He rejects the argument that the imposition of criminal liability is sufficient to render the director civilly liable, finding that other statutory provisions imposing criminal liability on directors for offences by their companies have not been treated as giving rise to civil liability [21 2].
He finds that the language in section 5 of the 1969 Act was deliberately chosen and is specifically directed at criminal liability, and accordingly it is difficult to infer an intention to impose a more general liability [23].
Lord Toulson would have allowed the appeal, finding that the effect in substance of section 5 of the 1969 Act is to place a legal obligation on a director or other officer of a company not to cause or permit the company to be without the required insurance, on pain of a criminal penalty.
He considers that the imposition of criminal responsibility for a specified act (or omission) carries with it a legal obligation not to act (or omit to act) in such a way [26].
Lord Toulson prefers a functional approach to interpreting the legislation which looks to the objective of the statute, which is employee protection [30].
However, even on a formalist approach, the director is in law guilty as a principal of failing to insure [31].
Since the Victorian age, the courts have held that breaches of legislation for the protection of employees are actionable at common law by the employee suffering the breach [32].
If the legislation is silent on whether there should be civil liability, the judges role is to fill the gaps [34].
Where legislation is passed to protect employees, a breach will ordinarily give rise to a cause of action, absent a clear statutory intention to the contrary [41].
Lady Hale agrees with Lord Toulson and would have allowed the appeal.
Lady Hale considers it absolutely clear that in enacting the 1969 Act, Parliament did intend that failure to insure should give rise not only to criminal liability but also to civil liability towards an employee who had been injured by his employers breach of duty and who, because of the failure to insure, would not otherwise receive the compensation for his injuries to which he was entitled [43].
She stresses that, contrary to the view expressed by the Inner House, the law has not been changed by recent House of Lords and Supreme Court decisions.
|
The four respondents to these appeals have all been convicted or received cautions or reprimands in respect of comparatively minor offending.
The disclosure of their criminal records to potential employers has made it more difficult for them to obtain jobs, or may make it more difficult in future.
In each case, the relevant convictions and cautions were spent under the legislation designed to enable ex offenders to put their past behind them.
They had to be disclosed only if the respondents applied for employment involving contact with children or vulnerable adults.
In all four of these appeals, the respondents challenge the statutory rules under which disclosure of their records was required as being incompatible with the European Human Rights Convention.
Such cases raise problems of great difficulty and sensitivity.
They turn on two competing public interests.
One is the rehabilitation of ex offenders.
The other is the protection of the public against people whose past record suggests that there may be unacceptable risks in appointing them to certain sensitive occupations.
The importance of both public interests needs no emphasis.
The ability of ex offenders to obtain employment is often an essential condition of their successful reintegration into law abiding society at what, especially in the case of young offenders, may be a critical period of their lives.
On the other hand, in some employment sectors a more cautious approach is indispensable.
The Bichard Inquiry (2004) (HC 653) into child protection procedures and vetting practices was a stark reminder of the importance of ensuring that the rehabilitation of offenders does not undermine proper standards of public protection when those with criminal records apply for jobs involving contact with children.
The Inquiry had been set up after two young girls had been murdered by a caretaker employed at their school, about whom there had been substantial intelligence in police files, not retained or disclosed to the school, suggesting a pattern of sexual interference with women and young girls.
The essential facts
P received a caution on 26 July 1999 for the theft of a sandwich from a shop.
Three months later, on 1 November 1999, she was convicted at Oxford Magistrates Court of the theft of a book worth 99p and of failing to surrender to the bail granted to her after her arrest for that offence.
She received a conditional discharge for both offences.
At the time of the offences she was 28 years old, homeless and suffering from undiagnosed schizophrenia which is now under control.
She has committed no further offences.
P is qualified to work as a teaching assistant but has not been able to find employment.
She believes that this is because she has been obliged to disclose her convictions on each job application.
W was convicted by Dewsbury Magistrates Court on 26 November 1982 of assault occasioning actual bodily harm contrary to section 47 of the Offences against the Person Act 1861.
At the time of the offence he was 16 years old.
The assault had occurred in the course of a fight between a number of boys on their way home from school.
He received a conditional discharge, and has not offended since.
In 2013, when he was 47, he began a course to obtain a certificate in teaching English to adults.
His conviction has not been disclosed, but he believes that he would need to disclose it and obtain a criminal record certificate if he were to apply for a job as a teacher, and that this will prejudice his chances of obtaining employment.
On 1 August 2006, when he was 13 years old, G was arrested for sexually assaulting two younger boys, contrary to section 13 of the Sexual Offences Act 2003.
The offences involved sexual touching and attempted anal intercourse.
These were potentially serious offences, but the mitigation was exceptional.
The police record indicates that the sexual activity was consensual and seems to have been in the form of dares and is believed to have been a case of sexual curiosity and experimentation of the part of all three boys.
The Crown Prosecution Service decided that it was not in the public interest to prosecute, but suggested a reprimand under section 65 of the Crime and Disorder Act 1998.
On 5 September 2006 G received two police reprimands, one in respect of each of the younger boys.
He has not offended since.
In 2011, when he was working as a library assistant in a local college, he was required to apply for an enhanced criminal record check because his work involved contact with children.
After the application was made, he was told by the police that they proposed to disclose the reprimand, together with an account of the mitigating circumstances.
As a result, G withdrew the application and lost his job.
He has since felt unable to apply for any job for which a standard or enhanced criminal record check would be required.
Lorraine Gallagher was convicted on 24 July 1996 at Londonderry Magistrates Court of one count of driving without wearing a seatbelt, for which she was fined 10, and three counts of carrying a child under 14 years old without a seatbelt, for which she was fined 25 on each count.
All four counts related to the same occasion.
On 17 June 1998, she was convicted at the same court on two counts of carrying a child under 14 years old in a car without a seatbelt.
She was fined 40 on each count.
Again, both counts related to the same occasion.
She had been carrying two of her children in the back of her car.
Their seatbelts had been attached, but not properly because, unbeknown to her (she says), they had placed the shoulder straps under their arms.
Ms Gallagher has no other convictions.
In 2013, having qualified as a social carer, she was admitted to the Northern Ireland Social Care Council Register of Social Care Workers.
In 2014, she applied for a permanent position at a day centre for adults with learning difficulties and received a conditional offer of employment.
In response to a request to disclose whether she had been convicted at any time of a criminal offence she disclosed Yes and carrying child without seatbelt in 1996, but she did not disclose the conviction in relation to herself.
She did not disclose the 1998 convictions at all.
When the enhanced criminal record certificate disclosed all the convictions, the job offer was withdrawn on the ground that her failure to disclose them called her honesty and integrity into question.
The statutory schemes
The disclosure of criminal convictions, cautions and reprimands is governed by two related statutory schemes.
Disclosure by the ex offender himself is governed by the Rehabilitation of Offenders Act 1974 in England and Wales and the corresponding provisions of the Rehabilitation of Offenders (Northern Ireland) Order 1978 (SI 1978/1908) in Northern Ireland.
There is no material difference between the Act and the Northern Ireland Order.
I shall therefore refer in this judgment to the provisions of the 1974 Act.
Section 1 of that Act provides that, subject to conditions none of which is material, where a person has been convicted of an offence which is not excluded from rehabilitation, that person shall be treated as rehabilitated after the expiry of the rehabilitation period and the conviction shall be treated as spent.
Sections 8A and 8AA make corresponding provision for cautions.
The rehabilitation period is defined by section 5, and varies according to the sentence of the court and the age of the offender.
Section 4 determines the effect of rehabilitation.
By section 4(1), the ex offender is to be treated for all legal purposes as a person who has not committed or been charged or prosecuted or convicted of the offence.
For present purposes, the critical provisions of the Act are sections 4(2) and (3).
Their effect is that where a question is put to an ex offender about his previous convictions, offences, conduct or circumstances (other than in judicial proceedings), the question shall not be treated as relating to spent convictions and may be answered accordingly.
In other words, the ex offender is under no obligation to disclose it, and indeed may lawfully deny it.
He is not to be subjected to any liability or prejudice in consequence.
Section 4(4) provides that the Secretary of State may by order provide for exceptions to sections 4(2) and (3).
The Secretary of State exercised this power for England and Wales by the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (SI 1975/1023) (as amended); and for Northern Ireland by the Rehabilitation of Offenders (Exceptions) Order (Northern Ireland) 1979 (SR(NI) 1979/195).
The effect of the Orders is that an ex offenders right not to disclose a conviction or caution does not apply if the question is asked in order to assess his or her suitability for any of 13 specified purposes.
These include his or her suitability for admission to certain professions or certain kinds of employment; or for his or her assignment to work with children or vulnerable adults in specified circumstances; or for the provision of day care; or for the adoption of a child.
Disclosure of criminal records by the Disclosure and Barring Service in England and Wales or AccessNI in Northern Ireland is governed in both jurisdictions by a distinct but closely related statutory scheme under Part V of the Police Act 1997 (as amended).
Sections 113A and 113B of the 1997 Act (as inserted) deal, respectively, with criminal record certificates (CRCs) and enhanced criminal record certificates (ECRCs) recording a persons convictions and cautions, including spent convictions and cautions.
Applications for a certificate are made by the ex offender himself and countersigned by a registered person, namely a person registered as having a proper interest in the information.
In R (T) v Chief Constable of Greater Manchester Police (Liberty intervening) [2015] AC 49, paras 10 12, Lord Wilson concisely summarised the scheme of disclosure under the Police Act 1997, as it stood before the scheme was amended in March 2014: 10.
Sections 113A and 113B of the 1997 Act identify the circumstances in which the DBS must issue a CRC and an ECRC respectively.
The only substantive difference between the two certificates is that an ECRC must include not only, as must a CRC, relevant matters recorded on the Police National Computer but also, by way of enhancement, information about the person on local police records which they reasonably believe to be relevant and ought to be included (conveniently described as soft intelligence): contrast section 113A(3)(a) with section 113B(3)(a)(4).
It is only where the certificate is required for the purposes of an exempted question asked for a prescribed purpose that an ECRC, rather than a CRC, is available 11.
In summary, section 113B provides that an ECRC must be issued in the following circumstances: (a) The application for it is made by the person who is to be the subject of it: subsection (1)(a). (b) The application is countersigned by a person listed in a register, maintained by the DBS, of persons likely to ask exempted questions: subsection (2)(a), read with section 120. (c) The application is accompanied by a statement by the registered person that the certificate is required for the purposes of an exempted question asked for a prescribed purpose: subsection (2)(b). (d) An exempted question is a question to which exemption from protection arises under the 1975 Order: subsection (9) and section 113A(6). (e) A prescribed purpose is a purpose prescribed in regulation 5A of the Police Act 1997 (Criminal Records) Regulations 2002 (SI 2002/233) (as inserted by paragraph 1 of Schedule 1 to the Police Act 1997 (Criminal Records) (Amendment) Regulations 2006 (SI 2006/748)) which sets out a list overlapping with, but not co extensive with, the list in article 3 of the 1975 Order, of situations in which the registered person proposes to consider the applicants suitability for a specified position of trust or sensitivity. 12. [It is] convenient to regard both the exceptional obligation of a person to disclose a spent conviction or a caution under the 1975 Order and the obligation of the DBS to make disclosure of it by an ECRC under the 1997 Act as running in parallel.
But the parallel is not exact.
For the obligation of the DBS to make disclosure under an ECRC is, at the same time, both wider than the obligation of the person in terms of its inclusion of soft intelligence and yet narrower in that it arises only in circumstances in which the application is countersigned by a registered person who states that the certificate is required for a prescribed purpose.
There will therefore be cases in which, although the questioned person is not exempt from a duty of disclosure, the questioner is not entitled to call for an ECRC.
Nevertheless, the shape of the 1975 Order is certainly reflected in the 1997 Act: for, if the prescribed circumstances surrounding the application for the ECRC are present, the duty of the DBS is to disclose even spent convictions and cautions irrespective of the circumstances in which they arose.
In summary, the 1997 Act provided for the mandatory disclosure of all convictions and cautions on a persons record if the conditions for the issue of a certificate were satisfied.
Section 113A(7) empowered the Secretary of State to amend by Order the definition of relevant matters falling to be disclosed.
With effect from March 2014, this power was exercised so as to introduce a more selective system for disclosure by the Disclosure and Barring Service: Police Act 1997 (Criminal Record Certificates: Relevant Matters) (Amendment) (England and Wales) Order 2013 (SI 2013/1200).
Similar changes were made in Northern Ireland with effect from April 2014 by the Police Act 1997 (Criminal Record Certificates: Relevant Matters) (Amendment) Order (Northern Ireland) 2014 (SI 2014/100).
The effect of the amendments was to limit the disclosure of convictions and cautions under sections 113A and 113B of the Police Act to (i) convictions and cautions for any of a list of more serious offences, generally violent or sexual, contained in section 113A(6D); (ii) convictions which resulted in a custodial sentence; (iii) other convictions or cautions if they were still current, ie had occurred within a specified period before the issue of the certificate, viz 11 years in the case of an adult and five and a half years in the case of a minor; and (iv) all convictions and cautions where the person has more than one conviction.
Broadly corresponding limitations were imposed on the convictions and cautions which had to be disclosed under the Rehabilitation of Offenders Act 1974: see Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (Amendment) (England and Wales) Order 2013 (SI 2013/1198), and Rehabilitation of Offenders (Exceptions) (Amendment) Order (Northern Ireland) 2014 (SI 2014/27).
Section 4(2) and (3) of the Rehabilitation of Offenders Act 1974 are not in terms confined to disclosures in the course of job applications.
These are, however, much the most significant occasions on which the disclosure of a criminal record is likely to be required, and it is clear that it was primarily with that context in mind that Parliament enacted section 4.
It follows that in conferring power on the Secretary of State, by section 4(4), to exclude the operation of sections 4(2) and 4(3) in specified circumstances, Parliament envisaged that there would be occupations in respect of which convictions should be disclosed to a potential employer, professional body or appointing authority notwithstanding that they were spent and notwithstanding that the convicted person might be prejudiced by their disclosure.
The scheme for the disclosure of criminal records by the Disclosure and Barring Service (or AccessNI in Northern Ireland) under the Police Act 1997 is carefully tailored to match the disclosure obligations of the person whose record is in question.
Under sections 113A(6) and 113B(9) of the Police Act 1997, where the question is asked in circumstances excluded from the operation of the Rehabilitation of Offenders Act 1974 under section 4(4) of the latter Act, it will fall to be disclosed by the Disclosure and Barring Service (or AccessNI in Northern Ireland) notwithstanding that it is spent.
This is a coherent scheme of legislation which acknowledges both of the competing public interests to which I have referred, and seeks to achieve a balance between them.
Those interests are not only competing but incommensurate.
In the nature of things, wherever the line is drawn, it will not be satisfactory from every point of view.
The whole issue raises classic policy dilemmas.
The underlying policy is precautionary, in line with strong public expectations.
The question is whether in adopting that approach the appellants contravened the European Convention on Human Rights.
Article 8 of the Human Rights Convention
Article 8 provides: Right to respect for private and family life (1) Everyone has the right to respect for his private and family life, his home and his correspondence. (2) There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
It is not disputed that article 8 is engaged.
It confers a qualified right of privacy, subject to important exceptions for measures which are (i) in accordance with the law, and (ii) necessary in a democratic society in the interests of public safety for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights of others.
Conditions (i) and (ii) impose tests of a very different character, with very different consequences.
Condition (i) is concerned with the legal basis for any measure which interferes with the right of privacy.
Any such measure must not only have some legal basis in domestic law, but must be authorised by something which can properly be characterised as law.
This is an absolute requirement.
In meeting it, Convention states have no margin of appreciation under the Convention, and the executive and the legislature have no margin of discretion or judgment under domestic public law.
Only if the test of legality is satisfied does the question arise whether the measures in question are necessary for some legitimate purpose and represent a proportionate means of achieving that purpose.
The Court of Appeal in England in R (P) v Secretary of State for Justice, R (G) v Chief Constable of Surrey Police and R (W) v Comr of Police of the Metropolis [2018] 1 WLR 3281, and the Court of Appeal in Northern Ireland in In re Gallaghers Application [2016] NICA 42, upheld the respondents cases.
Although the reasons of both courts were substantially the same, the fullest analysis of the law is to be found in the judgment of Sir Brian Leveson P in the English cases.
He rejected the submission that the Convention required a system of review that would enable each case to be assessed on its own facts.
But he held, first, that the legislation was not in accordance with the law because, although it discriminated between different categories of offence and convictions, the categories were still too broad.
They embraced offences of widely differing relevance, and were therefore liable to operate arbitrarily in a significant number of cases.
In particular, he regarded as inconsistent with the legality test: (i) the rule which made all convictions disclosable if there was more than one, because it failed to distinguish between cases which disclosed a relevant pattern of offending and those which did not; and (ii) the rule that required the disclosure of specified serious offences, because it was insufficiently calibrated so as to ensure that the proportionality of the interference is adequately examined: [2018] 1 WLR 3281, para 45.
Even if the legislation had passed the legality test, the scheme would have been disproportionate to its objective because it was insufficiently granular in distinguishing between convictions and cautions of varying degrees of relevance.
It will be seen that the reasons why, in his view, the legislation failed the legality and proportionality tests were substantially the same.
The scheme was more discriminating than its predecessor, but not discriminating enough.
In accordance with the law
The respondents submit that because the categories of disclosable conviction or caution are (they say) too wide, and not subject to individual review, the legislation does not have the quality of law.
Before I examine this submission in the light of the authorities, it is right to draw attention to some of its more far reaching consequences if it is correct.
In the first place, it means that the legislation is incompatible with article 8, however legitimate its purpose, and however necessary or proportionate it may be to deal with the problem in this particular way.
That conclusion would plainly have significant implications for the protective functions of the state, especially in relation to children and vulnerable adults.
Secondly, it must be remembered that the condition of legality is not a question of degree.
The measure either has the quality of law or it does not.
It is a binary test.
This is because it relates to the characteristics of the legislation itself, and not just to its application in any particular case: see Kruslin v France (1990) 12 EHRR 547, paras 31 32.
It follows that if the legislation fails the test of legality, it is incompatible with the Convention not just as applied to those convicted of minor offences like these respondents, but to the entire range of ex offenders including, for example, convicted child molesters, rapists and murderers.
Thirdly, this consequence cannot be confined to the right of privacy.
Most Convention rights are qualified by reference to various countervailing public interests.
These qualifications are fundamental to the scheme of the Convention.
They are what makes it possible to combine a high level of protection of human rights with legitimate measures for the protection of the public against real threats to their welfare and security.
For that reason, exceptions corresponding to those in article 8 attach to a number of other Convention rights.
They too must also have a proper basis in law.
It is fair to say that the jurisprudence of the Strasbourg court has been especially sensitive to the keeping of files on individuals by the state, a practice which was gravely abused by the authoritarian regimes of the 20th century in most of continental Europe.
This sensitivity explains why the right of privacy has been extended from covert and intrusive surveillance to the recording of things which would not be regarded as private in any other context, for example participation in demonstrations in public places (Segerstedt Wiberg v Sweden (2007) 44 EHRR 2, para 72) and even public acts of the state itself, such as criminal convictions in an open court of law (MM v United Kingdom (Application 24029/07), 29 April 2013, at para 188).
But the question what constitutes law is the same whatever the subject matter.
Neither the Strasbourg court nor the courts of the United Kingdom have ever suggested that the condition of legality applies in any different way in article 8 as compared with other articles.
In principle, therefore, whatever conclusion we reach in this case about the scope of the condition of legality must apply equally to the exceptions to article 5 (right to liberty and security), article 9 (freedom of thought, conscience and religion), article 10 (freedom of expression), and article 11 (freedom of assembly and association).
In none of these articles would there be any scope for distinctions based on judgment or discretion or weighing of broader public interests, even on the most compelling grounds, once the relevant measure failed the respondents exacting test of legality.
Nonetheless, the respondents submit that the issue was resolved in their favour by the decision of this court in R (T) v Chief Constable of Greater Manchester Police [2015] AC 49, and that submission was accepted by the courts below.
The argument is that, as applied to legislation which applies indiscriminately to a wide range of potentially very different circumstances, T is authority for the proposition that the test of legality requires that the legislation should include safeguards against its arbitrary application, by which is meant the disclosure of matters manifestly irrelevant to an ex offenders suitability for employment.
T is a recent and considered decision of this court about an earlier version of the statutory scheme before us now.
If it means what the respondents submit that it means, it is our duty to follow it unless (which is not suggested) Practice Statement (Judicial Precedent) [1966] 1 WLR 1234 applies.
The decision, however, needs to be properly understood in the light of the substantial body of Strasbourg case law on which it was expressly based and the particular domestic legislation with which it was concerned.
It is well established that law in the Human Rights Convention has an extended meaning.
In two judgments delivered on the same day, Huvig v France (1990) 12 EHRR 528, at para 26, and Kruslin v France (1990) 12 EHRR 547, para 27, the European Court of Human Rights set out what has become the classic definition of law in this context: The expression in accordance with the law, within the meaning of article 8.2, requires firstly that the impugned measure should have some basis in domestic law; it also refers to the quality of the law in question, requiring that it should be accessible to the person concerned, who must moreover be able to foresee its consequences for him, and compatible with the rule of law.
Huvig and Kruslin established a dual test of accessibility and foreseeability for any measure which is required to have the quality of law.
That test has continued to be cited by the Strasbourg court as the authoritative statement of the meaning of law in very many subsequent cases: see, for example, most recently, Catt v United Kingdom (Application No 43514/15, 24 January 2019).
The accessibility test speaks for itself.
For a measure to have the quality of law, it must be possible to discover, if necessary with the aid of professional advice, what its provisions are.
In other words, it must be published and comprehensible.
The requirement of foreseeability, so far as it adds to the requirement of accessibility, is essentially concerned with the principle summed up in the adage of the American founding father John Adams, a government of laws and not of men.
A measure is not in accordance with the law if it purports to authorise an exercise of power unconstrained by law.
The measure must not therefore confer a discretion so broad that its scope is in practice dependent on the will of those who apply it, rather than on the law itself.
Nor should it be couched in terms so vague or so general as to produce substantially the same effect in practice.
The breadth of a measure and the absence of safeguards for the rights of individuals are relevant to its quality as law where the measure confers discretions, in terms or in practice, which make its effects insufficiently foreseeable.
Thus a power whose exercise is dependent on the judgment of an official as to when, in what circumstances or against whom to apply it, must be sufficiently constrained by some legal rule governing the principles on which that decision is to be made.
But a legal rule imposing a duty to take some action in every case to which the rule applies does not necessarily give rise to the same problem.
It may give rise to a different problem when it comes to necessity and proportionality, but that is another issue.
If the question is how much discretion is too much, the only legal tool available for resolving it is a proportionality test which, unlike the test of legality, is a question of degree.
This much is clear not only from the Huvig and Kruslin judgments themselves, but from the three leading decisions on the principle of legality on which the Strasbourg courts statement of principle in those cases was founded, namely Sunday Times v United Kingdom (1979 80) 2 EHRR 245, Silver v United Kingdom (1983) 5 EHRR 347 and Malone v United Kingdom (1985) 7 EHRR 14.
Sunday Times v United Kingdom (1979 80) 2 EHRR 245 was the first occasion on which the Strasbourg court addressed the test of legality.
It was not a privacy case, but a case about freedom of expression in the context of the English law of contempt of court.
The requirement of foreseeability was summarised by the court as follows at para 49: A norm cannot be regarded as a law unless it is formulated with sufficient precision to enable the citizen to regulate his conduct: he must be able if need be with appropriate advice to foresee, to a degree that is reasonable in the circumstances, the consequences which a given action may entail.
In Silver v United Kingdom (1983) 5 EHRR 347, para 85, the Strasbourg court adopted this definition and applied it to a complaint of interference with prisoners correspondence, contrary to article 8.
The court observed at para 88 that the need for precision in the Sunday Times case meant that a law which confers a discretion must indicate the scope of that discretion.
It was in that context that the court addressed the question of safeguards, at para 90: The applicants further contended that the law itself must provide safeguards against abuse.
The Government recognised that the correspondence control system must itself be subject to control and the court finds it evident that some form of safeguards must exist.
One of the principles underlying the Convention is the rule of law, which implies that an interference by the authorities with an individuals rights should be subject to effective control.
This is especially so where, as in the present case, the law bestows on the executive wide discretionary powers, the application whereof is a matter of practice which is susceptible to modification but not to any Parliamentary scrutiny.
In Silver, interference with prisoners correspondence was authorised as a matter of domestic law by the Prison Rules, a statutory instrument which conferred an unlimited discretion on the Secretary of State to impose restrictions on prisoners correspondence for certain broadly stated purposes.
It also required the Secretary of States consent to correspondence with anyone other than a close relative and empowered the prison governor to at his discretion, stop any letter or communication on the ground that its contents are objectionable or that it is of inordinate length.
These discretions were regulated by internal administrative instructions which, however, were neither published nor available to prisoners.
The relevant restrictions were held not to be in accordance with the law because in some cases the actual measure of interference complained of was not foreseeable and in others the rule under which the stopping was effected could not itself be foreseen.
A fuller statement of the same principle appeared in the important judgment in Malone v United Kingdom (1985) 7 EHRR 14.
The context was telephone tapping, which under the system then in operation in the United Kingdom was authorised by warrants of the Home Secretary under purely administrative powers with no statutory basis.
The power exercisable by the Home Secretary was agreed to be lawful as a matter of domestic law, but no law constrained or limited his discretion.
After reciting the Sunday Times test, the court continued at para 67: The court would reiterate its opinion that the phrase in accordance with the law does not merely refer back to domestic law but also relates to the quality of the law, requiring it to be compatible with the rule of law, which is expressly mentioned in the preamble to the Convention.
The phrase thus implies and this follows from the object and purpose of article 8 that there must be a measure of legal protection in domestic law against arbitrary interferences by public authorities with the rights safeguarded by paragraph (1).
Especially where a power of the executive is exercised in secret, the risks of arbitrariness are evident. the law must be sufficiently clear in its terms to give citizens an adequate indication as to the circumstances in which and the conditions on which public authorities are empowered to resort to this secret and potentially dangerous interference with the right to respect for private life and correspondence.
The court then referred to its earlier observations in Silver about unconstrained discretion.
At para 68, it observed: The degree of precision required of the law in this connection will depend upon the particular subject matter.
Since the implementation in practice of measures of secret surveillance of communications is not open to scrutiny by the individuals concerned or the public at large, it would be contrary to the rule of law for the legal discretion granted to the executive to be expressed in terms of an unfettered power.
Consequently, the law must indicate the scope of any such discretion conferred on the competent authorities and the manner of its exercise with sufficient clarity, having regard to the legitimate aim of the measure in question, to give the individual adequate protection against arbitrary interference.
Accordingly, at para 70, the court identified the issue before them as being whether, under domestic law, the essential elements of the power to intercept communications were laid down with reasonable precision in accessible legal rules that sufficiently indicated the scope and manner of exercise of the discretion conferred on the relevant authorities.
This issue was considered under two heads in the pleadings: firstly whether the law was such that a communication passing through the services of the Post Office might be intercepted, for police purposes, only pursuant to a valid warrant issued by the Secretary of State and, secondly, to what extent the circumstances in which a warrant might be issued and implemented were themselves circumscribed by law.
The system was held not to be in accordance with the law because it failed the second of these tests.
The circumstances in which the Home Secretary might issue a warrant were not sufficiently defined.
The court summarised the reasons at para 79: in its present state the law in England and Wales governing interception of communications for police purposes is somewhat obscure and open to differing interpretations. it cannot be said with any reasonable certainty what elements of the powers to intercept are incorporated in legal rules and what elements remain within the discretion of the executive.
In the opinion of the court, the law of England and Wales does not indicate with reasonable clarity the scope and manner of exercise of the relevant discretion conferred on the public authorities.
To that extent, the minimum degree of legal protection to which citizens are entitled under the rule of law in a democratic society is lacking.
Later, at para 87, the court made a similar criticism of the practice of metering, ie the recording of numbers dialled and the duration of calls, but not their content: there would appear to be no legal rules concerning the scope and manner of exercise of the discretion enjoyed by the public authorities.
Consequently, although lawful in terms of domestic law, the interference resulting from the existence of the practice in question was not in accordance with the law, within the meaning of article 8(2).
The French system for tapping telephones was criticised on broadly similar grounds in Huvig and Kruslin.
In the latter case, at paras 35 36, the court observed: 35.
Above all, the system does not for the time being afford adequate safeguards against various possible abuses.
For example, the categories of people liable to have their telephones tapped by judicial order and the nature of the offences which may give rise to such an order are nowhere defined.
Nothing obliges a judge to set a limit on the duration of telephone tapping.
Similarly unspecified are the procedure for drawing up the summary reports containing intercepted conversations; the precautions to be taken in order to communicate the recordings intact and in their entirety for possible inspection by the judge (who can hardly verify the number and length of the original tapes on the spot) and by the defence; and the circumstances in which recordings may or must be erased or the tapes be destroyed, in particular where an accused has been discharged by an investigating judge or acquitted by a court.
The information provided by the Government on these various points shows at best the existence of a practice, but a practice lacking the necessary regulatory control in the absence of legislation or case law. 36.
In short, French law, written and unwritten, does not indicate with reasonable clarity the scope and manner of exercise of the relevant discretion conferred on the public authorities.
This was truer still at the material time, so that Mr Kruslin did not enjoy the minimum degree of protection to which citizens are entitled under the rule of law in a democratic society (see the Malone judgment previously cited, Series A no 82, p 36, para 79).
There has therefore been a breach of article 8 of the Convention.
In three notable later cases, Amann v Switzerland (2000) 30 EHRR 843, Rotaru v Romania (2000) 8 BHRC 449 and S v United Kingdom (2009) 48 EHRR 50, the same principles were applied to the retention in police records of personal information.
Amann was another case about phone tapping.
The court held that the retention of the fruits of a tap in police files did not satisfy the legality test even on the footing that the tap itself was in accordance with law.
The decision was expressed to be based on the statement of principle in Malone (para 56), and on a finding (para 62) that Swiss law does not indicate with sufficient clarity the scope and conditions of exercise of the authorities discretionary power in the area under consideration.
In Rotaru, the applicant objected to the retention on the files of the Romanian state security service of information, some of it false, about his dissident activities in the early years of the post war communist regime nearly half a century before.
His case (see para 50), which was upheld by the Grand Chamber, was that this was not in accordance with the law, since domestic law was not sufficiently precise to indicate to citizens in what circumstances and on what terms the public authorities were empowered to file information on their private life and make use of it.
Furthermore, domestic law did not define with sufficient precision the manner of exercise of those powers and did not contain any safeguards against abuses.
The judgment is of particular interest because it addresses the requirement that there should be safeguards established by law which apply to the supervision of the relevant services activities (para 59).
After examining the relevant domestic law, which conferred broad discretionary powers on the security service, and concluding that there were no safeguards, the court stated its conclusion as follows at para 61: That being so, the court considers that domestic law does not indicate with reasonable clarity the scope and manner of exercise of the relevant discretion conferred on the public authorities.
Finally, in S, the complaint was about the retention of DNA samples taken from suspects who had subsequently been acquitted.
At para 95, the court observed: The court recalls its well established case law that the wording in accordance with the law requires the impugned measure both to have some basis in domestic law and to be compatible with the rule of law, which is expressly mentioned in the Preamble to the Convention and inherent in the object and purpose of article 8.
The law must thus be adequately accessible and foreseeable, that is, formulated with sufficient precision to enable the individual if need be with appropriate advice to regulate his conduct.
For domestic law to meet these requirements, it must afford adequate legal protection against arbitrariness and accordingly indicate with sufficient clarity the scope of discretion conferred on the competent authorities and the manner of its exercise (see Malone v United Kingdom (1985) 7 EHRR 14, paras 66 68; Rotaru v Romania (2000) 8 BHRR 449, para 55; and Amann v Switzerland (2000) 30 EHRR 843, para 56). (See also Kvasnica v Slovakia (Application No 72094/01), 9 June 2009, para 79 and Dragojevi v Croatia (Application No 68955/11), 15 Jan 2015, at paras 80 83.)
As can be seen from these citations, from the outset the Strasbourg court has treated the need for safeguards as part of the requirement of foreseeability.
It has applied it as part of the principle of legality in cases where a discretionary power would otherwise be unconstrained and lack certainty of application.
This may be illustrated by reference to the subsequent decisions in Liberty v United Kingdom (2009) 48 EHRR 1 and Gillan v United Kingdom (2010) 50 EHRR 45.
Liberty concerned the bulk interception of telephone communications passing through submarine cables terminating in the United Kingdom.
There was statutory authority for the interception, but as the court pointed out at para 69, the legal framework did not have the quality of law.
This was because the court does not consider that the domestic law at the relevant time indicated with sufficient clarity, so as to provide adequate protection against abuse of power, the scope or manner of exercise of the very wide discretion conferred on the state to intercept and examine external communications.
In particular, it did not, as required by the courts case law, set out in a form accessible to the public any indication of the procedure to be followed for selecting for examination, sharing, storing and destroying intercepted material.
Similarly, in Gillan, at para 77, the connection between the principle of legality and the existence of unconstrained discretion was reasserted in the context of stop and search powers.
The court observed of the dual test of accessibility and foreseeability at para 77: For domestic law to meet these requirements it must afford a measure of legal protection against arbitrary interferences by public authorities with the rights safeguarded by the Convention.
In matters affecting fundamental rights it would be contrary to the rule of law, one of the basic principles of a democratic society enshrined in the Convention, for a legal discretion granted to the executive to be expressed in terms of an unfettered power.
Consequently, the law must indicate with sufficient clarity the scope of any such discretion conferred on the competent authorities and the manner of its exercise.
The level of precision required of domestic legislation which cannot in any case provide for every eventuality depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed.
MM v United Kingdom
It is against that background that one must approach the decision in MM v United Kingdom (Application No 24029/07), 29 April 2013.
The case concerned the retention and disclosure by the police of records of cautions in Northern Ireland.
The applicant had received a caution for child abduction in 2000 in unusual circumstances which provided very strong mitigation.
Its disclosure had nevertheless resulted in the failure of two applications for jobs involving care work.
She had accepted the caution on an assurance that it would be deleted from police records after five years, which was the practice at the time.
But the practice subsequently changed, and her attempts in 2006 and 2007 to have the caution deleted were unsuccessful.
The gravamen of her complaint was not about the past disclosures, but about the retention of the caution on police files, which exposed her to the risk of disclosure in future whenever she applied for a job requiring a criminal record certificate.
Much of the analysis of the Strasbourg court needs to be understood in that light.
The Strasbourg court examined in detail the complex and changing legal basis on which criminal records were handled in Northern Ireland.
There were three stages of the process to be considered, namely (i) collection of data, (ii) its retention in the records of the authorities, and (iii) its disclosure to third parties.
At the time when the caution was given, convictions in Northern Ireland were recorded under statutory regulations but the record was retained and disclosed under common law powers.
The regime governing cautions was different.
They were recorded as well as retained and disclosed under common law powers.
The only legal limitation on the exercise of these powers was the Data Protection Act 1998.
On 1 April 2008, the system was changed when Part V of the Police Act 1997 was brought into force in Northern Ireland by the Police Act 1997 (Commencement No 11) Order (SI 2008/692).
This introduced to Northern Ireland the system (already in force in England and Wales) under which the disclosure of all recorded and retained convictions and cautions, including warnings and reprimands, was mandatory.
It did not affect the recording or retention of cautions, which continued to be governed by common law powers.
The new regime in Northern Ireland was relevant to MMs case because the Police Act would thereafter have applied to the disclosure of her caution in connection with any fresh job application after April 2008.
The Strasbourg court was invited by the United Kingdom government to treat as part of the legal framework governing collection and retention of data the statutory Code of Practice for the Management of Police Information, issued by the Secretary of State in 2005 under section 39A of the Police Act 1996.
This established general standards for the management of police information, and provided for the issue of Guidance by the Association of Chief Police Officers (ACPO) in 2006 and 2010 which police forces were required to comply with.
These documents, however, applied directly only in England and Wales.
As the court noted at para 33, although the statutory Code of Practice was available for adoption by police forces elsewhere, it was not clear that it had been adopted in Northern Ireland. (In any event, since section 39A of the Police Act 1996 did not extend to Northern Ireland, it could have had only administrative and not statutory force there.)
The court held that the scheme did not have the quality of law, either before or after April 2008.
The principle on which it proceeded was stated at the outset of its analysis, at para 193, by reference to the dual requirements of accessibility and foreseeability derived from its earlier case law, including Malone and Liberty: The law must thus be adequately accessible and foreseeable, that is, formulated with sufficient precision to enable the individual if need be with appropriate advice to regulate his conduct.
For domestic law to meet these requirements, it must afford adequate legal protection against arbitrariness and accordingly indicate with sufficient clarity the scope of discretion conferred on the competent authorities and the manner of its exercise.
The pre 2008 position in Northern Ireland as regards cautions was an obvious example of unconstrained discretionary power.
For present purposes, however, the judgment is mainly of interest for its treatment of the position in Northern Ireland after April 2008 under the Police Act 1997.
MM contended that the caution should have been deleted so as not to be available for disclosure under the new regime.
The court recorded (para 195) its view that article 8 was engaged by the whole process of collection, retention, use and disclosure of data on police files.
It recognised (para 199) that there may be a need for a comprehensive record of all cautions, conviction, warnings, reprimands, acquittals and even other information of the nature currently disclosed pursuant to section 113B(4) of the 1997 Act.
However, as the court went on to observe at para 200: the greater the scope of the recording system, and thus the greater the amount and sensitivity of data held and available for disclosure, the more important the content of the safeguards to be applied at the various crucial stages in the subsequent processing of the data.
In other words, the considerations that were relevant to each of the three stages were interrelated, because the greater the volume or significance of the data retained, the more important it was to restrict its disclosure.
It followed that for the statutory scheme to have the quality of law, it was not enough that the circumstances in which disclosure was authorised were sufficiently defined by law.
This merely pushed the issue back to the earlier stages of collection and storage of data.
In R (Catt) v Association of Chief Police Officers of England and Wales and Northern Ireland [2015] AC 1065, para 15, I suggested that the Strasbourg court in MM had found disclosure of convictions under sections 113A and 113B not to be in accordance with law because it was mandatory.
It would have been more accurate to say that it was because its mandatory disclosure meant that the scheme as a whole was not in accordance with law, which is the third point made at para 16.
If collection and retention continued to be subject to an unconstrained discretion, the result was that the bank of data available for mandatory disclosure was variable according to the judgment of the police and did not have the necessary quality of foreseeability.
In MM, the court regarded the system of recording and retention of criminal convictions in Northern Ireland as indiscriminate and open ended: see para 199.
It went on to say that such a system is unlikely to comply with the requirements of article 8 in the absence of clear and detailed statutory regulations clarifying the safeguards applicable and setting out the rules governing, inter alia, the circumstances in which data can be collected, the duration of their storage, the use to which they can be put and the circumstances in which they may be destroyed.
The problem, as the court pointed out at para 202, was that both before and after April 2008, there was no legislation, primary or secondary, governing the collection and retention of cautions, apart from the Data Protection Act.
In the view of the court, the guidance of the ACPO, which had no statutory basis in Northern Ireland, did not sufficiently fill the gap.
The courts conclusion was stated at paras 206 207: 206.
In the present case, the court highlights the absence of a clear legislative framework for the collection and storage of data, and the lack of clarity as to the scope, extent and restrictions of the common law powers of the police to retain and disclose caution data.
It further refers to the absence of any mechanism for independent review of a decision to retain or disclose data, either under common law police powers or pursuant to Part V of the 1997 Act.
Finally, the court notes the limited filtering arrangements in respect of disclosures made under the provisions of the 1997 Act: as regards mandatory disclosure under section 113A, no distinction is made on the basis of the nature of the offence, the disposal in the case, the time which has elapsed since the offence took place or the relevance of the data to the employment sought. 207.
The cumulative effect of these shortcomings is that the court is not satisfied that there were, and are, sufficient safeguards in the system for retention and disclosure of criminal record data to ensure that data relating to the applicants private life have not been, and will not be, disclosed in violation of her right to respect for her private life.
The retention and disclosure of the applicants caution data accordingly cannot be regarded as being in accordance with the law.
In the most recent decision of the Strasbourg court, Catt v United Kingdom (Application No 43514/15), MM was treated at para 94 as authority for the following proposition: 94.
As the court has recalled the expression in accordance with the law not only requires the impugned measure to have some basis in domestic law, but also refers to the quality of the law in question, requiring that it should be accessible to the person concerned and foreseeable as to its effects.
For domestic law to meet these requirements, it must afford adequate legal protection against arbitrariness and accordingly indicate with sufficient clarity the scope and discretion conferred on the competent authorities and the manner of its exercise (see, among other authorities, MM v United Kingdom, no 24029/07, para 193, 13 November 2012 with further references).
In other words, an excessively broad discretion in the application of a measure infringing the right of privacy is likely to amount to an exercise of power unconstrained by law.
It cannot therefore be in accordance with law unless there are sufficient safeguards, exercised on known legal principles, against the arbitrary exercise of that discretion, so as to make its application reasonably foreseeable.
Domestic case law
This is, moreover, the analysis which the English courts have given the Strasbourg case law.
Lord Bingham put the matter in this way: In R (Gillan) v Comr of Police for the Metropolis [2006] 2 AC 307, para 34, The lawfulness requirement in the Convention addresses supremely important features of the rule of law.
The exercise of power by public officials, as it affects members of the public, must be governed by clear and publicly accessible rules of law.
The public must not be vulnerable to interference by public officials acting on any personal whim, caprice, malice, predilection or purpose other than that for which the power was conferred.
This is what, in this context, is meant by arbitrariness, which is the antithesis of legality.
Lord Hope observed that the Conventions concept of law In R (Purdy) v Director of Public Prosecutions [2010] 1 AC 345, at para 41, implies qualitative requirements, including those of accessibility and foreseeability.
Accessibility means that an individual must know from the wording of the relevant provision and, if need be, with the assistance of the courts interpretation of it what acts and omissions will make him criminally liable: see also Glmez v Turkey (Application No 16330/02) (unreported) given 20 May 2008, para 49.
The requirement of foreseeability will be satisfied where the person concerned is able to foresee, if need be with appropriate legal advice, the consequences which a given action may entail.
A law which confers a discretion is not in itself inconsistent with this requirement, provided the scope of the discretion and the manner of its exercise are indicated with sufficient clarity to give the individual protection against interference which is arbitrary: Goodwin v United Kingdom (1996) 22 EHRR 123, para 31; Sorvisto v Finland, para 112.
He went on to point out that by this test the Suicide Act 1961, which indiscriminately criminalised aiding and abetting, counselling or procuring the suicide of another in all circumstances without exception was in accordance with law because the statute sufficiently disclosed what a person had to do to comply with it.
R (T) v Chief Constable of Greater Manchester Police
R (T) v Chief Constable of Greater Manchester Police [2015] AC 49 concerned the regime governing disclosure of criminal records in England as it stood before the changes introduced with effect from March 2014.
This court held that that regime lacked the quality of law.
The leading judgment on this point was delivered by Lord Reed, with whom Lord Neuberger, Baroness Hale and Lord Clarke agreed.
There was very little discussion of the Northern Ireland system for managing criminal records considered in MM, because Lord Reed proceeded on the basis that the English legislation under consideration was indistinguishable from it: see paras 100, 119.
This was not entirely correct.
As I have explained, the Code of Practice and associated ACPO Guidance governing the management of police information in England had statutory force in England but not in Northern Ireland.
But for reasons which will appear, I do not think that that difference was critical to the outcome, either in MM or in T.
The essence of Lord Reeds reasoning appears at paras 113, 114 and 119 of the judgment: 113.
As long ago as 1984, the court said in Malone v United Kingdom 7 EHRR 14, in the context of surveillance measures, that the phrase in accordance with the law implies that the law must give the individual adequate protection against arbitrary interference: para 68.
In Kopp v Switzerland (1998) 27 EHRR 91, para 72, it stated that since the surveillance constituted a serious interference with private life and correspondence, it must be based on a law that was particularly precise: It is essential to have clear, detailed rules on the subject, especially as the technology available for use is continually becoming more sophisticated.
These statements were reiterated in Amann v Switzerland 30 EHRR 843.
As I have explained, that approach to the question whether the measure provides sufficient protection against arbitrary interference was applied, in the context of criminal records and other intelligence, in Rotaru v Romania, where the finding that the interference was not in accordance with the law was based on the absence from the national law of adequate safeguards.
The condemnation of Part V of the 1997 Act in MM v United Kingdom is based on an application of the same approach.
Put shortly, legislation which requires the indiscriminate disclosure by the state of personal data which it has collected and stored does not contain adequate safeguards against arbitrary interferences with article 8 rights. 114.
This issue may appear to overlap with the question whether the interference is necessary in a democratic society: a question which requires an assessment of the proportionality of the interference.
These two issues are indeed inter linked, as I shall explain, but their focus is different.
Determination of whether the collection and use by the state of personal data was necessary in a particular case involves an assessment of the relevancy and sufficiency of the reasons given by the national authorities.
In making that assessment, in a context where the aim pursued is likely to be the protection of national security or public safety, or the prevention of disorder or crime, the court allows a margin of appreciation to the national authorities, recognising that they are often in the best position to determine the necessity for the interference.
As I have explained, the courts focus tends to be on whether there were adequate safeguards against abuse, since the existence of such safeguards should ensure that the national authorities have addressed the issue of the necessity for the interference in a manner which is capable of satisfying the requirements of the Convention.
In other words, in order for the interference to be in accordance with the law, there must be safeguards which have the effect of enabling the proportionality of the interference to be adequately examined.
Whether the interference in a given case was in fact proportionate is a separate question. 119.
In the light of the judgment in MM v United Kingdom, it is plain that the disclosure of the data relating to the respondents cautions is an interference with the right protected by article 8.1.
The legislation governing the disclosure of the data, in the version with which these appeals are concerned, is indistinguishable from the version of Part V of the 1997 Act which was considered in MM.
That judgment establishes, in my opinion persuasively, that the legislation fails to meet the requirements for disclosure to constitute an interference in accordance with the law.
That is so, as the court explained in MM, because of the cumulative effect of the failure to draw any distinction on the basis of the nature of the offence, the disposal in the case, the time which has elapsed since the offence took place or the relevance of the data to the employment sought, and the absence of any mechanism for independent review of a decision to disclose data under section 113A.
This decision is treated by the respondents as authority for the proposition that a measure may lack the quality of law even where there is no relevant discretion and the relevant rules are precise and entirely clear, if the categories requiring to be disclosed are simply too broad or insufficiently filtered.
I do not accept this submission.
In the first place, it is hardly conceivable that Lord Reed intended to effect a revolution in this branch law the law, with such far reaching results, and without acknowledging the fact.
On the contrary, it is clear that he did not.
He regarded himself as applying the established case law of the Strasbourg court.
All of the Strasbourg decisions on which he based his analysis, notably Kopp, Malone, Rotaru, Amann and MM, had been expressly based on the classic dual test of accessibility and foreseeability.
In particular, Lord Reed regarded the decision in MM as reflecting the earlier jurisprudence.
In all of these cases, safeguards were said to be required in order to constrain administrative discretions which, unless constrained, undermined the foreseeability of the relevant measures.
Lord Reeds reference to the need for precision if something is to have the character of law shows that he had the foreseeability test well in mind.
He is echoing the observations in Sunday Times, (para 49), Silver (para 88) and Malone (para 70), that a person must be able to discover from the law itself precisely what effect, in the circumstances of his case, its application will have upon him.
Secondly, in distinguishing between the legality test and the proportionality test, Lord Reed pointed out at para 114 that: in order for the interference to be in accordance with the law, there must be safeguards which have the effect of enabling the proportionality of the interference to be adequately examined.
I agree.
This paragraph is part of Lord Reeds defence of the decision in MM against the criticisms of counsel for the Secretary of State.
The point which he is making is that the principle of legality is concerned with the quality of the domestic measure whereas the proportionality test is usually concerned with its application in particular cases.
Unless the domestic measure has sufficient clarity and precision for its effect to be foreseeable from its terms, it is impossible for the court to assess its proportionality as applied to particular cases.
But if the effect of the measure in particular cases is clear from its terms, there is no problem in assessing its proportionality.
Thirdly, at para 119, where Lord Reed explains his disposal of the appeal, he is expressly applying MM.
That decision, as I have pointed out, had been based on the perceived absence of a clear legislative framework for the collection and storage of data (emphasis supplied) which would fall to be mandatorily disclosed under sections 113A and 113B of the Police Act 1997.
The absence of any clear legislative framework for the recording and retention of criminal records meant that the body of data falling to be mandatorily disclosed was of uncertain content.
The uncertain character of the system for retaining criminal records affected the lawfulness of their disclosure.
Hence the relevance of the indiscriminate character of the disclosure which Lord Reed criticises at para 119.
In a precedent based system, the reasoning of judges has to be approached in the light of the particular problem which was before them.
There is a danger in treating a judges analysis of that problem as a general statement of principle applicable to a whole area of law.
Lord Reeds observations in T cannot in my opinion be applied generally to the whole relationship between legality and proportionality in the Convention, even in cases where the relevant domestic rule satisfied the tests of accessibility and foreseeability.
It is noticeable that the principle of legality was stated in narrower terms by Baroness Hale, Lord Reed and Lord Hodge in their joint judgment in Christian Institute v Lord Advocate [2016] UKSC 51.
They put it in this way at paras 79 80: 79.
In order to be in accordance with the law under article 8(2) of the ECHR, the measure must not only have some basis in domestic law which it has in the provisions of the Act of the Scottish Parliament but also be accessible to the person concerned and foreseeable as to its effects.
These qualitative requirements of accessibility and foreseeability have two elements.
First, a rule must be formulated with sufficient precision to enable any individual if need be with appropriate advice to regulate his or her conduct (The Sunday Times v United Kingdom, para 49; Gillan v United Kingdom, para 76).
Secondly, it must be sufficiently precise to give legal protection against arbitrariness: [I]t must afford a measure of legal protection against arbitrary interferences by public authorities with the rights safeguarded by the Convention.
In matters affecting fundamental rights it would be contrary to the rule of law . for a legal discretion granted to the executive to be expressed in terms of an unfettered power.
Consequently, the law must indicate with sufficient clarity the scope of any discretion conferred on the competent authorities and the manner of its exercise.
The level of precision required of domestic legislation which cannot in any case provide for every eventuality depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed. (Gillan, para 77; Peruzzo v Germany, para 35) 80.
Recently, in R (T) v Chief Constable, Greater Manchester Police, this court has explained that the obligation to give protection against arbitrary interference requires that there must be safeguards which have the effect of enabling the proportionality of the interference to be adequately examined.
This is an issue of the rule of law and is not a matter on which national authorities are given a margin of appreciation.
On this analysis, with which I agree, the statements in T about the need for safeguards against arbitrary interference with Convention rights, are firmly placed in their proper context as referring to safeguards essential to the rule of law because they protect against the abuse of imprecise rules or unfettered discretionary powers.
Application to the present appeals
The rules governing the disclosure of criminal records, both by ex offenders themselves under the Rehabilitation of Offenders Act 1974 and by the Disclosure and Barring Service and AccessNI under the Police Act 1997, are highly prescriptive.
The categories of disclosable convictions and cautions are exactly defined, and disclosure in these categories is mandatory.
Within any category, there is no discretion governing what is disclosable.
There is no difficulty at all in assessing the proportionality of these measures because, subject to one reservation (see the following paragraph), their impact on those affected is wholly foreseeable.
The one reservation arises from a submission made to us that on an application for an enhanced criminal record certificate under section 113B of the Police Act, it would be open to a chief officer of police, if he thought that it ought to be included, to call for the inclusion in the certificate of a conviction or caution which was not a relevant matter because it did not fall within any of the defined categories of disclosable conviction under section 113A(6).
I assume (without deciding) that this course was open to the chief officer.
But it would not deprive the legislation of the quality of law, because section 113B(4A) requires chief officers to exercise this function having regard to statutory guidance published by the Secretary of State.
This provision was inserted by the Protection of Freedoms Act 2012, which was shortly followed by the publication of detailed guidance in July of that year.
It is well established that guidance provided for by statute may constitute law for the purpose of the Convention: R (Purdy) v Director of Public Prosecutions [2010] AC 345, para 47 (Lord Hope).
The judgment of the chief officer is subjected to carefully drawn constraints that themselves have the quality of law.
In these circumstances, the only basis on which it could be said that the legislation lacks the quality of law is that the content of the classes of criminal record available for mandatory disclosure is itself uncertain, because of the uncertain or discretionary character of the rules governing their retention in the Police National Computer, or the Causeway System which serves the same purpose in Northern Ireland.
This was, as we have seen, the criticism made of the earlier version of the legislation as it applied in Northern Ireland, by the Strasbourg court in MM.
In the three English cases it was argued in the Court of Appeal that the retention of their records on the Police National Computer was itself a breach of article 8 of the Convention.
The argument was rejected and has not been repeated before us.
It would not in any event have affected the legality of the system of disclosure for the following reason.
As I have pointed out above (para 26), what is consistent with the legality test at the stages of collection and retention, may depend on how much of it is liable to be disclosed under the Police Act.
The reason why the uncertain content of the criminal record database was so significant in MM was that at the relevant time any conviction or caution on the database was liable to indiscriminate disclosure, without exception.
That has not been the case either in England and Wales or in Northern Ireland since 2014.
It is no longer correct to say, as Lord Reed quite rightly did about the unamended scheme considered in T (para 119), that the statutory scheme fails to draw distinctions by reference to the nature of the offence, the disposal of the case or the time which has elapsed since the offence took place.
It is still the case that it fails to draw distinctions based on the relevance of the conviction to a potential employer on more general grounds; and it still does not provide a mechanism for the independent review of disclosure.
However, even on the most expansive view of what was decided in T, nothing in that case suggests that these two factors are on their own enough to deprive the legislation of the quality of law.
The current legislation distinguishes, for the purpose of disclosure, between different categories of conviction or caution, depending on the gravity of the offence, the age of the offender at the time and the number of years which have passed.
Of course, there may be arguments for more or fewer, or wider or narrower categories, but the legality test is a fundamentally unsuitable instrument for assessing differences of degree of this kind.
A decision that the current regime governing retention and disclosure of criminal records lacked the quality of law would mean that it would be incompatible with the Convention even if, hypothetically, it could be shown that nothing short of it would sufficiently protect children and vulnerable adults from substantial risks of abuse or protect the public interest in the appointment of suitable people to highly sensitive positions.
I decline to accept that proposition.
It would have the practical effect of equating the right of privacy with such absolute provisions of the Convention as the prohibition of torture and slavery, when the terms of article 8 show that the right of privacy is qualified.
I conclude that the current scheme of disclosure under the Rehabilitation of Offenders Act 1974 (as amended) and the Police Act 1997 (as amended), and the corresponding legislation in Northern Ireland, are in accordance with the law for the purposes of article 8 of the Convention.
Proportionality
There are, as it seems to me, only three ways in which the question of disclosing criminal records of candidates for sensitive occupations could have been addressed: (i) by legislating for disclosure by reference to the pre defined categories of offence, offender or sentence in the legislation as it stands; (ii) by legislating for disclosure by reference to some differently drawn categories of offence, offender or sentence; or (iii) by legislating for disclosure by reference to the circumstances of individual cases, as ascertained by some process of administrative review.
Accordingly, two questions fall to be decided.
The first is whether the legislation can legitimately require disclosure by reference to pre defined categories at all, as opposed to providing for a review of the circumstances of individual cases.
If it can, then the second question is whether the boundaries of these categories are currently drawn in an acceptable place.
It is common ground that, for the purpose of assessing the proportionality of the scheme, the legislature and ministers exercising statutory powers have a margin of judgment, within limits.
I shall deal first with the question whether the legislation can legitimately require disclosure by reference to pre defined categories at all, rather than the circumstances of each case.
If not, then manifestly the present legislative scheme will not pass muster.
In principle, the legitimacy of legislating by reference to pre defined categories in appropriate cases has been recognised by the Strasbourg court for many years.
The fullest modern statement of the law is to be found in its decision in Animal Defenders International v United Kingdom (2013) 57 EHRR 21, where the court summarised the effect of a substantial body of earlier case law.
At paras 106 110, the court observed: 106.
It is recalled that a state can, consistently with the Convention, adopt general measures which apply to pre defined situations regardless of the individual facts of each case even if this might result in individual hard cases 107.
The necessity for a general measure has been examined by the court in a variety of contexts such as economic and social policy and welfare and pensions.
It has also been examined in the context of electoral laws; prisoner voting; artificial insemination for prisoners; the destruction of frozen embryos; and assisted suicide; as well as in the context of a prohibition on religious advertising. 108.
It emerges from that case law that, in order to determine the proportionality of a general measure, the court must primarily assess the legislative choices underlying it.
The quality of the parliamentary and judicial review of the necessity of the measure is of particular importance in this respect, including to the operation of the relevant margin of appreciation.
It is also relevant to take into account the risk of abuse if a general measure were to be relaxed, that being a risk which is primarily for the state to assess.
A general measure has been found to be a more feasible means of achieving the legitimate aim than a provision allowing a case by case examination, when the latter would give rise to a risk of significant uncertainty, of litigation, expense and delay as well as of discrimination and arbitrariness.
The application of the general measure to the facts of the case remains, however, illustrative of its impact in practice and is thus material to its proportionality. 109.
It follows that the more convincing the general justifications for the general measure are, the less importance the court will attach to its impact in the particular case 110.
The central question as regards such measures is not, as the applicant suggested, whether less restrictive rules should have been adopted or, indeed, whether the state could prove that, without the prohibition, the legitimate aim would not be achieved.
Rather the core issue is whether, in adopting the general measure and striking the balance it did, the legislature acted within the margin of appreciation afforded to it.
The courts reference in para 108 to the risk of uncertainty is supported by a footnote citation of its earlier decision in Evans v United Kingdom (2008) 46 EHRR 34.
In that case, it held that the absence of any provision for individual scrutiny in legislation requiring the consent of both parties to the implantation of stored embryos was consistent with article 8 of the Convention.
The Grand Chamber found (para 60) that strong policy considerations underlay the decision of the legislature to favour a clear or bright line rule which would serve both to produce legal certainty and to maintain public confidence in the law in a sensitive field.
It went on to observe, at para 89: While the applicant criticised the national rules on consent for the fact that they could not be disapplied in any circumstances, the court does not find that the absolute nature of the law is, in itself, necessarily inconsistent with article 8.
Respect for human dignity and free will, as well as a desire to ensure a fair balance between the parties to IVF treatment, underlay the legislatures decision to enact provisions permitting of no exception to ensure that every person donating gametes for the purpose of IVF treatment would know in advance that no use could be made of his or her genetic material without his or her continuing consent.
In addition to the principle at stake, the absolute nature of the rule served to promote legal certainty and to avoid the problems of arbitrariness and inconsistency inherent in weighing, on a case by case basis, what the Court of Appeal described as entirely incommensurable interests.
In the courts view, these general interests pursued by the legislation are legitimate and consistent with article 8.
In those cases where legislation by pre defined categories is legitimate, two consequences follow.
First, there will inevitably be hard cases which would be regarded as disproportionate in a system based on case by case examination.
As Baroness Hale observed in R (Tigere) v Secretary of State for Business, Innovation and Skills [2015] 1 WLR 3820, para 36, the Strasbourg courts jurisprudence recognises that sometimes lines have to be drawn, even though there may be hard cases which sit just on the wrong side of it.
Secondly, the task of the court in such cases is to assess the proportionality of the categorisation and not of its impact on individual cases.
The impact on individual cases is no more than illustrative of the impact of the scheme as a whole.
Indeed, as the Strasbourg court pointed out at para 109 of Animal Defenders, the stronger the justification for legislating by reference to pre defined categories, the less the weight to be attached to any particular illustration of its prejudicial impact in individual cases.
In my judgment, the legislative schemes governing the disclosure of criminal records in England and Wales and Northern Ireland provide as good an example as one could find of a case where legislation by reference to pre defined categories is justified.
I reach that view for four main reasons.
First, it is entirely appropriate that the final decision about the relevance of a conviction to an individuals suitability for some occupations should be that of the employer.
Only the employer can judge whether the particular characteristics of the particular job make it inappropriate to employ the particular ex offender.
Very often, this will be a judgment that the employer makes in the course of discussion with the candidate in the light of what is disclosed.
The employer will bear the responsibility for the consequences of its choice, and in sensitive appointments the responsibility may be a heavy one.
In order to discharge that responsibility with the thoroughness that the public interest requires, the employer must have access to potentially relevant information about a candidates past.
He may end up by disregarding some or all of it as irrelevant or insufficiently weighty.
But unless the decision is to be taken out of his hands, he must be told about any criminal record which might reasonably influence him, even if further consideration or discussion of the circumstances with the candidate may ultimately cause him to disregard or attach limited weight to it.
By comparison, the administrative authorities responsible for disclosure know only (i) the job title, which usually gives only the most general notion of what the job entails; and (ii) the broad category of offence for which the candidate was convicted or cautioned, the implications of which may be affected by a wide variety of mitigating or aggravating circumstances that are not apparent from the criminal record database.
A system of administrative review on the application of the candidate may be possible.
It has existed in Northern Ireland since 2016.
Such a system enables the disclosure authority to take into account the candidates representations.
But it cannot enable the authority to take over the employers function of assessing the candidates suitability for the particular employment.
It might be possible to design a system under which rather more information about the job was supplied to the disclosure authority than is provided for under the forms currently prescribed.
It might be possible to design a system under which the disclosure authority could call for further information from the employer, but that would give the game away.
The employer would know that there was something there, and the consequence for the candidate would in many cases be worse than disclosure of what might turn out to be a very minor offence.
None of these possibilities can realistically be thought to displace the employers judgment of the candidates suitability.
It follows that it cannot be right to say that as a matter of law the United Kingdom must have a scheme of disclosure which depends on an examination of the circumstances of individual cases by someone other the employer.
Secondly, the objection to disclosure by category is based on the argument that employers cannot be trusted to take an objective view of the true relevance of a conviction.
But the material available to support that objection is distinctly thin.
There is some survey evidence which is said to support it, although the generality and hypothetical character of the questions and the very summary form of the answers make it hard to attach much weight to it.
Lord Neuberger suggested in R (L) v Comr of Police of the Metropolis (Secretary of State for the Home Department intervening) [2010] 1 AC 410 at para 75 that in the majority of cases the disclosure of any criminal record would be something close to a killer blow.
However, as this court recently pointed out in R (AR) v Chief Constable of Greater Manchester Police [2018] 1 WLR 4079, para 75, it is far from clear on what if any empirical evidence Lord Neubergers observation was made.
Realistically, it must be assumed that some employers will take the line of least risk, and decline to employ ex offenders on principle, especially if there is an alternative candidate without a criminal record.
But the evidence before us does not bear out the suggestion that this is the norm.
Under sections 113A(2) and 113B(2), applications for criminal record certificates must be made or countersigned by a registered body.
Employers and the registered bodies who sponsor their applications are required to comply with a Code of Practice issued by the Secretary of State under section 122 of the Police Act 1997.
Registered bodies may lose their registration if they fail to do this themselves and to enforce the code on employers.
The Code of Practice requires employers, among other things, to have a written policy, available to candidates on request, concerning the suitability of ex offenders, to notify candidates of the potential impact of a criminal record and to discuss with candidates the content of any disclosure before withdrawing an offer of employment.
There is no evidence before us that the Code of Practice is ignored on a significant scale, either in letter or in spirit.
A high proportion of employers in cases where criminal record certificates are required will in any event be in the public sector, and they are particularly likely to comply.
But, be all that as it may, for as long as the employer has the ultimate right to decide and the legal responsibility to decide carefully, and is the only person in a practical position to do so, the risk that some employers may take too absolute a line is inescapable.
Thirdly, in this context, the value of certainty is particularly high.
The regimes governing disclosure by the candidate under the Rehabilitation of Offenders Act and by the Disclosure and Barring Service or AccessNI under the Police Act are carefully aligned.
Any legislation governing disclosure under the Police Act must take account of the fact that the candidate for sensitive positions will generally have been asked to disclose past convictions and cautions voluntarily.
Section 4 of the 1974 Act entitles the candidate to treat that request as not relating to spent convictions, subject to exceptions identified in subordinate legislation.
Those spent convictions which are excluded from section 4 and therefore disclosable by the candidate himself must necessarily be identified by category.
There is no room for a case by case review of the particular facts in that context, because candidates must know where they stand at the time when they complete the application form, ie before any application is made for disclosure under the Police Act.
The offences falling to be disclosed under the Police Act must substantially correspond to those disclosable by the candidate under the Rehabilitation of Offenders Act.
A regime for disclosure by the Disclosure and Barring Service or AccessNI which allowed for discretionary exceptions dependent on the facts of the case would not help the candidate if he has already had to disclose all convictions in the relevant category himself.
What this suggests is that any advantages of an administrative review of the circumstances of individual cases will have been gained at the expense of foreseeability.
This has a significant cost to the candidate himself.
It will be apparent that the justification for legislating by reference to categories of offence or offender is much more than a question of administrative convenience or practicality.
It goes to the whole purpose of the scheme, which is to enable employers properly to perform their function of vetting candidates for sensitive occupations, and to enable candidates themselves to know what is disclosable, in the first instance by themselves.
There are, however, and this is the fourth reason, important issues of practicality involved.
Some four million applications for criminal record certificates are made every year in England and Wales.
They have to be dealt with promptly, because a conditional offer of employment will commonly have been made to the candidate.
A system of individual assessment would require an assessment to be made or reviewed according to, among other things, the circumstances of the offence, the sentencing remarks of the judge, any relevant mitigating or aggravating factors, and presumably any representations of the candidate.
The evidence on behalf of the Secretary of State is that this is not a practical proposition in the case of a volume of disclosure applications as large as that in England and Wales.
The view taken by ministers was therefore that a mechanical process of disclosure by category was the only one consistent with basic levels of efficiency.
Of course, beyond a certain point, administrative efficiency cannot justify visiting an injustice upon candidates.
But it is particularly difficult for a court to determine where that point lies.
It is true that any administrative problems appear to have been overcome in Northern Ireland.
But Northern Ireland is a much smaller jurisdiction.
Taking these considerations together, they suggest that although it may be possible to abandon category based disclosure in favour of a system which allowed for the examination of the facts of particular cases, there would be a cost in terms of protection of children and vulnerable adults, foreseeability of outcome by candidates, consistency of treatment, practicality of application, and delay and expense, without necessarily achieving much more for ex offenders than the current system.
Once it is accepted that a category based scheme of disclosure is justifiable, it must inevitably follow that some candidates will find themselves in a category apparently more serious than the facts of their particular case really warrant.
The cases which have given rise to these appeals illustrate the point.
G was reprimanded at the age of 13 for offences of sexual activity with a child.
P received a caution for theft and was convicted shortly afterwards of another offence of theft.
W was convicted of assault occasioning actual bodily harm.
These are all, in the generality of cases, serious offences which in a category based system would rightly be disclosable in connection with a sensitive occupation, especially one involving contact with children or vulnerable adults.
In each case, it is only the detailed circumstances that show that the actual offence was very minor.
Conversely, Ms Gallagher was convicted of carrying children under 14 without a seatbelt, and convicted again of the same offences two years later.
This is a minor offence, but if the job for which Ms Gallagher had applied had involved driving children it would have been difficult to justify withholding these convictions from a potential employer.
Some employers might legitimately be concerned that her record disclosed a more general lack of concern with safety which was unacceptable to them.
Against that background, I turn to the next question, which is whether the legislation before us draws the boundaries of the relevant categories in an acceptable place.
As it stood at the relevant time, the statutory schemes in both England and Wales and Northern Ireland substantially reflected the recommendations of Ms Sunita Mason.
She was an experienced district judge, a former chair of the Law Societys Family Law Committee and the Governments Independent Adviser for Criminality Information Management.
Ms Mason was asked in 2009 to conduct a review of the retention and disclosure of criminal records held on the Police National Computer.
Her report, A Balanced Approach, was published in March 2010.
It recommended that disclosures to employers should be filtered and that a panel representing the various interested parties should advise on the filtering rules.
The Secretary of State subsequently established the Criminal Records Review to make proposals on the balance between respecting civil liberties and protecting the public.
That review was also conducted by Ms Mason, in conjunction with the Independent Advisory Panel for the Disclosure of Criminal Records.
Her two reports, published in February and December 2011, took account of the views of a broad range of experts and consultees drawn from the criminal justice system, the police and the judiciary, the teaching profession, and NGOs involved with children, vulnerable adults and ex offenders.
It was also informed by summaries of the disclosure systems operating in 26 other countries.
Ms Mason made proposals for removing old and minor offences from the scope of disclosable convictions and cautions.
The Panel recommended that spent convictions and cautions should be filtered by category, according to the period of time which had elapsed, that particular care should be taken before considering any sexual, drug related or violent offence type for filtering, that where a person has received a conviction or caution for any offence which is not categorised as minor, all his convictions and cautions (including minor ones) should be disclosed, and that the filtering rules should be both simple and understandable to individuals who are users and/or customers of the disclosure service.
The Panel thought that extra consideration should be given to minor offences committed by persons under the age of 18.
Although agreed on the principles, however, the Independent Advisory Panel did not agree on the criteria.
The recommendations concerning these were accordingly Ms Masons.
She proposed the disclosure of all convictions categorised as not being minor, all convictions where there was more than one, and the filtering out of single minor spent convictions by adults after three years and by persons under the age of 18 after six months.
She proposed that further consideration should be given to the problems of defining minor offences.
The problems of defining minor offences are described in a witness statement of Mr John Woodcock, then Head of Criminal Records Policy within the Safeguarding and Public Protection Unit of the Home Office.
In summary, the two main criteria available were the character of the offence as defined by law and the severity of the sentence, or some combination of the two.
Each of these criteria was liable to produce capricious results at the margins, as Mr Woodcock demonstrates.
I have already referred to those associated with the character of the offence.
The use of sentencing as a criterion was also problematic.
This was because mitigating factors affecting sentence will not necessarily be relevant to the assessment of the risks associated with sensitive employments.
Moreover, every additional refinement added to the system to make it more accurate, was liable also to make it more complex and less easy for candidates to understand.
The filtering criteria proposed by Ms Mason were adopted by ministers in framing the amendments to the scheme in 2013, except that the periods of currency adopted for single minor offences were longer.
I have summarised the criteria on which minor offences were filtered out of criminal records at para 9 above.
It was based on a combination of (i) the sentence (all offences resulting in a custodial sentence were disclosable), (ii) the legal definition of the offence (the sexual and violent offences listed in section 113A(6D) and in Schedule 15 to the Criminal Justice Act 2003 were disclosable in all cases), (iii) the period which had elapsed since the conviction or caution and (iv) the age of the offender at the time of the disposal.
In this form, the statutory orders were approved by Parliament under the positive resolution procedure, with bipartisan support.
As the Strasbourg court pointed out in Animal Defenders (para 108), the assessment of the defining factors in a category based scheme is a matter for the state, and the quality of the examination of the options is likely to be important.
I have summarised the history of the process which led to the current legislative scheme in order to make two points.
First the scheme is the result of substantial research and intensive consultation with a wide range of interested and expert groups and individuals.
Secondly, it is apparent that while there is broad agreement on the need for a category based system of disclosure and the basic principles which should govern it, there is no consensus about where the lines should be drawn.
This is not particularly surprising, because there is no solution which could satisfy all of the main desiderata in the design of such a system.
No one suggests that the courts can or should design the system themselves in proceedings for judicial review.
The function of the courts is an essentially negative one, namely to identify which schemes are incompatible with the Convention.
At the same time, a court can only be satisfied that a particular scheme is incompatible with the Convention if it is in a position to say what is wrong with it.
What is wrong with the design of the categories employed in the legislative scheme before us? On the footing that disclosure by categories is justified in principle, the respondents objections to the current system really amount to saying that the balance between the risk of blighting the prospects of ex offenders and the risk of appointing unsuitable persons to sensitive positions has been drawn in a place which puts too much emphasis on the latter and not enough on the former.
They also say that the balance has been drawn in a different way in Northern Ireland and Scotland.
Yet a balance of this kind necessarily involves a difficult value judgment.
All that a judge can say is that he or she would have drawn it in a different place.
But that, with respect, is not the test.
We may think that a better scheme could have been devised or that the categories could have been differently drawn, or that too much weight has been given to the risk of unsuitable appointments and not enough to the rehabilitation of offenders.
A more granular categorisation has been applied in Scotland to cases involving risks to vulnerable groups since 2007, and a system of administrative review on the application of an ex offender has existed in Northern Ireland since 2016.
There may be lessons to learn from their experience.
But none of this means that the scheme lies outside the margin of judgment properly allowed to the legislator or the Secretary of State on whom the legislator has laid the task of defining the exceptions to the rehabilitation regime.
In my judgment it is not possible for us to say, consistently with the proper role of a court of review, that the carefully drawn categories employed in this scheme are disproportionate.
To this analysis, I would make two exceptions.
The first concerns the multiple conviction rule.
Sections 113A(3) and (6)(b) and 113B(3) and (9)(b) of the Police Act 1997 provide that where a person has more than one conviction of whatever nature, any conviction of whatever nature is a relevant matter falling to be disclosed in a criminal record certificate.
Unlike the other relevant matters calling for disclosure, the multiple conviction rule does not, properly speaking, define a category of offence or offender.
It is in reality an aggravating factor affecting the significance of an offence.
Its rationale is that the criminal record of a serial offender is more likely to be relevant to his suitability for a sensitive occupation, because the multiplicity of convictions may indicate a criminal propensity.
In itself, that is an entirely legitimate objective of a legislative provision of this kind.
The rule as framed is, however, a particularly perverse way of trying to achieve it.
It applies irrespective of the nature of the offences, of their similarity, of the number of occasions involved or of the intervals of time separating them.
As framed, therefore, the rule is incapable of indicating a propensity.
It may coincidentally do so in some cases, but probably does not in a great many more.
Its eccentric consequences may be illustrated by the facts of the two appeals in which the multiple conviction rule was the basis on which disclosure was required, those of P and Lorraine Gallagher.
In Ps case the two minor thefts for which she received a caution and a conviction were only disclosable because she had also failed on the second occasion to surrender to her bail.
These offences were not only too minor but too disparate to suggest a propensity to even the most suspicious mind.
As to Ms Gallagher, I have already observed that her failure on two occasions to secure children in the back of her car might have been relevant to her proposed employment if it had involved driving children about.
But, even if she had not committed a further offence in 1998, her convictions of 1996 would have been disclosable simply because there were four unsecured persons in the car at the time, each of whom gave rise to a distinct conviction.
A rule whose impact on individuals is as capricious as this cannot be regarded as a necessary or proportionate way of disclosing to potential employers criminal records indicating a propensity to offend.
The second exception concerns warnings and reprimands administered to young offenders under sections 65 and 66 of the Crime and Disorder Act 1998 replaced, since 2013, by youth cautions under section 66ZA.
Warnings and reprimands were not a penal procedure.
As Lord Bingham put it in relation to warnings in R (R) v Durham Constabulary [2005] 1 WLR 1184 (HL), although they required the offender to have admitted the offence, they constituted a preventative, curative, rehabilitative or welfare promoting disposal: see paras 14 15.
A caution administered to an adult requires consent.
However, a warning or reprimand given to a young offender whose moral bearings are still in the course of formation, requires no consent and does not involve the determination of a criminal charge.
Its purpose is wholly instructive, and its use as an alternative to prosecution is designed to avoid any deleterious effect on his subsequent life.
Its disclosure to a potential employer would be directly inconsistent with that purpose.
In my view the inclusion of warnings and reprimands administered to a young offender among offences which must be disclosed is a category error, and as such an error of principle.
I would expect the same to be true of the current regime governing youth cautions, but we were not addressed on that question and it is neither necessary nor appropriate to decide it on this appeal.
Application to the present appeals and disposal
Ps convictions and caution were disclosable only by virtue of the multiple conviction rule.
In England and Wales, the rule requiring disclosure of the entire record where there are multiple convictions is embodied in primary legislation, namely section 113A(6)(b) of the Police Act 1997 (as amended).
The Divisional Court made a declaration of incompatibility in respect of that provision, which was affirmed by the Court of Appeal.
The Secretary of States appeal against that order must be dismissed, albeit on grounds narrower than those of the Court of Appeal.
That leaves to be considered in the case of P the corresponding exclusion from section 4 of the Rehabilitation of Offenders Act 1974, which is contained in article 2A(3)(c) of the Rehabilitation of Offenders Act 1974 (Exceptions) Order (SI 1975/1023), as amended with effect from 2014.
Since the multiple conviction rule depends on subordinate legislation, it was open to the Divisional Court to quash article 2A(3)(c) as an unlawful act, and it was invited to do so.
The Divisional Court declined the invitation and contented themselves with a declaration that the amended 1975 Order could not be read down so as to be compatible with article 8.
The Court of Appeal dismissed Ps cross appeal on that point.
In both cases, the reason was that while the amendment was incompatible with article 8 so far as it was applied to P, it would not be so in all cases.
Mr Southey QC, who appeared for P, has pursued his cross appeal before us.
The reasoning of the Divisional Court and the Court of Appeal gives rise to difficulty on the footing (accepted by them) that the whole legislative scheme lacks the quality of law, for as I have explained that is an all or nothing question.
However, I have concluded that it does have the quality of law, and that the only objection to article 2A(3)(c) of the amended 1975 Order is that it is disproportionate.
In a case where legislation by category is appropriate, as I have held it to be in this case, the fact that the categorisation may bear disproportionately on the complainant is not decisive: see para 49 above.
What is disproportionate is the creation by article 2A(3)(c) of the amended 1975 Order of a category of disclosable convictions and cautions which depends on the multiple conviction rule.
On that footing it would be open to this court to quash that article.
Nonetheless, the making of such an order is discretionary, and I would decline to make it in this case.
The reason is that it would introduce a discrepancy between the disclosures required of the Disclosure and Barring Service under the Police Act 1997 (the relevant provisions of which must stand unless and until amended or repealed by Parliament) and the disclosure required of the ex offender under the Rehabilitation of Offenders Act 1974.
This would authorise the ex offender to withhold disclosure of something that would then have to be disclosed in a certificate issued by the Disclosure and Barring Service.
In the circumstances, the appropriate course would be simply to vary the order of the Divisional Court by adding a declaration that article 2A(3)(c) is incompatible with article 8 of the Convention.
Lorraine Gallaghers case also turns on the multiple convictions rule.
As it happens, the disclosure made no difference to the fate of her job application in 2014, because it is clear from the uncontentious facts that the job offer was withdrawn because of the concealment of the 1998 convictions and not because of the criminality disclosed in the certificate.
She is, however, entitled to relief, because no disclosure would have been made but for section 113A(6)(b) of the Police Act 1997 (as amended) and article 1A(2)(c) of the Rehabilitation of Offenders (Exceptions) Order (Northern Ireland) 1979 (SR(NI) 1979/195) (as amended) (which corresponds to article 2A(3)(c) of the 1975 Order in England and Wales).
Treacy J in the High Court in Northern Ireland made two orders.
The first order dealt only with Ms Gallaghers application for judicial review of the automatic disclosure of her record under the Police Act 1997 (as amended).
It simply allowed the application without any further relief.
The second order dealt in addition with the position under the Rehabilitation of Offenders (Exceptions) Order (Northern Ireland) 1979 (as amended).
It declared in paragraph (a) that the 1979 Order violated Ms Gallaghers rights under article 8 because it fails the test of necessity; and in paragraph (b) that both the 1979 Order (as amended) and Part V of the Police Act 1997 (as amended) violated Ms Gallaghers rights under article 8 for the additional reason that they lacked the quality of law.
The Court of Appeal of Northern Ireland dismissed the Secretary of States appeal.
There is no cross appeal in Ms Gallaghers case.
It follows from the conclusions that I have reached that I would vary Treacy Js second order so as to limit paragraph (a) of his declaration to article 1A(2)(c) of the 1979 Order (the only provision relevant to her case); and to delete paragraph (b).
In Gs case, Blake J declared (a) that Part V of the Police Act 1997 (as amended) was incompatible with article 8 of the Convention to the extent that it required the mandatory disclosure of his reprimand for offences contrary to section 13 of the Sexual Offences Act 2003; and (b) that regulations made under the Rehabilitation of Offenders Act 1974 required amendment in the light of (a).
The Court of Appeal affirmed declaration (a) and set aside declaration (b).
There is no cross appeal.
For the reasons which I have given, which are narrower than those of the Court of Appeal, I would dismiss the Secretary of States appeal.
In Ws case, his conviction for assault occasioning actual bodily harm has not been disclosed.
His concern is with its prospective disclosure were he to apply for a teaching job.
Assault occasioning actual bodily harm is an offence specified in Schedule 15 to the Criminal Justice Act 2003.
As such it is excluded from section 4 of the Rehabilitation of Offenders Act 1974 (as amended), by article 2A(5)(d) of the 1979 Order, and falls to be disclosed in a Criminal Record Certificate under the corresponding provision of the Police Act 1997 (as amended).
Simon J, who heard Ws application for judicial review in the High Court, dismissed it, but the Court of Appeal allowed the appeal on proportionality (as well as legality) on the ground that it was difficult to see how publication of this detail, 31 years on, is relevant to the risk to the public, or proportionate and necessary in a democratic society.
I regret that I am unable to agree, essentially for the reason given by Simon J. Once it is accepted (as I have accepted) that disclosure may properly be required by categories, the question is whether the choice of category is proportionate, not whether it impacted disproportionately on particular cases.
Disclosure by categories must inevitably produce a disproportionate impact in some cases.
In my opinion, it was legitimate to include assault occasioning actual bodily harm among the offences which were sufficiently serious to require disclosure.
It is a violent offence which may be extremely serious.
As Simon J pointed out, it may attract an extended sentence of imprisonment.
It was also legitimate not to include a temporal limit in the definition of the category of violent or sexual offences requiring disclosure.
Any temporal limit would have risked the non disclosure of the worst cases in the category.
The limit would presumably have had to vary with the offence.
There would be complex additional problems of definition, thereby making the scheme notably more complex than it already is.
For example, a provision imposing a temporal limit on serious offences would presumably have had to differentiate between cases where the offender went on to commit further such offences and cases where (like W) he did not.
I cannot regard the existing categorisation as illegitimate, or as notably more problematical than any other categorisation.
Hard cases like Ws must ultimately be left to the judgment of employers.
I have given my reasons for believing that in the generality of cases they can and must be trusted to exercise that judgment responsibly and in accordance with the statutory guidance given to the registered persons who sponsor them.
LADY HALE: (with whom Lord Carnwath agrees)
This is a very troubling case.
In R (T) v Chief Constable of Greater Manchester Police (Liberty intervening); R (B) v Secretary of State for the Home Department (Liberty intervening) [2014] UKSC 35; [2015] AC 49 (hereafter T), the majority of this court held that the statutory scheme for the disclosure of convictions, cautions and reprimands under sections 113A and 113B of the Police Act 1997 constituted an interference with the right to respect for private life, protected by article 8.1 of the European Convention on Human Rights, which was not in accordance with the law, as an interference is required to be before it can be justified under article 8.2 (set out in full in para 11 by Lord Sumption).
It followed that those sections had to be declared incompatible with the Convention rights, under section 4 of the Human Rights Act 1998.
The court was unanimously of the view that those sections were also incompatible because, in the cases before the court and in many other cases, the interference was disproportionate that is, not necessary in a democratic society, although its aims were legitimate.
Both the Court of Appeal in Northern Ireland, in the case of Lorraine Gallagher, and the Court of Appeal of England and Wales, in the cases of P, G and W, took the view that it followed from this courts decision in T that the amended schemes (described by Lord Sumption in para 9) also failed the requirement that they be in accordance with the law in certain respects.
No party to this appeal has invited this court to depart from the ratio of the decision in T: indeed, as Lord Sumption points out in para 15, it is our duty to follow it unless (which is not suggested) the Practice Direction of 1966 applies.
There is no doubt that the ratio of T is that the scheme as it then stood was not in accordance with the law.
The question which divides this court is whether it follows that the scheme as it now stands also fails that test.
This is no easy question.
The scheme as it stood in T gave the authorities responsible for providing criminal record certificates under section 113A and enhanced criminal record certificates under section 113B of the 1997 Act no discretion: all convictions, cautions, warnings and reprimands recorded on the Police National Computer had to be disclosed (there was and is a discretion as to the additional material which may be disclosed in an enhanced certificate).
The schemes as they now stand also give the authorities no discretion as to what has to be disclosed: but they contain more nuanced rules, devised after a careful process described in detail by Lord Kerr in paras 117 to 142, as to what has to be disclosed, supplemented, in the case of Northern Ireland, by the possibility of independent review of the decision to disclose in individual cases, described by Lord Kerr in paras 143 to 146.
Is this sufficient to invest the scheme with the quality of legality required by the Convention?
I am persuaded that it is.
The principles to be derived from the Strasbourg cases were to my mind accurately summarised in the joint judgment of Lord Reed, Lord Hodge and myself in Christian Institute v Lord Advocate [2016] UKSC 51; 2017 SC (UKSC) 29, at paras 79 80, cited and agreed with by Lord Sumption at para 41.
The foundation of the principle of legality is the rule of law itself that people are to be governed by laws not men.
They must not be subjected to the arbitrary that is, the unprincipled, whimsical or inconsistent decisions of those in power.
This means, first, that the law must be adequately accessible and ascertainable, so that people can know what it is; and second, that it must be sufficiently precise to enable a person with legal advice if necessary to regulate his conduct accordingly.
The law will not be sufficiently predictable if it is too broad, too imprecise or confers an unfettered discretion on those in power.
This is a separate question from whether the law in question constitutes a disproportionate interference with a Convention right but the law in question must contain safeguards which enable the proportionality of the interference to be adequately examined.
This does not mean that the law in question has to contain a mechanism for the review of decisions in every individual case: it means only that it has to be possible to examine both the law itself and the decisions made under it, to see whether they pass the test of being necessary in a democratic society.
I do not believe that (cf Lord Kerr at para 153), when applying these principles in T, at para 119, quoted by Lord Sumption in para 36, Lord Reed was holding that for the disclosure rules to meet the requirement of legality they must always draw distinctions on the basis of the nature of the offence, the disposal in the case, the time which has elapsed since the offence took place or the relevance of the data to the employment sought and that there must always be a mechanism for independent review of a decision to disclose.
He was pointing to the cumulative effect of all those deficiencies in the scheme as it then stood.
Furthermore, he was relying on the judgment in MM v United Kingdom (Application No 24029/07), judgment of 29 April 2013, where, at para 206, the shortcomings whose cumulative effect led to the finding of a violation included the absence of a clear legislative framework for the collection and storage of data, and the lack of clarity as to the scope, extent and restrictions of the common law powers of the police to retain and disclose caution data, in addition to the absence of any mechanism for independent review of a decision to retain or disclose data and the limited filtering arrangements in respect of disclosures.
He was drawing attention to the indiscriminate nature of the scheme as it then stood.
The scheme as it now stands does not have that indiscriminate nature.
It has been carefully devised with a view to balancing the important public interests involved.
In my view there are at least three of these.
There is, of course, the importance of enabling people who have committed offences, and suffered the consequences of doing so, to put their past behind them and lead happy, productive and law abiding lives.
The full account of the facts of the four cases before us, given by Lord Kerr, is ample illustration of the importance of this aim, and of the devastating effect that disclosure of past offending can have upon it.
There is, on the other hand, the importance of safeguarding children and vulnerable adults from people who might cause them harm, as well as ensuring the integrity of the practice of certain occupations and activities.
No one who has read Sir Michael Bichards Report, prompted by the murder of two Soham school girls by their school caretaker (The Bichard Inquiry Report (2004) HC 653), can be in any doubt of that.
There is also, in my view, a public interest in devising a scheme which is practicable and works well for the great majority of people seeking positions for which a criminal record certificate is required.
Neither they nor their prospective employers should have to wait too long for the results of their enquiry.
It is for that last reason that I am persuaded that it cannot be a pre requisite of any proportionate scheme that it seeks to assess the relevance of the data to be disclosed to the employment or activity in question.
There may be other contexts involving interference with article 8 rights where this would be both practicable and necessary.
But this is a scheme catering for a very large number of inquiries (four million a year in England and Wales) and a substantial number (nearly 300,000) of positive responses.
Devising a coding mechanism for the type of position applied for and then a scheme for correlating the relevance of particular offending to each position would be extremely difficult, if not impossible.
It must be borne in mind that we are by definition concerned with people who are applying for positions where such a certificate is required.
No one has suggested to us that the categories of people required to get such certificates are over broad.
Leaving it to the prospective employer to judge the relevance of the particular offending to the particular post is probably the only practicable solution, although of course I accept that employers are likely to take a precautionary approach if they have more applicants than posts available.
I am also persuaded that the only practicable and proportionate solution is to legislate by reference to pre defined categories or, as these are sometimes pejoratively described, bright line rules.
For me, the most important of the four reasons given by Lord Sumption is his third, the need for certainty (Lord Sumption at para 53).
The scheme for disclosing data held on the Police National Computer mirrors closely the scheme for requiring applicants for particular positions to disclose their convictions, cautions, warnings and reprimands, although these would otherwise be spent under the Rehabilitation of Offenders Act.
They have to know what they must disclose if they are asked.
And as a general rule they will have to do this before any application for a Criminal Record Certificate is made.
There is no room for case by case consideration unless this is open to the prospective employer at this stage.
And it would make no sense for the applicant to have to make disclosure only to find that the authorities have decided that disclosure is not warranted.
The question therefore becomes whether the categories which have in fact been chosen are themselves a proportionate response to the legitimate aims of the scheme.
For the reasons given by Lord Sumption, at para 63, I agree that the rule relating to multiple convictions, at least as currently framed, is not apt to achieve its aim of detecting a relevant propensity to commit crimes.
It is not rationally connected to the aim it is trying to achieve.
For the reasons he gives, at para 64, I also agree the inclusion of reprimands or warnings given to young offenders, even where the offending is of some seriousness, is wrong in principle.
appeals and of the cross appeal in Ps case.
LORD KERR: (dissenting) Introduction P
Lord Sumption has outlined what he has described as the essential facts in each of these appeals.
I agree with his account but consider that some further detail of the predicament that each of the appellants has faced is necessary in order to I would therefore agree with Lord Sumptions proposed disposal of these demonstrate in a concrete way the considerable impact that the operation of the disclosure regimes in England and Wales and Northern Ireland has had and will continue to have, as a result of the decision of the majority in this case, on their lives.
As Lord Sumption has said, the woman who has been referred to as P has had two encounters with the criminal law.
Both occurred in 1999.
Before considering the circumstances which gave rise to these, it is necessary to say something of Ps background.
She has a degree in education studies and languages and has obtained a certificate to teach English as a foreign language.
She has worked in Spain and Greece, teaching English.
In 1997, while teaching in Spain, P began to feel unwell.
She returned to the United Kingdom in March of that year.
On her return to this country, Ps condition worsened.
She began to hear voices and became delusional.
At first, she lived in accommodation which she described as insecure.
Over time she became homeless.
Because of her condition, she found it difficult to keep medical appointments.
While homeless, she was the victim of physical and sexual abuse and she often had money stolen from her.
Eventually, in November 2000, she was admitted to hospital and there she was diagnosed as suffering from schizophrenia.
In hospital P was prescribed medication for her condition.
When she was discharged, she had a social worker assigned to her.
She was helped to obtain self contained housing on a secure tenancy.
The social worker ensured that P received the welfare benefits to which she was entitled.
She had regular visits from a psychiatric nurse and attended appointments with a consultant psychiatrist.
As a result of all this and of her own efforts, Ps condition has been under control since 2003.
She does not need to attend a psychiatrist now.
But she sees her general medical practitioner and continues to take her medication.
She considers that she has a much greater awareness and understanding of [her] illness and treatment, and [is] able effectively to control it.
Before her admission to hospital, P was involved in two episodes of criminal activity.
On 26 July 1999, a caution was administered to her for the theft of a sandwich.
On 13 August 1999, she was arrested on a charge of shoplifting.
She had stolen a book.
P now explains this as having been prompted by her deluded belief that the books title was sending her a message.
The book, as Lord Sumption has said, cost 99p.
P was charged with the offence of theft and was due to appear at Oxford Magistrates Court on 20 September.
She did not appear and was arrested at emergency accommodation for the homeless on 1 November.
On her subsequent appearance before the court, she pleaded guilty to theft and for failing to surrender to custody in answer to the bail that had been granted on the first court appearance.
She was given a conditional discharge on each of the two offences, ordered to run concurrently for a period of six months.
P has committed no further offences.
But when she has applied for employment (paid or unpaid) she has had to produce an enhanced criminal record certificate (ECRC).
She has also felt it necessary to disclose her medical history, in order to explain her circumstances at the time that the offences occurred.
She is qualified to work as a teaching assistant but has not been able to secure a position.
Not unreasonably, she is convinced that this is because she has had to reveal her convictions and her medical background.
P is therefore a young woman who, but for the requirement that she disclose her criminal record, could be expected to contribute significantly to society and to enjoy a happy, fulfilled life.
Those opportunities are now denied her.
There is no reason to suppose that the requirement that she continue to disclose her criminal record when she applies for employment in the future will not lead to the same outcome for those applications as occurred in the past.
She is thus condemned to an indefinite period quite possibly a lifetime of disadvantage.
And for what? Because she was convicted of the most trivial of offences, committed at a time when she was seriously ill with an undiagnosed condition.
Despite Ps concerted efforts to rehabilitate and to reintegrate into society, the fact that she must reveal her previous convictions will act as a perennial inhibition on the reward that she is due for the efforts that she has made.
Her case is a classic example of the phenomenon described by Lord Wilson in para 45 of his judgment in R (T) v Chief Constable of Greater Manchester Police (Liberty intervening), R (B) v Secretary of State for the Home Department (Liberty intervening) [2015] AC 49 (hereafter referred to as T) see para 167 below.
Thus, this young woman, with so much to offer and who has overcome grievous difficulties, may forever be shut out from achieving her potential or from making the valuable contribution to society that her talents and education so clearly equip her for.
A disclosure scheme which has that effect faces significant questions as to its efficacy and proportionality.
When he was 11 years old, G engaged in what was described by the Court of Appeal as consensual [sexual activity] appearing to be a form of dares with two younger boys.
Specifically, this involved sexual touching and attempted anal intercourse.
This happened over a period of months; the other boys were then nine and eight years old.
After an inquiry by the Crown Prosecution Service and social services, G was reprimanded by Surrey police.
In 2011 G was working in a local college as a library assistant.
He was told by his employment agency that he had to undertake an enhanced Criminal Records Bureau (CRB) check because his work involved some contact with children.
At that time, he believed that the reprimand was spent. (His mother had been given a Surrey police leaflet at the time that G was reprimanded which suggested that the reprimand would be expunged from his record after he reached the age of 18 or within five years of the reprimands issue.
This was incorrect.) G proceeded to apply for the check.
In February 2012 G received a letter from the Data Bureau Supervisor for Surrey Police.
The letter informed him that the reprimand for two counts of sexual assault on a male under the age of 13 was to be disclosed as part of the enhanced CRB checking process.
The data supervisor offered to include additional information on the enhanced CRB certificate.
This would be to the effect that G was 12 at the time that the events which led to the reprimand took place (he was, in fact, 11); that the activity was consensual; that it was in the nature of dares; and was motivated by sexual curiosity and experimentation by the children.
The data supervisor followed up this letter with a further communication which acknowledged that disclosure of the reprimand was likely to cause an employer unwarranted concern.
It was hoped that the background information might allay that concern.
G decided to withdraw his application for a CRB check.
As a result, he lost his job.
He appealed under the Surrey Polices exceptional case procedure to have the reprimand deleted for the purposes of any future CRB check.
That appeal was unsuccessful.
G decided therefore not to apply for employment which required such a check to be undertaken.
It is clear that the data supervisor was fully alive to the likely impact that disclosure of Gs reprimand would have.
Obviously, he was also aware of the iniquity of that situation.
G lost a useful and fulfilling job as a result of episodes of juvenile misbehaviour.
That is indeed iniquitous.
The respondent known as W is 52 years old.
When he was 16 he was convicted of assault occasioning actual bodily harm.
He was given a conditional discharge for two years and bound over to keep the peace and be of good behaviour for a period of 12 months.
The incident in which the offence was committed involved a fight with another boy after school.
In the 32 years that have elapsed since then, W has not been convicted of any further offence and, according to the Court of Appeal, has made a success of his life.
In 2013 W began a course to obtain a certificate in English language teaching to adults.
He had to get a criminal record certificate.
This disclosed his conviction.
It did not prevent him from undertaking the course, but it is stated to be highly likely to prejudice his prospects of employment.
This contention is not disputed by the appellants.
Again, the prospect of his making a useful contribution to society has been blighted.
The loss to his community and the frustration of his worthy ambition, having applied himself to the task of acquiring qualifications at the age of 47, must again raise questions about the operation of the scheme which has brought about this unfortunate state of affairs.
This is particularly so because, as we shall see, modifications to the scheme could readily and relatively simply avoid the consequence that has accrued in his case.
Indeed, Sir James Eadie QC, for the appellants, invited this court to give its opinion on how that might be achieved see para 165 below.
For reasons that I will discuss, reasonably simple and straightforward amendments to the schemes, without in any way destroying their core purpose, can, and in my view, should be effected.
Lorraine Gallagher
Mrs Gallagher is 54 years old.
On 4 May 1996 she was driving her car the short distance from her home to a post office.
Her three children were also in the car.
None of them was wearing a seatbelt.
The car was stopped by police and Mrs Gallagher was prosecuted for her failure to wear a seatbelt and for failing to ensure that her children were wearing theirs.
She was fined a total of 85.
On 17 June 1998 Mrs Gallagher had collected her children from school and was driving home.
According to her, she and one of her children were wearing their seatbelts in the correct fashion.
Although her two sons in the rear of the car had attached their seatbelts, (unbeknownst to Mrs Gallagher, she claims) they had placed the shoulder straps of the seatbelts under their arms and this did not constitute a proper attachment.
Mrs Gallagher was again prosecuted for allowing children to be carried without properly fastened seatbelts and was fined 80.
In 2010 Mrs Gallagher started a course to obtain qualification in social care.
She successfully completed the course.
She was then employed in various capacities as an agency worker by the Western Health and Social Care Trust and registered with the Northern Ireland Social Care Council.
With the encouragement of one of her supervisors she applied for a permanent position with the Trust.
She was required to complete an application form which stipulated that she disclose all convictions and cautions that she had received.
Mrs Gallagher revealed that she had been convicted of carrying a child without a seatbelt in 1996 and fined 25.
She did not refer to the convictions in 1998, subsequently explaining that she had believed that they had been wiped and that it was not major.
An offer of a position with the trust was made to Mrs Gallagher subject to pre employment checks.
An Enhanced Disclosure Certificate (EDC) issued by AccessNI (a statutory body created to facilitate such disclosures) revealed the full extent of Mrs Gallaghers criminal convictions and the offer of employment was withdrawn by the trust in a letter dated 23 October 2014.
This made it clear that the offer was withdrawn because Mrs Gallagher had failed fully to disclose her previous convictions.
CRCs, ECRCs and EDCs before 2013/2014
The Disclosure and Barring Service (DBS) is the agency responsible for the issue of certificates under the Police Act 1997 (the 1997 Act).
Part V of that Act, together with the Rehabilitation of Offenders Act 1974 (the 1974 Act) and the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (the 1975 Order), contains the criminal records disclosure scheme.
According to the appellants, the Secretary of State for the Home Department (SSHD) and the Secretary of State for Justice (SSJ) (together the SoSs), the scheme seeks to safeguard the vulnerable and help ensure that employments, offices and licences which require a particularly high level of trust continue to command public confidence.
These aims are achieved, it is said, by providing potentially relevant criminal conviction information to prospective employers and appointing bodies.
It is a significant feature of the scheme, the SoSs claim, that it is then for those employers and appointing bodies to consider the relevance of the material by reference to the employment, licence or office that has been applied for.
Section 4(2) (3)(b) of the 1974 Act applies to such convictions as are to be treated as spent under the Act; and paragraph 3(3) (5) of Schedule 2 to the Act applies in similar fashion to cautions.
In broad summary they provide that, where a question is asked of a person about his or her criminal record, they are not required to disclose convictions which are spent and he or she is not liable for failure to do so.
These provisions also stipulate that a persons spent conviction or his caution or a failure to disclose it, cannot justify his exclusion or dismissal from a profession or employment or any action prejudicial to him in the course of his employment.
The 1975 Order created exceptions to these provisions.
Article 3 of this Order, as amended by article 4 of the Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) Order 2001 and article 4 of the Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2008 provides that a persons entitlement not to disclose either spent convictions or cautions in answer to questions does not apply to situations in which the questions are asked in order to assess his or her suitability in any one of 13 specified respects.
These include his or her suitability for admission to certain professions and for engagement on certain types of employment; his or her assignment to work with children in particular circumstances; his or her assignment to work which involves national security; or a proposed adoption of a child; and for assignment to the provision of day care.
As Lord Wilson pointed out in para 9 of his judgment in In re T (see para 147 et seq below) the shape of the 1975 Order is clear.
The circumstances in which information is sought dictate whether an exception from protection under the 1974 Act arises.
When it arises, the duty to disclose in response to the request and the entitlement of the person who has made the request to act in reliance on the disclosure or on a failure to do so are both absolute.
They are unrelated to the circumstances in which the spent conviction or the caution arose.
As Lord Sumption has pointed out (in para 8), paras 10 to 12 of Lord Wilsons judgment contain a concise and useful summary of the effect of the 1997 Act on the disclosure regime.
I do not repeat them here because they are fully quoted by Lord Sumption.
Until 29 May 2013, therefore, the scheme for the disclosure of criminal records established by Part V of the 1997 Act provided that, where an individual requested a Criminal Record Certificate (CRC) under section 113A or an Enhanced Criminal Record Certificate (ECRC) under section 113B, so long as the requirements of the legislation were met, such certificates would contain details of all convictions and cautions held on the police national computer against an individual, including those that would otherwise be spent under the 1974 Act.
As Lord Wilson pointed out, ECRCs are the subject of separate provision because they can contain what is described as non conviction information, described as soft intelligence section 113B(4) of the 1997 Act.
In Northern Ireland, before April 2014, all convictions were recorded on an EDC.
Those applying for employment for posts where an EDC was required had to self declare where an employer asked for that information.
In other words, if you applied for a post where an EDC was compulsory, you had to make a declaration about all your convictions.
Where an employer applied for information about the convictions of a prospective employee, details of all convictions and cautions were supplied.
The position in Northern Ireland is helpfully set out by Gillen LJ in his judgment in that case ([2016] NICA 42).
At para 7 he provided a short summary of the scheme that applied at the time Mrs Gallagher made her application for employment, with some passing allusions to reforms brought about in 2014: On 1 April 2008, a statutory scheme for disclosure of criminal record information had entered into force in Northern Ireland.
In April 2014, shortly after the respondent applied to the Trust, this statutory scheme was amended in light of changes to the same scheme in England and Wales.
Under the scheme, AccessNI, a branch within the appellant Department, is responsible for carrying out checks on criminal records and police information on individuals who wish to work in certain types of jobs to enable employers to make safer recruitment decisions.
The checks are carried out under Part V of the Police Act 1997 and AccessNI will then produce a Disclosure Certificate.
There are three levels of check: basic, standard and enhanced.
Enhanced checks, required for those working closely with unsupervised children and vulnerable adults, make disclosure of the full criminal history including spent and unspent convictions (subject to the filtering scheme created by the 2014 statutory reform).
In para 10, Gillen LJ observed that the parties were agreed that the key issue in the case was whether the statutory requirement that, in the case of an EDC and its parallel requirement for self disclosure, the existence of more than one conviction required the disclosure of all convictions, irrespective of their vintage or the circumstances in which they occurred, is lawful.
As Gillen LJ explained in para 11, two statutory schemes were relevant in Mrs Gallaghers case.
First, the provisions of Part V of the Police Act 1997 which (as in England and Wales) provided for the disclosure on a CRC of any conviction where the person concerned had more than one criminal conviction of any kind.
Secondly, the self disclosure arrangements under the Rehabilitation of Offenders (Exceptions) Order (Northern Ireland) 1979 (SR(NI) 1979/195) (the equivalent of the 1975 Order in England and Wales) which enabled an employer to seek information from an applicant in respect of convictions that otherwise would be regarded as spent under the Rehabilitation of Offenders (Northern Ireland) Order 1978 (SI 1978/1908) (the equivalent of the 1974 Act).
R (T) in the Court of Appeal
On 29 January 2013 in R (T) v Chief Constable of Greater Manchester Police [2013] EWCA Civ 25; [2013] 1 WLR 2515 the Court of Appeal held that the statutory regime under section 113B of the 1997 Act was disproportionate to the general legitimate aim of protecting the rights of employers and of the children and vulnerable adults for whom they were responsible.
It was also disproportionate to the particular legitimate aim of enabling employers to assess an individuals suitability for a particular kind of work.
Blanket disclosure went beyond what was necessary to achieve those aims.
It did not seek to control the disclosure of information by reference to whether it was relevant to the particular aim.
Relevance in this context depended, the Court of Appeal held, on a number of factors.
These included the seriousness of the offence, the offenders age at the time of the offence, the sentence imposed or other manner of disposal, the time lapse since the commission of the offence, whether the offender had subsequently reoffended and the nature of the work which he wished to do.
The Court of Appeal further held that a blanket requirement of disclosure was inimical to the 1974 Act and its obvious aims.
If previous convictions or cautions were irrelevant or only marginally relevant to an assessment of the suitability of an applicant for a particular post, the requirement that there be disclosure of all recordable convictions or cautions went against the interests of re integrating ex offenders into society to enable them to lead positive and law abiding lives.
The court considered that it should be possible for the legislature to produce a proportionate scheme which did not insist on an examination of the facts of every case.
In light of the failure to devise such a scheme, the regime which was then in force could not be saved merely because it provided a bright line rule which had the merit of simplicity and ease of administration.
A number of themes can be detected in the Court of Appeals judgment.
These include: (1) The disproportionality of the policy of blanket disclosure in relation to what are described as its general and particular aims; (2) The importance of connecting disclosure to the aim which the policy sought to achieve; (3) The need for the policy to be tailored to the realisation of the aim hence, the requirement to take into account factors such as the seriousness of the offence, the offenders age, the vintage of the offence, whether there had been further offences and the nature of the work applied for; (4) Regard must be had to the rehabilitative aims of the 1974 Act and the possibility that a too widely drawn system of disclosure might undermine these; and (5) The impact of a bright line rule on individual cases must be carefully assessed, notwithstanding its advantages of simplicity of application.
The respondents in the T case appealed to this court.
Before that appeal was heard, however, the SoSs laid draft orders before Parliament to amend the 1997 Act and the 1975 Order.
They were passed by both Houses by affirmative resolution, following debates on the proposed amendments and became the Police Act 1997 (Criminal Record Certificates: Relevant Matters) (Amendment) (England and Wales) Order 2013 (the 2013 Order) and the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (Amendment) (England and Wales) Order 2013.
Before dealing with the content of the amendments, it is necessary to say something about the circumstances in which they came to be made.
The background to the reforms in 2013
A review of the circumstances in which the reforms in 2013 took place must begin at a time well before the judgment of the Court of Appeal in the T case was given.
Alison Foulds, a policy official in the Sentencing Unit in the Ministry of Justice, is what is described as the Policy Lead on the Rehabilitation of Offenders Act 1974, and the leader of policy on adult custodial sentencing policy.
In witness statements produced in these proceedings, she acknowledged that the starting point was the protection which the 1974 Act provides to rehabilitated offenders from having to reveal certain past convictions and cautions once a specified period of time has passed.
She accepted that the overall purpose of the Act was to assist the reintegration and resettlement of ex offenders into employment by not requiring them or any other person to answer questions regarding their spent convictions.
As discussed above, the 1975 Order created exceptions to the Act so that, in some circumstances, spent, as well as unspent, convictions and cautions must be disclosed and may be taken into account when assessing a persons suitability for certain positions.
This is said to reflect that, while it is generally desirable to help ex offenders to obtain employment, the public must remain adequately protected.
As noted above, an application under section 113A or section 113B of the 1997 Act resulted in the issue of certificates containing details of all convictions and cautions held on the police national computer, including those that would otherwise be spent under the 1974 Act.
It was against this background that on 7 September 2009 SSHD appointed Sunita Mason as the Independent Adviser for Criminality Information Management.
As Lord Sumption has said (in para 57) she was asked to conduct a review of the retention and disclosure of records held on the police national computer.
It is important to note that this was for the express purpose of providing an impartial perspective on whether a more proportionate approach could be taken.
Her appointment had been prompted by a Court of Appeal judgment in the case of the Chief Constable of Humberside Police v Information Comr [2009] EWCA Civ 1079; [2010] 1 WLR 1136.
As Lord Sumption has said (also in para 57) Mrs Masons first report, A Balanced Approach was published in March 2010.
It recommended that information provided from the police national computer in relation to employment checks should be filtered, using specific business rules.
Specifically, however, Mrs Mason stated that the purpose of this was to ensure that employers were not given every item of criminal record information.
This advice was accepted, and Mrs Mason was appointed to chair an independent advisory panel for the disclosure of criminal records.
The panel was to provide support and expert advice to Mrs Mason with a view to improving the arrangements for disclosing criminal records, with particular emphasis on the filtering of old and minor records.
On 22 October 2010, SSHD established the Criminal Records Review whose terms of reference were to examine whether the criminal records regime strikes the right balance between respecting civil liberties and protecting the public.
It is expected to make proposals to scale back the use of systems involving criminal records to common sense levels.
Mrs Mason conducted the review.
Her report on its first phase was published on 11 February 2011.
In it she said that she was keen to ensure that the government implemented an appropriate form of filtering in the CRB process that removes conviction information that is undeniably minor, and which cannot be classed as anything other than old.
She noted that the review team was considering a mechanism to prevent old and minor convictions from being disclosed through criminal record checks and recommended that the government should introduce a filter to remove old and minor conviction information (including caution, warning and reprimand information) from criminal records checks.
She identified a number of what she described as conviction types which should always be disclosed and gave a list of examples of these.
They included: (a) assault and violence against the person; (b) affray, riot and violent disorder; (c) aggravated criminal damage; (d) arson; (e) drink and drug driving; (f) drug offences; (g) robbery; and (h) sexual offences.
In her report Mrs Mason also observed that there were a number of important opinions and views around what constitutes serious.
She gave the example of possession of a quantity of cannabis which may be considered by some as not serious but more serious by others, where individuals have regular access to controlled drugs.
She also said that it could be argued that low level convictions for violence such as common assault may become more important where the individual works with children or vulnerable adults.
The report on the second phase of the review was published on 6 December 2011, at the same time as the governments response to the review teams recommendations.
In that response, the government indicated that it would continue to consider whether to introduce a filter for old and minor conviction information from CRB checks.
On 16 December 2011 Mrs Mason made a further report to the SoSs.
She said that the review team had agreed a number of principles.
These were: (1) Filtering should include convictions, cautions, warnings and reprimands, aligned to the conviction type; (2) There should be a consultation process before a particular conviction type can be subject to filtering; (3) Extra consideration should be given to convictions, cautions, warnings and reprimands defined as minor received by individuals before their 18th birthday; (4) There should be a defined period of time after which minor convictions, cautions, warnings and reprimands are not disclosed.
This would cover the old element of the proposal; (5) The rules should ensure that no conviction is filtered out if it is not spent under the provisions of the Rehabilitation of Offenders Act; (6) Particular care should be taken before considering any sexual, drug related or violent offence type for filtering; (7) Where any conviction, caution, warning or reprimand recorded against an individual falls outside the minor definition then all convictions should be disclosed, even if they would otherwise be considered as minor; (8) The filtering rules should be both simple and understandable to individuals who are users and/or customers of the disclosure service.
So far as the implementation of those principles was concerned, however, there was no consensus among the members of the review group.
The recommendation as to the criteria to be used in applying the principles was that of Mrs Mason alone.
The criteria were: Is the conviction defined as minor? If not, then disclose; (1) (2) Does the individual have a single minor conviction? If not, then disclose; (3) Was the single minor conviction received before the person was 18? If yes, then the conviction will not be disclosed if it is spent and more than six months old; (4) Was the single minor conviction received after the person was 18? If yes, the conviction can be filtered out if it is spent and it is more than three years old.
Mrs Mason referred again to the debate as to what could properly be described as a minor offence and said this: The Group felt that any definition of minor should be set by the Government and [be] subject to a full consultation process.
However, the following small number of [conviction] types are provided as working examples of what might constitute a minor offence (subject, of course to further debate and consultation): Drunk and disorderly Offence against property; Failing to report an accident.
This rider to Mrs Masons advice was added: There will always be exceptional cases where a conviction filtered out using the standard rules is, nevertheless relevant for inclusion in a disclosure because of the particular circumstances of the post being applied for.
For that reason, it would be important to retain the capacity for the police to add such convictions back into disclosures as part of local police information.
Various possible approaches to the matter of filtering out old and minor convictions and cautions were discussed in the report.
These included linking the filtering mechanism to the seriousness of the penalty imposed for a particular offence; placing the onus on the criminal courts to decide at the point of sentencing whether or not a conviction would fall to be disclosed in a criminal records check; and leaving the decision to the police in every case, thereby harmonising the position vis a vis convictions with that under section 113B(4) of the Police Act 1997 in relation to police intelligence information.
The appellants assert that, after receiving this report, careful consideration was given to the question of how best to devise a mechanism for filtering out offences which were undeniably minor, and which could not be classified as other than old.
It is claimed that this question gives rise to serious practical difficulties.
Some of these difficulties were discussed in a witness statement of John Woodcock, then Head of Criminal Records Policy within the Safeguarding and Public Protection Unit of the Home Office, filed in the case of T. Lord Sumption has referred to this in para 58.
Mr Woodcock made the unexceptionable claim that deciding which offences were minor was not easy.
He accepted that there were good arguments in favour of recognising a connection between the vintage of the offence and its seriousness in deciding what to filter out.
Minor offences could be weeded out after five years and intermediate offences after ten years, but the exercise which this would involve added an unwelcome layer of complexity.
Mr Woodcock considered that disposal (ie the sentence imposed) rather than the type of offence committed could be used as a more reliable indicator as to whether a particular form of offending should be filtered out.
A possible model was that all cautions could be filtered out after three years, fines after five years and sentences of up to three years after seven years.
Operated inflexibly, however, such a scheme would give rise to difficulty.
There were risks of filtering out specific cases, details of which ought to be disclosed.
Mr Woodcock instanced some sexual or violent offences where, by reason of their particular circumstances, relatively light sentences might have been imposed.
One solution, he suggested, might be to exclude all offences which had a sexual or violent element.
Another option was to make the decision whether to disclose entirely discretionary.
The police could be asked to decide on a case by case basis whether a specific conviction, caution, reprimand or warning was sufficiently relevant to include in a disclosure.
In Mr Woodcocks estimation, this carried a risk of inconsistency and he thought that there would be significant resource implications for the police.
Moreover, he said, it was important that any filtering system should be reasonably straightforward and easy to understand, both for applicants and for those using disclosures as part of recruitment processes.
In one of her witness statements, Ms Foulds described the scale of the operation that would be required if police were required to deal with applications to disclose on a case by case basis.
In the year ending in August 2014, of the almost four million applications for record certificates received, 329,891 involved data contained on the police computer.
Almost 330,000 applications would have to be considered individually, therefore, if a case by case assessment of these was undertaken.
The circumstances described in paras 113 to 126 above formed a crucial part of the background to the reforms of the scheme proposed in 2013.
The other vital element of that background was, of course, the decision of the Court of Appeal in R (T).
As I have said, judgment in that case was given on 29 January 2013 and Ms Foulds has said that it informed the final policy.
The reforms effected by the 2013 Order
The essence of the proposed reforms is perhaps best captured in the statement made by the minister for the Home Department in the House of Lords.
The relevant parts of that statement are these: all cautions and convictions for serious violent and sexual offences and for certain other offences specified in the orders, such as those directly relevant to the safeguarding of vulnerable groups including children, will continue to be disclosed, as will all convictions resulting in a custodial sentence.
For all other offences, the orders provide for the following filtering rules to be applied: cautions. and equivalents, administered to a young offender will not be disclosed after a period of two years; adult cautions will not be disclosed after a period of six years; a conviction received as a young offender resulting in a non custodial sentence will not be disclosed after a period of five and a half years; and an adult conviction resulting in a non custodial sentence will not be disclosed after a period of 11 years; but all convictions will continue to be disclosed where an individual has more than one conviction recorded.
In her discussion of the impact of the proposed reforms Ms Foulds claimed that the draft Orders took into account the issues raised in the Court of Appeal judgment in T, instancing the following aspects: the disposal made; the offence committed; the age of the offenders; and the period which had elapsed between caution or conviction and the application for a CRC.
The duty facing the SoSs in devising a scheme to accommodate the decision of the Court of Appeal in T was described by Ms Foulds in the following paragraphs of her first witness statement: 37.
The task for the SSHD and the SSJ was to come up with a workable scheme, which was sufficiently nuanced and also sufficiently certain.
The scheme had to be readily understood and certain so that individuals would know what was protected from disclosure, and so that the DBS system could be changed, and certificates could still be issued automatically.
Any system has, of course, to have bright lines and it is not workable to have any discretion in relation to individual eases, or different disclosure criteria for different occupations, not least because of the sheer number of applications.
I understand that the DBS system works by automatically recognising offence codes and other information provided from the PNC.
The automated solution does not provide any mechanism to identify the specific circumstances of individual offences and this would require significant manual intervention. 38.
In relation to the amount of time which has to elapse before a caution or conviction may be protected from disclosure, we had regard to the Court of Appeals judgment.
The Court of Appeal found in one case that it was disproportionate to disclose a caution received as an adult after a period of seven years, although it did not specify what might be a reasonable period.
The filtering policy therefore allows an adult caution (for a non specified offence) to be protected from disclosure after a period of six years and after two years for a caution received as a young offender.
For convictions we added six years to the then longest rehabilitation period for a non custodial disposal which was five years, giving us a period of 11 years which had to elapse from the date of conviction before it could be protected from disclosure.
This means that, as with a caution, a period of six years has to elapse after the disposal is spent before it can be filtered out.
The period was halved for convictions received as a young offender in line with the general policy on rehabilitation periods.
The technical detail of the reforms, as enacted in the 2013 Order, is well summarised in para 11 of the judgment ([2017] EWCA Civ 321; [2018] 1 WLR 3281) of Sir Brian Leveson, the President of the Queens Bench Division, in the Court of Appeal: The revised scheme no longer requires disclosure of every spent conviction and caution but, from 29 May 2013, requires disclosure only in the following circumstances.
Any current conviction or caution, currency depending upon the period which has elapsed since the date of the conviction or caution and which differs, as a consequence of the operation of the 1974 and 1997 Acts, depending on whether, at the time of the conviction or caution, the person concerned was under 18 years of age or aged 18 or over: see the definition of relevant matter in section 113A(6)(a)(iii) and (d), a current conviction in section 113A(6E)(c) and a current caution in section 113A(6E)(d) of the 1997 Act and articles 2A(l) and 2A(2) of the 1975 Order.
Any spent conviction or caution in respect of certain specified offences (including a number of identified offences but, of more significance, all offences specified in Schedule 15 [to] the Criminal Justice Act 2003 which includes, for example, assault occasioning actual bodily harm): see the definition of relevant matter in section 113A(6)(a)(i) and (c) and the list of specified offences in section 113A(6D) of the 1997 Act and articles 2A(l), (2) and (3)(a) read together with article 2A(5) of the 1975 Order (the serious offence rule).
Any spent conviction in respect of which a custodial sentence or sentence of service detention was imposed: see the definition of relevant matter in section 113A(6)(a)(ii) of the 1997 Act, of conviction in section 113A(6E)(a), caution in section 113A(6E)(b) and custodial sentence and sentence of service detention in section 113A(6E)(e) and articles 2A(2), 2A(3)(b) and 2A(4) of the 1975 Order.
Any spent conviction where the person has more than one conviction: see the definition of relevant matter in section 113A(6)(b) of the 1997 Act and articles 2A(2) and 2A(3)(c) of the 1975 Order (the multiple conviction rule).
The operation of the changes was described by McCombe LJ in paras 14 16 of his judgment in the first of the cases under appeal to the Court of Appeal, R (P and A) v Secretary of State for Justice [2016] EWHC 89 (Admin); [2016] 1 WLR 2009.
These paras were quoted by Sir Brian Leveson in para 12 of his judgment: 14.
The effect is that where there are two or more convictions, they are always disclosable on a CRC or an ECRC.
Further, where a conviction is of a specified kind or resulted in a custodial sentence or is current (ie for an adult within the last 11 years and for a minor within the last five years and six months), then it will always be disclosable. 15.
The offences listed in subsection (6D) are extensive, and include murder and offences specified under Schedule 15 to the Criminal Justice Act 2003, ie more serious offences of violence (including assault occasioning actual bodily harm) and all sexual offences, but not, for example theft or common assault. 16.
The primary feature of this new scheme which catches the claimants in the present case is that where there is more than one conviction all of them are disclosable throughout the subjects lifetime.
However, in the case of one of the claimants (P) one matter is not disclosable; that is, the theft which resulted in a caution alone and no conviction.
That flows from the fact that that offence is neither a subsection (6D) offence and is not current.
The reforms in Northern Ireland
The reforms in Northern Ireland are described by Gillen LJ in paras 16 18 of his judgment: 16.
The Rehabilitation of Offenders (Exceptions) (Amendment) Order (NI) 2014 changed its predecessor the 1979 Order in that it re instated protection in the case of what it named as protected caution and protected conviction.
A caution is protected if it was given otherwise than for any of 14 listed categories of offence and if at least six years have passed since the date of the caution (or two years if the person was then a minor): article 4.
A conviction is protected if it was imposed otherwise than for any of the listed categories; if it did not result in a custodial sentence; if the person has not been convicted of any other offence; and if at least 11 years have passed since the date of the conviction (or five and a half years if he was then a minor). 17.
The Police Act 1997 (Criminal Records Certificates: Relevant Matters) (Amendment) Order (Northern Ireland) 2014 amended its predecessor narrowing the content of the Criminal Record Certificate and the Enhanced Criminal Record Certificate analogously.
The obligation is to include in the certificate details of every relevant matter.
Whereas the definition of relevant matter originally included all convictions including all spent convictions, the new Order amends the definition so as to render the obligation to make disclosure of spent convictions and of cautions under the 1997 Act broadly co extensive with the new narrower obligation of the person to make disclosure under the amended 1979 Order. 18.
These recent amended Orders therefore represent a departure from the former regime under which disclosure of all spent and unspent convictions and all cautions was required of the question that was put or the application for a certificate made, in the specified circumstances.
Even in those circumstances certain spent convictions and cautions, identified by their subject matter and in the case of a conviction also by the sentence, and also by the number and age of them, are no longer required to be disclosed. (See In re T per Lord Wilson at paras 13 15.)
Significantly they would not have made any difference to her obligation to disclose her convictions.
As Gillen LJ pointed out in para 19, a person such as she, having more than one conviction, would still have to disclose all her convictions to the employer.
All her convictions would be set out in the ECRC by AccessNI notwithstanding that none of her offences was a specified offence; did not result in a custodial sentence; and was more than 11 years old.
Further scheme changes were introduced by Schedule 4 to the Justice Act (Northern Ireland) 2015.
This inserted a new Schedule 8A to the Police Act 1997 which significantly altered the position about data disclosure in Northern Ireland.
An independent review mechanism has been introduced to deal with criminal record disclosures.
Information which is eligible for review (in broad terms, spent convictions) will not be disclosed where the independent reviewer is satisfied, first, that disclosure would be disproportionate and, second, that non disclosure would not undermine the safeguarding or protection of children and vulnerable adults, or pose a risk of harm to the public.
The factors that the independent reviewer must take into account are: (i) The nature of the position being applied for; (ii) The seriousness of the offence(s); (iii) How long ago the offence(s) occurred; (iv) How many offences are being disclosed and, if more than one, whether they arose out of a single court hearing; (v) When the information would fall to be considered for filtering; and (vi) The age of the applicant at the time of the offence(s), including, in those cases where the applicant was under the age of 18 years, the need to have the best interests of children as a primary consideration.
R (T) in the Supreme Court
In R (T) v Chief Constable of Greater Manchester Police (Liberty intervening), R (B) v Secretary of State for the Home Department (Liberty intervening) [2015] AC 49, (the appeal before this court from the decision of the Court of Appeal), there were, at least so far as concerns the present case, two principal issues.
The first was whether disclosure of confidential information regarding an individuals criminal history, constituting, as it did, an interference with the respondents right under article 8.1 of the European Convention on Human Rights and Fundamental Freedoms (ECHR) to respect for a private life met the requirements in article 8.2 of being in accordance with the law and necessary in a democratic society.
The second issue was whether, if the legislation could be said to pursue a legitimate aim and was in accordance with law, it was justified.
By a majority (Lord Wilson dissenting) this court held that Part V of the 1997 Act was in breach of the requirement of legality because it contained no safeguards against arbitrary interference with the article 8 right.
There was no clear legislative framework for the collection and storage of data, no clarity as to the scope, extent and restrictions of the common law powers of the police to retain and disclose caution data; no mechanism for independent review of a decision to retain or disclose data; and no means by which the proportionality of the decision to disclose could be assessed.
Although it was necessary to check that persons wishing to work with children or the elderly did not present an unacceptable risk to them, the disclosures required by Part V of the 1997 Act were not based on any rational assessment of risk.
They therefore failed the test of being necessary in a democratic society.
The most important element of the judgments (for the purposes of the present case) is that there must be adequate safeguards built into a scheme for data disclosure which will allow for a proper evaluation of the proportionality of the interference with article 8 rights.
The condemnation of the provisions for the lack of any mechanism for independent review of a decision to disclose data is also important.
In fact, of course, the disclosure of data under the current arrangements is entirely automatic, conducted without any regard to the individual circumstances of particular cases within the defined categories.
However compelling those circumstances might be, they can never be called into account to displace the disclosure, if the case falls on the wrong side of the so called bright line rule.
And therefore, in my view, this is not in any sense merely a bright line rule; it is a rule of inevitably automatic and universal application.
It admits of no possible exceptions, if the case comes within one of the categories in which disclosure is preordained.
The case of the respondent G graphically illustrates this.
Although the data supervisor was anxious to mitigate the effect of the release of information, knowing full well its likely impact, he was powerless to withhold it.
On the second issue, this court unanimously held that laws requiring a person to disclose previous convictions or cautions to a potential employer, which affected his or her ability to pursue a chosen career, constituted an interference with their right under article 8.1 of ECHR and thus required justification under article 8.2.
While the avowed reason for such disclosure requirements, namely the protection of vulnerable groups of person, was a legitimate aim within article 8.2, there was no rational connection between minor dishonesty as a child and the question whether, as an adult, that person might pose a threat to the safety of children with whom he or she came into contact.
The requirement to disclose had not been shown to satisfy the test of necessity and the interference with the article 8 right was therefore not justified.
The requirement of legality
Article 8 of ECHR provides: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence. 2.
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
On what the requirement of in accordance with the law in article 8.2 demands, Lord Reed gave the principal judgment for the majority in T.
He explained the conceptual approach to this requirement in paras 113 119 of his judgment.
It is unnecessary to set out those paras verbatim, but I consider that a number of central precepts can be gleaned from them: (1) Any law interfering with a persons article 8 rights must ensure that there is adequate protection against arbitrary interference Malone v United Kingdom (1985) 7 EHRR 14; para 113 of Lord Reeds judgment. (2) To escape the charge of the interference being arbitrary, there must be clear, detailed rules on the circumstances in which it may take place Kopp v Switzerland (1999) 27 EHRR 91 and Amann v Switzerland (2000) 30 EHRR 843; again, para 113 of Lord Reeds judgment. (3) The decision as to whether disclosure is to be made should involve consideration of the nature of the offence; the disposal in the case; the time which has elapsed since the offence took place; and the relevance of the data to the employment sought MM v United Kingdom (Application No 24029/07, decision 29 April 2013) para 119 of Lord Reeds judgment. (4) To be in accordance with the law, there must be safeguards which have the effect of enabling the proportionality of the interference to be adequately examined para 114 of Lord Reeds judgment. (5) There should be a mechanism for independent review of a decision to retain or disclose data, either under common law police powers or pursuant to Part V of the 1997 Act para 206 of MM; para 119 of Lord Reeds judgment.
Lord Wilson, in paras 35 39 of his judgment, set out the criticisms made by the SoSs of the judgment in MM and expressed the view that these raise a legitimate concern.
His principal reservation about the correctness of the MM decision was that matters which properly fell within the requirement of necessity (in other words, whether the interference was necessary in a democratic society) were being considered as relevant to the question as to whether the interference was in accordance with law.
He pointed out (in para 37) that the European Court of Human Rights (ECtHR) had relied on a decision of this court in R (F) (A Child) v Secretary of State for Justice (Lord Advocate intervening) [2011] 1 AC 331 in support of its conclusion that the absence of a mechanism for independent review constituted a failure to observe the legality requirement in article 8.2.
In F (A Child), Lord Wilson observed, this courts analysis was specifically conducted in terms of necessity rather than legality.
In so far as Lord Wilson might be taken to suggest that a factor relevant to the question of necessity could not also be considered on the issue of legality, I would, with respect, disagree.
A factor is either relevant to one of the issues that arise under article 8.2 or it is not.
Thus, for instance, the question of the need for a mechanism of independent review is either intrinsically relevant to the issue of legality or is wholly immaterial to that issue.
But, if it is relevant, it does not lose that quality simply because it may also affect the judgment as to necessity.
As Lord Reed put it in para 114 of his judgment, the question whether the disclosure by the state of personal data is accompanied by adequate safeguards against arbitrary interferences can overlap with the question whether the interference is necessary in a democratic society.
Indeed, he accepted that the two issues were interlinked but pointed out that the focus of each was different.
He accepted that [d]etermination of whether the collection and use by the state of personal data was necessary in a particular case involves an assessment of the relevancy and sufficiency of the reasons given by the national authorities.
But, as he then explained, the other focus, in the context of legality, was on whether there were adequate safeguards against abuse.
This is how he put it: As I have explained, the courts focus tends to be on whether there were adequate safeguards against abuse, since the existence of such safeguards should ensure that the national authorities have addressed the issue of the necessity for the interference in a manner which is capable of satisfying the requirements of the Convention.
In other words, in order for the interference to be in accordance with the law, there must be safeguards which have the effect of enabling the proportionality of the interference to be adequately examined.
Whether the interference in a given case was in fact proportionate is a separate question.
The questions of necessity and legality do not merely overlap, therefore, they are interlinked.
In order to determine whether the interference is proportionate, safeguards have to be in place which demonstrate that the authorities have addressed the issue of necessity and to enable their content to be examined as to their adequacy in satisfying the requirement of proportionality.
It is essential that the various elements of the legality analysis be clearly recognised and evaluated.
I have set these out at para 148 above and have expressed the view that, for the purposes of this case, the fourth and fifth of these, viz that there must be safeguards which enable the proportionality of the interference to be adequately examined; and that there be a mechanism for independent review of a decision to release data, are the most important see para 149 above.
The third element is also significant that there should be consideration of the nature of the offence; the disposal in the case; the time which has elapsed since the offence took place; and the relevance of the data to the employment sought.
For reasons that I will discuss, the presence of all of these elements in every scheme for data disclosure is not a prerequisite to the scheme satisfying the requirement that it be in accordance with the law.
But the fundamental requirement is that the operation of the safeguards must permit a proper assessment of the proportionality of the interference with the article 8 right.
If proportionality cannot be confidently judged, the measure cannot be said to be in accordance with the law.
The application of the legality elements to the present case
The rules challenged in the cases of P, G and W are the multiple conviction rule and the serious offence rule.
These are set out in paras 11(iv) and 11(ii) of Sir Brian Levesons judgment, quoted at para 141 above.
In the case of Lorraine Gallagher, the challenge is to the requirement to self declare convictions.
Although, as I have said, not every element of the conventional features of a legal interference with a Convention right need be present in order for the requirement of legality to be met, it is essential that, in the final analysis, safeguards intrinsic to the scheme will allow for a proper assessment of proportionality.
It is against this critical yardstick that the legality of any scheme must be measured.
The other elements in the legality equation can be regarded as a sub set of this basic concept.
In my view, neither the scheme in England and Wales introduced by the 2013 reforms nor that in Northern Ireland brought about by the 2014 amendments meets this fundamental requirement.
It is not possible to judge whether the operation of either scheme would be proportionate in cases which fall into the categories where disclosure is mandated.
In some instances, disclosure might well be proportionate; in others it might be wildly disproportionate.
There is simply no way of assessing this if the scheme in England and Wales continues in its present form.
Leaving aside the question whether there needs to be individual consideration of particular cases, there is no way of calculating whether the scheme as a whole works in a proportionate way.
It is unquestionably true, as the appellants submit, that the examples which these particular cases provide should not be taken as generally representative of the effect of the scheme.
But it is equally true that one has no means of knowing that they are not.
What the cases show is that there is at least the potential for widespread disproportionate outcomes in the disclosure of data if the present system continues.
For that reason, it cannot be said that there are safeguards to the scheme which allow its proportionality to be adequately examined.
It is no answer to this central flaw in the scheme to say that it is the inevitable consequence of a bright line rule.
That argument might have force if it were possible for the appellants to show that, in general, the scheme operates in a proportionate way and that cases at the margins should not detract from its overall effect.
In this instance, the appellants cannot make that claim.
It is clear from the deliberations which preceded the introduction of the 2013 reforms (described in paras 117 137 above) that the question of how the scheme could be framed so that the safeguards which it contained would allow for an adequate examination of its proportionality was not addressed.
This is perhaps not surprising.
Mrs Masons task was to come up with a suggested classification of types of offence rather than to propose how the overall scheme might contain safeguards that would illuminate its proportionality.
Moreover, the 2013 reforms were considered before Lord Reeds clear statement on what role safeguards had to play in the assessment of proportionality.
That statement now provides authoritative and recent guidance on how the question should be approached.
Although there was debate as to its significance, there was no suggestion that we should depart from it.
For my part, I consider that its meaning and import are clear.
What safeguards might be incorporated into the disclosure scheme which would allow its proportionality to be examined? Sir James Eadie QC, appearing for the SoSs, invited this court, in the event that it dismissed the appeal, to indicate what modifications to the scheme in England and Wales might be made.
While it is, of course, not for this court to propose specific changes to legislation (and Sir James did not suggest otherwise), it seems to me that a provision which linked the relevance of the data to be disclosed to the nature of the employment sought might go some way to achieving that goal.
At present the scheme makes no provision for consideration of the propriety of disclosing information according to the type of post for which the individual has applied.
Two objections to this proposed modification are raised.
First, it is suggested that employers are in the best position to make a judgment about the relevance of convictions to the prospective employment and that disclosure should be made so that they can make that judgment.
It would be wrong, so the argument goes, to pre empt their consideration of possibly relevant material.
Second, it is claimed that to impose such a requirement on DBS would unwarrantably increase its burden in having to evaluate individual cases.
The argument that employers are in the best position to make a judgment about the relevance of convictions addresses the question from a single perspective that the standard position should be that disclosure be made of all material that might remotely, even unexpectedly, be relevant.
Lord Sumption has said that the evidence available to support the argument that employers cannot be trusted to take an objective view of the true relevance of a conviction, is distinctly thin.
Well, the evidence of the four cases involved in this appeal must go some considerable way to support the assertion.
And there is certainly no evidence to sustain the notion that these cases are in any sense untypical.
It would surely be impossible to quarrel with what Lord Wilson said in T at para 45: In these days of keen competition and defensive decision making will the candidate with the clean record not be placed ahead of the other, however apparently irrelevant his offence and even if otherwise evenly matched?
The notion of a killer blow to the prospects of employment resulting from the disclosure of even minor and unrelated offences (cf Lord Neuberger in R (L) v Comr of Police of the Metropolis [2010] 1 AC 410, at para 75 and referred to in para 52 by Lord Sumption) can be overstated.
But, in my view, it is wholly unrealistic not to recognise that many employers, faced with a choice of candidates of roughly similar potential, would automatically rule out the one with a criminal record.
That consideration simply cannot be ignored by the disclosure authority.
Indeed, Lord Sumption accepts as much in the final sentence of para 52.
It is, thus, incumbent on those responsible for devising a scheme of disclosure to be aware that at least some employers will regard the existence of a criminal record as an automatic bar to choosing the candidate with the record.
Where, therefore, it is abundantly obvious, as in many cases it will be, that the criminal record of an individual could have no conceivable relevance to the position for which he or she applies, a system in which disclosure is not made is not only feasible but essential.
As to the second objection, there is no reason to suppose that a system could not be devised whereby a correlation (or, more importantly, the lack of one) between the criminal record and the position applied for could be identified.
This would obviate the need for individual consideration of every case.
Thus, by way of example, if the position applied for did not involve contact with vulnerable adults or children and the criminal record of the person applying consisted of two convictions for shoplifting, both committed when the applicant for employment was considerably younger, it would undoubtedly be disproportionate to disclose his or her record.
Although this is a specific example, a code could surely be devised that would cater for that type of case.
As it is, under the present system, more than one conviction will, automatically and unavoidably, require disclosure.
Indeed, the current process does not reflect some of the recommendations made by Mrs Mason and her team.
As recorded in para 124 above, in her report of 11 February 2011 she said that the government should implement an appropriate form of filtering in the CRB process that removes conviction information that is undeniably minor, and which cannot be classed as anything other than old.
This does not happen, as the case of P exemplifies.
It is true, of course, that Mrs Mason considered that where there was more than one, even minor, conviction, there should be disclosure.
But this was because she felt that more than one conviction might be an indicator of a pattern of offending.
The case of P clearly demonstrates that more than one conviction does not, of itself, indicate a pattern of criminal behaviour.
Again, without requiring individual examination of every case, it should surely be possible to come up with a system which more reliably tests whether a person who has been found guilty of more than one offence should be considered to have displayed a pattern of offending.
Thus, for instance, the age of the offences and/or their wholly disparate nature could act as a filter.
If two offences of wholly different character were committed several years before the question of disclosure arose and if neither was remotely relevant to the position that had been applied for, could it possibly be said to be proportionate to disclose them? To exclude such offences as a matter of general filtering, rather than consideration of the individual circumstances of the case would be a sensible, workable system.
The suggestion that such offences be included in the disclosure package places far too high a premium on the prospect of an adventitious outcome to the disclosure of material which has no obvious or ready connection with the post that has been applied for.
Disclosing apparently irrelevant and ancient criminal convictions comes at a price.
That is the undermining of the aims of the 1974 Act.
In his judgment in the Court of Appeal in the T case, Lord Dyson MR in para 39 explained why this was so: The disclosure regime was introduced in order to protect children and vulnerable adults.
That objective is not furthered by the indiscriminate disclosure of all convictions and cautions to a potential employer, regardless of the circumstances.
A blanket requirement of disclosure is inimical to the 1974 Act and the important rehabilitative aims of that legislation.
Disclosure that is irrelevant (or at best of marginal relevance) is counter to the interests of re integrating ex offenders into society so that they can lead positive and law abiding lives:
see Mrs Masons Phase 2 report, at p 19
Although the reforms of 2013 (in England and Wales) and 2014 (in Northern Ireland) have reduced the categories in which automatic disclosure will be made, the blanket requirement of disclosure within the remaining categories endures.
There is no reason to suppose that disclosure that is irrelevant or of marginal relevance will not continue to occur within the fewer categories that are the result of the reforms.
The reduction of the number of categories does not eliminate the essential problem.
For this reason, the other possible safeguard which might enhance the opportunity for a proper investigation of the proportionality of the interference with article 8 rights is a review mechanism such as that introduced in Northern Ireland in 2016.
It has been suggested that this would create an impossible logistical burden for the authorities and, in this regard, reference has been made to the statistics produced by Ms Foulds (referred to at para 136 above).
Those statistics were produced to indicate the scale of operation that would be required if every application for data disclosure had to be examined in detail as to its particular circumstances.
The experience of the working of the Northern Irish model does not indicate that a substantial percentage of proposed disclosures will prompt applications to the reviewer.
At present, therefore, there is no evidence that this is not a perfectly viable option for England and Wales.
It is important to point out that I do not propose that every application should be subject to individual review.
I accept the reservations expressed by Mr Woodcock (see para 135 above) that to require the authorities to examine every case for its particular circumstances could lead to inconsistency of treatment and be a considerable charge on available resources.
The modifications to the present system which I propose do not involve a requirement that every application be considered individually.
Lord Sumptions judgment on the question of legality
In para 10, Lord Sumption says that the risk of impeding the prospects of employment of ex offenders and the risk that unsuitable persons may be allowed to occupy sensitive positions are not only competing factors, they are incommensurate.
Quite so.
But this does not relieve the court of its obligation to confront the question whether the interference with citizens article 8 rights which the current system entails is in accordance with the law.
The examination of that issue should be no less rigorous on account of the difficulty and sensitivity of the competing factors.
It is true that a great deal of thought and expert advice went into the design of the current system.
But, for the reasons given above (see para 164) all of that careful preparation did not include consideration of the critical question as to how the safeguards built into the scheme would allow for a proper vouching of its proportionality.
As Lord Sumption said in para 13, Sir Brian Leveson P held that the legislation was not in accordance with the law because, although it discriminated between different categories of offence and convictions, the categories were still too broad.
In my view, however, the principal reason for finding that the legislation is not in accordance with the law is not because of the width of the categories but because of its inscrutability in terms of assessing the proportionality of the measures which it prescribes.
In para 14 Lord Sumption states that the condition of legality relates to the characteristics of the legislation itself, and not just to its application in the present case, citing Kruslin v France (1990) 12 EHRR 547, paras 31 32.
And that the declarations which are proposed will mean that, while the current legislation will remain in force as a matter of domestic law until it is amended, it is nevertheless to be regarded as incompatible with article 8, not just as applied to minor offenders like the respondents, but to the entire range of ex offenders including, for example, convicted child molesters, rapists and murderers.
Inevitably, reference to serious offenders such as are included in Lord Sumptions account sparks concern.
But, as he acknowledges, the legislation remains in force until Parliament, if it decides to, chooses to amend it.
There is no realistic prospect of serious offending such as Lord Sumption has instanced coming within the purview of a regime forbidding the disclosure of criminal records.
The declarations which have been made by the Courts of Appeal in England and Wales and Northern Ireland, and which I propose should be upheld, do not portend the extension of exemption from the scheme of disclosure to offenders such as these.
Quite clearly, under a revised scheme such as is envisaged by this judgment, there is no question that offences such as Lord Sumption has described would continue to be included in the disclosure regime.
The proportionality of a scheme requiring offences such as these to be disclosed would not be open to doubt.
The prospect of the principle that safeguards sufficient to allow an examination of the proportionality of an interference with an article 8 right being applied to other qualified rights has been raised by Lord Sumption in para 12.
I consider that this is a prospect which can be faced with sanguinity.
The articles referred to by Lord Sumption, article 5 (right to liberty and security), article 9 (freedom of thought, conscience and religion), article 10 (freedom of expression), and article 11 (freedom of assembly and association), if interfered with by domestic legislation are just as amenable to the incorporation of safeguards capable of establishing their proportionality as is article 8.
Lord Sumption suggests that in none of these articles would there be any scope for distinctions based on judgment or discretion or weighing of broader public interests, even on the most compelling grounds, once the relevant measure failed the majoritys exacting test of legality.
This, with respect, misses the point.
Provided there is a sufficient basis on which the proportionality of the measure can be judged, the debate as to its propriety remains entirely open.
It is only where the reason for the interference is unexplained and indiscernible that the exacting test of legality is failed.
In paras 16 22 Lord Sumption has traced what he considers to be the contours of Strasbourg jurisprudence in relation to what the expression in accordance with law means.
He suggests that in Huvig v France (1990) 12 EHRR 528, para 26 and Kruslin v France (1990) 12 EHRR 547, para 27, the ECtHR has set out the classic definition of law in this context and that a dual test of accessibility and foreseeability for any measure which is required to have the quality of law was established.
Accessibility and foreseeability are undoubtedly aspects of the requirement that an intrusive measure be in accordance with law.
But they are not comprehensive of that concept.
An intervention with a qualified right which cannot on its face be examined for its purpose and proportionality will be equally objectionable to one which cannot be readily accessible or whose application cannot readily be foreseen.
At para 37 Lord Sumption expresses the view that the decision in T is treated by the respondents as authority for the proposition that a measure may lack the quality of law even where there is no relevant discretion and the relevant rules are precise and entirely clear, if the categories requiring to be disclosed are simply too broad or insufficiently filtered.
This is wrong.
The reason for considering that the current legislation is not in accordance with the law is not because the categories are too broad or insufficiently filtered; it is because they do not permit an adequate examination of their proportionality.
The requirement that the safeguards provide an opportunity for examination of the proportionality of the interference with a Convention right adds a further dimension to the dual test of accessibility and foreseeability.
Lord Sumptions analysis dismisses this essential extra dimension.
At para 31 of his judgment, Lord Sumption quotes para 94 of the recent decision of ECtHR in Catt v United Kingdom (Application 43514/15).
It should be noted, however, that the Strasbourg court in that case (in paras 106 and 107) made it clear that it did not consider it necessary to decide whether the interference was in accordance with law within the meaning of article 8.2.
Moreover, Judge Koskelo, in a separate judgment which concurs with the majority as to outcome, expresses misgivings as to the propriety of that course.
At paras 1 4 of Judge Koskelos judgment she said: I agree with the outcome of this case, namely that there 1. has been a violation of the applicants rights under article 8 of the Convention.
The majority in the Chamber have reached this conclusion following an analysis as to whether the impugned interference was necessary within the meaning of article 8.2 of the Convention.
I do not have any major objections to the essence of that analysis as such.
The misgivings I have are in relation to the preceding analysis of whether the interference with the applicants rights under article 8 was in accordance with the law.
On this point, the majority do identify a number of concerns but consider that it is not necessary in the present case to reach any firm conclusion as to whether the requirement of lawfulness has been met.
Regrettably, I find the approach adopted in this respect lacking in firmness as well as in consistency with existing case law. 2.
According to the courts well established case law, the phrase in accordance with the law in article 8.2 of the Convention requires not only that the impugned measure must have a basis in domestic law but that it must also be compatible with the rule of law, which is expressly mentioned in the preamble to the Convention and is inherent in the object and purpose of article 8.
Thus, the requirement of lawfulness also refers to the quality of the law in question.
This entails that the law should be adequately accessible and foreseeable as to its effects, that is to say formulated with sufficient precision to enable any individual if need be with appropriate advice to regulate his conduct (see, for instance, S and Marper v United Kingdom [GC], nos 30562/04 and 30566/04, para 95, ECHR 2008) 3.
For domestic law to meet these requirements, it must afford adequate legal protection against arbitrariness and, accordingly, indicate with sufficient clarity the scope of discretion conferred on the competent authorities and the manner of its exercise.
The level of precision required of the domestic law which cannot provide for every eventuality depends to a considerable degree on the context and content of the law in question, such as the field it is designed to cover (ibid para 96). 4.
In the field of data protection, the court has considered it essential for the applicable law to provide clear, detailed rules governing the scope and application of the relevant measures as well as sufficient guarantees against the risk of abuse and arbitrariness at each stage of the processing of personal data (see MM v United Kingdom, no 24029/07, para 195, 13 November 2012, and Surikov v Ukraine, no 42788/06, para 74, 26 January 2017; both with further references).
These are
indeed crucial requirements
It is clear that, in Judge Koskelos view, that there must be unambiguous rules which govern the application of the measures under challenge and sufficient guarantees against the risk of abuse and arbitrariness in their application.
Even where there is no relevant discretion and the rules are clear, if the categories requiring to be disclosed are too broad or insufficiently filtered (cf Lord Sumptions judgment at para 37), the question remains whether there are sufficient guarantees in place.
For the reasons which I have given, I do not consider that there were.
On that account Catt does not represent an endorsement of the majoritys position in the present case.
In paras 38 40, Lord Sumption seeks to confine the judgment of Lord Reed in T to what he describes as the classic dual test of accessibility and foreseeability.
This, I am afraid, cannot be accepted.
It is abundantly clear from Lord Reeds judgment in T that he went beyond this dual test by articulating a requirement that the safeguards inherent in the scheme of disclosure should be sufficiently transparent as to allow a judgment as to the proportionality of any interference with a qualified Convention right to be assessed.
And I do not consider that Lord Sumptions reference to the judgment in Christian Institute v Lord Advocate [2016] UKSC 51 assists his thesis.
In para 80 of that judgment, it is firmly stated that there must be safeguards which have the effect of enabling the proportionality of the interference to be adequately examined.
That is a requirement which is quite independent of the need for accessibility and foreseeability.
Proportionality
It is common case that, if the current scheme in England and Wales can be regarded as in accordance with law, it nevertheless constitutes an interference with the article 8 rights of the respondents and therefore calls for justification under article 8.2 of ECHR.
The claimed justification rests primarily on the assertion that a bright line rule, drawn on the lines of the current policy, is warranted and required.
The appeals in this case expose the poverty of that argument.
How can it possibly be said that it is necessary to reveal to prospective employers that someone engaged in sexual experimentation at the age of 11, when he has an unblemished record in the many years since? Or that someone was convicted of assault occasioning actual bodily harm at the age of 16, who has led a blameless life since then? Likewise, in the cases of P and Mrs Gallagher.
These cases should not be consigned to the category of unfortunate casualties at the margins.
They represent the significant impact that the current policy choice has on a potentially substantial number of individuals.
It is entirely possible to draw the boundaries for disclosable information at a level that would exclude persons such as the respondents in this case.
I consider, therefore, that the disclosure of the criminal records of the four respondents is plainly disproportionate.
Conclusion
I would dismiss the appeals and affirm the declarations of incompatibility which both Courts of Appeal propose.
| The respondents to these appeals (Mrs Gallagher, P, G and W) have all been convicted or received cautions or reprimands in respect of relatively minor offending.
The disclosure of their criminal records to potential employers has made, or may in future make, it more difficult for them to obtain employment.
In each case, the relevant convictions and cautions were spent under the legislation designed for the rehabilitation of ex offenders, set out below.
Nonetheless, criminal records had to be disclosed if they applied for employment involving contact with children or vulnerable adults.
In 1996, Mrs Gallagher was convicted of one count of driving without wearing a seatbelt, for which she was fined 10, and three counts of carrying a child under fourteen years old without a seatbelt, for which she was fined 25 on each count.
In 1998, she was again convicted of two counts of the latter offence and fined 40 on each count.
Mrs Gallagher has no other convictions.
In 2013, having qualified as a social carer, she was admitted to the Northern Ireland Social Care Council Register of Social Care Workers.
In 2014, she applied for a permanent position at a day centre for adults with learning difficulties and received a conditional offer of employment.
On a disclosure request, she only disclosed the 1996 convictions regarding her children, but not the 1996 conviction as to herself, nor the 1998 convictions.
Her job offer was withdrawn after the Enhanced Criminal Record Certificate disclosed all her previous convictions.
In 1999, P received a caution for the theft of a sandwich from a shop.
In the same year, P was convicted of the theft of a book worth 99p and of failing to surrender to the bail granted to her after her arrest for that offence.
She received a conditional discharge for both offences.
At the time of the offences, P was 28 years old, homeless and suffering from undiagnosed schizophrenia which is now under control.
She has committed no further offences.
P is qualified to work as a teaching assistant but has not been able to find employment.
She believes this is the result of her disclosure obligations.
In 1982, W was convicted of assault occasioning actual bodily harm.
He was 16 years old at the time when the assault occurred during a fight between a number of boys on their way home from school.
He received a conditional discharge, and has not offended since.
In 2013, aged 47, he began a course to obtain a certificate in teaching English to adults.
He believes that his chances of obtaining teaching employment will be prejudiced by the need to obtain a criminal record certificate for a job as a teacher.
In 2006, G, aged 13, was arrested for sexually assaulting two younger boys.
The offences involved sexual touching and attempted anal intercourse.
There was exceptional mitigation.
The police record indicates that the sexual activity was consensual and seems to have been in the form of dares and is
believed to have been a case of sexual curiosity and experimentation on the part of all three boys.
The Crown Prosecution Service decided it was not in the public interest to prosecute but suggested a reprimand.
G received two police reprimands in September 2006.
He has not offended since.
In 2011, when working as a library assistant in a local college, he was required to apply for an enhanced criminal record check because his work involved contact with children.
The police proposed to disclose the reprimand, with an account of the mitigation.
As a result, G withdrew the application and lost his job.
He has since felt unable to apply for any job requiring an enhanced criminal record check.
In all four of the appeals, the respondents challenge two related statutory disclosure schemes as being incompatible with Article 8 of the European Convention on Human Rights 1950 (ECHR), protecting the right to respect for private and family life.
This raises two separate questions, namely whether any interference with Article 8 ECHR is: (1) in accordance with the law (the legality test) and (2) necessary in a democratic society (the proportionality test).
The first scheme, governing disclosure by the ex offender, is that under the Rehabilitation of Offenders Act 1974 (the 1974 Act) in England and Wales and the corresponding provisions of the Rehabilitation of Offenders (Northern Ireland) Order 1978 (SI 1978/1908) in Northern Ireland, which are materially the same.
By sections 4(2) (3) of the 1974 Act, where a question is put to an ex offender about previous convictions, offences, conduct or circumstances, there is no duty of disclosure.
However, for any of thirteen specified purposes in the Rehabilitation of Offenders Act 1974 (Exceptions) Order (SI 1975/1023) (1975 Order) and the Rehabilitation of Offenders (Exceptions) Order (Northern Ireland) (SR(NI) 1979/195) (1979 Order), there is a duty of disclosure.
The second scheme, governing disclosure by the Disclosure and Barring Service in England and Wales or Access NI in Northern Ireland, is governed by Part V of the Police Act 1997, as amended (the 1997 Act).
Sections 113A and 113B deal with Criminal Record Certificates and Enhanced Criminal Record Certificates.
These provisions create a system of mandatory disclosure of all convictions and cautions on a persons record if the conditions for the issue of a certificate were satisfied.
In 2014, a more selective system for disclosure was introduced under the second scheme by the Disclosure and Barring Service the Police Act 1997 (Criminal Record Certificates: Relevant Matters) (Amendment) (England and Wales) Order (SI 2013/1200) and the Police Act 1997 (Criminal Record Certificates: Relevant Matters) (Amendment) (Northern Ireland) Order (SI 2014/100).
Broadly corresponding limitations were imposed in relation to the first scheme by the Rehabilitation Act 1974 (Exceptions) Order 1975 (Amendment) (England and Wales) Order (SI 2013/1198) and the Rehabilitation Act 1974 (Exceptions) (Amendment) Order (Northern Ireland) Order (SI 2014/27).
The Court of Appeal in England and in Northern Ireland (EWCA and NICA), affirming the decisions of the Divisional Court or High Court (except in Ws case), upheld the respondents case.
First, the statutory schemes were considered incompatible with Article 8 ECHR for failing the legality test because of the breadth of the categories in the legislation.
Secondly, the statutory schemes were considered disproportionate for failing to sufficiently distinguish between convictions and cautions of varying degrees of relevance.
The appellants now appeal to the Supreme Court.
Ps cross appeal concerns the refusal to quash article 2A(3)(c) of the 1975 Order for breach of Article 8 ECHR.
The Supreme Court dismisses the appeals (except in Ws case), but varies parts of the orders below.
A majority of the Court (Lord Sumption, Lord Carnwath, Lord Hughes and Lady Hale) reach that result based on a partial breach of the proportionality test.
Lord Sumption (with whom Lord Carnwath and Lord Hughes agree) gives the lead judgment.
Lady Hale (with whom Lord Carnwath also agrees) gives a concurring judgment.
On the cross appeal, the Court varies the order of the Divisional Court by adding a declaration that article 2A(3)(c) of the 1975 Order is incompatible with Article 8 ECHR.
Lord Kerr gives a separate judgment, disagreeing with the majoritys approach to the legality test and its application of the proportionality test.
Lord Kerr would have dismissed the appeals (including in Ws case) and affirmed the declarations of incompatibility made by the EWCA and NICA.
All members of the Supreme Court agree that Article 8 ECHR is engaged and that two conditions thus apply, namely satisfaction of: (1) the legality test and (2) the proportionality test [12], [73], [153].
They also all agree that the legality test requires, at least, accessibility and foreseeability [16], [73], [182].
Majority judgments (Lord Sumption and Lady Hale): Lord Sumption considers that the legality test, whether under Article 8 ECHR or otherwise, does not involve questions of degree [14].
For him, accessibility requires that it must be possible to discover what the provisions of a legal measure are, while foreseeability requires that a measure does not confer an unconstrained discretion [17], [31].
However, if the issue is how much discretion is too much (i.e. a question of degree), only the proportionality test can be used for review [17].
In the ECHR case law, in particular MM v United Kingdom (App. no. 24029/07), the Strasbourg Court has treated the need for safeguards as part of the foreseeability requirement and applied it as part of the legality test in cases where a discretionary power would otherwise be unconstrained and lack certainty of application [24].
There must be sufficient safeguards, exercised on known legal principles, against the arbitrary exercise of a discretion, so as to make its application reasonably foreseeable [31].
Lord Sumption disagrees with the EWCA and NICA as to the effect of the Supreme Courts decision in R (T) v Chief Constable of Greater Manchester Police [2014] UKSC 35, concerning the regime governing disclosure of criminal records in England before the changes introduced in March 2014 [15], [35 41].
He does not accept that R (T) decided that a measure may breach the legality test even where there is no relevant discretion and the relevant rules are precise and entirely clear [37].
For Lord Sumption, the rules governing the disclosure of criminal records under both the 1974 Act and the 1997 Act are highly prescriptive, mandatory and leave no discretion [42].
There is thus no real difficulty in assessing the proportionality of the two statutory schemes, so the legality test is satisfied both schemes are in accordance with the law for the purposes of Article 8 ECHR [42 45].
As to proportionality, Lord Sumption considers that two questions arise: (1) whether the legislation can legitimately require disclosure by reference to pre defined categories at all and (2), if so, whether the current boundaries of these categories are acceptable [46].
As to the first question, Lord Sumption considers that legislation by reference to pre defined categories is justified [50].
This is because: (1) the final decision about the relevance of a conviction should be that of the employer, who is best placed to assess the individual circumstances; (2) there is limited evidence that employers cannot be trusted to take an objective view; (3) the 1997 Act scheme is carefully aligned with the disclosure scheme under the 1974 Act, necessitating a category based approach; and (4) it would be impracticable to require a system of individual assessment [51 54].
On the second question, Lord Sumption considers that, with two exceptions, the carefully drawn categories in the legislation are not disproportionate [61 62].
The first exception is the multiple convictions rule, which does not achieve its purpose of indicating propensity as it applies irrespective of the nature, similarity, number or time intervals of offences [63].
The second exception concerns warnings and reprimands for younger offenders, the purpose of which is instructive and specifically designed to avoid damaging effects later in life through disclosure [64].
In Ps case, the disclosure was based on the multiple convictions rule under the 1997 Act, so the appeal against the declaration of incompatibility falls to be dismissed on that limited ground [65].
However, as to Ps cross appeal, article 2A(3)(c) of the 1975 Order is only to be declared incompatible with Article 8 ECHR (rather than quashed) [66].
As Mrs Gallaghers case also concerns the multiple convictions rule, she is also entitled to a declaration of incompatibility both as to the 1997 Act and the 1979 Order [67].
In Gs case, concerning a reprimand against a younger offender, the declaration of incompatibility as to the mandatory disclosure requirement under the 1997 Act is affirmed [68].
In Ws case, the High Courts order is restored since assault occasioning actual bodily harm may be a serious offence and it was appropriate to include it within the category of offences requiring disclosure [69].
Lady Hale agrees with Lord Sumption that, given the changes to the statutory schemes in 2014, the legality test is satisfied [72 73].
She considers that the law in question does not have to contain an individual review mechanism in every case.
The requirement is only that it is possible to test, both the
law itself and the decisions made under it, for proportionality [73].
The present schemes are not indiscriminate in nature and have been carefully devised to balance the competing public interests in (1) rehabilitation, (2) safeguarding and (3) practicability [75].
Given the need for a practicable and proportionate scheme, bright line rules are necessary [76 77].
She agrees with Lord Sumption that the categories used are proportionate, save as to the two exceptions above, and accordingly agrees with him on the disposal of each appeal and the cross appeal [78 79].
Lord Kerrs minority judgment: Lord Kerr would have dismissed the appeals (including in Ws case) and affirmed the declarations of incompatibility made by the EWCA and NICA.
Lord Kerr disagrees with the majority on compliance with the legality test and the proportionality test.
He illustrates the issues with the current statutory schemes by reference to a fuller account of the circumstances of each of the respondents [80 100].
He also reviews in detail the operation of the two statutory schemes before and after the 2014 amendments [101 146].
Lord Kerr considers that two important points follow from the Supreme Courts decision in R (T).
These are: (1) that there must be adequate safeguards built into a disclosure scheme which allow for a proper evaluation of proportionality and (2) that the provisions then in force were condemned for the lack of any mechanism for independent review [149].
Lord Kerr identifies five central precepts that are relevant to the legality test [153, 158], but adds that not all of these must necessarily be satisfied [159].
He considers that the fundamental requirement is that the operation of the safeguards must permit a proper assessment of the proportionality of the interference with the Article 8 ECHR right [159].
He also clarifies that his approach to the legality test goes beyond only satisfying the two requirements of accessibility and foreseeability, contrary to Lord Sumptions approach [182 187].
Lord Kerr would have found the scheme in England and Wales to fail the legality test since the cases show that there is at least the potential for widespread disproportionate outcomes in disclosure [162].
Therefore, it cannot be said that there are safeguards adequately to examine proportionality [162].
He suggests two potential modifications: (1) a provision which linked the relevance of the data to be disclosed to the nature of the employment sought [165 173] and (2) an individual review mechanism in some cases, such as that introduced in Northern Ireland in 2016 [174 175].
Further, Lord Kerr would have found the scheme disproportionate [188 190].
|
The distinct legal personality of companies has been a fundamental feature of English commercial law for a century and a half, but that has never stopped businessmen from treating their companies as indistinguishable from themselves.
Mr Michael Hunt is not the first businessman to make that mistake, and doubtless he will not be the last.
Mr Hunt is a wealthy investor.
The judge found that at the relevant time one of his preferred methods of investment was to lend money to companies whose business was too risky for them to be able to borrow on normal terms from banks.
For this he would charge a substantial arrangement fee and interest at a relatively high rate.
Swynson Ltd was a company controlled and beneficially owned by Mr Hunt which was used as a vehicle for such transactions, including the one which has given rise to these proceedings.
On 31 October 2006, Mr Hunt caused Swynson to lend 15m to Evo Medical Solutions Ltd (or EMSL) for a period of a year.
The purpose of the loan was to enable EMSL to finance the management buy out of an American company called Medical Industries America Inc, trading as Evo, which distributed medical equipment in the United States.
Shorn of peripheral detail, the result of the buy out was that the 15m was spent on buying out the existing owners of Evo.
Evo then became a wholly owned subsidiary of EMSL, whose shares were owned 71.4% by Evos management, 25% by Mr Hunt and 3.6% by an associate of Mr Hunt who joined its board.
Swynsons loan to EMSL was secured by charges over Evos assets and limited personal guarantees by the management.
Before entering into this transaction, Swynson and EMSL jointly instructed a firm of accountants, Hurst, Morrison Thomson, to carry out due diligence on Evo.
They subsequently changed their name to Lowick Rose LLP, but I shall refer to them throughout as HMT.
They are now in liquidation.
Their report failed to draw attention to some fundamental problems about the companys finances, in particular the insufficiency of its working capital.
It is now common ground that that failure was negligent, and that if HMT had carried out their task properly they would have reported the problem and the transaction would not have gone ahead.
In the course of 2007, Evo began to experience severe cash flow problems and EMSL began to default on its interest payments.
In July 2007, Mr Hunt was told that Evo was at risk of collapse without a substantial cash injection.
He decided that the only way of recovering his money would be to provide further funding until Evo was restored to financial health, when it could either be floated or sold.
To that end he caused Swynson to lend a further 1.75m to EMSL in 2007.
A yet further loan of 3m was made in July 2008, as part of a larger transaction, under which Mr Hunt became the controlling shareholder of EMSL with 85% of the equity, leaving 15% in the hands of the management.
Evos financial position did not improve, however, and neither the original nor the further loans were repaid.
On 31 December 2008, rather more than two years after the original transaction, the 2006 and 2007 loans were refinanced.
Mr Hunt and EMSL entered into a loan agreement under which Mr Hunt personally made a short term loan of 18.663m to EMSL, secured by fixed and floating charges over its assets and undertaking.
The loan was interest free, although there was a provision for default interest.
It was a term of the agreement that EMSL would apply the loan moneys in satisfaction of the outstanding balance of the 2006 and 2007 loans.
EMSL duly did this.
There were two reasons for these transactions.
The first was that under UK tax legislation governing close companies, once Mr Hunt, who already controlled Swynson, acquired control of EMSL in July 2008, Swynson became assessable to tax on the interest payments due from EMSL notwithstanding that those payments were not being made.
The second was that Mr Hunt took the view that it was disadvantageous for Swynson to have a large non performing loan on its books.
The result was that the 2006 and 2007 loans were discharged, as Mr Hunt intended.
Only the 2008 loan of 3m remained outstanding on Swynsons books.
In October 2012 Swynson and Mr Hunt brought the present proceedings in support of a claim against HMT for damages of 16.157m, being the principal amount of all the loans of 19.75m, less sums received under the managements personal guarantees and the value of recoveries from cash and assets in the hands of Evo.
The matter came on for trial before Rose J. Liability was conceded in the course of the trial, and by the time that the judge came to give judgment the only outstanding issues related to damages.
She found that only the 2006 loan had been made on the strength of HMTs report, but that losses arising from the 2007 and 2008 loans were in principle recoverable as the cost of reasonable steps taken in mitigation, subject to an overall cap of 15m agreed in the letter of engagement.
That left for decision the main point taken on damages, and the only one which is presently before this court, which concerned the effect of the discharge of the 2006 and 2007 loans as a result of the refinancing of December 2008.
HMT submitted that EMSL having repaid these loans to Swynson, albeit with money borrowed from Mr Hunt personally, Swynson had suffered no loss in respect of them which could be recovered by way of damages.
In response, Swynson and Mr Hunt argued four points: (i) that the December 2008 refinancing was res inter alios acta and did not affect the amount of Swynsons recoverable loss; (ii) that if the loss was not recoverable by Swynson it was recoverable by Mr Hunt, on the footing that HMT owed him a duty of care; (iii) that Swynson was entitled to recover on the principle of transferred loss; and (iv) that HMT having been unjustly enriched by Mr Hunts provision of funds to EMSL to repay Swynson, Mr Hunt was subrogated to Swynsons claims against them.
The judge accepted point (i) and awarded damages of 15m on that basis.
On point (ii) she held that no duty of care was owed to Mr Hunt personally.
Points (iii) and (iv) did not arise having regard to her conclusion on point (i) and she did not deal with them.
In the Court of Appeal, Mr Hunt abandoned the argument that a duty of care was owed to him personally.
But the other three points remained in issue.
The Court of Appeal held by a majority (Longmore and Sales LJJ) that the judge had been right about point (i) (res inter alios acta) and dismissed the appeal on that basis.
The majority disagreed about point (iv) (unjust enrichment and equitable subrogation).
Longmore LJ would have rejected it, while Sales LJ would have accepted it.
Davis LJ rejected all three points and would have allowed the appeal.
The issues before this court stand as they did in the Court of Appeal.
There is, as will be apparent, a measure of overlap between them.
Res inter alios acta
The general rule is that loss which has been avoided is not recoverable as damages, although expense reasonably incurred in avoiding it may be recoverable as costs of mitigation.
To this there is an exception for collateral payments (res inter alios acta), which the law treats as not making good the claimants loss.
It is difficult to identify a single principle underlying every case.
In spite of what the latin tag might lead one to expect, the critical factor is not the source of the benefit in a third party but its character.
Broadly speaking, collateral benefits are those whose receipt arose independently of the circumstances giving rise to the loss.
Thus a gift received by the claimant, even if occasioned by his loss, is regarded as independent of the loss because its gratuitous character means that there is no causal relationship between them.
The same is true of a benefit received by right from a third party in respect of the loss, but for which the claimant has given a consideration independent of the legal relationship with the defendant from which the loss arose.
Classic cases include loss payments under an indemnity insurance: Bradburn v Great Western Railway Co (1874 5) LR 10 Ex 1.
Or disability pensions under a contributory scheme: Parry v Cleaver [1970] AC 1.
In cases such as these, as between the claimant and the wrongdoer, the law treats the receipt of the benefit as tantamount to the claimant making good the loss from his own resources, because they are attributable to his premiums, his contributions or his work.
The position may be different if the benefits are not collateral because they are derived from a contract (say, an insurance policy) made for the benefit of the wrongdoer: Arab Bank Plc v John D Wood Commercial Ltd [2000] 1 WLR 857 (CA), at paras 92 93 (Mance LJ).
Or because the benefit is derived from steps taken by the Claimant in consequence of the breach, which mitigated his loss: British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Ltd [1912] AC 673, 689, 691 (Viscount Haldane LC).
These principles represent a coherent approach to avoided loss.
In Parry v Cleaver, at p 13, Lord Reid derived them from considerations of justice, reasonableness and public policy.
Justice, reasonableness and public policy are, however, the basis on which the law has arrived at the relevant principles.
They are not a licence for discarding those principles and deciding each case on what may be regarded as its broader commercial merits.
On the judges findings, the loss recoverable by Swynson from HMT was that which arose from its inability to recover (i) the 2006 loan which it had made to EMSL on the strength of HMTs reports about Evos financial strength, and (ii) the 2007 and 2008 loans which it made in a reasonable but unsuccessful attempt to mitigate the loss arising from the 2006 loan.
So far as the 2006 and 2007 loans were concerned, that loss was made good when EMSL repaid them.
The fact that the money with which it did so was borrowed from Mr Hunt was no more relevant than it would have been if it had been borrowed from a bank or obtained from some other unconnected third party.
There was nothing special about the fact that Mr Hunt provided the funds, once one discards the idea that HMT owed any relevant duty to him.
The short point is that the repayment of the 2006 and 2007 loans cannot be treated as discharging them as between Swynson and EMSL, but not as between Swynson and HMT.
If, in December 2008, Mr Hunt had lent the money to Swynson to strengthen its financial position in the light of EMSLs default, the payment would indeed have had no effect on the damages recoverable from HMT.
The payment would not have discharged EMSLs debt.
It would also have been collateral.
But the payments made by Mr Hunt to EMSL and by EMSL to Swynson to pay off the 2006 and 2007 loans could not possibly be regarded as collateral.
In the first place, the transaction discharged the very liability whose existence represented Swynsons loss.
Secondly, the money which Mr Hunt lent to EMSL in December 2008 was not an indirect payment to Swynson, even though it ultimately reached them, as the terms of the loan required.
Mr Hunts agreement to make that loan and the earlier agreements of Swynson to lend money to EMSL were distinct transactions between different parties, each of which was made for valuable consideration in the form of the respective covenants to repay.
Thirdly, as the Court of Appeal correctly held, the consequences of the refinancing could not be recoverable as the cost of mitigation, because the loan to EMSL was not an act of Swynson and was not attributable to HMTs breach of duty.
Transferred loss
The principle of transferred loss is a limited exception to the general rule that a claimant can recover only loss which he has himself suffered.
It applies where the known object of a transaction is to benefit a third party or a class of persons to which a third party belongs, and the anticipated effect of a breach of duty will be to cause loss to that third party.
It has hitherto been recognised only in cases where the third party suffers loss as the intended transferee of the property affected by the breach.
The paradigm case is the rule which has applied in the law of carriage of goods by sea ever since the decision of the House of Lords in Dunlop v Lambert (1839) 2 Cl & F 626, that the shipper may sue the shipowner for loss of or damage to the cargo notwithstanding that the loss has been suffered by the consignee to whom property and risk (but not the rights under the contract of carriage) have passed.
In Albacruz (Cargo Owners) v Albazero (Owners) [1977] AC 774, 847 Lord Diplock, with whom the rest of the Appellate Committee agreed, expressed the rationale of the carriage of goods rule as being that: in a commercial contract concerning goods where it is in the contemplation of the parties that the proprietary interests in the goods may be transferred from one owner to another after the contract has been entered into and before the breach which causes loss or damage to the goods, an original party to the contract, if such be the intention of them both, is to be treated in law as having entered into the contract for the benefit of all persons who have or may acquire an interest in the goods before they are lost or damaged, and is entitled to recover by way of damages for breach of contract the actual loss sustained by those for whose benefit the contract is entered into.
The party recovering is accountable to the third party for any damages recovered: ibid, p 844.
In Linden Gardens Trust v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, this rationale was extended to contracts generally.
A contractor had done defective work in breach of a building contract with the developer but the loss was suffered by a third party who had by then purchased the development.
The developer recovered the loss suffered by the purchaser.
Lord Griffiths, however, suggested (at p 97) that the result could be justified on what has become known as the broader ground.
This is that the developer had himself suffered the loss because he had his own interest in being able to give the third party the benefit that the third party was intended to have.
He could recover the cost of rectifying the defects because it represented what the developer would have to spend to give the third party that benefit, even though he had no legal liability to spend it.
On the broader ground, the principle would not be limited to cases where the loss related to transferred property.
It is, however, important to remember that the principle of transferred loss, whether in its broader or narrower form, is an exception to a fundamental principle of the law of obligations and not an alternative to that principle.
All of the modern case law on the subject emphasises that it is driven by legal necessity.
It is therefore an essential feature of the principle that the recognition of a right in the contracting party to recover the third partys loss should be necessary to give effect to the object of the transaction and to avoid a legal black hole, in which in the anticipated course of events the only party entitled to recover would be different from the only party which could be treated as suffering loss: see Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518, 547 548 (Lord Goff), 568 (Lord Jauncey), 577 578 (Lord Browne Wilkinson), 582 583 (Lord Millett).
That is why, as the House of Lords held in this last case, it is not available if the third party has a direct right of action for the same loss, on whatever basis.
In the present case the relevant duty was owed to Swynson but the loss has in the event been suffered by Mr Hunt.
Since Mr Hunt did not suffer his loss in his capacity as the owner of property, only the broader principle of transferred loss could be relevant to his case.
Like others before me, I consider that there is much to be said for the broader principle.
But it is not necessary to decide the point on this appeal because it is plain that the principle cannot apply in either form to the present facts.
The reason is that it was no part of the object of the engagement of HMT or indeed of any other aspect of the 2006 transaction to benefit Mr Hunt.
That is the main reason why no duty of care was owed to him.
It is also one reason why the engagement letter was unassignable without consent.
Mr Hunts loss arises out of the refinancing of December 2008, which had nothing to do with HMT and did not arise out of their breach of duty.
Equitable subrogation as a remedy for unjust enrichment
Equitable subrogation is a remedy available to give effect to a proprietary right or in some cases to a cause of action.
This is not a case where subrogation is invoked to give effect to a proprietary right.
It belongs to an established category of cases in which the claimant discharges the defendants debt on the basis of some agreement or expectation of benefit which fails.
The rule was stated by Walton J stated in Burston Finance Ltd v Speirway Ltd (in liquidation) [1974] 1 WLR 1648, 1652 as follows: [W]here As money is used to pay off the claim of B, who is a secured creditor, A is entitled to be regarded in equity as having had an assignment to him of Bs rights as a secured creditor It finds one of its chief uses in the situation where one person advances money on the understanding that he is to have certain security for the money he has advanced, and for one reason or another, he does not receive the promised security.
In such a case he is nevertheless to be subrogated to the rights of any other person who at the relevant time had any security over the same property and whose debts have been discharged in whole or in part by the money so provided by him.
Most of the cases are indeed about subrogation to securities, but the principle applies equally to allow subrogation to personal rights: Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291, at para 36; Commissioners for HM Revenue and Customs v Investment Trust Companies (In Liquidation) [2017] UKSC 29.
In Banque Financire de la Cit v Parc (Battersea) Ltd [1999] 1 AC 221 the House of Lords reinterpreted the existing authorities so as to recognise that, subject to special defences, equitable subrogation served to prevent or reverse the unjust enrichment of the defendant at the plaintiffs expense.
The argument for Mr Hunt is that HMT has been unjustly enriched at his expense by virtue of the discharge of the 2006 and 2007 loans, the loss on which would otherwise have been recoverable from them by way of damages.
Equitable subrogation is invoked as the appropriate remedy to reverse that enrichment.
I am prepared to assume for the sake of argument that HMT was enriched, although I regard it as rather contrived to treat someone as enriched simply because a contractual counterparty has suffered no loss by his breaches of duty.
I am also prepared to assume that if they have been unjustly enriched it was at Mr Hunts expense, although that is also an odd assumption to make on the facts of this case.
Although Mr Hunt lent EMSL the money which was used to pay off the debt, his loss was not attributable to the benefit thereby conferred on HMT.
It was purely incidental, for Mr Hunt had no claim against HMT and was not affected by the reduction of their liability.
He was affected only by the eventual insolvency of the borrower.
Nonetheless, I make both of these assumptions in order to focus attention on what seems to me to be the critical questions, namely whether the enrichment was unjust and if so whether subrogation is an appropriate way of addressing the fact.
As I shall show, these two questions are closely related.
Mr Hunt says that it was unjust because he entered into the December 2008 refinancing under a mistake.
The mistake in question has been identified on this appeal by reference to a passage from his witness statement which the Judge accepted: It should be obvious from what I have said that there was no intention on my part or Swynsons part to relieve HMT from any liability due to the refinancing exercise.
As far as I was concerned the claim against HMT remained unaffected by this refinancing and was of no concern of theirs.
As between me and Swynson the consideration of who technically would be entitled to recover the money from HMT did not matter as I was the owner of Swynson, but it was implicitly understood that the recovery would be held pro rata according to the unpaid lending advanced.
In fact, no case of mistake was ever pleaded or advanced at trial.
This evidence appears to have been given by Mr Hunt and accepted by the judge in support of the argument that she accepted, namely that the repayment of the loan by EMSL to Swynson was collateral (no concern of theirs).
It is therefore not entirely fair to deploy it in a very different legal context.
But I will put aside my reservations on that score and approach the matter as if mistake had been an issue at the trial and this finding had been addressed to it.
As with any novel application of the relevant principles, it is necessary to remind oneself at the outset that the law of unjust enrichment is part of the law of obligations.
It is not a matter of judicial discretion.
As Lord Reed points out in Investment Trust Companies (para 39) it does not create a judicial licence to meet the perceived requirements of fairness on a case by case basis: legal rights arising from unjust enrichment should be determined by rules of law which are ascertainable and consistently applied.
English law does not have a universal theory to explain all the cases in which restitution is available.
It recognises a number of discrete factual situations in which enrichment is treated as vitiated by some unjust factor.
These factual situations are not, however, random illustrations of the Courts indulgence to litigants.
They have the common feature that some legal norm or some legally recognised expectation of the claimant falling short of a legal right has been disrupted or disappointed.
Leaving aside cases of illegality, legal compulsion or necessity, which give rise to special considerations irrelevant to the present case, the defendants enrichment at the claimants expense is unjust because, in the words of Professor Burrows Restatement (2012) at Section 3(2)(a), the claimants consent to the defendants enrichment was impaired, qualified or absent.
As Lord Reed puts it in Investment Trust Companies (para 42), the purpose of the law of unjust enrichment is to correct normatively defective transfers of value by restoring the parties to their pre transfer positions.
It reflects an Aristotelian conception of justice as the restoration of a balance or equilibrium which has been disrupted.
In Banque Financire de la Cit v Parc (Battersea) Ltd [1999] 1 AC 221, Parc had borrowed money from R on the security of a first legal charge over property, and from an associated company, OOL, on the security of a second legal charge.
The plaintiff bank partially refinanced the borrowing from R. For regulatory reasons the refinancing was structured as a loan to the general manager of the group holding company, who in turn lent it to Parc who used it to pay off part of the loan from R.
The plaintiffs loan was made on the strength of an undertaking by the general manager that intra group loans to Parc would be postponed to the plaintiffs loan.
The undertaking was intended to bind all the companies of the group, but in fact bound only the holding company because it was given without the subsidiaries knowledge or authority.
OOL accordingly sought to enforce its second charge ahead of the plaintiff.
The plaintiff sought to defeat this attempt by claiming to be subrogated to Rs first charge.
This depended on the contention that OOL would otherwise be unjustly enriched by the indirect use of the plaintiffs money to discharge indebtedness which ranked ahead of theirs.
The House of Lords accepted that contention, holding that the plaintiffs were subrogated to Rs first charge, but only as against intra group creditors who would have been postponed had the general managers undertaking been binding on them.
Lord Hoffmann, with whom the rest of the Appellate Committee agreed, distinguished, at p 231H G, between contractual subrogation (as in the case of indemnity insurance or guarantee) and equitable subrogation, which was an equitable remedy to reverse or prevent unjust enrichment which is not based upon any agreement or common intention of the party enriched and the party deprived.
He identified as the unjust factor in OOLs enrichment the defeat of the plaintiffs expectation of priority over intra group loans which was the basis on which it had advanced the money.
This was so, notwithstanding that that expectation was not shared by OOL who had nothing to do with the transaction and was unaware of it.
Lord Hoffmann cited in support of this proposition a number of earlier cases in which a right of subrogation had been held to arise when the expectations of the person paying the money (whether or not shared by the party enriched) were defeated because something went wrong with the transaction.
Thus in Chetwynd v Allen [1899] 1 Ch 353 and Butler v Rice [1910] 2 Ch 277, the plaintiff lent money to pay off a prior loan secured by a mortgage on property.
The plaintiffs expectation that he would obtain a charge to secure his own loan was based on an agreement with the debtor, but was defeated because unbeknown to him the property in question belonged to the debtors wife.
The plaintiff was subrogated to the prior mortgage because otherwise the wife would have been unjustly enriched by the discharge of the debt which it secured.
In Ghana Commercial Bank v Chandiram [1960] AC 732, the plaintiff bank lent money to the debtor to pay off an existing loan from another bank secured by an equitable mortgage on property.
It did this on the footing that it would obtain a legal mortgage over the property.
That expectation was defeated because although the legal mortgage was executed it was invalidated by a prior attachment of the property in favour of a judgment creditor.
The plaintiff bank was subrogated to the judgment creditors attachment because otherwise the judgment creditor would have been unjustly enriched by the discharge of the debt which the equitable mortgage secured.
In Boscawen v Bajwa [1996] 1 WLR 328, the plaintiff Building Society agreed to lend money on mortgage for the purchase of a property.
It paid the loan moneys to the solicitors acting for them and the purchaser, to be held on its behalf until paid over against a first legal charge on the property.
The solicitors paid it over to the vendors solicitors to be held to their order pending completion.
The plaintiffs expectations were defeated because the vendors solicitors used it without authority to pay off the vendors mortgage before completion and the purchase subsequently fell through so that completion never occurred.
The plaintiff was subrogated to the vendors mortgage because otherwise the vendor would have been unjustly enriched by the discharge of the debt which it secured.
Likewise, in Banque Financire itself, the plaintiffs expectation of priority over intra group loans was defeated by the general managers absence of authority to bind the subsidiaries.
In the absence of subrogation, OOL would have been unjustly enriched because Parcs debt to R, which would otherwise have ranked ahead of its debt to OOL, was discharged at the plaintiffs expense without the plaintiffs effective consent.
As Lord Hoffman observed, at p 235A B, the plaintiff failed to obtain that priority over intra group indebtedness which was an essential part of the transaction under which it paid the money.
Where the basic conditions for equitable subrogation apply, the fact that the legal right to which the Claimant is subrogated has been discharged is irrelevant.
This is because, as Lord Hoffmann explained at p 236, subrogation operates on a fictionalised basis: In a case in which the whole of the secured debt is repaid, the charge is not kept alive at all.
It is discharged and ceases to exist It is important to remember that subrogation is not a right or a cause of action but an equitable remedy against a party who would otherwise be unjustly enriched.
It is a means by which the court regulates the legal relationships between a plaintiff and a defendant or defendants in order to prevent unjust enrichment.
When judges say that the charge is kept alive for the benefit of the plaintiff, what they mean is that his legal relations with a defendant who would otherwise be unjustly enriched are regulated as if the benefit of the charge had been assigned to him.
It does not by any means follow that the plaintiff must for all purposes be treated as an actual assignee of the benefit of the charge and, in particular, that he would be so treated in relation to someone who would not be unjustly enriched.
In Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291, the Plaintiff Building Society lent money to Mr and Mrs Appleyard to refinance debts owed to the Bradford & Bingley Building Society secured by a first charge on their home, and to BCCI secured by a second charge.
The plaintiff put its solicitors in funds and the solicitors paid the outstanding balance of both debts to the respective creditors.
The Appleyards executed a legal charge over the property in favour of the plaintiff.
But the charge could not be registered as a legal charge at HM Land Registry because BCCI (which was in liquidation) refused to recognise that it had received the money or to consent to the discharge of its own security, and the terms of that security prohibited any charge subsequent to its own.
The plaintiffs were held entitled to be subrogated to the legal charge of Bradford & Bingley to the extent of the value of the Bradford & Bingley mortgage at the time it was paid off.
This was because otherwise the Appleyards would be unjustly enriched to the extent that their property was burdened with a lesser security.
In Banque Financire and the earlier cases cited by Lord Hoffmann the defendants did not share the expectation of the claimant, whereas in Cheltenham & Gloucester they did.
But in either case the intentions of the defendants were beside the point.
The reason was that the claimant had bargained for the benefit which failed, whereas from the defendants point of view the discharge of the prior indebtedness was a windfall for which they had not bargained.
If they had given consideration for it the result would have been different.
This point may be illustrated by the other leading modern case, Bank of Cyprus UK Ltd v Menelaou [2016] AC 176.
The decision is authority for the proposition that a third party who pays the purchase price of property may be subrogated to the vendors lien for the purchase price, if the purchaser would otherwise have been unjustly enriched.
The Menelaou parents proposed to sell the family home to release capital to be spent on (among other things) buying a house for their daughter.
To enable this to happen, the claimant bank, to whom the family home was mortgaged, agreed to release its charges on condition that it would receive a charge over the house to be acquired for the daughter.
This expectation was defeated because she was unaware of the arrangement and the signature on the charge was not hers.
The daughter was enriched, not by the mere fact of acquiring a house, which she owed to the benevolence of her parents, but by the fact that she acquired it free of the charge which the bank expected to have and without which the transaction should not have proceeded.
The main issue on the appeal was whether that enrichment occurred at the banks expense, given that the money to pay the purchase price had come from her parents out of the proceeds of sale of the family home, and not directly from the bank.
Once that question was answered in the banks favour, it was held that the enrichment was unjust.
This was because the banks consent to the use of the proceeds of the family home to buy the daughter a house had been conditional on it obtaining a charge.
That condition had failed and the daughter had consequently been enriched.
To reverse the enrichment, the bank was subrogated to the vendors lien, on the footing that the purchase price secured by that lien had in substance been paid with the banks money.
The daughters intentions were irrelevant because the absence of a valid charge had been a windfall for her.
As Lord Neuberger pointed out (para 70), this was because she did not pay for it.
If she had been a bona fide purchaser for full value it might well have been impossible to characterise any enrichment arising from the absence of the intended charge as unjust.
The cases on the use of equitable subrogation to prevent or reverse unjust enrichment are all cases of defective transactions.
They were defective in the sense that the claimant paid money on the basis of an expectation which failed.
Many of them may broadly be said to arise from a mistake on the part of the claimant.
For example, he may wrongly have assumed that the benefit in question was available or enforceable or that his stipulation was valid, when it was not.
However, it would be unwise to draw too close an analogy with the role of mistake in other legal contexts or to try to fit the subrogation cases into any broader category of unjust enrichment.
It is in many ways sui generis.
In the first place, except in the case of voluntary dispositions, the law does not normally attach legal consequences to a unilateral mistake unless it is known to or was induced by the other party.
But it does so in the subrogation cases.
This is, as I have explained, because the windfall character of the benefit conferred on the defendant means that it is not unjust to give effect to the unilateral expectation of the claimant.
Secondly, where money is paid under a contract, restitution is normally available only if the contract can be and is rescinded or is otherwise at an end without performance (eg by frustration).
This is because the law of unjust enrichment is generally concerned to restore the parties to a normatively defective transfer to their pre transfer position.
Subrogation, however, does not restore the parties to their pre transfer position.
It effectively operates to specifically enforce a defeated expectation.
Thirdly, as Lord Clarke suggested in Menelaou (para 21), the rule may be equally capable of analysis in terms of failure of basis for the transfer.
Restitution on that ground ordinarily requires that the expectation should be mutual, whereas this is not a requirement for equitable subrogation.
But some cases, such as Boscawen v Bajwa and Cheltenham & Gloucester v Appleyard, cannot without artifice be analysed in any other way, since the payer does not seem to have been mistaken about anything.
His expectation was simply defeated by some subsequent external event.
What this suggests is that the real basis of the rule is the defeat of an expectation of benefit which was the basis of the payers consent to the payment of the money for the relevant purpose.
Mistake is not the critical element.
It is only one, admittedly common, explanation of how that expectation came to be disappointed.
Two things, however, are clear.
The first is that the role of the law of unjust enrichment in such cases is to characterise the resultant enrichment of the defendant as unjust, because the absence of the stipulated benefit disrupted a relevant expectation about the transaction under which the money was paid.
The second is that the role of equitable subrogation is to replicate as far as possible that element of the transaction whose absence made it defective.
This is why subrogation cannot be allowed to confer a greater benefit on the claimants than he has bargained for: see Paul v Speirway Ltd [1976] Ch 220, 232 (Oliver J), Banque Financire, at pp 236 237 (Lord Hoffmann), and Cheltenham & Gloucester v Appleyard, at paras 38, 41 42 (Neuberger LJ).
It can be seen that the fact that all the cases relate to defective transactions is not just an adventitious feature of the disputes that happen to have come before the courts.
It is fundamental to the principle on which they were decided.
The present case is entirely different from the kind of case with which equitable subrogation is properly concerned.
The December 2008 refinancing was not a defective transaction.
Mr Hunt intended to discharge EMSLs debt to Swynson.
Otherwise he would not have achieved his objective of cleaning up Swynsons balance sheet and reducing its liability to tax.
He received the whole of the benefit from the transaction for which he had stipulated: the covenant to repay, the security over EMSLs assets, the tax advantage and the presentational advantage of removing a large non performing debt from Swynsons books.
It is of course true that he did not receive repayment of his loan, because EMSL was (or became) insolvent and its assets were worth much less than the debt.
But that was a commercial risk that he took with his eyes open, and it was not what enriched HMT.
In these circumstances, subrogation is not being invoked for its proper purpose, namely to replicate some element of the transaction which was expected but failed.
It is being invoked so as to enable Mr Hunt to exercise for his own benefit the claims of Swynson in respect of an unconnected breach of duty under a different transaction between different parties more than two years earlier.
Mr Hunts alleged mistake contributes nothing to this analysis.
I need not enter into the long standing controversy about whether a transaction may be set aside on account of a mistake relating to the consequences or advantages of a transaction as opposed to its terms or character, or whether any causative mistake of sufficient importance will do.
That issue is discussed by Lord Walker in Pitt v Holt [2013] 2 AC 108 at paras 114 123 and by the editors of Goff & Jones, The Law of Unjust Enrichment, 9th ed (2016), paras 9 135 9 142.
But it does not arise here.
Mr Hunt is not seeking to set aside the December 2008 refinancing and would not be entitled to do so.
He is trying to invoke a remedy which the law provides for a specific purpose, and to deploy it for a different one.
When Mr Hunt entered into the December 2008 refinancing, he did not in any sense bargain for a right to recover substantial damages from HMT.
Nor was he mistaken about what he was going to get out of the refinancing.
At best, he was mistaken about the effect that the discharge of EMSLs debt to Swynson would have on the latters claims under the very different transaction which it had entered into in 2006 when it engaged HMT to carry out the due diligence.
In fact, however, his evidence does not even go that far.
What it shows is that he wrongly believed that he had already bargained for a right to substantial damages from HMT back in 2006.
This was because he considered that as the owner of Swynson he was as much entitled under Swynsons contract with HMT as Swynson was.
As between me and Swynson, he wrote in the passage from his witness statement cited by the judge, the consideration of who technically would be entitled to recover the money from HMT did not matter as I was the owner of Swynson.
As a result, he did not think that by discharging EMSLs debt to Swynson two years later he would diminish his own entitlement.
As between Swynson and himself, it was implicitly understood that whichever of them made the recovery it would be shared between them pro rata according to the unpaid lending advanced.
This was an error, but it does not follow that its consequences constitute an injustice which falls to be corrected by the law of equitable subrogation.
Unless the claimant has been defeated in his expectation of some feature of the transaction for which he may be said to have bargained, he does not suffer an injustice recognised by law simply because in law he has no right.
Failure to recognise these limitations would transform the law of equitable subrogation into a general escape route from any principle of law which the claimant overlooked or misunderstood when he arranged his affairs as he did.
The consequence of a rule as broad as that can be seen by supposing that after Mr Hunt has recovered damages from HMT by way of subrogation, the fortunes of Evo turn and EMSL is in a position to repay the December 2008 loan.
It does not matter for present purposes whether or not this was a realistic prospect in December 2008, although the judges findings on mitigation suggest that it was not unrealistic.
If Mr Hunts argument is correct, the transfer which enriched HMT at his expense was the payment of the loan moneys to EMSL and which EMSL then paid to Swynson.
His right of subrogation is said to have arisen from the discharge of the debt which EMSL owed to Swynson.
It did not depend on whether or not he was able to recover the money he lent to EMSL.
If EMSL were restored to financial health, there would be nothing to stop him from obtaining repayment of EMSLs debt under the December 2008 loan agreement.
Subrogation on these facts would then have served to give Mr Hunt an additional right on top of everything the he bargained for in December 2008.
This result would hardly do credit to the law.
But it is the natural consequence of allowing subrogation to rights arising under a different transaction from the one which gave rise to the enrichment, instead of confining it to cases where it serves to replicate a missing element of the same transaction.
Conclusion
appropriate order.
In the result I would allow the appeal.
The parties are invited to agree an LORD MANCE:
Introduction
This appeal arises from an unsuccessful management buyout of Medical Industries America Inc, trading as Evo Medical Solutions (Evo), made through Evo Medical Solutions Ltd (EMSL) in 2006.
EMSL was set up for the purpose and was owned as to 25% by Mr Michael Hunt through nominees, as to 3.6% by a colleague of his and as to the remaining 71.4% by the management team proposing the buyout.
Mr Hunt has at all material times owned and controlled the respondent to this appeal, Swynson Ltd (Swynson).
The management buyout was enabled by an interest bearing loan of 15m made on 31 October 2006 by Swynson to EMSL, secured by charges over EMSLs and Evos assets and repayable on 31 October 2007.
As from 28 February 2007, this loan was financed by Swynson by borrowing from Credit Suisse guaranteed by Mr Hunt and secured on his assets.
By July 2007 it appeared that Evo was at risk of financial collapse, and on 13 August 2007 Swynson granted a further facility of 1.75m to EMSL, which was fully drawn down by 1 October 2007 and repayable on 31 October 2007.
Evos finances failed to improve and on 4 June 2008 Swynson made a third loan of 3m to EMSL.
At or about the same date, Mr Hunt acquired the majority beneficial ownership of EMSL.
The appellants, Hurst Morrison Thomson LLP (now known as Lowick Rose LLP) (HMT) through their partner, Mr Morrison, introduced the management buyout to Mr Hunt in mid 2006, by a proposal letter dated 12 July 2006 followed by a meeting the next day.
They undertook by formal engagement letter dated 30 September 2006 to act as Swynsons reporting accountants in the same context and provided a final due diligence report on 31 October 2006.
The engagement letter provided that HMTs maximum liability for advice given in respect of this matter was limited to 15m in aggregate in respect of any claim or claims that Swynson might have against HMT arising out of this engagement.
It is conceded that HMTs advice was negligent and that their negligence caused Swynsons decision to enter into the 2006 loan.
During the first half of 2008 Mr Morrison asked Mr Hunt if he was contemplating legal action against HMT.
Mr Hunt replied that he would find that most unpalatable and said that they should wait and see how things developed following the additional funding provided in October 2007.
By 1 July 2008 it was clear that matters had further deteriorated, and Mr Hunt drafted a letter of claim, and disclosed that he had done so to Mr Morrison and had, as an alternative to forcing Evo into liquidation, made the third investment in June 2008.
Mr Morrison asked him not to send the letter as it would cause great concern with HMTs insurers, and Mr Hunt refrained from taking any such step until 24 August 2010, when he wrote referring to the earlier letter and conversation, stated that Evo had from the outset been a pig in a poke, and and made a formal claim.
That claim led in due course to the commencement on 30 October 2012 of the present proceedings, in which Swynson and Mr Hunt were both claimants and sought to recover damages for losses resulting from the management buyout and the making of all three loans in 2006, 2007 and 2008.
The losses claimed at trial consisted of the total of the funding provided (19.75m) less moneys and assets recovered, making a net claim of $16.157m (over HMTs limit of liability under the engagement letter), plus interest.
In the meantime, however, the consequence of Mr Hunts acquiring of majority ownership of EMSL in addition to his ownership of Swynson had been that Her Majestys Revenue and Customs began to treat Swynson as receiving the interest which EMSL should have paid, but was not in fact paying, to Swynson.
At the Revenues official interest rate of 6.25% pa and the corporation tax rate of 28% applicable at the time, the resulting tax charge on the 2006 and 2007 loans was some 293,125 per annum.
Swynson also remained exposed on its borrowings from Credit Suisse.
In these circumstances, on the advice, it appears, of his accountant, Mr Hunt determined to lend EMSL the money to pay off Swynson.
He did so under a loan agreement dated 31 December 2008, which recited that, due to the financial circumstances of the borrower the loan was to be non interest bearing, and clause 3.2 of which provided that: The Borrower shall use all money borrowed under this agreement (i) To pay certain of the Borrowers existing loans to Swynson Limited (but for the avoidance of doubt not the Second Additional Loan made available on 4 June 2008); (ii) To pay for costs incurred in connection with the repayment of this agreement and (iii) for general working capital purposes and not for any other purpose.
On this basis, EMSL was able to and did pay Swynson the sums due in respect of the 2006 and 2007 loans.
In the courts below, Mr Hunts claim against HMT failed, on the ground that HMT undertook and owed no duty to him personally.
There is no appeal against that conclusion.
In relation to Swynson, HMT unquestionably owed and breached duties in both contract and tort.
But HMT submit that the effect of the transaction of 31 December 2008 was and is to repay the loans given by Swynson to fund and support the management buyout.
So no loss has, in the event, been suffered by Swynson, and Swynson can have no claim against HMT with regard to them.
That is the submission. (a) Mitigation and res inter alios acta?
HMTs submission failed at first instance before Rose J and in the Court of Appeal before Longmore and Sales LJJ, with Davis LJ dissenting.
Rose J and the majority in the Court of Appeal held that the transaction effected on 31 December 2008 fell to be regarded as res inter alios acta, as between Swynson and HMT.
They considered, clearly correctly, that the transaction did not constitute mitigation by Swynson of its damage, since Swynson was in no position to, and did not effect, the transaction itself.
But they regarded the transaction as in fact avoiding loss in a way which should only be brought into account, if it arose out of HMTs breach of duty and in the ordinary course of business.
They cited in this connection from Viscount Haldane LCs speech in British Westinghouse Co Ltd v Underground Electric Railways Co Ltd [1912] AC 673, 690.
It can readily be accepted that there was a causal link between Mr Hunts action in funding EMSL to repay Swynson and HMTs negligence, and also that Mr Hunt was not acting in the ordinary course of business, but in the grip of a continuing and somewhat disastrous course of events brought about by that negligence.
But, as has been held, Mr Hunt himself has no claim against HMT for negligence, and his action brought about the repayment of the loan granted to Swynson independently of any action by Swynson itself.
In the passages cited, Viscount Haldane LC was speaking of loss mitigated by the claimant him or itself in circumstances where there was no obligation to mitigate loss.
Here, the payment off of the indebtedness was not undertaken by or at the request of Swynson.
It was initiated by Mr Hunt in his personal capacity deciding that it would suit Swynsons and his own interests to procure repayment by EMSL of its indebtedness to Swynson.
Swynson and Mr Hunt are distinct legal personalities, and Mr Hunts conduct cannot be attributed to Swynson.
The majority in the Court of Appeal also sought to support its reasoning by reference to the principle recognised in cases such as Parry v Cleaver [1970] AC 1 as governing collateral receipts, such as the proceeds of insurance, benevolent payments, disablement and pension payments.
Whether such receipts should be brought into account was there said by Lord Reid, at p 13H, to depend on justice, reasonableness and public policy, and to involve a distinction which in his view at p 15E depended not on their source but on their intrinsic nature.
In some cases, such payments can be seen to have been effectively purchased or paid for by the claimant, so that it would be unfair to deprive him of their benefit.
In other cases, such as insurance, whosoever has paid the premium, it is clear that insurers liability is intended to be secondary, and subrogation will ensure that any recovery flows back to compensate the insurer.
None of such cases resembles the present, where it is suggested that the court can ignore what is, in its intrinsic nature, a repayment of the loan under and by virtue of which the loss has been incurred.
Longmore LJ noted that, if Mr Hunt had simply given Swynson the amounts of the outstanding 2006 and 2007 loans, no one could have suggested that HMT would have benefitted by this.
That is clear.
But the reason is that the gift would not have discharged the outstanding loans, and would have been a purely gratuitous or benevolent addition to Swynsons assets which was clearly not intended or apt to discharge HMT.
Longmore LJ said it would be a triumph of form over substance if a different result occurred merely because the payment is made through EMSL.
But the difference is in the nature of the payment, to which Lord Reid referred in Parry v Cleaver.
Mr Hunts loan to EMSL was intended to and did lead to actual payment off of the first two loans which Swynson had made to EMSL.
Sales LJ, agreeing on this point with Davis LJ, also accepted (para 55) that, if EMSL had suddenly become able to repay and had repaid as a result of winning the lottery or being left a large sum in a will, then Swynson could to that extent no longer have a claim against HMT.
But he considered that considerations of justice, reasonableness and public policy made the present case different.
This was because HMTs negligence had put Swynson and Mr Hunt in an invidious position, in which Mr Hunt had felt he had to provide funding to shore up Swynsons position on uncommercial terms which were not in the ordinary course of business.
So, although Mr Hunt did not act out of pure benevolence, the position was analogous to cases of benevolence reviewed in Parry v Cleaver.
Again, however, there is all the difference between a benevolent act which benefits a claimant (here Swynson) collaterally in an amount equivalent to a loss which it has incurred and satisfaction of the claimant Swynsons loss, by Mr Hunts funding of EMSL to repay Swynson.
For these reasons, I do not consider that the result reached by Rose J and by the majority of the Court of Appeal can be justified by reference to the primary ground on which they put it.
This conclusion is also consistent, in my opinion, with the Court of Appeals reasoning and conclusion in Preferred Mortgages Ltd v Bradford & Bingley Estate Agencies Ltd [2002] EWCA Civ 336; [2002] PNLR 35, and with the reasoning of, in particular, Stephenson LJ in London and South of England Building Society v Stone [1983] 1 WLR 1242; 1261D 1262A.
The latter case involved a claim by lenders against negligent valuers (who had failed to spot subsidence) for the difference of 11,880 between the amount advanced and the amount which would have been lent upon a proper valuation.
The borrowers ultimate repayment of the original advance out of the proceeds of the eventual sale of the house was ignored in the latter case by concession (per OConnor LJ at p 1248H), the rationale being (per OConnor LJ at p 1249E F) that the repayment had in effect only been achieved out of the lenders own further advances totalling 29,000, made to cover repairs necessary to make good the subsidence which the valuers had negligently failed to spot.
The lenders therefore continued to suffer, and to be entitled to recover, loss up to the cap imposed by the difference between the amount advanced and the amount which would have been advanced on a proper valuation.
The Court of Appeals reasoning and decision in that very different factual situation do not affect the present, where Swynsons loss as lender has been fully extinguished by the repayment which Mr Hunt procured of the first two EMSL loans.
Swynsons alternative grounds: (b) transferred loss and (c) unjust enrichment
There are however two further grounds on which Swynson submits that the result reached below can and should be upheld.
One is unjust enrichment, which, it is submitted, operates by preserving Swynsons rights against HMT for the benefit of Mr Hunt as subrogee to the extent necessary to indemnify him against his outlay paying off Swynsons loan.
This basis was accepted in the Court of Appeal by Sales LJ, but would not have been accepted by Longmore and Davis LJJ, as an alternative basis for the result reached.
The other, transferred loss, was mentioned in, but not considered in depth by any member of, the Court of Appeal.
(b) Transferred loss
Recovery for transferred loss can, in my view, be addressed quite briefly.
The normal principle is that a claimant in an action for breach of contract cannot recover damages in respect of loss caused by the breach to some third person not party to the contract: see The Albazero [1977] AC 774, 846 B C per Lord Diplock.
But there are, as Lord Diplock went on to say, exceptions.
One exception, recognised and applied in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd and St Martins Property Corp Ltd v Sir Robert McAlpine Ltd (St Martins) [1994] 1 AC 85 exists where it was in the contemplation of the parties when the contract was made that the property, the subject of the contract and the breach, would be transferred to or occupied by a third party, who would in consequence suffer the loss arising from its breach: see Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68 and the narrow ground of decision expressed by Lord Browne Wilkinson at p 114G H in St Martins, in which all members of the House joined.
In such a situation, the claimant is seen as suing on behalf of and for the benefit of the injured third party and is bound to account accordingly: see St Martins, per Lord Browne Wilkinson at p 115A B and McAlpine Construction Ltd v Panatown Ltd (Panatown) [2001] 1 AC 518, per Lord Clyde, at pp 530E F and 532D E.
Another broader principle was suggested by Lord Griffiths in St Martins, at p 96F 97D and reviewed inconclusively by Lord Browne Wilkinson at pp 111F 112F as well as by the members of the House in Panatown.
This is that a contracting party might itself have an interest in performance enabling it to claim damages without proving actual loss.
In both cases the principle was being suggested in the context of contracts for supply, whether of goods or services.
In St Martins the suggestion was made in circumstances where the claimant had actually incurred costs of repair, but was entitled to recover them from the associated company to which the building had been transferred before the breach.
In Panatown the property was from the outset owned by an associated company of the company which contracted for its construction, and the construction defects which emerged did not lead to the latter company incurring any outlay.
The reason why, in the majority view, the latter company was not entitled to recover damages was not that it had incurred no outlay, but was that there existed a deed of care deed entitling the owning company to make a direct claim against the contractors.
Potential difficulties about the theory of performance interest are that it cannot prima facie embrace consequential losses suffered by the company actually (as opposed to contractually) interested in the quality of the property or services and that it is not clear whether or on what basis the company contractually entitled may be liable to account to the company actually interested: see on this latter point per Lord Clyde in Panatown at pp 532E F, 534B C and 535F.
Neither the narrow or the broad version of the transferred loss principle is in my view of assistance to Swynson.
As to the narrow principle, it is clear that Swynson did not contract with HMT on behalf of or for the benefit of Mr Hunt.
As to the broad principle, even if accepted, I do not see how it can apply in circumstances where Swynson itself suffered loss through being induced to support the management buyout by lending to EMSL, but the loan was ultimately repaid by EMSL.
This is not a case where Swynson had any performance interest other than being indemnified in respect of the loss which it incurred in lending moneys to support the management buyout.
That performance interest has been satisfied.
The fact that it was satisfied by Mr Hunt making moneys available to EMSL to repay Swynson does not bear on or expand Swynsons performance interest.
(c) Unjust enrichment
I turn then to unjust enrichment.
Swynsons and Mr Hunts submission is that relief by way of unjust enrichment is available to preserve Swynsons otherwise discharged claim against HMT for the benefit of Mr Hunt to the extent necessary to meet what are, it is submitted, the imperatives of the circumstances in which Mr Hunt effectively enriched HMT by arranging the repayment of the sums outstanding under the first two loans made by Swynson to EMSL, by reference to which sums HMTs liability would, otherwise, have fallen to be measured.
Longmore and Davis LJJ were not prepared to accept this as a potential basis of recovery for two reasons.
The first was difficulty in seeing how subrogation could arise in favour of Mr Hunt in respect of a claim by Swynson which had been discharged, unless, Longmore LJ relevantly added, the theory of fictionalised assignment expounded by Lord Hoftmann in Banque Financiere (see para 20 below) at p 236E solves this particular problem.
The second was doubt whether any mistake had been sufficiently demonstrated.
Both Longmore and Davis LJ saw the case as involving causative ignorance, rather than any incorrect conscious belief or incorrect tacit assumption, referring for this distinction to Pitt v Hunt [2013] 2 AC 108.
Sales LJ took a different view and would, if necessary, have recognised Mr Hunt as enjoying a right of subrogation to Swynsons discharged claim against HMT.
The basic questions in a claim in unjust enrichment were summarised by Lord Steyn in Banque Financire de la Cit v Parc (Battersea) Ltd [1999] 1 AC 221, 227A C in terms recently adopted by the Supreme Court in the judgment delivered by Lord Reed in Commissioners for Her Majestys Revenue and Customs v The Investment Trust Companies (In Liquidation) (ITC) [2017] UKSC 29.
The four questions are: (1) Has the defendant benefited or been enriched? (2) Was the enrichment at the expense of the claimant? (3) Was the enrichment unjust? (4) Are there any defences? More detailed examination and application of these questions in particular cases has proved controversial: see in particular Menelaou v Bank of Cyprus [2014] 1 WLR 854 and its academic aftermath.
However, the comprehensive review of their significance in Lord Reeds judgment in ITC now provides the essential basis for further consideration and application of the questions.
As to the first, there is, in the light of my conclusions on the issue of res inter alios acta, no doubt that HMT were, indirectly, enriched by the discharge by EMSL of the loan due to Swynson.
The discharge had the immediate effect of reducing (in this case to nil) the damages in respect of the 2006 and 2007 loans which (subject to the overall 15m cap) Swynson could otherwise have recovered from HMT on account of HMTs negligence.
A relevant benefit for the purposes of unjust enrichment can consist in the discharge of a debt or (as in Banque Financire) of the promotion of a second charge due to the discharge of part of a prior secured debt.
In principle, it seems to me that it can consist in the reduction of a loss, which would otherwise be recoverable by way of a claim for damages for breach of contract and/or duty.
The second question raises the issue what counts as enrichment at the expense of the claimant.
That this issue can prove less straightforward is evident from the examination of its conceptual base in paras 37 to 63 in ITC.
Usually, as Lord Reed points out (paras 46 50) the parties will have dealt directly with one another, but there are situations which are legally equivalent to direct provision and there may be other apparent exceptions or possible approaches, which it is not intended to rule out.
The claimant must incur a loss by conferring a benefit on the defendant, but economic reality is not the test (paras 59 60).
However, the reality, rather than the formal shape, of a transaction, or of a co ordinated series of transactions, can show that the claimant has conferred a benefit on the defendant, despite the absence of a direct relationship between them.
Thus, in Banque Financire itself, the transaction was structured so that Banque Financire (BFC) advanced the relevant moneys to Mr Herzig who on lent on different terms to Parc; the purpose was to reduce Parcs borrowing from Royal Trust Bank (Switzerland) (RTB), which had a first charge over Parcs assets; the moneys was actually remitted directly by BFC to RTB; and BFC believed, on the basis of a postponement letter written by Mr Herzig, that there had been agreement by all relevant companies in the Parc group that the advance made to Parc would have priority over other inter group lending to Parc, including by OOL.
In fact Mr Herzig had no authority to write the letter and so there had been no such agreement.
The unintended effect of the advances paying off RTB was therefore to promote OOLs second charge on Parcs assets pro tanto.
In these circumstances, BFC was treated, as against OOL, as subrogated to RTBs (otherwise discharged) secured debt to the extent necessary to cover the advance which it had made.
BFCs failure to take proper precautions to ensure that Mr Herzig had authority to write the postponement letter was no ground for holding that the enrichment was not unjust: see per Lord Hoffmann at p 235F G.
In reaching this conclusion, all five members of the House held that, despite Mr Herzigs interposition, OOL was enriched at the expense of BFC.
Lord Steyn (p 227B E), Lord Clyde (p 238B C) and Lord Hutton (p 239E G) each referred to this as the reality.
Lord Hoffmann (p 235C E) with whose reasons Lord Steyn (p 228F), Lord Griffiths (p 228F G) and Lord Clyde (p 238D E) also agreed, gave as the reason that there was no difficulty in tracing BFCs money into the discharge of the debt due to RTB; the payment to RTB was direct.
In this respect, the case is stronger than in Boscawen v Bajwa [1996] 1 WLR 328.
In Boscawen v Bajwa, money was advanced by a building society for the purchase of a property and was to be secured by a first charge.
The purchasers solicitors passed the money on to the vendors solicitors, who, in circumstances not involving any want of probity but to some extent contributed to by the purchasers solicitors issue of a dishonoured cheque, used it to discharge a mortgage on the property without any transfer of the property to the intended purchaser ever occurring.
The building society was held entitled to be subrogated to the discharged mortgage to the extent of its outlay, on the basis that the moneys were traceable into the discharged mortgage debt.
Where claimants property is traceable into a receipt or property held by the defendant, there is the equivalent of a direct transfer.
In the present case, there is also no difficulty in tracing the advance made by Mr Hunt to EMSL into the discharge of Swynsons borrowing from EMSL.
It was a term of Mr Hunts loan to EMSL that it should be used for such discharge: para 7 above.
Without more, this discharge would have been a benefit to Swynson alone, and that was no doubt how Mr Hunt saw it at the time.
In fact, as I have held, the discharge of EMSLs indebtedness to Swynson had the unforeseen consequence of eliminating any loss which Swynson would be able to show in respect of the 2006 and 2007 loans if it pursued a claim for damages against HMT, and did so moreover in circumstances in which Mr Hunt himself might (as proved to be the case) have no personal claim himself against HMT.
But the transfers which Mr Hunt arranged cannot be regarded as received by HMT, or as traceable into any sort of discharge of HMTs liability to Swynson.
It can however be argued that, even in Banque Financire, the transfers made by Banque Financire were not actually received, or converted into property held, by OOL.
OOL was simply enriched by the promotion of its charge, which occurred due to BFCs payment off of RTBs loan.
So here, it may be argued, HMT was enriched at Mr Hunts expense by the payment off through EMSL of Swynsons loan.
This is however to over simplify and there are a number of potentially significant points that need to be considered.
First and most importantly, in Banque Financire BFC bargained for, and mistakenly believed it was obtaining, priority over other group claims when it provided the moneys to discharge RTBs loan.
In the present case, Mr Hunt was not dealing with HMT, or addressing or discharging, or bargaining either to preserve or to step into the shoes of Swynson for the purposes of, any contractual or tortious claim which Swynson had against HMT.
Second, HMT submits that there can be no relevant benefit if all that can be shown is that the defendant is not liable because a fundamental component of the cause of action against him (namely loss) is missing.
But subrogation by virtue of unjust enrichment is an equitable remedy which operates by adjusting relationships on a fictionalised basis.
Thus, in Banque Financire, part of RTBs secured claim was treated as alive, as against OOL only, as if it had not been discharged by payment by BFC, but had been assigned to BFC (see per Lord Hoffmann, p 236E F).
So, here, it seems to me that it could be possible, if the other ingredients of subrogation were all present, to treat Swynsons claim against HMT as alive as if Swynsons loss had not been discharged by the payment arranged by Mr Hunt through EMSL, and as if Swynsons claim had been assigned to Mr Hunt.
Longmore LJs qualification recognising the potential relevance of this fictionalised basis of subrogation was to that extent well founded.
Third, Mr Hunt, when advancing to EMSL the money necessary to repay the first and second loans made by Swynson, acquired a countervailing right in law to repayment of those loans by EMSL.
The value of that right depended on Evo and its future performance.
The December 2008 refinancing was made on the basis that the EMSL loan was impaired (see per Rose J, paras 47 48 and Longmore LJ, para 7).
Mr Hunts letter of claim of 24 August 2010 stated that Evo had long been in desperate straits and that it had never in Mr Hunts view been more than a pig in a poke.
But the management accounts, summarised in the expert report of Ian Robinson produced at the request of Swynson and Mr Hunt for use before Rose J, indicate that there still existed hope that Evo might return to profitable trading in and after 2010.
Mr Robinsons opinion was also that as at December 2008 Evo had a net asset value in the order of USD 8m or a value on an earnings basis in the order of USD 4 to 5m.
Evo did ultimately yield some realisations (para 42 above), though this fell far short of covering Mr Hunts loan and the interest on it.
In summary, it would seem unrealistic to regard Mr Hunt as suffering no loss at all in December 2008, as a result of advancing the money he did to EMSL to pay off Swynson.
With the benefit of hindsight, it seems clear that his loss increased thereafter, as Evos position continued, despite his efforts, to deteriorate.
However, this analysis highlights a feature of Mr Hunts claim that HMT has been unjustly enriched at his expense.
The existence and extent of any enrichment could not be determined by simple reference to the amount that Mr Hunt lent to EMSL in December 2008.
They would depend on Evos and EMSLs subsequent fortunes.
A fourth point, arising from some observations of the Supreme Court in ITC, concerns the significance of the limited benefits intended and obtained from the repayment of the first and second loans made by Swynson to EMSL.
These consisted in a tax saving (para 43 above) and the removal of the perceived disadvantage to Swynson of having an impaired debt on its books: see Rose Js judgment, para 47.
In different ways, the existence of a tax liability without receipt of any corresponding income and the impaired debt were both disadvantages resulting from the original management buyout on the basis of HMTs original negligent advice.
Their elimination was a step taken by Mr Hunt in the course of dealing with that disastrous investment.
But it was a step taken by him personally, albeit in order to benefit his company Swynson.
The difficulties on this appeal arise because (a) the step he took had the unforeseen, consequential effect of depriving Swynson of any claim against HMT and (b) the highest that Mr Hunt can put the matter is to say that he himself thereby suffered loss in his capacity as owner of Swynson, in circumstances where, as has been held, he himself had no direct right of action against HMT.
A fifth point, which I mention in passing, is that, had Swynsons loan to EMSL been good, the same tax liability would have been incurred but in respect of moneys actually received, while the impairment would have been avoided.
Apart from the repayment of the EMSL loan procured by Mr Hunt on 31 December 2008, Swynsons damages claim against HMT could have included the full amount of the interest which EMSL had failed to pay to Swynson (which would no doubt have been taxable in Swynsons hands as a business receipt, even if EMSL had paid it).
Swynson having in fact been repaid by EMSL, Mr Hunt, if he were to have any subrogation claim against HMT, would probably have to give credit, against his gross loss for the purposes of that claim, for the amount of the tax on interest in respect of which he in effect indemnified Swynson (any subrogation recovery by him from HMT in respect of such interest not presumably being taxable).
I understood Mr Sims QC for Mr Hunt to accept as much (transcript, 22 November 2016, p 125 ll.22 23.) But, in any event, as Mr Sims went on to point out, this would be likely to be irrelevant, as any such reduction in Mr Hunts gross claim for subrogation purposes would not reduce it below HMTs maximum liability of 15m as at 31 December 2008, plus interest since then.
Turning to the significance of these points for Mr Hunts claim to be subrogated to Swynsons claim against HMT, in ITC, paras 52 to 58, Lord Reed noted that, where the provision of a benefit to a third party is incidental to work done or expenditure incurred in pursuit of a persons own interests, any enrichment may either not be regarded as being at the expense of the person doing the work or incurring the expenditure or may not be regarded as unjust.
One man heats his house, and his neighbour gets a great deal of benefit the classic example given by Lord President Dunedin in Edinburgh and District Tramways Co Ltd v Courtenay 1909 SC 99, 105 clearly involves circumstances in which it would be absurd, as the Lord President said, to suppose that the former could claim a contribution from the latter.
The case of TFL Mangement Services v Lloyds Bank plc [2013] EWCA Civ 1415 was wrongly decided for this reason, as the Court held in ITC and as the Scottish jurisprudence cited by Lord Reed at para 55 in ITC presciently suggested nearly two centuries ago.
In such situations, the questions whether a benefit was obtained at the expense of the claimant and whether it would be unjust for the defendant to retain it are likely to be difficult to separate.
If a person with a view to obtaining a small benefit for himself at the same time unintentionally and by mistake incurs a much larger loss in conferring a much larger benefit on a third party, the picture changes, and one is again potentially in the field of unjust enrichment.
The particular features of the present appeal, on which attention must necessarily focus, are that it concerns deliberately structured transfers (by Mr Hunt to EMSL and EMSL to Swynson) which had unforeseen, consequential effects on Swynsons separate relationship with a third party, HMT, and/or on Mr Hunt, as noted, particularly, in paras 62 and 65 above.
In these circumstances, I turn to consider whether there is here an unjust factor, which may make it appropriate to recognise the benefit conferred on HMT by the repayment of the first and second Swynson loans as giving rise to a claim by Mr Hunt.
The primary case now sought to be advanced is that Mr Hunt was labouring under a mistake when he advanced the money to EMSL to pay off the loans.
In the alternative, it is submitted that the unjust factor can be found in the failure of the basis on which Mr Hunt made such advance, or, in the further alternative, upon a more general policy based approach recognising the suggested unfairness of what has happened.
I do not see these two alternative submissions as adding in the present case to the primary submission or offering any real prospect of success if it fails.
In the present case, the basis of the advance could hardly be said to fail, if there was no relevant mistake.
Likewise, it is difficult to see any reason why Mr Hunt should have a remedy in respect of an advance if he made it without any mistake, particularly when it offered his company, Swynson, some advantage.
Having said that, there are cases which can be analysed as accepting such a subrogation claim simply in order to redress the defeat by unforeseen events of an expectation of benefit on the basis of which the claimant made a payment: see eg Banque Finanire and Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291.
The underlying rationale of subrogation to redress unjust enrichment may well be to redress the defeat of such an expectation, mistake being only one context in which this can occur.
But in each case, the nature of the expectation or mistake is also critical in determining whether there exists a subrogation claim to redress any enrichment.
This brings one back to the closeness of its relationship with the right to which the subrogation claim relates.
The first problem which arises on this appeal regarding mistake is that it was not explicitly pleaded, leading to a submission by HMT that it would be unfair to treat it as a basis on which this appeal could or should be decided against them.
This makes it necessary to examine the way in which the case was put and has developed.
The first relevant reference in the pleadings is in the reply dated 14 June 2013, where in para 35d the defence plea that HMT owed no separate duty to Mr Hunt was addressed, and Swynson advanced three heads of positive case: in summary, res inter alios acta, equitable subrogation and transferred loss.
The second was put simply on the basis that Swynson suffered the losses claimed herein before any refinancing and is entitled to recover the same for itself and Mr Hunt on the basis that Mr Hunt should be treated in equity, by way of equitable subrogation or otherwise, as entitled to his pro rata share.
Then, in its skeleton argument dated 8 May 2014 for the trial which began on 14 and continued to 23 May 2014, Swynson gave notice that it relied in support of its claim of subrogation on both Banque Financire and Menelaou.
At trial, Mr Hunt gave apparently uncontradicted evidence, which Rose J in any event expressly accepted to the following effect: It should be obvious from what I have said that there was no intention on my part or Swynsons part to relieve HMT from any liability due to the refinancing exercise.
As far as I was concerned the claim against HMT remained unaffected by this refinancing and was of no concern of theirs.
As between me and Swynson the consideration of who technically would be entitled to recover the money from HMT did not matter as I was the owner of Swynson, but it was implicitly understood that the recovery would be held pro rata according to the unpaid lending advanced.
In written closing submissions dated 21 May 2014, Swynson submitted (para
27) that: Mr Hunt should be entitled to a subrogation remedy, having regard to the implied common intention of Hunt & Swynson [viz that after what was called the refinancing any recoveries would be shared as them in accordance with their outstanding and unpaid lending], on the principles analogous to the insurance cases, or to the remedy on the equitable principles of unjust enrichment as set out in Banque Financire [1999] AC 221; see as to the former at 231E, and as to the latter 234G H, 227B C &228D E. As for the latter basis for the remedy, Mr Hunts decision to step in and take over some of the lending to EMSL was not intended to give HMT (or more substantially its insurer) a windfall.
No one could possibly suggest there was any discussion, intention or agreement that HMT would benefit by reason of Mr Hunts desire to give Evo an interest free loan and save Swynson from paying deemed interest.
In these circumstances HMT would be unjustly enriched at his expense if it was held that any claim against it should be reduced by the extent to which he took over the lending previously owed to Swynson.
Rose J recited the three heads of case which were advanced, decided the case on the basis of res inter alios acta, and did not need to consider the other two heads: see paras 49 and 55 of her judgment.
In the Court of Appeal the matter was put squarely on the basis that it had been a mistake to make the 2008 Partial Refinance in order to relieve HMT of liability (skeleton dated 11 May 2015, para 29) and that Mr Hunt made a mistake in the way he structured this back in 2008 (transcript of opening, p 55B C).
In response on this head of claim, counsel for HMT submitted that there had been no pleading of mistake and that Mr Hunts evidence, accepted by the judge (para 68 above), did not establish a mistake.
Asked directly by Sales LJ at this point whether she was saying that the argument was not available, counsel replied that HMT did not have to put it that high, but yes (transcript, p 67D F).
So HMT were, if necessary, taking a point on admissibility.
In further submissions about the case of subrogation based on unjust enrichment, which it was accepted was before the judge, counsel submitted that there was lacking that missing right which required subrogation in order to fix the gap.
When Sales LJ suggested that the missing right is Mr Hunt thought that he was going to make this loan but there would still be the benefit of the cause of action against HMT, the reply was that that was not enough for subrogation.
For subrogation, there needs to have been a right bargained for and not achieved.
The Court of Appeal did not deal formally with the admissibility of the case based on mistake.
But, having heard these submissions, it gave a judgment on 25 June 2015 in which all three members of the Court dealt on the merits with the issue of unjust enrichment based on the case of mistake which Swynson had advanced before it.
Longmore and Davis LJJ rejected that case on its merits, for reasons summarised in para 55 above, while Sales LJ would have accepted it.
In these circumstances, I conclude that the Court of Appeal determined that the case based on mistake was fairly open to Swynson, and should be addressed on its merits, although the majority concluded that it should fail on the evidence.
I see no basis on which to reach a different conclusion on the question whether the case was and is open.
Indeed, I would myself have reached the same conclusion.
The case on mistake needs to be addressed on its merits accordingly.
In my opinion it is clear that Mr Hunt was labouring under a form of mistake when he was advised to and did arrange to fund EMSL to pay off Swynsons first and second loans.
Not only did he have no intention thereby to relieve HMT of any liability, he gave positive evidence which Rose J accepted that As far as I was concerned the claim against HMT remained unaffected by this refinancing and [the refinancing] was of no concern of theirs (para 72 above).
The fact that he did not think it important whether the claim against HMT was Swynsons or his does not seem to me to matter in assessing whether he was acting under a mistake.
It clearly belonged to one or other.
What matters is that he mistook the significance of payment off of the Swynson loans.
In Pitt v Holt [2013] 2 AC 108, Lord Walker, in a judgment with which all members of the Supreme Court agreed, addressed suggestions in prior caselaw that a line fell to be drawn between mere causative forgetfulness or ignorance and a mistaken conscious belief or mistaken tacit assumption, concluding as follows in para 108: I would hold that mere ignorance, even if causative, is insufficient, but that the court, in carrying out its task of finding the facts, should not shrink from drawing the inference of conscious belief or tacit assumption when there is evidence to support such an inference.
In the present case, I consider that, contrary to the view taken by the majority of the Court of Appeal, the accepted evidence, recited in paras 71 and 78 above, is of a conscious belief on Mr Hunts part that funding the repayment of the Swynson loans would have no effect on any claim against HMT.
At the very least, however, it establishes a tacit assumption.
This belief (or assumption) has been shown to be mistaken (a) as regards a negligence claim by Mr Hunt personally against HMT, by Rose Js judgment and (b) as regards a claim by Swynson against HMT, by the Supreme Courts present judgment.
As to (a), if he had had a claim in his own name, then he would have been able to recover in full from HMT.
His repayment of the Swynson loans would in this context have constituted a step taken in continuing mitigation of the effects of HMTs breach of duty towards him.
As to (b), if Swynson had retained a claim against HMT, Mr Hunt would, as Swynsons owner, have been covered indirectly in respect of any loss arising to him from the December 2008 arrangements.
How far Mr Hunt was acting under advice in the arrangements he made is not known.
It is certainly possible to suggest that it was in a general sense careless to make them without considering their implications.
At least in so far as his mistake was to think that Swynson would, if necessary, retain its claim against HMT despite the December 2008 arrangements, it could be said in response that the mistake was understandable, since the Supreme Court has concluded that it was shared by both courts below.
But, even if it were right to conclude that any mistake by Mr Hunt involved carelessness, that by itself is no bar to equitable relief, unless the circumstances show that Mr Hunt deliberately ran, or must be taken to have run, the risk of being wrong: see Banque Financire, 235E G per Lord Hoffmann (cited in para 58 above) and Pitt v Holt [2013] 2 AC 108, 114, per Lord Walker.
It seems clear that Mr Hunt did not intend to run or believe that he was running any such risk.
Nonetheless, the arrangements he in fact made did involve the risk that he might himself have no direct claim, while paying off EMSLs debt to Swynson meant that Swynson could no longer claim to have suffered loss recoverable from HMT, with the result that there was no basis on which either Swynson or Mr Hunt could claim any substantial damages from HMT.
Was any mistake causative? Like Sales LJ (para 59), I do not think that there is any chance that Mr Hunt would have made the payments in the way he did had he thought that they might have the effect of eliminating the liability of HMT in respect of the 2006 and 2007 loans.
The advantages for Swynson in terms of tax and standing (para 43 above) would have been dwarfed by the loss of a claim for 15m (plus interest) against HMT.
He could not conceivably have allowed any claim by Swynson to be fatally undermined in this way.
Was Mr Hunts mistake one in respect of which equity should grant relief, by way of subrogation keeping alive for that purpose Swynsons claim against HMT to the extent that it was discharged by the payment off of the two Swynson loans? It is necessary to consider, first, in respect of what type of mistake such relief may be available.
In this connection, Lord Walker in Pitt v Holt, paras 114 145, addressed a distinction suggested in prior authority between a mistake about the nature or characteristics of a transaction and the consequences or advantages to be gained by entering into it.
After close analysis of authority, he concluded (para 122): I can see no reason why a mistake of law which is basic to the transaction (but is not a mistake as to the transactions legal character or nature) should not also be included, even though such cases would probably be rare.
I would provisionally conclude that the true requirement is simply for there to be a causative mistake of sufficient gravity; and, as additional guidance to judges in finding and evaluating the facts of any particular case, that the test will normally be satisfied only when there is a mistake either as to the legal character or nature of a transaction, or as to some matter of fact or law which is basic to the transaction.
Lord Walker was speaking in the particular context of the equitable jurisdiction to set aside a transfer for mistake.
Mr Hunt has no possible claim to set aside the transfers which he arranged.
If one takes Lord Walkers approach, admittedly out of context, and applies it to the present context, it highlights a difficulty which Mr Hunt faces in showing any sufficient connection between the transfers to which he directed his attention and the relationship between Swynson and HMT under which HMT benefitted as a result of those transfers.
That brings one back to the submission on which HMT focused in the Court of Appeal (para 75 above), that a mistake relating to the effect on third party rights (Swynsons against HMT) is not enough, because For subrogation, there needs to have been a right bargained for and not achieved.
Before the Court of Appeal, this was developed more specifically as follows (transcript, p 70G H): this is critical a lender cannot claim subrogation if he obtains all security which he bargains for or where he has specifically bargained on the basis that he would receive no security.
Now, the bargain that Mr Hunt made in this case was a bargain with EMSL that he would make them a loan and EMSL would repay it.
He did not make a bargain with Swynson to take an assignment of Swynsons rights.
He did not make a bargain with HMT.
There was not even any clause in his bargain with EMSL that asked EMSL to acquire an assignment of Swynsons rights against HMT.
There was nothing missing.
There is nothing in the contract between Mr Hunt and EMSL, which gives rise to the whole base of this claim.
There is nothing missing that he bargained for and did not get.
Reference was made in this context before the Court of Appeal to Banque Finanire and Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291.
In neither case, was there of course a bargain in the sense of any enforceable right or binding obligation.
Otherwise, cadit quaestio.
But in Banque Financire, BFC thought, however carelessly, that it had arranged priority for its loan.
And in Appleyard, the lender, C & G, obtained what it thought and intended should be a first charge, but one of two prior chargees did not accept that it had been repaid and C & Gs charge was as a result purely equitable and was recorded as such at the Land Registry (see para 7 in the judgment).
In giving the judgment of the court in Appleyard, Neuberger LJ identified 13 propositions of law, of which the tenth, relied on by HMT in the present case in the Court of Appeal, read: Tenthly, subrogation cannot be invoked so as to put the lender in a better position than that in which [he] would have been if he had obtained all the rights for which he bargained: see Banque Financire at 235D and 236G 273B per Lord Hoffmann.
This point was also made by Lindley MR in Wrexham [re Wrexham Mold and Connahs Quay Railway Co [1899] 1 Ch 440] at 447.
The message here, and in the passages cited, is that subrogation cannot improve a lenders position, by giving him more than he expected to get.
The lender need not actually to have contracted for or agreed some benefit which he did not obtain.
Thus, it was enough in Banque Financire that BFC thought, however carelessly, that it had obtained such a benefit by virtue of the postponement letter.
But any transfer of value must have been on the mistaken basis that it would yield a benefit which did not materialise.
Subrogation can redress the position where a claimant has bargained for a benefit which does not materialise, by putting the claimant in the position which he expected.
Here, Mr Hunt bargained for nothing in relation to Swynsons claim against HMT.
The most that he can say is that there was an indirect transfer of value by him to HMT, as the unforeseen and indirect result of the directly intended effects of the actual arrangements he made on a separate relationship pre dating those arrangements by over two years.
That is in my opinion the crux of this appeal.
Mr Hunts loan to EMSL and EMSLs consequent discharge of Swynsons loan were exactly as Mr Hunt specified and intended.
They had indirect consequences, evidently overlooked by Mr Hunt or his advisers, for Swynson, for Swynsons separate relationship with HMT, and so indirectly for both Swynson and Mr Hunt: see, in particular, paras 62, 65 and 68 above.
These circumstances do not establish any normative or basic defect in the arrangements which Mr Hunt made.
In so far as Mr Hunt thought that he might, as owner of Swynson, himself have a claim for breach of contract and/or duty against HMT, he was not mistaken in any way which concerned the relationship between Swynson and HMT or which could give him any arguable claim to be subrogated to a claim by Swynson against HMT.
In law, however, the only person with a claim against HMT was Swynson, as Rose J held.
Again, the arrangements he made for EMSL to pay off Swynson did not address or concern the relationship between Swynson and HMT, or the consequences of such arrangements for any claim which Swynson might have against HMT.
Again, Mr Hunt never envisaged obtaining any sort of direct interest in any such claim.
Further (although I should not be taken as suggesting this is critical to the outcome of the issue of unjust enrichment), the arrangements which Mr Hunt made were not by way of gift, but by way of a loan to EMSL, which in December 2008 had at least some prospect, however remote, of being repaid.
What matters is that any transfer of value by Mr Hunt to HMT was not just unintended, it was incidental and indirect and arose from the consequences of Mr Hunts deliberately structured arrangements on a relationship quite separate from that which the arrangements addressed in exactly their intended way.
In these circumstances, I do not consider that Mr Hunt can establish a basis for being subrogated to any claim which Swynson would have had against HMT, had its loss in respect of the 2006 and 2007 loans not been reduced to nil.
In a very general sense, I can understand it being said that it is an injustice to Swynson or Mr Hunt and a pure windfall for HMT, if HMT benefits by avoiding paying damages.
This is particularly so, when (as I believe to be the case) Mr Hunt made a mistake which was causative in the but for sense, that, apart from the mistake, he would not have structured the arrangements in the way he did.
But mere but for causation is not sufficient: see ITC, para 52.
Any benefit which HMT has from Mr Hunts mistake is no more than an indirect and incidental consequence of those arrangements on Swynsons separate and pre existing relationship with HMT.
This is too remote to be the basis for a claim that HMT has been unjustly enriched at Mr Hunts expense, or for reversal of the consequences of Mr Hunts arrangements by treating him as having a (fictionalised) interest which he never expected, in respect of a claim by Swynson to recover from HMT a loss otherwise reduced to nil by the arrangements he made.
This conclusion can be explained under the scheme indicated in Banque Financire either on the basis that there was no sufficiently direct transfer of value from Mr Hunt to HMT, or on the basis that there is no relevant unjust factor, or both.
More generally, this conclusion underlines the fact that it is not the role of the law of unjust enrichment to provide persons finding to their cost that they have made a mistake with recourse by way of subrogation against those who may indirectly have benefitted by such a mistake under separate relationships which those making the mistake were not addressing.
For these reasons, I have, not without some sympathy for Mr Hunts position, come to the conclusion that Mr Hunt has no right by way of unjust enrichment as against HMT or by way of subrogation in respect of any claim for damages that Swynson would have had against HMT apart from EMSLs discharge of its indebtedness to Swynson.
Conclusion
It follows that I would allow HMTs appeal against the judgment of the Court of Appeal upholding Rose Js judgment in favour of Swynson.
The parties should have 21 days in which to make submissions on the form of any order and declarations to give effect to these conclusions and on costs.
LORD NEUBERGER: (with whom Lord Clarke agrees)
The background
HMT admit that they were negligently in breach of their professional duty as accountants when advising Swynson in connection with its decision in October 2006 to advance a substantial loan (the original loan) to EMSL.
At that time, EMSLs financial position was significantly worse than HMT had reported it to be, and thereafter it deteriorated further, and EMSL eventually ceased business, and was unable to meet its liabilities.
HMT nonetheless contend that they have no liability for damages on the ground that Swynson has suffered no loss, because EMSL repaid Swynson the whole of the original loan in December 2008.
On the face of it at any rate, it is hard to see any answer to HMTs contention, which amounts to the simple point that this is a case of avoided loss.
The arguments to the contrary are based on the circumstances in which the original loan was repaid.
Given that EMSLs finances were in a parlous state at the time, the repayment was only possible because Mr Hunt, the controlling shareholder of Swynson, advanced a new, short term, non interest bearing loan (the new loan) to EMSL for the specific purpose of enabling EMSL to repay Swynson the original loan.
Mr Hunt did this for two reasons, namely (i) so long as the original loan was outstanding, Swynson was treated for tax purposes as if it was receiving interest on the original loan, even though no interest was being paid, and (ii) Mr Hunt did not want Swynson to have a non performing loan on its books.
It is also Mr Hunts contention that he did not appreciate that, as a result of his providing the funds to enable EMSL repay the original loan, Swynson lost the right to recover substantial damages from HMT for their breach of duty without his ever having had a similar right or obtaining such a right.
Based on those facts, Swynson and Mr Hunt dispute HMTs contention that it has no liability for their breach of duty on three separate grounds.
Those grounds are (i) the repayment of the original loan should be treated as res inter alios acta, and should therefore be disregarded when assessing Swynsons claim against HMT; (ii) despite the repayment of the loan, Swynson should be entitled to recover I shall consider these three grounds in turn. damages on the basis of the principle of transferred loss, namely the loss which Mr Hunt suffered as a result of making the new loan; and (iii) HMT have been unjustly enriched as a result of the repayment of the original loan, the enrichment was at Mr Hunts expense, and he therefore should be treated as subrogated to Swynsons claim against HMT.
Res inter alios acta
Swynsons argument based on res inter alios acta was accepted by Rose J at first instance and by Longmore and Sales LJJ in the Court of Appeal.
Nonetheless, in agreement with Davis LJ, I consider that this argument should be rejected.
Mr Hunt did not advance the new loan in order to mitigate any loss which Swynson was suffering: the new loan was advanced for commercial reasons.
Although those reasons would not have existed if the original loan had not been in difficulties, Davis LJ was right when he said at [2016] 1 WLR 1045, para 33, that the argument in this case revolves around avoidance of loss, not mitigation.
Therefore, the reasoning in British Westinghouse Co Ltd v Underground Electric Railways Co Ltd [1912] AC 673, which was relied on by both Rose J and Longmore LJ, is simply not in point.
Further, I do not consider that the reasoning in Parry v Cleaver [1970] AC 1 assists Swynsons first argument.
In Parry, the House of Lords addressed the question whether a plaintiff was bound to bring into account insurance payments, charitable payments, pension payments and the like, which were payable owing to the injury suffered as a result of the defendants tort, when assessing the damages which could be recovered from the defendant.
Lord Reid stated at [1970] AC 1, 13 that the answer should depend on justice, reasonableness and public policy; however, this should not be treated by judges as a green light for doing whatever seems fair on the facts of the particular case.
Ignoring cases of mitigation, and while it would be wrong to pretend that there could never be any exceptions, it seems to me that the effect of the reasoning in Parry is that the types of payments to a claimant which are not to be taken into account when assessing damages, are either those which are effectively paid out of his own pocket (such as insurance which he has taken out, whether through his employer, an insurance company or the government), or which are the result of benevolence (whether from the government, a charity, or family and friends), all of which can be characterised as essentially collateral in nature.
In this case, the payment in question was the repayment to Swynson of the original loan by EMSL.
Even though that repayment was only effected as a result of the new loan, I rather doubt that it would be appropriate for the purposes of this first argument to look more widely and address the basis upon which Mr Hunt provided the new loan to EMSL.
But, even if it is appropriate to look more widely, the new loan was not a gift, but a short term repayable loan, albeit carrying no interest.
If such a loan had been provided by someone other than Mr Hunt, the consequent repayment of the original loan would plainly not have been res inter alios acta, and, as Lord Reid said in Parry [1970] AC 1, 15, the question whether such a transaction should be ignored should depend on its intrinsic nature rather than on the identity of the source of the payment.
It is true that the money provided in the form of the new loan to EMSL could have been made available to Swynson (or even possibly to EMSL) by Mr Hunt in a way which would not have resulted in Swynsons loss being avoided, but that cannot possibly justify the conclusion that it must therefore be treated as if it had that effect.
The fact that a transaction could have been differently arranged does not mean that it must have the same consequences as if it had been differently arranged.
As a matter of logic, such a proposition would lead to an impossible situation, and as a matter of experience, it is by no means unusual to encounter cases where a transaction could be structured in two (or more) different ways, each of which would have different consequences both in law and in commercial reality.
Transferred loss
The second argument raised by Swynson is based on the principle of transferred loss; it was expressly not considered by Rose J and all three members of the Court of Appeal rejected it.
I think that they were right to do so.
The principle of transferred loss applies where there is a contract between A and B relating to As property which is subsequently acquired by C, and the principle enables A to recover damages for Bs breach of contract which injures the property, even though the loss flowing from that injury is suffered by C and not by A. Self evidently, it is an anomalous principle bearing in mind the well established conventional rules relating to recovery of damages for breach of contract, namely that, subject to the terms of the contract, scope of duty, foreseeability and mitigation, A can only recover damages in respect of loss which A suffers as a result of Bs breach of contract.
For that reason, the principle should only apply in defined and limited circumstances.
Examples of such circumstances are described in two decisions of the House of Lords.
In Albacruz (Cargo Owners) v Albazero (Owners) [1977] AC 774, 847, following a number of earlier cases starting with Dunlop v Lambert (1839) 2 Cl & F 626, Lord Diplock held that the principle applied where it is in the contemplation of the parties that cargo may be transferred from the contracting shipper to a third party, and it is the intention of both the shipper and the contracting shipowner that the contract of carriage is treated as entered into for the benefit of such a third party as well as the shipper.
In Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, it was held that the principle applied where a contractors construction of a building had been defectively in breach of its contact with the developer, but the loss had been suffered by a purchaser of the building from the developer.
Lord Browne Wilkinson explained that at the time of the contract both contractor and developer knew the building was going to be occupied, and possibly purchased, by third parties and not by [the developer] itself and that any loss from defective construction work would be likely to be suffered by a future purchaser, not the developer.
There is force in the proposition that these two decisions suggest that the law has moved to the point where it is possible to identify the circumstances in which the courts will accept that the principle of transferred loss can be invoked in order to avoid a black hole into which what would otherwise be a valid claim for damages has disappeared, to use the metaphor first judicially articulated in this context by Lord Stewart in J Dykes Ltd v Littlewoods Mail Stores Ltd 1982 SLT 50, 54 (col 2).
The circumstances in which the principle summarised in para 102 above can apply are where (a) at the time of making the contract with A, B would reasonably have anticipated that A would transfer the property to a person such as C and that that person would suffer loss if B breached the contract, so that the contract can be seen as having been entered into by B partly for Cs benefit, and (b) there is nothing in the contract or the surrounding circumstances which negatives the conclusion that the principle should apply.
The subsequent decision of the House of Lords in Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518 appears to me to support the notion that the scope of the principle is as I have suggested.
In that case, it was decided, albeit by a bare majority, that one circumstance which would negative the application of the principle can be where the third party, C, had his own contractual rights against the contract breaker.
It is fair to say that the Panatown decision leaves a number of points open in this difficult area.
One of those points is the correctness of another version of the principle, which was first articulated by Lord Griffiths in Lenesta Sludge, namely that B could be liable if A retains an interest in B performing his obligations, even though A has transferred away the property.
However, it is unnecessary to address that point in this case, because it plainly could not apply in this appeal: following repayment of the original loan, Swynson cannot sensibly claim to have retained an interest in the performance of HMTs duties.
I consider that the transferred loss argument on this appeal suffers from two defects.
First, this cannot be said to be a case of injury to an asset or property which came into the hands of Mr Hunt, because the loss suffered by Mr Hunt is not the same as the loss which would have been suffered by Swynson if the new loan had not led to the original loan being redeemed.
The losses may be very similar in nature (non repayment of a loan made to EMSL), in cause (EMSLs financial problems), and in quantum (as the new loan was very similar in amount to the original loan and identical to the extent that it was used to pay off the original loan).
However, Mr Hunt has suffered loss in relation to the new loan whereas Swynson would have suffered a loss in relation to the original loan.
Secondly, the principle cannot apply because, at the time HMT were advising Swynson, it was not reasonably foreseeable that Swynson would have the original loan repaid through the medium of a fresh loan made to EMSL by a third party.
Of course, as with most financing arrangements, it was reasonably foreseeable that some sort of subsequent re financing of EMSL might happen one day, but that is not enough in order for the principle to apply.
If it is to apply, Swynson would have to go further and demonstrate that it was anticipated that some such refinancing would occur, so that a person such as Mr Hunt, the new lender, can fairly be said to have been an intended beneficiary of Swynsons contractual rights against HMT.
That seems to me to be an untenable proposition in this case.
Unjust enrichment
A claim in unjust enrichment based on mistake was not raised on behalf of Swynson or Mr Hunt in front of Rose J, but it was raised in the Court of Appeal, where it was rejected by Longmore and Davis LJJ, but accepted by Sales LJ.
I have concerns about a claim based on mistake being raised for the first time on appeal, particularly as the issue of mistake did not play a significant part in the argument or evidence before Rose J, and only assumed importance once the unjust enrichment claim was raised.
However, for the reasons given by Lord Mance, I think that it is open to Mr Hunt to advance his unjust enrichment case in this Court, However, I consider that his unjust enrichment claim must fail.
As has been stated in a number of cases, most recently by Lord Reed in Commissioners for HM Revenue and Customs v The Investment Trust Companies (in liquidation) [2017] UKSC 29, para 24, an unjust enrichment claim can usefully be analysed by reference to four sequential questions, namely: i) Has the defendant benefitted in the sense of being enriched? ii) Was the enrichment at the claimants expense? iii) Was the enrichment unjust? iv) Are there any defences? In effect, the claimant in unjust enrichment has to satisfy the first three questions, and, if they are satisfied, it is then for the defendant to invoke the fourth question.
When considering these questions, indeed when considering claims based on unjust enrichment generally, there is an inevitable tension between the desire to achieve justice or fairness in the individual case and the need to adopt or apply an approach which is principled and predictable.
Concepts such as enrichment and expense may appear to be relatively uncontroversial, but even those concepts, particularly expense, can raise problems (as in Bank of Cyprus v Menelaou [2016] 1 AC 176, paras 69 73 and the Investment Trusts case at paras 32 74).
And the question whether enrichment is unjust can often lead to the risk of unpredictable value judgments unless a relatively structured approach is adopted.
Lord Goff made this point in the first case in which the House of Lords accepted the doctrine of unjust enrichment, Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, 578.
And, more recently, Lord Reed made the same point very clearly in the Investment Trusts case, para 39.
It is also important to remember that the four questions are not statutory or contractual requirements which have to be satisfied before an unjust enrichment claim can succeed.
They constitute a useful, summarily expressed, and practical approach to be adopted to an unjust enrichment claim.
Further, although they may appear to be self contained, there can often be a degree of overlap between some of the four questions when applied to a particular set of facts.
With that, I turn to consider whether the first three questions set out above are satisfied by Mr Hunt.
I consider that Mr Hunt can succeed on the first question.
At any rate it is arguable that it is not a natural use of colloquial language to describe HMT as enriched because they have (subject to the unjust enrichment claim) been effectively released from a very substantial potential liability for damages for professional negligence.
However, in economic terms they have undoubtedly been enriched, and in my view, avoidance of a pre existing liability must be capable of being enrichment for present purposes.
It is also true that the enrichment in this case can be described as incidental or collateral, but I think that that is a point better considered in relation to the second and third questions.
Turning to the second question, I do not have any difficulty with the fact that there were two stages by which Mr Hunts money got to Swynson, in that Mr Hunt made the new loan to EMSL and then EMSL used the loan to pay off the original loan made by Swynson.
I accept that the normal rule is that the defendant must be directly enriched by the claimant at whose expense the enrichment is said to have occurred, but there can be exceptional cases.
It would be inappropriate to discuss this further in the light of Lord Reeds clear analysis in the passages in the Investment Trusts case referred to above.
However, I consider that in this case, as in Banque Financire de la Cit v Parc (Battersea) Ltd [1999] 1 AC 221 and in Menelaou [2016] 1 AC 176, the fact that the money passed from Mr Hunt to EMSL and then from EMSL to Swynson does not present a problem for an unjust enrichment claim.
The new loan was advanced not merely on the basis that it was expected to be used to pay off the original loan: it was required to be used for that purpose.
However, the fact that Mr Hunt can be treated as having incurred expense of paying off the original loan is not enough to dispose of the second question in his favour.
What Mr Hunt has to establish is that the enrichment of HMT, not the enrichment of Swynson, was at his expense.
While the repayment of Swynsons original loan can be said to have be at the expense of Mr Hunt because it was funded by his new loan, and while HMT were enriched, I am unconvinced that HMT were enriched at Mr Hunts expense.
I do not find it easy to reconcile the reasoning of Lord Reed in the Investment Trusts case with the notion that the enrichment of HMT was sufficiently directly effected by Mr Hunts advance of the new loan (even treating it as incorporating the repayment of the original loan) to satisfy the second question.
As Lord Reed said in para 52, a claimant is not normally treated as having incurred a relevant loss where the provision of the benefit was merely an incidental or collateral result of his expenditure.
But, even assuming that this is one of those exceptional cases where the second question is satisfied by an indirect payment, I do not consider that Mr Hunt can satisfy the third question.
Of course, in the broadest sense, on the facts of this case, it can be argued that it would be unjust if HMT could be relieved of a substantial liability and that Mr Hunt and his companies (to treat them as a single entity) could lose a valuable claim.
This would be on the basis that this is a result of Mr Hunt deciding to restructure the financing of EMSL as between him and one of his companies, and the benefit to HMT is wholly adventitious and the loss to Mr Hunt and his companies was due to an oversight on the part of Mr Hunt and/or his advisers.
But unjustness in the context of unjust enrichment is not, in my view, of the palm tree variety.
It must be based on some principle.
As Lord Reed explains in para 52 of the Investment Trusts case, situations where the defendant has received a benefit merely as an incidental consequence of the claimants pursuit of some other objective are often situations where the enrichment of the defendant is not unjust.
It is true that in this case Mr Hunt made a mistake in that he assumed that the effect of making the new loan and repaying the original loan would not affect the claim which he and/or Swynson had against HMT.
However, while I see the attraction of the contrary view, in my opinion, that is not the sort of mistake which renders it unjust for HMT to escape liability for their negligence in the context of an unjust enrichment claim.
The purpose of unjust enrichment is to correct normatively defective transfers of value usually by restoring the parties to their pre transfer positions, as Lord Reed pithily put it in para 42 of the Investment Trusts case.
Thus, in the context of an unjust enrichment claim arising out of a transaction, there must, in my view, at least normally (and quite possibly always), be some defect in the transaction itself for the doctrine of unjust enrichment to come into play.
In other words, for some reason, including but not limited to a mistake on his part, the claimant must be able to show that he did not get all that he expected or thought that he had bargained for.
As Lord Sumption shows in paras 21 29, that analysis is consistent with Banque Financire [1999] 1 AC 221 and Menelaou [2016] 1 AC 176, and the cases referred to in the judgments in those decisions.
In this case, Mr Hunt got precisely what he thought he was getting from the transaction in question, namely repayment to Swynson of the original loan, and a right to recover the new loan from EMSL.
It is of course true that he did not appreciate that he was indirectly relieving HMT of a substantial liability to Swynson (without replacing it with some equivalent claim in his favour against HMT), but that cannot be characterised as a defect in the transaction.
Unless we were to hold that the facts of this case justify a departure from the normal scope of unjust enrichment cases as described by Lord Reed in the Investment Trusts case, para 42, it must follow that Mr Hunts unjust enrichment claim fails.
I can see no good reason for upholding the present unjust enrichment claim given that it is not within the normal scope of such claims.
On the contrary: given the absence of any telling reasons justifying such a course, if we held that the claim in this case succeeded, we would risk throwing the law on unjust enrichment claims into serious uncertainty, particularly bearing in mind that we have only very recently confirmed the scope of such claims in the Investment Trusts case.
Conclusion
For these reasons, and for the reasons given by Lord Sumption and Lord Mance (in relation to res inter alios acta and transferred loss) and by Lord Sumption (in relation to unjust enrichment), I consider that neither Mr Hunt nor Swynson has a claim which can be maintained against HMT, and I would therefore allow HMTs appeal.
It is only fair to add that I do not see any significant variation in the reasoning of Lord Sumption and Lord Mance on the unjust enrichment issue.
However, given the ability of ingenious lawyers to identify possible differences between concurring judgments, I consider that it is safer to take a course which minimises the risk of such an occurrence in this area of law, given its current stage of jurisprudential development.
| This appeal arises from an unsuccessful management buyout of Evo Medical Solutions (Evo) made through Evo Medical Solutions Ltd (EMSL) in 2006.
The buyout was funded by an interest bearing loan of 15m to EMSL by Swynson Ltd (Swynson), a company owned and controlled by Mr Hunt, a wealthy investor.
Prior to the buyout, Swynson instructed an accountancy firm formerly known as Hurst, Morrison Thomson, now Lowick Rose LLP (in liquidation) (HMT), to carry out due diligence on Evo.
It is common ground that HMT was negligent in failing to draw attention to fundamental problems about Evos finances, and that the transaction would not have gone ahead but for that failure.
By July 2007, Evo was at risk of financial collapse.
As a result, Mr Hunt caused Swynson to lend EMSL a further 1.75m in July 2007 and 3m in June 2008.
At or about the same time, Mr Hunt acquired the majority beneficial ownership of EMSL.
In December 2008, the 2006 and 2007 loans were refinanced.
Mr Hunt and EMSL entered into a loan agreement under which Mr Hunt personally made a short term non interest bearing loan of 18.663m to EMSL.
This was for the specific purpose of enabling EMSL to repay Swynson the original loan, with the aim of cleaning up Swynsons balance sheet and reducing its liability to tax.
EMSL duly repaid the loan, but eventually ceased business and was unable to meet its liabilities.
Swynson and Mr Hunt brought proceedings against HMT seeking to recover damages for losses resulting from the buyout and the making of all three loans in 2006, 2007 and 2008.
HMT contends that they have no liability for damages on the basis that Swynson has suffered no loss, because EMSL repaid Swynson the whole of the original loan in December 2008.
The Court of Appeal by a majority upheld the judges award of damages of 15m.
This was because they held that the judge had been right to regard the December 2008 refinancing as res inter alios acta.
It did not therefore affect the amount of Swynsons recoverable loss.
The Supreme Court unanimously allows HMT (Lowick Rose LLP)s appeal.
Lord Sumption gives the lead judgment, with which Lord Neuberger, Lord Clarke and Lord Hodge agree.
Lord Neuberger and Lord Mance give concurring judgments.
Res inter alios acta The general rule that loss which has been avoided is not recoverable as damages is subject to an exception in respect of collateral payments (res inter alios acta), where these are received independently
of the circumstances giving rise to the loss [11].
The payments made by Mr Hunt to EMSL and by EMSL to Swynson to pay off the 2006 and 2007 loans cannot be regarded as collateral.
First, the transaction discharged the very liability whose existence represented Swynsons loss [13].
Secondly, the money Mr Hunt lent to EMSL in December 2008 was not an indirect payment to Swynson, even though it ultimately reached them.
Mr Hunts agreement to make that loan and the earlier agreements of Swynson to lend money to EMSL were distinct transactions between different parties, each made for valuable consideration [13].
Thirdly, the consequences of refinancing could not be recoverable as the cost of mitigation, because the loan to EMSL was not an act of Swynson and was not attributable to HMTs breach of duty [13; 45; 97].
Transferred loss The judge and Court of Appeal were correct to reject Swynsons second argument, based on the principle of transferred loss.
This principle is a limited exception to the general rule that a claimant can recover only loss which he has himself suffered [14 15; 52 53; 102 105].
It does not arise here because it was no part of the object of the engagement of HMT, or any other aspect of the 2006 transaction, to benefit Mr Hunt [17; 54; 108].
Unjust enrichment HMT was not unjustly enriched by Mr Hunts provision of funds to EMSL to repay Swynson, with the result that Mr Hunt may not be subrogated to Swynsons claims against them: i. Lord Sumption is prepared to assume for the sake of argument that HMT was enriched [20], while Lord Neuberger and Lord Mance consider that HMT has undoubtedly been enriched in economic terms as a result of the discharge by EMSL of the loan due to Swynson [113; 57]. ii.
Lord Sumption is again prepared to assume that if HMT was enriched, it was at Mr Hunts expense [20].
Lord Neuberger considers that HMTs enrichment was not sufficiently directly effected by Mr Hunts advance of the new loan [114 115], while Lord Mance notes that the questions whether a benefit was obtained at the expense of the claimant and whether it would be unjust for the defendant to retain it are difficult to separate in the present case [58 68]. iii.
Mr Hunts case is that the enrichment of HMT was unjust because he made a mistake in assuming that the December 2008 refinancing would not affect the claim he and/or Swynson had against HMT [21; 78].
But the purpose of the law of unjust enrichment is to correct normatively defective transfers of value [22; 117].
The role of equitable subrogation in this context is to replicate as far as possible the element of the transaction whose absence made it defective [31; 86].
The December 2008 refinancing was not a defective transaction: Mr Hunt got precisely what he intended to get, namely the discharge of EMSLs debt to Swynson and a right to recover the new loan from EMSL [32 35; 119; 87].
As Lord Neuberger and Lord Mance also note, the fact that HMT received a benefit as an unforeseen and incidental consequence of Mr Hunts pursuit of those objectives does not establish any normative or basic defect in the arrangements made [117; 87 89].
|
This appeal concerns the assessment of compensation for compulsory acquisition of two parcels of grazing land, amounting in all to 26.85 acres (10.86 ha) (the reference land), formerly owned by the present appellant (the claimants).
They were part of a much larger area of some 420 acres (170ha) acquired under the North West Development Agency (Kingsway Business Park, Rochdale) Compulsory Purchase Order 2002 (the CPO), for the development of the so called Kingsway Business Park (KBP).
Responsibility for payment of compensation now rests with the Homes and Communities Agency, the respondent to this appeal (the authority).
An initial claim was made for 2,593,000 compensation, on the basis that the land had significant hope value for residential development, independently of the scheme of acquisition.
The authority contended that the claim should be limited to the existing use value, giving a figure (rounded) of 50,000.
The Upper Tribunal agreed with the claimants in part, awarding compensation of 746,000.
On the authoritys appeal, the Court of Appeal declined to accept the argument of either party, and remitted the matter to the tribunal to re determine compensation on what it considered to be the correct basis.
The valuation date was 4 January 2006, being the date when the reference land vested in the acquiring authority under a general vesting declaration.
The facts
The facts are set out in detail in the Upper Tribunals decision.
A summary will suffice.
The order lands lie about one mile east of Rochdale town centre, on the north west side of the M62 motorway, close to Junction 21.
The reference land, shown as Plots 13 & 14 on the CPO plan, comprises two adjoining parcels of land towards the north east part of the order lands, close to, but not immediately adjoining, a road to the south east known as Buckley Hill Lane.
The claimants relied on the prospect, in the absence of the scheme, of planning permission for residential development being permitted with access from Buckley Hill Lane through an intervening plot known as the Nib (also in their ownership but not subject to the CPO).
The area has a long planning history.
Its potential for development of some form had been recognised since the 1960s.
In 1999 developers published a KBP Development Framework, in support of an application for planning permission.
The framework included a master plan within which the reference land was shown for development of various kinds (including some residential) within phase 5.
Planning consents linked to the master plan were granted on 19 December 1999.
As the tribunal found (para 13) they had been commenced and were extant at the valuation date.
At the time the CPO was made (in 2002) the reference land was owned by members of the Nall family.
A planning application had been submitted on their behalf for residential development on part of the reference land and the Nib, but it was refused on 18 January 2002 as piecemeal development.
The land, together with the Nib, was acquired by the claimants in May 2003 for a total price of 1.3m (para 18).
Their objection to the CPO was rejected, principally on the grounds that the land was needed for the comprehensive development of the KBP scheme (para 19).
The Statutory Development Plan at the valuation date comprised the regional guidance (RPG13) approved in March 2003 and the Rochdale Unitary Development Plan (the 1999 UDP) adopted in March 1999.
The KBP was listed in RPG 13 as one of 11 Strategic Regional Sites.
The KBP site was allocated under policy EC/6 of the UDP, subject to certain criteria including provision for vehicular access to be obtained from the A664 Kingsway and from Junction 21 of the M62 Motorway only; for any individual development to be compatible with the overall objective of a strategic business park development; and for limited residential development provided it is part of a comprehensive development scheme for predominantly business uses (para 23).
Similar policies were reproduced in policy EC/7 of the draft replacement UDP which was well under way by the valuation date, and was agreed to be material to a hypothetical planning application made at that time (paras 24 30).
It was common ground that a limited residential development on the reference land with access from Buckley Hill Lane would not have been recommended for refusal on highway grounds (para 31).
In August 2006 the claimants made an application to Rochdale MBC for a Certificate of Appropriate Alternative Development (see para 15 below) in respect of the reference land, for various classes of development including residential development of 74 dwellings.
The officers report recommended refusal on the grounds (inter alia) of non compliance with policy EC/6 of the UDP.
Following sight of the report, the application was withdrawn before formal determination.
The law
The no scheme rule
The appeal raises questions concerning the so called Pointe Gourde rule (Pointe Gourde Quarrying & Transport Co Ltd v Sub Intendent of Crown Lands [1947] AC 565), or no scheme rule: that is, the rule that compensation for compulsory acquisition is to be assessed disregarding any increase or decrease in value solely attributable to the underlying scheme of the acquiring authority.
The law is to be found in the Land Compensation Act 1961 as explained and expanded by judicial interpretation.
The particular issue concerns the relationship between the general provisions for the disregard of the scheme, and the more specific provisions relating to planning assumptions.
The rule has given rise to substantial controversy and difficulty in practice.
In Waters v Welsh Development Agency [2004] 1 WLR 1304; [2004] UKHL 19, para 2 (Waters), Lord Nicholls of Birkenhead spoke of the law as fraught with complexity and obscurity.
In a report in 2003 the Law Commission conducted a detailed review of the history of the rule and the relevant jurisprudence, and made recommendations for the replacement of the existing rules by a comprehensive statutory code (Towards a Compulsory Purchase Code (1) Compensation Law Com No 286 (Cm 6071)).
Since that report aspects of the rule have been subject to authoritative exposition by the House of Lords in Waters itself, and more recently in Transport for London v Spirerose Ltd [2009] 1 WLR 1797; [2009] UKHL 44 (Spirerose).
Although the Law Commissions recommendations for a complete new code were not adopted by government, limited amendments to the 1961 Act in line with their recommendations were made by the Localism Act 2011 section 232 (relating to planning assumptions) Further proposed amendments, dealing with the no scheme principle more generally, are currently before Parliament in the Neighbourhood Planning Bill 2016 17.
The purpose of the latter is said to be that of clarify[ing] the principles and assumptions for the noscheme world, taking into account the case law and judicial comment (Explanatory Notes para 70).
The present appeal falls to be decided by reference to the 1961 Act as it stood before the 2011 amendments.
Section 5 rule 2 established the general principle that the value of land is taken to be the amount which the land if sold in the open market by a willing seller might be expected to realise.
In applying this general principle, it is necessary for present purposes to take account of two other groups of provisions, relating first to disregards of actual or prospective development (section 6 and Schedule 1), and secondly to planning assumptions (sections 14 16).
Disregards
Section 6 (headed disregard of actual or prospective development in certain cases) has been treated by the courts as a statutory but not exhaustive embodiment of the Pointe Gourde principle (see Waters paras 49 54).
So far as relevant to this appeal it provides: 1 no account shall be taken of any increase or diminution in the value of the relevant interest which, in the circumstances described in any of the paragraphs in the first column of Part I of the First Schedule to this Act, is attributable to the carrying out or the prospect of so much of the development mentioned in relation thereto in the second column of that Part as would not have been likely to be carried out if (a) (where the acquisition is for purposes involving development of any of the land authorised to be acquired) the acquiring authority had not acquired and did not propose to acquire any of the land; Part I of the First Schedule sets out in tabular form a number of cases with the corresponding development, the prospect of which is to be left out of account.
The first case is: Where the acquisition is for purposes involving development of any of the land authorised to be acquired.
The corresponding development is: Development of any of the land authorised to be acquired, other than the relevant land, being development for any of the purposes for which any part of the first mentioned land (including any part of the relevant land) is to be acquired. (emphasis added) Although this paragraph in terms applies the statutory disregard to land other than the relevant land, that is the land subject to acquisition, the Pointe Gourde rule has been treated by the court as requiring the same approach to be applied also to the subject land itself (see Camrose v Basingstoke Corpn [1966] 1 WLR 1100, Waters para 52.
Note that relevant land is defined by reference to the notice to treat, actual or, in the case of a vesting declaration, constructive: section 39(2); Compulsory Purchase (Vesting Declarations) Act 1981, section 7).
Planning assumptions
Section 14 is the first of a group of sections headed assumptions as to planning permission.
In valuing the relevant interest the valuer must make such one or more of the assumptions mentioned in sections 15 or 16 as are applicable to all or part of the relevant land (section 14(1)).
Such assumptions are to be in addition to any planning permission in force at the date of service of the notice to treat (section 14(2)).
Although the tribunal noted the existence of extant permissions for the KBP scheme, they do not appear to have been relied on by the parties for valuation purposes.
Section 14(3) makes clear that these provisions are not to be construed as requiring it to be assumed that planning permission would necessarily be refused for development not covered by the statutory assumptions.
Section 16(3) applies to land forming part of an area shown in the current development plan as an area allocated primarily for a range of two or more uses specified in the plan.
It was common ground that the reference land was within such an area.
It is to be assumed that planning permission would be granted for development for purposes falling within that range of uses, which is development for which planning permission might reasonably have been expected to be granted in respect of the reference, if no part of that land were proposed to be acquired by any authority possessing compulsory purchase powers (section 16(3)(b), (7)).
For the purpose of this exercise it has to be assumed that the scheme of acquisition in respect of the reference land was cancelled on the date of the notice to treat (the cancellation assumption: see (Fletcher Estates (Harlescott) Ltd v Secretary of State for the Environment [2000] 2 AC 307).
Section 17 (certification of appropriate alternative development) provides a means by which an application can be made to the local planning authority to determine the forms of development if any which would have been permitted if the land had not been proposed for compulsory acquisition.
As already noted, such an application was made in the present case, but withdrawn before determination.
The scope of the no scheme rule
One of the difficulties presented by these two groups of provisions in their unamended form arises from the distinction drawn between the application of the rule, on the one hand to the relevant land alone, that is in this case the reference land itself; and on the other to land comprised in the compulsory purchase order as a whole; or, more broadly still, to land comprised in the same scheme of development, which may for example include land already in the ownership of the authority, or land acquired by agreement.
Thus, the rules relating to assumed permissions (sections 14 16) are based on cancellation of the scheme solely in respect of the reference land.
In the Court of Appeal, Patten LJ summarised the effect of the cancellation assumption in the present case: It operates to limit the scope of any assumed planning permission to a counter factual scenario in which the KBP scheme has been cancelled in respect of, but only in respect of, the reference land: ie as if the landowner had succeeded at the public inquiry in persuading the Inspector to omit Plots 13 and 14 from the CPO.
There is no requirement to assume that the CPO would not have gone ahead in respect of the remainder of the order land or that the development of the KBP would not have proceeded (para 26) By contrast, as noted above, section 6 taken with the Pointe Gourde rule itself requires disregard of the scheme of acquisition in relation to the whole of the order land.
The Upper Tribunal spoke of the consequent need for them to consider life in at least two parallel universes: the cancellation assumption universe and the disregard the scheme universe (called no KBP for short) (para 52).
As will be seen below, the distinction drawn by the tribunal between these two universes is critical to the understanding of their later reasoning.
The proceedings below
The Upper Tribunal
The tribunal (HH Judge Mole QC and Paul Francis FRICS) began by summarising the law in respect first of planning assumptions and secondly of disregards, in terms which have not been materially challenged.
They mentioned the importance of not eliding the two stages (para 46).
They noted (following the Upper Tribunal decision in Thomas Newall Ltd v Lancaster City Council [2010] UKUT 2 (LC)) that for the purposes of sections 14 16 the cancellation assumption was to be applied, not to the whole scheme, but to only so much of it as affected the reference land (paras 42 43).
Under the heading disregards they set out the statutory provisions, noting that (in the light of Waters) the no scheme principle was to be treated as extending to the subject land as well as to other land within the same acquisition (paras 47 48).
Under the heading the nature of the exercise, having identified the two universes which required to be considered, they summarised the respective positions of the parties: 53.
Both parties focused in their evidence and submissions upon the prospects of a purchaser obtaining a residential permission on the reference land in those two different situations.
The cancellation universe assumed that the compulsory purchase orders on the reference land had been cancelled but that access could be obtained through the KBP.
In that situation it was broadly agreed that the reference land might indeed have some potential hope value for residential development. 54.
The claimant said it would be substantial.
The acquiring authority maintained that any such hope value would be much reduced, probably to nil, because the planning authority would not be prepared to grant a permission that did not conform with the master plan requirements for phasing, which would delay residential development, or make a very substantial financial contribution to the infrastructure of the KBP.
Finally, the acquiring authority submitted, any such value that remained should be disregarded as a matter of law. 55.
The second situation was postulated in order to consider what value the reference land might have if the law required that the whole of the KBP proposals had to be left out of consideration.
That situation was chiefly one where permission was being sought for a development with access from Buckley Hill Lane, although we do not think the claimant completely abandoned the possibility that in the no KBP universe a purchaser would still contemplate the development of a business park by another scheme.
There followed a lengthy review and discussion by the tribunal of the evidence and submissions relating to both planning assumptions and the disregards (paras 56 100).
For present purposes it is sufficient to refer to the critical findings, first relating to the application of the cancellation assumption under section 16, and secondly to the wider considerations under section 6.
As to the former the assumed position on the ground was described as follows: The cancellation assumption requires the Tribunal to imagine all the facts on the ground and all the planning permissions, plans and potentialities as they were at the valuation date but to assume that the compulsory purchase order on the reference land, and only on the reference land, had been cancelled.
That, of course, can have a significant effect upon some of the planning assumptions.
In the present case it is to be assumed that the KBP had been begun in accordance with the Master Plan.
The junction with the motorway, the central spine road and part of the southern loop road were built or in the course of construction, and some development had already begun.
Part of the northern loop road at the western end had also been started.
It was too late for the developer to pull out of its commitments to build out the KBP according to the master plan. (para 80) 89.
We think that simply on the cancellation assumption there would have been a reasonable prospect of some residential development on the reference land with access from a northern loop.
However, it would seem that such an increase
in the value of the relevant interest would have to be
Having reviewed a number of suggested alternatives the tribunal concluded: disregarded.
It would be unequivocally attributable to the development of part of the land authorised to be acquired other than the relevant land, and it would not have been likely to be carried out in the absence of the acquiring authoritys proposals to acquire the land for such a road.
Turning to section 6 and the Pointe Gourde rule, the tribunal noted that that this was not a case where the latter rule had anything much to add to the statutory code, given that the other land included in the compulsory purchase order encompass(ed) all the land that could be described as the scheme (para 91).
They accepted that, even if the KBP scheme itself had failed, the planning policies would have continued to support it, and the authorities would have done their best to bring forward another scheme, but a prospective purchaser of the reference land would have regarded it as a long shot.
It would not in itself have added much if anything to the existing use value of the reference land (para 92).
They continued: The only development that would produce an increased value on the reference land which would not have to be disregarded under the statute would be a likely development that took no part of the other land.
In other words that would have to be a development which took its access from the existing Buckley Hill Lane. (para 93) The statute required to be left out of account any increase or diminution (their emphasis) attributable to the acquisition of the other land for the purposes of the order.
For this purpose it was necessary to visualise a no KBP universe (para 94).
In such a universe it was necessary to leave out of account both the benefits of the KBP scheme, such as improved access due to its infrastructure, and also any disadvantages, such as potential traffic objections based on over use of existing highway capacity.
Broader policy objections based on possible prejudice to a future KBP scheme would also be very different in weight to the situation where the planning authority was relating such objections to a specific scheme which is just starting to get off the ground (para 95).
For similar reasons, the tribunal attached little weight to the refusals of the Nall application in 2002 or to the fate of the section 17 application, the reasons for both of which relied on policy EC/6 and the need for a comprehensive KBP scheme.
In a no scheme universe those reasons for refusal would have to be very carefully reconsidered and might carry much less weight.
Other possible objections would have to balanced against the extensive policy support for residential development on part of the reference land, leading in their view to a reasonable argument in favour of permission (para 96).
They concluded on this aspect: 97.
It was evident from our site visit that there has been development off Buckley Hill Lane in the comparatively recent past on its eastern side.
The long history of the identification of the land of which the reference land forms part for substantial development would weaken a PPG 3 greenfield objection to a residential development on the west side of the lane, incorporating the Nib.
It was agreed between the highway witnesses that a substantial number of houses could take an access on to Buckley Hill Lane although the witnesses differed as to whether the maximum would be 60 or 74.
For the reasons we have just given we think we should give less weight, in considering the prospects of this hypothetical permission, to an objection based upon policy EC/6 or emerging policy EC/7 and no weight to a highway objection based upon traffic flows from the KBP development.
On the other hand the motorway junction itself was a fact on the ground at the valuation date.
It was not part of the compulsory purchase order and it does not seem to us that it would be right to extend the definition of the scheme to include it. 98.
Taking all those matters into consideration and doing the best we can to make sense of a number of assumptions of varying solidity, in our judgement the hypothetical purchaser would have considered that the reference land would have had some extra hope value of a permission for residential development.
However we would not put a percentage better than 50/50 on the chances of success.
In summary they considered that there would have been a 50/50 chance of planning permission being obtained on the reference land in a no KBP world, and they thought it realistic to assess the period of deferral at five years (para 117).
Having considered the valuation evidence, and taking account of other factors, they arrived at a figure of 746,000, as the amount which a hypothetical purchaser would pay for the reference land, and accordingly determined compensation in that amount (para 123).
There is no challenge to the valuation aspects of their decision.
The Court of Appeal
The authority appealed to the Court of Appeal.
They did so principally on the grounds that the tribunal had misapplied the statutory disregards under section 6 and Schedule 1.
In the leading judgment Patten LJ summarised their primary submission: 32.
HCAs primary submission is that the UT has done the very thing which they had said was to be avoided: namely eliding the identification of the planning status of the reference land with its valuation.
They submit that once the planning status is determined by the application of sections 14 16 of the 1961 Act the valuation exercise has to proceed on that basis and that the application of the section 6 disregards does not involve any further alteration in the assumed planning permissions or policies which have previously been determined
to apply
Having reviewed the tribunals reasoning and the relevant case law, he identified the real issue as whether the Upper Tribunal had struck the balance between the no KBP universe and the planning actualit in the right place.
He continued: Mr Kingston QC (for the claimants) submits that the [Upper Tribunal] was right not to assume the total abandonment of policy EC/6 or emerging policy EC/7 but to regard them as modified to the point at which a planning application for an independent development via the Nib would be assessed on its own planning merits relative to location and housing need.
Mr Humphries primary position remained that the application of the disregards did not entitle the [Upper Tribunal] to assume any modification of the planning status determined in accordance with sections 14 16. (para 37)
Neither argument appeared correct to him (para 38).
Having further discussed the respective submissions, he concluded: 40.
In my view, the [Upper Tribunal] was right to hold that the planning status of the reference land did have to be modified for the purposes of valuation in accordance with the no KBP universe methodology.
But it was wrong to do so by simply downgrading the strict application of the existing and emerging development plan but otherwise leaving the allocation of the land for development in place.
What it should have done was to consider the planning potential of the reference land without regard to the development scheme and its underlying policies and therefore its effect on value.
In that no scheme world it should have examined what wider no scheme specific policies (including but not necessarily limited to PPG3) would have applied to a planning application at the valuation date had there been no KBP and so struck a fair balance between the public interest and those of the claimant in relation to the valuation of the reference land.
The assumption relied on in both parties submissions that policy EC/6 and developing policy EC/7 continued to apply was based on a wrong application of section 6(1) and the valuation calculated on that basis must be set aside.
He accordingly held that the assessment of compensation should be remitted to the Upper Tribunal to be decided without regard to the scheme of development as defined in this judgment (para 44).
Humphries principal submission that In a concurring judgment, Sales LJ similarly rejected what he took to be Mr once one has gone through the section 14 exercise the question of the planning status of the reference land must be taken to be immutably fixed when calculating the valuation of the land for the purposes of compensation. (para 47) However, he was unable to support the tribunals reasoning: 52.
In the present case the [Upper Tribunal] erred by still giving weight to the planning policies in relation to the KBP site, including in particular the part of the historic, current and emerging policies to promote the development of a business park which contemplated that there should be residential development on the site as part of that development (what the [Upper Tribunal] called the extensive policy support for residential development on part of the reference land: para 96).
In this respect, the [Upper Tribunal] failed to apply the section 6(1) disregard correctly and appears to have overvalued the reference land for the purposes of compensation.
Jackson LJ agreed with both judgments.
Issues in the appeal
In this court, Mr Kingston for the claimants submits in short that the Court of Appeal was wrong to adopt a line of reasoning which had been supported by neither party; and in doing so to interfere with a matter pre eminently for the judgment of the expert tribunal, that is the assessment of the weight to be given in the no scheme world to the policies in the development plan.
Contrary to the understanding of the court, the tribunal had ample evidence of the prospect of development in the absence of the KBP scheme, and properly took it into account.
For the authority Mr Humphries renews his primary submission, rejected by the Court of Appeal.
That relies on a strict division between two stages of the process: first, the assessment of planning status by reference to the statutory assumptions in sections 14 16 of the Act; and secondly the valuation of the land with the planning status so determined, at which stage the disregards under section 6 come into play.
On this approach it is not permissible for the decision maker at the second stage to use the valuation disregards to revisit and revise the planning status of the reference land as determined pursuant to the planning provisions at the first stage.
As an alternative submission he supports the reasoning of the Court of Appeal.
In particular the tribunal was wrong in effect to allow the claimant to have the benefit of the allocation of the land for development in policy EC/6, while treating the policy as modified so as to allow independent access.
Discussion
With respect to the Court of Appeal, Mr Kingstons criticisms of their reasoning appear to me well founded.
As already noted, it had not been supported by either party in argument before them.
As I read Patten LJs judgment (para 31 above) he seems to have treated the required disregard of the KBP scheme as extending also to all the policies, past and present, which supported development on this land.
The planning potential of the reference land was to be assessed without regard to the development scheme and its underlying policies.
Similarly Sales LJ (para 32 above) thought that the tribunal had erred by taking account of the historic, current and emerging policies promoting a business park, or the extensive policy support for residential development on the reference land.
In my view the tribunal were clearly entitled to regard the underlying policies, including the allocation in the development plan, as potentially relevant also to the prospect of development apart from the KBP scheme.
The assessment of their significance in the no KBP universe was pre eminently a matter for them.
Mr Humphries does not argue otherwise.
As the very experienced members of a specialist tribunal, who had also visited the area, they were well equipped for that task.
Their approach appears most clearly in their concluding passage at para 96 (see above).
There they properly took account of the pattern of development as seen by them on the ground, and the long history of identification of this land for substantial development.
They did not ignore potential policy objections, such as under PPG3 or policy EC/6, but took the view that they would not have sufficient weight to rule out the possibility of development in the absence of the KBP scheme.
That reasoning discloses no error of law.
I turn to Mr Humphries principal submission, that the tribunal erred in not treating the planning status of the land as conclusively fixed by reference to their applications of sections 14 to 16 of the 1961 Act.
In my view the Court of Appeal were right to reject this submission, which is supported neither by the statutory provisions nor by authority.
Indeed, the principle that the statutory assumptions are not exclusive is confirmed by the 1961 Act itself in section 14(3).
That provides in terms that the statutory planning assumptions do not imply any presumption against development which might otherwise fall to be taken into account.
The statutory assumptions work only in favour of the claimant, not against him.
They do not deprive him of the right to argue for prospective value under other provisions or the general law.
The right to claim for potential development value is long established.
As Lord Collins of Mapesbury said at the beginning of his leading judgment in Spirerose (para 65), it has been accepted from the earliest days of the law of compensation that the value of the land taken should include not only the present purpose to which the land is applied, but also any other more beneficial purpose to which in the course of events at no remote period it may be applied. (para 65, citing R v Brown (1867) LR 2 QB 630, 631) Since the introduction of general planning control in 1947, and the restoration of market value compensation in the 1950s development value has been an important element in the assessment of compensation, because the value of land in the open market may depend on what planning permission exists or could be obtained for development on the land.
In Spirerose itself there was no suggestion that the specific statutory provisions relating to planning assumptions precluded account being taken under the general law of the prospect of permission for valuable development.
The only issue was whether such a prospective permission should be valued as a certainty (as the tribunal had held) or merely as a hope, as the House ruled.
It is in any event well established that the application of the Pointe Gourde rule itself may result in changes to the assumed planning status of the subject land.
Thus in Melwood Units Pty Ltd v Main Roads Comr [1979] AC 426, where land was acquired for an expressway, the Privy Council accepted that compensation should reflect the fact that but for the expressway project permission would have been obtained to develop the whole area for a drive in shopping centre (p 433).
That case, although decided under a different statutory code, has long been accepted as authoritative in this jurisdiction.
It was cited without criticism in Spirerose (see paras 110ff per Lord Collins).
Nor is there anything in section 6 to indicate that a more restrictive approach should be applied under the statutory disregards.
In saying that the two stages should not be elided (para 19 above), the tribunal as I understand them were doing no more than emphasising the difference between the statutory tests.
It has also long been accepted that application of the general law may produce a more favourable result for the claimant than the statutory planning assumptions.
A striking illustration noted by the Law Commission (loc cit p 206 7) is provided by the two Jelson cases, relating to the same strip of land acquired for a road: Jelson Ltd v Minister of Housing and Local Government [1970] 1 QB 243, Jelson Ltd v Blaby District Council [1977] 1 WLR 1020.
The refusal in the first case of a section 17 certificate for residential development, was held in the second not to prevent the tribunal taking account of the prospect of residential development under the Pointe Gourde rule (or section 9 of the 1961 Act).
The difference lay in the criteria to be applied.
Under section 17 attention was directed at the position as at the date of the deemed notice to treat, by which time development on either side of the strip had made further development impossible.
Under the Pointe Gourde rule it was possible to look at the matter more broadly.
Again this decision was cited without criticism in Spirerose (paras 105ff per Lord Collins).
Mr Humphries relies on a passage in the concurring speech of Lord Neuberger of Abbotsbury in Spirerose (para 55), in which he referred to the distinction drawn in some authorities between the effect of the scheme on the value of the owners interest, as opposed to the characterisation of that interest (see Rugby Joint Water Board v Shaw Fox [1973] AC 202, 253, approving a dictum of Russell LJ in Minister of Transport v Pettitt (1968) 67 LGR 449, 462).
However, those comments must be read in context.
As already noted, Spirerose proceeded on the premise that the prospect of permission for development could be taken into account under the Pointe Gourde rule.
The use of the rule for that purpose was not in issue.
The question was how it should be valued.
The dicta mentioned by Lord Neuberger were directed to the ascertainment of the nature of the relevant interest in land, not its planning status.
It is true that in Myers v Milton Keynes Development Corpn [1974] 1 WLR 696, 702 Lord Denning MR (apparently with the agreement of counsel) seems to have equated the two, relying on the same dicta.
However, the legal basis for that approach was not discussed in detail, and it was not followed in later cases.
As it happens, at an earlier stage of the proceedings in Spirerose, a similar argument had been advanced for the claimant by Mr Barnes QC (who appeared also in the House of Lords), but it was not pursued in the higher courts.
The Court of Appeal commented ([2008] EWCA Civ 1230); [2009] 1 P & CR 20): 24.
We mention in passing Mr Barnes argument before the tribunal (see para 61), not pressed in this court, that the no scheme rule had nothing to do with planning assumptions, being a principle of valuation and not planning status.
This argument was based on some comments of Lord Denning MR in Myers v Milton Keynes Development Corpn [1974] 1 WLR 696, and of Carnwath LJ in Roberts v South Gloucestershire Council [2003] RVR 43.
He was right in our view not to pursue the point.
The observations in Roberts were certainly not intended to support such an argument.
It is also inconsistent with the reasoning of Lord Denning himself in the second Jelson case, and with one of the leading cases in the Privy Council, Melwood Units Pty Ltd v Main Roads Comr [1979] AC 426 (assumed permission for a shopping centre).
Conclusion
The Upper Tribunals decision in the present case is a powerful illustration of the potential complexities generated by the 1961 Act in its unamended form.
It is to be hoped that the amendments currently before Parliament will be approved, and that taken with the 2011 amendments they will have their desired effect of simplifying the exercise for the future.
It is no criticism of the tribunal if parts of their reasoning may appear obscure at first sight and require some unpicking.
However, once that is done, I am satisfied that the criticisms made by the Court of Appeal and in this court by the respondents are misplaced.
Overall, the tribunals application of these difficult provisions to the complex facts of this case is in my view exemplary.
I find no error of law.
For these reasons I would allow the appeal and set aside the order of the Court of Appeal.
In the result, if my colleagues agree, the award of the tribunal will be restored.
| This appeal concerns two parcels of grazing land one mile east of Rochdale, totalling 26.85 acres, formerly owned by the appellant and which were subject to compulsory acquisition under the North West Development Agency (Kingsway Business Park, Rochdale) Compulsory Purchase Order 2002 (the CPO).
Responsibility for paying compensation to the appellant rests with the respondent (the authority), and for which the valuation date was 4 January 2006.
In 1999 developers published a KBP Development Framework in support of an application for planning permission, which included a master plan.
Planning consents linked to the master plan were granted on 19 December 1999, and remained in force at the date when the parcels fell to be valued.
The CPO was then made in 2002.
The appellant acquired the land (and an additional adjacent parcel) for a total of 1.3m in May 2003 and its objection to the CPO was rejected, chiefly on the grounds that the land was required for the comprehensive development of the KBP scheme.
At the time the land came to be valued, the Statutory Development Plan in force comprised the regional guidance (RPG13) which included the Kingsway Business Park as a strategic regional site and the Rochdale Unitary Development Plan (the 1999 UDP).
The law on compensation for compulsory acquisition is found in the Land Compensation Act 1961 (the 1961 Act), with the general compensatory principle found in section 5, rule 2.
Also relevant to calculating compensation in this appeal are the provisions on disregards of actual or prospective development (section 6 and Schedule 1), and those on planning assumptions (sections 14 16).
These provisions operate alongside the Pointe Gourde rule or no scheme rule that compensation is to be assessed disregarding any increase or decrease in value solely attributable to the underlying scheme of the acquiring authority.
The appellant made a claim for 2,593,000 compensation on the basis that the land had significant potential value for residential development, independent of the scheme of acquisition.
The respondent, meanwhile, argued that the claim should be limited to the existing use value of approximately 50,000.
The Upper Tribunal agreed with the appellant in part, awarding compensation of 746,000 on the basis that there would have been a 50/50 chance of planning permission being obtained in the no KBP world.
On the authoritys appeal, however, the Court of Appeal did not accept either partys argument, and remitted the issue for determination on an alternative basis that applied the s.6(1) disregard more widely.
The Supreme Court unanimously allows the appeal.
Lord Carnwath gives the judgment, with which the other Justices agree.
The Court of Appeals approach would seem to require disregarding not just the KBP scheme, but also all the policies past and present which supported development on this land [35].
The Upper Tribunal were clearly entitled to regard the underlying policies as potentially relevant to the prospect of development, apart from the KBP scheme.
The assessment of their significance in the no KBP world was pre eminently a matter for the tribunal, which properly took account of the pattern of development on the ground and the long history of identification of this land for development.
Their approach did not ignore potential policy objections, and disclosed no error of law [36].
The Court of Appeal was, however, correct to reject the submission that the tribunal should have treated the planning status of the land as conclusively fixed by reference to sections 14 16 of the 1961 Act.
That the statutory assumptions are not exclusive is confirmed in section 14(3) of the 1961 Act, itself.
They work only in favour of a claimant, and do not deprive him of the right to argue for prospective value under other provisions or the general law [37].
It is well established that the application of the Pointe Gourde rule may result in changes to the assumed planning status of the subject land.
Further, there is nothing in section 6 to indicate that a more restrictive approach should be applied under the statutory disregards: the tribunal did no more than emphasise the difference between the statutory tests when it stated that the two stages of the analysis should not be elided [39].
It has also long been accepted that application of the general law may produce a result more favourable to a claimant than the statutory assumptions: the Law Commission has pointed to the two Jelson cases as an example of this, where the Pointe Gourde rule permitted a broader view of the matter [40].
It is hoped that the amendments currently before Parliament in the Neighbourhood Planning Bill will achieve their stated aim of clarifying the principles and assumptions for the no scheme world.
Overall, the tribunals application of these complex provisions was exemplary; the appeal should be allowed and the award of the tribunal restored [43 44].
|
These are three of five conjoined appeals which were heard by the Court of Appeal in Salford City Council v Mullen [2010] EWCA Civ 336, [2010] LGR 559.
They are concerned with possession proceedings brought by a local authority in circumstances where the occupier is not a secure tenant under Part IV of the Housing Act 1985.
Two of them, Leeds City Council v Hall (Hall) and Birmingham City Council v Frisby (Frisby), are cases where the claims for possession were made against tenants occupying under introductory tenancies entered into under Chapter 1 of Part V of the Housing Act 1996.
In the third, London Borough of Hounslow v Powell (Powell), the claim for possession was made against a person who was granted a licence of property under the homelessness regime in Part VII of the 1996 Act.
Permission to appeal was given in a fourth case, Salford City Council v Mullen.
But the proceedings in that case were stayed to await the outcome of these appeals.
Common to all three cases is the claim by each of the appellants that the property which is the subject of the proceedings for possession against them is their home for the purposes of article 8(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, which provides: Everyone has the right to respect for his private and family life, his home and his correspondence.
Their case is that, to avoid a breach of article 8, the interference must be justified under article 8(2) as being necessary in a democratic society and that this means that it must be in accordance with the law, it must be for a legitimate aim and it must be proportionate to the aim that the local housing authority is seeking to achieve.
They maintain that, as the court did not assess the proportionality of making the orders against them, there was a breach of their article 8 rights.
The Court had the opportunity in Manchester City Council v Pinnock [2010] UKSC 45, [2010] 3 WLR 1441 (Pinnock) of considering the application of article 8 to a claim for possession brought against a demoted tenant under Chapter 1A of Part V of the 1996 Act (as inserted by paragraph 1 of Schedule 1 to the Anti social Behaviour Act 2003).
It held that article 8 requires a court which is being asked to make an order for possession under section 143D(2) of the Housing Act 1996 against a person occupying premises under a demoted tenancy as his home to have the power to consider whether the order would be necessary in a democratic society: para 2.
Although Mr Arden QC submitted forcefully that it should not apply to introductory tenancies in view of their probationary nature, I would hold that this proposition applies to all cases where a local authority seeks possession in respect of a property that constitutes a persons home for the purposes of article 8.
There is a difference of view between the parties, however, as to its consequences, and in particular as to how cases of this kind should be dealt with in practice by the courts and local authorities.
The Court recognised that cases of the type that was examined in Pinnock arise relatively rarely and that cases of the kind represented by these appeals, which involve possession orders in different and more common circumstances, were likely to provide a more appropriate vehicle for the giving of general guidance: paras 58 59.
It was expected that the lawyers preparing for these appeals would have the opportunity of giving particular attention to the guidance that might usefully be given where possession is sought against introductory tenants and against applicants under the homelessness regime where there is no provision for the kind of procedure envisaged in Chapters 1 and 1A of Part V of the 1996 Act for introductory and demoted tenancies.
I wish to pay tribute to counsel on all sides for the way in which they have taken full and careful advantage of that opportunity.
The issues
The Court of Appeal delivered its judgment in Salford City Council v Mullen [2010] EWCA Civ 336 on 30 March 2010.
As Waller LJ explained in para 4, the court held that it was bound by what was said in Kay v Lambeth London Borough Council [2006] UKHL 10, [2006] 2 AC 465, para 110, as to the circumstances in which a county court might decline to make a possession order.
They were limited to two situations: first, if it was seriously arguable that the law which enables the county court to make the possession order is itself incompatible with article 8 (which the Court of Appeal in Doherty v Birmingham City Council [2006] EWCA Civ 1739, [2007] LGR 165, para 28 called gateway (a)); and second, if it was seriously arguable that the decision of the public authority was (regardless of the tenants Convention rights) an improper exercise of its powers because it was a decision that no reasonable person would consider justifiable (which the Court of Appeal in Doherty called gateway (b)).
So, where the local authority had fulfilled the requirements for the recovery of possession contained in the ordinary domestic law, a defence which did not challenge the law under which the order was sought as being incompatible with article 8 but was based on the proposition that the interference with the persons home was disproportionate should be struck out.
Writing extrajudicially, Lord Bingham of Cornhill said of the Strasbourg jurisprudence that its strength lies in its recognition of the paramount importance to some people, however few, in some circumstances, however rare, of their home, even if their right to live in it has under domestic law come to an end: Widening Horizons, The Hamlyn Lectures (2009), p 80.
There has never been any dispute about gateway (a).
It can be traced back to Kay v Lambeth London Borough Council [2006] 2 AC 465, para 39 where, in head (3)(a) of his summary of the practical position, Lord Bingham described the first of the two grounds on which the court might consider not making a possession order as being that the law which required the court to make the order despite the occupiers personal circumstances was Convention incompatible.
But gateway (b), albeit widened to some degree by what was said in Doherty v Birmingham City Council [2008] UKHL 57, [2009] AC 367, para 55, has always been controversial.
The central issue which divided the parties in Pinnock was whether the proposition which was encapsulated in it should still be applied in the light of subsequent decisions of the European Court of Human Rights in McCann v United Kingdom (2008) 47 EHRR 913, osi v Croatia (Application No 28261/06) (unreported) given 15 January 2009, Zehentner v Austria (Application No 20082/02) (unreported) given 16 July 2009 and Pauli v Croatia (Application No 3572/06) (unreported) given 22 October 2009.
This Court held that those cases, together with Kay v United Kingdom (Application No 37341/06) given 21 September 2010, The Times 18 October 2010, provided a clear and constant line of jurisprudence to the effect that any person at risk of being dispossessed of his home at the suit of a local authority should in principle have the right to question the proportionality of the measure and to have it determined by an independent tribunal in the light of article 8: para 45.
The decision in Doherty v Birmingham City Council had shown that our domestic law was already moving in that direction, and the time had come to accept and apply the jurisprudence of the European court.
So, where a court is asked to make an order for possession of someones home by a local authority, the court must have the power to assess the proportionality of making the order and, in making that assessment, to resolve any relevant dispute of fact: para 49.
It is against the background of that decision that the issues that arise in the present appeals must be considered.
They can be summarised briefly at this stage as follows. (1) What is the form and content of the proportionality review that article 8 requires? (2) What procedural protections are implicit in article 8 in homelessness cases before service of a notice to quit and after service but before possession proceedings are commenced? (3) Can the court defer the delivery of possession for a period in excess of the maximum permitted by section 89 of the Housing Act 1980 if it considers that it would be the proportionate course to do so and, if not, should there be a declaration of incompatibility? (4) Can section 127(2) of the 1996 Act be read compatibly with the introductory tenants article 8 Convention right so as to allow him to defend a claim for possession on the grounds recognised in Pinnock, or must there be a declaration that section 127(2) is incompatible with the Convention right? These issues are dealt with in paras 33 64.
The correct disposal of each appeal will also have to be considered, having regard to the facts of each case.
This is dealt with in paras 65 70.
The statutory background
As was explained in paras 5 7 of Pinnock, most residential occupiers of houses and flats owned by local authorities are secure tenants under Part IV of the Housing Act 1985.
In those cases the tenant must be given a notice setting out the reasons why possession is sought, the tenant cannot be evicted unless the landlord establishes that one of the grounds for possession listed in Schedule 2 to the 1985 Act applies and, except in some specified categories of case where suitable alternative accommodation is available, the court is satisfied that it is reasonable to make the order.
But certain types of tenancy are excluded from this regime.
They are listed in Schedule 1 to the 1985 Act.
They include two types of tenancy that were included in that Schedule by amendment: introductory tenancies referred to in paragraph 1A, added by paragraph 5 of Schedule 14 to the 1996 Act; and demoted tenancies referred to in paragraph 1B, added by paragraph 2(4) of Schedule 1 to the Anti social Behaviour Act 2003.
In addition, paragraph 4 of Schedule 1 to the 1985 Act (as substituted by paragraph 3 of Schedule 17 to the 1996 Act) provides that a tenancy granted in pursuance of any function under Part VII of the 1996 Act, which deals with homelessness, is not a secure tenancy unless the local housing authority concerned has notified the tenant that the tenancy is to be regarded as a secure tenancy.
The legislature has excluded these types of tenancy from the statutory scheme which applies to secure tenancies for very good reasons, which are firmly rooted in social policy.
In seeking democratic solutions to the problems inherent in the allocation of social housing, Parliament has sought to strike a balance between the rights of the occupier and the property rights and public responsibilities of the public authority.
The regimes that apply to introductory tenancies and demoted tenancies have been designed to address the problem of irresponsible or disruptive tenants whose presence in social housing schemes can render life for their neighbours in their own homes intolerable.
The homelessness regime provides the local housing authority with the flexibility in the management of its housing stock that it needs if it is to respond quickly and responsibly to the demands that this pressing social problem gives rise to.
Measures which would have the effect of widening the protections given to the occupiers by the statutes must be carefully tested against Parliaments choice as to who should, and should not, have security of tenure and when it should be given to them, if at all.
Social housing law draws a clear distinction between cases where security of tenure has been given, and those where it has not.
There are clear policy reasons why Parliament has denied security to certain classes of occupier.
It is with this in mind that the homelessness and introductory tenancy regimes must now be described in more detail.
(a) homelessness
The duties of local authorities in relation to homeless persons are set out in Part VII of the 1996 Act.
Ms Powell was provided with accommodation under section 193(2).
That section applies where the local housing authority is satisfied that an applicant is homeless, eligible for assistance and has a priority need, and is not satisfied that he became homeless intentionally.
In these circumstances section 193(2) imposes a duty on the local housing authority to secure that accommodation is available for occupation by the applicant.
The duty ceases in various circumstances, such as if the applicant became homeless intentionally from the accommodation that was made available for his occupation or otherwise voluntarily ceases to occupy that accommodation as his only or principal home.
Where the local housing authority decides that its duty under section 193(2) has ceased, the applicant has the right to request that it reviews its decision: section 202(1)(b).
If the applicant is dissatisfied with the decision on review he may appeal to the county court on any point of law arising from the decision on review or, as the case may be, the original decision: section 204(1).
Where an applicant has been found to be homeless and eligible for assistance but the local housing authority is also satisfied that he became homeless intentionally and has a priority need, it is under a duty to secure that accommodation is available for his occupation for such period as it considers will give him a reasonable opportunity of securing accommodation for his occupation: section 190(2).
As already noted, tenancies granted under Part VII of the 1996 Act are not secure tenancies unless the local housing authority has notified the tenant that the tenancy is to be regarded as a secure tenancy.
So the local authority is not required under domestic law to establish any particular ground for the termination of the tenancy when seeking possession from a tenant on whom it has served a notice to quit who has not been so notified.
The only procedural protections are to be found in the requirement under sections 3 and 5 of the Protection from Eviction Act 1977 that an order of the court must be obtained in order to recover possession and the requirement to give notice to quit in the form stipulated by that Act.
Section 89 of the Housing Act 1980 provides that, when the court makes an order for the possession of any land (except in the circumstances set out in section 89(2)), the giving up of possession may not be postponed for more than 14 days or, in cases of exceptional hardship, to a date no later than six weeks after the making of the order.
(b) introductory tenancies
Mr Hall and Mr Frisby were tenants under introductory tenancies when the possession orders were sought against them.
The regime under which they were granted these tenancies is set out in Chapter 1 of Part V of the 1996 Act.
It was created in response to concerns among social landlords about anti social behaviour among their tenants.
In April 1995 a consultation paper was issued in which views were sought on what were then described as probationary tenancies.
The idea was that, as a probationary tenancy would be converted automatically into a secure tenancy only if it was completed satisfactorily, a clear signal would be given to new tenants that anti social behaviour was unacceptable and would result in the loss of their home: para 3.2.
The White Paper Our Future Homes: Opportunity, Choice, Responsibility (Cm 2901, June 1995) identified the governments aims as being to encourage responsible social tenants and to protect the quality of life for the majority by supporting effective action against the minority of anti social tenants.
Social landlords were to be given the means to act rapidly to remove tenants in the worst cases, as a measure of last resort.
Section 124 of the 1996 Act provides that a local housing authority or a housing action trust may elect to operate an introductory tenancy regime.
Section 124(2), prior to its amendment by the Housing and Regeneration Act 2008 (Consequential Provisions) Order 2010 (SI 2010/866), provided : (2) When such an election is in force, every periodic tenancy of a dwelling house entered into or adopted by the authority or trust shall, if it would otherwise be a secure tenancy, be an introductory tenancy, unless immediately before the tenancy was entered into or adopted the tenant or, in the case of joint tenants, one or more of them was (a) a secure tenant of the same or another dwelling house, or (b) an assured tenant of a registered social landlord (otherwise than under an assured shorthold tenancy) in respect of the same or another dwelling house.
The duration of an introductory tenancy is defined by section 125.
The tenancy remains as an introductory tenancy until the end of the trial period which, unless shortened because the tenant was formerly a tenant under another introductory tenancy, lasts for the period of one year: section 125(2).
It does not become a secure tenancy until the end of the trial period: Housing Act 1985, Schedule 1, paragraph 1A.
The conversion then takes place automatically unless the introductory tenancy has been terminated.
Section 127 deals with proceedings for possession of a property which is subject to an introductory tenancy.
It provided (prior to its amendment by the Housing and Regeneration Act 2008): (1) The landlord may only bring an introductory tenancy to an end by obtaining an order of the court for the possession of the dwelling house. (2) The court shall make such an order unless the provisions of section 128 apply. (3) Where the court makes such an order, the tenancy comes to an end on the date on which the tenant is to give up possession in pursuance of the order.
Section 128(1) provides that the court shall not entertain proceedings for the possession of a dwelling house let under an introductory tenancy unless the landlord has served on the tenant a notice of proceedings complying with that section.
The notice must state that the court will be asked to make an order for possession, set out the reasons for the landlords decision to apply for such an order, specify a date after which proceedings may be begun, inform the tenant of his right to request a review of the landlords decision to seek a possession order and inform him that he can receive help or advice about the notice from a Citizens Advice Bureau, a housing aid centre or a solicitor: subsections (2) (7).
Section 129 provides that a request for a review of the landlords decision to seek an order for possession of the dwelling house must be made within no more than 14 days of service of the notice of proceedings under section 128.
The procedures of the demoted tenancy regime, which is the regime with which the Court was concerned in Pinnock, are closely based on the regime for introductory tenancies.
The procedure governing the landlords right to recover possession during the probationary period is set out in sections 143D, 143E and 143F which, as was noted in Pinnock, para 13, are virtually identical to sections 127, 128 and 129 of the 1996 Act.
But there is one important difference.
A tenant under a demoted tenancy was previously a tenant under a secure tenancy, that tenancy having been brought to an end by a demotion order under section 82A of the Housing Act 1985 (as inserted by section 14 of the Anti social Behaviour Act 2003).
The social purpose of the introductory tenancy regime is to allow local authorities to grant tenancies to new tenants without conferring security of tenure upon them until they have demonstrated that they are responsible tenants during the introductory period.
This is a factor which will always be highly relevant in any assessment of the proportionality of the landlords claim for possession, as the effect of denying the claim will be that an introductory tenant who may not deserve a secure tenancy will automatically obtain one.
The facts
(a) Ms Powell
As already noted, the local housing authority was satisfied that Ms Powell was homeless, eligible for assistance and had a priority need, and was not satisfied that she had become homeless intentionally.
She was given a licence by the London Borough of Hounslow (Hounslow) to occupy a two bedroom ground floor flat at 15 Pine Trees Close, Cranford from 2 April 2007.
She and her two sons Zaid, born on 3 April 2005, and Nour, born on 14 April 2006, were noted on the agreement as the occupiers.
A claim for housing benefit was received by Hounslow on 4 April 2007 in which Ms Powell indicated that she had a partner named Mr Ahmad Sami who normally resided with her.
By letter dated 11 May 2007 Hounslow wrote to Ms Powell stating that there were arrears of rent and warning her that this could lead to termination of her licence to occupy the property.
But on 14 May a credit of housing benefit was received which reduced the arrears to zero.
There was a further period when the payments fell into arrears, but they were fully cleared by a payment of housing benefit on 3 December 2007.
On 5 February 2008 Hounslows housing benefit section wrote to Ms Powell asking her to provide it with information in connection with her claim.
On 7 March 2008 it wrote to her stating that the information which it had asked for had not been provided.
As a result the housing benefit claim was terminated from 23 December 2007.
On 10 March 2008 Hounslows income recovery officer wrote to Ms Powell informing her that there were arrears of licence payments and asking her to attend for an interview on 17 March 2008.
Ms Powell did not attend as she had an interview at about the same time and on the same day with the Department of Work and Pensions.
On 17 March 2008 Hounslow sent a letter to Ms Powell with a notice to quit.
On 20 March 2008 she attended its offices and discussed the arrears with one of its officers.
On the same day a letter was sent to her setting out the possible effect on Hounslows homelessness duty towards her were she to be evicted due to rent arrears.
On 28 April 2008 Hounslows housing benefit section sent Ms Powell a housing benefit form.
It was received on 12 May 2008 and payment of housing benefit was resumed on 26 May 2008.
But there were substantial arrears of rent, represented by some 11 weeks rent, which were not covered by the initial credit of housing benefit and which remained unpaid.
On or about 19 September 2008 Hounslow issued a claim for possession of the premises, relying on the notice to quit dated 17 March 2008.
It was explained that there were arrears as at 30 June 2008 of 3,536.39.
The matter came before Deputy District Judge Shelton on 14 May 2009, who heard evidence from witnesses, including Ms Powell.
He found that the measures that had been taken by Hounslow were reasonable and proportionate (in the Doherty sense), and granted possession of the premises to Hounslow.
Having heard submissions as to her personal circumstances, he required Ms Powell to give possession of the property on or before a date 14 days after the date when the order was made.
Ms Powell was granted permission to appeal against the judges order by Mummery LJ on 2 July 2009, with a stay of execution on condition that Ms Powell paid off the arrears at 5 per week.
Her appeal was heard as one of five appeals by the Court of Appeal in March 2010.
It held that the decision in Ms Powells case was lawful, as the circumstances were not highly exceptional in the context of the homelessness legislation: [2010] EWCA Civ 336, para 76.
Her appeal was dismissed and the judges order was stayed pending the filing of a notice of appeal to this Court.
Ms Powells current position is that she is 23 years old and that her household consists of herself, her partner Mr Ahmad Sami and their four children, Zaid who is now 5, Nour who is now 4, Taysier who was born on 13 July 2007 and is now 3, and Laila who was born in July 2009 and is now 1.
The family is in receipt of various benefits including housing benefit which covers all of the rental liability.
In December 2009 the family was moved from 15 Pine Tree Close so that disrepair within the premises could be dealt with.
Work was completed in April 2010, and the family returned to the premises and has remained in occupation ever since.
(b) Hall
Mr Hall became an introductory tenant of property at 147 Leeds and Bradford Road, Bramley, Leeds of which he was granted a sole tenancy by Leeds City Council (Leeds) on 21 April 2008 and where he lives alone.
Allegations were made of noise nuisance and anti social behaviour by Mr Hall and by visitors to the property.
The behaviour which was complained of was mainly of noise nuisance from loud music and television and the banging and slamming of doors.
Mention was also made of shouting, screaming and arguing, banging on the communal door and ringing a neighbours doorbell at night and in the early hours of the morning.
It was also said that Mr Hall had engaged in threatening and intimidating behaviour and had been verbally abusive towards his neighbours.
On 1 July 2008 a noise abatement notice was served on him.
He did not appeal against this notice, and he appears to have disregarded it as complaints continued to be received.
On 28 November 2008 Leeds served a notice of proceedings for possession on him under section 128 of the 1996 Act.
A review was sought, and the notice was withdrawn following the review.
Leeds continued nevertheless to receive allegations of noise nuisance and anti social behaviour, so on 6 March 2009 it served a further notice of proceedings for possession on Mr Hall.
He again requested a review, but this time the review hearing upheld the service of the notice.
When the claim for possession came before His Honour Judge Spencer QC in the county court on 6 August 2009 the appropriateness of the notice was not challenged, nor was its validity.
Mr Hall accepted in a statement that was produced for the trial that there may have been occasions when he had played loud music and that, when his now ex girlfriend visited him and they drank alcohol together, they would sometimes argue.
He claimed that he had been drinking excessively because he had been suffering from depression and said that he had been receiving support from an organisation which supports vulnerable people who were having difficulty in maintaining their tenancies.
He asked the court to consider whether matters occurring after the review could provide a basis for challenging Leeds decision to seek possession.
The judge held that he could not consider anything occurring after the date of the review because section 127(2) of the 1996 Act provides that when, as happened in this case, the tenant has been served with a notice of proceedings that complies with section 128, the court shall make the order.
He made an order for possession, the effect of which was that Mr Hall was required to give possession of the property on or before a date 28 days after the date when the order was made.
He gave Mr Hall permission to appeal, and stayed execution of the order for possession pending the appeal.
On 21 September 2009 Mr Hall lodged a notice of appeal and his appeal was heard together with that of Ms Powell and Mr Frisby as one of five appeals by the Court of Appeal (Waller, Arden and Patten LJJ) in March 2010.
The court said that the judge ought to have considered whether the facts that had become known after the review made it arguable that the decision to pursue the proceedings was unlawful and in fact held that this was unarguable.
This was because tenants are on probation under the introductory tenancy scheme, because the review was not challenged and because there was no basis for arguing that it was unlawful for a local authority to refuse to change its mind by reference to facts which simply sought to demonstrate that the occupiers behaviour had improved: [2010] EWCA Civ 336, para 79.
The appeal was dismissed and the judges order was stayed for pending the filing of a notice of appeal to this Court.
Mr Hall remains in occupation of the property.
(c) Mr Frisby
Mr Frisby became an introductory tenant of property at 9 Hebden Grove, Hall Green, Birmingham under a tenancy agreement with Birmingham City Council (Birmingham) dated 23 April 2007.
Birmingham received complaints of excessive noise, including singing, music and banging emanating from the property.
It served a noise abatement notice on Mr Frisby on 19 November 2007 which permitted proceedings to be brought for a warrant to confiscate sound producing equipment.
On 4 February 2008 it served a notice under section 125A of the 1996 Act which had the effect of extending the trial period of the tenancy by six months to 22 October 2008.
Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy but he did not do so.
Having received further complaints of noise, Birmingham executed a warrant under the Environmental Protection Act 1990 and seized and removed sound producing equipment from the property.
On 2 May 2008 Birmingham served a notice of proceedings for possession on Mr Frisby under section 128 of the 1996 Act.
He requested a review of the decision to seek the order.
When the review panel convened he raised a number of issues and the panel decided to adjourn the hearing as they needed further information.
He did not attend the resumed hearing which proceeded in his absence, and the decision to commence proceedings was upheld.
On 17 September 2008 Birmingham commenced proceedings for possession in Birmingham County Court.
Mr Frisby filed a defence in which it was averred that Birmingham was amenable to judicial review and that the decision to seek possession was an improper exercise of its common law powers and an interference with his rights under article 8.
The possession claim was heard by District Judge Gailey on 3 July 2009.
He held in favour of Birmingham and struck out Mr Frisbys defence.
But he acceded to an application that he should not make a possession order there and then but should first hear argument as to whether or not he should adjourn the proceedings to enable an application for a judicial review to be brought in the administrative court.
On 27 October 2009 Mr Frisby was given permission to appeal against the judges decision, and the matter was referred to the Court of Appeal under CPR 52.14.
As in the cases of Ms Powell and Mr Hall, his appeal was heard as one of five appeals by the Court of Appeal in March 2010.
Having allowed certain additional expert evidence to be admitted, it dismissed the appeal: [2010] EWCA Civ 336, para 80.
The judges order was stayed pending the filing of a notice of appeal to this Court.
Mr Frisby remains in occupation of the property.
The form and content of the proportionality review
The basic rules are not now in doubt.
The court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and it has crossed the high threshold of being seriously arguable.
The question will then be whether making an order for the occupiers eviction is a proportionate means of achieving a legitimate aim.
But it will, of course, be necessary in each case for the court first to consider whether the property in question constitutes the defendants home for the purposes of article 8.
This is because it is only where a persons home is under threat that article 8 comes into play: Pinnock, para 61.
It is well established in the jurisprudence of the Strasbourg court that an individual has to show sufficient and continuing links with a place to show that it is his home for the purposes of article 8: Gillow v United Kingdom (1986) 11 EHRR 335, para 46; Buckley v United Kingdom (1996) 23 EHRR 101, 115, para 54; see also Harrow London Borough Council v Qazi [2003] UKHL 43, [2004] 1 AC 983, paras 9, 61 68.
In Pauli v Croatia, para 33 the court said: Home is an autonomous concept which does not depend on classification under domestic law.
Whether or not a particular premises constitutes a home which attracts the protection of article 8(1) will depend on the factual circumstances, namely, the existence of sufficient and continuous links with a specific place.
This issue is likely to be of concern only in cases where an order for possession is sought against a defendant who has only recently moved into accommodation on a temporary or precarious basis.
The Leeds appeal in Kay v Lambeth London Borough Council [2006] 2 AC 465, where the defendants had been on the recreation ground in their caravan for only two days without any authority to be there, provides another example of a situation where it was not seriously arguable that article 8 was engaged: see para 48.
In most cases it can be taken for granted that a claim by a person who is in lawful occupation to remain in possession will attract the protection of article 8.
(a) homelessness
The first question is whether in a case where domestic law imposes no requirement of reasonableness and gives an unqualified right to an order for possession, there is a requirement for an independent determination by a court of the issue of proportionality.
In Pinnock it was held that the court must have the ability to assess the article 8 proportionality of making a possession order in respect of a persons home: para 63.
This is so even if the defendants right of occupation has come to an end: Pinnock, para 45, applying McCann v United Kingdom, para 50; osi v Croatia, para 22; Zehentner v Austria, para 59; Pauli v Croatia, para 43; and Kay v United Kingdom, para 68.
But it was also held that, as a general rule, article 8 need only be considered if it is raised by or on behalf of the residential occupier, and that if an article 8 point is raised the court should initially consider it summarily and if it is satisfied that, even if the facts relied on are made out, the point would not succeed it should be dismissed.
Only if it is satisfied that it is seriously arguable that it could affect the order that the court might make should the point be further entertained: para 61.
I would hold that these propositions apply as much in principle to homelessness cases as they do to demoted tenancies.
It follows that in the great majority of cases the local authority need not plead the precise reasons why it seeks possession in the particular case.
But if an article 8 defence is raised it may wish to plead a more precise case in reply.
Mr Luba QC accepted that the threshold for raising an arguable case on proportionality was a high one which would succeed in only a small proportion of cases.
I think that he was right to do so: see also Pinnock, para 54.
Practical considerations indicate that it would be demanding far too much of the judge in the county court, faced with a heavy list of individual cases, to require him to weigh up the personal circumstances of each individual occupier against the landlords public responsibilities.
Local authorities hold their housing stock, as do other social landlords, for the benefit of the whole community.
It is in the interests of the community as a whole that decisions are taken as to how it should best be administered.
The court is not equipped to make those decisions, which are concerned essentially with housing management.
This is a factor to which great weight must always be given, and in the great majority of cases the court can and should proceed on the basis that the landlord has sound management reasons for seeking a possession order.
If the threshold is crossed, the next question is what legitimate aims within the scope of article 8(2) may the claimant authority rely on for the purposes of the determination of proportionality and what types of factual issues will be relevant to its determination.
The aims were identified in Pinnock, para 52.
The proportionality of making the order for possession at the suit of the local authority will be supported by the fact that making the order would (a) serve to vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
Various examples were given of the scope of the duties that the second legitimate aim encompasses the fair allocation of its housing, the redevelopment of the site, the refurbishing of sub standard accommodation, the need to move people who are in accommodation that now exceeds their needs and the need to move vulnerable people into sheltered or warden assisted housing.
In Kryvitska and Kryvitskyy v Ukraine (Application No 30856/03) (unreported) given 2 December 2010, para 46 the Strasbourg court indicated that the first aim on its own will not suffice where the owner is the State itself.
But, taken together, the twin aims will satisfy the legitimate aim requirement.
So, as was made clear in Pinnock, para 53, there will be no need, in the overwhelming majority of cases, for the local authority to explain and justify its reasons for seeking a possession order.
It will be enough that the authority is entitled to possession because the statutory pre requisites have been satisfied and that it is to be assumed to be acting in accordance with its duties in the distribution and management of its housing stock.
The court need be concerned only with the occupiers personal circumstances and any factual objections she may raise and, in the light only of what view it takes of them, with the question whether making the order for possession would be lawful and proportionate.
If it decides to entertain the point because it is seriously arguable, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order that is being sought by the local authority: Kryvitska and Kryvitskyy v Ukraine, para 44.
Mr Underwood QC drew attention to the fact that there was no express provision in Part VII of the 1996 Act which empowers a court to refuse to grant a possession order to the local authority where the occupier is accommodated following an exercise of the authoritys functions under that Part of the Act.
He said that this was because Parliament had taken a positive decision not to provide secure tenancies to persons who were accommodated under the homelessness provisions unless the local authority chooses otherwise.
Part VII was intended to be a life line for those who had nowhere to live; it uses accommodation which may be needed quickly for other cases; an occupier who is evicted through no fault of her own will be accommodated elsewhere; and if there is an issue about fault there is a right of review and of appeal.
The thrust of this part of his argument was that it was not possible under the scheme of Part VII to meet the article 8 procedural requirement in a way that was called for by the decision in Pinnock.
The answer to this argument is to be found in the fact that there is nothing in Part VII of the 1996 Act which either expressly or by necessary implication prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
In contrast to Pinnock, where the court was faced with a direction by the statute that, if the procedural requirements were satisfied, it must grant the order for possession, no equivalent provision is set out anywhere in Part VII.
There is, of course, an important difference between Part VII and the regimes that apply to introductory and demoted tenancies, in that it is likely in homelessness cases that the occupier will be the subject of a continuing duty if she is still homeless, eligible for assistance and has a priority need and will be entitled to contest a finding that she became homeless intentionally.
But the legitimate aims that justify seeking a possession order are just as relevant in homelessness cases.
The question for the court will always be whether the making of an order for possession would be lawful and proportionate.
Mr Luba then said that each of the exceptions to the security of tenure regime was there for a particular social housing reason.
It was material to a consideration of the issue of proportionality, therefore, for the court to know whether the local authoritys reason for seeking a possession order was relevant in that context.
In the case of an occupier who had been provided with accommodation under Part VII, seeking a possession order to enable the local authority to perform its homelessness functions, such as moving a family whose numbers had reduced to smaller accommodation, the case for granting the order would in the overwhelming number of cases be proportionate.
But if the local authoritys decision was based on other factors such as rent arrears which were not related to the performance of its homelessness functions, it was not enough to tell the court that it was the local housing authority and to rely on the two legitimate aims.
He said that a structured approach was required to the issue of proportionality so that the interests of the local authority could be balanced against that of the occupier: Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, paras 19 20.
Support for this was to be found in Zehentner v Austria, para 56 where the court said that, while it was for the national authorities to make the initial assessment of necessity, the final evaluation as to whether the reasons cited for the interference are relevant and sufficient remains subject to its review for conformity with the requirements of the Convention.
A structured approach of the kind that Mr Luba was suggesting may be appropriate, and indeed desirable, in some contexts such as that of immigration control which was the issue under discussion in Huang v Secretary of State for the Home Department.
But in the context of a statutory regime that has been deliberately designed by Parliament, for sound reasons of social policy, so as not to provide the occupier with a secure tenancy it would be wholly inappropriate.
I agree with Mr Stilitz QC for the Secretary of State that to require the local authority to plead its case in this way would largely collapse the distinction between secured and non secure tenancies.
It would give rise to the risk of prolonged and expensive litigation, which would divert funds from the uses to which they should be put to promote social housing in the area.
In the ordinary case the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances.
It is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration of the issues of lawfulness or proportionality.
If this test is not met, the order for possession should be granted.
This is all that is needed to satisfy the procedural imperative that has been laid down by the Strasbourg court.
The decision of the local authority to seek possession in a homelessness case will, of course, have been taken against the background of all the advice and assistance that the provisions of Part VII of the 1996 Act require to be given to the applicant.
It is unlikely, as the course of events in Ms Powells case demonstrates, that the reason why it has decided to take proceedings for eviction will not be known to the tenant.
The right to request a review of the decisions listed in section 202 and the right of appeal under section 204 are further factors to be taken into account.
They provide the tenant with an opportunity to address any errors or misunderstandings that may have arisen and to have them corrected.
She will have a further opportunity to raise such issues as a judicial review challenge by way of a defence in the county court.
But that is a matter for the tenant, not for the local authority.
There is no need for the court to be troubled with these issues unless and until, at the request of the tenant, it has to consider whether it should conduct a proportionality exercise.
There may, as was pointed out in Pinnock, para 53, be cases where the local authority has a particularly strong or unusual reason for wanting to obtain possession of the property.
It may think it desirable to inform the court of this fact so that it can take account of it in addition to the two given legitimate aims when it is determining the issue of proportionality.
There is no reason why it should not ask for this to be done.
But, if it wishes to do so, it must plead the reason that it proposes to found upon and it must adduce evidence to support what it is saying.
The particular grounds on which it relies can then be taken into account in the assessment.
No point can be taken against the local authority, however, if it chooses not to take this course and to leave it to the tenant to raise such points as she wishes by way of a defence.
(b) introductory tenancies
The above analysis applies equally to introductory tenancies.
It cannot be said in their case that there is nothing in the statutory scheme which prevents the court from refusing to make an order for possession if it considers it would not be proportionate to do so.
Section 127(2) is a direction to the contrary.
But, for the reasons set out in paras 50 56 below, that subsection can be read and given effect so as to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
As to what this entails, the twin legitimate aims that were held in Pinnock to justify seeking a possession order in the case of demoted tenancies are just as relevant in the case of introductory tenancies.
The question for the court will always be whether the making of an order for possession in their case too would be lawful and proportionate.
The question as to what the procedural requirements are in the case of introductory tenancies must be judged against the fact that the tenant has a statutory right to request a review of the local authoritys decision to seek possession under section 129 of the 1996 Act.
This strengthens the grounds for rejecting the structured approach to the issue of proportionality contended for by Mr Luba.
As has already been stressed, the regime that applies to introductory tenancies has been deliberately designed by Parliament so as to withhold enjoyment of the right to a secure tenancy until the end of the trial period.
In the ordinary case, as in cases of homelessness, the relevant facts will be encapsulated entirely in the two legitimate aims that were identified in Pinnock, para 52.
It is against those aims that the court must weigh up any factual objections that may be raised by the defendant and what she has to say about her personal circumstances, and it is only if a defence has been put forward that is seriously arguable that it will be necessary for the judge to adjourn the case for further consideration.
If this test is not met, the order for possession should be granted.
Procedural protections
The Court was invited to answer a series of practical questions which were designed to obtain advice as to the course that should be followed in homelessness cases to enable the occupier to make representations before or after service of a notice to quit and to enable the tenant to know the reasons why possession was being sought.
Drawing upon the practice of pre action protocols, Mr Luba said that the procedural dimensions of article 8 could best be satisfied by requiring that, before possession proceedings are begun, the non secure occupier knows why the proceedings are being initiated and has an opportunity to make representations to the official charged with making the decision whether to bring proceedings.
The Court was also invited to answer a series of questions directed to the way claims for possession in the case of introductory tenancies should be dealt with procedurally in the county court.
Detailed questions as to the way claims should be dealt with procedurally are best addressed in the light of facts and circumstances arising from the way proceedings are actually being handled in practice.
Otherwise there is a risk that such guidance as this Court can give will create more problems than it will solve.
The statutory regimes that are in place must also be taken into account.
These are not cases where the defendants were granted secure tenancies.
There is no statutory obligation to give reasons with the notice to quit in homelessness cases, and the local authority does not have to justify its motives for seeking a possession order.
It is not obvious that pre action protocols have a place in proceedings of this kind.
Furthermore, on the facts of the present cases there is no real issue that needs to be addressed.
Ms Powell was given warnings about her rent arrears and an opportunity to attend for interview and she discussed the problem of arrears with one of Hounslows officers.
The notice to quit was accompanied by a letter giving reasons, and the claim for possession explained that there were arrears.
The common law requirement of fair notice was, very properly, observed in her case by Hounslow and none of the steps that they took have been criticised as inadequate.
As for the cases of Mr Hall and Mr Frisby, the local authorities told them that they had received complaints of excessive noise, noise abatement notices were served on them against which they did not appeal and in Mr Frisbys case offending equipment was removed from the property.
The reasons for the decision to apply for a possession order were set out in the notice of proceedings as required by section 128(3) and the tenants were informed of their right to request a review, all as required by section 128(6).
In R (McLellan) v Bracknell Forest Borough Council [2001] EWCA Civ 1510, [2002] QB 1129, para 103 Waller LJ said that where a review has taken place it should be the norm for the local authority to spell out in affidavits before the county court how the procedure was operated, how the hearing was conducted and the reason for taking the decision to continue with the proceedings.
As Mr Luba pointed out, that suggestion was directed at the task of enabling the judge to decide whether to adjourn the claim so that a judicial review of the decision might be sought in the High Court.
He invited the Court to set out a revised list of requirements that had to be satisfied in the context of a case which might raise issues of proportionality.
I would, with respect, decline that invitation.
Matters of that kind are more appropriate for a practice direction.
In any event it is not for this court to give directions on matters of practice where the points at issue in the case do not require this to be done.
Section 127(2) of the 1996 Act
As already noted (see para 17, above), section 127(1) of the 1996 Act provides that the landlord may only bring an introductory tenancy to an end by obtaining an order of the court for possession of the dwelling house.
Section 127(2) provides that the court shall make such an order unless the provisions of section 128 apply.
That section directs the court not to entertain proceedings for possession unless the landlord has served on the tenant a notice complying with its requirements.
One of the things that the notice must do is inform the tenant of his right to request a review of the landlords decision to seek a possession order: section 128(6).
Section 129 provides that, so long as the request for a review is made no later than 14 days after the service of the possession order, the landlord must review its decision and that the review shall be carried out and the tenant notified before the date specified in the notice as the date after which proceedings for the possession of the dwelling house may be begun.
On the face of it, the court has no discretion under section 127(2) as to whether or not it should make the order for possession.
Its ordinary meaning is not in doubt.
If the requirements of section 128 and by implication section 129 (see para 56, below) are met, the court must make the order whether or not it considers it proportionate to do so.
The question that this issue raises is whether section 127(2) can nevertheless be read and given effect under section 3 of the Human Rights Act 1998 so as to permit the tenant to raise his article 8 Convention right by way of a defence to the proceedings in the county court and enable the judge to address the issue of proportionality.
In Pinnock, paras 68 79, the Court addressed the proper interpretation of section 143D(2) of the 1996 Act, as amended, which together with sections 143E and 143F are so similar to those of sections 127 to 129 as to indicate that they were modelled on what those sections provide.
Like section 127(2) in the case of a dwelling house let under an introductory tenancy, section 143D(2) provides when the court is asked to make an order for the possession of a dwelling house let under a demoted tenancy that the court must make the order (the word shall is not used, but the sense is the same) if the notice and review requirements have been complied with.
As the Court noted in para 68, if section 143D was construed in accordance with the traditional approach to interpretation, it was hard to see how the court could have the power either to investigate for itself the facts relied on to justify the decision to seek possession, or to refuse to make an order for possession if it considered that it would be disproportionate to do so.
The same problem arises with regard to section 127(2).
Unless a solution can be found under section 3 of the 1998 Act, the language of that section appears to deprive the court of almost any ability to stand in the way of a landlord who had decided to seek possession against an introductory tenant: see Pinnock, para 69.
In Pinnock it was held that it is open to a tenant under a demoted tenancy to challenge the landlords decision to bring possession proceedings on the ground that it would be disproportionate and therefore contrary to his article 8 Convention rights: para 73.
This finding applies just as much in the case of introductory tenancies, so it must be concluded that, wherever possible, the traditional review powers of the court should be expanded to permit it to carry out that exercise in their case too.
The courts powers of review can, in an appropriate case, extend to reconsidering for itself the facts found by a local authority, or indeed to considering the facts which have arisen since the issue of proceedings, by hearing evidence and forming its own view: Pinnock, para 74.
As was observed in that case, however, much the more difficult question is whether it is possible to read and give effect to section 127(2) in a way that would permit the county court judge to do this.
It is difficult because the wording of the subsection indicates that its purpose is to ensure that the court does nothing more than check whether the procedure has been followed.
An introductory tenancy, after all, has been deliberately deprived of the protections that apply to a secure tenancy.
It could be argued, as it was in Pinnock, that for the court to assess the proportionality of the decision to bring and continue the possession proceedings would go against the whole import of the section.
It would amount to amending it rather than interpreting it: para 75.
The Court decided in Pinnock to reject that argument for the reasons set out in paras 77 81.
The question in this case is whether there is any good reason for not applying that decision to the regime that the 1996 Act has laid down for introductory tenancies.
There are some differences between the two regimes.
There is no demotion stage, as a tenancy becomes an introductory tenancy upon its commencement and it remains an introductory tenancy until the end of the trial period.
And, while the language of sections 127 129 is for the most part reproduced, mutatis mutandis, in sections 147D 147F, there is one difference between them.
Section 127(2) does not refer to section 129, unlike section 143D(2), which states: The court must make an order for possession unless it thinks that the procedure under sections 143E and 143F has not been followed.
Furthermore, as Mr Underwood pointed out, Parliament had made a clear choice that introductory tenants were not to have the protection from eviction that secure tenants have.
He said that there were many ways in which section 127(2) could be made compatible with article 8, and that it should be left to Parliament to choose between them.
The fact that there is no mention in section 127(2) of the review procedure under section 129 can be seen to be of no consequence, in view of the direction in section 128(6) that the tenant must be informed of his right to request a review.
The fact that there is no demotion stage in the case of an introductory tenancy does not affect the reasoning on which the decision in Pinnock was based.
It was that, as lawfulness must be an inherent requirement of the procedure for seeking a possession order, it must equally be open to the court to consider whether that procedure has been lawfully followed having regard to the defendants article 8 Convention rights: para 77.
It was by this route, and by the application of sections 3(1) and 7(1)(b) of the 1998 Act, that the Court held that section 143D(2) could be read and given effect to enable the county court judge to deal with a defence that relies on an alleged breach of the defendants rights under article 8.
There is a sufficient similarity between section 127(2) and section 143D(2) to apply the reasoning in Pinnock to introductory tenancies also.
Although the word procedure is not used in section 127(2), it does refer to the procedural requirements in section 128.
So it should be read and given effect in the same way, and it is not necessary to resort to the making of a declaration of incompatibility.
Section 89 of the 1980 Act
The question raised by this issue is whether, if the argument is made out that the proportionate course would be to defer the delivery of possession for a period such as three months or to make a suspended order for possession, this can be done in the face of the provisions of section 89(1) of the Housing Act 1980.
That section provides: (1) Where a court makes an order for the possession of any land in a case not falling within the exceptions mentioned in subsection (2) below, the giving up of possession shall not be postponed (whether by the order or any variation, suspension or stay of execution) to a date later than fourteen days after the making of the order, unless it appears to the court that exceptional hardship would be caused by requiring possession to be given up by that date; and shall not in any event be postponed to a date later than six weeks after the making of the order. (2) The restrictions in subsection (1) above do not apply if (a) the order is made in an action by a mortgagee for possession; or (b) the order is made in an action for forfeiture of a lease; or (c) the court had power to make the order only if it considered it reasonable to make it; or (d) the order relates to a dwelling house which is the subject of a restricted contract (within the meaning of section 19 of the [Rent Act 1977]); or (e) the order is made in proceedings brought as mentioned in section 88(1) above [proceedings for possession of a dwelling house let under a rental purchase agreement].
None of the exceptions listed in section 89(2) apply to tenancies which are not secure tenancies.
The effect of subsection (1) of that section is to remove from the court the discretion which it had at common law to select whatever length of postponement it thought fit: see McPhail v Persons Unknown [1973] Ch 447.
In his commentary on this section in Current Law Statutes Mr Andrew Arden (as he then was) suggested that the section did not prevent a greater period being allowed by consent.
But it is difficult to see how the consent of the parties could confer a discretionary power on the court which has been removed from it by the statute.
The question whether the section permits the court to allow a longer period on grounds of article 8 proportionality was left open in Pinnock, para 63.
It did not need to be addressed on the facts of that case.
It does not arise in any of the cases that are before this Court either, as it has not been suggested in any of them that an order postponing possession for a period in excess of six weeks is necessary to meet the requirements of article 8.
In Ms Powells case the giving up of possession was postponed by 14 days.
In Mr Halls case the period allowed was 28 days.
In Mr Frisbys case the judge decided not make a possession order, so that an application could be made to the administrative court.
But as the point was fully argued, and as it is a matter of some importance to know what scope there is for departing from the strict timetable on grounds of proportionality in cases of exceptional hardship, it is appropriate that the Court should deal with it.
Two possible ways of enabling the court to depart from the strict timetable were suggested in argument.
One was to read down the section under the power that the court is given by section 3(1) of the Human Rights Act 1998.
The other was to exercise powers of case management by adjourning the proceedings if the six week period was likely to be insufficient to enable the tenant to remove from the property without incurring exceptional hardship, for such length of time as might be necessary to avoid it.
The timetable is very precise as to the limit to the power to postpone.
The words shall not in any event could hardly be more explicit.
Its language is in sharp contrast to that of section 87 of the 1980 Act (now contained in section 85 of the Housing Act 1985, as amended), the first two subsections of which provided: (1) Where proceedings are brought for possession of a dwelling house let under a secure tenancy on any of grounds 1 to 6 or 10 to 13 in Part I of Schedule 4 to this Act, the court may adjourn the proceedings for such period or periods as it thinks fit. (2) On the making of an order for possession of such a dwelling house on any of those grounds, or at any time before the execution of the order, the court may (a) stay or suspend execution of the order, or (b) postpone the date of possession, for such period or periods as the court may think fit.
The scheme of the 1980 Act, as the contrast between sections 87 and 89 illustrates, was to confer protection on secure tenants but to restrict it in relation to non secure tenants.
Its long title states that among the Acts purposes was to restrict the discretion of the court in making orders for possession.
Section 89 contains an express prohibition against exercising the extended powers given by section 85 in the case of secure tenancies.
In the face of such strong statutory language, any reading down of the section to enable the court to postpone the execution of an order for possession of a dwelling house which was not let on a secure tenancy for a longer period than the statutory maximum would go well beyond what section 3(1) of the 1998 Act permits.
As Lord Nicholls of Birkenhead said in Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, para 33, for the courts to adopt a meaning inconsistent with a fundamental feature of legislation would be to cross the constitutional boundary that section 3 of the 1998 Act seeks to demarcate and preserve.
Section 89 of the 1980 Act does not, of course, take away from the court its ordinary powers of case management.
It would be perfectly proper for it, for example, to defer making the order for possession pending an appeal or to enable proceedings to be brought in the administrative court which might result in a finding that it was not lawful for a possession order to be made, as was contemplated by the judge in the case of Mr Frisby but is now no longer necessary.
An adjournment would also be a permissible exercise of the courts discretion if more information was needed to enable it to decide what order it should make.
But what the court cannot do, if it decides to proceed to make the order, is play for more time by suspending or staying its effect so as to extend the time limit beyond the statutory maximum.
The question then is whether the Court should make a declaration of incompatibility under section 4 of the 1998 Act.
This would be appropriate if there was good reason to believe that the time limit that the section sets is likely in practice to be incompatible with the article 8 Convention right of the person against whom the order for possession is made.
Mr Ardens comment in Current Law Statutes indicates that at the time when section 89 of the 1980 Act was enacted postponements of orders for possession for periods of four to six weeks was normal.
No evidence has been put before the Court to show that in practice the maximum period of six weeks is insufficient to meet the needs of cases of exceptional hardship.
Furthermore, this is an area of law where the judgment of Parliament as to what was necessary to achieve its policy of restricting the discretion of the court in the case of non secure tenancies should be respected, unless it was manifestly without reasonable foundation: Blei v Croatia (2004) 41 EHRR 13, para 65.
In these circumstances, as no obvious need for the section to be revisited has been demonstrated, I would decline to make a declaration of incompatibility.
The disposal of these appeals
(a) Ms Powell
Mr Underwood informed the Court that Hounslow had decided, in the light of the decision in Pinnock, to offer Ms Powell suitable alternative accommodation.
As before, this accommodation was to be provided on a non secure basis.
Her rent arrears would be carried forward to the new tenancy on the basis that she continued to pay off the arrears at 5 per week, subject to any changes in her circumstances which would enable her to pay more.
Mr Luba said that he was grateful for this offer, and he submitted that in any event the order that had been made against his client should not stand.
Evidence had been heard by the district judge in her case.
But this was not a full proportionality hearing of the kind contemplated by Pinnock, and her personal circumstances had not been examined.
He invited the court to allow Ms Powells appeal.
In view of the offer that had been made, Mr Underwood did not oppose this invitation in his oral argument.
But in his written case, in which he invited the court to dismiss the appeal, he pointed out that the judge observed that the action taken by Hounslow was proportionate.
Had it not been for the offer of suitable alternative accommodation, there might have been grounds for remitting Ms Powells case to the county court for consideration of article 8 proportionality.
Giving effect to the order for possession would have the inevitable consequence of making Ms Powell homeless again so that the local authoritys duties to her will continue, unless she were to be found to be intentionally homeless or not to have a priority need.
Had there been a live issue to be examined, it would have been preferable for her to be given an opportunity for the proportionality of the order to be considered in the light of her personal circumstances.
As it is, it is not necessary to reach a view on this point.
An offer of suitable alternative accommodation having been made, no good purpose would be served by maintaining the order for possession or the notice to quit which preceded it.
I would allow this appeal for this reason and set the order and the notice to quit aside.
(b) Mr Hall
Mr Underwood informed the Court that Leeds had decided, in the light of the decision in Pinnock and as there had been no recent reports of his having caused a nuisance, to offer Mr Hall a secure tenancy of his current accommodation.
Mr Luba said that he was grateful for this offer, but he submitted that the order that had been made against his client should not stand in any event as the judge had been wrong to refuse to consider anything occurring after the date of the review.
He invited the court to dispose of the matter by allowing Mr Halls appeal.
Mr Underwood acknowledged that Mr Hall did not have a proportionality hearing.
But he submitted that under the introductory tenancy scheme it had no power to give him one, so the appeal should be dismissed.
Mr Underwoods submission that the county court had no power to consider whether it was proportionate to make the order must be rejected.
For the reasons set out in paras 50 56 above, it has that power.
So, if there were grounds for thinking that it was seriously arguable that the making of the order was disproportionate, I would have remitted his case to the county court to enable him to present that argument.
But the reasons given by the Court of Appeal for holding that it was unarguable that the decision was unlawful apply with equal force to the question whether, on the facts presented by Mr Hall, the decision was disproportionate.
No grounds have been put before this Court for thinking that he could present a case which was seriously arguable.
Had it not been for the offer of a secure tenancy, I would have dismissed his appeal.
As it is, no good purpose would be served by maintaining the order for possession.
I would, for this reason only, allow this appeal.
(c) Mr Frisby
Birmingham has not made any offer of settlement in Mr Frisbys case and Mr Arden indicated that it was not minded to do so.
Mr Luba submitted that, as the district judge had considered only the question of venue and had adjourned the proceedings so that an application could be made for judicial review, the proper course was for this Court to allow the appeal so that proceedings could be resumed in the county court.
Mr Arden, on the other hand, invited the Court to dismiss the appeal as Mr Frisby did not take advantage of the adjournment to take proceedings for judicial review and had given no indication of what the issues were that he wanted to raise.
He said that he had had his chance, and that he should not be given a further opportunity.
He pointed out that Mr Frisby did not appeal against the noise abatement notice, and it appeared that he was not in position to say that the notice of proceedings had not been properly served on him.
In view of the way the case was dealt with in the county court, Mr Frisby did not have an opportunity to present his arguments on proportionality in that court.
But I do not think that there is any reason for thinking that it is seriously arguable that the making of an order for possession in his case was disproportionate.
As already noted (see para 30 and 31, above), when Mr Frisby was advised of his right to seek a review of the decision to extend his introductory tenancy he did not do so and, having requested a review of the decision to seek an order for possession, he did not attend the resumed hearing.
The facts on which that decision was based are compelling, and no notice has been given of any grounds on which it might be suggested that the making of the order was disproportionate.
I would dismiss this appeal.
LORD PHILLIPS
Introduction
I am grateful to Lord Hope for setting out the facts and issues raised by these appeals with such clarity.
I agree with his conclusions, but in relation to some of these I wish to add some comments of my own.
I propose to do this, after an introductory overview, by addressing, in some cases very shortly, the issues set out in the Statements of Facts and Issues agreed by the parties.
Article 8(1) of the Convention confers on everyone a right to respect for his home.
It does not impose on a state, or a public authority within a state, a duty to provide a home or to sort out a persons housing problems see the comment of Lord Bingham in Kay v Lambeth London Borough Council [2006] 2 AC 465, at para 28 and the Strasbourg authorities cited by him.
English law, and public authorities acting pursuant to that law, have gone further than the Convention requires.
The law lays down a complex framework dealing with rights and obligations in relation to housing.
Under this public authorities are under an obligation to provide accommodation for the homeless in the circumstances described by Lord Hope at para 11.
The law also regulates the manner in which public authorities provide housing for those requiring this.
Article 8, together with section 6 of the Human Rights Act 1998 (HRA), imposes on a public authority which has provided a person with a home a duty to have respect for that home.
This imposes a fetter on the right of the authority to dispossess the occupier of his home.
As a matter of substance, article 8(2) requires that dispossession should be pursuant to one or more of the specified legitimate aims and that it should be a proportionate means of achieving that aim.
As a matter of procedure, the occupier is entitled to have any issue as to whether article 8(2) is satisfied determined by an independent tribunal.
Parliament has gone a long way towards satisfying these requirements by express statutory provisions.
It has created a class of secure tenants who cannot be dispossessed unless a court is satisfied, inter alia, that it is reasonable that they should be.
Parliament has also, however, deliberately created classes of tenants who do not have security of tenure (non secure tenants).
Parliament has conferred on some of these a degree of substantive and procedural protection, but has sought to place the decision on whether or not they should be dispossessed fairly and squarely on the local authorities themselves.
It has sought to avoid, in so far as possible, questions of proportionality being pursued before the courts.
The policy behind this approach is not in doubt.
It is to prevent the delay and expense that may occur if those who are not entitled to security of tenure are permitted to resist the grant of possession orders by the courts by attacking the reasons that have led the local authorities to claim possession.
The Strasbourg Court has made it plain that ousting the powers of the court to consider the proportionality of dispossessing a non secure tenant is not compatible with the procedural requirements of article 8.
In Manchester City Council v Pinnock [2010] 3 WLR 1441 this Court held that it was possible to read section 143D(2) of the Housing Act 1996 as permitting a demoted tenant to raise the issue of proportionality by way of defence to an application for a possession order.
These appeals require the Court to decide whether the reasoning in Pinnock applies where a local authority seeks, pursuant to section 127 of that Act, to recover possession of a property occupied by an introductory tenant or where possession is sought of property occupied pursuant to Part VII of the Act after the tenancy, or licence, has been terminated by a notice to quit.
More generally, these appeals raise a number of questions which are not clearly answered by the decision in Pinnock.
Foremost among these is the question of the matters to which the court must pay regard when an issue of proportionality is raised.
INTRODUCTORY TENANCIES
Mr Frisby, which arise in relation to introductory tenancies.
Issue 1: Does article 8 apply at all to a claim for possession of premises held on an introductory tenancy?
All parties were agreed that, in normal circumstances, the premises occupied by an introductory tenant constitute his home for the purposes of article 8.
I endorse that agreement.
When a tenant enters into occupation under an introductory tenancy the common intention is that, provided that the probationary period passes without incident, the tenancy will become secure.
The tenant enters into the premises with the intention of making them his home and, for the purposes of article 8, they normally become his home.
I shall start by considering the issues agreed in the appeals of Mr Hall and Issue 2: Must repossession of property that is occupied under an introductory tenancy be subject to an independent determination of proportionality under article 8(2)?
It might have been thought that an affirmative answer to the first issue would necessarily require a similar answer to this issue.
Counsel for the appellants, for Leeds City Council, and for the Secretary of State were agreed that this was so.
Mr Andrew Arden QC, for Birmingham City Council, submitted to the contrary.
He accepted that the premises occupied by an introductory tenant were his home for the purposes of article 8.
He submitted, however, that the Strasbourg Court had never laid down an absolute requirement for an independent determination of proportionality.
The grant of a non secure tenancy for a probationary period was properly to be considered as part of the process of allocating accommodation, or of the selection of tenants.
This was a matter for the local authority, not for the courts.
The existence of this probationary scheme was plainly in the interest of other tenants.
In these circumstances, and having regard to the requirement that local authorities should be able to act swiftly, economically and decisively in allocating accommodation, there was, exceptionally, no requirement for an independent determination of proportionality.
The exigencies of the introductory tenancy scheme outweighed the need for the tenant to be able to challenge proportionality before an independent tribunal.
Pinnock could be distinguished because it dealt with demoted tenancies, which were not an integral part of the scheme of allocation.
While I was initially attracted by this argument, I have not been persuaded by it.
The provisions of Part V of the 1996 Act that relate to demoted tenancies closely mirror the provisions that relate to introductory tenancies.
Each set of provisions has the effect of placing the tenant on probation, with good behaviour likely to earn the reward of a secure tenancy.
I can see no principled basis for distinguishing between the two so far as concerns the manner of application of article 8.
I would give an affirmative answer to the second issue.
Issue 3: What legitimate aims may the local authority invoke when seeking to justify under article 8(2) the dispossession of an introductory tenant?
This issue, and issue 4 which follows, arise on the premise that an affirmative answer is given to issue 5, a premise which, as I shall explain, I consider to be valid.
I agree with Lord Hope (para 36) that the answer to this issue is provided by para 52 of the judgment of this Court in Pinnock.
The legitimate aims itemised in article 8(2) include the protection of the rights and freedoms of others.
This phrase is wide enough to embrace (i) the vindication of the authoritys ownership rights in the property and (ii) the compliance by the authority with its duties in relation to the distribution and management of the housing stock for the benefit of other tenants.
A public authority can properly seek to justify its actions in dispossessing an introductory tenant by asserting that this was reasonably necessary to achieve these legitimate ends.
I do not understand any of the parties to dissent from this conclusion which reflects the views expressed by the Strasbourg Court in McCann v United Kingdom (2008) 47 EHRR 913, at para 48.
Issue 4: In the light of the legitimate aims, what types of factual issue will be relevant to any proportionality determination?
This substantive question is distinct from the procedural question of how the relevant factual issues are to be brought before the court.
The contentions of the parties.
On this issue there was a wide variety of submissions.
At one extreme was the case advanced by Mr Stilitz QC on behalf of the Secretary of State.
He submitted that each of the two legitimate aims was individually so cogent that the particular reasons that motivated the local authority to seek to recover possession were an irrelevance.
A local authoritys right to recover its own property from a recipient who had no legal right to remain in possession did not require to be supported by reference to the reasons which motivated the authority in seeking to exercise this right.
This is how this proposition was expressed in para 50.1 of the Secretary of States written case in relation to homelessness cases: When assessing proportionality by reference to this legitimate aim, it is not necessary or appropriate for the court to investigate the factual merits of the local authoritys reasons for serving the notice to quit, as the merits of the local authoritys reasons are irrelevant to the assessment of proportionality against this particular legitimate aim.
So far as the second legitimate aim was concerned, the Secretary of State submitted that it should be assumed that possession proceedings were brought in the proper, and (in terms of domestic public law) lawful discharge of the local authoritys housing duties.
Similar submissions were advanced at para 64 of the Secretary of States case in relation to introductory tenancies: Unless the local authority specifically seeks to invoke the particular reasons for seeking possession given to the occupier under the statutory scheme, the factual inquiry on an article 8 challenge in the county court will be confined to the determination of the occupiers personal circumstances.
At the other extreme, Mr Luba QC for Mr Frisby submitted that there was no restriction or inhibition on the factual matters that either party might deploy in relation to an issue of proportionality raised in possession proceedings.
In relation to an introductory tenancy he submitted that the local authority could properly rely on anti social behaviour or rent arrears, indeed on any breach of the terms of the tenancy other than those which had no adverse impact on third parties, such as a modest failure to maintain the garden or the keeping of an innocuous pet.
The tenant could raise any matters that he wished in support of his contention that dispossession was disproportionate.
Mr Arden did not adopt the extreme case of the Secretary of State.
He contended that it was open to the local authority to rely on a presumption that it was acting in proper pursuance of its duties in relation to the management and distribution of housing.
It could, however, if it chose, rely upon specific reasons for seeking to recover possession.
He accepted that it was open to a tenant to raise at the hearing of the possession application any of the matters previously raised in opposition to the dispossession on the statutory review under section 129 of the 1996 Act.
Lord Hopes analysis
Lord Hope deals with issues 3 and 4 together.
He does so first in relation to homelessness cases, but goes on to apply the same reasoning to introductory tenancies.
So far as issue 3 is concerned, I have agreed with Lord Hopes identification of the legitimate aims.
He deals very shortly with the factual issues that may be relevant to the issue of proportionality.
He states at para 37 that in the overwhelming majority of cases no issue will arise as to whether the authority is pursuing legitimate aims, for this will be presumed.
The only factual issue that may arise will be whether, in the light of the occupiers personal circumstances, the order is lawful and proportionate.
At para 41, dealing with homelessness, and again at para 45, when dealing with introductory tenancies, he states that in the ordinary case the relevant facts will be encapsulated in the two legitimate aims that were identified in Pinnock and that it is against those aims, which should always be taken for granted, that the court must weigh up any factual objections that may be raised by the defendant and what he has to say about his personal circumstances.
Discussion
I agree with Lord Hopes analysis.
In seeking an order for possession, the local authority is not required to advance a positive case that this will accord with the requirements of article 8(2).
This will be presumed by reason of the authoritys ownership of the property and duties in relation to the management of the housing stock.
Ownership alone is not enough to satisfy article 8(2), where the owner is a social landlord, as Lord Hope observes at para 36, citing Kryvitska and Kryvitsky v Ukraine (Application No 30856/03) given 2 December 2010.
Article 8(2) requires that the authority should be seeking possession in order to further the performance of its housing duties but, unless the tenant raises a challenge, this will be presumed.
The question raised by issue 4 is, however, the nature of the challenge that it is open to the tenant to make.
This is an important question.
If article 8(2) requires that repossession of accommodation let on an introductory tenancy should be in furtherance of the authoritys housing duties, the same is true of the independent requirements of English public law.
If the latter are satisfied, then, so it seems to me, it will almost inevitably follow that the requirements of article 8(2) are also satisfied.
The policy behind the introductory tenancy scheme is not in doubt.
It was well summarised in three short quotations at para 28 of Mr Ardens printed case, one from a consultation paper on Probationary Tenancies and two from parliamentary debates on the Housing Bill 1996.
Introductory tenancies place the tenant on probation.
They require the tenant to demonstrate that he is a good tenant, both as regards his behaviour towards his neighbours and as regards his contractual obligations to his landlord, before he is granted a tenancy that is secure for life.
When deciding whether to dispossess a tenant who has been granted an introductory tenancy, a local authority must have regard to this policy.
The authority cannot simply rely upon the fact that it owns the property and that the tenant has no security of tenure.
The decision to dispossess the tenant must be a reasoned decision.
Section 128(3) of the 1996 Act requires the tenant to be given notice of the reasons for the landlords decision to seek a possession order and section 129 entitles the tenant to a review of the decision and to the reasons for its confirmation if, indeed, it is confirmed.
Under the Introductory Tenants (Review) Regulations 1997 (SI 1997/72) made pursuant to section 129(3) of the 1996 the tenant is entitled to an oral hearing of the review, carried out by a person who was not involved in the original decision and (where the decision makers are officers) senior to that person.
He is entitled to be represented at that hearing.
It is implicit in this scheme that the reasons for terminating the introductory tenancy before it becomes secure will be that, in one way or another, the tenant has proved unsatisfactory.
That has certainly been the position in the cases of Mr Hall and of Mr Frisby.
It is possible to envisage a proportionality challenge before the judge being based on exceptional personal circumstances which have nothing to do with the reasons for seeking the possession order.
Normally, however, any attack on the proportionality of dispossession is likely to amount to an attack on the reasons given to the tenant for seeking the possession order.
Either the tenant will argue that the facts relied upon by the authority to justify seeking the order do not do so, or he will contend that those facts were not accurate.
In paras 51 to 53 this Court in Pinnock commented on the proposition that it will only be in very highly exceptional cases that it will be appropriate for the court to consider a proportionality argument.
I believe that this proposition is an accurate statement of fact in relation to introductory tenancies.
This is because the judge should summarily dismiss any attempt to raise a proportionality argument unless the defendant can show that he has substantial grounds for advancing this.
Two factors make it extremely unlikely that the defendant will be in a position to do this.
The first is the relatively low threshold that the authority has to cross to justify terminating the introductory tenancy.
The second is the significant procedural safeguards provided to the tenant that I have described in para 90 above.
As to the threshold, the arguments advanced by Mr Arden that I have considered at para 78 above are of some relevance.
The introductory scheme is designed to enable a local authority to select as long term secure tenants those who demonstrate that they are unlikely to pose problems for the authority or for their neighbours.
The authority can properly require a high standard of behaviour by the tenant during the probationary period.
Thus I do not accept Mr Lubas suggestion that the authority could not properly rely upon a breach of the tenancy condition if it had no adverse impact on any third party.
Furthermore, if a tenancy has given rise to complaints by neighbours of anti social behaviour the authority does not have to be in a position to prove that these are well founded in order to justify terminating the tenancy.
As Waller LJ remarked in R(McLellan) v Bracknell Forest Borough Council [2002] QB 1129, at para 97: Under the introductory tenancy scheme it is not a requirement that the council should be satisfied that breaches of the tenancy agreement have in fact taken place.
The right question under the scheme will be whether in the context of allegation and counter allegation it was reasonable for the council to take a decision to proceed with termination of the introductory tenancy.
As to the procedural safeguards, they may not be enough in themselves to satisfy article 8(2) in that the decision makers are representatives of the authority and thus not independent.
None the less, they have no axe to grind when deciding whether or not an introductory tenant has shown himself to be a suitable candidate for a secure tenancy.
It is likely to be a rare case, particularly as the defendant has a right to a review, where the defendant will be in a position to demonstrate that there are substantial grounds for attacking the authoritys findings of fact, or the decision based on them.
I note that in McCann at para 54 the Strasbourg Court accepted that it would only be in very exceptional cases that an applicant would succeed in raising an arguable case which would require the court to examine the issue and that in the great majority of cases it would be possible for possession orders to continue to be made in summary proceedings.
Issue 5: Can section 127(2)of the 1996 Act be read compatibly with the occupiers article 8 rights so as to allow him to defend a claim for possession of premises held on an introductory tenancy in the county court?
Mr Luba and Mr Stilitz submitted that this question should be answered in the affirmative on the ground that the reasoning of this Court in Pinnock in relation to section 143D(2) of the 1996 Act applied equally to section 127(2).
Mr Arden and Mr Underwood submitted to the contrary.
Mr Arden advanced two reasons for distinguishing the reasoning in Pinnock.
The first was that demoted tenancies are relatively rare whereas introductory tenancies are the norm for all new lettings nationally and amount to tens of thousands a year.
The second was that, syntactically it was not possible, as it had been in Pinnock, to imply the word lawfully into the statutory conditions precedent to making the possession order.
Mr Underwood QC advanced a further argument against applying the reasoning in Pinnock to section 127(2).
Section 143D(2) was inserted into the 1996 Act by amendment after the HRA came into force.
Accordingly the construction of the subsection was subject to section 3 of the latter Act.
The same was not true of section 127(2), which predated the HRA.
Consequently the latter subsection had to be given its natural meaning.
I have not found any of these arguments persuasive.
Mr Arden himself accepted that, in principle, the volume of cases affected had no obvious impact on construction.
As to the syntactical argument, the precise formulation of the proviso required by article 8 is of no significance.
Compatibility can be achieved in the case of either subsection by implying the phrase provided that article 8 is not infringed.
As to Mr Underwoods argument, section 3 of the HRA applies to all legislation, whether enacted before or after the HRA came into force.
Insofar as this alters the construction given to legislation before the HRA came into force, the HRA has the effect of amending legislation: see Ghaidan v Godin Mendoza [2004] 2 AC 557.
For the reasons given by Lord Hope in paras 50 to 56 I would give an affirmative answer to Issue 5.
Issues 6 and 8: Procedural questions
The parties agreed a considerable list of procedural questions which would arise if an affirmative answer were given to Issue 5.
There is no doubt that the affirmative answer that I would give to that issue creates a requirement for some procedural rules in order to provide an orderly process by which (i) an introductory tenant can raise a proportionality issue by way of defence to a claim for a possession order in respect of his home and (ii) the authority seeking possession can respond to such a defence.
I agree with Lord Hope that it is not appropriate for this Court to attempt to give directions or guidance in relation to the appropriate procedures.
These are much better formulated in the form of rules of court, practice directions or protocols by those who are normally responsible for producing these.
There is, however, one important matter of principle upon which I wish to comment.
This is whether the local authority should be required to give notice of the reasons that have led it to seek possession of the defendants home.
In the case of introductory tenancies this question is academic, for sections 128 and 129 of the 1996 Act expressly require reasons to be given.
Accordingly I propose to deal with this question in the context of homelessness cases.
Section 89 of the Housing Act 1980
Section 89 of the 1980 Act is of general application, so that it applies in relation to both introductory tenancies and homelessness cases.
In Pinnock, at para 63, this Court raised, but did not answer, the question of whether article 8 of the Convention impacts on, or is incompatible with, the true construction of section 89.
Lord Hope has dealt with this question at paras 57 to 64 of his judgment.
I agree with his conclusions, but wish to add a word on the question of incompatibility, which he has considered at para 64.
In any situation where the judge dealing with an application for a possession order has power to refuse to make the order on the ground that it would infringe article 8, no question of incompatibility can arise in relation to section 89.
That section merely increases the options open to the judge.
He can (i) make an immediate order for possession; (ii) make an order the operation of which is postponed up to the limit permitted by section 89; (iii) refuse to make the order on the ground that it would infringe article 8.
The clear limit on the judges discretion to postpone the operation of the order may thus, in rare cases, have the consequence that the order is refused, whereas it would otherwise have been granted, subject to postponement of its operation for a greater period than section 89 permits.
This is not a consequence that Parliament can have envisaged.
Issue 7
This does not arise Issue 9: Disposal.
For the reasons that he gives I would make the orders proposed by Lord Hope in respect of the appeals in the cases of both Mr Hall and Mr Frisby.
HOMELESSNESS CASES
I now turn to consider the position of those who, like Rebecca Powell, are provided with accommodation by a local authority pursuant to its duties under Part VII of the 1996 Act, which deals with homelessness.
Lord Hope has summarised the essential features of this scheme at paras 11 to 13 of his judgment.
The first two issues that I have considered in relation to introductory tenancies have not been raised in relation to tenancies under Part VII, for all parties have accepted, correctly in my view, that accommodation provided to the homeless will normally become their homes for the purposes of article 8 and that a judge, usually a district judge, who is considering an application for a possession order under Part VII, is entitled to entertain by way of defence to the application a submission that to make the order will infringe article 8.
Issue 1: What special features, if any, apply to the determination of an article 8 defence in the context of accommodation provided under Part VII?
Mr Luba has helpfully set out in his printed case six reasons why a person may be accommodated by a local authority under Part VII: (1) the authority has not yet reached a decision on the homelessness application but the applicant is being accommodated in the interim because he may be eligible, homeless and have a priority need: Housing Act 1996, section 188; (2) the authority is in the process of referring the application to a different local housing authority but accommodating the applicant until that process is resolved: Housing Act 1996, section 200; (3) the authority has determined the application but the applicant has invoked a statutory review or statutory appeal and the authority is accommodating until the review/appeal is determined: Housing Act 1996, sections 188 and 204(4); (4) the authority has decided to exercise its power to accommodate an applicant who is eligible, homeless, not intentionally homeless but not in priority need: Housing Act 1996, section 192(3); (5) the authority has decided that because the applicant is eligible, homeless, and in priority need but has become homeless intentionally it is under a duty to accommodate for such time as gives the applicant a reasonable opportunity of securing his own accommodation: Housing Act 1996, section 190(2)(b); or (6) the authority has decided that the applicant is eligible, homeless, in priority need and did not become homeless intentionally (the main housing duty): Housing Act 1996, section 193.
It is apparent from this list why it is that a local authority will not normally be prepared to grant security of tenure where accommodation is provided under Part VII.
The scheme is concerned with the provision of temporary accommodation while a persons claim under Part VII is addressed.
The housing stock from which the authority provides this temporary accommodation may well not all be owned by the authority.
Often it will have been obtained from a housing association or a private landlord.
It is important that the authority should have the maximum flexibility to move, where necessary, a tenant from one unit of accommodation to another.
Nevertheless, a tenant may be permitted to remain in accommodation provided under Part VII for a considerable period and the local authority may wish to remove the tenant from that accommodation not simply in the interests of the more efficient management of the housing stock, but because of shortcomings in the tenants behaviour, such as anti social activity or a failure to pay rent.
Issue 2: What legitimate aims may the local authority invoke when seeking to justify under article 8 (2) the dispossession of a tenant who is in occupation of premises pursuant to Part VII?
This issue is the same as Issue 3 in relation to introductory tenancies and the answer is the same (see para 80 above).
The difference in practice is that the local authoritys decision under Part VII is more likely to be dictated by the practical requirements of making the best allocation of a limited and fluctuating housing stock.
Issue 3: In the light of the legitimate aims what type of factual issues will be relevant to any such proportionality determination?
Just as in the case of introductory tenancies, the factual issues that will be relevant if a defendant makes a proportionality challenge to the making of a possession order are likely to depend upon the reasons that have led the local authority to seek the order.
As Mr Luba accepted, where the local authority simply wishes to relocate the defendant in alternative accommodation in the interests of the more efficient allocation of limited and fluctuating housing stock, it is not easy to envisage any issue of fact that the defendant could raise that would constitute a substantial ground for making a proportionality challenge.
In this context it is relevant that section 202 of the 1996 Act gives a statutory right to a review of the suitability of accommodation offered to a person pursuant to a local authoritys duties under Part VII.
Where the reason for seeking possession is alleged shortcomings on the part of the tenant, such as failure to pay rent, it will be open to the tenant to seek to challenge the facts upon which the decision is based.
The position will be similar to that considered in relation to introductory tenancies.
The defendant will have to show that he has substantial grounds for the challenge if he is to avoid the summary imposition of the possession order.
As Mr Luba pointed out, where the reason is non payment of rent there is not likely to be much scope for bona fide issues of fact.
For these reasons the statement that it will only be in rare cases that a valid proportionality challenge can be raised by way of defence to a possession order applies equally to repossession of accommodation provided under Part VII.
Issue 4: Does article 8 require the local authority to give notice of its reasons for seeking possession?
Mr Luba submitted that the procedural protections implicit in article 8 required that the tenant should be informed of the authoritys intention to seek possession and the reasons for it before service of the notice to quit, or at least before the commencement of the possession proceedings, in order to permit the tenant the opportunity to challenge those reasons and the authoritys decision.
This raises an important question of principle.
Sometimes a local authority will wish to recover possession of premises in the interests of a more effective allocation of the housing stock.
Sometimes the authority will be reacting to the behaviour, or perceived behaviour of the tenant.
In the latter event the authority may be proceeding on the basis of a factual assumption that is unsound.
If the only reason that the authority is seeking possession is that the tenant has been guilty of bad behaviour, obtaining possession will not further the legitimate aims of the authority if that factual premise is unsound.
If the defendant is not informed of the reason why the authority is seeking possession he will be denied the opportunity of displacing the presumption that the authoritys action will serve a legitimate aim.
I do not believe that the Strasbourg Court would tolerate a regime under which a person can be deprived of his home by a public authority without being told the reason for this.
Nor would I, for it is fundamentally unfair.
In Connors v United Kingdom (2004) 40 EHRR 189, at para 94 the Strasbourg Court said: The power to evict without the burden of giving reasons liable to be examined as to their merits by an independent tribunal has not been convincingly shown to respond to any specific goal .
The references to flexibility or administrative burden have not been supported by any concrete indications of the difficulties that the regime is thereby intended to avoid.
The Court was there dealing with gipsies but those words are equally applicable in the present context.
I do not suggest that there is any burden on a local authority, in the first instance, to justify to the court its application for a possession order or to plead the reason for seeking this.
What I do suggest is that the tenant must be informed of the reason for the authoritys action so that he can, if so minded, attempt to raise a proportionality challenge.
I do not believe that recognition of this obligation will have any significant practical consequences for I find it inconceivable that local authorities are, in practice, seeking possession orders against tenants accommodated pursuant to Part VII without telling them why they are doing so.
Mr Luba told the Court that tenants under Part VII who are relocated by the local authority usually agree to this course.
I would expect the local authority to inform the tenant of the reason for the proposed relocation, in order to procure this consent.
Where it is the conduct of the tenant that has led to the authoritys action, I would equally expect the authority to make this plain.
Certainly Hounslow did so in the case of Rebecca Powell.
Mr Luba urges that notice of the authoritys reasons should be given before service of a notice to quit.
I suspect that this is precisely what does happen in practice, but I would not, without further consideration, rule that article 8 requires this.
It is possible that article 8 will be satisfied provided that the occupier is given the information he needs in time to decide whether or not to raise a challenge in the possession proceedings.
Issue 5: When and how should notice of the authoritys reasons be given?
These are matters of procedure on which I do not propose to comment.
Mr Luba has referred the Court to a paper prepared by HH Judge Madge on Article 8 la lutta continua? (2009), JHL 2009, 12(3), 43 47, which has been approved by the Housing and Land Committee of the Civil Justice Council.
I consider that Judge Madge and that Committee are better placed to decide upon the appropriate procedural changes required by Pinnock and by the decision on these appeals than am I.
Issue 6
This raises the point on section 89 that I have already considered in the context of introductory tenancies.
Issue 7: Should the judge hearing the application for possession also rule on the validity of the notice to quit?
Mr Luba draws attention to the fact that if the judge refuses to make a possession order on article 8 grounds, but does not also rule that the notice to quit was unlawful, the defendant will remain in possession as a tolerated trespasser rather than as a non secure tenant.
He urges that this court should endorse the view expressed by Lord Scott in Doherty v Birmingham City Council [2008] UKHL 57; [2009] AC 367, at para 84 that the judge hearing a challenge to the claim for a possession order should also be prepared to entertain an article 8 challenge to the validity of the notice to quit.
This issue interrelates with the point that I have considered under Issue 4.
I can, in principle, see no reason why, if the validity of the notice to quit is challenged by way of defence to the claim for possession, the judge should not be entitled to deal with that challenge.
Issue 8: Disposal
I agree, for the reasons that he gives, that Rebecca Powells appeal should result in the order proposed by Lord Hope.
LORD RODGER, LORD WALKER, LADY HALE, LORD BROWN
LORD COLLINS
For the reasons given by Lord Hope and Lord Phillips, with which we entirely agree, we too would make the orders proposed by Lord Hope.
| These appeals concern the making of orders for possession of a persons home in favour of a local authority.
The issue is whether, in circumstances where the occupier is not a secure tenant, the court that makes the order must consider the proportionality of making it.
Most residential occupiers of property owned by local authorities are secure tenants under the Housing Act 1985.
This restricts the circumstances in which they can be evicted.
Certain types of tenancy, however, are excluded from that regime.
The case of London Borough of Hounslow v Powell involved one such type: accommodation provided under the homelessness regime in Part VII of the Housing Act 1996.
In order to regain possession of such accommodation, domestic law requires only that the local authority must give notice to quit and obtain a court order.
Ms Powell, as a homeless person to whom the local authority owed a duty to provide accommodation, had been given a licence to occupy property under Part VII.
Rent arrears of over 3,500 accumulated and the local authority issued a claim for possession of the property.
The court hearing the claim made an order requiring Ms Powell to give up possession.
The cases of Leeds City Council v Hall and Birmingham City Council v Frisby involved a second type of non secure tenancy: introductory tenancies entered into under Part V of the Housing Act 1996.
This type of tenancy is designed to provide an initial period of probation.
It remains introductory for a period of one year, after which it becomes secure unless the introductory tenancy has been terminated.
If the local authority decides to terminate the introductory tenancy the tenant is entitled to a review of that decision, but once the relevant procedures have been gone through section 127(2) of the 1996 Act provides that the court shall make a possession order.
Mr Hall and Mr Frisby had both been granted introductory tenancies, by Leeds and Birmingham City Councils respectively.
Allegations were made against them of noise nuisance and anti social behaviour.
The local authorities served notices indicating their intention to seek possession, which were upheld on review.
In possession proceedings the courts found in favour of the local authorities.
The three occupiers appealed to the Court of Appeal.
They argued that Article 8 of the European Convention on Human Rights, which provides that Everyone has the right to respect for his home, required that the court hearing the possession proceedings must be able to assess the proportionality of making the orders against them.
As the court did not do this, there was a breach of their Article 8 right.
The Court of Appeal dismissed the appeals and the occupiers appealed to the Supreme Court.
The Supreme Court unanimously holds that a court must have power to consider the proportionality of making possession orders under the homelessness and introductory tenancy schemes.
In the cases of Powell and Hall the Court allows the appeals and, having considered the facts in the case of Frisby, it dismisses his appeal.
Lord Hope and Lord Phillips give judgments.
These cases were a sequel to the case of Manchester City Council v Pinnock [2010] UKSC 45.
There the Supreme Court held that Article 8 of the European Convention on Human Rights requires that a court, which is being asked to make a possession order against a person occupying under the demoted tenancy scheme in Part V of the Housing Act 1996, must be able to consider whether it would be proportionate to do so.
The present cases raised the question of whether that principle applied to the homelessness and introductory tenancy schemes and, if so, how cases of this kind should be dealt with in practice by the courts.
The Court held that the principle from Pinnock applied to the homelessness and introductory tenancy schemes: in all cases where a local authority seeks possession of a property that constitutes a persons home under Article 8, the court must be able to consider the proportionality of making the order. [3] The Court then set out general guidance on meeting this requirement.
A court will only have to consider whether the making of a possession order is proportionate if the issue has been raised by the occupier and has crossed the high threshold of being seriously arguable.
The threshold will be crossed in only a small proportion of cases.
The question then will be whether making an order for possession is a proportionate means of achieving a legitimate aim.
Two legitimate aims should always be taken for granted: the making of the order will (a) vindicate the authoritys ownership rights; and (b) enable the authority to comply with its public duties in relation to the allocation and management of its housing stock.
The authority is not required to plead in advance any more particularised reasons or to advance a positive case that possession would accord with the requirements of Article 8: such a requirement would collapse the distinction between secure and non secure tenancies.
Where the local authority has a particularly strong or unusual reason for seeking possession, however, it is entitled to ask the court to take that reason into account and it should plead the reason if it wishes the court to do so.
If a court entertains a proportionality argument, it must give a reasoned decision as to whether or not a fair balance would be struck by making the order sought. [33] [49] On the face of it, section 127(2) of the Housing Act 1996 gives the court no discretion in the case of an introductory tenancy.
But this does not prevent the court considering proportionality.
Given that lawfulness is an inherent requirement of the procedure for seeking a possession order, it is open to the court to consider whether that procedure has been lawfully followed in respect of the defendants Article 8 rights. [56] Section 89 of the Housing Act 1980, however, does restrict the courts discretion as to the period for which the taking effect of the order can be deferred.
The section provides that a court making a possession order cannot postpone the date for possession for more than fourteen days or, in the case of exceptional hardship, six weeks.
The Supreme Court held that the mandatory language of the section prevents a court allowing a longer period to comply with the requirements of proportionality.
There was, however, no indication that proportionality requires a longer period and therefore no reason to declare section 89 incompatible with Article 8. [64]
|
This is an appeal against a decision of the Court of Appeal allowing the respondents appeal from a decision of Mr Andrew Sutcliffe QC, sitting as a Deputy High Court Judge, who granted the appellants relief against a debarring order, in circumstances where such relief had already been refused by another judge.
The background facts and proceedings
The respondent had entered into an agreement with the appellants, John Riordan and Eugene and Barrington Burke, to buy the shares which they owned in Prestige Property Develper UK Ltd. Having paid 1.572m to the appellants, the respondent sought specific performance of the agreement and associated relief, in proceedings issued in March 2013.
After obtaining an initial order without notice a week earlier, the respondent obtained a freezing order (the freezing order) from Arnold J on 17 May 2013 at a hearing attended by the appellants and their legal representatives.
This order required the appellants to provide by 24 May 2013 information and documents relating to all their assets, including details of all of their bank accounts and bank statements going back to 1 October 2010.
The freezing order also stated that such assets extended to those held by Prestige Properties Ltd (the Company).
Arnold J also directed that the proceedings be heard during October 2013.
The appellants did not afford the disclosure required by the freezing order by 24 May 2013, and the respondent gave them the opportunity to comply out of time.
However, the appellants still failed to comply, although they gave some further disclosure.
The respondent issued an application for an unless order, which came before Henderson J.
On 21 June 2013, he gave a judgment in which he held that the appellants disclosure was in many respects seriously inadequate [2013] EWHC 3356 (Ch).
He also described the failure to disclose full bank statements for the period of three years in the names of the relevant defendants as a particularly glaring omission.
Accordingly, he made an unless order which required the appellants to disclose certain identified assets that they had failed to disclose, and which also provided that, in default of compliance by 1 July 2013, the appellants would be debarred from defending the claim.
Although the appellants gave some further disclosure, they failed to comply fully with the unless order.
On 9 August 2013, Hildyard J heard (i) the respondents application for an order debarring the appellants from defending as they had failed to comply with the unless order, and (ii) the appellants application for (a) a determination that they had complied with the unless order, or, if they had not (b) an order for relief from sanctions under CPR 3.9 (the first relief application).
The appellants application was partly based on the contention that they had given further disclosure on 31 July 2013.
Hildyard J made the debarring order sought by the respondent and dismissed the appellants application for relief from sanctions [2013] EWHC 3464 (Ch).
There was no appeal against that order.
In his judgment, Hildyard J recorded the appellants contention that their failures were de minimis [or] the product of matters beyond their control.
He did not accept that contention, and described the position as less than satisfactory.
He rejected the argument that the appellants failure to produce certain charges had been caused by the refusal of the Bank of Cyprus to cooperate, and also held that there had been an obvious failure to give disclosure of certain other documents.
He observed that it was most difficult to reach any other conclusion than that there have been substantial failures to comply with the unless order.
He then referred to the fact that just one page of a bank account at HSBC in the name of the Company had been produced, and described this as a very unsettling turn of events, and a further illustration of the reasons for my conclusion that there has been a material failure, which cannot be dismissed as de minimis.
He then carefully addressed the question whether he should grant the appellants relief under CPR 3.9 from the sanction of the debarring order.
Having considered the principles as laid down in earlier cases, he explained that he felt constrained to refuse any relief from sanctions, while personally regret[ting] the need for such a step.
The trial of the action was due to start on 3 October 2013, with a time estimate of five days (which apparently was not altered following Hildyard Js order).
Having instructed fresh solicitors, the appellants issued an application on 2 October 2013 for relief from sanctions (the second relief application), supported by a lengthy affidavit, which provided, at least according to the appellants, full disclosure as required by the freezing order.
The trial and the second relief application were adjourned to 7 October 2013, when they came on before Mr Sutcliffe.
He heard the second relief application, over the next four days, and granted the appellants relief from sanctions, adjourned the trial, and fixed a new trial window in January 2014 [2013] EWHC 3179 (Ch).
In his judgment, the Deputy Judge began by summarising the substantive facts and issues and the procedural history.
He mentioned that he did not have approved transcripts of the ex tempore judgments of Henderson or Hildyard JJ, but quoted from informal notes or reported summaries of their respective judgments.
The Deputy Judge then summarised the appellants case in support of the second relief application, namely that they had tried hard to comply with the requirements of the freezing and unless orders, that their failure to comply was due to the extensive nature of the disclosure required, that any such failure had been relatively slight and some of it due to their former solicitors, that any such failure had now been put right, and that to maintain the debarring order would, in all the circumstances, be disproportionate.
He then referred to the respondents case in reply, namely that the second relief application was an abuse of process, and that, in any event, the debarring order ought to be maintained on the merits not least because the appellants had still not given the requisite disclosure in full.
The Deputy Judge then addressed the question of how he should resolve the appellants second relief application.
He began by mentioning the courts power to grant relief from sanctions, contained in CPR 3.9, and the guidance as to its exercise in certain judicial decisions.
He then referred to the freezing and unless orders, and turned to the respondents contention that the appellants remained in breach of the unless order in that they had not disclosed bank statements in respect of the Companys account at HSBC.
Because other bank statements had been provided for the Company, the Deputy Judge concluded that the omission of this evidence does not amount to a breach of the unless order and even if it did, in the context of the disclosure provided as a whole, it is de minimis and would not justify a finding that the [appellants] had failed to comply.
He also accepted that the appellants former solicitors were in part to blame for any failure on the appellants part to comply with the freezing and unless orders.
After mentioning one or two other factors, he held that the appellants were in all the circumstances entitled to take a full part in the trial, and that the debarring order should be discharged.
He added that, if, as the respondent contended relying on CPR 3.1(7), it was necessary for the appellants to show a change of circumstances since the decision of Hildyard J, in order to justify a second application for relief from sanctions, the fact that they had now substantially complied with their disclosure obligations was a sufficient change.
The respondent appealed against the decision of the Deputy Judge to grant the appellants relief from sanctions, and, for reasons set out in a judgment of the court given by Richards LJ (sitting with Aikens and Davis LJJ), the Court of Appeal allowed the appeal and restored the debarring order imposed by Hildyard J [2014] CP Rep 19.
The essence of the Court of Appeals reasoning was that, as Hildyard J had already rejected the appellants first relief application, CPR 3.1(7) applied and the Deputy Judge could not properly have acceded to the second relief application unless there had been a material change of circumstances since Hildyard Js decision, and there had been no such change.
To complete the history, the appellants were granted permission to appeal against this decision to this court.
Meanwhile, the trial duly took place on 21 March 2014 before Mr David Donaldson QC, whose decision was reversed on 4 February 2015 by the Court of Appeal, who ordered, inter alia, that the appellants pay just over 2.205m to the respondent see [2014] EWHC 725 (Ch) and [2015] EWCA Civ 41.
Discussion
I have summarised the effect of the judgment given by Richards LJ in very brief terms because I agree with it, and what follows is not intended to differ from its essential reasoning.
Indeed, I had wondered whether simply to say that this appeal should be dismissed for the reasons given by the Court of Appeal at [2015] EWCA Civ 41, paras 23 32.
However, having given permission to the appellants to appeal to this Court, we may leave them with an understandable feeling of grievance if we do not explain to them in our own words why their appeal is being dismissed.
The effect of Henderson Js unless order, coupled with Hildyard Js finding that the appellants had failed to comply with the disclosure requirements in that order, was that, unless the appellants were granted relief from sanctions under CPR 3.9, they would be debarred from defending the claim.
CPR3.9(1) provides: On an application for relief from any sanction imposed for a failure to comply with any Rule, Practice Direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application including the need (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with Rules, Practice Directions and orders.
The basis upon which a court should approach an application for relief from sanctions under CPR 3.9 has been authoritatively considered by the Court of Appeal in Mitchell v News Group Newspapers Ltd (Practice Note) [2014] 1 WLR 795 and Denton v TH White Ltd (De Laval Ltd, Part 20 defendant) [2014] 1 WLR 3926.
Although Hildyard J gave his decision refusing relief from sanctions before those two decisions of the Court of Appeal, his reasoning and decision reflected the guidance and approach set out in them.
Quite rightly, there has been no suggestion that we should reconsider what was said in those decisions.
As explained above, the Court of Appeal in this case held that the Deputy Judge should not have considered the second relief application on its merits, as it failed to get off the ground, because CPR 3.1(7) applied and the appellants could not show that there had been a material change of circumstances since the hearing of the first relief application before Hildyard J. Mr Letman, who appears for the appellants, contends that the Court of Appeal erred in two respects, namely (i) in holding that the appellants needed to establish a material change in circumstances, or, in the alternative, (ii) in holding that they had failed to establish such a material change.
So far as the first point is concerned, the appellants raise rather an arid point, namely whether CPR 3.1(7) applied to the second relief application.
CPR 3.1(7) provides that [a] power of the court under these Rules to make an order includes a power to vary or revoke the order.
The reason that it is said to be significant whether CPR 3.1(7) should have been taken into account by the Deputy Judge is because, as Lord Dyson MR giving the judgment of the court put it in Mitchell at para 44, citing the judgment of Rix LJ in Tibbles v SIG plc (trading as Asphaltic Roofing Supplies) [2012] 1 WLR 2591, para 39(ii): The discretion [exercisable under CPR 3.1(7)] might be appropriately exercised normally only (i) where there had been a material change of circumstances since the order was made; (ii) where the facts on which the original decision was made had been misstated; or (iii) where there had been a manifest mistake on the part of the judge in formulating the order.
Moreover, as the court emphasised, the application must be made promptly.
This reasoning has equal validity in the context of an application under CPR 3.9.
Lord Dyson went on to explain in para 45 that, on an application for relief from a sanction, therefore, the starting point should be that the sanction has been properly imposed and complies with the overriding objective.
Nothing said in Denton, where the Court of Appeal clarified some of the reasoning in Mitchell, undermines these observations.
It is worth mentioning that none of this was revolutionary when it was expounded in Mitchell.
In Collier v Williams [2006] 1 WLR 1945, para 40, Dyson LJ giving the judgment of the Court of Appeal had approved an observation of Patten J in Lloyds Investment (Scandinavia) Ltd v Christen Ager Hanssen [2003] EWHC 1740 (Ch) at para 7 to this effect: Although this is not intended to be an exhaustive definition of the circumstances in which the power under CPR 3.1(7) is exercisable, it seems to me that, for the High Court to revisit one of its earlier orders, the applicant must either show some material change of circumstances or that the judge who made the earlier order was misled in some way, whether innocently or otherwise, as to the correct factual position before him.
In my view, the Court of Appeal in this case rightly held that CPR 3.1(7) did apply to the second relief application.
As a matter of ordinary language, the Deputy Judge was being asked to vary or revoke the order made by Hildyard J, who had refused relief from sanctions and thereby confirmed the debarring order, which the Deputy Judge was being asked, in effect, to set aside.
However, even if that were not right, it appears to me that, as a matter of ordinary principle, when a court has made an interlocutory order, it is not normally open to a party subsequently to ask for relief which effectively requires that order to be varied or rescinded, save if there has been a material change in circumstances since the order was made.
As was observed by Buckley LJ in Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 WLR 485, 492 493: Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter.
Accordingly, even if CPR 3.1(7) did not apply to the second relief application, it appears clear that the appellants would have faced the same hurdle before the Deputy Judge.
That conclusion also derives support from the last sentence in para 44 in Mitchell, quoted in para 15 above.
There was no question of the facts having been misstated by Hildyard J or of manifest mistake in formulating his order.
Accordingly, unless (perhaps) they could show that this was not a normal case, the appellants had to establish a material change in circumstances since the hearing before Hildyard J before the Deputy Judge could properly consider the second relief application on its merits.
Mr Letman was unable to point to any factors which rendered this case relevantly not normal.
Accordingly, I reject the appellants first point.
That brings me to the second point made by the appellants, namely that the Court of Appeal were wrong to hold that their subsequent alleged compliance with the unless order was not a material change of circumstances.
In my view, that point must also be rejected, and that is for two reasons.
The first reason is that, where a party is subject to a debarring order for failing to comply with an unless order to do something within a specified period and relief from sanctions is refused at a time when he is still in default, the mere fact that he then complies with the unless order (albeit late) cannot amount to a material change of circumstances entitling him to make a second application for relief from sanctions.
By refusing the partys first application for relief from sanctions, the court would have effectively been saying that it was now too late for that party to comply with the unless order and obtain relief from sanctions.
So, if the court on a second application for relief from sanctions granted the relief sought simply because the unless order had been complied with late, its reasoning would ex hypothesi be inconsistent with the reasoning of the court which heard and determined the first application for relief.
Of course, that does not mean that late compliance, subsequent to a first unsuccessful application for relief from sanctions, cannot give rise to a successful second application for relief from sanctions.
If, say, the unless order required a person or company to pay a sum of money, and the court subsequently refused relief from sanctions when the money remained unpaid, the payment of the money thereafter might be capable of constituting a material change of circumstances, provided that it was accompanied by other facts.
For instance, if the late payment was explained by the individual having inherited a sum of money subsequent to the hearing of the first application which enabled him to pay; or if the company had gone into liquidation since the hearing of the first application and, unlike the directors, the liquidator was now able to raise money.
These are merely possible examples, and I am far from saying that such events would always constitute a material change of circumstances, or, even if they did, that they would justify a second application for relief from sanctions.
In this case, such subsequent compliance with the unless order which did occur after the hearing before Hildyard J was not accompanied by any explanation which could possibly have justified a court concluding that there had been a material change of circumstances since that hearing.
Accordingly, the Deputy Judge simply had no grounds to justify his entertaining the second relief application on its merits.
Quite apart from this, it seems to me that the Deputy Judge was not entitled to hold that the appellants had complied with the terms of the unless order, or that any breach of that order was de minimis, as he did.
Hildyard J had found that the appellants should have disclosed the HSBC bank statements for the Company and that their failure to do so cannot be dismissed as de minimis.
In those circumstances, it was simply inappropriate for the Deputy Judge to reach a different conclusion on essentially the same facts. (Indeed, that is a very good illustration of why it would only have been open to the Deputy Judge to consider the second relief application on its merits if there had been a material change of circumstances.
He could not simply revisit the same issues as had already been considered by another judge and reach a different conclusion.)
Further, it was not appropriate for the Deputy Judge to conclude that the appellants former solicitors were partly to blame for any failure on their part to comply with the unless order.
The contention that the appellants former solicitors were responsible for some of the breaches of the unless order was based on very slight evidence indeed a mere statement to that effect in a witness statement and two emails each of three or four lines, one of which was plainly incomplete.
That was quite insufficient to justify the finding that the former solicitors were to blame.
The Court of Appeal also considered that the appellants should have been in difficulties on the second relief application because of the delay.
Given that they made that application eight weeks after Hildyard J made his order and one day before the trial was due to begin, without any satisfactory explanation for the delay or last minute nature of the application (except for a change of solicitors), I see considerable force in that view.
It is fair to the Deputy Judge to mention that he did not have approved transcripts of the judgments of Henderson J or Hildyard J, but he had a pretty clear note and summary of the latter judgment.
It was incumbent on the appellants, who made the second relief application, to have obtained approved transcripts of those judgments: it was certainly no fault of the respondent that they were not available.
It is also fair to the Deputy Judge to add that Mitchell and Denton were decided after he determined the second relief application.
However, he was referred to Collier, which should have led him to the conclusion which the Court of Appeal reached.
It should perhaps also be added that the respondent had adduced evidence before us, which had not been available to the Court of Appeal or the Deputy Judge, to support a contention that, if we had disagreed with the Court of Appeal, we should proceed to determine the second relief application on its merits and dismiss it.
This evidence suggested that the appellants failure to produce the Companys bank accounts was indeed a serious failure, but it is unnecessary, indeed it would be inappropriate, to consider that aspect further.
Conclusion
Accordingly, I would dismiss this appeal.
| Mr Thevarajah entered into an agreement with the Appellants, Mr Riordan and Eugene and Barrington Burke, to buy the shares that they owned in Prestige Property Developer UK Ltd (the Company).
Having paid 1.572m to the Appellants, Mr Thevarajah sought specific performance of the agreement in proceedings issued in March 2013.
On 17 May 2013, Mr Thevarajah obtained a freezing order (the freezing order) which required the Appellants to provide by 24 May 2013 information and documents relating to all their assets, including assets held by the Company, as well as details of bank accounts.
The Appellants did not provide the disclosure required by the freezing order by 24 May 2013.
Mr Thevarajah subsequently applied for and obtained an unless order from Henderson J, which provided that: (i) the Appellants were required to disclose certain identified assets that they had failed to disclose; and (ii) in default of compliance by 1 July 2013, the Appellants would be debarred from defending the claim.
The Appellants failed to comply fully with the unless order.
Mr Thevarajah subsequently applied to the Chancery Division of the High Court for an order debarring the Appellants from defending their claim; the Appellants applied for a determination that they had complied with the unless order or, if they had not, for relief from sanctions.
On 9 August 2013, Hildyard J heard the applications, made the debarring order sought by Mr Thevarajah and dismissed the Appellants application for relief from sanctions.
There was no appeal against Hildyard Js order.
The trial of the action was due to start on 3 October 2013.
Having instructed fresh solicitors, the Appellants issued a second application for relief from sanctions (the second relief application) on 2 October, accompanied by a lengthy affidavit which provided what the Appellants considered to be full disclosure as required by the freezing order.
Mr Andrew Sutcliffe QC, sitting as a Deputy High Court Judge, heard the second relief application and granted the defendants relief against the debarring order, and fixed a fresh date for the trial.
Mr Thevarajah appealed to the Court of Appeal.
The Court of Appeal allowed the appeal and restored the debarring order imposed by Hildyard J.
The Appellants now appeal to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
Lord Neuberger gives the only judgment, with which the other Justices agree.
The Appellants contended that the Court of Appeal had erred in two respects: (i) in holding that the Appellants needed to establish a material change of circumstances in order to succeed on the second relief application; or, in the alternative (ii) in holding that the Appellants had failed to establish such a material change.
The Appellants first ground is rejected.
The effect of Henderson Js unless order, coupled with Hildyard Js finding that the Appellants had failed to comply with the disclosure requirements in that order, was that the Appellants were debarred from defending the claim unless they were granted relief from sanctions under CPR 3.9. [11] Hildyard Js reasoning in refusing relief from sanctions is consistent with authoritative guidance subsequently set out by the Court of Appeal in the cases of Mitchell v News Group Newspapers Ltd [2014] 1 WLR 795 and Denton v TH White Ltd [2014] 1 WLR 3926. [13] The Court of Appeals conclusion that the Deputy Judge should not have considered the second relief application on its merits because CPR 3.1(7) required the Appellants to show that there had been a material change of circumstances since the hearing of the first relief application, was correct. [14 19] Even if CPR 3.1(7) did not apply, this was the position as a matter of ordinary principle. [18] The Appellants second ground is also rejected.
Where a party has had imposed on it a debarring order for failing to comply with an unless order, its subsequent compliance with that unless order cannot without more amount to a material change of circumstances. [21] In refusing relief from sanctions, a court is effectively saying that it was now too late for that party to comply with the unless order and obtain relief from sanctions. [21] However, that does not mean that late compliance cannot, in certain circumstances, give rise to a successful second application for relief from sanctions, at least where it occurs in the context of some other relevant change in circumstances. [22] On the facts, there were no grounds which justified the Deputy Judge entertaining the second relief application on the merits. [23] The Deputy Judge was not entitled to come to a different conclusion on what where essentially the same facts as were before Hildyard J. [24] Further, the evidence before the Deputy Judge was insufficient to justify his finding that the Appellants former solicitors were partly to blame for the Appellants failure to comply with the unless order. [25] The issue of delay is also relevant.
There is considerable force in the Court of Appeals view that the Appellants should have been in difficulties on the second relief application because of their delay in bringing it.
The second relief application was made eight weeks after Hildyard J made his order and one day before the trial was due to begin, without any satisfactory explanation. [26]
|
These appeals are concerned with a little used provision in article 1F(c) of the Geneva Convention on the Status of Refugees (the Refugee Convention).
This excludes from refugee status and protection any person with respect to whom there are serious reasons for considering that . he has been guilty of acts contrary to the purposes and principles of the United Nations.
For the time being at least, however, the Home Secretary accepts that these appellants cannot be returned to their home countries because they face a real risk of torture or inhuman or degrading treatment or punishment there.
It is the grant of refugee status, rather than the right to stay in this country, which is in issue in these proceedings.
The issues in the two cases are different.
In Al Sirri, the question is whether all activities defined as terrorism by our domestic law are for that reason alone acts contrary to the purposes and principles of the United Nations, or whether such activities must constitute a threat to international peace and security or to the peaceful relations between nations.
In DD, the question is whether armed insurrection is contrary to the purposes and principles of the United Nations if directed, not only against the incumbent government, but also against a United Nations mandated force supporting that government, specifically the International Security Assistance Force (ISAF) in Afghanistan.
Although the issues are different, many of the relevant materials are the same, as must be the general approach to article 1F(c), and so we deal with them in one judgment to avoid unnecessary repetition.
In all article 1F cases, there is also the issue of the standard of proof: what is meant by serious reasons for considering a person to be guilty of the acts in question? (1) The general approach
Relevant treaty and legislative provisions
Article 1F of the Refugee Convention excludes three types of person from the definition of refugee: The provisions of this Convention shall not apply to any person with respect to whom there are serious reasons for considering that: (a) he has committed a crime against peace, a war crime, or a crime against humanity, as defined in the international instruments drawn up to make provision in respect of such crimes; (b) he has committed a serious non political crime outside the country of refuge prior to his admission to that country as a refugee; (c) he has been guilty of acts contrary to the purposes and principles of the United Nations.
It will be apparent that a particular act may fall within more than one of these categories.
In particular, terrorism may be both a serious non political crime and an act contrary to the purposes and principles of the United Nations.
Member States of the European Union are, moreover, bound to observe the standards laid down in Council Directive 2004/83/EC on minimum standards for the qualification and status of third country nationals or stateless persons as refugees or as persons who otherwise need international protection and the content of the protection granted (the Qualification Directive).
Its main objective is to ensure common standards in the identification of people genuinely in need of international protection and a minimum level of benefits for them in all Member States (recital 6).
Recital 22 deals with article 1F(c): Acts contrary to the purposes and principles of the United Nations are set out in the preamble and articles 1 and 2 of the Charter of the United Nations and are, amongst others, embodied in the United Nations Resolutions relating to measures combating terrorism, which declare that acts, methods and practices of terrorism are contrary to the purposes and principles of the United Nations and that knowingly financing, planning and inciting terrorist acts are also contrary to the purposes and principles of the United Nations.
Article 12 of the Qualification Directive both reflects and expands slightly upon article 1F of the Refugee Convention (the changes and additions are italicised): 2.
A third country national or a stateless person is excluded from being a refugee where there are serious reasons for considering that: (a) he or she has committed a crime against peace, a war crime, or a crime against humanity, as defined in the international instruments drawn up to make provision in respect of such crimes; (b) he or she has committed a serious non political crime outside the country of refuge prior to his or her admission [to that country] as a refugee; which means the time of issuing a residence permit based on the granting of refugee status; particularly cruel actions, even if committed with an allegedly political objective, may be classified as serious non political crimes; (c) he or she has been guilty of acts contrary to the purposes and principles of the United Nations as set out in the Preamble and articles 1 and 2 of the Charter of the United Nations. 3.
Paragraph 2 applies to persons who instigate or otherwise participate in the commission of the crimes or acts mentioned therein.
The Qualification Directive is transposed into United Kingdom law by the Refugee or Person in Need of International Protection (Qualification) Regulations 2006 (SI 2006/2525).
Regulation 2 provides that refugee means a person who falls within article 1(A) of the Geneva Convention and to whom regulation 7 does not apply.
Regulation 7(1) states that A person is not a refugee, if he falls within the scope of article 1D, 1E or 1F of the Geneva Convention.
The Immigration Rules provide, in paragraph 334, that a person will be granted asylum, inter alia, if (ii) he is a refugee, as defined in regulation 2 of The Refugee or Person in Need of International Protection (Qualification) Regulations 2006.
However, section 54 of the Immigration, Asylum and Nationality Act 2006 (the 2006 Act), provides: (1) In the construction and application of article 1F(c) of the Refugee Convention the reference to acts contrary to the purposes and principles of the United Nations shall be taken as including, in particular (a) acts of committing, preparing or instigating terrorism (whether or not the acts amount to an actual or inchoate offence), and (b) acts of encouraging or inducing others to commit, prepare or instigate terrorism (whether or not the acts amount to an actual or inchoate offence). (2) In this section the Refugee Convention means the Convention relating to the Status of Refugees done at Geneva on 28 July 1951, and terrorism has the meaning given by section 1 of the Terrorism Act 2000.
There is no need to set out the definition of terrorism contained in section 1 of the 2000 Act.
The essence is the use or threat of certain dangerous actions designed to influence this or any other government or intimidate the public for the purpose of advancing a political, religious, racial or philosophical cause.
But if firearms or explosives are involved, the act or threat need not be designed to influence the government or intimidate the public.
Terrorism designed solely to achieve political change within the United Kingdom, with no international repercussions, is clearly covered, as is terrorism committed here with a view to achieving internal political change in another country.
The Preamble to the Charter of the United Nations recites the determination of the peoples of the United Nations to save succeeding generations from the scourge of war; to reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and women and of nations large and small; to maintain justice and respect for international law; and to promote social progress and better standards of life in larger freedom; and for these ends to live together in peace, unite to maintain international peace and security, ensure that armed force is used only in the common good, and employ international machinery for the economic and social advancement of all peoples.
The purposes of the United Nations are set out in article 1 of the Charter.
The first purpose is 1.
To maintain international peace and security, and to that end: to take effective collective measures for the prevention and removal of threats to the peace, and for the suppression of acts of aggression or other breaches of the peace, and to bring about by peaceful means, and in conformity with the principles of justice and international law, adjustment or settlement of international disputes or situations which might lead to a breach of the peace.
The second is to develop friendly relations among nations based on respect for the principle of equal rights and self determination of peoples, and to take other appropriate measures to strengthen universal peace; the third is to achieve international cooperation in solving international problems of an economic, social, cultural, or humanitarian nature, and in promoting and encouraging respect for human rights and for fundamental freedoms for all; and the fourth is to be a centre for harmonising the actions of nations in the attainment of these common ends.
Article 2 of the Charter requires the United Nations and its Member States to act in accordance with the seven Principles set out therein.
These are: the sovereign equality of all Members; the duties of all Members to fulfil their obligations under the Charter in good faith; to settle their disputes by peaceful means; to refrain from the threat or use of force against the territorial integrity or political independence of any state; to give the United Nations every assistance in taking action in accordance with the Charter and to refrain from assisting any state against which it is taking action; the duty of the United Nations to ensure that non member states act in accordance with these principles so far as may be necessary to maintain international peace and security; and, finally, that Nothing contained in the present Charter shall authorise the United Nations to intervene in matters which are essentially within the domestic jurisdiction of any state .
The general approach to article 1F(c)
The appellants, with the support of the UNHCR, argue that article 1F must be interpreted narrowly and applied restrictively because of the serious consequences of excluding a person who has a well founded fear of persecution from the protection of the Refugee Convention.
This was common ground in R (JS (Sri Lanka)) v Secretary of State for the Home Department [2010] UKSC 15, [2011] 1 AC 184, in the context of article 1F(a), and must apply a fortiori in the context of article 1F(c).
Concern was expressed during the drafting of the Convention that the wording was so vague as to be open to misconstruction or abuse.
Professor Grahl Madsen comments that It seems that agreement was reached on the understanding that the phrase should be interpreted very restrictively: The Status of Refugees in International Law, 1966, p 283.
Secondly, article 1F(c) is applicable to acts which, even if they are not covered by the definitions of crimes against peace, war crimes or crimes against humanity as defined in international instruments within the meaning of article 1F(a), are nevertheless of a comparable egregiousness and character, such as sustained human rights violations and acts which have been clearly identified and accepted by the international community as being contrary to the purposes and principles of the United Nations.
The appellants rely on Pushpanathan v Canada, Minister of Citizenship and Immigration (Canadian Council for Refugees intervening) [1998] 1 SCR 982 (Pushpanathan) per Bastarache J at para 65: .In my view, attempting to enumerate a precise or exhaustive list [of acts contrary to the purposes and principles of the United Nations] stands in opposition to the purpose of the section and the intentions of the parties to the Convention.
There are, however, several types of acts which clearly fall within the section.
The guiding principle is that where there is consensus in international law that particular acts constitute sufficiently serious and sustained violations of fundamental human rights as to amount to persecution, or are explicitly recognised as contrary to the purposes and principles of the United Nations, then article 1F(c) will be applicable.
On the other hand, not every act which is condemned by the United Nations is for that reason alone to be deemed contrary to its purposes and principles.
In Pushpanathan itself, the majority held that international drug trafficking did not fall within article 1F(c), despite the co ordinated efforts of the international community to suppress it, through United Nations treaties, declarations and institutions.
As the UNHCR explains, in its Background Note on the Application of the Exclusion Clauses: Article 1F (September 2003), at para 47: The principles and purposes of the United Nations are reflected in myriad ways, for example by multilateral conventions adopted under the aegis of the UN General Assembly and in Security Council resolutions.
Equating any action contrary to such instruments as falling within article 1F(c) would, however, be inconsistent with the object and purpose of this provision.
Rather, it appears that article 1F(c) only applies to acts that offend the principles and purposes of the United Nations in a fundamental manner.
Article 1F(c) is thus triggered only in extreme circumstances by activity which attacks the very basis of the international communitys co existence under the auspices of the United Nations.
The key words in article 1F(c) acts contrary to the purposes and principles of the United Nations should therefore be construed restrictively and its application reserved for situations where an act and the consequences thereof meet a high threshold.
This threshold should be defined in terms of the gravity of the act in question, the manner in which the act is organised, its international impact and long term objectives, and the implications for international peace and security.
Thus, crimes capable of affecting international peace, security and peaceful relations between states would fall within this clause, as would serious and sustained violations of human rights.
Thirdly, for exclusion from international refugee protection to be justified, it must be established that there are serious reasons for considering that the person concerned had individual responsibility for acts within the scope of article 1F(c): see the detailed discussion at paras 50 to 75 of the UNHCR Background Note.
This requires an individualised consideration of the facts of the case, which will include an assessment of the persons involvement in the act concerned, his mental state and possible grounds for rejecting individual responsibility.
As a general proposition, individual responsibility arises where the individual committed an act within the scope of article 1F(c), or participated in its commission in a manner that gives rise to individual responsibility, for example through planning, instigating or ordering the act in question, or by making a significant contribution to the commission of the relevant act, in the knowledge that his act or omission would facilitate the act.
In Bundesrepublik Deutschland v B and D (Joined Cases C 57/09 and C 101/09) [2011] Imm AR 190 (B and D) the Grand Chamber of the Court of Justice of the European Union confirmed the requirement of an individualised assessment and held that it was not justifiable to base a decision to exclude solely on a persons membership of a group included in a list of terrorist organisations.
This too is consistent with the approach adopted by this Court in R (JS (Sri Lanka)) v Secretary of State for the Home Department [2011] 1 AC 184.
In our view, this is the correct approach.
The article should be interpreted restrictively and applied with caution.
There should be a high threshold defined in terms of the gravity of the act in question, the manner in which the act is organised, its international impact and long term objectives, and the implications for international peace and security.
And there should be serious reasons for considering that the person concerned bore individual responsibility for acts of that character.
However, those general observations are not enough in themselves to resolve the questions raised by the two cases before us, to which we now turn. (2) The case of Al Sirri
The facts
The appellant is a citizen of Egypt.
He arrived in the United Kingdom in April 1994 and claimed asylum then.
His claim was eventually turned down on 11 October 2000, on the ground that article 1F(c) of the Refugee Convention applied to him, but he was told that he would be granted exceptional leave to enter the United Kingdom.
That never happened, but on 1 April 2004 he was granted discretionary leave to enter which has been extended for periods of six months at a time ever since.
Under section 83 of the Nationality, Immigration and Asylum Act 2002, the grant of discretionary leave for an aggregate of more than a year also gave him the right to appeal against the refusal of asylum.
This he did in September 2006.
On 2 August 2007, the Asylum and Immigration Tribunal (the AIT) (Hodge J, President, Senior Immigration Judge Lane and Immigration Judge Woodhouse) dismissed his appeal.
On 18 March 2009, the Court of Appeal (Sedley, Arden and Longmore LJJ) set aside the Tribunals determination and remitted the case to be determined afresh by a differently constituted tribunal: [2009] EWCA Civ 222, [2009] INLR 586.
Nevertheless, the appellant has appealed to this Court because he takes issue with some aspects of the leading judgment given by Sedley LJ.
The Home Secretary relied upon seven matters to show that there are serious reasons for considering that the appellant has been guilty of acts contrary to the purposes and principles of the United Nations.
Four of these are accepted facts: (i) that the appellant had published and written the Foreword to an Arabic language book, Bringing to light some of the most important judgments in Islam; the author, Rifai Ahmed Musa, has been credibly named as having been a member of the Egyptian organisation, al Gamma al Islamiyya; the AIT pointed out that that organisation is proscribed under the Terrorism Act 2000, and also in Canada and the United States and within the European Union by Council Common Position 2005/936/CFSP; (ii) that the appellant was in possession of an unpublished Arabic manuscript, Expectations of the Jihad Movement in Egypt; the author, Ayman Al Zawahiri, is a former leader of the organisation, Egyptian Islamic Jihad; (iii) that the appellant possesses books and videos relating to Osama bin Laden and Al Qaeda; (iv) that the appellant had transferred money to and from foreign countries, allegedly in sums greater than his known income could explain.
The AIT relied upon a long and detailed statement from Acting Detective Inspector Dingemans of the Counter Terrorism Command at Scotland Yard, containing what Sedley LJ described as a damaging account and analysis of the material found at Mr Al Sirris premises (para 67).
Sedley LJ commented that the preferable course would have been for the AIT to be shown the documentary material supporting the allegations, to hear what both sides had to say about it, to consider any explanations given by the appellant, and to make up their own mind about it.
The Court of Appeal was not satisfied that this material, together with the more serious allegation referred to in para 22 below, would inevitably have led the AIT to conclude that the appellant fell within article 1F(c); it follows that they would not have been so satisfied on the basis of the above material alone.
Two of the matters relied upon were more serious, but the Court of Appeal ruled that the AIT was required by law to give them no weight, and the Home Secretary has not appealed against that ruling: (i) that the appellant has twice been convicted in his absence by the Supreme Military Court of Egypt: in March 1994, when he was sentenced to death for conspiracy to kill Dr Atef Sidqi, Prime Minister of Egypt; and in January 1999, when he was sentenced to 15 years imprisonment for membership of a terrorist organisation.
These convictions cannot be relied upon because they were probably secured by the use of torture.
Although the AIT placed little weight upon them, the Court of Appeal correctly ruled that this was a serious error of law, and the only principled way of dealing with them was to afford them no weight at all (para 44); (ii) that a grand jury in the United States District Court for the Southern District of New York had indicted him for allegedly providing material support to a terrorist organisation, al Gamma al Islamiyya, and soliciting the commission of a crime of violence.
The AIT had accorded this substantial weight, although none of the evidence on which the indictment was based had been disclosed, and as a result (under extradition law as it then stood) the Home Secretary had declined to authorise an extradition request based upon the indictment to proceed.
The Court of Appeal ruled that it should be accorded no evidential weight whatsoever.
This leaves the most important matter relied upon: that the appellant had conspired in the murder of General Ahmad Shah Masoud in Afghanistan on 9 September 2001, just two days before the atrocities of 11 September 2001.
The background to this is common knowledge, some of which is confirmed by the witness statement of General Masouds brother, Charg dAffaires in London for the Islamic State of Afghanistan.
This was then the recognised government of Afghanistan and General Masoud was its Vice President and Defence Minister.
But at the time the Taliban were in control of most of the country, apart from the territory in the north east of the country which was under the control of the Northern Alliance.
General Masoud was leader of the Northern Alliance.
Earlier that year he had travelled to Europe to address the European Parliament on the situation in Afghanistan and it is said that he had warned of an impending Al Qaeda attack upon the United States on a larger scale than the bombing of the US embassies in Kenya and Tanzania in 1998.
It is also believed that his assassination may have been ordered by Osama bin Laden to cut off the most obvious source of support for US retaliation against such an attack.
Be that as it may, the appellant was indicted at the Old Bailey for conspiracy to murder General Masoud.
The case against him was described by the Common Serjeant as follows.
The General had been murdered by two Arab suicide bombers posing as a journalist and photographer who had been granted an interview with him.
A letter of introduction, purportedly signed by the appellant, from the Islamic Observation Centre (IOC) which was run by the appellant in London, and informing the reader that the two were journalists of Arab News International, a TV subsidiary of the IOC, had played a part in securing this interview.
However, the letters actually carried by the assassins at the time of the murder were in fact, as the Common Serjeant put it, careful and elaborate forgeries of the letters that the appellant had created.
So did the appellant know that the letters which he created were to be used to secure an interview with the General at which he would be killed? Or were they used by the assassins as a template for the letters which they would forge, the appellant being an innocent fall guy who knew nothing of their intended use? The Common Serjeant concluded that the evidence was as consistent with the innocence of the accused (who had made no secret of his authorship of the templates which could easily be traced to him and had not destroyed any of the relevant documentation in his possession) as it was with his guilt.
Accordingly, on 16 May 2002, he dismissed the charge on the ground that the evidence would not be sufficient for a jury properly to convict.
The AIT reminded themselves that the standard of proof in criminal proceedings is not the same as that under article 1F(c).
They concluded that the evidence seriously points to some knowing involvement of the appellant in the events which led to the death of General Masoud (para 46).
Sedley LJ considered whether this conclusion, together with the Dingemans evidence referred to in para 19 above, would have been bound to lead to a finding adverse to the appellant (para 62).
He concluded that there was a realistic possibility that a tribunal of fact, confining itself to the admissible evidence and excluding the two items ruled inadmissible by the Court of Appeal, might have rejected the submission that the appellant fell within article 1F(c) (para 64).
Hence the case was remitted to be determined afresh on the basis of the admissible evidence.
Why then this appeal?
The appellant originally took issue with the Court of Appeal on three matters: (1) The Court of Appeal rejected his argument that article 1F was aimed only at state actors people who had in some way abused the powers of a sovereign state.
Although this had the support both of academic commentators on the Refugee Convention and of the UNHCR, it had been rejected as an absolute rule by the Supreme Court of Canada in Pushpanathan.
The appellant was originally given permission to argue the point in this Court, but has now abandoned it in the light of the later decision of the Court of Justice of the European Union in B and D. In these proceedings, Mr Fordham QC, who appears for the UNHCR, has accepted that it is possible for non state actors to be guilty of acts contrary to the purposes and principles of the United Nations. (2) Sedley LJ saw the force of the appellants submission that terrorism must have an international character or aspect in order to come within article 1F(c) (paras 29 and 32).
However, he did not think that this helped the appellant.
On the face of it, the assassination was in support of a domestic Afghan quarrel.
The international repercussions were referred to but not described by the AIT.
But what in his view gave it a dimension which brought it within the purposes and principles of the United Nations was that, if true, it involved the use of a safe haven in one state to destabilise the government of another by the use of violence (para 51).
The appellant wishes, therefore: (i) clearly to establish that the act in question must have an international character, because the relevant purposes and principles of the United Nations are limited to matters which significantly affect international peace and security; and (ii) clearly to establish that it is not enough to supply that international character that actions are taken in one state to destabilise the government of another. (3) Sedley LJ rejected the submission that serious reasons for considering the appellant to be guilty of acts falling within article 1F(c) imported the criminal standard of proof (paras 33 to 35).
The appellant was originally refused permission to appeal on this ground.
But he now wishes to appeal on the different ground that, for there to be such serious reasons, it must be found more likely than not that the appellant is guilty of the relevant acts.
This is of particular importance in his case, because of the Common Serjeants finding that the evidence was as consistent with his innocence as with his guilt.
An international dimension?
The question is whether labelling an act as terrorism or a person as a terrorist is sufficient to bring the act or the person within the scope of article 1F(c).
Before the Court of Appeal, Mr Eicke QC, on behalf of the Home Secretary, did not dispute that article 1F(c) was not as wide as the definition of terrorism in section 1 of the Terrorism Act 2000 (see para 29).
Further, by common consent the Qualification Directive conditions and qualifies the application of section 1 of the Terrorism Act to article 1F proceedings (see para 28).
Before this Court, Mr Eicke has withdrawn any such concession and argues that, because the United Nations has condemned terrorism but not defined it, Member States are free to adopt their own definitions and that, therefore, acts falling within the domestic definition of terrorism will also be acts contrary to the purposes and principles of the United Nations, whether or not they have any international dimension or repercussions for international peace and security.
In support of his argument, he cites the numerous General Assembly and Security Council resolutions on the subject of terrorism, sometimes with and sometimes without the adjective international.
In 1994, the General Assembly of the United Nations adopted, by resolution 49/60, the annexed Declaration on Measures to Eliminate International Terrorism.
By article 1: The States Members of the United Nations solemnly reaffirm their unequivocal condemnation of all acts, methods and practices of terrorism, wherever and by whomever committed, including those which jeopardise the friendly relations among states and peoples and threaten the territorial integrity and security of states.
By article 2: Acts, methods and practices of terrorism constitute a grave violation of the purposes and principles of the United Nations, which may pose a threat to international peace and security, jeopardise friendly relations among states, hinder international cooperation and aim at the destruction of human rights, fundamental freedoms and democratic bases of society.
And by article 3: Criminal acts intended or calculated to provoke a state of terror in the general public, a group of persons or particular persons for political purposes are in any circumstance unjustifiable, whatever the considerations of a political, philosophical, ideological, racial, ethnic, religious or any other nature that may be invoked to justify them.
By article 5(f), states were required to take effective measures before, among other things, granting asylum to ensure that the asylum seeker has not engaged in terrorist activities.
In 1996, the General Assembly adopted, by resolution 51/210, the Declaration to Supplement the 1994 Declaration on Measures to Eliminate International Terrorism.
By article 3: The States Members of the United Nations reaffirm that States should take appropriate measures in conformity with the relevant provisions of national and international law, including international standards of human rights, before granting refugee status, for the purpose of ensuring that the asylum seeker has not participated in terrorist acts, . and, after granting refugee status, for the purpose of ensuring that that status is not used for the purpose of preparing or organising terrorist acts intended to be committed against other states or their citizens.
Declarations are not, of course, binding in international law.
Resolution 51/210 referred to the possibility of considering in the future the elaboration of a comprehensive convention on international terrorism and established an ad hoc committee to that end; a draft text has been prepared for discussion but as yet no such Convention has been agreed.
In the meantime, a number of specific Conventions requiring states to criminalise certain particular acts of terrorism have been agreed.
The Security Council has passed numerous resolutions concerning threats to international peace and security caused by acts of terrorism, including Resolution 1624 of 2005.
Paragraph 8 of the Preamble to this reaffirms that acts, methods, and practices of terrorism are contrary to the purposes and principles of the United Nations, as is knowingly financing, planning and inciting terrorist acts.
But paragraph 2 also stresses that States must ensure that any measures taken to combat terrorism comply with all their obligations under international law, and should adopt such measures in accordance with international law, in particular international human rights law, refugee law, and humanitarian law.
Mr Fitzgerald QC, on behalf of the appellant, argues that an act of terrorism can only be contrary to the purposes and principles of the United Nations if it impacts in some significant way upon international peace and security.
In the Guidelines on International Protection: Application of Exclusion Clauses: Article 1F of the 1951 Convention relating to the Status of Refugees, 2003, para 17, the UNHCR takes a view of terrorism which is consistent with the general principles quoted above at para 14: In cases involving a terrorist act, a correct application of article 1F(c) involves an assessment as to the extent to which the act impinges on the international plane in terms of its gravity, international impact, and implications for international peace and security.
This position is maintained in the UNHCRs Note on the Impact of Security Council Resolution 1624 (2005) on the Application of Exclusion under Article 1F of the 1951 Convention relating to the Status of Refugees: The focus should . continue to be on the nature and impact of the acts themselves.
In many cases, the acts in question will meet the criteria for exclusion as serious non political crimes within the meaning of article 1F(b).
In others, such acts may come within the scope of article 1F(a), for example as crimes against humanity, while those crimes whose gravity and international impact is such that they are capable of affecting international peace, security and peaceful relations between states would be covered by article 1F(c) of the 1951 Convention.
Thus, the kinds of conduct listed in [preambular paragraph] 8 of Resolution 1624 ie acts, methods and practices of terrorism and knowingly financing, planning and inciting terrorist acts qualify for exclusion under article 1F(c), if distinguished by these larger characteristics. (Emphasis supplied)
B and D was decided by the Grand Chamber of the CJEU after the decision of the Court of Appeal in Al Sirri.
The principal question referred by the Bundesverwaltungsgericht was whether mere membership of or support for an organisation listed in the Annex to the Council Common Position of 17 June 2002 on the application of specific measures to combat terrorism constituted a serious non political crime within article 12(2)(b) or an act contrary to the purposes and principles of the United Nations within article 12(2)(c) of the Qualification Directive.
The Advocate General drew a distinction between terrorist acts in general, which depending upon the circumstances were likely to be categorised as serious non political crimes, and terrorist acts which were contrary to the purposes and principles of the United Nations.
As to the latter, in his view, the UNHCR Guidelines and Background Note suggested that it is nevertheless necessary to verify whether they have an international dimension, especially in terms of their seriousness and their impact and implications for international peace and security.
Within those limits, it therefore seems permissible to make a distinction between international terrorism and domestic terrorism (para 70, Adv Gen).
The Grand Chamber confirmed that terrorist acts, even if committed with a purportedly political objective, fall to be regarded as serious non political crimes (para 81).
Coming on to acts contrary to the principles and purposes of the United Nations, the Grand Chamber thought it clear from the Security Council Resolutions that the Security Council takes as its starting point the principle that international terrorist acts are generally speaking, and irrespective of any state participation, contrary to the purposes and principles of the United Nations (para 83).
It is for that reason that the appellant has conceded that non state actors can be guilty of such acts.
The Grand Chamber continued (para 84): It follows that as is argued in their written observations by all the governments which submitted such observations to the court, and by the European Commission the competent authorities of the Member States can also apply article 12(2)(c) of Directive 2004/83 to a person who, in the course of his membership of an organisation which is on the list forming the Annex to Common Position 2001/931, has been involved in terrorist acts with an international dimension.
The B and D case is prayed in aid on each side of the argument.
Mr Eicke, for the Secretary of State, correctly points out that the international dimension was not what the case was all about.
The principal issue was whether mere membership of and support for a listed organisation was sufficient for either article 12(2)(b) or (c) to apply.
The answer to this question was clearly no.
The national authorities had first to consider whether the acts committed by the organisation fell within those provisions and secondly whether individual responsibility for carrying out those acts could be attributed to the persons concerned.
In that context, little weight could be attached to the references to international terrorism and terrorist acts with an international dimension.
Against that, argues Mr Fitzgerald, it is clear that both the Advocate General and the Grand Chamber were drawing a distinction between paragraphs (b) and (c) of article 12(2).
There is no mention of an international element in the terrorist acts which could fall within paragraph (b), whereas the international element is referred to whenever reference is made to paragraph (c).
Discussion and conclusions
Approaching the matter in the light of the general principles discussed earlier, it is clear that the phrase acts contrary to the purposes and principles of the United Nations must have an autonomous meaning.
It cannot be the case that individual Member States are free to adopt their own definitions.
As Lord Steyn said in R v Secretary of State for the Home Department, Ex p Adan [2000] UKHL 67, [2001] 2 AC 477, In principle, there can be only one true interpretation of a treaty.
There is, at least as yet, no specialist international court or other body to adjudicate upon Member States compliance with the Refugee Convention.
The guidance given by the UNHCR is not binding, but should be accorded considerable weight, in the light of the obligation of Member States under article 35 of the Convention to facilitate its duty of supervising the application of the provisions of the Convention (see R v Asfaw [2008] AC 1061, per Lord Bingham at para 13, and R v Uxbridge Magistrates Court, Ex p Adimi [2001] QB 667, 678).
Within the European Union the Qualification Directive is designed to lay down minimum standards with which Member States must comply.
Sedley LJ correctly concluded that the adoption by section 54(2) of the 2006 Act of the meaning of terrorism contained in the 2000 Act has where necessary to be read down in an article 1F[(c)] case so as to keep its meaning within the scope of article 12(2)(c) of the Directive.
The United Nations Security Council has declared that acts, methods, and practices of terrorism are contrary to the purposes and principles of the United Nations and this is repeated in recital 22 to the Qualification Directive.
But it has done so in a context where there is as yet no internationally agreed definition of terrorism, no comprehensive international Convention binding Member States to take action against it, and where the international declarations adopted by the General Assembly are headed Measures to eliminate international terrorism.
Above all, however, the principal purposes of the United Nations are to maintain international peace and security, to remove threats to that peace, and to develop In those circumstances, it is our view that the appropriately cautious and friendly relations among nations.
It is also noteworthy that the CJEU, despite recital 22 to the Directive, consistently referred to international terrorism, when discussing article 12(2)(c) in B and D.
restrictive approach would be to adopt para 17 of the UNHCR Guidelines: Article 1F(c) is only triggered in extreme circumstances by activity which attacks the very basis of the international communitys coexistence.
Such activity must have an international dimension.
Crimes capable of affecting international peace, security and peaceful relations between states, as well as serious and sustained violations of human rights would fall under this category.
The essence of terrorism is the commission, organisation, incitement or threat of serious acts of violence against persons or property for the purpose of intimidating a population or compelling a government or international organisation to act or not to act in a particular way (see, for example, the definition in article 2 of the draft comprehensive Convention), as Sedley LJ put it in the Court of Appeal, the use for political ends of fear induced by violence (para 31).
It is, it seems to us, very likely that inducing terror in the civilian population or putting such extreme pressures upon a government will also have the international repercussions referred to by the UNHCR.
In this particular case, the AIT did not consider that any such repercussions were required, but commented that if we are wrong about that we consider the killing itself to be an act of terrorism likely to have significant international repercussions, as indeed it appears to have done (para 47).
When the case returns to the Tribunal, the Tribunal will have to consider the totality of the evidence and apply the test set out above.
Finally, is it enough to meet that test that a person plots in one country to destabilise conditions in another? This must depend upon the circumstances of the particular case.
It clearly would be enough if the government (or those in control) of one state offered a safe haven to terrorists to plot and carry out their terrorist operations against another state.
That is what the Taliban were doing by offering Osama bin Laden and Al Qaeda a safe haven in Afghanistan at the time.
As the UNHCR says, this would have clear implications for inter state relations.
The same may not be true of simply being in one place and doing things which have a result in another.
The test is whether the resulting acts have the requisite serious effect upon international peace, security and peaceful relations between states. (3) The case of DD
The facts
The appellant is a citizen of Afghanistan.
He arrived in the United Kingdom on 18 January 2007 and applied for asylum on the same day.
The basis of his claim was that he feared persecution because of his association with his brother AD, who was a well known Jamiat e Islami commander in Afghanistan.
Following the fall of the Najibullah government in 1992, the appellants brother became responsible for other commanders in the north of Afghanistan and formed a number of strategic alliances, ultimately allying himself with the Taliban.
The appellant acted as his deputy and commanded between 50 and 300 men.
He was later demoted and reduced to the command of no more than 20 men.
Following US military intervention in Afghanistan, the appellant and his brother fled to Pakistan.
In 2004, the appellants brother was assassinated in Pakistan by his enemies who held positions in the Karzai government of Afghanistan.
The appellant was also a target of the assassination attempt and sustained gunshot injuries.
After about a month, he returned to Afghanistan and sought protection from his enemies by joining a military grouping, Hizb e Islami.
He commanded 10 15 people and engaged in both offensive and defensive military operations against both the Afghan government and the forces of ISAF.
The appellants nephew (the son of his deceased brother) was killed in Peshawar in about September 2006.
The appellant was ordered to fight in his home area.
He decided that it would be too dangerous for him to do so as he had enemies there who were high ranking members of the Karzai government.
He fled once again to Pakistan and arrangements were made through an agent for him to travel from there to the United Kingdom.
He claimed asylum saying that he feared that, if he were returned to Afghanistan, he would be killed by his deceased brothers enemies or by Hizb e Islami as a traitor.
By letter dated 27 April 2007, the Secretary of State refused the claim on the grounds that the appellants account was not credible.
In particular, he did not accept the account that he gave of his role in Hizb e Islami.
By letter dated 6 August 2007, the Secretary of State gave supplementary reasons for the refusal.
These were that, even if the appellants claimed activities in Afghanistan were substantiated, he was not entitled to asylum in any event.
This was because his claim that he had fought against ISAF, if accepted, meant that he had been guilty of acts contrary to the purposes and principles of the United Nations and was therefore excluded from the definition of refugee by reason of article 1F(c) of the Refugee Convention.
The appellant appealed to the Asylum and Immigration Tribunal (AIT).
IJ Morgan found the appellant to be credible and allowed his appeal under the Refugee Convention and under article 3 of the European Convention on Human Rights (ECHR).
He had a well founded fear of persecution by his brothers enemies some of whom were members of the Karzai government.
The judge was not persuaded that the appellant had been guilty of acts contrary to the purposes and principles of the United Nations.
For reasons that are immaterial to the present appeal, a second stage reconsideration was ordered by SIJ Moulden.
The second stage reconsideration was conducted by IJ Simpson who, by a determination promulgated on 28 August 2008, allowed the appellants appeal on both asylum and article 3 of the ECHR grounds.
The judge found the appellant to be credible, except that she rejected his assertion that his actions with Hizb e Islami in Afghanistan were defensive.
He had a longstanding history of military involvement in Afghanistan, including at a high level, deputy to his Commander brother, and independently a Commander in Hizb e Islami Hekmatayar in Kunar.
There were prima facie grounds for considering his actions were both offensive and defensive.
As regards article 1F(c), the judge concluded that section 54 of the 2006 Act (see para 7 above), which came into effect on 31 August 2006, appeared to have effected a substantive change in the law and that, as a matter of natural justice, it applied only to acts after it came into force, that is from September 2006.
She concluded at para 151: Having regard to the combined lack of specificity of evidence of the appellants conduct with Hizb e Islami and the highly reasonable likelihood, given the chronology, that his involvement with Hizb e Islami was at its end stage after September 2006 and the coming into effect of section 54, I find in sum there are not serious grounds for considering he committed a barred act(s).
I find article 1F(c) does not apply.
The Court of Appeal
The issues before the Court of Appeal concerned (i) the interpretation and applicability of the 2006 Act and (ii) whether and, if so, to what extent on the AITs findings the appellant had been guilty of acts contrary to the purposes and principles of the United Nations within the meaning of article 1F(c) of the Refugee Convention.
Pill LJ (with whom Rimer and Black LJJ agreed) allowed the Secretary of States appeal.
He held that, on the findings of the AIT, the appellant had not committed any acts of terrorism within the meaning of section 54 of the 2006 Act.
The nub of the courts reasoning on the article 1F(c) point is contained in para 64 of Pill LJs judgment: The UN Security Council has mandated forces to conduct operations in Afghanistan.
The force is mandated to assist in maintaining security and to protect and support the UNs work in Afghanistan so that its personnel engaged in reconstruction and humanitarian efforts can operate in a secure environment.
Direct military action against forces carrying out that mandate is in my opinion action contrary to the purposes and principles of the United Nations and attracts the exemption provided by article 1F(c) of the Convention.
As we explain below, we substantially agree with this conclusion.
The Court of Appeal nevertheless remitted the case for reconsideration by the Upper Tribunal because the AIT had failed to consider the appellants individual responsibility as required by this Court in JS (Sri Lanka) (and by the CJEU in B and D) and whether he had been guilty of acts contrary to the purposes and principles of the United Nations.
The United Nations and Afghanistan
Ever since the Soviet withdrawal from Afghanistan in 1989, the United Nations has been trying to bring an end to the fighting that has been taking place in that country.
As long ago as 28 August 1998, Security Council Resolution 1193 called for a ceasefire and expressed grave concern about the continuing Afghan conflict and the Taliban forces offensive which was causing a serious and growing threat to regional and international peace and security, as well as extensive human suffering.
Similar resolutions followed.
For security reasons, all international United Nations personnel were withdrawn from Afghanistan in September 2001.
On 5 December 2001, the participants in the United Nations Talks on Afghanistan entered into the Bonn Agreement on Provisional Arrangements in Afghanistan Pending the Re establishment of Permanent Government Institutions.
The participants pledged their commitment to do all within their means and influence to ensure that security was provided in Afghanistan.
They agreed that an Interim Authority should be established (to be the repository of Afghan sovereignty) and that, pending the establishment and training of new Afghan security and armed forces, they would request the United Nations Security Council to consider authorising the early deployment in Afghanistan of a United Nations mandated force to assist in the maintenance of security in Kabul and its surrounding areas.
By Resolution 1383 (6 December 2001), the Security Council endorsed the Bonn Agreement.
By Resolution 1386 (20 December 2001), acting under Chapter VII of the United Nations Charter, the Security Council authorised the establishment for 6 months of ISAF to assist the Afghan Interim Authority in the maintenance of security in Kabul and its surrounding areas, so that the Afghan Interim Authority as well as the personnel of the United Nations can operate in a secure environment.
The resolution (i) authorised the Member States participating in ISAF to take all necessary measures to fulfil its mandate; called upon ISAF to work in close consultation with the Afghan Interim Authority in the implementation of the force mandate; (ii) called upon all Afghans to cooperate with ISAF; and (iii) called upon the Member States participating in ISAF to provide assistance to help the Afghan Interim Authority in the establishment and training of new Afghan security and armed forces.
On 18 March 2002, the Secretary General submitted a long report entitled The situation in Afghanistan and its implications for international peace and security.
The report contained a good deal of detail about the situation and expressed the hope that the Security Council would support the wish of the Afghan people for the expansion of the operation of ISAF.
At para 95, it said: the next step, to ensure that all United Nations efforts are harnessed to fully support the implementation of the Bonn Agreement, would be to integrate all the existing United Nations elements in Afghanistan into a single mission, the United Nations Assistance Mission in Afghanistan (UNAMA).
The missions mandate would be (i) to fulfil the tasks and responsibilities, including those related to human rights, the rule of law and gender issues, entrusted to the United Nations in the Bonn Agreement, which were endorsed by the Security Council in its resolution 1383 (2001); (ii) to promote national reconciliation and rapprochement throughout the country; and (iii) to manage all United Nations humanitarian relief, recovery and reconstruction activities in Afghanistan under the overall authority of the United Nations Special Representative and in coordination with the Interim Authority and successor administrations of Afghanistan.
By Resolution 1401 (28 March 2002), the Security Council endorsed the establishment of UNAMA for an initial period of 12 months with the mandate and structure set out in the Secretary Generals report of 18 March 2002.
By Resolution 1413 (23 May 2002), the Security Council extended the mandate of ISAF for a further 6 months from 20 June 2002, authorising the Member States participating in ISAF to take all necessary steps to fulfil its mandate.
By one of its recitals, the Security Council determined that the situation in Afghanistan still constituted a threat to international peace and security.
The mandate was extended for a further year beyond 20 December 2002 by Resolution 1444 (27 November 2002).
Once again, the threat to international peace and security posed by the situation in Afghanistan was recorded.
The mandate of UNAMA was extended for a further period of 12 months by Resolution 1471 (28 March 2003).
On 23 July 2003, the Secretary General reported on the situation in Afghanistan and its implications for international peace and security.
At para 67 of his report, he said that the consequences of failing to provide for sufficient security for the Bonn process to succeed may have implications far beyond Afghanistan.
On 11 August 2003, NATO assumed command of ISAF.
By Resolution 1510 (13 October 2003), the Security Council extended ISAFs mandate for a further 12 months to allow it, as resources permit, to support the Afghan Transitional Authority and its successors in the maintenance of security in areas of Afghanistan outside Kabul and its environs, so that the Afghan Authorities as well as the personnel of the United Nations and other international civilian personnel engaged, in particular in reconstruction and humanitarian efforts, can operate in a secure environment, and to provide security assistance for the performance of other tasks in support of the Bonn Agreement.
It called upon ISAF to continue to work in close consultation with the Afghan Transitional Authority and its successors as well as the Special Representative of the Secretary General.
By its recitals, the Security Council recognised that the responsibility for providing security and law and order throughout the country resided with the Afghans themselves and welcomed the continuing cooperation of the Afghan Transitional Authority with ISAF.
Yet again, the resolution recorded that the situation still constituted a threat to international peace and security.
By Resolution 1536 (26 March 2004), the Security Council extended the mandate of UNAMA for a further 12 months.
By Resolution 1563 (17 September 2004), the mandate of ISAF was extended for a further 12 months beyond 13 October 2004.
In subsequent years, the mandates of UNAMA and ISAF were again extended for periods of 12 months at a time.
As will become apparent, the differences between ISAF and UNAMA have assumed some importance in this case.
ISAF is an armed force, but it is not a United Nations force.
It has never been under direct United Nations command.
It was initially under the lead command of single nations (starting with the United Kingdom).
Since August 2003 it has been under the command of NATO.
On the other hand, UNAMA is an assistance mission under United Nations control.
It is not an armed force.
But the objectives of ISAF and UNAMA are essentially the same, although the means by which they seek to achieve them differ.
In particular, they both aim to promote the Bonn Agreement and to maintain peace and security in Afghanistan, thereby reducing the threat to international peace and security posed by the situation in Afghanistan.
Some of the more recent Security Council resolutions explicitly make the link between the two organisations.
Thus, recital 7 to Resolution 1776 (19 September 2007) is in these terms: Stressing the central role that the United Nations continues to play in promoting peace and stability in Afghanistan, noting, in the context of a comprehensive approach, the synergies in the objectives of the United Nations Assistance Mission in Afghanistan (UNAMA) and of ISAF, and stressing the need for further sustained cooperation, coordination and mutual support, taking due account of their respective designated responsibilities (underlining added).
Similar language appears in the recitals to Resolution 1806 (20 March 2008), Resolution 1833 (22 September 2008), Resolution 1868 (23 March 2009) and subsequent resolutions.
The appellants case on article 1F(c)
Mr Drabble QC, on behalf of DD, relies upon the general approach to article 1F(c) discussed earlier.
In particular, he argues that participation in an armed attack against forces operating under and carrying out a United Nations mandate does not without more engage article 1F(c).
Armed insurrection is not, in itself, contrary to the purposes and principles of the United Nations.
Internal armed conflict is now covered by international humanitarian law, in the shape of the 1949 Geneva Conventions.
United Nations mandated forces are often deployed during or after an armed conflict, where international humanitarian law provides the appropriate legal framework for determining the lawfulness of armed attacks against them.
The distinction between ISAF and UNAMA is crucial to the argument.
Armed attacks on UNAMA could be characterised as contrary to the purposes and principles of the United Nations.
UNAMA is a non combatant peacekeeping force which is protected under the 1994 Convention and the 2005 Protocol on the Safety of United Nations and Associated Personnel, whereas ISAF is not.
Article 1(a)(i) of the 1994 Convention defines United Nations Personnel as persons engaged or deployed by the Secretary General of the United Nations as members of the military, police or civilian components of a United Nations operation.
Article 1(c) defines a United Nations operation as an operation established by the component organ of the United Nationsand conducted under United Nations authority and control.
Article 9 provides that various specified acts against any United Nations or associated personnel (including murder or other attacks) shall be made by each State Party a crime under its national law.
But article 2(2) provides that the Convention is not to apply to a United Nations operation authorised by the Security Council as an enforcement action under Chapter VII of the Charter of the United Nations in which any of the personnel are engaged as combatants against organised armed forces and to which the law of international armed conflict applies.
Article 2(2) is consistent with the broad principle that the laws of war apply to UN forces engaged in hostilities, and therefore such forces do not have immunity from attack: p 624 of Documents on the Laws of War, ed Roberts and Guelff, 3rd ed (2000).
The distinction between combatants and peacekeeping personnel was considered by the Special Court for Sierra Leone in Prosecutor v Issa Hassan Sesay, Morris Kallon & Augustine Gbao (Case No SCSL 04 15T, 2 March 2009).
In that case, the Special Court handed down the first convictions for the war crime of attacking personnel involved in a peacekeeping operation, namely members of the United Nations Assistance Mission in Sierra Leone, who were entitled to the protection given to civilians under the international law of armed conflict.
Therefore, it is argued, military activities against United Nations mandated forces should only provide a basis for exclusion under article 1F(c) where (i) the act or acts in question constitute a crime in international law; or (ii) the act or acts, which must be of sufficient gravity to have a negative impact on international peace and security, have been specifically identified as contrary to the purposes and principles of the United Nations, either by clear decision of the Security Council acting within its competence, or by way of agreement or consensus among states at large; and (iii) there are serious reasons for considering that the individual concerned was personally responsible for the act or acts in question.
Discussion and conclusions
The acts relied on by the Secretary of State are acts of violence by the appellant against ISAF, the international force that was mandated by the United Nations for the express purpose of maintaining peace and security in Afghanistan, thereby assisting in the maintaining of international peace and security.
Time and again, the resolutions of the Security Council recorded that the role and responsibility of ISAF was to assist in the maintaining of international peace and security.
This is one of the most important purposes set out in article 1 of the United Nations Charter (see para 10 above).
In these circumstances, it might be thought to be obvious at first sight that such acts are contrary to the purposes and principles of the United Nations.
It is noteworthy that Mr Drabble (rightly) accepts that, if the appellant had been guilty of fighting UNAMA, he would in principle have been guilty of acts contrary to the purposes and practices of the United Nations.
We say in principle, because it would still be necessary to examine all the facts (as per B and D).
So why does it make any difference that the appellant was fighting ISAF rather than attacking UNAMA? That the aims and objectives of ISAF and UNAMA are congruent is amply borne out by the Security Council Resolutions: see para 58 above.
The answer given by Mr Drabble and Mr Fordham is that the 1994 Convention and 2005 Protocol would apply to attacks on UNAMA, but not to attacks on ISAF.
Peacekeeping forces, unlike combat forces, are entitled to the same protection against attack as that accorded to civilians under international humanitarian law, as long as they are not taking a direct part in hostilities.
Under the Statute of the International Criminal Court (articles 8(2)(b)(iii) and 9(e)(iii)), intentionally directed attacks against personnel involved in a peacekeeping mission in accordance with the Charter of the United Nations constitute a war crime: see rule 33 in Customary International Humanitarian Law vol 1:Rules (2005, International Committee of the Red Cross).
We accept the points made by Mr Drabble and Mr Fordham about the differences between ISAF and UNAMA which are summarised at paras 60 and 61 above.
These differences are not in doubt.
But they are not material to the issue of whether the appellant is excluded from the refugee status by article 1F(c).
The question which rules of law apply to attacks on ISAF and UNAMA is categorically different from (and irrelevant to) the question whether an attack against either body is contrary to the purposes and principles of the United Nations.
This latter question must be determined on an examination of all the relevant facts.
These include the terms of the Security Council Resolutions by which ISAF was mandated in the first place, and by which its mandate was renewed from time to time.
Mr Drabble submits that it is relevant to the issue in this case that, although the Security Council has mandated many military enforcement operations, it has never sought to characterise opposition, even armed opposition, as contrary to the purposes and principles of the United Nations.
In some cases, a United Nations resolution explicitly states that a particular activity is contrary to the purposes and principles of the United Nations. (One example is the condemnation of international terrorism in General Assembly resolution 49/60, referred to in para 27 above.) However, it is not suggested, either by the UNHCR or by the Supreme Court of Canada in Pushpanathan, that this is the only criterion.
In our view, the principled test is that put forward by the UNHCR in para 17 of its Guidelines and quoted at para 38 above.
In Pushpanathan, the court did not have to consider whether an attack on a United Nations body or a United Nations mandated body constitutes acts contrary to the purposes and principles of the United Nations.
We conclude that there is no basis for the view that such an attack can only be regarded as an act contrary to the purposes and principles of the United Nations in circumstances where (i) it is by consensus in international law explicitly recognised as being contrary to these purposes and principles, or (ii) it amounts to a serious and sustained violation of fundamental human rights.
This conclusion is consistent with Mr Drabbles acceptance that an attack on UNAMA is in principle capable of satisfying article 1F(c), despite the fact that there appears to be no United Nations resolution (or other formal international decision) which explicitly recognises that an attack against UNAMA would be contrary to the purposes and principles of the United Nations.
In short, an attack on ISAF is in principle capable of being an act contrary to the purposes and principles of the United Nations.
The fundamental aims and objectives of ISAF accord with the first purpose stated in article 1 of the United Nations Charter.
By attacking ISAF, the appellant was seeking to frustrate that purpose.
To hold that his acts are in principle capable of being acts contrary to the purposes and principles of the United Nations accords with common sense and is correct in law.
This conclusion accords with that of Hogan J in the High Court of Ireland in B v Refugee Appeals Tribunal and others [2011] IEHC 198 at para 56.
For these reasons, we agree with the conclusion of the Court of Appeal, quoted in para 47 above.
(4) Standard of proof
This issue arises in an acute form in Al Sirri but could arise in any proposed exclusion under article 1F.
The article requires that there be serious reasons for considering that the individual asylum seeker has committed the crimes referred to in article 1F(a) or (b) or been guilty of the acts referred to in article 1F(c).
In Al Sirri, it was argued in the Court of Appeal that this imported the criminal standard of proof beyond reasonable doubt.
In rejecting that submission, Sedley LJ said this, at para 33: . it clearly sets a standard above mere suspicion.
Beyond this, it is a mistake to try to paraphrase the straightforward language of the Convention: it has to be treated as meaning what it says.
In JS (Sri Lanka), at para 39, Lord Brown was inclined to agree with this
passage, having also pointed out that . serious reasons for considering obviously imports a higher test for exclusion than would, say, an expression like reasonable grounds for suspecting.
Considering approximates rather to believing than to suspecting.
In Al Sirri, the Common Serjeant had considered that the evidence admissible in a criminal trial for conspiracy to murder General Masoud was as consistent with innocence as with guilt.
Thus he, at least, was not satisfied of Al Sirris guilt even on the balance of probabilities.
Mr Fitzgerald QC argues that it is not possible to have serious reasons for considering a person to have committed a crime or be guilty of a particular act unless you can be satisfied that it is more likely than not that he did it.
In this he is less ambitious than the UNHCR.
Its 2003 Guidelines, at para 35, state that clear and credible evidence is required.
It is not necessary for an applicant to have been convicted of a criminal offence, nor does the criminal standard of proof need to be met.
However, the 2003 Background Note, at para 107, also states that: . in order to ensure that article 1F is applied in a manner consistent with the overall humanitarian objective of the 1951 Convention, the standard of proof should be high enough to ensure that bona fide refugees are not excluded erroneously.
Hence, the balance of probabilities is too low a threshold.
He also relies upon the Australian case of W97/164 v Minister for Immigration and Multicultural Affairs [1998] AATA 618, in which Mathews J said this at para 42: The article provides a direction to decision makers in words that are clear of meaning and relatively easy of application.
To re state this test in terms of a standard of proof is unnecessary and may in some cases lead to confusion and error.
But she went on in para 43 to say this: I find it difficult to accept that the requirement that there be serious reasons for considering that a crime against humanity has been committed should be pitched so low as to fall, in all cases, below the civil standard of proof.
The seriousness of the allegation itself and the extreme consequences which can flow from an alternative finding upon it would, in my view, require a decision maker to give substantial content to the requirement that there be serious reasons for considering (emphasis added) that such a crime has been committed.
On the other hand, in Arquita v Minister for Immigration and Multi cultural Affairs [2000] FCA 1889, 106 FCR 465, at para 54, Weinberg J disagreed.
There must be evidence available upon which it could reasonably and properly be concluded that the applicant has committed the crime alleged.
To meet that requirement, the evidence must be capable of being regarded as strong.
But evidence could properly be characterised as strong without meeting either the criminal or the civil standard of proof.
He did, however, say at para 58 that it would have to go beyond establishing merely that there was a prima facie case.
The New Zealand courts have followed the Court of Appeal in Al Sirri in taking the view that the Refugee Convention simply means what it says and that adding glosses by analogy with civil litigation or criminal prosecution simply confuses matters: see Hammond J in Tamil X v Refugee Status Appeals Authority; Attorney General (Minister of Immigration) v Y [2009] NZCA 488, [2009] 2 NZLR 73, paras 77, 79; upheld by the Supreme Court in Attorney General (Minister of Immigration) v Tamil X [2010] NZSC 107, [2011] 1 NZLR 721, para 39.
In Canada, the courts have adopted a lower standard of proof than the balance of probabilities: see Ramirez v Minister of Employment and Immigration (1992) 89 DLR (4th) 173, para 5.
But in Cardenas v Canada (Minister of Employment and Immigration) [1994] FCJ No 139, it was said that the Board must base its decision to exclude only on clear and convincing evidence, not simply on suspicion and speculation.
And the German Bundesverwaltungsgericht has said that as a rule, reasons are good when there is clear, credible evidence that such crimes have been committed (BVerwG 10 C 2.10).
We are, it is clear, attempting to discern the autonomous meaning of the words serious reasons for considering.
We do so in the light of the UNHCR view, with which we agree, that the exclusion clauses in the Refugee Convention must be restrictively interpreted and cautiously applied.
This leads us to draw the following conclusions: (1) Serious reasons is stronger than reasonable grounds. (2) The evidence from which those reasons are derived must be clear and credible or strong. (3) Considering is stronger than suspecting.
In our view it is also stronger than believing.
It requires the considered judgment of the decision maker. (4) The decision maker need not be satisfied beyond reasonable doubt or to the standard required in criminal law. (5) It is unnecessary to import our domestic standards of proof into the question.
The circumstances of refugee claims, and the nature of the evidence available, are so variable.
However, if the decision maker is satisfied that it is more likely than not that the applicant has not committed the crimes in question or has not been guilty of acts contrary to the purposes and principles of the United Nations, it is difficult to see how there could be serious reasons for considering that he had done so.
The reality is that there are unlikely to be sufficiently serious reasons for considering the applicant to be guilty unless the decision maker can be satisfied on the balance of probabilities that he is.
But the task of the decision maker is to apply the words of the Convention (and the Directive) in the particular case.
(5) Disposal
We would dismiss the appeal in DD.
The object of his argument was to establish that his activities could not be contrary to the principles and purposes of the United Nations.
In this he has failed.
However, the Court of Appeal were correct to hold that there were material errors of law in the AITs findings in that they failed to examine the appellants conduct in the manner prescribed by this court in JS and to consider whether he had been guilty of acts contrary to the purposes and principles of the United Nations.
The order remitting the case to the Upper Tribunal for reconsideration should stand.
The appeal in Al Sirri is rather different.
Technically, the appellant has challenged the decision of the Court of Appeal to remit his case to the tribunal, rather than to find that he was not excluded from the status of refugee.
We would dismiss that appeal.
But the reality is that he was challenging certain aspects of the guidance given to the tribunal which would hear the remitted case.
In that he has succeeded to some extent.
Consideration will also have to be given to whether it is more appropriate for the case to be remitted to the First tier or to the Upper Tribunal, given that the evidence will have to be examined afresh.
The parties therefore have 14 days from the date of judgment to file their submissions as to the precise form of the order and as to costs.
| These appeals concern a little used provision in article 1F(c) of the Geneva Convention on the Status of Refugees.
This excludes from protection any person with respect to whom there are serious reasons for considering thathe has been guilty of acts contrary to the purposes and principles of the United Nations.
Both appellants have been refused the grant of refugee status by the respondent on this ground.
Al Sirri is a citizen of Egypt who arrived in the UK in 1994.
The facts relied on for the refusal of his asylum claim included his possession of and contribution to books connected with Al Qaeda and other proscribed organisations and his alleged involvement in the murder of General Masoud in Afghanistan in 2001.
The issue raised by his case is whether all activities defined as terrorism by United Kingdom domestic law are for that reason acts falling within article 1F(c), or whether such activities must constitute a threat to international peace and security.
DD is a citizen of Afghanistan who came to the UK in 2007.
His claim for asylum was based on his fear of persecution as the brother of the leader of forces allied with the Taliban, who had fought against both the Afghan government and the UN mandated International Security Assistance Force (ISAF).
In his case the question is whether armed insurrection against not only the incumbent government but also a UN mandated force supporting that government falls within article 1F(c).
In both appeals the issue also arises as to what is meant by serious reasons for considering a person to be guilty of the act in question.
The appellants appealed against the respondents refusal to grant asylum.
On 18 March 2009 the Court of Appeal set aside the determination of the Asylum and Immigration Tribunal (AIT) in Al Sirris case and remitted it to be determined afresh omitting certain matters on which the respondent had sought to rely.
DD was initially successful in his appeals but the Court of Appeal remitted his case for reconsideration by the Upper Tribunal because the AIT had failed to consider DDs individual responsibility and whether he fell within article 1F(c).
Both appellants have nonetheless pursued an appeal to the Supreme Court in order to challenge the approach of the Court of Appeal to the interpretation of article 1F(c) in a number of respects.
The Supreme Court unanimously dismisses both appeals.
Both cases will now be remitted to the relevant tribunal for reconsideration in accordance with the orders of the Court of Appeal.
In the case of Al Sirri the guidance given to that tribunal should be in line with the judgment of the Supreme Court.
The judgment is given by Lady Hale and Lord Dyson, with whom the other justices agree.
The general approach to article 1F(c) Article 1F(c) should be interpreted restrictively and applied with caution.
There should be a high threshold defined by the gravity of the act in question, the manner in which the act is organised, its international objectives and its implications for international peace and security.
There should be serious reasons for considering that the person concerned bore individual responsibility for acts of that character [16].
International dimension It is clear that the phrase acts contrary to the purposes and principles of the United Nations must have an autonomous meaning and member states are not free to adopt their own definitions.
There is as yet no internationally agreed definition of terrorism.
It was appropriately cautious therefore to adopt paragraph 17 of the United Nations High Commissioner for Refugees (UNHCR) Guidelines which provided that article 1F(c) was only triggered in extreme circumstances by activity which attacks the very basis of the international communitys co existence.
Such activity must have an international dimension.
Crimes capable of affecting international peace, security and peaceful relations between States, as well as serious and sustained violations of human rights would fall under this category [36 38].
It could be enough if one person plotted in one country to destabilise another.
The test was whether the resulting acts had the requisite serious effect upon international peace [40].
Armed insurrection against UN mandated forces DD had been engaged in fighting against ISAF in Afghanistan.
ISAF was an armed force under the lead command of individual nations authorised by the UN from 2001, and was distinct from the United Nations Assistance Mission in Afghanistan (UNAMA), which was established in 2002 as a peacekeeping force.
Both ISAF and UNAMA had the same objective to maintain peace and security in Afghanistan.
DD argued that simple participation in an attack against UN mandated forces did not engage article 1F(c).
The Supreme Court agreed that the protection for ISAF against attack was not the same as for peacekeeping forces.
This was not however material to the issue under article 1F(c) which was to be judged under the same principle in paragraph 17 of the UNHCR Guidelines quoted above [66].
The fundamental aims and objectives of ISAF accorded with the purposes stated in the UN Charter and DD was seeking to frustrate that purpose [68].
Standard of proof This issue arose in acute form in Al Sirri.
Al Sirri had been indicted at the Old Bailey in relation to the murder of General Masoud but the charge was dismissed on the ground that the evidence was as consistent with his innocence as it was with his guilt.
Article 1F(c) required that there be serious reasons for considering that the asylum seeker had been guilty of the acts.
This had an autonomous meaning, and was not the same as the criminal standard of proof beyond reasonable doubt, or any domestic standard.
Serious reasons was stronger than reasonable grounds, strong or clear and credible evidence had to be present and the considered judgment of the decision maker was required.
The reality was that there were unlikely to be sufficiently serious reasons for considering an applicant to be guilty unless the decision maker could be satisfied that it was more likely than not that he was.
But the task of the decision maker was to apply the words of article 1F(c) in the particular case [75].
|
This appeal is about the rights of the owner of a time chartered ship after the ship has been lawfully withdrawn for non payment of hire.
The question must often have arisen in practice but, oddly enough, there is no direct authority upon it.
The MT Kos is a 301,000 mt VLCC.
She was time chartered by her owners to Petroleo Brasileiro SA on 2 June 2006 for 36 months plus or minus 15 days at charterers option.
The charterparty, which was on the Shelltime 3 Form, contained a standard form of withdrawal clause providing that if hire was not paid when due, the owners should have the right to withdraw the vessel without prejudice to any claim owners may otherwise have on charterers under this charter.
It is increasingly common for such contracts to include anti technicality clauses requiring notice to be given before this right is exercised.
But for whatever reason no anti technicality clause was included in this case.
So when, on 31 May 2008, charterers failed to make the advance payment required for the month of June, the owners were entitled to withdraw the MT Kos, and did so at 14.41 GMT on 2 June 2008.
It is agreed between the parties to the appeal that the charterers failure to pay hire was not a repudiatory breach of contract.
At the time of the withdrawal, the MT Kos was at Angra dos Reis in Brazil, where she had just completed the loading of a parcel of cargo for the charterers account in accordance with their orders.
She was awaiting a second parcel, which in the event was not loaded.
There were no bills of lading in the hands of third parties.
On 2 and 3 June there was a number of exchanges between the parties.
The charterers tried to persuade the owners to cancel the withdrawal.
The owners refused.
Their position was set out in a message at 11.30 GMT on 3 June 2008.
They said that they would be willing to reinstate the charterparty or continue on a voyage basis, but only at the current market rate, which was much higher than the charterparty rate.
Otherwise, they required the charterers to make prompt arrangements to receive back their cargo.
Ultimately, after further fruitless exchanges, the charterers told the owners at 21.36 GMT on 3 June 2008 that they would arrange for the terminal to receive back the cargo.
The arrangements were duly made, and discharge of the cargo was completed at 06.00 GMT on 5 June 2008.
It is agreed that if the charterers had begun to make arrangements for the discharge of their cargo as soon as they received the owners notice of withdrawal, the vessel would have been detained at Angra dos Reis for one day.
As it was, she was detained there for 2.64 days.
The issue before us is whether the owners are entitled to be paid for the service of the vessel during that 2.64 days, and for bunkers consumed in the same period.
Leaving to one side points which have fallen by the wayside at earlier stages of these proceedings, their claim is put forward on four bases: (i) under clause 13 of the charterparty; (ii) under an express or implied new contract made after the vessel was withdrawn, to pay for the time and bunkers; (iii) on the ground of unjust enrichment; and (iv) under the law of bailment.
The judge, Andrew Smith J, held that they were entitled to succeed on basis (iv), but rejected every other basis which they put forward.
The Court of Appeal (Longmore and Smith LJJ and Sir Mark Waller) rejected the claim on all four bases, except that they allowed the owners to recover the value of bunkers consumed in actually discharging the cargo.
New contract after withdrawal
The argument that there was a new contract turns entirely on the facts and can be shortly dealt with.
Once the charterparty came to an end, the owners no longer had any obligation to carry the cargo to its destination or to discharge it.
Their duty was to make it available to the charterers.
It was then for the charterers to make any necessary arrangements for discharge.
For a day and a half after the notice of withdrawal, they did nothing because they declined to accept that the owners were entitled to withdraw the vessel.
Each party was trying to persuade the other to resume the contractual service (or a variant of it) on its own terms.
Each of them rejected the others terms.
On the footing that the owners were not willing to treat the old contract as subsisting and that no agreement could be reached upon a new one, both parties then submitted to the inevitable.
Owners called on charterers to take delivery of their cargo, as charterers in any event were bound to do.
The charterers then got on with it.
Both courts below held that it was impossible to spell a new contract out of these facts.
I agree.
Implications of the owners decision to withdraw
Under all the remaining heads of claim, the charterers argument is substantially the same, namely that any delay or loss arising from the need to discharge the cargo results from the owners decision to withdraw.
That was a decision made at their own election and for their own commercial purposes.
The owners, it is said, must bear the adverse as well as the beneficial consequences of an optional decision made in their own interest.
It is clear that this consideration influenced both courts below, and that it was decisive in the minds of the Court of Appeal.
The factual premise of the argument is of course correct.
It is axiomatic that a withdrawal clause operates at the election of owners, and not automatically.
Two main consequences follow from this.
The first is that owners will not exercise their right of withdrawal unless it is in their commercial interest to do so.
Usually, this will be because market rates of hire have risen.
But it may be in owners interest to withdraw the vessel even if they have not risen, for example, where the charterers are insolvent or owners depend on prompt payment to fund payments under a head charter or charterers payment record occasions administrative or other difficulties.
The second consequence is that any failure on the part of the charterers to pay hire when it falls due will not of itself entitle the owners to damages representing the loss of the bargain or the expenses of termination simply because the owners respond by withdrawing the vessel.
This is because the non payment does not itself destroy the bargain or occasion the expenses, unless in the circumstances it is a repudiation which owners have accepted as such.
But the present claim is not a claim for damages, and the non payment of the June 2008 hire payment in this case was not a repudiation.
This, however, is as much as can usefully be said.
The fact that rather than perform the contract the owners found it more advantageous to exercise an express right of termination is morally and legally neutral.
There are no standards by which the owners reasons may be judged, other than those to be found in the contract.
There is no legal policy specific to termination rights restricting their availability or the consequences of their exercise more narrowly than does the language of the contract or the general law.
More generally, the reasons for any particular withdrawal cannot affect the principle to be applied in resolving an issue like the present one.
Clause 13
Clause 13 provides, so far as relevant: The master (although appointed by owners) shall be under the orders and direction of charterers as regards employment of the vessel, agency or other arrangements.
Bill[s] of lading are to be signed as charterers or their agents may direct, without prejudice to this charter. charterers hereby indemnify owners against all consequences or liabilities that may arise from the master, charterers or their agents signing bills of lading or other documents, or from the master otherwise complying with charterers or their agents orders.
Clause 13 is the employment and indemnity clause which is found in most modern forms of time charter.
The indemnity reflects the breadth of the powers conferred on the charterers as to the employment of the vessel.
As Devlin J observed in Royal Greek Government v Minister of Transport (1949) 83 Ll L Rep 228, 234, if [the owner] is to surrender his freedom of choice and put his master under the orders of the charterer, there is nothing unreasonable in his stipulating for a complete indemnity in return.
Indeed, the courts have held that, subject to the express terms of any particular charterparty and to the limitations which I shall consider below, the indemnity is not just not unreasonable.
It is necessary.
It will generally be implied even in forms of time charter (such as the New York Produce Exchange Form) where it is not expressed.
The scope of the indemnity in clause 13, like that of the corresponding implied term, is very wide (all consequences or liabilities that may arise).
But it is not complete, nor is it unlimited.
In the first place, it has to be read in the context of the owners obligations under the charterparty as a whole.
The owners are not entitled to an indemnity against things for which they are being remunerated by the payment of hire.
There is therefore no indemnity in respect of the ordinary risks and costs associated with the performance of the chartered service.
The purpose of the indemnity is to protect them against losses arising from risks or costs which they have not expressly or implicitly agreed in the charterparty to bear.
What risks or costs the owners have agreed to bear may depend on the construction of other relevant provisions of the contract, or on an informed judgment of the broad range of physical and commercial hazards which are normally incidental to the chartered service, or on some combination of the two.
The classic example of a loss within the indemnity, and probably the commonest in practice, is one which arises from the master complying with the charterers direction to sign bills of lading on terms of carriage more onerous than those of the charterparty.
But the indemnity has been held to be applicable in principle to a wide variety of other circumstances, including compliance with an order to load cargo which is dangerous even on the footing that appropriate care is taken of it, or an order to proceed to a legally unsafe port.
On the other hand, the indemnity will not apply to risks which the owners have contractually assumed, which will usually be the case where they arise from, for example, their own negligence or breach of contract or consequences such as marine fouling which are incidental to the service for which the vessel was required to be available.
Secondly, clause 13 itself limits the indemnity to losses which were caused by complying with the charterers orders.
Like all questions of causation, this one is sensitive to the legal context in which it arises.
It depends on the intended scope of the indemnity as a matter of construction, which is necessarily informed by its purpose.
We are not therefore concerned with questions of remoteness and foreseeability of the kind which would arise in the law of damages, where the object is to limit the range of consequences for which a wrongdoer may be said to have assumed responsibility in the eyes of the law.
Indeed, as Sir Donald Nicholls V C pointed out in Triad Shipping Co v Stellar Chartering & Brokerage Inc (The Island Archon) [1994] 2 Lloyds Rep 227, 238, the more foreseeable the owners loss, the more likely it is to be an ordinary incident of the chartered service and therefore outside the scope of the indemnity.
The real question is whether the charterers order was an effective cause of the owner having to bear a risk or cost of a kind which he had not contractually agreed to bear.
I use the expression effective cause in contrast to a mere but for cause which does no more than provide the occasion for some other factor unrelated to the charterers order to operate.
If the charterers order was an effective cause in this sense, it does not matter whether it was the only one.
For present purposes, the relevant order of the charterers was the order to load the parcel of cargo which was on board the vessel when it was withdrawn.
In my judgment the loss claimed by owners was the consequence of that order.
The need to discharge the cargo in the owners time arose from the combination of two factors, namely (i) that the cargo had been loaded, and (ii) that the purpose for which it had been loaded (ie carriage under the charterparty to its destination) had come to an end with the termination of the charterparty.
In other words, the cargo which charterers had ordered the vessel to load was still on board when the charterparty came to an end.
On any realistic view, this was because the charterers had put it there.
The analysis would have been exactly the same if the charterparty had come to an end for any other reason with cargo still on board, for example by frustration or expiry at the end of the contractual term.
Andrew Smith J and the Court of Appeal both rejected the claim under clause 13 on the ground that the true cause was the owners withdrawal of the vessel.
The judge said at para 35 of his judgment that the owners claims were too remote from the order to load.
Longmore LJ, giving the reasons of the Court of Appeal, observed at para 15 that it was not a natural consequence of ordering [the cargo] to be loaded that it would have to be discharged at the self same port.
The true cause of the necessity for the discharge of the cargo was the fact that, in the light of the withdrawal, the owners required the charterers to discharge the cargo.
In effect, therefore, both courts below found that the withdrawal of the vessel was an independent cause of the loss, breaking the chain of causation between the order to load the cargo and the detention of the vessel after withdrawal.
The difficulty about this is that because the cargo had been loaded, it had to be discharged somewhere, if not at the port of loading then at its destination or possibly at an intermediate port.
The owners decision to withdraw the vessel or, to be precise, the adventitious timing of that decision, merely determined the place at which the discharge of the cargo occurred.
If the owners were to withdraw the vessel, they had to do it promptly upon hire going into default, and it so happened this was when the vessel was still at the port of loading.
But the precise timing of the withdrawal and location of the discharge are irrelevant to the owners loss.
If the vessel had been withdrawn immediately before discharge at the destination, the consequence would have been exactly the same.
It is of course true that discharge at the destination would have been a great deal more beneficial to the charterers than discharge at the port of loading.
This is a point that seems to have influenced the Court of Appeal.
But a claim under clause 13 does not depend on the benefit conferred on the charterers.
It depends on the detriment to the owners.
They would have suffered a detriment of much the same kind wherever the vessel had discharged.
It is fair to say that it was only because of the withdrawal of the vessel that the subsequent discharge of the cargo at Angra dos Reis had to be done in the owners time and without earning contractual hire.
But that is the very reason why the detention of the vessel falls within the indemnity.
The need to discharge the cargo in their own time and at their own expense was not an ordinary incident of the chartered service and was not a risk that the owners assumed under the contract.
It arose after the chartered service had come to an end in accordance with the withdrawal clause in the contract.
Mr Baker QC for the charterers asked rhetorically whether, in that case, the owners would be entitled to claim the cost of sending the vessel in ballast from Angra dos Reis to somewhere else where she could start employment under a new charterparty.
But a claim like that, although ultimately dependent on its particular facts, would be likely to fall on the other side of the line.
The need for a ballast voyage before a vessel can begin her next employment is an ordinary commercial risk associated with the trading of the vessel under a time charter.
case: (1) In my judgment the whole of the 2.64 days during which the vessel was detained resulted from the cargo being on board on the charterers orders at the time of the withdrawal.
The time required to remove it was unnecessarily prolonged by the charterers refusal to recognise the owners right to withdraw the vessel or to make immediate arrangements for the removal of their cargo from a ship that was no longer at their disposal contractually, but that does not alter the character or cause of the delay.
It remains to consider the measure of the indemnity on the facts of this (2) It is not suggested that there is any difference, in the circumstances of this case, between (i) the measure of the owners loss in having to await discharge and then discharge in their own time, and (ii) reasonable remuneration for involuntarily making their ship available during that period.
On the face of it, the opportunity cost to the owners of the detention of their ship is the market rate of hire at the time.
In the absence of any subsisting contractual obligation to make her available at any other rate, the owners loss is the market rate of hire for 2.64 days. (3) Although the Court of Appeal distinguished between the owners right to the value of bunkers consumed (in actually discharging the cargo) and the rest of the owners claim, it seems to me that the two heads of loss must stand or fall together.
The owners are therefore entitled to the value of bunkers consumed during the whole period of detention.
Bailment
Strictly speaking, this makes it unnecessary to address any of the other legal bases put forward by the owners in support of their claim.
But I propose to deal with the question whether the owners were also entitled to succeed at common law as non contractual bailees of the cargo after the withdrawal of the vessel.
I do so partly out of respect for the trial judge who decided the case on that basis, and partly because I think that the commercial and legal logic of the claim in bailment is close to the logic which brings it within clause 13 and would bring it within any corresponding implied term.
On the whole, one would expect a coherent system of law to produce a consistent answer under both heads, and in my judgment it does.
Unlike many civil law systems, English law does not allow a general right of recovery for benefits conferred on others or expenses incurred in the course of conferring them.
In the pejorative phrase which has become habitual, there is no recovery for benefits officiously conferred.
In Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234, 248 Bowen LJ said: The general principle is, beyond all question, that work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone, create any obligation to repay the expenditure.
Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will.
While this remains the general principle, the exceptions have over the years become more important than the rule.
The particular feature of the present case which makes it difficult to apply the general rule is that the original bailment of the cargo had occurred under a previous contractual relationship.
The bailment was therefore consensual, albeit that after the withdrawal of the MT Kos from the time charter, it was no longer contractual.
It is common ground, and clear on the authorities that in these circumstances, the owners had a continuing duty to take reasonable care of the cargo, which they could not escape except by retaining it until arrangements were made to discharge it.
But the owners had in no sense officiously put themselves in this position, nor had they (as the charterers put it in argument), voluntarily assumed possession of the goods.
There is a thin, but consistent line of authority which deals with the legal consequences of this situation.
In Gaudet v Brown (1873) LR 5 PC 134 (Cargo ex Argos), petroleum was shipped in London on the Argos under a bill of lading providing for delivery at Le Havre.
The vessel arrived at Le Havre in the later stages of the Franco Prussian war, when the port was full of munitions, and the landing of flammable cargoes was forbidden.
The master therefore discharged the petroleum into lighters in the outer harbour, and it seems that the shippers (who had retained the bill of lading) could have taken delivery of it there and transported it elsewhere.
But they failed to present the bill of lading or to make any arrangements to receive it.
Having waited for as long as the port authorities would allow him to, the master reshipped the cargo and carried it back to London.
The owners then successfully sued the shippers for freight for the return voyage.
The case appears to have been decided on the footing that the contract of carriage was at an end when the Argos left Le Havre for London, either because the contractual service had been completed or because the contract was frustrated at Le Havre.
The ground of the decision was expressed at pp 165 166 as follows: . not merely is a power given, but a duty is cast on the master in many cases of accident and emergency to act for the safety of the cargo, in such manner as may be best under the circumstances in which it may be placed; and that, as a correlative right, he is entitled to charge its owner with the expenses properly incurred in so doing.
In a case like the present, where the goods could neither be landed nor remain where they were, it seems to be a legitimate extension of the implied agency of the master to hold that, in the absence of all advices, he had authority to carry or send them on to such other place as in his judgment, prudently exercised, appeared to be most convenient for their owner; and if so, it will follow from established principles that the expenses properly incurred may be charged to him.
The authority of the master being founded on necessity would not have arisen if he could have obtained instructions from the defendant or his assignees.
But under the circumstances this was not possible.
A year later, the Court of Exchequer reached a very similar conclusion in Great Northern Railway Co v Swaffield (1874) LR 9 Ex 132.
Mr Swaffield sent his horse by railway to a station at Sandy.
The horse arrived late at night, and the railway company lodged the horse overnight for their own account at a livery stable.
Mr Swaffield failed to collect it on the following morning.
The only basis on which he was prepared to give any instructions about the fate of his horse was that the railway company assumed all responsibility for storing and delivering it to him from the time of its arrival at Sandy.
After four months of this, the railway company lost patience.
They unilaterally delivered the horse to Mr Swaffields farm and then sued him for the livery charges to date.
As in Cargo ex Argos, the case was decided on the footing that the contract of carriage had come to an end, in this case on the day after the arrival of the horse at Sandy, when the performance required of them as carriers was completed.
Counsel did not refer to Cargo ex Argos.
But Baron Pollock drew attention to it in the course of argument and based his judgment upon it.
Having referred to previous authority to the effect that the railway company was bound to take reasonable care of the horse notwithstanding the termination of the contract of carriage, he observed (p 138) that if there were that duty without the correlative right, it would be a manifest injustice.
In his concurring judgment, at page 136, Kelly CB treated the principle as applying because it was necessary for the railway company to incur the expenditure.
They had no choice unless they would leave the horse at the station or in the high road to his own danger and the danger of other people.
The principle applied in these cases has commonly been analysed as depending on the agency of necessity of the carrier, which indeed is how Longmore LJ analysed it in his judgment in this case.
The existence of a coherent doctrine of agency of necessity has occasionally been doubted: see Goff & Jones, The Law of Unjust Enrichment, 8th ed (2011), para. 18 50, where it is suggested that the cases in which it has been invoked are now best understood in other ways.
But so far as the doctrine does have a coherent existence, the case law requires that a bailee of goods should have taken steps in an emergency for the sole benefit of the cargo in circumstances where it was impossible to communicate with the owners of the goods.
On that ground, the Court of Appeal held that the doctrine had no application to the present case, and that that was the end of the matter.
It is true that in Cargo ex Argos the Privy Council used the language of agency and necessity.
But the master of the Argos was not in fact acting as the cargo owners agent, as he would have been if (for example) he had purported to bind him to a contract with a third party, such as a lighterman or a warehouseman.
On the face of it, he was simply carrying the goods back to London on behalf of his owners, in circumstances where there was no contract to do so but no reasonable or practical alternative.
His claim was for additional remuneration for his own services, in excess of the performance required of him under the contract.
As for Swaffield, although Baron Pollock cited authority on agency of necessity, on its facts there was no emergency and no agency.
The true basis of the judgments in Swaffield was that where the property was originally bailed under a contract of carriage and the carrier had no choice but to remain in possession after the contract had ended, the existence of a continuing duty to care for the cargo was a sufficient basis for imposing on its owner an obligation to pay.
Pollock B, I think rightly, regarded this as the principle on which Cargo ex Argos was really founded.
This view of the matter was accepted by the House of Lords in China Pacific SA v Food Corpn of India (The Winson) [1982] AC 939.
The facts were that the Winson, bound for Bombay with a cargo of wheat, stranded on a reef in the South China Sea.
Salvors retained on behalf of the ship and cargo interests off loaded the wheat into barges and took it to Manila, where it was stored for their account in warehouses.
It was common ground that storage under cover was necessary to prevent deterioration of the wheat, and that upon its arrival at the warehouse the salvage services came to an end.
Some time after that, the owners gave notice that they were abandoning the voyage and the contract of carriage thereupon came to an end.
The salvors wrote to the cargo owners solicitors asking them to take delivery of their property, but received no answer.
On these facts the salvors were bailees under the salvage agreement from the time that the cargo was taken off the stranded vessel until it reached the warehouse, and were thereafter non contractual bailees until the cargo owners finally took possession of the wheat from the warehouse.
The issue was whether the cargo owners were liable to the salvors for warehouse charges incurred up to the time when the owners gave notice that they abandoned the voyage.
The cargo owners accepted liability for the charges after that point, but contended that while the contract of carriage subsisted the warehouse charges were the responsibility of the carriers alone.
It was held that the salvors were entitled to succeed.
The leading speech was given by Lord Diplock, with whom the rest of the House agreed.
Lord Diplock considered (p 957) that the case turned on the application of well known and basic principles of the common law of salvage, of bailment and of lien.
He expressed the principle (at p 960) as follows: the bailment which up to the conclusion of the salvage services had been a bailment for valuable consideration became a gratuitous bailment; and so long as that relationship of bailor and bailee continued to subsist the salvors, under the ordinary principles of the law of bailment too well known and too well established to call for any citation of authority, owed a duty of care to the cargo owner to take such measures to preserve the salved wheat from deterioration by exposure to the elements as a man of ordinary prudence would take for the preservation of his own property.
For any breach of such duty the bailee is liable to his bailor in damages for any diminution in value of the goods consequent upon his failure to take such measures; and if he fulfils that duty he has, in my view, a correlative right to charge the owner of the goods with the expenses reasonably incurred in doing so.
He regarded this as being the principle applied in Cargo ex Argos and Swaffield in which the decisive facts, on his analysis, had been (i) that the bailee was left in possession of the goods after the termination of the contract under which the bailment had originally been made, and (ii) that in the absence of any contrary instructions from the cargo owner, the warehousing of the goods was necessary for their preservation: see p 960G H. Lord Diplock added, at p 961: It is, of course, true that in English law a mere stranger cannot compel an owner of goods to pay for a benefit bestowed upon him against his will; but this latter principle does not apply where there is a pre existing legal relationship between the owner of the goods and the bestower of the benefit, such as that of bailor and bailee, which imposes upon the bestower of the benefit a legal duty of care in respect of the preservation of the goods that is owed by him to their owner.
Lord Diplock went on to consider the doctrine of agency of necessity, because it had been submitted on behalf of the cargo owners that a bailee in possession of goods could have authority on that basis only if it was impossible to communicate with the owner of the goods.
The argument was that although the cargo owners were not very communicative, they were never actually out of contact.
This submission was rejected because the restrictions placed by the case law on a bailees authority as an agent of necessity applied only where the bailee was acting as a true agent, ie by purporting to bind the bailor to arrangements with third parties.
They did not apply to a bailees right to reimbursement of his own expenses.
It was sufficient for that purpose that the bailor should have failed to give instructions: see pp 961G 962B.
It is clear that the relevance of this last point was that if the owner of the goods had given instructions, the salvor could by complying with them have relieved himself of any further responsibility.
The decisive point, and the sense in which the word necessity is used in these cases, is that if the bailee is in a position where he has no way of discharging his responsibility to care for the goods without incurring loss or expense, then the loss or expense is for the account of the goods owner.
Lord Simon of Glaisdale, who delivered a concurring judgment, took the same view.
He thought (p 965E) that to confine agency of necessity to cases where the issue was the bailees authority to bind the bailor to contracts with third parties was justified by the fact that the law of bailment will often resolve any issue between alleged principal and agent of necessity, as it has done here.
The Winson was a decision about the law of bailment.
It was not a decision about agency of necessity.
The circumstances which entitle the owners to recover in the present case correspond to those which were decisive in The Winson.
They are (i) that the cargo was originally bailed to the owners under a contract which came to an end while the cargo was still in their possession, (ii) that as a matter of law their obligation to look after the cargo continued notwithstanding the termination of the charterparty, and (iii) that the only reasonable or practical option open to them once the charterparty had come to an end was to retain the cargo until it could be discharged at the port where the vessel was then located.
The Winson was a claim for expenses incurred by the salvors, although Lord Diplocks adoption of the decision in Cargo ex Argos suggests that he would have applied the same principle to a claim for remuneration where the claimant stored and handled the goods with his own facilities.
In principle, that seems right.
The opportunity cost of retaining the vessel in Angra dos Reis while the charterers cargo remained on board was a true cost even if it was not an out of pocket expense.
However, it is unnecessary to go any further into that question because in this context as in that of clause 13, no point is taken about the difference between expenses and remuneration.
Smith J.
Unjust enrichment
It may well be that in the light of recent developments in this area of law, the owners might be entitled to succeed on this basis also, although the measure of recovery would not necessarily be the same.
This, however, raises larger issues which would be better decided in a case where they arise, and possibly in a less specialised context than a dispute about carriage by sea.
Conclusion
In the result, I agree with the conclusion reached on this point by Andrew I would allow the appeal and restore the order of Andrew Smith J.
LORD PHILLIPS
I agree, for the reasons given by Lord Sumption, that this appeal should be allowed.
I wish only to add a brief explanation of why I agree with him and Lord Clarke that the express indemnity provided by Clause 13 applied to the facts of this case.
I do not view the issue as turning upon a choice between competing causes of the requirement to discharge the cargo.
The obligation to discharge a cargo loaded under a time charter will normally be proximately caused by the order to load the cargo.
The reason why the consequences of the obligation to discharge are not normally covered by an indemnity clause such as clause 13 of the charter in this case is that those consequences form part of the services that the owners has contracted to provide under the charter and for which hire is being paid.
Where, however, the charter comes to an end before the cargo has been discharged in circumstances where the consequences are not expressly covered by the charter, those consequences fall naturally within the scope of the indemnity clause.
I accept that the application of the indemnity clause in such circumstances appears to be a novelty, but I can see no argument of principle that precludes this.
LORD MANCE
I agree with the result reached by the majority, but I do so not under clause 13, but on the basis of the principle in The Winson (China Pacific SA v Food Corpn of India [1982] AC 939), with which Lord Sumption deals in paras 18 30.
As he notes (para 29), the charterers in the present case have expressly disclaimed any reliance upon the distinction between reimbursement of expenses and remuneration (as to which, see eg The Principles of the Law of Resitution by Graham Virgo 2nd ed (2006), p 290).
They have done this on the basis that the two would on the facts here equate (ie it cost the owners the market rate to wait in Angra dos Reis).
It is unnecessary to consider the correctness of this concession, and I do not do so.
There is much case law on time charter indemnities.
They may be express, as in the time charters which were the subject of Larrinaga Steamship Co Ld v The King [1945] AC 246, 253 and Royal Greek Government v Minister of Transport (The Ann Stathatos) (1949) 83 Ll L Rep 228 and in the Shelltime 3 form of charter in issue in the present case.
They may also be implied, as in the case of the New York Produce Exchange form of charter, in which the only relevant express obligation is that the owners or master shall be under the orders and directions of the charterers as regards employment, agency and other arrangements.
The existence of an implied time charter indemnity in respect of compliance with charterers orders and direction has long been recognised: see The Athanasia Comninos [1990] 1 Lloyds Rep 277, 290 per Mustill J, and Triad Shipping Co v Stellar Chartering & Brokerage Inc (The Island Archon) [1994] 2 Lloyds Rep 227, 234 per Evans LJ.
The scope and application of an indemnity clause depends upon its precise terms read in the context of the contract as a whole.
Other terms of the contract may mean that it is necessarily or impliedly limited in its scope.
In addition to that, an indemnity clause in the form of clause 13 will not cover matters of navigation or in respect of which owners can by the contract be taken to have assumed the risk.
Within its scope, the present clause also only applies to consequences or liabilities that may arise from [here] the master complying with charterers or their agents orders.
This raises a question of causation.
The search is for the proximate or determining cause.
This was stated in relation to a materially identical clause in Larrinaga Steamship Co Ltd v The King [1945] AC 246, 253 by Viscount Simon LC, with whose speech Lord Thankerton and Wright agreed at pp 253 254.
The issue of causation was considered in depth by Devlin J in The Ann Stathatos 83 Ll L Rep 228.
The decision is at the root of the modern jurisprudence on time charter indemnity clauses, and Lord Sumption cites it in para 9.
One particular passage is worth citing in full, because it bears on an argument advanced by owners in the present appeal, which the majority might otherwise be thought to be accepting.
In The Ann Stathatos the vessel had been damaged by an explosion resulting from an explosive atmosphere created by the cargo of coal and some unidentified act during repair work causing a flame or spark leading to a series of explosions.
The arbitrator selected as the direct or immediate or effective cause of the explosions the latter act.
Owners argued that it was enough that the explosive atmosphere generated by the cargo was a cause.
The argument mirrors a submission made by owners on the present appeal, which was rejected in the following passage: This conclusion clears the ground for consideration of a further submission on behalf of the owner.
The loading, if not the proximate cause, was at any rate, it is argued, a cause of the explosion, and that is sufficient for the purpose of clause 9.
Sir Robert Aske does not in this contention rely on the phrase all consequences; in this I think he is right, having regard to the dictum of Willes J in Ionides v Universal Marine Insurance Co (1863) 14 CB (NS) 259, 289.
He relies on the principle applicable in cases of tort, and he referred again to Burrows v March Gas and Coke Co LR 7 Ex 96, though Baron Pigott, in the court below (LR 5 Ex 67, 73) hardly supports the contention.
He referred also to Minister of Pensions v Chennell [1947] KB 250, where Denning J discusses the whole matter.
As against this, Sir William McNair argues that the term a cause can properly be used only when there are two or more causes equal in proximity, as in Reischer v Borwick [1894] 2 QB 548.
I need not consider this last contention, for I think it is clear that clause 9 is concerned with the proximate cause.
It is a contract of indemnity, and I can see no reason for treating it differently from any other contract of insurance.
The observations of Lord Shaw in The Ikaria [1918] AC 350, 368 and the dicta he there cites are also in point.
The search is therefore for the proximate cause.
Devlin J cited Reischer v Borwick [1894] 2 QB 548 as indicating that there can be situations in which two causes are so closely matched that both are identified as proximate causes.
That is a largely theoretical analysis which finds little practical application in the authorities, and has achieved any prominence only in discussion about exception clauses.
Reischer v Borwick itself was a case on a marine insurance policy covering only . collision, and so not perils of the seas.
The vessel was holed by collision, the hole was temporarily plugged, but the plug failed as she was being towed to safety and she sank due to the inflow of water.
Not surprisingly, the claim succeeded.
Only Lindley LJ addressed the possibility that this situation could and should be analysed as one of concurrent proximate causes (although even he in his concluding remarks identified the injury by collision as really the cause of the loss the causa causans and not merely the causa sine que non).
Both Lopes and Davey LJJ analysed the position throughout in what one would have thought to be more conventional terms as involving a single proximate cause of the sinking (the collision holing the vessel).
Another of the few cases in which courts have discussed the possibility of concurrent causes is Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corpn Ltd [1974] QB 57.
The case involved an insurance claim following on from the decision in Harbutts Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447.
Harbutts factory was burnt down in a fire.
The fire occurred because Wayne Tank had installed a pipeline made of unsuitable and dangerous plastic material and wrapped in heating tape attached to a useless thermostat, and had then switched on the heating and left it unattended overnight without testing.
Wayne Tanks policy contained an exclusion of damage caused by the nature or condition of any goods which they sold or supplied.
Again not surprisingly, both Lord Denning MR (pp 66G 67B and 68A) and Roskill LJ (p 74 B C) preferred to analyse the situation as one of a single effective, dominant and proximate clause (the defective plastic material and thermostat supplied), while only Cairns LJ (p 69A) preferred an analysis of approximately equal causes.
All three member of the Court also indicated that the claim anyway failed (because of the exclusion) even if analysed as one of two concurrent proximate causes (pp 67B 68A, 69B D and 74D 75E).
In both Reischer v Borwick and Wayne Tank, the courts further noted that merely because one can identify concurrent causes does not mean that both are in law proximate causes.
The same point had been made by Lord Shaw fifty years earlier in another leading authority on proximate cause, Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society [1918] AC 350, 370, when he said: Where various factors or causes are concurrent, and one has to be selected, the matter is determined as one of fact, and the choice falls upon the one to which may be variously ascribed the qualities of reality, predominance, efficiency.
That reasoning was followed and applied in Yorkshire Dale Steamship Co Ltd v Minister of War Transport [1942] QC 691.
The issue in that case was whether a vessel lost by stranding in the course of a warlike operation was lost by reason of the warlike operation.
Viscount Simon LC said: Most results are brought about by a combination of causes, and a search for the cause involves a selection of the governing explanation in each case (p 698), Lord Macmillan said: it is not enough that the casualty arose in the course of a warlike operation.
It must also arise out of, and be proximately caused by the warlike operation (p 702), and Lord Wright underlined the point in a well known passage, including the statements that This choice of the real or efficient cause from out of the whole complex of the facts must be made by applying commonsense standards.
The question always is what is the cause, not merely what is a cause (p 706).
Another case involving an exceptions clause where the possibility of rival causes was considered briefly and obiter was Handelsbanken v Dandridge [2002] EWCA Civ 577. [2002] CLC 1227, where in para 47 Potter LJ remarked that the first task of the court is to look to see whether one of the causes is plainly the proximate cause of the loss and that It is only if the court is driven to the conclusion that there was not one dominant cause, but two causes which were equal or nearly equal in their efficiency in bringing about the damage one being a period, the other an exception, that the exception prevails, citing in support Wayne Tank, p 67.
That dictum may go further to blur lines than I would in referring to causes nearly equal in their efficiency, but, once again, the Courts actual view was that this was not the situation on the facts.
The position regarding exclusion clauses in situations where two causes might be said to be operating concurrently was most recently discussed in Global Process Systems Inc and another (Respondents) v Syarikat Takaful Malaysia Berhad [2011] UKSC 5, para 88.
As Devlin J pointed out in The Ann Stathatos at p 237, bottom left, the existence of an exceptions clause is itself likely to affect what falls to be regarded as dominant, proximate or relevant; this is because the whole of what one might call the area naturally appurtenant to the excepted area must be granted to it.
Indemnity clauses are not subject to such considerations.
They cover consequences proximately caused, no more and no less.
This is underlined by another way in which the scope of time charter indemnities is delimited in the case law.
Implied time charter indemnities and indemnities like clause 13 apply only where there is a direct causal link between the orders and the consequences.
The phrase and the emphasis are Lord Hobhouse of Woodboroughs in the leading speech, with which all other members of the House agreed, in Whistler International Ltd v Kawasaki Kisen Kaisha Ltd (The Hill Harmony) [2001] 1 AC 638, 656.
Lord Hobhouse made the comment in the course of discussion of the decision in Larrinaga Steamship Co Ltd v The King [1945] AC 246, a case like the present of an express indemnity.
He cited in support The White Rose [1969] 1 WLR 1098, another case of an express indemnity.
As to implied indemnities: see The Hill Harmony itself and Triad Shipping Co v Stellar Chartering & Brokerage Ltd. (The Island Archon) [1994] 2 Lloyds Rep 227, 238, where Sir Donald Nicholls V C noted that the underlying principle is that the implied indemnity extends only to certain consequences flowing from a shipowner complying with charterers orders, one limitation being that to be within the implied indemnity the loss must arise directly from the charterers instruction (another being that it must also be one which, on a fair reading of the charter party, the shipowner cannot be taken to have accepted: see para 37 above).
In The White Rose, Donaldson J had the benefit of the formidable advocacy of Mr Anthony Evans for owners and Mr Robert Goff QC and Mr Davenport for charterers.
He recited Mr Goffs submission that one vital element had been omitted from Mr Evanss case: namely, that the right to indemnity only arises if and in so far as the loss suffered by the shipowners can be proved to have been caused by compliance with the time charterers instructions (p 1107).
Donaldson J went on to note Mr Goffs further observation that causation is rarely a live issue in cases where an owner has on charterers instructions signed bills of lading committing him to liabilities over and above his charterparty liabilities, but that causation is all important in other cases.
Donaldson J accepted Mr Goffs submission, holding that it was necessary in every case to establish an unbroken chain of causation, and that: A loss may well arise in the course of compliance with the time charterers orders, but this fact does not, without more, establish that it was caused by and is in law a consequence of such compliance and, in the absence of proof of such causation, there is no right to indemnity. (p 1108)
The facts in The White Rose were that a Finnish vessel had been ordered to load in Duluth, Minnesota, where Mr de Chambeau, an employee of charterers stevedores was injured while on board.
He had left his proper place for purposes unconnected with his work, but owners were liable to him under Minnesota law on the ground that the part of the ship where he had gone lacked fencing.
The owners were, it seems, in breach of Finnish law in this respect, but that was expressly disregarded as being irrelevant.
Donaldson J nonetheless agreed with the umpire that owners indemnity claim failed because what connected the accident with, and gave rise to, a potential liability and an actual loss was the provisions of Minnesota law.
There was lacking the necessary causal connection between the order to load and the loss (p 1108).
The selection of the proximate, determining or, in the more modern terminology, real or efficient cause for the purposes of an indemnity has traditionally been described as involving a choice to be made by applying common sense standards as the man in the street or a business or seafaring man would apply them: The Ann Stathatos 83 Ll L Rep 228, 236 per Devlin J, citing Lord Wright in Yorkshire Dale Steamship Co Ltd v Minister of War Transport [1942] AC 691, 706.
Lord Wrights words were more recently cited under the implied indemnity which was in issue under a voyage charter in Total Transport Corpn v Arcadia Petroleum Ltd (The Eurus) [1998] 1 Lloyds Rep 351, 361 362.
Such an approach does not, or should not, conceal, or perhaps reveal in Lord Hoffmanns extra judicial words giving the Chancery Bar Association lecture in 1999 on Common Sense and Causing Loss a complete absence of any form of reasoning.
Rather, it should involve a conclusion reached after identifying the relevant context and purpose of the question and the relevant considerations.
I do not however regard it as wholly irrelevant that three experienced commercial judges have concluded, without it seems real doubt, that the present indemnity clause does not cover the present case.
Perhaps more striking, since the present constitution is also heavy in commercial experience, is the fact that no previous claim like the present can be identified under any express or implied time charter indemnity; this, despite the fact that time charter clauses entitling owners to withdraw in default of payment of any hire instalment, without anti technicality provisions, have been commonplace and have given rise to other contentious issues over many past decades.
Robert Goff J made no mention of any such possibility in Tropwood AG of Zug v Jade Enterprises Ltd (The Tropwind) [1982] 1 Lloyds Rep 45, when considering the nature of a shipowners right to recover from charterers remuneration for services rendered after a ship has been withdrawn from the charterers service under a time charter, pursuant to an express contractual right of withdrawal (p 53).
Apart from any express request which might be found to have been made (to render such services), he thought that their liability (if any) to pay remuneration for the services so rendered can only derive from the principles of the law of restitution.
Of course, if the owners were bound to third parties by bills of lading which charterers had required them to issue, the continuation of the voyage under those separate bill of lading contracts could engage the time charter indemnity, and could (despite Lord Denning MRs contrary dictum on appeal in The Tropwind [1982] 1 Lloyds Rep 232, 237) lead to charterers having to pay owners the market, rather than the charter, rate.
Further, if owners were left with no practical option but to carry the cargo to its destination, then they might still have an argument that their time and money were spent in compliance with the time charterers instructions.
No assistance on this latter situation is derived from the New South Wales Supreme Court decision in J Gadsden Pty Ltd v Strider 1 Ltd (The Aes Express) (1990) 20 NSWLR 57, where the owners failed in a claim against bill of lading holders, who, before the vessels withdrawal from charter, had pre paid freight to charterers under what were charterers bills.
The present case differs materially from both these situations.
Here, if one asks whether the loss suffered by the shipowners was caused by compliance with the time charterers instructions Robert Goff QCs words accepted by Donaldson J in The White Rose [1969] 1 WLR 1098, 1107 1108 the natural answer, it seems to me, is: certainly not.
It was caused because the charter was at an end, the owners were not performing the charterers instructions and they were not receiving hire for the time wasted prior to discharge.
The direct or unbroken causal link required by the authorities is lacking.
The loss did not even arise in the course of compliance with charterers orders, to use Donaldson Js words quoted in paragraph 70 above.
It is true, historically, that no cargo would have been on board but for charterers instructions.
But that is no test of the proximate or the effective cause, as the authorities make clear: see paragraphs 37 to 47 above.
It is also unrealistic to scissor up the instructions between loading and carriage to destination, and to attribute the loss to the instructions to load ignoring the failure to carry.
When one engages in such a division, one is in fact recognising that subsequent events superseded charterers orders and rendered them a matter of history.
The general contractual context in my view also supports a conclusion that the express indemnity clause is inapt to apply to the present situation.
Clause 8 of the charterparty gives owners a simple contractual option.
It is accepted that the mere late payment of one instalment did not constitute a repudiatory breach (or a breach of a condition in a sense like that used in the Sale of Goods Act 1979) which could entitle the owners to damages for loss of the charter.
That loss flowed from the owners exercise of their option to withdraw.
The phrase in clause 8 without prejudice to any claim owners may otherwise have on charterers under this charter does not create a right of action, and looks on its face only to pre existing claims.
So there is no way in which the time spent discharging in Angra dos Reis can be claimed as damages.
Yet it is submitted that, because the owners exercised an option to terminate the charter in mid flow, the charter indemnity provides them as of right not merely with the charter rate (US45,000 per day), but with the market rate (US158,864 per day) in respect of any delay before the vessel is free to move elsewhere to take advantage of the increased market rate.
That would be to give them a claim by way of indemnity for loss they cannot claim by way of damages.
It is also unclear where this submission could or would end.
In shipping law certainty is of recognised importance and disputes not to be encouraged.
The charter required redelivery at the same port as the port of delivery in the Arabian Gulf (clause 3), with hire being paid up to that point.
Logically, the consequences of the charterers orders to proceed to and load cargo at Angra dos Reis could, on owners case, embrace the whole period during which the vessel was returning to the Arabian Gulf, unless she found other paid employment to take her back.
The risk of having to return in ballast to her Arabian Gulf delivery port (or anywhere else) could not be described as an ordinary commercial risk which the owners were prepared to accept under this time charter (cf the last sentence of paragraph 16 of Lord Sumptions judgment), since the owners expressly stipulated against it.
The silence of clause 8 regarding the position post withdrawal also contrasts with clause 18 which expressly provides that, should the vessel be on a ballast or laden voyage at the date the charter should otherwise terminate, charterers shall continue to have the use of the vessel at the charter rate or the market rate if higher.
Under clause 18, the charterers are paying for completion of the services requested.
Under clause 8, owners, having elected to determine the charter, are now seeking by way of indemnity to recover the market rate, without of course having to give any credit for the considerable benefit likely to have accrued to them from such termination.
In conclusion, the majoritys present decision stretches the application of the express charter indemnity beyond any previous decision, without justification, without regard to the potential consequences (including the uncertainty or certainty of ever more ambitious claims) and without need.
The law is capable of dealing with this situation in a more conventional manner.
It will impose on charterers an obligation as bailors to reimburse the owners as bailees for their time and expense spent in looking after the cargo prior to its discharge.
It would, even apart from that, probably also impose on charterers an obligation in restitution in respect of any benefit they could be said to have had through the storage on board the vessel of the cargo.
But those remedies flow either from the service rendered in that respect by the owners under the compulsion of their legal obligations as bailees, or from the benefit received thereby by the charterers, and not from the express indemnity.
It follows that I too would allow the appeal and restore the order of Andrew Smith J, although I would do so for the reasons and on the basis that he gave, and not those adopted by the majority.
LORD CLARKE
I agree with Lord Sumption that, for the reasons he gives, this appeal should be allowed on the Winson point (China Pacific SA v Food Corpn of India [1982] AC 939).
I wish to add a few words of my own on the construction of clause 13 of the charterparty in the light of the sharp difference of opinion between Lord Mance and Lord Sumption.
I have not found this an easy question.
Lord Mance makes a powerful case for a narrower application of clause 13 than that preferred by Lord Sumption.
His analysis owes much to the approach adopted in a number of decided cases.
However, none of them is on facts such as these.
As I see it, the question whether the owners are entitled to succeed under the indemnity provided for in clause 13 involves two sub questions.
The first is one of construction of the clause and the second is whether the owners have shown that they are entitled to succeed under the clause on the particular facts of this case, which is essentially a question of causation.
Construction of clause 13
In order to succeed, the owners must show that the expenses (or loss) they sustained as a result of discharging the cargo at Angra dos Reis in Brazil, which was of course the loading port, in the circumstances described by Lord Sumption, were a consequence of their complying with the charterers order to load the cargo.
The relevant part of clause 13 is in these terms: charterers hereby indemnify owners against all consequences that may arise from the master complying with charterers orders .
I agree with Lord Sumption in paras 10 to 12 that the clause is very wide but that it is neither complete nor unlimited.
In particular, I agree with him that the indemnity is not intended to include consequences which are incidental to the service for which the vessel was required to be available under the charterparty.
So, for example, it would not include any cost of or in relation to the discharge of the cargo in the ordinary course of events, which would be covered by clauses 5 and 6 of the charterparty, which provide for the services to be provided and paid for by the owners and charterers respectively, or by clause 7, which provides for hire to be paid by the charterers to the owners.
Nor, as Lord Mance observes at para 37, would clause 13 cover matters of navigation or in respect of which owners can be taken to have assumed the risk by contract.
I further agree with Lord Sumption that the real question under clause 13 is whether the charterers order to load the cargo was an effective cause of the owners having had to bear a risk or cost of a kind which they had not contractually agreed to bear and that, if the charterers order was an effective cause in the sense that it was not a mere but for cause which did no more than provide the occasion for some other factor unrelated to the charterers order to operate, it does not matter whether it was the only effective cause.
It is not I think helpful to use other adjectives to describe the cause.
Different adjectives have been used over the years, including proximate cause, dominant cause and direct cause.
To my mind they are somewhat misleading because they tend to suggest that the cause must be the most proximate in time or that the search is for the sole cause.
Lord Mance says at para 37 that the search is for the proximate or determining cause.
However, I respectfully disagree because such a formulation suggests that there can be only one such cause, whereas there may, depending upon the circumstances, be more than one effective cause.
It is true that the cases make some reference to the determining or the proximate cause.
For example, in Larrinaga Steamship Co Ltd v The King [1945] AC 246, 252 Viscount Simon LC said that the proximate cause of the stranding of a vessel was not warlike operations.
As he put it at p 253, the vessel was attempting to make a voyage without cargo and suffered from a marine peril when doing so.
The fact that she was ordered to leave port sooner than her acting master thought was wise could not turn her disaster into the consequence of a warlike operation.
He concluded that the proximate or determining cause was a misfortune in navigation, not attributable to any warlike operation at all.
The House of Lords was not considering the possibility of two effective causes.
Lord Mance refers (at paras 38 to 40) in some detail to the decision of Devlin J in Royal Greek Government v Minister of Transport (The Ann Stathatos) (1949) 83 Ll L Rep 228.
On my reading of the arbitrator's findings in that case (as described at pp 231 232) he identified four causes of the first explosion (using the word caused in the wide sense of the word).
Omitting two causes which are irrelevant for present purposes, the arbitrator found that the first explosion was caused by (a) the loading on board of gassy and dusty coal and the battening down of the hatches so as to trap the gasses and leave coal dust suspended in such air as existed in tween deck space and (d) some act on the part of the crew who were repairing the tanks, which act caused a flame or spark.
Devlin J said at p 237 that by the wide sense of the word, the arbitrator meant to include all suggested or possible causes, however remote, and whether causes in the legal sense or not.
He added: From these five [the arbitrator] selects the act which caused the flame or spark and the explosive atmosphere as the direct or immediate or effective causes of the first explosion.
The first explosion is the only explosion which is relevant for present purposes.
It would seem to follow from that conclusion that there were two effective causes and not one.
It would also seem to follow that the arbitrator was choosing causes (a) and (d) as the two effective causes.
However the arbitrator then held (as stated at p 232) that the loading of the coal, while one of the causes of the damage to the ship (using the word causes in its wide sense), was not the direct or immediate or effective cause of the loss or expenses claimed.
It is not clear to me how these findings can be reconciled.
One possibility is that the arbitrator treated cause (a) as two causes and not one, by treating the loading of the coal as a different cause from the presence of the gas.
If that is correct, the arbitrator held that there were two effective causes, namely the presence of the gas and the flame or spark.
It is not easy to see how that is consistent with the view later expressed by the judge that the arbitrator seems to have taken what is immediate in time, by which he must have meant the flame or spark (p 237).
If the arbitrator treated (a) as one cause, namely the loading of cargo in a gaseous state, it is not easy to see how his conclusion that the flame or spark and the explosive atmosphere were the direct or immediate or effective causes of the explosion is consistent with his conclusion that the loading of the coal, while one of the causes of the damage to the ship (using the word causes in its wide sense) was not the direct or immediate or effective cause of the loss or expenses claimed.
As I read the judgment of Devlin J, he concluded (at pp 237 238) that the arbitrator favoured the cause that was immediate in time, namely the initial flame or spark which ignited the gas.
He rejected the submission that the arbitrator misdirected himself by confusing immediate cause with direct or effective cause.
He also rejected (at p 238) the submission that the flame or spark was too remote in law to be the cause of the first explosion.
He then considered whether the loading, which the arbitrator rejected as the direct cause, was too remote in law to be a cause at all.
It was in the light of those conclusions that, in the passage quoted by Lord Mance at para 39, Devlin J considered, at p 238, whether, if it was not the proximate cause, loading was a cause of the explosion.
This part of Devlin Js judgment must be set in the context of the facts.
Perhaps naturally in the light of the arbitrators award, he started with the proximate cause, which the arbitrator had held was the flame or spark which ignited the methane gas.
He considered the possibility of there being more than one proximate cause, but said that it was not necessary to consider it because the indemnity clause was concerned with the proximate cause.
He then expressed his conclusion thus: So the matter comes down to this, that the arbitrator has selected one cause in preference to another as the proximate or direct cause.
I cannot see that any question of law is involved in this selection.
In short, Devlin J held that that conclusion was a conclusion of fact and that the arbitrator had not misdirected himself in law.
In these circumstances, I do not think that the decision or reasoning in The Ann Stathatos is of any real assistance.
The arbitrator had expressly held that there was a sole proximate cause.
It may be that, in the light of his earlier conclusion that the direct or immediate or effective causes of the collision were both (a) the act which caused the spark or flame and (b) the explosive atmosphere, the arbitrator made an error in concluding that the spark or flame was the proximate cause, in the sense of sole proximate cause.
However, if he did, on Devlin Js approach it was an error of fact, not an error of law.
In all the circumstances the decision of Devlin J is an unconvincing basis for a conclusion that the search is for the proximate cause.
As I see it, the question in each case, whether under a contract of insurance or under a contract of indemnity, is whether an effective cause of the alleged loss or expense was a peril insured against or an indemnifying event.
By reference to Devlin Js citation of Reischer v Borwick [1894] 2 QB 548, Lord Mance accepts in para 64 that two causes may be so closely matched that both are identified as effective causes.
However he says that that it is a largely theoretical analysis which finds little practical application in the authorities.
It is true that the authorities do not contain much discussion of the circumstances in which there may be two effective causes.
However, in my opinion, they clearly show that two effective causes can, in principle, exist.
To my mind this can be clearly seen from Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corpn Ltd [1974] QB 57, Lloyd (JJ) Instruments Ltd v Northern Star Insurance Co Ltd (The Miss Jay Jay) [1987] 1 Lloyds Rep 32 and Midland Mainline Ltd v Eagle Star Insurance Co Ltd [2004] EWCA Civ 1042, [2004] 2 Lloyds Rep 604.
The present position can be most clearly seen from the Midland Mainline case, where Sir Martin Nourse, with whom Brooke and Jacob LJJ agreed, expressly held at para 48 that there can be more than one proximate cause of loss.
He cited Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350, Wayne Tank and The Miss Jay Jay as authority for that proposition.
It is true that in Wayne Tank [1974] QB 57, on the facts (which are described by Lord Mance at para 41) the majority of the Court of Appeal, Lord Denning MR and Roskill LJ, held that the proximate cause of the fire was the defective plastic material and thermostat supplied and not the act of switching on the heating and leaving it unattended without testing.
However, in a passage quoted by Sir Martin Nourse at para 10 of the Midland Mainline case, Roskill LJ said that he found it impossible to say that the latter was the sole proximate cause of the fire and, that if he was wrong to say that the defective state of the material and thermostat was the sole proximate cause of the fire, there were two effective proximate causes.
Cairns LJ, whose approach Sir Martin described as different but instructive, said at p 68: But for my part I do not consider that the court should strain to find a dominant cause if, as here, there are two causes both of which can be properly described as effective causes of the loss.
Mr Le Quesne recognised that if there are two causes which are approximately equal in effectiveness, then it is impossible to call one rather than the other the dominant cause.
I should prefer to say that unless one cause is clearly more decisive than the other, it should be accepted that there are two causes of the loss and no attempt should be made to give one of them the quality of dominance.
Those were cases in which it was held that, where the or a proximate, or effective, cause of the loss is excepted by the policy, the insurers are not liable.
It is, however, clear from The Miss Jay Jay that, where there are two effective causes, neither of which is excluded but only one of which is insured, the insurers are liable.
In the Court of Appeal Slade LJ underlined (at p 39) that the authorities show that the question of proximate cause has to be determined by a broad commonsense view of the whole position and that, by proximate, is meant proximate in efficiency.
It was held that the faulty design and construction of the vessel, which was neither an insured peril nor an excepted cause, and perils of the seas, which was an insured peril, were both proximate causes of the loss since they were, as Slade LJ put it at p 40 equal or at least nearly equal in their efficiency in bringing about the damage.
These principles are as I see it correctly summarised in McGillivray on Insurance Law, 11th ed (2008) at para 19 005 under the heading Two effective causes and in McGee on The Modern Law of Insurance 3rd ed (2011) at pp 260 261.
See also to the same effect McCanns Executors v Great Lakes Reinsurance (UK) Plc [2010] CSOH 59, para 112 to 117, where Lord Hodge also stressed the importance of context; Orient Express Hotels Ltd v Assicurazioni General SpA (UK branch) (trading as Generali Global Risk) [2010] EWHC 1186 (Comm), [2011] Bus LR 7 per Hamblen J; and Global Process Systems Inc v Syarikat Takaful Malaysia Bhd [2011] UKSC 5, [2011] Bus LR 537, para 88 per Lord Mance and, in the Court of Appeal, [2009] EWCA Civ 1398, [2010] 2 All ER 248, para 32 per Waller LJ.
I entirely agree with Lord Mance that there must be a causal link between the order and the consequences relied upon.
In short, there must be no break in the chain of causation between the order and the consequences.
This is clear from The White Rose [1969] 1 WLR 1098.
As Lord Mance says at para 45, Donaldson J there accepted that it was necessary in every case to establish an unbroken chain of causation.
That is the sense in which I read Lord Hobhouse of Woodboroughs reference to the necessity for a direct causal link in Whistler International Ltd v Kawasaki Kisen Kaisha Ltd (The Hill Harmony) [2001] 1 AC 638, 656.
Lord Hobhouse was not considering a case like the present.
I do not read him as intending a direct causal link to be different from an effective cause.
I remain of the view expressed above (and in agreement with Lord Sumption) that the question is whether the relevant order was an effective cause of the alleged consequence.
I agree with both Lord Sumption and Lord Mance that in deciding whether causation was established on the facts, it is important to have in mind the context in which the question is asked.
I do not think that the answer can be found in the conclusions on the facts to which Lord Mance has referred.
In particular, I do not think that Donaldson Js conclusion based on the vagaries of Minnesota law in The White Rose is of any assistance in deciding the relevant question of fact in this appeal.
Causation on the facts
Lord Sumption has identified the relevant commercial context.
It is that the charterers gave an order to load the cargo in the ordinary way.
The consequence of that order was that the cargo was indeed loaded and therefore had sooner or later to be discharged.
The failure of the charterers to pay hire timeously triggered the owners right of withdrawal.
When they exercised that right, the question was what should be done with the cargo which was still on board the vessel.
It had to be discharged somewhere.
As it happened, it was discharged at the port of loading but it might have been discharged at the port of discharge or at an intermediate port.
I entirely agree with Lord Sumptions analysis at paras 9 to 16.
In particular I agree with Lord Sumption that the owners motive for exercising the right to terminate is irrelevant.
It was adventitious where and when the termination occurred.
The position would have been the same if the termination had occurred for some other reason than the exercise of an option by the owners, as for example as a result of frustration.
The owners would have had to procure discharge of the cargo and would have incurred expenses and perhaps loss.
They would not have been able to recover such expenses and loss under any of the other provisions of the charterparty.
The reason they would have to incur the expenses is that the cargo was still on board the vessel.
Just as here there are two effective causes of the expenses and loss, namely the withdrawal and the fact that cargo had been loaded, so in a frustration case, there would be two such causes, namely the frustration and the fact that cargo had been loaded and was on board.
I agree with the view expressed by Lord Mance at para 50 that, if the owners were bound to third parties by bills of lading which charterers had required them to issue, the continuation of the voyage under those bill of lading contracts could engage the indemnity under clause 13.
Lord Mance further recognises (to my mind correctly) that if owners were left with no practical option but to carry the cargo to its destination, then they might have an argument that their time and money were spent in compliance with charterers orders.
Indeed, at present I see no reason why they should not succeed under the indemnity in such circumstances.
As I see it, that would be on the basis that the charterers orders would be the orders to load.
In terms of causation, I see no distinction in principle between that case and the present.
For these reasons and the reasons given by Lord Sumption I would allow this appeal on the indemnity point as well as the Winson point.
| The appeal concerns the rights of the owner of a time chartered ship to payment for use of the ship and fuel by the charterer to discharge cargo after the ship has been lawfully withdrawn for non payment of hire.
The appellant is the owner of the ship MT Kos.
The ship was time chartered to the respondent on 2 June 2006 for 36 months.
The charterparty contained a standard form of withdrawal clause entitling the owner to withdraw the vessel if the hire was not paid when due without prejudice to any claim owners may otherwise have on charterers under this contract.
On 31 May 2008 the respondent failed to make the required payment and the appellant withdrew the ship on 2 June 2008.
At the time of the withdrawal the MT Kos was at Angra dos Reis in Brazil and was in the process of being loaded with cargo.
Over the course of 2 and 3 June, the respondent unsuccessfully sought to persuade the appellant to cancel the withdrawal.
The respondent then made arrangements to unload the cargo which was already on the ship, which took until 5 June.
The ship was therefore detained at Angra dos Reis for 2.64 days.
Had the cargo been unloaded immediately upon withdrawal, it would have been detained for one day.
The appellant claimed from the respondent the cost of the service of the ship for the 2.64 days, including bunkers (fuel) consumed in the same period, on a number of different bases: (i) the express terms of an indemnity given in clause 13 of the charterparty (ii) under the terms of a new contract made after the withdrawal (iii) on the ground of unjust enrichment, and (iv) under the law of bailment.
The High Court granted the claim on the last basis alone.
The Court of Appeal allowed the respondents appeal, rejecting all bases for the claim except for the recovery of the value of bunkers consumed in actually discharging the cargo.
The Supreme Court unanimously allows the appeal and restores the order of Andrew Smith J in the High Court.
Lord Sumption (with whom Lord Phillips, Lord Walker and Lord Clarke agree) gives the main judgment, concluding that the express indemnity in the charterparty applied on the facts of this case.
Lord Mance would not have allowed the appeal on this basis but all five justices agreed with Andrew Smith J that the claim could in any event succeed under the law of bailment.
The charterparty The respondent had argued that any delay or loss arising from the need to discharge the cargo was the result of the choice exercised by the appellant to withdraw.
This was however morally and legally neutral [7].
Clause 13 of the contract, an employment and indemnity clause that is found in most modern forms of time charter, provided that the charterers indemnified the owners against all consequences or liabilities that arose from the master complying with the charterers or their agents orders [8].
The clause was very wide, but not unlimited [10].
It had to be read in the context of the owners obligations under the charterparty as a whole [11], and was sensitive to the legal context in which it arose.
The real question was whether the respondents order to load the cargo was an effective cause (not necessarily the only one) of the appellant having to bear a risk or cost which he had not contractually agreed to bear [12] [62].
Here, the detention of the vessel in the appellants own time and at their own expense after the charter had come to an end was not an ordinary incident of the chartered service nor was it a risk that the appellant had assumed under the contract.
It therefore fell within the indemnity [16].
The appellant was entitled to the market rate of hire for 2.64 days and the value of the bunkers consumed [17].
Lord Mance would not have allowed the appeal on this ground.
He considered that the search was one for the proximate or determining cause [37] and that the loss suffered by the appellant was not caused by compliance with the respondents instructions but instead by the fact that the charter was at an end [51].
The fact that no cargo would have been on board but for the instructions was not the test of the proximate or effective cause.
Subsequent events had superseded those instructions and rendered them a matter of history [51].
To apply the indemnity was unnecessary, the general contractual context supported a conclusion that the indemnity clause was inapt to apply [52] and its application would, in his view, open the door to uncertainty [55].
Bailment The appellant was also entitled to succeed at common law as the non contractual bailee of the cargo after the withdrawal of the vessel.
The principles set out in the The Winson (China Pacific SA v Food Corpn of India) [1982] AC 939 applied: the cargo was bailed to the appellant under a contract which terminated whilst the cargo was still in its possession and the appellant could not escape the continuing duty to take reasonable care of the cargo until arrangements were made to discharge it [28].
As bailee, the appellant would be entitled to the bunkers and the opportunity cost of the ship remaining in Angra dos Reis [28].
Other bases for the claim The argument that a new contract had been made after the withdrawal turned entirely on the facts of the case and the courts below had correctly held that no such contract had been made [5].
The argument based on unjust enrichment raised larger issues which the Supreme Court decided not to address in the context of this dispute [31].
|
This appeal is concerned with the liability of a local authority for what is alleged to have been a negligent failure to exercise its social services functions so as to protect children from harm caused by third parties.
The principal question of law which it raises is whether a local authority or its employees may owe a common law duty of care to children affected by the manner in which it exercises or fails to exercise those functions, and if so, in what circumstances.
The facts
The claimants, who have been given anonymity for the purposes of these proceedings and whom I shall refer to as Colin and Graham (not their real names), seek damages for personal injuries suffered while they were children living in the area of the respondent council.
There has been no investigation of the facts, but the matters on which they rely, as set out in the particulars of claim, can be summarised as follows.
In May 2006 the claimants and their mother, whom I shall refer to as Amy (not her real name), were placed by the council in a house on an estate in Poole, adjacent to another family who to the councils knowledge had persistently engaged in anti social behaviour.
Colin was then nine years old and Graham was seven.
Colin is severely disabled both mentally and physically, and requires constant care.
The council made extensive adaptations to the house in order to meet his needs, and provided him with a care package through its child health and disability team.
He had an allocated social worker.
The support provided in respect of Colin was kept under review over the relevant period by the child health and disability team together with Colins social worker.
A core assessment of his needs was updated in November 2006.
Following the placement an incident occurred when children belonging to the neighbouring family sat on Amys car and kicked a football against it.
When she remonstrated with them they abused and threatened her.
She reported the matter to the councils chief executive.
As a result the police attended and issued a warning to the neighbouring family.
This resulted in their targeting Amy and her family for harassment and abuse which persisted over a period of several years.
It included vandalism of Amys car, attacks on the family home, threats of violence, verbal abuse, and physical assaults on Amy and Graham.
These incidents were reported to the council.
Various measures were taken against the neighbouring family, including eviction, the obtaining of injunctions, proceedings for contempt of court, anti social behaviour orders, and the imposition of sentences of imprisonment, but the harassment nevertheless continued.
When Amys requests for assistance from the council and other agencies failed to bring the abuse to an end or to secure the rehousing of her family, she contacted councillors and Members of Parliament, prompting coverage by local and national media.
This resulted in the Home Office commissioning an independent report, which was critical of the police and of the councils failure to make adequate use of powers available under anti social behaviour legislation.
Graham expressed suicidal ideas during 2008, and in September 2009, aged ten, ran away from home leaving a suicide note.
He was then provided with psychotherapy by the local health authority.
A social worker undertook an initial assessment of his needs in October 2009, concluding that Amy should be referred to mental health services and that a core assessment of Grahams needs should be carried out by the councils family support team.
That assessment was completed in February 2010.
Graham was then allocated the same social worker as Colin.
In May 2010 the strategic manager for childrens services acknowledged that the initial assessment had been flawed.
In July 2010 a child protection strategy meeting decided that the risk of Grahams harming himself should be managed under a child in need plan rather than through the child protection system.
The child in need plan was completed later that month.
In November 2010 the council concluded that its assessment of Grahams needs had been flawed and that a revised core assessment should be undertaken by Grahams social worker.
Following its completion in June 2011, the council decided to undertake an investigation in relation to Graham under section 47 of the Children Act 1989 (the 1989 Act).
The following month a child protection conference decided to make Graham subject to a child protection plan.
In the meantime it had been decided that the family should be rehoused away from the estate.
A suitable house was identified, and the necessary adaptations were made.
Amy and the children moved into their new home in December 2011.
It is alleged that the abuse and harassment which the children underwent between May 2006 and December 2011 caused them physical and psychological harm.
The history of the proceedings
The claim form which instituted the present proceedings was issued on behalf of Amy and the children in December 2014, following the striking out of an earlier claim issued in 2012.
The council is the sole defendant.
Particulars of claim were served in April 2015.
They advanced allegations under two limbs.
The first was to the effect that the council, in the exercise of its housing functions, owed Amy and the children a duty of care to protect them from abuse and anti social behaviour by rehousing them.
The second limb was to the effect that the council owed the children a duty of care in relation to the exercise of its functions under sections 17 and 47 of the 1989 Act, which are explained below, and failed to protect them from harm by allowing them to continue to live on the estate.
In April 2015 the council applied for the claim to be struck out.
On 2 October 2015 Master Eastman acceded to the application and struck out the claim.
The main focus of the hearing before him was on the first limb of the claim, and he dealt relatively briefly with the second limb.
Referring to X (Minors) v Bedfordshire County Council [1995] 2 AC 633 and to the discussion in Charlesworth & Percy on Negligence, 10th ed (2001), he concluded that no duty of care arose out of the statutory powers and duties of local authorities under the 1989 Act.
The claimants appealed in relation to the second limb of the claim only.
On 16 February 2016 Slade J allowed the appeal: [2016] EWHC 569 (QB); [2016] HLR 26.
She considered that the principal issue arising was whether the decision of the Court of Appeal in D v East Berkshire Community NHS Trust [2003] EWCA Civ 1151; [2004] QB 558, in which it declined to strike out a childs claim against a local authority arising from action which it had taken to separate her from her father following a negligent investigation of suspected child abuse, had been impliedly overruled by the decisions of the House of Lords in Mitchell v Glasgow City Council [2009] UKHL 11; [2009] AC 874 and of this court in Michael v Chief Constable of South Wales [2015] UKSC 2; [2015] AC 1732.
She concluded that it had not, and that there was no absolute bar to a negligence claim by a child against a local authority for failure to safeguard him or her against abuse.
Whether a common law duty of care was owed by the council to the claimants would in her view depend upon a full examination of the facts.
By an order of the same date she gave the claimants permission to amend their particulars of claim.
Amended particulars of claim were served in March 2016.
These allege both a common law duty of care owed by the council and a duty of care owed by its social workers, social work managers and other staff allocated to the claimants or tasked with investigating their situation, for the breach of which the council is said to be vicariously liable.
It is said that the claimants rely in terms of the statutory backdrop giving rise to a common law duty of care on the statutory duty to safeguard the welfare and promote the upbringing of all children in a local authoritys geographical area, as set out in sections 17 and 47 of [the 1989 Act].
In relation to the council itself, it is said that it had a duty to protect children in its area, and in particular children reported to it as being at foreseeable risk of harm.
Such a risk is alleged to have been communicated to the council in the present case from July 2006, placing it under a duty to investigate whether the claimants were at foreseeable risk of harm, and thereafter to take reasonable steps to protect them from any such risk.
The council is said to have accepted a responsibility for the claimants particular difficulties in purporting to investigate the risk that the claimants neighbours posed to them and subsequently in attempting to monitor the claimants plight.
It is said that in so far as such investigation is shown to have been carried out negligently and/or negligently acted on, the defendant is liable for breach of duty.
In relation to vicarious liability, it is said that each of the social workers and social work managers who was allocated as the social worker or manager for the claimants or tasked with investigating their plight owed them a duty of care.
That duty is said to have included a duty to protect them from physical and psychiatric damage, to monitor their welfare, to arrange for the provision of such medical treatment as they required, to visit them and ascertain their views, wishes, anxieties and complaints, to ascertain whether either of them was at risk of harm from which their mother was unable to protect them, and in the event of such risk to remove them from such risk using the discretion of the defendant to remove the claimants to a home where they would be safe.
It is said that the social workers and social work managers knew or ought to have known that the claimants and their mother were being subjected to violence and abuse from which she was unable to protect them due mainly to her own position and vulnerability as a victim of such violence and abuse, that Colin was being targeted for mockery because of his disabilities, and that Graham was being assaulted and was threatening to commit suicide.
In relation to breach of duty, it is said that the council failed to assess the ability of the claimants mother to protect her children from the level of abuse and violence they were subjected to, and failed to assess that the mother was unable to meet the claimants needs whilst she lived on the estate with them.
As a result, it failed to remove the children from their home: On the balance of probabilities competent investigation at any stage would have led to the removal of the claimants from home.
A child in need assessment should with competent care have been carried out in respect of each claimant by September 2006 at the latest.
By September 2006 no competent local authority would have failed to carry out a detailed assessment and on the balance of probabilities such detailed assessment if carried out competently would and should have led to the conclusion that each of the claimants required removal from home if the family as a whole could not be moved.
With the information obtained by competent assessment in September 2006 on application to the court the defendant would have obtained at least respite care and if necessary by (sic) interim care orders in respect of each claimant.
Any competent local authority should and would have arranged for their removal from home into at least temporary care.
The council appealed against Slade Js decision.
On 21 December 2017 the Court of Appeal allowed the appeal: [2017] EWCA Civ 2185; [2018] 2 WLR 1693.
Irwin LJ gave the main judgment, with which Davis and King LJJ agreed.
Having considered the authorities in detail he concluded that two considerations in particular militated against liability.
The first was the concern articulated in X (Minors) v Bedfordshire County Council and in Hill v Chief Constable of West Yorkshire [1989] AC 53 that liability in negligence will complicate decision making in a difficult and sensitive field, and potentially divert the social worker or police officer into defensive decision making.
The second was the principle, illustrated by cases such as Mitchell v Glasgow City Council and Michael v Chief Constable of South Wales, that in general there is no liability for the wrongdoing of a third party, even where that wrongdoing is foreseeable.
In his view, none of the exceptions to that general principle applied, since this was not a case in which the council, performing its social services functions, brought about the risk of harm or had control over the individuals representing the risk, nor had it assumed responsibility towards the claimants.
The decision of the Court of Appeal in D v East Berkshire was in his view inconsistent with the subsequent decision of this court in Michael, where the majority had rejected an argument, based explicitly on D v East Berkshire, that the common law should be developed in order to achieve consistency with Convention rights.
In his view the Court of Appeal was therefore not bound to follow its decision in the East Berkshire case, applying the doctrine of stare decisis as explained in Young v Bristol Aeroplane Co Ltd [1944] KB 718, 725 726.
In those circumstances, there was no basis for holding the council liable for the wrongdoing of third parties.
King LJ added, in relation to the pleading quoted at para 14 above, that there appeared to be no understanding of the statutory basis upon which an order resulting in the removal of the claimants from their mother could have been made.
She explained that where a mother did not consent to the removal of her children from her care under an interim care order, the local authority must satisfy the court, pursuant to section 38(2) of the 1989 Act, that there were reasonable grounds for believing that the threshold criteria mentioned in section 31(2) were satisfied: in particular, that the child concerned was suffering, or likely to suffer, significant harm attributable to the care given to him not being what it would be reasonable to expect a parent to give to him.
On the facts of the case it seemed highly unlikely that it could be shown that there were reasonable grounds to conclude that the threshold criteria could be satisfied.
Further, numerous Court of Appeal decisions had made it clear that satisfaction of the threshold criteria should not be equated with satisfaction of the case for the removal of a child from its parent.
A care plan for the immediate removal of a child from its parent should only be approved by the court if the child's safety demanded immediate separation: see for example In re G (Interim Care Order) [2011] EWCA Civ 745; [2011] 2 FLR 955.
There was no such order as a respite care order.
She added that the pleadings should have particularised the broad basis on which it was said that the threshold criteria were capable of being satisfied, and why the council would have been permitted to remove the children from their mother.
Had that been done, it would have been apparent that the proposal that they should be removed from their mother was legally unsustainable.
Davis LJ added at paras 117 118, in relation to the alleged duty to seek and obtain a care order under the 1989 Act: It was never said that the mother was an unfit mother.
She loved and cared for her (vulnerable) children.
They loved and needed her.
Nothing she did or did not do caused them any harm: it was the harassment of the neighbours which did.
In the circumstances of this case, there was no justification for potentially separating, without the mothers consent, mother from children, children from mother by use of care proceedings.
To countenance care proceedings in the Family Court in order to overcome (or provide a subsequent remedy for) the problems caused by the neighbours on the estate would be, I would have thought, tantamount to an abuse of the process of that court.
The legislative context
The particulars of claim focus on sections 17 and 47 of the 1989 Act, although mention is also made of the Children Act 2004.
No reliance is placed on the functions of local authorities under legislation relating to the provision of support to carers, the provision of housing, or protection from anti social behaviour.
Section 17 appears in Part III of the 1989 Act, which is concerned with support for children and families.
In particular, section 17 is concerned with the provision of services for children in need, their families and others.
Section 17(10) defines a child in need: a child shall be taken to be in need if (a) he is unlikely to achieve or maintain, or to have the opportunity of achieving or maintaining, a reasonable standard of health or development without the provision for him of services by a local authority under this Part; (b) his health or development is likely to be significantly impaired, or further impaired, without the provision for him of such services; or (c) he is disabled Colin was a child in need as so defined, since he was disabled.
Graham was also assessed to be a child in need in July 2010.
Under section 17(1) it is the general duty of every local authority (a) to safeguard and promote the welfare of children within their area who are in need; and (b) so far as is consistent with that duty, to promote the upbringing of such children by their families, by providing a range and level of services appropriate to those childrens needs.
For the purpose of facilitating the discharge of that general duty, every local authority has the specific duties and powers set out in Schedule 2.
These include a duty to take reasonable steps to identify the extent to which there are children in need within their area, a duty to assess the needs of any child who appears to be in need, and a duty to take reasonable steps, through the provision of services under Part III of the Act, to prevent children suffering ill treatment or neglect: paragraphs 1, 3 and 4 respectively.
Under section 17(6) the services provided under that section may include providing accommodation.
Section 17(1) does not impose a duty to meet the needs of any particular child.
Rather, it is to be read as imposing a duty on the local authority to provide a range and level of services appropriate to meet the various needs of children in its area: R (G) v Barnet London Borough Council [2003] UKHL 57; [2004] 2 AC 208, para 109.
In relation to the provision of accommodation, it is necessary to bear in mind the observations of Lord Hope of Craighead in that case at paras 92 93, with which Lord Millett and Lord Scott of Foscote agreed: 92.
Although the services which the authority provides may include the provision of accommodation (see section 17(6)), the provision of residential accommodation to rehouse a child in need so that he can live with his family is not the principal or primary purpose of this legislation.
Housing is the function of the local housing authority, for the acquisition and management of whose housing stock detailed provisions are contained in the Housing Acts.
Provisions of that kind are entirely absent from this legislation. 93.
A reading of that subsection [section 17(1)] as imposing a specific duty on the local social services authority to provide residential accommodation to individual children in need who have been assessed to be in need of such accommodation would sit uneasily with the legislation in the Housing Acts.
As Mr Goudie pointed out, it could have the effect of turning the social services department of the local authority into another kind of housing department, with a
different set of priorities for the provision of housing
Section 47 appears in Part V of the 1989 Act, which is concerned with the protection of children.
In particular, section 47(1) imposes a duty on local authorities, where there is reasonable cause to suspect that a child . in their area is suffering, or is likely to suffer, significant harm, to make such enquiries as they consider necessary to enable them to decide whether they should take any action to safeguard or promote the childs welfare.
Under section 47(3) those enquiries shall, in particular, be directed towards establishing (so far as material) (a) whether the authority should make any application to the court, or exercise any of their other powers under this Act with respect to the child.
Compulsory powers of intervention are provided in Parts IV and V of the 1989 Act.
In particular, an application can be made to the court under section 31 for a care order or a supervision order, but in terms of section 31(2) such an order can only be made by the court if it is satisfied (so far as material): that the child concerned is suffering, or is likely to (a) suffer, significant harm; and (b) that the harm, or likelihood of harm, is attributable to (i) the care given to the child, or likely to be given to him if the order were not made, not being what it would be reasonable to expect a parent to give to him An interim care order can be made under section 38 of the 1989 Act, but only if the court is satisfied that there are reasonable grounds for believing that the circumstances with respect to the child are as mentioned in section 31(2): section 38(2).
Even if these tests are satisfied at what has become known as the threshold stage, it remains to be considered at the welfare stage whether an order ought to be made.
The Court of Appeal has held that interim care orders should be made only where the childrens safety requires removal, and removal is proportionate in the light of the risks posed by leaving them where they are: In re G (Interim Care Order), para 22.
In relation to care orders, the court must treat the welfare of the child as the paramount consideration, and any interference with article 8 rights must be proportionate: In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33; [2013] 1 WLR 1911, paras 32, 73 and 194 195.
Relevant developments in the law of negligence
It is accepted that the provisions of the 1989 Act which impose duties on local authorities do not create a statutory cause of action.
The question is whether local authorities may instead be liable at common law for breach of a duty of care in relation to the performance of their functions under the Act.
In order to answer that question, it will be necessary to consider a number of authorities decided over the period between about 1995 and the present day.
Before doing so, it may be helpful to begin with an overview, necessarily stated in general and simplified terms, of how legal thinking about the liabilities of public authorities in negligence developed over that period.
As will become apparent, the period has been marked by shifting approaches by the highest court.
In its recent case law this court has attempted to establish a clearer framework.
As was explained in Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4; [2018] AC 736, paras 31 42, public authorities other than the Crown were traditionally understood to be subject to the same general principles of the law of tort, at common law, as private individuals and bodies: see, for example, Entick v Carrington (1765) 2 Wils KB 275 and Mersey Docks and Harbour Board v Gibbs (1866) LR 1 HL 93.
That position might be altered by statute, by imposing duties whose breach gave rise to a statutory liability in tort towards private individuals, or by excluding liability for conduct which would otherwise be tortious at common law: see respectively Gorris v Scott (1874) LR 9 Ex 125 and Geddis v Proprietors of Bann Reservoir (1878) 3 App Cas 430.
In particular, as Lord Reid explained in Dorset Yacht Co Ltd v Home Office [1970] AC 1004, 1030, a person performing a statutory duty was liable for an act which, but for the statute, would be actionable at common law, if he performed the act carelessly so as to cause needless damage.
His liability arose because the defence which the statute provided extended only to the careful performance of the act.
The rationale, Lord Reid explained, was that: Parliament deems it to be in the public interest that things otherwise unjustifiable should be done, and that those who do such things with due care should be immune from liability to persons who may suffer thereby.
But Parliament cannot reasonably be supposed to have licensed those who do such things to act negligently in disregard of the interests of others so as to cause them needless damage.
Lord Reid added at p 1031 that the position was not the same where Parliament conferred a discretion.
If the discretion was exercised lawfully, then the act in question would be authorised by Parliament: But there must come a stage when the discretion is exercised so carelessly or unreasonably that there has been no real exercise of the discretion which Parliament has conferred.
The person purporting to exercise his discretion has acted in abuse or excess of his power.
Parliament cannot be supposed to have granted immunity to persons who do that.
Like private individuals, public bodies did not generally owe a duty of care to confer benefits on individuals, for example by protecting them from harm: see, for example, Sheppard v Glossop Corpn [1921] 3 KB 132 and East Suffolk Rivers Catchment Board v Kent [1941] AC 74.
In this context I am intentionally drawing a distinction between causing harm (making things worse) and failing to confer a benefit (not making things better), rather than the more traditional distinction between acts and omissions, partly because the former language better conveys the rationale of the distinction drawn in the authorities, and partly because the distinction between acts and omissions seems to be found difficult to apply.
As in the case of private individuals, however, a duty to protect from harm, or to confer some other benefit, might arise in particular circumstances, as for example where the public body had created the source of danger or had assumed responsibility to protect the claimant from harm: see, for example, Dorset Yacht Co Ltd v Home Office, as explained in Gorringe v Calderdale Metropolitan Borough Council [2004] UKHL 15; [2004] 1 WLR 1057, para 39.
This traditional understanding was departed from in Anns v Merton London Borough Council [1978] AC 728, where Lord Wilberforce laid down a new approach to determining the existence of a duty of care.
It had two stages.
First, it was necessary to decide whether there was a prima facie duty of care, based on the foreseeability of harm.
Secondly, in order to place limits on the breadth of the first stage, it was necessary to consider whether there were reasons of public policy for excluding or restricting any such prima facie duty.
These included, in the case of public authorities exercising discretionary powers, the supposed non justiciability of decisions falling into the category of policy as opposed to operations.
That two stage approach had major implications for public authorities, as they have a multitude of functions designed to protect members of the public from foreseeable harm of one kind or another, with the consequence that the first stage inquiry was readily satisfied, and the only limits to liability became public policy, including the distinction between policy and operations.
The Anns decision led to a period during which the courts struggled to contain liability, particularly for pure economic loss (ie, economic loss which was not the result of physical damage or personal injury) and for the failures of public authorities to perform their statutory functions with reasonable care.
Clarification of the general approach to establishing a duty of care in novel situations was provided by Caparo Industries plc v Dickman [1990] 2 AC 605, but the decision was widely misunderstood as establishing a general tripartite test which amounted to little more than an elaboration of the Anns approach, basing a prima facie duty on the foreseeability of harm and proximity, and establishing a requirement that the imposition of a duty of care should also be fair, just and reasonable: a requirement that in practice led to evaluations of public policy which the courts were not well equipped to conduct in a convincing fashion.
Although the decision in Anns was departed from in Murphy v Brentwood District Council [1991] 1 AC 398, its reasoning in relation to the liabilities of public authorities remained influential until Stovin v Wise [1996] AC 923, where a majority of the House of Lords reasserted the importance of the distinction in the law of negligence between harming the claimant and failing to confer a benefit on him or her, typically by protecting him or her from harm.
The distinction between policy and operations was also rejected.
The resultant position, as explained by Lord Hoffmann in a speech with which the other members of the majority agreed, was that [in] the case of positive acts, therefore, the liability of a public authority in tort is in principle the same as that of a private person but may be restricted by its statutory powers and duties (p 947: emphasis in original).
In relation to failures to perform a statutory duty, Lord Hoffmann stated at p 952 that [i]f such a duty does not give rise to a private right to sue for breach, it would be unusual if it nevertheless gave rise to a duty of care at common law which made the public authority liable to pay compensation for foreseeable loss caused by the duty not being performed.
Further clarification was provided by the decision in Gorringe v Calderdale Metropolitan Borough Council.
In a speech with which the other members of the Appellate Committee agreed, Lord Hoffmann reiterated at para 17 the importance of the distinction between causing harm and failing to protect from harm, in the context of a highway authoritys alleged duty of care to provide warning signs on the road: It is not sufficient that it might reasonably have foreseen that in the absence of such warnings, some road users might injure themselves or others.
Reasonable foreseeability of physical injury is the standard criterion for determining the duty of care owed by people who undertake an activity which carries a risk of injury to others.
But it is insufficient to justify the imposition of liability upon someone who simply does nothing: who neither creates the risk nor undertakes to do anything to avert it.
Lord Hoffmann also emphasised the difficulty of finding that a statutory duty or power generated a common law duty of care, observing at para 32 that it was difficult to imagine a case in which a common law duty can be founded simply upon the failure (however irrational) to provide some benefit which a public authority has power (or a public law duty) to provide.
Lord Hoffmann stressed at para 38 that the House was not concerned with cases in which public authorities have actually done acts or entered into relationships or undertaken responsibilities which give rise to a common law duty of care.
For example, [a] hospital trust provides medical treatment pursuant to the public law duty in the [National Health Service Act 1977], but the existence of its common law duty is based simply upon its acceptance of a professional relationship with the patient no different from that which would be accepted by a doctor in private practice.
The duty in such a case rests upon a solid, orthodox common law foundation and the question is not whether it is created by the statute but whether the terms of the statute (for example, in requiring a particular thing to be done or conferring a discretion) are sufficient to exclude it.
It took time for the significance of Stovin v Wise and Gorringe to be fully appreciated: they were not cited, for example, in Smith v Chief Constable of Sussex Police [2008] UKHL 50; [2009] AC 225.
Confusion also persisted concerning the effect of Caparo until clarification was provided in Michael and Robinson.
The long shadow cast by Anns and the misunderstanding of Caparo have to be borne in mind when considering the reasoning of decisions concerned with the liabilities of public authorities in negligence which date from the intervening period.
Although the decisions themselves are generally consistent with the principles explained in Gorringe and later cases and can be rationalised on that basis, their reasoning has in some cases, and to varying degrees, been superseded by those later developments.
For the purposes of the present case, it is necessary to consider a number of decisions of the House of Lords concerned with local authorities duties of care to children affected by their discharge of their statutory functions, together with some other cases in which the Court of Appeals decision in D v East Berkshire was considered, and the decisions in Mitchell, Michael and Robinson.
X (Minors) v Bedfordshire County Council
The first authority which is germane to the present case is X (Minors) v Bedfordshire County Council, decided by the House of Lords in 1995.
The case concerned a number of claims against local authorities, some relating to their functions under child care legislation and others to their functions as education authorities.
All of the claims had been struck out as disclosing no cause of action.
In one of the child care appeals, the Bedfordshire case itself, five children brought claims for damages against the council for failing to exercise its statutory powers and duties (including those conferred or imposed by sections 17, 31 and 47 of the 1989 Act, and similar provisions in earlier legislation) so as to protect them from harm at the hands of their parents.
In the other child care appeal, M (A Minor) v Newham London Borough Council, a child and her mother brought claims for damages against the council, the area health authority and a consultant psychiatrist employed by the latter.
The case against the council was based on vicarious liability for the negligence of a social worker in its employment.
It was alleged that he and the psychiatrist had been negligent when investigating allegations of child abuse.
They interviewed the child without taking a full history of the mothers domestic circumstances, with the consequence that they mistakenly assumed, when the child referred to her abuser by his first name, that she was referring to the mothers partner, rather than to another man with the same first name who had previously lived at the mothers address.
They then told the mother that her partner was the abuser, leading her to exclude her partner from her home.
On the basis of the psychiatrists and social workers conclusion that the mother would be unable to protect the child from her partner, the child was taken into compulsory care and placed with foster parents, where she remained for almost a year.
Eventually the mother obtained sight of a transcript of the interview, from which it was apparent that the child had not identified her partner as the abuser.
She then informed the local authority, and the child was returned to her care.
It should be noted at the outset that the Bedfordshire and Newham cases were radically different from one another.
In the former case, the allegation was that the council had failed to protect the children from harm inflicted by third parties.
The question therefore arose whether there were circumstances, such as an assumption of responsibility to protect the children from harm, which placed the council under a common law duty to protect them.
That question did not arise in the Newham case.
There, the allegation was that the councils employee had himself harmed the child, by negligently causing her to be removed from her home and detained against her will, with the result that she suffered a psychiatric disorder.
Unlike in the Bedfordshire case, there was no need to establish an assumption of responsibility towards the child: that is not a necessary ingredient either of the tort of wrongfully depriving a person of her liberty, or of the tort of negligently inflicting a psychiatric injury.
No such distinction was however drawn between the two claims.
Lord Browne Wilkinson gave the leading speech, with which Lord Jauncey of Tullichettle, Lord Lane and Lord Ackner agreed.
He began by dispelling confusion about some aspects of the law governing the liability of public authorities, concluding at pp 734 735 that in order to found a cause of action flowing from the careless exercise of statutory powers or duties, the plaintiff has to show that the circumstances are such as to raise a duty of care at common law.
The mere assertion of the careless exercise of a statutory power or duty is not sufficient.
He went on to explain at p 736 that the exercise of a statutory discretion could not be impugned unless it was so unreasonable as to fall outside the ambit of the discretion conferred: It is clear both in principle and from the decided cases that the local authority cannot be liable in damages for doing that which Parliament has authorised.
Therefore if the decisions complained of fall within the ambit of such statutory discretion they cannot be actionable in common law.
However if the decision complained of is so unreasonable that it falls outside the ambit of the discretion conferred upon the local authority, there is no a priori reason for excluding all common law liability.
In these respects, Lord Browne Wilkinsons approach accords with more recent authorities, as well as the older authorities to which he referred.
In relation to the Bedfordshire case, Lord Browne Wilkinson convincingly rejected the contention that the statutory provisions created a cause of action for breach of statutory duty.
In considering whether the circumstances were such as to impose a duty of care on the council at common law, Lord Browne Wilkinson considered that questions arising from the policy/operational distinction could not be resolved at that preliminary stage.
Nor could the question whether the council had acted in the reasonable exercise of its discretion.
There remained the three issues mentioned in Caparo: whether the defendants could reasonably foresee that the claimants might be injured, whether their relationship with the claimants had the necessary quality of proximity, and whether it was in all the circumstances just and reasonable that a duty of care should be imposed.
The first two of these issues were conceded.
The only question which required to be decided was whether it was just and reasonable to impose a duty of care.
In that regard, Lord Browne Wilkinson concluded at pp 749 751 that there were a number of reasons of public policy for denying liability: the multi disciplinary nature of the system of decision making, the delicacy and difficulty of the decisions involved, the risk that local authorities would respond to the imposition of liability by adopting a defensive approach to decision making, the risk of vexatious and costly litigation, and the availability of administrative complaints procedures.
Lord Browne Wilkinson also noted that Caparo required that, in deciding whether to develop novel categories of negligence, the court should proceed incrementally and by analogy with decided categories.
The nearest analogies, in his view, were the cases where a common law duty of care had been sought to be imposed upon the police, in relation to the protection of members of the public, and upon statutory regulators of financial dealings, in relation to the protection of investors.
In neither of those situations had it been thought appropriate to impose a common law duty of care: Hill v Chief Constable of West Yorkshire and Yuen Kun Yeu v Attorney General of Hong Kong [1988] AC 175.
No claim was made in the Newham case on the basis of direct liability.
In relation to the question of vicarious liability raised by that case, and also potentially by the Bedfordshire case, Lord Browne Wilkinson accepted at p 752 that the social worker and the psychiatrist exercised professional skills, and that in general a professional duty of care is owed irrespective of contract and can arise even where the professional assumes to act for the plaintiff pursuant to a contract with a third party, as in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 and White v Jones [1995] 2 AC 207.
The social worker and the psychiatrist had not, however, assumed any responsibility towards the claimants.
Although the carrying out of their duties involved contact with or a relationship with the claimants, they were nevertheless employed or retained to advise the local authority and the health authority respectively, not to advise or treat the claimants.
The position was not the same as in Smith v Eric S Bush [1990] 1 AC 831, where the purchaser of a house had foreseeably relied on the advice given by the surveyor to the building society which was going to lend money on the security of the property.
Even if the advice tendered by the social worker to the local authority came to the knowledge of the child or his parents, they would not regulate their conduct in reliance on the report.
The effect of the report would be reflected in the way the local authority acted.
Nor was the position the same as in Henderson v Merrett Syndicates, where the duty of care to the claimants was imposed by the terms of the defendants contract with a third party; so also in White v Jones.
Lord Browne Wilkinson concluded at p 753: In my judgment in the present cases, the social workers and the psychiatrist did not, by accepting the instructions of the local authority, assume any general professional duty of care to the plaintiff children.
The professionals were employed or retained to advise the local authority in relation to the well being of the plaintiffs but not to advise or treat the plaintiffs.
Lord Browne Wilkinson added that in any event, the same policy considerations which led to the view that no direct duty of care was owed by the local authority applied with at least equal force to the question whether it would be just and reasonable to impose a duty of care on the social worker and the psychiatrist.
The psychiatrist also benefited from witness immunity.
The fundamental problem with this reasoning, so far as relating to an assumption of responsibility, is that as explained in para 38 above, the liability of the social worker and the psychiatrist in the Newham case did not depend on whether they had assumed a responsibility towards the child.
Lord Browne Wilkinsons conclusion that there was no assumption of responsibility in the child abuse cases can be contrasted with his conclusion in the education cases, which concerned failures to diagnose and address special educational needs.
He concluded in the first of those cases (the Dorset case) that a direct claim could lie against the local authority on the basis that it was offering a service to the public, namely the provision of psychological advice, which the claimant had accepted.
By holding itself out as offering a service, it came under a duty of care to those using the service, in the same way as a health authority conducting a hospital under statutory powers was under a duty of care to those whom it admitted.
There could also be vicarious liability for negligence on the part of the educational psychologists which the local authority employed to provide the service, and on whose professional advice the claimants parents were said to have relied.
The position was similar in the second education case (the Hampshire case), which was based on vicarious liability for the negligence of a headmaster and an advisory teacher.
Lord Browne Wilkinson concluded that, whether it was operated privately or under statutory powers, a school which accepted a pupil assumed responsibility for his educational needs.
The education of the pupil was the very purpose for which the child went to the school.
The head teacher, being responsible for the school, came under a duty of care to exercise the reasonable skills of a headmaster in relation to such educational needs.
The position was the same where an advisory teacher was brought in to advise on the educational needs of a specific pupil, whether he was consulted privately or was provided by the local authority.
If he knew that his advice would be communicated to the pupils parents, he must foresee that they would rely on such advice.
Therefore, in giving that advice, he owed a duty to the child to exercise the skill and care of a reasonable advisory teacher.
Barrett v Enfield London Borough Council
The next case in the House of Lords concerned with local authorities statutory responsibilities towards children was Barrett v Enfield London Borough Council [2001] 2 AC 550.
The House declined to strike out a claim alleging that, in making or failing to make a number of decisions relating to a child who had been in its care throughout his childhood, a local authority had been in breach of a common law duty of care, and also alleging that social workers employed by the local authority had failed in a duty of care owed by them in carrying out its obligations to monitor the childs welfare.
Most of the allegations concerned failures to confer benefits on the claimant.
The critical difference from X (Minors) v Bedfordshire, as Lord Slynn of Hadley explained in a speech with which Lord Nolan and Lord Steyn agreed, was that the claim in Barrett v Enfield related to conduct occurring after the child had been taken into care.
Lord Slynn drew on the analogy of a school which accepted a pupil and thereby assumed responsibility for his educational needs, giving rise to a duty of care, as Lord Browne Wilkinson had stated in X (Minors) v Bedfordshire, and that of a prison which had a prisoner in its custody, and consequently assumed responsibility for his physical wellbeing, again giving rise to a duty of care, as had been held in R v Deputy Governor of Parkhurst, Ex p Hague [1992] 1 AC 58.
As Lord Hutton explained in his concurring speech, with which Lord Nolan and Lord Steyn agreed, the effect of taking the child into care was that the local authority assumed responsibility for his care.
The statutory powers and duties might have provided the local authority with defences in respect of its specific acts or omissions, but that could not be decided without an investigation of the facts.
The committee rejected the argument that to impose liability on local authorities for careless acts or omissions in relation to a child in their care would be contrary to public policy.
Lord Slynn approved at p 568 an observation in the Court of Appeal that the argument that imposing a duty of care might lead to defensive conduct should normally be a factor of little, if any, weight.
He also rejected the argument that the administrative remedies to which Lord Browne Wilkinson had referred in X (Minors) v Bedfordshire were likely to be as effective as the recognition of a duty of care.
Phelps v Hillingdon London Borough Council
In Phelps v Hillingdon London Borough Council [2001] 2 AC 619 an enlarged committee of the House of Lords considered a number of claims alleging negligence in the assessment of children with special educational needs, with the result that they did not receive the educational facilities which would otherwise have been provided.
As in the Bedfordshire case, the claims were based on failures to confer a benefit.
They were advanced both on the basis of the local authorities vicarious liability for breaches of a duty of care owed by teachers and educational psychologists in their employment, and also on the basis that the authorities were themselves in breach of a duty of care owed to the children.
In the one case which had gone to trial (the Phelps case), it was established, contrary to the understanding on which the education cases had been decided in X (Minors) v Bedfordshire, that the local authority did not offer a psychology service open to the public, in the same way as a hospital is open for the purpose of treating patients.
Instead, the psychology service was established to advise the local authority.
Nevertheless Lord Slynn, with whose speech Lord Jauncey of Tullichettle, Lord Lloyd of Berwick, Lord Hutton and Lord Millett agreed, concluded at p 654 that where an educational psychologist is specifically called in to advise in relation to the assessment and future provision for a specific child, and it is clear that the parents acting for the child and the teachers will follow that advice, prima facie a duty of care arises.
Lord Clyde, with whose speech Lord Jauncey, Lord Lloyd, Lord Hutton and Lord Millett also agreed, emphasised at p 675 that the psychologist in the Phelps case was advising the child through her parents, as well as the local authority, since it was clear that they were going to rely on the advice in question.
As in X (Minors) v Bedfordshire, the question whether the child (through his or her parents) was the intended recipient of professional advice, or could be expected to rely on advice provided to the local authority, was the key to whether there was an assumption of responsibility giving rise to a duty of care.
Lord Millett commented at p 677 that this reasoning was based on the Hedley Byrne principle (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465).
In addressing counter arguments based on public policy, the committee called into question much of the policy based reasoning advanced by Lord Browne Wilkinson in X (Minors) v Bedfordshire.
The idea that the multi disciplinary nature of decision making was a good reason for denying the existence of a duty of care was rejected by Lord Slynn, Lord Nicholls and Lord Clyde at pp 655 656, 665 666 and 674 respectively.
The risk of vexatious and costly litigation, and the availability of statutory complaints procedures, were also rejected by Lord Nicholls and Lord Clyde as reasons for refusing to recognise a duty of care, at pp 667 and 672 respectively.
D v East Berkshire Community NHS Trust
The case of D v East Berkshire Community NHS Trust, decided by the Court of Appeal in 2003, involved three appeals which were heard together.
In the first appeal (East Berkshire), a mother claimed damages in respect of psychiatric injury alleged to have been suffered as a result of being falsely accused by doctors of suffering from Munchausen syndrome by proxy.
In the second appeal (Dewsbury), a father and his daughter claimed for psychiatric injury and financial loss resulting from unfounded allegations by doctors and social workers of sexual abuse, which led to the father and daughter being prevented from seeing one another for about a fortnight.
The daughters claim was thus analogous to that of the child in the Newham case considered in X (Minors) v Bedfordshire.
In the third appeal (Oldham), parents claimed in respect of psychological distress suffered as a result of unfounded allegations by doctors of having inflicted injuries on their daughter, which led to the child being separated from her parents for almost a year.
The Dewsbury appeal was thus the only case which concerned social workers and the local authority which employed them.
The claims in the three appeals were brought against the local authority in the Dewsbury case, and the health authorities in the other two cases, on the basis of vicarious liability.
In each case, the court of first instance had determined as a preliminary issue that no duty of care was owed.
It was common ground in the appeals that the critical issue was whether the third element of the tripartite test understood to have been adopted in Caparo, that the imposition of a duty of care was fair, just and reasonable, was satisfied.
In that regard, the Court of Appeal noted that several of the policy factors which Lord Browne Wilkinson relied on, in X (Minors) v Bedfordshire, had been questioned in Barrett v Enfield and Phelps v Hillingdon.
Furthermore, the Human Rights Act 1998 had come into force since X (Minors) v Bedfordshire was decided.
The effect of section 8 was to impose a potential liability on local authorities to compensate children where there was a failure to protect them from ill treatment and neglect which infringed their rights under article 3 of the European Convention on Human Rights, and to compensate children and their parents where the children were taken into care, or prevented from having contact with a parent, in circumstances which violated their rights under article 8.
Litigation of a kind which in X (Minors) v Bedfordshire the House of Lords had considered it important to avoid as a matter of public policy had therefore become, under statute, a potential consequence of the conduct of those involved in taking decisions in child abuse cases.
In those circumstances, the court stated at para 81, the reasons of policy that led the House of Lords to hold that no duty of care towards a child arises, in so far as those reasons have not already been discredited by the subsequent decisions of the House of Lords, will largely cease to apply.
It concluded at para 84: It follows that it will no longer be legitimate to rule that, as a matter of law, no common law duty of care is owed to a child in relation to the investigation of suspected child abuse and the initiation and pursuit of care proceedings.
It is possible that there will be factual situations where it is not fair, just or reasonable to impose a duty of care, but each case will fall to be determined on its individual facts.
Although a duty of care might be owed to the child, the court considered that the position of the parents was different.
In view of the potential conflict between the best interests of the child and the interests of the parents, there were in the courts view cogent reasons of public policy for concluding that, where child care decisions were being taken, no common law duty of care should be owed to the parents.
Another way of expressing the point would have been to say that the imposition of a common law duty of care towards the parents would be inconsistent with the statutory framework, since it would interfere with the performance by the authority of its statutory powers and duties in the manner intended by Parliament.
Applying those conclusions to the facts of the individual appeals, the court concluded that no duty of care was owed to the mother in the East Berkshire case, the father in the Dewsbury case, or the parents in the Oldham case.
On the other hand, X (Minors) v Bedfordshire could no longer be regarded as precluding the claim by the child in the Dewsbury case against the local authority for negligence in the manner in which its employees contributed to the child protection investigation.
The court did not need to consider whether there had been an assumption of responsibility towards the child, since the doctors and social workers were alleged to have harmed her, rather than to have failed to protect her from harm.
The Court of Appeals reasoning effectively knocked away the public policy objection to liability.
It did not, however, undermine some other aspects of the reasoning in X (Minors) v Bedfordshire.
It remained the position that, where a decision under challenge was taken in the exercise of a statutory discretion, it was necessary to establish that the decision fell outside the ambit of the discretion and was not, therefore, authorised by Parliament.
It also remained necessary, in circumstances where a duty of care depended on an assumption of responsibility, to establish that there had been such an assumption of responsibility, and that the duty contended for fell within its scope.
The parents in D v East Berkshire appealed to the House of Lords.
Their appeals were dismissed: [2005] UKHL 23; [2005] 2 AC 373.
No issue was taken with the Court of Appeals decision concerning the child in the Dewsbury appeal, and it was conceded that the doctors in the other appeals owed a duty of care to the children.
Like the Court of Appeal, the House of Lords considered that the duty of care admittedly owed to the child in any case of suspected abuse would be compromised by the imposition of a concurrent duty of care towards the parents, since the interests of the parents might conflict with those of the child.
In those circumstances, no duty of care could be owed to the parents.
Lord Nicholls, in a speech with which Lord Steyn, Lord Rodger of Earlsferry and Lord Brown of Eaton under Heywood agreed, observed at para 82 that the law had moved on since the decision in X (Minors) v Bedfordshire: There the House held it was not just and equitable to impose a common law duty on local authorities in respect of their performance of their statutory duties to protect children.
Later cases mentioned by my noble and learned friend, Lord Bingham of Cornhill, have shown that this proposition is stated too broadly.
Local authorities may owe common law duties to children in the exercise of their child protection duties.
The latter sentence made it clear that the House of Lords accepted that a duty of care could be owed to the child.
Later authorities
The case of Kay v Lambeth London Borough Council [2006] UKHL 10; [2006] 2 AC 465 was not concerned with social services, but it raised a question as to whether there were circumstances in which lower courts might not be bound by decisions of the House of Lords, in the light of contrary decisions of the European Court of Human Rights.
In a speech with which the other members of the committee expressed agreement on that aspect of the case, Lord Bingham concluded that lower courts should normally follow precedents which are binding on them under the domestic principles of stare decisis.
He admitted one partial exception to that rule.
Explaining that there were a number of considerations which made X v Bedfordshire a very exceptional case, he stated at para 45 that on these extreme facts the Court of Appeal was entitled to hold, as it did in para 83 of its judgment in D [v East Berkshire], that the decision of the House in X v Bedfordshire, in relation to children, could not survive the 1998 Act.
The case of Mitchell v Glasgow City Council, decided by the House of Lords in 2009, concerned the question whether a local authority owed a duty of care to warn one of its tenants that he might be in danger when it responded to previous violent behaviour towards him by his neighbour by inviting the neighbour to a meeting and telling him that continued anti social behaviour could result in his eviction.
Following the traditional approach re established in Stovin v Wise and Gorringe, the local authority was held not to be under a duty of care to protect its tenant from harm inflicted by a third party.
It was accepted that there were particular situations where a duty of care could arise, such as where the defendant had created the source of the danger, or where the third party was under the defendants supervision or control, or where the defendant had assumed a responsibility to the claimant which lay within the scope of the duty alleged, but no such circumstances existed in the case at hand.
No reference was made to the decision of the Court of Appeal in D v East Berkshire.
The case of Michael v Chief Constable of South Wales Police, decided by this court in 2015, concerned the question whether the police owed a duty of care to a person who made an emergency call reporting threats of violence by a third party.
Following essentially the same approach as in Stovin v Wise, Gorringe and Mitchell, this court decided by a majority that no duty of care was owed.
It was recognised that liability for harm caused by a third party could arise in certain situations, such as where the wrongdoer was under the defendants control, or where the defendant had assumed a responsibility towards the claimant to protect her, but the situation in the case at hand was not considered to be of that kind.
In Michael, the decision of the Court of Appeal in D v East Berkshire was relied on in support of an argument that the common law should be developed in harmony with the obligations of public authorities under the Human Rights Act.
That argument was however rejected by Lord Toulson, who observed that the same argument had also been rejected by the House of Lords in Smith v Chief Constable of Sussex Police.
The majority of the court agreed.
As explained earlier, the reasoning of the Court of Appeal in the East Berkshire case was not that, because the European Court of Human Rights had found violations of the Convention, it followed that British courts should follow suit under the law of tort.
Rather, the reasoning was that, since claims could be brought under the Convention, it followed that claims could also be brought under the Human Rights Act: a possibility which pulled the rug from under some of the policy based reasoning in X (Minors) v Bedfordshire.
Most recently, the decision of this court in 2018 in the case of Robinson v Chief Constable of West Yorkshire Police drew together several strands in the previous case law.
The case concerned the question whether police officers owed a duty to take reasonable care for the safety of an elderly pedestrian when they attempted to arrest a suspect who was standing beside her and was likely to attempt to escape.
The court held that, since it was reasonably foreseeable that the claimant would suffer personal injury as a result of the officers conduct unless reasonable care was taken, a duty of care arose in accordance with the principle in Donoghue v Stevenson [1932] AC 562.
Such a duty might be excluded by statute or the common law if it was incompatible with the performance of the officers functions, but no such incompatibility existed on the facts of the case.
The court distinguished between a duty to take reasonable care not to cause injury and a duty to take reasonable care to protect against injury caused by a third party.
A duty of care of the latter kind would not normally arise at common law in the absence of special circumstances, such as where the police had created the source of danger or had assumed a responsibility to protect the claimant against it.
The decision in Hill v Chief Constable of West Yorkshire was explained as an example of the absence of a duty of care to protect against harm caused by a third party, in the absence of special circumstances.
It did not lay down a general rule that, for reasons of public policy, the police could never owe a duty of care to members of the public.
Robinson did not lay down any new principle of law, but three matters in particular were clarified.
First, the decision explained, as Michael had previously done, that Caparo did not impose a universal tripartite test for the existence of a duty of care, but recommended an incremental approach to novel situations, based on the use of established categories of liability as guides, by analogy, to the existence and scope of a duty of care in cases which fall outside them.
The question whether the imposition of a duty of care would be fair, just and reasonable forms part of the assessment of whether such an incremental step ought to be taken.
It follows that, in the ordinary run of cases, courts should apply established principles of law, rather than basing their decisions on their assessment of the requirements of public policy.
Secondly, the decision re affirmed the significance of the distinction between harming the claimant and failing to protect the claimant from harm (including harm caused by third parties), which was also emphasised in Mitchell and Michael.
Thirdly, the decision confirmed, following Michael and numerous older authorities, that public authorities are generally subject to the same general principles of the law of negligence as private individuals and bodies, except to the extent that legislation requires a departure from those principles.
That is the basic premise of the consequent framework for determining the existence or non existence of a duty of care on the part of a public authority.
It follows (1) that public authorities may owe a duty of care in circumstances where the principles applicable to private individuals would impose such a duty, unless such a duty would be inconsistent with, and is therefore excluded by, the legislation from which their powers or duties are derived; (2) that public authorities do not owe a duty of care at common law merely because they have statutory powers or duties, even if, by exercising their statutory functions, they could prevent a person from suffering harm; and (3) that public authorities can come under a common law duty to protect from harm in circumstances where the principles applicable to private individuals or bodies would impose such a duty, as for example where the authority has created the source of danger or has assumed a responsibility to protect the claimant from harm, unless the imposition of such a duty would be inconsistent with the relevant legislation.
Assumption of responsibility
It is apparent from the cases so far discussed that the nature of an assumption of responsibility is of importance in the present context.
That topic should be considered before turning to the circumstances of the present case.
Although the concept of an assumption of responsibility first came to prominence in Hedley Byrne in the context of liability for negligent misstatements causing pure economic loss, the principle which underlay that decision was older and of wider significance (see, for example, Wilkinson v Coverdale (1793) 1 Esp 75).
Some indication of its width is provided by the speech of Lord Morris of Borth y Gest in Hedley Byrne, with which Lord Hodson agreed, at pp 502 503: My Lords, I consider that it follows and that it should now be regarded as settled that if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise.
The fact that the service is to be given by means of or by the instrumentality of words can make no difference.
Furthermore, if in a sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise.
It is also apparent from well known passages in the speech of Lord Devlin, at pp 528 529 and 530: I think, therefore, that there is ample authority to justify your Lordships in saying now that the categories of special relationships which may give rise to a duty to take care in word as well as in deed are not limited to contractual relationships or to relationships of fiduciary duty, but include also relationships which in the words of Lord Shaw in Norton v Lord Ashburton [1914] AC 932, 972 are equivalent to contract, that is, where there is an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract.
I shall therefore content myself with the proposition that wherever there is a relationship equivalent to contract, there is a duty of care.
Where, as in the present case, what is relied on is a particular relationship created ad hoc, it will be necessary to examine the particular facts to see whether there is an express or implied undertaking of responsibility.
Since Hedley Byrne, the principle has been applied in a variety of situations in which the defendant provided information or advice to the claimant with an undertaking that reasonable care would be taken as to its reliability (either express or implied, usually from the reasonable foreseeability of the claimants reliance upon the exercise of such care), as for example in Smith v Eric S Bush, or undertook the performance of some other task or service for the claimant with an undertaking (express or implied) that reasonable care would be taken, as in Henderson v Merrett Syndicates Ltd and Spring v Guardian Assurance plc [1995] 2 AC 296.
In the latter case, Lord Goff observed at p 318: All the members of the Appellate Committee in [Hedley Byrne] spoke in terms of the principle resting upon an assumption or undertaking of responsibility by the defendant towards the plaintiff, coupled with reliance by the plaintiff on the exercise by the defendant of due care and skill.
Lord Devlin, in particular, stressed that the principle rested upon an assumption of responsibility when he said, at p 531, that the essence of the matter in the present case and in others of the same type is the acceptance of responsibility.
Furthermore, although Hedley Byrne itself was concerned with the provision of information and advice, it is clear that the principle in the case is not so limited and extends to include the performance of other services, as for example the professional services rendered by a solicitor to his client: see, in particular, Lord Devlin, at pp 529 530.
Accordingly where the plaintiff entrusts the defendant with the conduct of his affairs, in general or in particular, the defendant may be held to have assumed responsibility to the plaintiff, and the plaintiff to have relied on the defendant to exercise due skill and care, in respect of such conduct.
That approach is reflected in the cases previously discussed.
In X (Minors) v Bedfordshire, the social workers were held not to have assumed any responsibility towards the claimants in the child abuse cases on the basis that they were not providing their professional services to the claimants, and it was not reasonably foreseeable that the claimants would rely on the reports which they provided to their employers.
In the education cases, on the other hand, the local authority assumed responsibility for the advisory service which it was understood to provide to the public, since the public could reasonably be expected to place reliance on the advice; a school assumed responsibility for meeting the educational needs of the pupils to whom it provided an education; the headmaster came under a duty of care by virtue of his responsibility for the school; and an advisory teacher assumed responsibility for advice which he knew would be communicated to a childs parents and on which they would foreseeably rely.
In Barrett v Enfield, the local authority assumed responsibility for the welfare of a child when it took him into its care.
In Phelps v Hillingdon, the educational psychologist assumed responsibility for the professional advice which he provided about a child in circumstances where it was reasonably foreseeable that the childs parents would rely on that advice.
It is convenient at this point to consider a submission advanced on behalf of the council in the present case, said to be supported by some recent decisions of the Court of Appeal, that a public authority cannot assume responsibility merely by operating a statutory scheme.
The submission was based primarily on the judgment of Dyson LJ in Rowley v Secretary of State for Work and Pensions [2007] EWCA Civ 598; [2007] 1 WLR 2861, paras 51 55, where it was held that the Secretary of State, in carrying out his statutory duty to make an assessment of child support maintenance, did not assume a responsibility towards the parent with care of the children in question.
Dyson LJ focused on the requirement that responsibility must be voluntarily accepted or undertaken, as Lord Devlin put it in Hedley Byrne at p 529: a requirement which, he held, was not met merely by the Secretary of States performance of his statutory duty under the legislation.
That decision was followed in X v Hounslow London Borough Council [2009] EWCA Civ 286; [2009] 2 FLR 262, a case with similarities to the present case, where it was held that a local authoritys social services and housing departments had not assumed a responsibility to protect vulnerable council tenants and their children from harm inflicted by third parties.
Sir Anthony Clarke MR, giving the judgment of the Court of Appeal, observed at para 60 that the case was not one of assumption of responsibility unless the assumption of responsibility could properly be held to be voluntary.
That was because a public authority will not be held to have assumed a common law duty merely by doing what the statute requires or what it has power to do under a statute, at any rate unless the duty arises out of the relationship created as a result, such as in Lord Hoffmanns example [in Gorringe, para 38] of the doctor patient relationship.
Since the claimants case amounted to no more than that the council had failed to move them into temporary accommodation in breach of its statutory duty or in the exercise of its statutory powers, it failed because none of the statutory provisions relied on gave rise to a private law cause of action.
The correctness of these decisions is not in question, but the dicta should not be understood as meaning that an assumption of responsibility can never arise out of the performance of statutory functions.
Dyson LJ based his reasoning in Rowley on the decision of the House of Lords in Customs and Excise Comrs v Barclays Bank plc [2006] UKHL 28; [2007] 1 AC 181, where the question was whether the bank had assumed responsibility to the Commissioners to prevent payments out of an account, by virtue of having been served with freezing orders.
Dyson LJ cited Lord Binghams statement at para 14 that there was no assumption of responsibility by the bank: they had no choice.
Lord Hoffmann considered the question more fully.
He observed at para 38 that a duty of care is ordinarily generated by something which the defendant has decided to do: giving a reference, supplying a report, managing a syndicate, making ginger beer: It does not much matter why he decided to do it; it may be that he thought it would be profitable or it may be that he was providing a service pursuant to some statutory duty, as in Phelps v Hillingdon London Borough Council [2001] 2 AC 619 and Ministry of Housing and Local Government v Sharp [1970] 2 QB 223.
He added at para 39: The question of whether the order can have generated a duty of care is comparable with the question of whether a statutory duty can generate a common law duty of care.
The answer is that it cannot: see Gorringe v Calderdale Metropolitan Borough Council [2004] 1 WLR 1057.
The statute either creates a statutory duty or it does not. (That is not to say, as I have already mentioned, that conduct undertaken pursuant to a statutory duty cannot generate a duty of care in the same way as the same conduct undertaken voluntarily.) But you cannot derive a common law duty of care directly from a statutory duty.
Likewise, as it seems to me, you cannot derive one from an order of court.
There are indeed several leading authorities in which an assumption of responsibility arose out of conduct undertaken in the performance of an obligation, or the operation of a statutory scheme.
An example mentioned by Lord Hoffmann is Phelps v Hillingdon, where the teachers and educational psychologists assumption of responsibility arose as a consequence of their conduct in the performance of the contractual duties which they owed to their employers.
Another example is Barrett v Enfield, where the assumption of responsibility arose out of the local authoritys performance of its functions under child care legislation.
The point is also illustrated by the assumption of responsibility arising from the provision of medical or educational services, or the custody of prisoners, under statutory schemes.
Clearly the operation of a statutory scheme does not automatically generate an assumption of responsibility, but it may have that effect if the defendants conduct pursuant to the scheme meets the criteria set out in such cases as Hedley Byrne and Spring v Guardian Assurance plc.
The present case
In the light of the cases which I have discussed, the decision in X (Minors) v Bedfordshire can no longer be regarded as good law in so far as it ruled out on grounds of public policy the possibility that a duty of care might be owed by local authorities or their staff towards children with whom they came into contact in the performance of their functions under the 1989 Act, or in so far as liability for inflicting harm on a child was considered, in the Newham case, to depend upon an assumption of responsibility.
Whether a local authority or its employees owe a duty of care to a child in particular circumstances depends on the application in that setting of the general principles most recently clarified in the case of Robinson.
Following that approach, it is helpful to consider in the first place whether the case is one in which the defendant is alleged to have harmed the claimant, or one in which the defendant is alleged to have failed to provide a benefit to the claimant, for example by protecting him from harm.
The present case falls into the latter category.
Understandably, the reasoning of Irwin LJ in the Court of Appeal in the present case did not follow the approach set out in Robinson, which was decided after the Court of Appeal had given its decision.
The first consideration on which Irwin LJ placed particular emphasis, namely the concern expressed in X (Minors) v Bedfordshire and Hill v Chief Constable of West Yorkshire that liability in negligence would complicate decision making in a difficult and sensitive field, and potentially divert the social worker or police officer into defensive decision making, has not been treated as sufficient reason for denying liability in subsequent cases such as Barrett v Enfield, Phelps v Hillingdon and D v East Berkshire.
His view that the decision of the Court of Appeal in D v East Berkshire had been implicitly overruled by Michael was mistaken: the decision in D v East Berkshire has not been overruled by any subsequent decision.
In Michael, as explained earlier, this court rejected an argument which was said to be supported by D v East Berkshire, but it did not disapprove of the true ratio of that decision.
More fundamentally, in cases such as Gorringe, Michael and Robinson both the House of Lords and this court adopted a different approach (or rather, reverted to an earlier approach) to the question whether a public authority is under a duty of care.
That approach is based on the premise that public authorities are prima facie subject to the same general principles of the common law of negligence as private individuals and organisations, and may therefore be liable for negligently causing individuals to suffer actionable harm but not, in the absence of some particular reason justifying such liability, for negligently failing to protect individuals from harm caused by others.
Rather than justifying decisions that public authorities owe no duty of care by relying on public policy, it has been held that even if a duty of care would ordinarily arise on the application of common law principles, it may nevertheless be excluded or restricted by statute where it would be inconsistent with the scheme of the legislation under which the public authority is operating.
In that way, the courts can continue to take into account, for example, the difficult choices which may be involved in the exercise of discretionary powers.
The second consideration on which Irwin LJ based his decision, namely the principle that in general there is no liability for the wrongdoing of a third party even where that wrongdoing is reasonably foreseeable, is plainly important but, as he recognised, not conclusive in itself.
In Robinson, this court cited at para 34 a helpful summary by Tofaris and Steel, Negligence Liability for Omissions and the Police (2016) 75 CLJ 128, of the situations in which a justification commonly exists for holding that the common law imposes such a liability: In the tort of negligence, a person A is not under a duty to take care to prevent harm occurring to person B through a source of danger not created by A unless (i) A has assumed a responsibility to protect B from that danger, (ii) A has done something which prevents another from protecting B from that danger, (iii) A has a special level of control over that source of danger, or (iv) As status creates an obligation to protect B from that danger.
The present case is not brought on the basis that the council was in the second, third or fourth of these situations.
It was suggested in argument that a duty of care might have arisen on the basis that the council had created the source of danger by placing Amy and her family in housing adjacent to the neighbouring family.
The difficulty of sustaining such an argument is however apparent from Mitchell, paras 41, 61 63, 76 77 and 81 82.
As Lord Brown pointed out in the last of these passages, there is a consistent line of authority holding that landlords (including local authorities) do not owe a duty of care to those affected by their tenants anti social behaviour.
It is also necessary to remember that there is no claim against the council based on its exercise of its functions under housing legislation.
The claim against the council is based instead on an assumption of responsibility or special relationship.
The particulars of claim state: In purporting to investigate the risk that the claimants neighbours posed to the claimants and subsequently in attempting to monitor the claimants plight as set out in the sequence of events above, the defendant had accepted a responsibility for the claimants particular difficulties and/or there was a special nexus or special relationship between the claimants and the defendant.
The defendant purported to protect the claimants by such investigation and in as far as such investigation is shown to have been carried out negligently and/or negligently acted on the defendant is liable for breach of duty.
The sequence of events referred to is a chronology of events.
In relation to investigation and monitoring by the councils social services department, it refers to the assignment of social workers to the claimants, to the various assessments of their needs, and to meetings at which the appropriate response to Grahams behaviour was discussed.
Irwin LJ rejected the contention that there was an assumption of responsibility by the council on the ground that there was an insufficient basis to satisfy the approach of the Court of Appeal in X v Hounslow London Borough Council and Darby v Richmond upon Thames London Borough Council [2017] EWCA Civ 252.
I have also come to the conclusion that the particulars of claim do not provide a basis on which an assumption of responsibility might be established, for the following reasons.
As Lord Browne Wilkinson explained in relation to the educational cases in X (Minors) v Bedfordshire (particularly the Dorset case), a public body which offers a service to the public often assumes a responsibility to those using the service.
The assumption of responsibility is an undertaking that reasonable care will be taken, either express or more commonly implied, usually from the reasonable foreseeability of reliance on the exercise of such care.
Thus, whether operated privately or under statutory powers, a hospital undertakes to exercise reasonable care in the medical treatment of its patients.
The same is true, mutatis mutandis, of an education authority accepting pupils into its schools.
In the present case, on the other hand, the councils investigating and monitoring the claimants position did not involve the provision of a service to them on which they or their mother could be expected to rely.
It may have been reasonably foreseeable that their mother would be anxious that the council should act so as to protect the family from their neighbours, in particular by re housing them, but anxiety does not amount to reliance.
Nor could it be said that the claimants and their mother had entrusted their safety to the council, or that the council had accepted that responsibility.
Nor had the council taken the claimants into its care, and thereby assumed responsibility for their welfare.
The position is not, therefore, the same as in Barrett v Enfield.
In short, the nature of the statutory functions relied on in the particulars of claim did not in itself entail that the council assumed or undertook a responsibility towards the claimants to perform those functions with reasonable care.
It is of course possible, even where no such assumption can be inferred from the nature of the function itself, that it can nevertheless be inferred from the manner in which the public authority has behaved towards the claimant in a particular case.
Since such an inference depends on the facts of the individual case, there may well be cases in which the existence or absence of an assumption of responsibility cannot be determined on a strike out application.
Nevertheless, the particulars of claim must provide some basis for the leading of evidence at trial from which an assumption of responsibility could be inferred.
In the present case, however, the particulars of claim do not provide a basis for leading evidence about any particular behaviour by the council towards the claimants or their mother, besides the performance of its statutory functions, from which an assumption of responsibility might be inferred.
Reference is made to an email written in June 2009 in which the councils anti social behaviour co ordinator wrote to Amy that we do as much as it is in our power to fulfil our duty of care towards you and your family, and yet we cant seem to get it right as far as you are concerned, but the email does not appear to have been concerned with the councils functions under the 1989 Act, and in any event a duty of care cannot be brought into being solely by a statement that it exists: ORourke v Camden London Borough Council [1998] AC 188, 196.
I would therefore conclude, like the Court of Appeal but for different reasons, that the particulars of claim do not set out an arguable claim that the council owed the claimants a duty of care.
Although X (Minors) v Bedfordshire cannot now be understood as laying down a rule that local authorities do not under any circumstances owe a duty of care to children in relation to the performance of their social services functions, as the Court of Appeal rightly held in D v East Berkshire, the particulars of claim in this case do not lay a foundation for establishing circumstances in which such a duty might exist.
The council is also sought to be held liable on the basis of vicarious liability for the negligence of its employees.
That is an aspect of the case to which the Court of Appeal did not give separate consideration.
The particulars of claim state: Each of the social workers and/or social work managers and other staff employed by the defendant who was allocated as the social worker or manager for the claimants or tasked with investigating the plight of the claimants owed to the claimants a duty of care.
It appears from the particulars of claim that social workers carried out assessments of the claimants needs on the councils instructions, and provided the council (and others who may have been involved in decision making) with information and professional advice about the children for the purpose of enabling the council to perform its statutory functions.
There is no doubt that, in carrying out those functions, the social workers were under a contractual duty to the council to exercise proper professional skill and care.
The question is whether, in addition, they also owed a similar duty to the claimants under the law of tort.
That depends on whether the social workers assumed a responsibility towards the claimants to perform their functions with reasonable care.
In considering that question, it may be helpful to compare the position of the social workers with the positions of the educational psychologists and the advisory teacher in X (Minors) v Bedfordshire, and the educational psychologists in Phelps v Hillingdon.
In the former case, Lord Browne Wilkinson accepted in relation to the Dorset proceedings that the local authority could be vicariously liable for negligence on the part of its educational psychologists because they were providing professional advice to parents on which the parents had foreseeably relied.
In the Hampshire proceedings, he accepted that an advisory teacher, brought in to advise on a pupils educational needs, owed a duty to the child to exercise reasonable skill and care provided he knew that his advice would be communicated to the pupils parents, and could therefore reasonably foresee that they would rely on such advice.
In Phelps v Hillingdon, the duty of care of the educational psychologist towards the child was again based on the fact that it was reasonably foreseeable that the childs parents would rely on the advice provided.
Those were all cases where the duty of care arose on the basis of the Hedley Byrne principle.
In the present case, on the other hand, there is no suggestion that the social workers provided advice on which the claimants mother would foreseeably rely.
As has been explained, however, the concept of an assumption of responsibility is not confined to the provision of information or advice.
It can also apply where, as Lord Goff put it in Spring v Guardian Assurance plc, the claimant entrusts the defendant with the conduct of his affairs, in general or in particular.
Such situations can arise where the defendant undertakes the performance of some task or the provision of some service for the claimant with an undertaking that reasonable care will be taken.
Such an undertaking may be express, but is more commonly implied, usually by reason of the foreseeability of reliance by the claimant on the exercise of such care.
In the present case, however, there is nothing in the particulars of claim to suggest that a situation of that kind came into being.
The existence of an assumption of responsibility can be highly dependent on the facts of a particular case, and where there appears to be a real possibility that such a case might be made out, a court will not decide otherwise on a strike out application.
In the circumstances which I have described, however, the particulars of claim do not in my opinion set out any basis on which an assumption of responsibility might be established at trial.
Any uncertainty as to whether the case is one which can properly be struck out without a trial of the facts is eliminated by the further difficulties that arise in relation to the breach of duty alleged.
The case advanced in the particulars of claim is that any competent local authority should and would have arranged for [the claimants] removal from home into at least temporary care.
As King LJ explained, however, in order to satisfy the threshold condition for obtaining care orders under section 31(2) of the 1989 Act, it would be necessary to establish that the claimants were suffering, or were likely to suffer, significant harm which was attributable to a lack, or likely lack, of reasonable parental care.
The threshold condition applicable to interim care orders requires the court to be satisfied that there are reasonable grounds for believing that the circumstances with respect to the child are as mentioned in section 31(2).
Nothing in the particulars of claim suggests that those conditions could possibly have been met.
The harm suffered by the claimants was attributable to the conduct of the neighbouring family, rather than a lack of reasonable parental care.
There were simply no grounds for removing the children from their mother.
Conclusion
The particulars of claim in these proceedings do not disclose any recognisable basis for a cause of action.
The complaint is that the council or its employees failed to fulfil a common law duty to protect the claimants from harm inflicted by their neighbours by exercising certain statutory powers.
The relevant provisions do not themselves create a cause of action.
Reliance is placed on an assumption of responsibility arising from the relationship between the claimants and the council or its employees, but there is nothing to suggest that those relationships possessed the necessary characteristics for an assumption of responsibility to arise.
Furthermore, it is clear that the alleged breach of duty, namely a failure to remove the claimants from the care of their mother, has no possible basis.
Although the court does not have before it all the evidence which might emerge at a trial, there is no reason to believe that the claimants could overcome these fundamental problems as to the legal basis of their claim.
That being so, it is to the advantage of all concerned that the claim should not proceed to what would be a costly but inevitably fruitless trial.
For these reasons, which differ from those of the Court of Appeal, I would dismiss the appeal.
| The claimants, who have been given anonymity, seek damages for personal injuries suffered while they were children living in the area of the defendant council.
They maintain that the injuries were suffered as a result of the councils negligent failure to exercise its powers under the Children Act 1989 (the 1989 Act) so as to protect them from harm at the hands of third parties.
The claimants allege that in May 2006 they and their mother were placed by the council in a house on an estate in Poole next to a family who, to the councils knowledge, persistently engaged in anti social behaviour.
The claimants and their mother became the target of harassment and abuse at the hands of this family, which persisted over a period of several years until they were re housed in December 2011.
This included vandalism of the mothers car, attacks on the family home, threats of violence, verbal abuse, and physical assaults on the mother and one of the claimants.
As a result, the claimants suffered physical and psychological harm.
During the period in question, both claimants were identified by the council as children in need as defined in the 1989 Act, and had social workers allocated to them.
The claimants initially brought their claim on the basis that the council had been negligent in the exercise of both its housing functions and its functions under the 1989 Act.
The claim was struck out by Master Edelman on the basis that no relevant duty of care towards the claimants arose out of the statutory powers and duties relied on.
The claimants appealed in relation the councils functions under the 1989 Act only.
The appeal was allowed by Mrs Justice Slade in the High Court.
The Court of Appeal then allowed the councils further appeal.
The claimants now appeal to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
Lord Reed, with whom the rest of the Court agrees, delivers the judgment.
The claimants particulars of claim do not disclose any recognisable basis for a cause of action.
The case should not proceed to trial.
The claimants focus on section 17 and 47 of the 1989 Act, but it is accepted that the Act does not create a statutory cause of action.
Therefore, the question is whether local authorities may be liable for breach of a common law duty of care in relation to the performance of their functions under the Act. [25] Public authorities do not owe a duty of care at common law merely because they have statutory powers or duties, even if, by exercising their statutory functions, they could prevent a person from suffering harm.
However, they can come under a common law duty to protect someone from harm in circumstances where the principles applicable to private individuals or bodies would also impose such a duty, as for example where the authority has created the source of danger or assumed a responsibility to protect the claimant from harm, unless the imposition of such a duty would be inconsistent with the relevant legislation. [65] The present case is not one where the council is alleged to have harmed the claimants, but one in which the council is alleged to have failed to provide a benefit to the claimants by protecting them from harm. [74] The claimants case is that the council had assumed a responsibility towards them to take reasonable care in investigating and monitoring their position.
If such care had been taken, the council would have exercised its powers under the 1989 Act to remove the claimants from their home into at least temporary care.
The councils conduct in investigating and monitoring the claimants position did not, however, involve the provision of a service to them on which they or their mother could be expected to rely.
It could not be said that the claimants and their mother had entrusted their safety to the council, or that the council had accepted that responsibility.
Nor had the council taken the claimants into its care, and thereby assumed responsibility for their welfare.
The council therefore did not assume a responsibility towards them. [80] [81] The claimants also advance an alternative claim on the basis that the council is vicariously liable for negligence by the social workers in its employment.
There is no doubt that, in carrying out the councils statutory functions, the social workers were under a contractual duty to the council to exercise proper professional skill and care.
The question is whether, in addition, they also owed a similar duty to the claimants under the law of tort.
That depends on whether the social workers assumed a responsibility towards the claimants to perform their functions with reasonable care. [86] A defendant may assume responsibility to a claimant where he undertakes the performance of some task or the provision of some service for the claimant with an undertaking that reasonable care will be taken.
Such an undertaking may be express but is more commonly implied, usually by reason of the foreseeability of reliance by the claimant on the exercise of such care. [88] In the circumstances of this case, however, the particulars of claim do not set out any basis on which such an assumption of responsibility might be established at trial. [89] Any uncertainty as to whether this case is one which can properly be struck out is eliminated by the further difficulties that arise in relation to the claimants case that the council breached its duty of care by failing to remove the claimants from their home into, at least, temporary care.
In order to obtain a care order under the relevant provisions, it would have been necessary to establish that the claimants were suffering, or were likely to suffer, significant harm which was attributable to a lack, or likely lack, of reasonable parental care.
The harm suffered by the claimants was attributable to the conduct of the neighbouring family, rather than a lack of reasonable parental care.
There were simply no grounds for removing the children from their mother. [90]
|
This appeal raises the question whether the tort of malicious prosecution includes the prosecution of civil proceedings.
It also raises a question about whether and in what circumstances a lower court may follow a decision of the Privy Council which has reached a different conclusion from that of the House of Lords (or the Supreme Court or Court of Appeal) on an earlier occasion.
The second question is the subject of a separate judgment: [2016] UKSC 44.
The appeal is from a decision of Ms Amanda Tipples QC, sitting as a deputy judge of the Chancery Division, striking out a claim brought by Mr Peter Willers against Mr Albert Gubay as disclosing no cause of action known to English law.
The judge was faced with conflicting views of the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419 and the Privy Council in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014] AC 366.
She held that she was bound by the decision of the House of Lords but granted a leapfrog certificate under section 12 of the Administration of Justice Act 1969, and permission to appeal was given by this court.
In excellent arguments on both sides the court was referred to a large number of authorities.
In examining the case law it will be convenient to begin with the Gregory case and the Crawford case, before going back to the earlier authorities, and then to consider the policy arguments.
First, it is necessary to explain in brief outline the nature of the claim.
Mr Willers claim
Mr Gubay was a successful businessman.
He died while this appeal was pending and his executors now act on behalf of his estate.
Mr Willers was Mr Gubays right hand man for over 20 years until he was dismissed by Mr Gubay in the summer of 2009.
Among the group of companies controlled by Mr Gubay was a leisure company, Langstone Leisure Ltd (Langstone).
Mr Willers was a director of it.
Prior to Mr Willers dismissal, Langstone pursued an action for wrongful trading against the directors of another company, Aqua Design and Play Ltd (Aqua), which had gone into liquidation.
That action was abandoned shortly before trial in late 2009 on Mr Gubays instructions.
In 2010 Langstone sued Mr Willers for alleged breach of contractual and fiduciary duties in causing it to incur costs in pursuing the Aqua directors.
Mr Willers defended the action, and issued a third party claim for an indemnity against Mr Gubay, on the grounds that he had acted under Mr Gubays directions in the prosecution of the Aqua claim.
On 28 March 2013, two weeks before the date fixed for a five week trial of the action, Langstone gave notice of discontinuance.
On 16 April 2013 Newey J ordered Langstone to pay Mr Willers costs on the standard basis.
It is Mr Willers case that the claim brought against him by Langstone was part of a campaign by Mr Gubay to do him harm.
It is unnecessary to set out the details pleaded by him in the present action.
It is not disputed that they include all the necessary ingredients for a claim of malicious prosecution of civil proceedings, if such an action is sustainable in English law.
In particular, it is sufficiently alleged that Mr Gubay was responsible for having caused the claim to be brought; that the claim was determined in Mr Willers favour; that it was brought without reasonable cause, since Mr Gubay knew that it was he who was responsible for causing Langstone to bring the earlier wrongful trading claim; that Mr Gubay was actuated by malice in causing Langstone to sue Mr Willers; and that Mr Willers suffered damage.
The heads of damage claimed are damage to his reputation, damage to health, loss of earnings and the difference between the full amount of the costs incurred by him in defending Langstones claim (3.9m) and the amount recovered under the costs order of Newey J (1.7m).
Gregory v Portsmouth City Council
Mr Gregory was a member of Portsmouth City Council.
Allegations were made that he had misused, for his personal advantage, confidential information gained by him as a councillor about matters affecting local properties.
Internal disciplinary proceedings resulted in findings of misconduct and his removal from various committees.
The details were widely reported in the local press.
Mr Gregory successfully challenged the decision by means of judicial review.
He then brought an action against the council for malicious prosecution of the disciplinary proceedings.
The House of Lords upheld a decision striking out his claim.
The main speech was given by Lord Steyn.
It was argued by Mr Gregory that disciplinary proceedings were penal in nature and should therefore be covered by the tort of malicious prosecution in the same way as criminal proceedings.
This argument was rejected.
Lord Steyn observed that there was a great diversity of statutory and non statutory disciplinary proceedings with different purposes.
To leave it to the courts to decide on a case by case basis which disciplinary proceedings might ground the tort would be liable to plunge the law into uncertainty.
In arguing that the disciplinary proceedings should be regarded as penal, counsel for Mr Gregory conceded that the tort did not extend to civil proceedings generally.
Lord Steyn observed (pp 427 428) that it had never been held to be available beyond the limits of criminal proceedings and a few special cases of abuse of civil legal process, such as malicious presentation of a winding up or bankruptcy petition (Johnson v Emerson (1871) LR 6 Ex 329; Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674), malicious obtaining of a search warrant (Gibbs v Rea [1998] AC 786) or bench warrant (Roy v Prior [1971] AC 470), or malicious process to obtain execution against property (Clissold v Cratchley [1910] 2 KB 244).
He said that although such cases appeared to be disparate, there was in a broad sense a common feature in that they potentially involved immediate and irreversible damage to the reputation of the victim.
Another recognised head of actionable abuse of process was the malicious arrest of a vessel (The Walter D Wallet [1893] P 202) and in such cases the loss was merely financial, but Lord Steyn described them as rare.
He said that the traditional explanation for not extending the tort to civil proceedings generally was that in a civil case there was no damage, since the fair name of the victim was protected by the trial and judgment.
Lord Steyn acknowledged (p 432) that this theory was no longer plausible in an age when reputational harm can be caused by pre trial publicity, but he said that it was a matter for consideration whether there might be other reasons for restricting the availability of the tort in respect of civil proceedings.
Lord Steyn concluded (p 432) that it was not necessary for the disposal of the case to express a view on the argument in favour of extending the tort to civil proceedings generally, but that it would be unsatisfactory to leave the matter in the air, and he therefore stated his opinion briefly.
He accepted that there was a stronger case for extending the tort to civil proceedings generally than to disciplinary proceedings, but he said that for essentially practical reasons he was not persuaded that such an extension had been shown to be necessary, taking into account the protection afforded by the torts of defamation, malicious falsehood, conspiracy and misfeasance in public office.
Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd
Mr Alastair Paterson was a chartered surveyor in the Cayman Islands.
He provided services as a loss adjuster and as a project manager, acting through two companies of which he was a director.
In those capacities he was instructed by the insurers and owners of residential development in the Cayman Islands that had suffered hurricane damage.
Mr Paterson instructed building contractors to carry out the remedial work.
Acting on his advice the insurers made substantial payments to the contractors.
He was close to finalising his adjustment of the insurers liability, when the insurers internal claim handling was taken over by a newly appointed senior officer, Mr Frank Delessio.
From their past acquaintanceship Mr Delessio had a strong dislike of Mr Paterson and a low opinion of his competence.
On studying the paperwork, Mr Delessio became concerned that there was a serious lack of documentation to support the payments which the insurers had already made on Mr Patersons advice.
He announced that he intended to drive Mr Paterson out of business and to destroy him professionally.
He instructed another surveyor and loss adjuster to value the work done, but on Mr Delessios instructions the second surveyor did not speak to Mr Paterson or the contractors.
Nor did he make inquiries of the subcontractors or suppliers about costs or consult the structural engineers who had prepared the drawings.
On the strength of the figures put forward by the second surveyor, Mr Delessio caused the insurers to sue Mr Paterson, his companies and the contractors, claiming damages on various bases including deceit and conspiracy to defraud.
He was also instrumental in alerting the local press to the allegations against Mr Paterson of fraudulent or reckless misrepresentations, and the allegations were published.
As intended, the publicity caused great harm to Mr Patersons business and reputation.
After the contractors gave disclosure of invoices showing the amounts paid by them to the subcontractors and suppliers, the insurers attorneys were advised by counsel that it would be professionally improper for him, or them, to represent the insurers in the claims of fraud and conspiracy.
Days before the trial the insurers and owners discontinued their claims.
The judge ordered them to pay the defendants costs on an indemnity basis and gave Mr Paterson permission to amend his counterclaim to claim damages against the insurers for abuse of process.
At the trial of the counterclaim the judge considered the torts of abuse of process and malicious prosecution.
He rejected abuse of process because the insurers were genuinely seeking the relief claimed in the writ, rather than using the action as a device to secure an entirely extraneous objective.
As to malicious prosecution, he found that all the ingredients were established if the tort was capable in law of applying to the relevant proceedings, but, citing Gregory, he held that it was not.
He therefore dismissed the claim but said that, if it had been available, he would have awarded Mr Paterson CI$1.3m for his professional losses and CI$35,000 for distress and humiliation.
In particular, the judge found that although Mr Delessio believed that Mr Paterson had defrauded the insurers, his belief was without reasonable cause; that Mr Delessio knew that the second surveyors report was not a proper basis for making such allegations; and that the dominant factor which led him to make them was his strong dislike of Mr Paterson and obsessive determination to destroy him professionally.
The Privy Council decided by a majority of three to two that on those facts the judge was wrong to dismiss the claim for malicious prosecution.
All five members of the panel gave reasons for their opinions.
On the majority side the leading opinion was given by Lord Wilson.
On the dissenting side the leading opinion was given by Lord Sumption.
They each carried out a detailed historical survey of the tort from the middle ages to the present day but with different conclusions.
At the risk of over simplification, Lord Wilson concluded that the case law prior to Quartz Hill did not distinguish between civil and criminal proceedings as such, but limited the types of damage recoverable in a way which had the practical effect of restricting the claims that were brought as a result of malicious civil process.
Lord Wilson was critical of dicta in Quartz Hill to the effect that by the late 19th century, when that case was decided, no mere bringing of an action, albeit maliciously and without reasonable cause, could give rise to the tort.
As to later authority, Lord Wilson noted that Lord Steyns remarks on the subject in Gregory were obiter, and he observed that the practical rationale behind Lord Steyns reluctance about the tort applying to civil proceedings lost its force in circumstances where no other tort was capable of application.
As a matter of principle and policy, Lord Wilson concluded that it would be unjust for Mr Paterson to be left without a legal remedy for the damage which Mr Delessio had intentionally caused him to suffer by the malicious prosecution of civil process without any reasonable cause.
Lord Sumptions conclusion was that the tort had never applied to civil proceedings as such.
Over the course of history there had come to be recognised a small and anomalous class of cases in which the action had been held to be available for maliciously obtaining an ex parte order of the court which caused, or was liable to cause, immediate injury to the claimant through the misuse of the courts coercive powers.
Such cases were rare and in Quartz Hill the Court of Appeal had taken a firm stand against their extension.
So too had the House of Lords in Gregory.
Mr Paterson had suffered an undoubted injustice, but this did not make it right to sweep away restrictions on the application of the tort to civil process which had existed for very many years.
Lord Sumption was unpersuaded that there was a general need to extend the tort.
To do so would in his view create uncertainty, further anomalies and the likelihood of undesirable practical consequences.
Analysis: the case law
Lord Wilsons and Lord Sumptions historical analyses were the subject of very detailed critical analysis by counsel in the present case.
While respecting the thoroughness of their arguments, I do not intend to rehearse them.
It is apparent to my mind that the early case law is capable of more than one respectable interpretation, and it may be that there was never a time when there was a general understanding precisely where the boundaries of the tort lay.
The same could be said about other aspects of the common law.
In any case, the decision now to be made by this court should not depend on which side has the better argument on a controversial question about the scope of the law some centuries ago.
Having said that, it is right that I should indicate the more significant points which I glean from my reading of the case law.
But I do so with caution, because the identification of such points involves an element of selection in which I cannot lay any special claim to being necessarily right.
Before the judgment of Holt CJ in Savile v Roberts in 1698 (discussed below), I have not detected any authority which excluded the application of the tort to a civil action, and there are some indications that it was capable of applying to civil proceedings.
A number were referred to in the reported argument for the plaintiff in Cotterell v Jones (1851) 11 CB 713, 719 724.
Counsel cited, among other sources, Waterer v Freeman (1618) Hobart 266, Atwood v Monger (1653) Style 378, and a note by Hargrave to Coke on Littleton.
Waterer v Freeman involved double execution on goods, but counsel in Cotterell v Jones relied on what he argued was a statement of general principle by Hobart CJ (who had succeeded Sir Edward Coke as Chief Justice of the Court of Common Pleas): Now to the principal case, if a man sue me in a proper court, yet if his suit be utterly without ground of truth, and that certainly known to himself, I may have an action of the case against him for the undue vexation and damage that he putteth me unto by his ill practice, though the suit itself be legal and I cannot complain of it.
This statement was described by Blackburn J as an authority entitled to weight in Wren v Weild (1869) LR 4 QB 730, 736 (to which I refer below).
Atwood v Monger arose from proceedings brought against the plaintiff before the conservators of the River Thames, who had a statutory responsibility for the management of the river, for allegedly allowing earth to fall into the river.
Counsel for the plaintiff in Cotterell v Jones relied on what they submitted was a statement of general principle by Rolle CJ in the Atwood case: An action upon the case lies for bringing an appeal against one in the Common Pleas, though it be coram non judice, by reason of the vexation of the party, and so it is all one whether here were any jurisdiction or no, for the plaintiff is prejudiced by the vexation and the conservators took upon them to have authority to take the presentment.
And I hold that an action upon the case will lye, (sic) for maliciously bringing an action against him where he had no probable cause, and if such actions were used to be brought, it would deter men from such malitious (sic) courses as are to (sic) often put in practice.
The passage from Hargraves note to Coke on Littleton read: Where two or more conspire to harass any person by a false and malicious suit, whether criminally or civilly, it is a crime punishable by indictment, or the parties injured may sue for damages by writ of conspiracy; and both of these remedies lie at common law, that part of the statute or ordinance of Articuli super chartas which gives remedies against conspirators by writ out on Chancery, being, according to both Staunford and Lord Coke, only an affirmation of the common law.
Staunf CP 172 [Staunfords Common Pleas], 2 Inst 561, 562 [Cokes Institutes].
There is also a remedy for false and malicious prosecution, though the aggravation of a conspiracy or confederacy is wanting, and the injury comes from one only; for, in such a case, the party prosecuted may have an action upon the case for damages.
I apprehend, too, that such an action lies, as well where the vexation is practised by a civil suit, as where it is carried on through the medium of a criminal process.
FNB 114, D [Fitzherberts Natura Brevium]. (Sir William Staunford was a judge of the Court of Common Pleas from 1554 to 1558.
Sir Anthony Fitzherbert was appointed a judge of the Court of Common Pleas in 1522.
His new Natura Brevium was published in 1534.)
Savile v Roberts was an important case.
The defendant on two occasions caused the plaintiff to be prosecuted at quarter sessions on an indictment charging him with riot.
After being acquitted both times the plaintiff sued the defendant in the Court of Common Pleas for prosecuting him maliciously.
His claim succeeded and he was awarded damages for the expenses which he had incurred in defending himself.
The defendant brought a writ of error to have the judgment set aside but the judgment was upheld.
There are nine reports of the decision, varying in length and content.
Among them, I have found the reports at 5 Mod 405, 12 Mod 208 and 1 Ld Raymond 374 the most helpful.
Since the action was on the case, damage had to be proved.
Holt CJ identified three types of damage which could support such a claim.
The first was damage to the plaintiffs fame or reputation.
The second was damage to his person either by assault or by deprivation of his liberty.
The third was damage to his property, which included being put to expense.
The damages awarded to the plaintiff fell within this category, as to which Holt CJ said (12 Mod 209) that if this injury be occasioned by a malicious prosecution, it is reason and justice that he should have an action to repair him the injury: though of late days it has been questioned, yet it has always been allowed formerly; as Atwood v Monger (to which I have referred).
The defendant objected that to allow such an action will be of mischievous consequence, by stopping all prosecutions of this kind; and there is no more reason in this case of a malicious indictment, than a malicious action: and no man shall be responsible for any damages whatsoever for suing a writ or prosecuting in the Kings Courts (12 Mod 210).
Holt CJ said that there was a great difference between bringing an action maliciously and prosecuting an indictment maliciously (5 Mod 408, 12 Mod 210, 1 Ld Raymond 379 380).
He explained that in former times the common law provided that every claimant should provide pledges, who were amerced (that is, they forfeited the amount pledged) if the claim was false.
That method was replaced by statutes which provided for defendants to recover their costs.
By contrast Holt CJ said that there was no amercement upon indictments, and the party had not any remedy to reimburse himself but by action (1 Ld Raymond 380).
Holt CJ added that if an action were brought merely through malice and vexation, an action on the case would lie in some cases, where the plaintiff could show particular damage (1 Ld Raymond 380) or special matter (5 Mod 408, 12 Mod 211).
The ability to sue for malicious prosecution seems therefore to have depended, according to Holt CJ, essentially on the nature of the damage suffered rather than the form which the proceedings took, although the two were likely to be interrelated.
It is also possible that when Holt CJ spoke of special matter he was not referring to the damage suffered but to special matter showing the malicious nature of the defendants conduct.
I take this interpretation from the judgment of Parker CJ in Jones v Givin (1713) Gilb Cas 185, 196 197 (also reported as Jones v Gwynn 10 Mod 147, 214).
After commenting that the demand of right (a civil claim) was more favoured than bringing to punishment, and that if an action was false, the plaintiff was by law amerced, and the defendant to have costs, Parker CJ said: And therefore my Lord Chief Justice Holt, in his excellent argument in Savill and Roberts, where he fully states the difference between the two cases, said that in case for a malicious action the plaintiff must shew special matter which shows malice, for else an action, being the plaintiff seeking and demanding advantage to himself, carries in it [a] fair and honourable cause, unless the recovery be utterly hopeless, and the suit without some other design, which therefore must be specially shewn.
It is not necessary, even if it were possible, to decide whether the special matter referred to in these authorities was an evidential requirement, ie a reference to what was needed to prove malice, or related to the type of damage which could give rise to the action.
Either way the premise appears to have been that an action would lie if the defendant maliciously invoked civil process against the plaintiff which resulted in the plaintiff suffering a recognised head of damage.
In Grainger v Hill (1838) 4 Bing (NC) 212 the plaintiff owned a vessel which he mortgaged to the defendants as security for a loan repayable after 12 months.
The plaintiff was to retain the vessels register, which he needed in order to make voyages.
Two months later the defendants became concerned about the adequacy of the security and determined to obtain the register.
To that end they swore an affidavit of debt and issued a writ of capias for the arrest of the plaintiff in support of a claim of assumpsit.
The sheriffs officers told the plaintiff that they had come for the register, and that if he failed to hand it over or provide bail he would be arrested.
Under that threat he handed over the register.
The defendants claim in debt was settled by the repayment of the loan and release of the mortgage deed.
The plaintiff then sued the defendants for malicious issue of the civil proceedings.
At the trial the plaintiff obtained a verdict in his favour, but the defendants argued that the plaintiff should be nonsuited among other reasons because he had failed to aver that the action had been commenced without reasonable or probable cause.
The plaintiff responded that he had proved that the defendants suit was without reasonable or probable cause, but that in any event this was unnecessary in a case where the action had been brought for an improper purpose, ie as a means of coercing the plaintiff into giving up the register to which the defendants had no right.
The court accepted the plaintiffs argument.
Tindal CJ said at 221: If the course pursued by the defendants is such that there is no precedent of a similar transaction, the plaintiffs remedy is by an action on the case, applicable to such new and special circumstances; and his complaint being that the process of the law has been abused, to effect an object not within the scope of the process, it is immaterial whether the suit which that process commenced had been determined or not, or whether or not it was founded on reasonable and probable cause.
Similarly Park J said at 222: this is a case primae impressionis, in which the defendants are charged with having abused the process of the law, in order to obtain property to which they had no colour of title; and, if an action on the case be the remedy applicable to a new species of injury, the declaration and proof must be according to the particular circumstances.
Grainger v Hill has been treated as creating a separate tort from malicious prosecution, but it has been difficult to pin down the precise limits of an improper purpose as contrasted with the absence of reasonable and probable cause within the meaning of the tort of malicious prosecution.
This is not entirely surprising because in Grainger v Hill itself there plainly was no reasonable or probable cause to issue the assumpsit proceedings, since the debt was not due to be paid for another ten months as the lenders well knew.
It might be better to see it for what it really was, an instance of malicious prosecution, in which the pursuit of an unjustifiable collateral objective was evidence of malice, rather than as a separate tort.
This would be consistent with the reference in Parker CJs judgment in Jones v Givin (or Jones v Gwynn), cited above, to some other design as a potential special matter showing malice.
It is unnecessary to express a firm view on this point, but Grainger v Hill does at any rate illustrate the willingness of the court to grant a remedy, in what it regarded as novel circumstances, where the plaintiff had suffered provable loss as a result of civil proceedings brought against him maliciously and without any proper justification.
In other mid 19th century cases the courts recognised a broad principle underlying the cause of action for malicious prosecution; De Medina v Grove (1847) 10 QB 172 and Churchill v Siggers (1854) 3 E & B 929.
In both cases the plaintiff suffered a period of imprisonment and incurred expenditure through the execution of a writ of capias, which the plaintiff claimed that the defendant had issued for an excessive sum.
In De Medina v Grove the plaintiffs claim was dismissed on the ground that the facts pleaded by him were consistent with the existence of probable cause.
The claim in Churchill v Siggers was allowed to go to trial.
The judges in each case adopted a common starting point.
Cresswell J, Williams J, Parke B and Rolfe B agreed) began: In De Medina v Grove the judgment of Wilde CJ (with whom Maule J, The law allows every person to employ its process for the purpose of trying his rights, without subjecting him to any liability, unless he acts maliciously and without probable cause.
In Churchill v Siggers the judgment of the court (Lord Campbell CJ, Erle J
and Crompton J) began: To put into force the process of the law maliciously and without any reasonable or probable cause is wrongful; and, if thereby another is prejudiced in property or person, there is that conjunction of injury and loss which is the foundation of an action on the case.
It is argued by those in favour of limiting the cause of action to the various circumstances in which it has been applied that these statements were not intended to be definitive and should be read in their particular factual context.
But the statements contained the rationale by reference to which the cases were decided and cannot be regarded as obiter dicta.
The reference, for example, to the law allowing every person to apply its process for the purpose of trying his rights, unless he acted maliciously and without probable cause, does not fit with a narrow concept peculiar to the process of execution.
The subject was considered indirectly in Wren v Weild (1869) LR 4 QB 730.
The claim was in substance a patent dispute.
The plaintiffs were manufacturers of machinery.
They sued the defendant for falsely and maliciously telling their customers that their machines infringed the defendants patents and threatening legal action if the customers used the machines without paying royalties to the defendant.
There was no allegation on the pleading that the defendant acted without reasonable and probable cause.
Lush J nonsuited the plaintiffs, who applied to set aside the nonsuit.
The judgment of the court (consisting of Blackburn, Lush and Hayes JJ) was given by Blackburn J. He considered whether the circumstances were such as to make the bringing of an action [against the customers] altogether wrongful.
In that context Blackburn J considered (p 736) the statement of principle by Hobart CJ in Waterer v Freeman, set out in para 17 above, and the effect of Savile v Roberts: In Waterer v Freeman (1618) Hobart 266, 267, which was an action for maliciously and vexatiously issuing a second fi. fa. whilst the first was unreturned, the Chief Justice says: If a man sue me in a proper court, yet if his suit be utterly without ground of truth, and that certainly known to himself, I may have an action of the case against him for the undue vexation and damage that he putteth me unto by his ill practice.
This was not necessary for the decision of the case before the court, but it was by no means irrelevant, and it is therefore an authority entitled to weight.
On the other hand, in Savile v Roberts 1 Ld Raym 374, Lord Holt, in delivering the judgment of the Exchequer Chamber, expresses an opinion that no such action would lie without alleging and proving some collateral wrong, such as that he was maliciously held to bail, or the like.
For this he gives two reasons, first that a man is entitled to bring an action if he fancies he has a right, which is in accordance with Lord Ellenboroughs reasoning in Pitt v Donovan (1813) 1 M & S 639.
But this reason is quite consistent with Lord Hobarts position, that the action will lie where it was certainly known to him that the action was utterly without ground.
His second reason is, that the law considers that the party grieved has an adequate remedy in his judgment for costs; and on this the Court of Common Pleas acted in Purton v Honnor (1798) 1 B & P 205.
But this artificial reason does not apply in the present
Applying the same line of reasoning, the court held in the case before it that the action could not lie, unless the plaintiffs affirmatively proved that the defendants claim was not a bona fide claim in support of a right which, with or without cause, he fancied he had; but a mala fide and malicious attempt to injure the plaintiffs by asserting a claim of right against his own knowledge that it was without any foundation (p 737).
The courts reasoning was consistent with the statements of principle in De Medina v Grove and Churchill v Siggers and it confirms that this was a mainstream view.
It is noteworthy that by 1869 the court regarded the notion that a party who was sued maliciously and without any ground had an adequate remedy in a judgment for costs as artificial.
Blackburn Js statement that Holt CJ in his judgment in Savile v Roberts expresses an opinion that no such action would lie without alleging and proving some collateral wrong, as that he was maliciously held to bail, or the like must have been his interpretation of the sentence in the report in 1 Ld Raymond (the version cited by Blackburn J) at 380: If A sues an action against B for mere vexation, in some cases upon particular damage B may have an action; but it is not enough to say that A sued him falso et malitiose, but he must show the matter of the grievance specially, so that it may appear to the court to be manifestly vexatious. 1 Sid 424, Daw v Swain, where the special cause was the holding to excessive bail.
I have discussed the interpretation of Holt CJs reference to particular damage (or special matter as it appears in other reports of the judgment) at paras 20 to 21 above.
In Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674, [1882] WN 27, the defendant presented a petition to wind up the plaintiff company and advertised it in several papers.
The petition alleged that the companys capital had been raised by a fraudulent prospectus and that there was no possibility of its trading profitably.
The defendant believed at that time that he was a shareholder of the company, but immediately after the presentation he learned that his broker had sold his shares and he promptly gave notice that his petition would be withdrawn.
The petition was never served on the company and was dismissed by Hall V C.
Both parties were represented at the hearing, and each applied for their costs of appearance, but the judge made no order for costs.
The reason that the company was not given its costs appears to have been that its appearance was considered unnecessary: see Berry v British Transport Commission [1962] 1 QB 306, 319, per Devlin LJ.
The company then sued the defendant for maliciously presenting the petition without reasonable or probable cause.
At the trial before Stephen J the company adduced no evidence of special damage other than its costs in respect of the petition.
At the close of its case, the judge nonsuited it.
His decision was upheld by the Divisional Court (Pollock, B and Manisty, J) but reversed by the Court of Appeal, comprising Brett MR and Bowen LJ, and a new trial was ordered.
Counsel for the defendant advanced three arguments why the companys claim must fail.
The first was that there was no evidence of special damage necessary to maintain the action: Savile v Roberts.
The second was that there was no evidence of malice or absence of reasonable or probable cause.
The third was that no action of this kind would lie under the circumstances, because the action taken by the defendant was not of an ex parte character, but an application to the court on which the company had the opportunity of appearing in opposition, and the judge hearing the petition could make an award of costs.
Brett MR rejected the first argument on the ground that the publication of the petition in the newspapers would have been destructive of the companys reputation and that this amounted to damage within Holt CJs first category.
He accepted that the company was not entitled to recover its costs, because the courts operated on the theory that the jurisdiction to award litigation costs to the successful party covered all costs reasonably and necessarily incurred, and therefore any excess was not to be regarded in law as caused by the conduct of the losing party.
The second argument was a purely evidential matter.
The third argument has significance in the present case because Mr Bernard Livesey QC argued on behalf of Mr Gubays estate that the cases in which claims for malicious prosecution of civil proceedings have succeeded should be explained as cases in which the defendant took it on himself to make malicious and unjustifiable use of the coercive powers of the state, such as the power of arrest of a person or their property, and that it is only in such a case that the action can be maintained.
This submission has a strong echo of the third argument advanced by the defendant in the Quartz Hill case.
It was rejected by Brett MR in these terms, at (1883) 11 KB 684: The proposition is that an action cannot be maintained because the petitioning creditor merely asks the court to act judicially, and because it was to be assumed that the court would decide rightly.
If that proposition were well founded, it would be an answer to malicious prosecution on a criminal charge, because even in that case the prosecutor merely asks the tribunal to decide upon the guilt of the person whom he charges.
If a man is summoned before a justice of the peace falsely and maliciously and without reasonable or probable cause, he will be put to expense in defending himself, and his fame may suffer from the accusation; nevertheless the prosecutor only asks the justice to adjudicate upon the charge.
Therefore it is not a good answer to an action for maliciously procuring an adjudication in bankruptcy to say, that the alleged creditor has only asked for a judicial decision.
It seems to me that an action can be maintained for maliciously procuring an adjudication under the Bankruptcy Act, 1869, because by the petition, which is the first process, the credit of the person against whom it is presented is injured before he can shew that the accusation made against him is false; he is injured in his fair fame, even although he does not suffer a pecuniary loss.
Bowen LJ began his judgment by saying that he was of the same opinion as Brett MR and that he would not have added anything if they had not been overruling the opinion of more than one judge of great experience and ability.
He ended by saying that there must be a new trial for the reasons given by the Master of the Rolls and that he hoped that he had not weakened the force of those reasons by stating his own.
It is clear therefore that Brett MRs judgment had the full authority of the court.
In his judgment Bowen LJ expressed the view, obiter, that under our present rules of procedure, and with the consequences attaching under our present law, the bringing of an action could not give rise to an action for malicious prosecution, even if the first action were brought maliciously and without reasonable and probable cause (pp 690 691).
The reason, he explained, was that he could not conceive that under the courts present mode of procedure the bringing of an action could result in any of the three heads of damage recognised in Savile v Roberts.
As to damage to reputation, he acknowledged that the publication of the proceedings might incidentally cause damage to a persons reputation, but he said that the bringing of an action itself was not the cause of injury, and that when the action was tried in public his fair fame will be cleared, if it deserves to be cleared: if the action is not tried, his fair fame cannot be in any way assailed by the bringing of the action.
In this respect Bowen LJ contrasted the bringing of a civil action with the bringing of a criminal allegation involving scandal to reputation, or the issue of a bankruptcy petition, which he said in its nature caused reputational damage that could not necessarily be repaired afterwards.
Where reputational damage is concerned, to draw a distinction between the effect of the bringing of proceedings as such and the effect of attendant publicity seems highly artificial in circumstances where the action is brought as part of a determined campaign to destroy a persons reputation.
It seems surprising also that Bowen LJ considered it inconceivable that the making of allegations in a civil suit might result in reputational damage with immediate and irreparable consequences, in the same way as might result from the institution of criminal or insolvency proceedings.
But, if it was inconceivable in 1883, it is certainly not inconceivable in todays world.
Bowen LJ did not suggest that if he were wrong, and if such damage were to result from the malicious institution of civil proceedings without reasonable or probable cause, there would be any principled reason to leave the injured party without a remedy.
That would have been inconsistent with the reasoning which led the court to hold that Quartz Hills claim should go to trial.
In Berry v British Transport Commission the plaintiff was prosecuted for the summary offence of pulling the communication cord on a train without reasonable cause.
After conviction by the magistrates she appealed to quarter sessions, her conviction was quashed and she was awarded costs against the complainant in a sum which amounted to about a quarter of her actual costs.
She sued the defendant for malicious prosecution, claiming that she had suffered damage to reputation; had been held up to ridicule; had suffered mental anxiety; and had incurred special damage by way of the shortfall between the full amount of her expenses and the amount awarded to her at quarter sessions.
On the trial of a preliminary question of law, Diplock J struck out her claim as disclosing no cause of action: [1961] 1 QB 149.
Diplock J said at p 159 that the action on the case for malicious prosecution could be founded upon any form of legal proceedings, civil or criminal, brought maliciously and without any reasonable or proper cause by the plaintiff against the defendant, but, as the action was in case, damage was an essential ingredient.
He held that the criminal allegation was not an imputation affecting her fair fame, and that the rule in Quartz Hill that the difference between actual costs incurred and party and party costs awarded in civil proceedings could not be recovered as special damage should be applied also to costs incurred in defending criminal proceedings, since the criminal court had a discretion to order the prosecutor to pay such costs as were just and reasonable.
The Court of Appeal (Ormerod, Devlin and Danckwerts LJJ) upheld Diplock Js judgment on the issue of damage to reputation, but reversed his judgment on the issue of special damages: [1962] 1 QB 306.
The court accepted that it was bound by the decision in Quartz Hill that the excess of costs incurred in defending civil proceedings over the taxed costs awarded could not be recovered as special damage in a subsequent action for malicious prosecution, but it declined to extend the rule to costs incurred in defending criminal proceedings.
In his judgment, at p 334, Danckwerts LJ repeated Diplock Js obiter dictum that the action for malicious prosecution lies for wrongful and malicious civil proceedings as well as criminal proceedings.
The common law is prized for its combination of principle and pragmatism.
The doctrine of precedent in the words of Dean Roscoe Pound is one of reason applied to experience: The Spirit of the Common Law, 1963 ed, pp 182 183.
Growth he said is insured in that the limits of the principle are not fixed authoritatively once and for all but are discovered gradually by a process of inclusion and exclusion as cases arise which bring out its practical workings and prove how far it may be made to do justice in its actual operation.
The case law on the tort of malicious prosecution is in point.
It shows how the courts have fashioned the tort to do justice in various situations in which a person has suffered injury in consequence of the malicious use of legal process without any reasonable basis.
Drawing on that experience, the court has to decide whether the tort should now apply to the malicious and groundless prosecution of a civil claim causing damage of the kinds alleged in the present case.
This requires consideration of the justice and practical consequences whichever way the question is decided.
In considering those consequences, it is appropriate to have in mind the essential ingredients of the tort, although they were not the subject of argument (see paras 52 to 56 below).
Analysis: policy
Mr Willers claim to recover the excess of his legal expenses over the amount awarded under the costs order made in the action brought against him by Langstone raises a question to which I will return.
Otherwise I see no difficulty in principle about the heads of damage claimed by him (damage to reputation, health and earnings), subject to the fundamental question whether his action is maintainable in law.
The case put on his behalf can be simply stated.
In the words of Holt CJ in Savile v Roberts, if this injury be occasioned by a malicious prosecution, it is reason and justice that he should have an action to repair him the injury.
This appeal to justice is both obvious and compelling.
It seems instinctively unjust for a person to suffer injury as a result of the malicious prosecution of legal proceedings for which there is no reasonable ground, and yet not be entitled to compensation for the injury intentionally caused by the person responsible for instigating it.
It was that consideration which led the judges to create the tort of malicious prosecution, as can be seen in the case law.
The question is whether there are countervailing factors such that its applicability to civil proceedings should be limited to an assortment of instances where it has previously been applied.
A considerable number of countervailing factors have been suggested, and I turn to what appear to me to be the principal ones.
Underlying the individual counter arguments, it is a common theme of the opinions of the minority that malicious prosecution of criminal proceedings is now obsolescent, if not obsolete, as a form of tort, and so this is no time to countenance it in the area of civil proceedings.
I disagree with the premise of that argument.
Maliciously causing a person to be prosecuted on the basis of an allegation known by the complainant to be false is far from being a thing of the past, and in recent times it has led in some cases to the conviction of the complainant for the offence of perverting or attempting to pervert the course of justice.
Although in such cases the complainant has typically not been worth suing, if the situation were otherwise there would be no reason to regard an action for malicious prosecution as inappropriate.
Floodgates.
It is suggested that although Mr Willers claim may be meritorious, there is an unacceptable risk of its being followed by other claims which are unmeritorious.
The argument that a good claim should not be allowed because it may lead to someone else pursuing a bad one is not generally attractive, but in this case it is bolstered by two other arguments, the deterrence factor and the finality factor.
Deterrence.
It is suggested that if the tort is available it may deter those who have valid civil claims from pursuing them for fear that if the claim fails they may face a vindictive action for malicious prosecution.
This was the argument advanced 300 years ago in Savile v Roberts for not allowing the tort in criminal proceedings.
I am not persuaded that it has greater merit in relation to civil proceedings.
There are many deterrents to litigation (uncertainty, time, expense, etc), some of which may be stronger than others.
A claimant who brings civil proceedings on an improper basis exposes himself to the risk of having to pay indemnity costs, but I am not aware of evidence that this has deterred those with honest claims from pursuing them.
One can always hypothesise that an honest litigant who has not been put off from bringing a claim by the risk of the judge (wrongly) deciding that he had acted improperly and making an indemnity costs order might nevertheless be put off by the extra risk of an opposing party bringing a vindictive action for malicious prosecution, but there is no way of testing the hypothesis and it seems to me intrinsically unlikely.
Finality.
There is unquestionably a public interest in avoiding unnecessary satellite litigation, whether in criminal or civil matters, but that has not been considered a sufficient reason for disallowing a claim for malicious prosecution of criminal proceedings.
Unlike certain other forms of satellite litigation, an action for malicious prosecution does not amount to a collateral attack on the outcome of the first proceedings (subject to the discrete point about a claim for costs in excess of those allowed in the underlying proceedings).
Duplication of remedies.
In Gregory Lord Steyn expressed himself to be tolerably confident that any manifest injustices arising from groundless and damaging civil proceedings were either adequately protected under other torts or capable of being addressed by any necessary and desirable extensions of other torts: [2000] 1 AC 419, 432.
Crawford and the present case show that this is not so.
Inconsistency with witness immunity from civil liability.
It is suggested that to allow Mr Willers claim would introduce an inconsistency with the rule that evidence given to a court is protected by immunity from civil action, even if the evidence is perjured.
If this were a valid objection it would apply to all forms of the tort of malicious prosecution, including prosecution of criminal proceedings, as well as to the instances of malicious institution of civil process which are acknowledged on all sides to be within the scope of the tort.
Roy v Prior [1971] AC 470, 477 478, is authority that the rule which bars an action against a witness for making a false statement does not prevent an action in respect of abuse of the process of the court.
Lord Morris of Borth y Gest explained the difference: It is well settled that no action will lie against a witness for words spoken in giving evidence in a court even if the evidence is falsely and maliciously given (see Dawkins v Lord Rokeby (1873) LR 8 QB 255, Watson v MEwan [1905] AC 480) This, however, does not involve that an action which is not brought in respect of evidence given in court but is brought in respect of an alleged abuse of process of the court must be defeated if one step in the course of the abuse of the process of the court involved or necessitated the giving of evidence.
It must often happen that a defendant who is sued for damages for malicious prosecution will have given evidence in the criminal prosecution of which the plaintiff complains.
The essence of the complaint in such a case is that criminal proceedings have been instituted not only without reasonable and probable cause but also maliciously.
So also in actions based upon alleged abuses of the process of the court it will often have happened that the court will have been induced to act by reason of some false evidence given by someone.
In such cases the actions are not brought on or in respect of any evidence given but in respect of malicious abuse of process (see Elsee v Smith (1822) 2 Chit 304).
Inconsistency with the absence of a duty of care by a litigant towards the opposing party.
There is a great difference between imposing a duty of care and imposing a liability for maliciously instituting proceedings without reasonable or probable cause.
The same distinction is established in relation to criminal cases.
The police owe no duty of care towards a suspect (Calveley v Chief Constable of Merseyside Police [1989] AC 1228), but that does not mean that a police officer is immune from the tort of malicious prosecution.
The distinction between careless and intentional conduct is a familiar feature of parts of the common law, reflected in Oliver Wendell Holmes, Jrs often quoted saying, Even a dog distinguishes between being stumbled over and being kicked (The Common Law, 1909, lecture 1).
The tort should be confined to persons exercising the coercive power of the state.
This was the third argument advanced by the defendant in Quartz Hill and was rejected by the Court of Appeal for reasons which I regard as sound: see para 35 above.
Implicit in the suggested restriction is the idea that malicious prosecution is a public law tort, available against public officers and others who take it on themselves to exercise the coercive powers of the state; but in Gibbs v Rea [1998] AC 786, 804 Lord Goff and Lord Hope were emphatic that it would be incorrect to see the tort as having any of the characteristics of a public law remedy.
They were in a minority in their opinion about the proper decision in that case, but I do not detect any difference on that point.
Reciprocity.
It is suggested that the logical corollary of allowing a claim for malicious prosecution of civil proceedings should be a right to sue for the malicious defence of a civil claim without reasonable or probable cause.
The same argument might logically be advanced in relation to the malicious prosecution of criminal proceedings.
It is not uncommon for a criminal suspect, when questioned about an offence, to advance a defence involving false accusations of one kind or another against the complainant, which may be injurious to the complainants reputation.
It is easy to think of some high profile examples.
That aside, the question whether there should be civil liability for bad faith denial of claims raises other and wider considerations.
For an English court to adopt the approach of Supreme Court of New Hampshire in Aranson v Schroeder (1995) 671 A 2d 1023 and recognise the existence of a cause of action of that description would be bold, to say the least, but I do not see that recognition of civil liability for malicious prosecution of civil proceedings carries with it as a necessary counterpart that there should be liability for bad faith denial of a claim.
There is an obvious distinction between the initiation of the legal process itself and later steps which may involve bad faith (for which the court is able to impose sanctions) but do not go to the root of the institution of legal process.
Uncertainty as to malice.
It is suggested that a decision in Mr Willers favour would take the courts into new and uncertain waters about the meaning of malice.
The requirement of malice has been considered in the past at the highest level, for example in Glinski v McIvor [1962] AC 726, 766, and Gibbs v Rea [1998] AC 786, 797.
No argument was addressed to the court in the present case on this issue for understandable reasons.
If the facts alleged by Mr Willers are substantiated, there was undoubtedly malice on the part of Mr Gubay.
Lord Mance expresses concern about the concept of malice in the context of a claim for malicious prosecution of civil proceedings (paras 137 to 140).
I make two preliminary observations.
First, this subject was not raised in either partys written or oral arguments, for understandable reasons.
Mr Willers case is that Mr Gubay well knew that Mr Willers had done Mr Gubays bidding in the matter of Langstones claim against the Aqua directors, and the prosecution of Langstones claim against Mr Willers was part of Mr Gubays vendetta against him.
Secondly, over the last 400 years there has been a volume of case law about malice, and the related requirement of absence of reasonable and probable cause, for the purposes of the tort of malicious prosecution.
Most of it has not been cited, and the court has not had the benefit of the parties analysis of it.
I recognise that Lord Mance is registering a concern, rather than seeking to seeking to lay down doctrine.
It would be wrong for me to ignore that concern, but anything that I say on this aspect is necessarily obiter.
In the early case law Hobart CJ stated the requirements succinctly in the passage from his judgment in Waterer v Freeman cited at para 17 above: if a man sue me in a proper court, yet if his suit be utterly without ground of truth, and that certainly known to himself, I may have an action of the case against him.
This formula was adopted by Blackburn J in 1869 in Wren v Weild.
It accords with Lord Mances suggestion (para 139) that he would be readier to accept a concept of malicious prosecution which depended on actual appreciation that the original claim was unfounded.
Hobart CJs statement remains a helpful starting point and, speaking in general terms, it has in my view much to commend it.
It is well established that the requirements of absence of reasonable and probable cause and malice are separate requirements although they may be entwined: see, for example, Glinski v McIver [1962] AC 726, 765, (it is a commonplace that in order to succeed in an action for malicious prosecution the plaintiff must prove both that the defendant was actuated by malice and that he had no reasonable and probable cause for prosecuting, per Lord Devlin).
In order to have reasonable and probable cause, the defendant does not have to believe that the proceedings will succeed.
It is enough that, on the material on which he acted, there was a proper case to lay before the court: Glinski v McIver, per Lord Denning at 758 759. (Compare and contrast a suit which is utterly without ground of truth, per Hobart CJ.)
Malice is an additional requirement.
In the early cases, such as Savile v Roberts, the courts used the expression falso et malitiose.
In the 19th century malitiose was replaced by the word malicious, which came to be used frequently both in statutes and in common law cases.
In Bromage v Prosser (1825) 4 B & C 247, 255, Bayley J said that Malice, in common acceptation, means ill will against a person, but in its legal sense it means a wrongful act, done intentionally, without just cause or excuse.
His statement was cited with approval by Lord Davey in Allen v Flood [1898] AC 1, 171. (For a recent discussion of the nineteenth century understanding of the meaning of malicious in the law of tort, see O (A Child) v Rhodes [2016] AC 219, paras 37 to 41.) As applied to malicious prosecution, it requires the claimant to prove that the defendant deliberately misused the process of the court.
The most obvious case is where the claimant can prove that the defendant brought the proceedings in the knowledge that they were without foundation (as in Hobart CJs formulation.) But the authorities show that there may be other instances of abuse.
A person, for example, may be indifferent whether the allegation is supportable and may bring the proceedings, not for the bona fide purpose of trying that issue, but to secure some extraneous benefit to which he has no colour of a right.
The critical feature which has to be proved is that the proceedings instituted by the defendant were not a bona fide use of the courts process.
In the Crawford case Mr Delessio knew that there was no proper basis for making allegations of fraud against Mr Paterson, but he did so in order to destroy Mr Patersons business and reputation.
The combination of requirements that the claimant must prove not only the absence of reasonable and probable cause, but also that the defendant did not have a bona fide reason to bring the proceedings, means that the claimant has a heavy burden to discharge.
All things considered, I do not regard the suggested countervailing considerations as sufficient to outweigh the argument that simple justice dictates that Mr Willers claim for malicious prosecution should be sustainable in English law.
Excess costs.
Newey Js decision to award costs to Mr Willers on a standard basis is readily understandable.
The action had been discontinued and the judge would not have been able to determine whether Mr Willers should recover indemnity costs without conducting what would have amounted to a trial of the present action.
On the other hand, the notion that the costs order made has necessarily made good the injury caused by Mr Gubays prosecution of the claim is almost certainly a fiction, and the court should try if possible to avoid fictions, especially where they result in substantial injustice.
A trial of Mr Willers claim will of course take up further court time, but that is not a good reason for him to have to accept a loss which he puts at over 2m in legal expenses.
Expenditure of court time is sometimes the public price of justice.
If Langstones action against Mr Willers had gone to a full trial, and if at the end the judge had refused an application for indemnity costs because he judged that the claim had not been conducted improperly, then to attempt to secure a more favourable costs outcome by bringing an action for malicious prosecution would itself have been objectionable as an abuse of the process of the court, because it would have amounted to a collateral attack on the judges decision.
But those are not the circumstances and I do not regard Mr Willers claim to recover his excess costs as an abuse of process.
Conclusion
For these reasons, which largely replicate the judgments of the majority in Crawford, I would allow the appeal and hold that the entirety of Mr Willers claim should be permitted to go to trial.
LORD CLARKE: (agrees with Lord Toulson)
Introduction
The principal issue in this appeal is whether the tort of malicious prosecution includes the prosecution of civil proceedings.
I would firmly answer that question in the affirmative.
Lord Toulson and others have set out the facts and the issues in the light of the conflicting approaches of the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419 and the Privy Council in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014] AC 366.
I am content to adopt the facts as stated by Lord Toulson at paras 3 to 5 and his analyses of Gregory at paras 6 to 8 and of Sagicor at paras 9 to 15 respectively.
Lord Toulsons historical analysis
Lord Toulsons analysis of the cases he refers to at paras 16 to 41 is by no means conclusive but I agree with him when he says at the end of para 25 that Grainger v Hill (1838) 4 Bing (NC) 212 does at any rate illustrate the willingness of the court to grant a remedy in what it regarded as novel circumstances, where the plaintiff had suffered provable loss as a result of civil proceedings brought against him maliciously and without any proper justification.
Moreover it seems to me to be of some note that, as Lord Toulson says at paras 26 and 27, having briefly set out the facts of De Medina v Grove (1847) 10 QB 172 and Churchill v Siggers (1854) 3 E & B 929, the judges in each case adopted a common starting point.
See in particular the quotations in Lord Toulsons para 27, where he sets out a quote from De Medina v Grove in which Wilde CJ (with whom Maule J, Cresswell J, Williams J, Parke B and Rolfe B agreed) began his judgment by stating: The law allows every person to employ its process for the purpose of trying his rights, without subjecting him to any liability, unless he acts maliciously and without probable cause.
Similarly in Churchill v Siggers (1854) 3 E & B 929 Lord Campbell CJ, delivering the judgment of the court, including Erle J and Crompton J, began thus: To put into force the process of the law maliciously and without any reasonable or probable cause is wrongful; and, if thereby another is prejudiced in property or person, there is that conjunction of injury and loss which is the foundation of an action on the case.
I agree with Lord Toulson (in his para 29) that there is no good reason for limiting the breadth of that proposition: see his paras 30 to 32.
I also agree with his analysis of the Quartz Hill case at his paras 33 to 38 and with his analysis of the Berry v British Transport Commission case at his paras 39 to 42.
That analysis appears to me to provide at least some support for the proposition stated by Danckwerts LJ in the Court of Appeal [1962] 1 QB 306 in which at p 334 he repeated Diplock Js obiter dictum at first instance that the action for malicious prosecution lies for wrongful and malicious civil as well as criminal proceedings.
In all the circumstances I agree with Lord Toulsons conclusion at his para 42 that the courts have fashioned the tort of malicious prosecution to do justice in various situations in which a person has suffered injury in consequence of the malicious use of legal process without any reasonable basis.
As he puts it, the court has to decide whether the tort should now apply to the malicious and groundless prosecution of a civil claim causing damage of the kinds alleged in the instant case.
Discussion
I have reached the clear conclusion, in agreement with the majority in Crawford, and in particular with the leading judgment given by Lord Wilson, that this court should conclude that there is a tort of malicious prosecution of civil claims.
I recognise that there is scope for argument but, in my opinion, Lord Toulsons analysis shows that there is a good deal of support for such a tort.
In this regard I am not persuaded that the cases show that, in so far as such a tort has been recognised, it has been limited to ex parte applications to secure a claim.
In particular it does not seem to me that the jurisprudence on the arrest of ships is limited in that way.
Claims for damages for wrongful arrest of a ship are not limited to claims for security obtained on an ex parte basis.
They are claims in tort for wrongful arrest in which, if the claimant is successful he or it will obtain damages calculated in accordance with the principles of the common law.
A person who arrests a ship does not have to provide security to the defendant in respect of any loss which he might incur.
It is thus not helpful (as I see it) to note that it is now commonplace for claimants to be required to give undertakings as a condition of obtaining a freezing order.
I recognise that there are those who favour the introduction of such an approach in the case of the arrest of ships; see for example Sir Bernard Eder in a lecture given on 12 December 1996 under the auspices of the London Shipping Law Centre entitled Wrongful Arrest of Ships and see further the articles referred to in paras 82 84 below.
However, so far as I am aware, no such approach has been adopted in any decided case.
Much of the learning in this area derives from the decision of the Privy Council in The Evangelismos (1858) Swa 378, 12 Moore PC 352, where the judgment of the Board was given by the Rt Hon T Pemberton Leigh, where he said at pp 359 360: Their Lordships think that there is no reason for distinguishing this case, or giving damages.
Undoubtedly there may be cases in which there is either mala fides or that crassa negligentia, which implies malice, which would justify a Court of Admiralty giving damages, as in an action brought at Common law damages may be obtained.
In the Court of Admiralty the proceedings are, however, more convenient, because in the action in which the main action is disposed of, damages may be awarded.
The real question in this case, following the principles laid down with regard to actions of this description, comes to this: is there or is there not, reason to say, that the action was so unwarrantably brought, or brought with so little colour, or so little foundation, that it rather implies malice on the part of the plaintiff, or that gross negligence which is equivalent to it? The test was thus malice or crassa negligentia, defined as that crassa negligentia which implies malice.
That decision was preceded by a number of earlier cases to much the same effect including The Orion (1852) 12 Moo 356, The Glasgow (1855) Swa 145, The Nautilus (1856) Swa 105, and The Gloria de Maria (1856) Swab 106.
Moreover the principle in The Evangelismos was applied consistently through the late 1800s, usually by Dr Lushington: see The Active (1862) 5 LT (NS) 773, The Eleonore (1863) Br & L 185, The Volant (1864) Br & L 321; 167 ER 385 and The Cathcart (1867) LR 1 A&E 314, The Collingrove, The Numida (1885) 10 PD 158 and The Keroula (1886) 11 PD 92.
common law actions for malicious prosecution.
He said: In The Kate (1864) Br & L 218, Dr Lushington drew an express analogy with The defendants are not in my opinion entitled to damages, because the circumstances of the case do not shew on the part of the plaintiffs any mala fides or crassa negligentia, without which, according to The Evangelismos unsuccessful plaintiffs are not to be mulcted in damages.
The principles in The Evangelismos were further expressly followed by the Privy Council in The Strathnaver (1875) 1 App Cas 58.
The position was summarised in the well known case of The Walter D Wallet, [1893] P 202, where Sir Francis Jeune P put the principles thus at pp 205 206: No precedent, as far as I know, can be found in the books of an action at common law for the malicious arrest of a ship by means of Admiralty process.
But it appears to me that the onus lies on those who dispute the right to bring such an action of producing authority against it.
As Lord Campbell said in Churchill v Siggers , To put into force the process of law maliciously and without any reasonable or probable cause is wrongful; and, if thereby another is prejudiced in property or person, there is that conjunction of injury and loss which is the foundation of an action on the case.
Why is the process of law in Admiralty proceedings to be excepted from this principle? It was long ago held that that an action on the case would lie for malicious prosecution, ending in imprisonment under the writ de excommunicato capiendo in the spiritual court: Hocking v Matthews (1670) 1 Ventris 86.
It can, therefore, hardly be denied that it would have lain for malicious arrest of a person by Admiralty process in the days when Admiralty suits so commenced, just as for malicious arrest on mesne process at common law.
But if for arrest of a person by Admiralty process, why not for arrest of a person's property? I can imagine no answer, and the language of the reasons of the Privy Council in the case of The Evangelismos , quoted with approval in the later case of The Strathnaver appears to me to treat the existence of such an action at common law as indisputable.
The words to which I refer were employed by their lordships in speaking of the arrest of a ship in a salvage suit.
Their lordships say (at p 67), Undoubtedly there may be cases in which there is either mala fides, or that crassa negligentia which implies malice, which would justify a Court of Admiralty giving damages, as in an action brought at common law, damages may be obtained.
In the Court of Admiralty the proceedings are, however, more convenient, because, in the action in which the main question is disposed of, damages may be awarded.
It is perhaps noteworthy that, at any rate as I read it, The Walter D Wallet was an action brought at common law, although the President held that the relevant principles were the same as had been applicable in the Court of Admiralty.
He said at p 208: Still, the action of the defendants was, I think, clearly in common law phrase, without reasonable or probable cause; or, in equivalent Admiralty language, the result of crassa negligentia, and in a sufficient sense mala fides, and the plaintiffs ship was in fact seized.
A little earlier, at p 207 the President said: No doubt in an action on the case for commencing or prosecuting an action, civil or criminal, maliciously and without reasonable or probable cause, damage must be shown: Cotterell v Jones.
Cotterell v Jones is reported at (1851) 11 CB 713.
It was not necessary to decide whether an action would lie at all because it was held that, if it did, damage must be proved.
Although a majority of the judges left the point open, Williams J plainly thought that, if damage was proved, such an action would lie: see p 730.
The President was of the same view in The Walter D Wallet.
See also Mitchell v Jenkins (1833) 5 B & Ad 588.
There has been little analysis in England and Wales of the principles governing wrongful arrest since The Walter D Wallet.
The courts have essentially applied the principles in The Evangelismos since then.
See, comparatively recently, The Kommunar (No 3) [1997] 1 Lloyds Rep 22, per Colman J at p 30 and the decision of the Court of Appeal in Gulf Azov Shipping Co Ltd v Idisi [2001] 1 Lloyds Rep 727.
I note in passing that in The Maule [1995] 2 LRC 192 the Court of Appeal in Hong Kong applied the same principles by reference to the same cases.
Moreover it is interesting in the present context to see that Bokhary JA said at p 195, under the heading The analogy with malicious prosecution that [t]he analogy between the tort of malicious prosecution and claims such as the present is well established.
I should add that the court does not have a discretion as to whether to permit the arrest of a vessel.
It was held by the Court of Appeal in The Varna [1993] 2 Lloyds Rep 253 that, provided the property was within the scope of an action in rem, and provided that there had been procedural compliance with the rules, the plaintiff was entitled to arrest the vessel.
The specific issue related to the question whether there was a duty of full and frank disclosure.
The court held that after a change in the RSC in 1986, there was no such duty.
Before 1986 there was such a duty but, as I see it, there was a right to arrest subject to that duty.
Thus in the context of the arrest of ships the courts have recognised a claim for what is in essence malicious prosecution of a civil action by arresting a ship in circumstances where the ingredients of the tort are either mala fides, or that crassa negligentia which implies malice.
Moreover the above passage shows that damages were recoverable both in the Admiralty Court and in the courts of common law, where the principles were the same and where the action was on the case.
To my mind these principles cannot be disregarded on the basis that they were applied only in some form of interlocutory process.
They appear to me to support the historical analysis identified by Lord Toulson.
Moreover they show that there are some torts which require proof of malice or something akin to it.
There are two other examples which seem to me to support this approach.
They are misfeasance in public office and malicious prosecution of a criminal process.
I first came across misfeasance in public office in 1995 when I was asked, at first instance, to identify the ingredients of the tort in Three Rivers District Council v Governor and Company of the Bank of England [1996] 3 All ER 558.
However the case subsequently went twice to the House of Lords, reported at [2003] 2 AC 1.
On the first occasion the House considered the ingredients of the tort.
They were identified by Lord Steyn at pp 191 196.
His third ingredient focused on two alternative states of mind on the part of the defendant.
The first was targeted malice.
The second (at p 191E) was where a public officer acts knowing that he has no power to do the act complained of and that the act will probably injure the plaintiff.
It involves bad faith inasmuch as the public officer does not have an honest belief that his act is lawful.
That test seems to me to be close to the test of malice referred to in the wrongful arrest cases referred to above.
It shows that the torts which require malice or something like it are not uncommon.
There is in my opinion a close affinity between the tort of malicious prosecution of a crime and the tort of malicious prosecution of a civil action.
The ingredients are essentially the same, namely malice or, in the old language, crassa negligentia which implies malice.
I agree with Lord Toulsons approach to malice in his paras 52 to 56.
In addition, as Lord Toulson explains in para 54, by reference to Lord Devlins opinion in Glinski v McIver [1962] AC 726 at 765, it is commonplace that in order to succeed in an action for malicious prosecution the plaintiff must prove both that the defendant was activated by malice and that he had no reasonable and probable cause for prosecuting.
There is some scope for argument as to whether that is the same test as crassa negligentia in a claim based on wrongful arrest.
However, this was not discussed in the course of the argument in this appeal and is not relevant to the issue for decision.
Equally I should note in passing that there has been some discussion, both in academic articles here and elsewhere and in judgments in common law jurisdictions, on the question whether a less stringent test should be introduced in a claim for damages for wrongful arrest.
The articles include, in addition to the article referred to in para 68 above, the following.
First there are three articles in volume 38 of the Tulane Maritime Law Journal Winter 2013, No 1, at pp 115 145: the first by Sir Bernard Eder entitled Time for a Change, the second by Martin Davies by way of reply to Sir Bernard and the third a rejoinder by Sir Bernard.
The second is by Dr Aleka Sheppard in the third edition of her Modern Maritime Law, 2013 at section 2.4 under the heading Wrongful Arrest of Ships.
The third article is by Michael Woodford in (2005) 19 MLAANZ 115 which sets out the position in Australia and discusses many of the cases including those referred to above.
As to decided cases, there have been some Singapore cases in recent years which discuss the same cases and, for the most part follow the English cases.
They include the decision of Selvam JC in The Ohm Mariana, Ex p Peony [1992] 1 SLR(R) 556 and The Kiku Pacific [1999] SGCA 96, in which the Court of Appeal, endorsed the test of mala fides and crassa negligentia implying malice rather than the test of absence of reasonable and probable cause.
That decision was followed by the Singaporean High Court in The Inai Selasih (Ex p Geopotes X) [2005] 4 SLR 1.
Subsequently the same point was considered in some detail by the Court of Appeal in The Vasily Golovnin [2008] 4 SLR (R) 994, especially at paras 118 134, where it noted that the test was widespread in the Commonwealth, including Canada and New Zealand: see paras 132 133.
Rajah JA, delivering the judgment of the court, concluded as follows: 134.
We would agree with the views of both Iacobucci J [in the Canadian Supreme Court] and Giles J [in the High Court in New Zealand] to the extent that the Evangelismos test is long standing, and should not be departed from lightly, without good reasons and due consideration.
However, it is always open to this court to depart from this judicially created test if the day comes when it no longer serves any relevant purpose.
Having examined the genesis of the Evangelismos test and its current application in Singapore, we shall for now leave this issue to be addressed more fully at a more appropriate juncture.
We are prepared to reconsider the continuing relevance and applicability of the Evangelismos test when we have had the benefit of full argument from counsel as well as the submissions of other interested stakeholders in the maritime community in the form of Brandeis briefs.
For the present appeal, as will be demonstrated shortly, the outcome reached by this court would nonetheless be the same whether the Evangelismos test or a less onerous test is applied.
The court had earlier noted that relaxation of the test had in many cases been achieved by statute.
It is not necessary to consider this further here because the issue does not arise.
However, it is important to note that nobody has suggested that there should be no claim for damages for wrongful arrest, only that the test should be lower than the test of either mala fides, or that crassa negligentia which implies malice.
In so far as the test for malicious prosecution identified in Glinski v McIver includes the requirement that the defendant had no reasonable and probable cause for prosecuting, there may be scope for argument as to precisely what is meant by that expression, but that is not the subject of this appeal.
The question here is whether there is a tort of malicious prosecution of a civil claim.
For my part I can see no sensible basis for accepting that the tort of malicious prosecution of a crime exists in English law, whereas the tort of malicious prosecution of a civil action does not.
Not only are the ingredients the same, but it seems to me that, if a claimant is entitled to recover damages against a person who maliciously prosecutes him for an alleged crime, a claimant should also be entitled to recover damages against a person who maliciously brings civil proceedings against him.
The latter class of case can easily cause a claimant very considerable losses.
They will often be considerably greater than in a case of malicious prosecution of criminal proceedings.
Some members of the court rely upon a number of factors which are said to point to a different conclusion.
Lord Toulson has discussed those factors in his paras 44 to 51 under the headings of floodgates, deterrence, finality, duplication of remedies, inconsistency with the absence of a duty of care, witness immunity, limitation to the coercive power of the state and reciprocity.
Largely for the reasons given by Lord Toulson I agree that those factors do not have sufficient weight to counter the conclusion that, like malicious prosecution of criminal proceedings, malicious prosecution of civil proceedings is a tort.
The only point I would make by way of postscript in relation to the factors discussed by Lord Toulson is that it is to my mind irrelevant that no duty of care is owed because the sole question is whether the tort of malicious prosecution exists.
In my opinion it does.
Finally, I note that in Congentra AG v Sixteen Thirteen Marine SA (The Nicholas M) [2008] EWHC 1615 (Comm); [2009] 1 All ER (Comm) 479 Flaux J, albeit obiter, considered the question whether English law recognises a tort of wrongful attachment of property.
It was argued that it does not based on a passage in the speech of Lord Steyn in Gregory at p 427, which was relied upon as support for the proposition that the tort of malicious prosecution is not generally available in respect of civil proceedings.
Flaux J concluded that Lord Steyn was not laying down that proposition as of general application.
He referred in particular to Lord Steyns speech at pp 432 433, where he said this: My Lords, it is not necessary for the disposal of the present appeal to express a view on the argument in favour of the extension of the tort to civil proceedings generally.
It would, however, be unsatisfactory to leave this important issue in the air.
I will, therefore, briefly state my conclusions on this aspect.
There is a stronger case for an extension of the tort to civil legal proceeding than to disciplinary proceedings.
Both criminal and civil legal proceedings are covered by the same immunity.
And as I have explained with reference to the potential damage of publicity about a civil action alleging fraud, the traditional explanation namely that in the case of civil proceedings the poison and the antidote are presented simultaneously, is no longer plausible.
Nevertheless, for essentially practical reasons I am not persuaded that the general extension of the tort to civil proceedings has been shown to be necessary if one takes into account the protection afforded by other related torts.
I am tolerably confident that any manifest injustices arising from groundless and damaging civil proceedings are either already adequately protected under other torts or are capable of being addressed by any necessary and desirable extensions of other torts.
Instead of embarking on a radical extension of the tort of malicious prosecution I would rely on the capacity of our tort law for pragmatic growth in response to true necessities demonstrated by experience.
It is important to note that Lord Steyns conclusion was not based upon principle but upon what he called practical reasons.
Flaux J concluded (at para 22), that Lord Steyn expressly recognised that there may be scope for incremental growth and extension of existing torts, including wrongful arrest.
I agree.
Indeed, I would go further and hold that the logical conclusion from the cases is that a person who suffers damage as a result of the malicious prosecution of a civil suit against him is entitled to recover that damage in just the same way as a person who suffers damage as a result of the malicious prosecution of criminal proceedings against him.
Conclusion
For these reasons and those given by Lord Toulson I would allow the appeal.
LORD MANCE: (dissenting)
Introduction
This appeal revisits before nine Justices in the Supreme Court the question how far the tort of malicious prosecution does or should apply in relation to civil proceedings.
The question received intense and helpful consideration in no less than five judgments given by the five members of the court sitting as Privy Counsellors in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17, [2014] AC 366 (Crawford v Sagicor).
I would also pay tribute to the meticulous analysis of the issues in the first instance judgment of Miss Amanda Tipples QC in the present case.
Much of the discussion in those judgments can be taken as read.
The difficulty is that the Judicial Committee was split three to two in Crawford v Sagicor, taking different views both of the case law and of policy.
That the Supreme Court must also engage closely with legal policy is I think clear.
Viewed in isolation, the assumed facts of this case make it attractive to think that the appellant should have a legal remedy.
But the wider implications require close consideration.
We must beware of the risk that hard cases make bad law, and we are entitled to ask why, until the Privy Councils majority decision in Crawford v Sagicor, there has been an apparent dearth of authority in this jurisdiction for a claim such as the appellant wishes to pursue.
Both sides attached significance to this last question.
Mr John McDonnell QC for the appellant said at the outset that he accepted a fundamental difference between creating a remedy for the first time and recognising a remedy that had become over looked with time.
He relied on a series of authorities in the 16th, 17th and 18th centuries for an underlying principle, encapsulated he submitted most clearly by Holt CJ in the late 17th century in Savile v Roberts 1 Ld Raym 374, 3 Salk 17, 3 Ld Raym 264, 1 Salk 13, 12 Mod 208, Carthew 416, 5 Mod 405.
The principle was, he submitted, that malicious prosecution of an unfounded civil suit can give rise to liability for damage inflicted in respect of reputation, health, earnings and charges.
This principle had, he submitted, been misunderstood and wrongly constrained during the 19th century, in particular by the Court of Appeal in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674.
Analysis of the case law
McDonnell advocates is not justified: I have come to the conclusion that the reading of the authorities which Mr i) The 16th to 18th century authorities must be seen in the light of contemporary procedures governing civil proceedings.
Plaintiffs at the relevant times could on an ex parte basis institute or cause an officer of the state to institute drastic measures affecting the intended defendants person, property or ability to trade.
In that context, it was recognised that, once it had been established that the measures had been instituted or caused without any reasonable cause and maliciously, the defendant should have a remedy for what was effectively wrongful imprisonment, wrongful deprivation of goods or wrongful deprivation of the opportunity to trade.
He could then recover any concomitant damage to person, reputation, business or pocket. ii) However, it was established that damage to a plaintiffs pocket did not in this connection include extra costs, over and above those recoverable inter partes in the original action. iii) The principle of the prior authorities was in the 1880s extended by analogy to enable the recovery of general damages to reputation arising from malicious pursuit of a winding up petition in respect of a company.
But this extension was carefully limited, so as to exclude any general right to bring an action for malicious pursuit of a prior action. iv) good these propositions.
I will in the following paragraphs examine the authorities to make
Taking the cases prior to Savile v Roberts, in Bulwer v Smith (1583) 4 Leon 52, the defendant, by impersonating a deceased judgment creditor, took out against the judgment debtor successive writs, first a capias ad satisfaciendum whereby the debtor was outlawed and forfeited all his goods and then a capias utlagatum whereby he was arrested and imprisoned for two months.
The error having been revealed, it was held that the judgment debtor was entitled to damages.
In Waterer v Freeman (1617) Hobart 205, (1618) Hobart 266, the claim was that the defendant had wilfully and vexatiously taken out a second writ of fieri facias, thereby causing the sheriff to levy double execution on the plaintiffs goods.
The court held the claim to be maintainable, once the double execution was established and provided that the suit (here the second execution) was utterly without ground of truth, and that certainly known to the person taking it.
In Skinner v Gunton (1667) 2 Keb 473, (1668) 1 Saund 228(d), 2 Keb 475 and T Raym 176, (1671) 3 Keb 118, Gunton, maliciously and knowing that Skinner would not be able to find bail, issued an unfounded plaint for trespass allegedly causing loss of 300 against Skinner, causing the sheriff to arrest Skinner and imprison him for 20 days.
Gunton was held liable for damages of 10.
Finally, Daw v Swaine (or Swayne) (1668) 1 Sid 424, (1668) 2 Keble 546, (1669) 1 Mod 4, was another case of malicious issue of a plaint in a sum (variously put at 5,000 or 600), in the knowledge that it was not due and the defendant would not be able to afford bail and would suffer incarceration.
In fact a much lesser sum was due.
Skinner v Gunton was followed.
All these cases involved imprisonment or at least seizure of goods.
A case outside that ambit was Gray v Dight (1677) 2 Show KB 144 where the plaintiff, having given an account as churchwarden before the Ecclesiastical Court, was prosecuted a second time by the defendant, who went and told the Judge that he would not account, on which he [was] excommunicated.
It was resolved the action though nothing ensued by an excommunication, and no capias, nor any express damage laid; for this court will consider of the consequences of an excommunication; and an action lies for a malicious prosecution, though the judges proceedings are erroneous, for that is not material in this case. lies, It may be inferred from this reasoning that the court was conscious that it was outside the normal area of malicious prosecution, where a capias led to arrest, but justified this because of the seriousness attaching to excommunication.
In holding that judicial error in giving effect to the second action was no bar to the claim, the court was also anticipating much later decisions in Johnson v Emerson (1871) LR 6 Ex 329 and Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674: see below.
Against this background I turn to Savile v Roberts.
It was in fact a case of alleged malicious indictment (for taking part in a riot, by stopping a road by which the defendant used to carry his tithes).
But both counsels submissions and the judgment also addressed malicious pursuit of civil proceedings.
The Privy Council in Crawford Adjusters Ltd v Sagicor Insurance Ltd considered that the best encapsulation of the central decision in Savill v Roberts, which makes no distinction between criminal and civil proceedings, is to be collected from the report at 5 Mod 394, as follows: It is the malice that is the foundation of all actions of this nature, which incites men to make use of law for other purposes than those for which it was ordained.
It is now clear that the report at 5 Mod 394 is of counsels submissions.
The judgment of Holt CJ is covered by other reports, notably 1 Ld Raym 374, 1 Salkeld 13 and 12 Mod 208.
From those reports, it is clear that Holt CJ, speaking for all three members of the court, drew distinctions between maliciously pursued criminal proceedings and maliciously pursued civil proceedings.
Thus, addressing an objection that there was no more reason that an action should be maintainable in this case (ie for a malicious indictment) than where a civil action is sued without cause, for which no action will lie Holt CJ said (taking the report at 1 Ld Raym 374): There is a great difference between the suing of an action maliciously, and the indicting of a man maliciously.
When a man sues an action, he claims a right to himself, or complains of an injury done to him; and if a man fancies he has a right, he may sue an action.
He went on: 2.
The common law has made provision, to hinder malicious and frivolous and vexatious suits, that every plaintiff should find pledges, who were amerced, if the claim was false; which judgment the court heretofore always gave, and then a writ issued to the coroners, and they affeered them according to the proportion of the vexation.
See 8 Co 39 b FNB 76a.
But that method became disused, and then to supply it, the statutes gave costs to the defendants.
And though this practice of levying of amercements be disused, yet the court must judge according to the reason of the law, and not vary their judgments by accidents.
But there was no amercement upon indictments, and the party had not any remedy to reimburse himself but by action. 2.
If A. sues an action against B. for mere vexation, in some cases upon particular damage B. may have an action; but it is not enough to say that A. sued him falso et malitiose, but he must shew the matter of the grievance specially, so that it may appear to the court to be manifestly vexatious. 1 Sid 424, Daw v Swain, where the special cause was the holding to excessive bail.
But if a stranger who is not concerned, excites A. to sue an action against B. B. may have an action against the stranger.
FNB 98 n and 2 Inst 444.
The report at 1 Salkeld 13 adds a further reference at the end to 3 Cro 378.
That is the case of Robodham v Venleck, recognising a malicious assertion that a person had lied on his oath in court as involving an actionable slander.
The citation of 2 Inst 444 in the context of a stranger exciting the pursuit of an action indicates that Holt CJ was referring to a statute of 13 Ed I Stat 1 (Westminster second) chapter 36 entitled A Distress taken upon a Suit commenced by others.
This was enacted to deal with abuses of position by feudal courts.
Its opening words were: Forasmuch as lords of courts, and others that keep courts, and stewards, intending to grieve their inferiors, where they have no lawful means so to do, procure others to move matters against them, and to put in surety and other pledges . (Holt CJ also referred to the statute expressly in a passage cited in para 103 below.) The remedy for such abuses was prescribed to be triple damages.
This cause of action no longer exists, and no distinction was drawn in counsels submissions on the present appeal between the liability of a party maliciously suing and the liability of a third party knowingly procuring or assisting a party to sue maliciously.
It seems right that the two should be assimilated, certainly in a case like the present where Mr Gubay is said to have been the alter ego of the company alleged to have pursued civil proceedings maliciously at his instance.
In the report at 12 Mod 208, Holt CJ is reported as referring to both Daw v Swain and Skinner v Gunton, and as adding that: There is another case where an action of this nature will lie, and that is, where a stranger, who is not at all concerned, will excite another to bring an action, whereby he is grieved, an action lies against the exciter.
There are other cases where this action is allowed; as Carlion v Mills 1 Cro 291, Norris v Palmer 2 Mod 51 and Ruddock v Sherman 1 Danv Abr 209: but though this action does lie, yet it is an action not to be favoured, and ought not to be maintained without rank and express malice and iniquity.
Therefore, if there be no scandal or imprisonment, and ignoramus found [ie lack of basis for the original claim], no action lies, though the matter be false.
Carlion v Mills and Ruddock v Sherman concerned malicious citations before ecclesiastical courts for respectively inconsistency and adultery, and Norris v Palmer extended the action on the case for malicious prosecution to an indictment for a common trespass in taking away one hundred bricks in respect of which the defendant was only acquitted by the jury at trial after he was compelled to spend great sums of money presumably on lawyers, not the jury.
The judgment in Savile v Roberts focused on the nature of the injury which could found an action for malicious indictment.
The report at 1 Ld Raym 374 records Holt CJ saying (at p 378) that the nature of the injury for which damages might be recoverable has been much unsettled in Westminster Hall, and therefore to set it at rest is at this time very necessary.
And, 1.
He said, that there are three sorts of damages, any of which would be sufficient ground to support this action. 1.
The damage to a mans fame, as if the matter whereof he is accused be scandalous.
But there is no scandal in the crime for which the plaintiff in the original action was indicted. 2.
The second sort of damages, which would support such an action, are such as are done to the person; as where a man is put in danger to lose his life, or limb, or liberty, which has been always allowed a good foundation of such an action, as appears by the Statute de Conspiratoribus where the Parliament describes a conspirator, and the Statute of Westm 2, 13 Ed 1, st 1, c 12, which gives damages to the party falsely appealed, respectu habito ad imprisonamentum et arrestationem corporis, and also ad infamiam; but these kinds of damages are not ingredients in the present case 3.
The third sort of damages, which will support such an action, is damage to a mans property, as where he is forced to expend his money in necessary charges, to acquit himself of the crime of which he is accused, which is the present charge.
That a man in such case is put to expences is without doubt, which is an injury to his property; and if that injury is done to him maliciously, it is reasonable that he shall have an action to repair himself.
It cannot be assumed that Holt CJ meant that the same approach applied in respect of an action for malicious pursuit of civil proceedings.
In speaking of the third sort of damages, he expressly referred only to crime.
In the same judgment he went on to make clear (at p 379) that one of the great differences between criminal and civil proceedings, which explained why a claim could lie for maliciously instituting the former when it did not lie for maliciously pursuing the latter, was that the law did not provide for costs in relation to the former, when it did in relation to the latter: see para 99 above.
Further, and as will appear, later authority is almost unanimously to the effect that the costs position in relation to the malicious pursuit of civil proceedings is quite different from that in relation to criminal proceedings (see paras 107, 110, 111, 124 125 and 141 below).
The report at 12 Mod 208 also refers to the three sorts of damage which Holt CJ identified: it is necessary to consider what are the true grounds and reasons of such actions as these; and it does appear, that there are three sorts of damages, any one of which is sufficient to support this action.
First, damage to his fame, if the matter whereof he be accused be scandalous.
Secondly, to his person, whereby he is imprisoned.
Thirdly, to his property, whereby he is put to charges and expenses.
A scandalous matter in the context of the first sort of damage meant a charge, an oral accusation of which would amount to slander per se (not the case at the time with a charge of riot).
Later authority appears to have understood scandal as including any defamatory accusation a point that may require consideration in the context of the present case: see Berry v British Transport Commission [1961] 1 QB 149, pp 163 165, per Diplock J, discussing the effect of Rayson v South London Tramways Co [1893] 2 QB 304 and Wiffen v Bailey and Romford Urban District Council [1915] 1 KB 600.
As to the second sort of damage, the report at 12 Mod 208 makes clear that the second sort of damage involved showing actual imprisonment, rather than a mere risk of loss of liberty: Berry v British Transport Commission [1961] 1 QB 149, 161.
Two years after Savile v Roberts, Neal v Spencer (1700) 12 Mod 257 held that an action on the case for arresting without cause of action lies not, if it be not that he [the current plaintiff] was held to excessive bail.
The nature of the damage recoverable in an action upon the case for malicious indictment was further considered in Jones v Givin (or Gwynn) (1713) Gilb Cas 185, (1712) 10 Mod 147 and 214 (a case where the plaintiff had been wrongly accused of exercising the trade of a badger of corn and grain).
Holt CJ having died in 1710, his successor Parker CJ delivered a formidably erudite judgment paying tribute to the excellent argument of that great man in Savile v Roberts.
Dismissing a submission that a claim for malicious indictment was no more actionable than certain (unspecified) claims for malicious prosecution of a civil action, Parker CJ said: But I choose to say there is a great difference between the two cases. (1) Because the demand of right or satisfaction is more favoured than the bringing to punishment.
An action is to recover his right, or satisfaction for it, perhaps his subsistence.
An indictment does himself no good, only punishes another, and there is a case which goes so far as to say, that to indict for a common trespass for which a civil action will lie, is malice apparent.
Pas 30 Car 2, C B 2 Mod 306.
Lord Chief Justice North not named.
And it is observable, that in actions of conspiracy, in cases of appeals, the plaintiffs in appeals never were made defendants, but in case of judgments the prosecutors for the most part were. (2) Because if the action is false, the plaintiff is by law amerced, and the defendant to have costs.
And therefore my Lord Chief Justice Holt, in his excellent argument in Savill and Roberts, Mich 10 W 3, where he fully states the difference between the two cases, said that in case for a malicious action the plaintiff must shew special matter which shews malice, for else an action, being the plaintiffs seeking and demanding advantage to himself, carrys in it, 1.
A fair and honest cause, unless the recovery be utterly hopeless, and the suit without some other design, which therefore must be specially shewn.
Parker CJ concluded that, applying the guidance given in Savile v Roberts regarding the sorts of recoverable damage, a man was just as much intitled to satisfaction as well for damages in his property through expence, as for damage in his fame through scandal, the species of the damage, whether the one or the other is the same, for they can make no difference now, whatsoever it might have done formerly.
Again, that was said in the context of the claim for malicious indictment.
Then in Chapman v Pickersgill (1762) 2 Wils KB 145, Lord Mansfield CJ considered whether an action would lie for falsely and maliciously petitioning the Lord Chancellor that the plaintiff owed the petitioner a debt of 200 and had committed an act of bankruptcy, whereupon the commission had been issued (the petitioner giving to the Lord Chancellor a bond for 200 to cover loss which the plaintiff might sustain if no such debt was proved) and the plaintiff had been declared bankrupt.
The bankruptcy having been set aside, the petitioner, now defendant, objected, first, that a proceeding on a commission of bankruptcy was a proceeding in nature of a civil suit; and that no action of this sort was ever brought and, second, that the statutory remedy excluded any common law claim.
Lord Mansfield, giving the judgment of the whole court, gave both objections short shrift.
Of the first, he said: The general grounds of this action are, that the commission was falsely and maliciously sued out; that the plaintiff has been greatly damaged thereby, scandalized upon record, and put to great charges in obtaining a supersedeas to the commission.
Here is falsehood and malice in the defendant, and great wrong and damage done to the plaintiff thereby.
Now wherever there is an injury done to a man's property by a false and malicious prosecution, it is most reasonable he should have an action to As to the second objection, Lord Mansfield said: repair himself.
See 5 Mod 407, 8 10 Mod 218 [ie Jones v Givin or Gwynn], 12 Mod 210.
I take these to be two leading cases, and it is dangerous to alter the law.
See also 12 Mod 273, 7 Rep Bulwers case [ie Bulwer v Smith], 1. 2 Leon 1 Roll Abr 101, 1 Ven 86, 1 Sid 464.
But it is said, this action was never brought; and so it was said in Ashby and White.
I wish never to hear this objection again.
This action is for a tort: torts are infinitely various, not limited or confined, for there is nothing in nature but may be an instrument of mischief, and this of suing out a commission of bankruptcy falsely and maliciously, is of the most injurious consequence in a trading country. we are all of opinion, that in this case the plaintiff would have been entitled to this remedy by action at common law, if this Act had never been made, and that the statute being in the affirmative, hath not taken away the remedy at law. but the most decisive answer is, that this statute remedy is a most inadequate and uncertain remedy; for though there be the most outrageous malice and perjury, and the party injured suffer to the amount of ten or twenty thousand pounds, yet the Chancellor has no power to give him more than the penalty of 200.
Besides, the method of applying to the Chancellor is more tedious, expensive, and inconvenient than this common law remedy; and this case, in its nature, is more properly the province of a jury than of any judge whatever.
As the first passage shows, the damages awarded had been put in broad terms covering, according to Lord Mansfield, both great damage due to being scandalised upon record and great charges in obtaining a supersedeas to the commission.
Lord Mansfield in the second passage was clearly focusing on the former head of damages and on the evident inadequacy of a bond limited to 200 to cover all loss which the victim of a malicious civil suit might suffer up to five figure amounts.
He was not addressing the recoverability of extra costs in circumstances where the original court had or has a discretion to award appropriate compensatory costs.
In Goslin v Wilcox (1766) 2 Wils K B 303, the plaintiff, a market trader, owed some 5, but the creditor maliciously issued a writ of capias ad respondendum in the Bridgwater Borough court which he knew to have no jurisdiction.
On that basis, he caused the plaintiff while trading at his stall in Bridgwater Fair to be arrested by the bailiffs on pain of providing 5 bail, so that the plaintiff was not only put to great charges in freeing himself, but was also during his imprisonment hindered from trading and lost his whole profit at Bridgwater put at some 50.
The Common Pleas held that, although Courts will be cautious how they discourage men from suing, the action lay (p 307).
Lord Camden CJ, after initial hesitation, was evidently satisfied that the case was sufficiently analogous to those where nothing was due, or where the arrest was for much more than was due, where it had been held that the costs in the cause are not a sufficient satisfaction for imprisoning a man unjustly (p 305).
In Purton v Honnor (1798) 1 Bos & Pul 205, the claim was for damages for vexatious ejectment.
On the court expressing themselves clearly of opinion on the authority of Savile v Roberts 1 Salk 13, that such an action was not maintainable, counsel for the plaintiff declined to argue the point.
The report at 1 Salk 13 is very brief and confined to the proposition that it is not sufficient that the plaintiff prove he was innocent, but he must prove express malice in the defendant.
It therefore appears probable that the defect in the claim in Purton v Honnor was simply that there was no plea of malice.
On that basis, the case is presently irrelevant.
Sinclair v Eldred (1811) 4 Taunt 7 concerned the arrest of the plaintiff by a bill of Middlesex, the device whereby civil proceedings could be commenced in the Court of Kings Bench (rather than the Common Pleas) under the fiction that a trespass had been committed in the County of Middlesex.
The bill was indorsed for bail for 10, which the plaintiffs attorney undertook whereupon the plaintiff was released.
The defendant allowed the claim to lapse.
The plaintiff had by then incurred costs of 13 guineas, but was only allowed 4 4s 6d, leaving him out of pocket for 9, which he claimed to recover.
The claim failed, for want of evidence of malice, but Mansfield CJ said during submissions (p 9): The plaintiff has recovered already in the shape of taxed costs all the costs which the law allows, and it cannot be that an action may be sustained for the surplus.
And in his judgment (pp 9 10) he added: This is certainly a new species of action, I mean considering it as an action to recover the extra costs, for there was no proof of any inconvenience of any sort arising to the plaintiff, except in the payment of more costs than the law allows him, and which therefore he ought not to recover.
Cotterell v Jones (1851) 11 CB 713 involved a claim against two third parties for maliciously commencing an unfounded action against the plaintiff using the name of Osborne and knowing him to be a pauper.
The action was non suited without, so far as appeared, any order for costs being made against Osborne who was insolvent.
During the elaborate argument, the court evinced scepticism about the proposition that injury to property in putting a person to needless expense could ground a claim for malicious pursuit of a civil claim.
After counsel had made extensive reference to Savile v Roberts and other authority, Jervis CJ said (p 718): You will find that doctrine very much qualified, as you approach more modern times, and Williams J said (p 723): I doubt whether we can take notice of the alleged insolvency of the nominal plaintiff in the former action: the costs must be assumed to be a full compensation for the vexation.
Ultimately, the claim failed because no judgment for costs had, for whatever reason, been obtained against Osborne, so that his insolvency was not shown to have been causative of any inability to recover costs.
But the court endorsed the proposition, which was evidently common ground, that in the ordinary case costs not recoverable in the action cannot be recovered in an action for malicious pursuit of the action.
As Jervis CJ said: It is conceded also, that, if the party so wrongfully put forward as plaintiff in the former action had been a person in solvent circumstances, this action could not have been maintained, inasmuch as the award of costs to the defendant (the now plaintiff) upon the failure of that action, would, in contemplation of law, have been a full compensation to him for the unjust vexation, and consequently he would have sustained no damage.
To like effect, Maule J said: It is conceded that this action could not be maintained in respect of extra costs, that is, costs ultra the costs given by the statute (23 H 8, chapter 15, section 1) to a successful defendant.
Williams and Talfourd JJ started their judgments by saying that they were of the same opinion.
Talfourd J also said: It appears from the whole current of authorities, that an action of this description, if maintainable at all, is only maintainable in respect of legal damage actually sustained; and that the mere expenditure of money by the plaintiff in the defence of the action brought against him does not constitute such legal damage; but that the only measure of damage is, the costs ascertained by the usual course of law.
There being no averment in this declaration that any such costs were incurred or awarded, no legal ground is disclosed for the maintenance of the action.
Churchill v Siggers (1854) 3 E & B 929 and Gilding v Eyre (1861) 10 CB NS 592 were both successful claims for maliciously issuing writs of capias for sums larger than any remaining due, with the result that the plaintiff had been wrongly imprisoned for periods and had also incurred expenses.
Sophia de Medina v Grove and Weymouth (1846) 1 QB 152, 166 170 and (1847) 1 QB 172 was a claim for wrongfully issuing a writ of fi fa to enforce a judgment allegedly obtained for more than remained due, leading to the plaintiffs imprisonment until he provided securities for the full judgment sum.
The claim failed in the absence of any plea that the claim was brought without probable cause, as well as maliciously.
The plaintiffs remedy in such circumstances was to apply to set aside the judgment.
The case adds nothing to the wisdom of other case law.
In Johnson v Emerson (1871) LR 6 Ex 329 an order that the plaintiff put up a bond within seven days was stayed, but the allegation was that the petitioner, being aware of this, nonetheless maliciously petitioned ex parte for the plaintiffs bankruptcy for failure to put up such a bond and also ex parte obtained the appointment of a receiver, leading to the plaintiff being adjudicated bankrupt, an adjudication later set aside as having been erroneous.
The court split equally on the factual question of awareness and maliciousness, with the result that the verdict below in favour of the plaintiff stood.
Cleasby B, who with Kelly CB upheld the claim, distinguished a petition for adjudication [from] an ordinary commencement of an action, which leaves both parties in the same position, describing it as a most important ex parte proceeding against a man, which may be likened to an application for a capias to hold to bail The one makes a mans property liable to be taken, and the other makes his person liable to be taken (p 340).
On the other side, Martin B, who would have set aside the verdict in favour of the plaintiff, questioned whether an action for malicious pursuit of civil proceedings could ever lie where a petition would, procedurally, lead in due course to an inter partes adjudication.
Martin Bs view was not however followed by the Court of Appeal in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674.
Quartz Hill
Quartz Hill concerned a claim for malicious presentation and advertisement of a winding up petition, which was subsequently dismissed.
The Court of Appeal consisted of the powerful combination of Brett MR and Bowen LJ.
They addressed two main points, which they saw as related.
The first was whether an action would lie for falsely and maliciously presenting a petition to wind up a company, while the second related to the nature of any damage which might be recoverable in such an action: see p 688, per Bowen LJ.
As to the first, both members of the court treated it as axiomatic that no action lay for maliciously pursuing ordinary civil proceedings.
The question was whether a winding up petition could be brought by analogy within the group of ex parte procedural measures involving damage to person, property or reputation which, on past authority, could give rise to such an action.
As to the second, both members of the court also treated it as axiomatic that extra costs, over and above those recoverable in the original civil proceedings, could not be recovered in a later action for maliciously pursuing those proceedings.
In my opinion, the Court of Appeal was on all these points correct in its analysis of past authority.
Taking the first point, a petition to wind up a company could have no immediate effect of any person or property as such.
The authorities on arrest of the person and seizure or dispossession of goods were not therefore in point.
But the petition to wind up was nonetheless an ex parte procedure which directly affected the companys trading reputation.
It was in Brett MRs words (p 685) more like a bankruptcy petition than an action charging fraud, and the very touchstone of this point is that the petition to wind up is by force of law made public before the company can defend itself against the imputations made against it; for the petitioner is bound to publicly advertise the petition seven days before it
is to be heard and adjudicated upon
Both members of the court gave consideration to the distinction between what they saw as a general inability to found an action upon the malicious pursuit of a prior civil action and the case before them.
In a much commented passage, Brett MR suggested (pp 684 685) that the case before them was not like an action charging a merchant with fraud, where the evil done by bringing the action is remedied at the same time that the mischief is published, namely at the trial.
That idea was picked up by Buckley LJ in Wiffen v Bailey and Romford Urban District Council [1915] 1 KB 600, 607, who said that the exception of civil proceedings so far as they are excepted, depends not upon any essential difference between civil and criminal proceedings, but upon the fact that in civil proceedings the poison and the antidote are presented simultaneously.
Brett MRs and Buckley LJs aphorisms have been well criticised, on the basis that, if they were ever justified, the transparency and publicity surrounding modern day civil actions, at least in common law countries, make them quite unrealistic.
This criticism was accepted by the Supreme Court of Victoria in Little v Law Institute of Victoria (No 3) [1990] VR 257, where Kaye and Beach JJ held (in the context of allegedly malicious pursuit of civil proceedings alleging that the plaintiff had been practising as a solicitor without being qualified to do so) that there was no longer justification for confining to a bankruptcy petition and an application to wind up a company the remedy for malicious abuse of civil proceedings where the damages claimed is to the plaintiffs reputation.
The criticism was also accepted as valid by the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419, 428A.
But the House of Lords went on, rightly, to indicate (p 428B) that acceptance of the criticism leaves open for consideration whether the restriction upon the availability of the tort in respect of civil proceedings may be justified for other reasons.
In this regard, Bowen LJs judgment is in my opinion of interest for its fuller treatment of the point.
He said (p 688): I start with this, that at the present day the bringing of an action under our present rules of procedure, and with the consequences attaching under our present law, although the action is brought falsely and maliciously and without reasonable or probable cause, and whatever may be the allegations contained in the pleadings, will not furnish a ground for a subsequent complaint by the person who has been sued, nor support an action on his part for maliciously bringing the first action.
To speak broadly, and without travelling into every corner of the law, whenever a man complains before a court of justice of the false and malicious legal proceedings of another, his complaint, in order to give a good and substantial cause of action, must shew that the false and malicious legal proceedings have been accompanied by damage express or implied.
After examining the three sorts of damage contemplated in Savile v Roberts, Bowen LJ went on (pp 690 691): To apply this test to any action that can be conceived under our present mode of procedure and under our present law, it seems to me that no mere bringing of an action, although it is brought maliciously and without reasonable or probable cause, will give rise to an action for malicious prosecution.
In no action, at all events in none of the ordinary kind, not even in those based upon fraud where there are scandalous allegations in the pleadings, is damage to a mans fair fame the necessary and natural consequence of bringing the action.
Incidentally matters connected with the action, such as the publication of the proceedings in the action, may do a man an injury; but the bringing of the action is of itself no injury to him.
When the action is tried in public, his fair fame will be cleared, if it deserves to be cleared: if the action is not tried, his fair fame cannot be assailed in any way by the bringing of the action.
In contrast, certain indictments, those involving scandal to reputation or possible loss of liberty, were by their nature considered to affect a persons fair fame and to be actionable, if malicious, and the presentation of a bankruptcy petition fell into the same class: In the past, when a traders property was touched by making him a bankrupt in the first instance, and he was left to get rid of the misfortune as best he could, of course he suffered a direct injury as to his property.
But a traders credit seems to me to be as valuable as his property, and the present proceedings in bankruptcy, although they are dissimilar to proceedings in bankruptcy under former Acts, resemble them in this, that they strike home at a man's credit, and therefore I think the view of those judges correct who held, in Johnson v Emerson, that the false and malicious presentation, without reasonable and probable cause, of a bankruptcy petition against a trader, under the Bankruptcy.
Act, 1869, gave rise to an action for malicious prosecution.
On the general inability to found an action upon the malicious pursuit of a previous civil action, Bowen LJ also said this, vividly and in my view wisely (at pp 690 691): I do not say that if one travels into the past and looks through the cases cited to us, one will not find scattered observations and even scattered cases which seem to shew that in other days, under other systems of procedure and law, in which the consequences of actions were different from those of the present day, it was supposed that there might be some kind of action which, if it were brought maliciously and unreasonably, might subsequently give rise to an action for malicious prosecution.
It is unnecessary to say that there could not be an action of that kind in the past, and it is unnecessary to say that there may not be such an action in the future, although it cannot be found at the present day.
The counsel for the plaintiff company have argued this case with great ability; but they cannot point to a single instance since Westminster Hall began to be the seat of justice in which an ordinary action similar to the actions of the present day, has been considered to justify a subsequent action on the ground that it was brought maliciously and without reasonable and probable cause.
And although every judge of the present day will be swift to do justice and slow to allow himself as to matters of justice to be encumbered with either precedents or technicalities, still every wise judge who sits to administer justice must feel the greatest respect for the wisdom of the past, and the wisdom of the past presents us with no decisive authority for the broad proposition in its entirety which the counsel for the plaintiff company have put forward.
But although an action does not give rise to an action for malicious prosecution, inasmuch as it does not necessarily or naturally involve damage, there are legal proceedings which
do necessarily and naturally involve that damage
These passages highlight the point that civil actions cannot be said to have the same inevitable or necessary effect on trading or any other reputation as a winding up petition.
They may be the occasion for serious allegations, which may be reported, but that is a feature of much civil litigation, not merely as a result of the way in which it is initiated and pursued, but as a result of evidence which may be given by independent factual and expert witnesses as well as parties.
Civil actions are complex and developing phenomena, not infrequently exciting the interest of the press and public and leading ultimately to a resolution, by judgment, earlier settlement or sometimes withdrawal.
This is so with whatever motive or prospect they may be pursued.
The basic point which the Court of Appeal in Quartz Hill was concerned to underline was that an action to investigate the maliciousness or otherwise of a full blown prior civil action, which had been fought and resolved inter partes, was and is a quite different proposition to an action for malicious pursuit of an ex parte step taken maliciously with immediate effect on the other partys person, property or business.
That distinction is still in my view a valid one.
A judge of today would also be as sensible as a judge of Bowen LJs time to heed the fact that the wisdom of the past presents no decisive authority for the broad contrary proposition which counsel for Mr Willers puts forward.
The second proposition for which Quartz Hill stands is that extra costs over and above those awarded in a prior civil action cannot on any view ground or be recovered in an action for malicious pursuit of that prior action.
That proposition is supported by Sinclair v Eldred (1811), as well as by Johnson v Emerson (1871) to which the Court of Appeal referred.
Although such extra costs might be quite reasonable as between solicitor and client, they were as between the parties to be regarded as the only costs which were necessary or were caused by or properly recoverable in respect of the prior litigation: per Brett MR and Bowen LJ at pp 682 and 690.
There is an obvious policy imperative behind this rule.
A court awarding costs in a civil action is entitled to have regard to all relevant matters, including the absence of any prospects of success and the state of mind in which it was pursued, when deciding what costs, and whether on an indemnity or standard basis; should be recoverable.
To permit litigation about these issues after the close of an unsuccessful action would be to invite or risk re litigation of issues which were or could have been decided in the first action.
And in so far as the costs assessed by a costs judge are not likely to or may not enable full recovery of all costs incurred, the reason is likely to be that the costs incurred were not in the eyes of the law necessary, reasonable or proportionate in the context of the issues.
To allow a claim for their recovery in a separate action for malicious pursuit of the original action would in each of these cases run contrary to the general policy of the law regarding costs.
Authority since Quartz Hill
Pursuing the line of relevant authority, in Wiffen v Bailey and Romford Urban District Council [1915] 1 KB 600 the Court of Appeal held (albeit applying a view of scandal not necessarily coincident with that which Holt CJ intended in Savile v Roberts: see para 103 above) that non compliance with a Public Health Act 1875 notice did not necessarily and naturally involve damage to the defendants fair fame.
Buckley LJ noted Bowen LJ as indicating in Quartz Hill that it is in very few cases that an action for malicious prosecution will lie where the matter is one of civil proceedings (p 606).
It was accepted by counsel, and endorsed by Buckley and Phillimore LJJ (pp 607 and 610), that extra costs over and above the five guineas allowable by the Justices were not legal damages within the third head of damage recognised in Savile v Roberts.
Over the years since Quartz Hill, there has been a miscellany of further instances in which a remedy has been recognised in respect of procedural measures taken against the person or property.
The malicious arrest of a vessel was recognised as actionable in The Walter D Wallet [1893] P 202 and Varawa v Howard Smith Co Ltd (1911) 13 CLR 35, where Quartz Hill was cited with approval (by OConnor J at p 72); the case actually concerned the issue of a writ of capias for breach of an alleged contract for sale of a ship, pursuant to which writ the plaintiff had been arrested, imprisoned and held to bail.
There is nothing in The Walter D Wallet or the other Admiralty arrest cases which Lord Clarke cites in his judgment contrary to the general principles and distinctions identified in Quartz Hill.
The cases he cites do no more than illustrate that the malicious initiation of civil proceedings by wrongful arrest of a vessel can give rise to liability in similar fashion to the malicious institution of civil proceedings by wrongful arrest of a person.
The malicious obtaining of a bench warrant, although supported by false testimony from the witness box, was likewise held actionable in Roy v Prior [1971] AC 470, where the analogy with malicious arrest on a criminal charge was drawn.
Maliciously setting in train execution against property was accepted as actionable in Clissold v Cratchley [1910] 2 KB 244.
Maliciously procuring the issue of a search warrant by a judge was held actionable in Gibbs v Rea [1998] AC 786, where it was held that such a claim had long been recognised though seldom successfully prosecuted (p 797B), and that it was akin to malicious prosecution which is a well established tort and to the less common tort of maliciously procuring an arrest: Roy v Prior.
In Gregory v Portsmouth City Council [2000] 1 AC 419, 427G Lord Steyn said that: These instances may at first glance appear disparate but in a broad sense there is a common feature, namely the initial ex parte abuse of legal process with arguably immediate and perhaps irreversible damage to the reputation of the victim.
In Gregory v Portsmouth City Council the House of Lords refused to extend the tort of malicious prosecution to the malicious commencement of disciplinary proceedings (involving in that case the removal of a local counsellor from various committees).
But Lord Steyn, giving the only full speech, accepted at p 432F G that there was a stronger case for an extension of the tort to civil legal proceeding than to disciplinary proceedings.
Both criminal and civil legal proceedings are covered by the same immunity.
And as I have explained with reference to the potential damage of publicity about a civil action alleging fraud, the traditional explanation namely that in the case of civil proceedings the poison and the antidote are presented simultaneously, is no longer plausible.
Nevertheless, for essentially practical reasons I am not persuaded that the general extension of the tort to civil proceedings has been shown to be necessary if one takes into account the protection afforded by other related torts.
I am tolerably confident that any manifest injustices arising from groundless and damaging civil proceedings are either already adequately protected under other torts or are capable of being addressed by any necessary and desirable extensions of other torts.
While the last comment could well be true in relation to disciplinary proceedings not enjoying absolute privilege of the sort actually before the House, it would not necessarily be so in relation to civil proceedings before a court which enjoy absolute privilege.
Summary of the effect of the case law
As I have indicated in para 95 above, the authorities on malicious prosecution prior to Crawford v Sagicor appear to me to fall into only a limited number of categories, in essence: prosecution of criminal (and, at least anciently, some ecclesiastical) i) proceedings, but not of disciplinary proceedings; ii) institution of coercive measures instituted ex parte (though with the assistance of, or subject to some form of adjudication by, legal authorities) under civil procedures available leading to the arrest, seizure or search of the plaintiffs person or property or scandalisation of his fair fame; iii) petitions for bankruptcy or insolvency, even though the grant of the petition is subject to some form of adjudication.
In claims for malicious prosecution within point (i), ie relating to a criminal prosecution, damages could include costs which the plaintiff incurred in successfully defending the malicious prosecution.
But in the case of claims within points (ii) and (iii), ie in relation to the pursuit of prior civil proceedings, a plaintiff could, under the rules recognised in and expounded after Savile v Roberts recover damages for injury to person or reputation (in cases of scandal), but could not recover any extra costs over and above those recoverable inter partes in the original action.
In Crawford v Sagicor, the debate between Lord Wilson in the majority and Lord Sumption in the minority appeared at times to focus on whether the tort of malicious prosecution had or had not applied to civil proceedings: compare eg paras 42 and 140.
But, in reality, the position is more nuanced as appears both by their detailed discussion and by the analysis above of the case law.
There is a range of cases in which the ex parte misuse of civil procedures, with immediate effects on the other partys person, property or business, has grounded a tortious claim for malicious prosecution.
But it has never been accepted that there is a general right to claim damages for the malicious pursuit of a prior civil action, which has been decided in the original defendants favour by judgment, settlement or abandonment.
Policy
The question is whether that position should as a matter of policy be maintained.
I have already indicated some factors which suggest that it should be.
But ultimately it is necessary to review the issues of policy more generally.
At this point, I can return gratefully to the discussion in Crawford v Sagicor, in particular in the judgments of Lord Wilson and Lord Sumption, as well as to Lord Neubergers judgment on the present appeal which I have had the benefit of seeing before writing this part of my own judgment.
As will appear, I myself see the position in similar terms to Lord Neuberger and Lord Sumption.
But I add this.
To my mind, one thing is missing from the judgments so far.
That is a discussion of the nature of the heads, or sorts, of damage which might be recoverable, if such an action were to be admissible.
As Quartz Hill made clear, there can be a close relationship between this issue and the question whether any such action is admissible.
According to the Statement of Facts and Issues, it is to be assumed that Mr Willers has suffered damage (1) to his reputation, (2) to his health, (3) in the form of lost earnings, (4) in the form of expenses incurred but not fully recovered, ie his costs of defending the Langstone action net of the costs awarded in it by Newey J on the standard basis.
But there is no further information or assumption about the nature or causation of these heads of damage.
And we have heard no submissions on them.
It is impossible to form any view as to whether all or any of them might be said to have followed necessarily or naturally from the allegations made in the allegedly malicious action brought by Langstone Leisure Ltd against Mr Willers.
Nevertheless, I regret that it has not been possible, on the facts being assumed and on the way in which the case has been presented, to give any close examination to the sorts of damage that might be recoverable under any tort of malicious prosecution that might otherwise exist.
I shall nevertheless say some words on this.
Taking first however the general question of policy, I do not consider that the law should recognise the suggested general tort.
The first point I would make is that it is to my mind unconvincing to suggest that, because there is a tort of malicious prosecution of criminal proceedings, therefore it is logical or sensible that there should be a tort of malicious prosecution of civil proceedings.
Not only does that ignore the teaching of history, showing courts studiously avoiding any such parallel.
It also ignores the fact that, in an era when private prosecutions have largely disappeared, the tort of malicious prosecution of criminal proceedings is virtually extinct.
To create a tort of malicious prosecution of civil proceedings might in these circumstances be thought to come close to necromancy.
Second, the recognition of a general tort in respect of civil proceedings would be carrying the law into uncharted waters, inviting fresh litigation about prior litigation, the soundness of its basis, its motivation and its consequences.
The basis, motivation and consequences of individual ex parte steps, having immediate effects at the outset of litigation, are likely to be relatively easy to identify.
The exact opposite is likely to be the position in the context of prior litigation which has extended quite probably over years.
Further, there is (and could logically be) nothing in the proposed extension of the tort of malicious prosecution, to limit it to circumstances where the claim was at the outset unfounded or malicious.
It would be open to a defendant throughout the course of civil proceedings to tax the claimant with the emergence of new evidence, or the suggested failure of a witness to come up to proof, and to suggest that from then on the claim must be regarded as unfounded and could only be being pursued for malicious reasons.
Logically, as Lord Kerr recognised in Crawford v Sagicor, paras 111 113, it must also be open to a claimant to tax a defendant with pursuing a malicious defence.
Logically again, any such general tort should extend to any individual application or step in the course of a civil action, which could be said to be unfounded and maliciously motivated, eg to gain time or avoid execution, rather than for genuine litigational purposes.
Indeed, logically in my view, once the parties are exposed to claims for maliciously pursuing their respective cases, there is no real reason why witnesses should not likewise be exposed, whether as co conspirators or even as persons having their own individual malicious axe to grind by giving unfounded evidence.
Equally, as Lord Neuberger notes (para 162), there seems to be no reason why the extended tort should not extend to family court, domestic tribunal or arbitral proceedings.
I do not see how we can avoid considering these implications of the suggested extension, when we decide the present appeal.
It is no answer to say that they do not arise for immediate decision.
If on the face of it they follow logically from the suggested extension, we must recognise them.
Lord Wilson was unperturbed by any idea that claimants might feel exposed to off putting risks or that litigants might misuse the tort of malicious prosecution to their advantage.
He suggested in paras 72(a)(i) and (e)(ii) of his judgment in Crawford v Sagicor that the court should have before it empirical evidence before giving weight to any suggestion that litigants might be put off bringing civil actions by threats of malicious prosecution or that actions for malicious prosecution might become pervasive and contaminate the system.
In my opinion, such evidence could hardly be expected, when such actions have for long been seen as impossible.
In any event, the formation of legal policy does not normally depend on statistics, but rather on judges collective experience of litigation and litigants and, more particularly here, their appreciation of the risks involved in litigation and the risks of its misuse.
Judges have enough experience of disingenuous behaviour and procedural shenanigans on the part of litigants to form a view of sound policy in this area.
Further, there already exists a clear recognition of the need that civil actions should in general be litigated without any risk of one or another party, or a third party, subsequently being able to go over and claim in respect of anything said or done in such actions.
That is the absence of any duty of care owed by one litigant to another, and the general immunity which attaches to what is said or done in court by litigants or witnesses: see Lord Neubergers first and second points in paras 157 and 158 of his judgment on this appeal.
A similar recognition informs the House of Lords conclusion in Manifest Shipping Co Ltd v Uni Polaris Insurance Co Ltd [2001] UKHL 1; [2003] 1 AC 469, paras 73 78 that, once parties are in litigation, their conduct is subject to the rules governing litigation, which supersede the application of (in that case) any prior duty of good faith.
I need not go further into the reasons why I consider the proposed extension to be unjustified and unwise.
I am content simply to say that they have been fully and to my mind powerfully set out in Crawford v Sagicor by Lord Sumption in the four points he made at paras 145 148, supplemented by those made by Lord Neuberger on the basis of United States law and experience in paras 192 196, and on the present appeal by Lord Neuberger in his first ten and final points in paras 157 to 167 and 169.
However, I would add that I am also troubled by the role assigned to the concept of malice in the expanded tort for which Mr Willers contends, and reluctant on that ground also to undertake the proposed expansion.
The concept is key.
The pursuit of an unfounded claim, defence or other step during civil proceedings has never been actionable in itself.
Rather, the remedies available for such behaviour include striking out, judgment or costs or, where an undertaking is given or required as a condition of for example an injunction, enforcement of the undertaking.
The additional feature of malice is, as Lord Sumption observes in Crawford v Sagicor (para 133 et seq), not as a general rule relevant to tortious (or one may add contractual) liability.
One should hesitate before extending its role, for reasons which I will indicate.
The starting point is to ask what malice is said to mean in the context of malicious prosecution.
This is illustrated by Crawford v Sagicor itself.
The facts were that (a) it was unreasonable for Mr Delessio, acting for Sagicor, to believe that Mr Paterson had defrauded Sagicor, but (b) he did nonetheless believe this and (c) his dominant motive in alleging fraud against Mr Paterson was his strong dislike and resentment of Mr Paterson, his wish to gain revenge on him and his obsessive determination to destroy him professionally.
These factors were sufficient to make Sagicor liable: see paras 32 and 80, per Lord Wilson.
Two points arise from this.
First, liability for malicious pursuit of civil proceedings can arise from an unfounded claim, if the claimants dominant motive is to injure, even if he believes the claim to be well founded and intends to injure the defendant by pursuing it to judgment.
I would for my part better understand and be readier to accept a concept of malicious prosecution which depended on actual appreciation by the original claimant that the original claim was unfounded.
The concept as advanced, and as the case law suggests, opens the door to wider claims, to wider exposure and to wider risks of misuse.
Second, the concept as advanced also opens the door to future litigation about the meaning of dominant motive.
This was discussed and left unanswered in the very different context of directors duties to act for a proper purpose: see Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71; [2015] Bus LR 1345.
Lord Sumption there considered that but for causation was the answer, whereas I thought that the principal or primary purpose in mind would be likely to be easier to identify, as well as more consistent with such guidance as authority afforded.
The sorts of damage recoverable
I turn to the sorts of damages that might be contemplated when considering the possibility of an action for malicious pursuit of a prior civil action.
As indicated above, although much weight is put by those representing Mr Willers on Savile v Roberts, the submissions before the Supreme Court have not addressed this aspect, which was a significant element in Holt CJs judgment.
It was also central to the discussion in Quartz Hill.
It seems to me potentially to represent a whole further area for litigation, very likely at the appellate level, though one which it is impossible for us to resolve in any detail without having heard further submissions about it.
It seems clear, however, that what is contended is that, once proceedings are found to have been maliciously pursued, all adverse consequences of their pursuit, in terms of damage to reputation, earnings, health and extra costs, are recoverable without further enquiry into their precise nature or causation.
I will comment briefly on each of these sorts of damage.
As regards injury to reputation, all that can be said is that it will be necessary to revisit the area on which Diplock J touched in Berry v British Transport Commission [1961] 1 QB 149, pp 163 165 (see para 104 above) and then perhaps, having decided what is the correct or the appropriate modern understanding of a scandalous allegation, to consider whether the allegations of breach of common law and statutory duties made against Mr Willers by Langstone Leisure Ltd in action HC10C01760 fell necessarily and naturally within this concept.
It seems at least clear from Bowen LJs judgment in Quartz Hill that he would not have contemplated that breaches of this nature could constitute recoverable damage or ground an action for malicious pursuit of a prior civil action: see para 120 above.
The damage alleged to health (or by way of distress) lies some way from the damage to the person by way of arrest or imprisonment in issue in the case law discussed above.
Both the nature of the damage and its causation are presently unparticularised.
Once these are known, consideration will need to be given to whether the claim to recover damages in respect of them is subject to any special rule or simply to ordinary tortious rules.
The claim for damage to earnings is put on the basis that it was impossible for Mr Willers to find alternative employment while Langstone Leisure Ltds claims of breach of duty against him were unresolved.
He claims 500,000 in respect of the period 27 August 2009 to 28 March 2013.
Sinclair v Eldred (1811) 4 Taunt 7 stands as a precedent for the recovery of loss of earnings during a period of unfounded and maliciously caused imprisonment.
Mr Willers claim for loss of earnings is not related to imprisonment, but rather, it seems likely, to the alleged damage to his reputation which Langstone Leisure Ltds proceedings allegedly caused.
Consideration will need to be given to whether damage of this nature is recoverable at all, whether as general damages on account of the scandalous or other nature of the original malicious action under Savile v Roberts or as special damages on any other principle.
Finally, there is Mr Willers claim to recover extra costs amounting to 2,199,966.32, over and above the 1,700,582.20 which he recovered in the proceedings brought by Langstone Leisure Ltd. There is a strong line of case law over the last 200 years holding as a rule that extra costs of this nature are as a matter of principle irrecoverable as between the parties to the original proceedings: Sinclair v Eldred, Cotterell v Jones, Quartz Hill and Wiffen v Bailey (paras 110, 111, 124 and 125 above).
This line can also be traced back to Holt CJs reasoning in Savile v Roberts and to Parker CJs in Jones v Givin (paras 99 and 105 above).
This line extends back before and continues after Chapman v Pickersgill and, for the reasons I have given in para 107 above, Lord Mansfield CJs approach to the bond for 200 covering all loss in that case does not in my view impinge on it or on the rule it establishes.
The rule must in my opinion also apply in a case like the present where Mr Gubay is said to have been the effective instigator of the proceedings brought by Langstone Leisure Ltd (and indeed to have owned as well as controlled that company).
Extra costs may in some circumstances be payable to or recoverable from a true third party, eg payable by a party to its solicitor or recoverable under an insurance or other contract.
But a claim for malicious pursuit of prior proceedings against those responsible for their instigation is in effect a claim between the parties to the prior proceedings.
For the reasons given in the line of authority to which I have referred, and in my discussion of it (in particular in para 124 above), the rule applies and I agree with it.
Conclusion
It follows from all the above that I would dismiss this appeal.
LORD NEUBERGER: (dissenting)
The tort of malicious prosecution in the civil context
The question whether there should be a cause of action in malicious prosecution in respect of civil proceedings has recently been considered by the Judicial Committee of the Privy Council in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014] AC 366, and it is now being addressed by the Supreme Court.
In each case, the answer is in the affirmative, albeit by a bare majority.
As in Crawford v Sagicor, I am in the minority.
Although I agree with the judgment of Lord Mance, I propose to summarise my reasons for concluding that the answer should be in the negative, because, no doubt partly thanks to the judgments in Crawford v Sagicor, we have been given a fuller analysis of the history and implications of this tort than we had in the Judicial Committee.
So far as the history of the tort of malicious prosecution in civil proceedings is concerned, there was considerable debate as to the effect of the judgments in various cases, starting with the judgment of Wray CJ in Bulwer v Smith (1583) 4 Leon 52, including the much reported judgment of Holt CJ in Savile v Roberts (1698) reported variously in 1 Ld Raym 374, 3 Salk 17, 3 Ld Raym 264, 1 Salk 13, 12 Mod 208, Carthew 416, 5 Mod 405, and ending with the judgment of Campbell CJ in Churchill v Siggers (1854) 3 E & B 929.
The appellants argument is that those judgments demonstrate that the tort of malicious prosecution extended to all civil proceedings which had been maliciously and baselessly brought against the potential claimant.
The respondents argument is that those cases support the view that, although the tort did not generally apply to civil proceedings, there were exceptions which were limited to cases where the potential claimant loses his liberty or his property as a result of a malicious and baseless ex parte application or the like, and, as legal procedures have developed, those exceptions have largely fallen away.
The decision of Sir Francis Jeune P in The Walter D Wallet [1893] P 202 is a relatively late example of a successful malicious prosecution claim in such circumstances (in that case, the malicious arrest of a ship).
These old judgments, at least in the form in which they are reported, (i) are sometimes hard to interpret, (ii) often refer to, and may depend on, procedures and rules which have long since ceased to exist, (iii) at least in some cases, are not entirely reliable, as is apparent from differing reports of the same case, and (iv) do not, on any view, speak with one voice.
Accordingly, it is perhaps understandable that there is disagreement as to their precise effect in terms of the overall legal position.
Nonetheless, having read Lord Mances full and informative analysis in paras 96 110 above, which is supported by that of Lord Sumption in Crawford v Sagicor, I am satisfied that the respondents analysis is correct.
Apparently general remarks, such as one finds in the judgment of Lord Campbell CJ in Churchill at p 937 are not, on close analysis, as clear as they might at first appear to a modern reader.
He said [t]o put in force the process of law maliciously and without any reasonable or probable cause is wrongful, and the reference to the process of the law seems to me to be to be at least capable of referring to the execution of ex parte legal process, such as detention the claimants person or his assets, attachment and the like.
In any event, broad general statements about the law, even by highly respected judges, are by no means always a reliable guide to the precise boundaries of a cause of action, when the extent of those boundaries is not in issue in the case concerned.
In any case, any judicial decision is authority for what it decides, not for dicta which plainly go beyond the decision.
In addition to the actual contents of those judgments, two factors persuade me that the respondents contention as to the effect of these old judgments is correct.
First, there is not a single reported case of a successful claim in malicious prosecution which is inconsistent with the respondents much more limited version of the tort.
If the much wider tort, as contended for by the appellant, existed, one would have expected there to have been a reported case of a claim based on such a tort succeeding, or at least having been brought, especially bearing in mind the many law reporters in Westminster Hall between the 17th and 19th centuries.
Secondly, in Quartz Hill Consolidated Gold Mining Co v Eyre (1883) 11 QBD 674, both Sir Baliol Brett MR at pp 682 685 and Bowen LJ at pp 688 691 (where, as Lord Mance points out at para 122 above, he discusses, rather more fully, the point made in para 153 above) clearly took the view that the tort of malicious prosecution in civil proceedings had the more limited character contended for by the respondents.
In addition, I note from p 677 that the first instance judge was Stephen J, who held that there was no cause of action, and that his decision had been upheld by Pollock B and Manisty J.
It is perfectly true that in that case it was not argued that the tort was as wide as the appellant now suggests, and that the issue was whether the malicious and unfounded presentation of a winding up petition (whose immediate effect was then more drastic than under the current state of the law) was to be treated as within the class of ex parte exceptions to the normal rule that there was no general tort of malicious prosecution in civil cases.
Not only is that of itself worthy of note, but it appears to me to be little short of fanciful to imagine that all those five distinguished Judges would have misunderstood the scope of the tort of malicious prosecution.
All of them had been in practice in the 1860s, well before the fundamental procedural changes effect in the 1870s, and Sir Baliol Brett, Pollock B and Manisty J had all been in practice since the 1840s.
Further (at least in the Court of Appeal), they referred to a number of the previous authorities in their judgments.
Of course, the fact that the boundaries of the tort were heavily circumscribed in the past does not mean that this court is bound to hold that they should remain circumscribed.
However, the fact that the boundaries of the tort have (in my view) always been heavily circumscribed and have (on any view) been treated by the courts as heavily circumscribed since 1883, places a tolerably heavy burden on the appellants argument that those boundaries should, in effect, be removed, or at least substantially widened.
A defendant to a malicious groundless civil claim will suffer stress and often will suffer financially in general terms, and many peoples immediate reaction on hearing of what happened in this case (at least as pleaded by the appellant) would be that the malicious claimant should compensate him for any mental distress and other damage which he has suffered as a consequence.
However, to my mind, there are powerful reasons, some of which were identified by Lord Sumption in Crawford v Sagicor, against confirming (to use a neutral verb) the existence of a tort such as that contended for by the appellant.
Some of those reasons are based on principle and some are based on practical considerations.
The first reason, referred to in Crawford v Sagicor, para 124, is that the existence of the tort would be inconsistent with the well established general rule that a litigant owes no duty to his opponent in the conduct of civil litigation, a proposition which is supported by two recent House of Lords decisions, Customs and Excise Comrs v Barclays Bank plc [2007] 1 AC 181, and Jain v Trent Strategic Health Authority [2009] AC 853.
In the latter case, at para 35, Lord Scott, who gave the only reasoned judgment, said that, where the defendants slipshod conduct of an investigation and prosecution led to a wholly unjust order which caused the claimant substantial damage, a remedy for the damage cannot be obtained via the imposition on the opposing party of a common law duty of care, but that the solution must depend on the control of the litigation by the court or tribunal in charge of it.
The second reason, discussed in Crawford v Sagicor, para 125, is that the existence of the tort would be inconsistent with the equally well established rule that even a perjuring witness in court proceedings is absolutely immune from civil liability for a recent example see Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435, 445 446, 460 461 and 464.
As was confirmed in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177, this principle also applies to a potential witness giving a statement.
While the decision in Jones v Kaney [2011] 2 AC 398 can be said to have made a slight inroad into this principle, the Supreme Court actually affirmed the general rule (see paras 16 17 and 105).
More importantly, the effect of Jones was not to create a new tort or even a new duty of care; it was simply to remove an existing limitation on an existing duty of care: the result of the decision was that an expert witnesss duty to her client did not stop when she came to give evidence in court.
The third reason, identified in Crawford v Sagicor, para 145, is that the original justification for the tort in the criminal context does not apply in the ordinary civil context.
As Lord Sumption put it, the tort of malicious prosecution was developed as a tool for constraining the arbitrary exercise of the powers of public prosecuting authorities or private persons exercising corresponding functions against the claimant in subsequent potential malicious prosecution proceedings.
In the non criminal context this was limited to cases where the court was invited by the potential defendant to exercise ex parte or interlocutory powers which resulted in the claimant losing his liberty or property without the prior opportunity properly to defend himself.
That is no basis for extending it to civil proceedings generally.
It is perhaps worth adding that the courts have developed a different and more wide ranging power in this context, by requiring, almost as a matter of course in most cases, a cross undertaking in damages to be given by a party who obtains an interlocutory order.
In other words, rather than limiting damages claims by victims of wrongly granted ex parte or interlocutory orders to maliciously brought applications leading to loss of liberty or of property, the law grants an almost automatic right to such victims, irrespective of the nature of the loss or of the presence of malice.
That seems to me to render it all the more peculiar to resurrect today the tort of malicious prosecution in relation to civil claims generally.
The fourth reason, mentioned in Crawford v Sagicor para 146, is that within the past twenty years, in a judgment given by Lord Steyn, the House of Lords in Gregory v Portsmouth City Council [2000] AC 419 made it clear in obiter but very carefully considered remarks that the tort should not be extended beyond criminal proceedings.
The contrary view had been very fully expressed by Schiemann LJ in the Court of Appeal, and Lord Steyns detailed discussion and clear conclusion should, in the absence of very telling reasons to the contrary, settle the matter.
The fifth reason, as described in Crawford v Sagicor, para 147, is that the precise ambit of the tort, if it extends to civil proceedings of a private nature will be both uncertain and potentially very wide.
It appears that it would extend to a malicious defence (see per Lord Kerr in Crawford v Sagicor, paras 111 113), and it may be hard to justify why it should not extend to malicious applications or allegations in proceedings which would otherwise not be malicious.
And, as Lord Mance says in para 132 above, the tort could apply at different stages of proceedings, so that a claim which was not malicious initially could arguably become malicious as things change.
In particular, as he points out at para 133 above, there are likely to be arguments whether proceedings, which were initially unexceptionable, have become malicious because they are being continued for tactical or costs reasons.
Similarly, there could easily be arguments as to whether it could apply to family court proceedings, domestic tribunal proceedings, and arbitrations.
As I observed in Crawford v Sagicor, para 194, the present position is clear and simple, and in the field of law clarity and simplicity are at a premium.
The sixth reason, adumbrated in Crawford v Sagicor, para 148, arises from the practical consequences in terms of the risk of satellite litigation.
There are several recent examples where the House of Lords has had cause to express concern as to how well intentioned changes in the law have spawned such undesirable results eg an industry of satellite litigation in Grovit v Doctor [1997] 1 WLR 640, a new and costly form of satellite litigation in Medcalf v Mardell [2003] 1 AC 120, para 24, and a mass of satellite litigation in Three Rivers District Council v Bank of England [2005] 1 AC 610, para 65.
Seventhly, it seems to me that confirmation of the existence of the tort could well have unanticipated knock on effects in other areas of law.
For instance, in relation to the law of privilege.
Lord Reed pointed out that in Scotland, where such a tort is recognised, the law of privilege in relation to defamation claims is different, and it may need to be amended in this jurisdiction to accommodate the tort, with unpredictable consequences.
The unforeseen problems which follow when a court seeks to change the law of tort to do what it sees as justice in particular cases are, as Lord Reed says in para 184 below, well illustrated by the problems thrown up in Zurich Insurance plc UK Branch v International Energy Group Ltd v Zurich Insurance plc UK Branch (Association of British Insurers intervening) [2015] UKSC 33; [2015] 2 AC 509 and the cases cited therein.
Eighthly, problems could arise for a defendant to a malicious prosecution claim, who wished to invoke his right to privilege in relation to any document in connection with the allegedly malicious proceedings.
This problem would not arise in relation to a claim based on the ruling in Jones v Kaney, as the privilege would be that of the claimant, who would presumably be waiving the privilege in order to bring his claim in the first place.
Ninthly, the existence of the tort could have a chilling effect on the bringing, prosecuting or defending of civil proceedings.
The notion that a person should not have to face malicious proceedings brought by a ruthless party is said to justify the existence of this tort; but the existence of the tort severely risks creating what would be at least an equally undesirable new weapon in the hands of a ruthless party, namely intimidation through the unjustified, but worrying, threat of a malicious prosecution claim to deter bona fide proceedings.
In other words, the creation of a remedy for one wrong is likely to lead to another wrong.
Tenthly, it is almost inevitable that the cost and time of some proceedings will be increased as a party manoeuvres in one way or another with a view to setting up a malicious prosecution claim if the other partys case fails.
Eleventhly, there is a particular irony that we are creating or affirming the existence of this tort at a time when the courts of England and Wales have more powers than ever before to control litigation and make peremptory orders for costs.
Twelfthly, as I discussed in Crawford v Sagicor, paras 170 175 and 181 190, unlike courts in England and Wales, courts in the United States of America have considerable experience of claims for malicious prosecution in the civil field.
The state courts are pretty evenly divided as to the existence of the wide tort contended for by the appellant.
Many state courts which accept the existence of the wide tort justify departing from what they understand to be the law in England on the basis that [t]he English rule is that generally the loser must pay the winners attorneys fees and so an English plaintiff who brings a frivolous suit does so as the peril of paying his adversarys litigation expenses (to quote Ciparick J in Engel v CBS Inc (1999) 711 NE 2d 626, 629).
Thus, even though the costs sanction which applies to litigation in this jurisdiction is largely absent in the United States, a substantial proportion of the courts in that jurisdiction have set their face against the existence of this tort, and many of those that accept it justify their view by reference to the absence of the costs sanction which is routinely available in our courts.
In addition to these reasons for not approving the existence of the tort as proposed by the appellant, there are the two rather fundamental points made by Lord Mance in paras 136 139 and 140 144 above, which appear to me to be well founded.
Thus, I consider that there could be real problems involved both in identifying what constitutes malice and in deciding what types of loss and damage should be recoverable in connection with claims based on the proposed tort.
Finally, in this connection, it seems to me that the risks of according a right of action to those who suffer as a result of wrong doing in the context of litigation are very well illustrated by the unfortunate experience of the litigation prompted by Parliaments decision to extend the right of litigants to seek wasted costs orders against barristers in England and Wales through section 4 of the Courts and Legal Services Act 1990.
In Ridehalgh v Horsefield [1994] Ch 205, 239, Lord Bingham MR in the Court of Appeal, after referring to the fact that the number and value of wasted costs orders applied for, and the costs of litigating them, have risen sharply tried to stem the flow of such claims.
Subsequently, in the House of Lords case of Medcalf v Mardell, para 13, Lord Bingham referred to the fact that the clear warnings given in [Ridehalgh] have not proved sufficient to deter parties from incurring large and disproportionate sums of costs in pursuing protracted claims for wasted costs, many of which have proved unsuccessful.
In Ridehalgh, the Court of Appeal also tried to curtail the expense involved in wasted costs hearings by saying that such hearings should be measured in hours not days (a view repeated in Medcalf).
That led to courts refusing to hear wasted costs applications when they became disproportionate see eg Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1032.
Because wasted costs applications are procedural and ultimately discretionary, it is far easier for the court to control the proceedings than it would be in relation to a malicious prosecution proceedings, where the claim would be based on a substantive legal right (although, as mentioned in para 168 above, the courts generally have greater powers of case management than they did in the past).
The judgments in Ridehalgh v Horsefield at pp 233 234 and in Medcalf v Mardell at paras 23 24, 40 and 61 also demonstrate the problems thrown up by the law of privilege in relation to claims founded on the conduct of litigation.
In addition, Ridehalgh v Horsefield at pp 233 234 support the concerns I have expressed about the risk of the tort giving rise to intimidation to discourage the bringing of valid claims.
For these reasons, I would have held that a tort such as that argued for by the appellants should not be recognised in the courts of England and Wales, and I would have dismissed the appeal.
LORD SUMPTION: (dissenting)
This appeal has been argued with conspicuous learning and skill on both sides, but the result has been to confirm me in the view which I expressed in Crawford Adjusters (Cayman) Ltd v Sagicor [2014] AC 366, that the recognition of a tort of maliciously prosecuting civil proceedings is unwarranted by authority, unjustified in principle and undesirable in practice.
The only exception is the limited category of cases in which the coercive powers of the courts are invoked ex parte at the suit of the former claimant, without any process of adjudication.
This exception is less significant today than it was historically, because modern forensic procedure offers less scope for the exercise of this kind of power.
The only notable survivor of the panoply of procedures that once existed for the exercise of coercive powers over person or property without judicial intervention is the power to procure a warrant for the arrest of a ship, a context in which the exception is still germane and valuable.
But whatever its limits, the exception is at least certain and rationally founded upon the special features of such cases.
It has no application in this case any more than it did in Crawford v Sagicor.
Since I expressed my reasons at length in that case, and I entirely agree with the judgments of Lord Neuberger and Lord Mance in this one, I shall limit myself to some brief general observations.
The appellants are contending for a tort of general application, which was thought to have received its quietus from the Court of Appeal more than a century ago in Quartz Hill Consolidated Gold Mining Co v Eyre 11 QBD 674 and has never once been successfully invoked in the period of some five centuries during which the question has arisen.
The alleged tort can therefore fairly be described as novel, whatever ones interpretation of the language of Holt CJ in Savile v Roberts (1698) 1 Ld Raym 374.
Novelty as such is of course no bar to the recognition of a rule of law.
But in a system of judge made customary law, judges have always accepted limitations on their ability to recognise new bases of non consensual liability.
Two limitations are particularly germane in this case, neither of which is consistent with recognising the wider tort for which the appellant are arguing.
The first is that where the courts develop the law, they must do so coherently.
This means, among other things, that the development must be consistent with other, cognate principles of law, whether statutory or judge made.
The recognition of a general liability for maliciously prosecuting civil proceedings fails that test.
It circumvents the careful and principled limits that the courts have imposed on the tort of abuse of civil process.
It cuts across the immunities which the law has always recognised for things said and done in the course of legal proceedings.
It introduces malice as an element of tortious liability contrary to the long standing principle of the law of tort that malice is irrelevant.
Logically, it would entitle litigants to recover as of right costs which by statute are a matter of discretion.
And unless we are to overrule not just the reasoning but the decision of the House of Lords in Gregory v Portsmouth City Council [2000] 1 AC 419, it would introduce an unjustifiable distinction between civil proceedings sounding in private law and those sounding in public law such as the disciplinary proceedings in issue in that case.
The recognition of the wider basis of liability urged by the appellant would make the law relating to the conduct of legal proceedings incoherent in ways that cannot simply be brushed aside or left to other cases to sort out.
The second limitation is that the proposed development of the law should be warranted by current values and current social conditions.
Unless the law is to be reinvented on a case by case basis, something must generally have changed to make appropriate that which was previously rejected.
The appellants arguments fail that test also.
The courts have far more extensive powers today than they did a century and a half ago to prevent abuse of their procedures, and the closer judicial supervision of the interlocutory stages of litigation makes it easier to exercise them.
Of course, these powers will not be enough to identify in time the more determined and skilful abuses, but that is part of the price to be paid for access to justice.
The reluctance of the courts to accept rules of law justifying secondary or satellite litigation is born of long standing judicial experience of the incidents of litigation and the ways of litigants.
That experience is as relevant today as it has ever been.
The volume of litigation has increased exponentially in the last 70 years.
Its tendency to generate persistence, obsession and rancour is as great as ever.
The hazards of losing, already considerable in terms of costs, must inevitably be greater if one adds the threat of secondary litigation for prosecuting the earlier action in the first place.
Doubtless the great majority of secondary actions will fail, but that makes it even less satisfactory to enlarge the opportunities for bringing them.
On the status as authority of the judgments of the Privy Council, I have nothing to add to the judgment of Lord Neuberger, with which I entirely agree.
I would dismiss this appeal.
LORD REED: (dissenting)
I agree with the judgments of Lord Neuberger and Lord Mance, and wish to add only three observations.
The first concerns the extent to which the discussion in the present appeal has focused on the interpretation of law reports from the 16th to the 18th centuries.
It is often valuable to understand how the modern law has come to be shaped as it is, especially where, as in the present case, the court is faced with an argument that it contains an anomaly.
The judgment of Lord Sumption in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17; [2014] AC 366, and that of Lord Mance in the present case, are therefore valuable in explaining how the modern law came about, and why criminal prosecutions and certain ex parte civil proceedings have been treated differently from other civil proceedings.
But the significance of the historical inquiry to the courts decision should not be exaggerated.
My own conclusion in the present case would have been the same even if a judgment had been discovered which unequivocally demonstrated that a right of action had been held to lie 300 years ago for the malicious prosecution of a civil suit inter partes.
That is because, in the first place, the question raised by the appeal has to be answered in the context of the modern law of tort and modern civil procedure, rather than the corresponding law of 300 years ago.
More generally, the court must not lose sight of the fact that it is deciding the law for the 21st century.
We have to develop a body of law which is well suited to the conditions of the present day, looking back to the achievements of our predecessors, and also, often more pertinently, to those of our contemporaries in other jurisdictions (as Lord Neuberger did in Crawford, in his consideration of the US authorities).
As Maitland observed, every age should be the mistress of its own law (The making of the German Civil Code, in Fisher (ed), The Collected Papers of Frederic William Maitland, Vol III, p 487 (1911)).
The great judges of the past, such as Holt and Mansfield, would have been the first to recognise that.
The second point also concerns the use made of the reports of judgments given several centuries ago.
As any modern judge knows, the citation of something he has said in a judgment, taken out of its context, is liable to be misleading.
The same is surely true of the judgments of our predecessors.
The court must therefore have a secure understanding of the factual and legal context of those judgments in order to be able to determine the intended scope of any judicial pronouncements.
It is often difficult, however, to attain such an understanding of the judgments of the distant past.
Difficulties arising from an unfamiliar procedural context, and an equally unfamiliar remedy centred approach to legal thinking, are liable to be exacerbated by the variable quality of the reports themselves, and the variations between reports of the same case.
It is unsurprising that, in the present case, notwithstanding the careful research carried out by counsel and members of the court, the authorities are nevertheless interpreted differently.
Thirdly, major steps in the development of the common law should not be taken without careful consideration of the implications, however much sympathy one may feel for the particular claimant.
The confusion resulting from the development of the law in order to afford justice to the victims of mesothelioma, in Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 22; [2003] 1 AC 32, should have taught us that lesson.
In the present case, the basic problem facing the appellant, so far as his claim is based on damage to his reputation caused by allegations made against him in earlier civil proceedings, is the absolute privilege accorded by the modern law of defamation.
The solution favoured by the majority results in the circumvention of that problem by the creation or extension of another tort.
The question where that leaves the law of defamation, and the other issues identified by Lord Mance, appear to me to require fuller consideration than they have received.
Sooner or later, this court will have to address them.
| For the purposes of the appeal, the Court was invited to assume that Mr Gubay controlled a leisure company, Langstone, of which Mr Willers was a director.
Mr Willers was later dismissed as director of Langstone and in 2010 Langstone sued Mr Willers for alleged breach of contractual and fiduciary duties in pursuing litigation.
On 28 March 2013, Langstone discontinued its claim against Mr Willers.
Mr Willers claimed that the claim brought against him by Langstone was part of a campaign by Mr Gubay to do him harm.
Consequently he sued Mr Gubay for malicious prosecution.
It was not disputed that the alleged actions of Mr Gubay constituted the necessary ingredients for a claim in malicious prosecution (on the assumption Mr Willers could substantiate such claims at trial); the question was whether a claim in malicious prosecution could be brought in relation to civil proceedings by an individual against another individual.
Malicious prosecution already exists in relation to criminal proceedings.
If a malicious prosecution did exist in relation to civil proceedings as between private individuals, then Mr Willers claim would be permitted to go to trial.
The Supreme Court allows Mr Willers appeal by a majority of 5 to 4 ruling that the entirety of Mr Willers claim should be permitted to go to trial.
Lord Toulson (with whom Lady Hale, Lord Kerr and Lord Wilson agree) gives the lead judgment.
Lord Clarke delivers a concurring judgment.
Lords Neuberger, Mance, Sumption and Reed give dissenting judgments.
It seems instinctively unjust for a person to suffer injury as a result of the malicious prosecution of legal proceedings for which there is no reasonable ground, and yet not be entitled to compensation for the injury intentionally caused by the person responsible for instigating it [43].
The tort will not deter those who have valid claims.
This was the argument advanced for not allowing the tort in criminal proceedings.
It has no greater merit in civil proceedings [44].
There is a public interest in finality and in avoiding unnecessary satellite litigation, but an action for malicious prosecution does not amount to a collateral attack on the outcome of the first proceedings [46].
The tort does not create a duty of care.
There is a great difference between imposing a duty of care and imposing a liability for maliciously instituting proceedings without reasonable or probable cause [49].
Over the last 400 years there has been a volume of case law
about malice, and the related requirement of absence of reasonable and probable cause, for the purposes of the tort of malicious prosecution [53].
To make out malicious prosecution it is well established that the requirements of absence of reasonable and probable cause and malice are separate requirements although they may be entwined.
In order to have reasonable and probable cause, the defendant does not have to believe that the proceedings will succeed.
It is enough that, on the material on which he acted, there was a proper case to lay before the court.
Malice is an additional requirement.
As applied to malicious prosecution, it requires the claimant to prove that the defendant deliberately misused the process of the court.
The most obvious case is where the claimant can prove that the defendant brought the proceedings in the knowledge that they were without foundation.
But the authorities show that there may be other instances of abuse.
A person, for example, may be indifferent whether the allegation is supportable and may bring the proceedings, not for the bona fide purpose of trying that issue, but to secure some extraneous benefit to which he has no colour of a right.
The critical feature which has to be proved is that the proceedings instituted by the defendant were not a bona fide use of the courts process [54 55].
The combination of requirements that the claimant must prove not only the absence of reasonable and probable cause, but also that the defendant did not have a bona fide reason to bring the proceedings, means that the claimant has a heavy burden to discharge [56].
Lord Clarke delivers a concurring judgment by reference to the arrest of ships, the ingredients of the tort of misfeasance in public office and the close affinity between malicious prosecution of criminal proceedings and malicious prosecution of civil proceedings [60 91].
Lord Neuberger delivers a dissenting judgment with twelve reasons for why the tort of malicious prosecution should not available in respect of civil proceedings between one private litigant and another as well as in criminal proceedings.
The key reasons are that the tort would be inconsistent with the general rule that a litigant owes no duty to his opponent in the conduct of civil litigation [157], inconsistent with witness immunity from civil liability [158], create a danger of satellite litigation [163] and may have a chilling effect on the bringing civil proceedings [166].
Lord Mance delivers a dissenting judgment.
The extension of malicious prosecution is not supported by the authorities [95 129] or by policy because, for example, there is no duty of care owed between litigants [130 140, see 135].
Lord Sumption adds a dissenting judgment.
When recognising new species of non consensual liability, the common law must develop coherently.
The recognition of a general liability for maliciously prosecuting civil proceedings circumvents the principled limits that the courts have imposed on the tort of abuse [178].
Its developments must also be warranted by current values and social conditions.
The courts have far more extensive powers today than they did a century and a half ago to prevent abuse of their procedures [179].
Lord Reed adds a dissenting judgment in agreement with Lords Neuberger and Mance adding observations including a caution against relying on 16th to 18th century cases in a judgments reasoning, especially when constructing their historical context may be difficult [182 3].
|
The issue in this appeal is whether the appellant is entitled to subsidiary protection status under articles 2 and 15 of EU Council Directive 2004/83/EC on the minimum standards for the qualification and status of third country nationals or stateless persons as refugees or as persons who otherwise need international protection and the content of the protection granted (the Qualification Directive).
The main objectives of the Qualification Directive, identified in recital (6), are to ensure that EU member states apply common criteria for the identification of persons in need of international protection and that a minimum level of benefits is available to them.
Article 2 provides: international protection means the refugee and For the purposes of this Directive: (a) subsidiary protection status as defined in (d) and (f); . person eligible for subsidiary protection means a third (e) country national or stateless person who does not qualify as a refugee but in respect of whom substantial grounds have been shown for believing that the person concerned, if returned to his or her country of origin, or in the case of a stateless person, to his or her country of former habitual residence, would face a real risk of suffering serious harm as defined in article 15 and is unable, or, owing to such risk, unwilling to avail himself or herself the protection of that country; subsidiary protection status means the recognition by (f) a member state of a third country national or a stateless person
as a person eligible for subsidiary protection
Article 15 provides: Serious harm consists of (a) death penalty or execution; or (b) punishment of an applicant in the country or origin; or serious and individual threat to a civilians life or person (c) by reason of indiscriminate violence in situations of international or internal armed conflict.
torture or inhuman or degrading treatment or
The appellant is a national of Sri Lanka.
He arrived in the UK in January 2005, then aged 28, and was given leave to enter as a student.
His leave to remain was extended to 30 September 2008.
Shortly before its expiry he applied for a further extension.
This was refused on 11 December 2008.
He claimed asylum on 5 January 2009 on the grounds, in summary, that he had been a member of the Liberation Tigers of Tamil Eelam (LTTE), he had been detained and tortured by the Sri Lankan security forces, and, if returned to Sri Lanka, he was at risk of further ill treatment for the same reason.
The appellants application was refused by the respondent on 23 February 2009.
The respondent did not dispute the core of the appellants account, that he had been a member of the LTTE and had been detained and tortured for that reason, but she did not accept that he would be of continuing interest to the Sri Lankan authorities or at risk of further ill treatment if he were returned.
The appellant appealed against the respondents decision.
It is not necessary to set out full details of the procedural history, but ultimately his appeal formed part of a decision by the Upper Tribunal, dated 5 July 2013, giving Country Guidance on the risk to Tamils following the end of the Sri Lankan civil war: GJ and Others (post civil war: returnees) Sri Lanka CG [2013] UKUT 00319 (IAC).
The Upper Tribunal had medical evidence that the appellant bore scars on his chest and upper and lower limbs which were highly consistent with his account of being beaten with blunt instruments, burned with cigarettes and an iron bar, and his hand cut with a knife.
It also had evidence of a psychiatrist, who had examined the appellant and had access to his medical records in the UK, that he was suffering severe post traumatic stress disorder and severe depression, he showed a high degree of suicidality and he appeared to have a serious determination to kill himself if he were returned to Sri Lanka.
The appellant did not himself give evidence.
The psychiatrist did not consider him fit to do so.
The Upper Tribunal accepted that the appellant had a genuine fear of return to Sri Lanka, and that he had difficulty in trusting or interacting with official figures, even in the UK, because of his past torture, but it rejected his appeal under the Refugee Convention and the Qualification Directive because it did not accept that he was of any continuing interest to the authorities in Sri Lanka.
However, it allowed his appeal under article 3 of the European Convention on Human Rights.
It explained its reasoning in the following paragraphs: 453.
Although the appeal fails under the Refugee Convention and Qualification Directive, we must consider whether the suicide risk which this appellant presents is such as to engage article 3 ECHR.
Applying the J and Y principles [J v Secretary of State for the Home Department [2005] EWCA Civ 629 and Y (Sri Lanka) v Secretary of State for the Home Department [2009] EWCA Civ 362] and reminding ourselves of the gravity of the appellants past experience of ill treatment and his current grave mental health problems, with severe forms of both post traumatic stress disorder and depression, we have considered whether returning the appellant to Sri Lanka will breach the United Kingdoms international obligations under article 3. 454.
The evidence is that there are only 25 working psychiatrists in the whole of Sri Lanka.
Although there are some mental health facilities in Sri Lanka, at para 4 of the April 2012 UKBA Operational Guidance Note on Sri Lanka, it records an observation by Basic Needs that money that is spent on mental health only really goes to the large mental health institutions in capital cities, which are inaccessible and do not provide appropriate care for mentally ill people. 456.
We note that the appellant is considered by his experienced Consultant Psychiatrist to have clear plans to commit suicide if he is returned and that he is mentally very ill, too ill to give reliable evidence.
We approach assessment of his circumstances on the basis that it would be possible for the respondent to return to return the appellant to Sri Lanka without his coming to harm, but once there, he would be in the hands of the Sri Lankan mental health services.
The resources in Sri Lanka are sparse and limited to the cities.
In the light of the respondents own evidence in her OGN that there are facilities only in the cities and that they do not provide appropriate care for mentally ill people and of the severity of this appellants mental illness, we are not satisfied on the particular facts of this appeal, that returning him to Sri Lanka today complies with the United Kingdoms international obligations under article 3 ECHR.
The Upper Tribunals decision was upheld by the Court of Appeal: [2014] EWCA Civ 829.
Maurice Kay LJ, with whom the other members of the court agreed, said that in his judgment the Qualification Directive was not intended to catch article 3 cases where the risk is to health or of suicide rather than of persecution (para 48).
He referred to the decision of the European Court of Human Rights in N v United Kingdom (2008) 47 EHRR 39 (a case of an AIDS sufferer who claimed that her removal to Uganda would contravene article 3) as showing that cases where the risk to an applicant arose from his health were a special category to which article 3 applied only in very exceptional circumstances, because in such cases the alleged future harm would emanate not from the intentional acts or omissions of public authorities or non state bodies, but instead from a naturally occurring illness and the lack of sufficient resources to deal with it in the receiving country (para 43).
Counsel for the appellant submitted that it made a critical difference to the applicability of the Qualification Directive that the Sri Lankan state was responsible for his mental illness by its past ill treatment, but Maurice Kay LJ considered that this argument stretched the concept of subsidiary protection too far.
It is argued on the appellants behalf that the Upper Tribunal and the Court of Appeal took too narrow a view of the scope of the Qualification Directive.
It is his case that his mental illness should not be regarded as a naturally occurring illness, because it was caused by torture at the hands of the Sri Lankan authorities.
Instead, it is submitted that, just as the Upper Tribunal accepted that on the facts of this case the appellants return would cause him severe mental harm which, taking into account his history of ill treatment by the state and the inadequacy of facilities to treat its consequences, would amount to a violation of ECHR article 3, so for similar reasons it should have accepted that he was entitled to subsidiary protection status under the Qualification Directive.
According to this argument, it makes no difference to his entitlement to such protection that there is no longer a risk of repetition of the ill treatment which is the cause of his current state of health.
The respondent submits that the Upper Tribunal and Court of Appeal were right.
It is her case that it is a necessary component of subsidiary protection that there exists a risk of serious harm, as defined in article 15 of the Qualification Directive, in the country of origin for which the home state will be responsible, in that it will either inflict that harm or it will be inflicted by a non state actor against which the state is unable or unwilling to provide protection.
Put shortly, according to her argument, the Directive is aimed at providing international protection against the risk of serious harm from future ill treatment, either by the state or by a third party against which the state cannot or will not provide protection, and not at potential future consequences of past ill treatment of which there is no risk of repetition.
This court was referred to a number of authorities of the Court of Justice of the European Union, including MBodj v Kingdom of Belgium (Case C 542/13) [2015] 1 WLR 3059, and of the European Court of Human Rights, but none is precisely in point.
The question of principle which the appeal raises is debatable and should therefore be referred to the Court of Justice.
The question to be referred is: Does article 2(e), read with article 15(b), of the Qualification Directive cover a real risk of serious harm to the physical or psychological health of the applicant if returned to the country of origin, resulting from previous torture or inhuman or degrading treatment for which the country of origin was responsible?
| The appellant is a Sri Lankan national who arrived in the UK in January 2005 aged 28.
He was given leave to enter as a student and his leave to remain was extended to 30 September 2008.
His application for an extension was refused.
He claimed asylum on 5 January 2009 on the grounds that he had been a member of the Liberation Tigers of Tamil Eelan (LTTE) and had been detained and tortured by Sri Lankan security forces.
He contended that on return he was likely to suffer similar ill treatment.
The issue is whether he is a person eligible for subsidiary protection under the EU Council Directive 2004/83/EC (the Qualification Directive).
He is such a person if there are substantial grounds for believing that upon return to Sri Lanka he will face a real risk of suffering serious harm and is unable, or, owing to such risk, unwilling to avail himself or herself the protection of that country (article 2(e)).
Serious harm in this case means, under article 15(b), torture or inhuman or degrading treatment or punishment.
On 23 February 2009 the Secretary of State for the Home Department refused his application for asylum on the basis that he would not be at risk of further ill treatment despite his membership of LTTE.
The applicant appealed.
The Upper Tribunal (UT) had evidence from a psychiatrist that he was suffering severe post traumatic stress disorder and severe depression and showed a high degree of suicidality.
The UT accepted that the appellant had a genuine fear of return to Sri Lanka.
It accepted that the mental health provision in Sri Lanka was insufficient.
But it did not accept that he was of any continuing interest to the authorities in Sri Lanka.
Therefore the UT rejected his appeal under the Qualification Directive.
In the Court of Appeal, Maurice Kay LJ rejected his appeal on the basis that the alleged future harm would emanate not from the intentional acts or omissions of public authorities or non state bodies, but instead from a naturally occurring illness and the lack of sufficient resources to deal with it in the receiving country (paragraph 43).
The Appellant appealed to the Supreme Court on the grounds that this is too narrow a view of the scope of the Qualification Directive and that his mental illness should not be regarded as naturally occurring because it was caused at the hands of the Sri Lankan authorities.
He argued it
makes no difference to his entitlement to such protection that there is no longer a risk of repetition of the ill treatment which is the cause of his current state of health.
None of the authorities from the Court of Justice of the European Union or the European Court of Human Rights are precisely on point [13].
Therefore the following question will be referred to the Court of Justice of the European Union: Does article 2(e), read with article 15(b), of the Qualification Directive cover a real risk of serious harm to the physical or psychological health of the applicant if returned to the country of origin, resulting from previous torture or inhuman or degrading treatment for which the country of origin was responsible?
|
Act) provide as follows: Sections (1) and (2) of section 123 of the Insolvency Act 1986 (the 1986 (1) A company is deemed unable to pay its debts (a) [non compliance with a statutory demand for a debt exceeding 750 presently due] (b) to (d) [unsatisfied execution on judgment debt in terms appropriate to England and Wales, Scotland and Northern Ireland respectively] (e) if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due. (2) A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the companys assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
A company in the situation described in subsection (1)(e) is often said to be cash flow insolvent.
A company in the situation described in subsection (2) is often said to be balance sheet insolvent, but that expression is not to be taken literally.
It is a convenient shorthand expression, but a companys statutory balance sheet, properly prepared in accordance with the requirements of company law, may omit some contingent assets or some contingent liabilities.
There is no statutory provision which links section 123(2) of the 1986 Act to the detailed provisions of the Companies Act 2006 as to the form and contents of a companys financial statements.
This appeal is concerned with the construction and effect of section 123(1)(e) and (2) as incorporated into the documentation of an issue of loan notes.
The statutory provisions were incorporated, with some small modifications, into the conditions applicable to loan notes issued in the course of a securitisation transaction comprising a portfolio of non conforming mortgage loans secured on residential property in the United Kingdom.
The issuer is Eurosail UK 2007 3BL plc (Eurosail), one of many similar single purpose entities (SPEs) set up by the Lehman Brothers group (but off the balance sheet of any of that groups companies) not long before its collapse.
Eurosail is the principal respondent to this appeal, and it has a cross appeal on a subsidiary issue.
The other respondent appearing before this court, BNY Corporate Trustee Services Ltd (the Trustee) is part of the BNY Mellon Group.
It is the trustee for the holders (Noteholders) of loan notes of various classes issued by Eurosail.
It has adopted a neutral attitude in the proceedings (as explained in its written case), and has not appeared by counsel before this court.
But it will, in the event that the appeal succeeds and the cross appeal fails, have an important judgment to make as to material prejudice to the Noteholders interests.
In 2007 Eurosail (described in the documentation as the Issuer) acquired a portfolio of mortgage loans, secured on residential property in England and Scotland and denominated in sterling, to the principal amount of approximately 650m.
Most of the mortgages were regarded as non conforming in that they did not meet the lending requirements of building societies and banks.
This purchase was funded by the issue on 16 July 2007 of loan notes in five principal classes (A, B, C, D and E) comprising 14 different subclasses, some denominated in sterling, some in US dollars and some in euros.
In the designation of the classes a indicated that the loan was denominated in euros, b US dollars and c pounds sterling.
The senior (class A) notes were divided into three sub classes, denominated in one of the three currencies, designated and issued as follows: A1b A1c A2a A2b A2c A3a A3c US$200,000,000 102,500,000 64,500,000 US$100,000,000 63,000,000 215,000,000 64,500,000 The B, C, D and E Notes were issued in smaller amounts, with variations in currency but no subclasses having different priorities as between themselves.
There were also some notes designated as ETc revenue backed notes.
The total sum raised was just under 660,000,000.
After payment of costs and expenses of the issue the initial surplus of assets over prospective liabilities (if taken at face value) was quite small.
The provisions of section 123(1) and (2) of the 1986 Act are incorporated into an important provision in the conditions of issue of the Notes (the Conditions).
Condition 9(a) (events of default) provides that the Trustee may on the occurrence of any of five specified events (an Event of Default) serve on Eurosail a written notice (an Enforcement Notice) declaring the Notes to be due and repayable.
In some circumstances the Trustee is obliged to serve such a notice.
In the absence of an Event of Default the A1 Notes were repayable in 2027 at latest (in fact they have already been repaid, as have the revenue backed notes).
All the other Notes are repayable in 2045 at latest.
The Events of Default include (Condition 9(a)(iii)): The Issuer, otherwise than for the purposes of such amalgamation or reconstruction as is referred to in sub paragraph (iv) below, ceasing or, through or consequent upon an official action of the Board of Directors of the Issuer, threatens to cease to carry on business or a substantial part of its business or being unable to pay its debts as and when they fall due or, within the meaning of section 123(1) or (2) (as if the words it is proved to the satisfaction of the court did not appear in section 123(2) of the Insolvency Act 1986 (as that section may be amended from time to time), being deemed unable to pay its debts Under a proviso to Condition 9(a), an occurrence falling within sub paragraph (iii) counts as an Event of Default only if the Trustee certifies to Eurosail that it is, in the Trustees sole opinion, materially prejudicial to the interests of the Noteholders.
The service of an Enforcement Notice would have immediate and far reaching consequences for all the Noteholders (other than the A1 and ETc Noteholders, whose Notes have already been fully redeemed).
As described in more detail below, an Enforcement Notice shifts their rights from the regime prescribed in Condition 2(g) (priority of payments prior to enforcement) to the regime prescribed in Condition 2(h) (priority of payments post enforcement).
Under the latter regime Noteholders of Class A3 (A3 Noteholders) rank pari passu with Noteholders of Class A2 (A2 Noteholders) for repayment of principal.
That is in contrast with the present regime, under which A2 and A3 Noteholders rank pari passu for interest payments (clause 2(g)(vi)) but A2 Noteholders have priority over A3 Noteholders in receiving repayments of principal out of funds representing principal sums received on the redemption of mortgages in the portfolio (those funds being included in the definition of Actual Redemption Funds in the preamble to the Conditions): Condition 5(b)(i)(2) and (3).
It is in these circumstances that the construction of section 123(2) of the 1986 Act, as incorporated into Condition 9(a)(iii), has assumed such importance.
Eurosail, together with those of the A2 Noteholders who appeared below, succeeded before Sir Andrew Morritt C [2010] EWHC 2005 (Ch), [2011] 1 WLR 1200, and the Court of Appeal [2011] EWCA Civ 227, [2011] 1 WLR 2524.
The Court of Appeal considered that section 123(2) should be interpreted broadly and in line with standards of commercial probity: A balance has to be drawn between the right of an honest and prudent businessman, who is prepared to work hard, to continue to trade out of his difficulties if he can genuinely see a light at the end of the tunnel, and the corresponding obligation to put up the shutters, when, by continuing to trade, he would be doing so at the expense of his creditors and in disregard of those business considerations which a reasonable businessman is expected to observe. (That is a quotation from paragraph 216 of the Report of the Review Committee on Insolvency Law and Practice (1982) (Cmnd 8558), better known as the Cork Report, reflecting the view of Professor Goode; this passage is quoted in para 54 of the judgment of Lord Neuberger MR in the Court of Appeal).
The appellant A3 Noteholders say that this passage is not in point.
They have argued for a much stricter construction.
They have emphasised that a companys inability to pay its debts is no more than a precondition to the exercise of the courts jurisdiction, which is discretionary, to make a winding up order or an administration order.
The precondition to be satisfied should be, they have argued, transparent and certain, leaving scope for the exercise of discretion on the hearing of the petition.
There has also been argument as to whether the statutory text (as incorporated in an amended form, and also allowing for possible future legislative amendment) must bear the same meaning as it would in actual winding up proceedings, or whether it can and should, as incorporated, take account of the commercial context of the Conditions.
Those, in outline summary, are the positions of the opposing parties on the appeal.
The cross appeal, which is relevant only if the appeal is successful, is concerned with the so called Post Enforcement Call Option (PECO) which is a subsidiary (but technically important) part of the securitisation transaction.
Before going further into the complexities of the appeal I would comment that the image invoked by Professor Goode of an honest and prudent trader working hard to turn his business round relates, as was pointed out by Mr Moss QC for the appellants, to the law of insolvency as it applies to individuals.
Even if translated into corporate terms, it has very little bearing on the situation in which Eurosail now finds itself.
Its present financial position and future prospects are not matters for which Eurosail and its managers merit either praise or criticism, since those matters are almost entirely out of their control.
They depend on three imponderables: first, (since the currency and interest rate hedging arrangements with the Lehman Brothers group have failed, leaving Eurosail with a claim in its insolvency) the movements of the US dollar and the euro relative to the pound sterling; secondly, movements in LIBOR or equivalent interest rates on loans denominated in those three currencies; and thirdly, the performance of the United Kingdom economy in general, and the United Kingdom residential property market in particular, as influencing the performance of the mortgage portfolio.
The transaction documents
The legal documents relating to the securitisation issue are, as Lord Neuberger MR put it, regrettably and forbiddingly voluminous.
Apart from the Conditions themselves there was a formal trust deed made between the Trustee and Eurosail, a Liquidity Facility Agreement, currency swaps agreements, a Fixed/Floating Swap Agreement, a BBR Swap Agreement and other agreements relating to administrative matters (there is a full list of transaction documents in the definition of that expression in the preamble to the Conditions).
Several expressions used in the Conditions involve a paperchase to other documents in order to find their definitions.
Mr Moss opened the documents very lightly, moving rapidly from Condition 9(a)(iii) to concentrate his submissions on the construction of section 123(1) and (2) of the 1986 Act.
Mr Dicker QC (for Eurosail) went into the Conditions more fully to pave the way for his contextual arguments.
Without pre judging those arguments I think it is necessary, if only in order to appreciate the consequences of the opposing arguments, to have an outline understanding of how the SPE (which counsel concurred in describing as a closed system or wrapper) operated before the collapse of Lehman Brothers, of how it operates now (after the collapse of Lehman Brothers but before any Enforcement Notice), and of how it would operate after the service of an Enforcement Notice.
Interest is payable on all unredeemed Notes quarterly in arrears, the first payment having been made on 13 September 2007.
The annual rate of interest is linked to LIBOR or its dollar or euro equivalents (Condition 4(c)(i)), exceeding that rate by a margin (the Relevant Margin as defined in the preamble) which varies from 0.07% for A1b Notes to 4% for E Notes.
Mortgage interest received by Eurosail (the principal component in the Available Revenue Fund) cascades down the metaphorical waterfall set out in the 24 sub paragraphs of Condition 2(g) (priority of payments prior to enforcement).
The first claims on the income stream are for remuneration, charges and expenses; then (sub paragraph (iv)) sums due to the Liquidity Facility Provider, and (sub paragraph (v), but only until the collapse of Lehman Brothers) sums payable under or in connection with the Fixed/Floating Swap Agreement and the BBR Swap Agreement (but not any currency swaps).
Payments to currency swaps counterparties were linked to interest payments to particular classes of Noteholders, so that payments to counterparties in respect of A Noteholders come into the provision for payment of interest to those Noteholders, which is made pari passu as between all the A sub classes (Condition 2(g)(vi)).
The next priority (Condition 2(g)(vii)) was for payment off of any A Principal Deficiency (another expression defined in the preamble), but in practice such a deficiency could arise only if all the junior classes of Notes had become valueless.
Next in the waterfall come similar groups of provisions for payment of interest, sums due to the currency swaps counterparties (and any B Principal Deficiency) in respect of B Notes (Condition 2(g)(viii) and (ix)) and so on for all the other classes (Condition 2(g)(x) to (xv)).
On 15 September 2008 Lehman Brothers Holdings Inc (LBHI), the guarantor of the swaps counterparty, Lehman Brothers Special Financing Ltd (LBSF) filed for Chapter 11 bankruptcy, as did LBSF on 3 October 2008.
The swaps were terminated on 13 November 2009.
Eurosail has made a claim against LBHIs and LBSFs bankrupt estates for about $221,000,000.
At the time of the hearings below, the claim had not been admitted and no distribution has been made in respect of it.
During the last three years sterling has depreciated significantly against both the euro and the dollar, but the prevailing low level of interest rates has resulted in a surplus (excess spread) of mortgage interest received by Eurosail, which has enabled it to continue to pay in full the interest on all the outstanding Notes of every class.
In the meantime, both before and after the collapse of Lehman Brothers, Eurosail received principal sums from time to time as principal secured by the mortgages was repaid, either by way of partial or total redemption by mortgagors, or by enforcement of the security against mortgagors who were in default.
These sums have been and are at present applied under Condition 5(b)(i) as Actual Redemption Funds, on each date for payment of interest, in repaying the principal of the Notes in the order of priority A1 (now fully repaid), A2, A3, B, and so on.
There is a proviso to Condition 5(b) under which the order of priority may be altered.
The first possible variation (proviso (A)) applies if all the A1 and A2 Notes have been redeemed and other (favourable) specified conditions are satisfied: the A3 to E1c Notes then rank pari passu.
Conversely, under the other variation (proviso (B)), which applies if there is an A Principal Deficiency, priority is granted to the A Notes as a single class ranking pari passu.
Events of default are regulated by Condition 9.
The events specified in Condition 9(a) are, apart from that already set out (para 5 above): default in payment for three business days of any principal or interest due on any of the Notes; breach by Eurosail of any of its obligations and failure to remedy the breach (if remediable) for 14 days after notice of the breach given by the Trustee; the making of an order or resolution for the winding up of Eurosail, otherwise than for an approved amalgamation or reconstruction; and the initiation of insolvency or administration proceedings, or the levying of execution (subject to various qualifications which it is unnecessary to set out in detail).
If the Event of Default is an event under Condition 9(a)(iii) or a breach of
Eurosails obligations, there is a further requirement that the Trustee shall have certified to Eurosail that such event is, in its sole opinion, materially prejudicial to the interests of the Noteholders.
For this purpose the Trustee may under the trust deed (as recorded in Condition 2(c)) have regard only to (i) the interests of the A Noteholders if, in the Trustees sole opinion, there is a conflict between the interests of the A Noteholders (or any Class thereof) and the interests of the B Noteholders, the C Noteholders, the D Noteholders and/or the E Noteholders.
This provision does not indicate how the Trustee is to exercise its discretion in the event of a conflict (such as there now potentially is) between the interests of the A2 Noteholders and the A3 Noteholders.
If there is an Event of Default (and, in the cases just mentioned, it is materially prejudicial) the Trustee may at its discretion serve an Enforcement Notice on Eurosail.
Moreover it is obliged to do so if requested or directed (i) by holders of at least 25% of the outstanding Most Senior Class of Notes (defined as meaning the A Noteholders, rather than a subclass of them) or (ii) by an extraordinary resolution of the holders of that class.
This court was not shown any evidence, and did not hear any submissions, as to whether either of those requirements would be likely to be satisfied in practice.
On service of the Enforcement Notice the Notes become immediately due and payable and the Noteholders security becomes enforceable (Condition 9(b)).
Thereupon the order of priority shifts from that in Condition 2(g) to that in Condition 2(h).
It is unnecessary to go through all the detail of Condition 2(h).
The all important change is that under Condition 2(h)(v) the available funds are applicable to pay pari passu and pro rata (1) all amounts of interest and principal then due and payable on the A1c Notes, the A2c Notes and the A3c Notes and (2) [subject to provisions about currency swaps that have now lapsed] any interest and principal then due and payable on the A1b Notes, the A2a Notes, the A2b Notes and the A3a Notes, respectively.
In practical terms, the A2 Notes would no longer have priority, in terms of principal, to the A3 Notes.
The opening words of condition 2(h) express the Trustees obligation as being to make payments to the extent of the funds available to [Eurosail] and from the proceeds of enforcement of the Security (with exceptions that need not be detailed).
The penultimate provision of Condition 2(h) provides: The Noteholders have full recourse to [Eurosail] in respect of the payments prescribed above and accordingly are entitled to bring a claim under English law, subject to the Trust Deed, for the full amount of such payments in accordance with Condition 10 (Enforcement of Notes).
Mr Dicker did not challenge Mr Mosss submission that the opening words do not contradict the penultimate provision, and that seems to be correct.
The opening words are directed to the Trustees obligations, not to those of Eurosail.
Condition 5(j) contains the PECO (Post Enforcement Call Option) which is the subject of the cross appeal.
This option (which has been given effect to as a separate written agreement between the Trustee and a company named or referred to as OptionCo) is regarded in the industry as a means of achieving the effect of limited recourse without the adverse tax consequences that would then have followed from a simple express non recourse provision.
The operative part of Clause 5(j) is as follows: All of the Noteholders will, at the request of the holder of the Post Enforcement Call Option, sell all (but not some only) of their holdings of the Notes to the holder of the Post Enforcement Call Option, pursuant to the option granted to it by the Trustee (as agent for the Noteholders) to acquire all (but not some only) of the Notes (plus accrued interest thereon), for the consideration of one euro cent per Euro Note outstanding, one dollar cent per Dollar Note outstanding and one penny per Sterling Note outstanding (and for these purposes, each Global Note shall be one Note) in the event that the Security for the Notes is enforced, at any time after the date on which the Trustee determines that the proceeds of such enforcement are insufficient, after payment of all other claims ranking higher in priority to the Notes and pro rata payment of all claims ranking in equal priority to the Notes and after the application of any such proceeds to the Notes under the Deed of Charge, to pay any further principal and interest and any other amounts whatsoever due in respect of the Notes.
Bankruptcy remoteness
Bankruptcy remoteness was the expression used by Standard & Poors credit rating agency, and generally in the industry, to describe one criterion for a SPE to obtain a satisfactory credit rating for its loan notes (see European Legal Criteria for Structured Finance Transactions published by Standard & Poors (28 August 2008), and the comments of the Chancellor [2011] 1 WLR 1200, para 8 and Lord Neuberger of Abbotsbury MR [2011] 1 WLR 2524, para 28).
This is not the place to consider either the reliability of the credit rating agencies judgments on Notes secured by sub prime mortgages, or the influence that their judgments seem to have had in the market (caused, some have suggested, by the industrys general inability to comprehend the risks inherent in its own creations).
But the notion of bankruptcy remoteness, even if imperfectly understood, underlay many features of the Conditions and the arrangements of which they formed part.
In developing his contextual argument that this court should (if necessary)
mould the meaning of section 123(1) and (2), as incorporated into Condition 9(a)(3) so as to take account of commercial realities, Mr Dicker drew particular attention to five features of the arrangements.
They are set out and discussed in section B2 of Eurosails case.
Most of them have been mentioned already, at least in passing, but it may be helpful to bring them together in summary form.
They are relevant not only (arguably) to the issue of construction but also (without room for argument) to determining the likely length of deferment of Eurosails long term liabilities under the Conditions, in the absence of an Event of Default which triggers an Enforcement Notice.
These points are covered at some length in the witness statements of Mr Mark Filer, a director of Wilmington Trust SP Services (London) Ltd, Eurosails corporate services provider.
The five salient features of the Conditions and the supporting documentation bearing on the likely deferment of Eurosails obligations in respect of principal and interest are as follows: (1) Condition 2(g) defines Eurosails obligations for payment of interest on the Notes (after remuneration, charges and expenses) in terms of the Available Revenue Fund (see para 12 above).
If that source is insufficient for payment of interest on any of the Junior Notes (that is, those which are not A Notes) the obligation is deferred (while accruing interest) under Condition 6(i) and (j), if necessary until the final redemption date in 2045. (2) Temporary shortages of income can be provided for by the Liquidity Facility (reimbursements to which have a high order of priority under Condition 2(g)(iv)). (3) As to principal, redemption of Notes (other than the redeemed A1 Notes and the revenue backed Notes) is not due until 2045.
Until then redemption is limited to the Actual Redemption Funds (as defined in the preamble) which are applied in the appropriate order of priority under Condition 5(b) (see para 14 above). (4) Any loss of principal resulting from default on mortgages is termed a Principal Deficiency and is recorded in the Principal Deficiency Ledger (the detailed provisions as to this are found not in the Conditions but in Clauses 8 and 9 of the Cash/Bond Administration Agreement).
If there is surplus income from the mortgage payments, the excess spread can be used to reduce or eliminate any Principal Deficiency on whatever is the highest ranking class of Notes with a deficiency.
Recoupment of a Principal Deficiency takes priority to the payment of interest on lower ranking Notes (see para 12 above). (5) Finally there is the PECO, which is intended to produce the same, or a similar result as an express limited recourse provision (see paras 18 and 19 above).
The legislation
This court was taken to the legislative history of sections 122 and 123 of the 1986 Act, and it will be necessary to refer to it in some detail.
But it may be better to start with the sections themselves.
The 1986 Act was a consolidating statute which gave effect to the amendments made by the Insolvency Act 1985.
Section 122(1), as amended, provides seven cases in which a company may be wound up by the court, of which the most important are the last two: (f) the company is unable to pay its debts, (g) the court is of the opinion that it is just and equitable that the company should be wound up.
Section 123(1) then sets out five cases (stated or summarised in para 1 above) in which a company is deemed unable to pay its debts.
The four cases in paragraphs (a) to (d) of section 123(1) are true deeming provisions.
A companys non compliance with a statutory demand, or non satisfaction of execution of a judgment debt, is a matter that can be proved quite simply, usually by a single short witness statement.
If proved, it establishes the courts jurisdiction to make a winding up order, even if the company is in fact well able to pay its debts.
If however a debt which has been made the subject of a statutory demand is disputed on reasonable grounds, the petitioner is adopting what has been called a high risk strategy, and the petition may be dismissed with indemnity costs: In Re a Company 12209 of 1991 [1992] BCLC 865, 868 (Hoffmann J).
Section 123(1)(e) is significantly different in form: if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.
This is not what would usually be described as a deeming provision.
It does not treat proof of a single specific default by a company as conclusive of the general issue of its inability to pay its debts.
Instead it goes to that very issue.
It may open up for inquiry a much wider range of factual matters, on which there may be conflicting evidence.
The range is wider because section 123(1)(e) focuses not on a single debt (which under paragraphs (a) to (d) has necessarily accrued due) but on all the companys debts as they fall due (words which look to the future as well as to the present).
The words as they fall due did not appear in the legislation until the Insolvency Act 1985.
Similarly the express reference in section 123(2) to the test of the value of the companys assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities did not appear before the Insolvency Act 1985.
In the present case both the Chancellor and the Court of Appeal treated the present legislative provisions as materially different from those previously in force: [2011] 1 WLR 1200, para 24; [2011] 1 WLR 2524, para 53.
Yet when this point was raised during the passage of the Insolvency Bill in 1985, the government spokesman in House of Lords, Lord Lucas of Chilworth, stated: Commons Amendment No 458 gives effect to the way in which the courts have interpreted section 518 of the Companies Act [1985]; that was previously section [223] of the 1948 Act.
We are not seeking to amend the law by this amendment; merely to give effect to that interpretation by the courts, namely, that section 518 contains both a cash flow and a balance sheet test.
Hansard (HL Debates, 23 October 1985, col 1247) In these circumstances it is necessary to look quite closely at the legislative history.
In considering it I have derived great assistance from a variety of academic commentary, including an article by Dr Peter Walton, Inability to pay debts: beyond the point of no return? [2013] JBL 212.
The starting point is sections 79 and 80 of the Companies Act 1862 (25 & 26 Vict, c 89), the general structure of which is similar to that of sections 122 and 123 of the 1986 Act.
Section 80(4) of the 1862 Act stated the test simply as: Whenever it is proved to the satisfaction of the court that the company is unable to pay its debts.
However, it is to be noted that under section 158, once a winding up order had been made, all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as is possible, of the value of all such debts or claims as may be subject to any contingency or sound only in damages, or for some other reason do not bear a certain value.
So a contingent or prospective creditor could not present a petition, but if another creditor presented a petition and secured a winding up order, contingent and prospective liabilities were admitted to proof.
In In Re European Life Assurance Society (1869) LR 9 Eq 122 Sir William James V C dismissed a petition for the winding up of a company which had issued large numbers of life policies and annuity contracts, and appeared to be in financial difficulties.
In an extempore judgment he decided, with very little reasoning, that (p127) inability to pay debts must refer to debts absolutely due.
He then proceeded to consider at greater length, but to dismiss, the alternative just and equitable ground in section 79(5) of the Companies Act 1862.
As to this ground he said at p128: And in my view of the law of the case it would be just and equitable to wind up a company like this assurance company if it were made out to my satisfaction that it is, not in any technical sense but, plainly and commercially insolvent that is to say, that its assets are such, and its existing liabilities are such, as to make it reasonably certain as to make the court feel satisfied that the existing and probable assets would be insufficient to meet the existing liabilities.
I take it that the court has nothing whatever to do with any question of future liabilities, that it has nothing whatever to do with the question of the probability whether any business which the company may carry on tomorrow or hereafter will be profitable or unprofitable.
That is a matter for those who may choose to be the customers of the company and for the shareholder to consider.
So here, it seems, the Vice Chancellor was applying a balance sheet test, but only to existing liabilities, in the context of the just and equitable ground.
He did not refer to any of the authorities that had been cited.
It may be unfortunate that his judgment has come to be regarded as a leading case.
Shortly afterwards the law was changed in relation to life offices by the Life Assurance Companies Act 1870 (33 & 34 Vict, c 61), which was effectively the beginning of the modern statutory regulation of life assurance.
There was no general change until section 28 of the Companies Act 1907, which made an amendment which was then consolidated by the Companies (Consolidation) Act 1908.
The latter provided in section 130(iv) that a company should be deemed to be unable to pay its debts: if it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company.
The amendment made by the Companies Act 1907 was introduced on the recommendation of the Loreburn Committee (Report of the Company Law Amendment Committee) (1906) (Cd 3052), para 43, which was influenced by section 21 of the Life Assurance Companies Act 1870.
The amendment is described by Dr Walton [2013] JBL 212, 228 as an abbreviated version of section 21.
But there is not a very close parallel, since section 21 referred to a life office being insolvent (meaning, apparently, balance sheet insolvent) rather than its being unable to pay its debts.
But the admission of contingent and prospective liabilities, and especially long term liabilities, must tend to focus attention on balance sheet considerations.
Thus in In Re Capital Annuities Ltd [1979] 1 WLR 170, 185, Slade J observed: From 1907 onwards, therefore, one species of inability to pay its debts specifically recognised by the legislature as a ground for the making of a winding up order in respect of any company incorporated under the Companies Acts was the possession of assets insufficient to meet its existing, contingent and prospective liabilities.
Essentially the same wording appeared in section 223(d) of the Companies Act 1948 and in section 518(e) of the Companies Act 1985.
Two cases decided under section 223(d) call for mention.
The first is In Re a Company (also referred to as Bond Jewellers) [1986] BCLC 261, decided by Nourse J on 21 December 1983.
Like In Re European Life Assurance Society, it was an extempore judgment given without citation of authority, in order to avoid delay, but it has been much cited.
It was referred to in both Houses of Parliament during the committee stages of the Insolvency Bill.
It concerned a tenant company with a propensity for postponing payment of its debts until threatened with litigation.
Nourse J felt unable to make an order under section 223(d), and considered, but ultimately did not make an order, on the just and equitable ground in section 222(f).
The case is of interest as illustrating (at p 263) that the phrase as they fall due, although not part of the statutory text, was understood to be implicit in section 223(d).
It is also of interest for the judges observation on the second point in section 223(d) (now embodied, in different words, in section 123(2) of the 1986 Act): Counsel says that if I take into account the contingent and prospective liabilities of the company, it is clearly insolvent in balance sheet terms.
So indeed it is if I treat the loans made by the associated companies as loans which are currently repayable.
However, what I am required to do is to take into account the contingent and prospective liabilities.
That cannot mean that I must simply add them up and strike a balance against assets.
In regard to prospective liabilities I must principally consider whether, and if so when, they are likely to become present liabilities.
The second case, Byblos Bank SAL v Al Khudhairy [1987] BCLC 232, was a considered judgment of Nicholls LJ (with whom Slade and Neill LJJ agreed) delivered after 11 days of argument.
It concerned the disputed validity of the appointment of a receiver in June 1985, before either the Companies Act 1985 or the Insolvency Act 1985 was in force.
The ostensible ground for appointment of the receiver was not made out, but the bank relied on a new ground, section 223(d).
Nicholls LJ observed (p 247): Construing this section first without reference to authority, it seems to me plain that, in a case where none of the deeming paras (a), (b) or (c) is applicable, what is contemplated is evidence of (and, if necessary, an investigation into) the present capacity of a company to pay all its debts.
If a debt presently payable is not paid because of lack of means, that will normally suffice to prove that the company is unable to pay its debts.
That will be so even if, on an assessment of all the assets and liabilities of the company, there is a surplus of assets over liabilities.
That is trite law.
It is equally trite to observe that the fact that a company can meet all its presently payable debts is not necessarily the end of the matter, because para (d) requires account to be taken of contingent and prospective liabilities.
Take the simple, if extreme, case of a company whose liabilities consist of an obligation to repay a loan of 100,000 one year hence, and whose only assets are worth 10,000.
It is obvious that, taking into account its future liabilities, such a company does not have the present capacity to pay its debts and as such it is unable to pay its debts.
Nicholls LJ then referred to the judgment of James V C in In Re European Life Assurance Society LR 9 Eq 122, including the passage quoted at para 28 above, and commented (p 248): In my view the exercise described by James V C is the exercise required to be done under section 223 (now section 518 of the 1985 Act).
He also referred to the decisions of Slade J in In Re Capital Annuities Ltd [1979] 1 WLR 170 and Nourse J in In Re A Company [1986] BCLC 261 as consistent with the views he had expressed.
In my view these authorities go quite a long way to establishing that neither the notion of paying debts as they fall due, nor the notion of balance sheet insolvency, was unfamiliar before the enactment of the Insolvency Act 1985.
But petitions by contingent or prospective creditors have been rare even after the repeal in 1986 of the standard requirement for such a creditor to provide security for costs.
One reason for that is no doubt the difficulty of quantifying contingent and prospective liabilities to the satisfaction of the court.
Another may be the fact that well advised commercial lenders will insist on contractual conditions under which deferred liabilities are accelerated in the event of the borrower getting into financial difficulties.
The far reaching reforms effected by the Insolvency Acts of 1985 and 1986, together with related subordinate legislation, were influenced by the report of the Cork Committee, published in 1982.
One of its recommendations (para 535) was that the sole ground upon which the court may make an insolvency order in respect of a debtor, whether individual or corporate, will be that the debtor is unable to pay his or its debts.
The Committee proposed three cases in which the debtor would be deemed to be insolvent and unable to pay his or its debts.
The first two corresponded to the cases in section 123(1)(a) to (d) of the 1986 Act.
The third case was: (c) Where the applicant is a contingent or prospective creditor to whom the debtor is or may become indebted in a sum of not less than the prescribed amount, being a debt not yet presently due and payable, and it is proved to the satisfaction of the court that the ultimate repayment of the debt is in jeopardy because the debtors liabilities, including contingent and prospective liabilities, exceed the debtors assets.
This proposal limited the balance sheet insolvency test to applications by contingent or prospective creditors whereas the Byblos Bank case suggested that it was also relevant to the payment of debts as they fall due.
That point was noted by Briggs J in his perceptive judgment In Re Cheyne Finance plc (No 2) [2008] Bus LR 1562.
He referred at paras 42 43 to similar language (as they become due) used in Australian companies legislation, which until 1992 had a single test based on an inability to pay debts as they become due a phrase which looks to the future, as Griffith CJ said in Bank of Australasia v Hall (1907) 4 CLR 1514, 1527.
There is a good deal of later Australian authority, mentioned in the judgment of Briggs J, to the same effect.
In Re Cheyne Finance Plc (No 2) was concerned with a security trust deed which (in contrast to Condition 9(a)(iii) in the present appeal) incorporated into its definition of insolvency event the terms of section 123(1), but not section 123(2).
It was therefore necessary to consider how far section 123(1)(e) was concerned, not only with debts that were immediately payable, but also with those that would be payable in the future.
Briggs J decided, rightly in my view, that that is what section 123(1)(e) requires (para 56): In my judgment, the effect of the alterations to the insolvency test made in 1985 and now found in section 123 of the 1986 Act was to replace in the commercial solvency test now in section 123(1)(e), one futurity requirement, namely to include contingent and prospective liabilities, with another more flexible and fact sensitive requirement encapsulated in the new phrase as they fall due.
Briggs J considered (para 35), again rightly in my view, that the Byblos Bank case was a case about ability to pay debts as they became due, but that the Court of Appeal recognised that balance sheet insolvency is not irrelevant to that issue.
The practical effect of section 123
There is no doubt that, as a matter of form, the statutory test for a company being unable to pay its debts is materially different (as the Chancellor and the Court of Appeal observed) from the position under the Companies Act 1985.
Section 123(1)(e) introduced the words as they fall due and section 123(2) has introduced a direct reference to a companys assets and liabilities.
These two provisions, both labelled as deeming provisions (though neither is obviously of that character) stand side by side in section 123(1)(e) and section 123(2) with no indication of how they are to interact.
It seems likely that part of the explanation lies in the history of the passage through Parliament of the Insolvency Bill in 1985, and the lengthy and interrupted process of review and consultation which had preceded it.
This process began as long ago as October 1976 when the Secretary of State announced his intention of setting up what became the Review Committee chaired by Mr (later Sir) Kenneth Cork.
It produced an interim report in October 1979 (after a change of government) and its final report in 1982.
The whole protracted process is described by Professor Ian Fletcher QC in his Law of Insolvency 4th ed (2009), pp 16 22.
He explains how there was no official reaction to the final report until a spate of financial scandals early in 1984: At relatively short notice the government White Paper, referred to above, was published in February 1984 together with an indication that legislation was imminent.
In consequence, very little time was allowed for interested parties to submit comments before the drafting of the Insolvency Bill was embarked upon, and the Bill itself was introduced in the House of Lords on 10 December 1984.
This regrettable mishandling of the period of preparation for the first major overhaul of insolvency law for over 100 years cannot but be lamented.
The inadequate manner in which consultation was conducted, coupled with the near total lack of any form of public debate about the issues of policy and principle at the heart of any radical recasting of insolvency law, were an inauspicious prelude to what was to become a most contentious and confused episode of legislative history.
Thereby, what ought to have been a largely non controversial, non Party Bill became the subject of highly dramatic proceedings before both Houses, and also in Committee, and damage was unquestionably inflicted upon the ultimate quality of a highly technical piece of legislation whose detailed provisions were but vaguely understood by all but a minority of those participating in its enactment, but whose social and economic importance was nonetheless immense.
The Bills deficiencies, due to haste in preparation, together with the vicissitudes of the parliamentary process, resulted in a quite exceptional number of amendments being tabled to the Insolvency Bill, estimated to have approached 1,200 by the time of Royal Assent.
A high proportion of these amendments were tabled by the Government itself, and many were adopted virtually without debate during the closing stages of proceedings. (para 1 034)
Despite the difference of form, the provisions of section 123(1) and (2) should in my view be seen, as the Government spokesman in the House of Lords indicated, as making little significant change in the law.
The changes in form served, in my view, to underline that the cash flow test is concerned, not simply with the petitioners own presently due debt, nor only with other presently due debt owed by the company, but also with debts falling due from time to time in the reasonably near future.
What is the reasonably near future, for this purpose, will depend on all the circumstances, but especially on the nature of the companys business.
That is consistent with Bond Jewellers, Byblos Bank and Cheyne Finance.
The express reference to assets and liabilities is in my view a practical recognition that once the court has to move beyond the reasonably near future (the length of which depends, again, on all the circumstances) any attempt to apply a cash flow test will become completely speculative, and a comparison of present assets with present and future liabilities (discounted for contingencies and deferment) becomes the only sensible test.
But it is still very far from an exact test, and the burden of proof must be on the party which asserts balance sheet insolvency.
The omission from Condition 9(a)(iii) of the reference to proof to the satisfaction of the court cannot alter that.
Whether or not the test of balance sheet insolvency is satisfied must depend on the available evidence as to the circumstances of the particular case.
The circumstances of Eurosails business, so far as it can be said to have a business at all, are quite unlike those of a company engaged in normal trading activities.
There are no decisions to be made about choice of suppliers, stock levels, pricing policy, the raising of new capital, or other matters such as would constantly engage the attention of a trading companys board of directors.
Instead Eurosail is (in Mr Mosss phrase) in a closed system with some resemblance to a life office which is no longer accepting new business.
The only important management decision that could possibly be made would be to attempt to arrange new hedging cover in place of that which was lost when Lehman Brothers collapsed.
To that extent Eurosails present assets should be a better guide to its ability to meet its long term liabilities than would be the case with a company actively engaged in trading.
But against that, the three imponderable factors identified in para 9 above currency movements, interest rates and the United Kingdom economy and housing market are and always have been outside its control.
Over the period of more than 30 years until the final redemption date in 2045, they are a matter of speculation rather than calculation and prediction on any scientific basis.
At first instance the Chancellor started with three propositions derived from the case law (paras 29 to 32): that the assets to be valued are the present assets of the company; that contingent and prospective liabilities are not to be taken at their full face value; and that: Taking account of must be recognised in the context of the overall question posed by the subsection, namely whether the company is to be deemed to be insolvent because the amount of its liabilities exceeds the value of its assets.
This will involve consideration of the relevant facts of the case, including when the prospective liability falls due, whether it is payable in sterling or some other currency, what assets will be available to meet it and what if any provision is made for the allocation of losses in relation to those assets. (para 32) He then set out four reasons (paras 34 to 37) for concluding (para 38) that the value of Eurosails assets exceeded its liabilities, having taken account of its contingent and prospective liabilities to such extent as appears to be necessary at this stage.
In the Court of Appeal Lord Neuberger MR did not disagree with anything in the Chancellors judgment so far as it related to statutory construction.
He did however go further in his detailed discussion of section 123(2).
He observed (para 44): In practical terms, it would be rather extraordinary if section 123(2) was satisfied every time a companys liabilities exceeded the value of its assets.
Many companies which are solvent and successful, and many companies early on in their lives, would be deemed unable to pay their debts if this was the meaning of section 123(2).
Indeed, the issuer is a good example of this: its assets only just exceeded its liabilities when it was formed, and it was more than possible that, even if things went well, it would fall from time to time within the ambit of section 123(2) if the appellants are right as to the meaning of that provision.
Lord Neuberger MR developed this at paras 47 to 49 of his judgment: 47.
More generally, I find it hard to discern any conceivable policy reason why a company should be at risk of being wound up simply because the aggregate value (however calculated) of its liabilities exceeds that of its assets.
Many companies in that position are successful and creditworthy, and cannot in any way be characterised as unable to pay [their] debts.
Such a mechanistic, even artificial, reason for permitting a creditor to present a petition to wind up a company could, in my view, only be justified if the words of section 123(2) compelled that conclusion, and in my opinion they do not. 48.
In my view, the purpose of section 123(2) has been accurately characterised by Professor Sir Roy Goode in Principles of Corporate Insolvency Law, 3rd ed (2005).
Having referred to section 123(1)(e) as being the cash flow test and to section 123(2) as being the balance sheet test, he said this, at para 4 06: If the cash flow test were the only relevant test [for insolvency] then current and short term creditors would in effect be paid at the expense of creditors to whom liabilities were incurred after the company had reached the point of no return because of an incurable deficiency in its assets. 49.
In my judgment, both the purpose and the applicable test of section 123(2) are accurately encapsulated in that brief passage.
Toulson LJ agreed with Lord Neuberger MR but expressed himself in a more guarded way.
He agreed that Professor Sir Roy Goode had rightly discerned the underlying policy (para 115) but added (para 119) that Professor Goodes reference to a company having reached the point of no return because of an incurable deficiency in its assets illuminates the purpose of the subsection but does not purport to be a paraphrase of it.
He continued: Essentially, section 123(2) requires the court to make a judgment whether it has been established that, looking at the companys assets and making proper allowance for its prospective and contingent liabilities, it cannot reasonably be expected to be able to meet those liabilities.
If so, it will be deemed insolvent although it is currently able to pay its debts as they fall due.
The more distant the liabilities, the harder this will be to establish.
I agree with what Toulson LJ said here, and with great respect to Lord Neuberger MR I consider that the point of no return should not pass into common usage as a paraphrase of the effect of section 123(2).
But in the case of a companys liabilities that can as matters now stand be deferred for over 30 years, and where the company is (without any permanent increase in its borrowings) paying its debts as they fall due, the court should proceed with the greatest caution in deciding that the company is in a state of balance sheet insolvency under section 123(2).
Reasoning in the courts below
Sir Andrew Morritt C, having set out some general propositions as to the effect of section 123 (1)(e) and (2) (in paras 29 to 32 of his judgment, summarized above), rejected the A3 Noteholders submission that Eurosail was plainly insolvent for the purposes of section 123(2) as applied by Condition 9(a)(iii).
He relied on four points, set out in paras 34 to 37 of his judgment.
First, Eurosails claims in the insolvencies of LBHI and LBSF, though not admitted, could not be ignored.
The secondary market indicated that the claim was worth 35% to 37% of US$221m (that is, a value of the order of 60m).
Second, a large part of the total deficiency that was claimed to exist was due to conversion into sterling at the prevailing spot rate of liabilities not due for payment until 2045.
Third, the future liabilities were fully funded in the limited sense that deficiencies resulting from mortgage defaults reduced Eurosails liability to the Noteholders through the operation of the Principal Deficiency Ledger.
Fourth, the Chancellor was able to infer that a calculation of the then present values of assets and liabilities would not show a deficiency, since Eurosail was well able to pay its debts as they fell due, there was no deficiency on the Principal Deficiency Ledger, and projected redemptions of each class of A Notes were in advance of the maturity dates.
In the Court of Appeal counsel appearing for the A2 Noteholders did not feel able to give complete support to the Chancellors second point, and Lord Neuberger MR accepted (para 67) the submission of counsel for the appellants: As Mr Sheldon [then appearing for the A3 Noteholders] said, one has to value a future or contingent liability in a foreign currency at the present exchange rate.
By definition, that is the present sterling market value of the liability.
I would also respectfully question the Chancellors third point.
The Chancellor had earlier in his judgment, at para 13, referred to clause 8 of the Cash/Bond Administration Agreement, which provides for the maintenance of Principal Deficiency Ledgers.
That seems to be the basis of his point about liabilities being self cancelling.
But clause 8 seems to be concerned with no more than an accountancy exercise, not with a permanent extinction of liabilities.
It operates to defer liabilities for principal until the final redemption date, if circumstances require, and provided that an Enforcement Notice is not given in the meantime.
But Condition 2(h) provides for Eurosail to be liable on a full recourse basis post enforcement, as already noted (para 18 above).
Lord Neuberger MR did not accept that a forecast deficiency based on then current exchange rates could be dismissed as entirely speculative.
He started (para 63) from Eurosails audited accounts for the year ending 30 November 2009, which showed a net liability of 74.557m.
He noted (paras 63 to 74) that this figure required two substantial amendments (one for the Lehman Brothers claim, and the other for the full recourse factor) which, ironically and coincidentally, virtually cancel each other out (para 69).
So his final discussion and conclusion (paras 75 to 83) starts with an assumed deficiency of the order of 75m.
Against that Lord Neuberger MR set three factors.
The first was that a deficiency of 75m, with an aggregate principal sum of just over 420m outstanding on the mortgages, was less than 17% of the assets.
Secondly, the deficity was largely based on the assumption that exchange rates would remain constant (para 76): Of course, they are as likely to move in an adverse direction as they are to move in a favourable direction, but the volatility of those rates tell against the appellants given that they have to establish that the issuer has reached the point of no return.
Thirdly, the court was looking a long way ahead (para 78): Not only do all the unredeemed notes have a final redemption date in 2045, but it appears from the evidence that the weighted average term of the remaining mortgages is in the region of 18 years, and the rate of early redemption has slowed significantly and is likely, according to expert assessment, to remain low for the time being.
Lord Neuberger MR accepted that there was a real possibility that, if no Enforcement Notice was served, events might turn out to the disadvantage of the A3 Noteholders (para 79): However, as mentioned, a future or contingent creditor of a company can very often show that he would be better off if the company were wound up rather than being permitted to carry on business.
In a commercially sensible legal system that cannot of itself justify the creditor seeking to wind up the company.
Toulson and Wilson LJJ agreed with this reasoning.
Toulson LJ emphasised the importance of the liabilities being distant in time (para 119, quoted in para 42 above).
The appeal was therefore dismissed, as was the cross appeal.
Conclusions
The crucial issue, to my mind, is how far the Court of Appeals conclusion depended on the point of no return test.
For reasons already mentioned, I consider that that is not the correct test, if and in so far as it goes beyond the need for a petitioner to satisfy the court, on the balance of probabilities, that a company has insufficient assets to be able to meet all its liabilities, including prospective and contingent liabilities.
If it means no more than that, it is unhelpful, except as illuminating (as Toulson LJ put it) the purpose of section 123(2).
In my view the Court of Appeal would have reached the same conclusion without reference to any point of no return test; and I would myself reach the same conclusion.
Eurosails ability or inability to pay all its debts, present or future, may not be finally determined until much closer to 2045, that is more than 30 years from now.
The complex documentation under which the loan notes were issued contains several mechanisms (identified in para 22(1) to (4) above, the PECO being disregarded for present purposes) for ensuring that liabilities in respect of principal are, if necessary, deferred until the final redemption date, unless the post enforcement regime comes into operation.
The movements of currencies and interest rates in the meantime, if not entirely speculative, are incapable of prediction with any confidence.
The court cannot be satisfied that there will eventually be a deficiency.
I would therefore dismiss the appeal.
I would also dismiss the cross appeal, for the same reasons as were given by the Chancellor and the Court of Appeal.
It is not necessary to consider Mr Dickers arguments based on supposed inconsistencies and commercial realities, except to say that they would have encountered serious difficulties in the light of this courts decision in Enviroco Ltd v Farstad Supply A/S [2011] UKSC 16, [2011] 1 WLR 921: see the judgment of Lord Collins of Mapesbury, with which the other members of the court agreed, at paras 51 and 52.
The loan notes documentation did indeed contain some provisions (identified in paras 128 to 134 of Eurosails case) which are inconsistent with the post enforcement regime being triggered by a temporary deficiency of assets.
But the court might well have taken the view, on documents of such complexity, that the draftsman had simply failed to grasp all its many and various implications, and that it was not for the court to rewrite the documents for the parties.
LORD HOPE
I would dismiss the appeal for the reasons given by Lord Walker.
I would also dismiss the cross appeal, which concerns the effect of the PECO on the application of section 123(2) of the 1986 Act as incorporated into Condition 9(a)(iii).
The question which it raises no longer needs to be answered as the Noteholders appeal on the question whether Eurosail (the Issuer) was unable to pay its debts was not successful.
But Sir Andrew Morritt C [2011] 1 WLR 122 gave his view on it in paras 39 44 of his judgment, and so too did Lord Neuberger MR in the Court of Appeal [2011] 1 WLR 2524 in paras 84 100.
A PECO is widely used in securitisation transactions of the kind that was entered into in this case, and we have been told that the question is of some importance to the securitisation market more generally.
So it is appropriate that we should give our reasons for agreeing with the Chancellor and the Court of Appeal that it has no effect on the way the liability of the Issuer to the Noteholders for the purposes of the default provision in Condition 9(a)(iii) is to be calculated.
The Trustee entered into a PECO Agreement on behalf of the Noteholders on 16 July 2007, which is the same date as that on which the Notes were issued.
By Clause 3.1 it granted an option to a company called Eurosail Options Ltd (referred to in the Agreement as OptionCo): to acquire all (but not some only) of the Notes (plus accrued interest thereon) in the event that the Security for the Notes is enforced and the Trustee, after the payment of the proceeds of such enforcement, determines that the proceeds of such enforcement are insufficient, after payment of all claims ranking in priority to or pari passu with the Notes pursuant to the Deed of Charge, to pay in full all principal and/or interest and any other amounts whatsoever due in respect of the Notes.
The Trustee shall promptly after the Security is enforced and the proceeds of such enforcement are paid, make a determination of whether or not there is such an insufficiency.
If the Trustee determines that there is such an insufficiency the Trustee shall forthwith give notice (the Insufficiency Notice) of such determination to OptionCo and the Issuer.
Clause 3.1 has to be read together with Condition 5(j) (see para 19, above), which provides that each Noteholder will, on the exercise of the option conferred on OptionCo, sell to the company the whole of his holding of notes for the nominal consideration for which the PECO provides.
It also has to be read together with the Event of Default described in Condition 9(a)(iii): see para 5, above.
Under that provision a default occurs, among other things, in the event of the Issuer: being unable to pay its debts as and when they fall due or, within the meaning of section 123(1) or (2) (as if the words it is proved to the satisfaction of the court did not appear in section 123(2)) of the Insolvency Act 1986 (as that section may be amended from time to time), being deemed unable to pay its debts.
The Prospectus at p 26 contains this explanation of the effect of these provisions, under the heading Considerations related to the Instruments, for prospective purchasers: Although the Instruments will be full recourse obligations of the Issuer, upon enforcement of the security for the Instruments, the Trustee will, in practice, have recourse only to the Loans and Collateral Security, and to any other assets of the Issuer then in
existence as described in this document
The purpose of a PECO is to achieve bankruptcy remoteness for the issuer.
Its aim is to prevent the issuer from being susceptible to insolvent winding up proceedings by ensuring so far as possible that, if its assets prove to be insufficient to meet its liabilities, a director of the issuer will not instigate bankruptcy proceedings in respect of it.
Bankruptcy remoteness is one of the criteria used by the rating agencies which issuers of notes seek to satisfy so that their instruments will achieve the highest possible credit rating.
That criterion is satisfied in other jurisdictions by provisions which limit the rights of noteholders against the issuer to the value of the issuers assets.
Until recent tax legislation altered the position, limited recourse provisions of that kind gave rise to UK stamp duty reserve tax at the rate of 1.5% of the amount subscribed for them.
As the Chancellor explained in para 40, the PECO is designed to achieve the same result as limited recourse provisions, but without the adverse tax consequences.
The Issuer accepts that, as a matter of contract, the liabilities were unlimited in recourse.
But it maintains that the commercial reality was that the liabilities alleged to be the debts that the issuer was unable to pay to the Noteholder were liabilities which it would never have to meet.
In the event that the assets of the Issuer were exhausted, any claim that the Noteholder had against the Issuer would be assigned to the option holder.
That, it is said, would bring an end to the claim.
So it would be wrong to treat the Issuer as falling within section 123(2) as incorporated into Condition 9(a)(iii) on the ground that it was unable to pay its debts, as in practice it was never intended or expected that the liabilities would be paid except out of the underlying assets available to the Issuer.
The soundness of this approach depends however on whether, in law, the PECO affects the liability of the Issuer to the Noteholder.
In answering this question it is important to appreciate that the question is not whether the Issuer should actually be wound up on the grounds described in section 123(2), but whether its financial position is such that it falls within that subsection for the purposes of the default provision in Condition 9(a)(iii).
The answer to that question is to be found by examining the wording of the Condition in the context of the provisions of the transaction documents as a whole.
Does the PECO in any way alter the conclusion that would otherwise be drawn that the Issuers assets were less than its liabilities and that it was unable to pay its debts?
The Chancellor based his judgment that it did not on the wording of section 123(2), as amended for the purposes of Condition 9(a)(iii).
He held that if, in the application of that subsection the court concluded that the value of the companys assets was less than the amount of its liabilities, taking into account its contingent and prospective liabilities, the PECO had no effect on those liabilities at all: para 43.
As he put it, the liabilities of the Issuer remain the same, whether or not there is a PECO or, if there is, whether or not the call option has been exercised.
Unless and until the option holder releases the Issuer from all further liability, which it is under no obligation to do, the liability of the Issuer is unaffected.
Lord Neuberger reached the same conclusion, but for fuller reasons: see paras 92 97.
He said that, reading the relevant provisions of the documents together, they established that the Issuers liability to the Noteholders was to be treated as a liability of full recourse at least until the security was enforced and, arguably, until the option was exercised and the transfer to the option holder was completed.
There was the statement in the Prospectus mentioned in para 54, above.
It suggested a two stage process, under which the Issuers liability was treated initially as full recourse and liability would become limited recourse only on enforcement of the security.
There was the closing part of clause 6.7 of the Deed of Charge which, having restricted the ability of the Trustee to enforce the Noteholders rights on enforcement of the Security beyond the Issuers assets, provided that this shall not apply to and shall not limit the obligations of the Issuer to the [Noteholders] under the Instruments and this Deed.
And there was the provision in Condition 2(h), which stated in terms that the Noteholders had full recourse to the Issuer in respect of payments due and that they were entitled to bring a claim under English law for the full amount of such payments.
Finally Lord Neuberger referred to the wording of Condition 9(a)(iii) itself.
It was hard to see why any reference should be made in that Condition to section 123(2) if the Noteholders rights against the Issuer were not to be treated as full recourse until the enforcement of the security.
He also said that there was nothing commercially insensible in the conclusion that, for the purpose of Condition 9(a)(iii), the Noteholders rights against the Issuer were treated as being of full recourse, notwithstanding the PECO: para 100.
The A3 Noteholders submit that the key operative provision is Clause 3.1 of the PECO itself.
It makes it plain that it does not have the effect of limiting the liability of the Issuer in respect of the Notes to the value of the Issuers assets.
Its reference to there being an insufficiency of assets after enforcement to meet whatever is due in respect of the Notes is a clear indication that it contemplates that the amount of the liabilities that the Notes have created must be capable of exceeding the value of the assets of the Issuer.
Then there is the time at which the option is exercisable.
It is not said to have any operative effect at all prior to enforcement of the security.
So at all times prior to its exercise the Noteholders remain entitled to payment in accordance with the Conditions.
And even when exercised all it does is provide a mechanism by which the right to be paid under the Notes is assigned to OptionCo.
As the Issuer relies on commercial reality rather than legal form, the legal effect of the documents is not really in dispute.
The common intention of the parties is said by the Issuer to be quite different.
Its argument is that, as inclusion of a PECO rather than a contractual limited recourse provision was done solely for tax reasons, it was not intended or understood to alter the commercial nature, effect and operation of the asset backed securitisation.
As a matter of contract the liabilities were unlimited in recourse.
As a matter of commercial substance and in practice, they were the equivalent of a provision by which the rights of Noteholders were expressly limited.
The Issuers case is that its future obligations to pay principal under the Notes should be taken into account only to the extent that its assets were sufficient to pay for them.
As Mr Dicker QC for the Issuer put it at the end of his argument, legal form should not triumph over commercial substance.
I do not think that it is possible to distinguish the intended commercial effect of these provisions from their legal effect in this way.
The exercise that Condition 9(a)(iii) predicates is the quantification of the amount of the Issuers assets and liabilities in order to determine whether there has been an Event of Default.
The legal effect and the commercial effect of the PECO, on its true analysis, both point in the same direction.
It has no effect, for the purpose of that quantification, on the amount of the Issuers liabilities.
To limit those liabilities as the Issuer contends would contradict the parties clearly expressed commercial intention as found in the contractual documents.
The fact that the economic result of the PECO may be the same as if the Noteholders right of recourse had been limited to the Issuers assets is beside the point.
It can be expected to achieve bankruptcy remoteness as effectively.
But it would not be in accordance with the true meaning of the documents to treat the two methods as if they had the same effect in law.
when the provisions are open to different interpretations.
The court should adopt the more, rather than the less, commercial construction: Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900.
But, for the reasons given by the Chancellor and Lord Neuberger MR, the meaning to be given to the language that the parties used in this case is not open to doubt.
The suggestion that to give effect to that meaning is to surrender to legal form over commercial substance amounts, in effect, to an invitation to depart from the settled role of commercial good sense.
Its role is to find out what the parties meant when they entered into the arrangement, not to replace it with something which is not to be found in the language of the documents at all.
The ultimate aim in construing provisions of the kind that are in issue in this case, as it is when construing any contract, is to determine what the parties meant by the language that they have used.
Commercial good sense has a role to play
| Interest bearing loan notes (the notes) to the value of 660m were issued to certain companies (the Noteholders) by a special purpose vehicle formed by the Lehman Brothers group, Eurosail UK 2007 3BL (the Issuer).
The Issuer used the issue of the notes to fund the purchase of a portfolio of mortgage loans, to the value of 650m, secured on residential property in the United Kingdom.
The notes were issued in 5 principal classes in order of priority for repayment.
Those classes run from A through to E, and comprise a total of 14 sub classes.
The A notes hold highest priority, are of the highest value, and are designated either A1, A2 or A3.
The final redemption date of the lowest priority notes is in 2045.
The terms governing the issue of the notes (the Conditions) provide that in the event of an Event of Default, an Enforcement Notice may be served by the trustee of the Noteholders rights, namely BNY Corporate Trustee Services Ltd (the Trustee).
If the Issuer becomes unable to pay its debts under the terms of section 123 of the Insolvency Act 1986 (the 1986 Act), that would constitute an Event of Default.
That section provides that a company is deemed unable to pay its debts, first, if it is unable to pay those debts as they fall due or, secondly, if the value of the companys assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
The former is often referred to as the cash flow test, and the latter as the balance sheet test.
The effect of section 123 was incorporated into the Conditions.
Further, on the date on which the notes were issued, on behalf of the Noteholders the Trustee entered into an agreement (PECO) with another company (OptionCo).
OptionCo was granted the option to purchase all of the notes from the Noteholders, plus the accrued interest, for a nominal consideration in the event that the Trustee determines that the Issuer is unable to pay its debts under section 123.
The intended effect of this was that, in the event that the assets of the Issuer were exhausted, the remaining claims of the Noteholders against the Issuer would be assigned to OptionCo, and the Issuer would not be regarded as unable to pay its debts.
The Issuer had entered into swap agreements with two of Lehman Brothers companies, with the consequence that when the latter became insolvent the Issuer suffered a significant deficiency in its net asset position, though it continued to pay its debts.
The holders of the A1 and certain other of the notes had been repaid by this time.
The A2 Noteholders were to have priority over A3 Noteholders in receiving repayments of principal out of sums raised by the Issuer from the redemption of mortgages in the portfolio, though those two groups would rank equally for repayment of interest.
However, a finding that the Issuer was unable to pay its debts, and the consequent issuing of an Enforcement Notice, would alter this position significantly: all notes would become immediately due and payable and, importantly, A2 and A3 Noteholders would rank equally for repayment of principal.
Against that background, though adopting a neutral position, the Trustee commenced these proceedings to seek a determination of whether the difficulties suffered by the Issuer constituted an Event of Default on the basis that it was unable to pay its debts within the meaning of section 123 of the 1986 Act.
This appeal is therefore concerned with the construction of section 123.
The Issuer and certain of the A2 Noteholders successfully argued in both the High Court and the Court of Appeal that the Issuer was not unable to pay its debts within the meaning of section 123.
The Appellants, who are A3 Noteholders, argue to the contrary, and seek a stricter construction of section 123 than that which was applied by the lower courts.
By way of cross appeal the Issuer renews its argument, rejected by the Court of Appeal, that in the event that the Issuer was otherwise deemed unable to pay its debts under section 123, the effect of the PECO should serve to alter that conclusion.
The Supreme Court unanimously dismisses the appeals and the Issuers cross appeal.
Lord Walker, with whom Lord Mance, Lord Sumption and Lord Carnwath agree, gives the lead judgment.
Lord Hope gives a concurring judgment.
Having regard to previous relevant legislation, to the authorities pertaining to those provisions and to section 123 of the 1986 Act itself, the enactment of section 123 should be seen as having made little significant change in the law.
The changes in form therein emphasise that the cash flow test is concerned with debts falling due from time to time in the reasonably near future, in addition to those debts presently due.
What is to be regarded as the reasonably near future will depend on the circumstances at hand, but especially the nature of the companys business [37].
However, once one moves beyond the reasonably near future, any attempt to apply the cash flow test will become completely speculative.
In that situation, a comparison of present assets with present and future liabilities, the latter having been discounted to account for contingencies and deferment of payments, becomes the only sensible test.
That is the reason for the inclusion of the balance sheet test in section 123, though it is still very far from an exact test.
It is for the party asserting balance sheet insolvency to establish insolvency of that nature [37].
Whether or not the balance sheet test of insolvency is satisfied must depend on the available evidence as to the circumstances of the particular case.
In that regard, the Issuer is not engaged in normal, on going trading activities, and therefore its present assets should be a better guide to its ability to meet its long term liabilities.
Against that, the impact of factors relevant to its business in the period until the final redemption rate in 2045, such as currency movements, interest rates and the economy and housing market of the United Kingdom, must be considered.
However, they are a matter of speculation rather than calculation or prediction on a scientific basis [38, 49].
As the Issuers liabilities can, as matters stand, be deferred until 2045, and as it is currently paying its debts as they fall due, the Court should proceed with the greatest caution in deciding that it is in a state of balance sheet insolvency [42].
Its ability to pay all its debts, present or future, may not be finally determined until much closer to 2045.
The Conditions contain several mechanisms to ensure that liabilities in respect of principal can be deferred until that date.
That being so, the Court cannot be satisfied that there will eventually be an inability on the part of the Issuer to pay its debts [49].
Though it is not required to decide the point because the appeal is dismissed, PECO agreements are of importance to the securitisation market.
So the Court gives reasons for its decision to dismiss the cross appeal [51].
In that regard, the intended legal and commercial effects of the PECO, having regard to the wording of the documents pertaining to the transaction as a whole, point in the same direction: they do not affect the quantification of the Issuers liabilities.
The meaning to be given to the language used by the parties on this point is not open to doubt.
It would not be consistent with commercial good sense to depart from it [64].
|
In 1981 Samuel Brush worked as a postman.
He was also a member of the Ulster Defence Regiment.
Members of that regiment were frequently targeted by paramilitary groups then operating in Northern Ireland.
Because of that Mr Brush was wearing light body armour and carrying a personal protection weapon when he was ambushed by two gunmen on 13 June 1981.
The ambush took place in a remote area of County Tyrone, some four and a half miles from the village of Aughnacloy.
Although suffering bullet wounds from the attack on him, Mr Brush managed to fire his gun at one of his assailants.
One of the bullets which he fired struck one of the gunmen.
Some time later that person was admitted to hospital in Monaghan which, despite the fact that it is in the Republic of Ireland, is not far from Aughnacloy.
On his trial for the attempted murder of Mr Brush, it was held that the appellant was the man who had been admitted to that hospital and that he had been engaged in the attack and was guilty of attempted murder.
Those findings and the appellants conviction of the attempted murder of Mr Brush are not under challenge in this appeal.
The injuries that the appellant had sustained were serious.
He was airlifted to a hospital in Dublin.
There he underwent significant surgery.
A bullet was removed from his body.
This was handed to police and was later subjected to ballistic tests.
Inevitably, as a result of the operation, there was substantial scarring of the patients torso.
The results of the ballistic tests and the appearance of scarring on the appellants body were significant items of evidence on his trial.
After a relatively short period of convalescence in Dublin, the appellant was returned to Monaghan General Hospital on 22 June 1981.
Although he was thereafter under police guard, he managed to escape on 27 June and some time after that, he left the country.
On 22 August 1983, a man calling himself Terence Gerard McGeough made an application for asylum in Sweden.
The name, the date of birth, the place of birth and the next of kin that were given on the asylum application all matched those of the appellant.
His Irish passport was submitted with the application.
An expert gave evidence on his trial that the handwriting on the application form was that of the appellant.
The trial judge expressed himself as satisfied that it was the appellant who had made the asylum application.
Although it was not formally accepted by the appellant that he had made that application, this has not been disputed throughout the various hearings which have taken place.
Nor has it been disputed that the form in which the application for asylum was made contained information to the effect that the appellant had become an operational member of the Irish Republican Army in early 1976 and that thereafter he was given increasing levels of responsibility.
These led to his being assigned to take part in the attack on Mr Brush.
He carried out that attack as a member of the Irish Republican Army.
That group was a proscribed organisation throughout the time of the appellants admitted membership of it.
The appellant was charged with offences of attempted murder and possession of a firearm.
He was convicted of both.
Neither of these charges is the subject of this appeal.
On the basis of the material contained in the asylum application form, he was further charged with being a member between 1 January 1975 and 1 June 1978 of the Irish Republican Army contrary to section 19(1) of the Northern Ireland (Emergency Provisions) Act 1973.
He was also charged with the same offence in relation to the period between 31 May 1978 and 14 June 1981, contrary to section 21(1) of the Northern Ireland (Emergency Provisions) Act 1978.
He was convicted of those charges also.
The proceedings
The appellants trial on all four charges took place at Belfast Crown Court in November 2010 before Stephens J, sitting without a jury.
The appellant did not give evidence.
On 18 February 2011, the judge delivered judgment, convicting the appellant of all the offences with which he had been charged.
The convictions on the first two counts, those of the attempted murder of Mr Brush and possession of a firearm, were based on the identification of the appellant as the man whom Mr Brush had shot.
This is turn depended on a number of factors, including the name and age given by the person admitted to Monaghan hospital, the presence of a tattoo on the patients arm which matched that found on the appellant after his arrest, operation scars on the appellants body which were precisely where one would expect to find them in light of the surgery which had been carried out and the fact that ballistic tests carried out on Mr Brushs personal protection weapon had rifling marks which matched the bullet removed from the patient during the operation in Dublin.
The judge also drew an adverse inference against the appellant because of his failure to give evidence or to account for the scarring on his body.
An application had been made during Mr McGeoughs trial that the information that had been supplied when he sought asylum in Sweden should not be admitted in evidence.
The application was made on two bases.
Firstly, it was contended that the evidence should be excluded under article 76 of the Police and Criminal Evidence (Northern Ireland) Order 1989 (PACE) because it would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it.
Secondly, it was suggested that the admission of the evidence would offend the rule against self incrimination.
Before ruling on the application to exclude the evidence, Stephens J heard the testimony of Mrs Helene Hedebris, a legal expert from the migration board in Sweden.
She explained that an application for asylum is made to the police department.
It is then transferred to the migration board.
The board takes the decision on the application.
There is a right of appeal from the boards decision.
Mr McGeoughs application for asylum was rejected by the board.
He exercised his right to appeal.
His appeal was dismissed.
Mrs Hedebris gave evidence that Sweden had a centuries old tradition of openness in relation to public documents.
The only exception to this related to documents whose disclosure was forbidden by a specific secrecy code made under a Secrecy Act.
While this code applied to files for asylum applications generally, it did not prohibit the disclosure of information from those files which was required for a criminal investigation unless the asylum application had been successful.
In that event, material obtained in the course of an asylum application was not disclosed.
This is not relevant in Mr McGeoughs case, however, because, as already noted, his application was refused and his appeal against the refusal was dismissed.
There was therefore no reason under Swedish law to withhold the material from the prosecuting authorities in the United Kingdom.
Mrs Hedebris said that the position about disclosure of such material was widely known in Sweden.
The appellant had had the benefit of two lawyers advice, the first at the time of his application for asylum and the second when he appealed against the decision to dismiss his application.
It was inconceivable that he had not been advised of the position.
He could not have been in doubt when he made the application, that in the event of its not succeeding, the material that it generated would enter the public domain.
In the course of the application by Mr McGeough to have the information contained in the application form excluded from evidence, it was drawn to the judges attention that if, in 2009, an individual applied in the United Kingdom for asylum, an immigration officer would give him, on what is described as a statement of evidence form numbered ASL 1123, the following explanation as to how his application would be treated: The information you give us will be treated in confidence and the details of your claim for asylum will not be disclosed to the authorities of your own country.
However, information may be disclosed to other government departments, agencies, local authorities, international organisations and other bodies where necessary for immigration and nationality purposes, or to enable them to carry out their functions.
Information may also be disclosed in confidence to the asylum authorities of other countries which may have a responsibility for considering your claim.
If your asylum application is unsuccessful and you are removed from the United Kingdom, it may be necessary for us to provide information about your identity to the authorities in your own country in order to obtain travel documentation.
Stephens J was also asked to consider paragraph 339IA of the Immigration Rules 1994.
This provides that information supplied in support of an application (and the fact that an application had been made), would not be disclosed to the alleged actors of persecution of the applicant.
The judge held that the undertaking contained in form ASL 1123 went further than was required by Council Directive 2005/85/EC of 1 December 2005 on minimum standards on procedures in member states for granting and withdrawing refugee status (the Procedures Directive).
He found that the relevant obligation (in article 22 of the Procedures Directive) was restricted to the disclosure of information for the purposes of examining individual cases.
It did not restrict the disclosure of information for the purposes of undertaking criminal prosecutions.
Since, in order to make the application for asylum, the appellant was not under compulsion to reveal the information that he did (and there was therefore no question of a breach of the rule against self incrimination); since the appellant must have been aware that the information that he disclosed would enter the public domain if the application was unsuccessful; and since there was nothing in Swedish law, the Procedures Directive or general public policy considerations which contraindicated the disclosure of the information to prosecuting authorities in the United Kingdom, the judge decided that the conditions necessary for the exercise of his power under section 76 of PACE were not present and he directed that the material produced by the appellant in making his asylum application should be admitted in evidence.
It was on this material that the appellant was convicted on the third and fourth counts of membership of a proscribed organisation.
On appeal to the Court of Appeal, the basis of the objection to the admission of the evidence was described in para 10 of the judgment of the Lord Chief Justice, Sir Declan Morgan: the appellant submitted that the learned trial judge should not have admitted the Swedish asylum materials.
It was argued that assertions in such an application were inherently unreliable since applicants for asylum were liable to exaggerate the basis for their claims.
Secondly, it was contended that these were admissions made without caution and the approach to their admission should correspond with the admission of statements made to police in similar circumstances.
Thirdly, it was submitted that since it was necessary to set out the background to the appellant's asylum claim in this documentation these statements ought to be treated as statements made under compulsion.
Lastly, the appellant argued that reliance on such statements would undermine the purpose of the Refugee Convention by creating a chill factor which would prevent deserving claimants disclosing valid circumstances for fear of subsequent victimisation in their home territory if the application failed.
As well as article 22 of the Procedures Directive, the appellant relied on article 41 which stipulates that state authorities responsible for implementing the Directive are bound by the confidentiality principle as defined in national law, in relation to any information they obtain in the course of their work.
The Court of Appeal dismissed the appeal.
In rejecting the arguments in relation to the admission of the Swedish material, the Lord Chief Justice observed that the evidence was lawfully obtained in Sweden and in the United Kingdom in accordance with the international conventions applicable at the time.
The appellant was not under compulsion.
There was no question, therefore, of the rule against self incrimination being engaged.
The appellant had had legal advice in Sweden as to the effect of Swedish law.
Under that law the asylum documents could properly be revealed to the authorities in another jurisdiction if the asylum application was unsuccessful.
The arguments
On the hearing of the appeal before this court, the appellant accepted that there was nothing in the Procedures Directive or the Immigration Rules which explicitly forbade the disclosure of information concerning applications for asylum.
It was contended, however, that the clear purpose of the Directive was to encourage applicants for asylum to make full disclosure to the relevant authorities.
In order that this be achieved, applicants should feel secure that the information that they supplied would not be revealed to state authorities in the country from which they had fled.
It was acknowledged that the relevant instruments referred to the withholding of information from the actors of persecution but it was suggested that this reflected a broader public policy that all applicants for asylum should be encouraged to be candid and open in their applications.
Candour depended on assurance that the information revealed would not be disclosed.
Quite apart from the need to inspire applicants with confidence that the material would not be disclosed, there was, it was argued, a distinct public policy imperative which dictated that such material would not be used in criminal proceedings against the asylum seeker.
Two principal grounds were advanced in support of this contention.
First, it was pointed out that undertakings given to asylum seekers in the United Kingdom would preclude the disclosure of that material.
Secondly, by analogy with provisions in the Children Act 1989, the appellant argued that where an applicant for asylum was effectively compelled to give information which exposed him to the possibility of criminal sanction, that disclosure should not be used in subsequent criminal proceedings.
Discussion
The need for candour in the completion of an application for asylum is self evident.
But this should not be regarded as giving rise to an inevitable requirement that all information thereby disclosed must be preserved in confidence in every circumstance.
Obviously, such information should not be disclosed to those who have persecuted the applicant and this consideration underlies article 22 of the Procedures Directive.
It provides: Collection of information on individual cases For the purposes of examining individual cases, member states shall not: (a) directly disclose information regarding individual applications for asylum, or the fact that an application has been made, to the alleged actor(s) of persecution of the applicant for asylum; (b) obtain any information from the alleged actor(s) of persecution in a manner that would result in such actor(s) being directly informed of the fact that an application has been made by the applicant in question, and would jeopardise the physical integrity of the applicant and his/her dependants, or the liberty and security of his/her family members still living in the country of origin.
As the appellant has properly accepted, there is no explicit requirement in this provision that material disclosed by an applicant for asylum should be preserved in confidence for all time and from all agencies.
On the contrary, the stipulation is that it should not be disclosed to alleged actors of persecution and the injunction against its disclosure is specifically related to the process of examination of individual cases.
The appellants case had been examined and his application had been refused.
The trigger for such confidentiality as article 22 provides for was simply not present.
The appellant is therefore obliged to argue that the need for continuing confidentiality in his case arises by implication from the overall purpose of the Directive.
But neither article 22 nor article 41 provides support for that claim.
Article 22 is framed for a specific purpose and in a deliberately precise way.
To imply into its provisions a general duty to keep confidential all material supplied in support of an asylum application would unwarrantably enlarge its scope beyond its obvious intended purpose.
Article 41 provides: Member states shall ensure that authorities implementing this Directive are bound by the confidentiality principle as defined in national law, in relation to any information they obtain in the course of their work.
It is not disputed that Swedish national law does not define the confidentiality principle as extending to the non disclosure of information supplied in support of an asylum application, where that application has been unsuccessful.
On the contrary, the tradition of the law in that country is that information generated by such applications should enter the public domain.
Article 41 cannot assist the appellant, therefore.
Neither of the specific provisions of the Directive that the appellant has prayed in aid supports the proposition that its overall purpose was to encourage candour by ensuring general confidentiality for information supplied in support of an application for asylum.
The Directive in fact makes precise provision for the circumstances in which confidentiality should be maintained.
It would therefore be clearly inconsistent with the framework of the Directive to imply a general charter of confidentiality for such material.
The fact, if indeed it be the fact, that material which an applicant for asylum in the United Kingdom supplied, in circumstances such as those which confronted the appellant when making his application in Sweden, would not be disclosed here, likewise cannot assist his case.
The information which the Swedish authorities provided was properly and legally supplied.
When the authorities in this country obtained that material, they had a legal obligation to make appropriate use of it, if, as it did, it revealed criminal activity on the appellants part.
Neither the terms of the Directive nor the circumstances in which material would have been dealt with, if obtained in the United Kingdom, impinged on the manner in which the trial judge was required to approach his decision under article 76 of PACE.
There was nothing that was intrinsic to that material nor in the circumstances in which it was provided that would support the conclusion that its admission would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it.
The judge was plainly right to refuse the application.
The purported analogy with the provisions of the Children Act 1989 is inapt.
That Act imposed an obligation on all persons giving evidence in proceedings concerning the care, supervision and protection of children to answer any relevant question irrespective of whether the answer might incriminate him or his spouse or civil partner section 98(1).
In light of that compulsive provision, it is unsurprising that section 98(2) should provide that statements or admissions shall not be admissible in evidence against the person making it or his spouse or civil partner in proceedings for an offence other than perjury.
There is no correlative situation of compulsion in the case of an application for asylum and, consequently, no occasion for a prohibition on the use of evidence obtained through that procedure.
In any event, the need for a specific provision forbidding the use of such material in the Children Act and the absence of any corresponding provision in the law relating to asylum applications underscores the inaptness of the claimed comparison.
Conclusion
The appeal must be dismissed.
| In June 1981, Mr McGeough was implicated in the attempted murder of Samuel Brush, a postman and member of the Ulster Defence Regiment who was shot in County Tyrone.
In the course of the attack, Mr Brush managed to fire a gun at his assailants, striking one of them.
Mr McGeough subsequently presented at a nearby hospital with a gunshot wound from what was later determined to be Mr Brushs weapon.
He received treatment there and at a hospital in Dublin and, despite being placed under police guard, he managed to escape and leave the country.
In August 1983 Mr McGeough applied for asylum in Sweden.
The application was supported by the appellants account of his life, from which it appeared that he had been an operational member of the Irish Republican Army and had participated in the attack on Mr Brush.
His application for asylum was dismissed, as was his subsequent appeal against the dismissal.
In November 2010, the appellant was tried at Belfast Crown Court for attempted murder and possession of a firearm.
He was convicted of both offences and neither conviction is challenged in this appeal.
At the same time, he was tried on two charges of membership of a proscribed organisation (the Irish Republican Army), those charges being based on the material contained in the Swedish asylum application.
An application was made during the course of the trial that the Swedish material should not be admitted in evidence, either because it should be excluded under section 76 of the Police and Criminal Evidence Act 1984 (PACE) as having such an adverse effect on the fairness of the trial that it should not be admitted, or because the admission of the evidence would offend the rule against self incrimination.
Having heard evidence from a Swedish legal expert, the trial judge rejected the appellants application on the basis that there was nothing in Swedish law, nor in Council Directive 2005/85/EC of 1 December 2005 on minimum standards on procedures for granting and withdrawing refugee status (the Procedures Directive), nor in general public policy considerations which prevented the disclosure by Sweden of the material in the asylum application to UK prosecuting authorities.
The appellant had been represented in Sweden by lawyers who must have told him of the Swedish rule that the papers in an asylum application were open public documents.
The conditions necessary for exclusion of the material under section 76 PACE were therefore not present.
Further, the appellant had not been under compulsion when providing the information in the asylum application so the privilege against self incrimination was not engaged.
The Swedish material was admitted in evidence and the appellant was convicted of the charges of membership of a proscribed organisation.
The Court of Appeal dismissed the appellants appeal against conviction.
The Supreme Court unanimously dismisses the appeal.
Lord Kerr gives the only judgment, with which the other Justices agree.
The need for candour in the completion of an asylum application is self evident, but that should not be regarded as giving rise to an inevitable duty of confidence over material contained in them [22].
There is no explicit requirement in the Procedures Directive that material disclosed by an applicant for asylum should be preserved in confidence for all time and from all agencies, just that (per Article 22 of the Procedures Directive) it should not be disclosed to alleged persecutors or in the course of examining the individual case (neither of which applied here) [23].
Nor does the overall purpose of the Directive assist the appellant in establishing a general prohibition on disclosure: Article 22 is precisely worded and to read into it a general duty of confidence would unwarrantably enlarge its scope [24, 27].
Article 41 of the Directive requires member states implementing the Directive to abide by the confidentiality principle as defined in national law [25].
Swedish law does not contain a duty of confidentiality over information supplied in support of an asylum application where that application has been unsuccessful, but favours such applications entering the public domain [26].
The material provided by Sweden was lawfully supplied and the authorities in this country had a legal obligation to make appropriate use of it if it revealed criminal activity [28].
Whether the material would have been treated differently if it had originated in the United Kingdom did not affect the manner in which the trial judge was required to approach his decision under section 76 PACE.
The judge was plainly right to refuse the application [29].
Further, the absence of compulsion in the case of an application for asylum renders comparisons with situations involving compulsion (such as the requirement to answer questions under section 98 of the Children Act 1989) inapt.
The rule against self incrimination does not require a prohibition on the use of evidence obtained through a non compulsive procedure such as an application for asylum [30].
|
This appeal concerns the legality under the European Convention on Human Rights of licensing conditions imposed by the Environment Agency (the Agency) restricting certain forms of salmon fishing in the Severn Estuary.
Mr Motts interest
The respondent, Mr Mott, has a leasehold interest in a so called putcher rank fishery at Lydney on the north bank of the Severn Estuary.
A putcher rank is an old fishing technique, involving the use of conical baskets or putchers to trap adult salmon as they attempt to return from the open sea to their river of origin to spawn.
Mr Mott has operated the putcher rank under successive leases since 1975.
Since 1979, according to his evidence, it has been his full time occupation.
He claims that, before the limits introduced by the Agency in 2011, his average catch using the rank was some 600 salmon per year, at a value of about 100 each, giving him a gross annual income in the order of 60,000.
The right to operate the rank is derived from a Certificate of Privilege dated 14 May 1866, issued by the Special Commissioners for English Fisheries, and owned by the Lydney Park Estate.
The current 20 year lease was granted jointly to Mr Mott and a Mr David Merrett, and will expire on 31 March 2018.
It gives them the right to fish two stop nets and 650 putchers, in return for payment of an annual rent in two parts: a fish rent equivalent to 65 pounds in weight of salmon, and a monetary rent of (since the last review date) 276.
The tenants are required to operate the putcher rank during each fishing season unless circumstances make it impossible.
Further they may not assign, let or part with the fishery during the term of the lease, save upon death or disability, when they may with the written consent of the landlord assign to another family member.
To operate the putcher rank Mr Mott has required an annual licence from the Environment Agency (the Agency), under section 25 of the Salmon and Freshwater Fisheries Act 1975 (the 1975 Act).
The salmon season runs from 1 June to 15 August.
Licences are usually issued by the Agency in late April or early May, shortly before the season opens.
Until recently a licence for use of an historic installation such as the putcher rank (unlike other methods of fishing) could not be made subject to conditions limiting the number of fish taken (catch limitations).
However, with effect from 1 January 2011, the 1975 Act was amended to enable the Agency to impose such conditions where considered necessary for the protection of any fishery (paragraph 14A of Schedule 2 to the 1975 Act, inserted by Marine and Coastal Access Act 2009 section 217(7)).
Measures to protect salmon stock
It has been government policy, as implemented by the Agency and its predecessors, supported by government, that in the interests of effective management mixed stock fisheries should be gradually phased out, and exploitation limited, as far as possible, to places where the stock of salmon is from a single river.
The Agency considers that all the fisheries in the Severn Estuary exploit a mixed salmon stock, with fish destined to return to the rivers Severn, Wye, Usk, Rhymney, Taff and Ely and other rivers.
The rivers Wye and Usk are designated as Special Areas of Conservation (SAC) under the European Habitats Directive (Council Directive 92/44/EEC), transposed into domestic law by the Conservation of Habitats and Species Regulations 2017 (the Habitats Regulations).
One of the main reasons for the designation of these rivers is the need to conserve their salmon stocks.
The Severn Estuary itself is designated as a SAC, a Special Protection Area (under the Council Directive on the Conservation of Wild Birds (Council Directive 79/409/EEC)), and a Ramsar site.
Together, these areas constitute the Severn Estuary European Marine Site, for which salmon is a qualifying feature.
For some years the status of salmon stock in the Wye and Usk has been categorised by the responsible authorities as unfavourable or at risk, because of failure to achieve stock conservation targets or the objectives set under the Habitats Directive.
Dealings between the Agency and the Tenants
In late 2003, the Agency attempted to purchase the Certificate of Privilege to operate the putcher rank.
It agreed terms with the Estate, subject to contract, and (as the Estate required) subject to agreement with the tenants for termination of the lease.
Negotiations between the Agency and the tenants took place in 2004.
By an agreement in 2004, the Agency paid the tenants 30,000 compensation not to operate the putcher rank fishery during the 2004 fishing season.
The agreement also provided a further payment of 10,000, if agreement were reached before 1 June 2005 for permanent cessation.
In the event negotiations for permanent cessation were unsuccessful.
It was agreed in principle that compensation should be paid, but the parties failed to agree the basis of valuation.
During the 2005 to 2009 seasons the tenants continued to operate the fishery.
In 2010 an agreement was again reached for payment of 30,000 compensation not to operate the fishery during that season.
In February 2011, the Agency offered to purchase the then remaining term of the lease (seven years), but negotiations were unsuccessful.
However, in response to the application for a licence for the 2011 season, the Agency agreed to pay the tenants 35,000 compensation not to operate the putcher rank fishery during that season.
Another historic installation fishery was also paid not to seek a licence in the 2011 season.
The only historic installation fishery that was licensed in 2011 operated under the terms of a catch condition, imposed under the new powers in paragraph 14A of Schedule 2 to the 1975 Act which had by then come into effect.
The catch condition was determined following an appropriate assessment under the Habitats Regulations (the 2011 HRA).
The dispute
The events leading to the present dispute began with a letter from the Agency dated 16 April 2012, informing Mr Mott of a report by the University of Exeter (the Exeter Report), which, it was said, provided clear evidence of the mixed stock nature of the catch in the Severn Estuary.
He was informed of the intention to set a catch limit of 30 fish for that year, and of the power under the amended 1975 Act to impose a catch limit without compensation.
The Exeter Report was followed in May 2012 by a Habitats Regulations Assessment (the 2012 HRA) to the effect that unconstrained catches of salmon in the estuary were threatening the integrity of the River Wye SAC, and that it was necessary to limit the use of the historic installation fisheries.
As HHJ Cooke, sitting as a judge of the High Court noted (para 13), the contemporary documents showed that the controlling factor was consideration of the numbers of salmon returning to the Wye to spawn, the stock in that river being considered to be the most vulnerable; and the impact of the claimants fishery was considered therefore in terms of its potential effect on salmon destined to spawn in the Wye.
Mr Mott did not accept the Exeter Reports findings.
Having failed to persuade its authors at a meeting in May 2012, he commissioned his own expert report from a Professor Fewster of University of Auckland, New Zealand.
The disagreements between the experts were the subject of detailed study in the courts below but are not relevant to the remaining issue in this appeal.
In the meantime, Mr Mott was served with a notice under the 1975 Act on 1 June 2012, the first day of the new fishing season, limiting his catch to 30 fish.
This figure was fixed by reference to the lowest catch by any of the historic installation fisheries that had sought a licence in the preceding ten year period, with some increase to mitigate the risk of reduction in licence uptake and failure to maintain possible heritage.
A further reduction to 23 salmon was proposed for 2013, and 24 for the 2014 season.
The judge referred to a sentence in the Habitats Regulations Assessment for 2013 which explained that under the new regime the catch by the most productive estuary fisheries will be restricted to the approximate long term de minimus (sic) catch.: [2015] EWHC 314 (Admin); [2016] Env LR 27 (para 31).
He commented on the effect on Mr Mott: 33.
The final sentence quoted above was explained as meaning that the number of fish allowed per licence was set as being approximately the ten year average catch of the least productive of all the fisheries licensed.
The practical result for the claimant is that his fishery of 650 putchers is given the same catch allocation as the smallest and least effective of the other putcher fisheries, which may operate 50 baskets or less.
These he says are not commercially viable but operated only as a hobby.
Plainly, the heaviest impact of this policy falls on the claimant who relies on the fishery for his living rather than the smaller operators.
The proceedings
In the present judicial review proceedings Mr Mott challenged the decisions of the Agency to impose conditions on the licences for 2012, 2013 and 2014, limiting catches respectively to 30, 23, and 24 salmon per season.
He alleged irrationality, and breach of his rights under the Convention.
It was Mr Motts case that the catch limit conditions have made the putcher rank fishery wholly uneconomic and the lease worthless.
The judge upheld both claims and concluded that the decisions to impose the catch conditions were irrational, as the Exeter Report did not provide a reasonable basis for the view that the putcher installations were having a material effect on the salmon fishery in the river Wye.
He held further that the Agency could not under Article 1 of Protocol 1 of the ECHR (A1P1) properly have imposed the conditions, if otherwise lawful, without payment of compensation.
In a judgment dated 17 June 2016, the Court of Appeal (Beatson LJ, with whom Lord Dyson MR and McFarlane LJ agreed) allowed the Agencys appeal on the issue of irrationality, but dismissed the appeal under A1P1.
It made a declaration that all three decisions amounted to an unlawful interference with his A1P1 rights in the absence of compensation: [2016] EWCA Civ 564; [2016] 1 WLR 4338.
Only the latter issue arises on the appeal to this court.
A1P1 Principles
Article 1 of the first Protocol (A1P1) to the Convention provides: (1) Every natural or legal person is entitled to the peaceful enjoyment of his possessions.
No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. (2) The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
It is accepted that the right to fish granted to Mr Mott by lease is a possession for these purposes.
The general principles governing the interpretation of A1P1 are well established in European and domestic authorities.
In Back v Finland (2004) 40 EHRR 48 the Strasbourg court explained that it comprises three distinct rules: the first (in the first sentence of para 52) is of a general nature and enunciates the principle of peaceful enjoyment of property; the second (in the second sentence of the same paragraph) covers deprivation of possessions and makes it subject to certain conditions; the third (in the second paragraph) concerns the right of the state to control the use of property in accordance with the general interest.
The court added: The three rules are not distinct in the sense of being unconnected: the second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property and should therefore be construed in the light of the general principle enunciated in the first rule.
Each of the two forms of interference defined must comply with the principle of lawfulness and pursue a legitimate aim by means reasonably proportionate to the aim sought to be realised.
The principles were summarised by Lord Reed in AXA General Insurance Ltd v HM Advocate [2011] UKSC 46; [2012] 1 AC 868, paras 107 108.
The application of A1P1, in circumstances comparable in some respects to the present, was considered by the Court of Appeal in R (Trailer and Marina (Leven) Ltd) v Secretary of State for the Environment, Food and Rural Affairs [2005] 1 WLR 1267; [2004] EWCA Civ 1580.
The claimant company owned a stretch of canal designated a Site of Special Scientific Interest (SSSI) under the Wildlife and Countryside Act 1981 (the 1981 Act).
The company entered into a management agreement with English Nature, under which it agreed not to develop fishing and boating activities in return for annual compensation of 19,000.
The agreement expired at the end of 2000.
In January 2001, amendments to the 1981 Act (under the Countryside and Rights of Way Act 2000), imposed a new regulatory regime under which compensation was no longer payable.
The company claimed that the amended legislation involved a breach of their rights under A1P1, and sought a declaration of incompatibility under the Human Rights Act 1998.
The claim failed.
Neuberger LJ, giving the judgment of the court, reviewed the authorities dealing with the distinction between the taking or deprivation of property and mere control of use.
As he noted, the former normally requires payment of compensation to avoid a breach of the article; the latter does not, even if the control result in serious financial loss.
He noted that the division drawn by the Strasbourg jurisprudence is not clear cut.
He referred in particular to the Grand Chamber decision in Sporrong & Lnnroth v Sweden (1982) 5 EHRR 85, for the propositions, first, that under the second rule the court may need to investigate the realities of the situation complained of to determine whether it amounts to de facto expropriation and thus deprivation (para 63); and that even where the interference does not fall clearly within the ambit of either the second or third rule, it may be necessary to consider the application of the first more general rule, and for that purpose to determine whether a fair balance was struck between the demands of the general interest of the community and the requirements of the protection of the individuals fundamental rights (para 69)
On the facts of Trailer & Marina, the court held: We accept, of course, that the consequence of the amendments effected by the 2000 Act must have been to diminish, sometimes substantially, the scope of the uses to which an SSSI could be put, and accordingly to reduce, sometimes substantially, the income which could be obtained from activities on an SSSI, and consequently its market value.
It can fairly be said that, in those circumstances, the public benefit enjoyed as a result of the amendments effected by the 2000 Act will, in the absence of any compensation provisions, have been at the expense of the owners and occupiers of SSSIs.
However, given the purpose and genesis of the legislation, and the jurisprudence of the [ECtHR], that cannot of itself justify an argument that there has been an infringement of the Article 1 of the first Protocol rights of the owner of an SSSI whose value has been substantially diminished as a result of the amendments effected by the 2000 Act. (para 65) As Neuberger LJ noted, the challenge was directed to the compatibility of the legislation with the Convention.
It had not been argued that the restrictions in the particular case amounted to de facto expropriation, or a disproportionate burden on the owner of the land concerned (para 68).
An authoritative summary of the principles is found in the Grand Chamber decision in Hutten Czapska v Poland (2007) 45 EHRR 4, para 167: Not only must an interference with the right of property pursue, on the facts as well as in principle, a legitimate aim in the general interest, but there must also be a reasonable relation of proportionality between the means employed and the aim sought to be realised by any measures applied by the state, including measures designed to control the use of the individuals property.
That requirement is expressed by the notion of a fair balance that must be struck between the demands of the general interest of the community and the requirements of the protection of the individuals fundamental rights.
The concern to achieve this balance is reflected in the structure of Article 1 of Protocol No 1 as a whole.
In each case involving an alleged violation of that article the court must therefore ascertain whether by reason of the states interference the person concerned had to bear a disproportionate and excessive burden
The judgments below
In the present case, the judge distinguished the Trailer and Marina case, as a challenge to the legislation as a whole, rather than a particular executive decision made under it.
Thus the question of infringement of A1P1 had had to be considered in principle, and not in relation to the specific circumstances of the claimant.
The court had recognised that there were powers available to compensate an owner in an extreme case.
The decision did not therefore support a conclusion that any restriction on property on environmental grounds can be made without a requirement for compensation (para 93).
His own conclusion that there was no reasonable basis for the restrictions inevitably meant that the restrictions were not proportionate, however categorised.
However, he went on to consider the position apart from that finding: 96.
In my judgment this case, like that in Back v Finland, has elements both of deprivation and of control.
The claimants right is largely but not entirely extinguished.
It could be exploited and would presumably have some small value if sold for leisure interest rather than commercial use.
It should be considered under the general statement of principle with which A1P1 commences.
Given the extent of the restriction imposed, which eliminated at least 95% of the benefit of the right, it is to be considered as closer to deprivation than mere control, and that balance is relevant when considering the proportionality of the measure challenged. 97.
In adopting the measure decided on, there is no evidence that the Agency considered the extent of the effect on the claimant and his livelihood in any meaningful way at all.
Though the HRAs refer to the desirability of permitting the continuation of historic fishing methods to an extent described as residual they did not address what the consequences would be for the rights holders affected at all, looking no further than their own statement of the conservation objective. 98.
There is thus no evidence that any balanced consideration took place at all.
It would have been relevant to that consideration that the claimants rights were of a commercial nature, so that by making them uneconomic to exercise he was being deprived of his livelihood and not merely of a pleasurable leisure activity or the opportunity to maintain an ancient tradition.
So far as the claimant is concerned the position is exacerbated because the method chosen of levelling all permitted catches down to the previous lowest meant that by far the greatest impact fell on him whereas others who may only have used their rights for leisure or hobby purposes would be less affected, and possibly scarcely affected at all.
In my judgment, the effect is that even if the Agency 99. could properly have imposed the total catch limit that it did, the size of that limit and the way in which it was apportioned would still have meant that the claimant has been required to shoulder an excessive and disproportionate burden, such that a breach of A1P1 could only be prevented by payment of compensation.
It is to be noted (in particular from para 96) that the judge did not feel able, or find it necessary, to categorise the action under A1P1 as either deprivation (second rule) or control (first rule).
He considered it under the first general rule, as identified in Back v Finland, while regarding it as closer to deprivation for the purpose of the proportionality balance.
In the Court of Appeal Beatson LJ agreed with this assessment.
It is unnecessary to set out his reasoning, which in substance followed that of the judge (paras 87 89).
It was sufficient in any event that the court found no error in the judges reasoning, without needing to conduct their own independent assessment of proportionality (see In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] 1 WLR 1911).
The appeal
The issues identified by the parties as arising in the appeal are in short (i) whether the conditions imposed by the Agency amounted to control or de facto expropriation under A1P1? (ii) if the former, did the fair balance require compensation to be paid? (iii) if the latter, were there any exceptional circumstances justifying absence of compensation?
Mr Maurici QC for the Agency submitted that the restrictions clearly constituted a control, rather than expropriation, in spite of the adverse effects on Mr Mott.
He referred for example to Mellacher v Austria (1990) 12 EHRR 391 concerning a new Austrian Rent Act which had the effect of greatly reducing the rents to which certain landlords were entitled under existing tenancy agreements.
The court held that there had been no de facto expropriation of their property, since they retained the right to use it even if they had been deprived of a large part of their income.
Indeed the only example in the decided cases of de facto expropriation was the exceptional case of Papamichalopoulos v Greece (1993) 16 EHRR 440, in which the applicants were owners of a large area of valuable land in Greece, of which the military dictatorship had assumed control and transferred to the Navy to build a naval base and holiday resort for officers.
Although the land was not formally expropriated, the applicants had been deprived of the entirety of the use and value of the land in question.
As to whether a fair balance had been drawn, Mr Maurici drew attention to the emphasis given by European and domestic law to the protection of the environment, and the important responsibilities imposed on the Agency in that regard.
The responsibility was particularly strict in respect of sites designated under the Habitats Directive (citing Sweetman v An Bord Pleanla (Galway County Council intervening) (Case C 258/11) [2014] PTSR 1092, paras 40 41).
He submitted further that it would be contrary to public policy, and inconsistent with the polluter pays principle, for public funds to be used to pay compensation to individuals such as Mr Mott, whose activities were found to have caused environmental damage.
As an example of the emphasis given to the environment in the Strasbourg case law, he cited Hamer v Belgium (2008) (Application No 21861/03).
The court under A1P1 upheld an order for the demolition of a house in a woodland area, which was unpermitted, but had existed as a holiday home for 37 years with the full knowledge of the authorities.
The court held that the order was a control, rather than expropriation; and that it struck a fair balance, having regard to the wide margin of appreciation enjoyed by authorities in the field of environmental protection: .
The environment is a cause whose defence arouses the constant and sustained interest of the public, and consequently the public authorities.
Financial imperatives and even certain fundamental rights, such as ownership, should not be afforded priority over environmental protection considerations, in particular where the state has legislated in this regard.
The public authorities therefore assume a responsibility which should in practice result in their intervention at the appropriate time in order to ensure that the statutory provisions enacted with the purpose of protecting the environment are not entirely ineffective. (para 79)
For Mr Mott, Mr Hockman QC supported the reasoning of the courts below.
He submitted that the effect of the conditions was to nullify the practical use of Mr Motts lease, and thus amounted to expropriation.
But even if they were regarded as a control, the courts below were entitled to find that they required Mr Mott to shoulder an excessive and disproportionate burden, such that breach of A1P1 could only be prevented by payment of compensation.
It was accepted that the Agency had power to pay compensation, and it had done so in the past.
The 1975 Act itself (even following the amendments made by the 2009 Act), recognised that compensation might be necessary in certain cases.
Thus, section 26 dealing with limitation of licences for fishing with nets provides that where an order under the section would prevent a person from fishing in circumstances where that person is wholly dependent on the fishing for his livelihood, the Agency may pay that person such amount by way of compensation as it considers appropriate.
Discussion
The Strasbourg cases show that the distinction between expropriation and control is neither clear cut, nor crucial to the analysis.
Viewed from the Agencys point of view, and that of the public, the restrictions imposed in the present case were (as found by the Court of Appeal) a proper exercise of the Agencys powers to control fishing activity in the interests of the protection of the environment.
We were not referred to any case in which such action has been treated as amounting to expropriation merely because of the extreme effects on particular individuals or their businesses.
However, it was still necessary to consider whether the effect on the particular claimant was excessive and disproportionate.
Mr Maurici is right to emphasise the special importance to be attached to the protection of the environment.
However, this does not detract from the need to draw a fair balance, nor from the potential relevance of compensation in that context.
As Mr Hockman pointed out, the potential need for compensation is recognised in other parts of the 1975 Act itself.
Compensation played a part in a Strasbourg case close to the present on the facts.
Posti v Finland (2003) 37 EHRR 6 concerned a claim by two fishermen who operated under leases granted by the Finnish state.
They complained that restrictions imposed by the government to safeguard fish stocks had failed to strike a fair balance under A1P1.
The court held that the fishing restrictions were a control, rather than deprivation of property, and that the interference was justified and proportionate; the interference did not completely extinguish the applicants right to fish salmon and saltwater trout in the relevant waters, and they had received compensation for losses suffered (para 77).
By contrast in Pindstrup Mosebrug A/S v Denmark (2008) (Application No 34943/06), absence of compensation did not prevent the court ruling inadmissible a claim in respect of restrictions on the commercial exploitation of a peat bog, regarded as geologically and biologically unique.
The court upheld the assessment of the domestic courts that the effect on the claimants was not unduly severe, having regard to the findings that they had not invested in production facilities for the purpose of exercising their extraction rights at the bog and that they had access to the extraction of considerable amounts of peat elsewhere.
Against that background I am unable to fault the judges analysis of the applicable legal principles in this case.
As already noted, he did not find it necessary to categorise the measure as either expropriation or control.
It was enough that it eliminated at least 95% of the benefit of the right, thus making it closer to deprivation than mere control.
This was clearly relevant to the fair balance.
Yet the Agency had given no consideration to the particular impact on his livelihood.
The impact was exacerbated because the method chosen meant that by far the greatest impact fell on him, as compared to others whose use may have been only for leisure purposes.
Indeed the judge might have gone further.
He thought that the lease might have retained some small value if sold for leisure rather than commercial use.
However, as Mr Hockman pointed out, even that is doubtful given the strict limits in the lease on the power to assign.
I would therefore uphold the decision of the courts below.
In doing so, I would emphasise that this was an exceptional case on the facts, because of the severity and the disproportion (as compared to others) of the impact on Mr Mott.
As the Strasbourg cases show, the national authorities have a wide margin of discretion in the imposition of necessary environmental controls, and A1P1 gives no general expectation of compensation for adverse effects.
Furthermore, where (unlike this case) the authorities have given proper consideration to the issues of fair balance, the courts should give weight to their assessment.
I would dismiss the appeal.
| The Respondent, Mr Mott, has a leasehold interest in a putcher rank fishery on the banks of the Severn Estuary.
A putcher rank is an old fishing technique, involving the use of conical baskets to trap adult salmon as they attempt to return from the open sea to their river of origin to spawn.
According to Mr Motts evidence, the operation of the putcher rank has been his full time occupation since 1979.
The Appellant, the Environment Agency (the Agency), has a long standing policy of reducing exploitation of salmon stocks in the area.
For some years, the status of salmon stock in the Wye and Usk rivers, to which mixed salmon stock in the Severn Estuary are destined to return, has been categorised as unfavourable or at risk.
These rivers are designated as Special Areas of Conservation (SAC) under European law and are part of the wider Severn Estuary European Marine Site.
To operate the putcher rank during salmon season, Mr Mott has needed an annual licence from the Agency under section 25 of the Salmon Freshwater Fisheries Act 1975 (the 1975 Act).
With effect from 1 January 2011, the 1975 Act was amended to enable the Agency to grant a licence subject to conditions which limit the number of fish taken as the Agency considered necessary for the protection of any fishery.
On 1 June 2012, after negotiations between the parties for termination of the lease and permanent cessation of the putcher rank fishery failed, the Agency served notice on Mr Mott under the amended 1975 Act limiting his catch to 30 fish for the 2012 season.
Further limits of 23 salmon and 24 salmon were imposed in 2013 and 2014, respectively.
Whilst Mr Mott was paid compensation on various occasions between 2004 and 2011 not to operate the fishery during particular seasons, no compensation was paid to him in relation to the restrictions imposed between 2012 and 2014.
Mr Mott began judicial review proceedings against the Agencys decision to impose conditions.
He claimed that the catch limit conditions made his fishery wholly uneconomic to operate.
He also claimed that the decisions were irrational and in breach of his property rights under Article 1 of Protocol 1 (A1P1) of the European Convention on Human Rights (ECHR).
The judge held that the decisions were irrational and that, under A1P1, the Agency could not properly have imposed the conditions, if otherwise lawful, without payment of compensation.
The Court of Appeal allowed the Agencys appeal on the issue of irrationality, but dismissed the appeal under A1P1.
Only the A1P1 issue arises on appeal to the Supreme Court.
The Supreme Court unanimously dismisses the Agencys appeal.
Lord Carnwath gives the lead judgment with which the other justices agree.
The application of A1P1, in circumstances comparable in some respects to the present, was considered by the Court of Appeal in R (Trailer and Marina (Leven) Ltd) v Secretary of State for the Environment, Food and Rural Affairs [2005] 1 WLR 1267 [19].
In Trailer and Marina, Neuberger LJ referred to the decision of the Grand Chamber of the European Court of Human Rights (ECtHR) in Sporrong & Lonnroth v Sweden (1982) 5 EHRR 85 for the proposition that, irrespective of whether an interference with property rights can be classified as a deprivation or a control of use under A1P1, it may be necessary to consider whether a fair balance was struck between the demands of the general interests of the community and the requirements of the protection of the individuals fundamental rights [20].
An authoritative summary of the principles is found in the Grand Chamber ECtHR decision of Hutten Czapska v Poland (2007) 45 EHRR 4 which held that in each case involving an alleged violation of A1P1 the court must ascertain whether by reason of the states interference the person concerned had to bear a disproportionate and excessive burden [22].
The issues arising in this appeal were: (i) whether the conditions imposed by the Agency amounted to control or de facto expropriation under A1P1, (ii) if the former, did the fair balance require compensation to be paid, and (iii) if the latter, were there any exceptional circumstances justifying the absence of compensation [27].
The Agency submitted that the restrictions in question were clearly a control of use of Mr Motts property.
As to whether a fair balance had been struck, the Agency referred to its important responsibilities with respect to protection of the environment, a factor emphasised in the ECtHR case law [28 30].
Mr Mott submitted that the effect of the conditions was to nullify the practical use of his lease, and thus amounted to expropriation.
Even if the conditions were regarded as a control of use, the courts below were entitled to find that they required Mr Mott to shoulder an excessive and disproportionate burden, such that breach of A1P1 could only be prevented by payment of compensation [31].
The Court found that that the distinction between expropriation and control under ECtHR case law is neither clear cut nor crucial to the present analysis.
It is necessary to consider whether the effect on the particular claimant was excessive and disproportionate [32].
The Agency was correct to emphasise the special importance of environmental protection but this does not detract from the need to draw a fair balance, nor from the potential relevance of compensation [33].
Against the background of the ECtHR case law, the Court was unable to fault the judges analysis of the applicable legal principles in this case [34 36].
The fact that the conditions imposed by the Agency were closer to deprivation than mere control was clearly relevant to the fair balance.
The Agency gave no consideration to the particular impact on Mr Motts livelihood, which was severe.
The judge suggested that the lease retained some small value if sold for leisure rather than commercial use but this was doubtful and did not consider restrictions on Mr Motts ability to transfer his interest in the lease [36].
In upholding the decision of the courts below, the Court emphasised that this was an exceptional case on the facts, because of the severity and the disproportion (as compared to others) of the impact on Mr Mott.
The national authorities have a wide margin of discretion in the imposition of necessary environmental controls, and A1P1 gives no general expectation of compensation for adverse effects.
Furthermore, where (unlike this case) the authorities have given proper consideration to the issues of fair balance, the courts should give weight to their assessment [37].
|
This appeal is concerned with the interpretation of article 24(2) of the Brussels I Recast Regulation (Parliament and Council Regulation (EU) No 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Recast Regulation)), which sets out a special regime to determine jurisdiction in relation to certain matters regarding the governance of corporations.
Although the issue in the present case relates to where a Turkish company and certain Turkish domiciled individuals may be sued, and Turkey is of course not an EU member state, it is common ground that article 24(2) of the Recast Regulation applies to determine the question of jurisdiction which arises in this case.
Article 24 is in Section 6 of the Recast Regulation, entitled Exclusive jurisdiction.
Article 24(2) provides as follows: The following courts of a member state shall have exclusive jurisdiction, regardless of the domicile of the parties: (2) in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or the validity of the decisions of their organs, the courts of the member state in which the company, legal person or association has its seat.
In order to determine that seat, the court shall apply its rules of private international law;
The sixth appellant (Koza Altin) is a publicly listed company incorporated in Turkey.
It carries on a business specialising in gold mining.
It is part of a group of Turkish companies known as the Koza Ipek Group (the Group) which were formerly controlled by the second respondent (Mr Ipek) and members of his family.
Amongst other things, the Group has media interests in Turkey.
The first respondent (Koza Ltd) is a private company incorporated in England in March 2014.
It is a wholly owned subsidiary of Koza Altin.
Mr Ipek says that he and the Group have been targeted unfairly by a hostile government in Turkey, including by making them the subject of an investigation into alleged criminal activity and taking steps against them in conjunction with that investigation.
In order to defend himself as regards control of Koza Ltd, in September 2015 Mr Ipek caused a number of changes to be made to Koza Ltds constitution and share structure.
A new class of A shares was created and Koza Ltds articles of association were amended to introduce a new article 26 (article 26), which purported to preclude any further changes to the articles of association or any change of directors save with the prior written consent of the holders of the A shares.
Two A shares were issued, one to Mr Ipek and one to his brother.
The validity and effect of these changes is in issue in these proceedings.
The respondents contend that they are valid and lawful.
The appellants contend that they are invalid and unlawful attempts to entrench Mr Ipek and his associates in control of Koza Ltd.
In proceedings in Turkey relating to the criminal investigation in respect of Mr Ipek and the Group, on 26 October 2015 pursuant to article 133 of the Turkish Criminal Procedure Code the Fifth Ankara Criminal Peace Judge appointed certain individuals as trustees of Koza Altin and other companies in the Group, with power to control the affairs of those companies in place of the existing management.
Pursuant to further decisions of the judge dated 13 January and 3 March 2016, the first to fifth appellants were appointed as the trustees in relation to Koza Altin.
I refer to them together as the trustees, although in further proceedings in Turkey in September 2016 they were replaced by the Tasarruf Mevduati Sigorta Fonu (the Savings Deposit Insurance Fund of Turkey) as trustee of Koza Altin.
The trustees, with Koza Altin itself, are the relevant parties in the present proceedings in England and for this appeal.
On 19 July 2016, the trustees caused Koza Altin to serve a notice on the directors of Koza Ltd under section 303 of the Companies Act 2006, requiring them to call a general meeting to consider resolutions for their removal and replacement with three of the trustees.
The directors of Koza Ltd did not call such a meeting, so on 10 August 2016 Koza Altin served a notice pursuant to section 305 of the 2006 Act to convene a meeting on 17 August 2016 to consider those resolutions.
The service of this notice prompted Mr Ipek and Koza Ltd to make an urgent without notice application on 16 August seeking an injunction to prevent the meeting taking place and, so far as required, orders for service out of the jurisdiction and for alternative service.
Injunctive relief as set out in the application was sought on two bases.
It was contended that (i) the notices of 19 July and 10 August 2016 (the notices) were void under section 303(5)(a) of the 2006 Act because at least one of the holders of the A shares (Mr Ipek) did not consent to the proposed resolutions and so, if passed, they would be ineffective as being passed in breach of article 26 (I refer to this claim as the English company law claim); and (ii) the notices were void on the basis that the English courts should not recognise the authority of the trustees to cause Koza Altin to do anything as a shareholder of Koza Ltd, because they were appointed on an interim basis only and in breach of Turkish law, the European Convention on Human Rights and natural justice, so that it would be contrary to public policy for the English courts to recognise the appointment (I refer to this claim as the authority claim).
As regards jurisdiction, the primary submission for Mr Ipek and Koza Ltd was that permission to serve out of the jurisdiction was not required because the English courts had exclusive jurisdiction to deal with the whole claim pursuant to article 24(2) of the Recast Regulation.
At the without notice hearing before Snowden J on 16 August 2016, the judge accepted this submission.
He granted interim injunctive relief as sought by Mr Ipek and Koza Ltd and gave permission for alternative service at the offices of Mishcon de Reya LLP, the solicitors acting for Koza Altin and the trustees.
Mr Ipek and Koza Ltd issued their claim form on 18 August 2016 seeking a declaration that the notices were ineffective, an injunction to restrain Koza Altin and the trustees from holding any meeting pursuant to the notices and from taking any steps to remove the current board of Koza Ltd, a declaration that the English courts do not recognise any authority of the trustees to cause Koza Altin to call any general meetings of Koza Ltd or to do or permit the doing of anything else as a shareholder of Koza Ltd and an injunction to restrain the trustees from holding themselves out as having any authority to act for or bind Koza Altin as a shareholder of Koza Ltd and from causing Koza Altin to do anything or permit the doing of anything as a shareholder of Koza Ltd.
Koza Altin and the trustees filed an acknowledgement of service indicating their intention to contest jurisdiction and then issued an application to do that.
At the same time, Koza Altin filed a Defence and Counterclaim to the English company law claim, impugning the validity and enforceability of article 26 and also impugning the validity and effectiveness of the board resolution of Koza Ltd pursuant to which the two A shares were issued.
In turn, Mr Ipek and Koza Ltd issued an application to strike out the acknowledgment of service, Koza Altins Defence and Counterclaim and all other steps taken by Mishcon de Reya LLP purportedly on behalf of Koza Altin in the proceedings, on the basis that the authority of those who had caused Koza Altin to take these steps should not be recognised in this jurisdiction.
The application of Koza Altin and the trustees to challenge jurisdiction was heard by Asplin J in December 2016.
Their position was that (i) the English courts have no jurisdiction under article 24(2) of the Recast Regulation over the trustees in relation to any part of the claims; (ii) the English courts do have jurisdiction under that provision over Koza Altin in respect of the English company law claim, which relates to the affairs of Koza Ltd; and (iii) the English courts have no jurisdiction under that provision over Koza Altin in respect of the authority claim, which relates to the conduct of the business of Koza Altin.
Asplin J dismissed the application by order made on 17 January 2017.
It was common ground that the English company law claim fell within article 24(2) of the Recast Regulation so that the English courts had jurisdiction in relation to it and in the judges assessment the authority claim was inextricably linked with that claim, which she considered was the principal subject matter of the proceedings viewed as a whole.
Koza Altin and the trustees appealed on the grounds that Asplin J had erred in holding that article 24(2) conferred jurisdiction on the English courts to determine the authority claim and had erred in holding that article 24(2) conferred jurisdiction on the English courts to determine any of the claims against the trustees.
The Court of Appeal dismissed the appeal.
Like Asplin J, it held that the authority claim is inextricably linked with the English company law claim and it held that article 24(2) required the court to form an overall evaluative judgment as to what the proceedings are principally concerned with, which in this case is a challenge to the ability of Koza Altin to act as a shareholder of Koza Ltd in relation to Koza Ltds internal affairs (see, in particular, paras 45 46 and 49 51).
That was so even if certain parts of the relief sought, if viewed in isolation, appeared to go further than that, in that they related to the validity of decisions taken by the organs of Koza Altin.
In the view of the Court of Appeal, therefore, by virtue of article 24(2) the English courts have jurisdiction in relation to the authority claim as well as in relation to the English company law claim.
In addition, the Court of Appeal dismissed a distinct submission for the trustees that the English courts have no jurisdiction in relation to them under article 24(2), based on the fact that they are not necessary parties in the proceedings.
Despite the court accepting that they are not necessary parties, it held that jurisdiction was established under article 24(2) in relation to the trustees because the subject matter of the proceedings involving them remained the same and the rationale of avoiding conflicting decisions in relation to the same subject matter applied, as did the rationale of ensuring that the proceedings are tried in the courts best placed to do so (paras 52 54).
The trustees and Koza Altin now appeal with permission granted by this court.
They submit that in holding that the English courts have jurisdiction under article 24(2) in relation to the authority claim, which is concerned with the validity of decisions of the organs of Koza Altin, a Turkish company, the Court of Appeal has given that provision an impermissibly wide interpretation.
On proper construction of article 24(2), it is the courts of Turkey which have the relevant close connection with the authority claim and the English courts could not be regarded as having relevant (putatively exclusive) jurisdiction under that provision in relation to that claim.
The issues on the appeal are (i) whether article 24(2) confers jurisdiction on the English courts to determine the authority claim as against Koza Altin and (ii) whether article 24(2) confers exclusive jurisdiction on the English courts to determine either the authority claim or the English company law claim as against the trustees.
Each side maintains that the proper interpretation of article 24(2) is acte clair in their favour, but if it is not then a reference to the Court of Justice of the European Union is sought.
The Recast Regulation
The Recast Regulation is intended to lay down common rules governing jurisdiction assumed by member states.
Insofar as relevant for present purposes, the basic scheme is encapsulated as relevant for present purposes in recitals (13) (16) and (19): (13) There must be a connection between proceedings to which this Regulation applies and the territory of the member states.
Accordingly, common rules of jurisdiction should, in principle, apply when the defendant is domiciled in a member state. (14) A defendant not domiciled in a member state should in general be subject to the national rules of jurisdiction applicable in the territory of the member state of the court seised.
However, in order to ensure the protection of consumers and employees, to safeguard the jurisdiction of the courts of the member states in situations where they have exclusive jurisdiction and to respect the autonomy of the parties, certain rules of jurisdiction in this Regulation should apply regardless of the defendants domicile. (15) The rules of jurisdiction should be highly predictable and founded on the principle that jurisdiction is generally based on the defendants domicile.
Jurisdiction should always be available on this ground save in a few well defined situations in which the subject matter of the dispute or the autonomy of the parties warrants a different connecting factor.
The domicile of a legal person must be defined autonomously so as to make the common rules more transparent and avoid conflicts of jurisdiction. (16) In addition to the defendants domicile, there should be alternative grounds of jurisdiction based on a close connection between the court and the action or in order to facilitate the sound administration of justice.
The existence of a close connection should ensure legal certainty and avoid the possibility of the defendant being sued in a court of a member state which he could not reasonably have foreseen (19) The autonomy of the parties to a contract, other than an insurance, consumer or employment contract, where only limited autonomy to determine the courts having jurisdiction is allowed, should be respected subject to the exclusive grounds of jurisdiction laid down in this Regulation.
The scheme for allocation of jurisdiction under the Recast Regulation, therefore, is that persons domiciled in a member state should generally be sued in that member state (article 4), but pursuant to article 5 may also be sued in the courts of another member state in certain cases specified in sections 2 to 7 of Chapter II of the Recast Regulation.
Section 2 is entitled Special jurisdiction.
Within it, article 7 sets out rules applicable in particular kinds of case, including contract, tort, unjust enrichment and certain other cases; and article 8 provides, among other things, that a person domiciled in a member state who is one of a number of related defendants may be sued in the courts of the place where any one of them is domiciled, provided the claims are closely connected.
Section 3 deals with jurisdiction in matters relating to insurance; section 4 with jurisdiction over consumer contracts; and section 5 with jurisdiction over individual contracts of employment.
Section 6 comprises article 24, dealing with cases of exclusive jurisdiction.
Section 7, comprising articles 25 and 26, deals with prorogation of jurisdiction.
I set out here the full text of article 24: The following courts of a member state shall have exclusive jurisdiction, regardless of the domicile of the parties: (1) in proceedings which have as their object rights in rem in immovable property or tenancies of immovable property, the courts of the member state in which the property is situated.
However, in proceedings which have as their object tenancies of immovable property concluded for temporary private use for a maximum period of six consecutive months, the courts of the member state in which the defendant is domiciled shall also have jurisdiction, provided that the tenant is a natural person and that the landlord and the tenant are domiciled in the same member state; (2) in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal persons or associations of natural or legal persons, or the validity of the decisions of their organs, the courts of the member state in which the company, legal person or association has its seat.
In order to determine that seat, the court shall apply its rules of private international law; (3) in proceedings which have as their object the validity of entries in public registers, the courts of the member state in which the register is kept; in proceedings concerned with the registration or (4) validity of patents, trademarks, designs, or other similar rights required to be deposited or registered, irrespective of whether the issue is raised by way of an action or as a defence, the courts of the member state in which the deposit or registration has been applied for, has taken place or is under the terms of an instrument of the Union or an international convention deemed to have taken place.
Without prejudice to the jurisdiction of the European Patent Office under the Convention on the Grant of European Patents, signed at Munich on 5 October 1973, the courts of each member state shall have exclusive jurisdiction in proceedings concerned with the registration or validity of any European patent granted for that member state; (5) in proceedings concerned with the enforcement of judgments, the courts of the member state in which the judgment has been or is to be enforced.
Article 25 provides in material part as follows: If the parties, regardless of their domicile, have agreed 1. that a court or the courts of a member state are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that member state.
Such jurisdiction shall be exclusive unless the parties have agreed otherwise. 3.
The court or courts of a member state on which a trust instrument has conferred jurisdiction shall have exclusive jurisdiction in any proceedings brought against a settlor, trustee or beneficiary, if relations between those persons or their rights or obligations under the trust are involved. 4.
Agreements or provisions of a trust instrument conferring jurisdiction shall have no legal force if they are contrary to articles 15, 19 or 23, or if the courts whose jurisdiction they purport to exclude have exclusive jurisdiction by virtue of article 24. 1.
Apart from jurisdiction derived from other provisions of this Regulation, a court of a member state before which a defendant enters an appearance shall have jurisdiction.
This rule shall not apply where appearance was entered to contest the jurisdiction, or where another court has exclusive jurisdiction by virtue of article 24.
Article 26(1) provides:
These provisions indicate the priority given under the scheme of the Recast Regulation to the jurisdiction of the courts of a member state which have exclusive jurisdiction under article 24.
The cases of exclusive jurisdiction within article 24 comprise situations where reasons exist to recognise an especially strong and fixed connection between the subject matter of a dispute and the courts of a particular member state.
For the cases falling within article 24, the principle of exclusive jurisdiction cuts across and takes priority over the other principles underlying the Recast Regulation, including the principle of jurisdiction for the courts of the member state where the defendant is domiciled and the principle of respect for party autonomy referred to in recital (19) and reflected in various provisions of the Regulation.
The priority given to the jurisdiction of a member state within article 24 is underlined by departures from other general rules set out in the Recast Regulation.
In particular, in section 8 of Chapter II, entitled Examination as to jurisdiction and admissibility, article 27 provides for an exception to the usual rule in section 9 of Chapter II that it is the courts in a member state which are first seised with a matter which shall have jurisdiction in relation to it, so that the courts of other member states should decline jurisdiction accordingly.
Article 27 provides: Where a court of a member state is seised of a claim which is principally concerned with a matter over which the courts of another member state have exclusive jurisdiction by virtue of article 24, it shall declare of its own motion that it has no jurisdiction.
Also, in Chapter III, in section 3 (entitled Refusal of recognition and enforcement), article 45(1)(e) provides that the recognition of a judgment shall be refused if the judgment conflicts with Section 6 of Chapter II (ie with the provision for exclusive jurisdiction contained in article 24) and article 46 states that enforcement of a judgment shall be refused in cases falling within article 45.
Discussion Issue (i): claim
The application of article 24(2) in relation to the authority
Since article 24(2) of the Recast Regulation is a provision which creates exclusive jurisdiction for the courts of a member state in the circumstances specified, its proper interpretation can be tested on the hypothesis that Turkey stands in the position of a member state.
If Koza Altin were a company which had its seat in a member state, say Greece, article 24(2) would apply to allocate exclusive jurisdiction in relation to the authority claim either to Greece or to England.
They could not both have exclusive jurisdiction under the Recast Regulation, since that would be contrary to the very idea of the jurisdiction being exclusive.
The interpretation of article 24(2) does not change in the present case just because the other state in question (Turkey) happens not to be a member state.
The position in relation to article 24(2) is to be contrasted with that in relation to the general rule of jurisdiction in article 4 and the provisions contained in section 2 of Chapter II of the Recast Regulation.
Under article 4 and those provisions, it is quite possible that the courts of two or more member states might have jurisdiction in relation to the same claim.
This causes no difficulty under the scheme of the Recast Regulation.
In all such cases it is the priority rules in section 9 of Chapter II which determine the jurisdiction where the claim should proceed, which generally depends on which court is first seised.
But as noted above, those rules are disapplied where a claim falls within the exclusive jurisdiction provision in article 24.
Accordingly, it is clear from the scheme of the Regulation that the interpretation and application of that provision cannot depend on the type of evaluative judgment in relation to which different courts could reasonably take different views.
In principle, there should be only one correct application of article 24 in relation to a given claim.
This tells strongly against the broad evaluative approach to the interpretation and application of article 24(2) adopted by the courts below.
As stated in recital (15) of the Recast Regulation, the objective of the Regulation is to set out rules governing the allocation of jurisdiction which are highly predictable.
The desirability of having clear rules for allocation of jurisdiction is obvious, since parties who wish to bring claims and to defend them need to have a clear idea of which courts have jurisdiction so that they can decide how to proceed effectively and so as to minimise costs.
Also, rules which are highly predictable in their effects serve the purpose of enabling different courts to determine with a minimum of effort whether they have jurisdiction in respect of any given claim.
As is clear from the recitals and scheme of the Recast Regulation, a further objective of the regime is to avoid inconsistent judgments on the same issue being produced by the courts of different member states.
The case law of the Court of Justice of the European Union (the Court of Justice, formerly called the European Court of Justice) regarding the interpretation of article 24 has reached an advanced stage.
In my view it shows clearly that the interpretation of article 24(2) adopted by the courts below in these proceedings cannot be sustained.
An important early judgment was given in Hassett v South Eastern Health Board (Case C 372/07) [2008] ECR I 7403 regarding article 22(2) of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, the predecessor of article 24(2) in the Recast Regulation.
In proceedings in Ireland relating to a medical negligence claim against the Health Board, two doctors who had been involved in the incident in question were joined in a claim for contribution brought by the Health Board.
The doctors in turn sought an indemnity or contribution from the Medical Defence Union in England (the MDU), of which they were members, to which they claimed they had an entitlement under the MDUs articles of association.
The MDUs board decided to reject their claim, so the doctors sought to join the MDU in the Irish proceedings to claim in those proceedings the indemnity or contribution to which they maintained they were entitled.
The MDU resisted this on the basis that the doctors claim concerned the validity of the boards decision and so fell within article 22(2), with the result that the English courts had exclusive jurisdiction in relation to that claim.
This issue was referred to the Court of Justice, which disagreed with the MDU.
The court held that article 22(2) had to be interpreted strictly (that is to say, narrowly), since it was an exception to the general rule of jurisdiction under the Regulation based on domicile, and that it should not be given an interpretation broader than is required by [its] objective (paras 18 19); accordingly, the provision must be interpreted as covering only disputes in which a party is challenging the validity of a decision of an organ of a company under the company law applicable or under the provisions governing the functioning of its organs, as laid down in its Articles of Association (para 26).
Since the doctors were not challenging the fact that the MDUs board was empowered under the articles to take the decision it did, but were challenging the manner in which that power was exercised, the dispute between the doctors and the MDU did not fall within article 22(2) (paras 27 30).
The court did not approach the application of article 22(2) by making an evaluative judgment about how the doctors claim related to the proceedings in Ireland, but instead focused its analysis on the specific nature of the claim against the particular defendant, the MDU.
In view of its strict approach to the interpretation of article 22(2), it held that it could not be said that, in order for that provision to apply, it is sufficient that a legal action involve merely some link with a decision adopted by an organ of a company (paras 22 25).
The Court of Justice adopted the same approach to the interpretation and application of article 22(2) of Regulation No 44/2001 in Berliner Verkehrsbetriebe (BVG), Anstalt des ffentlichen Rechts v JP Morgan Chase Bank NA (Case C 144/10) EU:C:2011:300; [2011] 1 WLR 2087 (the BVG case).
JP Morgan and BVG, a local authority in Germany, entered into an interest rate swap contract which contained an English exclusive jurisdiction clause.
JP Morgan brought proceedings in England claiming payments which it maintained were due under the contract.
BVG argued that the swap contract was not valid because it had acted ultra vires in entering into it so that the decisions of its organs approving the making of the contract were null and void, with the result that the German courts had exclusive jurisdiction by virtue of article 22(2) of the Regulation.
BVG also commenced proceedings in Germany for a declaration that the contract was void because the decision to enter into it had been ultra vires.
The German court referred the question of jurisdiction to the Court of Justice.
The Court of Justice held that the German courts did not have exclusive jurisdiction under article 22(2).
The court followed its judgment in the Hassett case to the effect that article 22(2) had to be given a strict interpretation (paras 30 32).
It emphasised that a strict interpretation of article 22(2) which did not go beyond what was required by the objectives pursued by it was particularly necessary precisely because article 22(2) is a rule of exclusive jurisdiction which cuts across the usual expectation that parties to a contract have autonomy to choose their forum (para 32).
It further observed that one of the aims of article 22(2) was to confer exclusive jurisdiction on the courts of a member state in specific circumstances where, having regard to the matter at issue, those courts are best placed to adjudicate upon the disputes falling to them, because there is a particularly close link between those disputes and the member state (para 36).
Having identified a divergence between different language versions of article 22(2), the court held that this was to be resolved by interpreting that provision as covering only proceedings whose principal subject matter comprises the validity of the constitution, the nullity or the dissolution of the company, legal person or association or the validity of the decisions of its organs (para 44).
It also held that in a dispute of a contractual nature, questions relating to the contracts validity, interpretation or enforceability are at the heart of the dispute and form its subject matter, with the result that [a]ny question concerning the validity of the decision to conclude the contract, taken previously by the organs of one of the companies party to it, must be considered ancillary (para 38 and also paras 39 42).
In other words, in relation to a claim based on a contract and brought in England pursuant to an exclusive jurisdiction clause in which an ultra vires defence was advanced, which was inextricably bound up with and hence ancillary to the underlying claim, a narrow interpretation of article 22(2) meant that the ultra vires defence did not have the effect of pulling the whole proceedings or any part thereof into the exclusive jurisdiction of the German courts.
In that context it could not be said that the principal subject matter of the proceedings comprised the validity of the decisions of [BVGs] organs as would be required if article 22(2) was to have any application (para 44 of the judgment).
This point deserves emphasis, in light of the very different way in which the Court of Appeal in the present proceedings sought to draw guidance from the BVG case.
Relying on the judgment in that case, the Court of Appeal held that article 24(2) of the Recast Regulation required the court to form an overall evaluative judgment as to what the proceedings are principally concerned with (para 46).
But this approach had the effect of expanding the application of article 24(2) (ex article 22(2) of Regulation No 44/2001), contrary to the guidance in the Hassett case and the BVG case, rather than narrowing its application, as the Court of Justice had been at pains to do in its judgments in those cases.
According to the Court of Appeal, article 24(2) of the Recast Regulation is to be read as having the effect of allowing a party which is able to bring one claim within that article (the English company law claim) to add on another claim (the authority claim) which is conceptually distinct and is not inextricably bound up with the former claim, so that the latter claim is to be taken to fall within the scope of article 24(2) as regards the jurisdiction of the English courts as well.
In my view, Mr Crow QC for Koza Altin and the trustees was right to criticise this step in the Court of Appeals analysis as an illegitimate reversal of the approach indicated in the judgment of the Court of Justice in the BVG case.
Putting it another way, an evaluative assessment of proceedings relating to a specific claim, taken as a whole, may show that a particular aspect of the claim which involves an assessment of the validity of the decisions of a companys organs is so bound up with other features of the claim that it cannot be said that this is the principal subject matter of those proceedings, as would be required to bring the proceedings within the scope of article 24(2).
This was the effect of the ruling of the Court of Justice in the BVG case.
It does not follow from this that one can say the reverse, namely that where there are two distinct claims one, taken by itself, falling within article 24(2) as regards the exclusive jurisdiction of the English courts and the other, taken by itself, not falling within article 24(2) as regards such jurisdiction it is legitimate to maintain that by virtue of an overall evaluative judgment in relation to both claims taken together the second claim should be found also to fall within article 24(2) so that the English courts have exclusive jurisdiction in relation to it.
In this sort of situation, it is the guidance in paras 22 25 of the Hassett judgment which is relevant, to the effect that a mere link between a claim which engages article 24(2) and one which does not is not sufficient to bring the latter within the scope of that provision.
In the present case the English company law claim and the authority claim can be said to be connected in a certain sense, but they are distinct claims which are not inextricably bound up together.
Koza Altin is a shareholder in Koza Ltd and may act as such.
The issue, so far as the authority claim is concerned, is whether it has done so validly, acting by relevant organs authorised according to the law of its seat.
The English company law claim can be brought and made good on its own terms without any need to get into the merits of the authority claim.
The authority claim likewise can be brought and made good on its own terms without any need to get into the merits of the English company law claim.
Assessing the authority claim as a distinct set of proceedings, clearly their principal subject matter does not comprise the validity of the decisions of the organs of a company which has its seat in England.
In fact, it is clear that their principal subject matter comprises the validity of the decisions of the organs of a company which has its seat in another country, so that if Koza Altin had had its seat in Greece (as a hypothesis to test the validity of the respondents submissions) then, far from allocating exclusive jurisdiction to the English courts, article 24(2) of the Recast Regulation would have allocated exclusive jurisdiction to the Greek courts.
It would not be tenable to suggest that the English courts had exclusive jurisdiction under article 24(2) in such a case.
This analysis fits with and is supported by the scheme and underlying objectives of the Recast Regulation.
First, in such a hypothetical case, Koza Altin might have had subsidiaries in several EU member states all of which might potentially have been affected by actions taken by the trustees on its behalf as occurred with the decision to send the notices concerning Koza Ltd in the present case.
The relevant issues regarding the validity of the decisions of the trustees acting on behalf, and as an organ, of Koza Altin would fall to be assessed in the light of circumstances in the place of its seat and would be governed by the law of that place (in the hypothetical example, Greece), which would indicate clearly that it should be sued there.
Secondly, requiring that Koza Altin and the trustees should be sued in the jurisdiction where it had its seat would ensure that one single authoritative judgment from the courts there would resolve the relevant disputes affecting subsidiary companies in all the other member states without any risk of inconsistent judgments based on evidence of Greek law (in the hypothetical example) being produced by the courts of each of those other member states.
These two points reflect the primary reasons for the introduction of what is now article 24(2) of the Recast Regulation in the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, as set out in the report dated 27 September 1968 on that Convention by Mr P Jenard.
Mr Jenard explained the reasons for providing for exclusive jurisdiction in the form of what is now article 24(2) as follows: It is important, in the interests of legal certainty, to avoid conflicting judgments being given as regards the existence of a company or association or as regards the validity of the decisions of its organs.
For this reason, it is obviously preferable that all proceedings should take place in the courts of the state in which the company or association has its seat.
It is in that state that information about the company or
association will have been notified and made public
These reasons underlying what is now article 24(2) of the Recast Regulation have been treated by the Court of Justice as significant factors relevant to the interpretation of that provision.
The Court of Justice emphasised the importance of arriving at an interpretation of the provision so as to avoid the risk of inconsistent decisions in its judgment in the Hassett case at para 20 and again in its judgment in the BVG case at para 40.
In the Hassett judgment at para 21 the court drew on Mr Jenards report to explain that it is the courts of the member state in which the company has its seat which are regarded as best placed to deal with disputes regarding the validity of decisions of its organs, inter alia because it is in that state that information about the company will have been notified and made public, hence [e]xclusive jurisdiction is attributed to those courts in the interests of the sound administration of justice.
The interpretation of article 24(2) above is further supported by the judgment of the Court of Justice in Schmidt v Schmidt (Case C 417/15) EU:C:2016:881; [2017] I L Pr 6.
That case concerned the ground of exclusive jurisdiction set out in article 24(1) of the Recast Regulation, as regards rights in rem in immovable property.
In reliance on article 24(1) the claimant brought proceedings in Austria seeking rescission of a gift of land located there and, in consequence, an order for rectification of the Austrian land register.
The Court of Justice held that whilst the latter aspect of the proceedings fell within article 24(1), the rescission claim did not.
The court rejected the claimants contention that since there was plainly a link between the two claims, the whole proceedings should be regarded as falling within article 24(1) (paras 33 to 43).
Contrary to that contention, article 24(1) had to be read narrowly and with a precise focus on each distinct claim in the proceedings to which it was said to apply.
This was in line with the opinion of the Advocate General, in particular at paras 47 to 49.
At para 48 of her opinion, Advocate General Kokott said that as article 24 is an exception to the general principles underlying the Recast Regulation, the provision is to be interpreted narrowly, and the concept of proceedings restricted to the claim that specifically has as its object a right in rem.
The approach of the Advocate General and of the court is not compatible with the overall classification approach to the application of article 24(2) adopted by the Court of Appeal in the present case, according to which it concluded that the provision was applicable to the authority claim by reason of its being linked with the English company law claim.
The Court of Justice has recently reviewed the position regarding the interpretation and application of article 22(2) of Regulation No 44/2001, the predecessor of article 24(2) of the Recast Regulation, in EON Czech Holding AG v Ddouch (Case C 560/16) EU:C:2018:167; [2018] 4 WLR 94.
The case concerned a resolution by the general meeting of a Czech company to transfer all the securities in the company, including minority shareholdings, to its principal shareholder, the defendant, a German company.
The minority shareholders brought proceedings in the Czech courts seeking to review the reasonableness of the consideration for their shares set by that resolution.
Under Czech law, a ruling that the consideration was unreasonable would not result in the resolution being declared invalid (but presumably could result in an order that additional consideration should be paid).
The defendant raised a jurisdictional objection in those proceedings, maintaining that by reason of its seat the German courts alone had jurisdiction.
The Czech Supreme Court referred to the Court of Justice the question whether the Czech courts had exclusive jurisdiction in relation to the dispute by virtue of article 22(2) of Regulation No 44/2001.
The Court of Justice answered that question in the affirmative.
It reiterated and emphasised the key points which had emerged from its previous jurisprudence.
The relevant passage merits being set out in full: 26.
As regards the general scheme and context of Regulation No 44/2001, it should be recalled that the jurisdiction provided for in article 2 of that Regulation, namely that the courts of the member state in which the defendant is domiciled are to have jurisdiction, constitutes the general rule.
It is only by way of derogation from that general rule that the Regulation provides for special and exclusive rules of jurisdiction for cases, which are exhaustively listed, in which the defendant may or must, depending on the case, be sued in the courts of another member state: the Reisch Montage case, para 22 and Berliner Verkehrsbetriebe (BVG), Anstalt des ffentlichen Rechts v JP Morgan Chase Bank NA (Case C 144/10) EU:C:2011:300; [2011] 1 WLR 2087; [2011] ECR I 3961, para 30. 27.
Those rules of special and exclusive jurisdiction must accordingly be interpreted strictly.
As the provisions of article 22 of Regulation No 44/2001 introduce an exception to the general rule governing the attribution of jurisdiction, they must not be given an interpretation broader than that which is required by their objective: Hassetts case, paras 18 and 19 and the BVG case, para 30. 28.
As regards the objectives and the purpose of Regulation No 44/2001, it should be recalled that, as is apparent from recitals (2) and (11) thereof [which correspond with recitals (4) and (15) of the Recast Regulation], that Regulation seeks to unify the rules on conflict of jurisdiction in civil and commercial matters by way of rules of jurisdiction which are highly predictable.
That Regulation thus pursues an objective of legal certainty which consists in strengthening the legal protection of persons established in the European Union, by enabling the applicant easily to identify the court in which he may sue and the defendant reasonably to foresee before which court he may be sued: Falco Privatstiftung v Weller Lindhorst (Case C 533/07) EU:C:2009:257; [2010] Bus LR 210; [2009] ECR I 3327, paras 21 22, Taser International Inc v SC Gate 4 Business SRL (Case C 175/15) EU:C:2016:176; [2016] QB 887, para 32 and Granarolo SpA v Ambrosi Emmi France SA (Case C 196/15) EU:C:2016:559; [2017] CEC 473, para 16. 29.
Furthermore, as is apparent from recital (12) of that Regulation [which corresponds with recital (16) of the Recast Regulation], the rules of jurisdiction derogating from the general rule of jurisdiction of the courts of the member state in which the defendant is domiciled supplement the general rule where there is a close link between the court designated by those rules and the action or in order to facilitate the sound administration of justice. 30.
In particular, the rules of exclusive jurisdiction laid down in article 22 of Regulation No 44/2001 seek to ensure that jurisdiction rests with courts closely linked to the proceedings in fact and law (see, with regard to article 16 of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (OJ 1972 L299, p 32), the provisions of which are essentially identical to those of article 22 of Regulation No 44/2001, Gesellschaft fur Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (Case C 4/03) EU:C:2006:457; [2006] ECR I 6509; [2007] ILPr 34, para 21), in other words, to confer exclusive jurisdiction on the courts of a member state in specific circumstances where, having regard to the matter at issue, those courts are best placed to adjudicate upon the disputes falling to them by reason of a particularly close link between those disputes and that member state: the BVG case, para 36. 31.
Thus, the essential objective pursued by article 22(2) of Regulation No 44/2001 is that of centralising jurisdiction in order to avoid conflicting judgments being given as regards the existence of a company or as regards the validity of the decisions of its organs: Hassetts case [2008] ECR I 7403, para 20. 32.
The courts of the member state in which the company has its seat appear to be those best placed to deal with such disputes, inter alia because it is in that state that information about the company will have been notified and made public.
Exclusive jurisdiction is thus attributed to those courts in the interests of the sound administration of justice: Hassetts case, para 21. lidosta Rga VAS 33.
However, the court has held that it cannot be inferred from this that, in order for article 22(2) of Regulation No 44/2001 to apply, it is sufficient that a legal action involve some link with a decision adopted by an organ of a company (Hassetts case, para 22), and that the scope of that provision covers only disputes in which a party is challenging the validity of a decision of an organ of a company under the company law applicable or the provisions of its article of association governing the functioning of its organs: Hassetts case, para 26 and flyLAL Lithuanian Airlines AS (in liquidation) v Starptautisk (Case C 302/13) EU:C:2014:2319; [2014] 5 CMLR 1277, para 40. 34.
In the present case, while it is true that, under Czech law, proceedings such as those at issue in the main proceedings may not lead formally to a decision which has the effect of invalidating a resolution of the general assembly of a company concerning the compulsory transfer of the minority shareholders shares in that company to the majority shareholder, the fact none the less remains that, in accordance with the requirements of the autonomous interpretation and uniform application of the provisions of Regulation No 44/2001, the scope of article 22(2) thereof cannot depend on the choices made in national law by member states or vary depending on them. 35.
On the one hand, the origin of those proceedings lies in a challenge to the amount of the consideration relating to such a transfer and, on the other, their purpose is to secure a review of the reasonableness of that amount. 36.
It follows that, having regard to article 22(2) of Regulation No 44/2001, legal proceedings such as those at issue in the main proceedings concern the review of the partial validity of a decision of an organ of a company and that such proceedings are, as a result, capable of coming within the scope of that provision, as envisaged by its wording. 37.
Thus, in those circumstances, a court hearing such an application for review must examine the validity of a decision of an organ of a company in so far as that decision concerns the determination of the amount of the consideration, decide whether that amount is reasonable and, where necessary, annul that decision in that respect and determine a different amount of consideration. 38.
Furthermore, an interpretation of article 22(2) of Regulation No 44/2001 according to which that provision applies to proceedings such as those at issue in the main proceedings is consistent with the essential objective pursued by that provision and does not have the effect of extending its scope beyond what is required by that objective.
In that regard, the existence of a close link between the 39. courts of the member state in which [the Czech company] is established, in the present case the Czech courts, and the dispute in the main proceedings is clear. 40.
In addition to the fact that [the Czech company] is a company incorporated under Czech law, it is apparent from the file submitted to the court that the resolution of the general meeting that determined the amount of the consideration forming the subject of the main proceedings and the acts and formalities relating to it were carried out in accordance with Czech law and in the Czech language. 41.
Likewise, it is not disputed that the court with jurisdiction must apply Czech substantive law to the dispute in the main proceedings.
Consequently, bearing in mind the close link between the dispute in the main proceedings and the Czech courts, the latter are best placed to hear that dispute relating to the review of the partial validity of that resolution and the attribution, pursuant to article 22(2) of Regulation No 44/2001, of exclusive jurisdiction to those courts is such as to facilitate the sound administration of justice.
The attribution of that jurisdiction to the Czech courts is also consistent with the objectives of predictability of the rules of jurisdiction and legal certainty pursued by Regulation No 44/2001, since, as Advocate General Wathelet observed in point 35 of his opinion, the shareholders in a company, especially the principal shareholder, must expect that the courts of the member state in which that company is established will be the courts having jurisdiction to decide any internal dispute within that company relating to the review of the partial validity of a decision taken by an organ of a company. 42.
This reasoning again is not compatible with the decisions of the courts below in the present case.
If one tests the application of article 24(2) of the Recast Regulation by reference to the hypothetical Greek case referred to above, it is clear by reference to the factors identified by the Court of Justice that it would be the courts in Greece which had exclusive jurisdiction under that provision in relation to the authority claim, not the courts in England.
The non applicability of article 24(2) according to its proper interpretation does not alter when one asks whether the English courts have jurisdiction under that provision in the present case.
Article 24(2) does not apply in the present case by reason of the strict (ie narrow) interpretation to be given to that provision (para 27 of the EON judgment, above).
It is not sufficient that there is a link between the authority claim and the English company law claim (para 33 of the EON judgment, above).
There is an absence of any particularly close link between the authority claim and the English courts as would be required to bring the case within article 24(2) (para 30 of the EON judgment, above); on the contrary, the relevant particularly close link as regards the authority claim is with the courts in Turkey. 43.
In my view, the EU law regarding the interpretation and application of article 24(2) of the Recast Regulation, as reiterated in the EON judgment, is clear.
It is acte clair that this provision does not cover the authority claim in the present proceedings.
This means that the English courts cannot assert jurisdiction over Koza Altin and the trustees in relation to that claim in the present proceedings on the basis of that provision, and their appeal in that regard should be allowed.
Before leaving this part of the case, however, it should be pointed out that there is an important consequence which flows from the fact that Turkey is not a member state of the EU.
It means that the courts in Turkey do not enjoy exclusive jurisdiction in respect of the authority claim by virtue of the Recast Regulation.
Therefore, even though the authority claim does not fall within the exclusive jurisdiction provision in article 24(2) as regards the courts in England, that does not prevent those courts from assuming jurisdiction in relation to the authority claim on some other basis, if one exists under the general English regime in the Civil Procedure Rules governing service of proceedings on persons outside the jurisdiction.
It is not necessary to examine this possibility further, because in the present case it is solely on the basis of article 24(2) that the English courts have assumed jurisdiction over Koza Altin and the trustees in these proceedings in relation to the authority claim.
Issue (ii): The application of article 24(2) in relation to the trustees
Since on its proper interpretation article 24(2) of the Recast Regulation does not cover the authority claim, the English courts have no jurisdiction in relation to the trustees under that provision with respect to that claim.
The proceedings against the trustees are principally concerned with the authority claim.
It cannot be said that the fact that the English courts have jurisdiction under article 24(2) in relation to the English company law claim, as it concerns Koza Ltd, means that such jurisdiction extends to cover the trustees, who are not necessary parties to that claim and are more removed from it than they are in relation to the authority claim.
Once it is appreciated that the application of article 24(2) to the authority claim and its application to the English company law claim are to be considered separately, a strict interpretation of article 24(2) as explained by the Court of Justice leads to the conclusion that it does not cover the trustees in relation to the latter claim.
Further, the rationale underlying article 24(2) of avoiding conflicting decisions in relation to the relevant subject matter of each respective claim and the rationale that each respective claim should be tried in the courts best placed to do so both support that view.
Conclusion
I would allow the appeals by Koza Altin and the trustees and would accept their case that (i) the English courts have no jurisdiction under article 24(2) of the Recast Regulation over the trustees in relation to any part of the claims; (ii) the English courts have jurisdiction under that provision over Koza Altin in respect of the English company law claim, which is principally concerned with the affairs of Koza Ltd; and (iii) the English courts have no jurisdiction under that provision over Koza Altin in respect of the authority claim, which is principally concerned with the conduct of the business of Koza Altin.
| This appeal is about article 24(2) of the Brussels I Recast Regulation (Regulation (EU) No 1215/2012) (the Recast Regulation).
This sets out special jurisdictional rules on the governance of corporations.
The sixth appellant (Koza Altin) is a publicly listed company in Turkey.
It is part of the Koza Ipek Group (the Group), formerly controlled by the second respondent (Mr Ipek) and his family.
The first respondent (Koza Ltd) is a private company in England and a wholly owned subsidiary of Koza Altin.
Mr Ipek alleges that he and the Group have been targeted unfairly by the Turkish government.
In September 2015, he caused a number of changes to be made to Koza Ltds constitution and share structure to control his interests.
Their validity and effect are in issue in these English proceedings.
On 26 October 2015, in Turkish proceedings relating to a criminal investigation, a judge appointed certain individuals as trustees of Koza Altin and companies in the Group.
Subsequently, he appointed the first to fifth appellants as trustees.
On 19 July 2016, the trustees caused Koza Altin to serve a notice on the directors of Koza Ltd under section 303 of the Companies Act 2006 (the 2006 Act), requiring them to call a general meeting to consider resolutions for their removal and replacement with three of the trustees.
The directors refused.
On 10 August 2016, Koza Altin served a notice under section 305 of the 2006 Act to convene a meeting on 17 August.
On 16 August, Mr Ipek and Koza Ltd made an urgent without notice application seeking an injunction to prevent the meeting.
Injunctive relief was sought on two bases.
First, that the notices of 19 July and 10 August 2016 (the notices) were void under section 303(5)(a) of the 2006 Act (the English company law claim).
Second, that the notices were void because the English courts should not recognise the authority of the trustees to cause Koza Altin to do anything as a Koza Ltd shareholder, since they were interim appointees only and acting contrary to Turkish law, human rights and natural justice (the authority claim).
On 16 August 2016, Snowden J granted interim injunctive relief.
On 18 August, Mr Ipek and Koza Ltd issued a claim seeking declaratory and injunctive relief.
Koza Altin and the trustees filed an acknowledgement of service and then an application contesting jurisdiction.
Koza Altin also filed a Defence and Counterclaim to the English company law claim.
In turn, Mr Ipek and Koza Ltd issued a strike out application, alleging lack of authority.
Asplin J, in the High Court, dismissed the jurisdiction challenge on 17 January 2017.
It was common ground that the English company law claim fell within article 24(2) of the Recast Regulation.
Her assessment was that the authority claim was inextricably linked with that claim, which she considered the principal subject matter of the proceedings as a whole.
Koza Altin and the trustees appealed.
The Court of Appeal dismissed the appeal.
It largely agreed with Asplin Js assessment and also rejected a distinct submission that the trustees are not necessary parties.
The trustees and Koza Altin appeal to this Court.
The issues are: (1) whether article 24(2) of the Recast Regulation confers jurisdiction on the English courts to determine the authority claim as against Koza Altin and (2) whether article 24(2) confers exclusive jurisdiction on the English courts to determine either the authority claim or the English company law claim as against the trustees.
The Supreme Court unanimously allows the appeal.
Lord Sales gives the sole judgment, with which all members of the Court agree.
The basic scheme for allocation of jurisdiction under the Recast Regulation is that persons domiciled in a member state of the European Union should generally be sued in that member state (by article 4), but they may also be sued in another member state in certain situations, including in cases of exclusive jurisdiction specified under article 24 [20].
The cases of exclusive jurisdiction within article 24 reflect situations where there is an especially strong and fixed connection between the subject matter of a dispute and the courts of a particular member state [24].
The principle of exclusive jurisdiction supersedes the other principles underlying the Recast Regulation, including the domiciliary principle of jurisdiction (under article 4) and the principle of respect for party autonomy [25].
Given the scheme of the Recast Regulation, in principle, there should be only one correct application of article 24 in relation to a given claim [28].
The interpretation and application of article 24 cannot depend on an evaluative judgment in which different courts could reasonably take different views [28].
This is consistent with the objectives of setting highly predictable rules on the allocation of jurisdiction and avoiding inconsistent judgments on the same issue by the courts of different member states [29].
Decisions of the Court of Justice of the European Union, particularly Hassett v South Eastern Health Board (Case C 372/07) [2008] ECR I 7403 and Berliner Verkehrsbetriebe v JP Morgan Bank Chase Bank NA (Case C 144/10) [2011] 1 WLR 2087, show that article 24(2) is to be construed narrowly, as an exception to the general domiciliary principle, and should not be given an interpretation broader than required by its objective [31 32, 40 41].
These decisions also stress the importance of arriving at an interpretation which avoids the risk of inconsistent decisions [39].
Therefore, the interpretation of article 24(2) adopted by the Court of Appeal cannot be sustained.
An evaluative assessment of proceedings relating to a specific claim may show that a particular aspect of the claim, involving an assessment of the validity of decisions of a companys organs, is so linked with other features of the claim that it is not the principal subject matter of those proceedings, as required by article 24(2).
Where there are two distinct claims one, by itself, falling within article 24(2) and the other, by itself, not falling within article 24(2) it is not legitimate to maintain that by an overall evaluative judgment as to both claims taken together the second also falls within article 24(2), giving the English courts exclusive jurisdiction.
A mere link between the two claims is not sufficient. [33 34] On issue (1), in this case, the English company law claim and the authority claim are connected in a sense, but they are distinct claims which are not inextricably bound up together.
The English company law claim can be brought and made good on its own terms without regard to the authority claim, as can the authority claim.
Assessing the authority claim as a distinct set of proceedings, clearly the principal subject matter does not comprise the validity of the decisions of the organs of a company with its seat in England.
That interpretation and application of article 24(2) is acte clair.
The English courts thus lack article 24(2) jurisdiction over Koza Altin and the trustees as to that claim. [35, 43] On issue (2), since article 24(2) does not cover the authority claim, the English courts lack article 24(2) jurisdiction in relation to the trustees with respect to that claim.
The proceedings against the trustees are principally concerned with the authority claim.
Article 24(2) jurisdiction over the English company law claim cannot extend to the trustees, who are not necessary parties to that claim. [45]
|
This appeal raises a question about the boundary between the jurisdiction of the First tier Tribunal (Tax Chamber) and that of the county court or the High Court.
Underlying that issue is a question of the legality of the approach which Her Majestys Commissioners of Revenue and Customs (the Revenue) have taken to entries which a taxpayer, Mr Cotter, made in a tax return.
This is a test case as we have been told that about 200 taxpayers have used the tax scheme which Mr Cotter has used.
The case turns on the proper interpretation of provisions in the Taxes Management Act 1970 (TMA).
The facts
Mr Cotter filed his tax return for the 2007/08 year of assessment on 31 October 2008.
In his return he made no claim for loss relief.
As he is entitled to do, he left it to the Revenue to calculate the tax due for that tax year.
On 24 December 2008 the Revenue produced a tax calculation based on Mr Cotters return.
It showed income and capital gains tax due of 211,927.77.
On 29 January 2009 Mr Cotters accountants wrote to the Revenue and enclosed a provisional 2007/08 loss relief claim and amendments to his 2007/08 tax return.
The amendments added various entries to boxes in the tax return intimating that Mr Cotter had sustained an employment related loss of 710,000 in the tax year 2008/09 for which he claimed relief under sections 128 and 130 of the Income Tax Act 2007 (ITA).
In particular, the claim for relief was made in: (i) the main tax return in box 19 on page TR6 under Any other information; (ii) the capital gains summary in box 14 on page CG1 in which the figure of 314,583 was inserted, and under Any other information in box 35 on page CG2; and (iii) the Additional Information pages.
In the Additional Information pages, Mr Cotter inserted 395,417 in Box 3 on page Ai3 (Relief now for 2008 09 trading, or certain capital, losses) and 2007 08 in box 4 on that page (and the tax year for which you are claiming relief).
On page Ai4, box 17 (Additional Information) he explained, as he had done on box 19 on page TR6 and in box 35 on page CG2, that his claim was made under sections 128 and 130 of ITA for an employment related loss which he had sustained in the tax year 2008/09.
The provisional loss relief claim ended with these words: I acknowledge that my interpretation of the tax law applicable to the above transactions and the loss (and the manner in which I have reported them) may be at variance with that of [the Revenue].
Further please note that although I have reported (and hereby claim the loss pursuant to section 128 ITA 2007) in box 3 above I wish to make it clear that the deduction I am claiming on my return is not necessarily what you may regard as relief now for 2008 09 trading, and certain capital losses for these reasons I assume you will open an enquiry.
On 30 January 2009 the accountants sent a copy of the loss relief claim to the Revenues West Cheshire recovery office.
They stated: As a result of this claim no further 2007/08 taxes will be payable by Mr Cotter.
After sending a holding reply, the Revenue responded on 5 March 2009 to confirm that the tax return had been amended and to state that enquiries would be opened into the claim and the tax return.
The letter stated that the Revenue did not intend to give effect to any credit for the loss until those enquiries were complete.
On the same date the Revenue issued a fresh tax calculation which again stated Mr Cotters liability for the tax year 2007/08 at 211,927.77.
On 11 March 2009 the Revenue wrote to Mr Cotter to intimate that it was enquiring into the amendment and the 2008/09 loss claim under Schedule 1A to TMA.
In a further letter on the same date the Revenue asked Mr Cotter to provide specified information and documents.
On 24 March 2009 Mr Cotters accountants wrote to the Revenues recovery office to inform it that they had asked the Revenue to amend the self assessment calculation and that as a result no further 2007/08 taxes will be payable by Mr Cotter.
Mr Cotters accountants asserted in correspondence (i) that no further taxes were payable for 2007/08 because of the loss claim which was the subject of enquiry and (ii) that if tax were due as a result of an enquiry under section 9A of TMA, that tax was not payable until the enquiry had been completed.
Mr Cotter also instructed NT Advisors LLP (NT) to respond to the Revenues recovery unit and to the threat of legal proceedings.
In an undated letter which that unit received on 14 May 2009, NT contended that legal proceedings would be unlawful because (i) Mr Cotters self assessment showed that no tax was payable as at 31 January 2009 and (ii) the Revenue had not amended the self assessment return.
After further correspondence about, among other things, the tax avoidance scheme which had been used to generate the loss claim, the Revenue issued legal proceedings in St Helens County Court on 22 June 2009.
Its claim was for the income tax and capital gains tax for 2007/08 and the first payment to account for the year of assessment 2008/09 in the sum of 203,342, together with statutory interest.
In his defence Mr Cotter argued (a) that he was entitled to use his loss claim to reduce to nil the tax otherwise payable for 2007/08 and (b) that the Tax Chamber of the First tier Tribunal had exclusive jurisdiction to determine whether he could make the loss claim in his 2007/08 tax return and thereby reduce the tax payable for that year.
On 12 February 2010 the proceedings were transferred to the Chancery Division of the High Court, Manchester District Registry to determine the issue of jurisdiction.
In a judgment handed down on 14 April 2011, David Richards J, the Vice Chancellor of the County Palatine of Lancaster, held (a) that the court had jurisdiction to determine in collection proceedings whether the taxpayer was entitled to rely on the claim for relief as a defence to a demand by the Revenue for immediate payment and (b) that Mr Cotter was not entitled to rely on his claim for loss relief as a defence to the Revenues demand for payment of the tax due in respect of 2007/08.
The Vice Chancellor granted Mr Cotter permission to appeal.
On 8 February 2012, the Court of Appeal (Arden, Richards and Patten LJJ) allowed Mr Cotters appeal.
In their judgment, the Court of Appeal analysed the self assessment procedure and held that if the Revenue wished to dispute an item contained in a tax return, it had to follow the enquiry procedure set out in section 9A of TMA which would have given Mr Cotter a right of appeal to the First tier Tribunal.
Neither the county court nor the High Court had jurisdiction to determine whether the taxpayer was entitled to make his claim in his tax return for 2007/08 for an income loss incurred in 2008/09.
The Revenue appealed to this court.
The tax provisions governing employment loss relief
Section 128 of ITA provides for employment loss relief.
It provides: 128 Employment loss relief against general income (1) A person may make a claim for employment loss relief against general income if the person (a) is in employment or holds an office in a tax year, and (b) makes a loss in the employment or office in the tax year (the loss making year). (2) The claim is for the loss to be deducted in calculating the persons net income (a) for the loss making year, (b) for the previous tax year, or (c) for both tax years. (See Step 2 of the calculation in section 23.)
Sub section (7) provides: This Chapter is subject to paragraph 2 of Schedule 1B to TMA 1970 (claims for loss relief involving two or more years).
Section 42(11A) of TMA provides the same: Schedule 1B to TMA has effect in respect of claims for relief involving two or more years of assessment.
It is not disputed that Schedule 1B applies to Mr Cotters claim for relief.
Paragraph 2 of Schedule 1B to TMA provides: (1)This paragraph applies where a person makes a claim requiring relief for a loss incurred or treated as incurred, or a payment made, in one year of assessment (the later year) to be given in an earlier year of assessment (the earlier year). (2) Section 42(2) of this Act shall not apply in relation to the claim. (3)The claim shall relate to the later year. (4) Subject to sub paragraph (5) below, the claim shall be for an amount equal to the difference between (a) the amount in which the person is chargeable to tax for the earlier year (amount A); and (b) the amount in which he would be so chargeable on the assumption that effect could be, and were, given to the claim in relation to that year (amount B). (5)Where effect has been given to one or more associated claims, amounts A and B above shall each be determined on the assumption that effect could have been, and had been, given to the associated claim or claims in relation to the earlier year. (6)Effect shall be given to the claim in relation to the later year, whether by repayment or set off, or by an increase in the aggregate amount given by section 59B(1)(b) of this Act, or otherwise. .
In my view it is clear, in particular from paragraphs 2(3) and (6), that the scheme in Schedule 1B allows a taxpayer, who has suffered a loss in a later year (year 2) and seeks to attribute the loss to an earlier year of assessment (year 1), to obtain his relief by reducing his liability to pay tax in respect of year 2 or by obtaining a repayment of tax in year 2.
It does not countenance by virtue of the relief any alteration of the tax chargeable and payable in respect of year 1.
On the contrary, the sum for which the taxpayer receives relief in year 2 is the difference between what was chargeable in year 1 and what would have been chargeable on the assumption that effect could be, and were, given to the claim in relation to that year (paragraph 2(4)).
In other words, the relief is quantified on the basis that the tax liability in year 1 has already been assessed.
Income tax is an annual tax, and liability to such tax is calculated in relation to a particular tax year: sections 4 and 23 of ITA.
Mr Gordon, who appeared for Mr Cotter, did not argue in this court that he was entitled to deduct the relief against income and gains in 2007/08.
He accepted that paragraph 2(6) of Schedule 1B to TMA provides that effect is to be given to the claim in year 2.
He was correct to make that concession.
Accordingly, the claim did not affect the amount of tax which was chargeable or payable in relation to 2007/08.
There was therefore no issue between the parties as to the correct assessment to tax in that year.
The Revenues use of the taxpayers income tax liability in 2007/08 in quantifying his obligation to make payments to account for 2008/09 on 31 January and 31 July 2009 (section 59A(1) and (2) of TMA) does not affect the finality of the 2007/08 assessment.
Whatever rights the claim for relief might have given the taxpayer in relation to a payment to account for 2008/09, if the Revenue had accepted its validity, it did not affect his obligation to pay the tax payable for 2007/08.
Whether the Revenue acted legally by instituting an enquiry under Schedule 1A
The conclusion that the relief could not diminish the tax chargeable and payable for 2007/08 is central to the Revenues contention that it was entitled to initiate an enquiry under Schedule 1A to TMA, which allowed the postponement of relief until the completion of the enquiry (Schedule 1A, paragraph 4(3)).
But Mr Gordon submitted that the Revenue might enquire only under section 9A of TMA, which allows an officer to enquire into a return or an amendment of the return (section 9A(1) and (5)).
That enquiry extends to: anything contained in the return, or required to be contained in the return, including any claim or election included in the return, (Schedule 9A, paragraph (4)).
He argued that section 42(11) excluded the possibility of a Schedule 1A enquiry.
That sub section provides: Schedule 1A to this Act shall apply as respects any claim which (a) is made otherwise than by being included in a return under section 8, 8A or 12AA of this Act.
Mr Gordons submission was attractive in its simplicity.
The word return in the TMA should be given its ordinary meaning.
It was defined in section 118 (unless the context otherwise required) as including any statement or declaration under the Taxes Acts.
The claim was made in Mr Cotters tax return and so Schedule 1A could not apply.
The Revenue could enquire only under section 9A and it had not done so.
I recognise the force of that submission, which found favour in the Court of Appeal.
Treating everything in the tax return form as the tax return has the benefit of keeping simple both the process of self assessment and the jurisdictional boundary between the specialist tax tribunal and the courts.
But, as Ms Simler explained on behalf of the Revenue, it exposes the Revenue to irrelevant claims made in the tax return form which have no merit and which serve only to postpone the payment of tax which is payable.
There was, she suggested, a risk that the Court of Appeals decision would encourage marketed tax avoidance schemes which would give a cash flow advantage to taxpayers, even if the schemes were ultimately found to be ineffective.
The Revenues argument was that a claim was included in a return for the purposes of sections 8(1), 9, 9A and 42 of TMA only if it affected or as Ms Simler put it, could feed into, the calculation of tax payable in respect of the particular year of assessment.
In judging the rival contentions it is in my view important to recall the
sequence of events which I set out in paragraphs 2 7 above.
First, Mr Cotter gave information relating to his tax affairs in his initial return form.
But he did not carry out the calculation of the tax which he was due to pay for 2007/08.
Secondly, the Revenue made that calculation.
Thirdly, Mr Cotter then provided the information about his provisional loss relief claim in his amendment of the tax return.
Fourthly, the Revenue reviewed the return and confirmed its assessment of the tax due for 2007/08, treating the claimed relief as irrelevant to that assessment.
Finally, Mr Cotters advisers disagreed with the Revenues view but did not seek to amend the tax return (under section 9ZA of TMA) by carrying out their own calculation of tax.
In particular, I do not construe the letter of 30 January 2009 from Mr Cotters accountants as an amendment of his tax return.
The accountants did not purport to produce a self assessment calculation.
Their amendment of the return was confined to the intimation of the claim.
The statement in the letter of 30 January 2009 that no further 2007/08 taxes would be payable was merely an assertion in a covering letter.
Where, as in this case, the taxpayer has included information in his tax return but has left it to the Revenue to calculate the tax which he is due to pay, I think that the Revenue is entitled to treat as irrelevant to that calculation information and claims, which clearly do not as a matter of law affect the tax chargeable and payable in the relevant year of assessment.
It is clear from sections 8(1) and 8(1AA) of TMA that the purpose of a tax return is to establish the amounts of income tax and capital gains tax chargeable for a year of assessment and the amount of income tax payable for that year.
The Revenues calculation of the tax due is made on behalf of the taxpayer and is treated as the taxpayers self assessment (section 9(3) and (3A) of TMA).
The tax return form contains other requests, such as information about student loan repayments (page TR2), the transfer of the unused part of a taxpayers blind persons allowance (page TR3) or claims for losses in the following tax year (box 3 on page Ai3) which do not affect the income tax chargeable in the tax year which the return form addresses.
The word return may have a wider meaning in other contexts within TMA.
But, in my view, in the context of sections 8(1), 9, 9A and 42(11)(a) of the TMA, a return refers to the information in the tax return form which is submitted for the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for the relevant year of assessment and the amount payable by him by way of income tax for that year (section 8(1) TMA).
In this case, the figures in box 14 on page CG1 and in box 3 on page Ai3
were supplemented by the explanations which Mr Cotter gave of his claim in the boxes requesting any other information and additional information in the tax return.
Those explanations alerted the Revenue to the nature of the claim for relief.
It concluded, correctly, that the claim under section 128 of ITA in respect of losses incurred in 2008/09 did not alter the tax chargeable or payable in relation to 2007/08.
The Revenue was accordingly entitled and indeed obliged to use Schedule 1A of TMA as the vehicle for its enquiry into the claim (section 42(11)(a)).
Matters would have been different if the taxpayer had calculated his liability to income and capital gains tax by requesting and completing the tax calculation summary pages of the tax return.
In such circumstances the Revenue would have his assessment that, as a result of the claim, specific sums or no sums were due as the tax chargeable and payable for 2007/08.
Such information and self assessment would in my view fall within a return under section 9A of TMA as it would be the taxpayers assessment of his liability in respect of the relevant tax year.
The Revenue could not go behind the taxpayers self assessment without either amending the tax return (section 9ZB of TMA) or instituting an enquiry under section 9A of TMA.
It follows that a taxpayer may be able to delay the payment of tax by claims which turn out to be unfounded if he completes the assessment by calculating the tax which he is due to pay.
Accordingly, the Revenues interpretation of the expression return may not save it from tax avoidance schemes.
But what persuades me that the Revenue is right in its interpretation of return is that income tax is an annual tax and that disputes about matters which are not relevant to a taxpayers liability in a particular year should not postpone the finality of that years assessment.
Jurisdiction
The First tier Tribunal (the tribunal), as the successor of the general and special commissioners, has exclusive jurisdiction to hear taxpayers appeals against assessments to tax (Autologic Holdings plc v Inland Revenue Commissioners [2006] 1 AC 118, Lord Nicholls of Birkenhead at paras 12 15, Lord Millett at para 62 and Lord Walker of Gestingthorpe at para 84).
But, as explained below, we are not dealing in the present case with an assessment to tax in respect of a particular year of assessment, but how the Revenue has dealt with a loss relief claim relating to a later year.
The Revenue did not need to amend Mr Cotters return form (under section 9ZB of TMA) in order to calculate the tax which it assessed as payable for 2007/08.
There was therefore no rejection by Mr Cotter of a Revenue correction (under section 9ZB(4) of TMA).
There was no section 9A enquiry.
The Revenue did not have to amend the self assessment under section 9C of TMA during such an enquiry and there was no appeal against such an amendment of the return by the Revenue (under section 31 of TMA).
The only appeal which Mr Cotters accountants made was an appeal by letter of 17 April 2009 against a late payment surcharge (under section 59C(7) of TMA), because he claimed that his losses meant that no tax was due.
As a result, the only issue for the tribunal was the late payment surcharge.
Nothing else occurred to engage the jurisdiction of the tribunal.
The Revenues position was simple: its calculation, based on the information which Mr Cotter had included in his tax return form, showed that he was due to pay tax in the sum it assessed on his behalf for 2007/08.
The tax return form for 2007/08 did not show a loss claim which reduced Mr Cotters liability to tax in respect of that tax year.
As the Revenue lawfully commenced an enquiry under Schedule 1A of TMA and elected (under paragraph 4(3)(a) of that Schedule) not to give effect to the claim until the end of the enquiry, there was no postponement of payment of the tax due on 31 January 2009 by giving effect to the claim in the interim.
The taxpayer was obliged to pay the amount of tax which had been assessed less any payment to account (section 59B of TMA) and the Revenue was entitled to raise collection proceedings in the county court (section 66 of TMA).
I agree with that position.
In this case, the county court was not asked to rule on the validity of the claim for loss relief.
Nor was it concerned with any appeal against the assessment to tax.
It was asked to determine in collection proceedings whether the taxpayers claim for relief for losses incurred in 2008/09, which he had made in his tax return form for 2007/08, constituted a defence to the Revenues claim for immediate payment of the tax which it had calculated as payable in respect of 2007/08.
In my view, the county court and the High Court had jurisdiction to determine that issue which did not trench upon the tribunals exclusive jurisdiction.
How the system works
The Court of Appeal expressed concern about the risk of satellite litigation and delays in tax collection if the Revenue were correct in its submission on the meaning of return in the relevant provisions.
For that reason, it is appropriate that I should say something about how, as I see it, the system works.
Where a taxpayer makes a claim for relief in a tax return form which is on its face relevant to the year of assessment (as, for example, when he claims employment loss relief in year 2) or where the taxpayer chooses under section 9(1) of TMA to calculate the amount of tax that he is due to pay, and allows for the relief in his calculation, the Revenue, if it disagrees, will have the option of correcting the return under section 9ZB of TMA, which extends to errors of principle.
If the taxpayer rejects the correction (under section 9ZB(4)), that correction has no effect.
The Revenue may give notice of an enquiry under section 9A.
When the Revenue completes the enquiry by issuing a closure notice under section 28A, the taxpayer may appeal a conclusion stated or amendment made in the closure notice (under section 31(1)(b) of TMA).
Similarly if the Revenue amends the self assessment during the enquiry under section 9C to prevent loss of tax, the taxpayer may appeal to the tribunal (section 31(1)(a)).
Until this procedure is complete, effect is given to the claim, unless it results in a repayment (section 59B(4A) of TMA).
Where the taxpayer chooses to let the Revenue calculate the tax due but includes a claim for relief in a tax return form (whether from the outset or by amendment) which is clearly not relevant to the calculation of tax for the particular year of assessment, the Revenue may ignore the claim in its calculation of the tax under section 9(3) of TMA.
It treats it as a claim made otherwise than in a return and Schedule 1A to TMA applies (section 42(11)(a) of TMA).
In the procedure under that Schedule, if the Revenue considers that the claim contains obvious errors, it can amend the claim (paragraph 3).
If satisfied that the claim is valid, the Revenue is to give effect to the claim promptly (paragraph 4).
If not so satisfied, the Revenue may enquire into the claim and not give effect to it until the enquiry is completed (paragraphs 4(3) and 5).
Thus the Revenue may collect the tax due for a year of assessment on the basis that the claim is not effective.
On completion of the enquiry (paragraph 7), the taxpayer can notify the Revenue of an appeal (paragraph 9) and thus place the dispute before the tribunal.
The Revenues submission, which I have accepted, that some entries in a tax return form are not part of the tax return for the purposes of, among others, sections 9 and 9A of TMA, may create avoidable uncertainty to taxpayers and their advisers.
But that uncertainty could be removed if the return form which the Revenue prescribes (section 113 TMA) were to make clear which boxes requesting information were not relevant to the calculation of tax due in the particular year of assessment.
In particular, the Revenue could make this clear where the form provides for the intimation of stand alone claims which relate to another tax year.
Conclusion
As I have concluded that the Revenue did not have to give effect to the claim for relief before the conclusion of the enquiry, I do not need to consider a submission, which the Revenue sought to raise late in the day, that section 35 of the Crown Proceedings Act 1947 and CPR Rule 66.4 prevent a taxpayer from pleading set off against the Crown.
The claim for relief based on an employment related loss in 2008/09 did not provide a defence to the Revenues demand for the payment of the tax assessed for 2007/08.
I would therefore allow the appeal so as to restore paragraphs 1 and 2 of David Richards Js order of 5 May 2011.
| This test case raises a question about the jurisdictional boundary between the specialist tax tribunal and the ordinary courts, as well as an underlying issue as to the approach taken by the Revenue to enquire into a claim for loss relief made as part of a tax avoidance scheme used by some 200 taxpayers [1].
On 31 October 2008, Maurice David Cotter filed a tax return for the 2007/08 year of assessment.
He made no claim for loss relief in the return, and let the Revenue calculate his tax for that tax year.
This resulted in a calculation of income and capital gains tax of 211,927.77 [2].
In January 2009, Mr Cotters accountants wrote to the Revenue enclosing a provisional 2007/08 loss relief claim and amendments to his 2007/08 return.
These added various entries to boxes in the return intimating that Mr Cotter had sustained an employment related loss of 710,000 in the tax year 2008/09 for which he claimed relief in tax year 2007/08 under the Income Tax Act 2007 [3 4].
He acknowledged that his interpretation of the applicable tax law might not accord with that of the Revenue and stated, for these reasons I assume you will open an enquiry [5].
His accountants then sent a copy of the loss relief claim to a Revenue recovery office, stating: As a result of this claim no further 2007/08 taxes will be payable by Mr Cotter [6].
The Revenue wrote to Mr Cotters accountants to confirm that the tax return had been amended and that enquiries would be opened into the claim and the tax return.
It indicated that it did not intend to give effect to any credit for the loss until those enquires were complete.
On the same day, it issued a fresh tax calculation of 211,927.77.
The Revenue then wrote to Mr Cotter intimating that it was enquiring into the amendment and the loss claim under Schedule 1A to the Taxes Management Act (TMA).
His accountants informed the recovery office that they had asked the Revenue to amend the self assessment calculation [7].
They asserted that (i) no further taxes were payable for 2007/08 because of the loss claim which was the subject of enquiry and (ii) that if tax were due as a result of an enquiry under section 9A TMA, it was not payable until the enquiry had been completed.
Meanwhile, advisors acting for Mr Cotter wrote to the Revenue arguing that legal proceedings against him would be unlawful because his self assessment showed that no tax was payable as at 31 January 2009, and the Revenue had not amended his self assessment return [8].
On 22 June 2009, the Revenue issued proceedings in the county court seeking recovery of 203,243, namely the income and capital gains tax for 2007/08 and the first payment of account for 2008/09.
Mr Cotter argued that he was entitled to use his loss claim to reduce to nil the tax otherwise payable for 2007/08 and that the First tier Tribunal (Tax Chamber) had exclusive jurisdiction to determine whether that was the case [9].
The proceedings were transferred to the High Court (Chancery Division) and on 14 April 2011 David Richards J held that the court had jurisdiction and that Mr Cotter was not entitled to rely on his claim for loss relief as a defence to the Revenues claim [10].
This was overturned in the Court of Appeal.
Lady Justice Arden (with whom Lords Justices Richards and Patten agreed) held that if the Revenue wished to dispute an item contained in a tax return it had to follow the procedure set out in section 9A TMA, which would have given Mr Cotter a right to appeal to the tribunal [11].
The Supreme Court unanimously allows the Revenues appeal, restoring the relevant provisions of the High Courts order [35].
The central question is whether the Revenue was correct to have carried out its enquiry under Schedule 1A to TMA (allowing postponement of relief until completion of the enquiry), or whether any enquiry ought to have been made under section 9A (with effect given to the claim meantime).
Section 9A allows an officer to enquire into anything contained in the return, or required to be contained in the return, including any claim or election included in the return [19].
Part of the appeal therefore involved a consideration of the meaning of a return in the relevant legislation.
Delivering the Courts judgment, Lord Hodge provides guidance as to how the system works [33 36].
In summary, where a taxpayer makes a claim for relief in a tax return form which is, on its face, relevant to that particular year of assessment, or where he chooses to calculate the amount payable and allows for the relief in his calculation, the Revenue may correct the tax return if it disagrees with the claim for relief.
If the taxpayer rejects the amendment, the Revenue may institute a section 9A enquiry.
Upon the closure of that enquiry, the taxpayer will have a right of appeal to the tribunal.
In the meantime, effect is given to the loss relief claim [27; 34].
If, by contrast, the taxpayer chooses to let the Revenue calculate his tax but includes a claim for relief in a tax return form which is clearly not relevant to the calculation of tax for that particular year of assessment, the Revenue may ignore the claim in its calculation.
In other words, it may treat the claim as made otherwise than in a return, and Schedule 1A TMA shall apply.
The Court considers that, in the present context, a return refers to the information in the tax return form which is submitted for for the purpose of establishing the amounts in which a person is chargeable to income tax and capital gains tax for the relevant year of assessment and the amount payable by him by way of income tax for that year (section 8(1) TMA) [24 25; 35].
Lord Hodge notes that whilst treating everything on the tax return form as the tax return is attractive in its simplicity, it would expose the Revenue to irrelevant claims made in the form which have no merit and which serve only to postpone the payment of tax due [20 21].
Having concluded, correctly, that the claim in respect of losses incurred in 2008/09 did not alter the tax chargeable or payable in relation to 2007/08, the Revenue was entitled indeed obliged to use Schedule 1A as the vehicle for its enquiry (section 42(11)(a) TMA) [26].
The county court and the High Court had jurisdiction in this case as it was not an appeal against an assessment to tax in respect of a particular year of assessment (the exclusive jurisdiction of the tribunal [29]) but a question of whether a claim for relief for losses incurred in 2008/09, which the taxpayer had made in his tax return form for 2007/08, constituted a defence to the Revenues claim for immediate payment of the tax it had calculated as payable in respect of 2007/08 [29 32].
|
The common law has long protected the liberty of the subject, through the machinery of habeas corpus and the tort of false imprisonment.
Likewise, article 5 of the European Convention on Human Rights begins: Everyone has the right to liberty and security of person.
No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law.
In Storck v Germany (2005) 43 EHRR 6, paras 74 and 89, confirmed by the Grand Chamber in Stanev v Bulgaria (2012) 55 EHRR 22, paras 117 and 120, and adopted by this court in Surrey County Council v P; Cheshire West and Chester Council v P [2014] UKSC 19; [2014] AC 896 (commonly known as Cheshire West), para 37, the European Court of Human Rights held that there were three components in a deprivation of liberty for the purpose of article 5: (a) the objective component of confinement in a particular restricted place for a not negligible length of time; (b) the subjective component of lack of valid consent; and (c) the attribution of responsibility to the State.
At the same time, the common law and equity have long recognised the authority of parents over their minor children, now encapsulated in the concept of parental responsibility in the Children Act 1989.
Likewise, article 8 of the European Convention on Human Rights begins Everyone has the right to respect for his private and family life, his home and his correspondence; and, as this court recognised in Christian Institute v Lord Advocate [2016] UKSC 51; 2017 SC (UKSC) 29, paras 71 to 74, the responsibility of parents to bring up their children as they see fit, within limits, is an essential part of respect for family life in a western democracy.
This case is about the interplay between the liberty of the subject and the responsibilities of parents, between the rights and values protected by article 5 and the rights and values protected by article 8, and between the relationship of parent and child at common law and the Convention rights.
The principal issue can be simply stated: is it within the scope of parental responsibility to consent to living arrangements for a 16 or 17 year old child which would otherwise amount to a deprivation of liberty within the meaning of article 5? But this principal issue cannot sensibly be addressed without also considering further issues.
What difference, if any, does it make that the child lacks the mental capacity to make the decision for himself? What difference, if any, does it make that the holder of parental responsibility is a public authority rather than an individual? Furthermore, although the concentration in this case is upon 16 and 17 year old children, similar issues would arise in a case concerning a child under 16.
A further issue was raised by the court after the hearing: do the restrictions on placing children in accommodation provided for the purpose of restricting liberty, arising from section 25 of the Children Act 1989, apply to the sort of living arrangements in question here? We are grateful to the parties for their written submissions on this complicated issue.
It is addressed by Lady Black at paras 91 to 115 of her judgment, with which I agree.
The history
The child in question, D, was born on 23 April 1999, and so is now aged 20 and an adult.
Nevertheless, the importance of the issues is such that this court gave the Official Solicitor, who acts for him as his litigation friend, permission to appeal from the decision of the Court of Appeal.
D was diagnosed with attention deficit hyperactivity disorder at the age of four, Aspergers syndrome at seven, and Tourettes syndrome at eight.
He also has a mild learning disability.
His parents struggled for many years to look after him in the family home, despite the many difficulties presented by his challenging behaviour.
Eventually, in October 2013 when he was 14, he was informally admitted to Hospital B for multi disciplinary assessment and treatment.
Hospital B provided mental health services for children between the ages of 12 and 18.
He lived in a unit in the hospital grounds and attended a school which was integral to the unit.
The external door to the unit was locked and D was checked on by staff every half hour.
If he left the site, he was accompanied by staff on a one to one basis.
His visits home were supervised at all times.
In 2014, the Hospital Trust issued an application under the inherent jurisdiction of the Family Division of the High Court relating to children, seeking a declaration that it was lawful for the Trust to deprive D of his liberty and that this was in his best interests.
In March 2015, Keehan J held: first, that the conditions under which D lived amounted to depriving him of his liberty (by which he meant confinement under limb (a) of Storck v Germany, para 1 above); the fact that he enjoyed living in the unit made no difference; second, that it was within the zone of parental responsibility for his parents to agree to what would otherwise be a deprivation of liberty; it was a proper exercise of parental responsibility to keep an autistic 15 year old boy who had erratic, challenging and potentially harmful behaviours under constant supervision and control; but third, once he reached 16 he would come under the jurisdiction of the Court of Protection and the different regime there, largely contained in the Mental Capacity Act 2005: In re D (A Child) (Deprivation of Liberty) [2015] EWHC 922 (Fam); [2016] 1 FLR 142.
By then, the clinical team had agreed that D should be discharged from Hospital B to a residential placement.
Birmingham City Council took the lead in making the arrangements for D to move to Placement B.
His parents agreed to the move.
On 23 April 2015, his 16th birthday, proceedings were issued in the Court of Protection.
Birmingham sought a declaration that D would not be deprived of his liberty at Placement B because his parents could consent to it.
On 20 May 2015, Keehan J made an order for Ds transfer from Hospital B to Placement B. This took place on 2 June 2015.
D was accommodated there under section 20 of the Children Act 1989 and thus became a looked after child within the meaning of section 22(1) of that Act.
It has always been common ground between the parties to this case that the arrangements under which D lived at Placement B would have amounted to a deprivation of liberty were it not for his parents consent to them.
Placement B was a large house set in its own grounds, with 12 residential units in the grounds, each with its own fenced garden.
D lived with three other young people in House A.
The external doors were locked.
If he wanted to go out into the garden, he had to ask for the door to be unlocked.
He was not allowed to leave the premises except for a planned activity, such as attending his school, which was also on the site, swimming and leisure activities.
He received one to one support during waking hours and staff were in constant attendance overnight.
The application was heard by Keehan J in the Court of Protection in November 2015.
In January 2016, he held: first, that the parents could no longer consent to what would otherwise be a deprivation of liberty now that D had reached 16; his principal reasons for doing so were that Parliament had, on numerous occasions, distinguished the legal status of those who had reached the age of 16 from that of those who had not; and that the Mental Capacity Act 2005 applied to people who had reached the age of 16.
He also held that this deprivation of liberty was attributable to the state, a matter which is no longer in dispute: Birmingham City Council v D (by his litigation friend, the Official Solicitor) [2016] EWCOP 8; [2016] PTSR 1129.
Birmingham City Council appealed to the Court of Appeal.
Before the hearing, D was transferred to Placement C, where the arrangements were not materially different from those in Placement B. Once again, his parents agreed to his being accommodated under section 20 of the 1989 Act, to the arrangements themselves and to the restrictions on Ds liberty which they entailed.
On 23 November 2016, Keehan J authorised the placement and the deprivation of liberty.
There has never been any doubt that both placements were in Ds best interests but that D himself did not have the capacity to consent to them.
The appeal was heard in February 2017, but judgment was not given until 31 October 2017.
In the meantime, D had reached the age of 18 and parental responsibility for him ceased.
However, by virtue of his age, it was now possible for a deprivation of liberty in a hospital or care home to be authorised under the deprivation of liberty safeguards in Schedule A1 to the Mental Capacity Act 2005 (which applied only to those aged 18 or over), as well as by the Court of Protection.
The Court of Appeal agreed with Keehan J that Ds accommodation in Placement B and Placement C was attributable to the State.
However, the appeal was allowed on the ground that Keehan J had been wrong to hold that a parent could not consent to what would otherwise be a deprivation of the liberty of a 16 or 17 year old child who lacked the capacity to decide for himself.
Sir James Munby P, in a typically erudite judgment, traced the development of the common law responsibilities of parents in great detail.
He concluded, first, that the approach of Keehan J did not give effect to the fundamental principle, established by the majority of the House of Lords in Gillick v West Norfolk and Wisbech Area Health Authority [1986] AC 112, that the exercise of parental responsibility comes to an end, not on the childs attaining a fixed age, but on his attaining Gillick capacity; and second, that none of the statutory provisions upon which Keehan J had relied had a bearing on the matter in hand (para 125).
The position of each party to this appeal
The Official Solicitor now appeals to this court on Ds behalf.
The Official Solicitors primary case is that, whatever may once have been the position at common law, no person can consent to the confinement of a child who has reached the age of 16 and lacks the capacity to decide for himself.
If such a child is confined, and that confinement is attributable to the state, he is deprived of his liberty within the meaning of article 5 and there must be safeguards to ensure that the deprivation is lawful.
The Mental Capacity Act 2005 provides a complete decision making framework for the care and treatment of people aged 16 and above who lack the capacity to decide for themselves.
His alternative case is that, even if such consent is within the scope of parental responsibility, the person giving it should apply the principles and procedure for deciding whether the arrangements are in the childs best interests set out in section 4 of the Mental Capacity Act 2005.
Birmingham City Councils case is that it is within the scope of a parents lawful exercise of parental responsibility to authorise the confinement of a 16 or 17 year old child who is not Gillick competent to consent.
The common law as to the scope of parental responsibility in this respect has not been eroded by the Mental Capacity Act 2005 or by any other legislation.
If it affects the exercise of parental responsibility at all, it does so only by substituting the concept of lack of capacity within the meaning of the Act for the concept of lack of competence within the meaning of Gillick (to the extent that these two may differ an issue which does not arise on this appeal).
The Equality and Human Rights Commission have been given permission to intervene in this court, as they did in the Court of Appeal.
Their case is that, while parental responsibility can in principle extend to the age of 18, whether it applies in particular circumstances has to be judged in the light, not only of the common law, but also of statute, the European Convention on Human Rights and other international instruments.
Parents should not be able to consent to the confinement of a 16 or 17 year old child, thereby removing the protections given by article 5 of the European Convention.
Further, to remove those protections from a child who lacks Gillick competence because of a disability, while according them to a competent child, is unjustified discrimination on the ground of his or her disability.
The Secretaries of State for Education and for Justice did not intervene in the Court of Appeal but have been given permission to intervene jointly in this court.
The Secretary of State for Education has policy responsibility for children and young people and depriving them of liberty; the Secretary of State for Justice has overall policy responsibility for the Mental Capacity Act 2005 and in relation to parental responsibility generally.
Their case is, first, that a child will only be confined if the restrictions on his liberty go beyond those which would be imposed upon a child of the same age and relative maturity who is free from disability; and second, that even if a child is confined, a person with parental responsibility may provide a valid consent to that confinement if the child is not Gillick competent to make the decision for himself; however, a person with parental responsibility must be acting in the best interests of the child for there to be a proper exercise of that responsibility.
The Secretaries of State agree with both the Official Solicitor and Birmingham City Council that a local authority with parental responsibility by virtue of a care order or interim care order, or with any other statutory responsibilities for a child, cannot supply a valid consent to the confinement of a child (as Keehan J held in In re AB (A Child) (Deprivation of Liberty: Consent) [2015] EWHC 3125 (Fam), [2016] 1 WLR 1160; see also In re K (A Child) (Secure Accommodation Order: Right to Liberty) [2001] Fam 377, para 35 below).
Only a natural person with parental responsibility can do so.
Quite what the basis is for distinguishing between the content of parental responsibility according to the person who holds it is not explained: the Children Act 1989, which both defines and governs the allocation of parental responsibility, makes no such distinction.
Parental responsibility
This case turns on the inter relationship between the concept of parental responsibility, as defined by the Children Act 1989, the common law and other relevant statutory provisions, and the obligation of the State to protect the human rights of children under the European Convention on Human Rights.
The one cannot supply an answer without reference to the other.
It makes sense, therefore, to begin with parental responsibility.
Parental responsibility is defined in the Children Act 1989 as all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and his property (section 3(1)).
By law obviously refers to the common law, but also includes those statutory provisions which give rights etc to parents, such as the Marriage Act 1949, which gives them the right to withhold consent to the marriage of a 16 or 17 year old child (section 3).
As Lady Black explains in more detail in paras 55 to 68 of her judgment, the common law and equity recognised the parental power of a father over his legitimate minor children (the mother did not acquire equal rights and authority with the father until the Guardianship Act 1972): see the valuable account of the history by P H Pettitt, Parental Control and Guardianship in R H Graveson and FR Crane, A Century of Family Law (1957, Sweet & Maxwell).
The high water mark of this was the well known case of In re Agar Ellis (No 2) (1883) 24 Ch D 317, at 326, where the Master of the Rolls declared: the law of England is, that the father has the control over the person, education and conduct of his children until they are 21 years of age.
That is the law.
However, as Sachs LJ explained in Hewer v Bryant [1970] 1 QB 357, at 372, in passages quoted in full at para 55 of Lady Blacks judgment, a distinction was drawn between custody in the narrow sense of the right to physical possession of the child and custody in the wider sense of the right to control every aspect of the childs life, including his religion, education and property.
The common law courts would enforce the former by way of the writ of habeas corpus.
But they would refuse to do this against the wishes of the child, once he or she had reached the age of discretion.
In the 19th century, this was regarded as fixed at 14 for boys and 16 for girls (the latter by reference to the Abduction Acts of 1557 and 1828).
The Court of Chancery would enforce all parental powers and authority, but by way of the Crowns parens patriae jurisdiction rather than by way of enforcing the parents rights, potentially up to the age of majority.
Parental rights were never absolute and became increasingly subject to the overriding consideration of the childs own welfare.
This was put on a statutory footing by the Guardianship of Infants Act 1925, which famously declared that Where in any proceedings before any court the custody or upbringing of an infant, or the administration of any property belonging to or held in trust for an infant, or the application of the income thereof, is in question, the court, in deciding that question, shall regard the welfare of the infant as the first and paramount consideration (section 1).
That remains the guiding principle in section 1(1) of the Children Act 1989, which provides that the childs welfare shall be the courts paramount consideration.
Section 1, of course, deals with the position if a case about a childs upbringing gets to court.
But what about the powers and authority of holders of parental responsibility before a case gets to court? Two 20th century cases show how, whatever may have been the earlier position, the common law is capable of moving with the times.
In Hewer v Bryant [1970] 1 QB 357, the issue was the meaning of in the custody of a parent in the Limitation Act 1954.
The High Court had held that a child remained, by law, in the custody of his father until the age of majority, applying In re Agar Ellis.
The Court of Appeal held that a 15 year old living away from home and working as an agricultural trainee was not in the custody of a parent for this purpose.
Custody in the Limitation Act meant the actual exercise of powers of control.
But both Lord Denning MR and Sachs LJ recognised that the parents legal powers of physical control diminished as the child got older.
Sachs LJ expressly referred to the parents ability to restrict the liberty of the person, which lasted until the age of discretion, and distinguished between the parental power and the courts power, which lasted until the age of majority (p 372).
Lord Denning MR put it this way: the legal right of a parent to the custody of a child is a dwindling right which the courts will hesitate to enforce against the wishes of the child, and the more so the older he is.
It starts with a right of control and ends with little more than advice.
That dictum was approved by the majority of the House of Lords in Gillick v West Norfolk and Wisbech Area Health Authority [1986] AC 112, at pp 172, 186, 195.
The issue was whether it was lawful to give contraceptive advice and treatment to a child under 16 without her parents consent if she herself was capable of giving that consent.
The Court of Appeal had held that this would be infringing the inalienable and legally enforceable rights of parents relating to the custody and upbringing of their children which, except in emergencies, could only be overridden by a court.
A girl under 16 was incapable either of consenting to treatment or prohibiting a doctor from seeking the consent of her parents.
The House of Lords, by a majority, disagreed.
The earlier age of discretion cases had established the principle that children could achieve the capacity to make their own decisions before the age of majority.
It was no longer, if it ever had been, correct to fix that at any particular age, rather than by reference to the capacity of the child in question: it had already been established that a child below the age of 16 could consent to sexual intercourse so that it was not rape (R v Howard [1966] 1 WLR 13) or to being taken away so that it was not kidnapping (R v D [1984] AC 778).
Parental rights and authority existed for the sake of the child, to enable the parent to discharge his responsibilities towards the child, and not for the sake of the parent.
Lord Scarman put it thus (p 185): The principle is that parental right or power of control of the person and property of his child exists primarily to enable the parent to discharge his duty of maintenance, protection, and education until he [the child] reaches such an age as to be able to look after himself and make his own decisions.
The consequence was that (p 188): as a matter of law the parental right to determine whether or not their minor child below the age of 16 will have medical treatment terminates if and when the child achieves a sufficient understanding and intelligence to enable him or her to understand fully what is proposed.
As Lady Black explains in paras 69 to 72 of her judgment, the Gillick case is not directly relevant to the issue before us now.
It had to do with medical treatment and not with deprivation of liberty.
It was concerned with whether a child might acquire the capacity, and the right, to make such decisions for herself before she reached the common law age of discretion, not with whether parental authority endured beyond that age if the child lacked the capacity to decide for herself.
And as Lady Black has shown, it is, to say the least, highly arguable that such authority did not extend to depriving such a child of her liberty once she had reached the age of discretion.
Some support for that conclusion is supplied by the earliest legislation dealing specifically with people with mental disabilities, the Mental Deficiency Act 1913.
Section 6(3) provided both for detention in an institution and admission to guardianship.
Section 10(2) provided that an order that a person be placed under guardianship conferred upon the person named as guardian such powers as would have been exercisable if he had been the father of the defective and the defective had been under the age of 14.
That provision remained in force until repealed by the Mental Health Act 1959, under which the powers of a guardian were defined, by section 34(1), in materially identical terms. (The powers of a guardian are now more narrowly defined in the Mental Health Act 1983.) It is highly likely that it was contemplated that a guardian might have to accommodate the person under his guardianship in conditions which deprived him of his liberty.
The fact that the guardian was therefore given the powers of the father of a child under 14, rather than the powers of the father of a child of any age, suggests that it was not then thought that a father had the right to deprive a child of any age of his liberty if the child lacked the capacity to make his own decisions.
Many of the people falling within the definition of mental defective would lack that capacity.
Statute has also intervened to make specific provision for children who have reached the age of 16.
In the Court of Protection, Keehan J referred to the following (para 64) although not in the same terms or the same order: (i) Section 8(1) of the Family Law Reform Act 1969 provides that the consent of a child of 16 to any surgical, medical or dental treatment shall be as effective as it would be if he were of full age and that where a child has given an effective consent it is not necessary to obtain the consent of a parent or guardian.
That is why the discussion in Gillick related to children below that age.
However, subsection (3) provides that Nothing in this section shall be construed as making ineffective any consent which would have been effective if this section had not been enacted.
Lord Fraser of Tullybelton saw this as recognising that the consent of a child below that age might also be effective.
Whether the consent of a parent remains effective even if a child, with capacity, has refused consent is a more controversial question (which fortunately does not arise in this case). (ii) Section 131(2) of the Mental Health Act 1983 provides that subsections (3) and (4) apply to a child of 16 who has the capacity to consent to arrangements for his own informal admission to hospital for treatment for mental disorder.
Subsection (3) provides that if he does consent, those arrangements may be made even though there is someone with parental responsibility for him; and subsection (4) provides that if he does not consent, then the arrangements cannot be made on the basis of parental consent.
Subsection (5) provides that capacity is to be read in accordance with the Mental Capacity Act 2005. (iii) Section 2(5) of the Mental Capacity Act 2005 provides that the powers which may be exercised under that Act in relation to a person who lacks, or is reasonably believed to lack, capacity cannot be exercised in relation to a person under 16 (although there is an exception for powers in relation to their property and affairs if it is likely that the incapacity will continue past majority: section 18).
This means that the Act, including the presumption of capacity in section 1(2) and the test for incapacity in sections 2(1) and 3, applies to a person who has reached 16.
The Act gives protection for people acting in connection with the care and treatment of a person whom they reasonably believe to lack capacity if they reasonably believe that it will be in that persons best interests (section 5(1)).
However, the Act does not authorise any person to deprive another person of his liberty except in accordance with an order of the court or if authorised under the deprivation of liberty safeguards in Schedule A1 (section 4A).
Schedule A1 only applies to people aged 18 or over.
After these events, a new Schedule AA1 (not yet in force) has been inserted applying to those aged 16 and above. (iv) Section 9(6) of the Children Act 1989 provides that no court may make a child arrangements, specific issue or prohibited steps order under section 8 of the Act which is to have effect after the child reaches 16 unless the circumstances are exceptional. (v) Section 31(3) of the Children Act 1989 provides that a care or supervision order may not be made in respect of a child of 17 (or of 16 who is married).
However, an order made before this point can last until the child reaches 18 (section 92(12)). (vi) Section 20(11) of the Children Act 1989 provides that a child of 16 or 17 may agree to being accommodated by a local authority even if his parents object or wish to remove him.
The age of 16 is significant for various other purposes, such as leaving school, joining the armed forces or getting married (albeit that parental consent is usually required).
So Keehan J was correct to suggest that the law accords children who have reached 16 a status which is in some respects different from that of children under that age.
However, Sir James Munby P was also correct to hold that these provisions do not supply the answer to the issues in this case.
Items (iv) and (v) are concerned with the limits on making court orders.
Items (i) and (ii) relate only to children who have the capacity to make a decision for themselves, and it is quite possible that item (vi) is also so limited.
Furthermore, as Gillick holds, a child may acquire the capacity to make certain decisions for himself before the age of 16.
We are concerned with the extent of parental responsibility for a child who lacks the capacity to make the decision for himself.
It may well be that, as a general rule, parental responsibility extends to making decisions on behalf of a child of any age who lacks the capacity to make them for himself.
This would always be subject to the courts powers of intervention, whether at the behest of another parent or individual in private law proceedings under Part 2 of the Children Act 1989, or at the behest of a local authority in public law proceedings under Part 4 on the ground that the child is suffering or likely to suffer significant harm as a result of the parents decisions.
The question, however, is whether there are any limits to that general rule, and in particular whether it is within the scope of parental responsibility to make arrangements which have the effect of depriving a child of his liberty.
In view of the conclusion which I have reached as to the effect of article 5 of the European Convention on Human Rights, and the interaction between parental responsibility and the childs rights under article 5, it is strictly unnecessary to reach a concluded view on that question.
But I acknowledge the force of the conclusion reached by Lady Black at para 90 of her judgment.
As she says, it reinforces the conclusion which I have reached for other reasons.
The European Convention on Human Rights
Article 1 of the European Convention on Human Rights requires the High Contracting Parties to secure to everyone within their jurisdiction the rights and freedoms set out in the Convention.
There can be no doubt that everyone includes minor children, or indeed that the Convention rights may require adaptation to cater for their special needs as children: see, for example, the case of Thompson and Venables dealing with the fair trial rights of children accused of serious crime: T v United Kingdom (1999) 30 EHRR 121.
We are here concerned with article 5, which, as already stated, accords to everyone the right to liberty and security of person.
No one shall be deprived of his liberty save in the [listed] cases and in accordance with a procedure prescribed by law.
That this applies to children is made clear by article 5(1)(d) which permits the detention of a minor by lawful order for the purpose of educational supervision .
That it applies to people who lack the capacity to make decisions for themselves is made clear by article 5(1)(e) which permits the lawful detention of persons of unsound mind.
Article 5(1) contains within it the requirement that decisions made under it are not arbitrary and accord with the Convention concept of legality: see, for example, HL v United Kingdom (2005) 40 EHRR 32.
Article 5 also contains various specific procedural safeguards, including article 5(4), which requires that everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.
Prima facie, therefore, article 5 protects children who lack the capacity to make decisions for themselves from being arbitrarily deprived of their liberty.
All parties to this case agree that this means that a local authority which has parental responsibility for a child cannot deprive the child of his liberty without the authority of a court.
But, say Birmingham City Council and the Secretaries of State, the position is different if the parents or other individuals with parental responsibility such as special guardians agree to it.
Why should that be?
The facts of RK v BCC, YB and AK [2011] EWCA Civ 1305; [2012] COPLR 146, were remarkably similar to the facts of this case.
A young woman aged 17 suffered from autism, attention deficit hyperactivity disorder and severe learning difficulties, as well as epilepsy.
She had been looked after at home for nearly 16 years but was then accommodated by the local authority under section 20 of the Children Act 1989 in a private care home.
In proceedings brought by her mother in the Court of Protection, the Official Solicitor raised concerns that her living arrangements might amount to a deprivation of liberty.
Mostyn J held: first, that the provision of accommodation under section 20 could never amount to a deprivation of liberty because the parents must have agreed to it; and second, that in any event the restrictions authorised by her parents did not amount to a deprivation of liberty.
In relation to the first, the Court of Appeal upheld the consensus reached at the Bar (para 14): that an adult in the exercise of parental responsibility may impose, or may authorise others to impose, restrictions on the liberty of the child.
However, restrictions so imposed must not in their totality amount to deprivation of liberty.
Deprivation of liberty engages the article 5 rights of the child and a parent may not lawfully detain or authorise the deprivation of liberty of a child.
However, the Court of Appeal went on to hold that the restrictions imposed did not amount to a deprivation of liberty: they were no more than what was reasonably required to protect RK from harming herself or others within her range (para 27).
That decision was, of course, before the Supreme Courts decision in Cheshire West, which clarified the objective elements of a deprivation of liberty (limb (a) of Storck v Germany, para 1 above).
The acid test is that a person is under continuous supervision and control and not free to leave.
The fact that such restrictions may be necessary in order to prevent a person from harming himself or others makes no difference.
Nor does the fact that the persons living arrangements are as close to a normal home life as they could possibly be.
It seems likely, therefore, that the conditions under which RK was living would now be regarded as depriving her of her liberty.
But it is not clear why that should make any difference to the validity of the consensus reached at the Bar and endorsed by the court as to the scope of parental responsibility.
The basis for that consensus was said to be the case of Nielsen v Denmark (1988) 11 EHRR 175 in the European Court of Human Rights, together with the Court of Appeal decision in In re K (A Child) (Secure Accommodation Order: Right to Liberty) [2001] Fam 377.
It is worth looking at the case of Nielsen v Denmark in some detail.
It concerned a 12 year old child of unmarried parents.
The mother alone had custodial rights over him.
Nevertheless, at the age of eight he had refused to return to his mother after a holiday with his father and then disappeared to live in hiding with his father for more than three years.
He re appeared with his father during proceedings in which his father was attempting to obtain a change in custody.
His father was arrested and his mother requested that the boy be admitted to the State Hospitals child psychiatric ward as it was clear that he did not want to stay with her.
He was eventually discharged after six months and went to live with another family.
However, five months after that, the Danish Supreme Court awarded custody to the father.
The boy complained to the European Court of Human Rights that his rights under article 5(1) and 5(4) of the European Convention had been breached.
The European Commission found, by 11 votes to one, that there had been a breach of article 5(1) and by ten votes to two that there had been a breach of article 5(4).
However, the Court found, by nine votes to seven, that there had been no breach.
It is not easy to identify how the majoritys decision fits into the tri partite scheme of later decisions such as Storck v Germany and Stanev v Bulgaria.
The majority held that article 5 was not applicable in so far as it is concerned with deprivation of liberty by the state (para 64), a conclusion which was strongly disputed by the dissenters who pointed out that the boy was detained in a State Hospital, with the agreement of the responsible psychiatrist, and was returned to hospital by the police when he disappeared on the day that he was due to be discharged into his mothers care.
Nevertheless, the majority went on to consider whether article 5 was applicable in regard to such restrictions on the applicants liberty as resulted from the exercise of the mothers parental rights (para 64).
This can only be explained on the basis that, again as the minority observed, article 5 imposes a positive obligation upon the state to protect individuals from being deprived of their liberty by private persons.
The majority went on to consider the boys actual situation.
They found that he was in need of medical treatment for his nervous condition.
The treatment did not involve medication, but consisted of regular talks and environmental therapy.
The restrictions on his freedom of movement and contact with the outside world were not much different from restrictions which might be imposed on a child in an ordinary hospital.
In general conditions in the ward were said to be as similar as possible to a real home (para 70).
The restrictions to which the boy was subject were no more than the normal requirements for the care of a child of 12 years of age receiving treatment in hospital.
They were not in principle different from those in many hospital wards where children with physical disorders were treated.
The boy was still at an age at which it would be normal for a decision to be made by the parent even against the wishes of the child (para 72).
Accordingly, the hospitalisation of the applicant did not amount to a deprivation of liberty within the meaning of article 5, but was a responsible exercise by his mother of her custodial rights in the interest of the child (para 73).
The minority considered that the placing of a 12 year old boy who was not mentally ill for several months in a psychiatric ward was a deprivation of liberty for which the state was accountable.
Whether one agrees with the majority or the minority assessment of the facts of the case, the majority judgment clearly turned on the comparative normality of the restrictions imposed upon the freedom of a 12 year old boy.
In In re K (A Child) (Secure Accommodation Order: Right to Liberty), the Court of Appeal was faced with an argument that the regime for authorising the placement of a child in secure accommodation, under section 25 of the Children Act 1989, was incompatible with the right to liberty in article 5.
The first issue was whether such a placement was indeed a deprivation of liberty, even though it was agreed to by the local authority, which had parental responsibility under an interim care order, as well as by the childs parents.
Dame Elizabeth Butler Sloss P and Judge LJ held that it clearly was.
Butler Sloss P recognised the force of the principles in Nielsen (and Family T v Austria, 64 DR 176, which followed it).
Nevertheless, There is a point, however, at which one has to stand back and say: is this within ordinary acceptable parental restrictions upon the movements of a child or does it require justification? (para 28) Judge LJ was to the same effect: In short, although normal parental control over the movements of a child may be exercised by the local authority over a child in its care, the implementation of a secure accommodation order does not represent normal parental control (para 102). (They went on to hold that section 25 was not incompatible with article 5 as it fell within article 5(1)(d).)
That, as it seems to me, is the crux of the matter.
Do the restrictions fall within normal parental control for a child of this age or do they not? If they do, they will not fall within the scope of article 5; but if they go beyond the normal parental control, article 5 will apply (subject to the question of whether parental consent negates limb (b) of the Storck criteria, see para 42 below).
Quite clearly, the degree of supervision and control to which D was subject while in Placement B and Placement C was not normal for a child of 16 or 17 years old.
It would have amounted to a deprivation of liberty in the case of a child of that age who did not lack capacity.
The question then arises what difference, if any, does Ds mental disability make?
The answer to that question lies in the illuminating discussion by Lord Kerr in Cheshire West: 77.
The question whether one is restricted (as a matter of actuality) is determined by comparing the extent of your actual freedom with someone of your age and station whose freedom is not limited.
Thus a teenager of the same age and familial background as MIG and MEG is the relevant comparator for them.
If one compares their state with a person of similar age and full capacity it is clear that their liberty is in fact circumscribed.
They may not be conscious, much less resentful, of the constraint but, objectively, limitations on their freedom are in place. 78.
All children are (or should be) subject to some level of restraint.
This adjusts with their maturation and change in circumstances.
If MIG and MEG had the same freedom from constraint as would any child or young person of similar age, their liberty would not be restricted, whatever their level of disability.
As a matter of objective fact, however, constraints beyond those which apply to young people of full ability are and have to be applied to them.
There is therefore a restriction of liberty in their cases.
Because the restriction of liberty is and must remain a constant feature of their lives, the restriction amounts to a deprivation of liberty.
Indeed, the principal point of Cheshire West was that the living arrangements of the mentally disabled people concerned had to be compared with those of people who did not have the disabilities which they had.
They were entitled to the same human rights, including the right to liberty, as any other human being.
The fact that the arrangements might be made in their best interests, for the most benign of motives, did not mean that they were not deprived of their liberty.
They were entitled to the protection of article 5, precisely so that it could be independently ascertained whether the arrangements were indeed in their best interests.
It follows that a mentally disabled child who is subject to a level of control beyond that which is normal for a child of his age has been confined within the meaning of article 5.
Limb (a) of the three Storck criteria for a deprivation of liberty (see para 1 above) has been met.
There was, however, an argument that the consent of Ds parents supplied a substitute for the consent of the person confined, so that limb (b) was not met.
It suited counsel in Cheshire West (as recorded in the last sentence of para 41) to argue that Nielsen should be regarded as a case of substituted consent, because no person has the right to give such consent on behalf of a mentally incapacitated adult.
But, as also pointed out in Cheshire West, it is striking that the European Court of Human Rights has consistently held that limb (b) can be satisfied despite the consent of a person with the legal right to make decisions on behalf of the person concerned: see Stanev v Bulgaria (2012) 55 EHRR 696, DD v Lithuania [2012] MHLR 209, Kedzior v Poland [2013] MHLR 115, Mihailovs v Latvia, unreported, and now Stankov v Bulgaria [2015] 42 ECtHR 276.
In Stanev, the court did observe, in passing, that there are situations where the wishes of a person with impaired mental facilities may be validly replaced by those of another person acting in the context of a protective measure and that it is sometimes difficult to ascertain the true wishes or preferences of the person concerned (para 130).
However, as Keehan J observed in the Court of Protection (para 118) that is very far from adopting a general principle of substituted consent.
The consent of a legal guardian may have been sufficient to make the confinement lawful in the domestic law of the country concerned, but that did not prevent its being a deprivation of liberty, or guarantee that it fulfilled the Convention requirement of legality.
In the cases where limb (b) has been held to be satisfied, it is because the evidence showed that the person concerned was willing to stay where he or she was and was capable of expressing that view.
Parental consent, therefore, cannot substitute for the subjective element in limb (b) of Storck.
As already mentioned, limb (c) of Storck is no longer disputed and rightly so.
Not only was the State actively involved in making and funding the arrangements, it had assumed statutory responsibilities albeit not parental responsibility towards D by accommodating him under section 20 of the Children Act 1989, thereby making him a looked after child.
Even without all this, it is clear that the first sentence of article 5 imposes a positive obligation on the State to protect a person from interferences with liberty carried out by private persons, at least if it knew or ought to have known of this: see, for example Storck, para 89.
In conclusion, therefore, the accommodation of D in Placement B and Placement C did amount to a deprivation of liberty within the meaning of article 5 and the fact that his parents agreed to them did not rob the arrangements of this quality.
The procedural requirements of article 5 applied. (As it happens, both placements were authorised by a High Court Judge sitting in the Court of Protection and it is common ground that they were in Ds best interests.
His rights under article 5 have not, in fact, been violated.)
This conclusion is consistent with the whole thrust of Convention jurisprudence on article 5, which was examined in great detail in Cheshire West.
But it is reinforced by the consideration that it is also consistent with the principle of non discrimination in article 2.1 of the United Nations Convention on the Rights of the Child, which requires that the rights set out in the Convention be accorded without discrimination on the ground of, inter alia, disability, read together with article 37(b), which requires that no child shall be deprived of his liberty unlawfully or arbitrarily, and article 37(d), which requires the right to challenge its legality.
It is also consistent with article 7.1 of the United Nations Convention on the Rights of Persons with Disabilities, which requires all necessary measures to ensure the full enjoyment by children with disabilities of all human rights and fundamental freedoms on an equal basis with other children.
Parental responsibility and human rights
But what is the relationship between holding that the placement did deprive D of his liberty within the meaning of article 5 and the view that it might otherwise have been within the scope of parental responsibility? Parental responsibility is about the relationship between parent and child and between parents and third parties: it is essentially a private law relationship, although a public authority may also hold parental responsibility.
As Irwin LJ correctly pointed out (para 157) human rights, on the other hand, are about the relationship between individuals (or other private persons) and the state.
It is, however, now agreed that any deprivation of liberty in Placement B or Placement C was attributable to the state.
So is there any scope for the operation of parental responsibility to authorise what would otherwise be a deprivation of liberty?
There are two contexts in which a parent might attempt to use parental responsibility in this way.
One is where the parent is the detainer or uses some other private person to detain the child.
However, in both Nielsen and Storck it was recognised that the state has a positive obligation to protect individuals from being deprived of their liberty by private persons, which would be engaged in such circumstances.
The other context is that a parent might seek to authorise the state to do the detaining.
But it would be a startling proposition that it lies within the scope of parental responsibility for a parent to license the state to violate the most fundamental human rights of a child: a parent could not, for example, authorise the state to inflict what would otherwise be torture or inhuman or degrading treatment or punishment upon his child.
Likewise, section 25 of the Children Act 1989 recognises that a parent cannot authorise the State to deprive a child of his liberty by placing him in secure accommodation.
While this proposition may not hold good for all the Convention rights, in particular the qualified rights which may be restricted in certain circumstances, it must hold good for the most fundamental rights to life, to be free from torture or ill treatment, and to liberty.
In any event, the state could not do that which it is under a positive obligation to prevent others from doing.
In conclusion, therefore, it was not within the scope of parental responsibility for Ds parents to consent to a placement which deprived him of his liberty.
Although there is no doubt that they, and indeed everyone else involved, had Ds best interests at heart, we cannot ignore the possibility, nay even the probability, that this will not always be the case.
That is why there are safeguards required by article 5.
Without such safeguards, there is no way of ensuring that those with parental responsibility exercise it in the best interests of the child, as the Secretaries of State acknowledge that they must.
In this case, D enjoyed the safeguard of the proceedings in the Court of Protection.
In future, the deprivation of liberty safeguards contained in the Mental Capacity Act 2005 (as amended by the Mental Capacity (Amendment) Act 2019) will apply to children of 16 and 17.
I would therefore allow this appeal and invite the parties submissions on how best to incorporate this conclusion in a declaration.
Logically, this conclusion would also apply to a younger child whose liberty was restricted to an extent which was not normal for a child of his age, but that question does not arise in this case.
The common law may draw a sharp distinction, in relation to the deprivation of liberty, between those who have reached the age of 16 and those who have not, but the extent to which that affects the analysis under the Human Rights Act is not clear to me and we have heard no argument upon it.
I therefore prefer to express no view upon the question.
Nor would I express any view on the extent of parental responsibility in relation to other matters, such as serious and irreversible medical treatment, which do not entail a deprivation of liberty.
Some reference to this was made in the course of argument, but it does not arise in this case, which is solely concerned with depriving 16 and 17 year olds of their liberty.
It follows that I agree with what Lady Black says about those last two points in para 90 of her judgment.
LADY BLACK:
The purpose of this judgment is two fold.
It addresses the question of whether the restrictions, in section 25 of the Children Act 1989, on placing children in accommodation provided for the purpose of restricting liberty apply to the sort of living arrangements in question here.
It also provides an opportunity to explain a little further why I agree with Lady Hales conclusion that the consent of Ds parents to his confinement cannot operate as a substitute for Ds own consent.
Lady Hale bases this conclusion, essentially, on there being no room for substituted consent in cases such as the present, for reasons she sets out commencing at para 42 of her judgment; I agree with her on this point and I do not seek to detract from what she says there.
My comments are directed at the prior issue of whether it is actually within the scope of parental responsibility to consent to living arrangements for a 16 or 17 year old child which would otherwise amount to a deprivation of liberty within the meaning of article 5.
Like Sir James Munby P (at para 50 of the Court of Appeal judgment), I consider that, in order to answer this question, it is necessary to look to the domestic law, set in its proper historical context.
Before us, the parties have not dwelt on the legal history in relation to parental responsibility.
This is no doubt because the Official Solicitor accepts that the Court of Appeal was entitled to hold that, immediately following the decision in Gillick v West Norfolk & Wisbech Area Health Authority [1986] AC 112 (Gillick), parental responsibility was, in principle, exercisable to authorise the confinement of a 16 or 17 year old child who, for whatever reason, lacked capacity.
The Official Solicitors argument is that that position has changed since Gillick with the passage of the Mental Capacity Act 2005 and the trends in international rights norms.
Notwithstanding the Official Solicitors approach, I have gone back to look in detail at the old authorities, many of them signposted in the Presidents judgment.
The President observed that the domestic law is far from straightforward, an observation which I have no difficulty in endorsing.
At para 62 below, I have summarised an explanation given by Bowen LJ in In re Agar Ellis (No 2) (1883) 24 Ch D 317 of the terminology used in this area of the law, which might help a little in understanding the earlier authorities.
Lady Hale sets out, in para 21, the themes which are to be found in the old cases.
I do not disagree with what she says, but merely seek to add a little more detail to the picture and to explain that, as will become apparent (particularly from paras 88 to 90), I have reached a firmer conclusion than she has on this aspect of the case.
It might be useful to set the scene by citing the passage from Sachs LJs judgment in Hewer v Bryant [1970] 1 QB 357, at 372 373, which, after his own study of the earlier authorities, the President found (para 65) to be an accurate analysis of the position: Before proceeding further, it is essential to note that among the various meanings of the word custody there are two in common use in relation to infants which are relevant and need to be carefully distinguished.
One is wide the word being used in practice as almost the equivalent of guardianship: the other is limited and refers to the power physically to control the infant's movements.
In its limited meaning it has that connotation of an ability to restrict the liberty of the person concerned to which Donaldson J referred in Duncans case, at p 762.
This power of physical control over an infant by a father in his own right qua guardian by nature and the similar power of a guardian of an infants person by testamentary disposition was and is recognised at common law; but that strict power (which may be termed his personal power) in practice ceases upon the infant reaching the years of discretion.
When that age is reached, habeas corpus will not normally issue against the wishes of the infant.
Although children are thought to have matured far less quickly in the era when the common law first developed, that age of discretion which limits the fathers practical authority (see the discussion and judgment in R v Howes (1860) 3 El & El 332) was originally fixed at 14 for boys and 16 for girls (see per Lindley LJ in Thomasset v Thomasset [1894] P 295, 298).
This strict personal power of a parent or guardian physically to control infants, which is one part of the rights conferred by custody in its wider meaning, is something different from that power over an infants liberty up to the age of 21 which has come to be exercised by the courts on behalf of the Crown as parens patriae, to use the phraseology in A Century of Family Law, 1857 1957 (1957), p 68.
It is true that in the second half of last century that power was so unquestionably used in aid of the wishes of a father that it was referred to as if its resultant exercise was a right of the father.
Indeed in the superbly Victorian judgments in the Agar Ellis case 24 Ch D 317, it seems thus to be treated: for the purpose, however, of the present issues it is sufficient to observe that if those judgments are to be interpreted as stating as a fact that fathers in practice personally had in 1883 strict and enforceable power physically to control their sons up to the age of 21, then as my Lord, the Master of the Rolls, has already indicated they assert a state of affairs that simply does not obtain today.
In truth any powers exercised by way of physical control in the later years of infancy were not the fathers personal powers but the more extensive ones of the Crown (see Lindley LJ in Thomassets case [1894] P 295, 299); and hence the fathers right was really no more than that of applying to the courts for the aid he required as guardian.
The reason for emphasising the word power appears later in this judgment.
In its wider meaning the word custody is used as if it were almost the equivalent of guardianship in the fullest sense whether the guardianship is by nature, by nurture, by testamentary disposition, or by order of a court. (I use the words fullest sense because guardianship may be limited to give control only over the person or only over the administration of the assets of an infant.) Adapting the convenient phraseology of counsel, such guardianship embraces a bundle of rights, or to be more exact, a bundle of powers, which continue until a male infant attains 21, or a female infant marries.
These include power to control education, the choice of religion, and the administration of the infants property.
They include entitlement to veto the issue of a passport and to withhold consent to marriage.
They include, also, both the personal power physically to control the infant until the years of discretion and the right (originally only if some property was concerned) to apply to the courts to exercise the powers of the Crown as parens patriae.
It is thus clear that somewhat confusingly one of the powers conferred by custody in its wide meaning is custody in its limited meaning, namely, such personal power of physical control as a parent or guardian may have.
It is, of course, custody in what Sachs LJ called its limited meaning that is material in the present appeal.
In this sense, it is concerned with, as he put it, an ability to restrict the liberty of the person concerned, otherwise described as a power of physical control over an infant, and even physical possession.
There are a number of earlier cases, notably Rex v Greenhill (1836) 4 Ad & E 624, R v Maria Clarke (In the Matter of Alicia Race) (1857) 7 E & B 186, and R v Howes (1860) 3 El & El 332, which deal with the common law position in relation to this aspect of custody.
The context in each case is a habeas corpus application by a parent.
What is important about the decisions for present purposes is that they establish, as the common law position, that (i) up to the age of discretion, the parents right to restrict the childs liberty was absolute (subject to some very limited exceptions), (ii) once the child reached the age of discretion, that right disappeared, and (iii) reaching the age of discretion was a matter of attaining the requisite chronological age, and not a matter of mental capacity.
It is necessary to begin with Rex v Greenhill, although it is only in the subsequent cases that its import becomes clear.
It concerned children who were all under six years of age and were with their mother.
Their father obtained an order for them to be delivered up to him and their mother applied for that to be set aside.
She was unsuccessful, a father being entitled to custody in the absence of any sufficient reason to separate the children from him.
The four judges each gave separate short judgments, from which the following are extracts: When an infant is brought before the court by habeas corpus, if he be of an age to exercise a choice, the court leaves him to elect where he will go.
If he be not of that age, and a want of direction would only expose him to dangers or seductions, the court must make an order for his being placed in proper custody. (Lord Denman CJ) The practice in such cases is that, if the children be of a proper age, the court gives them their election as to the custody in which they will be; if not, the court takes care that they be delivered into the proper custody. (Littledale J) In general, where the party brought up by habeas corpus is competent to exercise a discretion on [custody], the court merely takes care that the option shall be left free But where the age is not such as to allow the exercise of a discretion, and there is a controversy as to the custody, the court must decide (Williams J) A habeas corpus proceeds on the fact of an illegal restraint.
When the writ is obeyed, and the party brought up is capable of using a discretion, the rule is simple, and disposes of many cases, namely, that the individual who has been under the restraint is declared at liberty; and the court will even direct that the party shall be attended home by an officer, to make the order effectual.
But, where the person is too young to have a choice, we must refer to legal principles to see who is entitled to the custody (Coleridge J)
Rex v Greenhill was relied upon in R v Maria Clarke (In the matter of Alicia Race) (1857) where Lord Campbell CJ interpreted it as having: laid down the rule that, where a young person under the age of 21 years of age is brought before the court by habeas corpus, if he be of an age to exercise a choice, the court leaves the infant to elect where he will go, but, if he be not of that age, the court must make an order for his being placed in the proper custody.
The issue in the Maria Clarke case was whether the ten year old girls widowed mother, as her guardian for nurture, had a legal right to custody against the wishes of the girl, however intelligent she was, or whether the court was bound to examine the child to ascertain whether she had the mental capacity to make a choice.
There was no argument but that children under seven were delivered to the guardian without any such examination; the argument was about those between the ages of seven and 14 (when guardianship for nurture ended).
The court held that the guardian was absolutely entitled to the custody of the child until the age of 14, irrespective of the childs capacity.
Lord Campbell said: Lord Denman, Littledale J, Williams J and Coleridge J all make age the criterion, and not mental capacity, to be ascertained by examination.
They certainly do not expressly specify the age: but they cannot refer to seven as the criterion; and there is no intervening age marking the rights or responsibility of an infant till 14, when guardianship for nurture ceases, upon the supposition that the infant has now reached the years of discretion.
In R v Howes (1860) 3 El & El 332, a father sought the delivery to him of a girl of 15 who was unwilling to return to him, and had been brought into court in obedience to a writ of habeas corpus and interviewed privately by the judges before they heard argument.
Cockburn CJ, giving the judgment of the court, said: Now the cases which have been decided on this subject shew that, although a father is entitled to the custody of his children till they attain the age of 21, this court will not grant a habeas corpus to hand a child which is below that age over to its father, provided that it has attained an age of sufficient discretion to enable it to exercise a wise choice for its own interests.
The whole question is, what is that age of discretion? We repudiate utterly, as most dangerous, the notion that any intellectual precocity in an individual female child can hasten the period which appears to have been fixed by statute for the arrival of the age of discretion; for that very precocity, if uncontrolled, might very probably lead to her irreparable injury.
The Legislature has given us a guide, which we may safely follow, in pointing out 16 as the age up to which the fathers right to the custody of his female child is to continue; and short of which such a child has no discretion to consent to leaving him.
The reference to the guide given by [t]he Legislature is no doubt a reference to the statutes making it an offence to take a female unmarried child under the age of 16 out of the possession of the childs father or mother.
In re Agar Ellis (No 2) (1883) 24 Ch D 317 concerned a girl of 16 who wanted to spend time with her mother, contrary to her fathers directions.
She and her mother argued that, given her age, her father had no right to the control or custody of her.
Their petition failed at first instance and they appealed.
This was not a habeas corpus application because, said Sir William Brett MR, the child is not away from her father the child is under the control of her father.
It was, as Lindley LJ described it the following year in Thomasset v Thomasset (see below), an attempt to remove a girl over 16 from the care of her father.
Therefore, although the habeas corpus cases were considered, they were found to be inapplicable.
The court was concerned, rather, with an exercise of what Cotton LJ described as the jurisdiction which the Court of Chancery has always exercised, delegated probably from the Crown as parens patriae.
The law was declared to be that the father had, as the Master of the Rolls put it, control over the person, education, and conduct of his children until they are 21 years of age.
Exercising its Chancery jurisdiction, the court proceeded on the basis that it could interfere with the discretion of the father, but would not do so except in very extreme cases, of which this was not one.
It is to be noted that this might have been seen by some as an overly narrow application of the Chancery approach, see the judgment of Kay LJ in R v Gyngall [1893] 2 QB 232.
Sachs LJ commented, in the passage I have quoted above from Hewer v Bryant, on the use during the second half of the 19th century of the parens patriae jurisdiction unquestionably in aid of the wishes of the father, citing Agar Ellis (No 2) as an example of this, but pointing out that any powers exercised by way of physical control in the later years of infancy were not in fact the fathers personal powers but the more extensive ones of the Crown.
And in Gillick, Lord Scarman referred to In re Agar Ellis (No 2) and an earlier decision concerning the same family (In re Agar Ellis (1878) 10 Ch D 49), as the horrendous Agar Ellis decisions (p 183E of Gillick).
Bowen LJs judgment in In re Agar Ellis (No 2) includes an interesting explanation of how confusion had been caused by earlier law books making distinctions which were no longer adhered to.
He explained that the strict common law gave the father guardianship of his children during the age of nurture and until the age of discretion (14 for a boy, and 16 for a girl), and thereafter, apart from in the case of the heir apparent (in relation to whom he was guardian by nature until 21), he had no guardianship.
But he said that, for a great number of years, more especially in the courts of equity, the term guardian by nature had not been confined to heirs apparent, so that there was a natural paternal jurisdiction between the age of discretion and the age of 21, which the law will recognise.
The distinction between the common law jurisdiction (concerned to declare rights between the parties) and the broader jurisdiction of the Courts of Chancery is made very clear in R v Gyngall (supra).
The father of the child in that case (a girl of about 15) was dead and it was the mother who was the guardian, it seems by operation of the Guardianship of Infants Act 1886.
The decision of the first instance court not to return the girl to her mother, despite there being no misconduct on the part of the mother derogating from her right to custody, was interpreted as an exercise of the Chancery jurisdiction, taking into account the welfare of the child, rather than an exercise of the common law habeas corpus jurisdiction.
It is worth looking at the case of Thomasset v Thomasset, the following year, because the Court of Appeal there set out its understanding of the position that the law had now reached.
Dealing first with the approach of the Courts of Common Law, Lindley LJ said (at p 298) that the father had a legal right to custody of his child until the child attained 21, but the child would not be forced to remain with the father after he or she had attained the age of discretion.
He quoted the passage from Coleridge J in Rex v Greenhill which is set out above, and continued: The age at which a child is deemed to have a discretion is 14 in the case of a boy, and 16 in the case of a girl After a child has attained the age of discretion, a Court of Common Law will set it free if illegally detained, but will not force a child against
his or her will to remain with his or her father or legal guardian
Although the Court of Chancery would be in the same position as the Courts of Common Law when dealing with a writ of habeas corpus, Lindley LJ emphasised that it also had its much more extensive parens patriae jurisdiction.
This had been exercised in aid of fathers and guardians of children who had attained the age of discretion, and also to control the rights of fathers and guardians in order to secure the welfare of infants, and it was available to the Divorce Court since the Judicature Acts.
However, whilst the Divorce Court could make orders respecting the custody, maintenance, and education of infants during the whole period of infancy, that is up to 21, both members of the court expressed caution on the subject.
Lindley LJ said (p 303): I do not say that a child who has attained years of discretion can, except under very special circumstances, be properly ordered into the custody of either parent against such childs own wishes.
Lopes LJ said (p 306): No doubt a writ of habeas corpus could not go to compel a child over the age of 16 to return to the custody of the parent
when such child was unwilling to submit to such custody
It is not easy for us, accustomed to a legal system which has changed very considerably since Victorian times, to reach a perfect understanding of these cases, and I do not pretend to have done so.
Like Sir James Munby P, I would settle for Sachs LJs summary, quoted at para 55 above.
How does this historical perspective, as summarised by Sachs LJ, inform the present issue?
It can be seen from the old cases that the mere fact that a parent had guardianship of a child did not give him a free hand to make decisions about that childs life.
The extent of his ability to dictate depended upon the circumstances.
At common law, the ability to restrict the liberty of the child lasted only until the age of discretion, and the age of discretion was fixed chronologically, and not by considering the attributes of the particular child.
Equity had wider powers to govern a childs behaviour, but this was essentially by stepping in as the parent, and making decisions for the welfare of the child, rather than by enforcing the parents rights.
Terminology has changed, of course, and what was referred to as guardianship in those days has been translated into todays parental responsibility, but I do not see this older chapter in the evolution of the scope of parental authority as irrelevant in the search for the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and his property (section 3(1) of the Children Act 1989).
Equally, it is not the end of the investigation, because the common law can evolve.
I turn therefore to the important case of Gillick decided in 1985.
The President took the view (see in particular paras 85 and 125 of his judgment) that the fixed age of discretion, encountered in the old cases, has been replaced by a test of, as he termed it, Gillick capacity to determine when the exercise of parental responsibility comes to an end.
I will look in more detail at Gillick below, but it may help to preface this examination by explaining that I do not share the Presidents confidence that the Gillick test extends to the aspect of parental responsibility with which the present case is concerned.
The issue in Gillick was different in at least two important ways.
First, it was not about restricting the physical liberty of the child, but concerned decision making in the sphere of medical treatment.
Secondly, the question was whether the parent could lose his or her exclusive decision making powers before the child reached the age of 16, if the child was capable of making his or her own decision, not whether the parent was entitled to continue to make decisions after the child reached 16, if the child was not capable.
As to the first of these differences, the considerations in relation to decisions about physical liberty are not the same as those involved in other spheres where parental responsibility may operate.
In particular, article 5 of the European Convention on Human Rights was not material in the Gillick decision, but is of central importance to the present case, as can be seen from Lady Hales judgment.
Moreover, it is not only in the Convention, and the cases decided by the European Court of Human Rights, that one can find special attention being given to liberty, whether of a child or a vulnerable adult.
It is evident in the older habeas corpus authorities to which I have referred.
And it has been firmly engrained in domestic law in certain statutes, notably in the Children Act 1989 in the secure accommodation provisions, with which I deal later in this judgment, and in the Mental Capacity Act 2005 which, by section 4A, marks out deprivation of liberty for special treatment, with more attendant safeguards than other acts performed in relation to a person who lacks capacity.
Turning to the second of the differences, it has a number of components, one of which is the pivotal age of 16.
Although not determinative of the question before us, I think it is far from irrelevant that, as Lady Hale puts it at para 27 (after listing various statutory provisions in her para 26), the law accords to children who have reached the age of 16 years a status which is in some respects different from children below that age.
Of the provisions listed, I would single out section 2(5) of the Mental Capacity Act 2005 (para 26(iii) of Lady Hales judgment).
I cannot accept the Official Solicitors case that the 2005 Act constitutes a complete decision making framework for the care and treatment of those aged 16 and above who lack capacity, not least because there is an obvious overlap between the reach of the Children Act 1989 and that of the 2005 Act, and I can find nothing in the 2005 Act that could be said to indicate a general rule to the effect that, where it applies, it does so to the exclusion of other common law and statutory provisions.
However, it does seems to me that the deliberate choice of the legislature to include children of 16 to 18 years within the scope of the 2005 Act, and now (by virtue of the recent amendment to the Act, see para 49 of Lady Hales judgment) to extend a regime of administrative deprivation of liberty safeguards to them, indicates an appreciation of the different needs of this particular age group.
At risk of underlining the obvious, another important element in this second difference is that Gillick was about contracting the boundary of parental responsibility and empowering the child at an earlier age, whereas the present case is about extending the boundary of parental responsibility beyond the age at which, in relation to the particular matter in issue, it would have been taken, at common law, to have ended.
As can be seen from Sachs LJs analysis, the common law position at the time of Hewer v Bryant, in 1969, was that the power of physical control over an infant ended at the age of discretion.
For present purposes I would take that age as 16.
The common law, even in 1969, might have balked at continuing to treat a boy as reaching the age of discretion at 14, but a girl as having to wait until 16, and, if an issue about this had come up, would no doubt have evolved to iron out the difference.
It is pointless to worry, in the present context, about whether it would have equalised up or down, because we are dealing here with the position of a child between the ages of 16 and 18.
If the age of discretion had been raised above 16, thus extending the parents power of physical control into the age group with which we are concerned, that would have been of considerable significance to the debate, but I have seen nothing to suggest that that was done, and it would be extremely surprising if it had been.
So to the detail of Gillick.
Lady Hale deals with the case in para 23 of her judgment.
I propose to refer to some further passages, in order to provide some substance for the views that I have just expressed about it.
The Family Law Reform Act 1969 had provided that the consent of a minor who has attained the age of 16 years to medical treatment was as effective as if the child were of full age, and rendered it unnecessary to obtain consent from the parent or guardian.
It was the position of a child of under 16 that was in question, and in particular whether such a child could, herself, provide the necessary consent for contraceptive treatment.
It will be recalled that Mrs Gillick was arguing (see p 168D of the report) that the custody that parents have of a minor under the age of 16 necessarily involves the right to veto contraceptive advice or treatment being given to the girl, and that she failed in this argument.
Giving the first speech, Lord Fraser of Tullybelton, one of the three members of the House in the majority, spoke in terms of parental rights to control a child, which he held (p 170D) existed for the benefit of the child, not the parent, and were justified only in so far as they enabled the parent to perform his duties towards the child, and towards other children in the family.
Understandably, given the issue in the case, his speech is directed at diminishing control on the part of a parent as a child ages, rather than at the opposite problem of the child who needs parental input for a longer than usual period, although I accept that some of what he said is in general terms and could be applied to either situation.
He spoke (p 171E) of wise parents relaxing their control gradually as the child develops, and of the degree of parental control actually exercised over a particular child varying according to his understanding and intelligence.
He looked at R v Howes, In re Agar Ellis, and Hewer v Bryant (see above).
As to R v Howes, where the court declined to consider a child having discretion to consent to leaving the father before she reached 16, he said that the view that the childs intellectual ability is irrelevant cannot now be accepted.
He endorsed the criticism that had been heaped on Agar Ellis, dismissed the concept deployed in that case of absolute paternal authority continuing until a child attains majority as so out of line with present day views that it should no longer be treated as having any authority, and shared Lord Dennings view that the legal right of a parent to custody of a child was a dwindling right, as the child approached majority.
He said (p 173D): Once the rule of the parents absolute authority over minor children is abandoned, the solution to the problem in this appeal can no longer be found by referring to rigid parental rights at any particular age.
The solution depends upon a judgment of what is best for the welfare of the particular child.
This abandonment of the rule of the parents absolute authority led to the conclusion that a doctor could prescribe contraceptive treatment to a girl of under 16 without the consent of her parents, provided that, amongst other things, she would understand his advice.
Lord Scarman agreed with Lord Fraser but added his own speech.
Having considered the earlier case law, he enunciated what he had found to be the principle of law (hereafter in my discussion of his speech the principle), saying (pp 183 184): Parental rights clearly do exist, and they do not wholly disappear until the age of majority.
Parental rights relate to both the person and the property of the child custody, care, and control of the person and guardianship of the property of the child.
But the common law has never treated such rights as sovereign or beyond review and control.
Nor has our law ever treated the child as other than a person with capacities and rights recognised by law.
The principle of the law, as I shall endeavour to show, is that parental rights are derived from parental duty and exist only so long as they are needed for the protection of the person and property of the child.
The principle has been subjected to certain age limits set by statute for certain purposes: and in some cases the courts have declared an age of discretion at which a child acquires before the age of majority the right to make his (or her) own decision.
But these limitations in no way undermine the principle of the law, and should not be allowed to obscure it.
Later in his speech, Lord Scarman formulated the principle in slightly different ways.
At p 185E, the following formulation can be found: parental right or power of control of the person and property of his child exists primarily to enable the parent to discharge his duty of maintenance, protection, and education until he reaches such an age as to be able to look after himself and make his own decisions.
And at p 186D, Lord Scarman put it this way: parental right yields to the childs right to make his own decisions when he reaches a sufficient understanding and intelligence to be capable of making up his own mind on the matter requiring decision.
Understandably, in his consideration of the common laws understanding of the nature of parental right, Lord Scarmans focus was upon the particular type of parental right/duty that was in issue there, as the following passage from his speech makes clear (p 184F): It is abundantly plain that the law recognises that there is a right and a duty of parents to determine whether or not to seek medical advice in respect of their child, and, having received advice, to give or withhold consent to medical treatment.
The question in the appeal is as to the extent, and duration, of the right and the circumstances in which outside the two admitted exceptions to which I have earlier referred [order of a competent court, and emergency] it can be overridden by the exercise of medical judgment.
Although varying ages of discretion had been fixed by statute and case law for various purposes, Lord Scarman found it clear that (p 185F): this was done to achieve certainty where it was considered necessary and in no way limits the principle that parental right endures only so long as it is needed for the protection of the child.
In modern times, statute had intervened in respect of a childs capacity to consent to medical treatment from the age of 16 onwards, but neither statute nor case law had ruled on the extent and duration of parental right in respect of children under the age of 16.
So, Lord Scarman said, it was open to the House to formulate a rule (p 185H).
He was influenced, in so doing, by the fact that the law relating to parent and child is concerned with the problems of growth and maturity of the human personality.
This disposed him against the fixed age limit of 16 (below which a girl could not give valid consent) that had commended itself to the Court of Appeal.
He observed (p 186B): If the law should impose upon the process of growing up fixed limits where nature knows only a continuous process, the price would be artificiality and a lack of realism in an area where the law must be sensitive to human development and social change.
He found the earlier cases no guide to the application of the principle in the conditions of today.
He dealt specifically with the habeas corpus cases in these terms (p 187B): The habeas corpus age of discretion cases are also no guide as to the limits which should be accepted today in marking out the bounds of parental right, of a childs capacity to make his or her own decision, and of a doctors duty to his patient.
Nevertheless the age of discretion cases are helpful in that they do reveal the judges as accepting that a minor can in law achieve an age of discretion before coming of full age The principle underlying them was plainly that an order would be refused if the child had sufficient intelligence and understanding to make up his own mind.
A passage from the judgment of Cockburn CJ in R v Howes (1860) 3 El & El 332 [quoted at para 10 above] illustrates their reasoning and shows how a fixed age was used as a working rule to establish an age at which the requisite discretion could be held to be achieved by the child The principle is clear: and a fixed age of discretion was accepted by the courts by analogy from the Abduction Acts (the first being the Act of 1557, 4 & 5 Ph & M c8).
While it is unrealistic today to treat a 16th century Act as a safe guide in the matter of a girls discretion, and while no modern judge would dismiss the intelligence of a teenage girl as intellectual precocity, we can agree with Cockburn CJ as to the principle of the law the attainment by a child of an age of sufficient discretion to enable him or her to exercise a wise choice in his or her own interests.
After citing from R v D [1984] AC 778 (an appeal relating to the conviction of a father on indictment of kidnapping his five year old daughter) on the subject of parental right and a childs capacity to give or withhold a valid consent, Lord Scarman concluded (p 188H) that: as a matter of law the parental right to determine whether or not their minor child below the age of 16 will have medical treatment terminates if and when the child achieves a sufficient understanding and intelligence to enable him or her to understand fully what is proposed.
It will be a question of fact whether a child seeking advice has sufficient understanding of what is involved to give a consent valid in law.
Until the child achieves the capacity to consent, the parental right to make the decision continues save only in exceptional circumstances.
The third member of the majority, Lord Bridge, agreed with what Lord Fraser and Lord Scarman had said, without adding further reasoning of his own.
What the President drew from the speeches of Lord Fraser and Lord Scarman was, as he set out at paras 83 to 85, that the attainment of Gillick capacity is child specific, to be decided as a matter of fact in relation to each particular child.
He said: 84.
This has an important corollary.
Given that there is no longer any magic in the age of 16, given the principle that Gillick capacity is child specific, the reality is that, in any particular context, one child may have Gillick capacity at the age of 15, while another may not have acquired Gillick capacity at the age of 16 and another may not have acquired Gillick capacity even by the time he or she reaches the age of 18: cf, In re R (A Minor) (Wardship: Consent to Treatment) [1992] Fam 11, at 24 and 26.
Therefore, he said (para 85), after Gillick, the position of domestic law in relation to the aspect of custody described in Hewer v Bryant as, inter alia, the ability to restrict the liberty of the person was that: The parental power was precisely as described by Sachs LJ subject only to the substitution, when applying the principles set out by Sachs LJ in relation to the concept of the age of discretion, of the test of what we now call Gillick capacity in place of the previous fixed ages.
So, the President concluded, Keehan J was wrong to decide that a parent of an incapacitous 16 year old may not consent to confinement which would otherwise amount to a deprivation of liberty (para 115 of Keehan Js judgment) because (para 125 of the Presidents judgment), none of the statutory provisions upon which he relied assisted on the matter and: his approach does not give effect to the fundamental principle established by Gillick: namely that, in this context (see paras 79 85 above), the exercise of parental responsibility comes to an end not on the attaining of some fixed age but on attaining Gillick capacity.
In effect, Keehan J would have us go back to the approach of Cockburn CJ and Parker LJ.
As I have explained (see above at para 69 et seq), I do not share the Presidents confidence that the Gillick test extends to the aspect of parental responsibility with which the present case is concerned, or that the Gillick decision can, without more, be treated as regulating the situation where the objective is not to contract the boundaries of parental responsibility, but to extend them.
In my view, as I said above, it is of real significance that in Gillick, the House of Lords were dealing with a materially different issue.
The respondent recognises that the focus of Gillick was specific to the issue of consent to medical treatment of children under 16, but invites this court to conclude that the test laid down there applies beyond that scope and up to the age of majority.
I accept that certain things that were said in Gillick were capable of being interpreted as applying to a situation such as the present, but it would not, in my view, be appropriate to interpret them in that way, so as to draw into the Gillick net a situation which is diametrically opposed to that with which the House was concerned (not the tempering of parental responsibility in relation to the under 16 age group, but its expansion in relation to those aged 16 and 17 so as to give it a role which would not otherwise be afforded by the common law).
My unwillingness to adopt this interpretation is reinforced by what I perceive to be the distinct, and rather special, features of the field of deprivation of liberty with which we are here concerned.
It follows that the rights of a parent in relation to restricting the liberty of a child remain, at common law, as described in Hewer v Bryant.
The inescapable result of that is, I think, that it is not within the scope of parental responsibility for parents to give authority for their 16 year old child to be confined in a way which would, absent consent, amount to a deprivation of liberty.
In so saying, I do not intend in any way to water down the important changes brought about by Gillick or to alter the way in which it has been applied in many spheres of family law.
I have only been concerned to consider its application in the very specific context of confinement of children of the ages of 16 to 18.
The position in relation to the confinement of children who are under 16 might be different for a variety of reasons.
It could be argued, for example, that the Gillick decision is more readily applicable to under 16s than to over 16s, given that this was the age group with which the House was concerned.
It would then be arguable that the position in relation to that group was as the President set out at para 85 of his judgment (quoted above) ie that the parental ability to restrict a childs liberty continues to be as described by Sachs LJ in Hewer v Bryant, but with a Gillick test rather than the previous fixed ages.
But the effect of this, applied to a child who lacked capacity, would not be to leave a gap in the parents powers to cater for the particular needs of a child with disability.
On the contrary, the child not having attained Gillick capacity, there would be nothing to bring to an end the parents common law power to confine the child as required in the childs interests.
To put it in the terms used in this appeal, it would remain within the ambit or zone of the parents parental responsibility.
However, there would, no doubt, be other arguments to be aired on the point, and I have not formed even a preliminary view about it.
In summary, therefore, I would hold that as a matter of common law, parental responsibility for a child of 16 or 17 years of age does not extend to authorising the confinement of a child in circumstances which would otherwise amount to a deprivation of liberty.
For me, this reinforces the conclusion to which Lady Hale has come by the route she sets out in paras 42 to 49 of her judgment.
She concludes, in para 50, by saying that logically her conclusion would also apply for a younger child, but I would prefer to leave this separate question entirely open, to be decided in a case where it arises.
I should also stress, before moving on to the discrete issue in relation to section 25 of the Children Act 1989 and its potential application to living arrangements such as Ds, that I have been looking specifically at the common law power of a parent in relation to a childs liberty.
I have not intended to cast doubt on any existing understanding about the operation of parental responsibility in different spheres of a childs life.
And nothing that I have said is intended to cast any doubt on the powers of the courts, recognised in the early cases to which I have referred, and still available today in both the parens patriae jurisdiction and under statute, notably the Children Act 1989, to make orders in the best interests of children up to the age of majority, with due regard to their wishes and those of their parents, but not dictated by them.
Does section 25 of the Children Act 1989 apply to living arrangements such as Ds?
Where it applies, section 25 of the Children Act 1989 regulates the circumstances in which children can be placed and kept in accommodation provided for the purpose of restricting liberty and dictates that, save for very short periods, the courts authorisation of the arrangements is required.
If the section applies to living arrangements like Ds, making court authorisation obligatory, the debate as to whether it falls within the scope of parental responsibility to authorise a childs confinement would be of far less practical significance.
In order to set that debate in its proper context, the scope of section 25 was therefore explored.
In the light of this exploration, it appears likely that a significant number of children living in confined circumstances will be outside the ambit of the section, although clearly each case will depend upon its own facts.
Accordingly, the parental responsibility issue has a real practical importance.
The reasons for this provisional conclusion are set out below.
They deal with the law as it applies to accommodation in England; there is a separate statutory and regulatory regime where the accommodation is in Wales, albeit in similar terms.
Section 25 provides as follows, omitting provisions concerned solely with Scotland: 25.
Use of accommodation for restricting liberty (1) Subject to the following provisions of this section, a child who is being looked after by a local authority in England or Wales may not be placed, and, if placed, may not be kept, in accommodation in England or Scotland provided for the purpose of restricting liberty (secure accommodation) unless it appears (a) that he has a history of absconding and is (i) likely to abscond from any other description of accommodation; and if he absconds, he is likely to suffer (ii) significant harm, or (b) that if he is kept in any other description of accommodation he is likely to injure himself or other persons. (2) The Secretary of State may by regulations (a) specify a maximum period (i) beyond which a child may not be kept in secure accommodation in England or Scotland without the authority of the court; and for which the court may authorise a child (ii) to be kept in secure accommodation in England or Scotland; (b) empower the court from time to time to authorise a child to be kept in secure accommodation in England or Scotland for such further period as the regulations may specify; and (c) provide that applications to the court under this section shall be made only by local authorities in England or Wales. (3) It shall be the duty of a court hearing an application under this section to determine whether any relevant criteria for keeping a child in secure accommodation are satisfied in his case. (4) If a court determines that any such criteria are satisfied, it shall make an order authorising the child to be kept in secure accommodation and specifying the maximum period for which he may be so kept. (5) On any adjournment of the hearing of an application under this section, a court may make an interim order permitting the child to be kept during the period of the adjournment in secure accommodation. (5A) (6) No court shall exercise the powers conferred by this section in respect of a child who is not legally represented in that court unless, having been informed of his right to apply for the provision of representation under Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and having had the opportunity to do so, he refused or failed to apply. (7) The Secretary of State may by regulations provide that (a) this section shall or shall not apply to any description of children specified in the regulations; (b) this section shall have effect in relation to children of a description specified in the regulations subject to such modifications as may be so specified; (c) such other provisions as may be so specified shall have effect for the purpose of determining whether a child of a description specified in the regulations may be placed or kept in secure accommodation in England or Scotland. (d) a child may only be placed in secure accommodation that is of a description specified in the regulations (and the description may in particular be framed by reference to whether the accommodation, or the person providing it, has been approved by the Secretary of State or the Scottish Ministers). (8) The giving of an authorisation under this section shall not prejudice any power of any court in England and Wales or Scotland to give directions relating to the child to whom the authorisation relates. (8A) (9) This section is subject to section 20(8).
Where applicable, the section operates to prevent a child being placed or kept in secure accommodation unless one of the two conditions set out in section 25(1)(a) and (b) is satisfied.
The initial placement need not involve the court, but regulations made under section 25(2) provide that a child may not be kept in secure accommodation without court authority for more than 72 hours in any period of 28 consecutive days (regulation 10, Children (Secure Accommodation) Regulations 1991 (SI 1991/1505), hereafter the 1991 Regulations).
There are limits on the period that can be authorised by the court, being three months in the first instance, and a further period of up to six months thereafter (regulations 11 and 12).
There is a misconception that section 25 applies only to children who are being looked after by a local authority.
These are the children to whom section 25(1) refers, but section 25(7) gives the Secretary of State power to provide, by regulations, that the section shall or shall not apply to other descriptions of children, and he did so in the 1991 Regulations.
Various categories of children are excluded from the operation of the section including, by regulation 5(1), a child who is detained under the provisions of the Mental Health Act 1983, and, by regulation 5(2)(a), a child who is being accommodated under section 20(5) of the Children Act 1989 (which relates to certain accommodation in a community home of people who are over 16 but under 21 years of age).
In contrast, regulation 7 widens the reach of section 25, extending it to children other than those looked after by a local authority.
It provides: (1) Subject to regulation 5 and paras (2) and (3) of this regulation section 25 of the Act shall apply (in addition to children looked after by a local authority) (a) to children, other than those looked after by a local authority, who are accommodated by health authorities, National Health Service trusts established under section 5 of the National Health Service and Community Care Act 1990, NHS foundation trusts or local authorities in the exercise of education functions or who are accommodated pursuant to arrangements made by the Secretary of State, the National Health Service Commissioning Board or a clinical commissioning group under the National Health Service Act 2006, and to children, other than those looked after by a (b) local authority, who are accommodated in care homes or independent hospitals.
Regulation 7(2) and (3) modify the wording of section 25 so as to reflect its widened scope in the cases covered by regulation 7(1).
With regulation 7 casting the section 25 net beyond looked after children, the possibility that a child is in secure accommodation cannot be dismissed simply on the basis that the child is not being looked after by the local authority.
Furthermore, the inclusion within section 25 of children in hospitals and care homes demonstrates that the traditional view that secure accommodation has a punitive quality (see for example In re AB (A Child) (Deprivation of Liberty: Consent) [2015] EWHC 3125 (Fam); [2016] 1 WLR 1160, para 31) will not always be valid, so that cannot be used as a reliable hallmark of secure accommodation either.
Deprived of obvious insignia such as these, how is it to be determined whether a particular childs circumstances are covered by section 25? As established by section 25(1), the concern of the section is a child who is placed, and if placed, kept in accommodation provided for the purpose of restricting liberty (secure accommodation).
This definition, which is mirrored in regulation 2(1) of the 1991 Regulations, is the only definition of secure accommodation, so the hallmark by which such accommodation has to be identified is that it is accommodation provided for the purpose of restricting liberty.
The Secretaries of State argue that identification is simplified in the case of childrens homes because, they say, Parliament has provided a mechanism for determining which childrens homes have the nature of being secure accommodation.
The mechanism suggested derives from regulation 3 of the 1991 Regulations.
This provides that [a]ccommodation in a childrens home shall not be used as secure accommodation unless it has been approved by the Secretary of State for that use.
It seems that the Secretaries of State argue that where the accommodation in question is in a childrens home, it will count as secure accommodation only if it has been approved by the Secretary of State for that use.
The logical corollary of that would appear to be that no matter what the living arrangements of a child in an unapproved childrens home, he or she is not placed/kept in accommodation provided for the purpose of restricting liberty and therefore not within section 25.
This argument might owe something to the regime in relation to local authority homes which was discussed in R v Secretary of State for the Home Department, Ex p A [2000] 2 AC 276 (see later).
It is not necessary to determine, in the present case, whether it is correct in the different context of section 25, but it should be acknowledged that it does give rise to some questions.
Whilst it can readily be accepted that the intention is that only properly authorised childrens homes are to be used as accommodation for the purpose of restricting liberty, it does not necessarily follow that, in practice, a child could not find him or herself placed or kept in a childrens home which, but for the fact that it does not have the Secretary of States approval, has every appearance of being secure accommodation.
If the argument advanced by the Secretaries of State is right, such children might be doubly prejudiced ie placed in an unapproved childrens home and outside the protective regime of section 25.
Given the shortage of approved secure childrens homes, highlighted by the Court of Appeal in In re T (A Child) [2018] EWCA Civ 2136, this is a risk which cannot be ignored.
In In re T, the appellant was 15 years old and subject to a full care order.
The local authority proposed that she be detained in a unit which was not an approved childrens home, and sought authority from the High Court for the restriction of the childs liberty, relying upon the inherent jurisdiction.
It is evident from the judgment of the President of the Family Division (with whom the other members of the court agreed) that such applications are not uncommon.
At para 5, he said that there are many applications being made to place children in secure accommodation outside the statutory scheme laid down by Parliament, expressing concern about the situation (see also paras 88 and 89).
No question seems to have been raised as to whether it is proper for the High Courts inherent jurisdiction to be used to authorise the restriction of a childs liberty in an unapproved childrens home.
This might, perhaps, have been because the childs accommodation was not in fact in a childrens home as defined for the 1991 Regulations (see regulation 2) and therefore not covered by the prohibition in regulation 3, but given the limited details available about the childs circumstances, it is impossible to know.
In any event, even if the approach commended by the Secretaries of State is correct, it would not serve to identify secure accommodation in all its various settings, but only in so far as childrens homes are concerned, and it would leave unanswered questions in relation to many other children.
Accordingly, there being no reliable and universally applicable shortcuts to identifying secure accommodation, it is necessary to look more closely at the wording of section 25(1) in order to determine what circumstances fall within it.
The parties rightly stress the need to interpret the section with an eye to the whole scheme in which it takes its place.
Local authorities have far reaching welfare obligations towards children.
Notably, under section 20 of the Children Act 1989, they have a duty to provide accommodation for children in need, and they must also address the accommodation and other needs of children in relation to whom care orders have been made.
The children who require help will present with all sorts of different problems, and there will be those whose care needs cannot be met unless their liberty is restricted in some way.
But by no means all of these children will fall within the criteria set out in section 25(1)(a) and (b), which are the gateway to the authorisation of secure accommodation.
It seems unlikely that the legislation was intended to operate in such a way as to prevent a local authority from providing such a child with the care that he or she needs, but an unduly wide interpretation of secure accommodation would potentially have this effect.
It is possible to imagine a child who has no history, so far, of absconding, and who is not likely actually to injure himself or anyone else, so does not satisfy section 25(1)(a) or (b), but who, for other good reasons to do with his own welfare, needs to be kept in confined circumstances.
If section 25 applies whenever a childs liberty is restricted, local authorities will not be able to meet the welfare needs of children such as this.
And, of course, it is similarly possible to envisage children in hospitals and care homes who need a degree of confinement, but do not satisfy either of the limbs of section 25(1).
Putting it another way, the criteria set for the placing or keeping of a child in secure accommodation might be taken to reveal something of the problems which it was anticipated that children in secure accommodation would present.
This, in turn, could be taken as a pointer towards the characteristics that one could expect to find in secure accommodation being used to meet those problems.
It is also worth noting, when considering how section 25 fits into the statutory scheme, that a court determining an application under the section does not have the childs welfare as its paramount consideration, as would normally be the case when the court determines any question with respect to the upbringing of a child (section 1 of the Children Act 1989).
If any of the relevant criteria for keeping a child in secure accommodation are satisfied, the court is obliged to make the order authorising the child to be kept in secure accommodation (section 25(4)).
It would be surprising if section 25 were intended to be interpreted in such a way as to extend this displacement of the courts welfare role beyond a relatively circumscribed group of children whose circumstances make this unavoidable.
Underlining this, it is worth noting that where the position of a child of 16 or 17 is being considered in the Court of Protection under the Mental Capacity Act 2005, welfare is the touchstone, as deprivation of liberty will only be endorsed where it is in the best interests of the child.
So, the challenge is to interpret section 25 in such a way as to provide the protection intended by the legislature, without getting in the way of meeting the varied needs of the children for whom hospitals, care homes, and local authorities (in the exercise of their social services and education functions) have responsibility.
We are grateful to the parties for the valuable detailed written submissions they have all made to assist with this process; as, for the most part, they traverse similar ground, it is unnecessary to attribute submissions in what follows.
It is unnecessary also to address all the arguments advanced, given that we are not making a definitive decision as to the operation of section 25.
It is submitted that the focus should be on the accommodation and the purpose for which it is provided, rather than upon the regime within the accommodation.
This would be consistent with section 25(1)(a) and (b) which, in setting the criteria for the use of secure accommodation, stipulate that the child may not be placed/kept in secure accommodation unless it appears that he is likely to abscond from any other description of accommodation or to injure himself or others if he is kept in any other description of accommodation.
This contrast of secure accommodation with any other description of accommodation can be read as supporting the notion that secure accommodation is a description of accommodation, rather than a description of a regime of care.
This is an interpretation which also gains support from R v Secretary of State for the Home Department, Ex p A [2000] 2 AC 276.
The 15 year old offender in that case had been remanded to a local authority childrens home which was not approved by the Secretary of State for the purpose of restricting liberty, but he was subject to a curfew and other conditions whilst there.
The issue was whether he should be given credit, in serving his sentence of detention in a young offender institution, for his period in the local authority accommodation.
That depended on whether it was covered by section 67(1A)(c) of the Criminal Justice Act 1967 which entitled an offender to have his sentence reduced by: (c) any period during which, in connection with the offence for which the sentence was passed, he was remanded or committed to local authority accommodation by virtue of an order under section 23 of the Children and Young Persons Act 1969 or section 37 of the Magistrates Courts Act 1980 and in accommodation provided for the purpose of restricting liberty.
The legislative scheme with which the House was concerned was, of course, different from the provisions which concern us.
Broadly speaking, by virtue of (inter alia) section 23 of the Children and Young Persons Act 1969, a court remanding a child or young person who had committed, or was alleged to have committed, a criminal offence could release him on bail or remand him to local authority accommodation, in either case with or without conditions.
In the case of certain offenders who had reached 15 years of age, the court could require [the designated local] authority to comply with a security requirement, that is to say, a requirement that the person in question be placed and kept in secure accommodation (section 23(4)).
Section 23(12) defined secure accommodation as accommodation which is provided in a community home, a voluntary home or a registered childrens home for the purpose of restricting liberty, and is approved for that purpose by the Secretary of State.
It will be noted that this definition differs from that in section 25 of the Children Act, in that it makes approval by the Secretary of State an integral part of the definition of secure accommodation, whereas the section 25 definition makes no reference to such approval which is, instead, the subject of regulation 3 of the 1991 Regulations.
The local authority home in which the offender was accommodated on remand was not approved by the Secretary of State, so did not qualify as secure accommodation as such.
But it was argued that section 67(1A)(c) was satisfied anyway, by virtue of the restrictions placed upon him whilst he was living there.
A useful review of the history of the provisions as to secure accommodation in the civil and the criminal spheres can be found in the speech of Lord Clyde (with whom all the other members of the House agreed), commencing at p 285, although inevitably the law has moved on again since the decision.
Then, at p 287, dealing with the construction of the phrase and in accommodation provided for the purpose of restricting liberty at the end of section 67(1A)(c), Lord Clyde said: The use of the expression accommodation provided in the statutory phraseology is to my mind significant.
The word accommodation refers to the place where the person is to be accommodated.
The phrase designates a particular class or kind of accommodation.
It is accommodation which has been provided for a particular purpose.
The phrase does not refer to any accommodation where the liberty of a person may be restricted.
The reference intended by the language used is in my view not simply to a regime of some kind whereby the persons liberty is restricted, but to the nature of the accommodation itself.
The phrase is looking to a category of accommodation, namely accommodation which has been provided for the stated purpose.
The obvious category of accommodation which can be identified as having been provided for the purpose of restricting liberty is that which came to be referred to as secure accommodation.
The same point can be taken from the repeated use of the word in which appears in relation to police detention in paragraph (a), to custody in paragraph (b) and to accommodation in paragraph (c).
It is the place in which the person is situated, and in particular its nature, rather than any controls over his movements, to which the subsection is looking.
Similarly, Lord Hope (with whom the members of the Appellate Committee other than Lord Clyde agreed) said, at p 282, that: the words provided for the purpose of restricting liberty appear to direct attention to the nature of the accommodation and the purpose for which it is provided, not to the effect on the persons liberty of any conditions to which he may be subjected under section 23(7) of the Act of 1969.
Thus the additional requirement indicated by the word and is that the accommodation to which the person was committed must have been for that purpose and of that character.
Both Lord Clyde and Lord Hope were persuaded not only by the wording of the provision but also by practical considerations that this construction was correct.
By focusing on whether the offender was in what Lord Clyde called qualifying accommodation (p 289E), the institution detaining the offender would be able to apply the appropriate credit against the sentence without having to form judgments about the precise conditions under which the individual offender had been held there (see Lord Hope at p 283 and Lord Clyde at p 289).
Lord Clyde was clearly equating qualifying accommodation for section 67(1A)(c) purposes with secure accommodation as defined in section 23(12), as he envisaged that all that was necessary to ascertain whether the offender had been in qualifying accommodation was to see whether it had been approved by the Secretary of State as secure accommodation.
It would not be right to regard R v Secretary of State for the Home Department, Ex p A as determinative of the ambit of section 25 of the Children Act 1989.
Although the phrase considered by the House of Lords there also features in section 25, the context is obviously different.
There, by training the lens on the accommodation itself, the House was able to ensure that there was a simple means of identifying relevant periods on remand, merely by looking to see whether or not the particular local authority accommodation had the Secretary of States approval.
Focusing on the accommodation itself does not, however, provide such a simple answer to the problem of what is secure accommodation within section 25.
Section 25 extends well beyond local authority homes, and undoubtedly encompasses secure accommodation which does not have to be approved by the Secretary of State.
Furthermore, the purpose of the provisions considered by the House of Lords was very different from the purpose of section 25.
They were concerned with a scheme which conferred power on a court remanding a child to local authority accommodation to dictate that the child should be kept in secure accommodation as narrowly defined by section 23(4) of the Children and Young Persons Act, and confined credit for time spent in local authority accommodation to that type of accommodation.
In contrast, what section 25 has to say about secure accommodation is of much wider application.
It does not set out to dictate where a local authority must place/keep a particular child, but to regulate, in both local authority and non local authority settings, the circumstances in which a child can be placed/kept in secure accommodation as defined in the section.
Nevertheless, given that the House of Lords were concerned with the same phrase as features in section 25, their interpretation must carry weight.
Coming closer to home, we are invited to endorse the approach that Wall J took to the phrase accommodation provided for the purpose of restricting liberty in In re C (Detention: Medical Treatment) [1997] 2 FLR 180 at p 193.
The case concerned a 16 year old girl suffering from anorexia nervosa.
The local authority made an application for an order under the inherent jurisdiction authorising her detention in a clinic for medical treatment.
Wall J was faced with the question whether the courts powers under the inherent jurisdiction were ousted by the scheme laid down by Parliament in section 25, and in addressing that issue, he needed to determine whether the clinic was, in fact, secure accommodation within section 25.
Having reviewed three earlier authorities (R v Northampton Juvenile Court, Ex p London Borough of Hammersmith and Fulham [1985] FLR 193, South Glamorgan County Council v W and B [1993] 1 FLR 574, and A Metropolitan Borough Council v DB [1997] 1 FLR 767) he said (p 193): Whilst I respectfully agree that premises which are not designed as secure accommodation may become secure accommodation because of the use to which they are put in the particular circumstances of individual cases, it does seem to me that the more natural meaning of the words provided for the purpose of restricting liberty is designed for, or having as its primary purpose the restriction of liberty.
The circumstances in which section 25 operates are based on the premise that the child has a history of absconding and is likely to abscond from any other description of accommodation.
The alternative premise, that if he is kept in any other description of accommodation he is likely to injure himself or others once again envisages a secure regime designed to prevent self harm.
I therefore prefer to look at the clinic, and ask myself: is it accommodation provided for the purpose of restricting liberty? This is, of course, as Cazalet J indicates, a question of fact.
Having said that, he went on to examine the regime operated by the particular clinic, before finding that it was not secure accommodation.
In his view, the purpose of placement of a child in the clinic is to achieve treatment: the accommodation provides a structure for that treatment.
The fact that there was a degree of restriction on the patients liberty was an incident of the treatment programme, and the fact that steps could be taken to prevent the child from leaving the premises did not, of itself, render the clinic secure accommodation.
Section 25 has played no direct role in the proceedings in the present case, and the bulk of the argument about it has occurred in writing after the conclusion of the hearing in this court.
Nothing that we say about it will conclusively resolve the difficult questions that arise as to its scope and operation, and that is as it should be, because it would be undesirable that final views should be formed, without there having been an opportunity for oral argument.
Furthermore, it would be better that such issues as there are about the scope of section 25 should be resolved in a case where the relevant facts have been found, so that the section can be interpreted with reference to a real factual situation.
Because the issue was not under consideration at all before the appeal arrived in this court, factual findings have not been made in relation to all the matters relevant to the application of section 25 in Ds case.
As, by virtue of his age, D is now no longer within the scope of the Children Act, there would be absolutely no point in remitting the case for evidence to be heard, particularly as none of the parties contends that this is a section 25 case.
The exercise in which we have engaged has, however, been sufficient to persuade us that section 25 is not intended to be widely interpreted, so as to catch all children whose care needs are being met in accommodation where there is a degree of restriction of their liberty, even amounting to a deprivation of liberty.
There is much force in the argument that it is upon the accommodation itself that the spotlight should be turned, when determining whether particular accommodation is secure accommodation, rather than upon the attributes of the care of the child in question.
This fits with the language used in section 25(1), when read as a whole.
It is also consistent with the objective of ensuring that the section is not so widely drawn as to prejudice the local authoritys ability to offer children the care that they need, and it ought to make it more straightforward to apply than would be the case if the issue were dependent upon the features of a childs individual care regime, so that the child might be found to be in secure accommodation in all manner of settings.
A restrained construction of the section is also justified by the fact that, far from being concerned with the routine sort of problems that might require a childs freedom to be curtailed, the section has a last resort quality about it.
It is concerned with accommodation which has the features necessary to safeguard a child with a history of absconding who is likely to abscond from any other description of accommodation or to prevent injury where the child in question would be likely to injure himself or others if kept in any other description of accommodation.
Of course, training the spotlight on the accommodation itself does not provide a complete answer to the question as to what falls within the definition of secure accommodation.
Some secure accommodation will be readily recognisable from the fact that it is approved as such by the Secretary of State, but that is by no means a universal hallmark, as that approval is not needed for all types of secure accommodation.
Moreover, given that it is contemplated that secure accommodation might be provided in places such as hospitals, it seems likely that there will not infrequently be more than one purpose of the child being in the accommodation, and there is much to commend Wall Js approach to such a situation, that is to count within the definition of secure accommodation designed for or having as its primary purpose the restriction of liberty.
Equally, the section will have to be interpreted in such a way as to allow for situations where only a part of the premises is made over to restricting liberty.
LADY ARDEN:
I agree with the judgment of Lady Hale on the effect of article 5 of the European Convention on Human Rights (the Convention).
She has held that parental consent to a childs living circumstances is not effective to prevent a child, who has mental disabilities and cannot give any relevant consent to those circumstances, from being deprived of their liberty for the purposes of article 5 if their living circumstances mean that they are not free and the restrictions on them go beyond those which are normal for a child of their age.
In this case, the child, D, is over 16 years of age.
I agree with Lady Hale (para 50) that it is unnecessary in this case to express any view on the question whether there would be a deprivation of liberty for the purposes of article 5 if a child who has not yet attained that age has their liberty restricted to an extent that is not normal for a child of their age.
Likewise I express no view on the question of parental consent for medical treatment or other matters outside article 5.
The key case on article 5 in this context is Nielsen v Denmark (1988) 11 EHRR 175, which Lady Hale analyses at paras 34 to 38 above.
As Lady Hale explains, it is the normality of the parents control over the child, as compared with arrangements for children of a similar age, that is the key to understanding this difficult decision of the European Court of Human Rights (the Strasbourg court).
In the present case, the position can simply be compared with the position of other children in the UK.
It might in future be necessary to have regard to the practice in other contracting states to the Convention, but that does not arise in this case.
I have one qualification.
Article 5 is not a qualified right and there is no scope for holding that the denial of a persons liberty engages article 5 but does not amount to a violation because it serves a legitimate aim and is proportionate and necessary in a democratic society.
Exceptionally there are situations where the Strasbourg court finds that in effect those tests were met but it can only do so by holding that there is no deprivation of liberty for article 5 purposes.
Thus, in Austin v United Kingdom 35 EHRR 14, the complainants were demonstrators who had been kettled by the police, that is, kept against their will within a police cordon.
The Strasbourg court held that there was no violation because the need for the police to maintain order in this situation meant the denial of liberty was not a deprivation of liberty for article 5 purposes.
So, too, in Nielsen, the Strasbourg court had held that there was no deprivation of liberty for article 5 purposes.
It follows that there will be cases where a person loses their liberty but the acid test in Cheshire West, as Lady Hale describes it, does not apply.
That conclusion is shown by observing that Ds case is about living arrangements.
It is not about a child, or anyone else, needing life saving emergency medical treatment.
For the reasons which the Court of Appeal (McFarlane LJ, Sir Ross Cranston and myself) gave in R (Ferreira) v Inner South London Senior Coroner [2018] QB 487, the situation where a person is taken into (in that case) an intensive care unit for the purpose of life saving treatment and is unable to give their consent to their consequent loss of liberty, does not result in a deprivation of liberty for article 5 purposes so long as the loss of liberty is due to the need to provide care for them on an urgent basis because of their serious medical condition, is necessary and unavoidable, and results from circumstances beyond the states control (para 89).
I pass on to section 25 of the Children Act 1989 and to the judgment of Lady Black.
So far as section 25 is concerned, this was unfortunately dealt with only on written submissions.
I have read the judgment of Lady Black, in which Lady Hale concurs, with admiration.
I have read it as laying down a marker for the future.
I have read it conscious of the depth of experience which Lady Black and Lady Hale bring to bear in the field of family law, and particularly the circumstances in those childrens cases which may be affected by a ruling on section 25.
It is evident that there is a very serious issue here, but I do not express any final view until a case arises which raises this very question.
I am far from disagreeing with them, but I would like to reach a final view against the facts of an actual case.
I express no view on the other issues as to the common law in Lady Blacks judgment for the same reason.
It follows that I would allow this appeal.
LORD CARNWATH: (dissenting) (with whom Lord Lloyd Jones agrees)
Introduction
As Lady Hale says, this case is about the limits of parental responsibility in the case of a young person who has reached the age of 16, but does not have the mental capacity to make decisions for himself.
This arises in the context of article 5 of the European Convention on Human Rights by which: Everyone has the right to liberty and security of person.
No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law.
As she also explains (para 1), and as is common ground, the application of article 5 is to be tested by reference to three components: (a) the objective component of confinement in a particular restricted place for a not negligible length of time; (b) the subjective component of lack of valid consent; and (c) the attribution of responsibility to the State.
This is the effect of Storck v Germany (2005) 43 EHRR 6 (Storck), followed by this court in Surrey County Council v P; Cheshire West and Chester Council v P [2014] UKSC 19; [2014] AC 896 (Cheshire West).
It is further common ground that on the facts of this case, components (a) and (c) are satisfied.
The area of debate is about component (b): whether on the facts of this case the exercise of parental responsibility could make up for the lack of consent by D himself.
That it could do so while he was under the age of 16 was not in dispute in the courts below.
That was supported by reference to the decision of the Strasbourg court in Nielsen v Denmark (1988) 11 EHRR 175 (see Lady Hale para 34).
It is worth stating at the outset the reasons for this view, as stated by Keehan J, and adopted by Sir James Munby P giving the leading judgment in the Court of Appeal (para 108): The parents of this young man are making decisions, of which he is incapable, in the welfare best interests of their son.
It is necessary for them to do so to protect him and to provide him with the help and support he needs.
I acknowledge that D is not now cared for at home nor in a home setting.
His regime of care and treatment was advised by his treating clinicians and supported by his parents.
They wanted to secure the best treatment support and help for their son.
They have done so.
It has proved extremely beneficial for D who is now ready to move to a new residential home out of a hospital setting.
What other loving and caring parent would have done otherwise? Those arrangements are and were made on the advice of the treating clinicians.
All professionals involved in his life and in reviewing his care and treatment are agreed that these arrangements are overwhelmingly in Ds best interests.
On the facts of this case, why on public policy or human rights grounds should these parents be denied the ability to secure the best medical treatment and care for their son? Why should the state interfere in these parents role to make informed decisions about their sons care and living arrangements? I can see no reasons or justifications for denying the parents that role or permitting the state to interfere in Ds life or that of his family.
I accept the position might well be very different if the parents were acting contrary to medical advice or having consented to his placement at Hospital B, they simply abandoned him or took no interest or involvement in his life thereafter.
The position could not be more different here.
Ds parents have regular phone calls with him.
They regularly visit him at the unit.
Every weekend D has supported visits to the family home.
He greatly enjoys spending time at home with his parents and his younger brother.
In my judgment, on the facts of this case, it would be wholly disproportionate, and fly in the face of common sense, to rule that the decision of the parents to place D at Hospital B was not well within the zone of parental responsibility. (paras 58 64)
The good sense of that appraisal has not, as I understand it, been challenged by any of the parties to this court.
Nor is it suggested that, when D became 16, anything changed in practical terms, whether in respect of his own needs and best interests, or of his relationship with his parents or the public agencies involved.
However, Keehan J was persuaded by the Official Solicitor that there was a fundamental change in the legal position so that the approval of the court was now required.
The Court of Appeal disagreed.
That view is challenged in this court by the Official Solicitor, with the support of the Equality and Human Rights Commissioner as first intervener.
The Court of Appeals approach is defended by the Council as the statutory authority responsible for safeguarding Ds interests.
They are supported by the Secretaries of State for Education and Justice.
They have intervened as having policy responsibility respectively for the Mental Capacity Act 2005 (MCA 2005) and the Children Act 1989, and for the Court Service.
They are concerned that the outcome of the appeal could have significant implications for a large number of 16 and 17 year olds, who are being held in care across a variety of settings, ranging from foster care placements to residential holiday schemes for disabled children.
They also point out that the appeal takes place against the background of the Law Commissions review of the law of Mental Capacity and Deprivation of Liberty, and in particular the deprivation of liberty safeguards (DoLS) (Law Com No 372).
As the Commission explained in its Consultation Paper (CP No 222, paras 2.39 40), that review was prompted by the massive and unanticipated increase in cases requiring to be dealt with under the DoLS arrangements (from 11,300 in 2013 4 to 113,300 in 2014 5), following the decision of this court in the Cheshire West case.
Their review has been followed more recently by the consideration by Parliament of the Mental Capacity (Amendment) Bill (now the Mental Capacity (Amendment) Act 2019).
That provides for the replacement of DoLS by a new scheme of safeguards (the Liberty Protection Safeguards) for those who lack capacity under the MCA and who are deprived of their liberty, which will extend to 16 and 17 year olds.
The background to the 2019 Act was described in the Explanatory Notes: 6.
In 2014 the decision of the Supreme Court in the case of Cheshire West gave a significantly wider interpretation of deprivation of liberty than had been previously applied in the health and social care context.
This increased considerably the number of people treated as being deprived of liberty, and correspondingly increased the obligations on public authorities (primarily local authorities) in connection with authorising, and providing safeguards for, these extra deprivations of liberty. 7.
Following Cheshire West, the Government asked the Law Commission to review this area of law.
The Commissions final report, which included a draft Bill, called for the DoLS to be replaced as a matter of pressing urgency and set out a replacement scheme.
The new scheme was intended to establish a proportionate and less bureaucratic means of authorising deprivation of liberty.
The Law Commission noted that its remit had been limited to children of 16 or over (para 7.20).
It also noted the complicating factor that in the Nielsen case the Strasbourg court had recognised the right of parents in certain cases to consent to what would otherwise be a deprivation of liberty for their children; but it also noted that Keehan J (in the present case, decided since the consultation paper) had limited that approach to children under 16 (para 7.22).
When what became the 2019 Act was presented to Parliament it was limited to those over 18, but it was later extended to those over 16.
That followed an amendment proposed in the House of Lords by (inter alios) Baroness Thornton.
It is of interest that she referred to evidence of the Royal College of Psychiatrists which has pointed out that case law has established that the parents of children under 16 may give consent to what would otherwise constitute a deprivation of a childs liberty where the matter falls within the zone of parental responsibility, but it has been held that a parent cannot give equivalent consent for a 16 to 17 year old.
It therefore argues that the Bill should be extended to 16 to 17 year olds to provide them with better safeguards, as they are not served well at present. (HL Committee Stage Day 1 Volume 792 Column 1832)
It seems therefore that the fixing of the age threshold in the new Act at 16 was directly related to the then understanding of the scope of parental responsibility as reflected in the judgment of Keehan J in the present case.
Parental responsibility
There is no dispute about the importance of the principle of parental responsibility in the common law.
As Sir James Munby P said in In re H B (Contact) [2015] EWCA Civ 389; [2015] 2 FCR 581, para 72: parental responsibility is more, much more than a mere lawyers concept or a principle of law.
It is a fundamentally important reflection of the realities of the human condition, of the very essence of the relationship of parent and child.
Parental responsibility exists outside and anterior to the law.
Parental responsibility involves duties owed by the parent not just to the court.
First and foremost, and even more importantly, parental responsibility involves duties owed by each parent to the child.
Not surprisingly a corresponding principle is recognised under the European Convention on Human Rights.
As the Strasbourg court said in Nielsen v Denmark (1988) 11 EHRR 175, family life in the Contracting States encompasses a broad range of parental rights and responsibilities in regard to care and custody of minor children.
The care and upbringing of children normally and necessarily require that the parents or an only parent decide where the child must reside and also impose, or authorize others to impose, various restrictions on the childs liberty.
Family life in this sense, and especially the rights of parents to exercise parental authority over their children, having due regard to their corresponding parental responsibilities, is recognized and protected by the Convention, in particular by article 8.
Indeed the exercise of parental rights constitutes a fundamental
element of family life
The common law principle is given specific statutory recognition in section 3 of the Children Act 1989, which defines parental responsibility as encompassing all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and his property.
A child in this context means a person under the age of 18 (section 105(1)).
Neither definition is in terms modified by anything in the MCA 2005 or the 2019 Act.
The judgments below
The judges conclusion that the legal position changed when D became 16 turned principally on his view of the change in the statutory framework applicable to such children.
He said: 103.
I am entirely persuaded that Parliament has on numerous occasions, , chosen to distinguish the legal status of those who have not attained the age of 16 years, those aged 16 and 17 and, finally, those who have attained their majority. 104.
I am particularly persuaded by the fact that Parliament chose to include incapacitous 16 and 17 year olds within the remit of the Mental Capacity Act 2005.
An incapacitous young person under the age of 16 years is specifically excluded from the provisions of the Act: see section 2(5) (subject to the exceptions referred to [above] ).
The President disagreed.
As to the correct approach to article 5, and in particular the effect of Nielsen, he extracted the following propositions from the judgments in Cheshire West of Lady Hale and Lord Neuberger: 105.
In the premises, and whilst acknowledging that parents still have parental responsibility for their 16 and 17 year old children, I accept that the various international Conventions and statutory provisions referred to, the United Nations Convention on the Rights of the Child and the Human Rights Act 1998, recognise the need for a greater degree of respect for the autonomy of all young people but most especially for those who have attained the age of 16 and 17 years.
Accordingly, I have come to the clear conclusion that however close the parents are to their child and however co operative they are with treating clinicians, the parent of a 16 or 17 year old young person may not consent to their confinement which, absent a valid consent, would amount to a deprivation of that young persons liberty. i) Nielsen is, fundamentally, a case about Storck component (b); or, to be more precise, about the proper ambit of Storck component (b) and the extent and limit of parental authority, which between them determine whether Storck component (c) arises for consideration. ii) Whatever its implications in relation to adults, a matter which is not before us and which is not free from difficulty, Nielsen is good authority in relation to children. iii) In accordance with Nielsen, there are circumstances in which the consent by a holder of parental authority in domestic terms, someone with parental responsibility will provide a valid consent for the purposes of Storck component (b) to something which is a confinement for the purposes of Storck component (a).
Those circumstances, although extensive, are not unlimited. (para 37)
This led him to a discussion of the scope of parental responsibility in the context of Storck component (b), which in his view was governed by domestic law: 50.
For the purpose of applying the Nielsen principle one first has to identify what are the relevant rights of the holder of parental authority, and that, in my judgment, is plainly a matter to be determined by the relevant domestic law.
Understanding of the issues arising in relation to ground (1) therefore requires consideration of our domestic law before one can turn to consider the application of article 5 and the Strasbourg jurisprudence (para 50)
There followed a comprehensive review of the authorities culminating in the leading modern authority in Gillick v West Norfolk and Wisbech Area Health Authority [1986] AC 112.
From an extended discussion of the speeches in Gillick (paras 74ff) he derived three propositions: (in very brief summary) first, that parental rights exist for the benefit of the child not the parent; secondly, that parental rights are to be exercised in the best interests of the children, and subject to the control of the court by reference to general community standards; thirdly, the rejection of the rule that the age of discretion was fixed and the substitution of what it has now become customary to refer to as the acquiring of Gillick capacity (para 79).
He concluded his discussion of Gillick with this summary: What for convenience, and in accordance with settled practice, I shall refer to as Gillick capacity or Gillick competence is not determined by reference to the characteristic development trajectory of some hypothetical typical or normal child (whatever those expressions might be understood as meaning).
Whether a particular child has Gillick capacity is determined by reference to the understanding and intelligence of that child The attainment of Gillick capacity is, and has always been, treated as being child specific.
This has an important corollary.
Given that there is no longer any magic in the age of 16, given the principle that Gillick capacity is child specific, the reality is that, in any particular context, one child may have Gillick capacity at the age of 15, while another may not have acquired Gillick capacity at the age of 16 and another may not have acquired Gillick capacity even by the time he or she reaches the age of 18. (paras 83 84)
He thought that the judges approach was inconsistent with the Gillick principle, and unsupported by the statute: On this point, in my judgment, Keehan J was wrong in law.
I say this for two reasons.
First, because his approach does not give effect to the fundamental principle established by Gillick: namely that, in this context , the exercise of parental responsibility comes to an end not on the attaining of some fixed age but on attaining Gillick capacity Secondly, because none of the statutory provisions upon which he relied bears either expressly or by implication upon the matter in hand which, to emphasise the obvious, is to do with the ambit and extent of parental responsibility and nothing else.
It was therefore, with great respect to Keehan J, beside the point for him to observe (para 103) that: Parliament has on numerous occasions chosen to distinguish the legal status of those who have not attained the age of 16 years, those aged 16 and 17 and, finally, those who have attained their majority.
No doubt, but, I ask rhetorically, where does that take us? given the rejection by the House of Lords in Gillick of this courts reliance in the same case on what was essentially the same line of thought. (para 125)
In relation to the 2005 Act itself he made two points First, that in general terms the 2005 Act does not make specific provision in relation to those aged 16 or 17.
Secondly, and even more important for present purposes, that with only two (in the present context irrelevant) exceptions, the 2005 Act makes no statutory provision for the role of those exercising parental responsibility.
Precisely so: the matter is left to the common law, in other words to the operation of the Gillick principles. (para 127, his emphasis) He concluded that in the present context, parental responsibility is, in principle, exercisable in relation to a 16 or 17 year old child who, for whatever reason, lacks Gillick capacity (para 128).
The Official Solicitors case
In this court the Official Solicitor submits that the President was wrong to treat Nielsen as relevant only to limb (b) of the Storck test, having regard to the later authorities reviewed in the judgment of Keehan J.
To do justice to the argument, I cannot do better than quote from the written submissions advanced by Mr Setright QC and his team.
He suggests that argument about the scope of limb (a) (confinement) is to some extent, a sterile one since it is the nuancing of the meaning of confinement that allows the balance to be struck between consideration of the rights of the parents (whether under the common law or article 8 ECHR) to exercise parental control over their children as an aspect of their caring responsibilities, and consideration of the rights of the child to be recognised as an independent legal actor, those latter rights gaining greater strength the closer the child gets to adulthood (and irrespective of their disability).
In the remainder of his case he puts the main emphasis on developments in the law since Gillick, in particular the 2005 Act.
Indeed he accepts that the Presidents approach was undoubtedly correct as a statement of the operation of Gillick competence at common law in 1985 , but argues that it has been overtaken by developments in the law, in particular, the passage of the 2005 Act, and also the trends in international human rights norms (Case para 65).
He argues that these changes justify a change in the approach of the courts: If as the Official Solicitor submits section 5 MCA 2005 provides a complete framework for the delivery of care and treatment to those aged 16 above lacking capacity, then he submits that, by operation of conventional principles, it should be seen as ousting the place of the common law.
As set out above, it has already been held that, where section 5 MCA 2005 applies, the common law defence of necessity has no application. [citing Comr of Police for the Metropolis v ZH [2013] 1 WLR 3021.] The Official Solicitor submits that the same analysis applies equally to the (common law) position in relation to those aged 16 and 17 with impaired capacity.
Even if the court considers that the common law has not been ousted by the passage of the MCA 2005, the great virtue of the common law is that it can respond to changing circumstances.
The Official Solicitor prays in aid by analogy the approach adopted by the Supreme Court in Montgomery v Lanarkshire Health Board [2015] AC 1430 In the circumstances, the Official Solicitor respectfully submits that good practice in the clinical and caring context now recognises very considerable limits upon the ability of parents to consent to beneficent, but either coercive or very serious, interventions in relation to their children The Official Solicitor would respectfully submit that this can, and should, be the point at which the Supreme Court expressly confirms as a matter of common law that the power of a parent to consent on behalf of a 16/17 year old with impaired capacity simply does not exist, as (1) there is no requirement for it to exist; and (2) it does not reflect contemporary understandings of the rights of children; (Case paras 65.3 4)
This argument is resisted by the City Council.
Discussion
Parental authority and the MCA 2005
Without disrespect I can deal relatively shortly with the central argument in the Official Solicitors case, because I agree essentially with the reasons given by the President for rejecting the corresponding part of the judges reasoning.
Like the President I see nothing in the 2005 Act which detracts from the common law principle or from section 3 of the 1989 Act.
There is a presumption that Parliament does not change the common law by implication.
Certainly in respect of a concept as basic and sensitive as parental responsibility one would expect clear words to indicate the nature of the change and its practical consequences.
Not only is there nothing in the 2005 Act itself to indicate such a change, but, as the Secretary of State has shown (without challenge), there is nothing in the background to the Act to indicate such an intention.
On the contrary it was made clear by the Law Commission and in Ministerial statements to Parliament, that there would be an overlap between the proposed regime and the 1989 Act.
That position has been reinforced by the lack of anything in the 2019 Act to undermine the common law position, as reflected in the 1989 Act.
In the absence of any specific legislative change I do not see how unincorporated international instruments can add anything to the argument.
I am also satisfied that this is not an area in which it would be appropriate for this court to accept the invitation to develop the law to fill a supposed gap left by the legislation, or otherwise to reflect contemporary understandings of the rights of children, as the Official Solicitor invites us to do.
There is no parallel with the Montgomery case (Montgomery v Lanarkshire Health Board [2015] 1432) where a seven justice court had been convened specifically to consider whether to depart from the controversial and much criticised reasoning of the majority in Sidaway v Board of Governors of the Bethlem Royal Hospital and the Maudsley Hospital [1985] AC 871.
Not only does the Secretary of State, who is responsible for legislative policy in this area, resist such a development, but the treatment of mentally incapacitated 16 or 17 year olds has been subject of Parliamentary scrutiny in connection with legislation passing through Parliament during the course of this appeal.
In addition the experience of the Cheshire West decision should lead us to extreme caution in this difficult and sensitive area of the law.
Nielsen
On the question whether Nielsen was a case about Storck limb (a) or (b), I accept that, as the case was decided before the identification of the Storck components, it is a little artificial to attempt to fit the reasoning of the majority directly into that scheme.
It is enough to say that, on the authorities as they stood before him, I see no error in Sir James Munby Ps approach.
He referred to two passages in Cheshire West to support his view.
The first (para 26) was from Lady Hale: I start with Baroness Hale of Richmond DPSC, who said this about Nielsen v Denmark (1988) 11 EHRR 175 (para 30): The seven dissenting judges considered that placing a 12 year old boy who was not mentally ill in a psychiatric ward for several months against his will was indeed a deprivation of liberty.
It would appear, therefore, that the case turns on the proper limits of parental authority in relation to a child.
As already mentioned (para 4 above) there is no equivalent in English law to parental authority over a mentally incapacitated adult.
She added (para 41): Although Nielsen 11 EHRR 175 has not been departed from, it is to be regarded as a case of substituted consent, and thus not fulfilling component (b).
The second (para 35) was from Lord Neuberger, who said of Nielsen (at para 73): The case involved a child, and was decided on the basis that his mother was exercising her article 8 rights responsibly, in
good faith and on the basis of medical advice: see para 71
There was some discussion before us whether the second passage in the quotation from Lady Hale was an expression of her own opinion, or simply a recitation of counsels submission.
Either way I can see nothing in the remainder of her judgment to indicate disagreement with that proposition, which also seems to me consistent with the first passage, and with the passage quoted from Lord Neubergers judgment.
It also seems to me the more natural interpretation.
If Storck component (a) is directed to the objective quality of confinement, it is difficult to see how that quality is affected by whether or not it has been sanctioned by the parent.
It is true that the attributes of confinement may vary in relation to children of different ages, as explained by Lord Kerr in Cheshire West paras 77 79 (a passage quoted by the Lady Hale: para 38).
However, I am not persuaded that the clarity of the concept would be improved by further nuancing as the Official Solicitor suggests.
In this case, as I have said, it is not in dispute that component (a) is satisfied.
Lady Hales judgment
I need to deal separately with Lady Hales judgment in the present appeal.
She takes a rather different approach from that advocated by any of the parties before us, and perhaps for that reason finds it unnecessary to address in any detail the reasoning of the Court of Appeal.
She deals relatively briefly with the majority judgment in Nielsen, which she treats as turning on the comparative normality of the restrictions imposed on the freedom of a 12 year old boy (para 38).
Later in the judgment (para 42), she discounts suggestions in Cheshire West that Nielsen was a case of substituted consent, because it had suited counsel so to argue.
Instead she relies on later Strasbourg authorities as showing that limb (b) (that is, lack of valid consent) can be satisfied despite the consent of a person with the legal right to make decisions on behalf of the person concerned, the only exceptions being where the evidence showed that the person concerned was willing to stay where he or she was and was capable of expressing that view.
She concludes accordingly that parental consent cannot substitute for the subjective element of limb (b) of Storck.
Later in her judgment (para 48) she reinforces that view by equating deprivation of liberty with other fundamental human rights such as the right to life or freedom from torture.
She argues that it would be a startling proposition that it lies within the scope of parental responsibility to authorise violation of such rights.
I say at once, with respect, that I am not persuaded that such comparisons are fair or helpful.
Ds parents were not authorising the state to commit torture or anything comparable to it.
They were doing what they could, and what any conscientious parent would do, to advance his best interests by authorising the treatment on which all the authorities were agreed.
That this involved a degree of confinement was an incidental but necessary part of that treatment, and no more than that.
On the Presidents view, with which I agree, they were not authorising a violation of his rights, but rather exercising their parental responsibility in a way which ensured that there was no such violation.
More importantly, I do not accept that the majority reasoning in Nielsen, nor indeed what was said about it in Cheshire West, can simply be brushed aside.
It was not just about the relative normality of the confinement (although some might share the minoritys doubts about that description of the forcible confinement of a 12 year old child for five months in a locked psychiatric ward).
As has been seen (para 147 above), in Cheshire West Lady Hale herself described it as turning, not on the normality of the arrangements, but on the proper limits of parental authority in relation to a child.
More specifically Lord Neuberger said that it was decided on the basis that his mother was exercising her article 8 rights responsibly, in good faith and on the basis of medical advice .
Sir James Eadie QC, on behalf of the Secretaries of State, has helpfully analysed the majority judgment in Nielsen in terms which I would in substance endorse.
He accepts that, not surprisingly in a case decided before Storck, there may be some overlap between the categories.
But, in agreement with the President, he sees it as primarily about limb (b).
He points to the emphasis given by the majority at the outset to family life under the Convention, encompassing the broad range of parental rights and responsibilities in regard to the care and custody of minor children (para 61).
He notes the following points from the judgment (paras 68 72): i) The mothers decision to have the applicant hospitalized was a lawful exercise of parental powers under Danish law and was also well founded.
The Danish courts found that the hospitalization decision fell within the mothers competence as holder of parental rights. ii) The mother had taken her decision on the basis of medical advice from her family doctor and a professor, and had as her objective the protection of the applicants health.
This was a proper purpose for the exercise of parental rights. iii) The mothers decision was approved by the relevant social services authorities. iv) There was no suggestion that the treatment given at the hospital and the conditions under which it was administered were inappropriate in the circumstances. The applicant was in need of medical treatment for his condition and the treatment administered to him was curative. v) There was no evidence of bad faith on the part of the mother.
Hospitalization was decided upon by her in accordance with expert medical advice.
It must be possible for a child to be admitted to hospital at the request of the holder of parental rights, a case which was not covered by para 1 of article 5.
That the court based its reasoning principally on the exercise of parental responsibility seems to me put beyond doubt by its concluding comment: the hospitalization of the applicant did not amount to a deprivation of liberty within the meaning of article 5, but was a responsible exercise by his mother of her custodial rights in the interests of the child.
Accordingly, article 5 is not applicable in the case. (para 73) In context, that comment is clearly designed to take the reader back to where this discussion began (para 61), that is to the broad range of parental rights and responsibilities recognised by the Convention under the concept of family life.
The Secretaries of State further submits (without contradiction) that the Strasbourg court has not departed from Nielsen in the three decades since the judgment was delivered.
That submission is confirmed by the exhaustive review by Keehan J of the Strasbourg authorities relied on by the Official Solicitor before him (paras 44 61).
The case has been consistently explained by the court itself as a case about the responsible exercise by the applicants mother of her custodial rights: see Koniarski v United Kingdom (Application No 33670/96) 30 EHRR CD 139 and DG v Ireland (Application No 39474/98) (2002) 35 EHRR 33. (Notably, the fact that both those cases related to 17 year olds was not cited as a ground of distinction).
In HL v United Kingdom (2004) 40 EHRR 761, it was cited with approval, but distinguished on the basis that no one had legal authority to act on the adult HLs behalf in the same way as Jon Nielsens mother (para 93).
It was also cited with approval by the Grand Chamber in Stanev v Bulgaria (2012) 55 EHRR 696, where it was explained as the exercise of exclusive custodial rights over a child who was not capable of expressing a valid opinion (para 122).
Keehan J (para 42) noted some doubts about the case expressed by Lord Walker in Austin v Comr of Police [2009] 1 AC 564, para 42.
But no such doubts appear to have found their way into the Strasbourg jurisprudence.
It was and remains the leading Grand Chamber decision on the scope of such parental rights and responsibilities in the context of article 5.
It is unnecessary in my view to decide whether the case is to be regarded as a case of substituted consent so as to bring it directly with Storck limb (b) (as was hinted at in Stanev v Bulgaria [2012] 55 EHRR 22, para 130), or whether it is simply an exception to the Storck categorisation, justifiable in its own terms by reference to the scope of family life under article 8.
For the present purposes, it provides amply sufficient support in Strasbourg case law for the Presidents reliance on equivalent domestic law principles to determine the present case.
Lady Blacks judgment
Lady Black, while agreeing with Lady Hale, has introduced a new line of reasoning based on a review of the common law authorities preceding Gillick.
This leads her to reject the Presidents view of the relevance of that case to decisions relating to detention.
Instead she reads those authorities as showing that in this context reaching the age of discretion was a matter of attaining the requisite chronological age, and not a matter of mental capacity (para 56, 68).
As I understand her judgment (paras 71 72), she would regard 16 as the appropriate age in the modern law, taking account inter alia of the recognition by the legislature in successive Acts of that age as a pivotal turning point, most recently in the 2019 Act.
This line of reasoning was not subject to detailed argument at the hearing.
For the moment I remain unconvinced that the earlier cases can be relied on to limit the scope of the judgments in Gillick in the way she proposes, or that the Presidents conclusions are undermined.
However, I acknowledge that this approach, if correct, may have advantages for the certainty and coherence of the law, particularly if taken with another important point which emerges from her review of the earlier cases.
That is the willingness of the courts since the 19th century to take guidance from the legislature as to where to draw the lines in relation to the limits of parental responsibilities (see para 60, citing Cockburn CJ in R v Howes (1860) 3 El & El 332).
In the present case there is the added consideration that, as noted above (para 130), the exclusion of those under 16 from the new legislative scheme appears at least in part to be a reflection of the legislatures understanding of the law following Keehan Js judgment, which to that extent may be seen as having the implicit endorsement of Parliament.
I note with some concern that Lady Hale (para 50) has raised a question as to the logic of the differential treatment of those under 16, at least in the context of article 5 taken on its own.
That does not reflect any issue between the parties.
Keehan Js application of parental responsibility to those under 16 has not been questioned by any of the parties in the Court of Appeal or in this court.
Nor does Lady Hale, as I understand it, suggest that there is anything in the Strasbourg law as it stands which invalidates that aspect of Keehan Js judgment.
For the time being his reasoning remains the law, and as such appears to fit well with the new legislative scheme.
I have nothing to add to what Lady Black says in respect of section 25 of the Children Act 1989, with which I agree.
Conclusion
For the reasons stated earlier in this judgment, in substantial agreement with the reasoning of the Court of Appeal, I would have dismissed the appeal.
| The issue in this appeal is whether it is within the scope of parental responsibility to consent to living arrangements for a 16 or 17 year old child which would otherwise amount to a deprivation of liberty within the meaning of article 5 of the European Convention of Human Rights (ECHR), in particular where the child lacks the mental capacity to make the decision for himself.
D was born in 1999.
He was diagnosed with attention deficit hyperactivity disorder, Aspergers syndrome and Tourettes syndrome, and has a mild learning disability.
When he was 14 he was admitted to a hospital providing mental health services, for assessment and treatment.
He lived in the hospital grounds and attended a school which was integral to the unit.
The external door was locked and D was accompanied whenever he left the site.
The hospital trust applied to the High Court for a declaration that it was lawful for the trust to deprive D of his liberty in this way.
The judge, Mr Justice Keehan, held that D was so deprived but that it was a proper exercise of parental responsibility to consent to his constant supervision and control while he was under 16.
By then, with his parents agreement, and with Birmingham City Council (the Council) accommodating him under s 20 Children Act 1989, D had been discharged from hospital to a residential placement, where he was similarly under constant supervision and not allowed to leave the premises except for a planned activity.
On his 16th birthday proceedings were issued in the Court of Protection for a declaration that the consent of Ds parents meant that he was not deprived of his liberty at the placement.
Keehan J held that his parents could no longer consent to what would otherwise be a deprivation of liberty once D had reached 16, and that the provisions of the Mental Capacity Act 2005 (MCA) now applied.
He authorised the placement, and a subsequent transfer to another similar placement, as being in Ds best interests.
When D reached the age of 18 his deprivation of liberty could be authorised under the deprivation of liberty safeguards in the MCA.
The Councils appeal to the Court of Appeal was allowed, on the ground that parents could consent to what would otherwise be a deprivation of liberty of a 16 or 17 year old child who lacked the capacity to decide for himself, and the MCA had no bearing on this.
The Supreme Court by a majority of 3 to 2 (Lord Carnwath and Lord Lloyd Jones dissenting) allows the appeal.
Lady Hale gives the main judgment.
Lady Black gives an additional judgment, dealing also
with the issue of secure accommodation which arose during the hearing.
Lady Arden agrees with Lady Hale on the effect of article 5 in a further judgment.
Lord Lloyd Jones agrees with Lord Carnwaths dissenting judgment.
The case turns on the inter relationship between the concept of parental responsibility, as defined by the Children Act 1989, the common law and other relevant statutory provisions, and the obligation of the State to protect the human rights of children under the ECHR [19].
Historically, parental rights under domestic law were never absolute and became increasingly subject to the overriding consideration of the childs own welfare.
The power of physical control was a dwindling right as the child acquired sufficient understanding and intelligence to make his or her own decisions the age of discretion which could be before the age of majority (known as Gillick competence after the case of Gillick v West Norfolk and Wisbech AHA [1986] 1 AC 112) [21 23].
Gillick is not directly relevant to the question of whether parental authority endures beyond the age of discretion, if the child lacks capacity to make decisions [24, 69 72].
The MCA does not override other common law and statutory provisions relating to 16 and 17 year old children, but it does indicate an appreciation of the different needs of this age group [27, 71].
Lady Black would hold that as a matter of common law, parental responsibility for a child of 16 or 17 does not extend to authorising a confinement of the child in circumstances amounting to a deprivation of liberty [88 90].
Lady Hale prefers not to express a concluded view on this question but agrees that it reinforces the conclusion reached under the ECHR [28].
Article 5 ECHR protects children who lack the capacity to make decisions for themselves from being arbitrarily deprived of their liberty.
Clearly the degree of supervision to which D was subject at the placements was not normal for a child of 16 or 17 [39].
Ds living arrangements had to be compared with those of children of the same age without disabilities, and the fact that they were made in his best interests did not mean he was not deprived of his liberty [41].
Parental consent could not substitute for the subjective requirement under article 5 for valid consent to the deprivation [42].
The procedural requirements of article 5 applied (and had in fact been complied with by the court authorisations) [44].
Human rights are about the relationship between private persons and the state, and Ds deprivation of liberty in the placements was attributable to the state [46].
There is no scope for the operation of parental responsibility to authorise what would otherwise be a violation of a fundamental human right of a child [49].
The question was raised in the hearing of whether the provisions of s 25 Children Act 1989, regarding the placing of children in accommodation provided for the purpose of restricting liberty, apply to Ds living arrangements.
Lady Black addresses this issue in her judgment, concluding that a narrow construction of s 25 is needed to ensure local authorities can meet the welfare needs and best interests of children who for good reasons need to be kept in confined circumstances, but that s 25 does not play a direct role in Ds case [100, 113 115].
Lord Carnwath, dissenting, would have agreed with the Court of Appeal that nothing in the MCA detracts from the common law principle of parental responsibility in respect of 16 and 17 year olds [145].
He further considers that the case law of the European Court of Human Rights on article 5 recognises that the proper exercise of parental responsibility can include consent to confinement of a child such as D [155].
|
The central issue in this appeal is whether the Court of Appeal in Northern Ireland was entitled to order that a claim for damages under section 8 of the Human Rights Act 1998, for breach of the requirement under article 2 of the European Convention on Human Rights that an investigation into a death should begin promptly and proceed with reasonable expedition, should not be brought until an inquest has been concluded, or if already brought should be stayed until after that date.
The facts
The appellants son, Pearse Jordan, was shot and killed by a member of the Royal Ulster Constabulary on 25 November 1992.
In 1994 the appellants husband, Hugh Jordan, made an application to the European Court of Human Rights, complaining that the failure to carry out a prompt and effective investigation into his sons death was a violation of article 2.
An inquest commenced on 4 January 1995 but was adjourned shortly afterwards.
On 4 May 2001 the European Court of Human Rights upheld Mr Jordans complaint and awarded him 10,000 in respect of non pecuniary damage, together with costs and expenses: Jordan v United Kingdom (2003) 37 EHRR 2.
A fresh inquest into Pearse Jordans death commenced on 24 September 2012, and a verdict was delivered on 26 October 2012.
Hugh Jordan then brought proceedings for judicial review of the conduct of the inquest, which resulted in the verdict being quashed: In re Jordans application for Judicial Review [2014] NIQB 11.
A subsequent appeal against that decision was dismissed: [2014] NICA 76.
In 2013 Hugh Jordan brought the present proceedings for judicial review, in which he sought declarations that the Coroner and the Police Service of Northern Ireland (PSNI) had been responsible for delay in the commencement of the inquest in violation of his rights under article 2, together with awards of damages under section 8 of the Human Rights Act in respect of the delay from 4 May 2001 until 24 September 2012.
Stephens J upheld the claim against the PSNI, finding that there had been a series of failures to disclose relevant information until compelled to do so, and also a delay in commencing a process of risk assessment relating to the anonymity of witnesses: [2014] NIQB 11, paras 350 359.
Following a further hearing in that case and five other similar cases, he made a declaration that the PSNI delayed progress of the Pearse Jordan inquest in breach of article 2 of the European Convention on Human Rights and contrary to section 6 of the Human Rights Act 1998, and awarded damages of 7,500: [2014] NIQB 71.
The Chief Constable of the PSNI appealed against the declaration and award of damages, contending that although the PSNI might have been responsible for part of the delay, they should not have orders made against them where other state authorities had also been responsible for the delay but were not party to the proceedings.
Hugh Jordan cross appealed against the dismissal of his claim against the Coroner.
The Department of Justice was joined as a respondent to the proceedings.
It is a matter of agreement before this court that, at the hearing of the appeal, the Court of Appeal raised a preliminary issue relating to the timing of the application for judicial review, and heard argument on that issue only.
The judgment itself states that the issue of timing was raised by counsel for the PSNI, who argued that the application was time barred under section 7(5) of the Human Rights Act, since there was no finding that delay in breach of article 2 had occurred within the period of 12 months immediately prior to the commencement of the proceedings, and there was no reason why the court should exercise its discretion to extend the period for bringing proceedings under section 7(5)(b).
Judgment was handed down on 22 September 2015: [2015] NICA 66.
That judgment was subsequently withdrawn and a revised judgment, also dated 22 September 2015, was issued on 12 May 2017.
The resultant orders, also dated 22 September 2015, were made on 10 June 2017.
The judgment and orders are discussed below.
The immediate result of the orders was a stay of proceedings.
A further inquest into Pearse Jordans death commenced on 22 February 2016 and a verdict was delivered on 9 November 2016.
That verdict was challenged in judicial review proceedings brought by Pearse Jordans mother, the present appellant, but without success: In re Jordans application for Judicial Review [2018] NICA 34.
She also took over the conduct of the present proceedings from her husband as his health had deteriorated so as to prevent him from taking part.
On 23 October 2017, following a hearing which it had convened of its own motion in the exercise of its case management functions, the Court of Appeal lifted the stay on the present proceedings.
It had been in place for a period of two years and one month.
Both the Chief Constables appeal and the claimants cross appeal were heard during 2018.
The cross appeal was dismissed: [2018] NICA 23.
The appeal has not yet been decided.
The delays in the investigation into Pearse Jordans death, and the repeated litigation which has characterised that process, are a common feature of what have come to be known as legacy cases: that is to say, cases concerning deaths occurring in Northern Ireland during the Troubles.
In his recent judgment In re Hughes application for Judicial Review [2018] NIQB 30, Sir Paul Girvan found that there was systemic delay in these cases, arising from a lack of resources to fund inquests of the length, complexity and contentiousness involved.
There were at that point 54 inquests pending in relation to 94 deaths.
Only one inquest was heard during 2018.
In an effort to address this problem, reforms have been proposed by the Lord Chief Justice of Northern Ireland which, it is hoped, will enable all the outstanding cases to be heard within five years.
The proposed reforms have not however been implemented, as the necessary funding has not been provided.
The judgment and order of the Court of Appeal
In its judgment the court considered how section 7(5) of the Human Rights Act applies to complaints of delay in relation to the holding of inquests.
Section 7(1)(a) provides that a person who claims that a public authority has acted in a way which is made unlawful by section 6(1) (ie has acted in a way which is incompatible with a Convention right) may bring proceedings against the authority under the Act.
Section 7(5) provides: (5) Proceedings under subsection (l)(a) must be brought before the end of the period of one year beginning with the date on (a) which the act complained of took place; or (b) considers equitable having regard circumstances such longer period as the court or tribunal the
to all
The court observed that it was apparent from the history of this case and other legacy cases that delay as a result of failures to disclose evidence had been a recurring problem.
Where there had been a series of failures of disclosure, was it necessary, the court asked, for the applicant to issue proceedings within one year of the end of a particular failure to disclose, or was the applicant entitled to include periods of delay resulting from earlier failures where proceedings were issued within 12 months of the latest failure? Might the answer to that question depend upon whether there was a finding that all of the failures of disclosure were part of a policy or practice to cause delay?
The court did not answer these questions, but it observed that in the light of these issues, and the very long delays occurring in legacy cases, those who wished to avoid being captured by the primary limitation period under section 7(5)(a) might well feel obliged to issue proceedings separately in relation to each and every incident of delay.
That might involve separate proceedings against different public authorities allegedly contributing to periods of delay which might or might not overlap.
If each case had to be pursued within one year of the end of each particular element of delay, that would introduce a proliferation of litigation in respect of which periods of delay justified an award of damages against which public authorities.
Practicality and good case management pointed towards ensuring that all of those claims against each public authority should be heard at the same time.
In the present case a fresh inquest had been ordered (ie the inquest which began on 22 February 2016 and had already been completed when the substituted judgment was delivered).
If it did not take place within a reasonable time, that would constitute a fresh breach of the Convention for which a remedy, including damages, might be available.
It was when the inquest was completed that it would be possible to examine all the circumstances surrounding any claim for delay, and the court would then be in a position to determine whether adequate redress required an award of damages and, if so, against which public authority in which amount.
The court stated at para 21: We consider, therefore, that in legacy cases the issue of damages against any public authority for breach of the adjectival obligation in article 2 ECHR ought to be dealt with once the inquest has finally been determined.
Each public authority against whom an award is sought should be joined.
In order to achieve this it may be necessary to rely upon section 7(5)(b) of the 1998 Act.
The principle that the court should be aware of all the circumstances and the prevention of even further litigation in legacy cases are compelling arguments in favour of it being equitable in the circumstances to extend time if required.
Where the proceedings have been issued within 12 months of the conclusion of the inquest, time should be extended.
This appears on its face to constitute general guidance for all legacy cases in which damages are sought.
The court made it clear at para 22 that it expected there to be very few, if any, exceptions to this approach: We find it difficult to envisage any circumstances in which there should be an exception to the approach set out in the preceding paragraph in such cases.
The court concluded at para 23: For the reasons given we consider that the claim for damages for delay should be assessed after the completion of the inquest but should be made within one year of the completion.
Since we have ordered a fresh inquest in this case that period has not yet commenced.
We will hear the parties on whether the appeal on the award of damages should be adjourned until after the inquest or allowed without adjudication on the merits to enable the issue of a fresh claim.
The first sentence in this passage again appears to constitute general guidance for legacy cases (since damages had already been assessed in the present case).
So far as the present case was concerned, the alternatives set out in the third sentence were either to adjourn further consideration of the appeal until after the inquest had been completed, or to allow the appeal without a decision on the merits, so that the proceedings were brought to an end and a further claim could be brought after the inquest.
In the event, the resultant order stayed the proceedings until the conclusion of the inquest, as explained earlier.
Separate orders were made on 10 June 2017 in respect of the appeal and the cross appeal.
In relation to the appeal, the court ordered: 1. that the claim for damages for breach of the article 2 procedural requirement that an inquest be conducted promptly should not be brought until the inquest has finally been determined. that where a claim for damages for breach of the article 2. 2 procedural requirement that an inquest be conducted promptly is brought within 12 months of the conclusion of the inquest, time should be extended under section 7(5)(b) of the 1998 Act [ie the Human Rights Act]. that the appeal be stayed until the conclusion of the 3. inquest proceedings.
In relation to the cross appeal, the court ordered: 1. that the issue of delay at ground 7 on the cross appeal be stayed until the conclusion of the inquest proceedings.
Paragraph 1 of the order in the appeal was consistent with the general guidance given in the judgment, and appeared to lay down a general rule that claims of the present kind should not be brought until an inquest has been concluded.
It has no direct bearing on the present proceedings, where the claim was brought as long ago as 2013.
Paragraph 2 addressed the implications of paragraph 1 in relation to the limitation period imposed by section 7(5).
Only paragraph 3, and the order in the cross appeal, directly concerned the present proceedings.
The decision of the Court of Appeal appears to have been understood as laying down a general rule that claims of the present kind could not be brought before the conclusion of an inquest, and that any claims which had been brought before that stage should be stayed until then.
The present appeal
The present appeal was brought in order to challenge the general guidance given by the Court of Appeal, reflected in paragraph 1 of the order made in the appeal.
The main issue in the appeal was agreed to be whether the Court of Appeal was correct to rule that a victim adversely impacted by delay in the conduct of an inquest could not bring a claim for damages prior to the conclusion of the inquest.
The appellant sought to set aside the judgment and order made by the Northern Ireland Court of Appeal whereby it decided that her claim for damages for breach of article 2 ECHR by reason of delay could only be brought after the conclusion of the inquest into her sons death.
In re McCords application for Judicial Review
After the hearing of the present appeal, the Court of Appeal handed down judgment in another legacy case where the applicant had applied for leave to issue judicial review proceedings in which he sought a declaration that the non disclosure of certain documents by the PSNI had caused delay in the holding of an inquest, in violation of his rights under article 2: In re McCords application for Judicial Review, unreported, 18 January 2019.
The proceedings had been stayed by the High Court.
In the course of its judgment, the Court of Appeal considered the judgment under appeal in the present proceedings (in its original version).
It said at paras 21 22, in relation to para 27 of its original judgment in the present case (identical to para 22 of the revised version, cited at para 15 above): 21.
We accept that this passage created the impression that in every legacy case any application to pursue a remedy by way of damages for delay could only be dealt with at the end of the inquest.
Indeed it is clear that that was the common understanding of the parties before the learned trial judge as a result of which the applicant decided to abandon the determination of his claim for damages in the proceedings and rely solely upon the claim for a declaration 22.
We consider, however, that this passage of the judgment ought to be interpreted in a rather more qualified manner.
First, it has to be borne in mind that the court, having given the judgment in September 2015, decided of its own motion to relist the case for the determination of the damages claim in June 2017 having regard to the fact that the inquest had not yet concluded.
Secondly, it needs to be borne in mind that this was a case management decision and was not intended to set forth any rule of law about the entitlement to damages in legacy cases.
Thirdly, the case was concerned with circumstances in which there were active and ongoing inquest proceedings but where issues of delay in the course of those active proceedings arose.
It was such cases that were being discussed in this passage of the judgment and we consider that the interpretation of para 27 [ie para 22 of the revised version] should be confined to cases in which those circumstances are present.
The court observed at para 23 that the case before it was different: The inquest in this case has not taken place.
No Coroner has been allocated to hear it and no materials have been provided to the Coroners Service by the police.
It is impossible to estimate how many years it might take before the inquest might proceed In these circumstances the appeal was allowed.
In the light of this judgment, it appears that the Court of Appeal intends the guidance given in the present case to be confined to cases where the only outstanding issue is damages and where an inquest can be expected to begin within the near future, if not already under way.
The court also indicated in para 22 that the appropriateness of the stay should be kept under review, and that it should be lifted if the claim for damages will not otherwise be determined within a reasonable time.
Discussion
In considering the guidance given by the Court of Appeal in the present case, as clarified in the case of McCord, it must be borne in mind at the outset that, in cases of the present kind, it is the delay itself which constitutes a breach of the claimants Convention rights and gives rise to a right to bring proceedings under the Human Rights Act.
The breach does not crystallise only after the inquest has been concluded: the claimant is entitled to bring proceedings as soon as the delay reaches the requisite threshold under article 2.
Claims arising from such delay are brought under section 7(1)(a) of the Human Rights Act.
That provision confers a statutory right on any person who claims that a public authority has acted in a way which is incompatible with a Convention right to bring proceedings against the authority, provided that he or she qualifies as a victim of the unlawful act and brings the proceedings within the time limits set by section 7(5).
The court then has the power to grant appropriate relief under section 8.
This may take the form of relief designed to end the delay, such as a mandatory order or declaration, or relief designed to compensate for the consequences of delay, in the form of an award of damages.
In the present proceedings, both a declaration and damages were sought and awarded.
The same remedies were also sought in the McCord case, although the claim for damages was abandoned in light of the guidance given in the present case.
No court can take away the right conferred by section 7(1)(a), whether in the exercise of case management powers or otherwise.
Leaving aside the courts power to control vexatious litigants and abuses of process, which are not here in issue, there can be no question of anyone being prevented from bringing proceedings at a time of their choosing (subject to the limitation provision in section 7(5)) in respect of a claimed violation of their Convention rights.
Although the court cannot prevent proceedings from being brought by persons who claim that their Convention rights have been violated, it can exercise powers of case management in relation to those proceedings.
Such powers can include ordering a stay of proceedings in appropriate circumstances.
In that regard, however, three important aspects of Convention rights must be borne in mind.
1. Rights that are practical and effective
First, the European Court has emphasised many times that Convention rights must be applied in a way which renders them practical and effective, not theoretical and illusory: see, for example, Airey v Ireland (1979) 2 EHRR 305, para 24.
The effectiveness of the right under article 2 to have an investigation into a death begin promptly and proceed with reasonable expedition could be gravely weakened if there were a general practice of staying proceedings seeking to secure the prompt holding of an inquest, typically by obtaining a mandatory order or a declaration.
Although compensation might be payable at a later stage, the primary object of the Convention, and of the Human Rights Act, is to secure compliance with the Convention so far as possible, rather than to tolerate violations so long as compensation is eventually paid.
On the other hand, a practice of staying the assessment of damages (as distinct from the consideration of remedies designed to end the delay) until the entirety of the delay can be considered is less likely to undermine the effectiveness of the right, since that is less likely to depend on the point in time at which damages are assessed and awarded.
Nevertheless, it remains necessary to consider whether that might be the consequence of a stay in the individual case before the court.
2. Determination within a reasonable time
Secondly, since the right conferred by section 7(1)(a) of the Human Rights Act is a civil right within the meaning of article 6 of the Convention, a claimant is entitled under that article to have his claim determined within a reasonable time.
That right under article 6 is distinct from the article 2 right on which the proceedings are based.
A breach of the article 6 right is itself actionable under section 7(1)(a).
The staying of proceedings will be unlawful if it results in a breach of the reasonable time guarantee in article 6.
That would be a real possibility in some cases, if stays until after the completion of an inquest were ordered as a general rule.
In the McCord case, the Court of Appeal observed that it was impossible to estimate how many years it might take before the inquest might proceed.
In the proceedings brought by Hugh Jordan successfully challenging the verdict of the second inquest, the Lord Chief Justice remarked that if the existing legacy inquests are to be brought to a conclusion under the present system someone could easily be hearing The proportionality of a restriction on access to the courts some of these cases in 2040: [2014] NICA 76, para 122.
The state of affairs described in Sir Paul Girvans recent judgment In re Hughes application for Judicial Review is consistent with that assessment.
Plainly, a stay of that duration, or anything like it, would constitute a breach of article 6. 3.
Thirdly, since a stay of proceedings prevents a claim from being pursued so long as it remains in place, it engages another aspect of article 6 of the Convention, namely the guarantee of an effective right of access to a court: see, for example, Woodhouse v Consignia plc [2002] EWCA Civ 275; [2002] 1 WLR 2558.
It must therefore pursue a legitimate aim, and there must be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved: see Tinnelly & Sons Ltd v United Kingdom (1998) 27 EHRR 249, para 72.
It follows that even in a case where a stay would not render the article 2 right ineffective or breach the reasonable time guarantee in article 6, it is nevertheless necessary to consider whether it would be a proportionate restriction of the right of access to a court.
As will be explained, that exercise requires consideration of the circumstances of the individual case before the court.
So far as legitimate aims are concerned, the Court of Appeal mentioned two objectives: that a proliferation of litigation should be avoided, and that the court should be aware of all relevant circumstances when determining claims.
Both of those aims are clearly legitimate.
The courts concern about a potential proliferation of litigation was based, as it explained, on uncertainty in the legal profession about the answers to certain questions affecting the limitation of claims: whether a separate violation of the article 2 right to a prompt investigation, for which a separate claim arises, occurs on every occasion when a public authority is responsible for some measure of unjustified delay; and if so, whether such claims become time barred under section 7(5)(a), subject to the courts exercise of its discretion under section 7(5)(b), 12 months after each claim arises.
How those questions should be answered has seemingly yet to be considered.
If a suitable case were brought before the court for determination, that uncertainty could be resolved one way or the other.
Until that occurs, however, the courts concern that uncertainty may result in a proliferation of litigation is reasonable and constitutes an important consideration on one side of the scales.
In relation to the other legitimate aim, namely that the court should be aware of all relevant circumstances, the point made by the Court of Appeal was that it is only after an inquest has been completed that it is possible to determine whether adequate redress for delay requires an award of damages, and if so against which public authority and in which amount.
Whether that is so depends on how damages are assessed.
Hitherto, assessment has not depended on factors which can only be considered after an inquest.
The possibility of assessing damages on a broadly conventional basis prior to the conclusion of an inquest is demonstrated by several judgments of the European Court in cases emanating from Northern Ireland, including its judgment in the Jordan case.
That is not to say, however, that there may not be good practical reasons for staying the proceedings, where the question arises of whether it is appropriate to award damages, and if so in what amount.
Particularly in a situation where the court may have to decide claims against different public bodies in respect of the same or different periods of delay, deferring consideration of these issues until after the conclusion of an inquest may enable the court to consider all relevant periods of delay, and responsibility for them, at one and the same time.
It is therefore another means of reducing the risk of an undue burden being placed on the courts by a proliferation of claims for damages (and potentially for contribution, depending on how the concept of joint and several liability applies in this context: another question which seemingly has yet to be considered).
As indicated earlier, this is a relevant and significant factor to be weighed in the balance.
Whether a stay is proportionate depends on an assessment of the weight of the competing interests at stake in the circumstances of the particular case.
The cogency of the arguments in favour of a stay will depend on the degree of risk that the proceedings may otherwise result in a proliferation of litigation, if that is the legitimate aim pursued.
On the other side of the scales, the importance to the claimant of obtaining monetary redress for the violation of his or her Convention rights without avoidable delay has to be considered.
In most cases the claimant is likely to be the widow, parent or child of the deceased, and may suffer anguish as decades pass without any adequate inquiry into the circumstances of the death, particularly where there are allegations of state involvement in the death (as in the present case), and of collusion and cover up.
The imposition of delay in the determination of their claim for damages may cause additional distress.
There may be other factors in individual cases which make the expeditious determination of the claim particularly important.
The present case, for example, illustrates the importance of expedition where proceedings are brought by claimants who are elderly or infirm.
In striking an appropriate balance between the different interests at stake, the length of any stay will be of considerable importance.
There is no doubt that there may be cases in which it is proportionate to impose a stay on a claim for damages in a legacy case, weighing the relevant factors for and against it.
There is equally no doubt that there may be cases in which, weighing those factors, a stay is not proportionate.
Since the relevant factors can differ in nature and weight from one case to another, it follows that courts should carry out the necessary balancing exercise in the individual case.
A virtually automatic rule requiring all such claims to be stayed until after the inquest, regardless of their individual circumstances, would not comply with that requirement, and in addition, as previously explained, would result in breaches of the reasonable time requirement of article 6.
The present case
The guidance which the Court of Appeal was understood to have given in paras 21 23 of its judgment in the present case was not consistent with the foregoing principles.
On its face, it involved no assessment of proportionality or consideration of individual circumstances.
It was also liable to render the article 2 procedural right ineffective, and to result in breaches of the reasonable time guarantee.
The clarification provided in the case of McCord has, however, considerably narrowed the apparent scope of that guidance, so as to confine it to cases where the only outstanding issue is damages and where an inquest can be expected to begin within the near future, if not already under way.
The court also indicated that the appropriateness of the stay should be kept under review, and that it should be lifted if the claim for damages will not otherwise be determined within a reasonable time.
Guidance to that effect is generally consistent with the principles discussed above, although it remains necessary to allow for the possibility of exceptions in individual cases.
The foregoing discussion has concerned the general guidance given by the Court of Appeal in the present case, and the reconsideration of that guidance in the case of McCord.
So far as the present proceedings are concerned, the decision which is challenged was to stay the claim for damages until the inquest had been concluded.
It has not been argued that the effect of that decision was to render the claimants article 2 right theoretical or illusory, or that there was a breach of the reasonable time requirement imposed by article 6.
On the other hand, it does not appear from the judgment of the Court of Appeal that it carried out any assessment of the proportionality of the stay which it ordered.
It is uncertain whether the court would have ordered the stay if such an assessment had been conducted, particularly if Mr Jordans ill health had been drawn to its attention.
Conclusion
It is impossible not to feel considerable sympathy for the serious practical difficulties which the courts in Northern Ireland face in dealing with legacy cases, and which prompted the guidance which was given in the present case and clarified in the case of McCord.
As has been explained, the guidance as originally given was defective on its face, and the appellant was entirely justified in bringing this appeal in order to challenge it.
The Court of Appeal has, however, recognised that the terms in which it expressed itself have caused difficulty, and it has resolved the problem in its McCord judgment, to which I would only add that it remains necessary to consider whether that general guidance should be applied in the circumstances of an individual case.
So far as complaint is made about the order made in the present proceedings, this court would not normally question a case management decision.
The decision in question was however taken without any evident consideration of its proportionality in the particular circumstances of this case.
In addition, it is uncertain whether the Court of Appeal would have reached the same decision if the question of proportionality had been considered in the light of all the relevant facts, including the then claimants declining health.
In these circumstances I would allow the appeal.
| On 25 November 1992, Pearse Jordan was shot and killed by a member of the Royal Ulster Constabulary.
In 1994, his father, Hugh Jordan, made an application to the European Court of Human Rights (ECtHR) complaining that the failure to carry out a prompt and effective investigation into his sons death was a violation of article 2 of the European Convention on Human Rights (ECHR).
An inquest commenced on 4 January 1995 but was adjourned shortly afterwards.
On 4 May 2001, in Jordan v United Kingdom (2003) 37 EHRR 2, the ECtHR upheld the complaint and awarded damages of 10,000.
A fresh inquest into Pearse Jordans death commenced on 24 September 2012, and a verdict was delivered on 26 October 2012, but Hugh Jorden then brought proceedings for judicial review, which resulted in the verdict being quashed: In re Jordans Application for Judicial Review [2014] NIQB 11.
In 2013, Hugh Jordan brought the present proceedings for judicial review seeking declarations that the Police Service of Northern Ireland (PSNI) and the Coroner had violated his article 2 rights by delaying the commencement of the inquest and an award of damages under section 8 of the Human Rights Act 1998 (HRA) in respect of the delay from 4 May 2001 until 24 September 2012.
At first instance, Stephens J upheld the claim against the PSNI and awarded damages of 7,500 but dismissed the claim against the Coroner.
The PSNI appealed against the declaration and damages award, and Hugh Jordan cross appealed against the dismissal of his claim against the Coroner.
On 22 September 2015, the Court of Appeal ordered that the proceedings should be stayed until after the inquest had been completed.
That order was subsequently withdrawn, and an order in similar terms was made on 10 June 2017, which Mr Jordan appealed against.
Meanwhile, a further inquest had commenced on 22 February 2016, and a verdict was delivered on 9 November 2016.
The stay was lifted on 23 October 2017.
The Supreme Court unanimously allows the appeal.
Lord Reed, with whom the rest of the Court agrees, delivers the judgment.
The Court of Appeal in Northern Ireland held that in so called legacy cases, which concern deaths that occurred in Northern Ireland during the Troubles, the issue of damages against any public authority for breach of the adjectival obligation in article 2 ECHR [i.e. the obligation to investigate the circumstances of the death] ought to be dealt with once the inquest has finally been determined.
This appeared to constitute general guidance, and, consistently with this, the Court of Appeal ordered that the claim for damages for breach of the article 2 procedural requirement that an inquest be conducted promptly should not be brought until the inquest has finally been determined. [16] [17] The appeal was against this part of the Court of Appeals order. [20] After the hearing of this appeal, the Court of Appeal, in another legacy case, In Re McCords Application for Judicial Review, clarified the remarks in Jordan, so that it appears that it intends the guidance to be confined to cases where damages are the only outstanding issue and where an inquest can be expected to begin in the near future, if not already under way.
Further, the appropriateness of the stay should be kept under review, and it should be lifted if the claim for damages will otherwise not be determined within a reasonable time. [24] Lord Reed states that it must be borne in mind at the outset that, in cases of the present kind, it is the delay itself which constitutes a breach of the claimants Convention rights and that [t]he breach does not crystallise only after the inquest has been concluded. [25] Section 7(1)(a) of the HRA, pursuant to which claims arising from such delay are brought, confers a statutory right on any person to bring proceedings against a public authority that acted in a way which was incompatible with their Convention right. [26] No court can take that statutory right away. [27] However, it can exercise powers of case management, including ordering a stay, but, when doing so, three important aspects of Convention rights must be borne in mind. [28] First, Convention rights must be practical and effective. [29] Second, a stay will be unlawful if it results in a breach of the reasonable time guarantee in article 6 of the Convention. [31] [32] Third, a stay also engages another aspect of article 6, namely the guarantee of an effective right of access to a court.
It must therefore pursue a legitimate aim, and there must be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved. [33] This requires an assessment of the weight of the competing interests in the particular case: the risk of a proliferation of litigation, the avoidance of which was the legitimate aim pursued by the stay, against the importance to the claimant of obtaining monetary redress for the violation of his or her Convention rights without avoidable delay.
There may be factors in individual cases which make the expeditious determination of the claim particularly important.
The present case, for example, illustrates the importance of avoiding delay where proceedings are brought by claimants who are elderly or infirm, since Hugh Jordans health has so deteriorated that his wife had to take over the conduct of these proceedings. [37] On its face, the guidance given by the Court of Appeal in the present case involved no assessment of proportionality or consideration of individual circumstances.
It was also liable to render the article 2 procedural right ineffective resulting in breaches of the reasonable time guarantee. [39] However, the McCord judgment resolved this.
Nevertheless, it remains necessary to consider whether that general guidance should be applied in the circumstances of an individual case.
In the present case, the stay was imposed without any evident consideration of its proportionality.
It is uncertain whether it would have been imposed if proportionality had been considered in the light of all the relevant facts, including Hugh Jordans declining health.
The appeal is therefore allowed. [41] [42]
|
The issue in this appeal is whether section 31(3)(d) of the Adoption and Children (Scotland) Act 2007 is within the legislative competence of the Scottish Parliament.
It is contended on behalf of the appellant that the provision is incompatible with the Convention rights set out in Schedule 1 to the Human Rights Act 1998, that section 29(2)(d) of the Scotland Act 1998 therefore applies, and that the provision is accordingly not law.
The issue has arisen in the course of adoption proceedings in the Sheriff Court, in circumstances to which I shall return.
The sheriff decided to refer the issue to the Inner House of the Court of Session, in accordance with paragraph 7 of Schedule 6 to the Scotland Act.
The Inner House held that the provision was not incompatible with the Convention rights and was within the legislative competence of the Parliament: ANS and DCS v ML [2012] CSIH 38, 2012 SC 8.
The present appeal is brought against that decision, in accordance with paragraph 12 of Schedule 6.
The appellant is the mother of the child who is the subject of the adoption proceedings.
She is opposed to the proposed adoption and has refused to give her consent.
The first respondents are the prospective adoptive parents.
The second respondent is the Lord Advocate, who has become a party to the proceedings in order to defend the lawfulness of the provision in issue.
The legislation
Section 31 of the 2007 Act is concerned with parental consent to adoption.
Subsection (1) provides that an adoption order may not be made unless one of five conditions is met.
The first condition is set out in subsection (2): (2) The first condition is that, in the case of each parent or guardian of the child, the appropriate court is satisfied (a) that the parent or guardian understands what the effect of making an adoption order would be and consents to the making of the order (whether or not the parent or guardian knows the identity of the persons applying for the order), or (b) that the parent's or guardian's consent to the making of the adoption order should be dispensed with on one of the grounds mentioned in subsection (3).
Put shortly, the first condition will therefore be met where the court is satisfied that each parent or guardian of the child consents to the making of an adoption order, or that the parents or guardians consent should be dispensed with on one of the grounds mentioned in subsection (3).
It is unnecessary for the purposes of the present appeal to consider the remaining conditions in detail.
It is sufficient to note that they concern situations where the consent of parents or guardians, or dispensing with such consent, is no longer a live issue.
Returning to the first condition, the grounds on which the parents or guardians consent to the making of the adoption order may be dispensed with are set out in subsection (3): (3) Those grounds are (a) that the parent or guardian is dead, (b) that the parent or guardian cannot be found or is incapable of giving consent, (c) that subsection (4) or (5) applies, (d) that, where neither of those subsections applies, the welfare of the child otherwise requires the consent to be dispensed with.
Paragraphs (a) and (b) of subsection (3) are self explanatory.
Paragraph (c)
refers to subsections (4) and (5), which are in the following terms: (4) This subsection applies if the parent or guardian (a) has parental responsibilities or parental rights in relation to the child other than those mentioned in sections 1(1)(c) and 2(1)(c) of the [Children (Scotland) Act 1995], (b) is, in the opinion of the court, unable satisfactorily to (i) discharge those responsibilities, or (ii) exercise those rights, and (c) is likely to continue to be unable to do so. (5) This subsection applies if (a) the parent or guardian has, by virtue of the making of a relevant order, no parental responsibilities or parental rights in relation to the child, and (b) it is unlikely that such responsibilities will be imposed on, or such rights given to, the parent or guardian.
A relevant order, for the purposes of subsection (5), is a permanence order which does not include provision granting authority for the child to be adopted: section 31(6).
Section 31 has to be read along with other provisions of the 2007 Act.
In particular, it is necessary to have regard to section 14, which is concerned with the considerations relevant to the exercise of powers under the Act.
So far as material, it provides as follows: (1) Subsections (2) to (4) apply where a court or adoption agency is coming to a decision relating to the adoption of a child. (2) The court or adoption agency must have regard to all the circumstances of the case. (3) The court or adoption agency is to regard the need to safeguard and promote the welfare of the child throughout the child's life as the paramount consideration. (4) The court or adoption agency must, so far as is reasonably practicable, have regard in particular to (a) the value of a stable family unit in the child's development, (b) the child's ascertainable views regarding the decision (taking account of the child's age and maturity), (c) the child's religious persuasion, racial origin and cultural and linguistic background, and (d) the likely effect on the child, throughout the child's life, of the making of an adoption order.
It is also necessary to have regard to section 28, which so far as material
provides: (1) An adoption order is an order made by the appropriate court on an application under section 29 or 30 vesting the parental responsibilities and parental rights in relation to a child in the adopters or adopter. (2) The court must not make an adoption order unless it considers that it would be better for the child that the order be made than not. (3) An adoption order may contain such terms and conditions as the court thinks fit.
Section 31(4) and (5) also has to be read along with the definitions of parental responsibilities and parental rights in sections 1(1) and 2(1) of the Children (Scotland) Act 1995, as amended.
Section 1(1) provides: (1) a parent has in relation to his child the responsibility (a) to safeguard and promote the child's health, development and welfare; (b) to provide, in a manner appropriate to the stage of development of the child (i) direction; (ii) guidance, to the child; (c) if the child is not living with the parent, to maintain personal relations and direct contact with the child on a regular basis; and (d) to act as the child's legal representative, but only in so far as compliance with this Section is practicable and in the interests of the child.
Section 2(1) provides: (1) a parent, in order to enable him to fulfil his parental responsibilities in relation to his child, has the right (a) to have the child living with him or otherwise to regulate the child's residence; (b) to control, direct or guide, in a manner appropriate to the stage of development of the child, the child's upbringing; (c) if the child is not living with him, to maintain personal relations and direct contact with the child on a regular basis; and (d) to act as the child's legal representative.
Finally in this context, it is relevant to note the terms of article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence. 2.
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
The argument
In the printed case, it was argued on behalf of the appellant that section 31(3)(d) was incompatible with the right of a parent to respect for her family life, as guaranteed by article 8.
The provision applied only where neither section 31(4) nor section 31(5) applied: that is to say, where the court did not consider that the parent was unable satisfactorily to discharge her parental responsibilities or exercise her parental rights and was likely to continue to be unable to do so, or where the parent was not someone who was subject to an order removing parental responsibilities and rights and was unlikely to have such responsibilities or rights restored in the future.
In other words, section 31(3)(d) was applicable only in circumstances in which the parent was able to fulfil her parental responsibilities satisfactorily or, if presently unable to do so, was not likely to continue to be unable to do so.
In that situation, a provision which allowed a court to sever permanently the bond between parent and child, merely on the basis of an assessment of the childs welfare, failed to respect the rights of the parent under article 8.
The dangers of a broad test of welfare had been identified by this court in In re S B (Children)(Care Proceedings: Standard of Proof) [2009] UKSC 17, [2010] 1 AC 678, para 7.
Section 101(2) of the Scotland Act required a provision of an Act of the Scottish Parliament to be read as narrowly as was required for it to be within competence, if such a reading was possible.
It was not however possible to read section 31(3)(d) of the 2007 Act as narrowly as was required in order for it to be compatible with the relevant case law of the European Court of Human Rights, as exemplified by Neulinger v Switzerland (2012) 54 EHRR 1087.
In the course of the hearing, counsel for the appellant recognized that this argument faced a number of difficulties, to which I shall return.
Ultimately, the submission was that an order based on section 31(3)(d) would not be made in accordance with the law, within the meaning of article 8(2).
That was because the provision was lacking in precision and failed, in its terms, to reflect the requirements of article 8 as laid down in the case law of the European court.
The correct approach to interpretation
It sometimes seems that, whenever lawyers hear the words compatibility with the Convention rights, they reach for section 3 of the Human Rights Act.
That response is however a mistake: since the object of section 3 is to avoid, where possible, action by a public authority which would be incompatible with the Convention rights and therefore unlawful under section 6, it follows that the special interpretative duty imposed by section 3 arises only where the legislation, if read and given effect according to ordinary principles, would result in a breach of the Convention rights (R (Hurst) v London Northern District Coroner [2007] UKHL 13, [2007] 2 AC 189).
That conclusion also follows on constitutional grounds: the courts endeavour to ascertain and give effect to the intention of Parliament (or, in this case, the Scottish Parliament) as expressed in legislation.
It is only if that intention cannot be given effect, compatibly with the Convention rights, that the courts are authorized by Parliament, in terms of section 3, to read and give effect to legislation in a manner other than the one which Parliament had intended.
Accordingly, as Lord Hope observed in R (Wardle) v Crown Court at Leeds [2002] 1 AC 754, para 79, before having recourse to section 3 one must first be satisfied that the ordinary construction of the provision gives rise to an incompatibility.
When an issue arises as to the compatibility of legislation with the Convention rights, it is therefore necessary to decide in the first place what the legislation means, applying ordinary principles of statutory interpretation.
Those principles seek to give effect to the legislatures purpose.
If language is used whose meaning is not immediately plain, the court does not throw up its hands in bafflement, but looks to the context in order to ascertain the meaning which was intended.
The court will also apply the presumption, which long antedates the Human Rights Act, that legislation is not intended to place the United Kingdom in breach of its international obligations.
Those international obligations include those arising under the Convention.
If however the ordinary meaning of the legislation is incompatible with the Convention rights, it is then necessary to consider whether the incompatibility can be cured by interpreting the legislation in the manner required by section 3.
Even if the legislation in question is an Act of the Scottish Parliament, it is section 3 which is relevant in the context of the Convention rights, rather than section 101 of the Scotland Act, for the reasons explained by Lord Hope in DS v HM Advocate [2007] UKPC 36, 2007 SC (PC) 1, paras 23 24.
If the legislation can be construed in accordance with section 3 in a manner which is compatible with the Convention rights, then it will be within the competence of the Scottish Parliament so far as the Convention rights are concerned.
If it cannot be so construed, then it will not be within competence.
The background to the legislation
In considering the interpretation of section 31(3)(d) of the 2007 Act, it may be helpful to begin by setting the provision in the context in which it was enacted.
Under the previous law, set out in section 16 of the Adoption (Scotland) Act 1978 as amended, parental agreement to the making of an adoption order could be dispensed with on any of four grounds.
The first was that the parent could not be found or was incapable of giving agreement: that ground corresponds to section 31(3)(b) of the 2007 Act.
A second, put shortly, was that the parent had persistently failed, without reasonable cause, to fulfil specified parental responsibilities in relation to the child.
A third ground, again put shortly, was that the parent had seriously ill treated the child.
The residual ground for dispensing with parental consent, under section 16(2)(b) of the 1978 Act, was that the parent was withholding consent unreasonably: a ground whose interpretation and application had given rise to a considerable amount of litigation.
The 2007 Act had its roots in the work of the Adoption Policy Review Group, carried out between 2001 and 2005 under the chairmanship of Sheriff Principal Graham Cox QC.
In its Phase II Report (Adoption: Better Choices for our Children), published in 2005, the Group noted that the current Scottish grounds for dispensing with agreement had been criticized as complicated and difficult to apply.
It noted that, in England and Wales, the grounds for dispensing with the parents agreement had been much the same as in Scotland, but had been radically changed by the Adoption and Children Act 2002.
Section 52(1) of that Act provided only two grounds for dispensing with consent: that the parent or guardian could not be found or was incapable of giving consent, or that the childs welfare required the consent to be dispensed with.
The Group stated (para 3.23): The grounds being introduced in England and Wales under the 2002 Act have the attraction of simplicity.
It is also desirable in an issue such as adoption that the approach taken on both sides of the border should be broadly similar.
There is, however, an issue about whether the welfare test gives sufficient weight to birth parents' interests.
The Group believed that the test must be more stringent than whether the prospective adopters would give the child a better life than the birth parents (sometimes known as a beauty parade).
The welfare of the child must require the birth parents' consent to be dispensed with.
This test should be at least equivalent to that in article 8 of the European Convention on Human Rights (ECHR) which requires that any interference in private or family life must be in accordance with law and necessary to protect health or the rights and freedom of others.
The Group considered that the test in the 2002 Act would be improved if it reflected article 8 more exactly.
That conclusion was reflected in the Groups recommendation (para 3.24): The Group recommends that the current grounds for dispensing with the agreement of birth parents should be changed and that those in the 2002 Act should be adopted, amended to reflect the necessity test in article 8.
These grounds are clear and straightforward and give due consideration and protection to the rights of birth parents.
It is apparent therefore that the Group had article 8 of the Convention firmly in mind in making its recommendation.
Its thinking was that the Scottish provision enabling the court to dispense with parental consent to the making of an adoption order should be based upon section 52(1) of the 2002 Act, subject to amendment designed to reflect more explicitly the requirements of article 8.
In its response, also published in 2005, the Scottish Executive stated that it supported the recommendation and proposed to implement it through legislation (Secure and safe homes for our most vulnerable children: Scottish Executive Proposals for Action, page 15).
It did so in the Adoption and Children (Scotland) Bill, subsequently enacted as the 2007 Act.
In the Bill as introduced, the relevant provision (section 33(2)(b)) replicated section 52(1) of the 2002 Act: consent could be dispensed with only where the parent could not be found or was incapable of giving consent, or where the welfare of the child required the consent to be dispensed with.
The Policy Memorandum which accompanied the Bill explained (para 18): The Bill introduces new grounds for dispensing with parental agreement to the child being placed for adoption.
The existing grounds, set out at section 16(2) of the Adoption (Scotland) Act 1978, are considered to be too complicated and difficult to apply.
The Bill will introduce simpler grounds based on the parent or guardian not being found or being incapable of giving consent, or the welfare of the child requiring that parental consent is dispensed with.
This will make it a more straightforward process and will reinforce the fact that the welfare of the child is the paramount consideration when considering whether to dispense with the need for parental consent.
The relevant section was however amended during its passage through the Scottish Parliament, to an extent which compromised the aim of simplicity.
The amendments made at Stage 2 permitted the court to dispense with parental consent on the ground that the welfare of the child required it only if, in addition, one of the conditions set out in what became section 31(4) or (5) was also satisfied.
At Stage 3 the section was further amended so as to take the form in which it was enacted: that is to say, the power of the court to dispense with consent where the welfare of the child required it was made applicable only where the power based upon section 31(4) and (5) could not be exercised, rather than being an additional condition for the exercise of the latter power.
Introducing the Stage 3 amendment, the Minister stated that it widened the grounds on which consent could be dispensed with while still applying an appropriate test that respected the rights of the parents.
The amendment, he explained, was designed to reduce the risk that the making of an adoption order would be delayed or would not take place at all because neither of the grounds set out in what are now subsections (4) and (5) quite fitted (Proceedings of the Scottish Parliament, 7 December 2006, col 30248).
The interpretation and application of the legislation
Returning to section 31 of the 2007 Act, the first point to note is that it is premised on the general need for parents to consent to the making of an adoption order.
The default position is that, absent parental consent, an adoption order cannot be made.
Section 31(2)(b) however confers a power, exercisable only by a court, to dispense with the consent of a parent on the grounds specified in section 31(3).
The next point to note is that those grounds are specified in greater detail than in section 52(1) of the 2002 Act.
As I have explained, that section provides only two grounds on which consent may be dispensed with, and the second of those grounds is expressed in general terms: (a) the parent or guardian cannot be found or lacks capacity (within the meaning of the Mental Capacity Act 2005) to give consent, or (b) the welfare of the child requires the consent to be dispensed with.
Section 52(1)(b) of the 2002 Act applies in any situation where section 52(1)(a) does not: in other words, in any situation where the parents whereabouts are known and she is of full capacity.
Section 31(3)(b) of the 2007 Act replicates section 52(1)(a) of the 2002 Act.
Section 31(3)(c) then identifies two other specific circumstances, described in detail in subsections (4) and (5), where consent may be dispensed with: namely, where the parent is unable to discharge her parental responsibilities or to exercise her parental rights, and is likely to continue to be unable to do so; and where the parent has, by virtue of a permanence order, no parental rights and responsibilities, and it is unlikely that such responsibilities or rights will be imposed upon, or given to, her.
Section 31(3)(d) then repeats the language of section 52(1)(b) of the 2002 Act.
In its context, however, section 31(3)(d) has a narrower scope than the similarly worded English provision.
It applies only where section 31(4) and (5) do not.
It is therefore not, as in England and Wales, the general ground which the court has to consider when dealing with any parent whose whereabouts are known and who is of full capacity.
Instead, it is relevant only when the court is dealing with a parent who, in addition to fulfilling those requirements, also falls within neither of the categories defined in section 31(4) and (5).
In practice, adoption proceedings will usually be brought without the agreement of a parent in situations where either a permanence order has been made, in which event section 31(5) or section 31(7) will apply, or where parental rights and responsibilities have been suspended by a supervision requirement, in which event a question will arise under section 31(4) as to whether the suspension is likely to be lifted following a review.
This practical context reinforces the relatively limited scope of section 31(3)(d), when compared with section 52(1)(b) of the 2002 Act.
The provision is nevertheless of practical importance.
In particular, it is possible to conceive of cases where a parent may have limited parental responsibilities and rights which he or she is capable of discharging and exercising, and where section 31(4) and (5) will therefore not apply.
In Principal Reporter v K [2010] UKSC 56, 2011 SC (UKSC) 91, for example, a parent was granted parental rights and responsibilities only to the extent of becoming a relevant person in the childrens referral relating to the child.
In NJDB v JEG [2012] UKSC 21 a parent continued to have parental rights and responsibilities, notwithstanding the withdrawal of contact with the child.
A parent in those situations does not fall within the scope of section 31(4) or (5), but it is nonetheless possible that his or her consent to the making of an adoption order should be dispensed with, where the welfare of the child so requires.
Equally, there may be cases where it is difficult for a court to determine whether a parent who is presently unable to discharge parental responsibilities or exercise parental rights will continue to be unable to do so, at least within the maximum period of time during which, in the childs interests, his or her future can reasonably be left in limbo: if, for example, the parent is a drug addict or alcoholic who is undergoing rehabilitation.
In such a case, the test imposed by section 31(4) might not be met, but the welfare of the child could nevertheless require that an adoption order should be made.
In that situation, section 31(3)(d) provides a basis upon which the court can properly dispense with parental consent.
Section 31(3)(d) is a more complex provision than it might appear.
In the first place, the word welfare has to be read in the context of section 14(3), which applies where a court is coming to a decision relating to the adoption of a child: section 14(1).
The decision whether to dispense with parental consent is plainly a decision relating to the adoption of a child.
In reaching its decision under section 31(3)(d), therefore, the court must regard the need to safeguard and promote the welfare of the child throughout the childs life as the paramount consideration, as required by section 14(3).
Secondly, since a decision whether to dispense with parental consent falls within the scope of section 14(1), the court must have regard to the specific matters listed in section 14(4), so far as is reasonably practicable.
As I have explained, those matters are (a) the value of a stable family unit in the child's development, (b) the child's ascertainable views regarding the decision (taking account of the child's age and maturity), (c) the child's religious persuasion, racial origin and cultural and linguistic background, and (d) the likely effect on the child, throughout the child's life, of the making of an adoption order.
Thirdly, section 31(3)(d) empowers the court to dispense with the parents consent only if it is satisfied that the welfare of the child requires it.
The word requires imposes a high test.
That is so as a matter of ordinary English: to say that something is required means that it is not merely desirable or reasonable, but that it is necessary.
That ordinary meaning is appropriate in the context of section 31(3)(d), for several reasons.
First, the making of an adoption order against the wishes of a parent is a very serious intervention by the state in family relationships.
It follows that the court will not lightly authorize such intervention.
It did not require the Convention to teach us that.
The point was made in Axa General Insurance Ltd, Petitioners [2011] UKSC 46, 2011 SLT 1061, para 153, that legislation has to be construed bearing in mind the societal values which Parliament can be taken to have intended it to embody.
As Lord Hoffmann stated in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131, the courts presume that even the most general words were intended to be subject to the basic rights of the individual.
This point is also reflected in the observations made by this court in In re S B (Children) (Care Proceedings: Standard of Proof) [2009] UKSC 17, [2010] 1 AC 678, paras 6 7: In this country we take the removal of children from their families extremely seriously it is not enough that the social workers, the experts or the court think that a child would be better off living with another family.
That would be social engineering of a kind which is not permitted in a democratic society.
It follows that legislation authorizing the severing of family ties between parents and their children will not readily be construed as setting anything less than a test of necessity.
Section 31(3)(d), in stipulating that the welfare of the child must require that parental consent be dispensed with, is consistent with such a test.
There must, in other words, be an overriding requirement that the adoption proceed for the sake of the childs welfare, which remains the paramount consideration.
The court must be satisfied that the interference with the rights of the parents is proportionate: in other words, that nothing less than adoption will suffice.
If the childs welfare can be equally well secured by a less drastic intervention, then it cannot be said that the childs welfare requires that consent to adoption should be dispensed with.
That requirement is consistent with section 28(2), which prohibits the court from making an adoption order unless it considers that it would be better for the child that the order be made than not.
As the Court of Appeal observed in relation to section 52(1)(b) of the 2002 Act in In re P (Children) (Adoption: Parental Consent) [2008] EWCA Civ 535, [2009] PTSR 150 (para 126): What is also important to appreciate is the statutory context in which the word requires is here being used, for, like all words, it will take its colour from the particular context.
Section 52(1) is concerned with adoption and what therefore has to be shown is that the child's welfare requires adoption as opposed to something short of adoption.
A child's circumstances may require statutory intervention, perhaps may even require the indefinite or long term removal of the child from the family and his or her placement with strangers, but that is not to say that the same circumstances will necessarily require that the child be adopted.
They may or they may not.
The question, at the end of the day, is whether what is required is adoption.
Secondly, the 2007 Act was intended to operate in the context of the Convention rights established by the Human Rights Act, and the duty of courts and other public authorities, under section 6 of that Act, not to act in a way which is incompatible with those rights.
It must therefore have been intended that section 31(3)(d) of the 2007 Act would be construed and given effect by the courts in a manner which complied with the Convention right of parents to respect for their family life.
That intention entails that the word requires should be construed in the manner which I have described, since that construction reflects the requirements of the Convention as established in the jurisprudence of the European court.
Indeed, the use of the word requires in section 52(1)(b) of the 2002 Act, from which it was borrowed for section 31(3)(d) of the 2007 Act, echoes the language used by the European court, as the Court of Appeal explained in In re P (Children) (Adoption: Parental Consent) (paras 124 125): In assessing what is proportionate, the court has, of course, always to bear in mind that adoption without parental consent is an extreme indeed the most extreme interference with family life.
Cogent justification must therefore exist if parental consent is to be dispensed with in accordance with section 52(1)(b).
Hence the observations of the Strasbourg court in Johansen v Norway (1996) 23 EHRR 33 .
That was a case where the court had to consider a permanent placement with a view to adoption.
It said, at para 78: These measures were particularly far reaching in that they totally deprived the applicant of her family life with the child and were inconsistent with the aim of reuniting them.
Such measures should only be applied in exceptional circumstances and could only be justified if they were motivated by an overriding requirement pertaining to the child's best interests.
This is the context in which the critical word requires is used in section 52(1)(b).
It is a word which was plainly chosen as best conveying, as in our judgment it does, the essence of the Strasbourg jurisprudence.
And viewed from that perspective requires does indeed have the connotation of the imperative, what is demanded rather than what is merely optional or reasonable or desirable.
The formulation used by the European court at para 78 of its Johansen v Norway judgment (an overriding requirement pertaining to the childs best interests) is one which it has repeated in identical or similar language in subsequent judgments.
A recent example is R and H v United Kingdom (2011) 54 EHRR 28, concerned with the law of adoption in Northern Ireland.
Thirdly, the 2007 Act is also to be construed, as I have explained, in accordance with the presumption that it is not intended to place the United Kingdom in breach of its international obligations.
The relevant international obligations include those arising under the Convention.
That is therefore a further reason for interpreting the test imposed by section 31(3)(d) as one which calls for an overriding requirement: a test, in other words, of necessity and proportionality.
It is also in accordance with international law that the welfare of the child should be the paramount consideration.
That appears, for example, from article 21 of the United Nations Convention on the Rights of Child: States Parties that recognize and/or permit the system of adoption shall ensure that the best interests of the child shall be the paramount consideration.
It is also reflected in the preamble to the European Convention on the Adoption of Children (Revised, 2008) (Recognising that the best interests of the child shall be of paramount consideration).
The same principle is also implicit in article 8 of the European Convention on Human Rights, as the European court has made clear on many occasions.
In the recent adoption case of Pontes v Portugal (Application No 19554/09) (unreported) given 10 April 2012, for example, the court stated (para 94): La Cour le rpte avec force, dans les affaires de ce type, lintrt de lenfant doit passer avant toute autre considration.
Compatibility with the Convention rights
It is necessary next to consider whether, so construed on the basis of ordinary principles of statutory interpretation, section 31(3)(d) of the 2007 Act is incompatible with the Convention rights.
That assessment calls for an examination of the relevant case law both of domestic courts and of the European court.
The requirements of the Convention in relation to dispensing with parental consent to the making of an adoption order were fully considered by the Court of Appeal, in relation to section 52(1)(b) of the 2002 Act, in In re P (Children) (Adoption: Parental Consent).
The judgment of the court was extensively cited by the Lord President when delivering the opinion of the Inner House in the present case, and I shall follow his example: it is a judgment which merits such citation.
The court stated (paras 119 123): 119 Plainly article 8 is engaged; and it is elementary that, if article 8 is not to be breached, any adoption order made without parental consent in accordance with section 52(1)(b) of the 2002 Act, must be proportionate to the legitimate aim of protecting the welfare and interests of the child.
As Hale LJ said in In re C and B (Care Order: Future Harm) [2001] 1 FLR 611, para 33: under article 8 of the Convention both the children and the parents have the right to respect for their family and private life.
If the state is to interfere with that there are three requirements: first, that it be in accordance with the law; secondly, that it be for a legitimate aim (in this case the protection of the welfare and interests of the children); and thirdly, that it be necessary in a democratic society.
Necessary takes its colour from the context but in the 120 Strasbourg jurisprudence has a meaning lying somewhere between indispensable on the one hand and useful, reasonable or desirable on the other hand.
It implies the existence of what the Strasbourg jurisprudence calls a pressing social need.
Hale LJ continued, at para 34: the that intervention has There is a long line of European Court of Human Rights jurisprudence on that third requirement, which emphasises to be proportionate to the legitimate aim.
Intervention in the family may be appropriate, but the aim should be to reunite the family when the circumstances enable that, and the effort should be devoted towards that end.
Cutting off all contact and the relationship between the child or children and their family is only justified by the overriding necessity of the interests of the child. 121 She reiterated that in In re O (Supervision Order) [2001] 1 FLR 923 , adding, at para 28, that Proportionality, therefore, is the key 122 To the same effect is the judgment of Thorpe LJ in In re B (Care: Interference with Family Life) [2003] 2 FLR 813, para 34: where the application is for a care order empowering the local authority to remove a child or children from the family, the judge in modern times may not make such an order without considering the European Convention for the Protection of Human Rights and Fundamental Freedoms 1950 article 8 rights of the adult members of the family and of the children of the family.
Accordingly he must not sanction such an interference with family life unless he is satisfied that that is both necessary and proportionate and that no other less radical form of order would achieve the essential end of promoting the welfare of the children. 123 That last observation reflects the well established principle that, particularly in the context of public law proceedings, the court should adopt the least interventionist approach.
As Hale J said in In re O (Care or Supervision Order) [1996] 2 FLR 755, 760: the court should begin with a preference for the less interventionist rather than the more interventionist approach.
This should be considered to be in the better interests of the children unless there are cogent reasons to the contrary.
More recently, the European court has itself considered the compatibility with article 8 of a decision to dispense with parental consent, taken under section 52(1)(b) of the 2002 Act.
In YC v United Kingdom (Application No 4547/10) (unreported) given 13 March 2012, the court collated at para 134 a number of different ways in which, in its previous judgments, it had sought to explain the requirements of necessity and proportionality in relation to adoption orders made against the wishes of the parents: The Court reiterates that in cases concerning the placing of a child for adoption, which entails the permanent severance of family ties, the best interests of the child are paramount (see Johansen vs Norway (1996) 23 EHRR 33, para 78; Kearns vs France (2008) 50 EHRR 33, para 79; and R and H v United Kingdom (2011) 54 EHRR 28, paras 73 and 81).
In identifying the child's best interests in a particular case, two considerations must be borne in mind: first, it is in the child's best interests that his ties with his family be maintained except in cases where the family has proved particularly unfit; and second, it is in the child's best interests to ensure his development in a safe and secure environment (see Neulinger v Switzerland (2010) 54 EHRR 1087, para 136; and R and H, cited above, paras 73 74).
It is clear from the foregoing that family ties may only be severed in very exceptional circumstances and that everything must be done to preserve personal relations and, where appropriate, to rebuild the family (see Neulinger, cited above, para 136; and R and H, cited above, para 73).
It is not enough to show that a child could be placed in a more beneficial environment for his upbringing (see K and T v Finland (2001) 36 EHRR 18, para 173; and TS and DS v United Kingdom (Application No 61540/09) (unreported) given 19 January 2010).
However, where the maintenance of family ties would harm the child's health and development, a parent is not entitled under article 8 to insist that such ties be maintained (see Neulinger, cited above, para 136; and R and H, cited above, para 73).
In its YC judgment, the European court attached particular significance to the list of factors to which courts and adoption agencies must have regard when exercising their powers under section 52(1)(b) of the 2002 Act, as set out in section 1(4) of the Act.
In that regard, the court stated (para 135): The identification of the child's best interests and the assessment of the overall proportionality of any given measure will require courts to weigh a number of factors in the balance.
The court has not previously set out an exhaustive list of such factors, which may vary depending on the circumstances of the case in question.
However, it observes that the considerations listed in section 1 of the 2002 Act broadly reflect the various elements inherent in assessing the necessity under article 8 of a measure placing a child for adoption.
In particular, it considers that in seeking to identify the best interests of a child and in assessing the necessity of any proposed measure in the context of placement proceedings, the domestic court must demonstrate that it has had regard to, inter alia, the age, maturity and ascertained wishes of the child, the likely effect on the child of ceasing to be a member of his original family and the relationship the child has with relatives.
The decision with which the case of YC was concerned, taken in accordance with section 52(1)(b) of the 2002 Act, was held to be compatible with article 8.
Decisions taken in accordance with section 31(3)(d) of the 2007 Act, construed and applied as I have explained, should be no less compatible.
Such decisions have a legitimate aim, namely to protect the welfare of children.
If the provision is interpreted in the manner I have explained, such decisions also meet the requirements of necessity and proportionality.
They will be made only where the court is satisfied that there is an overriding requirement that the adoption should proceed, for the sake of the childs welfare, and that nothing less than adoption will suffice.
In considering the child's welfare, and in assessing the overall proportionality of an order under section 31(3)(d), the court will apply section 14(2) and (3), and will have regard in particular to the matters listed in section 14(4).
Two of those matters correspond to factors which are listed in section 1(4) of the 2002 Act and were mentioned by the European court: the age, maturity and ascertained wishes of the child are covered by section 14(4)(b), and the likely effect on the child of ceasing to be a member of his original family is covered by section 14(4)(d).
One would equally expect a court exercising powers under section 31(3)(d) of the 2007 Act to take into account the remaining matter mentioned by the European court, namely the relationship the child has with relatives, since that is one of the circumstances of the case, and it is plainly relevant to the likely effect on the child of the making of an adoption order.
It is therefore a matter which falls within the ambit of section 14(2) and (4)(d).
Emphasis was placed by counsel for the appellant upon the European courts statement that family ties may only be severed in very exceptional circumstances.
That is not a legal test, but an observation about the rarity of the circumstances in which the compulsory severing of family ties will be in accordance with article 8.
The Scottish population statistics for 2010 indicate that there were then 911,794 children aged under 16 (General Register Office for Scotland, Mid 2010 Population Estimates Scotland).
Information provided to the court by the Scottish Executive indicates that 406 adoption orders were made that year.
There are no statistics available for the number of cases where a court made an order dispensing with parental consent.
Such cases might include a number where the parent in question had died or was incapable of giving consent.
They would also include an appreciable number where the parent could not be found: where, for example, a child who had lost all contact with one biological parent was adopted by a step parent.
Most of the cases where parental consent was dispensed with under section 31(3)(c) or (d) are likely to have been amongst the cases where children were adopted from care, which totalled 218 in 2009/10.
Even if parental consent had been dispensed with in all 218 cases, the number would amount to 0.02% of children: in other words, one child in 5000.
In reality, the number can be expected to have been lower than that.
It appears therefore that orders dispensing with consent to the making of an adoption order, against the wishes of a parent, are indeed made only in exceptional circumstances.
It remains to consider the contention that an order made under section 31(3)(d) is not in accordance with the law, within the meaning of article 8(2), because the provision is so imprecisely expressed that it lacks legal certainty.
This contention must be rejected.
It is important to recognize at the outset that the meaning of statutory language involves more than simply the bare words of the provision in question.
In the first place, the language used in section 31(3)(d) has to be interpreted in the light of its statutory context.
Section 14, in particular, clarifies the meaning of the word welfare as used in section 31(3)(d).
It indicates the matters to which the court must in particular have regard when applying section 31(3)(d), and the consideration which the court must treat as paramount.
Section 28(2) further clarifies the circumstances in which an adoption order may be made.
The wider context of the legislation, including the duty of courts and other public authorities to act compatibly with Convention rights under the Human Rights Act, is a further aid to its interpretation, as I have explained.
Furthermore, section 31(3)(d) must be construed, like all other legislation in this country, in accordance with well established principles of statutory interpretation.
I have discussed the relevant principles, including the presumption that legislation is not intended to conflict with the values of our society, including respect for basic individual rights, or with the United Kingdoms international obligations.
The application of those principles makes it plain, if there were otherwise any doubt about the matter, that the word requires in section 31(3)(d) is to be understood as meaning that there must be an overriding requirement, for the sake of the childs welfare over his or her lifetime, that the consent of the parent be dispensed with, and that the childs welfare requires nothing less than the making of an adoption order: a test, in other words, of necessity.
All that said, section 31(3)(d) leaves much to the judgment of the sheriff hearing the individual case.
He is not as tightly constrained, in his appreciation of the circumstances of the case, as a court may be in some other contexts where legislation has been drafted with greater specificity.
That however reflects the nature of the subject matter of the provision.
It is impossible to spell out exhaustively the particular circumstances in which an order dispensing with parental consent may be necessary.
A number of specific circumstances are described in section 31(3)(a) and (b), and in subsections (4) and (5).
Section 31(3)(d) is intended to confer a residual power which can be used in such other circumstances as may arise: it is, in effect, a safety net.
It is unrealistic to expect that a provision of that nature will spell out the precise circumstances in which it may appropriately be employed.
The use of general language in such a context is not inconsistent with the Convention rights.
The approach adopted by the European court is illustrated by the case of Kuijper v Netherlands (2005) 41 EHRR SE 266, which concerned the adoption of a child against the wishes of one of her parents.
One of the complaints made was that the adoption was not in accordance with the law, as the relevant legislation was lacking in legal certainty.
In rejecting the complaint, the court stated at page 277: As regards the applicant's argument that the Arts 1:228 and 3.13 of the Civil Code and their application in practice fell short of the requirement of foreseeability, the Court considers that it is a logical consequence of the principle that laws must be of general application that the wording of statutory provisions is not always precise.
The need to avoid excessive rigidity and to keep pace with changing circumstances means that many laws are inevitably couched in terms which, to a greater or lesser extent, are vague.
However clearly drafted a legal provision may be, its application in practice involves an inevitable element of judicial interpretation and assessment of facts, which do not by itself make a legal provision unforeseeable in its application.
On many occasions and in very different spheres the Court has held that it is in the first place for the national authorities, and in particular the courts, to construe and apply the domestic law (see, for example, Winterwerp v Netherlands (1979) 2 EHRR 387 at [46]; Iglesias Gil v Spain (2003) 40 EHRR 3 at [61]; and Slivenko v Latvia: (2003) 39 EHRR 24 at [105]).
Accordingly, an issue of foreseeability could only arise under the Convention if the national courts' assessment of the facts or domestic law was manifestly unreasonable or arbitrary.
Applying that approach in the context of section 31(3)(d) of the 2007 Act, I have explained why that provision is inevitably couched in terms which are to some extent imprecise.
Interpreted and applied in the manner which I have explained, however, it is not unforeseeable in its application.
An issue of foreseeability should not therefore arise, provided the court interprets the provision correctly and bases its decision upon a reasonable assessment of the facts.
The procedure in the present case
I have not yet said anything about the circumstances of the present case, as they have no bearing on the issue of law which the court has to decide.
It would not however be appropriate to part with this case without making some observations about the procedure followed.
I should emphasise at the outset that my observations are not intended to be critical of the sheriff who heard the case.
It is clear that in making the reference he acted in the manner which he thought was likely to minimize delay.
It also appears from the reference that he received no encouragement from the parties, other than the Lord Advocate, to adopt a different course.
With the benefit of hindsight, however, it is apparent that there are lessons to be learned from this case about how devolution issues should be handled when they arise in the course of proceedings of this kind.
More generally, considering this appeal soon after the case of NJDB v JEG [2012] UKSC 21, where this court was critical of the procedure followed in a dispute over contact, it is difficult to avoid the impression that further efforts require to be made to encourage active and firm judicial case management of family proceedings in the Sheriff Court.
These adoption proceedings began in November 2009, when the child was 2 years old.
He is now 5 years old, and the proceedings have not yet reached their conclusion.
That is a very unfortunate state of affairs.
He has been living with the respondents throughout that period.
His mother, the appellant, has had no contact with him, and has been unable to fulfil the role of his mother.
Equally, unless and until the proceedings are concluded in their favour, the respondents have to hold back from treating him fully as their son: he is not their child, and they do not know whether he ever will be.
He has only one childhood, and it is rapidly passing.
The appellant and the respondents have only one opportunity to fulfil the role of parents towards this child during his childhood.
The delay can only be causing anguish to all the individuals involved.
The damaging consequences of delay in the determination of adoption proceedings have long been well known.
The longer the proceedings unfold, the stronger the attachments which the child is likely to form with the prospective adopters, and they with the child.
The child may identify wholly with the new family.
It may be profoundly damaging to the child if the court does not endorse that new identity.
The protracted uncertainty may itself be damaging and distressing.
In the interests of the welfare of the child, and out of common humanity towards all the individuals involved, it is imperative that unnecessary delay should be avoided.
The duty to avoid undue delay in the determination of disputes of this nature, in order to comply with the obligations imposed by article 8, has also been made clear many times by the European court.
As is obvious, undue delay in the determination of adoption proceedings may have irreversible effects upon the child, and may in any event bring about the de facto determination of the issue.
Parliament recognized, in section 25A of the 1978 Act, the need to avoid delay in particular when it is sought to dispense with parental consent to the making of an adoption order: the court was required under that provision, with a view to determining the question without delay, to draw up a timetable for the proceedings and to give directions designed to ensure that the timetable was adhered to.
There is no equivalent provision in the 2007 Act, but the importance of avoiding delay is instead reflected, as I shall explain, in Practice Notes and rules of court.
The importance of avoiding delay was one of the points emphasised by the Adoption Policy Review Group in their Phase II Report.
They stated in particular that it was essential that as little time as possible should elapse between a formal decision by an adoption agency that a child should be adopted, and the decision of the court to grant or refuse the application for an adoption order (para 7.4).
One of their consequent recommendations was that all sheriffdoms should have a Practice Note with guidance for sheriffs and practitioners (para 7.2).
That recommendation resulted in the promulgation of Practice Notes on the application of the 2007 Act, designed to ensure that proceedings under the Act were conducted expeditiously.
In relation to proceedings in the Court of Session, the provisions of chapter 67 of the Rules of Court have a similar objective.
Since the present case has been dealt with at Dumbarton Sheriff Court, the applicable Practice Note is that issued by the Sheriff Principal of North Strathclyde (Practice Note No 1, 2009: Adoption and Children (Scotland)Act 2007: Guidance for Sheriffs and Practitioners).
It states at para 3: Minimum of delay It shall be the duty of the court to secure that all applications 3. and other proceedings under the Act are dealt with as expeditiously as possible and with the minimum of delay.
Such applications and proceedings require the co operation of all concerned and active and firm case management by the sheriff throughout their course.
In the present case, as I have said, the adoption petition was lodged in November 2009.
A proof was held during September and October 2010.
Fourteen days of evidence were led.
I would observe in passing that it is difficult to understand why fourteen days of evidence should have been necessary, if the guidance given in the Practice Note was followed.
That guidance includes, for example, the following: 20.
The parties should therefore apply their minds to the question whether any evidence might be appropriately presented in the form of an affidavit or other document and the sheriff should encourage them to decide that question at the pre proof hearing.
The sheriff should also encourage the use of affidavits to cover non contentious (or indeed contentious) issues where that would save the time of witnesses and the court. 21.
Where the author of a report or the maker of a statement which has been or is to be lodged is to be called as a witness, the sheriff may order that the report or statement is to be held to be equivalent to the witnesss examination in chief, unless for special reasons he or she otherwise directs. 22.
The sheriff should discourage the unnecessary use of expert witnesses.
If expert evidence is essential, the sheriff should encourage the joint instruction of a single expert by all parties. 24.
At a proof it should be borne in mind that there is a heavy responsibility on the parties representatives to exercise all reasonable economy and restraint in the presentation of the evidence and in their submissions to the court (Lothian Regional Council v A 1992 SLT 858 at 862B).
The sheriff may therefore exercise his or her existing common law power to intervene to discourage prolixity, repetition, the leading of evidence of unnecessary witnesses and the leading of evidence on matters which are unlikely to assist the court to reach a decision.
That guidance is particularly important in cases where it is sought to dispense with parental consent under section 31(3)(c) or (d).
In such cases, courts may be presented with voluminous social work notes, with allegations of alleged failures by the birth parents going back over several years, and with competing assessments of their future prospects.
There may also be expert evidence.
In the absence of firm judicial control, following the guidance in the Practice Note, there may be very extensive examination and cross examination.
The consequence is likely to be protracted proceedings focused primarily upon the past history of the parents rather than the future of the child.
Following the fourteen days of evidence, in November 2010 the sheriff began to hear the submissions of the parties representatives.
According to the agreed chronology, counsel for the appellant intimated her intention to raise a devolution issue on the third day of submissions (a period of time which again seems surprisingly long, particularly bearing in mind the encouragement given in the Practice Note, at para 25, to the advance submission of draft findings in fact and skeleton arguments).
A minute setting out the devolution issue was lodged three days later.
The sheriff allowed it to be received, and referred the issue to the Inner House.
We are informed that he did so without having completed the hearing of parties submissions on the evidence led at the proof, and without making any findings on the evidence or reaching any decision.
It is common ground that, once the reference has been determined, the case will have to return to the sheriff.
He will then have to receive further evidence albeit perhaps very limited on developments since 2010, hear the parties submissions, and issue his judgment.
It is impossible to predict when the question of the childs possible adoption will be finally determined.
If a devolution issue was to be raised as to the compatibility of section 31(3)(d) of the 2007 Act with the Convention rights, that should have been done far earlier than it was.
The relevant procedure is governed by the Act of Sederunt (Proceedings for Determination of Devolution Issues Rules) 1999 (SI 1999/1347).
Article 4 provides:
It shall not be competent for a party to any proceedings to raise a devolution issue after proof is commenced, unless the sheriff, on cause shown, otherwise determines.
It is also relevant to note what is stated in the Practice Note at para 19: Legal issues At a pre proof hearing the sheriff should ask the parties if there are any questions of admissibility of evidence or any other legal issues, including any questions under the European Convention on Human Rights, that are likely to arise at the proof.
If so, the sheriff should consider whether they could with advantage be determined at this hearing rather than at the proof.
Alternatively, the sheriff may adjourn the pre proof hearing to another date in order to enable any such issue to be argued and determined.
If a legal issue is not raised at the pre proof hearing, the sheriff may refuse to allow it to be raised at the proof except on cause shown.
The issue not having been raised at the proper time, the sheriff was under no obligation to allow it to be raised on the seventeenth day of the proof.
It is not apparent from the terms of his reference whether he understood that cause had to be shown for permitting the issue to be raised late, or gave any consideration to the question whether such cause had in fact been shown.
The reference appears to proceed on the basis that the devolution issue having been raised, it had to be determined, and that the only procedural question which the sheriff had to decide was whether he should refer the issue to the Inner House or determine it himself.
Given the stage at which the issue was raised, and having regard to the Act of Sederunt and to the guidance given in the Practice Note, notably in paragraphs 3 and 19, the sheriff could appropriately have refused to allow the issue to be raised: indeed, it is difficult to see how he could appropriately have done otherwise, given the nature of the proceedings and the stage which they had reached.
He would then have allowed parties to complete their submissions, and would have issued his determination.
He might then have refused the application, or granted it on the basis that parental consent could be dispensed with under section 31(3)(c) of the 2007 Act.
In either event the issue sought to be raised would have become academic.
If alternatively he had granted the application on the basis that consent could be dispensed with under section 31(3)(d), the appellant might then have sought to raise the devolution issue on appeal.
She might not have been permitted to do so.
If however she had been, and if (contrary to what in fact occurred) she had succeeded in persuading the appellate court that section 31(3)(d) was not law, then the sheriffs decision would have been quashed.
One way or another, the application would in all likelihood have been determined by now.
Having however allowed the devolution issue to be raised, the sheriff could then have determined it himself.
If he was minded to refer it to the Inner House, he could have asked to be addressed on it before deciding whether it raised a point of real substance which merited a reference.
If he had done so, I find it difficult to imagine that a reference would have been made.
The minute raising the devolution issue was based on the proposition that welfare was not a Convention compliant ground for dispensing with parental consent to adoption, since it was vague and did not call for exceptional circumstances.
No significance was attached to the word requires, in section 31(3)(d), or to the provisions of sections 14 and 28.
No mention was made in the minute of the duty of courts to act compatibly with Convention rights under section 6 of the Human Rights Act, or of the interpretative duty arising (if need be) under section 3 of that Act.
The submissions lodged by the Lord Advocate in response to the minute referred (among other authorities) to the judgment of the Court of Appeal in In re P (Children) (Adoption: Parental Consent) [2008] EWCA Civ 535, [2009] PTSR 150, in which the relevant issues were fully addressed.
It is difficult to believe that, if the contentions advanced in the minute had been tested, they could have survived scrutiny.
LORD HOPE
I agree, for all the reasons that Lord Reed gives, that the appeal should be dismissed.
I am grateful too to Lord Carnwath for his helpful comments on the use of judgments of the Strasbourg court.
It is disappointing to find, despite repeated directions in rules of court and practice notes that adoption proceedings are to be conducted as expeditiously as possible, there are still cases in which this fundamental principle is not being applied in practice.
It needs to be stressed that the responsibility for conducting the proceedings as expeditiously as possible rests on the parties representatives as well as on the sheriff or the presiding judge.
Effective case management is not a process that can be conducted in a vacuum.
It is the duty of the court to manage cases of this kind actively from the outset, by encouraging the taking of steps that will minimise delay and by giving directions as to how the proceedings are to be conducted.
But it is the duty of the parties too, and their legal advisers, to do everything they can to help the court to secure its objective.
Not sitting back and waiting for the other party to act, co operating with each other where possible, giving positive assistance in the setting of timetables and limiting the opportunity for delay both between each stage in the process and during the hearings themselves are just some examples of steps that they may take to assist the court.
I would like therefore to add my own strong endorsement of the point that Lord Reed makes in para 50 of his judgment that this case indicates that further efforts require to be made to strengthen the practice of case management of family proceedings in the Sheriff Court.
While the primary responsibility rests, of course, on the judiciary, practitioners too at all levels should be brought into this process.
Experience has shown that it is not enough to make rules and to give directions.
Advice and training as to how they should be implemented may be just as important if they are to be applied effectively.
LORD CARNWATH (WITH WHOM LORD WILSON AGREES)
I agree that the appeal should be dismissed for the reasons given by Lord Reed.
I only wish to add a short comment on the use made in argument of authorities from the European Court of Human Rights.
We were referred to numerous cases dating back over more than twenty years, dealing with the rights of children and parents in similar contexts.
They offer slightly different formulations and different shades of emphasis.
Many of the cases contain summaries of the previous case law, but again there are differences in the way they are presented.
In general little help is likely to be gained by detailed comparative or historical analysis.
In the present case, as Lord Reed has shown, the relevant Strasbourg principles are readily apparent from the most recent cases, and the leading UK authorities, as cited in his judgment.
The risks are well illustrated by reference to the judgment on which Lord Davidson principally relied, Neulinger and Shuruk v Switzerland (2011) 54 EHRR 1087.
The critical passage reads as follows: 134.
In this area the decisive issue is whether a fair balance between the competing interests at stake those of the child, of the two parents, and of public order has been struck, within the margin of appreciation afforded to States in such matters (see Maumousseau and Washington, cited above, 62), bearing in mind, however, that the childs best interests must be the primary consideration (see, to that effect, Gnahor vs France, Application no. 40031/98, 59, ECHR 2000 IX), as is indeed apparent from the Preamble to the Hague Convention, which provides that the interests of children are of paramount importance in matters relating to their custody.
The childs best interests may, depending on their nature and seriousness, override those of the parents (see Sahin v Germany [GC], Application no. 30943/96, 66, ECHR 2003 VIII).
The parents interests, especially in having regular contact with their child, nevertheless remain a factor when balancing the various interests at stake (ibid, and see also Haase vs Germany, Application no. 11057/02, 89, ECHR 2004 III (extracts), or Kutzner vs Germany, Application no. 46544/99, 58, ECHR 2002 I, with the numerous authorities cited). 135.
The court notes that there is currently a broad consensus including in international law in support of the idea that in all decisions concerning children, their best interests must be paramount (see the numerous references in paragraphs 49 56 above, and in particular Article 24 (2) of the European Unions Charter of Fundamental Rights).
As indicated, for example, in the Charter, [e]very child shall have the right to maintain on a regular basis a personal relationship and direct contact with both his or her parents, unless that is contrary to his or her interests. 136.
The childs interest comprises two limbs.
On the one hand, it dictates that the childs ties with its family must be maintained, except in cases where the family has proved particularly unfit.
It follows that family ties may only be severed in very exceptional circumstances and that everything must be done to preserve personal relations and, if and when appropriate, to rebuild the family (see Gnahor, cited above, 59).
On the other hand, it is clearly also in the childs interest to ensure its development in a sound environment, and a parent cannot be entitled under Article 8 to have such measures taken as would harm the childs health and development (see, among many other authorities, Elsholz v Germany [GC], Application no. 25735/94, 50, ECHR 2000 VIII, and Marlek v the Czech Republic, Application no. 8153/04, 71, 4 April 2006). (emphasis added)
The essence of Lord Davidsons argument was that the Scottish statute did not properly incorporate the tests laid down in that judgment, particularly the two limbs described in the two italicised passages in paragraph 136.
With the assistance of his Junior, Miss Maria Clarke, he proposed two alternative versions of sub section (3)(d) of section 31 designed to remedy that deficiency.
The statutory version (see Lord Reed para 6) reads: (d) that, where neither of those subsections applies, the welfare of the child otherwise requires the consent to be dispensed with.
The proposed alternatives were: that neither of (d) those subsections applies and. , notwithstanding the non application of (4) and (5), the parent is particularly unfit or harm will result to the childs health and development by the exercise of parental responsibilities or parental rights in relation to the child. or (d) that neither (4) nor (5) applies but the parent is particularly unfit or would cause harm to the child in the event of residence or contact.
The only significant difference appears to be in the relative of simplicity of the latter.
As I understand it, both suggested drafts are designed to bring the precision said to be lacking in the statute (see Lord Reed para 45ff).
The wording reflects the apparently mandatory and exclusive character implied by the word dictates.
I cannot accept this approach.
For the reasons given by Lord Reed the search for undue precision in this area of the law is inappropriate, as indeed recognised by the European court (Lord Reed para 48).
In this case, it also gives unjustified weight to the detailed drafting of the passage in question.
This can be illustrated by reference to the preceding paragraphs, dealing with the primacy of the interests of the child.
Thus, paragraph 134 begins by asserting that the childs best interests must be the primary consideration, which proposition is equated with the words of the Hague Convention (the interests of the children are of paramount importance in matters relating to their custody).
However, this is followed by a statement that the childs best interests may, depending on their nature and seriousness, override those of the parents There is an apparent difference of emphasis between saying that the childs interests are of paramount importance, and saying that they merely may, depending on their nature and seriousness override those of the parents.
The authority referred to for the latter proposition is Sahin v Germany (2003) 36 EHRR 43, a case decided in October 2001.
The particular paragraph (42) is in the following terms: The Court further recalls that a fair balance must be struck between the interests of the child and those of the parent and that in doing so particular importance must be attached to the best interests of the child which, depending on their nature and seriousness, may override those of the parent.
In particular the parent cannot be entitled under article 8 of the Convention to have such measures taken as would harm the childs health and development.
The context was that the finding of a violation of the fathers rights when he was refused contact, principally because of the profound dislike of him developed by the mother, and without anyone seeking the views of the child.
In that context one can understand why the legal test was put as it was, but it may not fit readily into the analysis in Neulinger.
For the purposes of the present case it is unnecessary to go further into that debate.
As Lord Reed has shown (para 37), the most recent Strasbourg cases leave no material room for ambiguity.
Thus, R (H) v UK (2011) 54 EHRR 2 (a decision given in May 2011) confirms that in all decisions concerning children their best interests must be paramount; or in Pontes v Portugal (10th April 2012, cited by Lord Reed) the interest of the child doit passer avant tout autre consideration.
Similarly, the apparently mandatory nature of the paragraph 136 tests is not supported by comparison with more recent authority.
In YC v UK, (13 March 2012, cited by Lord Reed at para 40), the same two factors are referred to citing Neulinger, but they are described no longer as tests dictated but as considerations to be borne in mind.
Yet again, in Uyanik v Turquie (Application no. 60328/09, decision 3 May 2012 para 52) the various aspects (les intrts concurrent en jeu) are brought together, again citing Neulinger, but leaving no doubt as to their relative weight: lintrt suprieur de lenfant devant toutefois constituer la consideration dterminante Cela tant, lintrt des parents, notamment bnficier dun contact rgulier avec lenfant, reste un facteur dans la balance des diffrents intrts en jeu.
I cite these various examples not by way of criticism of the Strasbourg Court.
Such variations are unsurprising bearing in mind that the judgments may be given by different chambers of the Strasbourg Court.
Their primary task is to outline the main principles and apply them to the facts of the case before them, not to establish any new proposition of law, or even to offer authoritative restatement of existing law.
There are many decisions of the Court of Appeal in England or the Court of Sessions in Scotland, of which the same could be said.
Neulinger, unlike the others, was a Grand Chamber decision and to that extent would normally be treated as having greater authority.
However, the passages relied on were largely designed to summarise earlier authority, and on examination, and in the light of their treatment in later cases, cannot bear the formulaic significance attributed to them by the appellants submissions.
| The issue in the appeal is whether section 31(3)(d) of the Adoption and Children (Scotland) Act 2007 (the 2007 Act) is incompatible with the Convention right set out in article 8 of the European Convention on Human Rights 1950 (the Convention), with the consequence that it is outside the legislative competence of the Scottish Parliament as defined in the Scotland Act 1998 and is not law.
The appellant is the mother of a child who is the subject of adoption proceedings.
She is opposed to the proposed adoption and has refused to give her consent.
The first respondents are the prospective adoptive parents.
Section 31 of the 2007 Act is concerned with parental consent to adoption.
Subsection (3) sets out the grounds on which the parents or guardians consent to the making of the adoption order may be dispensed with.
In this case, one of the grounds relied on is that set out in section 31(3)(d).
This provision applies only where neither section 31(4) nor section 31(5) apply: that is to say, where the court does not consider that the parent is unable satisfactorily to discharge her parental responsibilities or exercise her parental rights and is likely to continue to be unable to do so, or where the parent is not someone who is subject to an order removing parental responsibilities and rights and is unlikely to have such responsibilities or rights restored in the future.
An adoption order may be made in these circumstances where [] the welfare of the child otherwise requires the consent to be dispensed with.
The Supreme Court dismisses the appeal.
The lead judgment is given by Lord Reed, with whom the other justices agree.
Lord Hope and Lord Carnwath add brief concurring judgments.
The Supreme Court first considers the correct approach to interpretation where Convention rights apply.
It notes that the special interpretive duty imposed by section 3 of the Human Rights Act 1998 arises only where the legislation, if read and given effect according to ordinary principles, would result in a breach of the Convention.
If the ordinary meaning of the legislation is incompatible with the Convention, it is then necessary to consider whether the incompatibility can be cured by interpreting the legislation in the manner required by section 3.
If the legislation cannot be construed in a manner which is compatible with the Convention, then it will not be within the competence of the Scottish Parliament [15 17].
In interpreting section 31 of the 2007 Act, the Court notes that it is premised on the need for parents to consent to the making of an adoption order.
Section 31(2)(b) however confers a power, exercisable only by a court, to dispense with the consent of a parent on the grounds specified in section 31(3).
Secondly, the Court observes that those grounds are specified in greater detail than in section 52 of the Adoption and Children Act 2002, on which section 31 of the 2007 Act was based [24 29].
Turning to the precise wording of section 31(3)(d), the word welfare has to be read in the context of section 14(3), which requires the court to have regard to the need to safeguard and promote the welfare of the child throughout the childs life as the paramount consideration.
The Court also considers that the court must have regard to the specific matters listed in section 14(4), so far as is reasonably practicable.
Furthermore, section 31(3)(d) empowers the court to dispense with the parents consent only if it is satisfied that the welfare of the child requires it.
The word requires must mean, as a matter of ordinary English, that it is necessary [30 32].
That ordinary meaning is appropriate for several reasons.
First, the court will not lightly authorise the making of an adoption order against the wishes of a parent.
Secondly, the 2007 Act was intended to operate in the context of the Convention rights, and the duty of courts, under section 6 of the Human Rights Act, not to act in a way which is incompatible with those rights.
It must therefore have been intended that section 31(3)(d) would be construed and given effect by the courts in a manner which complied with the Convention.
Thirdly, the 2007 Act is also to be construed in accordance with the presumption that it is not intended to place the United Kingdom in breach of its international obligations.
The relevant international obligations include those arising under the Convention [33 37].
The Court next considers whether, construed on the basis of ordinary principles of statutory interpretation, section 31(3)(d) of the 2007 Act is incompatible with article 8 of the Convention.
Having examined the relevant case law, the Court concludes that if the provision is applied as it considers it should be, then decisions made under it are compatible.
Such decisions have a legitimate aim, namely to protect the welfare of children.
Moreover, they meet the requirements of necessity and proportionality [38 43].
The Court rejects the contention that an order made under section 31(3)(d) is not in accordance with the law, within the meaning of article 8(2), because the provision is so imprecisely expressed that it lacks legal certainty.
Interpreted in the light of its statutory context, it is plain that requires imports a test of necessity.
Although section 31(3)(d) leaves much to the judgment of the sheriff, that reflects the nature of the subject matter of the provision.
It is impossible to spell out exhaustively the particular circumstances in which an order dispensing with parental consent may be necessary.
The application of the provision is foreseeable, provided the court interprets the provision correctly and bases its decision upon a reasonable assessment of the facts [45 49].
The Court regrets the delay in these proceedings, and makes suggestions as to how such delays might be minimised in future. [51 64].
|
A feature of the trial is that in the public interest all those directly taking part are given civil immunity for their participationThus the court, judge and jury, and the witnesses including expert witnesses are granted civil immunity.
This is not just privilege for the purposes of the law of defamation but is a true immunity Arthur JS Hall & Co v Simons [2002] 1 AC 615, 740, per Lord Hobhouse of Woodborough.
In Stanton v Callaghan [1998] QB 75 the Court of Appeal held that the immunity of an expert witness extended to protect him from liability for negligence in preparing a joint statement for use in legal proceedings pursuant to RSC, Ord 38, r 38.
The claim in this case relates precisely to such negligence and was, for that reason, struck out by Blake J on 22 January 2010.
He certified, however, that the case involved a point of law of general public importance and granted a leapfrog certificate under section 12 of the Administration of Justice Act 1969, so that this appeal is brought directly from his decision.
The narrow issue raised by this appeal is whether the act of preparing a joint witness statement is one in respect of which an expert witness enjoys immunity from suit.
Mr Ter Haar QC for the appellant was careful to emphasise at the outset of his submissions that he was not concerned to do more than establish that an expert witness enjoyed no immunity in relation to this activity.
Inevitably, however, his submissions have raised the broader issue of whether public policy justifies conferring on an expert witness any immunity from liability in negligence in relation to the performance of his duties in that capacity.
Surprisingly, this immunity has never been challenged in the past.
It has simply been accepted that an immunity which protects witnesses of fact applies equally to prevent a client from suing in negligence the expert that he has retained.
The facts
In so far as this statement of the facts describes conduct on the part of the respondent, the facts are not proved but asserted in the particulars of claim.
They are to be treated as true for the purpose of resolving the question of whether this claim was properly struck out.
Understandably, the respondent has not suggested that the facts asserted do not disclose a good cause of action if she is susceptible to liability in negligence.
The action has its origin in a road traffic accident that occurred in Liverpool on 14 March 2001.
The appellant was stationary on his motorcycle, waiting to turn at a road junction, when he was knocked down by a car driven by a Mr Bennett.
Mr Bennett was drunk, he was uninsured and he was driving while disqualified.
The appellant suffered significant physical injuries, but these were not of such severity as to dwarf the significance of the psychiatric consequences of his accident.
These were post traumatic stress disorder (PTSD), depression, an adjustment disorder and associated illness behaviour which manifested itself in chronic pain syndrome.
On 20 March 2001 the appellant instructed solicitors (Kirwans) to act for him in personal injury proceedings.
Kirwans instructed a consultant orthopaedic surgeon who advised that an opinion from a clinical psychologist would be of help.
The respondent is a consultant clinical psychologist.
In May 2003 Kirwans instructed her to examine the appellant and prepare a report for the purposes of litigation.
She prepared a report dated 29 July 2003 in which she expressed the view, inter alia, that the appellant was at that time suffering from PTSD.
Kirwans issued proceedings on 26 September 2003 against Mr Bennett and the Motor Insurance Bureau.
The latter was replaced by the relevant insurer (Fortis).
Fortis admitted liability on 17 February 2004, so that only quantum remained in issue.
Pursuant to instructions from Kirwans, the respondent carried out a further examination of the appellant and issued a second report dated 10 December 2004.
This stated that the appellant did not have all the symptoms to warrant a diagnosis of PTSD, but was still suffering from depression and some of the symptoms of PTSD.
A subsequent report prepared by Dr El Assra, a consultant psychiatrist instructed by Fortis, expressed the view that the appellant was exaggerating his physical symptoms.
The district judge ordered the two experts to hold discussions and to prepare a joint statement.
The discussion took place on the telephone and Mr El Assra prepared a draft joint statement, which the respondent signed without amendment or comment.
The joint statement was damaging to the appellants claim.
It recorded agreement that his psychological reaction to the accident was no more than an adjustment reaction that did not reach the level of a depressive disorder of PTSD.
It further stated that the respondent had found the appellant to be deceptive and deceitful in his reporting, and that the experts agreed that his behaviour was suggestive of conscious mechanisms that raised doubts as to whether his subjective reporting was genuine.
When taxed by Kirwans with the discrepancy between the joint report that she had signed and her earlier assessments the respondent gave what Blake J rightly described as an unhappy picture of how the joint statement came to be signed, summarised as follows: She had not seen the reports of the opposing expert at the time i) of the telephone conference; ii) The joint statement, as drafted by the opposing expert, did not reflect what she had agreed in the telephone conversation, but she had felt under some pressure in agreeing it; iii) Her true view was that the claimant had been evasive rather than deceptive; iv) now resolved; v) She was happy for the claimants then solicitors to amend the joint statement.
It was her view that the claimant did suffer PTSD which was
Kirwans sought permission to change their psychiatric expert, but the district judge would not permit this.
It is the appellants case that Kirwans were then constrained to settle his claim for significantly less than the settlement that would have been achieved had not the respondent signed the joint statement in the terms in which she did.
The current state of the law
The immunity of expert witnesses, as propounded by the Court of Appeal in Stanton v Callaghan, has a long history.
This dates back over 400 years see Cutler v Dixon (1585) 4 Co Rep 14b; 76 ER 886.
Thus the immunity was established long before the development of the modern law of negligence and, in particular, the recognition of the possibility of liability for negligent misstatement.
It also dates back to an era long before it became common for forensic experts to offer their services under contracts for reward.
The immunity has its origin in a reaction to an actual or perceived tendency on the part of disgruntled litigants, or defendants in criminal proceedings, to bring proceedings for libel or slander against those who had given evidence against them.
Thus the immunity originally took the form of absolute privilege against a claim for defamation and it extended to all who took part in legal proceedings.
In Dawkins v Lord Rokeby (1873) LR 8 QB 255, 263 Kelly CB stated: The authorities are clear, uniform and conclusive, that no action of libel or slander lies, whether against judges, counsel, witnesses or parties, for words written or spoken in the ordinary course of any proceeding before any court or tribunal recognized by law.
This privilege was extended, in the form of immunity from suit, to other forms of action in tort.
In Hargreaves v Bretherton [1959] 1 QB 45 a man who had been convicted of fraud sought to bring a civil suit for perjury.
In striking out the claim as disclosing no cause of action Lord Goddard CJ cited the statement of Lord Mansfield in R v Skinner (1772) Lofft 55 that neither party, witness, counsel, jury, or judge, can be put to answer, civilly or criminally, for words spoken in office.
He commented: That is a perfectly clear statement by one of the greatest common lawyers that ever lived, that for words spoken by a witness in office, which means, of course, for this purpose in giving evidence, he cannot be put to answer either civilly or criminally.
In Marrinan v Vibart [1963] 1 QB 528 an attempt to circumvent the immunity by framing a claim in conspiracy to defame was roundly rejected by the Court of Appeal.
The typical situation where the immunity was invoked was where a witness or party had given evidence hostile to the plaintiff.
A similar protection was afforded to counsel in relation to defamatory allegations made against a party, or indeed anyone else, in the course of his conduct of legal proceedings.
This immunity overlapped with a wider immunity enjoyed by a barrister from a claim by his own client for failure to exercise reasonable skill and care in the conduct of litigation on behalf of the client.
That immunity was unsuccessfully challenged in Rondel v Worsley [1969] 1 AC 191.
In Hall v Simons [2001] 1 AC 615 the House of Lords abolished it on the ground that it could no longer be justified.
The barrister is, however, still protected by absolute privilege from a claim in defamation in relation to statements made in the course of the conduct of legal proceedings see Medcalf v Mardell [2002] UKHL 27, [2003] 1 AC 120, 142, per Lord Hobhouse.
I now propose to consider the authorities in greater detail.
My particular objects in doing so are first to identify the reasons for the immunity from suit, secondly to examine the circumstances in which it was accepted that this immunity extended to expert witnesses and thirdly to identify the reasoning that was applied first in holding that this immunity extended to barristers and then in holding that it did not protect them from actions for breach of duty of care.
In the light of the authorities I shall then turn to consider whether the immunity can be justified.
The authorities
The reasons for the immunity
In Cutler v Dixon the reason given for rejecting the claim was that if actions should be permitted in such cases, those who have just cause for complaint, would not dare to complain for fear of infinite vexation.
The continuous theme that runs through the cases is, in modern parlance, the chilling effect that the risk of claims arising out of conduct in relation to legal proceedings would have.
It would make claimants reluctant to resort to litigation.
It would make witnesses reluctant to testify.
If they did testify, it would make them reluctant to do so freely and frankly.
The cases emphasise that the object of the immunity is not to protect those whose conduct is open to criticism, but those who would be subject to unjustified and vexatious claims by disgruntled litigants.
There is no need to cite the many early authorities that support these propositions, for the reasons for the immunity were considered relatively recently by the House of Lords in Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435.
The issue in that case was whether witness immunity extended to protect police officers who were alleged to have fabricated evidence, as opposed to having given false evidence, from claims of conspiracy to injure and misfeasance in public office.
The plaintiffs had been indicted for serious offences, but their trial had been permanently stayed on the grounds of abuse of process on the part of the police.
Their Lordships identified the following justifications for witness immunity: i) To protect witnesses who have given evidence in good faith from being harassed and vexed by unjustified claims: per Lord Hope of Craighead at p 446 and Lord Hutton at p 464; ii) To encourage honest and well meaning persons to assist justice; in the interest of establishing the truth and to secure that justice may be done: per Lord Hope at p 447 and Lord Clyde at p 460; iii) To secure that the witness will speak freely and fearlessly: per Lord Clyde at p 461.
A further justification was identified by Lord Hope at p 446, namely to avoid a multiplicity of actions in which the value or truth of the evidence of a witness would be tried all over again.
This justification had been identified by Lord Wilberforce in Roy v Prior [1971] AC 470, 480.
In Darker Lord Hope observed that this justification only applied to evidence given in court, so that it was not relevant to that appeal.
He might have added that it only applied where the proceedings had culminated in a decision.
In his judgment in this case, Lord Hope suggests that this justification is one that was relevant to barrister immunity, but which is not relevant to witness immunity.
I do not wholly agree.
A claim against a witness might well involve an assertion that, but for the false evidence, the trial would have had a different outcome, a matter with obvious implications for the measure of damages.
I agree, however, that this was not one of the original justifications, nor the most cogent justification, for the general immunity.
The extension of the immunity to expert witnesses
A significant distinction between an expert witness and a witness of fact is that the former will have chosen to provide his services and will voluntarily have undertaken duties to his client for reward under contract whereas the latter will have no such motive for giving evidence.
The question was raised, but not explored in depth, of whether an expert is normally in direct contractual relationship with his client, or whether his contract is with the solicitor who engages him on behalf of the client.
I do not think that this is significant.
In either event there is a marked difference between holding the expert witness immune from liability for breach of the duty that he has undertaken to the claimant and granting immunity to a witness of fact from liability against a claim for defamation, or some other tortious claim, where the witness may not have volunteered to give evidence and where he owes no duty to the claimant.
It is notable that, before the present case, no one appears to have suggested that this difference called into question whether witness immunity should extend to protect the expert witness against a claim by his own client.
The Scottish case of Watson v MEwan [1905] AC 480 was a case where a claim was brought against a medical witness in respect of statements made in preparation of a witness statement and similar statements subsequently made in court.
It is a case of unusual facts.
The appellant was a doctor of medicine who had been retained by the respondent (the wife) in respect of proposed proceedings against her husband for separation and aliment.
He was subsequently retained by the husband in the same proceedings.
In preparing his witness statement he included some very damaging allegations based on matters that he had learned when acting for the wife, which included allegations of taking morphine and planning to procure an abortion.
He subsequently gave oral evidence of these matters in the court proceedings.
The wife brought an action against him for breach of confidence and for slander, relying on both what was said to the husbands lawyers and what was said in court.
The head note to the report of the decision in the House of Lords suggests that the claim for breach of confidence did not proceed, and that the relevant issues that came before the House of Lords were whether the appellant was immune from a claim for slander in respect of what he said in court and, more pertinently, whether this immunity extended to what he had said when giving his witness statement (the precognition).
I am however grateful to Lord Hope for his clarification of the nature of this rather confusing litigation.
The House of Lords held that the appellant was immune.
Giving the leading speech the Earl of Halsbury LC said, at pp 488 489: I do not care whether he is what is called a volunteer or not; if he is a person engaged in the administration of justice, on whichever side he is called his duty is to tell the truth and the whole truth.
If he tells the truth and the whole truth, it matters not on whose behalf he is called as a witness; in respect of what he swears as a witness he is protected that cannot be denied and when he is being examined for the purpose of being a witness he is bound to tell the whole truth according to his views, otherwise the precognition, the examination to ascertain what he will prove in the witness box, would be worth nothing.
This decision lends some support for extending witness immunity to experts, but it is right to observe that the focus of the House of Lords appears to have been the claim for slander and the case was not concerned with the duty of care that, under the modern law, is owed by an expert to his client, as to which see para 49 below.
Evans v London Hospital Medical College (University of London) [1981] 1 WLR 184 involved a claim against forensic scientists in negligence.
The scientists had provided post mortem reports to the police that had led to the plaintiff being prosecuted for the murder of her small son.
At trial the prosecution offered no evidence so that she was acquitted.
She alleged that the defendants had been negligent in the conduct of the post mortem.
Drake J held that the defendants were protected by witness immunity.
He held that immunity given to a witness extended to cover statements he made prior to the issue of a writ or the commencement of a prosecution, provided that the statement was made for the purpose of a possible action or prosecution and at a time when the possible action or prosecution was being considered.
There is no reported case where immunity was invoked against a claim for breach of a duty of care brought against a professional expert witness by his client before Palmer v Durnford Ford [1992] QB 483.
In that case the plaintiffs had pursued a disastrous claim against both the supplier and a repairer of a lorry tractor unit.
They subsequently sued an engineering expert on the ground that his incompetent report had led them to advance claims on a basis that was invalid, and their solicitors for negligence in engaging an incompetent expert.
The expert persuaded the district judge to strike out the claim against him on the ground that he was immune from suit.
On appeal the plaintiff did not challenge the proposition that the immunity that was enjoyed by witnesses in general protected a paid expert against a claim by his own client.
The issue was the extent of that immunity.
Mr Simon Tuckey QC, sitting as a deputy High Court judge, applied by analogy the decision of the House of Lords in relation to the advocates immunity from suit in Saif Ali v Sydney Mitchell & Co [1980] AC 198 a decision that I shall consider in due course.
He held, at p 488, that immunity would only extend to what could fairly be said to be work which was preliminary to giving evidence in court, judged perhaps by the principal purpose for which the work was done.
Work done principally for the purpose of advising the client was not covered.
Until the present case I am not aware that the decision in Palmer v Durnford Ford has been questioned.
It was referred to, with approval, in X (Minors) v Bedfordshire County Council [1995] 2 AC 633.
One of the issues raised in that case was whether witness immunity protected a psychiatrist from liability in negligence to a child in respect of advice as to whether the likelihood of child abuse rendered it desirable for a child to be removed from her home.
The argument was that if the psychiatrists views were to lead to child care proceedings, the psychiatrist would have to present those views in court.
In the Court of Appeal at p 661 Sir Thomas Bingham MR dismissed this argument.
He observed that witness immunity had been treated as analogous to immunity accorded to those in the conduct of proceedings.
If the immunity were as wide as that claimed, a barrister or solicitor advising a client on a factual question with a view to proceedings would be immune from an action for negligence.
Such a result was inconsistent with authority.
Mr Simon Tuckey had reached a correct conclusion in Palmer v Durnford Ford.
In the House of Lords Lord Browne Wilkinson disagreed at p 755, inasmuch as he held that the views expressed by the psychiatrist were protected by witness immunity.
He found the reasoning of Drake J in Evans v London Hospital compelling, at least in relation to criminal proceedings.
He expressed no view in relation to ordinary civil proceedings and said that he intended to cast no doubt on Mr Simon Tuckeys decision in Palmer v Durnford Ford.
Stanton v Callaghan [2000] QB 75 is the leading case on immunity conferred in respect of a claim brought by a litigant against his own expert witness.
The case has features in common with those of the present case.
The defendant was a structural engineer, retained by the plaintiffs to assist in a claim against insurers in relation to the costs of dealing with subsidence of the plaintiffs house.
He initially advised that total underpinning was required at a cost of some 77,000.
Subsequently, in the course of preparing a joint report with the insurers expert witness, the latter persuaded him to agree that infilling with polystyrene, at a cost of only some 21,000, would be a satisfactory remedy.
The case was settled on that basis, but the plaintiffs then brought an action claiming that their experts change of advice had been negligent.
The master refused an application to strike out the claim and the judge upheld him, but the Court of Appeal reversed the decision.
After a review of authority, including lengthy citation from Palmer v Durnford Ford, Chadwick LJ summarised their effect as follows, at p 100: (i) an expert witness who gives evidence at a trial is immune from suit in respect of anything which he says in court, and that immunity will extend to the contents of the report which he adopts as, or incorporates in, his evidence; (ii) where an expert witness gives evidence at a trial the immunity which he would enjoy in respect of that evidence is not to be circumvented by a suit based on the report itself; and (iii) the immunity does not extend to protect an expert who has been retained to advise as to the merits of a partys claim in litigation from a suit by the party by whom he has been retained in respect of that advice, notwithstanding that it was in contemplation at the time when the advice was given that the expert would be a witness at the trial if that litigation were to proceed.
What, as it seems to me, has not been decided by any authority binding in this court is whether an expert is immune from suit by the party who has retained him in respect of the contents of a report which he prepares for the purpose of exchange prior to trial say, to comply with directions given under RSC, Ord 38, r 37 in circumstances where he does not, in the event, give evidence at the trial; either because the trial does not take place or because he is not called as a witness.
Chadwick LJs conclusion appears at pp 101 102: In my view, the public interest in facilitating full and frank discussion between experts before trial does require that each should be free to make proper concessions without fear that any departure from advice previously given to the party who has retained him will be seen as evidence of negligence.
That, as it seems to me, is an area in which public policy justifies immunity.
The immunity is needed in order to avoid the tension between a desire to assist the court and fear of the consequences of a departure from previous advice.
Otton LJ agreed.
He drew an analogy between the position of an expert witness and the position of an advocate, and applied the reasoning of the House of Lords in relation to the position of barristers in Rondel v Worsley [1969] 1 AC 191, to which I shall shortly refer.
Each had to be given full opportunity to discharge their duties to the court.
Otton LJs conclusion on the facts of the case before him were as follows: On any basis the defendant when attending the meeting with his opposite number enjoyed the immunity.
It is true that he did not do so pursuant to RSC, Ord 38, r 38 but the purpose of the meeting was to identify those parts of the evidence and the others opinion which they could agree and those which they could not.
It was in the public interest to do so.
The duty to the court must override the fear of suit arising out of a departure from a previously held position.
The expert must be able to resile fearlessly and with dignity.
In the instant case both experts resiled from more extreme positions.
In theory, at least, the defendants could have sued their expert for placing them in a more adverse position.
This is the extent of the relatively sparse authority in this jurisdiction which deals directly with the immunity of an expert witness to suit by his own client.
Before considering whether this Court should allow the law to stand where it is I turn to consider what lessons are to be learned from the position of advocates, for the courts have both compared and contrasted the position of advocates with the position of expert witnesses.
The position of barristers
It had long been thought by many that barristers were immune from liability in negligence because they did not enter into contracts with their clients.
They could not sue for their fees and thus they owed their clients no duty of care.
This reasoning was thrown into question by the decision in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.
The immunity of barristers was challenged in Rondel v Worsley [1969] 1 AC 191.
No case could have been better designed to illustrate the dangers of being exposed to vexatious litigation.
The defendant had accepted a dock brief for a man who was rightly convicted and sentenced to 18 months imprisonment.
His application for permission to appeal included complaints against his counsel.
It was refused.
He then commenced proceedings for negligence.
It was at all stages found that his claim was hopeless.
But the issue of principle of whether an action for negligence could be brought against a barrister was pursued to the House of Lords.
Their Lordships unanimously held that it could not.
Barristers were immune from liability in negligence.
This immunity did not stem from a barristers inability to sue for his fees.
It was to protect him from the risk of being sued for doing no more than his duty to the court.
This would sometimes conflict with what appeared to be the personal interests of the client: as an officer of the court concerned in the administration of justice, he has an overriding duty to the court, to the standards of his profession, and to the public, which may and often does lead to a conflict with his clients wishes or with what the client thinks are his personal interests. per Lord Reid at p 227.
This rendered counsel particularly susceptible to vexatious suits and immunity was necessary to protect against this.
Without this immunity there would be a pressure on the advocate to subordinate his duty to the court to his duty to the client.
This would lead him into undesirable prolixity per Lord Reid at p 229, Lord Morris of Borth y Gest at p 251, Lord Pearce at pp 256 and 272, and Lord Upjohn at p 284.
Some of their Lordships were also concerned with the prospect of repeated litigation raising the same issues having failed to prove by appeal that he was wrongly convicted, the defendant would seek to establish this by a claim against his counsel.
This would lead to a trial upon a trial, speculation upon speculation, an unseemly excrescence upon the legal system per Lord Morris at pp 249 250.
Lord Reid, Lord Morris and Lord Upjohn expressed the view that public policy did not require that a barrister should be immune from negligence in relation to matters unconnected with cases in court.
Lord Reid observed at p 229 that immunity was not the only way that the law protected counsel.
They also shared with the judge and witnesses the absolute privilege with regard to what was said by them in court.
At p 252 Lord Morris compared the immunity of the barrister with that accorded to witnesses in respect of the evidence given by them in court, an immunity which also attached to the parties and to the judge, albeit that the relationship between an advocate and the client differed from the relationship between the client and an adverse witness p 253.
Lord Pearce at pp 268 269 also drew an analogy between the position of advocates and the position of witnesses.
He remarked that the reasons underlying the immunity of witnesses were first that there might be a series of retrials and secondly that an honest witness might be deflected by fear of the consequences.
He asked at p 270 whether counsel alone of the five ingredients of a trial parties, witnesses, judge, jurors and advocate should be the only one to be liable to his client in damages.
Lord Upjohn at p 283 remarked that it was because of counsels duty to the court in the public interest that immunity from defamation was granted, as it was to the judge and to witnesses.
This immunity was just as necessary in respect of his general conduct of the case.
It is noteworthy that, in justifying the immunity from suit enjoyed by counsel, their Lordships compared the position of counsel with that of the others who took part in the trial process, including witnesses.
In Saif Ali v Sydney Mitchell & Co [1980] AC 198 the issue was not whether barristers should have immunity from suit, but the scope of that immunity.
The plaintiff brought an action against his solicitors for failure to sue the correct defendant in relation to a road traffic accident.
The solicitors joined the barrister who had advised them.
The issue was whether the barristers immunity extended to his advice on whom to sue.
The House of Lords, Lord Keith of Kinkel dissenting, held that it did not.
Lord Wilberforce at p 214 distinguished this immunity from the privilege that attached to court proceedings, which protected equally judge, counsel, witnesses, jurors and parties, observing that this had nothing to do with a barristers immunity from suit.
The following test of immunity, laid down by McCarthy P in the New Zealand Court of Appeal in Rees v Sinclair [1974] 1 NZLR 180, 187 was approved: the protection exists only where the particular work is so intimately connected with the conduct of the cause in court that it can fairly be said to be a preliminary decision affecting the way that cause is to be conducted when it comes to a hearing.
Lord Diplock commented at p 218 that the barristers immunity from liability for negligence in the conduct of his professional work granted the Bar a privileged status which the common law did not accord to any other profession or skilled craft.
He held that this immunity was justified by two considerations.
The first was that the barristers immunity for what he said and did in court was part of the general immunity from civil liability which attached to all persons in respect of their participation in proceedings before a court of justice; judges, court officials, witnesses, parties, counsel and solicitors alike p 222.
The second was the undesirability of re trials of the same issues.
Lord Salmon at p 230 remarked that public policy required the barrister to have the same immunity as the judge, juryman or witness for anything he said or did in court, but not for failing to join the right party.
Lord Russell of Killowen, who also dissented, at p 233, on the other hand, said that the barristers immunity was so that he could perform his public duty in relation to the conduct of litigation without worrying about the possibility of a claim for negligence.
He did not consider that this immunity was connected with a quite different immunity of judges, witnesses and jurors.
It is not easy to trace a common thread in these judgments.
The majority, however, come close to equating the position of the barrister with that of the others who take part in proceedings in court.
The majority also held that, when a solicitor was acting as an advocate, he enjoyed the same immunity as a barrister.
In Hall v Simons the House of Lords swept away the advocates immunity from liability in negligence, in court and out, albeit not their absolute privilege from claims for defamation.
Counsel for the plaintiffs accepted that expert witnesses enjoyed immunity and did not seek to challenge this.
Rather they sought to distinguish expert witnesses from advocates on the ground that the former owed no duties to their clients once they were in the witness box.
Their sole duty was then to the court p 671.
Lord Steyn does not seem to have accepted this argument.
At p 679 he referred to the analogy of the immunity of those involved in court proceedings.
He then referred to an argument in Cane, Tort Law and Economic Interests, 2nd ed (1996), p 237 that urged the case for removing immunity from paid expert witnesses.
He was, however, persuaded by an argument that there was little connection between immunity from liability for things said in court and immunity from liability for negligent acts.
Lord Hoffmann accepted counsels argument.
He said at p 698: Mr Scott invited your Lordships to apply by analogy the decision of the Court of Appeal in Stanton v Callaghan [2000] QB 75, in which it was held that an expert witness could not be sued for agreeing to a joint experts statement in terms which the client thought detrimental to his interests.
He said that this was an example of a general immunity for acts done in the course of litigation.
But that seems to me to fall squarely within the traditional witness immunity.
The alleged cause of action was a statement of the evidence which the witness proposed to give to the court.
A witness owes no duty of care to anyone in respect of the evidence he gives to the court.
His only duty is to tell the truth.
There seems to me no analogy with the position of a lawyer who owes a duty of care to his client.
Nor is there in my opinion any analogy with the position of the judge.
The judge owes no duty of care to either of the parties.
He has only a public duty to administer justice in accordance with his oath.
The fact that the advocate is the only person involved in the trial process who is liable to be sued for negligence is because he is the only person who has undertaken a duty of care to his client.
I shall shortly consider the extent to which there is a valid distinction between advocates and expert witnesses in the present context.
It suffices to note that in Hall v Simons the House of Lords abolished immunity from liability in negligence in the case of the former without questioning the immunity of the latter.
Discussion
I propose to consider the following issues in relation to expert witnesses: i) What are the purposes of the immunity? ii) What is the scope of the immunity? iii) Has the immunity been eroded? iv) What are the effects of the immunity? v) Can expert witnesses be compared to advocates? vi) Is the immunity justified? vii) Should the immunity be abolished? What are the purposes of the immunity?
Mr Lawrence QC for the respondent did not seek to advance the danger of a multiplicity of proceedings in support of witness immunity.
He accepted that that argument had been more cogent as a justification for the immunity from suit that had been accorded to advocates, and yet that argument had not prevailed in Hall v Simons.
Rather, Mr Lawrence invoked the chilling factor that potential liability in negligence would introduce in respect of expert evidence.
This, he submitted, would operate in two ways.
First it would make expert witnesses more reluctant to provide their services at all.
He drew attention to concerns expressed by Thorpe LJ in Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462, paras 225 249, that, in relation to family justice, the demand for experts exceeded supply and that this was a field which was very sensitive to increasing or newly emerging disincentives.
This was a theme that Wall LJ had underlined extra judicially when delivering a paper on the use of experts in family cases at the annual Bond Solon expert witness conference on 6 November 2009.
Mr Lawrence placed more emphasis on the other aspect of the chilling factor.
This was the reluctance that an expert witness would have to give evidence that was contrary to his clients interest if there was a risk that this might lead his client to sue him.
This risk, he submitted, had become more significant since Lord Woolf, and the provisions of the CPR which gave effect to his recommendations, had emphasised the paramount importance of the duty of an expert to give frank and objective advice to the court.
It was important that experts should have the reassurance that, if they complied with this obligation to the possible disadvantage of their clients, they would not be at risk of being sued for failing to have regard to their clients best interests.
I believe that Mr Lawrence has accurately identified the primary case for conferring immunity from liability in negligence on expert witnesses.
As I explained in para 17 above, however, I would not wholly discount the argument that it is undesirable that one court, other than an appellate court, should be required to pass judgment on the correctness of the decision of another court, which is a possible consequence of permitting claims for negligence against expert witnesses.
What is the scope of the immunity?
The Court suggested to Mr Lawrence that the requirement identified by Otton LJ in Stanton v Callaghan that an expert must be able to resile fearlessly and with dignity from a more extreme position taken in an earlier advice could present a paradox.
The expert might be reluctant to do this through fear of conceding that his earlier advice had been erroneous.
In that event he needed protection, not in respect of his revised view, but in respect of his earlier advice.
Yet, on the approach in Palmer v Durnford Ford, the earlier advice might not be covered by the immunity.
Mr Lawrences response to this was that any advice given in possible anticipation of litigation should be covered by the immunity.
This would bring within the scope of the immunity a wider class of expert advice than those embraced by the test in Palmer v Durnford Ford, indeed any expert advice where there was a possibility of litigation.
Mr Lawrences submissions lend support to a point made in opposition to the immunity by Mr Ter Haar.
This is that it is difficult to draw the line that confines the immunity.
The border is fuzzy.
It is clear, however, that if the immunity is to be effective in removing inhibitions on what the expert witness is prepared to say at the trial it must protect him in relation to his expression of views before the trial.
Has the immunity been eroded?
Mr Ter Haar submitted that the case for conferring immunity on expert witnesses has weakened because, in two respects, the immunity of expert witnesses has been eroded.
In Meadow v General Medical Council [2007] QB 462 the Court of Appeal held that expert witnesses had no immunity against disciplinary proceedings before professional tribunals where fitness to practice was in issue.
In Phillips v Symes (No 2) [2004] EWHC 2330 (Ch), [2005] 1 WLR 2043 Peter Smith J held that expert witnesses were not immune from being held liable to wasted costs orders.
Mr Lawrence accepted the validity of this argument to the extent of submitting that Phillips v Symes (No 2) had been wrongly decided.
I do not consider that the susceptibility of expert witnesses to disciplinary proceedings or to wasted cost orders weakens the case for immunity from civil suit, in so far as this case exists.
The principal argument advanced for immunity from civil suit is that the risk of being sued will deter the expert witness from giving full and frank evidence in accordance with his duty to the court when this conflicts with the interests of his client.
In so far as a witness may be tempted to trim his sails to suit his client, I would expect the risk of disciplinary proceedings or of a wasted costs order to be a deterrent.
The argument advanced in support of immunity from suit by the client does not extend to immunity from disciplinary proceedings or wasted costs orders.
What are the effects of the immunity?
It is common ground that if the immunity is to be effective it must apply to views expressed not only in court, but in contemplation of, or at least preparation for, possible court proceedings.
The vast proportion of civil claims settle before they get to court.
For this reason alone it will be in only a small minority of cases that views expressed by an expert will affect the client because of their impact on a hearing in court.
In the vast majority of cases those views will impact, not on a judgment of the court, but on the clients decision whether or not to proceed with an action or on the terms on which he agrees to settle the dispute.
It is no coincidence that both in the present case and in Palmer v Durnford Ford the claim has related to the effect of the experts opinion on the terms of a settlement.
Thus the effect of the immunity is to preclude the client from suing for breach of duty where the experts negligence is alleged to have adversely affected such a decision.
The question is whether this is necessary in order to ensure that his objectivity is not affected in the minority of cases that do result in court proceedings.
Can expert witnesses be compared to advocates?
In Hall v Simons at p 698 Lord Hoffmann, when comparing the position of an expert witness to that of an advocate, said that a witness owes no duty of care in respect of the evidence that he gives to the court.
His only duty is to tell the truth.
That statement may be true of a witness of fact, but it is not true of an expert witness.
Lord Hoffmann was wrong to distinguish between the expert witness and the advocate on the basis that the latter is the only person who has undertaken a duty of care to the client.
In some circumstances the difference between an immunity from suit and an absence of legal duty can be readily appreciated.
Diplomatic immunity, which can be waived, is an example.
In this case the distinction is more elusive.
There was a time when it might have been possible to argue that there was a difference between the duty owed by an expert witness to the client who retained him and a conflicting, and overriding, public duty owed by the expert when giving evidence in court; that the former obliged the expert to put forward the best case for his client whereas the latter involved a duty to be candid, even at the expense of his client.
The existence of such a difference is implicit in the provision of CPR 35.3 which states that it is the duty of experts to help the court with matters within their expertise and that this duty overrides any obligation to the person from whom the experts have received their instructions or by whom they are paid.
Such a distinction lends force to the argument that, once the expert is providing evidence to the court, or preparing to do so, he is no longer bound by a duty to his client and thus cannot be held liable for breach of such duty.
In Cala Homes (South) Ltd v Alfred McAlpine Homes East Ltd [1995] FSR 818 Laddie J, at p 841, quoted from an article, The Expert Witness: Partisan with a Conscience, in the August 1990 Journal of the Chartered Institute of Arbitrators by a distinguished expert who suggested that it was appropriate for an expert to act as a hired gun unless and until he found himself in court where the earlier pragmatic flexibility is brought under a sharp curb, whether of conscience, or fear of perjury, or fear of losing professional credibility.
It is no longer enough for the expert like the virtuous youth in the Mikado to tell the truth whenever he finds it pays: shades of moral and other constraints begin to close up on him.
Laddie J was rightly critical of the approach of this expert.
There is no longer any scope, if indeed there ever was, for contrasting the duty owed by an expert to his client with a different duty to the court, which replaces the former, once the witness gets into court.
In response to Lord Woolfs recommendations on access to justice the CPR now spell out in detail the duties to which expert witnesses are subject including, where so directed, a duty to meet and, where possible, reach agreement with the expert on the other side.
At the end of every experts report the writer has to state that he understands and has complied with his duty to the court.
Where an expert witness is retained, it is likely to be, as it was in the present case, on terms that the expert will perform the functions specified in the CPR.
The expert agrees with his client that he will perform the duties that he owes to the court.
Thus there is no conflict between the duty that the expert owes to his client and the duty that he owes to the court.
Furthermore, a term is implied into the contract under section 13 of the Supply of Goods and Services Act 1982, that the expert will exercise reasonable skill and care in carrying out the contractual services.
Thus the expert witness has this in common with the advocate.
Each undertakes a duty to provide services to the client.
In each case those services include a paramount duty to the court and the public, which may require the advocate or the witness to act in a way which does not advance the clients case.
The advocate must disclose to the court authorities that are unfavourable to his client.
The expert witness must give his evidence honestly, even if this involves concessions that are contrary to his clients interests.
The expert witness has far more in common with the advocate than he does with the witness of fact.
Is the immunity justified?
In Darker Lord Clyde remarked, at pp 456 457: since the immunity may cut across the rights of others to a legal remedy and so runs counter to the policy that no wrong should be without a remedy, it should be only allowed with reluctance, and should not readily be extended.
It should only be allowed where it is necessary to do so.
With this principle in mind, I would adopt the approach advocated by Lord Reid in Rondel v Worsley at p 228, when considering the immunity from suit enjoyed by advocates: the issue appears to me to be whether the abolition of the rule would probably be attended by such disadvantage to the public interest as to make its retention clearly justifiable.
It would not be right to start with a presumption that because the immunity exists it should be maintained unless it is shown to be unjustified.
The onus lies fairly and squarely on the respondent to justify the immunity behind which she seeks to shelter.
I turn to consider whether she can do so.
I shall consider the various justifications advanced for the immunity that I have identified earlier in this judgment.
Reluctance to testify
Is Mr Lawrence right to submit that, if expert witnesses are liable to be sued for breach of duty, they will be discouraged from providing their services at all? I can see no justification for this assumption.
All who provide professional services which involve a duty of care are at risk of being sued for breach of that duty.
They customarily insure against that risk.
In some circumstances the risk of suit and the cost of insurance may be so high that this is a discouragement to provision of those services.
I understand that, in some parts of the world, this is true of the services of obstetricians.
In Meadow Thorpe LJ drew attention to the shortage of medical experts who were prepared to provide forensic services in child care cases.
He said, at para 227, of the family justice system: Here most of the required experts are either medically qualified or otherwise qualified in the mental health professions.
The majority will be employed under NHS consultant contracts.
By contrast to the other justice systems this is a market in which demand exceeds supply.
It is thus very sensitive to increasing or newly emerging disincentives.
This factor is compounded by a paucity of incentives.
The fee for the work will often be paid to the trust employer.
The employer may be reluctant to release the consultant from other duties.
Keeping up with the demands of the courts timetable may involve evening or weekend work.
Thorpe LJ was describing the position as it then was, notwithstanding that expert witnesses were immune from suit in relation to their evidence.
It does not follow that removing this immunity would constitute a further significant disincentive to their provision of forensic services.
Why should the risk of being sued in relation to forensic services constitute a greater disincentive to the provision of such services than does the risk of being sued in relation to any other form of professional service? Furthermore, as Thorpe LJ remarked, the supply of expert witnesses in other fields exceeds demand.
Mr Ter Haar referred the Court to a survey carried out at the Bond Solon Annual Expert Witness Conference in November 2010. 106 experts were asked whether they would continue to act as expert witnesses if expert immunity from suit were substantially reduced. 92 answered yes and 14 no. I do not consider that much weight can be attached to a survey of this type, but it does not suggest that immunity from suit for negligence is essential to secure an adequate supply of forensic experts.
The case that immunity is necessary to prevent a chilling effect on the supply of expert witnesses is not made out.
Is immunity necessary to ensure that expert witnesses give full and frank evidence to the court?
The principal justification for immunity that Mr Lawrence urged was that this was necessary to ensure that the expert performed his duty to the court.
This duty required him, whether when attempting to reach agreement with the expert on the other side, or when giving evidence to the court, to give his honest opinion, even if this proved adverse to the case of his own client.
Mr Lawrence submitted that the expert would have some apprehension about taking such a course and that immunity from suit was necessary to allay this apprehension.
Mr Lawrence could produce no empirical evidence to support this thesis, nor could Mr Ter Haar produce any empirical evidence to disprove it.
Research into the position in other common law jurisdictions was inconclusive.
As expert witnesses have, to date, had the benefit of immunity, how they will behave if that immunity is removed must be a matter of conjecture or, more accurately, reasoning.
But if reasoning is applied, I do not find that it supports Mr Lawrences thesis.
An experts initial advice is likely to be for the benefit of his client alone.
It is on the basis of that advice that the client is likely to decide whether to proceed with his claim, or the terms on which to settle it.
The question then arises of the experts attitude if he subsequently forms the view, or is persuaded by the witness on the other side, that his initial advice was over optimistic, or that there is some weakness in his clients case which he had not appreciated.
His duty to the court is frankly to concede his change of view.
The witness of integrity will do so.
I can readily appreciate the possibility that some experts may not have that integrity.
They will be reluctant to admit to the weakness in their clients case.
They may be reluctant because of loyalty to the client and his team, or because of a disinclination to admit to having erred in the initial opinion.
I question, however, whether their reluctance will be because of a fear of being sued at least a fear of being sued for the opinion given to the court.
An expert will be well aware of his duty to the court and that if he frankly accepts that he has changed his view it will be apparent that he is performing that duty.
I do not see why he should be concerned that this will result in his being sued for breach of duty.
It is paradoxical to postulate that in order to persuade an expert to perform the duty that he has undertaken to his client it is necessary to give him immunity from liability for breach of that duty.
There is here, I believe, a lesson to be learnt from the position of barristers.
It was always believed that it was necessary that barristers should be immune from suit in order to ensure that they were not inhibited from performing their duty to the court.
Yet removal of their immunity has not in my experience resulted in any diminution of the advocates readiness to perform that duty.
It would be quite wrong to perpetuate the immunity of expert witnesses out of mere conjecture that they will be reluctant to perform their duty to the court if they are not immune from suit for breach of duty.
Will the diligent expert witness be harassed by vexatious claims for breach of duty?
There is an overlap between this question and the last.
The rational expert witness who has performed his duty is unlikely to fear being sued by the rational client.
But unsuccessful litigants do not always behave rationally.
I can appreciate the apprehension that, if expert witnesses are not immune, they may find themselves the subject of vexatious claims.
But again I question the extent to which this apprehension is realistic.
It is easy enough for the unsuccessful litigant to allege, if permitted, that a witness of fact who has given evidence against him was guilty of defamatory mendacity.
It is far less easy for a lay litigant to mount a credible case that his expert witness has been negligent.
The present case is unusual in that, on the agreed facts, the respondent has admitted to putting her signature to a joint report that did not express her views.
There is nothing vexatious about the present claim.
Where, however, a litigant is disaffected because a diligent expert has made concessions that have damaged his case, how is he to get a claim against that expert off the ground? It will not be viable without the support of another expert.
Is the rare litigant who has the resources to fund such a claim going to throw money away on proceedings that he will be advised are without merit? The litigant without resources will be unlikely to succeed in persuading lawyers to act on a conditional fee basis.
A litigant in person who seeks to bring such a claim without professional support will be unable to plead a coherent case and will be susceptible to a strike out application.
For these reasons I doubt whether removal of expert witness immunity will lead to a proliferation of vexatious claims.
I am not aware that since Hall v Simons barristers have experienced a flood of such claims from disappointed litigants.
Will there be a risk of a multiplicity of suits?
For the reasons that I have already given I do not believe that there will.
I have, however, been considering thus far the position of expert witnesses in civil cases.
I believe that my conclusions hold good in the case of the duty owed by an expert witness to the client who retains him in a criminal trial.
I concede, however, that the risk of vexatious claims from those convicted of criminal offences may be greater.
Such claims will, however, be struck out as an abuse of process unless the convicted client first succeeds in getting his conviction overturned on appeal see Hunter v Chief Constable of the West Midlands Police [1982] AC 529.
For these reason I conclude that no justification has been shown for continuing to hold expert witnesses immune from suit in relation to the evidence they give in court or for the views they express in anticipation of court proceedings.
Should the immunity be abolished?
It follows that I consider that the immunity from suit for breach of duty that expert witnesses have enjoyed in relation to their participation in legal proceedings should be abolished.
I emphasise that this conclusion does not extend to the absolute privilege that they enjoy in respect of claims in defamation.
Accordingly, I would allow this appeal.
LORD BROWN
Being far from sure that I have anything of value to add to the judgments of the majority in favour of allowing this appeal, I shall state my central views on the matter very briefly indeed.
Expert witnesses are to be regarded as sui generis in the present context.
There are profound differences between them and, on the one hand, witnesses of fact; on the other hand, advocates. (For the purposes of this brief judgment I mean by an expert witness a witness selected, instructed and paid by a party to litigation for his expertise and permitted on that account to give opinion evidence in the dispute.
I am not referring, for example, to a treating doctor or forensic pathologist, either of whom may be called to give factual evidence in the case as well as being asked for their professional opinions upon it without their having been initially retained by either party to the dispute.)
It has long been established that witnesses of fact enjoy complete immunity immunity, that is, from any form of civil action in respect of evidence given (or foreshadowed in a statement made) in the course of proceedings.
It is no less clearly established, following Arthur J S Hall & Co v Simons [2002] 1 AC 615 that advocates have no immunity from suit in respect of any aspect of their conduct of proceedings (save, of course, from defamation claims and the like pursuant to the absolute privilege attaching to court proceedings).
The absolute immunity rule which applies to witnesses of fact, as noted by Lord Hoffmann in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177, 208: is designed to encourage freedom of speech and communication in judicial proceedings by relieving persons who take part in the judicial process from the fear of being sued for something they say.
That aside, witnesses of fact are unlikely to owe the party calling them any duty of care whether in contract or in tort.
In stark contrast, not only do expert witnesses clearly owe the party retaining them a contractual duty to exercise reasonable skill and care but, I am persuaded, the gains to be derived from denying them immunity from suit for breach of that duty substantially exceed whatever loss might be thought likely to result from this.
These pros and cons have been fully explored in the judgments of other members of the court.
Suffice to say that in my opinion the most likely broad consequence of denying expert witnesses the immunity accorded to them (only comparatively recently) by the decisions in Palmer v Durnford Ford [1992] QB 483 and Stanton v Callaghan [2000] QB 75 will be a sharpened awareness of the risks of pitching their initial views of the merits of their clients case too high or too inflexibly lest these views come to expose and embarrass them at a later date.
I for one would welcome this as a healthy development in the approach of expert witnesses to their ultimate task (their sole rationale) of assisting the court to a fair outcome of the dispute (or, indeed, assisting the parties to a reasonable pre trial settlement).
The other signal advantage of denying immunity to expert witnesses is, of course, that in the no doubt rare case where the witness behaves in an egregious manner such as is alleged in the instant case or, indeed, otherwise causes his client loss by adopting or adhering to an opinion outside the permissible range of reasonable expert opinions, the wronged client will enjoy, rather than have denied to him by rule of law, his proper remedy.
Such cases are to my mind likely to be highly exceptional and for my part I would urge the courts to be alert to protect expert witnesses against specious claims by disappointed litigants not to mention to stamp vigorously upon any sort of attempt to pressurise experts to adopt or alter opinions other than those genuinely held.
Overall, I am satisfied that the balance of advantage here lies clearly in favour of allowing this appeal.
LORD COLLINS
I agree that the appeal should be allowed.
This appeal is concerned only with the liability of the so called friendly expert to be sued by the client on whose behalf the expert was retained.
The facts raise directly only liability to be sued for out of court statements, but any immunity in relation to such statements is a necessary concomitant of the immunity for things said in court, and the same principles must apply equally to each.
The early history of witness immunity is largely concerned with immunity from suit for defamation: see, e.g. Dawkins v Lord Rokeby (1873) LR 8 QB 255.
It was of course extended to other causes of action, but absolute privilege of witnesses and other persons in the judicial process from defamation is at its core.
The basis of the present decision is that where a person has suffered a wrong that person should have a remedy unless there is a sufficiently strong public policy in maintaining an immunity.
The policy behind immunity from suit for defamation is that to allow the possibility of such an action would create a chilling effect, inhibit frankness and bring the trial process into disrepute.
Thus there is nothing in the present decision which would enable a client to sue his handwriting expert for slander because in the witness box he changed his mind and expressed the view that the clients document was a forgery.
Nor of course is there anything in the present decision which affects the position of the adverse expert.
It is not sufficient to say that the adverse expert presents no problem because the expert owes no duty to the client on the other side.
There are wider considerations of policy which ought to prevent adverse experts from being the target of disappointed litigants, even if the scope of duty in tort were to be extended in the future.
It is true, as McHugh J said in DOrta Ekenaike v Victoria Legal Aid [2005] HCA 12, (2005) 223 CLR 1, para 100, that except for the purpose of classification it may not matter whether the lack of legal liability stems from characterising it as an immunity or as an absence of duty of care.
But it would be preferable to treat it as an immunity to emphasise the strong element of policy involved.
Lord Phillips has referred in detail to the developments in the case law in England.
Because this appeal raises questions of policy it is more than usually helpful to look at developments in other countries, and in particular at the rich jurisprudence which has developed in the United States in the last 20 years or so.
The tendency in the Commonwealth in recent years has been to uphold witness immunity for experts, although it has not been the subject of full discussion at higher appellate levels.
General witness immunity has been re affirmed by the High Court of Australia in DOrta Ekenaike v Victoria Legal Aid [2005] HCA 12, (2005) 223 CLR 1, para 39; by the Supreme Court of New Zealand in Lai v Chamberlains [2007] 2 NZLR 7; and by the Ontario Court of Appeal in Reynolds v Kingston (Police Services Board) [2007] ONCA 166.
The immunity has been re affirmed in relation to expert witnesses in Australia in Sovereign Motor Inns Pty Ltd v Howarth Asia Pacific Pty Ltd [2003] NSWSC 1120; James v Medical Board of South Australia (2006) 95 SASR 445 (South Australia); Commonwealth v Griffiths (2007) 245 ALR 172 (NSW C.A) and in Canada in Carnahan v Coates (1990) 71 DLR (4th) 464; Varghese v Landau [2004] Can LII 5084 (Ont SC) and Deep v College of Physicians and Surgeons of Ontario [2010] ONSC 5248 (Ont SC).
But all of these other than Sovereign Motor Inns v Howarth Asia Pacific were cases of actions against adverse experts or independent experts.
It is highly desirable that at this appellate level, in cases where issues of legal policy are concerned, the Court should be informed about the position in other common law countries.
This Court is often helped by being referred to authorities from other common law systems, including the United States.
It is only in the United States that there has been extensive discussion in the case law of the policy implications of removal of immunity for actions by disappointed clients against their experts.
On this appeal the appellant did not rely on the United States material, although it is helpful to his case.
The respondents counsel drew attention to some of the United States cases on the basis of research which (it was said) was slightly hampered by the renovation of the Middle Temples American room.
But there is an outstanding collection of United States material in the Institute of Advanced Legal Studies in London University, and (provided the barristers or solicitors concerned are prepared to make the expenditure) all of the material is readily available on line.
Lord Wilberforce said in Buttes Gas & Oil Co v Hammer (Nos 2 & 3) [1982] AC 888, 936 937: When the judicial approach to an identical problem between the same parties has been spelt out with such articulation in a country, one not only so closely akin to ours in legal approach, the fabric of whose legal doctrine in this area is so closely interwoven with ours, but that to which all the parties before us belong, spelt out moreover in convincing language and reasoning, we should be unwise not to take the benefit of it.
This is not, of course, as that case was, litigation between the same parties in the two countries, but the principle is the same.
In the present context the American State courts have considered and dealt with precisely the same arguments of policy which have been argued before this court.
In the last 20 years several State courts have considered the immunity of retained or so called friendly experts, sued by the party which retained them.
The respondents counsel suggested that the Court would not derive much assistance from these cases, because (it is said) the culture relating to expert evidence is different in the United States.
There are, it is true, many references to the expert (who, of course, will be giving evidence in jury trials) as a hired gun (e.g. Blackwell v Wyeth, 971 A 2d 235, 245 (Ct App Md 2009), quoting Judge Weinstein an expert can be found to testify to the truth of almost any factual theory, no matter how frivolous) and there have been well known concerns about the practice of shopping around for experts and the venality of some of them, and the lack of specific procedural guides to the conduct of experts by contrast with England, where the Woolf reforms have sought to entrench and give teeth to the principle.
But the underlying principle is the same: the expert owes a duty to the client, but also owes a duty to the court, as a servant of the court, to present truthful and competent evidence: Marrogi v Howard, 805 So 2d 1118, 1132 (La 2002); and cf Federal Rules of Evidence, rules 102, 702.
In 1983 the United States Supreme Court re affirmed the general principle of witness immunity in Briscoe v LaHue, 460 US 325 (1983).
That was an action in which police officers were held to be absolutely immune from action arising out of their evidence in a criminal trial.
Apart from a passing reference in a footnote (at p 341, n 27) the Supreme Court did not touch on the subject of expert witnesses.
In the United States witness immunity has generally been applied to adverse and court appointed experts: e.g. Provencher v Buzzell Plourde Associates, 711 A 2d 251 (NH 1998); Dalton v Miller, 984 P 2d 666 (Colo Ct App 1999); McNall v Frus, 784 NE 2d 238 (Ill App Ct. 2002).
The question was first considered in the State of Washington, but its courts stand alone in recent years in upholding the immunity: Bruce v Byrne Stevens & Associates Engineers Inc, 776 P 2d 666 (Wash.1989).
The rationale of the decisions upholding immunity included these: that absence of immunity would lead to a loss of objectivity, and the threat of civil liability would encourage experts to assert extreme positions favourable to the client; it would run counter to the fundamental reason for expert evidence, which was to assist the court in a matter which was beyond its fact finding capabilities; there is a need to promote finality of judgments by discouraging endless collateral litigation; and fewer experts would be willing to become involved in litigation if they could later be sued by the party who retained them.
Other States which have considered the matter have come to a different view: California, Missouri, Pennsylvania, Connecticut, Massachusetts, and Louisiana: Mattco Forge Inc v Arthur Young & Co, 6 Cal Reptr 2d 781 (Ct.App.1992) and Lambert v Carneghi, 70 Cal Reptr 3d 626 (2008); Murphy v AA Matthews, 841 SW 2d 671 (Mo.1992); LLMD of Michigan Inc v Jackson Cross Co, 740 A 2d 186 (Pa. 1999); Pollock v Panjabi, 781 A 2d 518 (Conn.Super.
Ct.2000); Boyes Bogie v Horvitz & Associates, 14 Mass L Reptr 208 (Mass Sup Ct 2001); Marrogi v Howard, 805 So 2d 1118 (La.2002).
The policy reasons in these decisions included these: The reality is that an expert retained by one party is not an unbiased witness, and the threat of liability for negligence may encourage more careful and reliable evaluation of the case by the expert.
Consequently, the threat of liability will not encourage experts to take extreme views.
The client who retains a professional expert for court related work should not be in a worse position than other clients.
The practical tools of litigation, including the oath, cross examination, and the threat of perjury limit any concern about an expert altering his or her opinion because of potential liability.
The risk of collateral litigation is exaggerated.
There is no basis for suggesting that experts will be discouraged from testifying if immunity were removed most are professional people who are insured or can obtain insurance readily, and those who are not insured can limit their liability by contract.
See, for a critical analysis, Jurs, The Rationale for Expert Immunity or Liability Exposure and Case Law since Briscoe: Reasserting Immunity Protection for Friendly Expert Witnesses (2007 2008) 38 U Mem LR 49.
In England there has never been complete immunity for expert witness evidence, any more than there has been complete immunity for other witnesses.
The general principle does not preclude prosecutions for perjury, or for perverting the course of justice, or for contempt of court, or liability for malicious prosecution, or misfeasance in public office: see, e.g. Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435.
Any suggestion of a potentially unsatisfactory chilling effect on expert witnesses is inconsistent with the liability to a prosecution for perjury for untruthful evidence and with liability to disciplinary proceedings for unprofessional conduct in the preparation or presentation of expert evidence.
The immunity has never prevented the possibility of prosecution for perjury of an expert witness who deliberately misleads the court although it would of course be very difficult to prove its elements.
As Sir George Jessel MR said in Lord Abinger v Ashton (1873) 17 LR Eq 358, 373 374: in matters of opinion I very much distrust expert evidence, for several reasons. [A]lthough the evidence is given on oath, in point of fact the person knows he cannot be indicted for perjury, because it is only evidence as to a matter of opinion.
So that you have not the authority of legal sanction.
A dishonest man, knowing that he could not be punished, might be inclined to indulge in extravagant assertions on an occasion that required it.
The potential effects of a sanction by a professional body are more serious than the effects of civil proceedings by a dissatisfied client (where the expert will usually, although not invariably, be insured).
An expert may lose his livelihood and entire reputation as a result of an adverse ruling by a professional disciplinary body, but no suggestion has been made on this appeal that the Court of Appeal was wrong to decide that witness immunity does not protect an expert witness from disciplinary proceedings for unprofessional conduct in the preparation of, or giving of, expert evidence: Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462.
There are no longer any policy reasons for retaining immunity from suit for professional negligence by expert witnesses.
The danger of undesirable multiplicity of proceedings has been belied by the practical experience of the removal of immunity for barristers.
A conscientious expert will not be deterred by the danger of civil action by a disappointed client, any more than the same expert will be deterred from providing services to any other client.
It is no more (or less) credible that an expert will be deterred from giving evidence unfavourable to the clients interest by the threat of legal proceedings than the expert will be influenced by the hope of instructions in future cases.
The practical reality is that, if the removal of immunity would have any effect at all on the process of preparation and presentation of expert evidence (which is not in any event likely), it would tend to ensure a greater degree of care in the preparation of the initial report or the joint report.
It is almost certain to be one of those reports, rather than evidence in the witness box, which will be the focus of any attack, since it is very hard to envisage circumstances in which performance in the witness box could be the subject of even an arguable case.
For these reasons and those given by Lord Phillips and Lord Dyson, I would allow the appeal.
I agree that this appeal should be allowed for the reasons given by Lord
LORD KERR
Phillips.
It has not been disputed that an expert witness owes a duty to the client by whom he has been retained.
Breach of that duty should, in the normal course, give rise to a remedy.
This is the unalterable back drop against which the claim to immunity must be made.
Whether or not witness immunity has had a long history (and, as to that, I agree with Lord Dyson that this is far from clear) this court should not be deflected from conducting a clear sighted, contemporary examination of the justification for its preservation.
This is particularly required because the immunity has its roots in a time when, as Lord Phillips has pointed out, it was not customary for experts to offer their services under contract for reward.
Although the circumstances of modern litigation are substantially different from those which obtained when immunity from suit was extended to all who participated in litigation, many of the reasons that it is said to be necessary are strikingly similar to those which underlay its original recognition.
These are given something of a modern twist by the suggestion that not only would witnesses be deterred from giving evidence but that those who testified would be inclined to tailor their evidence to guard against the risk of being sued.
Both these consequences are claimed to be the product of fear that would descend on potential witnesses faced with the daunting prospect of adverse litigation.
This line of reasoning can be traced back to the decision of Mr Tuckey QC, sitting as a deputy High Court judge, in Palmer v Durnford Ford [1992] QB 483 and the way that this decision influenced the outcome of the appeal in Stanton v Callaghan [2000] QB 75.
It is to be noted that in Palmer it was not in dispute that witnesses enjoyed immunity from suit in respect of evidence given whether in civil or criminal proceedings.
What was in issue in the case was whether that immunity should extend to work undertaken by the expert in advising the client whether he had a good case worthy of pursuit.
At p 488H Mr Tuckey said this: the immunity would only extend to what could fairly be said to be preliminary to his giving evidence in court judged perhaps by the principal purpose for which the work was done.
So the production or approval of a report for the purposes of disclosure to the other side would be immune but work done for the principal purpose of advising the client would not.
It is important to recognise that this approach was modelled on what Mr Tuckey described as the analogous but not identical situation of the advocate's immunity from suit for what he does in court considered by the House of Lords in Saif Ali v Sydney Mitchell & Co [1980] AC 198.
Of course, the decision in that case to the effect that an advocate was immune from suit for advocacy has been overtaken by the later decision in Arthur J S Hall & Co v Simons [2002] 1 AC 615 where that immunity was swept away.
In the meantime, however, the Court of Appeal in Stanton had to confront the question of whether an expert was immune from suit in respect of the contents of a joint statement to which he had contributed following a site meeting between the defendant and the insurers' expert witness.
In deciding that immunity should attach to the contents of the report and relying on the decision in Palmer, Chadwick LJ said this at pp 100H 101A: the only ground of public policy that can be relied upon as a foundation for immunity in respect of the contents of an expert's report, in circumstances where no trial takes place and the expert does not give evidence, is that identified by Lord Morris of Borth y Gest in Rondel v Worsley [1969] 1 AC 191, 251G and referred to by Lord Diplock in Saif Ali v Sydney Mitchell & Co [1980] AC 198, 222B: It has always been the policy of the law to ensure that trials are conducted without avoidable strains and tensions of alarm and fear.
The rather incongruous outcome of this process of reasoning is that although initially an expert could be expected to be sanguine about the prospect of suit when giving preliminary advice, he would be overcome by fear and apprehension as the date for trial approached.
It would also lead to the paradox articulated by Lord Phillips in para 42 of his judgment to the effect that a more convincing case for an immunity could be made, not at the stage of giving evidence, but at the earlier stage when advice that may subsequently prove inconvenient may have been given.
When confronted with this, Mr Lawrence QC was prompted to suggest that the zone of protection should be extended backwards so as to comprehend advice given at the early stage.
I would have no hesitation in rejecting that suggestion firstly because it would be a wholly retrograde step and would involve reversing well established authority to contrary effect.
More importantly, however, there is no evidence that witnesses would react in this way in anticipation of possible proceedings by disappointed clients.
In particular, there is nothing to support the assumption that conscientious witnesses (which, if assumptions are to be made at all, professional witnesses must be presumed to be) would behave discreditably by modifying their opinions from those they truly held because they feared that an aggrieved client might unwarrantably seek redress against them.
If an expert expresses an honestly held view, even if it differs from that which he may have originally expressed, provided it is an opinion which is tenable, he has nothing to fear from a disgruntled party.
Pitched against the arguments that witnesses might be influenced to distort their evidence is the fundamental consideration that breach of a duty owed by a witness to his client should, in the normal course, give rise to a remedy.
Properly examined, the claimed chilling factors that would descend on expert witnesses if there was removal of the immunity are highly unlikely to materialise.
In the final analysis, the only possible reason for preservation of the rule is its supposed longevity.
Even if that could be established, it is in no sense an adequate justification for maintaining an immunity whose effect is to deny deserving claimants of an otherwise due remedy.
LORD DYSON
The duty owed by an expert witness
It is not in dispute that an expert who acts in civil litigation owes his client a duty to act with reasonable skill and care.
He owes this duty in contract (section 13 of the Supply of Goods and Services Act 1982) and in tort (on the basis of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465).
He holds himself out as a skilled and competent person.
The client relies on his advice in determining whether to bring or defend proceedings, in considering settlement values and in appraising the risks at trial.
The client also relies on him to give the court skilled and competent expert opinion evidence.
This was rightly acknowledged by Chadwick LJ in the leading case of Stanton v Callaghan [2000] QB 75, 88E: Mr Callaghan was a professional man who undertook, for reward, to provide advice within his expertise.
The expectation of those who engaged him must have been that he would exercise the care and attention appropriate to what he was engaged to do.
I would find it difficult to accept that Mr Callaghan did not share that expectation.
But an expert witness who is retained to act for a client in relation to litigation also owes a duty to the court.
CPR 35.3 provides: (1) It is the duty of experts to help the court on matters within their expertise. (2) This duty overrides any obligation to the person from whom experts have received instructions or by whom they are paid.
The existence of this duty is affirmed by para 4.1 of the Protocol for the Instruction of Experts to give Evidence in Civil Claims 2005 which provides: Experts always owe a duty to exercise reasonable skill and care to those instructing them, and to comply with any relevant professional code of ethics.
However when they are instructed to give or prepare evidence for the purpose of civil proceedings in England and Wales they have an overriding duty to help the court on matters within their expertise (CPR 35.3).
This duty overrides any obligation to the person instructing or paying them.
This Protocol was drafted by the Civil Justice Council with the assistance of work done by the Expert Witness Institute and the Academy of Experts.
It was cited with approval by Sir Anthony Clarke MR in Meadow v General Medical Council [2007] QB 462, para 22.
The overriding duty of an expert to the court in relation to criminal proceedings is reflected in Part 33.2(1) of the Criminal Procedure Rules and in relation to family proceedings in para 3 of Practice Direction (Family Proceedings: Experts) [2008] 1 WLR 1027.
There is no conflict between the duty owed by an expert to his client and his overriding duty to the court.
His duty to the client is to perform his function as an expert with the reasonable skill and care of an expert drawn from the relevant discipline.
This includes a duty to perform the overriding duty of assisting the court.
Thus the discharge of the duty to the court cannot be a breach of duty to the client.
If the expert gives an independent and unbiased opinion which is within the range of reasonable expert opinions, he will have discharged his duty both to the court and his client.
If, however, he gives an independent and unbiased opinion which is outside the range of reasonable expert opinions, he will not be in breach of his duty to the court, because he will have provided independent and unbiased assistance to the court.
But he will be in breach of the duty owed to his client.
In saying that an expert who is engaged for reward by his client owes the client a duty of care both in contract and tort, I do not, of course, seek to prejudge the question raised on this appeal whether such an expert is immune from suit.
The present state of the law
The immunity of witnesses as a general class is long established.
But the particular question of whether expert witnesses retained for reward by their clients enjoy immunity from liability does not seem to have been considered until it arose in Palmer v Durnford Ford [1992] QB 483.
In that case it was not in issue that it was well settled that witnesses in either civil or criminal proceedings enjoy immunity from any form of civil action in respect of evidence given during those proceedings (emphasis added).
The issue in Palmer was to what extent that immunity extended to the activities of the expert at the pre trial stage.
Mr Simon Tuckey QC held that the immunity extended to work which was preliminary to his giving evidence (such as the production or approval of a report for the purposes of disclosure), but not to work done for the principal purpose of advising the client.
In drawing the line in this way, he avowedly followed the approach that had been adopted by the House of Lords in Saif Ali v Sydney Mitchell & Co [1980] AC 198 in relation to the immunity of advocates.
The correctness of Palmer has not since been challenged.
In Stanton, the Court of Appeal drew heavily on Mr Tuckeys judgment in Palmer (as well as the decisions of the House of Lords in Rondel v Worsley [1969] 1 AC 191 and Saif Ali).
It is important to note that the decision in Stanton pre dated the decision in Arthur J S Hall & Co v Simons [2002] 1 AC 615.
There are several features of the current state of the law to which I would draw attention.
First, the rationale given for the decision in Palmer was that there is a close analogy between the position of experts and that of advocates, so that the immunity/liability line in relation to experts should be drawn at a point which is analogous to the point at which it was drawn in Saif Ali in relation to advocates.
As Mr Tuckey said at p 488F, the problem of where to draw the line was considered in Saif Ali in the analogous but not identical situation of the advocates immunity from suit for what he does in court.
If the analogy is good, it should follow that since (following Arthur Hall) advocates no longer have the immunity, experts should not have it either.
In other words, the reasoning in the case of Palmer leads to the inevitable conclusion that it would have been decided differently today.
Secondly, Mr Tuckey recognised that it might be difficult to decide in any given case whether the experts work can fairly be said to be (i) preliminary to his giving evidence in court judged perhaps by the principal purpose for which the work was done or (ii) work done for the principal purpose of advising the client.
He said at p 489A: Each case would depend upon its own facts with the court concerned to protect the expert from liability for the evidence which he gave in court and the work principally and proximately leading thereto.
I do not think that difficulty in drawing the line precisely should result in a plaintiff in a case such as this being denied all remedy against his expert.
But this uncertainty, generated by the difficulty of knowing where to draw the line in any given case, is inherently unsatisfactory, since the difficulty itself contains the seeds of potential litigation.
Moreover, there should be a degree of certainty as to the existence of an immunity if it is to be fair and effective.
The expert should know in advance whether what he or she says will or will not be protected.
This point has been made on a number of occasions.
Thus, for example, see per Lord Clyde in Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435, 457C.
In Arthur Hall, Lord Hope said at p 724F that a further reason for regarding the core immunity in the civil field as no longer justifiable was the difficulty of finding a satisfactory way of defining the limits of the immunity.
Lord Hutton said at p 729D that the Saif Ali test had proved difficult to apply in practice and had given rise to considerable uncertainty.
He agreed with the observation of Kirby J in Boland v Yates Property Corpn plc Ltd (1999) 74 ALJR 209, 238, para 137 that it was obviously desirable that a clear line establishing the limits of an advocates immunity should be drawn.
Thirdly, as Lord Phillips points out, the Palmer approach gives rise to the paradox which he explains at para 42 above.
I cannot agree with Lord Hope that there is a formidable body of authority in support of the Palmer approach.
More important, however, is the fact that, as I have said, the very foundation that was identified by Mr Tuckey as the basis for that approach, namely the analogy with the position of advocates, now suggests that the immunity for experts should be removed as it has been for advocates.
The correct starting point
There are two possible views as to the correct starting point for a consideration of the question whether experts should have immunity.
The first is that there is a general rule that every wrong should have a remedy and that any exception to this rule must be justified as being necessary in the public interest.
The second is that there is a different general rule, which is long established and founded on grounds of public policy, that witnesses may not be sued for anything said in court and that, if there is to be an exception to that rule, it too must be justified in the public interest.
This is Lord Hopes approach.
He acknowledges that the general rule that where there is a wrong there should be a remedy is a valuable guide in the right context.
But he says that this rule cannot prevail in the present context because it runs contrary to long established authority.
In other words, the existence of a long established exclusionary rule is itself a sufficient reason for holding that it is necessary to deny a remedy to those who have suffered a wrong.
I respectfully disagree with this approach for two reasons.
First, upon close examination the rule that an expert witness retained for reward is immune from liability is not long established.
As Lord Wilberforce explained at p 214E in Saif Ali, it is necessary to disentangle three separate strands in relation to the immunity of barristers.
The first is the privilege which attaches to proceedings in court and protects equally the judge, counsel, witnesses, jurors and parties.
It has nothing to do with a barristers duty to his client.
The second is that in the nature of things an action against a barrister who acts honestly and carefully is very unlikely to succeed.
The third is that the barrister enjoys immunity from an action, which depends upon public policy.
In fixing its boundary, account must be taken of the counter policy that a wrong ought not to be without a remedy.
Thus, the fact that there was a long standing rule that all who participated in a trial enjoyed absolute privilege was not because they did not owe a duty of care to those who might be adversely affected by what they said at the trial.
As Lord Phillips points out, this rule was established long before the modern law of negligence and, in particular, long before liability for negligent misstatement was first recognised.
There is no long established rule that witnesses are immune from liability to their clients in respect of what they say at trial and in connection with litigation.
As I have said, the distinct position of such witnesses does not seem to have received the attention of the courts until Palmer.
It is true that Palmer has been approved on a few occasions, but in so far as the rule has been applied in relation to the liability of expert witnesses to their clients, it has shallow roots.
But secondly, even if there is such a long established rule, it is based on policy grounds and cannot survive if the policy grounds on which it is based no longer justify the rule.
The mere fact that the immunity is long established is not a sufficient reason for blessing it with eternal life.
Circumstances change as do attitudes to the policy reasons which underpin the immunity.
The common law develops in response to these changes.
The history of the rise and fall of the immunity of advocates provides a vivid illustration of the point.
As Lord Reid observed in Rondel v Worsley at p 227C, public policy is not immutable and any rule of immunity requires to be considered in the light of present day conditions.
The general rule that where there is a wrong there should be a remedy is a cornerstone of any system of justice.
To deny a remedy to the victim of a wrong should always be regarded as exceptional.
As has been frequently stated, any justification must be necessary and requires strict and cogent justification: see, for example, per Lord Hoffmann in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177, 214D; Darker v Chief Constable of the West Midlands Police per Lord Hope at p 446D, per Lord Clyde at p 456H and per Lord Hutton at p 468F.
If the position were otherwise, the law would be irrational and unfair and public confidence in it would be undermined.
Furthermore, the justification for any exception to this general rule should be kept under review.
That is what happened in relation to the immunity of barristers.
Their immunity for all that they did was recognised by the House of Lords in Rondel v Worsley.
It was based on the public policy grounds that the administration of justice required that a barrister should be able to carry out his duty to the court fearlessly and independently, and that actions for negligence against barristers would make the retrying of the original actions inevitable and so prolong litigation contrary to the public interest.
In Saif Ali the immunity was limited (again on grounds of public policy) to what barristers did in court and to work that could fairly be said to affect the way that the case would be conducted if it came to a hearing.
Finally, the immunity was swept away altogether in Arthur Hall, when it was decided that the public policy grounds previously relied on were no longer sufficient to justify a departure from the general rule that where there was a wrong there should be a remedy.
It follows that the issue that arises on this appeal is whether there is a compelling need to continue the immunity enjoyed by expert witnesses from liability to their clients.
Is the immunity justified?
Two reasons have been advanced in support of the continued immunity.
The first is that it is necessary to ensure that expert witnesses will be prepared to give evidence at all.
Like Lord Phillips and Lord Hope, I am not impressed with this argument.
From time to time, the court is called upon to make decisions on whether to grant or withhold immunity from suit in certain classes of case.
It does not expect to be able to make decisions of this kind on the basis of empirical evidence.
In my view, surveys such as that carried out at the Bond Solon Annual Expert Witness Conference in November 2010 are of very limited value.
It is unrealistic to look for hard evidence in this area.
It is easy to assert that professional persons will refuse to act as expert witnesses if they cease to enjoy immunity.
The court has to exercise its judgment in assessing the validity of such an assertion.
Whether professional persons are willing to give expert evidence depends on many factors.
I am not persuaded that the possibility of being sued if they are negligent is likely to be a significant factor in many cases in determining whether a person will be willing to act as an expert.
Negligence is not easy to prove against an expert witness, especially in relation to what he or she says in the heat of battle in court.
This is the second of the three strands identified by Lord Wilberforce at p 214E in Saif Ali.
Professional indemnity insurance is available.
Professional persons engage in many activities where the possibility of being sued is more realistic than it is in relation to undertaking the role of an expert in litigation.
Thus, for example, it is a sad fact of life that births sometimes go wrong and when that happens, parents sometimes look for someone to blame.
But that does not stop people from practising as obstetricians.
The second reason advanced in support of maintaining the immunity is that expert witnesses would be reluctant to give evidence against their clients interests if there was a risk that they would be sued.
This is the divided loyalty argument that was considered in relation to advocates in Rondel v Worsley, Saif Ali and Arthur Hall.
The argument in those cases was that the advocate owes an overriding duty to the court and unless there was immunity from liability to the client, there was a danger that they would disregard their duty to the court.
Lord Hope suggests in the present case that the duties owed by the advocate to the court are not as far reaching as those owed to the court by the expert.
But it is significant that in Rondel v Worsley and Saif Ali the House of Lords described the advocates duty to the court as overriding and regarded that fact as one of the reasons for not withdrawing the immunity.
In Arthur Hall, Lord Hoffmann recognised that the duty of the advocate to the court is extremely important in the English system of justice.
He described the divided loyalty argument as being that the possibility of being sued for negligence would actually inhibit the lawyer, consciously or unconsciously, from giving his duty to the court priority to his duty to his client.
That is precisely the argument advanced by Mr Lawrence in the present case.
It is therefore relevant to examine the way in which the divided loyalty argument was dealt with in Arthur Hall.
The fullest treatment of it is in the speech of Lord Hoffmann at p 692F: To assess the likelihood [of the removal of the immunity having a significant adverse effect], I think that one should start by considering the incentives which advocates presently have to comply with their duty and those which might tempt them to ignore it.
The first consideration is that most advocates are honest conscientious people who need no other incentive to comply with the ethics of their profession.
Then there is the wish to enjoy a good reputation among ones peers and the judiciary.
There can be few professions which operate in so bright a glare of publicity as that of the advocate.
Everything is done in public before a discerning audience.
Serious lapses seldom pass unnoticed.
And in the background lie the disciplinary powers of the judges and the professional bodies.
Looking at the other side of the coin, what pressures might induce the advocate to disregard his duty to the court in favour of pleasing the client? Perhaps the wish not to cause dissatisfaction which might make the client reluctant to pay. Or the wish to obtain more instructions from the same client.
But among these pressures, I would not put high on the list the prospect of an action for negligence.
It cannot possibly be negligent to act in accordance with ones duty to the court and it is hard to imagine anyone who would plead such conduct as a cause of action.
Although the analogy between the advocate and the expert witness is not precise, it is sufficiently close for much of what Lord Hoffmann said in this passage to be equally applicable to expert witnesses.
In particular, like advocates, they are professional people who can be expected to want to comply with the rules and ethics of their profession.
Experts can be in no doubt that their overriding duty is to the court.
That is spelt out in the rules and they are reminded of the duty every time they write a report: rule 35.10(2) states that at the end of the experts report there must be a statement that the expert understands and has complied with their duty to the court.
There is no reason to doubt that most experts are honest conscientious people who need no other incentive to comply with their duty and the rules and ethics of their profession.
There may be a few experts (as there may be a few advocates) who behave dishonourably.
But that is no more compelling a reason for retaining the immunity for experts than it was for retaining it for advocates.
As Lord Hoffmann said in relation to advocates, the prospect of an action for negligence is unlikely to tempt an expert to disregard his duty to the court.
Experts can and almost always do obtain professional indemnity insurance to cover the risk of negligence.
Most of them act honestly and conscientiously because that is what professional men and women do.
It follows from what I have said that I cannot agree with what Lord Hoffmann said at p 698D G about expert witnesses.
He said of Stanton that it was an example of a general immunity for acts done in the course of litigation which fell squarely within the traditional witness immunity; and that a witness owes no duty of care to anyone in respect of the evidence he gives to the court.
For the reasons that I have given, an expert engaged for reward does owe a duty of care to his client.
The only question is whether there are sufficiently compelling policy reasons for according the expert immunity from suit.
It is in any event difficult to see how immunity would promote the discharge by experts of their duty to the court.
The lesson of history suggests that it would not do so.
Even before the Woolf reforms, it was well established that an expert witness owed a duty to be independent and assist the court: see The Ikarian Reefer [1993] 2 Lloyds Rep 68, 81, and the cases cited there.
But that did not dissuade the hired gun, who all too often walked the stage before the Woolf reforms, from acting in a partisan way, even though at that time he enjoyed immunity from suit.
It follows that I am not convinced by either of the reasons advanced in justification of the immunity.
I am even less persuaded that the immunity is necessary in the public interest or that there is a sufficiently compelling reason to justify continuing to deny a remedy to a person who has suffered loss as a result of his experts breach of the duty of care owed in contract and tort.
Should the immunity of expert witnesses survive for any purpose?
Nothing that I have said is intended to undermine the long standing absolute privilege enjoyed by other witnesses in respect of litigation.
Although it is unnecessary to decide the point, as presently advised I can see no reason to treat expert witnesses who are engaged in criminal and family litigation any differently from those engaged in civil litigation.
Conclusion
For these reasons as well as those given by Lord Phillips, I would hold that the immunity of expert witnesses from liability to their clients for breach of duty (whether in contract or negligence) can no longer be justified.
I would, therefore, allow this appeal.
LORD HOPE
The question in this case is whether an exception should be made to the rule that witnesses may not be sued in respect of evidence given in court, or things said or done in contemplation of giving evidence in court, where the witness is an expert who accepts instructions from the litigant to give evidence for reward.
The respondent is said to have negligently signed an inaccurate joint statement which had been prepared as directed by the judge under CPR 35.12(3).
She did not give evidence in court, as the case was subsequently settled.
So it is her conduct when she agreed to the way the joint statement had been worded by the other sides expert that is the focus of attention.
It is common ground that the immunity rule applies to things said or done, or omitted to be said or done, by an expert witness at that stage of the proceedings unless it is subject to the exception for which the appellant contends: see Watson v MEwan [1905] AC 480.
In that case it was held that the privilege of a witness extends to statements made in a preliminary statement with a view to giving evidence.
I have not found this an easy question to answer, for a variety of reasons.
The first is to be found in the nature and purpose of the rule itself, which must be the starting point for an inquiry as to whether an exception should be made to it.
The second is to be found when an attempt is made to define the limits of the exception.
The third is the lack of firm evidence, pointing either one way or the other, as to the need for the exception or as to the consequences if it were to be introduced.
The question whether the rule continues to perform a useful function has been raised from time to time.
Andrew Edis, Privilege and immunity: problems of expert evidence (2007) CJQ 40, suggested that compliance with the experts duty to the court would be enhanced by its removal.
But it is a very different thing for it to be removed retrospectively, as I assume it will have to be if the appellants claim is be given effect, by a decision of seven Justices in this Court, from which there would be no way back except by legislation enacted by Parliament.
I doubt whether it is right that we should proceed in this way only on the basis of assumptions, which is really all we have to go on in this case.
I regret too the absence of any intervention in these proceedings by a body with experience across the whole range of this area of practice, such as the Academy of Experts, which could have provided us with evidence to inform our judgment.
In Arthur J S Hall & Co v Simons [2002] 1 AC 615, in which the opportunity was taken to challenge the decision of the House of Lords in Rondel v Worsley [1969] 1 AC 191 on the question of the immunity given to advocates, the House had the benefit of argument from the Bar Council which was given leave to intervene.
As Lord Steyn said at p 676, it played a particularly helpful part in the appeal.
The House was, of course, dealing in that case with an issue which was within the personal experience of all members of the Appellate Committee, and it was known that advocates were already under a professional obligation to carry insurance: see Lord Steyn, p 682; Lord Hoffmann, p 691.
In this case we are dealing with an area of practice with whose precise limits I suspect I am not alone in being less familiar.
I am unwilling to assume that every witness who gives evidence as an expert belongs to a professional organisation or engages regularly in court work.
Some may be academics, and some may come forward to give expert evidence only once in a lifetime.
It seems to me that it would be unwise to assume that they all have insurance cover against claims for negligence.
I am also unimpressed by the line of argument that the rule should not be allowed to provide a shelter for the negligent expert who is in breach of the duty that he owes to the client from whom he has accepted instructions or by whom he is being paid.
Of course, if the point is put that way round the immunity that the rule currently provides may seem objectionable.
But, as I shall mention later, it was recognised long ago that it is not the purpose of the rule to protect those who are guilty of such transgressions.
Its purpose is to ensure that witnesses are not deterred from coming forward to give evidence in court and from feeling completely free to speak the truth when they do so, without facing the risk of being harassed afterwards by actions in which allegations are made against them in an attempt to make them liable in damages.
It is important not to lose sight of this fundamental principle.
To do so risks devaluing the rule.
It diverts attention from the consequences for those who are wholly innocent of any transgression for which damages could properly be awarded, but are nevertheless exposed to harassment by the disgruntled or the unscrupulous.
There has been no challenge to the policy justification as it applies to witnesses generally.
So the question in this case is whether the reasons which justify an immunity for witnesses generally do not apply to expert witnesses.
The grounds for making that exception by judicial decision need to be examined and explained very carefully.
This is because they may have implications for the immunity which is at present given to other kinds of witness against whom a breach of duty may be alleged.
An incautious removal of the immunity from one class of witness risks destabilising the protection that is given to witnesses generally.
The rule
The rule that affords immunity to witnesses when giving evidence in court, or with a view to giving evidence, is not itself in doubt.
But I think that it is important, before deciding whether an exception should be made to it in the case of expert witnesses, to examine the origins of the rule and the grounds of policy on which it is based.
The rule is of very long standing, perhaps as early as the 16th century: see DOrta Ekenaike v Victoria Legal Aid [2005] HCA 12, (2005) 214 ALR 92, para 39.
It was recognised in the 17th century that judges, with whose immunity that which is given to witnesses there is an affinity, should not be exposed to action, at least in dubious cases where just and rational men might be of different judgments: otherwise no man but a beggar, or a fool, would be a judge: Stair, Institutions of the Law of Scotland (2nd ed, 1693), IV, 1, 5.
Two centuries later, in Dawkins v Lord Rokeby (1873) LR 8 QB 255, 264, Kelly CB declared: no action lies against parties or witnesses for anything said or done, although falsely and maliciously and without any reasonable or probable cause, in the ordinary course of any proceeding in a court of justice.
That this principle had long been recognised in English law can be seen from Lord Mansfields statement in R v Skinner (1772) Lofft 55 that: neither party, witness, counsel, jury, or judge, can be put to answer, civilly or criminally, for words spoken in office.
As Lord President Inglis observed in Williamson v Umphray and Robertson (1890) 17 R 905, 910 911 where the claim was one of libel, the rule that gives that privilege to judges, jurors, counsel and witnesses is founded on obvious grounds of public policy: It is essential to the ends of justice that persons in such positions should enjoy freedom of speech without fear of consequences, in discharging their public duties in the course of a judicial inquiry.
But the motive of the law is not to protect corrupt or malevolent judges, malicious advocates, or malignant and lying witnesses, but to prevent persons acting honestly in discharging a public function from being harassed afterwards by actions imputing to them dishonesty and malice, and seeking to make them liable in damages.
The Lord President referred in support of this explanation of the purpose of the rule to the following passage in the speech of Lord Penzance in the House of Lords in Dawkins v Lord Rokeby (1875) LR 7 HL 744, 755 756: If by any process of demonstration, free from the defects of human judgment, the untruth and malice could be set above and beyond all question or doubt, there might be ground for contending that the law of the land should give damages to the injured man.
But this is not the state of things under which this question of law has to be determined.
Whether the statements were, in fact, untrue, and whether they were dictated by malice, are, and always will be, open questions, upon which opinions may differ, and which can only be resolved by the exercise of human judgment.
And the real question is, whether it is proper on grounds of public policy to remit such questions to the judgment of a jury.
The reasons against doing so are simple and obvious.
A witness may be utterly free from malice, and may yet in the eyes of a jury be open to that imputation; or, again, the witness may be cleared by the jury of the imputation, and may yet have to encounter the expenses and distress of a harassing litigation.
With such possibilities hanging over his head, a witness cannot be expected to speak with that free and open mind which the administration of justice demands.
Commenting on that passage in Primrose v Waterston (1902) 4 F 783, in which an action for slander was brought against a magistrate, Lord Moncreiff said at pp 793 794 that the reason for the wideness of the protection was that experience showed that, although the judge might after trial succeed in clearing himself of the imputation, he would be exposed to being called on to answer what ex facie of the summons was apparently a relevant charge: Now, if that were once permitted the protection of absolute privilege would disappear; and therefore the only sound rule is to grant that protection unless it can be demonstrated that is, shewn so clearly that no man of ordinary intelligence and judgment could honestly dispute it that the words used had no connection with the case in hand.
The result of this, no doubt, is that in an exceptional case like that which we have before us, of a judge who is unable to restrain himself, hardship is inflicted on the person to whom the remarks are addressed.
But on the other hand it is to be remembered that, thanks to the protection afforded by the privilege, ninety nine out of a hundred judges are enabled to discharge their duties without fear or favour and without the dread of an impending action.
Although Lord Moncreiff was there speaking of the rule in its application to judges, his point applies with equal force to the position of witnesses.
There will, of course, be some who may abuse the privilege and against whom allegations might reasonably be made that what they said in the witness box was malicious and defamatory.
But the privilege exists for the protection of all witnesses, not just the few against whom successful actions might otherwise be brought for an award of damages: see also Munster v Lamb (1883) 11 QBD 588, 607 where Fry LJ said that the purpose of the rule was to protect persons acting bona fide who under a different rule would be liable, not perhaps to verdicts and judgments against them, but to the vexation of defending actions.
In Watson v MEwan [1905] AC 480 the Lord Chancellor, the Earl of Halsbury, said that the privilege of a witness, the immunity from responsibility in an action in which evidence has been given by him in a court of justice, was too well established then to be shaken.
He described it as one of the necessities of the administration of justice.
In that case a medical practitioner, whom the pursuer had employed as her professional adviser with a view to an action she proposed to bring against her husband for separation and aliment, then gave evidence for the husband in that same action.
This was said to have come about because he expressed views to the husbands solicitors that made it evident that his opinion was adverse to the position that the wife wished him to adopt.
This led to his being requested by those acting for the husband to give evidence on his behalf.
He agreed to do so, and in the course of his evidence referred to matters which he had learned on the occasion of his professional visit to the wife relevant to her state of health which, so it was alleged, impressed the judge unfavourably to the wifes case and without which, it was said, she would have been successful.
An action of damages was then raised by the wife against him for slander and breach of confidentiality.
The wifes father raised an action of damages against him on similar grounds.
In both cases the question whether the medical practitioner was entitled to witness immunity was raised as a preliminary issue.
Reversing the judgment of the Court of Session (see AB v CD (1904) 7 F 72; reported also in the Scots Law Times as MEwan v Watson (1905) 12 SLT 599), the House of Lords held that the protection that the medical practitioner undoubtedly had as to what he had said in the witness box should be given also to his preliminary examination by those acting for the husband to find out what he could prove if called to give evidence on his behalf.
As to that, the Lord Chancellor made this observation: It may be that to some extent it seems to impose a hardship, but after all the hardship is not to be compared with that which would arise if it were impossible to administer justice, because people would be afraid to give their testimony.
The facts of that case are of particular interest, especially because this appears to have been the first case that the immunity was invoked in response to a claim other than one for slander.
They are best explained in the report of the judgment of the Court of Session at (1904) 7 F 72, in which the averments for both sides are set out.
Sir Patrick Watson was a hospital surgeon and clinical teacher with an unrivalled reputation for his operative skill and teaching powers.
He accepted instructions from Mrs McEwan with a view to his giving evidence as an expert witness on her behalf.
In the event the evidence which he was said to have given, when he appeared as a witness for her husband, was unfavourable to her and in support of the case that was being made against her.
He was said in the course of his evidence to have read out notes which he had made during a professional visit when he examined her.
They contained entries to the effect that it seemed to him that both the wife and her father were bent on inducing her premature labour (in other words, an abortion) with a view to freeing her from any permanent reminder of the marriage and, if possible, to obtain a separation.
This is an early example of the protection being given to an expert witness against an allegation that his evidence to the court was contrary to the interests of the person by whom he had originally been instructed for reward.
It was also alleged that what he said was defamatory of her and her father.
There was no suggestion that the fact that he may have owed duties to them, such as the duty of confidentiality, made any difference.
He was entitled to the protection in the same way as any other witness.
The reports of the case in the House of Lords, which describe the case in the head note as one of slander, give the impression that the claim for breach of confidence did not proceed and that the relevant issues before the House were concerned only with the claim for slander.
But the report of the case in the Court of Session in the Session Cases shows that the pursuer had proposed four issues for trial: AB v CD (1904) 7 F 72, 76 77.
Issue (1) was whether giving the precognition amounted to breach of confidence; issue (2) was whether giving the evidence in court amounted to breach of confidence; issue (3) was whether giving the precognition amounted to slander; and issue (4) was whether giving the evidence in court amounted to slander.
The Lord Ordinary disallowed issues (2) and (4), as they related to evidence given in court which attracted the immunity.
But he allowed issues (1) and (3), on the view that witness immunity did not extend to giving a precognition.
In the Inner House it was argued that the fact that an expert gave evidence by choice and was not compelled to do so meant that he did not require the protection of the immunity.
This argument was rejected, and the Inner House agreed with the Lord Ordinary that issues (2) and (4) should be disallowed.
But it also disallowed issue (1).
Watson then appealed to the House of Lords against the decision of the Inner House that issue (3) should go to trial.
This was the issue as to slander in the precognition.
The Session Cases report of the case in the House of Lords states that Mrs McEwan cross appealed against the disallowance of the first issue: Watson v MEwan (1905) 7 F (HL) 109, 110.
This was issue (1), the issue as to breach of confidentiality in the precognition.
The appeal was heard together with an appeal in the action raised by Mrs McEwans father, in which the issues were almost the same.
The fathers case has not been separately reported, but the names of both cases appear in the Scots Law Times report at (1905) 13 SLT 340.
The Lord Chancellor said that it was impossible to say that any different question arose in the one appeal from that which arose in the other: [1905] AC 480, 485.
Both claims as to what was said in the precognition were before the House and, as the outcome of the appeal was that Mrs McEwans case was remitted to the Court of Session to dismiss her action, its ruling that Watson was entitled to the immunity at the precognition stage must be taken to have extended to her claim against him for breach of confidence as well as her claim for slander.
That this is how the Lord Chancellor saw the matter appears from the second paragraph of his speech, at p 486, where he said that he was not disposed to express an opinion either way as to the confidential nature of the relationship, which might raise very serious and difficult questions, because he had no difficulty at all in their solution on other grounds: The broad proposition I entertain no doubt about, and it seems to me to be the only question that properly arises here; as to the immunity of a witness for evidence given in a Court of Justice, it is too late to argue that as if it were doubtful.
I think that this passage makes it clear that, in his opinion, there were no grounds for distinguishing between the claims that were being made in the action.
The immunity extended as much to a claim of damages for breach of a duty of confidence as it did to a claim for slander, or indeed any other claim.
The question whether an expert witness was in a different position from an ordinary witness had been raised and dealt with in the Inner House.
The decision in Watson v MEwan [1905] AC 480 that the protection extended to the preparation of evidence was applied in Marrinan v Vibart [1963] 1 QB 528.
The plaintiff in that case was a barrister who brought an action in damages for conspiracy to make false statements defamatory of him as a barrister against two police officers.
They had given evidence against him at a criminal trial and in disciplinary proceedings at an inquiry before the Benchers of Lincolns Inn.
His action was held to be barred by the rule of public policy.
Sellers LJ, with whom the other members of the Court of Appeal agreed, said at p 535: Whatever form of action is sought to be derived from what was said or done in the course of judicial proceedings must suffer the same fate of being barred by the rule which protects witnesses in their evidence before the court and in the preparation of the evidence which is to be so given. [Emphasis added] Salmon J said of the immunity in the same case at first instance, at [1963] 1 QB 234, 237: This immunity exists for the benefit of the public, since the administration of justice would be greatly impeded if witnesses were to be in fear that any disgruntled and possibly impecunious persons against whom they gave evidence might subsequently involve them in costly litigation.
In Roy v Prior [1971] AC 470, 480 Lord Wilberforce said that the reasons why immunity is conferred upon witnesses in respect of evidence given in court are in order that they may give their evidence fearlessly and to avoid a multiplicity of actions in which the value or truth of their evidence would be tried over again.
This appears to have been the first mention of the second of these two reasons in the context of witness immunity.
Lord Wilberforces formulation was adopted by Mr Simon Tuckey QC in Palmer v Durnford Ford [1992] QB 483, 487 and by Simon Brown LJ in Silcott v Commissioner of Police of the Metropolis (1996) 8 Admin LR 633, 637.
It was referred to also by Drake J in Evans v London Hospital Medical College (University of London) [1981] 1 WLR 184, 189 when he was discussing the reasons for the immunity in the context of criminal proceedings.
He accepted that one of the reasons was to prevent disgruntled prisoners from seeking to have their cases retried in civil suit.
But he said that the reason was in fact more broadly based than that.
In Stanton v Callaghan [2000] QB 75, 93 94, Chadwick LJ pointed out that Lord Wilberforces second reason, which he appears to have derived from the reasons for the immunity given to barristers in Rondel v Worsley [1969] 1 AC 191, was said by Lord Diplock in Saif Ali v Sidney Mitchell & Co [1980] AC 198, 223 to have overlooked the possibility that the action had been dismissed or judgment entered without a contested hearing so that there was no possibility of restoring the action and proceeding to trial.
We are left then with the first reason, which has been the only true basis for the rule from the very beginning.
In Taylor v Director of the Serious Fraud Office [1999] 2 AC 177 Lord Hoffmann said that the policy of the immunity is to enable people to speak freely without fear of being sued, whether successfully or not.
Once again there is a recognition of the fact that the rule exists for the protection of all witnesses, not just the few against whom successful actions might otherwise be brought.
Lord Hoffmann added these words at p 214: If this object is to be achieved, the person in question must know at the time he speaks whether or not the immunity will attach.
If it depends upon the contingencies of whether he will be called as a witness, the value of the immunity is destroyed.
It is the need for certainty that also makes it necessary to extend the protection of the rule to all witnesses and to all causes of action that may be brought against them.
The rough is taken with the smooth.
There will be some cases where a genuine cause of action is excluded by it.
But in the vast majority of cases it is the assurance of the protection that enables people against whom no action could reasonably be brought to speak freely without facing the prospect of being harassed by those against whose interests they have spoken.
It is an important part of the protection that, as Sellers LJ said in Marrinan v Vibart [1963] 1 QB 528, 535, it extends to whatever form of action is sought to be derived from what was said or done in the proceedings.
That had been settled law since the decision of the House of Lords in Watson v MEwan [1905] AC 480, where it was held that the witness was protected by the immunity against a claim for breach of confidence: see para 141, above.
In Arthur J S Hall & Co v Simons [2002] 1 AC 615 it was argued for the Bar Council that witness immunity provided a useful analogy to that given to advocates: p 669.
For the clients, on the other hand, it was argued that no relevant parallel could be drawn, as the duties that a paid witness owed to his client were subject to the overriding duty to the court to tell the truth: p 671.
Lord Hobhouse of Woodborough said at p 741 that the expert witness was in a special position similar to that of the advocate.
But Lord Hoffmann at pp 697 698 rejected the expert witness analogy.
He said that it was not enough to explain the immunity relating to court proceedings by saying, as Lord Diplock did in Saif Ali v Sidney Mitchell & Co [1980] AC 198, 222, that people involved in litigation should be free from avoidable stress and tensions of alarm and fear.
It was necessary to go further and explain why the public interest requires that a particular participant should be free from the stress created by the possibility that he might be sued.
The witness rule, he said, depends on the proposition that without it, witnesses would be more reluctant to assist the court.
Referring to Stanton v Callaghan [2000] QB 75, in which it was held that an expert could not be sued for agreeing to a joint experts statement in terms which the client thought detrimental to his interests, he said: that seems to me to fall squarely within the traditional witness immunity.
The alleged cause of action was a statement of the evidence which the witness proposed to give to the court.
A witness owes no duty of care to anyone in respect of the evidence he gives to the court.
His only duty is to tell the truth.
The question which this case raises is whether Lord Hoffmann was right to declare that the case of the expert witness fell within the traditional witness immunity.
The expert witness
The observations of Lord Hoffmann and Lord Hobhouse in Arthur J S Hall & Co v Simons [2002] 1 AC 615 indicate that they did not think that the fact that expert witnesses owed a duty of care to their clients was a reason for excluding them from the immunity that is available to witnesses generally.
In Watson v MEwan [1905] AC 480 the fact that Sir Patrick Watson may have owed a duty in confidence to his former client made no difference to the result: see paras 139 141, above.
Lord Browne Wilkinson made it clear in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 755 that nothing that he had said in that case about the investigation and preparation of evidence by the psychiatrist in proceedings for the protection of a child from abuse was intended to cast doubt on the ruling by Mr Simon Tuckey QC in Palmer v Durnford Ford [1992] QB 483, 488 489 that the protection should be extended to the production or approval of an experts report for the purposes of disclosure to the other side, but not to work done for the principal purpose of advising the client.
In the Court of Appeal in X (Minors) v Bedfordshire County Council Sir Thomas Bingham MR too said that in his opinion Mr Simon Tuckey QC reached a correct conclusion in Palmer: [1995] 2 AC 633, 661.
There was a difference of view between the Court of Appeal and the House of Lords in that case as to whether there was a sufficiently immediate link between the investigations carried out by the psychiatrist to attract the immunity.
But it was common ground that the psychiatrist was in the same position in regard to the immunity as any other witness.
This is a formidable body of authority which should not be lightly disregarded.
The decision of Drake J in Evans v London Hospital Medical College (University of London) [1981] 1 WLR 184 lends further support to it.
In Hughes v Lloyds Bank Plc [1998] PIQR P98 the Court of Appeal assumed that expert witnesses were immune from suit for negligence.
In Raiss v Palmano [2001] PNLR 21 a claim for negligence against a surveyor was struck out at first instance but allowed so far as it alleged deceit because he conceded in cross examination that he did not have the qualification claimed in his expert report.
On appeal the entire claim against him was struck out.
Lord Phillips says that the immunity of expert witnesses from liability in negligence has never been challenged but has simply been accepted.
It is true that none of the earlier cases addressed the question of immunity from liability for negligence, and it was accepted in Palmer v Durnford Ford [1992] QB 483 and Hughes v Lloyds Bank Plc [1998] PIQR P98 that in general the paid expert witness is protected by the immunity.
But I think, with respect both to him and Lord Dyson, that this view does not do justice to what the authorities, properly understood, reveal to us.
The immunity was challenged in Watson v MEwan [1905] AC 480 but held to apply to a claim by a client for breach of the experts duty of confidence.
The universality of the rule was declared in that case, and it has been asserted and applied repeatedly since then.
Its application to claims for breach of duty by their clients against expert witnesses was expressly recognised by both Lord Hoffmann and Lord Hobhouse in Arthur J S Hall & Co v Simons [2002] 1 AC 615.
The fact must be faced that what we are being asked to do in this case is to remove an immunity which until now has been accepted as falling within the universal principle.
This is not just a fringe decision of the kind to which Lord Wilberforce referred in Saif Ali v Sidney Mitchell & Co [1980] AC 198, 211 where, as he saw it, the extent of the immunity then given to advocates was in need of being clarified.
The leading modern authority on the position of expert witnesses is Stanton v Callaghan [2000] QB 75.
In that case too, after reviewing the authorities, the Court of Appeal saw no reason to disturb the ruling in Palmer.
Chadwick LJ said at p 101 that he was not persuaded that experts who, as part of their professional practice and for reward, offer their services as potential witnesses on matters within their expertise are prone to strains and tensions of alarm and fear at the stage at which they are preparing their reports for exchange.
But the basis in fact for this observation is unclear, and the other members of the Court did not agree with him on this point.
Otton LJ said at p 104 in Stanton that there was clear authority that, provided the test of principal and proximate connection is satisfied, the pre hearing work of an expert will be within the protective circle of the witness immunity principle.
What remained to be considered was whether it was appropriate to draw the circle narrower so that some experts are admitted and some are not.
His conclusion was that, while the need to grant immunity may be more obvious in some cases than others, the courts ought not to rush to draw a rigid boundary between situations where immunity is automatically granted to some and not to others.
He reminded himself at p 107 that the immunity is not granted primarily for the benefit of the individuals who seek it.
They are the beneficiaries of the public interest to ensure that the administration of justice is not impeded, which is the consideration that should be paramount.
Although Nourse LJ was prepared to acknowledge that the rule could not be quite the same for experts as for other witnesses as the expert usually has the dual capacity of advising the client as well as giving evidence in support of his case, he saw no justification for distinguishing between an expert and a lay witness either on the ground that the expert is usually remunerated for his services or on the ground that he may be less likely than a lay witness to be deterred from giving evidence.
The proper administration of justice depends frequently on evidence given by expert witnesses.
As Otton LJ observed in Stanton at p104, witnesses who claim to be and are treated as experts come from many disciplines and appear in ever widening areas of litigation, ranging from accident reconstruction experts to veterinary surgeons and it might also be said to zoologists.
The proceedings in which they are engaged range across the board, from criminal trials at one extreme to professional disciplinary hearings at the other, with a wide variety of civil proceedings in between.
And they range from those whose profession is to give expert evidence and who are very familiar with the court process to those who appear once only in a particular case and who are least likely to have protected themselves against the risk of a claim for negligence.
Mr Ter Haar QC for the appellant was careful to confine his argument to the facts of this case.
His proposition was that an expert in civil cases should no longer have immunity from suit in relation to negligent work performed for the substantial purpose of giving evidence in court.
He said that it was no part of his argument that his proposition should be applied to expert witnesses in criminal cases or in family law cases either.
Nor was it part of his argument that it should be applied to what the expert witness said when giving evidence in court.
But I do not think that, if there are good grounds for removing the immunity from that stage of the proceedings, it would be possible to retain it for the stage when the expert gives evidence in court.
And it would be difficult to defend its retention where the expert witness gives evidence, or prepares for the giving of evidence, for his client in other tribunals.
The underlying duty of care is the same in all cases.
In his report, Access to Justice (1996), Lord Woolf referred in chapter 13, para 3 to the recommendation in chapter 23 of his interim report that the calling of expert evidence in civil cases should be under the complete control of the court.
His concern was that a more economical use should be made of this type of evidence by narrowing the issues between opposing experts as early as possible.
Among the points that he made about the way expert evidence was being used was a concern that experts sometimes took on the role of partisan advocates instead of neutral fact finders or opinion givers.
In chapter 13, para 25 of his report he said that there was wide agreement that the experts role should be that of an independent adviser to the court, and that lack of objectivity could be a serious problem.
In para 27 he said that it was important that each opposing experts overriding duty to the court was clearly understood.
In para 30 he said that there was widespread agreement that an experts report intended for use as evidence in court proceedings should be addressed to the court.
These observations formed the basis for the rules that are now set out in CPR Part 35 and for Practice Direction 35 which supplements them.
CPR Part 35 and the Practice Direction are designed for use in civil cases only.
They do not apply to criminal cases, and they do not apply in Scotland either.
But it seems to me that the principles which they express are of universal application in criminal cases arguably even more so, in view of the overriding public interest in securing the ends of justice in proceedings of that kind.
CPR 35.2(1) states that a reference to an expert in the Part is a reference to a person who has been instructed to give or prepare expert evidence for the purpose of proceedings.
CPR 35.3 states: (1) It is the duty of experts to help the court on matters within their expertise. (2) This duty overrides any obligation to the person from whom experts have received instructions or by whom they are paid.
In National Justice Compania Naviera SA v Prudential Assurance Co Ltd (The Ikarian Reefer) [1993] 2 Lloyds Rep 68, 81 Cresswell J said, of the duties and responsibilities of experts in relation to the party and to the court, that expert evidence presented to the court should be, and should be seen to be, the independent product of the expert uninfluenced as to the form or content by the exigencies of litigation, and that an expert witness should provide independent assistance to the court by way of objective unbiased opinion in relation to matters within his expertise.
He referred, in support of these propositions, to Lord Wilberforces observations in Whitehouse v Jordan [1981] 1 WLR 246, 256 and those of Garland J in Pollivitte Ltd v Commercial Union Assurance Company Plc [1987] I Lloyds Rep 379, 386 and Cazalet J in In re J (Child Abuse: Expert Evidence) [1991] FCR 193.
There is, then, an obvious conflict between the duties that the expert owes to his client and those that, in the public interest, he owes to the court.
Lord Hoffmann was perhaps overstating the position when he said in Arthur J S Hall & Co v Simons [2002] 1 AC 615, 698, in the context of a discussion about expert witnesses, that a witness owes no duty of care to anyone in respect of the evidence he gives to the court, as his only duty is to speak the truth.
This may be true of witnesses generally, but it is plain that the paid expert owes duties to the client by whom he is being paid.
If he agrees for a reward to prepare a report and to present himself in court to give evidence, he is obliged to do those things and to take reasonable care when he is doing so.
He must make the necessary investigations and preparations for the giving of that evidence.
Nevertheless when it comes to the content of that evidence his overriding duty is to the court, not to the party for whom he appears.
His duty is to give his own unbiased opinion on matters within his expertise.
It is on that basis that he must be assumed to have agreed to act for his client.
It would be contrary to the public interest for him to undertake to confine himself to making points that were in the clients interest only and to refrain from saying anything to the court to which his client might take objection.
Do these considerations reduce, or remove, the need in the case of the expert witness for the protection of the immunity? As Justice Stevens observed in Briscoe v LaHue (1983) 460 US 325, 335 336, when a police officer appears as a witness he may reasonably be viewed as acting like any other witness sworn to tell the truth.
He may be regarded as an official performing a critical role in the judicial process, in which event he may seek the benefit afforded to other participants in the same proceeding.
At p 345 he recognised that the absolute witness immunity bars a path to recovery by defendants who have been convicted on the basis of false testimony: But we have recognised, again and again, that in some situations, the alternative of limiting the officials immunity would disserve the broader public interest.
There would seem then, as a starting point, to be a strong case for treating an expert in the same way as any other witness when it comes to the giving of sworn evidence in court.
If that is so, the case would seem to be just as strong for treating him in the same way when, on the directions of the court, he is agreeing a joint statement with the opposing expert and for treating him in the same way when he is preparing his own report with a view to giving his evidence.
Lord Phillips does not see why an expert should be concerned that performance of his duty to the court will result in his being sued for breach of duty to his client: para 56.
But this assumption contradicts the justification for the immunity that is extended to witnesses generally, which is that there are grounds from time to time for believing that the fear of suit exists.
If he is right, there are seeds here for challenging the whole concept of witness immunity.
Pros and cons
Various arguments have been advanced in favour of removing the immunity from expert witnesses and for not doing so.
I shall deal first with those that have been advanced for removing it.
Where there is a wrong there must be a remedy.
This may be a valuable guide in the right context.
Lord Wilberforce said in Saif Ali v Sidney Mitchell & Co [1980] AC 198, 214 that account had to be taken of this principle in fixing the boundary of the advocates immunity, which until then was unclear.
But we are not dealing with fringe issues in this case, and in the present context it seems to me that little weight can be attached to it.
Removal of the immunity runs counter to long established authority.
The question whether it was more important to right wrongs was considered and rejected by Lord Penzance in the House of Lords in Dawkins v Lord Rokeby (1875) LR 7 HL 744: see para 133, above.
It was considered again and rejected by Lord President Inglis in Williamson v Umphray and Robertson (1890) 17 R 905, by Fry LJ in Munster v Lamb (1883) 11 QBD 588 and by the Lord Chancellor in Watson v MEwan [1905] AC 480.
Nothing that has been said in any of the later authorities casts doubt on the policy choice that was made in these early cases.
Lord Hoffmanns declaration in Taylor v Director of the Serious Fraud Office [1999] 2 AC 177 that the policy of the immunity is to enable people to speak freely without fear of being sued, whether successfully or not, is a restatement of exactly the same point.
Lord Wilberforces view in Saif Ali was that this consideration showed that the area of the immunity must be cautiously defined.
By that I think he meant that the immunity should not be extended any further than necessary.
That test can be applied without too much difficulty when one is setting limits to the context in which things said or done will attract the immunity.
It will then follow that the protection will extend to all claims of whatever nature that fall within that context.
Those which fall outside it of whatever nature will not have that protection.
It is more difficult to apply the idea that where there is a wrong there must be a remedy to include some wrongs within the scope of the immunity and exclude others that fall within the same context.
If it is necessary to give the protection against some claims to enable witnesses to speak freely, why should it not be given to them all? Why should a claim for a breach of duty be treated differently from a claim for defamation? If the claim is well founded, a wrong was done in either case which ought to be remedied.
Any immunity has to be justified.
This too is a sound argument in the right context.
But in this case we are dealing with a long established principle which extends the immunity to everyone who gives evidence to the court.
Any extension of that principle would, of course, have to be justified.
That was the problem that was faced up to and answered in Watson v MEwan [1905] AC 480 and more recently in X (Minors) v Bedfordshire County Council [1995] 2 AC 633.
But in this case we are being asked to make an exception to it.
We are being asked to remove the immunity for a category of witness which until now has been given the benefit of it.
Watson v MEwan [1905] AC 480 is a case in point as, of course, is Stanton v Callaghan [2000] QB 75.
It seems to me to be that it is the proposed exception to the rule, not the rule itself, that needs to be justified.
Analogy with the removal of the immunity from advocates.
It was said that, as the decision in Arthur J S Hall & Co v Simons [2002] 1 AC 615 that the advocates immunity from liability for a breach of duty to his client had not given rise to any problems, the assumption could be made that the same could be said for the removal of the immunity from experts.
I am not convinced that this is so.
The witness and the advocate perform different functions.
The duties that the advocate owes to the court are not as far reaching as the overriding duty to the court that rests on the expert.
His principal duty is to his client, not to the court.
Lord Phillips makes another point: see paras 46 50.
He says that the expert witness can be compared with the advocate, as both undertake a duty to their client.
In that respect he has much more in common with the advocate than he does with the witness of fact.
Lord Dyson addresses the same issue when he is discussing the problem of divided loyalties: para 120.
His conclusion is that the fact that the experts overriding duty is to the court is no more compelling for retaining the immunity for experts than it was for retaining it for advocates.
These observations use the fact that the immunity has been withdrawn from the one as an argument for withdrawing it from the other.
I find this disturbing.
I do not think that anyone who sat in Arthur J S Hall & Co v Simons foresaw that removing the immunity from advocates would be taken as an indication that it should be removed from expert witnesses too.
Lord Hoffmanns remarks indicate that, rightly or wrongly, he saw no such analogy.
Only Lord Hobhouse disagreed with him.
Yet here we are a decade later contemplating taking just that step.
There is a warning here, to repeat the old adage, that one thing leads to another.
Removing just one brick from the wall that sustains the witness immunity may have unforeseen consequences.
Wasted costs orders and disciplinary proceedings against experts.
It was also said that, as it was now clear that an expert witness was not immune from the sanction of compensating by a wasted costs order those who had suffered by evidence given recklessly in flagrant disregard of his duties to the court, and that he was not immune from disciplinary proceedings for professional misconduct at the instance of the professional body to which he belongs, a sufficient inroad had been made into his immunity for it to be but a short step for it to be removed as regards his duties to his client too.
The suggestion was that the protection of the immunity had been significantly eroded by these developments.
I am not convinced by this argument either.
The decisions in Phillips v Symes (No 2) [2004] EWHC 2330 (Ch), [2005] 1 WLR 2043 and Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462 are not inconsistent with the continued existence of the general immunity.
But there is a more fundamental point.
It is one thing to be liable to a wasted costs order at the instance of the court itself or to proceedings by a professional body for professional misconduct.
It is quite another to be at risk of worthless but possibly embarrassing and time consuming proceedings by a disgruntled and disaffected litigant in person.
Insurance cover, if available, is not a universal remedy.
And here again one must be careful not to lose sight of the policy choice that was made long ago that, to be effective, the immunity must be for the protection of all, not just those who might otherwise be liable.
Experts can look after themselves.
Some experts may be robust enough to withstand the risks and in most cases, no doubt, the risks they face will be minimal.
But one cannot assume that this will be so for everyone.
And it is not the robustness of the witness that is the problem.
It is the risk of the expense and distress of a harassing litigation at the instance of an aggressive client which in some cases, given the vagaries of human nature, may be quite obvious.
Lord Penzance thought in Dawkins v Lord Rokeby (1875) LR 7 HL 744 that, with such possibilities hanging over his head, a witness could not be expected to speak with that free and open mind which the administration of justice demands.
I would find it hard to say that he misdirected himself on this point or that what he said then does not still hold true today, even in the case of experts who regularly give evidence but certainly in respect of those who do not.
As against those points, there are various arguments that have been put forward in support of retaining the immunity for expert witnesses.
Chilling effect on the availability of witnesses.
Mr Lawrence QC for the respondent said that it was a relevant consideration whether abolition of the immunity would deter a significant number of potential experts from giving evidence.
Otton LJ made this point in Stanton v Callaghan [2000] QB 75, 106 and Thorpe LJ raised the same concern in Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462, para 227.
I would not, on present information, attach much importance to this argument.
In any event, without hard information, it is not possible to assess how much weight should be given to it.
Experts can usually expect to be paid for their work, and there are no doubt other considerations that will incline them to continue to make themselves available.
I would not, however, discard this point as entirely irrelevant.
There may be some situations some kind of case, some kinds of client where the expert would be reluctant to become involved at all.
If that were to happen it would raise questions as to whether access to justice for the disadvantaged was being inhibited.
This is a reason for wishing to be cautious before taking a step which, for all practical purposes, would be irretrievable.
Fuzzy edges: where to draw the dividing line.
This is a much more important point.
Although Mr Ter Haar was careful to confine his submissions to civil cases and to the relationship between the expert and his own client only, it is hard to see how one could justify removing the immunity in that respect but keeping it for all the other tribunals which hear evidence for experts.
This would be a matter of particular concern in the criminal jurisdiction.
The expert for the prosecution would continue to enjoy the immunity from proceedings at the instance of the defendant.
The expert for the defence would have it removed from him.
One cannot discount the fact that exposure to the risk of incurring the expense and distress of a harassing litigation at the clients instance should the defence fail, however unlikely, will colour his evidence.
The public interest surely demands that experts who give evidence on either side in criminal proceedings are free from pressures of that kind.
The same point could be made where proceedings are brought for the protection of children, where the interests of the child must be the paramount consideration and it is undesirable that anything should be done that might discourage the expert from giving full and frank evidence.
What is the basis in principle that would justify the removal in civil cases but retaining it in all the others? And what if the removal is to be extended to family proceedings and public law proceedings where children are involved? Lady Hales compelling treatment of this subject in paras 182 and 183 of her judgment illustrates the problems.
It would be unwise to leave the position outside the civil jurisdiction in a state of uncertainty.
Other duties giving rise to the risk of liability.
The argument in favour of removing the immunity concentrated on the duties of care that arise from the contractual relationship and, in tort, from the relationship of reliance on the services of the professional.
There are however other circumstances that need to be considered that might give rise to liability from which, as matters stand, experts enjoy immunity.
There is the duty of confidentiality which was the subject of the proceedings against the expert in Watson v MEwan [1905] AC 480.
Is the immunity to be removed in cases of that kind too, where the expert agrees to give evidence for the other side or feels himself bound when giving evidence for his own side to reveal information which the court needs if it is to be told the truth but which his client maintains was confidential?
What about the joint or the court appointed expert? And what about witnesses who, although not experts, can be said to owe duties to a party to the litigation or those who may be affected by what they say? Is the immunity to be removed from the company director who owes a duty to the company to promote its interests but is said to have made an inexcusable error when giving evidence on its behalf? What about the employee with specialist skills who gives evidence on his employers behalf and is said to have caused loss to his employer because of the negligent way he presented his evidence? How does one determine who, for the purposes of the removal of the immunity, is an expert and who is not? And how is one to identify those to whom the duty is owed? In Carnahan v Coates (1990) 71 DLR (4th) 464, 471 472 Huddart J drew attention to the fact that prima facie a professional person who gives evidence owes a duty of care towards all who might be contemplated to be harmed by his failure to conduct himself with the minimum standard of care dictated by his profession.
In E OK v DK [2001] 3 IR 568 the unsuccessful party to an action of nullity of marriage sought damages against a witness whom the court had appointed to carry out a psychiatric examination of her, alleging that he had been negligent.
The different ways in which Lord Phillips, Lord Brown and Lord Dyson describe the extent to which the immunity is to be removed suggest that the boundaries are, and are likely to remain, unclear.
Conclusion
The lack of a secure principled basis for removing the immunity from expert witnesses, the lack of a clear dividing line between what is to be affected by the removal and what is not, the uncertainties that this would cause and the lack of reliable evidence to indicate what the effects might be suggest that the wiser course would be to leave matters as they stand.
The Law Commission has recently completed a project in which it addressed the admissibility of expert evidence in criminal proceedings in England and Wales: see Law Com No 325 (HC 829, 21 March 2011).
The question of immunity was not raised at any stage during its consideration of this issue.
If there is a need to reform the law in this area, it would be better to leave it to be dealt with by Parliament following a further report by the Law Commission.
As Watson v MEwan [1905] AC 480 remains binding in Scotland and witness immunity in Scotland is a devolved matter, the question whether it is in need of reform deserves attention by the Scottish Law Commission as soon as practicable.
In this way all the various problems could be addressed after proper consultation and debate.
For these reasons, and for those given by Lady Hale, I would dismiss the appeal.
LADY HALE
On 26 July 1966, the Lord Chancellor made the following statement, Practice Statement (Judicial Precedent) [1966] 1 WLR 1234, on behalf of himself and the Lords of Appeal in Ordinary: Their Lordships regard the use of precedent as an indispensable foundation upon which to decide what is the law and its application to individual cases.
It provides at least some degree of certainty upon which individuals can rely in the conduct of their affairs, as well as a basis for orderly development of legal rules.
Their Lordships nevertheless recognise that too rigid adherence to precedent may lead to injustice in a particular case and also unduly restrict the proper development of the law.
They propose therefore to modify their present practice and, while treating former decisions of this House as normally binding, to depart from a previous decision when it appears right to do so.
In Austin v Southwark London Borough Council [2010] UKSC 28, [2010] 3 WLR 144, at para 25, Lord Hope (with whom all other members of the court agreed) stated that this has as much effect in this court as it did before.
However, this case illustrates how hard it is to apply that wise guidance in practice.
Lord Hope has demonstrated, to my mind convincingly, that there is House of Lords authority, in the shape of Watson v MEwan [1905] AC 480, for the general proposition that no cause of action of any kind lies against any witness in respect of the evidence he gives to a court.
The rule was first developed as a protection against suits in defamation, but there is no reason in principle to limit it to these.
If the purpose is to ensure that witnesses can prepare and give their evidence freely to the court, irrespective of whether it might otherwise constitute a tort or a breach of contract against someone else, then it should not matter what the source of that liability might be: whether saying or writing something which is defamatory of someone else; or saying or writing something in breach of a duty of confidence owed to someone else; or saying or writing something in breach of a contractual duty owed to someone else; or saying or writing something in breach of what would otherwise be a tortious duty owed to someone else.
The rule has been taken for granted by courts at all levels for a very long time.
I therefore agree with Lord Hope that we are here concerned with whether we should carve out an exception to that long established rule.
There are, of course, existing exceptions.
The most important is perjury, but among the others are contempt of court, professional misconduct (assuming Meadow v General Medical Council [2006] EWCA Civ 1390, [2007] QB 462 to be correctly decided), and liability for the wasted costs of the other side (assuming Phillips v Symes (No 2) [2004] EWHC 2330 (Ch), [2005] 1 WLR 2043 to be correctly decided).
It has been suggested that these exceptions, and in particular the last two, make such inroads into the rule that they call its whole purpose into question.
In my view they do no such thing.
These exceptions are all, in their different ways, in support of the courts interest in witnesses behaving properly: telling the truth, obeying court orders or respecting the undertakings given to the court, behaving professionally so as to justify the courts confidence in their expertise and not wasting the time of the court or the other parties.
In short, they are there to encourage, indeed to oblige, the witness to perform her duty to the court.
They are not there to protect the interests of the witnesss client.
The exception which we are being asked to make is to protect the interests of the client.
That is a significant departure from existing principles.
The rule may have been established before certain developments in law and practice in particular the modern evolution of the law of negligence and the practice of paying expert witnesses to give their opinions in civil or criminal cases.
But these are not new developments in the way that, for example, email and the internet are new developments which the existing law must find ways of accommodating.
A professional person has always owed her client a contractual duty to exercise reasonable care and skill: its statutory recognition in the Supply of Goods and Services Act 1982 was not intended to change the law.
It has never, so far as I am aware, been contrary to public policy for a party to litigation to pay an expert for her advice in connection with the litigation.
The development is one of quantity not quality.
If an exception is to be made, the boundaries of that exception must be logical and clear.
As I understand it, there is no question of removing the absolute privilege which all witnesses enjoy against defamation, whether or not the person defamed is their client.
As I also understand it, there is no question of erecting a duty of care where none would otherwise exist, and thus of rendering an expert witness liable to the other side or to anyone else involved in the litigation apart from her own client.
The rationale for the proposed exception is that, without the rule, an expert witness would owe a duty of care to her own client and there is no reason why she should not be liable if she has caused her client loss through the breach of that duty.
I am unclear whether the exception would apply only in a case where there was a contractual duty or whether it would apply in a case where there was no contractual duty but there might be a duty owed in tort.
Or is it to be assumed that the two are co terminous? I doubt that because there may be situations where there is no contractual duty, for example because the contract was made with the partys legal advisers, but where there could be a duty in tort were it not for witness immunity.
I ask these questions because, as it seems to me, it would be impossible to confine any exception to run of the mill cases like the present.
The present case is a classic personal injury action.
The claimant was injured in a road traffic accident.
There is a variety of medical evidence available.
Some of it comes from the doctors who have been treating him for his injuries.
Some of it comes from doctors, and in this case a clinical psychologist, who have been instructed by one side or the other to give their expert opinion purely for the purpose of the litigation.
These last are the paradigm case on which the rationale for the proposed exception is based.
They have been called in to give their opinion for the purpose of the litigation.
They are paid a fee for doing so.
They would ordinarily owe a contractual duty to exercise reasonable care and skill, either directly to the client or through the clients legal advisers.
Why should they not be held liable to the client if they fail to exercise that care and skill? After all, as professionals, they will only fail in their duty if they fail the Bolam test (Bolam v Friern Hospital Management Committee [1957] 1 WLR 582); and as witnesses, they will be excused much in the hurly burly of the trial.
These are powerful arguments indeed in the context in which they are deployed.
Mr Ter Haar QC, for the appellant claimant, was at pains to exclude consideration of the liability of expert witnesses in other contexts.
But I do not think that we can exclude it.
If we are to change the law, we must do so in a principled way.
If the exception is made, it will clearly have to apply between expert witnesses and their clients in all kinds of civil proceedings, before all kinds of courts and tribunals: the surveyor who gives valuation evidence in a leasehold enfranchisement case; the plasterer who gives quantum meruit evidence in a building dispute; the engineer who explains how a machine works in a factory accident; or the scientist who explains how DNA works in a patent case.
All of this may sound straightforward.
But even in ordinary civil cases, it is not completely so.
A doctor who has treated the patient after an accident or for an industrial disease may be called upon, not only to give evidence of what happened at the time, but also to give an opinion as to the future.
Sometimes there may be a fee involved and sometimes not.
Is the proposed exception to cover all or only some of her evidence? In many civil cases, there are commonly now jointly instructed experts on some issues.
A jointly instructed expert owes contractual duties to each of the parties who instruct her.
A party who is disappointed by her evidence will often find it difficult to persuade the court to allow a further expert to be instructed to enable her evidence to be properly tested.
But the disappointed party does not have to ask the courts permission to find an expert who will enable him to launch proceedings against the jointly instructed expert.
Because such an expert is extremely likely to disappoint one of those instructing her, she may be more vulnerable to such actions than is the expert instructed by one party alone.
How far beyond ordinary civil proceedings is this exception to go? I have already suggested that it would have to apply to essentially private law proceedings in tribunals as well as in courts thus to proceedings between landlord and tenant in leasehold valuation, service charge, rent assessment and other such disputes; or between employer and employee in unfair dismissal, redundancy, discrimination and breach of contract cases.
But what about cases which are essentially public law proceedings? Should the independent psychiatrist who is instructed on behalf of the patient in tribunal proceedings under the Mental Health Act 1983 be covered by the proposed exception? Should the educational psychologist or child psychiatrist instructed by the parents of a child with special educational needs to give evidence in tribunal proceedings under Part 4 of the Education Act 1996? These are sensitive and often highly fraught cases in which performing the experts duty to the tribunal may well be perceived by the client patient or parent as a breach of her duty towards him.
This brings me to family proceedings, in which all of these various situations can arise.
The most obvious analogy with an ordinary civil case is ancillary relief proceedings between husband and wife.
Expert valuation or forensic accountancy evidence is common.
If such experts may be held liable to their clients in other civil proceedings, it is hard to see why they should not be so liable in ancillary relief proceedings.
The next example is proceedings between mother and father (or other relatives) about the future of their children.
Often, the court will be assisted by a welfare report from a Cafcass officer.
That officer is not instructed by either party and so will presumably run no risk of liability to either of them.
But sometimes the parties will jointly instruct a child psychiatrist or psychologist to assist the court.
Is such an expert to be potentially liable to the disappointed parent even though it is generally accepted that her principal duty is owed, not to the parents, but to the child? And sometimes, even in these private law disputes, the child will be separately represented.
Such cases are so difficult and sensitive that it is quite likely that an expert will be instructed on behalf of the child.
Is such an expert to be potentially liable to the child?
Then there are public law proceedings between a local authority, the child and the parents.
There will often be a great deal of expert evidence.
Some of the evidence will come from social workers employed or instructed by the local authority.
Some of these will be simple witnesses of fact.
Some will have carried out expert risk assessments.
Many will do both.
Are they to be potentially liable to the local authority in respect of all or only some of their evidence? Some of the evidence will come from doctors, nurses and other health care professionals who have treated or looked after the child at critical times.
They may be called as witnesses by any party to the proceedings but are usually called by the local authority.
I do not know, but it may be that they are sometimes paid a fee for giving an expert opinion to the court.
Are they to be potentially liable to whoever called them as witnesses in respect of all or only some of their evidence? Some of the evidence will come from health care professionals who have not treated the child, but have been called in to make an assessment for the purpose of potential or actual care proceedings.
They may be instructed by the local authority, the parents or the childs guardian.
Are they to be potentially liable to whoever instructed them? Should any of this depend upon whether the expert is paid a fee specifically for her appearance in court, or provides her assessment as part of her ordinary duties to the health or social care services, who may not be party to the proceedings, or provides it as part of a special arrangement between the agencies?
In M (A Minor) v Newham London Borough Council [1995] 2 AC 633, 661, Sir Thomas Bingham MR (with whom Staughton LJ agreed) held that a psychiatrist who interviewed a child in the course of investigating suspected child sexual abuse was not covered by witness immunity: she must have known that if she concluded that the child had been abused by someone living in the household, proceedings to remove the child were likely, but she had never in fact become involved in proceedings about the child.
When the case went to the House of Lords, as one of those reported as X v Bedfordshire County Council [1995] 2 AC 633, at pp 754 755, Lord Browne Wilkinson pointed out that this was factually incorrect: the psychiatrist had made a report which was relied upon in the proceedings.
He also concluded that there should be no liability for investigations which had such an immediate link with possible proceedings.
But this was in the context of the case as a whole, where it was held that there was no duty of care owed to a child by the professionals involved in deciding whether or not to institute proceedings to protect him from abuse.
In D v East Berkshire Community NHS Trust [2003] EWCA Civ 1151, [2004] QB 558, the Court of Appeal held that both doctors and social workers did owe a duty of care to the child when conducting child protection investigations.
Discussing the impact of witness immunity, at paras 113 117, Lord Phillips of Worth Matravers MR compared the approach of Lord Browne Wilkinson in X v Bedfordshire with the more detailed consideration of witness immunity in Darker v Chief Constable of the West Midlands Police [2001] 1 AC 435.
There Lord Hope had said, at p 448: The actions which the police take as law enforcers or as investigators may, of course, become the subject of evidence.
But there is no good reason on grounds of public policy to extend the immunity which attaches to things said or done by [police officers] when they are describing these matters to things done by them which cannot fairly be said to form part of their participation in the judicial process as witnesses.
The purpose of the immunity is to protect witnesses against claims made against them for something said or done in the course of giving or preparing to give evidence.
It is not to be used to shield the police from action for things done while they are acting as law enforcers or investigators.
Lord Phillips went on to say that it may not be easy to draw the line between investigation and preparation of evidence in cases of suspected child abuse but the Court clearly held that that was where the line should be drawn.
To that extent, therefore, the view taken in X v Bedfordshire has been superseded by later authority.
There was no appeal to the House of Lords against that aspect of the decision of the Court of Appeal in D v East Berkshire NHS Trust.
There may, therefore, be a relatively clear dividing line between conducting the examinations and investigations, on the one hand, and preparing for and giving evidence, on the other.
But what these examples also make clear is that in many family cases, if the law is to be changed, there will be some professional witnesses who enjoy immunity in respect of their evidence and some who do not.
Some of those distinctions will appear arbitrary.
Whereas in the past, all enjoyed the same immunity, in the future only some will do so.
This will introduce a dimension to the interactions between the experts, and between the experts and the courts, which was not there before.
To what extent will the court, in evaluating an experts evidence, take account of that experts potential liability to a client or the lack of it?
These demarcation problems might have to be suffered if it were clear that the benefits of making the exception outweighed the risks.
But it is impossible to say what effect the removal of immunity will have, either on the care with which the experts give their evidence, or upon their willingness to do so.
It is certainly possible that it will reduce any tendency to act as a hired gun and that would be a very good thing; but it is also possible that it will increase the pressure on an expert to stick to her previous opinion for fear of being sued if she retracts or modifies it.
It is possible that it will have no effect at all upon the willingness of experts to give evidence; it is also possible that, in certain fields at least, it will reduce their willingness to do so, or even to become involved in the particular field of practice at all.
It is possible that professional indemnity insurance premiums will rise and that fees for giving expert evidence will also rise to take account of this; it is possible that exclusion clauses may be introduced into contracts to give expert evidence, in which case we shall be back where we started.
The major concern, however, is not about the effect of making the exception upon expert witnesses.
If they are truly expert professionals, they should not allow any of this to affect their behaviour.
The major concern is about the effect upon disappointed litigants.
I agree with Lord Hope that the object of the rule is to protect all witnesses, the great majority of whom are trying to do a professional job and are well aware of their duties to the court, against the understandable but usually unjustifiable desire of a disappointed litigant to blame someone else for his lack of success in court.
For these reasons, it does not seem to me self evident that the policy considerations in favour of making this exception to the rule are so strong that this Court should depart from previous authority in order to make it.
To my mind, it is irresponsible to make such a change on an experimental basis.
This seems to me self evidently a topic more suitable for consideration by the Law Commission and reform, if thought appropriate, by Parliament rather than by this Court.
| The appellant in this case challenged the rule that an expert witness enjoyed immunity from any form of civil action arising from the evidence he or she gave in the course of proceedings.
The appellant had been hit by a car in March 2001 and suffered physical and psychiatric consequences.
He consulted solicitors with a view to bringing a claim for personal injury, and they instructed the respondent, a clinical psychologist, to prepare a report on his psychiatric injuries for the purposes of the litigation.
She reported that the appellant was suffering from post traumatic stress disorder (PTSD).
Proceedings were issued and liability was admitted, so that the only remaining issue was the amount of damages.
The appellant was examined by a consultant psychiatrist instructed by the defendant driver, who expressed the view that the appellant was exaggerating his symptoms.
The district judge ordered the two experts to hold discussions and to prepare a joint statement to assist the court at the trial.
It is the appellants case that the respondent carried out this task negligently, and thereby signed a joint statement which wrongly recorded that she agreed that the appellant had not suffered PTSD and that she had found the appellant to be deceitful in his reporting.
This was so damaging to his claim for damages that he felt constrained to settle it for a significantly lower sum than he might otherwise have been able to achieve.
The appellant accordingly issued proceedings for negligence against the respondent.
She applied for the claim to be struck out.
The judge in the High Court was bound by the Court of Appeals decision in Stanton v Callaghan [2000] QB 75 to hold that the respondent, as an expert witness, was entitled to immunity from such a claim in respect of her preparation of a joint statement for trial, and granted the application.
The appellants appeal against this order came direct to the Supreme Court as a point of general public importance.
The Supreme Court by a majority (Lord Hope and Lady Hale dissenting) allows the appeal.
Lord Phillips gives the lead judgment.
The majority hold that the immunity from suit for breach of duty (whether in contract or in negligence) that expert witnesses have enjoyed in relation to their participation in legal proceedings should be abolished.
Witness immunity dates back over 400 years, long before the development of the modern law of negligence and the practice of forensic experts to offer services to litigants for reward [11].
It originally took the form of absolute privilege against defamation claims but was extended to all forms of suit [12].
It overlapped with the wider immunity formerly enjoyed by an advocate from negligence claims by his own client, before that immunity was abolished by the House of Lords in 2001 on the ground that it could no longer be justified [13].
The general rule was that every wrong should have a remedy and that any exception to this rule must be justified as being necessary in the public interest and kept under review [51][88][113].
The primary rationale for the immunity was a concern that an expert witness might be reluctant to give evidence contrary to his clients interest, in breach of his duty to the court, if there was a risk that this might lead his client to sue him [41].
In common with advocates, however, there was no conflict between the duty that the expert had to provide services to his client with reasonable skill and care, and the duty he owed to the court.
The evidence did not suggest that the immunity was necessary to secure an adequate supply of expert witnesses [54] [117].
The removal of immunity for advocates had not diminished their readiness to perform their duty, nor had there been a proliferation of vexatious claims or multiplicity of actions [57 60][85].
For these reasons the majority concluded that no justification had been shown for continuing to hold expert witnesses immune from suit for breach of duty in relation to the evidence they give in court or for the views they express in anticipation of court proceedings [61].
This decision did not affect the continued enjoyment by expert witnesses of absolute privilege from claims in defamation [62], nor did it undermine the longstanding immunity of other witnesses in respect of litigation [125].
Lord Hope and Lady Hale, dissenting, disagreed with the majoritys approach of reviewing the justification for the immunity.
The rule was longstanding and its application to claims beyond defamation in respect of evidence given by any witness was confirmed by the House of Lords in Watson v MEwen [1905] AC 480 [141].
The question therefore was whether an exception to this rule could be justified [161][176].
The main concern arising from the decision of the majority was the effect on disappointed litigants liable to commence worthless but time consuming claims against their experts [165][188].
The lack of a secure principled basis for removing the immunity, of a clear dividing line between what was to be affected by the removal and what was not, and of reliable evidence to indicate what the effects might be, suggested that the wiser course was to leave any reform, if needed, to Parliament [173][189].
|
This appeal is sensitive and important.
I regret that I have failed to contain this judgment within fewer than 78 paragraphs, plus 25 paragraphs of a schedule to it.
The Court of Appeal has made a rare finding that the judges conduct of the trial was unfair towards one of the parties.
When made in respect of the conduct of any judge, however senior or junior, such a finding carries profound sensitivity.
Our duty is to appraise it with the utmost care; and, were we to uphold it, we would need to address the order made by the Court of Appeal in consequence of it.
But there is a second dimension to the appeal to this court.
For the Court of Appeal also based its decision upon its understanding of the effect of section 4 of the Defamation Act 2013 (the Act), entitled Publication on matter of public interest; and energetic criticisms are made to us in relation to its exposition of the effect of the section.
For reasons which will become apparent, our own analysis of the section will not form part of our decision; but it is intended to be helpful nevertheless.
It will be convenient to describe the appellants as the defendants; and the respondent as the claimant.
The first defendant, Mr Malkiewicz, is the editor in chief of a Polish newspaper, entitled Nowy Czas (which means New Time) and owned by the second defendant, Czas Publishers Ltd. The third defendant, Mrs Bazarnik Malkiewicz, is an editor of the paper, a director of the second defendant and the wife of the first defendant.
At the relevant time the paper was published eight times a year, both in hard copy and online, and it addresses issues of interest to the substantial Polish community in the UK, particularly in London.
The claimant, Mr Serafin, now aged about 68, was born in Poland but has lived in England since 1984.
The claimant sued the defendants for libel in respect of an article which they published about him in the newspaper in October 2015.
Over seven days in October and November 2017 Mr Justice Jay (the judge), sitting in the Queens Bench Division of the High Court, heard the claim.
The claimant appeared in person before him, supported by a McKenzie friend.
Simon Burn Solicitors had been acting for him but came off the record shortly before the hearing.
It appears, however, that, outside court, a degree of legal assistance was continuing to be provided to the claimant during the hearing, in particular in relation to the compilation of his closing submissions.
But ranged against the claimant in court was Mr Metzer QC, by then instructed directly by the defendants rather than by the solicitors who had acted for them until shortly before the hearing.
By a reserved judgment dated 24 November 2017, the judge explained why he had decided to dismiss the claim: [2017] EWHC 2992 (QB).
On 8 December 2017 he made an order to that effect.
The claimant appealed against it to the Court of Appeal.
On 5 March 2019 Lewison, McCombe and Haddon Cave LJJ heard the appeal.
By a judgment of the whole court dated 17 May 2019, they explained why they had decided to allow the appeal: [2019] EWCA Civ 852.
On 21 June 2019 they made an order to that effect.
They remitted the task of quantifying the claimants damages in respect of part or all of his claim to a judge of the Media and Communications List other than the judge.
The defendants now appeal to this court against that order.
B. The Background
Following his arrival in England, the claimant set up business as a builder.
In about 1989 he joined POSK, a substantial Polish social and cultural association, established as a charity, with premises in Hammersmith.
For about 15 years until 2012 he sat on the General Council of POSK and between about 2003 and 2007 he was a senior member of its House Committee, which was responsible for all building work done at the premises.
During his membership of it there was refurbishment both of the entrance hall and of the basement, where a bar and caf, together called The Jazz Caf, were created.
Between 2007 and 2012 the claimant was joint manager of The Jazz Caf and often served behind the bar.
In 2008 the claimant set up a company, Polfood (UK) Ltd, with a view to its importing Polish foodstuffs and selling them wholesale to Polish groceries in England.
The company needed working capital and the claimant persuaded Polish friends and acquaintances to buy shares in it or to lend money either to it or to him for transmission to it.
But Polfood soon became insolvent.
In 2011 the claimant was declared bankrupt.
In 2012 he was discharged but only in consideration of his entry into a Bankruptcy Restrictions Undertaking, which was to endure for five years.
He thereby apparently undertook not to be a director of a company without the courts permission, not to borrow more than 500 without disclosing the restriction and not to be a trustee of a charity.
Kolbe House is the name of a charity which runs a substantial care home in Ealing.
It provides care for elderly Polish people.
While it was trading, Polfood supplied bread and other foodstuffs to Kolbe House.
In 2012 the claimant began again to supply it with bread.
In 2013 he became the maintenance man and general factotum at Kolbe House; and he invoiced it for works of renovation done by him there.
The Meanings of the Article
The article, written of course in the Polish language, is entitled Bankruptcy need not be painful.
At its foot is the name of the first defendant, whom the judge described as a Polish intellectual in the old school.
The judge described the article as satirical, witty, allusive and intellectually sophisticated in style and tone.
The claimant alleged that the words of the article had in effect 13 defamatory meanings (or, to use the word in the Act, imputations).
The defendants responded that the words bore a common sting, which was that the claimant was a bankrupt and a serially untrustworthy man who, in order to satisfy his ambition and financially benefit himself and his family in Poland, took improper advantage of a number of people, including women.
The judge disagreed that the words bore this common sting and held that he was therefore required to address whether the defendants were liable for each of the 13 meanings which, insofar as they admitted them, were as alleged by the claimant and which, insofar as they disputed those alleged by the claimant, were those which he found the article to have carried.
The first meaning (M1) was that the claimant abused his position as house manager of POSK in order to award himself or his company profitable contracts for maintenance work at POSK, avoiding the proper procedure for obtaining approval for tenders for such contracts.
The defendants appear to have contended that, if the article bore this meaning, it was not defamatory by reason of section 1(1) of the Act, which provides as follows: A statement is not defamatory unless its publication has caused or is likely to cause serious harm to the reputation of the claimant.
The judge rejected the defendants contention.
He proceeded, however, to consider an alternative contention of the defendants, namely that they had a defence under section 2(1) of the Act, which provides as follows: It is a defence to an action for defamation for the defendant to show that the imputation conveyed by the statement complained of is substantially true.
The judge found that M1 had been shown to be substantially true.
The second meaning (M2) was that the claimant purchased memberships of POSK for those whom he could rely upon to support his electoral aspirations.
The judge found that, even if, which he doubted, the publication of a statement to this effect crossed the threshold of serious harm to reputation set by section 1 of the Act, M2 had been shown to be substantially true.
The third meaning (M3) was that the claimant was not really single at all, or at the very least his personal circumstances in Poland were mysterious and that he exploited his supposed availability as a means of bringing him closer to women, over whom he exercised his charm.
As in relation to the second meaning, the judge found that even if, which he doubted, the publication of a statement to this effect crossed the threshold of serious harm set by section 1 of the Act, M3 had been shown to be substantially true.
The fourth meaning (M4) was that the claimant in the course of supplying alcohol for retail sale in POSKs Jazz Caf, dishonestly ensured that money taken from sales would by pass the cash register, in order to obtain unlawful and fraudulent profit from those sales.
The judge found that the statement to this effect had been shown to be substantially true.
The fifth meaning (M5) was that the claimant conned a number of women into investing their life savings into his food business by leading each woman to believe she was the only one and with promises of a good life together with him.
The judge found that the statement to this effect had been shown to be substantially true.
The sixth meaning (M6) was that the claimant having dishonestly persuaded investors in his food business to part with their life savings, stole their money for himself and transferred it to Poland to support a family construction project in Poland and to support his family there.
The judge found that the statement to this effect had been shown to be substantially true.
The seventh meaning (M7) was that the claimant defrauded his creditors and dishonestly circumvented the normal consequences of bankruptcy in order to retain for himself personal wealth, in the form of a BMW X5 car and real property that he pretended to sell, that should have been made available to satisfy the claims of his creditors.
The judge found that the statement to this effect had been shown to be substantially true.
The eighth meaning (M8) was that the claimant had profited or attempted to profit by selling out of date food to Kolbe House, a residential care home for elderly and vulnerable people, including those suffering from dementia.
The judge found that the defendants had failed to show that the statement to this effect was substantially true.
The ninth meaning (M9) was that the claimant by means of exploiting his charm and sway over the female manager of Kolbe House, inveigled himself into the highest levels of management at the home to the extent that he treated it as if it were his own personal property, including accessing at will the highly confidential records of the vulnerable residents despite having no legitimate reason to do so.
The judge found that the defendants had failed to show that the statement to this effect was substantially true.
The tenth meaning (M10) was that the claimant abused his position of trust at Kolbe House and callously diverted to himself funds that were needed for the care of the homes elderly and sick residents by securing for himself a contract for the major renovation of the bathrooms at the home, even though these renovations were completely unnecessary.
The judge found that the defendants had failed to show that the statement to this effect was substantially true.
There is inconsistency in the judges judgment about what he found to be the 11th meaning (M11).
But it appears to have been that the claimant supplied to Kolbe House frozen milk and bread which was close to its sell by date from a source which he did not disclose.
The judge found that the statement to this effect failed to cross the threshold of serious harm to reputation set by section 1 of the Act.
The 12th meaning (M12) was that the claimant dishonestly concealed from the manager and trustees of Kolbe House his current status as an undischarged bankrupt in order to win their trust and also to obtain a building contract for the extension of the managers home.
The judge rejected the assertion of the defendants that the statement to this effect failed to cross the threshold of serious harm to reputation set by section 1 of the Act and he proceeded to find that they had also failed to show that it was substantially true.
The 13th meaning (M13) was that the claimant concealed his bankrupt status from Ealing Council [in relation to a planning application] in circumstances where he was obliged to reveal it.
The judge found that the defendants had failed to show that the statement to this effect was substantially true.
It follows that, by this stage of the judges judgment, the claimants cause of action had been rejected in relation to all the meanings apart from M8, M9, M10, M12 and M13.
These five meanings all related, directly or indirectly, to Kolbe House.
Then, however, the judge turned to address a further defence raised by the defendants in relation to all 13 meanings, thus relevantly including the five meanings which had until that stage of his judgment survived as actionable.
This was the defence under section 4 of the Act.
D. Public Interest
Section 4, entitled Publication on matter of public interest, is more conveniently set out in para 52 below.
Much of the argument before the judge in relation to section 4 surrounded subsection (1)(b), namely whether the defendants could show, particularly in circumstances in which they had not invited the claimant to comment prior to publication on their intended allegations against him, that it was reasonable for them to have believed that publishing the statements was in the public interest.
In the event the judge found that the defendants had indeed established a defence under section 4 in relation to all the allegations and thus, relevantly, to the five meanings of them which had until that stage survived as actionable.
The judge added, however, that, even if the defence under section 4 had not been established, he would not have awarded damages (other, presumably, than nominal damages) in respect of those five meanings.
For, so he explained, the claimants reputation had been sufficiently shot to pieces by the other statements in the article which had been shown to be substantially true.
So the judge dismissed the claim.
The Appeal to the Court of Appeal
For his appeal the claimant re instructed Simon Burn Solicitors.
The claimants grounds of appeal were (a) that the judge had been wrong to uphold the defence under section 4; (b) that there was no evidence on which he could have found that M4 was substantially true and that, without reference to that finding, he could not have found that the claimants reputation had been shot to pieces by reference only to the other imputations shown to have been substantially true; and that the judges conduct of the hearing had been unfair to the claimant. (c)
Before the Court of Appeal Ms Marzec appeared for the claimant and, as before, Mr Metzer appeared for the defendants.
The court chose to address the grounds of appeal in the order set out by the claimant.
It held, first, at para 84 that the judge had been wrong to uphold the defence under section 4.
It held, second, at para 99 that on the evidence before him he had not been entitled to find that M4 was substantially true and so it set that finding aside.
Then, suggesting that M4 had been the most serious imputation made against him, it proceeded at para 101 to uphold the claimants contention that it would not have been open to the judge to find that his reputation had been shot to pieces by reference only to the other imputations shown to have been substantially true.
At that stage of the judgment and (as it said) on this basis, the Court of Appeal explained at para 102 that the claimant was entitled to damages in respect not only of M8, M9, M10, M12 and M13 but therefore also of M4.
The Court of Appeal then addressed the claimants third ground of appeal, namely that the judges conduct of the hearing had been unfair to him.
The court was furnished with substantial parts of the transcripts of the first four days of the hearing and with 16 short excerpts from them on which Ms Marzec particularly relied.
The court concluded at para 114 that on numerous occasions the judge had appeared to descend into the arena, to cast off the mantle of impartiality, to take up the cudgels of cross examination and to use language which was threatening and bullying; and that its impression was of a judge who, if not partisan, had developed an animus towards the claimant.
It observed at para 117 that it found his conduct all the more surprising in light of the fact that the claimant was appearing in person and that, although he spoke it well, English was not his first language.
It added at para 118 that it was highly troubled by the judges criticisms of the claimants disclosure of particular documents in circumstances in which the defendants had at no time sought an order for their disclosure.
The court concluded as follows at para 119: In our view, the judge not only seriously transgressed the core principle that a judge remains neutral during the evidence, but he also acted in a manner which was, at times, manifestly unfair and hostile to the claimant [W]e are driven to the conclusion that the nature, tenor and frequency of the judges interventions were such as to render this libel trial unfair.
We, therefore, uphold [this] ground of appeal.
The Court of Appeals Order F.
The problem is that the Court of Appeal did not in its judgment proceed to address the consequences that should flow from its conclusion that the trial had been unfair.
In particular it did not consider whether that conclusion should in any way displace its earlier conclusion, set out in para 31 above, about the relief to which the claimant was entitled.
At the end of its judgment the court said only that the appeal should be allowed; and, apparently by email, it invited the parties to file written submissions in respect of the appropriate order to be made in the light of its judgment.
The transcript of the hearing before the Court of Appeal shows that both parties had then reluctantly accepted, as apparently had the court, that, were it to conclude that the trial had been unfair, it would have no option but to order a retrial of the claim.
The written submissions of the parties to the court following distribution of its judgment show only limited departure from that position.
Thus the claimants basic contention was that the judgment no longer stands because the trial was unfair and that the claim should be remitted for determination by another judge.
But the claimant qualified his contention by reference to two points: he argued that, in the light of the courts judgment, the pleas in the Defence under section 4 of the Act and, in relation to M4, that it was substantially true should both be struck out of it.
The defendants agreed with the claimants basic contention that there should be a retrial; they argued that all issues that were alive on the statements of case at the trial should remain alive at the retrial save to the extent that the judgment of the Court of Appeal had finally determined them.
In this latter regard they conceded, no doubt subject to their proposed appeal to our court, that the judgment had finally rejected their defence in relation to public interest and that it should be struck out of their Defence; but they disputed that the judgment had finally rejected their contention that M4 was substantially true.
the following order: In the event, however, the Court of Appeal, without giving reasons, issued 1.
There be judgment for the appellant. 2.
The orders of Mr Justice Jay . be set aside. 5.
The matter shall be remitted for an assessment of the quantum of the claimants damages only, by a Judge of the Media and Communications List [other than Jay J].
It follows that the Court of Appeal did not order a retrial.
It ordered a remittal limited to the assessment of damages.
At the hearing before us we asked counsel on both sides what each understood the courts order to mean.
Did it mean, particularly in the light of the order for judgment for the claimant, that the liability of the defendants was established in relation to all the meanings encompassed within his claim? If so, why should the defendants be deprived of a retrial in respect of liability for those meanings which neither the judge nor the Court of Appeal had held to be actionable? Or did the order mean that damages should be assessed only in respect of M8, M9, M10, M12, M13 and also of M4? If so, why should the claimant be deprived of a retrial in respect of liability for the other meanings held not to be actionable in the course of a trial which had been unfair to him? No counsel seemed able to answer our question with confidence but they seemed to be of the view that the order probably meant the latter.
G. Unfair Trial: The Principles
There was no express reference to bias in the judgment of the Court of Appeal.
It did observe, at para 114: One is left with the regrettable impression of a judge who, if not partisan, developed an animus toward the claimant.
Its observation may come close to a suggestion of apparent bias on the judges part towards the claimant.
But the clear focus of the court was on whether the trial had been unfair.
In M & P Enterprises (London) Ltd v Norfolk Square (Northern Section) Ltd [2018] EWHC 2665 (Ch) the ultimately unsuccessful appellant company alleged both that the trial had been unfair and that the judge had given the appearance of bias against it.
In para 31 of his judgment Hildyard J quoted the definition of bias given by Leggatt LJ in Bubbles & Wine Ltd v Lusha [2018] EWCA Civ 468, para 17, as follows: Bias means a prejudice against one party or its case for reasons unconnected with the legal or factual merits of the case In paras 32 to 42 Hildyard J proceeded to analyse the interplay between the two allegations before him.
He observed that, although they overlapped, they were distinct.
He added that they required appraisal from different perspectives for, while the fairness of a trial required objective judicial assessment, the appearance of bias fell to be judged through the eyes of the fair minded and informed observer; and, in the protracted analysis of the trial judges questionable performance which Hildyard J proceeded to undertake, he studiously paused at every point to ask (and, at the end, he considered in the round) whether it either rendered the trial unfair or would generate an appearance of bias in the eyes of that observer.
I have no doubt that the Court of Appeal in the present case was correct to treat the claimants allegation as being that the trial had been unfair.
We have not been addressed on the meaning of bias so it would be wise here only to assume, rather than to decide, that the quite narrow definition of it offered by Leggatt LJ and quoted by Hildyard J is correct.
On that assumption it is far from clear that the observer would consider that the judge had given an appearance of bias.
A painstaking reading of the full transcripts of the evidence given over four and a half days strongly suggests that, insofar as the judge evinced prejudice against the claimant, it was the product of his almost immediate conclusion that the claim was hopeless and that the hearing of it represented a disgraceful waste of judicial resources.
The leading authority on inquiry into the unfairness of a trial remains the judgment of the Court of Appeal, delivered on its behalf by Denning LJ, in Jones v National Coal Board [1957] 2 QB 55.
There, unusually, both sides complained that the extent of the judges interventions had prevented them from properly putting their cases.
The court upheld their complaints.
At p 65 it stressed in particular that interventions should be as infrequent as possible when the witness is under cross examination because the very gist of cross examination lies in the unbroken sequence of question and answer and because the cross examiner is at a grave disadvantage if he is prevented from following a preconceived line of inquiry.
In London Borough of Southwark v Kofi Adu [2006] EWCA Civ 281,
Jonathan Parker LJ, giving the judgment of the Court of Appeal, suggested at paras 145 and 146 that trial judges nowadays tended to be much more proactive and interventionist than when the Jones case was decided and that the observations of Denning LJ should be read in that context; but that their interventions during oral evidence (as opposed to during final submissions) continued to generate a risk of their descent into the arena, which should be assessed not by whether it gave rise to an appearance of bias in the eyes of the fair minded observer but by whether it rendered the trial unfair.
In Michel v The Queen [2009] UKPC 41, [2010] 1 WLR 879, it was a criminal conviction which had to be set aside because, by his numerous interventions, a commissioner in Jersey had himself cross examined the witnesses and made obvious his profound disbelief in the validity of the defence case.
Lord Brown of Eaton under Heywood, delivering the judgment of the Privy Council, observed at para 31: The core principle, that under the adversarial system the judge remains aloof from the fray and neutral during the elicitation of the evidence, applies no less to civil litigation than to criminal trials.
The distinction, drawn expressly or impliedly in all three of the cases last cited, between interventions during the evidence and those during final submissions was stressed by Hildyard J in para 223 of his judgment in the M & P Enterprises (London) Ltd case, cited in para 38 above.
He suggested at para 225 that, upon entry into final submissions, the trial had in effect entered the adjudication stage.
In In re G (Child) [2015] EWCA Civ 834 counsel for the father, who was responding to the mothers contention that the conduct of the trial had been unfair, sought to rely on the judges reserved judgment, which he suggested was balanced and had in no way represented a wholesale acceptance of his case.
So too, before us, the defendants commend the quality of the judges reserved judgment.
It is on any view a remarkable document.
The judge distributed it to the parties only 16 days after the end of the hearing.
It runs to 355 paragraphs spread over 70 pages.
It is intricately constructed and beautifully written.
In it, as will already be clear, the judge in no way accepted all the defendants arguments although his acceptance of their defence of public interest ultimately swept the claim into overall dismissal.
Following a reading of this judgment, but of nothing else, many might ask how could that trial have been unfair? As it happens, Miss Page QC on behalf of the claimant does question whether the judgment, even on its face, is fair.
In particular she criticises the alleged poverty of the reasoning in support of the judges conclusion, pursuant to section 4(1)(b) of the Act, that the defendants reasonably believed that publication of the article was in the public interest.
But this part of the inquiry does not relate to the judges judgment and it is not affected by its ostensible quality.
For, as Black LJ said in the G case, at para 52: the careful and cogently written judgment cannot redeem a hearing in which the judge had intervened to the extent of prejudicing the exploration of the evidence.
In the G case Black LJ also observed, at para 53:
the one person from whom this court has not heard is the judge, who would no doubt have had much that she could valuably have contributed to the evaluation of the process.
The observation precipitated a discussion at the hearing before us about the merits or otherwise of an invitation by an appellate court to the trial judge to comment on an allegation such as the present.
In relation to a hearing which has not been recorded and so cannot be made the subject of a transcript, such as a hearing before the Immigration and Asylum Chamber of the First tier Tribunal, it may well be appropriate to invite the judge to comment in writing and perhaps to provide his or her own note of the hearing: Sarabjeet Singh v Secretary of State for the Home Department [2016] EWCA Civ 492, [2016] 4 WLR 183, para 53.
But where, as in the present case, there is a full transcript of the relevant part of the proceedings, it is less likely to be appropriate to invite the judge to comment.
On the one hand, as I know from personal experience, the anxiety of a trial judge may be profound if he considers that what he perceives to be the baselessness of criticisms of him in a forthcoming appeal is likely to go unexposed.
On the other hand, unlike a disciplinary inquiry into his conduct, the focus of the appeal is not directly upon him.
It is upon the alleged breach of the appellants right to a fair trial both at common law and under article 6 of the European Convention.
Most appeals involve criticism of trial judges in one way or another and no doubt most judges would welcome an opportunity to respond to it.
Where would the line be drawn and, if the appellant were to take issue with the judges responses, would resolution of the appeal be even more problematical? The observation of Black LJ in the G case therefore raises a difficult issue.
All that need here be said is that, where a transcript exists, it is not the present practice of appellate courts to invite the judge to comment; but that the absence of his ability to comment places upon them a requirement to analyse the evidence punctiliously.
In the present case we should draw confidence from the fact that it was Mr Metzer, counsel for the defendants at the trial and therefore intimately acquainted with the course that it took, who was able to place before us a detailed and energetic response to the contention that the trial had been unfair.
No authority has been cited to us in which the conduct of the trial was alleged to have been unfair towards a litigant in person.
The appearance of a litigant in person presents the court with well known challenges.
When, at an early stage of his judgment, the judge said that, for a number of reasons, conduct of the trial had been difficult, his first reason was that the claimant had appeared in person.
The appearance of the defendants by leading counsel will no doubt in one sense have assisted the judge but in another sense will have made his task even more difficult.
For Mr Metzers appearance made the imbalance of forensic resources all the more stark.
Every judge will have experienced difficulty at trial in divining the line between helping the litigant in person to the extent necessary for the adequate articulation of his case, on the one hand, and becoming his advocate, on the other.
The Judicial College, charged with providing training for the judges of England and Wales, has issued an Equal Treatment Bench Book.
In chapter one of the edition issued in February 2018 and revised in March 2020, the college advises the judges as follows: 8.
Litigants in person may be stressed and worried: they are operating in an alien environment in what is for them effectively a foreign language.
They are trying to grasp concepts of law and procedure about which they may have no knowledge.
They may well be experiencing feelings of fear, ignorance, frustration, anger, bewilderment and disadvantage, especially if appearing against a represented party. 59.
The judge is a facilitator of justice and may need to assist the litigant in person in ways that would not be appropriate for a party who has employed skilled legal advisers and an experienced advocate.
This may include: Not interrupting, engaging in dialogue, indicating a preliminary view or cutting short an argument in the same way that might be done with a qualified lawyer.
Training and experience will generally have equipped the professional advocate to withstand a degree of judicial pressure and, undaunted, to continue within reason to put the case.
The judge must not forget that the litigant in person is likely to have no such equipment and that, if the trial is to be fair, he must temper his conduct accordingly.
H. Unfair Trial: The Facts
Any inclusion within the body of this judgment of the requisite factual analysis of the conduct of the trial would have unbalanced it.
The analysis is better set out in the schedule to this judgment, to which the reader should now turn.
This court, unlike the Court of Appeal, has been provided with full transcripts of the first four and half days of the hearing, during which almost all the oral evidence was given.
I have read all of them and, also deriving some assistance from a schedule provided on behalf of the claimant, I have chosen to place 25 excerpts from them into the schedule.
In order to keep the schedule within manageable bounds it has been necessary
for the 25 excerpts to be set out together.
But it is important to remember that those passages were separated by long stretches of evidence in respect of which no criticism of the judge can be made.
Ellipses within the excerpts also indicate the omission from them of words which add nothing either to the claimants complaint about the trial or to the defendants response to it.
Some of the excerpts, if taken alone, would not merit significant criticism.
Nor should we forget that the transcripts enable us to read but neither to hear nor to see.
But, when one considers the barrage of hostility towards the claimants case, and towards the claimant himself acting in person, fired by the judge in immoderate, ill tempered and at times offensive language at many different points during the long hearing, one is driven, with profound regret, to uphold the Court of Appeals conclusion that he did not allow the claim to be properly presented; that therefore he could not fairly appraise it; and, that, in short, the trial was unfair.
Instead of making allowance for the claimants appearance in person, the judge harassed and intimidated him in ways which surely would never have occurred if the claimant had been represented.
It was ridiculous for the defendants to submit to us that, when placed in context, the judges interventions were wholly justifiable.
What order should flow from a conclusion that a trial was unfair? In logic the order has to be for a complete retrial.
As Denning LJ said in the Jones case, cited in para 40 above, at p 67, No cause is lost until the judge has found it so; and he cannot find it without a fair trial, nor can we affirm it.
Lord Reed observed during the hearing that a judgment which results from an unfair trial is written in water.
An appellate court cannot seize even on parts of it and erect legal conclusions upon them.
That is why, whatever its precise meaning, it is so hard to understand the Court of Appeals unexplained order that all issues of liability had, in one way or another, been concluded.
Had the Court of Appeal first addressed the issue of whether the trial had been unfair, it would have been more likely to recognise that the only proper order was for a retrial.
It is no doubt highly desirable that, prior to any retrial, the parties should seek to limit the issues.
It is possible that, in the light of what has transpired in the litigation to date, the claimant will agree to narrow the ambit of his claim and/or that the defendants will agree to narrow the ambit of their defences.
But that is a matter for them.
Conscious of how the justice system has failed both sides, this court, with deep regret, must order a full retrial.
Subject to any agreed narrowing of the issues, the new judge will, among many other things, decide whether the defendants have shown the substantial truth of the (admitted) meaning of M4.
This is not to show disrespect for the conclusion of the Court of Appeal that the defendants had failed to do so.
Its conclusion was founded upon the evidence given to the original judge.
But the new judge will reach a conclusion founded upon the evidence given to him or her.
Of course it is rare for the Court of Appeal not just to set aside but even to reverse a finding of fact made by a trial judge who had all the well known advantages.
But the court may have been justified in doing so.
There is no need for us to look into it.
Subject again to any agreed narrowing of the issues, the new judge will also, among other things, decide whether to uphold the defendants overall defence under section 4 of the Act.
The Court of Appeals conclusion that the defence failed was based on fact finding which is likely to differ, at least to some extent, from that to be conducted by the new judge.
But the Court of Appeals analysis of the defence of public interest under section 4 included abstract statements of principle which the defendants and the Media Lawyers Association, which intervenes in the appeal, criticise and which even the claimant concedes to be in various places at least unfortunate.
We must proceed to address these criticisms and, insofar as they are valid, so declare since otherwise the Court of Appeals statements of principle would remain authoritative both for the new judge and generally.
The Public Interest Defence
The Act provides as follows: 4.
Publication on matter of public interest (1) defendant to show that It is a defence to an action for defamation for the the statement complained of was, or formed part (a) of, a statement on a matter of public interest; and (b) that reasonably believed publishing the statement complained of was in the public interest. the defendant (2) Subject to subsections (3) and (4), in determining whether the defendant has shown the matters mentioned in subsection (1), the court must have regard to all the circumstances of the case. (3) If the statement complained of was, or formed part of, an accurate and impartial account of a dispute to which the claimant was a party, the court must in determining whether it was reasonable for the defendant to believe that publishing the statement was in the public interest disregard any omission of the defendant to take steps to verify the truth of the imputation conveyed by it. (4) In determining whether it was reasonable for the defendant to believe that publishing the statement complained of was in the public interest, the court must make such allowance for editorial judgement as it considers appropriate. (5) For the avoidance of doubt, the defence under this section may be relied upon irrespective of whether the statement complained of is a statement of fact or a statement of opinion. (6) The common law defence known as the Reynolds defence is abolished.
The origin of the defence lies in the common law.
Any study of how in the common law one principle emerges, stage by stage, from another until it achieves independence of it, like a butterfly shedding a chrysalis and taking wing, would do well to address first the decision in Reynolds v Times Newspapers Ltd [2001] 2 AC 127, then the decision in Jameel (Mohammed) v Wall Street Journal Sprl [2006] UKHL 44, [2007] 1 AC 359, and finally the decision in Flood v Times Newspapers Ltd [2012] UKSC 11, [2012] 2 AC 273.
In the Reynolds case the defendants published an article which included a statement taken to mean that, when he had been the Taoiseach, the claimant had deliberately misled the Irish parliament.
At a trial the jury found that the statement was not substantially true but it in effect awarded him only nominal damages.
Before the appellate committee of the House of Lords there was no challenge to the Court of Appeals order that the claimants action should be retried.
The issue was whether it should be open to the defendants at the retrial to assert a defence of qualified privilege.
By a majority the committee ruled that it should not be open to them to do so but, in its journey towards that ruling, the committee considered the nature of the suggested defence in the context of the statement at issue.
Lord Nicholls of Birkenhead gave the leading speech, with which Lord Cooke of Thorndon and Lord Hobhouse of Woodborough agreed.
Lord Nicholls noted at p 194 that privilege had been held to exist where a person making a statement had a duty to make it and where its recipient had an interest in receiving it; suggested at p 197 that it was preferable to describe the duty interest test as a right to know test; explained at p 195 that the privilege had particular relevance to a statement on a matter of public interest; held at p 201 that, in relation to publication of a defamatory statement of fact on a matter of public interest, the claimants traditional ability to defeat a claim to privilege by proof of malice was insufficient protection for him; concluded at p 202 that the solution of the common law was to have regard to all the circumstances in deciding whether, because of its value to the public, the publication was privileged and that the requisite standard was that of responsible journalism; identified at p 205 ten factors which might fall to be taken into account in that regard, including, at seven, whether (which was, so Lord Nicholls confirmed, not always necessary) comment had been sought from the claimant prior to publication; there observed that the list was not exhaustive and that the weight to be given to any relevant factor would vary from case to case; and there also stressed the need to remember that journalists act without the benefit of the clear light of hindsight.
I interpolate a reference to Bonnick v Morris [2002] UKPC 31, [2003] 1 AC 300, because there, in delivering the advice of the Privy Council upon an appeal from Jamaica, Lord Nicholls offered a useful epitome of the decision in relation to which he had played the leading role three years earlier.
On the boards behalf he said: 23.
Stated shortly, the Reynolds privilege is concerned to provide a proper degree of protection for responsible journalism when reporting matters of public concern.
Responsible journalism is the point at which a fair balance is held between freedom of expression on matters of public concern and the reputations of individuals.
Maintenance of this standard is in the public interest and in the interests of those whose reputations are involved.
It can be regarded as the price journalists pay in return for the privilege.
If they are to have the benefit of the privilege journalists must exercise due professional skill and care.
In the Jameel case, cited in para 53 above, the defendant published an article which asserted that bank accounts held by the claimants, namely Mr Jameel and his company, were among those which the Saudi central bank was monitoring in case they were being used, wittingly or unwittingly, for channelling funds to terrorists.
Prior to publication the defendant had not given Mr Jameel an adequate opportunity to comment on the intended assertion.
The appellate committee reversed the decision of the Court of Appeal, which had been to uphold the decision of the trial judge that the Reynolds defence was not available to the defendant.
Lord Hoffmann gave a speech of seminal importance, with which Lord Scott of Foscote and Baroness Hale of Richmond agreed.
Lord Hoffmann observed at paras 43 and 46 that, although the reference to Reynolds privilege was historically accurate, it might be misleading and that the better description was Reynolds public interest defence; also at para 46 that there was no need to consider the concept of malice because the propriety of the defendants conduct was built into the conditions under which the material was privileged; at para 50 that it was unhelpful to inquire into the existence of duty and interest because, as a result of the decision in the Reynolds case, the duty and the interest were in law to be taken to exist in a publication in the public interest; at para 56 (echoing what Lord Bingham of Cornhill had said at para 33) that the ten factors identified by Lord Nicholls were not ten tests all of which the publication had to pass; at para 62 that the elements of the defence were the public interest of the material and the conduct of the journalist at the time and that, if the statement was not true, the defendant nevertheless had usually to establish that the journalist honestly and reasonably believed that it was true; and at paras 84 and 85 that in the circumstances the failure to afford to Mr Jameel an adequate opportunity to comment prior to publication did not preclude establishment of the defence.
On 15 March 2011 the government put proposals for reform of the law of defamation out for public consultation.
In a foreword the Lord Chancellor referred to mounting recent concern that the law was failing to strike the right balance and was having a chilling effect on freedom of speech.
The proposals took the form of a draft Bill and of a consultation paper.
Clause 2 of the Bill was entitled Responsible publication on matter of public interest.
Subclause (1) was as follows: It is a defence to an action for defamation for the defendant to show that (a) a statement on a matter of public interest; and (b) statement complained of. the defendant acted responsibly in publishing the the statement complained of is, or forms part of, Subclause (2) listed eight matters to which, among others, the court might have regard in determining whether a defendant acted responsibly in publishing the statement.
In substance the eight listed matters were, in the words of the consultation paper, broadly based on the ten factors identified by Lord Nicholls in the Reynolds case.
In the paper the government explained that concerns had been expressed about the complexity of the Reynolds defence and about its application outside the context of mainstream journalism; that on balance it considered that there should be a statutory defence aimed at meeting these concerns; and that the drafting of subclause (2) was intended to make clear that the listed matters should not be interpreted as a checklist or set of hurdles for defendants to overcome.
On 10 May 2012 the Defamation Bill was introduced in the House of Commons.
In relation to the public interest defence, there were only minor changes from the draft which had been put out for consultation in 2011.
The defence had been moved from clause 2 to clause 4.
There were now nine, rather than eight, matters listed in subclause (2) and there were changes in their phraseology.
There were now further subclauses, including, at (6), that The common law defence known as the Reynolds defence is abolished.
Accompanying the Bill were Explanatory Notes, which included the following: 29. [Clause 4] creates a new defence to an action for defamation of responsible publication on a matter of public interest.
It is based on the existing common law defence established in Reynolds v Times Newspapers and is intended to reflect the principles established in that case and in subsequent case law. 37.
Subsection (6) abolishes the common law defence known as the Reynolds defence.
This is because the statutory defence is intended essentially to codify the common law defence.
While abolishing the common law defence means that the courts would be required to apply the words used in the statute, the current case law would constitute a helpful (albeit not binding) guide to interpreting how the new statutory defence should be applied.
As the Bill progressed through its stages in both Houses, concerns were expressed about clause 4.
One of them was that it failed to take into account the effect of the decision in the Flood case, which this court had decided on 21 March 2012, thus less than two months prior to introduction of the Bill in the House of Commons.
In the Flood case, cited in para 53 above, the defendant published an article taken to mean that there were reasonable grounds to suspect that the claimant, a police officer, had corruptly taken bribes.
The allegation was false.
This court held that the defendant nevertheless had a valid defence of public interest.
Lord Phillips of Worth Matravers, the President of the court, said at para 26 that in that case analysis of the defence required particular reference to two questions, namely public interest and verification; at para 27 that it was misleading to describe the defence as privilege; at para 78, building on what Lord Hoffmann had said in the Jameel case at para 62, that the defence normally arose only if the publisher had taken reasonable steps to satisfy himself that the allegation was true; and at para 79 that verification involved both a subjective and an objective element in that the journalist had to believe in the truth of the allegation but it also had to be reasonable for him to have held the belief.
Lord Brown at para 113 chose to encapsulate the defence in a single question.
Could, he asked, whoever published the defamation, given whatever they knew (and did not know) and whatever they had done (and had not done) to guard so far as possible against the publication of untrue defamatory material, properly have considered the publication in question to be in the public interest?.
Lord Mance at para 137, echoing what Lord Nicholls had said in the Reynolds case at p 205, stressed the importance of giving respect, within reason, to editorial judgement in relation not only to the steps to be taken by way of verification prior to publication but also to what it would be in the public interest to publish; and at para 138 Lord Mance explained that the public interest defence had been developed under the influence of the principles laid down in the European Court of Human Rights (the ECtHR).
On 19 December 2012 the House of Lords in Grand Committee considered three substantial amendments to the Defamation Bill moved by the government.
Although it arguably represented a less significant development than the decision in the Jameel case, the recent decision in the Flood case had clearly influenced the governments thinking.
Before the committee, Lord McNally, Minister of State for Justice, moved the amendments.
He prefaced his remarks by saying that clause 4 was, as he had been told, at the heart of the Bill.
The first proposed amendment was to subclause (1)(b), set out in para 57 above.
Instead of providing that the defendant should have acted responsibly in publishing the statement complained of, the form of words now proposed was that the defendant should have reasonably believed that publishing the statement complained of was in the public interest.
Lord McNally explained the proposed change in interesting terms, as follows (Hansard, (HL Debates) 19 December 2012, col GC 534): Consideration of whether a publication was responsible involved both subjective and objective elements.
Reasonable belief also does this, but we believe that it brings out more clearly the subjective element in the test what the defendant believed at the time rather than what a judge believes some weeks or months later while retaining the objective element of whether the belief was a reasonable one for the defendant to hold.
The second proposed amendment was to delete subclause (2) of the Bill, which had listed the nine matters to which, among others, the court might have regard in determining the question identified in subclause (1)(b).
Lord McNally explained the proposed change in similarly interesting terms, as follows (col GC 534): Although we do not believe that the courts would apply the list of factors, based on those in Reynolds, as a checklist, we have responded to strongly expressed concerns that the use of a list may be likely to lead in practice to litigants and practitioners adopting a risk averse approach and gathering detailed evidence on all the factors listed, in case the court were ultimately to consider them relevant on balance, we consider that it is preferable for there to be greater flexibility than a statutory list might provide.
The third proposed amendment was to add a subclause that in determining whether it was reasonable for the defendant to believe that publishing the statement complained of was in the public interest, the court must make such allowance for editorial judgement as it considers appropriate.
In this respect Lord McNally referred (col GC 535/6) to the decision in the Flood case and no doubt he had in mind in particular para 137 of the judgment of Lord Mance.
The Grand Committee accepted all three of the proposed amendments and, as the reader will have realised, each was ultimately carried into the Act.
Later, prior to enactment, the government moved a further amendment.
It was to add into clause 4 a subclause to the effect that, in determining whether the defendant had shown the matters mentioned in subclause (1), the court should have regard to all the circumstances of the case.
On 5 February 2013, at the Report stage in the House of Lords, Lord McNally (col 198) moved the amendment.
He noted a concern that, following the removal of the list of nine matters potentially relevant to the question at subclause (1)(b), the courts would invent a new check list of potentially relevant matters.
He suggested that the proposed subclause, albeit not strictly necessary, would send a signal to the courts and practitioners to make clear the wish of Parliament that the new defence should be applied in as flexible a way as possible in light of the circumstances.
He concluded by saying that he believed that, were this further amendment to be agreed, the final version of the Bill would in particular reflect the question posed by Lord Brown in the Flood case.
This further amendment was agreed and ultimately found its way into subclause (2).
On 25 April 2013 the Bill received Royal Assent.
The Explanatory Notes which accompanied the Act were necessarily changed from the Explanatory Notes which had accompanied the Bill.
Thus while in para 29 the first two sentences of the later Notes were in effect identical to those of the earlier Notes set out in para 58 above, the rest of the paragraph was now changed so as to set out the new terms of subsection (1) and to explain that the intention behind it was to reflect the common law as recently set out in the Flood case and in particular the subjective and objective elements of the requirement now both contained in subsection (1)(b).
But para 37 of the Notes to the Bill, also set out in para 58 above, was reproduced, word for word, in para 35 of the Notes to the Act.
It therefore continued to say that the reason for the abolition in subsection (6) of the common law defence known as the Reynolds defence was that the statutory defence is intended essentially to codify the common law defence.
The failure to change this sentence was unfortunate.
Codify is a strong word.
One could scarcely say that the terms of the section ultimately enacted went so far as to codify the law even as set out in the Jameel and Flood cases, let alone as set out in the Reynolds case.
Since the enactment of section 4, the primary authority in relation to its interpretation has been, so we are told, the case of Economou v De Freitas decided by Warby J at [2016] EWHC 1853 (QB), [2017] EMLR 4, and by the Court of Appeal (in a judgment of Sharp LJ with which Lewison and Ryder LJJ agreed) at [2018] EWCA Civ 2591, [2019] EMLR 7.
The claimant had a relationship with the defendants daughter.
Following its breakdown the daughter accused the claimant of rape.
He was arrested but not charged.
He launched a private prosecution against her, later continued by the Crown Prosecution Service, on the ground that she had falsely accused him of rape with intent to pervert the course of justice.
Days before her trial she committed suicide.
The defendant made statements in writing and in interviews which were published by the press and by the BBC.
In summary their meaning was that there were reasonable grounds to suspect that the claimant had raped his daughter and thus that the basis of his prosecution of her had been false.
A central issue in both courts was whether the defendants defence under section 4 of the Act should be upheld.
Warby J upheld it and dismissed the claim; and the Court of Appeal dismissed the claimants appeal.
Section 4(1)(b) requires that the defendants belief that publication was in the public interest should have been reasonable; and a major part of the discussion in both courts addressed the effect of that requirement in relation to a defendant who, not being a professional journalist, had been a contributor, albeit the central one, to the publication.
Warby J introduced his discussion with the following statement: 241.
I would consider a belief to be reasonable for the purposes of section 4 only if it is one arrived at after conducting such enquiries and checks as it is reasonable to expect of the particular defendant in all the circumstances of the case.
Sharp LJ at para 101 quoted the judges statement with approval.
Before us, however, the defendants criticise it as incompatible with the section.
I can discern no basis for that criticism.
It is almost impossible to expand in the abstract on the meaning of the word reasonable but, so far as it goes, the judges statement is no doubt helpful.
Two passages in the judgment of Sharp LJ in the Economou case have been the subject of particular focus.
The first is as follows: 86.
The statutory formulation in section 4(1) obviously directs attention to the publishers belief that publishing the statement complained of is in the public interest, whereas the Reynolds defence focussed on the responsibility of the publishers conduct. Nevertheless . it could not sensibly be suggested that the rationale for the Reynolds defence and for the public interest defence are materially different, or that the principles that underpinned the Reynolds defence, which sought to hold a fair balance between freedom of expression on matters of public interest and the reputation of individuals, are not also relevant when interpreting the public interest defence.
It could be said that the contrast drawn in the first sentence of the passage is misconceived.
For, in addressing the subsection, Sharp LJ has there omitted reference to its requirement that the publishers belief should be reasonable; and it is that requirement which falls to be compared with the focus in the Reynolds defence on the responsibility of his conduct.
But the second sentence, if carefully read, is clearly correct: the rationale for each of the defences is indeed not materially different and the principles which underpinned the Reynolds defence are indeed relevant to the interpretation of the statutory defence.
The second passage in the judgment of Sharp LJ in the Economou case is as follows: 110.
Section 4 requires the court to have regard to all the circumstances of the case when determining the all important question arising under section 4(1)(b) The statute could have made reference to the Reynolds factors in this connection, but it did not do so.
That is not to say however, that the matters identified in the non exhaustive checklist may not be relevant to the outcome of a public interest defence or that, on the facts of the individual case, the failure to comply with one or some of the factors, may not tell decisively against a defendant.
However, even under the Reynolds regime the weight to be given to those factors, and any other relevant factors, would vary from case to case.
In the light of the analysis of the passage of the Bill through Parliament in paras 58 to 65 above, it is possible to add to what Sharp LJ there said.
For the Bill, as introduced, did in effect make reference to the Reynolds factors but later they were deliberately omitted.
Subject to what some may regard as only a quibble, the observations of Sharp LJ are valid.
The quibble, if such it be, relates to her use of the word checklist.
I suggest that a check list is a list of factors to which reference ought to be made, in particular in order to check whether a preliminary conclusion should be confirmed.
Even in its pre legislative consultation the government had expressed concern that the matters then proposed to be listed in the Bill should not be interpreted as a checklist: see para 57 above.
But, in removing the listed matters from the Bill and in proceeding to substitute a reference to all the circumstances, Parliament made clear its intention that the Reynolds factors, upon which the list had been based, were not to be used as a check list.
Even if, at the time of the decision in the Reynolds case, it was appropriate to describe the factors identified by Lord Nicholls as a check list, it is clearly inappropriate so to regard them in the context of the statutory defence.
But, as Sharp LJ proceeded to explain, that is not to deny that one or more of them may well be relevant to whether the defendants belief was reasonable within the meaning of subsection (1)(b).
The Court of Appeals Analysis of the Defence
Good manners require immediate acknowledgement both of the fuller submissions on the statutory defence made to us than were made to the Court of Appeal and, following the hearings, of the greater opportunity for reflection upon the defence available to us than was available to it.
In para 36 of its judgment the Court of Appeal said: In Reynolds, Lord Nicholls set out a well known check list for use when determining whether the defendant reasonably believed that publishing the statement complained of was in the public interest.
But the inquiry which the Court of Appeal there described is the inquiry mandated by section 4(1)(b) rather than that suggested in the Reynolds case.
In para 41 of its judgment the Court of Appeal said: The Reynolds public interest defence has been replaced by the section 4 public interest defence.
The recent Court of Appeal decision in Economou has confirmed that the two tests are not materially different.
But what the Court of Appeal said in the Economou case was that the rationale for each of the tests was not materially different: see para 68 above.
It is wrong to consider that the elements of the statutory defence can be equiparated with those of the Reynolds defence.
In para 44 of its judgment the Court of Appeal said: The defence is a form of qualified privilege.
The origins of the statutory defence lie in the Reynolds defence which, at birth, arose out of the concept of qualified privilege.
But even in 2006, long before the enactment of section 4, Lord Hoffmann in the Jameel case explained that it was unhelpful to regard the defence as a form of privilege: see para 56 above.
Indeed in the Flood case Lord Phillips said likewise: see para 60 above.
The concept of qualified privilege is laden with baggage which, on any view, does not burden the statutory defence.
In para 47 of its judgment the Court of Appeal said: When determining the issue whether defamatory material is published in the public interest under section 4, the public interest in publication is to be balanced with the fact that an individuals article 8 right to reputation will be breached by the publication of unproven allegations without a remedy. (The CJEU has long recognised that a persons reputation is encompassed by the article 8 right: see eg Einarsson v Iceland, App no 24713/15, at para 33.) The section 4 defence needs to be confined to the circumstances necessary to protect article 10 rights.
The first question is to ask whether the court was there addressing (a) or (b) of section 4(1).
The answer, agreed by counsel, is that, had it been addressing (b), it would have referred to reasonable belief so that it must have been addressing (a).
The requirement at (a) is, however, not whether the statement is published in the public interest but whether it is on a matter of public interest; and, with respect, it is important to adhere to the statutory wording.
The court then proceeded to refer to human rights under the European Convention: its reference to the CJEU, like an earlier reference in para 34 of its judgment, is a slip of its pen and should be to the ECtHR.
At present I cannot envisage how, as the Court of Appeal reiterated in para 57, the objective evaluation whether a statement is on a matter of public interest might be affected by consideration of rights under article 8.
But there is a wider point: for just as the common law defence was developed under the influence of Convention principles (see para 60 above), so was the statutory defence.
Its three requirements that the statement should have been on a matter of public interest, that the defendant should have believed that publication of it was in the public interest and that the belief should have been reasonable, all of which have to be established by the defendant, are intended, and may generally be assumed, to ensure that operation of the section generates no violation either of the claimants right under article 8, or of the defendants right under article 10.
To the extent that a court is persuaded to consult Convention jurisprudence in the course of a determination under section 4, it is likely to find that the word reasonably in subsection (1)(b) is sufficiently elastic to enable the section to be given effect in a way which is compatible with Convention rights.
In para 48 of its judgment the Court of Appeal said: When considering whether or not an article is in the public interest, the court needs to consider not merely the bare subject matter, but also the context, timing, tone, seriousness and all other relevant factors.
In this respect Lord Nicholls check list in the Reynolds case remains relevant not only to the issue of whether the journalist acted responsibly, but also the issue of the existence of public interest in the article.
But, with respect, the question is not whether the article is in the public interest but whether it is on a matter of public interest.
I suggest that reference to a check list is now inappropriate for the reasons given in para 69 above and that reference to acting responsibly is now also best avoided.
For, acting upon the reasons given by Lord McNally to the Grand Committee on 19 December 2012, Parliament deliberately removed the reference to acting responsibly from the Bill and substituted the words in section 4(1)(b): see para 62 above.
In para 66 of its judgment the Court of Appeal said: It is a basic requirement of fairness and responsible journalism that a person who is going to publish a story without being required to show that it is true should give the person who is the subject of the story the opportunity to put his side of the story.
Gatley [Gatley on Libel and Slander, 12th ed (2013)] refers to this as the core Reynolds factor A failure to invite comment from the claimant prior to publication will no doubt always at least be the subject of consideration under subsection (1)(b) and may contribute to, perhaps even form the basis of, a conclusion that the defendant has not established that element of the defence.
But it is, with respect, too strong to describe the prior invitation to comment as a requirement.
It was never a requirement of the common law defence: see the Jameel case, cited at para 53 above; and so to describe it would be to put a gloss on subsections (1)(b) and (2) of the section.
In para 83 of its judgment the Court of Appeal said: Finally, by way of a checklist, it is useful to consider the Reynolds factors seriatim: The Court of Appeals exercise in then proceeding to set out Lord Nicholls ten factors and to apply them to the present case is not what Parliament intended it to do: see para 69 above.
In the light of the above I am driven, with a degree of embarrassment in
Key Judge: J Claimant: C First Defendant: D1 Third Defendant: D3 The Defendants: Ds M Mr Metzer QC: DAY ONE A1.
M cross examines C. Mr Paczesny.
I do not want a speech.
M: Do you deny saying you were still married? C: Starting with Mrs Paczesny, okay? I was friends with J: Comment: J stifles Cs explanation prematurely. A2.
M cross examines C about a civil claim against him.
J: You said this was an internet claim? C: Yes.
J: Well, it cannot be because (a) it does not look as if it is an C: Let me tell you how it was.
J: Do not keep on interrupting me.
C: J: You interrupt counsel and now you are interrupting me.
Comment: J takes over cross examination, shows irritation. internet claim Im sorry. A3.
M cross examines C about a debt owed by Polfood.
J: There is always a lack of clarity with your evidence which I am finding irritating.
Comment: J makes no secret of irritation. A4.
M ends cross examination for the day.
J to C (about to rise): It is not very ethical behaviour, this, but we will see where the weight of the evidence is leading.
Because if I conclude that you are acting unethically as a businessman, I am not sure [that] the precise terms of the defamations are going to matter to you much.
Do you understand that? You will lose, but there is a lot more evidence yet.
Comment: Strong indication, albeit subject to further evidence, that C will lose.
See para 59 of Bench Book, set out in para 46 above.
DAY TWO A5.
M cross examines C about his alleged investment in Polfood.
J: Where are the documents to show your investment of 385,000? Ill try to find that in a second, but C: J: Well, it should not take you a second.
It should take you a nanosecond, because it is obvious that this point would be raised.
I want to see them at one minute past two, the page.
If you do J: not show them to me, I will draw inferences.
Do you understand what that means? C: Yes I do.
Comment: Severe treatment of perceived failure to disclose documents in anticipation of cross examination. A6.
M cross examines C about repayment of a creditor of Polfood.
The company did not pay.
It came out of the proceeds of your J: house? C: Yes.
J: Did you tell the Official Receiver this? C: Yes.
J: Right, you can show me the page after lunch.
Just It looks like a fraudulent preference of sorts. respectfully suggest.
M: J: M: Yes at the very least, highly questionable, My Lord, I would Comment: Further demand for documents and a suggestion of fraudulent preference not made by M. A7.
M cross examines C about his assertion that Polfoods remittances to Poland went to suppliers to it of Polish food.
J: And they are all for deliveries, are they? C: Yes. [After 13 further questions from J and others from M] J: . what is being suggested is that you are funnelling money out of the company, probably to go to your family in Poland.
C: No, thats not true.
J: I am not going to take your word for it, ok? I need you to prove it to me.
A bunch of assertions is not going to cut any ice.
I need proof.
Strictly speaking, the burden of proof is on the defendant to prove that under the Defamation Act, but it is not going to work like that in the sense that I will draw inferences.
So, you can get it over lunch.
You can prove to me where these monies went.
Comment: Advance notice that, unless supported by documents, Cs evidence will be rejected. A8.
M cross examines C about Polfoods accounts.
C: The first years accounts, they are there Ive got them in the file.
Is this going to be more work over lunch, finding these J: accounts? C: Yes.
J: But why do you not have them at your fingertips? C: [No audible reply] J: Also I want proof that they were filed at Companies House, documented proof.
C: Ill try to find out.
Im not quite sure that theres anything about it in the documents that they were filed. inference again.
J: Well, it is up to you.
If you fail to provide it, I can draw an Comment: Further demand for documents, including to satisfy a new requirement introduced by J that the accounts had been filed at Companies House.
J: A9.
M cross examines C about whether, as he had told Polfood investors, a loan was to him personally or whether, as he now claimed, it was to Polfood.
This does not look great, frankly, because either you were lying to the investors or you are lying to me.
If you are lying to me, the consequences can be really awful, because you understand, I do not like being lied to.
Which is it? Who were you lying to? Were you telling the truth to the investors and therefore lying to me, or were you lying to the investors and telling the truth to me? C: Thats accurate, I was lying to the investors.
Because the document that she lended the company, I dont cant dispute that.
J: But do you understand what this is about, Mr Serafin? That you are bringing proceedings in the High Court . taking ten days, and however long it takes for me to write the judgment.
It will take some considerable time, seeking to uphold your reputation.
But your reputation is already beginning to fall to pieces, because you are a liar, and you do treat women in a frankly disgraceful way, on your own admission.
Comment: J applies heavy pressure and uses intemperate language. A10.
M cross examines C about his completion of an application form.
M: Youre saying this is for a parking permit? C: Yeah.
M: This is not this is a vehicle registration certificate J: No, no, no, Mr Metzer.
He is giving a false address in order to M: Oh, I see, Im sorry Is His Lordship right? Its me being J: C: Yeah, yeah.
J: entitle himself to a parking permit slow and I apologise for that.
That is right, is it not? That is what you were doing? Thoroughly dishonest, but it is what you were doing.
Comment: J refocuses Ms cross examination and reiterates Cs dishonesty. A11.
M cross examines C about his repayment of a debt out of alleged earnings.
I am sure you declared all this to the Revenue, did you? J: C: Yeah, Ive done every year.
J: Honestly and fully, so that your statement in your tax return for the relevant year will give a true picture? C: Yes.
J: why do you not do that by tomorrow morning? Because if I do not think there is a true picture, I will take action to include sending your papers off to the Revenue for you to be investigated.
So, I would like to see your personal tax returns for 2010 onwards, first thing tomorrow morning.
Comment: J introduces demand for production of six years tax returns within 24 hours and threatens C with HMRC investigation. A12.
M cross examines C about his disclosure of a creditors email to him and asks him to compare it with a different version of the email which, unchallenged by J, he, M, suddenly produces.
December, and you have manipulated the email M: This is the real email that came from [her] to you on 22 C: No, I never manipulated anything.
M: Now, Im going to suggest to you that you have manipulated that email to add in things that were simply never said by [her], and Ill show you how youve done that.
M: Please just read those last three lines J: You are still not in the right place: Sorry, Mr Metzer, can you just find it for him? M: Of course.
I wonder if his assistant can J: He is either being obtuse, or he is playing for time, and I cannot decide which.
Im sorry, but Im somehow confused.
C: J: Or he is getting flustered.
J: Well, I think this is so important that we should make available the electronic copy, because you understand what the consequences are.
If I think that you are lying, I will send the papers to the Director of Public Prosecutions, and if you are found guilty by a jury, of perjury, you will go to prison.
Do you understand? C: Yes, I do.
J: Which paragraph are you referring to which you say is omitted? .
C: Its the paragraph, what is clear is you put a question mark after how J: You see what you are doing is you are not answering my question, and what you are doing is trying to obfuscate, and I am going to sit here until I pin you down on this.
Which paragraph do you say is missing? Just read it out before I lose my temper.
C: Ok.
J: Comment: An offensive and inappropriate aside to M about whether C is being obtuse or playing for time.
Threat of imprisonment and statement that C is deliberately not giving a clear answer. A13.
In re examination of himself C seeks to adduce photographs of a cash register in The Jazz Caf.
C: If you allow me to present those pictures that are very clear, and they are dated now, then J: Well, I have refused you that because you should have produced those before Comment: DAY THREE A14.
C cross examines D1 about his research for the article, as set out in his witness statement.
In context, a harsh ruling. [inaudible] as a prominent member of POSK.
C: What for you is a prominent member? You describe Mr J: A prominent member, it speaks for itself, If you are suggesting that he was not a prominent member, that the witness statement is untrue, put it to the witness.
But otherwise you are wasting my time.
In article was mentioned that I overcharged a lot of people and C: in your witness statement, number 31, is that I behaved very badly towards [inaudible].
J: But again, you see, it does not matter because it is not in the article.
You see, if I were a jury it would be important, because it might poison my mind.
But I am not a jury.
I do not care about this.
In peremptory terms J prevents C from cross examining Comment: D1 on allegations in D1s witness statement. A15.
C cross examines D1 about alleged confusion in Poland as to his (Cs) marital status.
J: You are not going to get very far asking this witness question.
You should keep your questions far more focussed to the narrow question which is this: did he publish this recklessly without caring that it was true, or did he carry out proper research and enquiries? Just keep to that point and you might, you might get somewhere or at least you might learn some useful evidence.
Otherwise you are completely wasting my time.
I am not interested in what the witness says more generally as to the truth or otherwise of what is contained in his piece.
Comment: A fair direction but cast in offensive terms.
DAY FOUR A16.
C cross examines D1 about letters in response to the article published in the following issue.
C: Yeah, but that was rather criticisms for you and not D1: Exactly.
J: Comment: J introduces a note of sarcasm. congratulations, isnt it? That was not [a] brilliant question, was it? . A17.
C cross examines D1 about his alleged failure to have established whether C had repaid his creditors.
C: Did you contact [Mr Ligeza] for any reason asking if he was repaid or start to be repaid? J: Well, that is not [inaudible] point because he has only been repaid small amounts.
Move on you were on better ground with Mrs Howard.
Comment: J stops a relevant question. A18.
C seeks to cross examine D1 about a document.
This is the report the committee report.
J: C: Yes, its my report to the annual board of POSK.
C: Would it be fair that the word we could have been used as a universal term for [inaudible] Polish community? J: Apart from the fact that you say twice here I would like to thank That is you I know you are trying to distance yourself from this document, but your fingerprints are all over it.
C: Yeah, Im not questioning that I wrote this.
J: Yes.
And you, therefore, were part of the process that selected Antec Builder, the dormant company.
So this is a hopeless line of questioning.
The more you try and distance yourself from this, the worse it gets from your perspective.
Is there a question you want to ask? C: No, I think, thank you very much.
Comment: J appears to misunderstand Cs case and prevents cross examination on the report. A19.
After D1s evidence, M expresses the hope that C will now concede that some of the challenged parts of the article are substantially true.
M: quite a lot of the factual material may have fallen by the wayside and I will be asking, and it may assist My Lord also, which parts of the article the claimant still maintains are false because, evidentially, one would hope that the issues have been narrowed.
I would not even bother, Mr Metzer.
I think we have got to J: assume every point is lies.
Comment: C wrongly submits that here J means that every point that he was making was a lie.
But J almost certainly means only that we (he and Mr Metzer as a unit together) had to assume that Cs case remained that every point made in the article was a lie.
Nevertheless the tone of his comment is offensive. A20.
J asks M about the terms of Cs Bankruptcy Restrictions Undertaking.
M: And we probably should have pushed for this.
I dont think the Annex setting out the restrictions was disclosed.
J: Yes.
Where is it, Mr Serafin? Why have we not got the terms of the restriction? C: I will try to find out by tomorrow morning, because I dont know where it is J: You have not given proper disclosure in this case.
You are under an obligation under the rules to give disclosure of all relevant documents .
Your failure to disclose them will give rise to an adverse inference.
Do you know what that means? I will hold things against you It is only fair.
C: no. J: It was unfair because, as M conceded, Ds lawyers were Comment: well aware of the undertaking and had never asked C to disclose it and because from Cs perspective it was not foreseeably relevant. A21.
In cross examination of one of Ds witnesses, C seeks to invite comment about potentially contrary evidence given by Ms Stenzel, a previous witness.
C: Well, you dont know Maria Stenzel but I just want to something what she say in her testimony yesterday .
She state that she never prepared payment cheques for A Serafin, which would be Anna Serafin or Anna Serafin Project Company.
So that was That is not a proper question.
J: C: But, My Lord, I J: Do not waste everybodys time, particularly this witness time C: Because J: Do not use it as a [?] to make a speech.
C: Because he dont asking the wrong sort of questions.
I think I finished because he dont know her. go there.
Is there any re examination, Mr Metzer? J: You were doing quite well until you insisted on ruining it by C: J: He does not know anything about Ms Stenzel so do not even C: Theres no point.
J: Comment: Cs proposed question was legitimate yet rudely disallowed. A22.
C cross examines one of Ds witnesses about occupation of her flat in Poland.
C: Whos living in the flat? M: I really do fail to understand the relevance of this, My Lord.
Its fairly relevant, I assure you.
C: J: Well, it had better be relevant, this, otherwise I shall get very annoyed with you.
Comment: Warning of increased irritation. A23.
M objects to Cs cross examination of the same witness, with whom C had had a sexual relationship.
M: I think this is, unfortunately, an unnecessary area of cross examination this is not an area of dispute.
Its accepted that essentially he is a womaniser and sleeps with more than one woman at the same time.
C: Thats not accepted, My Lord.
It is not accepted by you but it is true, is it not? You certainly J: were running two women at the same time.
C: [inaudible] Why Im asking J: It happened to you.
It just sort of came upon you as some sort of passive alien (?) Comment: Further sarcasm A24.
C continues to cross examine the same witness, who had lent him money.
J: You have not made any proposals, by the way, to repay this money, have you? C: no. J: You seem pretty craven about that.
I think you need to get on with this because it is just making it worse, ok? Just speed up and come to a conclusion.
It is not the best part of your case.
C: I know.
J: You know? Well then why aggravate it even more? You have acted completely in the wrong and you were with at least one other woman at the time, part of the time, when the money was lent to you? C: Yes, I accept it.
It was deplorable behaviour and I am going to say so in my J: judgment.
C: Yes, I know.
J: Well, are you going to stop asking questions or not? Comment: finding will be.
In hostile terms J reveals during the evidence what his DAY FIVE A25.
C cross examines an investor in Polfood who lost money and seeks to ask her about Polfoods accounts.
It is all grossly unfair because you have never provided the accounts.
J: C: Yeah, this is [file] number three J: Yes, well, you will not find proper accounts in this.
You will find management accounts for nine months, and you will find abbreviated accounts.
I am going to ask you one last time, do you have, at least for the first year of trading, the full audited accounts of the company ? C: No, we never had audited accounts.
J: Well, I am not going to allow you to ask any more questions on this theme without the documents being made available.
In any event, those are questions that lead nowhere.
C: Ok.
J: Can you ask questions on a more fruitful line please? C: There will be questions regarding the second director. says he was moving to.
It has everything to do with it. am going to get even more irritated.
M: My Lord, this has nothing to do with the point that Mr Serafin C: J: Well, you had better bring this to a head quickly, otherwise I Comment: Unfair refusal to allow C (who rightly or wrongly denied that there were audited accounts) to cross examine by reference to the unaudited accounts.
Further expression of irritation. relation to respected colleagues, to suggest that the new judge should determine the availability of the public interest defence without reference to the reasoning which led the Court of Appeal to conclude that the defendants had met the requirements neither of section 4(1)(a) nor of section 4(1)(b) of the Act.
Schedule
| The respondent (the claimant) sued the appellants (the defendants) for libel in respect of an article which they published about him in Nowy Czas, a newspaper addressing issues of interest to the Polish community in the UK.
The Court of Appeal found that the conduct of the trial by Mr Justice Jay (the judge) in the High Court had been unfair towards the claimant.
The defendants appeal against that finding.
They also challenge the Court of Appeals analysis of the effect of section 4 of the Defamation Act 2013 (the Act), which sets out the public interest defence to a defamation claim.
The claimant was born in Poland but has lived in England since 1984.
In about 1989 he joined POSK, a Polish social and cultural association and charity.
He became joint manager of The Jazz Caf, a bar and caf at POSKs Hammersmith premises.
He also worked at Kolbe House, a charity which runs a care home in Ealing.
The article was published in October 2015.
The claimant asserted that it had 13 separate defamatory meanings, including that he had abused his position at POSK to award himself or his company contracts for maintenance work there; had dishonestly obtained unlawful and fraudulent profit from sales at The Jazz Caf (this meaning is referred to as M4); and had diverted to himself funds needed for the care of Kolbe Houses residents by securing for himself a contract for unnecessary renovations.
The claimant represented himself at the hearing before the judge.
The judge found that all the articles meanings other than the five relating to Kolbe House were substantially true or, in one instance, had caused no serious harm to the claimants reputation.
But he found that in relation to all 13 meanings the defendants had established a defence to the claim under section 4 of the Act: for, in his opinion, each of them was on a matter of public interest, and it was reasonable for the defendants to have believed that publishing them was in the public interest.
So the judge dismissed the claim.
The Court of Appeal allowed the claimants appeal.
It held that the judge had been wrong to uphold the defence under section 4; that he had not been entitled to find that M4, which it described as the most serious of the allegations, was substantially true; and that the claimant was entitled to damages in respect of M4 and the meanings relating to Kolbe House.
Lastly, after reviewing transcripts of the hearing, it held that the nature, tenor and frequency of the judges interventions were such as to render [the trial] unfair.
It ordered that the quantification of damages be remitted to a judge other than Mr Justice Jay but did not order a full retrial.
The defendants now appeal to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
But, in place of the Court of Appeals order that only the assessment of damages be remitted, the Court orders that the case be remitted for a full retrial.
Lord Wilson gives the only judgment, with which the other Justices agree.
Unfair trial The Court of Appeal was correct to treat the claimants allegation as being that the trial had been unfair, not that the judge had given the appearance of bias against him.
For it is far from clear that an informed and fair minded observer would consider that the judge had given that appearance [39].
The authorities on an inquiry into the unfairness of a trial establish the following principles: a judges interventions should be as infrequent as possible during cross examination of witnesses, and he must remain above the fray and neutral while evidence is being elicited; the quality of the written judgment cannot render a trial fair in circumstances where the judges interventions at the hearing prejudiced the exploration of evidence; and where a transcript exists, it is not the present practice of higher courts to invite the judge to comment on the allegations, but the fact that he is unable to comment requires those courts to analyse the evidence with great care [40 45].
Unrepresented litigants are unlikely to be equipped to withstand judicial pressure and so the judge must temper his conduct accordingly [46].
The factual analysis of the conduct of the trial is set out in the schedule to Lord Wilsons judgment [47].
It is important to remember (among other things) that the excerpts from the transcript which are reproduced there were separated by long stretches of evidence in respect of which no criticism of the judge can be made.
But the transcripts do nevertheless show that the judge directed a barrage of hostility towards the claimants case and towards the claimant himself acting in person.
In doing so the judge used immoderate, ill tempered and at times offensive language.
The Court is driven to uphold the Court of Appeals conclusion that the judge did not allow the claim to be properly presented; that therefore he could not fairly appraise it; and that the trial was unfair.
Instead of making allowance for the claimants being unrepresented, the judge harassed and intimidated him [48].
The logical consequence of a conclusion that a trial was unfair is an order for a complete retrial.
So it is hard to understand the Court of Appeals order that all the issues relating to the determination of whether the defendants were liable to the claimant had been concluded.
Conscious that the justice system has failed both sides, the Court, with deep regret, must order a full retrial [49].
Public interest defence The House of Lords decision in Reynolds v Times Newspapers Ltd [2001] 2 AC 127 established the existence at common law of a specific defence to a claim for defamation brought in relation to publication of a statement on a matter of public interest.
Where the defamatory material concerned such a matter, the defendant had to show that it had met the standard of responsible journalism, measured by reference to a list of ten factors [53 56].
Section 4 of the Act replaced the Reynolds defence with a new defence which, on any view, draws on the principles in Reynolds and later cases [58, 68 69].
The section 4 defence is available where the defendant reasonably believed that publishing the statement complained of was in the public interest (s.4(1)(b)) [52, 62].
In assessing reasonableness, the Court must (among other things) have regard to all the circumstances of the case (s.4(2)) [52, 65]. factors was deliberately omitted from the section [62, 69].
The Court of Appeal was wrong to state that the Reynolds defence and the section 4 defence are not materially different: for the elements of the two cannot be equated [68, 72].
It was also inappropriate for the Court of Appeal to regard the Reynolds factors as a check list in the context of section 4 [69, 77].
For these and other reasons, the new judge should determine whether the public interest defence is available to the defendants without reference to the Court of Appeals reasoning on section 4 [78].
|
This judgment deals with the first, and major, limb of this appeal.
At the end I shall explain the position in relation to the second limb.
On 2 June 2006 the appellant (TNL) published an article (the Article) which defamed the respondent, (Sergeant Flood), who is a Detective Sergeant in the Extradition Unit of the Metropolitan Police Service (MPS).
The Article stated that allegations had been made against Sergeant Flood that had led Scotland Yard to investigate whether he was guilty of corruption.
The police investigation subsequently ended with a finding that there was no evidence that Sergeant Flood had acted corruptly and the trial judge, Tugendhat J accepted Sergeant Floods evidence that he was not guilty of corruption.
That finding has not been challenged.
The issue before the Court is whether TNL are protected from liability to Sergeant Flood in defamation under the doctrine known as Reynolds privilege.
Put shortly Reynolds privilege protects publication of defamatory matter to the world at large where (i) it was in the public interest that the information should be published and (ii) the publisher has acted responsibly in publishing the information, a test usually referred to as responsible journalism although Reynolds privilege is not limited to publications by the media see Reynolds v Times Newspapers Ltd [2001] 2 AC 127.
Tugendhat J held that TNL are protected by Reynolds privilege [2009] EWHC 2375 (QB) [2010] EMLR 169, but his decision was reversed by the Court of Appeal, Lord Neuberger MR, Moore Bick and Moses LJJ, [2010] EWCA Civ 804 [2011] 1WLR 153.
The major reason for the Court of Appeals decision was their view that the journalists responsible for the Article had failed to act responsibly in that they had failed adequately to verify the allegations of fact that it contained.
The Article
The Article had the following heading, the first sentence of which was in large bold letters: Detective accused of taking bribes from Russian exiles.
Police investigating the alleged sale to a security company of intelligence on the Kremlin's attempts to extradite opponents of President Putin, Michael Gillard reports.
The relevant part of the text of the Article was helpfully numbered by the judge for purposes of reference.
I shall follow the example of the Court of Appeal in adopting that numbering. 1.
Allegations that a British security company with wealthy Russian clients paid a police officer in the extradition unit for sensitive information are being investigated by Scotland Yard. 2.
The officer, who has been moved temporarily from his post, is alleged to have provided Home Office and police intelligence concerning moves by Moscow to extradite a number of Russia's wealthiest and most wanted men living in Britain. 3.
Anti corruption detectives are examining documents detailing the client accounts of ISC Global (UK), a London based security firm at the centre of the investigation.
The financial dossier, seen by The Times, shows that ISC was paid more than 6m from off shore companies linked to the most vocal opponents of President Putin of Russia. 4.
Between 2001 and 2005, ISC provided a variety of specialist security services including monitoring the Kremlin's attempts to extradite key clients to Moscow, where they face fraud and tax evasion charges.
A former ISC insider passed the dossier to the intelligence arm of the anti corruption squad in February.
The informant directed handlers to a series of ISC payments, totalling 20,000, made to a recipient codenamed Noah.
Detectives from Scotland Yard professional standards directorate were told that Noah could be a reference to an officer in the extradition unit who was friendly with one of ISC's bosses.
The officer under investigation has been identified as Detective Sergeant Gary Flood.
His home and office were raided last month.
A spokesman for the Metropolitan Police said yesterday: 'We are conducting an investigation into allegations that a serving officer made unauthorised disclosures of information to another individual in exchange for money.'
Anti corruption detectives are examining the relationship between Sergeant Flood and a former Scotland Yard detective, one of the original partners in ISC.
The men admit to being close friends for more than 25 years but deny any impropriety and are willing to co operate with the inquiry.
Sergeant Flood has not been suspended.
His lawyer said: 'All allegations of impropriety in whatsoever form are categorically and unequivocally denied.'
ISC Global was set up in October 2000 by Stephen Curtis, a lawyer.
He was already acting for a group of billionaire Russians led by Mikhail Khodorkovsky and Leonid Nevzlin, who controlled Yukos Russia's privatised energy giant 15.
The dossier also reveals Boris Berezovsky was a client of ISC. 16.
Two companies linked to Mr Berezovsky Bowyer Consultants Ltd and Tower Management Ltd appear to have made payments totalling 600,000 to ISC. 19.
ISC stopped trading last year after Curtis, the chairman, died in a helicopter crash.
Subsequently, two former Scotland Yard officers, Keith Hunter and Nigel Brown, whom Curtis recruited to set up ISC, fell out and Mr Hunter bought the company and renamed it RISC. 20.
A spokesman for Mr Hunter said: 'Neither my client nor his associated companies have ever made illegal payments to a Scotland Yard officer.' 21.
Mr Brown, who lives in Israel said: 'Scotland Yard recently contacted me as a result of receiving certain information.
I have been asked not to discuss this matter.' 5.
Moore Bick LJ stated at para 88 of his judgment, that since the Article repeated allegations made by others the starting point was the repetition rule.
Under that rule a defendant who repeats a defamatory allegation made by another is treated as if he had made the allegation himself, even if he attempts to distance himself from the allegation see Stern v Piper [1997] QB 123, 128; Gatley on Libel and Slander 11th ed (2008) para 11.4; Carter Ruck on Libel and Privacy, 6th ed (2010) paras 9.34 37. 6.
Sergeant Floods claim is not founded simply on the repetition rule.
The Article reports a variety of matters only some of which repeat, without adopting, allegations made by others.
A central feature of the Article is the statement that the police are investigating the conduct of Sergeant Flood and the defamatory meaning alleged is derived in part from that fact.
The identification of the issues arising in this case is not easy and calls for some precision in the analysis of the Article. 7.
The heading, the first sentence, para 1 and para 7 of the Article report that allegations have been made to the police that an officer, identified elsewhere in the Article as Sergeant Flood, has corruptly taken bribes in exchange for the provision of sensitive information to a security company, identified elsewhere in the Article as ISC.
I shall describe these allegations as the Flood is guilty accusation.
Para 5 of the Article alleges that a former ISC insider (the ISC Insider) has stated that ISC made payments to Noah who could be an officer who was friendly with one of ISCs bosses.
The Article makes it plain that the officer in question is Sergeant Flood.
I shall describe this allegation as the Flood could be guilty accusation.
Most of the rest of the Article consists of allegations of fact, some of these derived from the dossier provided to the police and to TNL by the ISC Insider.
Of these Lord Neuberger, at para 25, identified paras 5, 8, 15, and 16, to which he later added paras 10 and 19 as containing what he called the Allegations.
Moses LJ preferred to describe these as the details of the foundation of the allegations against Sergeant Flood.
I shall call these the supporting facts. 8.
What is the defamatory meaning, or sting, to be derived from the Article when read as a whole? In Chase v News Group Newspapers Ltd [2002] EWCA Civ 1772; [2003] EMLR 218 Brooke LJ identified three possible defamatory meanings that might be derived from a publication alleging police investigations into the conduct of a claimant.
These have been adopted as useful shorthand in subsequent cases.
The Chase level 1 meaning is that the claimant was guilty.
The Chase level 2 meaning is that there were reasonable grounds to suspect that the claimant was guilty.
The Chase level 3 meaning is that there were grounds for investigating whether the claimant was guilty. 9.
The respondent has not alleged that the Article conveys a Chase level 1 meaning.
Rather he has pleaded what are in effect alternative Chase level 2 meanings, namely: The words complained of meant that there were strong grounds to believe, or alternatively that there were reasonable grounds to suspect, that he had abused his position as a police officer with the MPS extradition unit by corruptly accepting 20,000 in bribes. 10.
The meaning alleged by TNL, for the purposes of a plea of justification, is a Chase level 3 meaning.
This was: [DS Flood] was the subject of an internal police investigation and that there were grounds which objectively justified a police investigation into whether the claimant received payments in return for passing confidential information about Russia's possible plans to extradite Russian oligarchs.
The relevant facts
Tugendhat J made detailed findings of fact see [2009] EWHC 2375 (QB) at paras 15 to 121.
Those findings have not been challenged.
The Master of the Rolls made a brief summary of these at the beginning of his judgment.
This is not entirely accurate, so I shall adapt it into my own summary.
The Article was the result of a lengthy investigation by journalists, Michael Gillard, his father, Gillard senior, and Jonathan Calvert, the editor of "Insight" at The Sunday Times, under whose auspices the investigation had been carried out.
Following its decision not to publish, Michael Gillard took the story to The Times, with more success.
Michael Gillard was first told in December 2005 of alleged bribes for information from the Extradition Unit by one of his sources (A), who identified the police officer in question as Sergeant Flood or his brother (a police officer not in the Extradition Unit).
The information related to the extradition and asylum of Mr Berezovsky and another Russian.
Michael Gillard decided to investigate this matter.
He sought the assistance of his father in doing so.
Over the next three months Michael Gillard had meetings with A and two other sources, one of whom, B, was working with A together with the ISC Insider.
Michael Gillard concluded that A and B did not have direct knowledge about the alleged bribery of a police officer, but derived their information from the ISC Insider.
He learned that in February 2006 A and B had arranged for the ISC Insider to meet with the Intelligence Development Group (IDG) of the Directorate of Professional Standards (DPS) of the MPS.
On 13 March A provided Michael Gillard with a copy of a Note that he had arranged to be given to the IDG when arranging this meeting.
It read as follows: One of Hunter's clients is Boris Berezovsky The Russians regularly up date information on the warrants and details of the emendations are transmitted to all the extradition desks around the world.
Hunter has a long term detective friend called Flood (possibly Gary ) who either works at, or has contacts at the extradition department.
Flood provides Hunter with the information as it arrives.
Hunter pays Flood in cash.
Flood apparently uses, or has used the money in the past for [the sensitive information]It is not clear whether Berezovsky is aware of how Hunter obtains the information If President Putin discovers this information it is
likely to cause a Diplomatic incident
Meanwhile Mr Gillard Senior managed to have a series of meetings and telephone conversations with the ISC Insider.
He told Mr Gillard Senior about his visit to the IDG and expressed frustration that they did not appear to be taking any action in relation to the information that he had provided.
He provided Mr Gillard Senior with a copy of a CD Rom that he had provided to the IDG.
This contained details of ISCs internal accounts.
These showed a series of payments, totalling 20,000 to Noah.
The ISC Insider told Mr Gillard Senior that he believed that Noah was Sergeant Flood, although he did not know that this was the case.
He believed that Sergeant Flood had a corrupt relationship with Mr Hunter of ISC.
Mr Gillard Senior prepared a memorandum for Mr Michael Gillard setting out what he had been told by the ISC Insider.
This ran to 8 pages and included: [ ] aware of payment to Flood ISC management accounts Evidence of payments to 'Noah' for 2002 2003.
Believes but does not know 'Noah' codename for Flood.
Atkinson codename for Boris Berezovsky in ISC accounts.' Noah' payments related to 'Atkinson' 'Noah' payments made out of KH's [Mr Hunter's] suspense account.
Suspense account used to park items not immediately assignable to particular client or expense KH used to brag about my man at the Yard.
Talked about how my man would be in court and would agree to bail.
Described as in charge of all Russian cases.
Said to have been at Home Office meeting and taking notes regarding Berezovsky asylum/extradition.
KH also mentioned other possible contacts.
Could have been deliberate exaggeration.
At a long liquid lunch in Champers Wine Bar in Kingly Street KH talked openly about paying brown envelopes to my man at the Yard.
Problem arose when BB barrister spoke directly to Flood in court on one occasion and asked how to handle some legal issue.
KH very upset that BB lawyers had contacted my man.
An unsuccessful attempt by Michael Gillard and Mr Calvert to approach Sergeant Flood at his home on 26 April was reported to Mr Hunter, who in turn told Sergeant Flood.
He put matters in the hands of his superiors the following day.
They informed the MPS press office ("the Press Office"), who then made contact with Michael Gillard and Mr Calvert.
On 27 April, Mr Calvert provided to the Press Office, to be passed on to Sergeant Flood, details of allegations that Mr Calvert said that he understood had been passed to Scotland Yard earlier in the year.
These included the following: My understanding is that Scotland Yard received information early this year alleging that Mr Hunter paid you for information that you are privy to as a member of the Yard's Extradition Unit.
This information would be of particular use to certain Russian individuals, some of whom were clients of ISC Global (UK) We understand that Scotland Yard has been given financial accounts detailing how money was transferred from Berezovsky companies to ISC Global accounts here and in Gibraltar.
In addition Mr Hunter's 'suspense account' is said to have made a series of payments of at least 20,000 to 'Noah' We understand that you have been identified to the police as 'Noah'.
These events caused DPS to initiate a police investigation by its Investigation Command, with DCI Crump as the Senior Investigating Officer.
It seems that DCI Crump was unaware of the information that had been provided to the IDG by the ISC Insider in February.
The DPS obtained and executed search warrants in respect of Sergeant Flood's home and office.
On the same day the Press Office issued the statement quoted in para 7 of the Article, and a few days later, Sergeant Flood was moved from the Extradition Unit owing to the ongoing investigation.
Meanwhile the DPS officers, including DCI Crump, who were investigating the matter, had meetings with Michael Gillard and Mr Calvert, who were anxious to discover precisely why it was that the police had taken action.
I shall deal with the details of these meetings later in my judgment.
On 2 June 2006, The Times published the Article as a newspaper report and on its website.
On 2 December 2006 the DPS made their report ("the DPS Report"), in which the DPS concluded that they had been unable to find any evidence to show that [Sergeant Flood] has divulged any confidential information for monies or otherwise.
Consequently there are no recommendations made as to criminal or discipline proceedings in relation to that matter.
The respondent gave evidence in the course of which he denied that he had been guilty of any impropriety.
That evidence was not challenged and was accepted by the judge.
The issues
This appeal raises a number of issues of principle in relation to Reynolds privilege.
The parties were agreed, and the judge accepted, that the rival meanings set out in paras 9 and 10 above were so close that, for the purpose of resolving the issue of Reynolds privilege, it was not necessary to choose between them.
It will none the less be necessary to consider how the court should approach the meaning of a publication when considering a claim to Reynolds privilege.
This is the meaning issue.
Mr Price QC for Sergeant Flood has argued that, as a matter of principle, Reynolds privilege should not normally protect publication of accusations of criminal conduct on the part of a named individual made to the police, at least if they are accompanied by details of matters alleged to support those allegations.
This raises the public interest issue.
The public interest issue is whether, and in what circumstances, it is in the public interest to refer to the fact that accusations have been made, and in particular that accusations have been made to the police, that a named person has committed a criminal offence.
This issue embraces the question of whether, if it is in the public interest to report the fact of the accusation, it is also in the public interest to report the details of the accusation.
The third issue of principle raised by this appeal is the verification issue.
As I shall show when I come to examine Reynolds in detail, one relevant element in the approach of a responsible journalist was held to be the steps taken to verify the information.
Where the publication alleges that accusations have been made of misconduct on the part of the claimant, or alternatively that there are grounds to suspect him of misconduct, the question arises of what, if any, verification is required on the part of the responsible journalist? In particular, is the journalist required to take steps to check whether the accusations that have been made are well founded, or is his duty to do no more than verify that the accusations reported were in fact made?
Reynolds privilege
I propose at this point to consider the defence of Reynolds privilege.
In Reynolds at p 205 Lord Nicholls of Birkenhead recorded that, over time, a valuable corpus of case law would be built up in respect of that defence.
I shall examine how far that has occurred over the past decade, with particular attention to the questions of public interest and verification.
The publication in Reynolds involved an allegation that the claimant, who was the Taoiseach, or prime minister, had lied to the Dil and to his cabinet colleagues.
The defendants sought to establish a generic head of qualified privilege at common law in relation to political information, on the basis that this would protect them in the absence of malice.
The House of Lords rejected this attempt, but identified the defence that has since been termed Reynolds privilege, albeit that the term privilege is misleading.
It is more accurately described as a public interest defence.
The leading speech was delivered by Lord Nicholls, who having set out the elements of Reynolds privilege, held that it could not arise on the facts of the case.
Lord Cooke of Thorndon and Lord Hobhouse of Woodborough expressed full agreement with the speech of Lord Nicholls.
Lord Steyn and Lord Hope of Craighead differed in the result, but their speeches accorded with Lord Nicholls conclusion that qualified privilege could protect publication of defamatory matter to the world at large where the public interest justified the publication.
The passage in which Lord Nicholls set out his conclusions [2001] 2 AC 127, 204 205 has been cited in both the judgment of Lord Neuberger MR and that of Tugendhat J, but, as it is the foundation of Reynolds privilege, I shall set it out again: The elasticity of the common law principle enables interference with freedom of speech to be confined to what is necessary in the circumstances of the case.
This elasticity enables the court to give appropriate weight, in today's conditions, to the importance of freedom of expression by the media on all matters of public concern.
Depending on the circumstances, the matters to be taken into account include the following.
The comments are illustrative only. 1.
The seriousness of the allegation.
The more serious the charge, the more the public is misinformed and the individual harmed, if the allegation is not true. 2.
The nature of the information, and the extent to which the subject matter is a matter of public concern. 3.
The source of the information.
Some informants have no direct knowledge of the events.
Some have their own axes to grind, or are being paid for their stories. 4.
The steps taken to verify the information. 5.
The status of the information.
The allegation may have already been the subject of an investigation which commands respect. 6.
The urgency of the matter.
News is often a perishable commodity. 7.
Whether comment was sought from the plaintiff.
He may have information others do not possess or have not disclosed.
An approach to the plaintiff will not always be necessary. 8.
Whether the article contained the gist of the plaintiff's side of the story. 9.
The tone of the article.
A newspaper can raise queries or call for an investigation.
It need not adopt allegations as statements of fact. 10.
The circumstances of the publication, including the timing.
This passage is largely, but not entirely, concerned with responsible journalism.
The starting point is, however, that the publication should be in respect of a matter of public concern.
This is not a black and white test, for, as Lord Nicholls observed, it is necessary to consider the extent to which the subject matter is a matter of public concern (Emphasis added).
As he made plain, responsible journalism requires the striking of the right balance between the public interest in the subject matter of the publication on the one hand and the harm to the claimant, should the publication prove to be untrue on the other.
Lord Hobhouse of Woodborough observed at p 239: The publisher must show that the publication was in the public interest and he does not do this merely by showing that the subject matter was of public interest.
He went on to commend the test of what it is in the public interest that the public should know and what the publisher could properly consider that he was under a public duty to tell the public.
This echoed the observation made by Lord Steyn at p 213 and Lord Cooke at p 224 that it was appropriate to adopt the conventional test applied when considering qualified privilege in relation to publication to a limited class.
That is to ask whether the recipients had an interest in receiving the information and the publisher a duty to publish it.
Lord Nicholls had earlier, at p 197, said that he preferred to ask: in a simpler and more direct way, whether the public was entitled to know the particular information.
He referred to this as the right to know test.
While Lord Hobhouse was correct to observe that it will not always be in the public interest to publish matters which are of public interest, the starting point in considering whether publication was in the public interest must be to ask whether the subject matter of the publication was a matter of public interest.
Lord Bingham of Cornhill CJ, when giving judgment in the Court of Appeal in Reynolds attempted at p 176 the difficult task of defining a matter of public interest: By that we mean matters relating to the public life of the community and those who take part in it, including within the expression public life activities such as the conduct of government and political life, elections (subject to Section 10 of the Act 1952, so long as it remains in force) and public administration, but we use the expression more widely than that, to embrace matters such as (for instance) the governance of public bodies, institutions and companies which give rise to a public interest in disclosure, but excluding matters which are personal and private, such that there is no public interest in their disclosure.
So far as verification is concerned, Lord Nicholls included in his list of relevant factors the steps taken to verify the information.
He was, however, dealing with a case where the relevant allegations were made, or at least adopted, by the publisher.
The publication was not simply reporting allegations made by another.
In Al Fagih v HH Saudi Research and Marketing (UK) Ltd [2001] EWCA Civ 1634 [2002] EMLR 215 the Court of Appeal, by a majority, found that Reynolds privilege was made out in respect of a report in a newspaper of defamatory allegations made in the course of an ongoing political debate, notwithstanding that the publishers had made no attempt to verify the allegations.
The newspaper had not adopted or endorsed these allegations.
Giving the leading judgment Simon Brown LJ at p 236 identified circumstances where both sides to a political dispute were being reported fully, fairly and disinterestedly and where the public was entitled to be informed of the dispute.
In such circumstances there was no need for the newspaper to concern itself with whether the allegations reported were true or false.
The public interest that justified publication was in knowing that the allegations had been made, it did not turn on the content or the truth of those allegations.
A publication that attracts Reynolds privilege in such circumstances has been described as reportage.
In a case of reportage qualified privilege enables the defendant to avoid the consequences of the repetition rule.
The nature of reportage was extensively analysed by Ward LJ in Roberts v Gable [2007] EWCA Civ 721; [2008] QB 502.
At para 60 he correctly identified it as a special example of Reynolds privilege, a special kind of responsible journalism but with distinctive features of its own.
There is a danger in putting reportage in a special box of its own.
It is an example of circumstances in which the public interest justifies publication of facts that carry defamatory inferences without imposing on the journalist any obligation to attempt to verify the truth of those inferences.
Those circumstances may include the fact that the police are investigating the conduct of an individual, or that he has been arrested, or that he has been charged with an offence.
In the present case Mr Rampton QC, for TNL, has not expressly sought to rely on the principle of reportage as absolving TNL from any duty of verification in respect of the matters alleged in the article.
He has, however, relied upon the decision of the House of Lords in Jameel (Mohammed) v Wall Street Journal Europe Sprl [2006] UKHL 44; [2007] 1 AC 359 as demonstrating that TNLs duty of verification did not extend to verifying that the allegations made against Sergeant Flood were well founded.
When I come to consider Jameel I shall suggest that, on analysis, an approach similar to reportage was applied.
It will be necessary to examine whether such an approach can properly be applied in a case such as the present.
The next occasion on which the Court of Appeal considered Reynolds privilege was Loutchansky v Times Newspapers Ltd (Nos 2 5) [2001] EWCA Civ 1805, [2002] QB 783.
I shall refer to the defendant as the Times, to avoid any confusion with the present case.
The publication in that case reported in detail allegations made against the claimant of criminal activities including money laundering on a vast scale.
The Times invoked Reynolds privilege.
The judgment of the Court of Appeal set out in a short passage at para 10 the matters that the Times relied upon to demonstrate the exercise of responsible journalism.
In essence these were that the published allegations were based on reports from reliable, responsible and authoritative sources.
At para 23 the Court held: At the end of the day the court has to ask itself the single question whether in all the circumstances the duty interest test or the right to know test has been satisfied so that qualified privilege attaches.
The judgment went on to explore the nature of this test.
At paras 32 35 the court explained why Reynolds privilege was in reality sui generis, a different jurisprudential creature from the traditional form of privilege from which it sprang.
This was not accepted by all members of the House of Lords in Jameel, but I have no doubt that it was correct.
Reynolds privilege arises not simply because of the circumstances in which the publication is made, although these can bear on the test of responsible journalism.
Reynolds privilege arises because of the subject matter of the publication itself.
Furthermore, it arises only where the test of responsible journalism is satisfied, and this requirement leaves little or no room for separate consideration of malice.
The court went on at para 36 to say this about the interest/duty test: The interest is that of the public in a modern democracy in free expression and, more particularly, in the promotion of a free and vigorous press to keep the public informed.
The vital importance of this interest has been identified and emphasised time and again in recent cases and needs no restatement here.
The corresponding duty on the journalist (and equally his editor) is to play his proper role in discharging that function.
His task is to behave as a responsible journalist.
He can have no duty to publish unless he is acting responsibly any more than the public has an interest in reading whatever may be published irresponsibly.
That is why in this class of case the question whether the publisher has behaved responsibly is necessarily and intimately bound up with the question whether the defence of qualified privilege arises.
Unless the publisher is acting responsibly privilege cannot arise.
This passage did not attempt to define the criteria governing whether it is in the public interest that a particular matter should be published to the world at large, so that the journalist has a duty to publish it.
The CA rejected, however, the test applied by the judge of whether the publisher would be open to legitimate criticism if he failed to publish the information in question, holding that such a test was too stringent see paras 46 49.
I come now to the case of Jameel [2007] 1 AC 359, in which the House of Lords subjected Reynolds privilege to a searching analysis.
The defendant (the Journal) published an article that asserted that at the request of the United States the central bank of Saudi Arabia was monitoring certain bank accounts to prevent them from being used, wittingly or unwittingly, for channelling funds to terrorist organisations.
The article included a number of names that were alleged to be on the list, which I shall call the black list, including that of the claimants trading group.
The claimants succeeded at first instance.
The jury found that the article defamed the claimants, presumably concluding that the article suggested that there were some grounds for suspecting that the claimants might be involved in funnelling funds to terrorists.
The Journals claim to Reynolds privilege was rejected by both the trial judge and the Court of Appeal.
The House of Lords reversed those decisions.
The reasons why the House considered that reporting not only the existence of the black list but the names on it was in the public interest appears most clearly from the speeches of Lord Hoffmann at para 49, Lord Scott of Foscote at para 142 and Baroness Hale of Richmond at para 148.
The main thrust of the story was that Saudi Arabia was co operating with the United States in the fight against terrorism.
This was evidenced by the existence of the black list.
This was a matter of high public interest.
Publication of the names on the black list was justified because this gave credibility to the story, per Lord Scott, or because without the names the impact of the story would have been much reduced, per Lady Hale.
Lord Bingham at paras 34 35 seems to have viewed the publication of the names as peripheral to the thrust of the article, which was of great public interest.
Lord Hoffmann at paras 51 52 held that the article as a whole was in the public interest and the inclusion of the names was an important part of the story as it showed that Saudi cooperation extended to the heartland of the Saudi business world.
Lord Hope held at para 111 that the question of whether the publication was privileged had to be judged in the context of the article read as a whole.
As to the formulation of the test of public interest, different opinions were expressed.
Lord Bingham at para 30 referred, with approval, to the adoption by Lord Nicholls in Reynolds of the duty interest test or the simpler test of whether the public was entitled to know the particular information.
Lord Hoffmann at para 50 said that he did not find it helpful to apply the classic test of whether there was a duty to communicate the information and an interest in receiving it.
These requirements should be taken as read where the publication was in the public interest.
Lord Hope at para 107 commented that the duty interest test, based on the publics right to know, which lies at the heart of the matter, maintains the essential element of objectivity.
Lord Scott at paras 130 and 135, like Lord Bingham, endorsed Lord Nicholls adaption of the duty/interest test.
Lady Hale at para 146 observed that the Reynolds defence sprang from the general obligation of the press, media and other publishers to communicate important information upon matters of general public interest and the general right of the public to receive such information.
She added at para 147 that there must be some real public interest in having this information in the public domain.
I doubt if this formulation could be bettered.
I turn now to consider how the House of Lords dealt with the question of verification.
The article contained two material assertions.
The first was one of fact that the claimants name was on the black list.
The second was the implied assertion that, because of this, there were grounds for suspecting that the claimants might be wittingly or unwittingly involved in funnelling funds to terrorists.
That latter assertion was on the basis that the United States authorities must have told the central bank of Saudi Arabia that there were such grounds.
The House of Lords considered it relevant to the test of responsible journalism that the journalists should have sought to verify the first, factual, assertion see Lord Bingham at para 35, Lord Hoffmann, at great length, at paras 59 to 78, Lord Hope at para 110, Lord Scott at para 139 and Lady Hale at para 149.
It is significant that no one considered that the Journal was under any duty to attempt to check the truth of the implied, defamatory, assertion, namely that there were grounds for suspecting that the claimants might be involved in funnelling funds to terrorists.
Thus, on analysis, the Reynolds privilege in Jameel had strong similarities with reportage.
The article reported facts that had defamatory implications.
Privilege protected the publishers from being responsible for those implications and they were under no duty to seek to verify whether the implications were true.
The balancing act and human rights
Reynolds privilege is not reserved for the media, but it is the media who are most likely to take advantage of it, for it is usually the media that publish to the world at large.
The privilege has enlarged the protection enjoyed by the media against liability in defamation.
The decisions to which I have referred contain frequent emphasis on the importance of freedom of speech and, in particular, the freedom of the press.
That importance has been repeatedly emphasised by the European Court of Human Rights when considering article 10 of the Convention.
There is, however, a conflict between article 10 and article 8, and the Strasbourg Court has recently recognised that reputation falls within the ambit of the protection afforded by article 8 see Cumpana and Mazare v Romania (2004) 41 EHRR 200 (GC) at para 91 and Pfeifer v Austria (2007) 48 EHRR 175 at paras 33 and 35.
In Reynolds Lord Nicholls at p 205 described adjudicating on a claim to Reynolds privilege as a balancing operation.
It is indeed.
The importance of the public interest in receiving the relevant information has to be weighed against the public interest in preventing the dissemination of defamatory allegations, with the injury that this causes to the reputation of the person defamed.
There is a danger in making an exact comparison between this balancing exercise and other situations where article 8 rights have to be balanced against article 10 rights.
Before the development of Reynolds privilege, the law of defamation, as developed by Parliament and the courts, already sought to strike a balance between freedom of expression and the protection of reputation.
Thus a fair and accurate report of court proceedings is absolutely privileged.
Publication is permitted even though this may involve publishing allegations that are clearly defamatory.
The balance in respect of the reporting of such proceedings is heavily weighted in favour of freedom of speech.
The public interest in favour of publication is firmly established.
The judge has, however, jurisdiction to make an anonymity order, thereby tilting the balance back.
Decisions in relation to the exercise of this power cannot be automatically applied to a situation where the publication of defamatory allegations has no statutory protection.
In the former case one starts with a presumption in favour of protected publication; in the latter one starts with a presumption against it.
There is thus a need for care when applying to the law of defamation decisions on the tension between article 8 and article 10 in other contexts.
The fact remains, however, that the creation of Reynolds privilege reflected a recognition on the part of the House of Lords that the existing law of defamation did not cater adequately for the importance of the article 10 right of freedom of expression.
Their Lordships had well in mind the fact that Convention rights were about to be introduced into our domestic law as a consequence of the Human Rights Act 1998.
In developing the common law the courts as public authorities are obliged to have regard to the requirements of the Convention.
Article 10.2 provides that the right of freedom of expression may be subject to restrictions for the protection of the reputation or rights of others and the Strasbourg Court has had to address the tension between articles 8 and 10 in the context of the publication of statements by the press that prove to be defamatory.
The Court has been provided with a certified translation of the recent decision of the Strasbourg Court in Polanco Torres and Movilla Polanco v Spain (Application No 34147/06), Ruling of 21 September 2010, in which this tension arose.
The Spanish Newspaper El Mundo had published an article defamatory of the petitioners that was largely founded on computer disks of company accounts that had been authenticated by an accountant who had been dismissed by the company.
The Spanish Constitutional Court had applied a relevant principle of Spanish law described as due diligence, namely that if such publication is to be protected the journalist responsible for it must have taken effective steps to verify the published information.
The Strasbourg Court at para 43 identified as relevant matters when considering restrictions on freedom of expression under article 10 necessary to protect the reputation of others the degree of defamation involved and the question of knowing at what point the media might reasonably consider sources as credible for the allegations.
The latter had to be considered from the viewpoint of the journalists at the time and not with the benefit of hindsight.
The Strasbourg Court upheld the finding of the Spanish Constitutional Court that the requirement of due diligence had been satisfied.
The meaning issue
Reynolds privilege exists where the public interest justifies publication notwithstanding that this carries the risk of defaming an individual who will have no remedy.
This requires a balance to be struck between the desirability that the public should receive the information in question and the potential harm that may be caused if the individual is defamed.
In Reynolds at pp 200 201 Lord Nicholls dwelt at some length both on the importance of freedom of expression and on the importance of the protection of reputation.
As to the latter, he rightly observed that it is not simply the individual but also society that has an interest in ensuring that a reputation, and particularly the reputation of a public figure, is not falsely besmirched.
Lord Nicholls at p 205 commented that the more serious the charge, the more the public is misinformed and the individual harmed, if the allegation is not true.
But, turning the coin over, the more serious the allegation the greater is likely to be the public interest in the fact that it may be true.
Either way, it may be a critical matter in striking the right balance.
It is commonplace, and sensible, for a claim to Reynolds privilege to be determined as a preliminary issue.
This can, however, raise a practical problem.
In order to perform the balancing act to which I have just referred it is necessary to determine the meaning of the article that has been published.
Furthermore, it is not possible to consider steps taken by way of verification without first deciding what it was that needed to be verified.
This also can raise a question as to the meaning of the publication.
Where there is an issue as to meaning, this is normally a matter for the jury, and in theory there is only one true meaning see Gatley at para 3.15.
How then is the judge to approach the meaning of an article when considering a claim to Reynolds privilege as a preliminary issue? It seems to me that the sensible way of avoiding this difficulty where there is a serious issue of Reynolds privilege will usually be for the parties to agree to trial by judge alone.
It will then be open to the judge to resolve for himself any issue that arises in relation to the meaning of the words published.
That course was not adopted in this case but the parties have, by their pleadings, effectively agreed that the meaning of the article lies on the spectrum that spans, at one extreme, that there were strong grounds for believing that Sergeant Flood had abused his position as a police officer by taking bribes and, at the other extreme, that there were grounds which objectively justified a police investigation into whether Sergeant Flood had acted in this way.
Where there is a range of meanings that a publication is capable of bearing, what approach should be adopted when considering whether the journalist acted responsibly in relation to it? In Bonnick v Morris [2002] UKPC 31; [2003] 1 AC 300, Lord Nicholls, when giving the advice of the Judicial Committee of the Privy Council on an appeal from Jamaica, held that the single meaning rule should not be applied when considering a claim to Reynolds privilege.
He continued at para 25 to say this: Where questions of defamation may arise ambiguity is best avoided as much as possible.
It should not be a screen behind which a journalist is willing to wound, and yet afraid to strike.
In the normal course a responsible journalist can be expected to perceive the meaning an ordinary, reasonable reader is likely to give to his article.
Moreover, even if the words are highly susceptible of another meaning, a responsible journalist will not disregard a defamatory meaning which is obviously one possible meaning of the article in question.
Questions of degree arise here.
The more obvious the defamatory meaning, and the more serious the defamation, the less weight will a court attach to other possible meanings when considering the conduct to be expected of a responsible journalist in the circumstances.
In Bonnick the Privy Council held the publishers to be protected by Reynolds privilege in circumstances where the journalist responsible for the publication had given evidence that he had not appreciated that the article that he had published bore the defamatory meaning found by the jury.
The Board held that a responsible journalist might well not have appreciated that the article bore that defamatory meaning.
While I find the result reached in Bonnick surprising, the approach to the test of responsible journalism adopted by the Board makes sound sense.
When deciding whether to publish, and when attempting to verify the content of the publication, the responsible journalist should have regard to the full range of meanings that a reasonable reader might attribute to the publication.
I do not know whether this was the reason why counsel agreed that it was unnecessary to choose between the meaning pleaded by Sergeant Flood and that pleaded by TNL, but it is one reason why I believe that their agreement was correct.
It is for the judge to rule on a claim to Reynolds privilege, just as it is for the judge to rule on the range of meanings that a publication is capable of bearing.
The judges conclusions as to the latter will inform his judgment as to whether the defendant acted responsibly in publishing the article.
TNL have not, in this case, sought to argue that the Article is not capable of bearing one or other of the Chase level 2 meanings that I have quoted in para 9.
A responsible journalist would have appreciated that the article might be read, by some readers at least, as indicating that there were strong grounds for suspecting that Sergeant Flood had been guilty of corruptly selling sensitive information to the ISC.
Others might read it as alleging no more than the meaning asserted by TNL.
The claim to Reynolds privilege must be assessed having regard to this range of meanings.
The public interest issue
Both Tugendhat J and the Court of Appeal considered that the subject matter of the article was of sufficient public interest to render publication of it justified in the public interest provided that the test of responsible journalism was satisfied.
This was in the context of a concession by Mr Price that the report of the statement of the Metropolitan Police reported at para 7 of the Article was subject to statutory qualified privilege pursuant to section 15(1) of the Defamation Act 1996 and that Sergeant Flood could not have complained had TNL simply reported that he was the officer under investigation.
That latter concession Mr Price withdrew, without objection from Mr Rampton.
Mr Prices primary grounds for complaint were not, however, that TNL had named Sergeant Flood as the person who was the subject of the police investigation, but that they had published the details of the supporting facts that had been placed before the police in support of the accusation that the police were investigating.
It follows that two matters have to be considered in relation to public interest. (i) Was it in the public interest that the details of the supporting facts should be published and (ii) was it in the public interest that Sergeant Flood should be named? Was it in the public interest that the supporting facts should be published?
Mr Price submitted that, as a matter of principle, publication in the mass media of complaints, charges or denunciations, made under cover of anonymity to the police, and of the allegedly supporting evidence, before the subject of them had had an opportunity of answering the charges and before the investigation had taken place, would in many cases be contrary to the public interest and oppressive to the subject.
He observed that accusations are often made to the police maliciously or misguidedly.
The police may, none the less, be under a duty to investigate them.
It cannot normally be in the public interest that, if the informant then informs the press of the allegations made to the police, the press should publish the allegations.
Publication would be likely, in such circumstances, to be unfairly prejudicial to the subject of the allegations.
Even if given the chance to respond to them, it would not be reasonable to expect him to do so.
The protections normally afforded to a person charged with a criminal offence would be by passed.
Mr Price conceded that there could be public interest in publishing reports of misconduct against a person that had been sufficiently verified by the press, but contended that they had not been in this case.
This argument exemplified the overlap between the test of public interest in publication and the test of responsible journalism.
Mr Price sought to support his submission that privilege should not attach to reports of allegations of misconduct by reference to two authorities of some antiquity.
The first was Purcell v Sowler (1877) 2 CPD 215.
In that case the defendant newspaper unsuccessfully claimed privilege for reporting charges of neglect made against the plaintiff, the medical officer of a union workhouse, which were made at a public meeting of the board of guardians for a local poor law union.
The plaintiff was not present, so had no opportunity to respond to the charges.
Mellish LJ, giving the leading judgment, plainly considered this significant.
He observed at p 221: there is no reason why the charges should be made public before the person charged has been told of the charges, and has had the opportunity of meeting themSuch a communication as the present ought to be confined in the first instance to those whose duty it is to investigate the charges.
The other case relied on by Mr Price was De Buse v McCarthy [1942] 1KB 156.
There the publication was of an agenda of a town council committee which was posted in a number of public places.
The agenda included a report that inferred that the four plaintiffs, who were council employees, had been involved in thefts of petrol.
The defendants argued that the publication was privileged because they had a duty to communicate the matters in the report to the ratepayers and the ratepayers had an interest in receiving the communication.
The defence failed because the Court of Appeal did not accept either proposition.
Tugendhat J discounted these decisions in part on the ground that they had been overtaken by Reynolds and Jameel.
The Master of the Rolls at para 38 remarked that Purcell was a decision on its facts.
He went on at para 40 to remark that it was rather dangerous to rely on cases of such antiquity when dealing with fundamental issues of freedom of speech and respect for private life, the more so as in Reynolds the House of Lords had set out to redress the balance between the two in favour of greater freedom to publish matters of genuine public interest.
I agree with those comments, and indeed Mr Price accepted that the law had moved on since those case were decided.
He submitted, however, that they remained of value inasmuch as they contained statements that privilege should not be accorded to publication of allegations that had not been investigated or tried.
Tugendhat J observed at para 131 that there was no dispute that the conduct of police officers in general, and police corruption in particular, was a matter of interest to the community.
At para 215 he expressed the view that the real issue was whether the journalism was responsible in the sense of whether the publication was fair to the respondent.
Was it a proportionate interference with his right to reputation given the legitimate aim in pursuit of which the publication was made? The legitimate aim was primarily the publication of a story that was of high public interest.
At para 183 Tugendhat J dismissed the suggestion that there was a general rule that it was against the public interest for the media to engage in investigative journalism on a matter which was, or which, in the view of the media, should be the subject of police investigation.
The law provided its own sanctions for publications that interfered with the course of justice.
So far as concerned Mr Prices submission that it was not in the public interest to publish allegations that had not been verified, Tugendhat J considered that this contention could not stand with the decision in Jameel, where no attempt had been made to verify the existence of grounds for suspecting that the claimants had been a conduit for terrorist funds see paras 135, 153 and 181 of his judgment.
I shall revert to this matter when I come to deal with verification.
Lord Neuberger held at paras 37 and 39 that there was no reason to exclude allegations made to the police from the ambit of potential Reynolds privilege.
Whether the allegations were made to the police, to a third party or directly to the journalist, and even if they amounted to allegations of criminal conduct, Reynolds privilege could, in principle, attach to them.
Lord Nicholls in Reynolds had made it clear that publication of allegations of wrongdoing might or might not attract privilege, depending on all the circumstances of the particular case.
So far as the publication of the supporting facts was concerned, Lord Neuberger at paras 57 to 59 accepted the following submission made by Mr Price: While allegations of police corruption are of public interest, the mere fact that particular allegations are being investigated by the police themselves should not enable the media to publish details of the allegations, without fear of being liable for defamation, unless (a) the publication of the allegations is in the public interest, and (b) the journalist responsible took reasonable steps to check on their accuracy.
Dealing with those two criteria, Lord Neuberger at paras 68 and 69 accepted that the details of the allegations were of considerable public concern.
He went on, however, to find that reasonable steps had not been taken to check on their accuracy.
It was essentially on that basis that he reversed the decision of Tugendhat J.
I shall consider his reasoning when I deal with verification.
Moore Bick LJ at para 100 remarked that as the subject matter of the article was police corruption, there could be no doubt that it was a matter of public interest.
He went on to consider whether this applied to the details of the allegations and the naming of DS Flood, and concluded that it did.
He held that the allegations were the whole story.
If the inclusion of the defamatory material was justifiable, so was the story, and vice versa.
At para 102 he observed that there was no public interest in knowing the mere fact that an ISC insider had made allegations against a member of the Metropolitan Police, but there was a public interest in knowing the facts, insofar as the allegations were true.
For this reason it was necessary to consider, in particular, what was the source of the journalists information and what steps were taken to verify it.
At the end of his judgment he expressed agreement with the Master of the Rolls that the judge had reached the wrong conclusion because he failed to have sufficient regard to the serious nature of the allegations against Sergeant Flood and the journalists failure to take any significant steps to verify their accuracy, and because he misunderstood the effect of Jameel.
Once again, failure to verify was at the heart of the refusal to accord TNL the protection of Reynolds privilege.
But it is right that I should quote in full para 104 of the Lord Justices judgment, which endorsed the submissions of Mr Price that I have summarised at para 56 above: In my view responsible journalism requires a recognition of the importance of ensuring that persons against whom serious allegations of crime or professional misconduct are made are not forced to respond to them before an investigation has been properly carried out and charges have been made.
It is very easy for allegations of impropriety or criminal conduct to be made, to the police, professional bodies and others who may have a duty to investigate their truth, out of malice, an excess of zeal or simple misunderstanding.
If the details of such allegations are made public, they are capable of causing a great deal of harm to the individual concerned, since many people are inclined to assume that there is no smoke without fire.
Moreover, there is a serious risk that once the allegations have been published the person against whom they are made will feel obliged to respond to them publicly, thereby depriving himself of the safeguard of the ordinary process and risking a measure of trial by press.
I am not dealing here with the publication of the simple fact that a complaint has been made against a person, without any details being given, or with the publication of the fact that a person has been charged with a criminal offence.
Such information is likely to be a matter of public interest.
It is routinely made public in statements issued by the police and when that occurs a report of the statement is protected under section 15 of the Defamation Act 1996.
However, it is unnecessary and inappropriate for such reports to set out the details of the allegations made against the person charged; the description of the charge itself is sufficient to inform the public of what it has an interest in knowing.
The alternative is trial by press without proper safeguards, which is clearly not in the public interest.
Moses LJ held that it was in the public interest that the public should learn that the police were pursuing an investigation of corruption against a fellow police officer.
This was because it was important that public trust in the police should be upheld.
He went on to hold, however, that there was not the same public interest in publication of the supporting facts on which the allegation against the respondent was based.
This was because they merely added credence to the grounds on which the investigation was pursued.
They invited the reader to think that there might be something in them notwithstanding that they had not been investigated let alone substantiated para 116.
Once again, emphasis was placed on failure to verify, for at para 118 the Lord Justice summarised his conclusions by saying: I agree that publication without investigation of the details on which the allegation was based was not in the public interest. (My emphasis)
Conclusions on publication of the details of the accusation
I have set out in full para 104 of the judgment of Moore Bick LJ because he identifies matters that will often weigh conclusively against publication of details that appear to support an accusation that has been made against an individual of criminal conduct that is being investigated by the police.
It may be that the details are, if true, of some public interest, but, the responsible journalist must weigh that fact against the prejudice that may be caused to the suspect that Moore Bick LJ has identified.
At the end of the day, however, each case will turn on its own facts and the overriding test is that of responsible journalism.
I have reached the conclusion that, subject to the issue of verification, it was in the public interest that both the accusation and most of the facts that supported it should be published.
The story, if true, was of high public interest.
That interest lay not merely in the fact of police corruption, but in the nature of that corruption.
The object of the Extradition Unit of the Metropolitan Police was to assist in the due process of extradition.
The accusation was that there were grounds for suspecting the respondent of selling sensitive information about extradition for the benefit of Russian oligarchs who might be subject to it.
What was suggested was not merely a corrupt breach of confidentiality, but the betrayal of the very object of his employment by the police.
The story told was a story of high public interest and, as Moore Bick LJ remarked, the allegations were the whole story.
Tugendhat J accepted evidence given by Michael Gillard to the effect that he had doubts as to whether the police were exercising due diligence in investigating the information provided to them by the ISC Insider.
He explained that one motive in publishing the Article was to ensure that the police investigation was carried out promptly.
This finding has not been directly challenged, albeit that some of Mr Prices oral submissions verged upon such a challenge and Moore Bick LJ at para 106 said that he was unable to accept this.
The judges finding was based upon his assessment of the oral evidence given by Michael Gillard see para 38 and there is no valid basis for challenging it.
Lord Neuberger observed at para 54 that the journalists motives for publishing were of little relevance.
In this instance I do not agree.
Tugendhat J considered that Michael Gillards motive was relevant both because it constituted a legitimate aim of publishing para 200, and because it was in the public interest to ensure that the investigation was carried out promptly para 216.
I consider that there is force in these points.
Michael Gillard had good reason to doubt whether the investigation was being pursued with diligence.
In fact, there is no evidence that there had been any investigation before the police reacted to TNLs intervention on 26 April.
Michael Gillards concern, coupled with the high public interest in the story, justified its publication.
There was, in the words of Lady Hale in Jameel at para 147, real public interest in having this information in the public domain.
I have said that it was in the public interest that most of the facts that supported the story should be published because I have yet to deal with the publication of the Sergeant Floods name, coupled with the codeword Noah, which identified for readers of the Article the officer suspected of corruption.
I now turn to the question of whether the publication of that matter also was in the public interest.
Was it in the public interest that the respondents name should be published?
Michael Gillard, who wrote the Article, gave the following reasons for naming the respondent: a.
The Met had confirmed that he was under investigation; b. Other possible witnesses might not have come forward with information had I not named him; c.
I suspected that the DPS was not properly investigating the matter and believed that if the matter was brought into the open it might help to ensure that they did so; d. The claimant was part of a reasonably small squad and if he was not named it would leave the newspaper open to complaints from others in the squad that the article referred to them; e. The claimant was already aware of the investigation, so was his family and colleagues in the extradition squad.
Tugendhat J at para 218 held that the naming of Sergeant Flood was within the range of judgments open to TNL, partly because it gave the story the interest referred to by Lord Steyn in In re S (A Child) (Identification: Restrictions on Publication) [2004] UKHL 47; [2005] 1 AC 593, para 34, but more importantly because not naming the claimant would not have saved his reputation entirely.
Rather it would have spread the damage to reputation to all the officers in the extradition unit.
The issue in In re S was whether reporting restrictions should be imposed in respect of the name of a defendant in a murder trial in order to protect the privacy of her son.
In para 46 above I have warned of the danger of applying directly to defamatory publications cases dealing with restrictions on publication in other contexts.
Mr Rampton argued that naming the respondent was responsible journalism because, had he not been named, the Article would have lacked interest.
Had it been possible to conceal Sergeant Floods identity by removing his name from the Article, together with the reference to Noah, but leaving it otherwise intact, I would not have accepted this argument.
Sergeant Flood was not a public figure.
Publication of his name can have meant nothing to most readers, and any interest that it added to the article would not have outweighed the damage that it caused to his reputation.
Furthermore, adding interest to the Article was not a reason advanced by Mr Michael Gillard for naming the respondent.
On the facts of this case, however, it was impossible to publish the details of the Article without disclosing to those close to the respondent that he was the officer to whom it related.
He would be identified as such by the other members of the Extradition Unit and anyone else who knew that he had been removed from that unit.
There is also force in the point that, if he were not named, other members of the Extradition Unit might come under suspicion.
Having regard to these matters, I have concluded that naming the respondent was not, of itself, in conflict with the test of responsible journalism or with the public interest.
The verification issue: the law
Not all the items in Lord Nicholls list in Reynolds were intended to be requirements of responsible journalism in every case.
The first question is whether, on the facts of this case, the requirements of responsible journalism included a duty of verification and, if so, the nature of that duty.
I should insert a word of warning at the outset.
Each case turns on its own facts.
I use the phrase duty of verification as shorthand for a requirement to verify in the circumstances of this case.
My comments should not be treated as laying down principles to be applied in cases of different facts.
Mr Price alleged that TNL should have verified the accusation against Sergeant Flood reported in the Article.
Tugendhat J concluded that Jameel was incompatible with such an obligation.
He considered that Jameel showed that if it was in the public interest to publish the fact of an accusation, there was no obligation to verify the grounds of the allegation.
Moore Bick LJ commented at para 95 that, if the judge were right, there was very little distinction to be drawn between the defence of reportage and the defence of responsible journalism in relation to the reporting of statements made by third parties.
The judge was not right.
Reportage is a special, and relatively rare, form of Reynolds privilege.
It arises where it is not the content of a reported allegation that is of public interest, but the fact that the allegation has been made.
It protects the publisher if he has taken proper steps to verify the making of the allegation and provided that he does not adopt it.
Jameel was analogous to reportage because it was the fact that there were names of substantial Saudi Arabian companies on the black list that was of public interest, rather than the possibility that there might be good reason for the particular names to be listed.
Just as in the case of reportage, the publishers did not need to verify the aspect of the publication that was defamatory.
The position is quite different where the public interest in the allegation that is reported lies in its content.
In such a case the public interest in learning of the allegation lies in the fact that it is, or may be, true.
It is in this situation that the responsible journalist must give consideration to the likelihood that the allegation is true.
Reynolds privilege absolves the publisher from the need to justify his defamatory publication, but the privilege will normally only be earned where the publisher has taken reasonable steps to satisfy himself that the allegation is true before he publishes it.
Lord Hoffmann put his finger on this distinction in Jameel at para 62, when he said In most cases the Reynolds defence will not get off the ground unless the journalist honestly and reasonably believed that the statement was true, but there are cases (reportage) in which the public interest lies simply in the fact that the statement was made, when it may be clear that the publisher does not subscribe to any belief in its truth.
Thus verification involves both a subjective and an objective element.
The responsible journalist must satisfy himself that the allegation that he publishes is true.
And his belief in its truth must be the result of a reasonable investigation and must be a reasonable belief to hold.
What then does the responsible journalist have to verify in a case such as this, and what does he have to do to discharge that obligation? If this were a Chase level 1 case he would have to satisfy himself, on reasonable grounds, that the respondent had in fact been guilty of corruption.
His defence would not get off the ground unless he reasonably believed in the respondents guilt.
This is not, however, a Chase level 1 case, see my discussion of the meaning of the Article at paras 48 to 50 above.
What did the duty of verification involve? There is authority at the level of the Court of Appeal that to justify a Chase level 2 allegation a defendant has to adduce evidence of primary facts that constituted reasonable grounds for the suspicion alleged.
These will normally relate to the conduct of the claimant.
Allegations made by others cannot be relied upon.
The same may be true of a Chase level 3 allegation.
The discussion in Gatley at para 11.6 and the three cases there cited support these principles.
No such hard and fast principles can be applied when considering verification for the purpose of Reynolds privilege.
They would impose too strict a fetter on freedom of expression.
Where a journalist alleges that there are grounds for suspecting that a person has been guilty of misconduct, the responsible journalist should satisfy himself that such grounds exist, but this does not necessarily require that he should know what those grounds are.
Their existence can be based on information from reliable sources, or inferred from the fact of a police investigation in circumstances where such inference is reasonable.
I derive support for this conclusion from the fact that in Jameel the House of Lords accepted that appropriate steps had been taken to verify the fact that the claimants were named on the black list where there had been reliance upon reliable sources, even though the defendants were not prepared to name them.
The present case has the following particular features.
The Article did not simply consist of the Flood could be guilty accusation.
It combined this with the Flood is guilty accusation and the supporting facts.
Although the latter, when taken on their own, did not amount to strong grounds for suspecting Sergeant Flood of corruption, their incorporation into the Article both provided detail of the nature of the corruption of which Sergeant Flood was suspected and, as Moses LJ observed, added credence to the case being investigated.
It was these features that made the Article capable of bearing the first of the two Chase level 2 meanings alleged by Sergeant Flood.
Before publishing this Article responsible journalism required that the journalists should be reasonably satisfied both that the supporting facts were true and that there was a serious possibility that Sergeant Flood had been guilty of the corruption of which he was suspected.
The latter requirement reflects the range of meanings that the Article was capable of conveying to its readers.
The verification issue: the facts
When considering the evidence, the trial judge made findings that were not challenged and that were highly relevant to the question of verification.
The challenge made by Mr Rampton to the decision of the Court of Appeal is founded on an assertion that the Court of Appeal made an erroneous assessment of the relevant facts and failed to have regard to some of the findings of the trial judge.
I propose first to summarise the relevant observations of the Court of Appeal before considering, in the light of these, the relevant findings of Tugendhat J.
When dealing with verification, Lord Neuberger focussed on what he described as the Allegations.
These he had, in para 25, identified as the matters alleged in paras 5, 8, 15 and 16 of the Article, but to these he subsequently added paras 10 and 19.
The relevant parts of his judgment appear in the following paragraphs: 68.
The Allegations were serious: accusing a fairly senior police officer of what was not inaccurately described in DS Flood 's pleaded case as an appalling breach of duty and betrayal of trust and . a very serious criminal offence is self evidently a very grave charge.
Being identified as the officer the subject of the investigation described in paragraph [7] of the article in The Times may, on its own, have been pretty damaging to DS Flood (although I have doubts as to whether The Times would have published on that limited basis).
However, by going further and publishing the allegations being made against him, with the details given in para [5], coupled with the references to Mr Berezovsky and others in paras [10], [15], [16] and [19], the journalists must have realised would be very likely to result in the article constituting a story with a far greater impact, and far greater effect on DS Flood 's reputation.
As Lord Nicholls said [2001] 2 AC 127, 205 the more serious the charge, the more the public is misinformed and the individual harmed. 69.
The nature of the information contained in the Allegations is of considerable public concern in that it involves police corruption, but the weight to be given to that point is very severely reduced by the fact that the information is contained in the Allegations, which, as the journalists knew, were largely unchecked and unsupported.
That factor is particularly important once one appreciates that the main content of the Article was the Allegations, coupled with the identification of DS Flood, and the link with named Russian migrs. 73.
When one turns to the steps taken to verify the information, the journalists do not seem to have done much to satisfy themselves that the Allegations were true.
When they were published in the article, they were, as the passages just quoted from the judgment show, and as the journalists must have appreciated, no more than unsubstantiated unchecked accusations, from an unknown source, coupled with speculation.
The only written evidence available to the journalists did not identify any police officer, let alone DS Flood, as the recipient of money from ISC at all, let alone for providing confidential information.
Moore Bick LJ agreed.
He accepted Mr Prices submission that the journalists had taken few, if any, steps to verify the truth of the allegations themselves.
Moreover the status of the information was no more than that of an uninvestigated and unsubstantiated allegation.
The dossier, which the journalists had seen, did not identify the respondent as Noah nor did it specifically support the allegation that any officer had been the recipient of payments from ISC.
As I explained at para 68, Moses LJ also attached importance to the failure to verify what, at para 115, he had described as the details of the foundation of the allegation.
At para 116 he commented that these exposed the respondent to the suggestion that unchecked and unsubstantiated allegations from an unknown source might be well founded.
Mr Rampton submitted that the reference by both Lord Neuberger and Moses LJ to allegations from an unknown source demonstrated a failure to appreciate the important fact that the ISC Insider was known to the journalists.
I do not believe that Lord Neuberger or Moses LJ had failed to appreciate this fact.
In para 11 of his judgment Lord Neuberger had recorded meetings between the ISC Insider and both Mr Gillard Senior and the Metropolitan Police.
Unknown should, I think, probably be read as undisclosed.
I have drawn attention to the importance that all three members of the Court of Appeal attached to the fact that the supporting details of the allegations made against Sergeant Flood were unverified.
I consider that importance to have been misplaced.
The supporting details were true.
Nor, so far as I can see, did Mr Price contend that the journalists were at fault for failing to verify them.
Tugendhat J held at para 204 that the fact that payments in cash were made to Noah was soundly based on the documents.
He added that it had not been suggested that the journalists ought to have doubted the authenticity of these.
It does not seem to have been any part of Sergeant Floods case that the journalists were at fault for failing to verify the supporting details.
The case that Mr Price has consistently advanced in relation to verification is very different.
In para 18 of his written case he submitted that no attempt worthy of the name had been made to verify what he described as the accusation.
By the accusation I understood him to mean the accusation that Sergeant Flood had corruptly received bribes in exchange for confidential information.
If so, he put his case too high.
For the reasons set out in para 82 above responsible journalism required that the journalists should be reasonably satisfied that there was a serious possibility that Sergeant Flood had been guilty of corruption.
The submissions in relation to the facts made by Mr Price were, however, equally applicable to this requirement.
I turn to consider whether, contrary to the submission of Mr Price, that requirement was satisfied.
Mr Prices complaint was that the journalists made no attempt to investigate the truth of the allegations made to the police by the ISC Insider.
This complaint focussed not on the contents of the dossier provided by the ISC Insider to the police but upon the ISC Insiders statement that he believed that the payments recorded as having been made to Noah had been made to Sergeant Flood.
Mr Prices submission was that responsible journalists would have discovered that this expressed belief had no foundation.
Sergeant Flood gave evidence, which was unchallenged, that he had had no information that would have been of any value to ISC.
In particular he had no information in relation to the attempt to extradite Mr Berezovsky or his application for asylum that was of value.
The journalists shortcoming, according to Mr Price, was in failing to inquire whether there was any confidential information available to Sergeant Flood that he could have sold to ISC.
Such inquiry would have disclosed that there was none and thus that the ISC Insiders expressed belief that Sergeant Flood was Noah was wholly without foundation.
Instead, the journalists had based their Article on allegations made by the ISC Insider, notwithstanding, as they had acknowledged, that he had his own axe to grind.
In answer to this submission, Mr Rampton relied on the implications that could reasonably be drawn from the actions of the police themselves.
The police, he argued, were best placed to form a view as to whether there was any substance in the allegations made against Sergeant Flood.
Their actions in not merely investigating the allegations but in obtaining and executing a search warrant were a basis upon which the journalists could properly conclude that the allegations made against Sergeant Flood were allegations of substance.
The inferences that could properly be drawn from the police activity constituted one of the central issues at the trial.
It was Sergeant Floods case that it was the journalists own intervention on 26 April that had resulted in the police activity, so that they could not treat this as adding weight to the allegations that they had made.
With hindsight it is apparent that this was factually correct.
It was Michael Gillards evidence, however, that he had believed that the police action was a response to the information that had been provided by the ISC Insider in February.
I turn to examine this part of the story in a little more detail.
On 28 April Mr Calvert and Michael Gillard had invited Mr Hunter to comment on the fact that the police were investigating allegations that he had made corrupt payments to Sergeant Flood.
Solicitors for Mr Hunter, in an e mail on 2 May followed by a letter on 3 May to Mr Calvert, alleged that the only reason for the police investigation had been TNLs own enquiries on 26 April.
This led Mr Calvert to contact the MPS Press Office to ask whether the police began their investigation following allegations received from TNL or whether the investigation was already ongoing.
The Press Office replied that they could not expand on their press statement of 28 April (which was that reported in para 7 of the Article) and so were unable to answer this question.
It now seems clear that, both when drafting the initial press notice and in replying to Mr Calvert on 3 May, the MPS Press Office was anxious not to disclose the fact that the police investigation had only just been commenced.
No doubt the Press Office were apprehensive, with good reason, that the police might be exposed to press allegations of dragging their feet.
Michael Gillard and Mr Calvert met with DCI Crump and two other officers concerned in the police investigation on 9 May. DCI Crump then confirmed that the police had received intelligence before the journalists communications with the Press Office, but that those communications had probably forced their hand.
Having heard Michael Gillard give evidence, the judge made the following findings.
By mid April Michael Gillard had formed the impression that the police were not investigating at all the information that they had received from the ISC Insider.
After 27 April, however, he changed his mind.
The MPS press notice of 28 April led him to believe that there was an ongoing investigation, which had started, or ought to have started in February.
He did not believe the suggestion made by Mr Hunters solicitors that the investigation had been started by TNLs own inquiries.
Those findings by the judge have not been challenged.
The judge considered that the fact of the police investigation augmented the ground for suspicion that arose from the supporting facts published in the Article.
He commented at para 191 that the police do not automatically investigate every allegation that is made to them.
They decide what to investigate and what not to investigate.
At para 203 he commented that while the basis for the allegations was weak, in that there was no evidence that the claimant was Noah or that any confidential information had been received by ISC, nevertheless as early as 9 May and up to the time of publication on 2 June the police had confirmed that they had sufficient evidence to obtain a search warrant and to carry out an investigation.
I have considered whether it was reasonable for Michael Gillard to conclude that the police activity at the end of April and the beginning of May owed at least something to the information that had been provided to them by the ISC Insider.
I have concluded that it was.
It is remarkable that the DPS should have obtained and executed a search warrant in respect of Sergeant Floods home and office, and removed him from the Extradition Unit, on the strength only of the inquiries made by the journalists on 26 April.
It was not unreasonable for the journalist to have assumed that this action was, at least in part, a response to information provided by the ISC Insider in February.
The natural inference was that the DPS had concluded that the accusation made against Sergeant Flood might be well founded.
The information provided by the ISC Insider, including that set out in the dossier, amounted to quite a strong circumstantial case against Sergeant Flood.
Michael Gillard stated that he regarded it as significant that the dossier showed in the same period payments by Mr Berezovsky to ISC and payments by ISC to Noah and that during that period Mr Flood was working at the Extradition Unit.
It was of course during that period that Russia was attempting to extradite Mr Berezovsky.
The statements attributed to Mr Hunter, as recorded in Mr Gillard Seniors memorandum, while gossipy in character, none the less lent support to the possibility that a police officer who fitted the description of Sergeant Flood was in the pay of Mr Hunter.
The known friendship between Sergeant Flood and Mr Hunter made this more credible.
It is true that Michael Gillard accepted that the ISC Insider might have had an axe to grind in making his allegations, but they were not allegations that were lightly made.
The ISC Insider went to considerable lengths to place his information before the police.
I am not greatly impressed by Mr Prices submission that inquiries should have been made which would have showed that Sergeant Flood had no confidential information to sell.
Mr Gillard Senior gave evidence that, in his experience the Russians were happy to corrupt government officials and that of his own experience and knowledge the Extradition Unit would have had information that would have been of interest.
Michael Gillard gave evidence that from his knowledge of the specialist squads of the MPS Sergeant Flood was likely to have confidential information at his fingertips.
He added that if there was no information that Sergeant Flood could have passed on to Mr Hunter he would have expected the police to dismiss the allegations as ill founded rather than remove Sergeant Flood from his post.
Having regard to all these matters I consider that the journalists could reasonably conclude that Sergeant Flood was in a position to provide information that Mr Berezovsky would consider justified payments to him.
Conclusion
Michael Gillard does not seem to have been asked in terms whether he believed that there was a serious possibility that Sergeant Flood had been guilty of corruption.
Tugendhat Js judgment, when read as a whole, leaves me in no doubt that had he been asked, he would have given an affirmative answer to this question.
Indeed the inference that I draw from that judgment is that Michael Gillard considered that Sergeant Flood had probably been guilty of corruption.
The case against the respondent was circumstantial, but I consider that the journalists, together with Mr Gillard senior, were justified in concluding that it was a strong circumstantial case.
They accepted that it was probable that the sources had interests of their own but Mr Gillard had had to seek out the ISC insider, and had had difficulty in persuading him to divulge the relevant information.
I find far fetched the suggestion that he might have deliberately set out to deceive the police and Mr Gillard.
Although the judge considered, on the basis of Jameel, that responsible journalism did not require verification of the accusation made by the Article, his careful analysis of the evidence involved consideration of the evidential base of the allegations made in the Article.
The judge concluded that the case against Sergeant Flood was not strong on the facts known to the journalists, but found it significant that the police appeared to have sufficient evidence to justify obtaining a search warrant and the other action that they took.
There is a danger of using hindsight in a case such as this.
My initial reaction on reading the facts of this case was that the journalists had been reasonably satisfied, on the basis both of the supporting facts and of the action of the police that there was a serious possibility that Sergeant Flood had been guilty of corruption.
After a detailed analysis of the case I remain of that view.
Contrary to the decision of the Court of Appeal, I consider that the requirements of responsible journalism were satisfied.
I would allow this limb of the appeal.
Post Script: The approach to the decision of the trial judge
Before concluding this judgment I wish to comment on one matter of general importance raised by the Court of Appeal.
Before that court TNL invoked the following statement of principle by Sir Anthony Clarke MR when giving the judgment of the Court of Appeal in Galloway v Telegraph Group Ltd [2006] EWCA Civ 17, [2006] EMLR 221, para 68 another case involving Reynolds privilege: The right to publish must however be balanced against the rights of the individual.
That balance is a matter for the judge.
It is not a matter for an appellate court.
This court will not interfere with the judges conclusion after weighing all the circumstances in the balance unless he has erred in principle or reached a conclusion which is plainly wrong.
The Court of Appeal had no need to comment on this statement, for the court concluded that Tugendhat J had erred in principle in misunderstanding the effect of Jameel and paying no heed to the question of verification.
However, Lord Neuberger MR and Moore Bick LJ suggested that the statement in Galloway wrongly treated the balancing exercise required by a judge in a case such as this as being akin to the exercise of a discretion.
Lord Neuberger, at para 46 drew a distinction between the exercise of a discretion and the value judgment or balancing exercise that was necessary on the basis of the facts found in a case such as this.
He described the latter as raising an issue of law, as to which there was only one right answer.
He went on, however, (in para 48) to comment on a statement of Lord Bingham in Jameel [2007] 1 AC 359 para 36: 48.
I note that, at the end of his opinion in Jameels case, Lord Bingham referred to the fact that the House of Lords had not, like the judge and the jury, heard the witnesses and seen the case develop day after day, and the fact that the House had read no more than a small sample of the evidence.
Accordingly, he described it as a large step for the House to decide for itself whether Reynolds privilege could be invoked in that case.
It could be said to be an even larger step for an appellate court, which has not (and should not have) been taken through all the evidence, and which has not seen the witnesses and the development of the case over four days, to disagree with the trial judge's assessment, unless he has misunderstood the evidence, taken into account a factor he ought not to have taken into account, failed to take into account a factor he ought to have taken into account, or reached a conclusion no reasonable judge could have reached. 49.
In my view, a decision in a case such as this does not involve the exercise of a discretion and cannot therefore be approached as the court suggested in Galloways case.
Where a first instance court carries out a balancing exercise, the appeal process requires the appellate court to decide whether the judge was right or wrong, but it should bear in mind the advantage that the trial judge had in the ways described in Jameels case.
Where the determination is a matter of balance and proportionality, it is, generally speaking, difficult for an appellant to establish that the judge has gone wrong.
Save in the first sentence of para 49, in this passage Lord Neuberger did no more than recognise the advantage that the trial judge has over the Court of Appeal where a decision turns, in part, on evidence heard by the trial judge.
The extent to which the trial judge is at an advantage over the Court of Appeal will depend on the circumstances of the particular case.
The greater the advantage of the trial judge, the greater the weight to be attached to his decision and the more cogent must be the basis for finding that his decision was wrong.
The passage cited from Galloway went further.
It applied in the context of Reynolds privilege the same test that an appeal court should apply when considering an appeal against an exercise of discretion by a judge of first instance.
A decision on Reynolds privilege does not involve the exercise of discretion.
There are, none the less, a number of cases in other contexts, some at the highest level, where appellate courts have applied or endorsed a similar approach to that stated in the fourth sentence of the quotation from Galloway set out above, principally in cases where there is room for a legitimate difference of judicial opinion as to what the answer should be and where it will be impossible to say that one view is demonstrably wrong and the other demonstrably right: see eg George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] AC 803, 815H per Lord Bridge, Designers Guild Ltd v Russell Williams (Textiles) Ltd [2001] FSR 113, 122 per Lord Hoffmann approving words of Buxton LJ in Novowzian v Arks (No 2) [2000] FSR 363, 370 and Pro Sieben Media AG v Carlton UK Television Ltd [1999] 1 WLR 605, 612 3 per Walker LJ; see also British Fame v MacGregor (The MacGregor) [1945] AC 197 and Datec Electronics Holdings Ltd v United Parcels Service Ltd [2007] UKHL 23, [[2007] 1 WLR 1325, para 46.
Context is all important.
There is a spectrum, well identified in In re Grayan Building Services Ltd [1995] Ch 241, 254, where Hoffmann LJ stated that generally speaking, the vaguer a standard and the greater the number of factors which the court has to weigh up in deciding whether or not the standards [i.e. the relevant legal standards or test] have been met, the more reluctant an appellate court will be to interfere with the trial judges decision.
How, and in particular whether within or outside this spectrum, an issue of Reynolds privilege should be addressed is a matter on which I would wish to hear oral argument in a context where it mattered before reaching any conclusion.
We have heard no oral argument on such points.
In these circumstances I do not consider that this Court should lay down any general principle as to the approach to be adopted by an appellate court to an issue of Reynolds privilege.
The second limb of the appeal.
The DPS report clearing Sergeant Flood was made, internally, on 2 December 2006.
Its result was not communicated to TNL until 5 September 2007.
On that date the Article still remained on the TNL website, and TNL neither removed it nor qualified it.
In these circumstances, Tugendhat J held that the protection of Reynolds privilege did not extend beyond 5 September 2007.
Before the Court of Appeal TNL appealed without success against that finding.
They have appealed against it before this Court.
Time did not permit us to hear argument in relation to this limb of TNLs appeal, and it was agreed that it should be adjourned, to be pursued, if appropriate, after judgment had been given in respect of the first limb of the appeal.
The Court is prepared to hear submissions on the second limb if so requested.
LORD BROWN
The critical issue for decision in this appeal is whether Reynolds priviledge attaches to TNLs publication of the article set out at para 4 of Lord Phillips judgment.
The undisputed background to the publication was that the Metropolitan Police were at the time carrying out an investigation into allegations that Sergeant Flood had abused his position as a police officer with the Extradition Unit by corruptly accepting substantial bribes in return for passing confidential information about possible plans to extradite certain Russian oligarchs.
The defamatory meanings contended for in respect of the article range from there were strong grounds to believe that Sergeant Flood was guilty of such corruption, through an intermediate meaning that there were reasonable grounds to suspect such guilt (these being Sergeant Floods alternative contended for meanings), to there were grounds which objectively justified such a police investigation (TNLs contended for meaning).
It follows that this case has little to do with the repetition rule.
It is not suggested that the article repeated as such an allegation that Sergeant Flood was guilty of corruption (Lord Phillips Chase level 1meaning see para 8).
Rather it asserted one or other of the above range of lesser allegations.
Accordingly, to attract Reynolds privilege, it is these lesser allegations that TNL must establish they were justified in publishing a different task, of course, from that which, were the Reynolds defence to fail, TNL would have a trial, namely to justify whichever meaning the jury then decided the Article in fact bore.
I agree with Lord Phillips view (para 51) that the responsible journalist should have regard to the full range of meanings that a reasonable reader might attribute to the publication.
As is now well established, Reynolds privilege attaches to a defamatory publication which may properly be regarded as being in the public interest notwithstanding that it may be incapable of being justified as true and may therefore leave the defamed individual with no opportunity to vindicate his reputation and no compensation for its destruction.
It has been exhaustively considered in a series of authoritative judgments, most helpfully perhaps in Reynolds itself Reynolds v Times Newspapers Ltd [2001] 2 AC 127 , Loutchansky v Times Newspapers Ltd (Nos 2 5) [2002] QB 783, Bonnick v Morris [2003] 1 AC 300 and Jameel (Mohammed) v Wall Street Journal Europe Sprl [2007] 1 AC 359.
In deciding whether Reynolds privilege attaches (whether the Reynolds public interest defence lies) the judge, on true analysis, is deciding but a single question: could whoever published the defamation, given whatever they knew (and did not know) and whatever they had done (and had not done) to guard so far as possible against the publication of untrue defamatory material, properly have considered the publication in question to be in the public interest? In deciding this single question, of course, a host of different considerations are in play.
One starts with the (expressly non exhaustive) list of ten factors identified by Lord Nicholls in Reynolds itself.
As the present case well illustrates, however, depending on the particular publication in question, there are likely to be other relevant considerations too.
Amongst the additional relevant considerations arising here are, for example, the journalists view (accepted by the judge) that the publication of the article would not merely inform the public of the particular allegation of corruption being investigated but would also tend to encourage its speedy and thorough investigation.
Further, with regard to the naming of Sergeant Flood, the consideration was, first, that his identity would in any event be known to all who knew that he had been removed from the Extradition Unit and, secondly, that, if he were not named, other members of that Unit might come under suspicion besides, of course, the consideration that names lend interest and impact to a publication, particularly where, as here, there is an obvious connection between Sergeant Floods name and Noah (referred to in paragraph 5 of the article).
To my mind the critical question in this appeal indeed the only real point of principle calling for decision is whether it can ever properly be said to be in the public interest to publish, as here, the detailed allegations underlying a criminal investigation to publish, in effect, a summary of the case against the suspect, reliant in part on anonymous sources, before even the police have investigated the allegations, let alone charged the suspect.
I confess that I was at one time very doubtful whether Reynolds privilege could ever attach to such a publication.
This is not, after all, a case of pure reportage a case in which the public interest lies simply in the fact that the statement was made, when it may be clear that the publisher does not subscribe to any belief in its truth (Lord Hoffmann in Jameel at para 62) a case like Al Fagih v H H Saudi Research and Marketing (UK) Ltd [2002] EMLR 215 where the disinterested publication of the respective allegations and responses by both sides to a political dispute was held to attract Reynolds privilege, the mere fact of such allegations being made being a matter of public interest.
Nor, indeed, is it a case like Jameel itself, helpfully described by Lord Phillips (para 78) as being analogous to reportage, where the real public interest in the publication lay in its demonstration of the fact that Saudi Arabia was cooperating with the United States in the fight against terrorism, the inclusion of the defamed companys name in the blacklist of those who might wittingly or unwittingly funnelled funds to terrorist organisations showing that this cooperation extended to companies which were by any test within the heartland of the Saudi business world (Lord Hoffmann at para 52).
Rather the justification for the publication of the article here must lie in it being in the public interest that the public should know, in advance of the outcome of the investigation, that such an allegation has been made and is being duly investigated.
TNL must establish that this public interest would not be sufficiently served by a report merely of the Metropolitan Police press release set out at para 7 of the statement (privileged as this is under section 15 of, and para 9(1) (b) of Schedule 1 to, the Defamation Act 1996) but rather required, or at least could properly be considered by TNL to require, an altogether fuller account of the nature of the alleged corruption and the case supporting it.
None of this has seemed to me by any means self evident and, indeed, a strong case against such a publication being in the public interest can be made, founded upon authorities such as Purcell v Sowler (1877) 2 CPD 215 and De Buse v McCarthy [1942] KB 156 and upon the consideration that there may be more to lose than to gain by ventilating in public an anonymous accusation such as that made here before even it is investigated by the police.
At the end of the day, however, I am persuaded that there is no principle of law which precludes TNL from invoking Reynolds privilege in a case such as this.
As the Court of Appeal themselves noted, authorities like Purcell and De Buse pre dated the Human Rights Act 1998 and, indeed, the development of the Reynolds public interest defence itself.
Reynolds, itself anticipating the 1998 Act and the impact of article 10 of the Convention, was intended, as Lord Hoffmann observed in Jameel (at para 38), to promote greater freedom for the press to publish stories of genuine public interest.
Lord Phillips (para 47) and Lord Mance (at para 142) have both cited examples of recent Strasbourg jurisprudence plainly supporting the view that the press should enjoy such greater freedom.
Of course not every anonymous denunciation to the police will attract Reynolds privilege.
Far from it.
That, as Mr Price QC for Sergeant Flood was at pains to point out, would indeed be a charter for malice.
But where, as here, the denunciation is of a public officer, relates to a matter of obvious public importance and interest, and may justifiably appear to the journalists to be supported by a strong circumstantial case, it seems to me properly open to the trial judge to find the defence made out.
I too, therefore, would allow the appeal and restore Tugendhat Js judgment on the first limb of the appeal.
LORD MANCE
Introduction
The appellants (TNL) published in The Times on 2 June 2006 and also on their website an article in defamatory terms about Detective Sergeant Flood.
TNL advance two defences, qualified justification and public interest privilege.
The present appeal concerns only the latter, which was tried as a preliminary issue.
Further, it concerns only the first limb of that issue: the existence of a public interest defence up to 5 September 2007, the date on which TNL learned of the internal police report clearing DS Flood but failed to remove or qualify the article on their website.
The public interest defence
The contours of a defence of public interest privilege have been considered in a line of recent cases including Reynolds v Times Newspapers Ltd [2001] 2 AC 127, Bonnick v Morris [2002] 1 AC 300 (PC) and Jameel Mohammed v Wall Street Journal Europe Sprl [2006] UKHL 44; [2007] 1 AC 359.
Its basic elements are the public interest of the material and the conduct of the journalists at the time.
Whether the material is true is a neutral circumstance.
In contrast, whether at the time the relevant journalists believed it to be true is (other than in cases of purely neutral reportage of allegations) highly material when considering their conduct.
See, on these points, Jameel, para 62, per Lord Hoffmann.
Although the words I have cited from Jameel treat the conduct of the journalists as a separate element of the test, an alternative approach subsumes the second element within the first.
It will not be, or is unlikely to be, in the public interest to publish material which has not been the subject of responsible journalistic enquiry and consideration.
The alternative approach appears in Lord Nichollss speech in Reynolds, listing a series of matters as being of potential relevance to an overall decision whether publication was in the public interest.
He said, at p 205A: Depending on the circumstances, the matters to be taken into account include the following.
The comments are illustrative only. 1.
The seriousness of the allegation.
The more serious the charge, the more the public is misinformed and the individual harmed, if the allegation is not true. 2.
The nature of the information, and the extent to which the subject matter is a matter of public concern. 3.
The source of the information.
Some informants have no direct knowledge of the events.
Some have their own axes to grind, or are being paid for their stories. 4.
The steps taken to verify the information. 5.
The status of the information.
The allegation may have already been the subject of an investigation which commands respect. 6.
The urgency of the matter.
News is often a perishable commodity. 7.
Whether comment was sought from the plaintiff.
He may have information others do not possess or have not disclosed.
An approach to the plaintiff will not always be necessary. 8.
Whether the article contained the gist of the plaintiff's side of the story. 9.
The tone of the article.
A newspaper can raise queries or call for an investigation.
It need not adopt allegations as statements of fact. 10.
The circumstances of the publication, including the timing.
This list is not exhaustive.
The weight to be given to these and any other relevant factors will vary from case to case.
Lord Nicholls did not regard any of these factors as a pre condition which must always be satisfied.
In particular, he viewed the steps taken to verify the information as one factor among all others.
The same approach appears in the opinion which he gave in the Privy Council in Bonnick v Morris [2003] 1 AC 300.
In determining the public interest of material, the court considers both its subject matter and content and the appropriateness of publishing it as and when it was (or is to be) published.
The speeches in Jameel [2007] 1 AC 359 discuss the extent to which it remains helpful to view the privilege in terms of the test (traditionally applied in cases of qualified privilege) of a reciprocal duty on the part of the press to publish and an interest on the part of the public to know.
It is a truism that what engages the interest of the public may not be material which engages the public interest: para 31 per Lord Bingham.
Lord Bingham, with whom Lord Hope agreed, thought that a duty/interest test still underpinned public interest privilege: paras 31, 92 and 105 106.
But Lord Hoffmann thought at para 50 that it should be regarded as a proposition of law that, where there is a public interest in publishing, the duty and interest are taken to exist.
Lady Hale said at para 147 that there must be a real public interest in communicating and receiving the information and in having [it] in the public domain, but that was less than a test of what the public need to know, which would be far too limited.
Lord Scott engaged in a detailed discussion at paras 128 138, concluding that the duty was the presss professional duty to publish information of real and unmistakeable public interest to the public, and the interest was the publics in free expression, both of which only existed provided that the press satisfied the test of responsible journalism.
In so far as there was any difference between the speeches of the members of the House, he agreed with Lord Hoffmanns.
Like Lord Phillips at para 44, I find Lady Hales formulation helpful.
It also seems consistent with both Lord Hoffmanns succinct and Lord Scotts more detailed discussion of the point.
It is for the court to determine whether any publication was in the public interest.
But the court gives weight to the ordinary standards of responsible journalism.
It does so in a broad and practical way, and in contexts going beyond the steps taken to check material.
This can be illustrated, first, by reference to Bonnick v Morris [2002] 1 AC 300.
In that case, a newspaper article had recorded in a restrained and even handed way a difference between an authoritative source and Mr Bonnick, former managing director of the company concerned, as to the legitimacy and propriety of two contracts.
But it had continued Mr Bonnicks services as managing director were terminated shortly after the second contract was agreed.
The article did not record Mr Bonnicks explanation that he had made [the company] fire him, because, based on the advice he had received, this would enable him to obtain more compensation.
Without this explanation, the natural and ordinary meaning of the article, to an ordinary reader, was that he had been dismissed because the company was dissatisfied with his handling of the contracts.
Nonetheless, the Privy Council held the public interest defence made out.
Two points arise.
First, the Privy Council held that the objective standard of responsible journalism was to be applied in a practical and flexible manner and not exclusively by reference to the single meaning which the law attributed to the particular words, para 24.
A journalist should not be penalised for making a wrong decision on a question of meaning on which different people might reasonably take different views, para 24, although questions of degree arose and the more obvious the defamatory meaning, and the more serious the defamation, the less weight will a court attach to other possible meanings when considering the conduct to be expected of a responsible journalist in the circumstances, para 25.
The report in Bonnick v Morris records, para 19, that the journalist (Mrs Morris) seems to have thought that she was not making any such statement as set out in the pre penultimate sentence of para 127 above, but the Privy Council said that rather more relevantly and importantly one of the judges in the Court of Appeal took the same view, in other words that the article was open to different readings in the eyes of reasonable persons.
The principle endorsed by the Privy Council in Bonnick v Morris appears to be, therefore, that a responsible journalist would have had in mind the less damaging of the possible meanings that reasonable persons might attach to the article, and would have been entitled to focus in that direction when checking and reporting the relevant subject matter.
In the present case, the possible meanings suggested by the opposing parties see para 154 below are so close that any such principle appears irrelevant.
At all events, the parties have not suggested that significance attaches for present purposes to the differences between such meanings.
I can therefore leave this aspect of Bonnick v Morris on one side, without attempting to analyse it or its implications further.
The second, presently relevant, aspect of Bonnick v Morris is that, in forming its overall judgment as to the availability of the defence of public interest on the facts, the Privy Council was prepared to overlook some respects in which the journalists conduct could legitimately be criticised.
The activities of the company and the competence of its management were matters of considerable public interest.
The journalist had fallen short of the standards to be expected of a responsible journalist by not making further enquiries of the anonymous source about the reasons for Mr Bonnicks dismissal and not including his explanation (so that the case was near the borderline).
But, despite this, the publication was held overall to be covered by public interest privilege: para 27.
The need to look at the position in the round was also identified by Lord Bingham in Jameel, para 34, when he disclaimed too close a focus on particular ingredients which have (or have not) been included in a composite story.
He said: This may, in some instances, be a valid point.
But consideration should be given to the thrust of the article which the publisher has published.
If the thrust of the article is true, and the public interest condition is satisfied, the inclusion of an inaccurate fact may not have the same appearance of irresponsibility as it might if the whole thrust of the article is untrue.
A similar latitude has been recognised with regard to the content and presentation of news items of general public interest, particularly with regard to the naming of persons whose reputations might be adversely affected.
In Jameel, the general public interest in the article was that it showed whether and how far the Saudi Arabian authorities were cooperating with United States authorities in cutting off funds to terrorist organisations.
The potential libel was that the article meant that there were reasonable grounds to suspect, or alternatively to investigate, the involvement of Mr Jameel and his trading company in the witting or unwitting channelling of funds to terrorist organisations.
Was it appropriate for the article to name Mr Jameel and his company? As to this, Lord Hoffmann said at paras 51 52: (b) Inclusion of the defamatory statement If the article as a whole concerned a matter of public interest, the next question is whether the inclusion of the defamatory statement was justifiable.
The fact that the material was of public interest does not allow the newspaper to drag in damaging allegations which serve no public purpose.
They must be part of the story.
And the more serious the allegation, the more important it is that it should make a real contribution to the public interest element in the article.
But whereas the question of whether the story as a whole was a matter of public interest must be decided by the judge without regard to what the editor's view may have been, the question of whether the defamatory statement should have been included is often a matter of how the story should have been presented.
And on that question, allowance must be made for editorial judgment.
If the article as a whole is in the public interest, opinions may reasonably differ over which details are needed to convey the general message.
The fact that the judge, with the advantage of leisure and hindsight, might have made a different editorial decision should not destroy the defence.
That would make the publication of articles which are, ex hypothesi, in the public interest, too risky and would discourage investigative reporting.
In the present case, the inclusion of the names of large and respectable Saudi businesses was an important part of the story.
It showed that co operation with the United States Treasury's requests was not confined to a few companies on the fringe of Saudi society but extended to companies which were by any test within the heartland of the Saudi business world.
To convey this message, inclusion of the names was necessary.
Generalisations such as "prominent Saudi companies", which can mean anything or nothing, would not have served the same purpose.
Weight was therefore given to the newspapers editorial judgment as to what details (by way of naming) were necessary to convey the essential message, which was that US Saudi co operation went to the heart of the Saudi business world.
This might simply have been asserted, without names, but the press was entitled to lend it credence by giving names.
Subsequent authority underlines the point with regard to the inclusion of names.
In re British Broadcasting Corpn; In re Attorney Generals Reference (No 3 of 1999) [2009] UKHL 34; [2010] 1 AC 145, the issue was whether an anonymity order should be discharged, to enable the BBC to identify a defendant who had been acquitted of rape on the basis of the trial judges decision (subsequently been held to be wrong in law) to exclude certain DNA evidence.
The BBCs aim was to undermine his acquittal and campaign for a retrial pursuant to Part 10 of the Criminal Justice Act 2003.
Lord Hope dealt with the issue of naming as follows: 25.
Lord Pannick suggested it would be open to the BBC to raise the issue of general interest without mentioning D's name or in any other way disclosing his identity.
But I think that Mr Millar was right when he said that the BBC should not be required to restrict the scope of their programme in this way.
The freedom of the press to exercise its own judgment in the presentation of journalistic material has been emphasised by the Strasbourg court.
In Jersild v Denmark (1994) 19 EHRR 1, para 31, the court said that it was not for it, nor for the national courts for that matter, to substitute their own views for those of the press as to what technique of reporting should be adopted by journalists.
It recalled that article 10 protects not only the substance of the ideas and the information expressed but also the form in which they are conveyed.
In essence article 10 leaves it for journalists to decide what details it is necessary to reproduce to ensure credibility: see Fressoz v France (1999) 31 EHRR 28, para 54.
So the BBC are entitled to say that the question whether D's identity needs to be disclosed to give weight to the message that the programme is intended to convey is for them to judge.
As Lord Hoffmann said in Campbell v MGN Ltd [2004] 2 AC 457, para 59, judges are not newspaper editors.
They are not broadcasting editors either.
The issue as to where the balance is to be struck between the competing rights must be approached on this basis. 26.
Will the revealing of D's identity in connection with the proposed programme pursue a legitimate aim? I would answer that question in the affirmative.
In Jersild v Denmark, at para 31 it was recognised that there is a duty to impart information and ideas of public interest which the public has a right to receive.
The programme that the BBC wish to broadcast has been inspired by the removal of the double jeopardy rule.
What this means in practice for our system of criminal justice is a matter of legitimate public interest. [T]he arguments that the programme wishes to present will lose much of their force unless they can be directed to the facts and circumstances of actual cases.
The point about D's name is that the producers of the programme believe that its disclosure will give added credibility to the account which they wish to present.
This is a view which they are entitled to adopt and, given the content of the programme as a whole, it is an aim which can properly be regarded as legitimate.
Lord Hope went on to deal with the question of proportionality, balancing the public's right to receive information against D's right to be protected against publication of details of his private life, in the light of the fact that the statute now enabled application to be made to retry him for the offence of rape, of which he had been previously convicted; the conclusion reached was that, although the interference with D's article 8 right would be significant, it would be proportionate when account was taken of the weight to be given to the competing right to freedom of expression that the BBC wished to assert.
Lord Brown put the matter tersely: 65.
What weight, then, should be attached to the BBC's article 10 right to free expression? Whilst Lord Pannick naturally recognises the high value ordinarily attaching to the freedom of the media to report on court proceedings and to discuss matters of obvious public interest such as arise here, he nevertheless suggests that very little weight should be given to that right in this case.
Why, he asks rhetorically, cannot the BBC broadcast their programme simply referring to D as D without actually identifying him? 66.
The short answer to that submission is in my opinion to be found in paragraph 34 of Lord Steyn's speech in In re S (A Child) [2005] 1 AC 593 . : such a programme would indeed be very much disembodied and have a substantially lesser impact upon its audience.
In a yet more recent case, re Guardian News and Media Ltd [2010] UKSC 1; [2010] 2 AC 697, para 63, Lord Rodger summarised the position characteristically: 63.
Whats in a name? A lot, the press would answer.
This is because stories about particular individuals are simply much more attractive to readers than stories about unidentified people.
It is just human nature.
Writing stories which capture the attention of readers is a matter of reporting technique, and the European Court holds that article 10 protects not only the substance of ideas and information but also the form in which they are conveyed: News Verlags GmbH & Co KG v Austria (2000) 31 EHRR 246, 256, para 39, quoted at para 35 above.
More succinctly, Lord Hoffmann observed in Campbell v MGN Ltd, para 59, judges are not newspaper editors.
See also Lord Hope of Craighead in In re British Broadcasting Corpn [2010] 1 AC 145, para 25.
This is not just a matter of deference to editorial independence.
The judges are recognising that editors know best how to present material in a way that will interest the readers of their particular publication and so help them to absorb the information.
A requirement to report it in some austere, abstract form, devoid of much of its human interest, could well mean that the report would not be read and the information would not be passed on.
Ultimately, such an approach could threaten the viability of newspapers and magazines, which can only inform the public if they attract enough readers and make enough money to survive.
The courts therefore give weight to the judgment of journalists and editors not merely as to the nature and degree of the steps to be taken before publishing material, but also as to the content of the material to be published in the public interest.
The courts must have the last word in setting the boundaries of what can properly be regarded as acceptable journalism, but within those boundaries the judgment of responsible journalists and editors merits respect.
This is, in my view, of importance in the present case.
The European Convention on Human Rights
British courts have developed the defence of public interest privilege under the influence of principles laid down in the European Court of Human Rights.
The case law of that Court is cited in passages from the judgments of Lord Hope and Lord Rodger, cited above.
It emphasises the importance of the role of the press (and some other individuals or bodies, eg bodies protecting environmental interests) as public or social watchdogs (or chiens de garde): see eg Jersild v Denmark (1994) 19 EHRR 1, para 35, Goodwin v United Kingdom (1996) 22 EHRR 123, para 39, Affaire Vides Aizsardzbas Klubs v Lettonie (Application No 57829/00), para 42, Trsasg A Szabadsgjogokrt v Hungary (Application No 37374/05), paras 27, 36 and 38, Riolo v Italy (Application No 42211/07), para 55 and 62, Flux (No 7) v Moldova (Application No 25367/05), para 40, cited below in para 142, Axel Springer AG v Germany (Application No 39954/08) paras 79 and 91, Von Hannover v Germany (Applications Nos 40660/08 and 60641/08), paras 102 and 110.
In that context, the court has been ready to tolerate a degree of exaggeration or even provocation in the way the press expresses itself: see eg Prager v Oberschlick (1995) 21 EHRR 1, para 38, Standard Verlagsgesellschaft mbH (no 2) v Austria (Application No 37464/02), para 40, Riolo v Italy, para 68 and Axel Springer AG v Germany, para 81, and has confirmed that it is not for the Court, any more than it is for the national courts, to substitute its own views for those of the press as to what techniques of reporting should be adopted in a particular case: Axel Springer AG v Germany para 81 and Von Hannover v Germany, para 102.
It has also recognised that the bounds of press criticism admissible in respect of politicians and also, though not necessarily to the same extent, officials are larger than they are in relation to private individuals: see eg Affaire Vides, para 40c) and Flux (No 7) v Moldova, para 38, cited in para 142 below.
The conduct of the judiciary, above all in exercising their functions, but also in other contexts, is likewise a legitimate subject of press scrutiny: Affaire Polanco Torres and Movilla Polcanco v Spain (Application No 34147/06), para 42.
In relation to private individuals, the court stated in Pedersen and Baadsgaard v Denmark (No 2) (2006) 42 EHRR 486, para 78 that: special grounds are required before the media can be dispensed from their ordinary obligation to verify factual statements that are defamatory of private individuals.
Whether such grounds exist depends in particular on the nature and degree of defamation in question and the extent to which the media can reasonably regard their sources as reliable with respect to the allegations (see, among other authorities, McVicar v the United Kingdom, no 46311/99, 84, ECHR 2002 III, and Bladet Troms and Stensaas, cited above, 66).
This statement was effectively repeated in Riolo v Italy, para 61 and Standard Verlagsgesellschaft, para 38.
But in Affaire Polanco Torres, above, allegations of reported irregularity in corporate affairs by the spouses of two court presidents and a chief prosecutor were seen as matters of public interest, because they were directed to the spouses as such, as well as because one of the spouses had in her reported denial pointed at the president of the region of Cantabria, the most senior regional politician, as probably responsible for a manoeuvre implicating her.
The case did not therefore involve reporting on purely private aspects of a persons life: para 46.
The extent to which the press may reproduce information derived from sources which it cannot itself prove has been considered by that Court in several cases which merit some examination.
In White v Sweden (2006) 46 EHRR 23, two Swedish newspapers had published articles, which mainly contained reports of allegations made by others, in particular Dirk Coetzee, a former senior official of the South African security police.
The articles contained strong statements which designated the applicant as a serious criminal including a statement by an unnamed source that He kills without a seconds hesitation and as having a reprehensible life style, involving smuggling and poaching in southern Africa, although it did not appear that he had been convicted of any crime.
Among the criminal offences ascribed to him was the murder of Olof Palme, the Swedish Prime Minister (under a heading He is pointed out as PALMES MURDERER), although the articles also contained statements of other individuals which rejected the allegations made against the applicant and, in one case, a denial by the applicant himself.
The journalists had gathered much information from conservation groups to support what was said about smuggling and poaching, but, although they had had high ambition to find the degree of truth of Coetzees statements regarding murder and Coetzee appeared credible, the truth of such statements was not shown.
The Swedish Court of Appeal concluded in the light of the evidence about smuggling and poaching that Mr White was not an ordinary private person in respect of whom there was a particular need of protection (2006) 46 EHRR 23, para 28.
The Court of Human Rights said in this light that: 29.
The Court of Appeal balanced the applicants interests against the public interest in the relevant matters, namely the unsolved murder of the former Swedish Prime Minister Olof Palme and, especially, the so called South Africa trail, in the criminal investigation.
Undoubtedly, both the murder of Mr Palme and that particular avenue of investigation were matters of serious public interest and concern.
As such, there was little scope for restricting the communication of information on these subjects.
The Court of Human Rights found that the Swedish courts had balanced the opposing interests appropriately, and were justified in finding that the public interest in publishing the information in question outweighed the applicants right to the protection of his reputation.
The case involves unusual facts, but smuggling and poaching are not the same as murder, and the case indicates that there are circumstances in which the press may legitimately keep the public informed of matters of real public importance, even though they are under active criminal investigation, where the person affected is not an ordinary private person.
The later case of Flux (No 7) v Moldova (Application No 25367/05) involved media reports of stories about politicians emanating from a source other than the applicant.
The article complained of was published under the headline: Four more communists have obtained housing on our money, and it stated: According to certain sources in Parliament, who have asked to remain anonymous, the future owners of the relevant apartments include V.S., the president of the communist faction in Parliament, C.G., head of the Parliament apparatus, and M.R., the president of Floreti county.
V.S. issued proceedings.
The Court of Human Rights said that: 38.
The plaintiff in the domestic proceedings was a politician and president of the Communist faction in Parliament at the time of the events.
As such, he inevitably and knowingly lays himself open to close scrutiny of his every word and deed by both journalists and the public at large, and he must consequently display a greater degree of tolerance (see Lingens v Austria, 8 July 1986, 42, Series A no. 103).
The domestic courts would have had to find a particularly pressing social need to sanction the newspaper in such circumstances.
The Court observes that the article in question was aimed at criticising Parliament for alleged lack of transparency, rather than at disparaging V.S. specifically.
The latter's name appeared twice in the entire article.
While not focusing on any particular person, the article mentioned the names of all the alleged beneficiaries of the four apartments and described the attempts to verify the information with some of them, including V.S. 39.
The Court also notes that the article published by the applicant newspaper dealt with the issue of whether the Parliament leadership had spent public money in a non transparent manner.
This was therefore a matter of genuine public interest, which is also to be given additional protection under article 10 of the Convention. 40. [The Court] also reiterates that, as part of their role of public watchdog, the media's reporting on 'stories' or 'rumours' emanating from persons other than the applicant or 'public opinion' is to be protected where they are not completely without foundation (see Thorgeir Thorgeirson v Iceland, 25 June 1992, 65, Series A no. 239, and Timpul Info Magazin and Anghel, no. 42864/05 (27/11/2007), 36). 41.
In situations such as this, where on the one hand a statement of fact is made and insufficient evidence is adduced to prove it, and on the other the journalist is discussing an issue of genuine public interest, verifying whether the journalist acted professionally and in good faith becomes paramount (see Flux v Moldova (no. 6), no. 22824/04 (29/07/2008), 26 et seq.).
Flux (No 7) v Moldova is therefore an illustration of the more relaxed approach to press reporting on a matter of real public interest concerning an important public figure.
These cases may be compared with the Strasbourg Courts decision in A v Norway (Application No 28070/06), in which reference was made to White v Sweden as a case in which the Court has recognised reputation.
A v Norway was a case about a private individual, who had in 1988 been convicted of murder, attempted murder and assault using a knife and who now lived near and visited a recreation area known as Baneheira, in the city of Kristiansand.
In May 2000 two young girls aged 8 and 10 were raped and stabbed to death in Baneheira.
A newspaper then focused on two successive days on the applicant.
He was repeatedly described as a convicted murderer, with sub titles relating to his convictions such as Beserk with a knife and Victims at random.
In relation to the current rapes and killings, his assertions of innocence were recorded, but the place where the rapes and killings occurred was stated to be his nearest neighbour, and he was described as probably the most interesting of several criminally convicted persons whose movements are now being checked by the police.
In answer to the question whether the police had got the murderer in the papers?, the chief constable was quoted as saying that the police have received so much information of substance that they have the answer in their documents to the question who had murdered the two young girls.
Disagreeing with the majority judges in the Norwegian Supreme Court, the Strasbourg Court held at para 72 that the disputed press coverage was conducted in a manner which directly affected the applicants enjoyment of his right to respect for private life.
It noted in this connection that, as observed by the minority in the Norwegian Supreme Court, the applicant was persecuted by journalists against whom he found it difficult to protect himself at a time when he was in a phase of rehabilitation and social integration ., had a fixed abode and pursued gainful employment, whereas [a]fter the publications he found himself unable to pursue his job and he had to leave his home and was driven into social exclusion para 72.
There had been a particularly grievous prejudice to the applicants honour and reputation that was especially harmful to his moral and psychological integrity and to his private life para 73, and the majority in the Norwegian Supreme Court had failed to maintain a reasonable relationship of proportionality between the interests of the newspapers freedom of expression and those of the applicant in having his honour, reputation and privacy protected para 74.
The decision in A v Norway is in my view unsurprising, bearing in mind that it concerned newspaper conduct which the Strasbourg Court found to have persecuted a private individual, caused him to be unable to work and to have to leave his home, driven him into social exclusion and so been especially harmful to his moral and psychological integrity and private life.
The European Court of Human Rights in Affaire Polanco Torres (Application No 34147/06) affirmed the legitimacy under article 10 of the press reporting allegations of irregularity in corporate affairs based upon computer disks which El Mundo had received anonymously, in circumstances where (a) the companys former accountant (dismissed after the disappearance of its accounting disks) had verified to the newspaper as genuine in a meeting, and (b) the paper had contacted one of the spouses implicated and had published with its report her denial and her riposte pointing at the president of the region of Cantabria.
The European Court regarded these as important steps showing responsible journalism (para 50) and it noted the relevance of having regard to the nature and degree of the defamation involved; it also noted the need to consider the reasonableness of a journalists reliance on his sources as the situation appeared to the journalist at the time, and not with hindsight: para 43.
Most recently, in its judgment in Axel Springer AG v Germany (Application No 39954/08), delivered after the oral hearing in the present appeal, the Court stated, at para 82, that: special grounds are required before the media can be dispensed from their ordinary obligation to verify factual statements that are defamatory of private individuals.
Whether such grounds exist depends in particular on the nature and degree of the defamation in question and the extent to which the media can reasonably regard their sources as reliable.
In that case, the first article in issue involved the publication in the Bild Zeitung of a report that a well known actor who played the part of a police superintendent in a popular television series has been caught in possession of cocaine at the Munich Oktoberbierfest.
The article was based on information provided by the press officer at the Munich public prosecutors office, and the Court said, citing previous authority, that Consequently . it had a sufficient factual basis para 105.
The fact that the truth of the information was not in dispute in the subsequent proceedings in Germany and Strasbourg was mentioned by the Court as a separate point (para 105).
The Court went on to conclude that there was nothing to suggest that the newspaper had not undertaken the appropriate exercise of balancing its interest in publishing against the actors right to respect for his private life, and, disagreeing with the German courts, that there was no reason to disagree with the newspapers decision to publish.
The Court referred to both A v Norway and White v Sweden: see paras 61, 74, 83 and 90.
It also drew a broad distinction between private individuals and persons acting in a public context (para 91), which it reiterated in identical terms in its parallel judgment in Von Hannover v Germany, para 110.
German authority
It is of interest also to note in passing jurisprudence in the highest German courts, regarding the responsibility of the press in relation to the publication of allegations of the commission of criminal offences.
Of particular interest are decisions of the Federal Constitutional Court in 1 BvR 765/97, reported at NJW 1997, 2589 and 1 BvR 152/01 and 1 BvR 160/04, reported at BVerfGK 9, 317, and a decision of the Federal Supreme Court VI ZR 51/99, reported in BGHZ 143, 199 and referred to in the latter Constitutional Court case.
In short, these decisions recognise as permissible in principle under German law the reporting of matters giving rise to the suspicion of commission of criminal offences, including those already under criminal investigation.
Provided that the report is the product of appropriately careful journalism, identifying an appropriate minimum of facts speaking for its truth, so making it worthy of publication, and is fairly expressed without distortion or undue sensationalism, it is not incumbent on the press to be able to prove the truth of the reported suspicions.
The press will however have to consider, inter alia, whether it is appropriate to disclose the name of the suspect.
It usually will be with suspected criminality of a serious kind.
But, where the suspicion relates to misconduct in public office, a particular public interest exists, which can, even in a case of lesser criminality, justify the publication of both the subject matter and the name of the public servant involved.
Where a published article can be read as having a range of meanings, German law appears, from the Federal Supreme Courts decision (p 206), to take the meaning least detrimental to the suspect, and so most favourable to the press.
As further developments occur (eg an outcome of criminal proceedings favourable to the accused), the press may have to permit publication of a corresponding report.
The present case
Against this background I return to the circumstances of the present appeal.
It was common ground in the Court of Appeal that the publication of the polices press statement that that they were conducting an investigation into allegations that a serving officer made unauthorised disclosures of information to another individual in exchange for money was privileged under the express terms of section 15 of the Defamation Act 1996.
In the Court of Appeal, Mr Price QC for Mr Flood was prepared to accept, in the light of this privilege and the significance attached to names in cases such as re British Broadcasting Corpn [2010] 1 AC 145 and In re Guardian News and Media Ltd [2010] 2 AC 697, that TNL was entitled to identify Mr Flood as the officer the subject of investigation.
The Court of Appeal was prepared to proceed on that basis, although Lord Neuberger doubted whether TNL would have thought it worthwhile to publish an article which confined itself to doing this: para 68.
Before the Supreme Court, Mr Price took a different line.
He noted that Mr Flood would not have sued if all that had been done was report the police press statement and Mr Floods name.
But he submitted, if necessary, that naming Mr Flood was not covered by any privilege and he relied on A v Norway.
However, his principal submission was, that, whatever might be the position in that respect, the article went too far in the detail it gave of allegations made against Mr Flood.
In particular, he submitted, and the Court of Appeal accepted, that the police informants allegations in paragraphs 5. 8, 15 and 16 of the article were prejudicial details which added inappropriate credence to the grounds on which the investigation was being pursued, and that their publication was not in the public interest.
Tugendhat J held that the article as a whole was on a matter of public interest because the conduct of police officers in general, and police corruption in particular, is a matter of interest to the community: para 123 and 131.
A police investigation into an allegation of police corruption was a story of high public interest and the purpose of publishing the story was to ensure that that investigation was carried out promptly which was also a matter of public interest: para 216.
The journalism was responsible in the sense that the publication on 2 June 2006 was a proportionate interference with [the Claimants] right to reputation, given the legitimate aim in pursuit of which the publication was made: paras 215 216.
He went on, that That is not to say that the judgment of [Times Newspapers] was a good judgment in the circumstances, but only that it was within the range of permissible editorial judgments which the court is required to respect: para 217.
The Court of Appeal drew a distinction between the publication of detailed allegations of corruption where the corruption is proven, or reasonable steps have been take to verify its occurrence, and their publication in situations in which corruption is simply alleged and under investigation, paras 59, 63 and 68 per Lord Neuberger MR, paras 102 104 per Moore Bick LJ and paras 110 118 per Moses LJ.
Lord Neuberger noted that the presss editorial judgment could not dispense with the requirements of Reynolds privilege, from which he concluded that the publication of the allegations could not be privileged, unless it can be said to have been responsible journalism, ie to have been in the public interest with the journalists having taken reasonable steps to verify the truth of the allegations: paras 64 66.
Moore Bick LJ was unable to accept the judges conclusion that part of the public interest lay in prompting the police to pursue the investigation; had it been, the article would, he thought, have been written differently, para 106; Moses LJ also thought that the suggested subjective motives of the journalists to ensure that the investigation was vigorously pursued does [sic] not assist in identifying whether or not the publication was in the public interest and that the article was not drawn in a way which suggested such a purpose: para 114; he thought that the publication of an article simply recording that the police were pursuing an investigation of corruption against a fellow police officer would have been of public interest, as underlining the significance of alleged corruption, as providing some assurance to the public and also as providing some impetus to pursuing the investigation to conclusion: para 114, but that publication of the details on which the investigation was founded was not in the public interest, para 115 118.
The newspaper must be left to justify any imputation, as yet undetermined, without protection of qualified privilege: para 118.
In concluding that it was not in the public interest to publish the alleged details, the Court of Appeal was influenced by their largely unchecked and unsupported nature: para 69 per Lord Neuberger, para 90 per Moore Bick LJ and para 118 per Moses LJ.
Lord Neuberger also said that When they were published in the article, they were . , as the journalists must have appreciated, no more than unsubstantiated unchecked accusations, from an unknown source, coupled with speculation: para 73; and Moses LJ said that their publication exposed DS Flood to the suggestion that unchecked and unsubstantiated allegations, from an unknown source, might be well founded: para 116.
Analysis
There is no suggestion that the article contained mere reportage.
Equally, however, it did not contain out and out allegations that the details were true.
Rather, it reported alleged details from which the nature and to some extent basis of the investigation could be ascertained.
The libel alleged by DS Flood is that the article meant that there were strong grounds to believe, or alternatively reasonable grounds to suspect, that DS Flood had abused his position by corruptly accepting bribes from some of Russias most wanted suspected criminals in return for selling highly confidential Home Office and police intelligence about attempts to extradite them to Russia, to which TNLs response is that it meant that DS Flood was the subject of an internal police investigation and that there were grounds objectively justifying such an investigation into whether he had received payments in return for such information.
The judge considered that these alternative meanings were not so far apart as to require any decision on meaning for present purposes.
That conclusion has not been challenged.
The suggestion of possible corruption of a very serious nature on the part of DS Flood was clearly very injurious to his reputation and feelings.
On the other hand, the conduct under investigation was not only serious, but also of great public interest, involving the possibility of police corruption at the instance of Russian oligarchs in the context of proceedings for their extradition from the United Kingdom to Russia.
None of the possible meanings amounts to a suggestion that DS Flood was guilty of the conduct under investigation.
It was said only that Noah could be a reference to him.
It was made clear that the whole investigation was based on information emanating from an unnamed source not an unknown source, the phrase used twice in the Court of Appeal: paras 73 and 116.
It was also made clear that all parties concerned had been approached and offered the opportunity to comment, and that the conduct was categorically denied on all sides by DS Flood, by Mr Berezovsky and by Mr Hunter of ISC.
The article was moderate in its tone and phrasing.
It cannot be compared in content or in tone or in consequences with the persecution inflicted on the applicant in A v Norway.
DS Flood was temporarily removed from the police extradition unit, but remained in service until restored to that unit.
The judge was satisfied that the journalists had taken appropriate steps to verify the information.
They had obtained as many documents as they could.
They had not simply relied upon intermediaries, but had insisted on meeting the ISC insider, and had taken into account the possibility that he had an axe to grind in making the suggestions of corruption that he did.
The judge regarded Jameel as indicating that what was required was verification of the making of an accusation by a source, not verification of the information which led to the accusation: para 135.
The Court of Appeal concluded that this was insufficient, and, in passages from which I have quoted extracts in para 151 above, it concluded that what was required was that the journalists should verify, or at least take reasonable steps to verify, the truth of the details of the suggested corruption upon which they reported: paras 66, 103 and 118.
This reasoning has a number of inter related aspects.
One is that the article reported allegations made to the police and deriving from a source behind or beyond whom TNL had not gone.
But in Reynolds Lord Nicholls expressly contemplated that the source of information might be informants with no direct knowledge of the events (para 123 above).
In Jameel the reporter had relied upon a prominent Saudi businessman (source A) for information that the Saudi authorities were, at the request of US authorities, monitoring bank accounts to prevent them being used wittingly or unwittingly for the funnelling of funds to terrorist organisations: paras 4 and 8; but neither this information, nor so far as appears the alleged inference that there were reasonable grounds to suspect or investigate the involvement of Mr Jameel and his trading company in such funnelling, were or could be further investigated: paras 5 and 42.
Further, as the Strasbourg authority of Flux (No 7) v Moldova illustrates, it is part of [the presss] role of public watchdog to report on stories or rumours emanating from persons other than the claimant: paras 138 and 142 above.
The stories were in that case about politicians, but, as I have indicated in para 139 above, the European Court of Human Rights also recognises that stories which are in the public interest about officials also merit particular protection.
I agree in this connection with what I understand to be Lord Phillips view that the defence of public interest privilege involves a spectrum.
At one end is pure reportage, where the mere fact of a statement is itself of, and is reported as being of, public interest.
Higher up is a case like the present, where a greater or lesser degree of suspicion is reported and the press cannot disclaim all responsibility for checking their sources as far as practicable, but, provided the report is of real and unmistakeably public interest and is fairly presented, need not be in a position to produce primary evidence of the information given by such sources.
A second aspect of the Court of Appeals reasoning is that the source was unknown, or, better said, unnamed: para 73 per Lord Neuberger and para 116 per Moses LJ.
But the media is entitled to protect the anonymity of sources, as recognised in Jameel, para 59 per Lord Hoffmann as well as in the European Court of Human Rights in Flux (No 7) v Moldova.
It was in the present case (as in Flux (No 7) and presumably also Jameel) the wish of the sources to remain anonymous.
A third, associated aspect of the Court of Appeals reasoning is that the detailed allegations contained in the report related to corruption which was simply alleged and under investigation and were themselves largely unchecked and unsupported and coupled with speculation: para 153 above.
In para 73 Lord Neuberger went on to note that the only written evidence available to the journalists did not identify any police officer, let alone DS Flood, as the recipient of money from ISC at all, let alone for providing confidential information.
These passages in my view both overstate the requirements of responsible journalism in the present context, and undervalue the nature and significance of the steps which TNLs journalists actually took.
These steps are extensively summarised in Tugendhat Js judgment, paras 17 to 81.
I can further abbreviate my treatment of them by adopting the summary contained in Lord Phillips judgment at paras 12 to 20 above.
I note only a few specific points.
First, Mr Gillard juniors journalistic interest in the possibility of corruption involving ISC and DS Flood went back to December 2005 and pre dated any involvement of any arm of the police service.
By early January 2006 he had ascertained various matters which he concluded would suggest vulnerability on the part of DS Flood to a corrupt approach.
Only on 30 January 2006 was he informed by source A that source B, who had access to the Intelligence Development Group (IDG) of the Directorate of Professional Standards (DPS) of the Metropolitan Police Service (MPS), had been in touch with the IDG at source As request and on behalf of an ISC insider.
Mr Gillard junior spoke with and met source B, who told him that the police had been given a typed note of the allegations being made by the ISC insider, but that the DPSs attitude had been as if not interested.
If this had remained the position and no subsequent investigation had followed, but Mr Gillards own enquiries had elicited the other information used in the article of 2 June 2006 and had been published both to inform and to stimulate an investigation, any argument that he should have awaited the outcome of an investigation would have disappeared.
The second point relates to the claimants submission that it was pure speculation that Noah was DS Flood, the ISC having done no more than say that he believed Noah to be DS Flood.
But DS Flood worked in the police extradition unit (unlike his brother), and the ISC insider also recounted that Mr Hunter used to refer to paying brown envelopes to my man at the Yard, and that a problem had once arisen in court when Mr Beresovskys lawyer spoke directly to DS Flood in court on one occasion, and Mr Hunter became very upset at this contact with my man.
All this was recorded in the notes of the discussions with the ISC insider as well as in a long internal memorandum which Mr Gillard senior prepared.
It is the case, as the judge noted, that none of this specific information about my man at the Yard was put to DS Flood through the Metropolitan press office, but that is a minor point in the overall picture, and there could have been no real doubt but that DS Flood would simply have denied it, as he did the other matters which were put to him.
Third, Mr Gillard was aware (and so had in mind as a reason for caution) that the ISC insider had issues with Mr Hunter, or what might be called an axe to grind, but, as he said in evidence, sources often do have.
On 13 March 2006 source A also sent to Mr Michael Gillard a copy of the note which had been given to the police in January 2006.
The note was consistent with the conversations which Mr Gillard senior had had with the ISC, except that, rather than stating belief but not knowledge that NOAH was DS Flood, it was categorical in stating that DS Flood provided information for cash.
Bearing in mind the circumstantial information, which was also given as set out in the previous paragraph, the difference appears less stark than it might otherwise have done.
Fourth, in late April 2006 TNL approached the DPS asking the DPS to address a list of questions about their knowledge and position; and it was this, Tugendhat J found, that in fact led to the opening, for the first time, on 28 April 2006 of a police investigation by the police Investigations Unit.
However, the MPS statement issued to TNL on the same day said that the The .
Investigations Unit is currently conducting an investigation into allegations that a serving MPS officer made unauthorised disclosures of information to another individual in exchange for money, and the judge also found that this led Mr Gillard junior to think that the investigations related to what had been said to the police in February.
At a meeting on 9 May 2006 between Mr Gillard junior and DCI Crump and others, DCI Crump accepted that intelligence had been received by the IDG in February 2006, but said that he did not know what the IDG had done with it when received, and asserted that it was TNLs inquiries at the MPS press office that had probably forced their [the polices] hands and led to the Investigation Unit being involved.
Tugendhat J had in these circumstances to consider Mr Gillard juniors motivation in publishing the article of 2 June 2006.
He accepted Mr Gillards evidence that he was sceptical about DCI Crumps explanations and concerned about the MPSs failure to follow up the intelligence provided in February 2006 and that the article was published as a means of keeping up pressure on MPS to investigate properly (para 41) and to ensure that that investigation was carried out promptly, to which the judge added That too was a matter of public interest para 216.
Although the article did not itself focus on police dilatoriness or mention this motive, there was no appeal against these findings.
The Court of Appeal was not in my view justified in departing from them, as Moore Bick LJ and Moses LJ did in passages which I have set out in para 152 above.
Fifth, TNL also made attempts in late April 2006 to elicit their accounts from DS Flood, Mr Hunter and Mr Beresovsky.
DS Flood through solicitors denied all allegations of impropriety.
Mr Hunter through solicitors initially denied any knowledge of, but in a later letter gave an explanation, of operation Noah in a way which Mr Gillard junior thought suggested that he had something to hide.
He also made suggestions about the ISC insiders motivation which Mr Gillard junior discounted.
Mr Gillard junior also concluded that he could discount suggestions made by Mr Beresovskys solicitors that the police extradition unit would have no information of value to Mr Beresovsky.
Mr Gillard believed that, if so, the MPS would have dismissed the allegations outright.
The judge accepted his evidence on this point also: paras 164 and 199.
Tugendhat Js conclusion was that no criticism could be made of what the journalists did by way of steps taken to verify the information received from the informants, including the ISC insider.
In the light of what I have said in paras 158 to 166 above and the judges more detailed findings of fact, I do not consider that this conclusion can be faulted.
The Court of Appeal was in my view in error in so far as it based its decision on apparent conclusions, firstly, that more was required as a matter of principle and, secondly (and largely, if not entirely, as a result), that TNLs journalists conduct and reporting could not, on the facts found by the judge, be regarded as meeting the standards of responsible journalism.
The previous paragraphs lead back to the critical issues, which represent the fourth and fifth aspects of the Court of Appeals reasoning.
They are whether it was in the public interest for TNL to publish an article naming DS Flood and to publish an article with the detail which this article had, when the allegations which it recorded were only at the stage of investigation.
It is material here that the publication had the purpose of ensuring an effective investigation.
As noted in para 164 above, TNL started its own investigation well before anyone supplied any intelligence to the police.
It was of obvious public interest that the investigation should be pursued and the journalists were, not unreasonably, concerned that intelligence given to the MPS might not have been or be being handled as promptly or properly as would have been expected.
Taking first the naming of DS Flood (about which no issue was raised in the Court of Appeal: para 148 above), his identification did not underline a central aspect of the articles message in quite the same way as the naming of Mr Jameel and his company in Jameel.
But the naming was still in my judgment central to any publication.
Without names, there would have been little to publish at all.
Any article would have been very much disembodied: see para 135 above.
The allegations of corruption made by the ISC insider touched Mr Beresovsky, ISC and Mr Hunter as much as DS Flood.
To avoid the risk of identification of all or any of them, all would have had to have been anonymised.
An article excluding all names, and consisting of a general and anonymised report of investigation into possible corruption in the extradition unit at the instance of unidentified foreigners at risk of extradition, would have been unlikely to be readable or publishable.
It would also have been unlikely to fulfil the purpose of stimulating and ensuring diligent pursuit by the police of their investigation, which the judge found that Mr Gillard junior intended.
Further, as Mr Gillard junior also noted in his evidence, a generalised report of investigation into corruption involving the MPS extradition unit could have cast a shadow over all officers in that fairly small unit.
The authorities cited in para 127 136 above indicate that these are all material considerations.
As to the detail of the allegations, TNL could have reproduced the police statement of 28 April 2006, together with a bare statement identifying DS Flood as the officer under investigation.
But, as the Master of the Rolls acknowledged (Court of Appeal, para 68), it is doubtful how publishable any article would then have been.
Again, it is also doubtful whether it would have achieved the purpose which the journalists had in mind.
Here too, journalistic judgment and editorial freedom are entitled to weight: paras 132 137 above.
These considerations do not however themselves determine the question whether it was in the public interest to publish an article with the names and detail in fact included, or whether, if without such names and detail there was no publishable article, TNL should not simply have awaited the outcome of the police investigation before contemplating any publication.
Mr Price relied before the Supreme Court, as before the Court of Appeal, upon Purcell v Sowler (1877) 2 CPD 215 and De Buse v McCarthy [1942] 1 KB 156.
I agree with what Lord Phillips says about these cases in his judgment at paras 58 to 60 above.
Their significance needs to be reviewed in the light of more recent developments of legal principle, although they remain valuable for their emphasis on the significance of personal reputation in the face of unproven allegations of misconduct.
But it is worth underlining that they are, even on their own terms, decisions reached on facts very different from the present.
In Purcell v Sowler, no privilege was held to attach to the newspaper publication of a report of proceedings at a meeting of poor law guardians, at which ex parte charges of misconduct against the medical officer of the union were made, of neglect in not attending to the pauper patients when sent for.
The conduct of such a medical officer was accepted to be of the greatest importance in the district and so to concern the public in general.
But, although the meeting was a privileged occasion so far as the speaker was concerned, publication in the press was not: Reynolds, p 196A, per Lord Nicholls.
The reasons of the four judges involved in Purcell v Sowler do however not coincide.
Despite speaking earlier of the importance of the medical officers conduct, Cockburn CJ said that the court was concerned with a body with very limited jurisdiction, as to which it cannot be asserted that publicity is essentially necessary or usual, and he accepted that the proceedings of different bodies to whom part of the administration of the country is committed such as the Corporation of London might be matter of general discussion and publication.
Baggallay JA was unready to extend the privilege granted to bodies such as Parliament, because of the advantage of publicity, to bodies such as the poor law guardians.
In a case like the present, concerned with the possibility of police corruption in relation to extradition of Russian oligarchs, analogies with bodies with very limited jurisdiction or distinctions between the conduct of the MPS and the proceedings of bodies like the Corporation of London are unconvincing.
Mellish and Bramwell JJA adopted different reasoning.
First, they emphasised that there was no reason to make the charges public before the person charged had been told of them and had had an opportunity of meeting them.
Second, they distinguished situations where the facts had been ascertained or were not in controversy.
On the present appeal, DS Flood was told of and had the opportunity to respond to the allegations, though Mr Price points out that the facts have not been ascertained and are in controversy.
Mr Price also submits that it would be unfair to have expected DS Flood to respond in detail, beyond a full denial, when the police investigation was under way.
I am not, however, persuaded that this can have caused any unfairness on the facts of this case.
Assuming his innocence, DS Floods response can only ever have been that he knew nothing of Noah or of any attempts to obtain information about extradition proceedings involving any Russian oligarch, because he was not Noah.
In other words, the blanket denial which appeared in paragraph 11 of the article was essentially all that he would have said, however much detail about the allegations was put to him.
In De Buse a town clerk circulated to council members and, as was the practice, to all local public libraries, an agenda attached to which was a report on loss of petrol from a council depot.
The report recounted the conviction of two council employees for stealing the petrol, together with allegations of involvement on the part of other employees made by the convicted employees at their trial and repeated before the committee.
The committee report recounted that the other employees had denied any such involvement, contained in terms no statement that the committee found the charges proved, but recommended the removal and transfer to other positions of the other employees.
The Court of Appeal held that no privilege attached to the publication in public libraries.
Even the ratepayers had no proper interest in a matter which was going to be examined internally, before it emerged in the shape of some practical action or practical resolution: p 166 per Lord Greene.
Lord Greene went on to contrast Hunt v Great Northern Railway Co [1891] 2 QB 189, where a railway company, after dismissing a guard for gross neglect of duty, published the fact with details of the grounds in a circular to employees.
Lord Greene thought such a publication to be obviously privileged, because it was clearly to the interest of railway company to bring home to its employees the type of action which was regarded by it as a proper subject for punishment by dismissal, and it was also to the interest of the employees to know that: p 167.
De Buse therefore concerned a town clerks disclosure to the random cross section of society visiting public libraries of an agenda and report for a forthcoming meeting of the local authority.
The meeting itself would shortly determine the consequences of the reported allegations.
Several points arise.
First, the case did not concern the press or its role as social watchdog in disclosing to the public information of real public interest.
Tugendhat J pointed out (para 189), that the freedom of any public authority, including the police, to disclose information to the public body would now fall to be considered, not under the head of Reynolds public interest privilege, but under the Human Rights Act 1998 and article 8 of the Convention or the Data Protection Act 1998.
Second, the public interest, even at a local level, of the allegations in De Buse does not compare with the public interest, at a national and international level, of the allegations of corruption in the MPS relating to the extradition of Russian oligarchs in the present case.
Third, there was nothing in De Buse comparable to the feature of the present case, that the press had itself been investigating the matter, and was concerned that the police were not taking it as seriously as it appeared to merit.
More fundamental though is the point noted by Lord Phillips, that the House of Lords in Reynolds and later also in Jameel has reconsidered the weight to be attached to protection of reputation and freedom of the press, and reached decisions of which the effect is to liberalise and to redress the balance in favour of greater freedom to publish matters of genuine public interest: Jameel, para 35, per Lord Bingham and para 38, per Lord Hoffmann.
The Master of the Rolls took up these points and noted that the introduction of the Convention rights into domestic law potentially justified a different approach in relation to the circumstances of Purcell.
The analysis of Convention authority which I have included in paras 138 146 above in my view bears this out.
However, the Master of the Rolls was right to observe that both Purcell and De Buse remain as salutary reminders that publicising allegations of serious wrongdoing made by third parties, whether relayed to the police or not, can cause serious distress and reputational harm to the victim, and, if they turn out to be wrong, there should be a good reason before the victim is left without redress: para 43.
Only the last part of this statement may be open to criticism, since the existence or otherwise of Reynolds privilege must be judged on the facts as they reasonably appeared to the journalist at the time.
But any journalist who publishes allegations must consider carefully the public interest in doing so and the terms in which he does so, at a time when the allegations have not been investigated or their accuracy determined, and weigh these against the risk of unjustified damage to the reputations of those affected.
The Master of the Rolls also noted in this connection Lord Nicholls warning in Reynolds, at p 201, that Protection of reputation is conducive to public good.
It is in the public interest that the reputation of public figures should not be debased falsely.
On the other hand, public officers with a role as important as that of the police must expect that their conduct will be open to close scrutiny by the press, as the European Court of Human Rights has made clear in cases such as Flux (No 7) v Moldova, paras 19 and 22, and Axel Springer AG v Germany, paras 91 and 99, where the Court indicated that the fact that the actor was known for his role as a police superintendent, whose mission was law enforcement and crime protection, itself bore on the public interest in being informed about his arrest for a criminal offence.
Conclusion
It follows from the analysis in paragraphs 154 to 178 above that in my view the Court of Appeal erred in its approach and in the reasons it gave for reaching conclusions differing from the judge.
Balancing the competing interests in this case, the judge was in my view justified in the present case in regarding the article concerning DS Flood as covered by the public interest defence recognised in Reynolds and Jameel.
The starting point is that the investigation into possible police corruption in the area of extradition of a Russian oligarch to Russia informed the public on a matter of great public interest and sensitivity.
TNL journalists were motivated by a concern to ensure that the investigation was being or would be properly pursued.
They had themselves investigated the sources and nature of the allegations exhaustively over a substantial period as far as they could.
The article would have been unlikely to be publishable at all without details of the names and transactions involved in the alleged corruption.
The facts regarding such transactions were accurately stated.
The article, although undoubtedly damaging to DS Floods immediate reputation, was balanced in content and tone (certainly much more so, I add in parenthesis, than the articles in issue in White v Sweden: paras 140 141 above).
It did not assert the truth of the reported allegations of impropriety made by the ISC insider, but it identified them as the basis of an investigation in progress to establish whether there had been any impropriety.
DS Flood and all others implicated in the allegations of impropriety were given the opportunity of commenting, and their denials in that regard were in each case recorded.
Such omissions as there may have been in the reporting were in the overall context minor.
The judgment of the journalists and editors of TNL as to the nature and content of the article merits respect: paras 127 137 above.
All these and other relevant factors fell and fall to be weighed in the balance.
On this basis, there was, in my judgment, no good reason for the Court of Appeal to depart from the judges overall assessment that publication of the article was in the public interest, despite its immediate adverse effect on DS Floods reputation.
On the contrary, I agree with the judges assessment.
The proper appellate approach
I agree with Lord Phillips that this is not the case in which to consider the proper appellate approach to the issue or issues involved in a decision on Reynolds privilege.
It is unnecessary to do so.
For the reasons given in paragraphs 121 181, I would allow the appeal and restore the judgment of Tugendhat J on the first limb of the appeal.
LORD CLARKE
Introduction
I agree that the first limb of this appeal should be allowed for the reasons given by Lord Mance and Lord Dyson.
I agree with Lord Brown that, for the reasons he gives, there is no principle of law that precludes TNL from invoking Reynolds privilege in a case such as this.
I further agree with him that, as he puts it at para 113, in such a case the judge is deciding but a single question, namely whether those who published the defamation, given what they knew and did not know and whatever they had done or had not done to guard so far as possible against the publication of untrue defamatory material, could properly have considered the publication in principle to be in the public interest.
I further agree with Lord Brown that, in deciding that question, a host of different considerations are in play.
Lord Brown has identified some of them in para 113 above.
Finally, I agree with his conclusion at para 119 that, where, as here, the denunciation is of a public officer, relates to a matter of obvious public importance and interest, and may justifiably appear to the journalists to be supported by a strong circumstantial case, it is properly open to the trial judge to find the defence made out.
The question thus arises what is the correct approach of an appellate court to the determination of the question whether it was properly open to the trial judge to find the defence made out.
I agree with the other members of the court that the answer to that question is not critical to the determination of the appeal because, as I read their judgments, they all agree that the appeal should be allowed, whatever the correct test.
I had intended to express some views on this question.
However, given that the question what is the correct test in a Reynolds privilege case was not the subject of oral argument, I agree with Lord Phillips, for the reasons he gives, that this is not the case in which this court should lay down any general principle in this class of case.
LORD DYSON
The general principles of Reynolds privilege are now well established: see Reynolds v Times Newpapers Ltd [2001] 2 AC 127, Bonnick v Morris [2002] 1 AC 300 and Jameel (Mohammed) v Wall Street Journal Europe Sprl [2007] 1 AC 359.
These principles are not hard edged and, as is illustrated by the present case, their application in particular circumstances can give rise to real difficulty.
As Lord Nicholls said in Reynolds at p 205D, the weight to be given to relevant factors will vary from case to case.
Over time, a valuable corpus of case law will be built up.
In Loutchansky v Times Newspapers Ltd [2002] QB 783, para 23, the Court of Appeal said that at the end of the day the court has to ask itself the single question whether in all the circumstances the duty interest test, or the right to know test has been satisfied so that qualified privilege attaches.
Although this may be the ultimate question, the answer to it will usually depend on a number of specific considerations, which may include some or all of those identified by Lord Nicholls in his celebrated speech which is quoted by Lord Phillips at para 29 above.
Thus necessary conditions for a Reynolds privilege defence will include that (i) there is a real public interest in communicating and receiving the information (the public interest issue); and (ii) the journalist must have taken the care that a responsible journalist would take to verify the information published (the verification issue): see, for example, per Baroness Hale at paras 147 to 149 of Jameel.
But even if both of these conditions are fulfilled, it does not necessarily follow that the Reynolds privilege defence will be made out.
As Lord Nicholls said in Reynolds, the existence of the defence will depend on whether there has been responsible journalism in all the circumstances.
In the present case, the debate has focused on both the public interest and verification issues.
They are factually distinct, although the rationale for Reynolds privilege tends to conflate them.
Thus, it has been said that there is no duty to publish and the public has no interest to read material which the publisher has not taken reasonable steps to verify: see, for example, per Lord Bingham in Jameel at para 32.
Lord Phillips and Lord Mance have explained in detail first why they consider that there was a public interest in the publication of most, if not all, of the facts that supported the story and in the naming of DS Flood; and secondly why they would hold that the journalists had taken reasonable steps to verify that there was a serious possibility that DS Flood had been guilty of corruption.
I agree that the appeal should be allowed for the reasons given by Lord Mance and, subject to the qualifications that appear below, also for the reasons given by Lord Phillips.
I propose to say nothing about the verification issue.
But I wish to say something on three topics.
The first arises from para 69 above, where Lord Phillips comments on para 104 of the judgment of Moore Bick LJ (quoted at para 67 above).
The second is whether there was a public interest in naming DS Flood in the article.
The third is whether the motives of the journalists were relevant to the public interest issue.
Paragraph 104 of Moore Bick LJs judgment
At para 104 of his judgment, Moore Bick LJ seems to set out a general principle as to when it will be in the public interest to publish details that appear to support an accusation that has been made against an individual of criminal conduct that is being investigated by the police.
He appears to state in uncompromising terms as a general proposition that it is unnecessary and inappropriate (and therefore not in the public interest) for reports of serious allegations of crime or professional misconduct to set out the details of the allegations.
The journalist should go no further than to describe the charge itself.
That is sufficient to inform the public of what it has an interest in knowing.
The alternative is trial by press without proper safeguards, which is clearly not in the public interest.
In other words, regardless of the other circumstances of the case, it is not in the public interest to publish details that appear to support an accusation against an individual of criminal conduct that is being investigated by the police.
This general principle would appear to deny a Reynolds defence even where, for example, the journalist has taken all reasonable steps to verify the truth of the details of the accusation, his sources are apparently reliable, the individual has been invited to comment on the accusations and his response is fairly reported and the tone of the article is measured.
I can see no basis for a general rule in these uncompromising terms.
So far as I am aware, there is no support for it in the authorities.
I would reject it for three reasons.
First, such a rule is not consonant with the statement by Lord Nicholls in Reynolds that all the circumstances of the case should be taken into account, which may include (but are not limited to) the ten factors listed by him.
Secondly, Lord Nicholls emphasised the need to confine the interference with freedom of speech to what is necessary in the circumstances of the case.
This is a point which is emphasised in many of the cases.
It has particular importance in the light of the Human Rights Act 1998 and article 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms.
In this respect, I agree with what Lord Mance says at paras 138 to 146 above.
If (as para 104 would appear to suggest) it is unlawful to publish the details of an accusation of criminal conduct regardless of the public interest in the subject matter of the article and the other circumstances of the case, this is bound to have a chilling effect on investigative journalism of this type.
This is undesirable in a democratic society.
Thirdly, such a general rule is inconsistent with another important principle which is that, although the question of whether the story as a whole was a matter of public interest must be determined by the court, the question of whether defamatory details should have been included is often a matter of how the story should have been presented.
On that issue, allowance must be made for editorial judgment: see per Lord Hoffmann in Jameel at para 51 quoted by Lord Mance at para 132 above.
Moore Bick LJ recognised the importance of this point at para 100 of his judgment.
He said: It has been recognised that a considerable degree of deference should be paid to editorial judgment when deciding whether the inclusion of the defamatory material was justified and undoubtedly setting out the allegations and naming DS Flood added force and credibility to the story.
The paragraphs about various Russian oligarchs, their business affairs and their relationship with the Kremlin, were no doubt included essentially for colour and presentational purposes.
Lord Phillips accepts that there is no general rule that it is not in the public interest to publish details that appear to support an accusation of criminal conduct that is being investigated by the police.
But he says that the matters identified by Moore Bick LJ at para 104 will often weigh conclusively against publication of the details.
In other words, the danger of trial by press without proper safeguards will often of itself determine that it is not in the public interest to publish the details.
In my view, it is necessary to distinguish between allegations made against ordinary individuals and allegations made against persons who perform public functions (especially where they are about the alleged performance of those functions).
I would accept that the danger of trial by press without proper safeguards will often weigh heavily against the publication of the details of an accusation against an ordinary individual.
But where the accusation is of crime or professional misconduct by a person in his performance of a public function, I do not think that the danger of trial by press without proper safeguards weighs heavily, still less conclusively, against publication.
As Lord Phillips says at para 69 above, subject to the issue of verification in this case, it was in the public interest to publish most of the facts that supported the accusation against DS Flood.
The details of the accusation were likely to excite particular public interest since it concerned allegations of selling sensitive information about extradition for the benefit of Russian oligarchs.
But I do not consider that the public interest in the publication of the details lay only in the particularly eye catching nature of the allegations of corruption in this case.
It is generally likely to be in the public interest to publish the details of allegations of police corruption, whatever the nature of the alleged corruption, provided that the test of responsible journalism is met.
It seems to me that the Reynolds privilege jurisprudence provides sufficient protection from the unjustified inclusion of the details of allegations of crime or professional misconduct.
Thus not only must the story as a whole be in the public interest, but there must also be a public interest in the publication of the details of the allegations.
The need for verification provides real protection for the individual concerned.
More generally, Reynolds privilege is not available where there is some indication that the professional judgment of the editor or journalist was made in a casual, cavalier, slipshod or careless manner: per Lord Bingham in Jameel at para 33.
And then there are other factors relevant to responsible journalism such as those identified by Lord Nicholls in Reynolds, including whether comment has been sought from the claimant, whether the article contains the gist of his side of the story and the tone of the article.
I accept that, where the details of allegations which are being investigated by the police are published, the individual concerned may feel compelled to say something in response which he would be wiser not to say.
But where he is asked by a journalist to comment on an allegation, he can seek legal advice.
He can always deny the allegation (as DS Flood did in this case).
Further, as Tugendhat J said at para 183 of his judgment, the law provides sanctions for interference with the course of justice or contempt of court.
I would, therefore, hold that for all the reasons summarised by Lord Mance at paras 179 to 181 above, there was a public interest in the publication of the details of the allegations or the supporting facts in the article.
Subject to what I have said at para 195 above, I also agree with what Lord Phillips says about this.
The naming of DS Flood
Lord Phillips deals with this at paras 73 to 75 and Lord Mance at paras 132 to 137 and 169.
There is a difference of emphasis between them.
The authorities referred to by Lord Mance at paras 132 to 137 show that weight should be given to a newspapers editorial judgment as to what details are necessary to convey the essential message.
These include whether an individual should be named.
Lord Phillips places little or no weight on the editorial judgment point but holds that, on the facts of this case, it was impossible to publish the details of the article without disclosing to those close to DS Flood that he was the officer to whom it related.
I agree that this particular aspect of the case would support the conclusion that naming the officer was responsible journalism.
But I would also reach this conclusion on the wider basis that the court should be slow to interfere with an exercise of editorial judgment and would hold on that ground too that the naming of the individual was justified in this case.
The motive question
The judge held that it was a matter of public interest that the police may not have been investigating allegations of police corruption in a timely fashion and that it was in pursuit of a legitimate aim (and therefore in the public interest) that TNL published the article with a view to attempting to ensure that an investigation took place, or took place in a timely fashion (paras 200 and 216).
The Court of Appeal disagreed: [2011] 1 WLR 153.
Lord Neuberger MR (para 54) said that the subjective motives of the journalist were irrelevant to whether the publication was in the public interest.
Moore Bick LJ (para 106) did not accept that part of the public interest in publishing the story lay in prompting the investigation.
He said that, if the purpose of the article had been to prompt the police to pursue an investigation, the article would have been written in a way that would have placed greater emphasis on the existence of the allegations and the failure of the police to pursue an investigation.
Moses LJ (para 114) agreed with both.
It is important to distinguish between the objective aim of a publication and the subjective motives of the journalist or publisher who publishes it.
I agree that the subjective motives are usually irrelevant to the question whether the publication is in the public interest.
That question should be determined objectively.
I think that this is what Lord Neuberger was saying.
The mere fact that an article is published because the journalist or publisher wants to hurt the subject of the article is not material to whether the publication is in the public interest.
A story that a police officer is being investigated for corruption is prima facie in the public interest even if the story is published in furtherance of a personal vendetta by the journalist or publisher against the officer.
If an investigation into allegations of police corruption is not being properly conducted, there is a public interest in the publication of a story about that failure.
Quite apart from the public interest in the subject matter of the story, the objective aim of its publication might legitimately be to draw attention to the failure and to encourage the proper conduct of the investigation.
It was in the public interest for the allegations against DS Flood to be investigated promptly, and that was relevant to whether it was in the public interest to publish a story about the investigation.
Lord Nicholls said in terms in Reynolds at p 205C: A newspaper can raise queries or call for an investigation.
By the same token, it can publish a story about an existing investigation and expressly or by implication criticise the manner in which the investigation is being conducted.
Moore Bick LJ seems implicitly to have accepted this, but concluded that, if that had been the purpose of the Article, it would have been expressed differently.
Like Lord Phillips (para 70) and Lord Mance (para 160), I am of the opinion that the Court of Appeal should not have interfered with the finding of the judge on this point (which in any event did not form a central part of his reasoning).
Like Lord Clarke, I had intended to express an opinion as to the circumstances in which an appellate court should interfere with the assessment of the lower court on an issue such as whether a publication should be protected by Reynolds privilege.
But I have been persuaded that, for the reasons given by Lord Phillips at paras 100 to 106 above, it would not be right to do so in the present case.
| The respondent is a Detective Sergeant with the Metropolitan Police Service (MPS) Extradition Unit.
The appellant is the publisher of The Times newspaper and of material on The Times website.
On 2 June 2006 the appellant published an article which named the respondent as a detective accused of taking money to disclose confidential extradition information to a security firm, ISC Global (UK).
ISCs clients included high profile Russians who were the subject of extradition requests.
The respondent was a friend of one of the partners of ISC, Mr Hunter.
An ISC insider was said to have identified cash payments totalling 20,000, to a recipient codenamed as Noah in the accounts, which could be a reference to the respondent.
The appellant was told of and became interested in this possibility from December 2005.
The ISC insider later passed a dossier of information to the MPS and to the appellant.
The article quoted a spokesman from the MPS who confirmed that the MPS was conducting an investigation into allegations that a serving officer made unauthorised disclosures of information to another individual in exchange for money.
The article reported the denial of wrongdoing issued by the respondent.
The MPS had not in fact taken any steps to investigate the allegations before being contacted by the appellant in April 2006.
At that point warrants were issued and the respondents home was searched.
The respondent was temporarily moved from the Extradition Unit, returning in January 2007.
In September 2007 the MPS told the parties that the investigation had finished and that it had made no recommendations of criminal or disciplinary proceedings against the respondent.
The respondent issued a claim for libel, complaining that the article meant there were strong grounds to suspect he had abused his position as a police officer.
The appellant relied, amongst other defences, on the special defence for publications in the public interest known as Reynolds privilege.
The applicability of the defence in the circumstances of this case was determined as a preliminary issue.
On 16 October 2009 the judge in the High Court found that the publication of the article in the newspaper (and on the website up to the date the investigation was completed) was protected by Reynolds privilege.
This finding was overturned by the Court of Appeal on 13 July 2010.
The Supreme Court unanimously allows the appeal and holds that the article was protected by Reynolds privilege.
The main judgments are given by Lord Phillips and Lord Mance.
Reynolds privilege protects the publication of defamatory matter to the world at large where (i) it is in the public interest that the information should be published and (ii) the publisher has acted responsibly in publishing the
information [2].
The present appeal raised three issues of principle in relation to the privilege: how to approach the question of the meaning of the article, whether it was in the public interest to refer to the details of allegations made against the respondent and what verification was required to discharge the requirements of responsible journalism [22 25].
The Supreme Court addressed the issues as follows: Meaning The seriousness of the allegation being made is an important factor in the assessment of where the balance is to be struck between the desirability that the public should receive information and the potential harm caused if the individual is defamed [48].
It is commonplace for Reynolds privilege to be determined as a preliminary issue but this makes it necessary to determine the meaning of the article, which will also be relevant to verification.
The sensible way of achieving this is for the parties to agree to trial by judge alone, who can then resolve any dispute as to meaning at the same time [49].
In this case the parties agreed that the meanings of the article for which they respectively contended that there were strong grounds to investigate the respondent or that there were grounds justifying a police investigation were so close that it was not necessary to choose between them for the purposes of the preliminary issue.
However, where a publication is capable of bearing a range of meanings, Lord Phillips and Lord Brown thought that a journalist must have regard to the full range when deciding whether to publish and when attempting to verify [51][111].
Public interest The respondent maintained that while the general subject matter of the article police corruption was of public interest, as a matter of principle the publication of the facts giving rise to the allegations being investigated was not [53].
This may be so, but each case will turn on its own facts and on this occasion the publication of such details was justified.
The story was of high public importance and the allegations against the respondent were the whole story [68] [119].
They were published with the legitimate aim of ensuring the allegations were properly investigated by the police in circumstances where the journalist had good reason to doubt that they were being [69].
Naming the respondent was also justified as he would be identified in any event by his fellow officers and suspicion should not fall on other members of the Extradition Unit [75] [169].
Lord Mance held that journalistic judgment and editorial freedom were entitled to weight when considering how much detail should be published [170] but any journalist must consider carefully the public interest in doing so when allegations have not been investigated or their accuracy determined [177].
Lord Dyson considered that it was generally likely to be in the public interest to publish the details of allegations of police corruption, provided the test of responsible journalism was met [195].
Verification This was not a case of reportage, where the public interest lies in the fact that an allegation has been made.
Here the public interest lay in the content of the allegations and the fact that they might be true.
Privilege for this would only attach if the journalist honestly and reasonably believed the published facts to be true [78].
The hard and fast principles relating to the defence of justification do not apply when considering verification.
The existence of grounds for suspicion can be based on information from reliable sources or may reasonably be inferred from the fact of a police investigation [80].
In this case the judge found that the supporting facts were true and verified as such [87] [167].
It was reasonable for the journalists to conclude from the police investigation and application for a search warrant that the accusation against the respondent might be well founded.
There was a strong circumstantial case against him [98].
The Supreme Court declined to address the question of how, as a matter of principle, the Court of Appeal should approach a challenge to a decision of a trial judge on a defence of Reynolds privilege, in the absence of oral argument on this aspect [100 106].
The outstanding appeal, in relation to the continued publication of the article on the website after the completion of the investigation of the respondent, was adjourned for a further hearing [107].
|
From time to time cases come before the courts that try the patience of even the most phlegmatic of judges.
This, I fear, is one of them.
On the one side there is an articulate and determined litigant who suffers from an implacable belief that his case has not been dealt with justly and, because he has run out of money, cannot afford to be represented.
On the other is an opposing party for whom these proceedings have been dragging on for far too long and which has little or no prospect of recovering any of its expenses.
One may regret the situation in which that party finds itself.
But our basic common law rule that a party is entitled to a fair hearing applies not only to those whom the court finds it easy to deal with, but to everyone.
That is the standard the judges who have dealt with this case in the Court of Session set for themselves at each stage in the proceedings, as their carefully reasoned opinions amply demonstrate.
So, had it not been for an order that they made because they regarded the proceedings as incapable of achieving anything of value, the case would not have been open to consideration by the Supreme Court at all.
As it is, the course they took has raised the possibility which this court cannot ignore that the interlocutor which they pronounced may, after all, be appealable.
Mr and Mrs Politakis are the directors and the only shareholders of Apollo Engineering Ltd (Apollo).
They wish to appeal to this court against two interlocutors that were pronounced in a case that was stated for the opinion of the Court of Session under section 3 of the Administration of Justice (Scotland) Act 1972 (the 1972 Act) on 28 September 2007.
The case had been stated on the application of Apollo before section 3 of the 1972 Act was repealed by paragraph 1 of Schedule 2 to the Arbitration (Scotland) Act 2010.
The arbitration proceedings to which the stated case related arose out of a contractual dispute between Apollo and James Scott Ltd about pipe construction work which Apollo had been carrying out for James Scott Ltd in 1990 at Coulport.
James Scott Ltd are the respondents to these proceedings.
On 18 January 2012 an Extra Division of the Inner House (Lady Paton and Lords Reed and Bracadale) refused a motion enrolled by Mr Politakis in his own name, as Apollo had run out of funds and could no longer afford legal representation: [2012] CSIH 4.
He had asked the court to make an order under article 6 of the European Convention on Human Rights which would allow him to represent the company.
He was invited to make submissions on his own behalf, and he did so both orally and in writing.
The court held that it was well established by the authorities that Scots law does not permit a company to be represented by a director or an employee of the company.
It can be represented only by an advocate or a solicitor with a right of audience: Equity and Law Life Assurance Society v Tritonia Ltd 1943 SC (HL) 88; Secretary of State for Business, Enterprise and Regulatory Reform v UK Bankruptcy Ltd 2011 SC 115.
The Extra Division also held by a majority (Lord Reed and Lord Bracadale differing in this respect from Lady Paton) that, as the issues in the case were complex and it was unlikely that the appeal could be presented effectively by anyone without legal qualifications, article 6 did not require that Mr Politakiss motion should be granted.
As he was not suitably qualified, this would not provide the company with an effective right of access to the court: Airey v Ireland (1979) 2 EHRR 305.
On 27 November 2012 the Extra Division (Lady Paton and Lords Menzies and Bracadale) pronounced a further interlocutor which dealt, among other things, with an opposed motion which had been enrolled by James Scott Ltd for the stated case to be dismissed: [2012] CSIH 88.
It was in these terms: The Lords, having resumed consideration of the cause, refuse Mr Politakis leave to appeal to the Supreme Court; refuse the motion enrolled by Mr Politakis in June 2011 and amended on 18 April 2012 to sist himself in room and place of Apollo Engineering Limited; refuse the alternative motion to sist himself as a party to the court and arbitration proceedings; find Apollo Engineering Limited liable to the respondents James Scott Limited in the expenses of the two day hearing held on 7 and 8 July 2011, said expenses to be paid out of the sum held as caution for Apollo Engineering Limited by the Accountant of Court; remit an account thereof, when lodged, to the Auditor of Court to tax; dismiss the Stated Case and decern; reserve meantime any question of expenses in that process insofar as not already dealt with.
That interlocutor, leaving aside the orders about expenses, fell into three parts.
First, Mr Politakis was refused leave to appeal to this court against the interlocutor of 18 January 2012 refusing his application to represent his company.
Second, his attempts to sist himself as a party to the proceedings were rejected.
That would have enabled him to represent himself, as a natural person is entitled to present his own case.
But he was not a party to the arbitration or to the contract with James Scott Ltd, so there were no grounds for regarding him as entitled to be sisted in these proceedings in his own name.
Mr Politakis has not sought leave from the Inner House to appeal against this part of the interlocutor.
Third, the stated case was dismissed, so the proceedings in the stated case were brought to an end.
The Extra Division did not give its opinion on the questions in the case, on which it had not heard any argument.
It was of the opinion that, since at any future hearing Apollo would be unrepresented, it would be fruitless for it to permit the stated case proceedings to continue: [2012] SCIH 88, para 40.
There has been no application for leave to appeal against that part of the interlocutor either.
The circumstances in which it is competent to appeal to the Supreme Court against a judgment of the Court of Session are set out in section 40 of the Court of Session Act 1988 (the 1988 Act) which, so far as relevant to this case, provides: (1) Subject to the provisions of any other Act restricting or excluding an appeal to the Supreme Court and of sections 27(5) and 32(5) of this Act, it shall be competent to appeal from the Inner House to the Supreme Court (a) without the leave of the Inner House, against a judgment on the whole merits of the cause, or against an interlocutory judgment where there is a difference of opinion among the judges or where the interlocutory judgment is one sustaining a dilatory defence and dismissing the action; (b) with the leave of the Inner House, against any interlocutory judgment other than one falling within paragraph (a) above. (4) On an appeal under this section all the prior interlocutors in the cause shall be submitted to the review of the Supreme Court.
The answer to the question whether it is competent to appeal to this court against the interlocutors of 18 January 2012 and 27 November 2012 is not as straightforward as it might have been if the Court of Session had proceeded to answer the questions in the stated case.
In John G McGregor (Contractors) Ltd v Grampian Regional Council 1991 SC (HL) 1 it was held that an opinion of the court upon questions of law given on consideration of a case stated under provisions such as those in section 3 of the 1972 Act did not constitute a judgment within the meaning of section 40(1) of the 1988 Act.
The House dismissed Grampian Regional Councils petition of appeal as incompetent.
But the facts here are different, as the Extra Division did not give its opinion on the questions of law that were before it in the stated case.
In this situation two questions arise.
The first is whether, having regard to the terms of section 3 of the 1972 Act, the decision in McGregor applies to this case at all.
Apollo is not seeking to appeal against any opinion.
Its appeal is directed to the fact that the stated case has been dismissed.
The second is whether, if the appeal is not incompetent for the reasons given in McGregor, that part of the interlocutor of 27 November 2012 which dismissed the stated case was a judgment against which an appeal to this court is competent under section 40(1) of the 1988 Act without the leave of the Inner House of the Court of Session.
The Supreme Court directed that these two questions should be the subject of an oral hearing as to the competency of an appeal against that interlocutor.
Mr Politakis was given permission, in the exceptional circumstances of this case, to represent Apollo at the hearing.
The court was also assisted by submissions made by Mr Andrew Young QC, who had been appointed at the courts request as an advocate to the court by the Dean of Faculty.
Mr Politakis made it clear that he also wished to appeal against the interlocutor of 18 January 2012.
But it is plain that this was an interlocutory judgment within the meaning of section 40(1) of the 1988 Act for which the leave of the Inner House was required to appeal against it, and the Inner House has refused his application for leave to appeal.
It could be submitted to the review of this court under section 40(4) as one of the prior interlocutors in the cause.
But that can only happen if an appeal is competently before this court under section 40(1) in the first place, and if it is necessary to subject the interlocutor to review as part of that appeal.
Leave to appeal having been refused by the Inner House, there is no self standing right of appeal against it.
Section 3 of the 1972 Act
The report of the Appeal Committee in McGregor was given by Lord Jauncey.
He said at p 4 that its decision to find that the petition to appeal in that case was incompetent was based on clear authority for the view that an opinion of the court upon questions of law in a case stated under section 3 of the 1972 Act did not constitute a judgment within the meaning of section 40(1) of the 1988 Act.
He added that this view was in any event consonant with the ordinary use of language, and that it was supported by various other statutory provisions such as those now to be found in section 27 of the 1988 Act, which enables a special case to be presented to the court for its opinion by parties who are agreed on the facts and are in dispute on a question of law only, and in section 13(2) of the Tribunals and Inquiries Act 1971 which, by making express provision to the contrary, appears to recognise that in general an opinion of the court on a stated case does not constitute a judgment for the purposes of the jurisdiction of the Court of Appeal to entertain appeals.
But none of the decisions in the cases to which he referred were concerned with the situation that has arisen in this case, and it is not so obvious that the decision of the Inner House to dismiss the stated case did not constitute a judgment within the meaning of section 40(1) of the 1988 Act.
The leading case on this subject, prior to that of McGregor, was In re Knight and the Tabernacle Permanent Building Society [1892] 2 QB 613.
The question in that case was whether there was an appeal to the Court of Appeal from a decision of the High Court upon a special case stated by an arbitrator under section 19 of the Arbitration Act 1889.
The ratio of the decision is to be found in the judgment of Lord Esher at p 617, where he said: It appears to me that what the statute in terms provides for is an opinion of the court to be given to the arbitrator or umpire: and there is not to be any determination or decision that amounts to a judgment or order.
Under these circumstances I think there is no appeal.
I base my decision on the words of the statute: but when I consider the result of holding otherwise, I am fortified in the conclusion at which I have arrived.
It seems to me that it would be most inexpedient that, where an opinion is given by the court under this statute in the course of a reference for the guidance of arbitrators, there should be an appeal which might be carried up to the House of Lords.
Bowen LJ said at p 619 that it appeared to him that the consultative jurisdiction of the court did not result in a decision which was equivalent to a judgment or order.
The proposition that the giving by the court of its opinion to the arbitrator is not a determination or decision that amounts to a judgment is easy to understand, but it does not apply to this case as no such opinion was given.
Lord Eshers point on expediency also assumes that the court has given its opinion on the questions of law that were before it.
It is less easy to see why, if the court has declined to give its opinion, its reasons for reaching that decision should not be open to review by means of an appeal to a higher court.
Lord Jauncey also referred to two cases from Scotland.
In Johnstons Trustees v Glasgow Corporation 1912 SC 300 the question was whether the sheriff could be required to state a case under the Housing, Town Planning etc Act 1909 after he had given judgment.
It was held that it was incompetent for him to do so after he had disposed of the appeal.
The court would not then be giving its opinion for the sheriffs guidance, as the sheriff could not recall his judgment and there was no provision in the statute that would allow it to be recalled by the court.
Lord President Dunedin observed at p 303 that the issue was absolutely decided by authority both in Scotland and in England.
The Scottish case was Steele v McIntosh Brothers (1879) 7 R 192 in which, after reviewing various examples in the statutes, Lord President Inglis said at p 195 that there were some proceedings, as in that case, where all that those stating the case were empowered to do was to obtain the opinion and guidance of the court in the administration of the jurisdiction conferred on them.
The English case was In re Knight and the Tabernacle Permanent Building Society.
Lord President Dunedin said that the decision in that case was entirely on the same lines as Steeles case.
In Mitchell Gill v Buchan 1921 SC 390 it was held that an arbiter who had stated a case for the opinion of the court would be guilty of misconduct if he disregarded the law as stated in its opinion.
Agreeing with the other judges that the arbiter was not entitled to disregard it, Lord Skerrington observed at p 398 that this was so even though the opinion could not be enforced or appealed against in the same way as a judgment or decree.
None of these cases touch on the question that has to be resolved in this case.
The special nature of the proceedings is recognised, but it is assumed in all of them that the court will do what is provided for by the statute and will give its opinion for the guidance of the tribunal by which the case has been stated.
Neither Mr Ellis QC for James Scott Ltd nor Mr Young were able to refer us to any authorities that offered assistance as to the situation which we have here where the court has declined to do what the statute provides for.
Mr Ellis submitted that it made no sense for an interlocutory decision to be appealed where there was no appeal against a decision answering the questions of law, and Mr Young said to allow a right of appeal in such a case would run counter to the general thrust of section 40 of the 1988 Act which sought to limit appeals to the Supreme Court on procedural matters.
But it seems to me that those submissions beg the question whether the part of the interlocutor of 27 November 2012 by which the stated case was dismissed was truly of a procedural or interlocutory character.
Our attention was drawn by Mr Young to Lady Cathcart v The Board of Agriculture for Scotland 1915 SC 166, where a reclaiming motion against an opinion of the Lord Ordinary on a stated case was held to be incompetent as the Lord Ordinarys opinion was final, and to Johnston Ferguson v Board of Agriculture 1921 SC 103, where it was held that it was beyond the intention of the legislature for a procedure to be introduced which would allow the opinion of the sheriff to be a matter of appeal to the court.
Neither of these cases offers direct assistance on the point at issue.
But Lord Skerringtons observation in Lady Cathcarts case at p 168 that in legal language an opinion is one thing and a judgment is another is of some interest.
It suggests that an interlocutor which dismisses a case without giving an opinion could be regarded as a judgment for the purposes of section 40(1) of the 1988 Act simply because, if it is not one thing, it must be the other.
Mr Ellis suggested that section 3 of the 1972 Act was a provision of a kind referred to in the preamble to section 40(1) of the 1988 Act because, as properly construed, it excluded an appeal to the Supreme Court.
As he put it, nothing done within it will give rise to such an appeal.
I do not think, however, that this provides an answer to the problem posed by this case.
Section 3(1) provides that the arbiter may, on the application of a party to the arbitration, and shall, if the Court of Session on such an application so directs at any stage in the arbitration state a case for the opinion of that Court on any question of law arising in the arbitration.
As Lord Jauncey said in McGregor at p 5, the ordinary use of language indicates that an appeal to this court against an opinion of the Court of Session under that section is excluded by necessary implication because it is for the opinion of that court only that the case has been stated.
But there is nothing in the language of section 3(1) which addresses the situation where the Court of Session has dismissed the stated case without giving its opinion on the questions that were before it at all.
Its role is, of course, simply to answer the questions.
And the parties to the arbitration were entitled to make use of the procedure provided for by the statute and, a case having been competently stated under it, to obtain the courts opinion for the guidance of the arbiter.
The statute makes no provision for the course of action that the Extra Division felt obliged to take in this case.
It seems to me in these circumstances that the question of competency depends on whether that part of the interlocutor of 27 November 2012 which dismissed the stated case was a judgment within the meaning of section 40(1)(a) of the 1988 Act against which there is a right of appeal to this court without the leave of the Inner House.
If it is, there being no provision in any other statute of the kind referred to in the preamble to section 40(1), we must conclude that Apollo has a right of appeal under that subsection to which effect must be given so long, of course, as the appeal raises a question which can responsibly be certified by counsel as reasonable.
Section 40 of the 1988 Act
Section 40(1)(a) of the 1998 Act provides that an appeal from the Inner House to the Supreme Court is competent without the leave of the Inner House in one or other of three kinds of case: (1) where it is an appeal against a judgment on the whole merits of the cause; (2) where it is an appeal against an interlocutory judgment where there is a difference of opinion among the judges; and (3) where the interlocutory judgment is one sustaining a dilatory defence and dismissing the action.
An appeal is also competent, but only with the leave of the Inner House, under section 40(1)(b) where it is an appeal against an interlocutory judgment other than one falling within cases (2) and (3) above.
The language that section 40(1) uses is not easy to translate into modern legal terminology.
As the Lord Justice Clerk, Lord Carloway, explains in his chapter on Decrees and Interlocutors in Macfadyen, Court of Session Practice, Division K, Chapter 1, para [1], it is best to read the words in the context in which they appear and in their historical context.
One can take as the starting point the fact that an appeal lies to the Supreme Court from any order or judgment of the Court of Session if an appeal lay from that court to the House of Lords at or immediately before 1 October 2009: Constitutional Reform Act 2005, section 40(3), read together with the Constitutional Reform Act (Commencement No 11) Order 2009 (SI 2009/1604).
Section 3(2) of the Appellate Jurisdiction Act 1876 provided that an appeal lay to the House of Lords from any order or judgment of any court in Scotland from which error or an appeal at or immediately before the commencement of that Act lay to the House of Lords by common law or statute.
Lord Keith of Kinkel understood this to mean that, as a general rule, every final judgment of the Inner House was appealable to the House of Lords, but that the right might be restricted or excluded by statute: Stair Memorial Encyclopaedia, vol 6, Courts and Competency, para 829.
I would take the right of appeal to the Supreme Court to be subject to the same general rule and to the same qualification.
The common law right of appeal which had existed since the Treaty of Union of 1707 was not at first under any restriction, and it was too easily open to abuse: see Lord Brodies chapter in The Judicial House of Lords 1876 2009 (2009), Part D, Regional Perspectives, From Scotland and Ireland, pp 282 283.
So it was restated and modified by section 15 of the Court of Session Act 1808, which provided that thereafter no appeal to the House of Lords was to be allowed from interlocutory judgments but that such appeals were to be allowed only from judgments or decrees on the whole merits of the cause, except with the leave of the Division of the Judges pronouncing such interlocutory judgments or except in cases where there was a difference of opinion among the Judges of that Division.
In Beattie v Glasgow Corporation 1917 SC (HL) 22 the House of Lords held that an interlocutor allowing an issue so that an action of damages could proceed to trial before a jury was an interlocutory judgment which was not appealable without leave.
Lord Loreburn observed at p 24 that interlocutory judgments meant judgments which are in substance interlocutory, not those which although in form interlocutory are final in substance.
Then, by section 5 of the Court of Session Act 1825, which dealt with the disposal of dilatory defences by the Court of Session, it was provided that it was not to be competent to appeal to the House of Lords against an interlocutory judgment which sustained a dilatory defence where the action was not dismissed, unless express leave be given by the Court.
In Ross v Ross 1927 SC (HL) 4, at p 6, Lord Dunedin said that the disability imposed on the House which forbade the hearing of appeals against interlocutory judgments where there had been no difference of opinion in the court below and no leave to appeal had been granted was statutory and could not be got over.
But the generality of the right of appeal in cases where it was not restricted or excluded by statute has never been called in question.
Interlocutors which are final in substance are, as a general rule, appealable.
The wording of section 40(1) of the 1988 Act must be understood against that background.
Mr Ellis submitted that the interlocutor of 27 November 2012 was not a judgment on the whole merits of the cause for three reasons.
The first was that it was not proper to regard the stated case as the cause.
The cause from which the stated case arose was the arbitration.
All the Court of Session was asked to do was to offer advice to the arbiter.
The second was that the interlocutor was not a judgment of the Inner House because it was an interlocutory decision in a process from which there was no appeal to the Supreme Court.
The third was that it was a procedural decision taken in unusual circumstances of the stated case process which did not address the substance of the questions in the stated case at all.
I do not think that there is any substance in the second and third of these propositions.
The decision to dismiss the stated case cannot be regarded as an interlocutory judgment of the kind referred to in section 40(1)(b) which is appealable only with leave: see Buchanan v Alba Diagnostics 2004 SC (HL) 9, 17.
All the issues that were in controversy before the Court of Session were disposed of when the stated case was dismissed.
The interlocutor was in substance a final interlocutor because the proceedings were brought to an end by it.
They could not continue and the Court of Session was not in a position to retrieve them.
For the same reason the decision which the Extra Division took cannot be treated as a procedural decision only.
There were, no doubt, procedural reasons for it, as Mr Politakis had been refused permission to represent Apollo and the company was unable to pay for counsel to represent it.
One can understand why, in these circumstances, the Extra Division was of the opinion that it would be fruitless for the proceedings to continue.
But the effect of the interlocutor was not merely to resolve that issue of procedure.
It was to end the proceedings completely as, having dismissed the stated case, the court had exhausted its functions under the statute, save as to resolving any outstanding issues about expenses.
As for the first point, the word cause is a word of wide ambit.
It is defined in rule 1(3) of the Rules of the Court of Session 1994 as meaning any proceedings.
And it does not make sense of section 40(1) of the 1998 Act to regard the cause in question as the arbitration proceedings out of which the application for the stated case arose.
The cause in question must be taken to be the cause or matter that was before the Inner House.
Section 40 is concerned only with the proceedings in the Inner House in which the interlocutor was pronounced.
There is no indication anywhere in the section that it is concerned in any way with proceedings in any lower court or tribunal.
The proceedings in the Inner House must be regarded for this purpose, both in form and in substance, as a separate process from the proceedings before the arbiter.
The dismissal of the stated case was final, in just the same way as if the interlocutor had encompassed the courts opinion on the questions that were before it: see Davidson v Scottish Ministers (No 3) 2005 SC (HL) 1, paras 12 14.
In either case the court had, or would have had, no further functions to perform under the procedure that brought the matter before it.
The question then is, which of the three kinds of interlocutor referred to in section 40(1)(a) are we dealing with in this case? For the reasons already given, the interlocutor of 27 November 2012 was not an interlocutory judgment of the second kind.
It did not answer the questions in the stated case.
But it was final in substance, in the words of Lord Loreburn in Beattie, as it brought the stated case proceedings to an end.
This suggests that it was an interlocutor which did actually dispose of the whole merits of the cause.
Mr Young suggested that, if we were to conclude that it was not a judgment of that kind, it could be considered to be an interlocutory judgment of the third kind because it sustained a dilatory defence by dismissing the stated case.
Mention of this kind of interlocutor made its first appearance in section 5 of the Court of Session Act 1825.
It provided that it was not to be competent to appeal to the House of Lords against such a judgment where the action was not dismissed unless express leave was given by the court.
But that qualification did not apply where the action was dismissed.
The use of the adjective dilatory appears still to have been in common use in 1893: see Mackays Manual of Practice in the Court of Session (1893), where at p 221 the author said: Defences are dilatory or preliminary, and peremptory or on the merits.
A dilatory or preliminary defence is one which, if sustained, puts an end to the particular suit, or at least suspends it till some other action is brought and terminated, or some proceeding taken which is necessary before the suit can proceed.
Twenty three years later it seems that the use of the adjective preliminary was beginning to predominate: see Maclaren, Court of Session Practice (1916), p 379 where the following description is given: A preliminary or dilatory defence is a defence which does not touch the merits of the case, but is based upon the failure of the pursuer to observe the rules of practice or procedure of the Court before which the cause is brought.
The word dilatory does not appear again in the following discussion, and it is not mentioned in the index.
It has long since dropped out of the vocabulary of the Court of Session practitioner.
It was preserved in section 40(1) as part of the process of consolidation of the previous Court of Session Acts.
But it now looks rather odd, and thought might perhaps be given to rewording this part of the subsection at the next opportunity.
It is not easy to fit the interlocutor dismissing the stated case into this description.
It did not touch the merits of the issues on which its opinion was being sought.
The respondents motion for its dismissal, to which the Extra Division gave effect, was based on Apollos inability to fulfil the courts rules of practice about representation.
But it would be stretching the language of the statute to say that this objection was a defence, especially as the procedure under section 3 was not one that could, in the ordinary sense of the word, be defended.
It may not matter much whether the interlocutor is to be regarded as a judgment on the whole merits of the cause or as one sustaining a dilatory defence, as both are appealable without the leave of the Inner House.
On balance, however, I think that would be more correct to regard it as a judgment on the whole merits of the cause within the meaning of section 40(1)(a) of the 1988 Act, even though the Inner House did not address itself to the issues raised in the stated case.
Conclusion
For these reasons I would hold that Apollo can competently appeal to this court against that part of the interlocutor of 27 November 2012 which dismissed the stated case without the leave of the Inner House.
As is the case with all other interlocutors that are appealable without leave however, its petition of appeal must be certified by two counsel as reasonable the test for which is whether the appeal raises arguable points of law which are of general public importance: Uprichard v Scottish Ministers [2013] UKSC 21, per Lord Reed at paras 58 63.
It must be emphasised that the question for counsel is not whether the arguments which Apollo would have wished to advance in the stated case were reasonable.
That is not an issue which is open for consideration by this court.
It was for the Court of Session to give its opinion on the questions that were before it, not this court.
The only question which this court can consider is whether the Extra Divisions decision to dismiss the stated case was one which was open to it to take under the jurisdiction given to it by the statute.
Unless something has gone seriously wrong, however, this was an exercise of judgment on a matter of procedure with which this court would not normally wish to interfere: McIntosh v British Railways Board (No 2) 1990 SC 339; Girvan v Inverness Farmers Dairy 1998 SC (HL) 1, at 21C G.
have been represented so as to avoid the situation that the Extra Division described as fruitless is not before us.
But it is a troublesome aspect of this case, and there may be grounds for thinking that the rule which disables a company from being represented other than by counsel or a solicitor with a right of audience needs to be re examined.
The rule about representation does not apply to proceedings before an arbiter, as has now been made clear by rule 33 in Schedule 1 to the Arbitration (Scotland) Act 2010 which provides that a party may be represented by a lawyer or any other person: see also rule 41 which enables a party to apply for issues of Scots law arising in an arbitration to be determined in the Outer House.
Rules 33 and 41 are, it must be emphasised, default rules.
They apply only in so far as the parties have not agreed to modify or disapply them: see section 9 of the 2010 Act.
But the fact that they are there suggests that the rule about representation ought not to be applied in cases where they do apply in a way that disables a company which is unable to pay for a lawyer from obtaining the view of the court on such issues.
The question whether there was any way in which Apollos interests could
| This case concerns an aspect of the Supreme Court's jurisdiction to hear appeals in Scottish civil cases.
Mr and Mrs Politakis are the directors and the only shareholders of Apollo Engineering Ltd (Apollo).
They wish to appeal against two orders that were made in a case stated for the opinion of the Inner House of the Court of Session under section 3 of the Administration of Justice (Scotland) Act 1972.
The stated case arose from an arbitration between Apollo and James Scott Ltd in relation to a contractual dispute [2].
Apollo ran out of funds and could no longer afford legal representation.
On 18 January 2012 the Inner House made an order refusing Mr Politakis request that he represent Apollo, on the basis that as a matter of Scots law, a company requires to be legally represented.
On 27 November 2012 the Inner House made a further order in which, among other things, it (1) refused Mr Politakis leave to appeal to the Supreme Court against the order of 18 January 2012; (2) refused to allow Mr Politakis to be joined as a party either to replace or in addition to Apollo; and (3) dismissed the stated case [3, 4].
Section 40 of the Court of Session Act 1988 (the 1988 Act) regulates appeals to the Supreme Court in Scottish civil cases.
It provides that it is competent to appeal from the Inner House to the Supreme Court without the leave of the Inner House, against: (1) a judgment on the whole merits of the cause; (2) an interlocutory judgment where there is a difference of opinion among the judges; or (3) where the interlocutory judgment is one sustaining a dilatory defence and dismissing the action.
It is also competent to appeal to the Supreme Court with the leave of the Inner House against any other type of interlocutory judgment of the Inner House [6].
The House of Lords had decided in the case of John G McGregor (Contractors) Ltd v Grampian Regional Council 1991 SC (HL) 1 that an opinion of the court in a stated case did not constitute a judgment within the meaning of section 40 of the 1988 Act.
In the present case, an opinion on the legal issues in the stated case had not been given [7].
Two issues are before the Supreme Court: (1) whether the McGregor principle applies in the present case so that an appeal against the order of 27 November 2012 is incompetent; and (2) if not, whether the part of the order of 27 November 2012 which dismissed the stated case can competently be appealed to the Supreme Court under section 40 of the 1988 Act without the leave of the Inner House.
The Supreme Court directed that these two issues should be the subject of an oral hearing [8].
There is no self standing right of appeal to the Supreme Court against the order of 18 January 2012, because it was an interlocutory judgment under section 40 of the 1988 Act and the Inner House has refused leave to appeal against it [9].
Apollo can competently appeal to the Supreme Court without the leave of the Inner House against the part of the order of 27 November 2012 which dismissed the stated case, as long as the appeal raises a question which can be responsibly be certified by counsel as reasonable [16, 28, 29].
Lord Hope gives the judgment of the Court.
On issue (1), the Court holds that none of the cases in this area, including the McGregor case, offer direct assistance on the question that is to be resolved, and none deals with the situation where the court has declined to do what the statute provides for, which is to give an opinion [10 14].
The ordinary use of language indicates that an appeal to the Supreme Court against an opinion of the Inner House under section 3 of the 1972 Act is excluded by necessary implication because it is for the opinion of that court only that the case has been stated.
But the 1972 Act makes no provision for the course of action that the Inner House felt obliged to take in this case: dismissing the stated case without giving its opinion on the questions that were before it at all [15].
On issue (2), the Court holds that the order dismissing the stated case cannot be regarded as an interlocutory judgment of the kind which is appealable only with leave under section 40 of the 1988 Act.
All the issues that were in controversy before the Inner House were disposed of when the stated case was dismissed.
In dismissing the stated case, the court exhausted its functions under the statute, save as to resolving any outstanding issues about expenses.
The effect of the order was to end the proceedings completely, in just the same way as if it had encompassed the courts opinion on the questions that were before it [22, 23].
It is not easy to characterise the order dismissing the stated case as one sustaining a dilatory defence and dismissing the action.
The order gave effect to a motion by James Scott Ltd based on Apollos inability to fulfil the courts rules of practice about representation.
It would be stretching the language of the statute to say that this objection was a defence, especially as the procedure under section 3 was not one that could, in the ordinary sense of the word, be defended [27].
It may not matter much whether the order is to be regarded as a judgment on the whole merits of the cause or as one sustaining a dilatory defence, as both are appealable without the leave of the Inner House.
On balance, however, it would be more correct to regard it as a judgment on the whole merits of the cause within the meaning of section 40 of the 1988 Act, even though the Inner House did not address itself to the issues raised in the stated case [27].
As is the case with all other orders that are appealable without leave however, Apollos petition of appeal must be certified by two counsel as reasonable the test for which is whether the appeal raises arguable points of law which are of general public importance.
The only question which the Supreme Court can consider is whether the order of the Inner House to dismiss the stated case was one which was open to it to make under the jurisdiction given to it by the statute.
Unless something has gone seriously wrong, however, this was an exercise of judgment on a matter of procedure with which this court would not normally wish to interfere [29].
The question whether there was any way in which Apollos interests could have been represented which might have avoided the situation in which the Inner House felt obliged to dismiss the stated case is not before the Court.
But it is a troublesome aspect of this case, and there may be grounds for thinking that the rule which disables a company from being represented other than by counsel or a solicitor with a right of audience needs to be re examined [30].
|
The Immigration Act 1971 is now more than forty years old, and it has not aged well.
It is widely acknowledged to be ill adapted to the mounting scale and complexity of the problems associated with immigration control.
The present appeals are a striking illustration of the difficulties.
They concern the system for licensing educational institutions to sponsor students from outside the European Economic Area under Tier 4 of the current points based system of immigration control.
The status of a licensed sponsor is central to the operation of the points based system for international students.
It is also of great economic importance to the institutions which possess it.
It enables them to market themselves to international students on the basis that their acceptance of a student will in the ordinary course enable them to enter the United Kingdom for the duration of their studies.
For institutions with a high proportion of non EEA students, the status of licensed sponsor may be essential to enable them to operate as functioning businesses.
New London College was a licensed Tier 4 (General) sponsor until 18 December 2009, when its licence was suspended by the Secretary of State on the ground that it was in breach of its duties as sponsor.
On 5 July 2010, the Secretary of State, after considering the Colleges representations, revoked the licence with immediate effect.
Officials of the UK Border Agency subsequently agreed to review that decision, but in light of the review the Secretary of State decided on 19 August 2010 to maintain the revocation.
These decisions are challenged by the New London College by way of judicial review.
The grounds of challenge with which this court is concerned succeeded in part before Wyn Williams J, but failed in the Court of Appeal.
In April 2010, the Secretary of State introduced a new status for Tier 4
sponsoring institutions known as Highly Trusted Sponsor status.
Highly Trusted Sponsors were allowed to offer a wider range of eligible courses, including some which comprised periods of work placements as well as study.
They were also exempted from certain of the administrative requirements of the scheme.
The importance of the new status was much increased after a review of the Tier 4 scheme in the summer of 2011 produced substantial evidence of abuse.
As a result a number of changes were announced in March 2011.
One of them was that Highly Trusted Sponsor status would become mandatory for all sponsoring educational institutions from April 2012.
In the meantime there was to be a limit on the number of new students that sponsors could accept without Highly Trusted Sponsor status.
The West London Vocational College fell foul of this requirement.
It had become a licensed sponsor on 9 March 2011, initially with a B rating, which meant that it was a probationer licensee subject to an enhanced level of supervision.
It acquired an A rating on 13 October 2011.
On 26 March 2012, it applied for Highly Trusted Sponsor status, but its application was rejected on 23 August 2012.
The effect, under the recent changes, was that it could not be a licensed sponsor at all.
That rejection is challenged by way of judicial review in these proceedings.
The challenge failed before the Divisional Court on the ground that the main question of law at issue had been decided against it by the Court of Appeal in the New London College case.
The matter comes to the Supreme Court as a leap frog appeal under section 12 of the Administration of Justice Act 1969.
Much the most significant question in both cases, and the only one for which the Appellants have permission to appeal to this court, is the lawfulness of the Tier 4 Sponsor Guidance issued by the Secretary State, which sets out the conditions for the grant and retention of a sponsor licence and of Highly Trusted Sponsor status.
The Appellants contend that so far as the Sponsor Guidance contained mandatory requirements for sponsors, it had to be laid before Parliament under section 3(2) of the Immigration Act 1971.
It was not.
It follows, say the Appellants, that the Secretary of State acted unlawfully in making decisions affecting them by reference to it.
It is no longer disputed that the Secretary of State was entitled to conclude that the New London College was in breach of the sponsorship duties set out in the Guidance.
Nor is it disputed that the West London Vocational Training College failed to qualify for Highly Trusted Status in accordance with the criteria stated in the Guidance.
The statutory framework
Section 1(2) of the Immigration Act 1971 provides that those not having the
right of abode in the United Kingdom may live, work and settle there only by permission and subject to such regulation and control of their entry into, stay in and departure from the United Kingdom as is imposed by this Act.
Under section 1(4), The rules laid down by the Secretary of State as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons not having the right of abode shall include provision for admitting (in such cases and subject to such restrictions as may be provided by the rules, and subject or not to conditions as to length of stay or otherwise) persons coming for the purpose of taking employment, or for purposes of study, or as visitors, or as dependants of persons lawfully in or entering the United Kingdom.
Section 3 provides for the regulation and control of immigration by the Secretary of State.
Section 3(1) provides that a person who is not a British citizen shall not enter the United Kingdom unless given leave to do so in accordance with the provisions of or made under this Act.
Leave to enter or remain may be given for a limited or indefinite period and subject to any or all of a number of specified conditions, including a condition restricting his studies in the United Kingdom.
Under section 4(1), the power under the Act to give or refuse leave to enter the United Kingdom is exercisable by immigration officers, who at the relevant time were employees of the UK Border Agency, an executive agency of the Home Office.
The power to give or to vary leave to remain for those who are already here is exercisable by the Secretary of State.
At any one time, there is a substantial body of rules, discretions and practices laid down by the Secretary of State as the ultimate administrative authority responsible for the administration of the Act.
Section 3(2) of the Act, provides: The Secretary of State shall from time to time (and as soon as may be) lay before Parliament statements of the rules, or of any changes in the rules, laid down by him as to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons required by this Act to have leave to enter, including any rules as to the period for which leave is to be given and the conditions to be attached in different circumstances.
They are then subject to approval under the negative resolution procedure.
In principle, the rules in question are contained in the Immigration Rules,
which in successive editions and with frequent variations have invariably been laid before Parliament.
But section 3(2) is not confined to the Immigration Rules formally so called.
It extends to any instrument, direction or practice laid down by the Secretary of State which (i) contains or constitutes a rule, and (ii) deals with the practice to be followed in the administration of the Act for regulating the entry into and stay in the United Kingdom of persons required by this Act to have leave to enter or the period or conditions attaching to them.
In R (Munir) v Secretary of State for the Home Department [2012] 1 WLR 2192, this court held that the power of the Secretary of State to make or vary rules falling within this description was not an exercise of prerogative power but was wholly statutory.
Under the Immigration Act, the Secretary of State has a power and duty to make them, and once made they may be the source of legal rights.
It followed that no rule falling within the description in section 3(2) was lawful unless it was laid before Parliament.
In R (Alvi) v Secretary of State for the Home Department [2012] 1 WLR
2208, which was heard with Munir and decided on the same day, this court considered in detail what constituted a rule dealing with the practice to be followed for regulating entry into and stay in the United Kingdom.
The principal judgments were delivered by Lord Hope and Lord Dyson.
They were agreed upon the basic requirement of section 3(2) and on the test for distinguishing a rule from something that was merely advisory or explanatory, although not on every aspect of its application to the facts of that case.
Lord Walker of Gestinghorpe, Lord Clarke of Stone cum Ebony and Lord Wilson delivered concurring judgments agreeing with both of them on the points on which they were agreed.
Lord Hope put the point in this way at para 41: The content of the rules is prescribed by sections 1(4) and 3(2) of the 1971 Act in a way that leaves matters other than those to which they refer to her discretion.
The scope of the duty that then follows depends on the meaning that is to be given to the provisions of the statute.
What section 3(2) requires is that there must be laid before Parliament statements of the rules, and of any changes to the rules, as to the practice to be followed in the administration of the Act for regulating the control of entry into and stay in the United Kingdom of persons who require leave to enter.
The Secretary of State's duty is expressed in the broadest terms.
A contrast may be drawn between the rules and the instructions (not inconsistent with the rules) which the Secretary may give to immigration officers under paragraph 1(3) of Schedule 2 to the 1971 Act.
As Sedley LJ said in ZH (Bangladesh) v Secretary of State for the Home Department [2009] Imm AR 450, para 32, the instructions do not have, and cannot be treated as if they possessed, the force of law.
The Act does not require those instructions or documents which give guidance of various kinds to caseworkers, of which there are very many, to be laid before Parliament.
But the rules must be.
So everything which is in the nature of a rule as to the practice to be followed in the administration of the Act is subject to this requirement.
At para 94, Lord Dyson, in a conclusion expressly endorsed by Lord Hope, at para 57, said: a rule is any requirement which a migrant must satisfy as a condition of being given leave to enter or leave to remain, as well as any provision as to the period for which leave is to be given and the conditions to be attached in different circumstances (there can be no doubt about the latter since it is expressly provided for in section 3(2)).
I would exclude from the definition any procedural requirements which do not have to be satisfied as a condition of the grant of leave to enter or remain.
But it seems to me that any requirement which, if not satisfied by the migrant, will lead to an application for leave to enter or remain being refused is a rule within the meaning of section 3(2).
That is what Parliament was interested in when it enacted section 3(2).
It wanted to have a say in the rules which set out the basis on which these applications were to be determined.
The points based system: Tier 4 sponsorship
In its original form, the points based system of immigration control came into force in November 2008.
It introduced a requirement that migrants intending to enter the United Kingdom should achieve a specified minimum number of points, broadly reflecting the migrants qualifications for admission in the relevant category (or Tier).
Tier 4 (General), which comprised migrants aged over 16 coming to the United Kingdom for study, was implemented in March 2009.
Before that, the Immigration Rules had provided that all migrants seeking to enter or remain in the United Kingdom for the purpose of study had to have been accepted for a course at an institution appearing on a Register of Education and Training Providers maintained by the Department of Education.
The essential requirement of the new Tier 4 system was that the migrant should have been sponsored by an educational institution holding a sponsors licence.
The scheme was described in two documents.
The first was Part 6A of the Immigration Rules, which deals with the requirements to be satisfied by migrants applying for leave to enter or remain.
The second was the Tier 4 Sponsor Guidance, which dealt with the requirements to be satisfied by educational institutions seeking to qualify for a sponsors licence.
The former were laid before Parliament under section 3(2), but the latter were not.
It is the absence of tacit Parliamentary approval for the Guidance which lies at the heart of these appeals.
Part 6A of the Immigration Rules
For present purposes the relevant versions of the Immigration Rules are those which came into force on 30 March 2009 and 5 July 2010, and applied at the time of the decisions which the Appellants challenge.
They are in the same terms in every relevant respect.
Paragraphs 245ZT to 245ZY relate to Tier 4 (General) migrants.
Paragraph 245ZV of the Rules provides: To qualify for entry clearance as a Tier 4 (General) Student, an applicant must meet the requirements listed below.
If the applicant meets these requirements, entry clearance will be granted.
If the applicant does not meet these requirements, the application will be refused.
Paragraph 245ZX contains corresponding provisions relating to applications for leave to remain by those who have already gained entry clearance.
In each case, the requirements in question include at least 30 points under paragraphs 113 to 120 of Appendix A.
These paragraphs provide that the 30 points are scored if (and only if) a visa letter or a Confirmation of Acceptance for Studies (or CAS) has been issued in respect of a course of study satisfying the academic requirements set out in paragraph 120.
A visa letter was an unconditional offer letter from an educational institution for the relevant course of study.
In the course of 2010, the visa letter was superseded by the CAS, which performed the same function on line.
A CAS is not a physical document.
It is an entry made by the sponsor in an electronic database to which the sponsor and the UK Border Agencys staff both have access.
What the migrant receives is a unique reference number, which he supplies to the Border Agency on applying for leave to enter or remain in the United Kingdom, and which enables the agency to access the electronic file relating to him.
Paragraphs 116 117 of the Appendix A lay down conditions for the validity of a CAS.
They provide, so far as relevant, 116.
A Confirmation of Acceptance for Studies will only be considered to be valid if: . (d) it was issued by an institution with a Tier 4 (General) Student Sponsor Licence, (e) the institution must still hold such a licence at the time the application for entry clearance or leave to remain is determined (f) it contains such information as is specified as mandatory in guidance published by the United Kingdom Border Agency. 117.
A Confirmation of Acceptance for Studies reference number will only be considered to be valid if: (a) the number supplied links to a Confirmation of Acceptance for Studies Checking Service entry that names the applicant as the migrant and confirms that the Sponsor is sponsoring him in the Tier 4 category indicated by the migrant in his application for leave to remain (that is, as a Tier 4 (General) Student or a Tier 4 (Child) Student), and (b) that reference number must not have been cancelled by the Sponsor or by the United Kingdom Border Agency since it was assigned.
It should be noted that the issue of a valid CAS and the scoring of the thirty
points associated with it, are not the only requirement listed below which paragraphs 245ZV and 245ZX require to be satisfied.
It is not, therefore, in itself a guarantee of entry.
In the first place, the other requirements of Rule 245ZV include a requirement that the student should not fall for refusal under the general grounds of refusal.
These grounds, which are set out at paragraph 320 of the Immigration Rules, include refusal on the ground of the applicants failure to produce specified documentation or information, or on the ground of the applicants past convictions or breaches of immigration law, or on the ground that for some other reasons the applicant has been or should be excluded for the public good or, more generally, on the ground (see para 320(1)) that entry is being sought for a purpose not covered by these Rules.
All of these are matters for decision (subject to appeal) by an immigration officer.
Secondly, Appendix A, paragraph 118 of the Immigration Rules, requires the applicant as a condition of being awarded his 30 points, to supply any documentary evidence of his or her previous qualifications which he used to obtain the offer of a place on a course offered by the sponsoring educational institution.
Broadly summarised, the effect of these provisions is that a migrant with a CAS may still be required to satisfy an immigration officer upon applying to enter that he is genuinely entering for the purpose of study, that there was a proper basis for his application for a place from the sponsor, and that there are no character issues which require his exclusion.
Certain of these requirements also apply under paragraph 322 to applications for leave to remain.
The Tier 4 Sponsor Guidance
The Sponsor Guidance is a large and detailed document issued on behalf of the Secretary of State, which may be amended at any time and has in fact been amended with bewildering frequency.
The relevant editions of the Guidance are those applying from 5 October 2009, 3 March 2010, 6 April 2010 and 5 September 2010.
They differ in detail, but not in their broad lines.
In what follows, I shall refer (unless otherwise stated) to the paragraph numbers of the Guidance which came into force on 6 April 2010.
Their tenor and purpose is conveyed by the opening paragraphs (in all three relevant editions): WHAT IS SPONSORSHIP? 1.
Sponsorship is based on two fundamental principles: those who benefit most directly from migration (that is, the employers, education providers or other bodies who are bringing in migrants) should play their part in ensuring that the system is not abused; and we need to be sure that those applying to come to the United Kingdom to do a job or to study are eligible to do so and that a reputable employer or education provider genuinely wishes to take them on. 2.
Before a migrant can apply to come to, or remain in the United Kingdom to study, he/she must have a sponsor.
The sponsor will be an education provider in the United Kingdom that wishes to provide education to a migrant.
Sponsorship plays two main roles in the application process: it provides evidence that the migrant will study for an approved qualification; and it involves a pledge from the sponsor that it will accept the duties of sponsoring the migrant.
I need not set out the substantive provisions in detail.
For present purposes
it is enough to note that the Guidance lays down mandatory requirements governing (i) the criteria for the award of a sponsors licence, (ii) the obligations of those to whom a license has been awarded, (iii) the criteria to be applied by a licensed sponsor in issuing a CAS, and (iv) the procedure and criteria for suspending, downgrading or withdrawing a sponsors licence.
In the first category, there are provisions relating to the academic standards of the sponsors courses, the qualifications to which they lead, the adequacy of its facilities and key staff, and its general efficiency.
In the second category come provisions relating to the duties of sponsors, including their duties to monitor student attendance, report significant absences, and maintain proper records of these matters.
Para 163 sets out a number of specific tests which must also be satisfied.
In particular, it imposes a maximum acceptable proportion of enrolled migrant students who have abandoned their studies at specified stages of the course.
In the third category come requirements to assess and report upon migrant students command of English, their ability to follow their chosen course, and their possession of sufficient resources to maintain themselves in the United Kingdom during their studies.
In the fourth category, the provisions regarding the withdrawal of a licence distinguish between cases in which a sponsors licence will be withdrawn (paragraphs 344 345), cases in which it will normally be withdrawn (paragraphs 346 9), and cases in which it may be withdrawn (paragraphs 350 352).
These corresponded to breaches of greater or lesser gravity of the institutions obligations as a sponsor or its failure to satisfy the licence criteria on a continuing basis.
In 2011, after the announcement that Highly Trusted Status was to become mandatory, the criteria for granting it were tightened up.
The new criteria were included in the edition of the Tier 4 Sponsor Guidance which came into force on 5 September 2011.
One of the more significant changes was the introduction of an additional test, namely that where an institution had been licensed for twelve months, not more than 20 per cent of Tier 4 (General) migrants to whom it had given a CAS should have been refused leave to enter or remain when in due course they applied.
The West London Colleges failure to satisfy this test was the ground on which it was refused Highly Trusted Status.
Unlawful delegation
The Appellants first argument is that paragraphs 245ZV and 245ZX of the Immigration Rules constituted an unlawful delegation to the sponsoring institutions of the Secretary of States powers to control entry into or stay the United Kingdom.
It is correct that when the points based system was introduced for Tier 4 migrants, a number of matters on which students had previously been required to satisfy immigration officers or the Secretary of State, such as a bona fide intention to study, were now to be examined by the sponsoring institution as a condition of being entitled to issue a CAS.
But the short answer to the suggestion that this involved an unlawful delegation is that leave to enter or remain continues to be the responsibility of immigration officers and the Secretary of State, who retain the last word in each individual case by virtue of the general grounds of refusal.
These include a right to refuse on the ground that the Immigration Officer or the Secretary of State is not satisfied with the material used by the migrant to obtain his offer of a place on the sponsors course, or on the ground that notwithstanding the CAS the migrant is not seeking to enter or remain for a purpose (i.e. study at an appropriate institution) which is covered by the Rules.
I have summarised the relevant provisions at paragraph 14 above.
The evidence shows that a significant number of Tier 4 (General) migrants with a CAS are in fact refused leave to enter or remain on these grounds.
The upshot is that the grant of a CAS by an educational institution is not tantamount to leave to enter or remain.
It is strong but not conclusive evidence of some of the matters which are relevant upon the migrants application for leave to enter or remain.
Absence of statutory power
This, although placed second in the order of argument, was really the Appellants main point and was the focus of the decisions of the courts below.
Under the points based system, the control of immigration under Tier 2 (skilled workers), Tier 4 (students) and Tier 5 (temporary workers) depends critically on the sponsorship of migrants by licensed sponsors.
The requirement that a migrant in the relevant category should be sponsored by an institution with a sponsor licence is laid down in the Immigration Rules, in the case of Tier 4 (General) by Appendix A, paragraph 116 (d) and (e).
A Sponsor Licence is defined in paragraph 6 of the Rules as a licence granted by the Secretary of State to a person who, by virtue of such a grant, is licensed as a Sponsor under Tiers 2, 4 or 5 of the Points Based System.
But there are no provisions in the Rules dealing with the qualifications and obligations of a licensed sponsor.
The system for licensing sponsors is wholly governed by the Guidance issued for the relevant tier on behalf of the Secretary of State.
This includes, it is said, mandatory requirements for obtaining and retaining a sponsor licence which qualify as rules and determine whether the migrant will obtain leave to enter or remain in the United Kingdom.
Therefore, they must be laid before Parliament under section 3(2) of the Act.
In the absence of tacit Parliamentary approval, the Secretary of State is not entitled to have regard to them in making decisions about the status of sponsors.
There is a conceptual difficulty for the Appellants in this argument.
Their objective in this litigation is to recover the sponsor licence (in the case of the New London College) and to obtain Highly Trusted Status (in the case of the West London Vocational Training College).
If the sponsor licensing scheme is unlawful for want of tacit Parliamentary approval, it must follow that the Secretary of State was not entitled to grant licences in accordance with it.
On that footing, the Secretary of State cannot be bound to confer a licence under it on the West London Vocational Training College, or to allow the New London College to retain a licence once granted.
Moreover, since under Part 6A of the Immigration Rules migrants in Tier 4 require a CAS from a licensed sponsor as a condition of obtaining leave to enter or remain, it must follow, if the system of sponsor licensing is unlawful, that leave to enter or remain in the United Kingdom cannot be granted to students whom they have accepted, except possibly on the footing of an administrative relaxation of the relevant parts of the Immigration Rules.
The Appellants brought a fair amount of ingenuity to the task of escaping this dilemma.
New London College argued that the grant of a sponsor license was lawful, whereas its withdrawal was not.
Both Appellants argued that the sponsor licensing scheme could remain valid on the footing that the mandatory requirements for the grant or retention of sponsor licences or Highly Trusted Sponsor status were excised, leaving only those parts of the criteria which were discretionary or advisory.
But none of this is realistic.
The criteria under paragraphs 344 345 of the Guidance are mandatory in exactly the same way as the criteria for granting it is in the first place.
The mandatory requirements, whether they relate to the grant or the withdrawal of a license or of Highly Trusted Sponsor status, cannot be severed from the rest of the licensing scheme, because they are fundamental to its whole operation.
It follows that either the sponsor licensing scheme is wholly unlawful by reason of its inclusion of mandatory requirements for sponsors, or it is lawful notwithstanding those requirements.
Neither alternative will result in these Appellants being licensed.
There is no half way house.
Mr Drabble QC, who appeared for the Interveners (the Migrants Rights Network and the Joint Council for the Welfare of Immigrants), was understandably concerned not with the position of these Appellants but with the state of English law and the general operation of the system of immigration control.
So while recognising the Appellants problem, he had no reason to be inhibited by it, and put the case in its purest and most radical form.
Mr Drabble submitted that the Sponsor Guidance does not fall within sections 1(4) or 3(2) of the Act, because it is not directed to regulating the grant of leave to enter or remain in the United Kingdom but to the licensing and regulation of the sponsoring institutions themselves.
It did not therefore need to be laid before Parliament.
But, he says, because the control of immigration is wholly statutory and there is no power to control it otherwise than by rules falling within section 3(2), there is no power to operate a system of sponsor licensing at all.
Only on the footing that (contrary to this submission) the requirements for sponsors did fall within sections 1(4) and 3(2) of the Act, was he able by way of alternative to give at least partial support to the Appellants argument.
Absence of statutory authority
The first question is accordingly the scope of section 3(2) of the Act.
It does not apply to all rules, but only to those which relate to the practice to be followed in the administration of this Act for regulating the entry into and stay in the United Kingdom of persons required by this Act to have leave to enter.
Alvi is authority for the proposition that it extends only to requirements which if not satisfied by the migrant, will lead to an application for leave to enter or remain being refused: see para 94 (Lord Dyson).
I would readily accept that the mandatory criteria for the award and retention of a sponsor licence are rules.
But, subject to one reservation (considered below), they are not rules calling for compliance by the migrant as a condition of his obtaining leave to enter or remain.
The Sponsor Guidance is wholly concerned with the position of the sponsor.
The point may be illustrated by imagining an appeal by the migrant under section 84(1) of the Nationality, Immigration and Asylum Act 2002 on the statutory ground that his application to enter or remain was refused on a ground not in accordance with immigration rules.
This provision is the main reason why the Rules have been treated as giving rise to legal rights, which in turn was a significant part of the analysis in Alvi: see paras 9, 38, 39, 42 (per Lord Hope); cf.
MO (Nigeria) v Secretary of State for the Home Department [2009] 1 WLR 1230 at para 6 (per Lord Hoffmann).
As far as the migrant is concerned, the only relevant rule is that to obtain leave to enter or remain he must have received a CAS from a licensed sponsor.
That rule is contained in the Immigration Rules.
If the issue on a hypothetical appeal under section 84(1) was whether the migrant had a CAS from a licensed sponsor, that would fall within the proper scope of the appeal, because the requirement to have a CAS from a licensed sponsor was laid down by the Rules.
But if the issue was whether the course provider ought to have been licensed, it would plainly not fall within the proper scope of the appeal, for that was not a requirement falling to be satisfied by the migrant and could have formed no part of the ground of refusal.
Compare the situation in Alvi, a Tier 2 case in which the applicant was refused leave to remain because his occupation was not included in a list of skilled occupations.
Because the list of skilled occupations was liable to be changed by the Secretary of State and was not part of the Immigration Rules laid before Parliament, it was not lawful to make a decision by reference to it.
An appeal under section 84(1) of the Act of 2002 would therefore have been competent.
For this purpose, the critical feature of the list of skilled occupations was that it was part of the criteria for granting leave to enter or remain which the migrant had to satisfy and which determined the fate of his application.
This is not true of the criteria for sponsor licensing.
This is not a technical or adventitious distinction.
It is logically coherent, entirely consistent with the purpose of the Immigration Rules and dictated by the language of section 3(2) of the Act.
The reservation arises out of the cross references to the Sponsor Guidance in the Rules.
Since the Guidance is liable to be changed without Parliamentary scrutiny at the discretion of the Secretary of State, the Rules cannot lawfully incorporate by reference from the Guidance anything which constitutes a rule that if not satisfied will lead to the migrant being refused leave to enter or remain: see Alvi, at para 39 (per Lord Hope).
The relevant cross references are concerned with documentation.
Appendix A, paragraph 116(f) of the Rules requires the CAS to contain, as a condition of its validity, such information as is specified as mandatory in guidance published by the United Kingdom Border Agency.
This is a reference to the information specified at paragraphs 170 of the Guidance.
Paragraph 170 provides that when assigning a CAS the sponsor must complete all of the relevant details within the sponsorship management system, for example the students personal details, course level and information about fees, etc.
It goes on to draw attention to the importance of completing in detail the evidence provided section stating, for example, how it has assessed the students command of English and his ability to follow the course.
Paragraph 245AA(a) of the Rules provides that where Appendix A requires specified documents to be provided, this means documents specified by the Secretary of State in the Sponsor Guidance.
Paragraph 245AA(a) provided that if the specified documents are not provided, the applicant will not meet the requirement for which the specified documents are required as evidence.
Paragraph 245AA(c) (in effect from 5 July 2010) provided that if the Sponsor or applicant does not satisfy the requirements set out in guidance and referred to in these Rules, the applicant will not meet the related requirement in these Rules.
The effect of these provisions is simply to require the sponsor to enter on the migrants electronic file information which the migrant will himself have had to produce to obtain the offer of a place on the sponsors course.
Appendix A, paragraph 118 of the Rules, requires the migrant to produce the same material in support of his application for leave to enter or remain.
It follows that none of the sections of the Guidance incorporated by reference in the Rules raises the bar against migrants any higher than the Rules themselves do.
For these reasons I accept Mr. Drabbles starting point, that the criteria for sponsor licensing contained in the Guidance did not fall within sections 1(4) or 3(2) and did not therefore fall to be laid before Parliament.
This disposes of the Appellants argument.
I turn therefore to Mr Drabbles principal submission, namely that on the footing that the criteria for sponsor licensing do not fall within sections 1(4) and 3(2), there is no power to have such a system at all.
He submitted that this was implicit in the decisions of this court in Munir and Alvi.
In particular, he relied on Lord Hopes observation in Alvi, at para 33, that the obligation under section 3(2) to lay statements of the rules and any changes in the rules before Parliament excludes the possibility of exercising prerogative powers to restrict or control immigration in ways that are not disclosed by the rules.
I do not accept that Munir and Alvi go that far.
The only mode of restricting or controlling immigration which was in issue in those cases was the regulation of entry into and stay in the United Kingdom.
The decisions are authority for the proposition that the power of the Secretary of State to make rules relating to the practice to be followed for regulating the entry into and stay in the United Kingdom is implicit in the obligation imposed on her by section 3(2) to lay such rules before Parliament.
It has no other legal basis.
Section 3(2) is concerned only with rules of that description, and it was only with the control of immigration by the grant or refusal of leave to enter or remain that Lord Hope, like the rest of the court, was concerned.
The court was not concerned with the existence or extent of any power that the Secretary of State might have to do something which was not within the scope of section 3(2).
So in my opinion Mr. Drabbles submission is unsupported by authority.
But is it right in principle? In my view it is not.
It has long been recognised that the Crown possesses some general administrative powers to carry on the ordinary business of government which are not exercises of the royal prerogative and do not require statutory authority: see B.V. Harris, The Third Source of Authority for Government Action Revisited (2007) 123 LQR 225.
The extent of these powers and their exact juridical basis are controversial.
In R v Secretary of State for Health Ex p C [2000] 1 FLR 627 and Shrewsbury and Atcham Borough Council v Secretary of State for Communities and Local Government [2008] 3 All ER 548, the Court of Appeal held that the basis of the power was the Crowns status as a common law corporation sole, with all the capacities and powers of a natural person subject only to such particular limitations as were imposed by law.
Although in R (Hooper) v Secretary of State for Work and Pensions [2005] 1 WLR 1681, para 47 Lord Hoffmann thought that there was a good deal of force in this analysis, it is open to question whether the analogy with a natural person is really apt in the case of public or governmental action, as opposed to purely managerial acts of a kind that any natural person could do, such as making contracts, acquiring or disposing of property, hiring and firing staff and the like.
But the question does not need to be resolved on these appeals because the statutory power of the Secretary of State to administer the system of immigration control must necessarily extend to a range of ancillary and incidental administrative powers not expressly spelt out in the Act, including the vetting of sponsors.
The Immigration Act does not prescribe the method of immigration control to be adopted.
It leaves the Secretary of State to do that, subject to her laying before Parliament any rules that she prescribes as to the practice to be followed for regulating entry into and stay in the United Kingdom.
Different methods of immigration control may call for more or less elaborate administrative infrastructure.
It cannot have been Parliaments intention that the Secretary of State should be limited to those methods of immigration control which required no other administrative measures apart from the regulation of entry into or stay in the United Kingdom.
If the Secretary of State is entitled (as she plainly is) to prescribe and lay before Parliament rules for the grant of leave to enter or remain in the United Kingdom which depend upon the migrant having a suitable sponsor, then she must be also be entitled to take administrative measures for identifying sponsors who are and remain suitable, even if these measures do not themselves fall within section 3(2) of the Act.
This right is not of course unlimited.
The Secretary of State cannot adopt measures for identifying suitable sponsors which are inconsistent with the Act or the Immigration Rules.
Without specific statutory authority, she cannot adopt measures which are coercive; or which infringe the legal rights of others (including their rights under the Human Rights Convention); or which are irrational or unfair or otherwise conflict with the general constraints on administrative action imposed by public law.
However, she has not transgressed any of these limitations by operating a system of approved Tier 4 sponsors.
It is not coercive.
There are substantial advantages for sponsors in participating, but they are not obliged to do so.
The rules contained in the Tier 4 Guidance for determining whether applicants are suitable to be sponsoring institutions, are in reality conditions of participation, and sponsors seeking the advantages of a licence cannot complain if they are required to adhere to them.
Brief submissions were addressed to us on the question whether the fee charged by the Border Agency required and if so whether it had specific statutory authority.
Since the answer to that question cannot affect the lawfulness of the principles on which a sponsors licence is refused, downgraded or withdrawn, I say nothing about it one way or the other.
Conclusion It follows, in my opinion, that both appeals should be dismissed.
Under paragraph 323A(a) of the Immigration Rules, if a migrants sponsor ceases to hold a sponsors licence, his leave to enter or remain is not automatically annulled but may be curtailed.
One would assume that the Secretary of State would respond with reasonable sensitivity to the difficulties faced by international students in a situation which is not necessarily of their own making.
LORD CARNWATH
In agreement with Lord Sumption, but for rather different reasons, I would reject Mr Drabbles extreme submission that the establishment of the sponsor licensing system is outside the scope of the 1971 Act altogether.
It is clear (following R (Munir) v Secretary of State for the Home Department [2012] 1 WLR 2192) that the Secretary of States powers of immigration control are confined to those conferred expressly or impliedly by the 1971 Act.
They may include both powers expressly conferred and powers reasonably incidental to them (see Wade and Forsyth, Administrative Law 10th Ed p 181; Bennion, Statutory Interpretation 5th Ed pp 494ff).
The obvious source of such incidental powers in the present context, in my view, is to be found in section 1(4), which imposes on the Secretary of State the duty to establish arrangements which allow admissions for the purposes of study.
Fairly incidental to that is the establishment of a system for vetting educational institutions who may be permitted to participate.
A useful parallel can be found in R (Barry) v Liverpool Council [2001] EWCA Civ 384, where it was held that a scheme for registering and vetting door staff was incidental to the council's power for licensing places for public entertainment.
I cannot accept Mr Swifts submission (if I understood it correctly) that there is some alternative, unidentified source of such powers, derived neither from the prerogative nor from any specific provision in the Act, but from the general responsibilities of the Secretary of State in this field.
No authority was cited for that proposition and to my knowledge none exists.
Mr Swift did not seek to rely on a possible third source of powers, by reference to the controversial line of authority mentioned by Lord Sumption (para 28).
In my view he was wise not to do so (for the reasons given in my judgment for the majority in the Shrewsbury case [2008] 3 All ER 548, 562 4). (This sensitive issue has also been the subject of recent consideration by the House of Lords Select Committee on the Constitution: The pre emption of Parliament HL Paper 165 1 May 2013).
Lord Sumption relies instead on a broader application of the incidental powers approach, which appears to be a variant of Mr Swifts main submission.
The Secretary of States power to administer the system of immigration control must, it is said, extend to a range of ancillary and incidental powers, including administrative measures for identifying suitable sponsors, even if these measures do not themselves fall within section 3(2) of the Act.
This formulation, as I understand it, treats the licensing process as linked not to the specific provisions for regulating entry under section 1(4), but to the general system of immigration control under the Act.
It thus takes it outside the scope of the section 3(2) procedure altogether.
I find this more difficult to accept.
In Hazell v Hammersmith LBC [1992] 2
AC 1, considering the analogous principle in section 111 of the Local Government Act 1972, Lord Templeman extracted from the authorities, starting with Attorney General v Great Eastern Railway Co (1880) 5 App Cas 473 . the general proposition that when a power is claimed to be incidental, the provisions of the statute which confer and limit functions must be considered and construed. (p 31D) In that case the alleged power to enter into swap transactions had to be considered in the context of the specific provisions governing local authority borrowing.
Similarly, in Barry the scheme for vetting door staff was incidental, not to the councils regulatory powers in general, but to the particular power for licensing places for public entertainment.
In each case the source of the incidental power was found in a specific provision conferring specific functions.
So in the present context, in my view the sponsorship licensing scheme is an adjunct, not of the immigration control system in general, but of the specific function of providing for entry for study under section 1(4).
That is its only purpose within the statutory scheme.
Section 1(4) states that such provision is to be in such cases and subject to such restrictions as may be provided by the rules.
On its face that leads back to section 3(2) which prescribes the procedure for making the rules.
That view appears also to accord with the approach of those responsible for drafting the relevant rules and regulations.
They did not treat the licensing scheme as falling outside the scope of the rules altogether.
On the contrary the concept of such a licence, as defined in the rules, is an essential feature of Appendix A to which Lord Sumption has referred.
They must therefore be taken as authorising the Secretary of State to maintain arrangements for the grant of licences.
They do not as such provide for her to withdraw licences once given.
However, it is apparent from rule 323A that the grant of a licence is not permanent, so that a power to revoke for good reason may not be difficult to imply (see eg R v Hillingdon LBC Ex p LRT Times, 20.1.99, cited in Wade and Forsyth, op cit p 194).
What are missing from the rules are the detailed arrangements for the grant or review of licences, or the criteria under which they are to be carried out.
Consistently with this approach, the fees regulations, in their earlier form, defined sponsor licence as a licence granted by the Secretary of State under the immigration rules (Immigration and Nationality (Fees) Order 2011 SI 2011 No 445 art 2, emphasis added).
It is true that the wording was not preserved in 2013 regulations (SI 2013 No 617), which refer simply to a licence granted to a person who, by virtue of such a grant, is licensed as sponsor; but this change may itself have been a response to the potential problems highlighted by Pankina v Secretary of State for the Home Department [2011] QB 376.
The next question is whether, assuming that that the power to issue the guidance is derived from section 1(4), it falls outside the scope of the rules which are to be submitted to Parliament under section 3(2).
It is not in dispute, as I understand it (para 24), that parts at least of the guidance are of the nature of rules in the ordinary meaning of that word.
Lord Clarke said in Alvi: 120.
It seems to me that, as a matter of ordinary language, there is a clear distinction between guidance and a rule.
Guidance is advisory in character; it assists the decision maker but does not compel a particular outcome.
By contrast a rule is mandatory in nature; it compels the decision maker to reach a particular result.
By that test, there are parts of the guidance which are clearly mandatory in nature, and so described in the document.
I did not understand Mr Swift to argue otherwise.
However, I would not necessarily accept that such compulsion is an essential characteristic of rules in the ordinary use of that word.
For example, rule 323A to which I have referred, providing for the circumstances in which leave to enter may be curtailed, is properly included in the body of rules, even though its effect is not to compel a particular result in any case, but rather to define the criteria governing the exercise of the discretion.
The more difficult issue, to my mind, is whether, as Mr Swift has argued and the majority accept, the term rules in the present context is to be read in a more limited sense, defined by Lord Dyson in Alvi (para 94) confined to any requirement which, if not satisfied by the migrant, will lead to an application for leave to enter or remain being refused (my emphasis).
Left to myself, I would have needed some convincing that Alvi was determinative of the present case, not least because the issue was different.
The court was concerned with a group of provisions which were admittedly within the general scope of section 3(2), the only issue being the proper categorisation of individual provisions within that group.
It was not concerned, as we are, with the categorisation of a complete and self contained regulatory code for sponsoring educational institutions.
However, the other members of the court, including two members of the majority in Alvi, do not share my doubts on this point.
Accordingly, I see no purpose in introducing a note of dissent on what should as far as possible be a clear cut test.
Finally, I would offer a brief comment on what would have been the practical consequences of a successful appeal on this point.
It was part of Mr Swifts case (echoed by Lord Sumption para 21) that the appellants arguments in effect proved too much for their own good.
If the guidance is unlawful, then so must be the licence originally issued to NLC in reliance on it.
Similarly, in the West London case, setting aside the present decision to refuse HT status cannot turn it into a positive decision in their favour; nor can they pick and choose between different parts of the guidance in support of a new application.
In respect of West London College, I agree that success on the section 3(2) point would not have offered any obvious advantage.
Setting aside the refusal of HTS status would not in itself result in a more favourable outcome.
Although the concept of such status is in the rules, the criteria by which it is to be granted are in the guidance.
If the existing guidance, or material parts of it, were held to be invalid, the Secretary of State would need the opportunity to validate it, with the assistance of Parliament if necessary.
Until then, the status of the college may have to remain undetermined.
In respect of New London College, in my view, the position is different.
The relevant decision in that case was not one to confer a status which they did not have, but to revoke an existing licence.
An order setting aside that decision, if it goes no further, would simply leave the existing licence in place.
There is nothing unlawful in the concept of such a licence, as such, which as I have noted is created by the rules.
Nor, as I understand, is there anything on the face of the licence (whether in paper or digital form) to undermine its validity.
It may well be true, as Mr Swift submits, that the grant of that licence was influenced by criteria in the guidance.
But that does not mean that the licence itself is now to be taken as invalid, in circumstances where no interested party has sought to challenge it, either at the time or since.
Taken to its logical conclusion, Mr Swifts argument would extend not just to the present guidance, but to all the previous versions since the points based system was introduced, and indeed to all licences issued under them.
Happily, however, that is not how public law remedies work.
It is sufficient to refer to the valuable discussion in Wade and Forsyth, previous versions of which have themselves influenced the development of the case law in this area.
The general principle which emerges is summarised as follows (under the heading Nullity and relativity): The truth is that the court will invalidate an order only if the right remedy is sought in the right proceedings and circumstances.
The order may be a nullity and void but these terms have no absolute sense: their meaning is relative, depending upon the courts willingness to grant relief in any particular situation.
If this principle of legal relativity is borne in mind, the law can be made to operate justly and reasonably in most cases through the exercise of remedial discretion (p 253)
If the appellants had succeeded on the legal issue, the result would have been the setting aside of the Secretary of States decision revoking the licence.
Neither NLC nor the Secretary of State (nor any other interested party) has sought to challenge the original licence.
That in my view would have remained in effect unless and until the Secretary of State could put in place valid procedures for its revocation and exercise them accordingly.
Until then, the College and its students would have been unaffected.
| These appeals concern the system for licensing educational institutions to sponsor students from outside the European Economic Area under Tier 4 of the current points based system of immigration control.
Tier 4 deals with the grant of leave to enter or remain in the United Kingdom to migrants to the UK from outside the European Economic Area for the purpose of study.
The essential requirement of the Tier 4 scheme was that the migrant should have been sponsored by an educational institution holding a sponsors licence.
This requirement was laid down in Part 6A of the Immigration Rules, which dealt with the requirements to be satisfied by migrants applying for leave to enter or remain for the purpose of study.
The criteria for licensing sponsors and the duties of sponsors once licensed were not prescribed in the Immigration Rules, but only in the Tier 4 Sponsor Guidance issued by the Secretary of State.
Section 3(2) of the Immigration Act 1971 (the Act) provides that the Secretary of State shall lay before Parliament rules as to the practice to be followed in regulating the entry and stay in the UK of persons required under the Act to have leave to enter.
Part 6A of the Immigration Rules was laid before Parliament under section 3(2) of the Act, but the Sponsor Guidance was not.
New College London was a licensed Tier 4 sponsor until December 2009 when its licence was suspended by the Secretary of State on the ground that it was in breach of its duties as sponsor as set out in the Sponsor Guidance.
Its licence was subsequently revoked.
West London Vocational Training College applied for Highly Trusted Sponsor status in accordance with the Sponsor Guidance and was refused in August 2012.
The effect of that refusal under the terms of the then current Sponsor Guidance was that it could not be a licensed Tier 4 sponsor.
Both applicants sought to challenge these decisions by way of judicial review.
Both failed in the High Court and in the Court of Appeal.
Their case was that, so far as the Sponsor Guidance contained mandatory requirements for sponsors, it had to be laid before Parliament, and that in making decisions by reference to it without having done this, the Secretary of State acted unlawfully.
The Supreme Court unanimously dismisses the appeals.
Lord Sumption (with whom Lords Hope, Clarke and Reed agree) gives the lead judgment.
Lord Carnwath adds a concurring judgment agreeing with the result but differing as to some of the reasoning.
The criteria for sponsor licensing contained in the Sponsor Guidance were properly to be described as rules, but they were not required to be laid before Parliament under section 3(2) of the Act because that requirement related only to rules regulating the grant of leave to enter or remain in the UK
have to be satisfied by the migrant.
The Guidance is directed only to the licensing of sponsoring institutions [23, 26].
If the provisions of the Act do not apply, it does not follow that there is no power to have such a system at all [23, 27].
The statutory power of the Secretary of State to administer the system of immigration control must necessarily extend to a range of ancillary and incidental administrative powers not expressly spelt out in the Act, including the vetting of sponsors [28].
The Act does not prescribe the method of immigration control to be adopted.
It cannot have been Parliaments intention that the Secretary of State should be limited to those methods of immigration control which required no other administrative measures apart from the grant or refusal of leave to enter or remain in the UK.
Since the Secretary of State is entitled to prescribe and lay before Parliament rules for grant of leave to enter or remain in the UK which depend upon the migrant having a suitable sponsor, then she must also be entitled to take administrative measure for identifying sponsors who are and remain suitable, even if these measures do not themselves fall within section 3(2) of the Act [29].
This right is not unlimited: the Secretary of State cannot adopt measures which are inconsistent with the Act or Immigration Rules or adopt measures which are coercive, infringe legal rights or contravene the general constraints on administrative action imposed by public law.
However, the Tier 4 sponsor system was not coercive but voluntary.
The rules contained in the Sponsor Guidance were, in reality, conditions of participation and sponsors seeking the advantages of licences could not complaint if they were required to adhere to them. [CA29] Lord Carnwath agreed with the result, but held that the sponsor licensing scheme was an adjunct, not of the immigrant control system in general, but of the specific function of providing entry under section 1(4) of the Act.
This provides for the admission of persons not having the right of abode for the purpose of study subject to such restrictions as may be provided by the rules.
This leads back to section 3(2) of the Act which prescribes the procedure for making the rules [37].
Lord Carnwath differed as to the practical effect of the decision in respect to New College.
The decision did not confer a status which they did not have but revoked an existing licensing, and an order setting aside that decision would have left the existing licence in place.
No party had sought to challenge the validity of that original licence [44 6].
|
The respondent stood trial at the Central Criminal Court on a charge of entering into or becoming concerned in a money laundering arrangement, contrary to section 328(1) of the Proceeds of Crime Act 2002.
The particulars of the offence were that he and another between the first day of August 2011 and the 13th day of January 2012 entered into or became concerned in an arrangement which they knew or suspected would facilitate the retention, use or control of criminal property, namely money received into a Lloyds Bank account and a Barclays bank account from the sale of motor insurance through the [AM Insurance] website, by or on behalf of [B].
At the close of the evidence, the respondent submitted that there was no case to answer because at the time that the respondent entered into the arrangement no criminal property was yet in existence.
The trial judge, Recorder Greenberg QC, upheld the submission.
The prosecution appealed against her ruling pursuant to section 58 of the Criminal Justice Act 2003.
The appeal was dismissed.
The Court of Appeal (Lloyd Jones LJ and Irwin and Green JJ) held in summary that under section 328 it is not necessary for criminal property to exist at the moment when parties come to a prohibited arrangement, but that the arrangement must relate to property which is criminal property at the time when the arrangement begins to operate on it; and that on the facts of this case the property had not become criminal property at the time when the arrangement began to operate on it.
The court certified that the case involves the following point of law of general public importance: Where, by deception, A induces the payment of money to a bank account opened for that purpose by B (pursuant to an arrangement with A to receive and retain that money, then may B commit an offence contrary to section 328 of the Proceeds of Crime Act 2002, on the basis that the arrangement to receive and retain the money in that bank account can be treated as both
8. rendering the property criminal property and facilitating its retention, use or control? The prosecution was given leave to appeal by this court.
In order to avoid the possibility of prejudice in the event of a new trial, I will avoid using the names of the parties involved.
The case arose from the activities of a fraudster, B, who pleaded guilty to a number of offences.
He established four ghost websites falsely pretending to offer cut price motor insurance and recruited associates to open bank accounts for channelling the proceeds.
One of the websites was established in the name of AM Insurance.
It operated from 1 September 2011 to January 2012.
Shortly before the website went live, H opened two bank accounts, one with Lloyds Bank and the other with Barclays.
B took control of the documentation and bank cards relating to them.
During the short active lifetime of the website, unsuspecting members of the public were duped into paying a total of 417,709 into the Lloyds Bank account and 176,434 into the Barclays account for non existent insurance cover.
The prosecution opened the case to the jury on the basis that H may not have known the details of Bs fraud, but that the circumstances in which the accounts were opened were such that H must have known or at least suspected that B had some criminal purpose.
POCA money laundering offences
Part 7 of the Proceeds of Crime Act (POCA) is concerned with money laundering as defined in section 340(11).
The expression includes any act which constitutes an offence under sections 327, 328 or 329.
Those sections criminalise various forms of dealing with criminal property, as defined in section 340.
Section 340(3) provides that property is criminal property if (a) it constitutes a persons benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and (b) the alleged offender knows or suspects that it constitutes or represents such a benefit. 9.
Section 340(5) provides that a person benefits from conduct if he obtains property as a result of or in connection with the conduct. 10.
Criminal conduct is defined in section 340(2) as conduct which (a) constitutes an offence in any part of the United Kingdom, or (b) would constitute an offence in any part of the United Kingdom if it occurred there. 11.
Section 340(4) provides that It is immaterial (a) who carried out the conduct; (b) who benefited from it; (c) whether the conduct occurred before or after the passing of the Act.
The respondent relies on the use of the past tense, for the purposes of an argument to which I will come. 12.
Section 340(9) provides that property includes money; all forms of property, real or personal, heritable or moveable; and things in action and other intangible or incorporeal property. 13.
Section 329 deals with acquisition, use and possession of criminal property.
Section 327 deals with concealing or transferring criminal property and the like.
Section 328, with which we are directly concerned, deals with arrangements facilitating the acquisition, retention, use or control of criminal property by or on behalf of another person. 14.
Together, sections 327, 328 and 329 form the principal money laundering offences and they cover a wide range of conduct.
There are supplementary offences relating to tipping off and to businesses operating in the regulated financial sector (who have positive reporting duties if they have cause to suspect money laundering). 15.
The material words of section 328 for present purposes are in subsection (1).
This states: A person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person. 16.
Although on a literal interpretation these words could be read as creating criminal liability if the defendant suspects that the effect of the arrangement is to facilitate the acquisition, etc, of criminal property, even where his suspicions are misplaced and the property concerned is not criminal, that is not its accepted or correct interpretation.
The actus reus of the offence is entering or being concerned in an arrangement which in fact facilitates the acquisition etc of criminal property, and the mens rea required is knowledge or suspicion. (See R v Montila [2004] UKHL 50, [2004] 1 WLR 3141, a decision of the House of Lords regarding different but analogous wording in earlier legislation.) 17.
The present case arises under section 328 but the arguments advanced on either side effect also sections 327 and 329.
Subject to immaterial exceptions, a person commits an offence under section 327 if he (a) conceals criminal property; (b) disguises criminal property; (c) converts criminal property; (d) transfers criminal property; (e) removes criminal property from England and Wales or from Scotland or from Northern Ireland. 18.
Subject to similar exceptions, a person commits an offence under section 329 if he (a) acquires criminal property; (b) uses criminal property; (c) has possession of criminal property. 19.
As the Court of Appeal explained in Bowman v Fels (Bar Council intervening) [2005] EWCA Civ 226, [2005] 1 WLR 3083, POCA gave effect to Council Directive 91/308/EEC on prevention of the use of the financial system for the purpose of money laundering (as amended by Council Directive 2001/97/EC), but the Directive set minimum requirements and in some respects POCA was more stringent.
For example, money laundering as defined in POCA includes dealing with property known or suspected to constitute or represent a benefit from criminal conduct; by contrast, the definition in the Directive required knowledge.
The current version of the Directive is 2005/60/EC.
This repealed and replaced 91/308/EEC.
Case law on criminal property 20.
There is an unbroken line of Court of Appeal authority that it is a prerequisite of the offences created by sections 327, 328 and 329 that the property alleged to be criminal property should have that quality or status at the time of the alleged offence.
It is that pre existing quality which makes it an offence for a person to deal with the property, or to arrange for it to be dealt with, in any of the prohibited ways.
To put it in other words, criminal property for the purposes of sections 327, 328 and 329 means property obtained as a result of or in connection with criminal activity separate from that which is the subject of the charge itself.
In everyday language, the sections are aimed at various forms of dealing with dirty money (or other property).
They are not aimed at the use of clean money for the purposes of a criminal offence, which is a matter for the substantive law relating to that offence. 21.
The first authority was the decision of the Court of Appeal Criminal Division (Clarke LJ, Hughes and Dobbs JJ) in R v Loizou [2005] 2 Cr App R 618. 22.
The defendants were charged under section 327 with transferring a large quantity of cash, knowing or suspecting that it constituted a persons benefit from criminal conduct.
The defendants were under police surveillance and the transfer took place in the car park of a hotel.
The prosecution put its case in alternative ways.
The first was that the money represented the proceeds of earlier criminal conduct.
That approach was legally uncontroversial.
The prosecutions alternative case was that the money became criminal property at the moment of the transfer because it was paid for a criminal purpose, namely the purchase of smuggled cigarettes.
At a preliminary hearing the judge ruled that so long as the prosecution could prove that the money was transferred for a criminal purpose, the actus reus of the offence was established by the act of transfer, at which moment the money became criminal property.
His ruling was reversed by the Court of Appeal.
The court held that criminal property within section 327 meant property which was already criminal at the time of the transfer, by reason of constituting or representing a benefit from earlier criminal conduct and not the conduct which was the subject of the indictment.
In Kensington International Ltd v Republic of Congo (formerly Peoples Republic of Congo) (Vitol Services Ltd, Third Party) [2007] EWCA Civ 1128 [2008] 1 WLR 1144, the question arose whether a person who commits a criminal offence of bribery also thereby commits an offence under section 328.
It was argued that the giving of a bribe necessarily involves the briber entering into an arrangement which he knows facilitates the acquisition of criminal property by the recipient, since the bribe, once received, constitutes the latters benefit from criminal conduct.
The argument was rejected.
Moore Bick LJ said at para 67: 23.
I accept that section 328 is of broad application, but in my view that seeks to stretch its scope too far.
As section 340(3)(b) makes clear, the mental element of the offence includes knowledge or suspicion on the part of the defendant that the property in question is criminal property, but that cannot be the case until it has been acquired by means of criminal conduct.
In order for an offence under section 328 to be committed, therefore, the arrangement into which the defendant enters, or in which he becomes involved, must be one which facilitates the acquisition, retention, use or control by another of property which has already become criminal property at the time when it becomes operative.
That requirement is not satisfied if the only arrangement into which he enters is one by which the property in question first acquires its criminal character. 24. 25. 26.
In R v Geary [2010] EWCA Crim 1925, [2011] 1 WLR 1634, another case under section 328, a further argument was raised which is relevant in the present case.
The defendant agreed to help a friend named Harrington to hide some money for a period.
Under the arrangement Harrington transferred around 123,000 into the defendants bank account.
The defendant used some of it to make some purchases for Harrington and, after an interval, he repaid the balance to Harrington less about 5,000.
The prosecutions case was that the money represented proceeds of a fraud carried out by a bank official, who stole it from dormant accounts.
The stolen money was laundered through a network of recipients, each of whom retained a small sum as payment for his services.
The recipients included Harrington and the defendant.
The defendants case was that he was approached by Harrington with a story that he was about to become involved in divorce proceedings, and that the defendant was asked to help Harrington to hide the money from Mrs Harrington (and the court), which he agreed to do.
He denied any knowledge that the money had a criminal source.
In the course of the trial the judge was invited to indicate how he proposed to direct the jury.
He said that in his view the defendants account of the facts did not provide him with a defence to the charge under section 328.
The defendant then pleaded guilty on the basis of the facts alleged by him, which the prosecution perhaps surprisingly were content to accept, and he appealed against his conviction on the ground that the judges ruling was wrong.
The Court of Appeal allowed his appeal and quashed the conviction.
It was argued by the prosecution that the arrangement on the accepted version of the facts involved a conspiracy to pervert the course of justice.
The money transferred was therefore criminal property at the moment of being paid into the defendants account.
Alternatively, the arrangement involved not merely the receipt of the money but also its retention, use or control, and so constituted the offence.
Both parts of the argument were rejected.
Moore Bick LJ said at para 19: In our view the natural and ordinary meaning of section 328(1) is that the arrangement to which it refers must be one which relates to property which is criminal property at the time when the arrangement begins to operate on it.
To say that it extends to property which was originally legitimate but became criminal only as a result of carrying out the arrangement is to stretch the language of the section beyond its proper limits.
An arrangement relating to property which has an independent criminal object may, when carried out, render the subject matter criminal property, but it cannot properly be said that the arrangement applied to property that was already criminal property at the time it began to operate on it.
Moreover, we do not accept that an arrangement of the kind under consideration in the present case can be separated into its component parts, each of which is then to be viewed as a separate arrangement.
In this case there was but one arrangement, namely, that the appellant would receive money, hold it for a period and return it.
To treat the holding and return as separate arrangements relating to property that had previously been received is artificial. 28. 27.
Moore Bick LJ added, obiter, at para 39 that, on the assumption that the purpose for which the money was transferred to the defendant involved perverting the course of justice, it became criminal property in his hands on its receipt, and he could therefore have been charged with an offence of converting or transferring criminal property contrary to section 327 by returning most of it to Harrington, together with the goods which he had purchased with part of it.
In R v Amir and Akhtar [2011] EWCA Crim 146, [2011] 1 Cr App R 464, Akhtar entered into an arrangement with a mortgage broker to obtain money from mortgage companies by submitting false mortgage applications on behalf of third parties.
He was prosecuted under section 328.
The particulars of the offence in the indictment do not appear from the report, but the prosecution argued that Akhtar was guilty because he entered into an arrangement which he knew would facilitate the acquisition of property for third parties by deception, and, as an alternative submission, that the funds had the character of criminal property at the time when the arrangement began to operate on them.
The Court of Appeal quashed Akhtars conviction.
As to the first part of the argument advanced by counsel for the prosecution, Elias LJ said at para 21: On his analysis an offence is committed where a defendant becomes concerned in an arrangement which facilitates the criminal acquisition of property.
The statute requires an arrangement facilitating the acquisition of criminal property.
There is a material distinction.
He also rejected the argument that the funds had the character of being criminal property at the time when the arrangement began to operate.
Issues 29.
The following issues arise: (1) Does the commission of an offence under section 328 require the property to constitute criminal property prior to the arrangement coming into operation? (2) Does the property have to exist at the time when the defendant enters into or becomes concerned in the arrangement? (3) Did the sums received into the respondents accounts constitute criminal property before being paid into those accounts? (4) Was the actus reus of the offence committed by reason of the arrangement facilitating the retention, use or control of the money paid into the respondents accounts? Does the commission of an offence under section 328 require the property to constitute criminal property prior to the arrangement coming into operation? 30.
Mr Kennedy Talbot submitted that the Court of Appeal authorities to which I have referred were wrong, and that the same conduct could both cause property to become criminal and simultaneously constitute the offence charged under section 328.
He made the same submission in relation to sections 327 and 329, correctly recognising that the three sections have to be construed coherently.
So, he submitted, a thief who steals legitimate property is necessarily at the same time guilty of acquiring criminal property contrary to section 329. 31.
As Elias LJ pithily put it, this argument elides the distinction between a person who acquires criminal property and one who acquires property by a criminal act or for a criminal purpose. 32.
The Court of Appeals interpretation of criminal property in the various money laundering sections as meaning property which already has the quality of being criminal property, as defined in section 340, by reason of criminal conduct distinct from the conduct alleged to constitute the actus reus of the money laundering offence itself, accords not only with the natural meaning of the sections but also with the purpose underlying them. 33.
Paragraph 6 of the Explanatory Notes to POCA describes money laundering as the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin, so that they can be retained permanently or recycled into further criminal enterprises.
That is a fair description of the ordinary meaning of the expression.
With reference to the individual offences, para 469 of the explanatory notes states: Section 327 creates one of three principal money laundering offences.
The other two are to be found in sections 328 and 329.
Because of the definition of criminal property at section 340, all three principal money laundering offences now apply to the laundering of an offenders own proceeds as well as those of someone else.
The reference to proceeds of crime is clearly a reference to the proceeds of an earlier offence. 34.
The Court of Appeals interpretation is also consistent with the definition of money laundering in the Council Directive.
The version of the Directive which was in force at the date of enactment of POCA defined money laundering as meaning the following conduct, when committed intentionally: the conversion or transfer of property, knowing that such property is derived from criminal activity or from an act of participation in such activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his action; the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from criminal activity or from an act of participation in such activity; the acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation in such activity; participation in, association to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the actions mentioned in the foregoing indents. 36. 35.
The 2005 Directive retains this wording but extends the scope of the Directive by a separate provision relating to terrorist financing.
This expression is defined to include the provision or collection of funds with the intention that they should be used or the knowledge that they are to be used, to carry out certain offences identified in the Council Framework Decision of 13 June 2002 on combatting terrorism (2002/475/JHA).
In the UK, the Terrorism Act 2000 contains provisions relating to terrorist property which are similar to, but wider than, the money laundering offences under POCA.
Terrorist property is defined in section 14(1) as meaning: (a) money or other property which is likely to be used for the purposes of terrorism (including any resources of a proscribed organisation), (b) proceeds of the commission of acts of terrorism, and (c) proceeds of acts carried out for the purposes of terrorism.
In para (a) the definition includes words which are forward looking, to use Mr Tim Owen QCs description, whereas the definition of criminal property in Part 7 of POCA looks backward. 37.
Sections 327, 328 and 329 were aptly described by Moses LJ in JSC BTA Bank v Ablyazov [2009] EWCA Civ 1124, [2010] 1 WLR 976, at para 14, as parasitic offences, because they are predicated on the commission of another offence which has yielded proceeds which then become the subject of a money laundering offence.
A wider interpretation would have serious potential consequences for third parties including banks and other financial institutions.
They already have an onerous reporting obligation if they know or suspect, or have reasonable grounds for knowing or suspecting, that another person is engaged in money laundering.
That obligation would be considerably enlarged and its limits potentially difficult to gauge if they are required, on pain of criminal sanctions, to report any suspicion, or reasonable grounds for suspicion, of a customers intended use of property either in connection with an offence within the UK or in connection with conduct elsewhere in the world which would be an offence if committed within the UK.
In HKSAR v Li Kwok Cheung George [2014] HKCFA 48, a similar issue arose on the wording of a Hong Kong money laundering ordinance.
Ribeiro and Fok PJJ said in their joint judgment with which the other members of the Court of Final Appeal agreed, at para 84: It is one thing to criminalise dealing with funds where the dealer knows or has reasonable grounds to believe that they are the proceeds of crime, it is quite a different matter to stigmatise as a money launderer, a lender dealing with its own clean funds because of what the borrower does or intends to do with them.
However, that would be the consequence if property obtained in connection with criminal conduct (section 340(5)) bears the extended meaning for which the prosecution contends.
Does the property have to exist at the time when the defendant enters into or becomes concerned in the arrangement? 38.
The Court of Appeal held in the present case that there is no basis on the plain meaning of the words used in section 328 for restricting the offence to a case where the criminal property is already in existence at the time at which a defendant enters into or becomes concerned in the arrangement.
Mr Owen argued that the court was wrong.
He relied on the use of the present tense in sections 327, 328 and 329, which he contrasted with the use of the past tense in the definition of criminal property in section 340(4). (See paras 8 10, 15, 17 and 18 above.) He observed that sections 327 and 329 presuppose the existence of the relevant criminal property at the time of the actus reus.
Similarly, he submitted that under section 328 the court must take a snapshot view of the position at the moment when the defendant entered into the arrangement.
There must at that moment have been criminal property to which the arrangement related.
The words in section 328 an arrangement which he knows or suspects facilitates the acquisition, retention, use or control of criminal property are not to be read, in his submission, as an arrangement which he knows or suspects will facilitate. 39.
That submission is right inasmuch as the offence requires actual facilitation of the acquisition etc, of criminal property as well as the requisite knowledge or suspicion.
As a matter of strict English, the way in which the section has been drafted may be criticised for condensing the separate ingredients of actus reus and mens rea into one.
But it places no undue strain on the language to read the section as providing that a person commits an offence if a) he enters into or becomes concerned in an arrangement which facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person, and b) he knows or suspects that it does so.
It has sensibly to be read in that way or else a party might be guilty by reason of having the necessary mens rea even if it transpired that the property was not criminal.
The offence is complete when the arrangement becomes one which facilitates the acquisition, etc, of criminal property and the defendant knows or suspects that this is so.
At that point he becomes a participant in an arrangement which is made criminal by section 328. 40.
The Court of Appeal was therefore right in the present case to hold that it does not matter whether criminal property existed when the arrangement was first hatched.
What matters is that the property should be criminal at a time when the arrangement operates on it.
To take a practical example, if defendants make arrangements for the transportation and warehousing of a quantity of illegally imported drugs, it would make no difference for the purposes of section 328 whether the vessel carrying the goods were still on the high seas or had entered UK territorial waters, ie whether the act of importation had occurred, at the moment when the arrangements were made, save that the offence would not become complete until the goods were imported.
The contrary interpretation would not accord either with a natural reading of the words used or with the obvious purpose of this section.
Did the sums received into the respondents account constitute criminal property before being paid into those accounts? 41.
Mr Talbot submitted that the money paid by the victims into the respondents accounts was criminal property at the time of payment because it represented a chose in action, namely the obligation of the purchasers of insurance to pay the price.
The fact that the contracts were procured by fraud and therefore voidable made no difference, in his submission, because the contracts were valid until avoided.
This argument was first advanced in the Court of Appeal and was rejected.
It appears from the judgment of the Court of Appeal that the argument presented to it was put in a slightly different form.
The prosecution is recorded as having argued that B had acquired a proprietary interest in a chose in action, but the argument does not appear to have been developed as to how this fed through into the charge made against the respondent.
Lloyd Jones LJ, delivering the judgment of the Court of Appeal, said that the argument did not assist the prosecution in this case because the particulars in the indictment identified the criminal property as money received into the accounts opened by the respondent.
He added that the court did not consider it necessary to express a view on whether the fraud transactions may have given rise to property of another character, which he said was only touched upon and not fully argued before the court.
In this court Mr Talbot took the point that property will amount to criminal property if it constitutes or represents a benefit from criminal conduct; and so, if there was an underlying chose in action which the money paid into the account represented, the money paid would satisfy the definition of being criminal property. 42.
That argument is sound as far as it goes, but the appellant faces a more fundamental problem in seeking to identify the alleged chose in action.
POCA defines property as including a thing in action, but, if the prosecution is going to advance a case on that basis, it has to identify and prove the nature of the proprietorial right.
Mr Talbot suggested initially that B had some sort of contractual right against the victims of his fraud, but any supposed contract would presumably have been between AM Insurance and the victims, and there is no evidence before the court to show what form any such putative contract may have taken.
The prosecution would have to establish the existence of a prior bilateral contract (ie a contract which bound the purchaser in advance of paying the supposed premium), rather than a unilateral contract (ie an offer by AM Insurance which was available for acceptance by the would be insured paying the premium quoted).
Other questions might arise as to whether there was any legal chose in action prior to the payments made by the victims, but it is sufficient to say that there is a stark absence of material before this court to substantiate a case of the nature suggested.
There may be cases properly founded on the laundering of property in the form of a chose in action, but it is not a subject with which jurors or, for that matter, judges of the Crown Court are likely to be readily familiar.
If the prosecution is going to advance a case on that basis, it has not only to consider whether the case is capable of being presented in a readily comprehensible way (or whether there might be a different and simpler method of approach) but also to ensure that its tackle is properly in order.
Abstract references to a chose in action, without the basis being clearly and properly identified and articulated, are a recipe for confusion.
Was the actus reus of the offence committed by reason of the arrangement facilitating the retention, use or control of the money paid into the accounts? 43.
The particulars in the indictment made no reference to the acquisition of criminal property.
They alleged that the respondent and another entered into or became concerned in an arrangement which they knew or suspected would facilitate the retention, use or control of criminal property.
As a matter of pleading, the Court of Appeal rightly criticised the form of the particulars for including the words would facilitate.
It should have been alleged that the defendants entered into or became concerned in an arrangement which, as they knew or suspected, facilitated the retention, use or control of criminal property (or words to that effect). 45. 44.
Looking at the substance of the matter, the money paid by the victims into the accounts was lawful money at the moment at which it was paid into those accounts.
It was therefore not a case of the account holder acquiring criminal property from the victims.
But by the arrangement the respondent facilitated also the retention, use and control of the money by or on behalf of B. Did the arrangement regarding the facilitation of the retention, use and control of the money fall foul of section 328 on the basis that it was criminal property at that stage, since it was the proceeds of a fraud perpetrated on the victims? It was submitted on behalf of the prosecution before the Court of Appeal and in this court that in that respect the arrangement fell squarely within the ambit of section 328.
The Court of Appeal treated the case as indistinguishable from Geary and rejected the argument.
Lloyd Jones LJ said at para 39: Although the arrangement particularised in count two is limited to facilitation of the retention, use and control of criminal property, facilitation of the acquisition of the money via those accounts is, on the Crowns factual case, an integral part of that arrangement.
It seems to us that in these circumstances it is both artificial and illegitimate to seek to sever one element of an integral arrangement (facilitation of acquisition) in order to leave other elements (facilitation of retention, use and control) which, if considered in isolation to constitute the arrangement, would relate to criminal property.
Moreover, the position cannot be improved by artificially limiting the particulars of offence alleged in count two to certain elements of the wider arrangement which the Crown maintains was in fact entered into. 46.
There is an important distinction between the facts of Geary and the present case.
In Geary it would indeed have been artificial to regard the property as changing its character between the defendant receiving it and repaying it.
The property belonged to Harrington at all times and, more importantly, his interest in it was lawful on the facts known to the defendant.
It was not a case of the defendant holding proceeds originating from a crime independent of the arrangement made between them.
It was Harringtons lawfully owned property when it was paid to the defendant, and it remained his lawfully owned property throughout the time that the defendant had possession of it.
It bore no criminal taint apart from the arrangement made between them.
The fact that the arrangement involved a conspiracy to pervert the cause of justice did not mean that the money had a criminal quality independent of the arrangement. 47.
The present case is different.
The character of the money did change on being paid into the respondents accounts.
It was lawful property in the hands of the victims at the moment when they paid it into the respondents accounts.
It became criminal property in the hands of B, not by reason of the arrangement made between B and the respondent but by reason of the fact that it was obtained through fraud perpetrated on the victims.
There is no artificiality in recognising that fact, and I do not see it as illegitimate to regard the respondent as participating in (or, in the language of section 328, entering into or becoming concerned in) an arrangement to retain criminal property for the benefit of another.
For that reason, the ruling that the respondent had no case to answer was erroneous and this appeal should be allowed. 48.
The same reasoning applies to sections 327 and 329.
A thief is not guilty of acquiring criminal property by his act of stealing it from its lawful owner, but that does not prevent him from being guilty thereafter of an offence under one or other, or both, of those sections by possessing, using, concealing, transferring it and so on.
The ambit of those sections is wide.
However, it would be bad practice for the prosecution to add additional counts of that kind unless there is a proper public purpose in doing so, for example, because there may be doubt whether the prosecution can prove that the defendant was the thief but it can prove that he concealed what he must have known or suspected was stolen property, or because the thiefs conduct involved some added criminality not just as a matter of legal definition but sufficiently distinct from the offence that the public interest would merit it being charged separately.
Brinks Mat Ltd v Noye [1991] 1 Bank LR 68 provides a notorious example of the laundering of the proceeds of the theft of gold bars from a warehouse, but the conduct of thieves in laundering property stolen by them would not have to be on such a grand scale to merit them being prosecuted for it. 49.
The courts should be willing to use their powers to discourage inappropriate use of the provisions of POCA to prosecute conduct which is sufficiently covered by substantive offences, as they have done in relation to handling stolen property.
A person who commits the offence of handling stolen property contrary to section 22 of the Theft Act 1968 is also necessarily guilty of an offence under section 329 of POCA, but the Court of Appeal has discouraged any practice of prosecuting such cases under POCA instead of charging the specific statutory offence under the Theft Act (see R (Wilkinson) v Director of Public Prosecutions [2006] EWHC 3012 (Admin) and R v Rose [2008] EWCA Crim 239, [2008] 1 WLR 2113, para 20).
It is unlikely that the prosecution would fail to respect the view of the court in such a matter and it is unnecessary to consider what power the court might have in such an unlikely event.
I have some doubt about the correctness of Moore Bick LJs obiter dictum in Geary that on the facts of that case the defendant could have been charged with an offence of converting or transferring criminal property contrary to section 327, for the same reasons as I have given in differentiating that case from the present.
However, the object of Moore Bick LJs observation was to make the broader point that it is undesirable to give a strained and unduly broad interpretation to section 328, particularly where the conduct would fall within another section of the Act, and with that broad proposition I am in full agreement. 50.
The phrasing of the certified question is not entirely apt because it asks whether the arrangement to receive and retain money in a bank account can be treated as both rendering the property criminal property and facilitating its retention, use or control.
What rendered the property which the respondent received from the victims criminal property was not the arrangement made between B and the respondent, but the fact that it was obtained from the victims by deception.
For the reasons explained, the arrangement between B and the respondent for its retention is capable of constituting an offence under section 328.
| A fraudster, B, established four ghost websites falsely pretending to offer cut price motor insurance.
In order to carry out this plan he recruited associates to open bank accounts for channelling the proceeds.
H was one such associate.
One website was named AM Insurance, which operated from 1 September 2011 to January 2012.
Shortly before the website went live, H opened two bank accounts, one with Lloyds Bank and one with Barclays Bank.
Subsequently, B took control of these accounts and the related bank cards.
In total, members of the public were duped into paying 417,709 into the Lloyds account and 176,434 into the Barclays account for non existent insurance cover.
B pleaded guilty to a number of offences.
H stood trial at the Central Criminal Court charged with entering into or becoming concerned in an arrangement which he knew or suspected would facilitate the retention, use or control of criminal property, namely the money received into the accounts, by or on behalf of B, contrary to section 328(1) of the Proceeds of Crime Act 2002 (POCA).
The trial judge upheld the submission that H had no case to answer, finding that at the time H entered into the arrangement no criminal property existed.
The Court of Appeal dismissed the prosecutions appeal; although it was not necessary for criminal property to exist when B and H came to the prohibited arrangement, the arrangement must relate to property which was criminal property when the arrangement begun to operate on it.
In this case, the money was not criminal property when the arrangement began to operate on it, in other words at the moment the money was paid into the accounts.
The prosecution appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
Lord Toulson (with whom all the other Justices agree) delivers the judgment of the Court.
Whether s 328 POCA requires property to constitute criminal property prior to the arrangement operating Criminal property in sections 327 329 of POCA refers to property which already has the quality of being criminal property (as defined in section 340 of POCA) by reason of prior criminal conduct distinct from the conduct alleged to constitute the commission of the money laundering offence itself.
This accords with the natural meaning and underlying purpose of these sections [32], the explanatory notes to POCA [33] and Council Directives 91/308/EEC and 2005/60/EC [34].
If section 328 did not require property to constitute criminal property before an arrangement came into operation, it would have serious potential consequences in relation to, for example, banks and other financial institutions who are already under onerous obligations to report known, suspected or reasonably suspected money laundering [37].
Whether criminal property has to exist when the defendant enters or becomes concerned with the arrangement The Court of Appeal was correct to hold that it does not matter whether criminal property existed when the arrangement was first made.
What matters is that the property should be criminal when the arrangement operates on it [40].
Whether the sums received into the bank accounts constituted criminal property before being paid into the accounts The submission that the money paid into the accounts represented underlying choses in action and that, therefore, criminal property existed before money was received in the accounts would presumably have involved a contract between AM Insurance and the victims.
There is a stark absence of material to substantiate the existence of such a contract [42].
Whether the actus reus of the s 328 POCA offence was committed Nonetheless, in the present case the character of the money although lawful at the moment of payment changed on being paid into the bank accounts.
The money became criminal property in the hands of B by reason of the fraud perpetrated on the victims.
As such, it is legitimate to regard H as entering into or becoming concerned in an arrangement to retain criminal property for the benefit of another.
Consequently, the ruling that H had no case to answer was erroneous [47].
Although this same reasoning applies to sections 327 329 of POCA, the wide ambit of these sections can be managed by: (i) the prosecution only adding parasitic counts to substantive ones where there is a proper public purpose in doing so [48]; and, (ii) courts using their powers to discourage inappropriate use of the POCA provisions to prosecute conduct sufficiently covered by substantive offences [49].
|
These appeals raise the question as to the test which is to be applied when considering whether a gay person who is claiming asylum under the Convention relating to the Status of Refugees 1951, as applied by the 1967 Protocol (the Convention) has a well founded fear of persecution in the country of his or her nationality based on membership of that particular social group.
The need for reliable guidance on this issue is growing day by day.
Persecution for reasons of homosexuality was not perceived as a problem by the High Contracting Parties when the Convention was being drafted.
For many years the risk of persecution in countries where it now exists seemed remote.
It was the practice for leaders in these countries simply to insist that homosexuality did not exist.
This was manifest nonsense, but at least it avoided the evil of persecution.
More recently, fanned by misguided but vigorous religious doctrine, the situation has changed dramatically.
The ultra conservative interpretation of Islamic law that prevails in Iran is one example.
The rampant homophobic teaching that right wing evangelical Christian churches indulge in throughout much of Sub Saharan Africa is another.
The death penalty has just been proposed in Uganda for persons who engage in homosexual practices.
Two gay men who had celebrated their relationship in a public engagement ceremony were recently sentenced to 14 years imprisonment in Malawi.
They were later pardoned in response to international pressure by President Mutharika, but he made it clear that he would not otherwise have done this as they had committed a crime against the countrys culture, its religion and its laws.
Objections to these developments have been greeted locally with derision and disbelief.
The fact is that a huge gulf has opened up in attitudes to and understanding of gay persons between societies on either side of the divide.
It is one of the most demanding social issues of our time.
Our own government has pledged to do what it can to resolve the problem, but it seems likely to grow and to remain with us for many years.
In the meantime more and more gays and lesbians are likely to have to seek protection here, as protection is being denied to them by the state in their home countries.
It is crucially important that they are provided with the protection that they are entitled to under the Convention no more, if I may be permitted to coin a well known phrase, but certainly no less.
Background
The appellants are both gay men.
HJ, who is 40 years old, is an Iranian.
He claimed asylum on arrival in the United Kingdom on 17 December 2001.
He practised homosexuality in Iran and has continued to do so in the United Kingdom.
HT, who is 36 years old, is a citizen of Cameroon.
He claimed asylum following his arrest at Gatwick on 19 January 2007.
He had presented a false passport while in transit to Montreal.
He too is a practising homosexual.
Both appellants claim that they have a well founded fear that they would be persecuted if they were to be returned to their home countries.
The Secretary of State for the Home Department (the respondent) refused asylum in both cases.
HJs appeal against that decision was dismissed by the Asylum and Immigration Tribunal on 15 August 2005.
On 26 July 2006 the Court of Appeal remitted his case to the Tribunal for reconsideration: J v Secretary of State for the Home Department [2006] EWCA Civ 1238, [2007] Imm AR 73.
On 8 May 2008, following reconsideration, his appeal remained dismissed.
HTs appeal to the Tribunal was dismissed on 29 October 2007.
Reconsideration was ordered on 14 November 2007 on the ground that the Tribunal might have made an error of law in the test to be applied to a gay person seeking asylum.
But on 5 June 2008 Senior Immigration Judge Warr held that the earlier determination was not flawed, and he did not proceed to a reconsideration of the evidence.
The appellants appealed against these decisions to the Court of Appeal.
On 10 March 2009 the Court of Appeal (Pill and Keene LJJ and Sir Paul Kennedy) dismissed both appeals: [2009] EWCA Civ 172.
The Secretary of State accepted that practising homosexuals are a particular social group for the purposes of article 1A of the Convention.
The issue was how those who had a well founded fear of persecution could be identified.
It was said by counsel for the appellants to be whether it was an answer to a claim for refugee status for the applicant to be required to conceal his sexual identity in order to avoid harm of sufficient severity as to amount to persecution the proposition being that to impose such a requirement was incompatible with the Convention.
For the Secretary of State it was submitted that the issue always was whether the applicant could reasonably be expected to tolerate the need for discretion on return: para 7.
The Court of Appeal applied the test stated by Maurice Kay LJ in J v Secretary of State for the Home Department [2007] Imm AR 73, para 16, where he said that the tribunal would have to ask itself whether discretion was something that the applicant could reasonably be expected to tolerate, not only in the context of random sexual activity but in relation to matters following from, and relevant to, sexual identity in the wider sense.
In HJs case the Court of Appeal held that the Tribunal were entitled to conclude on the evidence that HJ could reasonably be expected to tolerate conditions in Iran: [2009] EWCA Civ 172, para 31.
In HTs case there was finding that he would be discreet on return to Cameroon.
The question whether he could reasonably be expected to tolerate a life involving discretion was not raised.
The Court of Appeal held that there were no facts on which a decision on that matter could be based but that the Tribunal were entitled to find that HT had not established that there was a real risk of persecution in the future: paras 44, 45.
In this court Mr Bourne for the Secretary of State submitted that the test of whether the appellants should have refugee status was correctly stated by the Court of Appeal in J v Secretary of State for the Home Department [2007] Imm AR 73, that it was correctly applied by the Tribunal in both cases and that the Court of Appeal was right to dismiss the appeals.
Mr Husain QC for HJ said that the test as stated in J v Secretary of State for the Home Department is misconceived.
He submitted that it is contrary to the ordinary meaning of the definition of refugee in the Convention, and the objects and purposes of the treaty, to deny a refugees claim on the basis that he was required to suppress or surrender his protected identity to avoid the persecution that would ensue if that identity were to be disclosed.
Miss Carss Frisk QC for HT too disputed the test in Js case.
She submitted that if the applicant could show that he had a well founded fear of persecution he was entitled to refugee status.
He should not be required to demonstrate that concealment of his identity was something that he could not reasonably be expected to tolerate.
She also said that HT ought to succeed on the facts in any event because of what happened to him in Cameroon.
Background
Article 1A(2) of the Convention provides that a refugee is a person who owing to well founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, unwilling to avail himself of the protection of that country Amongst the benefits that a person who satisfies that definition enjoys under the Convention is the prohibition of expulsion or return.
Article 33(1) provides: No Contracting State shall expel or return (refouler) a refugee in any manner whatsoever to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion.
To a large extent the meaning of the definition in article 1A(2) is common ground.
It treats membership of a particular social group as being in pari materia with the other Convention reasons for persecution: Fornah v Secretary of State for the Home Department [2006] UKHL 46, [2007] 1 AC 412, para 20, per Lord Bingham of Cornhill.
There is no doubt that gay men and women may be considered to be a particular social group for this purpose: Islam v Secretary of State for the Home Department; R v Immigration Appeal Tribunal, Ex p Shah [1999] 2 AC 629, 643 644, per Lord Steyn.
As Lord Rodger points out in para 42, regulation 6(1)(e) of the Refugee or Person in Need of International Protection (Qualification) Regulations 2006 (SI 2006/2525) recognises as clearly as can be that a group based on a common characteristic of sexual orientation may be included in a particular social group that is in need of international protection.
The group is defined by the immutable characteristic of its members sexual orientation or sexuality.
This is a characteristic that may be revealed, to a greater or lesser degree, by the way the members of this group behave.
In that sense, because it manifests itself in behaviour, it is less immediately visible than a persons race.
But, unlike a persons religion or political opinion, it is incapable of being changed.
To pretend that it does not exist, or that the behaviour by which it manifests itself can be suppressed, is to deny the members of this group their fundamental right to be what they are of the right to do simple, everyday things with others of the same orientation such as living or spending time together or expressing their affection for each other in public.
The Convention does not define persecution.
But it has been recognised that it is a strong word: Sepet and Bulbul v Secretary of State for the Home Department [2003] UKHL 15, [2002] 1 WLR 856, para 7, per Lord Bingham.
Referring to the dictionary definitions which accord with common usage, Lord Bingham said that it indicates the infliction of death, torture or penalties for adherence to a belief or opinion, with a view to the repression or extirpation of it.
Article 9(1)(a) of the EC Council Directive 2004/83/EC on minimum standards for the qualification and status of third country nationals or stateless persons as refugees (the Qualification Directive) states that acts of persecution must (a) be sufficiently serious by their nature or repetition as to constitute a severe violation of basic human rights or (b) be an accumulation of various measures, including violations of human rights which is sufficiently severe as to affect an individual in a similar manner as mentioned in (a).
In Appellant S395/2002 v Minister for Immigration and Multicultural Affairs (2003) 216 CLR 473, para 40, McHugh and Kirby JJ said: Persecution covers many forms of harm ranging from physical harm to the loss of intangibles, from death and torture to state sponsored or condoned discrimination in social life and employment.
Whatever form the harm takes, it will constitute persecution only if, by reason of its intensity or duration, the person persecuted cannot reasonably be expected to tolerate it.
To constitute persecution for the purposes of the Convention the harm must be state sponsored or state condoned.
Family or social disapproval in which the state has no part lies outside its protection.
As Professor J C Hathaway in The Law of Refugee Status (1991), p 112 has explained, persecution is most appropriately defined as the sustained or systemic failure of state protection in relation to one of the core entitlements which has been recognised by the international community.
The Convention provides surrogate protection, which is activated only upon the failure of state protection.
The failure of state protection is central to the whole system: Horvath v Secretary of State for the Home Department [2001] 1 AC 489, 495.
The question is whether the home state is unable or unwilling to discharge its duty to establish and operate a system for the protection against persecution of its own nationals.
The reference in the preamble to the Universal Declaration of Human Rights of 1948 shows that counteracting discrimination was a fundamental purpose of the Convention.
Article 2 states: Everyone is entitled to all the rights and freedoms set forth in this Declaration, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.
Lord Steyn emphasised this point in Islam v Secretary of State for the Home Department; R v Immigration Appeal Tribunal, Ex p Shah [1999] 2 AC 629, 639.
He also drew attention to the first preamble to the Declaration, which proclaimed the inherent dignity and the equal and inalienable rights of all members of the human family.
No mention is made of sexual orientation in the preamble or any of its articles, nor is sexual orientation mentioned in article 1A(2) of the Convention.
But coupled with an increasing recognition of the rights of gay people since the early 1960s has come an appreciation of the fundamental importance of their not being discriminated against in any respect that affects their core identity as homosexuals.
They are as much entitled to freedom of association with others of the same sexual orientation, and to freedom of self expression in matters that affect their sexuality, as people who are straight.
The guarantees in the Universal Declaration are fundamental to a proper understanding of the Convention.
But the Convention itself has, as the references in para 12 show, a more limited purpose.
It is not enough that members of a particular social group are being discriminated against.
The contracting states did not undertake to protect them against discrimination judged according to the standards in their own countries.
Persecution apart, the Convention was not directed to reforming the level of rights prevailing in the country of origin.
Its purpose is to provide the protection that is not available in the country of nationality where there is a well founded fear of persecution, not to guarantee to asylum seekers when they are returned all the freedoms that are available in the country where they seek refuge.
It does not guarantee universal human rights.
So the conditions that prevail in the country in which asylum is sought have no part to play, as matter of legal obligation binding on all states parties to the Convention, in deciding whether the applicant is entitled to seek asylum in that country: Januzi v Secretary of State for the Home Department [2006] UKHL 5, [2006] 2 AC 426, paras 16, 46.
As Laws LJ said in Amare v Secretary of State for the Home Department [2005] EWCA Civ 1600, [2006] Imm AR 217 para 31: The Convention is not there to safeguard or protect potentially affected persons from having to live in regimes where pluralist liberal values are less respected, even much less respected, than they are here.
It is there to secure international protection to the extent agreed by the contracting states.
Thus international protection is available only to those members of the particular social group who can show that they have a well founded fear of being persecuted for reasons of their membership of it who, owing to that fear, are unwilling to avail themselves of the protection of their home country.
Those who satisfy this test cannot be returned to the frontiers of a territory where their life or freedom would be threatened on account of their membership of that group: article 33(1).
To be accorded this protection, however, the test that article 1A(2) sets out must first be satisfied.
As Lord Bingham of Cornhill said in Januzi v Secretary of State for the Home Department [2006] 2 AC 426, para 5, the words owing to well founded fear of being persecuted for reasons of membership of a particular social group in the definition of refugee express a causative condition which governs all that follows.
Well founded fear: the causative condition
In situations such as those presented by these appeals the fact that members of the particular social group are persecuted may not be seriously in issue.
In Iran, where the death penalty exists, persons have been hanged simply because they are gay.
In Cameroon homosexuality is illegal and the sanctions for it include sentences of up to five years imprisonment.
Although prosecutions are rare, homosexuals are liable to be denounced and subjected to acts of violence and harassment against which the state offers no protection.
But the situation in the country of origin is only the beginning, not the end, of the inquiry.
The Convention directs attention to the state of mind of the individual.
It is the fear which that person has that must be examined and shown to be well founded.
In cases where the fear is of persecution for reasons of religion or political opinion, it may be necessary to examine the nature and consequences of any activity that the applicant claims he or she may wish to pursue if returned to the country of nationality.
It will not be enough for the person merely to assert that persons who are of that religion or political opinion are liable to be persecuted.
The question is, what will the applicant actually do, and does what he or she will in fact do justify the fear that is complained of?
INLR 1, 7 8 Simon Brown LJ said: In Ahmed (Iftikhar) v Secretary of State for the Home Department, [2000] In all asylum claims there is ultimately a single question to be asked: is there a serious risk that on return the applicant will be persecuted for a Convention reason? The critical question [is]: if returned, would the asylum seeker in fact act in the way he says he would and thereby suffer persecution? If he would, then, however unreasonable he might be thought for refusing to accept the necessary restraint on his liberties, in my judgment he would be entitled to asylum.
Nobody has suggested that there is anything wrong with these observations, as far as they go, and I would respectfully endorse them.
They contain two propositions which the Secretary of State in this case accepts, and which I do not think can be disputed.
The first is that attention must be focused on what the applicant will actually do if he is returned to his country of nationality.
The second is that the fact that he could take action to avoid persecution does not disentitle him from asylum if in fact he will not act in such a way as to avoid it.
That is so even if to fail or to refuse to avoid it would be unreasonable.
In Appellant S395/2002 v Minister for Immigration and Multicultural Affairs (2003) 216 CLR 473, para 40, per McHugh and Kirby JJ said that persecution does not cease to be persecution for the purposes of the Convention because the harm can be avoided by taking avoiding action within the country of origin.
I am inclined to think that this proposition, as stated, expresses the point too broadly.
But I would accept it as accurate if at the end there were added the words which the applicant will in fact not take.
Of course, I do not mean by this that persecution ceases to be persecution if those at risk of being persecuted can and do eliminate the harm by taking avoiding action.
That is a different point, with which their Honours go on to deal later in the same paragraph.
How to define the test for its application is the issue in this case: see paras 21 and 22.
It has been recognised, of course, that an applicant may be required to live in a place of relocation within his country of origin so long as it would not be unduly harsh for him to be required to do so: Januzi v Secretary of State for the Home Department [2006] 2 AC 426.
As Lord Bingham explained in para 7, the Convention does not expressly address the situation where, within his country of nationality a person has a well founded fear of persecution at place A, where he lived, but not at place B, where he could reasonably be expected to relocate.
But that situation may reasonably be said to be covered by the causative condition to which he referred in para 5.
A person will be excluded from refugee status if under all the circumstances it would be reasonable to expect him to seek refuge in another part of the same country.
Persons seeking refuge from the process known as ethnic cleansing, for example, may be refused asylum on the basis that there are other parts of the country of their nationality where they may live without being persecuted: see also R (Yogathas) v Secretary of State for the Home Department [2002] UKHL 36, [2003] 1 AC 920, para 40; the UNHCR Handbook, para 91.
Mr Bourne suggested that an analogy could be drawn between internal relocation, or internal flight as it is sometimes less happily called: see R (Yogathas) v Secretary of State for the Home Department [2003] 1 AC 920, para 6.
Mr Husain submitted in his written case that applicants who are gay and who avoid persecution by a modification of their behaviour may be said on return to have taken internal flight within the self to avoid persecution.
Mr Bourne submitted that any such analogy supported the respondent.
The analogy, as he expressed it in his written case, was put this way.
A person to whom geographical internal flight is available is not a refugee unless it would be unduly harsh to take such flight.
So a person who will, if necessary, take the metaphorical flight of hiding his sexuality is not a refugee unless it would be intolerable for him to do so.
Examples were referred to of situations that might demonstrate the logic of this approach.
They were said to include situations where the applicant would be discreet, there would be no real risk that he would come to the attention of the authorities and suffer persecution and the consequences of his discretion were objectively reasonable for him to be expected to tolerate.
He would have no well founded fear of persecution and not be a refugee even if the reason why he would be discreet was because, or partly because, he feared persecution.
This submission takes me to the core of the issue between the parties and to the question whether the test in para 16 of J v Secretary of State for the Home Department [2007] Imm AR 73 stands up to examination.
But I think that the suggested analogy with internal relocation can be dismissed at once as incompatible with the principles of the Convention.
The objection to it is that it assumes that the applicant will be prepared to lie about and conceal his sexual orientation when he moves to the place of relocation.
Unless he does this he will be no better off than he would be if he did not relocate at all.
The misconception lies in the idea that he will be willing and able to make a fresh start when he moves to somewhere where he is not known.
In Hysi v Secretary of State for the Home Department [2005] EWCA Civ 711, [2005] INLR 602 the Court of Appeal held that the tribunal had not assessed the consequences of expecting the applicant to lie and dissemble in the place of relocation about his ethnic origins.
He would have to be a party to the long term deliberate concealment of the truth, living in continuing fear that the truth would be discovered: para 37.
There is no place, in countries such as Iran and Cameroon, to which a gay applicant could safely relocate without making fundamental changes to his behaviour which he cannot make simply because he is gay.
The submission that it is proper to examine the question whether it would be objectively reasonable for the applicant to be expected to tolerate some element of concealment I would prefer not to use the word discretion, as this euphemistic expression does not tell the whole truth when he is returned to the country of his nationality cannot be dismissed so easily.
Behaviour which reveals ones sexual orientation, whether one is gay or straight, varies from individual to individual.
It occupies a wide spectrum, from people who are naturally reticent and have no particular desire to establish a sexual relationship with anybody to those who wish, for various reasons, to proclaim in public their sexual identity.
Social and family disapproval of overt sexual behaviour of any kind, gay or straight, may weigh more heavily with some people than others.
Concealment due to a well founded fear of persecution is one thing.
Concealment in reaction to family or social pressures is another.
So one must ask why the applicant will conduct himself in this way.
A carefully nuanced approach is called for, to separate out those who are truly in need of surrogate protection from those who are not.
The test in J's case
In J v Secretary of State for the Home Department [2007] Imm AR 73 the applicant was of Iranian nationality.
The Asylum and Immigration Tribunal found that he was a practising homosexual, but that his relationship with his partner in Iran was discreet and that his homosexual practices there had never been such that his own homosexual activity was reasonably likely to result in adverse attention from the authorities.
It was held that the tribunal had fallen into error by not asking why the applicant had acted discreetly, especially as the appellant said in his witness statement that he was forced to hide his relationship and was not able to live openly with his partner as he wanted to do.
The case was remitted to the tribunal for further reconsideration.
In para 16 Maurice Kay LJ gave the following directions to the tribunal: It will have to address questions that were not considered on the last occasion, including the reason why the appellant opted for discretion before his departure from Iran and, by implication, would do so again on return.
It will have to ask itself whether discretion is something that the appellant can reasonably be expected to tolerate, not only in the context of random sexual activity but in relation to matters following from, and relevant to, sexual identity in the wider sense recognised by the High Court of Australia (see the judgment of Gummow and Hayne JJ at para 83).
This requires consideration of the fact that homosexuals living in a stable relationship will wish, as this appellant says, to live openly with each other and the discretion which they may feel constrained to exercise as the price to pay for the avoidance of condign punishment will require suppression of many aspects of life that related to, or informed by, their sexuality (ibid, para 81).
This is not simply generalisation; it is dealt with in the appellants evidence. [Emphasis added] Buxton LJ, making the same point, said in para 20 that the applicant might have to abandon part of his sexual identity in circumstances where failure to do so exposed him to the extreme danger that the country guidance indicated: The Tribunal may wish to consider whether the combination of those two circumstances has an effect on their decision as to whether the applicant can be expected to tolerate the situation he may find himself in when he returns to Iran. [Emphasis added]
The passages which I have italicised lie at the heart of the argument.
For the Secretary of State, Mr Bourne submitted that there were two major questions that had to be addressed: (1) what will the situation be on return, and (2) in these circumstances is there a real risk of persecution? The inquiry in regard to the first question was directed to how the applicant will conduct himself and how others will react to this.
He accepted that a finding that the applicant will in fact be discreet on return to the country of his nationality is not the end of the inquiry.
The question that then had to be asked, he said, was whether opting for discretion itself amounted to persecution.
The threshold between what was and was not persecution was marked by what he could reasonably be expected to tolerate.
As in the case of internal flight, it was what he could not reasonably be expected to tolerate that amounted to persecution.
As the references to it in para 16 of J v Secretary of State for the Home Department [2007] Imm AR 73 indicate, the Court of Appeal in that case sought guidance from the decision of the High Court of Australia in Appellant S395/2002 v Minister for Immigration and Multicultural Affairs (2003) 216 CLR 473.
Among the passages from that judgment that are quoted is para 40, where (setting out the paragraph in full) McHugh and Kirby JJ said: The purpose of the Convention is to protect the individuals of every country from persecution on the grounds identified in the Convention whenever their governments wish to inflict, or are powerless to prevent, that persecution.
Persecution covers many forms of harm ranging from physical harm to the loss of intangibles, from death and torture to state sponsored or condoned discrimination in social life and employment.
Whatever form the harm takes, it will constitute persecution only if, by reason of its intensity or duration, the person persecuted cannot reasonably be expected to tolerate it.
But persecution does not cease to be persecution for the purpose of the Convention because those persecuted can eliminate the harm by taking avoiding action within the country of nationality.
The Convention would give no protection from persecution for reasons of religion or political opinion if it was a condition of protection that the person affected must take steps reasonable or otherwise to avoid offending the wishes of the persecutors.
Nor would it give protection to membership of many a particular social group if it were a condition of protection that its members hide their membership or modify some attribute or characteristic of the group to avoid persecution.
Similarly, it would often fail to give protection to people who are persecuted for reasons of race or nationality if it was a condition of protection that they should take steps to conceal their race or nationality. [Emphasis added] It was the appearance in this paragraph of the sentence which I have italicised that led Maurice Kay LJ to use almost the same words when he was framing his directions in para 16.
This can be seen from his quotation of it in para 11 of his judgment, where he said that it had been adopted in Z v Secretary of State for the Home Department [2005] Imm AR 75, para 12, Amare v Secretary of State for the Home Department [2006] Imm AR 217, para 27 and RG (Colombia) v Secretary of State for the Home Department [2006] EWCA Civ 57, [2006] Imm AR 297, para 16.
Para 40 of the judgment in Appellant S395/2002 v Minister for Immigration and Multicultural Affairs (2003) 216 CLR 473 is not entirely easy to follow.
The Convention does not permit, or indeed envisage, applicants being returned to the countries of their nationality on condition that they take steps to avoid offending their persecutors.
The use of the phrase a condition of protection seems to overlook the fact that it is the country in which asylum is sought that is being appealed to for protection, not the country of the applicants nationality.
But the flaw in the sentence in para 16 of J v Secretary of State for the Home Department [2007] Imm AR 73 to which the appellants take objection is indicated by the sentence that immediately follows it.
It makes the point that persecution does not cease to be persecution for the purpose of the Convention because those persecuted can eliminate the harm by taking avoiding action within the country of nationality.
In para 50, which the Court of Appeal did not quote in Js case, McHugh and Kirby JJ said: In so far as decisions in the Tribunal and the Federal Court contain statements that asylum seekers are required, or can be expected, to take reasonable steps to avoid persecutory harm, they are wrong in principle and should not be followed.
The same point was made with perhaps greater force by Gummow and Hayne JJ in para 82, where they said: Saying that an applicant for protection would live discreetly in the country of nationality may be an accurate description of the way in which that person would go about his or her daily life.
To say that a decision maker expects that that person will live discreetly may also be accurate if it is read as a statement of what is thought likely to happen.
But to say that an applicant for protection is expected to live discreetly is both wrong and irrelevant to the task to be undertaken by the Tribunal if it is intended as a statement of what the applicant must do.
The references in the judgments of Maurice Kay and Buxton LJJ in J v Secretary of State for the Home Department [2007] Imm AR 73, paras 16 and 20 to what the applicant could be expected to do when he returned do not fit happily with the approach indicated in some parts of the judgment in Appellant S395/2002 v Minister for Immigration and Multicultural Affairs (2003) 216 CLR 473 which they said they were following.
The explanation for this may perhaps lie in para 10 of the judgment in Js case, where Maurice Kay LJ said: In our jurisdiction Buxton LJ demonstrated in Z v SSHD [2005] Imm AR 75 that the approach of the High Court of Australia had in turn been influenced by English authority, particularly Ahmed v SSHD [2000] INLR 1.
Having referred to the judgment of Simon Brown LJ in Ahmed, he said at para 16: It necessarily follows from that analysis that a person cannot be refused asylum on the basis that he could avoid otherwise persecutory conduct by modifying the behaviour that he would otherwise engage in, at least if that modification was sufficiently significant to place him in a situation of persecution.
In para 11 Maurice Kay LJ added this comment: That brief extract is particularly helpful because it brings together the principle articulated by the High Court of Australia and the underlying need for an applicant to establish that his case contains something significant in itself to place him in a situation of persecution.
The principle which the Court of Appeal should have taken from the judgment of the High Court of Australia is that it would be wrong to say that an applicant for protection was expected to live discreetly if it was intended as a statement of what the applicant must do: Appellant S395/2002 v Minister for Immigration and Multicultural Affairs (2003) 216 CLR 473, para 82.
The test of whether the situation he may find himself in on return was one that he could reasonably be expected to tolerate was introduced to address the high threshold that has to be crossed between what does and what does not amount to persecution.
But the way the test was expressed in para 16 of Js case suggests that the applicant will be refused asylum if it would be reasonable to expect him to be discreet even if he is unwilling or unable to do this.
That is a fundamental error.
It conflicts with Simon Brown LJs observation in Ahmed (Iftikhar) v Secretary of State for the Home Department [2000] INLR 1, 8 that, however unreasonable the applicant might be thought for refusing to accept the necessary restraint on his liberties, he would be entitled to asylum.
I would hold that the test in para 16 of Js case is not accurately expressed and should no longer be followed.
For the reasons that Sir John Dyson gives, I would reject the reasonably tolerable test.
As this was the test that the Court of Appeal applied to these appeals, its decision to dismiss them was mistaken and must be set aside.
Comparative jurisprudence
The Court was referred to a number of decisions in Australia, New Zealand, South Africa, the United States and Canada.
I do not think that they reveal a consistent line of authority that indicates that there is an approach which is universally accepted internationally.
The Australian cases that are of interest are those that post date the decision in Appellant S395/2002 v Minister for Immigration and Multicultural Affairs (2003) 216 CLR 473.
They are NALZ v Minister for Immigration and Multicultural Affairs [2004] FCAFC 320; NABD of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 29, (2005) 79 ALJR 1142, and SZATV v Minister for Immigration and Citizenship [2007] HCA 40, (2007) 233 CLR 18.
In NALZ the Federal Court was divided on the question how the principles set out S395/2002 should be applied.
The applicant was an Indian national who was refused refugee status by the tribunal because he could avoid future arrest by not engaging in the activity that would attract persecution.
The majority, Emmett and Downes JJ, held that this was not an impermissible approach.
Madgwick J thought that the tribunal had fallen into the error identified in S395/2002 because it had not asked itself what the applicant would in fact do.
In NABD the High Court was again divided in its identification of the relevant legal principles.
It did not reach the question whether a test of what was reasonably tolerable could be applied.
It is worth noting however that McHugh J stressed the need for a rigorous and careful examination of the applicants specific characteristics and circumstances.
In SZATV the question was whether the tribunal was right to deny asylum on the ground that it would be reasonable for the applicant, a journalist whose fear was of persecution on grounds of political opinion, to relocate to another part of the country of his nationality and do construction work there.
The High Court on this occasion was unanimous in holding that the tribunal had failed to address itself to what might reasonably be expected of the applicant with respect to his relocation if he were to be returned.
I think that the single most important message to emerge from these cases is the need for a careful and fact sensitive analysis.
The New Zealand case is Refugee Appeal No 74665/03 [2005] INLR 68, in which the judgment of the New Zealand Refugee Status Appeals Authority was written by Rodger Haines QC.
It contains an impressive analysis of the relevant principles, and it is impossible to do full justice here to what it contains.
The passages that are of particular interest are to be found from paras 92 and following.
The point made by Sachs J in National Coalition for Gay and Lesbian Equality v Minister of Justice 1999 (1) SA 6, para 130 that to require an applicant to engage in self denial was to require him to live in a state of self induced oppression was approved and adopted: para 114.
The decision of the High Court of Australia in S395/2002 is analysed in paras 116 124.
Haines is critical of its approach on the ground that it concentrates on an evaluation of the risk rather than being, as it is put in para 124, located in the persecution element.
The New Zealand approach, it is said, places international human rights standards at the centre of the being persecuted analysis in the belief that this provides a principled and disciplined framework for analysis.
The significance of this distinction becomes apparent at the end of the judgment when, without any detailed analysis of the causative condition by examining what will actually happen on return, the conclusion is reached in a few sentences that the applicant was at risk of serious harm simply because he was gay: para 132.
In Karouni v Gonzales (2005) 399 F 3d 1163 the US Court of Appeals upheld an appeal by an applicant who claimed that he had a well founded fear of persecution on return to Lebanon because he was gay.
It applied the principle, which the Secretary of State in this case accepts, that he should not be required to change his sexual identity, as it was a fundamental characteristic and an integral part of human freedom.
Several Canadian cases were referred to by Mr Bourne in support of his proposition that the tribunal must look at what the applicant will, rather than could, do if he were to be returned: Case no 02751 of 9 January 2007 (unreported) 16 February 2007; Atta Fosu v Canada (Minister of Citizenship and Immigration) [2008] FC 1135 and Okoli v Minister of Citizenship and Immigration [2009] FC 332.
In Atta Fosu, for example, the Federal Court held that it was impermissible to require a person to deny or hide his sexuality when there was no evidence that he could, or was even prepared to, keep it secret.
What is missing from these cases, especially those from Australia and New Zealand, is clear and consistent guidance as to the way the fact finding tribunals should go about their task.
Useful advice is set out in A Guide to Refugee Law in Australia, prepared by the Legal Service Section of the Refugee Review Tribunal and the Migration Review Tribunal, pp 10.25 10.26.
But it is not authoritative.
The test as stated in para 16 of J v Secretary of State for the Home Department [2007] Imm AR 73 does not fit well with some of the dicta in these cases, and with the recommendation in the Guide that asylum seekers are not required, and cannot be expected, to take reasonable steps to avoid persecutory harm or to live discreetly so as to avoid it.
But I have already concluded that it should be departed from.
The test
This brings me to the test that should be adopted by the fact finding tribunals in this country.
As Lord Walker points out in para 98, this involves what is essentially an individual and fact specific inquiry.
Lord Rodger has described the approach in para 82, but I would like to set it out in my own words.
It is necessary to proceed in stages. (a) The first stage, of course, is to consider whether the applicant is indeed gay.
Unless he can establish that he is of that orientation he will not be entitled to be treated as a member of the particular social group.
But I would regard this part of the test as having been satisfied if the applicants case is that he is at risk of persecution because he is suspected of being gay, if his past history shows that this is in fact the case. (b) The next stage is to examine a group of questions which are directed to what his situation will be on return.
This part of the inquiry is directed to what will happen in the future.
The Home Offices Country of Origin report will provide the background.
There will be little difficulty in holding that in countries such as Iran and Cameroon gays or persons who are believed to be gay are persecuted and that persecution is something that may reasonably be feared.
The question is how each applicant, looked at individually, will conduct himself if returned and how others will react to what he does.
Those others will include everyone with whom he will come in contact, in private as well as in public.
The way he conducts himself may vary from one situation to another, with varying degrees of risk.
But he cannot and must not be expected to conceal aspects of his sexual orientation which he is unwilling to conceal, even from those whom he knows may disapprove of it.
If he fears persecution as a result and that fear is well founded, he will be entitled to asylum however unreasonable his refusal to resort to concealment may be.
The question what is reasonably tolerable has no part in this inquiry. (c) On the other hand, the fact that the applicant will not be able to do in the country of his nationality everything that he can do openly in the country whose protection he seeks is not the test.
As I said earlier (see para 15), the Convention was not directed to reforming the level of rights in the country of origin.
So it would be wrong to approach the issue on the basis that the purpose of the Convention is to guarantee to an applicant who is gay that he can live as freely and as openly as a gay person as he would be able to do if he were not returned.
It does not guarantee to everyone the human rights standards that are applied by the receiving country within its own territory.
The focus throughout must be on what will happen in the country of origin. (d) The next stage, if it is found that the applicant will in fact conceal aspects of his sexual orientation if returned, is to consider why he will do so.
If this will simply be in response to social pressures or for cultural or religious reasons of his own choosing and not because of a fear of persecution, his claim for asylum must be rejected.
But if the reason why he will resort to concealment is that he genuinely fears that otherwise he will be persecuted, it will be necessary to consider whether that fear is well founded. (e) This is the final and conclusive question: does he have a well founded fear that he will be persecuted? If he has, the causative condition that Lord Bingham referred to in Januzi v Secretary of State for the Home Department [2006] 2 AC 426, para 5 will have been established.
The applicant will be entitled to asylum.
It should always be remembered that the purpose of this exercise is to separate out those who are entitled to protection because their fear of persecution is well founded from those who are not.
The causative condition is central to the inquiry.
This makes it necessary to concentrate on what is actually likely to happen to the applicant.
As Lord Walker says in para 88, the inquiry is directed to what will happen in the future if the applicant is returned to his own country.
An approach which disregards what is in fact likely to occur there in the case of the particular applicant is wrong and should not be adopted.
The facts of these cases
Applying the guidance in J v Secretary of State for the Home Department [2007] Imm AR 73 to HJs case, the Asylum and Immigration Tribunal said that the issue was whether the need for him to live discreetly would itself constitute persecution.
The evidence of suppression of aspects of his life in Iran was limited.
It concluded that to live a private life discreetly would not cause significant detriment to his right to respect for private life and that it would not involve suppression of many aspects of his sexual identity.
Noting that enforcement of the law against homosexuality in Iran is arbitrary, it said that the evidence did not show a real risk of discovery or of adverse action against homosexuals who conduct their homosexual activities discreetly.
It found on the evidence that the level of seriousness for international protection had not been reached.
HJ could reasonably be expected to tolerate the position in Iran on any return: para 46.
In the Court of Appeal Pill LJ said that in his judgment the test stated in para 16 of Js case by reference to S395/2002 complied with the standard required by the Convention and that the findings of the tribunal were findings that they were entitled to make on the evidence: para 31.
In HTs case the Tribunal found that he would be discreet on return to Cameroon.
In the Court of Appeal Pill LJ said that the groundwork for a further finding that he could not reasonably be required to be discreet in Cameroon or to tolerate a life involving discretion there was not established: para 44.
He upheld the Tribunals decision on the ground that it was entitled to find that the first panel did not err in law in finding that a single attack on HT followed a one off incident of him being seen by a neighbour kissing another man with whom he had a three year relationship in his garden.
Miss Carss Frisk pointed out that there was no finding that his behaviour with the other man was a one off incident.
He was the victim of a single attack involving serious violence by way of mob justice following the garden incident.
Instead of helping him, the police joined in the assault.
But he had had two homosexual relationships.
The second had lasted for a period of five years.
The problem had started when neighbours spotted what he and his partner were doing in the garden.
The Tribunal said that he could move to another part of Cameroon where his sexual identity was unknown.
But it is plain that to be effective against the risk of persecution, which is present everywhere in that country, he would have to lie about and conceal his sexuality.
The Tribunal did not assess the effects on him of suppressing his sexual identity.
Conclusion
I am not confident that the tribunals would have come to the same conclusion if they had approached the facts in the way I have suggested in paras 35 36.
It was suggested by the appellants that this court should make a reference of a question arising under the Qualification Directive to the Court of Justice of the European Union under article 267 TFEU (formerly article 234 EC).
But the point that was said to require a reference was not clearly identified, and I would reject that suggestion.
I would allow these appeals and set aside the orders of the Court of Appeal.
I would remit both cases to the Tribunal, for further reconsideration in HJs case and for reconsideration in the case of HT, in the light of the guidance given by this Court.
LORD RODGER
A gay man applies for asylum in this country.
The Secretary of State is satisfied that, if he returns to his country of nationality and lives openly as a homosexual, the applicant will face a real and continuing prospect of being beaten up, or flogged, or worse.
But the Secretary of State is also satisfied that, if he returns, then, because of these dangers of living openly, he will actually carry on any homosexual relationships discreetly and so not come to the notice of any thugs or of the authorities.
Is the applicant a refugee for purposes of the United Nations Convention relating to the Status of Refugees 1951 (the Convention)? The answer is Yes.
Article 1A(2) of the Convention declares that a refugee is a person who, owing to well founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country.
The appellants, HJ, from Iran, and HT, from Cameroon, are gay men who both claim to be outside their country of nationality owing to a well founded fear of being persecuted for reasons of being gay.
At one time there would have been debate as to whether homosexuals constitute a particular social group for the purposes of the Convention.
But, in more recent years, it has come to be accepted that, at least in societies which discriminate against homosexuals, they are indeed to be regarded as a particular social group.
See, for instance, R v Immigration Appeal Tribunal, Ex p Shah [1999] 2 AC 629, 644G 645A, per Lord Steyn, and at p 663, per Lord Millett (dissenting).
Indeed regulation 6(1)(e) of the Refugee or Person in Need of International Protection (Qualification) Regulations 2006 (SI 2006/2525) really puts the point beyond doubt by providing that, subject to an exception which is not relevant for present purposes, a particular social group might include a group based on a common characteristic of sexual orientation.
The Secretary of State therefore accepts that, in the case of Iran and Cameroon, homosexuals do indeed form a particular social group, of which HJ and HT are members.
The approach in HJ
In the case of HJ, the Asylum and Immigration Tribunal observed, at para 9 of its determination, that It is accepted that for a person to be openly gay in Iran would attract a real risk of persecution (see in particular RM and BB (Homosexuals) Iran [2005] UKAIT 00117).
The issue therefore is whether the need for the appellant to be discreet about his sexuality on return to Iran would itself constitute persecution within the meaning of the Refugee Convention.
The Tribunal went on to hold, at para 25, that It remains clear, as it was at the time of RM and BB, that those who confess to homosexual acts or are convicted by whatever means are at real risk as they face condign punishment.
But, in its view, the evidence fell well short of showing that surveillance had reached such levels that Iranian citizens who engaged in homosexual activities in private ran a real risk of discovery.
It remained the case, as the Tribunal had concluded in RM and BB, at para 124, that, given the legal context in which homosexuals operate in Iran, it can be expected that they would be likely to conduct themselves discreetly for fear of the obvious repercussions that would follow.
The Tribunal in the present case summarised the position at para 44: We acknowledge that the way in which he is able to live as a gay man in the UK is preferable for him and we are satisfied that this informs his view that it is impossible for him to return to Iran.
We acknowledge too that the appellant is now much more aware of the legal prohibitions on homosexuals in Iran and the potential punishments for breach of those prohibitions.
On any return, to avoid coming to the attention of the authorities because of his homosexuality he would necessarily have to act discreetly in relation to it.
We are satisfied that as a matter of fact he would behave discreetly.
On the evidence he was able to conduct his homosexual activities in Iran without serious detriment to his private life and without that causing him to suppress many aspects of his sexual identity.
Whilst he has conducted his homosexual activities in the UK less discreetly, we are not persuaded that his adaptation back to life in Iran would be something he could not reasonably be expected to tolerate.
We consider that as a matter of fact he would behave in similar fashion as he did before he left Iran and that in doing so he would, as before, be able to seek out homosexual relationships through work or friends without real risk to his safety or serious detriment to his personal identity and without this involving for him suppression of many aspects of his sexual identity.
Having analysed the evidence in more detail in para 45, the Tribunal referred to the test laid down by Buxton LJ in J v Secretary of State for the Home Department [2006] EWCA Civ 1238, [2007] Imm AR 73, at para 20. (The test is set out at para 48 below.) The Tribunal added, at para 46: The circumstances to be tolerated are the inability to live openly as a gay man as the appellant can in the UK.
The part of sexuality to be abandoned is on the evidence also the ability to live openly as a gay man in the same way the appellant can do elsewhere.
To live a private life discreetly will not cause significant detriment to his right to respect for private life, nor will it involve suppression of many aspects of his sexual identity.
Enforcement of the law against homosexuality in Iran is arbitrary but the evidence does not show a real risk of discovery of, or adverse action against, homosexuals who conduct their homosexual activities discreetly.
The position has not deteriorated since RM and BB [2005] UKAIT 00117.
On the evidence we find the appellant can reasonably be expected to tolerate the position on any return.
The approach in HT
In the case of HT it is agreed that, following an occasion when he was seen kissing his then (male) partner in the garden of his home, the appellant was attacked by a crowd of people when leaving church.
They beat him with sticks and threw stones at him.
They pulled off his clothes and tried to cut off his penis with a knife.
He attempted to defend himself and was cut just above the penis and on his hand.
He was threatened with being killed imminently on the ground that you people cannot be changed.
Police officers arrived and demanded to know what was going on and why the crowd were assaulting him.
They were told it was because he was gay.
One of the policemen said to the appellant How can you go with another man? and punched him on the mouth.
The policemen then kicked him until he passed out.
As a result of the injuries which he received he was kept in hospital for two months.
After that, he was taken home by a member of his church who told him that he feared for his life and safety if he remained in Cameroon.
This man made travel arrangements for HT who flew to the United Kingdom via another European country.
In HTs case the Tribunal was of the view that in some respects the position in Cameroon was not dissimilar from the position in Iran and it was the view of the Tribunal that there might be difficulties for someone openly professing his homosexuality.
A homosexual relationship carried on in private, however, was considered by the Tribunal not to create a reasonable degree of likelihood of persecution. (The Tribunals information about the position in Iran appears to have been taken from the admissibility decision of the European Court of Human Rights in F v United Kingdom (Application No 17341/03), 22 June 2004, unreported.) Because people in the area where he lived before leaving Cameroon knew that he was gay, the Tribunal contemplated that, in addition to conducting any relationship in private, HT would move to another part of the country where he would not be known.
On reconsideration, the Senior Immigration Judge held, at para 15 of his determination, that Should the appellant choose to relocate it would be relatively safe for him to practice [sic] his sexual orientation in private and not come to the attention of the authorities.
In both cases, therefore, the findings of the Tribunal are to the effect that, if the appellant were to return to his country of origin, he would be at risk of persecution if he were openly homosexual, but he would be unlikely to come to the attention of the authorities or to suffer harm, if he were to conduct any relationship in private.
The test adopted by the Court of Appeal
The question, whether in such circumstances an applicant has a well founded fear of persecution, seems to have been considered by the Court of Appeal for the first time in Z v Secretary of State for the Home Department [2004] EWCA Civ 1578, [2005] Imm AR 75.
The court had been referred to the decision of the High Court of Australia in Appellant S395/2002 v Minister for Immigration (2003) 216 CLR 473.
Buxton LJ accepted that the judgments in that case contained a number of statements to the effect that, if an applicants way of life would be subjected to persecution in his home country, he cannot be denied asylum on the basis of a conclusion that he could avoid that persecution by modifying that way of life.
Having referred to paras 40 and 43 of the judgment of McHugh and Kirby JJ, Buxton LJ continued, at paras 15 16: 15.
Mr Kovats for the Secretary of State pointed out that where avoiding action is forced on the subject, that case only falls under the Refugee Convention if it results in a condition that can properly be called persecutory, in that imposes on the subject a state of mind or conscience that fits with the definition of persecution given by McHugh and Kirby JJ in paragraph 40 of their judgment, and in line with English authority already quoted: Whatever form the harm takes, it will constitute persecution only if, by reason of its intensity or duration, the person persecuted cannot reasonably be expected to tolerate it.
That no doubt is the level of interference that McHugh and Kirby JJ had in mind when speaking of threats and menaces in the passage cited in para 14 above. 16.
Although S395 was presented to the court that granted permission in this appeal as a new departure in refugee law, and for that reason justifying the attention of this court, in truth it is no such thing.
McHugh and Kirby JJ, at their paragraph 41, specifically relied on English authority, Ahmed v SSHD [2000] INLR 1.
It has been English law at least since that case, and the case that preceded it, Danian v SSHD [1999] INLR 533, that, in the words of the leading judgment of Simon Brown LJ at pp 7G and 8C D: in all asylum cases there is ultimately a single question to be asked: is there a serious risk that on return the applicant would be persecuted for a Convention reason.the critical question: if returned, would the asylum seeker in fact act in the way he says he would and thereby suffer persecution? If he would, then, however, unreasonable he might be thought for refusing to accept the necessary restraint on his liberties, in my judgment he would be entitled to asylum.
It necessarily follows from that analysis that a person cannot be refused asylum on the basis that he could avoid otherwise persecutory conduct by modifying the behaviour that he would otherwise engage in, at least if that modification was sufficiently significant in itself to place him in a situation of persecution.
If the IAT in our case refused Mr Z asylum on the basis that he was required to avoid persecution they did not respect the jurisprudence of Ahmed.
Buxton LJs formulation of the position, as he derived it from Simon Brown LJs statement in Ahmed v Secretary of State for the Home Department [2000] INLR 1, 7, was quoted by Maurice Kay LJ in J v Secretary of State for the Home Department [2007] Imm AR 73, at para 11.
He added that it was particularly helpful because it brings together the principle articulated by the High Court of Australia and the underlying need for an applicant to establish that his case contains something sufficiently significant in itself to place him in a situation of persecution.
Maurice Kay LJ went on to say, at para 16, that the Tribunal will have to address questions that were not considered on the last occasion, including the reason why the appellant opted for discretion before his departure from Iran and, by implication, would do so again on return.
It will have to ask itself whether discretion is something that the appellant can reasonably be expected to tolerate, not only in the context of random sexual activity but in relation to matters following from, and relevant to, sexual identity in the wider sense recognised by the High Court of Australia (see the judgment of Gummow and Hayne JJ at para 83).
This requires consideration of the fact that homosexuals living in a stable relationship will wish, as this appellant says, to live openly with each other and the discretion which they may feel constrained to exercise as the price to pay for the avoidance of condign punishment will require suppression in respect of many aspects of life that related to or informed by their sexuality (Ibid, para 81).
Buxton LJ added, at para 20: The question that will be before the AIT on remission will be whether the applicant could reasonably be expected to tolerate whatever circumstances are likely to arise were he to return to Iran.
The applicant may have to abandon part of his sexual identity, as referred to in the judgment of Gummow and Hayne JJ in S, in circumstances where failure to do that exposes him to the extreme danger that is set out in the country guidance case of RM and BB.
The Tribunal may wish to consider whether the combination of those two circumstances has an effect on their decision as to whether the I would accept both submissions. applicant can be expected to tolerate the situation he may find himself in when he returns to Iran.
In his judgment on the present appeals Pill LJ held, at para 31, that the test stated in para 16 of Maurice Kay LJs judgment in J v Secretary of State complies with the standard required by the Refugee Convention.
He added that it is an appropriate and workable test.
Pill LJ considered that in the case of HJ the Tribunal had plainly understood the test and that their conclusion that he could reasonably be expected to tolerate conditions in Iran was firmly based on the evidence in the case, considered in the context of the in country evidence.
On that ground he dismissed the appeal.
Keene LJ and Sir Paul Kennedy agreed.
The appellants take this fairly well established case law of the Court of Appeal head on.
They contend that the Court of Appeal test is incompatible with the definition of refugee in article 1A(2) of the Convention and is based on a misunderstanding of the decision of the High Court of Australia in Appellant S395/2002 v Minister for Immigration (2003) 216 CLR 473.
The rationale of the Convention
For someone to be a refugee within the terms of article 1A(2) of the Convention, he must be outside his country of nationality owing to well founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion.
In effect, the Convention proceeds on the basis that people should be allowed to live their lives free from the fear of serious harm coming to them because of their race, religion, nationality, membership of a particular social group or political opinion.
Countries which sign up to the Convention recognise, however, that we do not live in an ideal world and that, in fact, there are many countries where persecution for these reasons does indeed take place.
In such countries either agents of the state carry out the persecution themselves or, at least, the state does not offer adequate protection against individuals and groups who carry it out.
Of course, diplomatic and other pressures may be exerted on states in the hope of improving the situation.
But, in the meantime, the signatories to the Convention do not wash their hands of those at risk: in effect, they agree that, by giving the victims asylum, they will afford them the protection from persecution which their country of origin should have afforded them but did not.
See, for example, La Forest J in Canada (Attorney General) v Ward [1993] 2 SCR 689, 709: At the outset, it is useful to explore the rationale underlying the international refugee protection regime, for this permeates the interpretation of the various terms requiring examination.
International refugee law was formulated to serve as a back up to the protection one expects from the state of which an individual is a national.
It was meant to come into play only in situations when that protection is unavailable, and then only in certain situations.
In Horvath v Secretary of State for the Home Department [2001] 1 AC 489, 495D G, Lord Hope of Craighead quoted this passage with approval and adopted Professor Hathaways description of the protection as surrogate or substitute protection.
At the risk of repetition, the importance of this analysis for present purposes is that it proceeds on the basis that, so far from permitting or encouraging its agents to persecute the applicant for one of the protected grounds, the home state should have protected him from any persecution on that ground.
The underlying rationale of the Convention is therefore that people should be able to live freely, without fearing that they may suffer harm of the requisite intensity or duration because they are, say, black, or the descendants of some former dictator, or gay.
In the absence of any indication to the contrary, the implication is that they must be free to live openly in this way without fear of persecution.
By allowing them to live openly and free from that fear, the receiving state affords them protection which is a surrogate for the protection which their home state should have afforded them.
The applicant who would not take steps to avoid persecution
The Secretary of State accepts accordingly that an applicant is entitled to the protection of the Convention if he could avoid suffering any actual harm by modifying his behaviour (say, by conducting himself discreetly) on his return to his home state but would not in fact choose to do so.
English authority for this approach in the field of religion is to be found in the judgment of Simon Brown LJ in Ahmed (Iftikhar)v Secretary of State for the Home Department [2000] INLR 1.
The applicant was an Ahmadi, who, if returned to Pakistan, would still have been vocal in his proclamation of Ahmadi beliefs, for which he would have suffered persecution.
Simon Brown LJ observed, at p 7: It is one thing to say that it may well be reasonable to require asylum seekers to refrain from certain political or even religious activities to avoid persecution on return.
It is quite another thing to say that, if in fact it appears that the asylum seeker on return would not refrain from such activities if, in other words, it is established that he would in fact act unreasonably he is not entitled to refugee status.
The same point is made, with considerably more elaboration, in the judgment of McHugh and Kirby JJ in Appellant S395/2002 v Minister for Immigration (2003) 216 CLR 473.
They begin by pointing out, at p 489, para 40, that persecution does not cease to be persecution for the purpose of the Convention because those persecuted can eliminate the harm by taking avoiding action within the country of nationality.
In the remainder of para 40 they point out that, if the position were otherwise, the Convention would not protect those who chose to exercise their right, say, to express their political opinion openly.
Similarly, the Convention would not protect those who chose to live openly as gay men rather than take the option of living discreetly.
Their Honours added, 216 CLR 473, 489 490, para 41: History has long shown that persons holding religious beliefs or political opinions, being members of particular social groups or having particular racial or national origins are especially vulnerable to persecution from their national authorities.
The object of the signatories to the Convention was to protect the holding of such beliefs, opinions, membership and origins by giving the persons concerned refuge in the signatory countries when their country of nationality would not protect them.
It would undermine the object of the Convention if the signatory countries required them to modify their beliefs or opinions or to hide their race, nationality or membership of particular social groups before those countries would give them protection under the Convention.
They concluded the paragraph by citing the passage from Simon Brown LJ in Ahmed v Secretary of State for the Home Department [2000] INLR 1, 7, which I have quoted at para 54 above.
The applicant who would conduct himself discreetly
In Ahmed Simon Brown LJ was tackling the case of an applicant who could take steps to avoid persecution on his return, but who would not do so.
The present appeals concern a completely different kind of applicant: the applicant who, on his return, would act discreetly to avoid the harm which would come to him if he were to live openly as a gay man.
In the passage from Ahmed which I cited at para 54 above, Simon Brown LJ appears to have envisaged that it might, in some sense, be reasonable to require applicants to refrain from certain political or even religious activities to avoid persecution on return.
But, in his conspicuously clear argument on behalf of the Secretary of State in the present case, Mr Bourne accepted that neither the Secretary of State nor a tribunal had any power to require a gay applicant to act discreetly on his return to his country of nationality in order to avoid persecution.
Both of them might, of course, purport to decide the case on the assumption that the applicant would do so.
But counsel accepted that neither the Secretary of State nor any tribunal could reject an application for asylum on the basis of an assumption that the gay applicant would act discreetly and so avoid, say, being beaten up or worse.
He might or might not.
It would be a question of fact, depending on the circumstances of the individual case.
Although counsel for the Secretary of State was at pains to draw this distinction between assuming that the applicant would act discreetly to avoid persecution and finding that this is what he would in fact do, the distinction is pretty unrealistic.
Unless he were minded to swell the ranks of gay martyrs, when faced with a real threat of persecution, the applicant would have no real choice: he would be compelled to act discreetly.
Therefore the question is whether an applicant is to be regarded as a refugee for purposes of the Convention in circumstances where the reality is that, if he were returned to his country of nationality, he would have to act discreetly in order to avoid persecution.
The question is not confined to cases where fear of persecution is the only reason why the applicant would act discreetly.
In practice, the picture is likely to be more complicated.
A fear of persecution is by no means the only reason why an applicant might behave discreetly if he were returned to his country of nationality.
For example, he might not wish to upset his parents or his straight friends and colleagues by revealing that he is gay; in particular, he might worry that, if the fact that he was gay were known, he would become isolated from his friends and relatives, be the butt of jokes or unkind comments from colleagues or suffer other discrimination.
Indeed, in a society where gay men are persecuted, it is quite likely that the prevailing culture will be such that some of an applicants friends, relatives and colleagues would react negatively if they discovered that he was gay.
In these circumstances it is at least possible that the only real reason for an applicant behaving discreetly would be his perfectly natural wish to avoid harming his relationships with his family, friends and colleagues.
The Convention does not afford protection against these social pressures, however, and so an applicant cannot claim asylum in order to avoid them.
So if, having considered the facts of any individual case, the Secretary of State or a tribunal concluded that the applicant would choose to behave discreetly on his return simply to avoid these social pressures, his application for asylum would fall to be rejected.
He would not be a refugee within the terms of article 1A(2) of the Convention because, by choosing to behave discreetly in order to avoid these social pressures, the applicant would simultaneously choose to live a life in which he would have no well founded fear of being persecuted for reasons of his homosexuality.
A similar point arose, in the context of religion, in NABD of 2002 v Minister of Immigration and Multicultural and Indigenous Affairs (2005) 79 ALJR 1142, discussed at para 70 below.
Having examined the relevant evidence, the Secretary of State or the tribunal may conclude, however, that the applicant would act discreetly partly to avoid upsetting his parents, partly to avoid trouble with his friends and colleagues, and partly due to a well founded fear of being persecuted by the state authorities.
In other words the need to avoid the threat of persecution would be a material reason, among a number of complementary reasons, why the applicant would act discreetly.
Would the existence of these other reasons make a crucial difference? In my view it would not.
A Jew would not lose the protection of the Convention because, in addition to suffering state persecution, he might also be subject to casual, social anti semitism.
Similarly, a gay man who was not only persecuted by the state, but also made the butt of casual jokes at work, would not lose the protection of the Convention.
It follows that the question can be further refined: is an applicant to be regarded as a refugee for purposes of the Convention in circumstances where the reality is that, if he were returned to his country of nationality, in addition to any other reasons for behaving discreetly, he would have to behave discreetly in order to avoid persecution because of being gay?
It is convenient to use a phrase such as acting or behaving discreetly to describe what the applicant would do to avoid persecution.
But in truth he could do various things.
To take a few examples.
At the most extreme, the applicant might live a life of complete celibacy.
Alternatively, he might form relationships only within a circle of acquaintances whom he could trust not to reveal to others that he had gay relationships.
Or, he might have a gay partner, but never live with him or have him to stay overnight or indulge in any display of affection in public.
Or the applicant might have only fleeting anonymous sexual contacts, as a safe opportunity presented itself.
The gradations are infinite.
Suppose the Secretary of State or the tribunal were satisfied that, if the applicant took some such precautions, he would be unlikely to suffer any actual harm.
Would the applicant then have no well founded fear of persecution by reason of being gay and so be unable to claim asylum under the Convention?
Surely not.
As already explained in para 53 above, so far as the social group of gay people is concerned, the underlying rationale of the Convention is that they should be able to live freely and openly as gay men and lesbian women, without fearing that they may suffer harm of the requisite intensity or duration because they are gay or lesbian.
Their home state should protect them and so enable them to live in that way.
If it does not and they will be threatened with serious harm if they live openly, then most people threatened with persecution will be forced to take what steps they can to avoid it.
But the applicants country of nationality does not meet the standard of protection from persecution which the Convention envisages simply because conditions in the country are such that he would be able to take, and would in fact take, steps to avoid persecution by concealing the fact that he is gay.
On the contrary, the fact that he would feel obliged to take these steps to avoid persecution is, prima facie, an indication that there is indeed a threat of persecution to gay people who live openly.
His country of nationality is therefore not affording him the necessary level of protection.
So the receiving country should.
For this reason, in Appellant S395/2002 v Minister for Immigration (2003) 216 CLR 473, 493, para 51, McHugh and Kirby JJ emphasise that a tribunal will fall into error if it fails to ask why an applicant would act discreetly if he were returned to his home state.
That question will be particularly important where the evidence shows that, before leaving his country and applying for asylum, the applicant lived discreetly.
Their Honours explained, at p 490, para 43: In cases where the applicant has modified his or her conduct, there is a natural tendency for the tribunal of fact to reason that, because the applicant has not been persecuted in the past, he or she will not be persecuted in the future.
The fallacy underlying this approach is the assumption that the conduct of the applicant is uninfluenced by the conduct of the persecutor and that the relevant persecutory conduct is the harm that will be inflicted.
In many perhaps the majority of cases, however, the applicant has acted in the way that he or she did only because of the threat of harm.
In such cases, the well founded fear of persecution held by the applicant is the fear that, unless that person acts to avoid the harmful conduct, he or she will suffer harm.
It is the threat of serious harm with its menacing implications that constitutes the persecutory conduct.
Their Honours went on to apply that approach to the decision of the tribunal in that case, at p 493, paras 51 53: 51.
Central to the Tribunals decision was the finding that the appellants had not suffered harm in the past because they had acted discreetly.
Because the Tribunal assumed that it is reasonable for a homosexual person in Bangladesh to conform to the laws of Bangladesh society, the Tribunal failed to determine whether the appellants had acted discreetly only because it was not possible to live openly as a homosexual in Bangladesh.
Because of that failure, the Tribunal, unsurprisingly, failed to give proper attention to what might happen to the appellants if they lived openly in the same way as heterosexual people in Bangladesh live. 52.
The Tribunal did find, however, that to attempt to live openly as a homosexual in Bangladesh would mean to face problems ranging from being disowned by ones family and shunned by friends and neighbours to more serious forms of harm, for example the possibility of being bashed by the police.
That finding appears to be based on an acceptance of the evidence of Mr Khan, the Executive Director of the Naz Foundation.
In its reasons, the Tribunal recorded Mr Khan as saying: [T]he consequences of being identified as homosexual vary enormously, from acceptance and tolerance, to harassment, physical abuse or expulsion from the community.
Most of the harassment of males who have sex with males takes the form of extortion by local police and hustlers who threaten to expose them to their families if they do not cooperate. 53.
The Tribunals findings on the attitude of Bangladesh society and the statements of the appellants indicate that they were discreet about their relationship only because they feared that otherwise they would be subjected to the kinds of discrimination of which Mr Khan spoke.
If the Tribunal had found that this fear had caused them to be discreet in the past, it would have been necessary for the Tribunal then to consider whether their fear of harm was well founded and amounted to persecution.
That would have required the Tribunal to consider what might happen to the appellants in Bangladesh if they lived openly as a homosexual couple.
Would they have suffered physical abuse, discrimination in employment, expulsion from their communities or violence or blackmail at the hands of police and others, as Mr Khan suggested were possibilities? These were the sorts of questions that the Tribunal was bound to consider if it found that the appellants discreet behaviour in the past was the result of fear of what would happen to them if they lived openly as homosexuals.
Because the Tribunal assumed that it is reasonable for a homosexual person in Bangladesh to conform to the laws of Bangladesh society, however, the Tribunal disqualified itself from properly considering the appellants claims that they had a real fear of persecution if they were returned to Bangladesh.
In short, the fact that the applicants would act discreetly and so not be subjected to violence if returned to Bangladesh did not mean that they did not have a well founded fear of persecution on their return.
Rather, the tribunal had to go on to ask itself why they would act discreetly.
If it was because they would suffer serious harm if they lived openly as a homosexual couple, then they would have a well founded fear of persecution since it is the right to live openly without fear of persecution which the Convention exists to protect.
The other justices in the majority, Gummow and Hayne JJ, described the tribunals error in this way, 216 CLR 473, 503, para 88: The Tribunal did not ask why the appellants would live discreetly.
It did not ask whether the appellants would live discreetly because that was the way in which they would hope to avoid persecution.
That is, the Tribunal was diverted from addressing the fundamental question of whether there was a well founded fear of persecution by considering whether the appellants were likely to live as a couple in a way that would not attract adverse attention.
That the Tribunal was diverted in that way is revealed by considering the three statements in its reasons that are referred to earlier: first, that it is not possible to live openly as a homosexual in Bangladesh; secondly, that [t]o attempt to [live openly] would mean to face problems; and, thirdly, that Bangladeshi men can have homosexual affairs or relationships, provided they are discreet.
Nowhere did the Tribunal relate the first and second of these statements to the position of the appellants.
It did not consider whether the adverse consequences to which it referred sufficed to make the appellants fears well founded.
All that was said was that they would live discreetly.
Again, the point is that the tribunal should have considered why the appellants would live discreetly if they were returned to Bangladesh.
In particular, it should have asked whether they would live discreetly because that was the way they would hope to avoid persecution.
If so, then the tribunal should have considered whether the adverse consequences sufficed to make the appellants fears of persecution well founded.
The decision of the High Court is accordingly powerful authority, which I would respectfully follow, for the proposition that, if a person has a well founded fear that he would suffer persecution on being returned to his country of nationality if he were to live openly as a gay man, then he is to be regarded as a refugee for purposes of the Convention, even though, because of the fear of persecution, he would in fact live discreetly and so avoid suffering any actual harm.
The High Court has followed the same line of reasoning in subsequent cases.
Application of the High Courts approach in Appellant S395/2002
In NABD of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 79 ALJR 1142 the appellant, who had converted to Christianity, would face persecution if he returned to Iran.
He argued that the tribunal had fallen into the same kind of error as the tribunal in S395/2002 v Minister for Immigration by attaching significance to a supposed difference between discreet and confrontational behaviour.
By a majority (McHugh and Kirby JJ dissenting), the High Court dismissed his appeal.
In doing so, they did not reject the approach in S395/2002 v Minister for Immigration.
Rather, applying that approach, they held that the appeal failed on the facts.
As Hayne J (one of the majority in S395/2002) and Heydon J explained, at para 168: At no point in its chain of reasoning did the Tribunal divert from inquiring about whether the fears which the appellant had were well founded.
It did not ask (as the Tribunal had asked in Appellant S395/2002) whether the appellant could avoid persecution; it asked what may happen to the appellant if he returned to Iran.
Based on the material the Tribunal had, including the material concerning what the appellant had done while in detention, it concluded that were he to practise his faith in the way he chose to do so, there was not a real risk of his being persecuted.
In SZATV v Minister for Immigration and Citizenship (2007) 233 CLR 18 the appellant had worked as a journalist in Chernovtsy in Ukraine.
Due to his political views he had been subjected to a systematic campaign of harassment, including physical maltreatment.
The Refugee Review Tribunal none the less rejected his claim for asylum on the ground that he could return to a different part of Ukraine where he would not be known, and work in the construction industry.
He would not then come to the notice of the authorities.
Allowing his appeal, at p 28, para 28, Gummow, Hayne and Crennan JJ referred to the analysis in para 40 of the judgment of McHugh and Kirby JJ in Appellant S395/2002 v Minister for Immigration (2003) 216 CLR 473, 489, where they had criticised the idea that an applicant would not suffer persecution for his homosexuality if he could avoid it by living discreetly.
Similarly, in SZATV, the tribunal had gone wrong by approaching the issue on the footing that it would not be unreasonable for the appellant to relocate within Ukraine and obtain work which would not involve the expression to the public of his political opinions.
In other words, he would avoid persecution by giving up the very right to express his political opinions without fear of persecution which the Convention is designed to protect.
Again, the decision is consistent with the approach in Appellant S395/2002 v Minister for Immigration.
The same approach has been followed in New Zealand.
In Refugee Appeal No 74665/03, [2005] INLR 68 at para 124, the New Zealand Refugee Status Appeals Authority considered that its own approach and the approach of the High Court of Australia in Appellant S395/2002 converged on the same point, namely that refugee status cannot be denied by requiring of the claimant that he or she avoid being persecuted by forfeiting a fundamental human right.
The difference between the High Court and the Authority which the Authority considered could be important in certain cases was that it preferred to use a human rights framework in order to determine the limits of what an individual is entitled to do and not to do.
That approach might, for instance, be relevant if an applicant were claiming asylum on the ground that he feared persecution if he took part in a gay rights march.
I respectfully see the attractions of that approach.
But no such issue arises in the present appeals and I prefer to leave the point for consideration in a case where it might be of practical effect.
For present purposes I take the decision of the Authority, based on a particularly full and impressive analysis of the relevant materials, as clear support for the High Court of Australias approach that an applicant cannot be denied asylum on the basis that he would, in fact, take effective steps, by suppressing his sexual identity, to avoid the harm which would otherwise threaten him.
The Court of Appeal: living discreetly as persecution
Under reference to the case law of the Court of Appeal set out above at paras 47 49, the Secretary of State argued, however, that if the applicant would actually live discreetly and avoid the danger, then he would have no real fear of persecution unless he could not reasonably be expected to tolerate that situation, viz, having to conceal his sexual identity, and all the restrictions which that would entail, in circumstances where failure to do so would expose him to extreme danger.
In other words the basis for claiming asylum would be a well founded fear that he would find it intolerable to live discreetly to avoid the danger.
Something of the same idea can be seen in the argument which Mosley J considered in Sadeghi Pari v Canada (Minister of Citizenship and Immigration) 2004 FC 282, para 29: The meaning of persecution is generally defined as the serious interference with a basic human right.
Concluding that persecution would not exist because a gay woman in Iran could live without punishment by hiding her relationship to another woman may be erroneous, as expecting an individual to live in such a manner could be a serious interference with a basic human right, and therefore persecution (internal citations omitted).
In my view, the approach adopted by the Court of Appeal is unsound.
I leave on one side my reasoning so far and also the obvious point that the Court of Appeals test seems to require the applicant to establish a form of secondary persecution brought on by his own actions in response to the primary persecution.
In my view the core objection to the Court of Appeals approach is that its starting point is unacceptable: it supposes that at least some applications for asylum can be rejected on the basis that the particular applicant could find it reasonably tolerable to act discreetly and conceal his sexual identity indefinitely to avoid suffering severe harm.
The New Zealand Refugee Status Appeals Authority observed in Re GJ [1998] (1995) INLR 387, 420 that sexual orientation is either an innate or unchangeable characteristic or a characteristic so fundamental to identity or human dignity that it ought not be required to be changed (emphasis in the original).
So, starting from that position, the Convention offers protection to gay and lesbian people and, I would add, bisexuals and everyone else on a broad spectrum of sexual behaviour because they are entitled to have the same freedom from fear of persecution as their straight counterparts.
No one would proceed on the basis that a straight man or woman could find it reasonably tolerable to conceal his or her sexual identity indefinitely to avoid suffering persecution.
Nor would anyone proceed on the basis that a man or woman could find it reasonably tolerable to conceal his or her race indefinitely to avoid suffering persecution.
Such an assumption about gay men and lesbian women is equally unacceptable.
Most significantly, it is unacceptable as being inconsistent with the underlying purpose of the Convention since it involves the applicant denying or hiding precisely the innate characteristic which forms the basis of his claim of persecution: Atta Fosu v Canada (Minister of Citizenship and Immigration) 2008 FC 1135, para 17, per Zinn J.
At the most basic level, if a male applicant were to live discreetly, he would in practice have to avoid any open expression of affection for another man which went beyond what would be acceptable behaviour on the part of a straight man.
He would have to be cautious about the friendships he formed, the circle of friends in which he moved, the places where he socialised.
He would have constantly to restrain himself in an area of life where powerful emotions and physical attraction are involved and a straight man could be spontaneous, impulsive even.
Not only would he not be able to indulge openly in the mild flirtations which are an enjoyable part of heterosexual life, but he would have to think twice before revealing that he was attracted to another man.
Similarly, the small tokens and gestures of affection which are taken for granted between men and women could well be dangerous.
In short, his potential for finding happiness in some sexual relationship would be profoundly affected.
It is objectionable to assume that any gay man can be supposed to find even these restrictions on his life and happiness reasonably tolerable.
It would be wrong, however, to limit the areas of behaviour that must be protected to the kinds of matters which I have just described essentially, those which will enable the applicant to attract sexual partners and establish and maintain relationships with them in the same way as happens between persons who are straight.
As Gummow and Hayne JJ pointed out in Appellant S395/2002 v Minister for Immigration (2003) 216 CLR 473, 500 501, para 81: Sexual identity is not to be understood in this context as confined to engaging in particular sexual acts or, indeed, to any particular forms of physical conduct.
It may, and often will, extend to many aspects of human relationships and activity.
That two individuals engage in sexual acts in private (and in that sense discreetly) may say nothing about how those individuals would choose to live other aspects of their lives that are related to, or informed by, their sexuality In short, what is protected is the applicants right to live freely and openly as a gay man.
That involves a wide spectrum of conduct, going well beyond conduct designed to attract sexual partners and maintain relationships with them.
To illustrate the point with trivial stereotypical examples from British society: just as male heterosexuals are free to enjoy themselves playing rugby, drinking beer and talking about girls with their mates, so male homosexuals are to be free to enjoy themselves going to Kylie concerts, drinking exotically coloured cocktails and talking about boys with their straight female mates.
Mutatis mutandis and in many cases the adaptations would obviously be great the same must apply to other societies.
In other words, gay men are to be as free as their straight equivalents in the society concerned to live their lives in the way that is natural to them as gay men, without the fear of persecution.
This is not to give any false or undue prominence to the applicants sexuality or to say that an individual is defined by his sexuality.
It is just to accept that sexual identity is inherent to ones very identity as a person: Hernandez Montiel v Immigration and Naturalisation Service, 225 F 3d 1084, 1093 (9th Cir 2000), per Tashima J. A E Housman showed many of the hallmarks of genius both as a textual critic and as a poet; Alan Turing was a mathematical genius.
Not only may these talents have been at least as significant to their identity as their homosexuality, but the individuals themselves may well have thought so too.
That does not matter in the context of persecution.
As the Nazi period showed all too clearly, a secular Jew, who rejected every tenet of the religion and did not even think of himself as Jewish, was ultimately in as much need as any Orthodox rabbi of protection from persecution as a Jew.
Similarly, an applicant for asylum does not need to show that his homosexuality plays a particularly prominent part in his life.
All that matters is that he has a well founded fear that he will be persecuted because of that particular characteristic which he either cannot change or cannot be required to change.
Another way of pointing to essentially the same basic defect in the approach of the Court of Appeal is to say that a tribunal has no legitimate way of deciding whether an applicant could reasonably be expected to tolerate living discreetly and concealing his homosexuality indefinitely for fear of persecution.
Where would the tribunal find the yardstick to measure the level of suffering which a gay man far less, the particular applicant would find reasonably tolerable? How would the tribunal measure the equivalent level for a straight man asked to suppress his sexual identity indefinitely? The answer surely is that there is no relevant standard since it is something which no one should have to endure.
In practice, of course, where the evidence showed that an applicant had avoided persecutory harm by living discreetly for a number of years before leaving his home country, the tribunal would be tempted to fall into error.
The tribunal would be liable to hold that the evidence showed that this applicant, at least, must have found his predicament reasonably tolerable in the past and so would find it reasonably tolerable if he were returned to his country of nationality.
But, in truth, that evidence would merely show that the applicant had put up with living discreetly for fear of the potentially dire consequences of living openly.
I would therefore hold that the tests formulated by Maurice Kay LJ and Buxton LJ in J v Secretary of State for the Home Department [2007] Imm AR 73, at paras 16 and 20, and applied by Pill LJ in this case, are wrong in principle, unworkable and inconsistent with the way that article 1A(2) of the Convention has been interpreted and applied in other authorities.
As can be seen from the passage from Z v Secretary of State for the Home Department [2005] Imm AR 75 quoted at para 47 above, Buxton LJ seems to have thought that he was following the approach of McHugh and Kirby JJ in Appellant S395/2002 v Minister for Immigration (2003) 216 CLR 473.
That was, quite simply, a misunderstanding.
As the cross heading above para 40 of their judgment showed, at this point in their judgment their Honours were considering the position of a gay person who would live openly.
They first explained that persecution could take a variety of forms, and then observed, in the sentence quoted by Buxton LJ, that to count as persecution the harm had to be intolerable.
But this is just a general description of what counts as persecution.
As I have explained, in paras 55 and 56 above, the remainder of para 40 of their Honours judgment contains not the slightest hint of the approach favoured by the Court of Appeal.
That approach should not be followed in future.
The approach to be followed by tribunals
When an applicant applies for asylum on the ground of a well founded fear of persecution because he is gay, the tribunal must first ask itself whether it is satisfied on the evidence that he is gay, or that he would be treated as gay by potential persecutors in his country of nationality.
If so, the tribunal must then ask itself whether it is satisfied on the available evidence that gay people who lived openly would be liable to persecution in the applicants country of nationality.
If so, the tribunal must go on to consider what the individual applicant would do if he were returned to that country.
If the applicant would in fact live openly and thereby be exposed to a real risk of persecution, then he has a well founded fear of persecution even if he could avoid the risk by living discreetly.
If, on the other hand, the tribunal concludes that the applicant would in fact live discreetly and so avoid persecution, it must go on to ask itself why he would do so.
If the tribunal concludes that the applicant would choose to live discreetly simply because that was how he himself would wish to live, or because of social pressures, e g, not wanting to distress his parents or embarrass his friends, then his application should be rejected.
Social pressures of that kind do not amount to persecution and the Convention does not offer protection against them.
Such a person has no well founded fear of persecution because, for reasons that have nothing to do with any fear of persecution, he himself chooses to adopt a way of life which means that he is not in fact liable to be persecuted because he is gay.
If, on the other hand, the tribunal concludes that a material reason for the applicant living discreetly on his return would be a fear of the persecution which would follow if he were to live openly as a gay man, then, other things being equal, his application should be accepted.
Such a person has a well founded fear of persecution.
To reject his application on the ground that he could avoid the persecution by living discreetly would be to defeat the very right which the Convention exists to protect his right to live freely and openly as a gay man without fear of persecution.
By admitting him to asylum and allowing him to live freely and openly as a gay man without fear of persecution, the receiving state gives effect to that right by affording the applicant a surrogate for the protection from persecution which his country of nationality should have afforded him.
The Secretary of State should, of course, apply the same approach when considering applications of this type.
Although I have, for the most part, concentrated on the position of gay men, the Secretary of State and tribunals should approach applications concerning lesbian women in the same way.
These appeals
I add a comment on the case of HT.
The tribunal rejected his application on the ground that, on his return to Cameroon, he could go to live in another part of the country and live discreetly there.
In that event he would have no real fear of persecution.
But there appears to have been nothing in the evidence to suggest that there was any area of Cameroon where gay men could live openly without any fear of persecution.
So in no sense would the applicant be returning to a part of the country where the state would protect him from persecution.
In effect, therefore, the tribunal was simply saying that his application should be rejected because, on return, he could take steps to avoid persecution by conducting himself discreetly.
For the reasons which I have given, that approach is inconsistent with the very aims of the Convention.
In effect, the tribunal made the same error as the tribunal in SZATV v Minister for Immigration and Citizenship (2007) 233 CLR 18, discussed at para 71 above.
For these reasons I would allow both appeals and remit matters to the respective tribunals for reconsideration in the light of the approach which I have outlined.
LORD WALKER
I agree with the reasoning and conclusions in Lord Rodgers judgment.
But in view of the importance of this appeal I will add some observations in my own words.
After all the carefully researched debate that the Court has heard and participated in (we have had 23 bundles of authorities containing 250 different items) there is, as has often been noted, ultimately a single question: does the claimant asylum seeker have a well founded fear of being persecuted, if returned to his own country, for reasons falling within article 1A(2) of the Convention? As it was put by Simon Brown LJ in Secretary of State for the Home Department v Iftikar Ahmed [2000] INLR 1, cited by McHugh and Kirby JJ in Appellant S395/2002 v Minister for Immigration and Multicultural Affairs [2003] HCA 71 (2003) 216 CLR 473 para 42 : [I]n all asylum cases there is ultimately but a single question to be asked: is there a serious risk that on return the applicant would be persecuted for a Convention reason? If there is, then he is entitled to asylum.
This single question is however complex (McHugh J in Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225, 256) described it as a compound conception which nevertheless needs to be interpreted as a totality).
It is not directed at ascertaining past facts (though findings as to events asserted by the claimant to have happened in the past will always be relevant, and often crucial).
Instead it is directed at predicting what would or might happen in the future if (contrary to his wishes) the claimant is returned to his own country.
Here too his evidence as to his own state of mind (in particular his intentions and his apprehensions in an eventuality which he earnestly hopes to avoid) will always be relevant.
But his evidence may have to be treated with caution because of his strong personal interest in the outcome of his claim.
Moreover the inquiry is by no means wholly subjective.
The need for the claimants fear to be well founded introduces a very important objective element.
Different jurisdictions have taken different approaches to evaluating what Professor James C Hathaway has called the threshold of concern (Hathaway, The Law of Refugee Status (1991) pp 75 80).
When that work was published the test approved by the House of Lords in R v Secretary of State for the Home Department Ex p Sivakumaran (and conjoined appeals) [1988] AC 958 was that there should be a reasonable degree of likelihood (Lord Keith at p 994) or real and substantial danger (Lord Templeman at p 996) or a real and substantial risk (Lord Goff at p 1000) of persecution for a Convention reason.
This remains the test.
The editors of Macdonald, Immigration Law and Practice 7th ed (2008) prefer the expression real risk, citing the Court of Appeal in MH (Iraq) v Secretary of State for the Home Department [2007] EWCA Civ 852, a real as opposed to a fanciful risk.
Risk is in my view the best word because (as explained in the next paragraph) it factors in both the probability of harm and its severity.
In understanding the practical implications of the test it is important to note that in Sivakumaran Lord Keith quoted Lord Diplocks remarks in R v Governor of Pentonville Prison, Ex p Fernandez [1971] 1 WLR 987, 994 (an extradition case) as to the relative gravity of the consequences of the courts expectation being falsified either in one way or in the other and Lord Templeman referred to his own similar remarks in R v Secretary of State for the Home Department Ex p Bugdaycay [1987] AC 514, 537.
Where life or liberty may be threatened, the balance of probabilities is not an appropriate test.
As Sedley LJ said in Batayav v Secretary of State for the Home Department [2003] EWCA Civ 1489, [2004] INLR 126 para 38: If a type of car has a defect which causes one vehicle in ten to crash, most people would say that it presents a real risk to anyone who drives it, albeit crashes are not generally or consistently happening.
Getting away from metaphor, I suppose that it may be debatable whether a gay man would be at real risk of persecution (in the Convention sense) if, on returning to his own country, he would face a one in ten risk of being prosecuted and made to pay a fine, or sent to prison for a month.
But if he would face a one in ten risk of being prosecuted and sentenced to death by public hanging from a crane there could be only one answer.
The notion that a gay man could (and so, some might say, should) avoid trouble by adopting a discreet lifestyle (or leading an entirely celibate life) is not limited to the context of asylum law.
It is the way in which hundreds of thousands of gay men lived in England before the enactment of the Sexual Offences Act 1967.
But it has assumed particular importance in asylum law since gays and lesbians have become generally recognised as a particular social group for Convention purposes.
Jenni Millbank has described this development (which she terms discretion reasoning) in From discretion to disbelief: recent trends in refugee determinations on the basis of sexual orientation in Australia and the United Kingdom (2009) 13 IJHR 391, 393 394 (most references omitted): At its baldest, discretion reasoning entailed a reasonable expectation that persons should, to the extent that it is possible, co operate in their own protection, by exercising self restraint such as avoiding any behaviour that would identify them as gay; never telling anyone they were gay; only expressing their sexuality by having anonymous sex in public places; pretending that their partner is a flatmate; or indeed remaining celibate.
This approach subverted the aim of the Refugees Convention that the receiving state provide a surrogate for protection from the home state by placing the responsibility of protection upon the applicant: it is he or she who must avoid harm.
The discretion approach also varied the scope of protection afforded in relation to each of the five Convention grounds by, for example, protecting the right to be openly religious but not to be openly gay or in an identifiable same sex relationship.
The idea of discretion reflects broader social norms concerning the proper place of lesbian and gay sexuality, as something to be hidden and reluctantly tolerated, a purely private sexual behaviour rather than an important and integral aspect of identity, or as an apparent relationship status.
The discretion approach explicitly posited the principle that human rights protection available to sexual orientation was limited to private consensual sex and did not extend to any other manifestation of sexual identity (which has been variously characterised as flaunting displaying and advertising homosexuality as well as inviting persecution).
Thus for example in 2001 the Federal Court of Australia held that the Iranian Penal Code prohibiting homosexuality and imposing a death penalty did place limits on the applicants behaviour; the applicant had to avoid overt and public, or publicly provocative homosexual activity.
But having to accept those limits did not amount to persecution. (Nezhadian v Minister for Immigration and Multicultural Affairs [2001] FCA 1415, para 12).
On appeal, the full Federal Court endorsed the view that public manifestation of homosexuality is not an essential part of being homosexual (WABR v Minister for Immigration and Multicultural Affairs [2002] FCAFC 124, para 23).
The discretion approach thus has had wide reaching ramifications in terms of framing the human rights of lesbians and gay men to family life, freedom of association and freedom of expression as necessarily lesser in scope than those held by heterosexual people.
This approach has been brought to an end, for the purposes of Australian asylum law, by the majority decision of the High Court of Australia in Appellant S395/2002 v Minister for Immigration and Multicultural Affairs (2003) 216 CLR 473.
The High Court divided by four to three in favour of allowing the appeal and remitting the case (though the tribunal to which the case was remitted decided that S395/2002 and his co applicant S396/2002 were not gay after all this fact, recorded by Jenni Millbank in her article, is reflected in its title).
The minority (Gleeson CJ and Callinan and Heydon JJ) considered that the tribunal had not erred in law.
The majority consisted of McHugh and Kirby JJ who joined in one judgment, and Gummow and Hayne JJ who joined in another.
I find the joint judgment of Gummow and Hayne JJ illuminating and compelling.
Lord Hope and Lord Rodger have quoted parts of paras 81 and 82 but I think it helpful to set out the whole section (paras 78 83) which appears under the heading Discretion and being discreet: The central question in any particular case is whether there is a well founded fear of persecution.
That requires examination of how this applicant may be treated if he or she returns to the country of nationality.
Processes of classification may obscure the essentially individual and fact specific inquiry which must be made.
The dangers of arguing from classifications are particularly acute in matters in which the applicants sexuality is said to be relevant.
Those dangers lie within the notions of discretion and being discreet: terms often applied in connection with some aspects of sexual expression.
To explain why use of those terms may obscure more than they illuminate, it is useful to begin by considering Convention reasons other than membership of a social group defined in terms of sexual identity.
If an applicant holds political or religious beliefs that are not favoured in the country of nationality, the chance of adverse consequences befalling that applicant on return to that country would ordinarily increase if, on return, the applicant were to draw attention to the holding of the relevant belief.
But it is no answer to a claim for protection as a refugee to say to an applicant that those adverse consequences could be avoided if the applicant were to hide the fact that he or she holds the beliefs in question.
And to say to an applicant that he or she should be discreet about such matters is simply to use gentler terms to convey the same meaning.
The question to be considered in assessing whether the applicants fear of persecution is well founded is what may happen if the applicant returns to the country of nationality; it is not, could the applicant live in that country without attracting adverse consequences.
It is important to recognise the breadth of the assertion that is made when, as in the present case, those seeking protection allege fear of persecution for reasons of membership of a social group identified in terms of sexual identity (here, homosexual men in Bangladesh).
Sexual identity is not to be understood in this context as confined to engaging in particular sexual acts or, indeed, to any particular forms of physical conduct.
It may, and often will, extend to many aspects of human relationships and activity.
That two individuals engage in sexual acts in private (and in that sense discreetly) may say nothing about how those individuals would choose to live other aspects of their lives that are related to, or informed by, their sexuality.
Saying that an applicant for protection would live discreetly in the country of nationality may be an accurate general description of the way in which that person would go about his or her daily life.
To say that a decision maker expects that that person will live discreetly may also be accurate if it is read as a statement of what is thought likely to happen.
But to say that an applicant for protection is expected to live discreetly is both wrong and irrelevant to the task to be undertaken by the Tribunal if it is intended as a statement of what the applicant must do.
The Tribunal has no jurisdiction or power to require anyone to do anything in the country of nationality of an applicant for protection.
Moreover, the use of such language will often reveal that consideration of the consequences of sexual identity has wrongly been confined to participation in sexual acts rather than that range of behaviour and activities of life which may be informed or affected by sexual identity.
No less importantly, if the Tribunal makes such a requirement, it has failed to address what we have earlier identified as the fundamental question for its consideration, which is to decide whether there is a well founded fear of persecution.
It has asked the wrong question.
Addressing the question of what an individual is entitled to do (as distinct from what the individual will do) leads on to the consideration of what modifications of behaviour it is reasonable to require that individual to make without entrenching on the right.
This type of reasoning, exemplified by the passages from reasons of the Tribunal in other cases, cited by the Federal Court in Applicant LSLS v Minister for Immigration and Multicultural Affairs, leads to error.
It distracts attention from the fundamental question.
It leads to confining the examination undertaken (as it was in LSLS) merely to considering whether the applicant had a well founded fear of persecution if he were to pursue a homosexual lifestyle in [the country of nationality], disclosing his sexual orientation to the extent reasonably necessary to identify and attract sexual partners and maintain any relationship established as a result.
That narrow inquiry would be relevant to whether an applicant had a well founded fear of persecution for a Convention reason only if the description given to what the applicant would do on return was not only comprehensive, but exhaustively described the circumstances relevant to the fear that the applicant alleged.
On its face it appears to be an incomplete, and therefore inadequate, description of matters following from, and relevant to, sexual identity.
Whether or not that is so, considering what an individual is entitled to do is of little assistance in deciding whether that person has a well founded fear of persecution.
Lord Rodger, in paras 78 80 of his judgment, adds a vivid commentary which illustrates and brings to life the general message conveyed by this part of the judgment of Gummow and Hayne JJ.
There is a similar message in the joint judgment of McHugh and Kirby JJ (especially paras 40 43).
But I have to say, with great respect to those two very distinguished judges, that I have difficulty with some of the reasoning in para 43, and in particular the sentence, It is the threat of serious harm with its menacing implications that constitutes the persecutory conduct.
I think that this sentence (together with the unexceptionable comment in para 40 that harm is persecution only if, by reason of its intensity or duration, the person persecuted cannot reasonably be expected to tolerate it) have contributed to the Court of Appeal straying into error in J v Secretary of State for the Home Department [2006] EWCA Civ 1238, [2007] Imm AR 1 paras 16 and 20, an error which was followed in this case: [2009] EWCA Civ 172, paras 11, 12, 31 and 44.
In the present case Pill LJ referred, at para 10 of his judgment, to what counsel had described as the Anne Frank principle.
That is of course a reference to the Jewish girl who was hidden in an attic in Amsterdam for more than two years, but ultimately discovered by the Nazis and sent to a concentration camp, where she died.
The conditions which she had to endure, confined in an attic away from the normal pleasures of childhood and in constant fear of discovery, were certainly severe enough to be described as persecution.
But in the context of a claim to asylum under the Convention this approach may be an unnecessary complication, and lead to confusion.
The essential question in these cases is whether the claimant has a well founded fear of persecution as a gay man if returned to his own country, even if his fear (possibly in conjunction with other reasons such as his familys feelings) would lead him to modify his behaviour so as to reduce the risk.
There are some countries in which a gay couple who lived together quite openly, and made no attempt to conceal their affection, even in public places, would be inviting persecution (an expression used in R v Secretary of State for the Home Department, Ex p Binbasi [1989] Imm AR 595, p 4).
That is an unfortunate expression.
Some people who risk martyrdom have complex motivation and appear to others to be stubborn and wrong headed. (John Donne, who was born a Catholic and knew a lot about persecution from his own familys experiences, wrote a prose work entitled Pseudo Martyr, published in 1610, deploring the intransigence of some loyal Catholics.) But neither the most courageous nor the most timorous forfeit protection as asylum seekers if, in their different ways, they satisfy the test of a well founded fear of persecution because of their sexuality.
I respectfully concur in para 82 of Lord Rodgers judgment, setting out the approach to be followed by tribunals in cases of this sort.
It involves (as Gummow and Hayne JJ put it in S395, para 78) an essentially individual and fact specific inquiry.
It will often be a difficult task since much of the relevant evidence will come from the claimant, who has a strong personal interest in its outcome.
For these reasons, and for the fuller reasons given by Lord Rodger, I would allow both appeals and remit them to the tribunal for reconsideration in the light of Lord Rodgers judgment.
LORD COLLINS
I agree that the appeal should be allowed for the reasons given by Lord Rodger and that the approach to be followed by tribunals should be as he proposes in paragraph [82] of his judgment.
In the context of cases such as this, the use of the words discretion and discreetly tends to obscure the point that what is really involved is concealment of sexual orientation.
The relevant question is whether the applicant has a well founded fear of being persecuted for reasons of membership of a particular social group: Refugee Convention, article 1A(2).
Persecution is sustained or systemic failure of state protection in relation to one of the core entitlements which has been recognised by the international community, or an affront to internationally accepted human rights norms, and in particular the core values of privacy, equality and dignity: Horvath v Secretary of State for the Home Department [2001] 1 AC 489, 495; Amare v Home Secretary [2005] EWCA Civ 1600, [2006] Imm AR 217, [17].
The test of reasonable tolerability adopted by Buxton LJ in Z v Secretary of State for the Home Department [2004] EWCA Civ 1578, [2005] Imm AR 75 at [17], and applied by Maurice Kay LJ in J v Secretary of State for the Home Department [2006] EWCA Civ 1238, [2007] Imm AR 73 at [16], and Pill LJ in the present case at [31] was based on a misunderstanding of the passage in the judgment of McHugh and Kirby JJ in Appellant S395/2002 v Minister for Immigration [2003] HCA 71,(2003) 216 CLR 473, at [40], when they said: [40] Persecution covers many forms of harm ranging from physical harm to the loss of intangibles, from death and torture to state sponsored or condoned discrimination in social life and employment.
Whatever form the harm takes, it will constitute persecution only if, by reason of its intensity or duration, the person persecuted cannot reasonably be expected to tolerate it.
But persecution does not cease to be persecution for the purpose of the Convention because those persecuted can eliminate the harm by taking avoiding action within the country of nationality.
The Convention would give no protection from persecution for reasons of religion or political opinion if it was a condition of protection that the person affected must take steps reasonable or otherwise to avoid offending the wishes of the persecutors.
Nor would it give protection to membership of many a particular social group if it were a condition of protection that its members hide their membership or modify some attribute or characteristic of the group to avoid persecution.
Similarly, it would often fail to give protection to people who are persecuted for reasons of race or nationality if it was a condition of protection that they should take steps to conceal their race or nationality.
The idea of reasonable toleration was plainly being mentioned in the context of what amounts to persecution and not in the context of what they described as taking avoiding action or where members of the group hide their membership or modify some attribute or characteristic of the group to avoid persecution.
If a person would have to conceal his sexual identity because of a well founded fear of persecution, he does not cease to have that well founded fear even if the concealment will be successful: see also NABD of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 29, (2005) 216 ALR 1; SZATV v Minister for Immigration and Citizenship [2007] HCA 40, (2007) 233 CLR 18; Refugee Appeal No 74665/03 [2005] INLR 68 (NZ Refugee Status Appeals Authority, Mr Haines QC).
A similar, though not identical, approach has been adopted in Canada and the United States.
Thus in Atta Fosu v Canada (Citizenship and Immigration) 2008 FC 1135 (Federal Court of Canada, Zinn J) it was held that to say that an internal flight alternative existed if the homosexual refugee claimant lived a discreet existence, was to say that it was not an internal flight alternative.
The applicant was a Ghanaian citizen who claimed to fear persecution by the police and the family of his former same sex partner, on the basis of his homosexuality.
The immigration board found that the applicant could live as a homosexual, discreetly, in the city of Accra, and therefore that an internal flight alternative existed for the applicant and therefore held that no determination on his identity as a homosexual needed to be made.
The court held that the decision was unreasonable because it required the applicant to deny or hide the innate characteristic which formed the basis of his claim of persecution.
See also Sadeghi Pari v Canada (Minister of Citizenship and Immigration), 2004 FC 282.
In the United States it was said in Karouni v Gonzales, 399 F 3d 1163, 1173 (9th Cir 2005) that by arguing that the homosexual applicant could avoid persecution by living a life of celibacy in Lebanon, the Attorney General was essentially arguing that the law required him to change a fundamental aspect of his human identity.
See also, for a full discussion of the suggestion that applicants could hide their religion to avoid persecution, Kazemzadeh v US Attorney General, 577 F 3d 1341 (11th Cir 2009), following Iao v Gonzales, 400 F 3d 530, 532 (7th Cir 2005), Zhang v Ashcroft, 388 F 3d 713, (9th Cir.2004); Woldemichael v Ashcroft, 448 F 3d 1000 (8th Cir 2006).
These principles also answer the Anne Frank question which is discussed in the case law and which was the subject of argument on this appeal.
In Win v Minister for Immigration and Multicultural Affairs [2001] FCA 132, a political opinion case, the Minister argued that the Tribunal was only required, under the terms of the Convention, to consider whether the applicants would be punished for their political opinions; and that since the applicants had claimed to have operated clandestinely in the past and gave no indication that they would not do so in the future, it was appropriate for the Tribunal merely to ask what the prospects were that the authorities would discover their activities in the future.
Madgwick J said (at [18]): upon the approach suggested by counsel for the [Minister], Anne Frank, terrified as a Jew and hiding for her life in Nazi occupied Holland, would not be a refugee: if the Tribunal were satisfied that the possibility of her being discovered by the authorities was remote, she would be sent back to live in the attic.
It is inconceivable that the framers of the Convention ever did have, or should be imputed to have had, such a result in contemplation.
In this case the Secretary of State argued that had Anne Frank escaped to the United Kingdom, and had it been found (improbably, as the Secretary of State recognised) that on return to Holland she would successfully avoid detection by hiding in the attic, then she would not be at real risk of persecution by the Nazis, and the question would be whether permanent enforced confinement in the attic would itself amount to persecution.
Simply to re state the Secretary of States argument shows that it is not possible to characterise it as anything other than absurd and unreal.
It is plain that it remains the threat to Jews of the concentration camp and the gas chamber which constitutes the persecution.
SIR JOHN DYSON SCJ
On the findings of the tribunals, HJ and HT would have a well founded fear of persecution if, on return to Iran and Cameroon respectively, they were to live openly as gay men.
Their claims for asylum failed because it was found that on their return they would conceal their sexual orientation and live discreet lives.
I agree that these appeals should be allowed for the reasons given by Lord Rodger.
In view of the importance of the issues, I would like to add a few words of my own.
How can a gay man, who would have a well founded fear of persecution if he were to live openly as a gay man on return to his home country, be said to have a well founded fear of persecution if on return he would in fact live discreetly, thereby probably escaping the attention of those who might harm him if they were aware of his sexual orientation? It is well established that in asylum cases it is necessary for the decision maker to determine what the asylum seeker will do on return: see Ahmad v Secretary of State for the Home Department [1990] Imm AR 61.
Thus, the asylum seeker who could avoid persecution on his return, but who (however unreasonably) would not do so is in principle a refugee within the meaning of the Convention.
At first sight, therefore, it might be thought that this should lead to the conclusion that, if a gay man would live discreetly on return and thereby avoid being harmed or persecuted on account of his sexual orientation, he could not have a well founded fear of persecution within the meaning of article 1A(2) of the Convention.
I shall call this the prima facie interpretation.
But none of the parties to this appeal argues for this interpretation, although their reasons for not doing so differ fundamentally.
Reasons why the prima facie interpretation must be rejected
The Convention must be construed in the light of its object and purpose, which is to protect a person who owing to well founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country.
If the price that a person must pay in order to avoid persecution is that he must conceal his race, religion, nationality, membership of a social group or political opinion, then he is being required to surrender the very protection that the Convention is intended to secure for him.
The Convention would be failing in its purpose if it were to mean that a gay man does not have a well founded fear of persecution because he would conceal the fact that he is a gay man in order to avoid persecution on return to his home country.
A purposive approach to the meaning of refugee was adopted by McHugh and Kirby JJ in the S395/2002 decision (2003) 216 CLR 473, at para 41 where they said: The object of the signatories to the Convention was to protect the holding of such beliefs, opinions, membership and origins by giving the persons concerned refuge in the signatory countries when their country of nationality would not protect them.
It would undermine the object of the Convention if the signatory countries required them to modify their beliefs or opinions or to hide their race, nationality or membership of particular social groups before those countries would give them protection under the Convention.
Like Lord Rodger, I would follow this approach which has been substantially followed in Australia.
I do not find it necessary to examine the Australian authorities to which we were referred.
It is perhaps sufficient to refer to the paper by Jenni Millbank From discretion to disbelief: recent trends in refugee determinations on the basis of sexual orientation in Australia and the United Kingdom (2009) 13 (2 3) IJHR 391 414.
This paper explores the impact of the S395/2002 decision on the refugee jurisprudence of Australia and the United Kingdom five years on.
It shows that the reasoning of the majority judgments is being generally applied in Australia, but that there has been a clear shift away from discretion towards disbelief as the major area of contest in decisions since S395 and S396, with a significant increase in decisions where the applicants claim to actually being gay, lesbian, or bisexual is outright rejected.
The somewhat different analysis of the problem adopted in New Zealand also leads to a rejection of the prima facie interpretation and to the same overall conclusion that a persons claim to refugee status is not to be denied even if on return he will act discreetly in order to avoid being persecuted.
On this analysis, which is expounded very fully in the leading case of Refugee Appeal No 74665/03 [2005] INLR 68, the emphasis is on the fact that refugee status cannot be denied to a person who on return would forfeit a fundamental human right in order to avoid persecution.
Like Lord Rodger, I see the attractions of this approach.
It gives due weight to the fact that the Convention must be interpreted in accordance with its broad humanitarian objective and having regard to the principles, expressed in the preamble, that human beings should enjoy fundamental rights and freedoms without discrimination and that refugees should enjoy the widest possible exercise of these rights and freedoms: see per Lord Bingham in Fornah v Secretary of State for the Home Department [2007] 1 AC 412 at para 10.
An interpretation of article 1A(2) of the Convention which denies refugee status to gay men who can only avoid persecution in their home country by behaving discreetly (and who say that on return this is what they will do) would frustrate the humanitarian objective of the Convention and deny them the enjoyment of their fundamental rights and freedoms without discrimination.
The right to dignity underpins the protections afforded by the Refugee Convention: see Canada (AG) v Ward [1993] 2 SCR 689, approving Professor Hathaway, Law of Refugee Status, 1991, p 108: The dominant view, however, is that refugee law ought to concern itself with actions which deny human dignity in any key way, and that the sustained or systemic denial of core human rights is the appropriate standard.
A particular attraction of the New Zealand approach is that, as was said at [2005] INLR 68, para 120 of the decision delivered by RPG Haines QC, it facilitates a determination of: whether the proposed action by the claimant is at the core of the right or at its margins and whether the prohibition or restriction imposed by the state is lawful in terms of international human rights law.
If the proposed action is at the core of the right and the restriction unlawful, we would agree that the claimant has no duty to avoid the harm by being discreet or complying with the wishes of the persecutor.
If, however, the proposed activity is at the margin of the protected interest, then persistence in the activity in the face of the threatened harm is not a situation of being persecuted for the purposes of the Refugee Convention.
The individual can choose to carry out the intended conduct or to act reasonably or discreetly in order to avoid the threatened serious harm.
None of these choices, however, engages the Refugee Convention.
It is open to question how far the distinction between harmful action at the core of the right and harmful action at its margin is of relevance in cases of persecution on grounds of immutable characteristics such as race and sexual orientation.
But it is a valuable distinction and there may be more scope for its application in relation to cases concerning persecution for reasons of religion or political opinion.
There is a yet further analysis that may be adopted which leads to the conclusion that the prima facie interpretation should be rejected.
This is that, if a person will conceal his true identity and protected status out of a well founded fear that he will otherwise be persecuted, he will nevertheless continue to have a well founded fear of persecution even if, by concealing his true identity, he may succeed in avoiding serious harm.
As McHugh and Kirby JJ said in S395/2002 at para 43: In manyperhaps the majority ofcases, however, the applicant has acted in the way that he or she did only because of the threat of harm.
In such cases, the well founded fear of persecution held by the applicant is the fear that, unless that person acts to avoid the harmful conduct, he or she will suffer harm.
It is the threat of serious harm with its menacing implications that constituted the persecutory conduct.
In other words, the threat of serious harm and the fear of it will remain despite the avoiding behaviour.
In Win v Minister for Immigration and Multicultural Attains (2001) FCA 132, at para 18 Madgwick J said: upon the approach suggested by counsel for the respondent, Anne Frank, terrified as a Jew and hiding for her life in Nazi occupied Holland would not be a refugee: if the Tribunal were satisfied that the possibility of her being discovered by the authorities was remote, she would be sent back to live in the attic.
It is inconceivable that the framers of the Convention ever did have, or should be imputed to have had, such a result in contemplation.
Even if it could be imagined that Anne Frank, as an asylum seeker, would not objectively have been at risk of being discovered in the attic, she would nevertheless have had a well founded fear of the threat of serious harm, a fear not eliminated by her decision to conceal her identity as a Jew and live in the attic.
The Secretary of States solution: the reasonable tolerability test
The Secretary of State recognises that it cannot have been intended that Convention protection should be denied to those who feel compelled to take extreme measures to avoid persecution.
She does not, therefore, espouse the prima facie interpretation.
Her case is that, if the measures that an asylum seeker would take on return to avoid persecution are not reasonably tolerable, then that of itself would amount to persecution.
I cannot accept this.
First, the phrase being persecuted in article 1A(2) refers to the harm caused by the acts of the state authorities or those for whom they are responsible.
The impact of those acts on the asylum seeker is only relevant to the question whether they are sufficiently harmful to amount to persecution.
But the phrase being persecuted does not refer to what the asylum seeker does in order to avoid such persecution.
The response by the victim to the threat of serious harm is not itself persecution (whether tolerable or not) within the meaning of the article.
Secondly, the test of what is reasonably tolerable is vague and difficult to apply.
Is it a subjective test? Or does the word reasonably import the idea of the reasonable victim? If so, how for example would a decision maker determine whether it is reasonably tolerable to a person to conceal his or her sexual orientation or race? These are difficult questions which those who framed the Refugee Convention surely cannot have intended decision makers to address.
On the Secretary of States test, it would seem that a person who feels compelled to conceal his or her protected status, but does not feel strongly about it and does not find the concealment intolerable is denied the protection of the Convention; whereas the person who does feel strongly about it and finds the concealment intolerable has the benefit of its protection.
This differential treatment of the tolerant and the intolerant is unfair.
It is an unprincipled and improper basis for deciding whether a person should or should not be accorded refugee status.
The decision by the AIT in HJs case shows just how unsatisfactory the Secretary of States test is.
The AIT comprised three very experienced immigration judges who endeavoured faithfully to apply the reasonable tolerability test prescribed for them by the Court of Appeal.
They found at para 44 of their Determination that for 16 years HJ had been able to conduct his homosexual activities in Iran without serious detriment to his private life and without that causing him to suppress many aspects of his sexual identity (my emphasis).
They concluded at para 45 that he would behave in the same way on his return to Iran and that it was difficult to see on the evidence that a return to that way of living can properly be characterised as likely to result in an abandonment of the appellants sexual identity.
They said that he had been able to express his sexuality albeit in a more limited way than he can do elsewhere.
Finally, they said at para 46: To live a private life discreetly will not cause significant detriment to his right to respect for private life, nor will it involve suppression of many aspects of his sexual identity.
I do not understand by what yardstick the AIT measured the tolerability of these limitations and concluded that they were reasonably tolerable.
True, HJ had endured them for 16 years, but that did not make them tolerable, let alone reasonably tolerable to him.
He had endured them because the alternative was the real risk that he would face severe punishment at the hands of the state authorities.
In short, there was no basis on which the tribunal could properly conclude that the fact that HJ had to conceal his identity as a gay man was reasonably tolerable to him.
I wish to make it clear that I am not seeking to criticise the tribunal, but rather to show the nature of the task that they were asked to perform.
Thirdly, the Secretary of State seeks to draw a distinction between the decision maker (i) requiring the asylum seeker to act discreetly on return and (ii) making a finding that the asylum seeker will in fact act discreetly on return.
It is said that the former is impermissible and irrelevant to whether the asylum seeker has a well founded fear of persecution, whereas the latter is not only permissible but highly relevant.
But as Lord Rodger points out, this is an unrealistic distinction.
Most asylum seekers will opt for the life of discretion in preference to persecution.
This is no real choice.
If they are returned, they will, in effect, be required to act discreetly.
Fourthly, the Secretary of States test, as formulated by the Court of Appeal in Z v Secretary of State for the Home Department [2004] EWCA Civ 1578, [2005] Imm AR 75 and applied in subsequent decisions of the Court of Appeal is based on a misunderstanding of two authorities.
The test is founded entirely on these authorities and is not supported by any independent reasoning.
The first misunderstanding is of para 40 of the judgment of McHugh and Kirby JJ in S395/2002.
The sentence relied on by Buxton LJ is: Whatever form the harm takes, it will constitute persecution only if, by reason of its intensity or duration, the person persecuted cannot reasonably be expected to tolerate it.
This sentence comes in a passage which is dealing with persecution generally.
The paragraph then goes on to say that persecution does not cease to be persecution for the purpose of the Convention because those persecuted can eliminate the harm by taking avoiding action within the country of nationality.
The sentence relied on by Buxton LJ is saying nothing about the quality or effect of action taken to avoid persecution.
The second misunderstanding is of the true effect of what Simon Brown LJ said in Ahmed v Secretary of State for the Home Department.
What he said at p 7 of his judgment (quoted by Lord Rodger at para 54 above) was that an asylum seeker would have a well founded fear of persecution if he could avoid persecution on his return, but would choose not to do so (case A).
He did not address either expressly or by implication the question whether an asylum seeker would have a well founded fear of persecution if on his return he would act discreetly to avoid the persecution that he would suffer if he lived openly (case B).
A conclusion on case A sheds no light on the correct answer to case B.
Fifthly, there is no support for the Court of Appeal approach in any other jurisprudence.
This is important in view of the implicit rejection of it in a number of other jurisdictions, including at least Australia and New Zealand, and the fact that it is desirable that, so far as possible, there should be international consensus on the meaning of the Convention.
For all these reasons, I would reject the reasonable tolerability test.
I should add that in his judgment in the present case, Pill LJ said at para 32 that in determining whether suppression was reasonably tolerable for an individual: . a degree of respect for social norms and religious beliefs in other states is in my view appropriate.
Both in Muslim Iran and Roman Catholic Cameroon, strong views are genuinely held about homosexual practices.
In considering what is reasonably tolerable in a particular society, the fact finding Tribunal is in my view entitled to have regard to the beliefs held there.
Even if I had accepted the reasonable tolerability test, I would not have felt able to agree with this passage.
It would have been necessary to conduct the assessment by reference to objective human rights standards, and not by reference to the social mores of the home country.
As Lord Hoffmann said in R v Immigration Appeal Tribunal, Ex p Shah [1999] 2 AC 629, 655E: The findings of fact as to discrimination have not been challenged.
They cannot be ignored merely on the ground that this would imply criticism of the legal or social arrangements in another country.
The whole purpose of the Convention is to give protection to certain classes of people who have fled from countries in which their human rights have not been respected.
In Refugee Appeal No 74665/03, the New Zealand Status Appeals Authority stated at para 112: We do not accept that the domestic law of the country of origin or cultural relativity can override international human rights norms in the refugee determination context.
I agree.
Conclusion
It follows that the AIT in HJs case applied the wrong test, although they are not to be criticised for having done so.
His appeal must be allowed and his case remitted to a fresh tribunal.
The tribunal in HTs case did not apply the reasonably tolerability test.
But they dismissed HTs appeal on the basis that he could relocate to a different part of Cameroon, presumably on the basis that he would act discreetly there.
Their conclusion is flawed for the simple reason that they seem to have thought that the mere fact that HT had acted discreetly in the past and would do so in the future was determinative of the issue.
That was an error of law.
His appeal must also be allowed and his case remitted to a fresh tribunal.
As regards guidance for immigration judges in the future, I agree with what Lord Rodger has said at para 82.
| The Supreme Court unanimously allows the appeal, holding that the reasonable tolerability test applied by the Court of Appeal is contrary to the Convention and should not be followed in the future.
HJ and HTs cases are remitted for reconsideration in light of the detailed guidance provided by the Supreme Court.
There is no dispute that homosexuals are protected by the Convention, membership of the relevant social group being defined by the immutable characteristic of its members sexuality [paras [6] and [10] per Lord Hope and para [42] per Lord Rodger].
To compel a homosexual person to pretend that their sexuality does not exist, or that the behaviour by which it manifests itself can be suppressed, is to deny him his fundamental right to be who he is.
Homosexuals are as much entitled to freedom of association with others of the same sexual orientation, and to freedom of self expression in matters that affect their sexuality, as people who are straight [paras [11] and [14] per Lord Hope and para [78] per Lord Rodger].
The Convention confers the right to asylum in order to prevent an individual suffering persecution, which has been interpreted to mean treatment such as death, torture or imprisonment.
Persecution must be either sponsored or condoned by the home country in order to implicate the Convention [paras [12] and [13] per Lord Hope].
Simple discriminatory treatment on grounds of sexual orientation does not give rise to protection under the Convention.
Nor does the risk of family or societal disapproval, even trenchantly expressed [paras [13], [15] and [22] per Lord Hope and para [61] per Lord Rodger].
One of the fundamental purposes of the Convention was to counteract discrimination and the Convention does not permit, or indeed envisage, applicants being returned to their home country on condition that they take steps to avoid offending their persecutors.
Persecution does not cease to be persecution for the purposes of the Convention because those persecuted can eliminate the harm by taking avoiding action [paras [14] and [26] per Lord Hope and paras [52] [53] and [65] per Lord Rodger].
The reasonable tolerability test applied by the Court of Appeal must accordingly be rejected [para [29] per Lord Hope and paras [50], [75] and [81] per Lord Rodger].
There may be cases where the fear of persecution is not the only reason that an applicant would hide his sexual orientation, for instance, he may also be concerned about the adverse reaction of family, friends or colleagues.
In such cases, the applicant will be entitled to protection if the fear of persecution can be said to be a material reason for the concealment [paras [62], [67] and [82] per Lord Rodger].
Lord Rodger (with whom Lords Walker and Collins and Sir John Dyson SCJ expressly agreed), at para [82] and Lord Hope, at para [35], provided detailed guidance in respect of the test to be applied by the lower tribunals and courts in determining claims for asylum protection based on sexual orientation.
|
The fundamental issue in this case is a simple one.
Is it compatible with the European Convention on Human Rights to deny British citizenship to the child of a British father and a non British mother simply because they were not married to one another at the time of his birth or at any time thereafter? If the parents had been married to one another, their child would have been a British citizen.
If the mother had been British and the father non British, their child would have been a British citizen.
If the child had been born after 1 July 2006 he would have been a British citizen.
The child is not responsible for the marital status of his parents or the date of his birth, yet it is he who suffers the consequences.
There are many benefits to being a British citizen, among them the right to vote, the right to live and to work here without needing permission to do so, and everything that comes along with those rights.
This case is about the right not to be deported on the ground that one is a foreign criminal whose presence here is not conducive to the public good.
But the unsympathetic context in which the issue arises should not distract us from the importance of the issue to anyone who was born to unmarried parents at the relevant time.
The facts
The appellant was born on 18 March 1985 in Jamaica.
His mother was Jamaican and his father British.
His paternity is not in doubt.
His parents were not married to one another.
Under the law then in force the appellant became a citizen of Jamaica but not a British citizen.
His father brought him to the United Kingdom in 1989, when he was aged four, and he has lived here ever since.
He or his father might have made an application for him to be registered as a British citizen while he was still a child and it would have been the policy of the UK government to grant such an application provided that, if the child was 16 or over, he was of good character.
But no such application was made.
He was, however, granted indefinite leave to remain here in 1992, just before his seventh birthday.
Neither has the appellant since applied to be registered as a British citizen.
It is accepted that such an application would not succeed, because the appellant cannot demonstrate that he is of good character.
He has a very serious criminal record and has been convicted of offences from 2003, the year in which he reached the age of 18, until 2008, when he was convicted of manslaughter and sentenced to nine years imprisonment.
In March 2011, the Secretary of State served notice upon him that he was liable to automatic deportation as a foreign criminal under section 32(5) of the UK Borders Act 2007.
A deportation order was made in August that same year.
On appeal, the First tier Tribunal held that he had both a private and a family life in this country but that his deportation was a proportionate and lawful interference with them.
The tribunal remitted to the Secretary of State the question whether his deportation was unlawfully discriminatory, given that he would not have been liable to deportation had his parents been married to one another.
One year later, in August 2012, the Secretary of State set removal directions for his removal on 16 September 2012 and these judicial review proceedings were launched to challenge them, principally on the ground that he still had an extant appeal.
The removal directions were stayed by the court and on 19 November 2012 the Secretary of State accepted that they should not have been issued given the tribunals decision to remit.
On 23 November 2012, she reconsidered her deportation decision but decided that it was not unlawfully discriminatory and refused to revoke it.
She also certified that the appellants claim was clearly unfounded and thus that he had no right of appeal within this country against the decision.
These proceedings were amended to challenge that decision and its certification.
In July 2014, Dingemans J held that the discrimination against a child of unmarried parents was not justified at the time of his birth and continued to be unjustified; that there had been a violation of article 14 of the Convention read with article 8; and that the certification of the claim as clearly unfounded was unlawful.
He quashed the certificate, but declined either to read the relevant legislative provisions so as to entitle the appellant to British citizenship under section 3(1) of the Human Rights Act 1998 or to make a declaration of incompatibility under section 4: [2014] EWHC 2386 (Admin).
In January 2016, the Court of Appeal allowed the Secretary of States appeal, finding that there had been no violation of the Convention rights at the time of the appellants birth in 1985 and no wrong for which the UK courts could have given a remedy then.
The matter had to be judged at that time rather than as a continuing act.
Any violation had taken effect before the Human Rights Act came into force.
Hence there was no violation of the Convention rights and thus the claim could be certified as clearly unfounded: [2016] EWCA Civ 22.
The appellant now appeals to this court.
British Nationality Law
At all material times, section 2(1)(a) of the British Nationality Act 1981 provided (and still provides): A person born outside the United Kingdom shall be a British citizen if at the time of the birth his father or mother is a British citizen otherwise than by descent . (a)
However, until amended by the Nationality, Immigration and Asylum Act 2002, section 50(9) of the 1981 Act provided the following definition of a persons mother and father: For the purposes of this Act (a) the relationship of mother and child shall be taken to exist between a woman and any child (legitimate or illegitimate) born to her; but (b) the relationship of father and child shall be taken to exist only between a man and any legitimate child born to him; and the expressions mother, father, parent, child and descended shall be construed accordingly.
Nevertheless, section 47 of the 1981 Act, until its repeal by section 9(4) of the 2002 Act, provided that a person born out of wedlock but legitimated by the subsequent marriage of his parents (if their marriage operated to legitimate him by the law of the place where the father was domiciled when the marriage took place) was to be treated as from the date of the marriage as if he had been born legitimate.
Section 50(9) of the 1981 Act was amended, and a new section 50(9A) added, by section 9(1) of the 2002 Act, with effect from 1 July 2006, as follows: (9) For the purposes of this Act a childs mother is the woman who gives birth to the child. (9A) For the purposes of this Act a childs father is (c) a person who satisfies prescribed requirements as to proof of paternity.
Section 162(5) of the 2002 Act made it clear that section 9 would have effect only in relation to a child born on or after the date appointed by the Secretary of State, which was 1 July 2006.
Thus persons born before that date can still take advantage of the legitimation provision in section 47.
These provisions define people who are automatically entitled to British citizenship, whether they want it or not.
Other people can apply to be registered as British citizens.
Section 3(1) of the 1981 Act provides that applications may be made while a person is a minor for him to be registered as a British citizen; and from 1987 onwards it was the policy of the Secretary of State to grant, on satisfactory proof of paternity, applications made by or on behalf of minors whose unmarried fathers were British citizens, who were living in the United Kingdom, and who, if aged 16 or over, were of good character.
Section 65 of the Immigration Act 2014 has now introduced sections 4E to 4I into the 1981 Act, giving a specific right to be registered to people who were unable to acquire citizenship automatically because their father was not married to their mother.
But this is subject to the general provision governing applications for registration, under section 41A of the 1981 Act, that such an application must not be granted unless the Secretary of State is satisfied that the adult or young person is of good character.
The progressive removal of discrimination against children of unmarried parents
At common law, a child of parents who were not married to one another at the time of his birth was filius nullius or nobodys child.
The law scarcely recognised his relationship with his mother, let alone with his father.
Relationships traced otherwise than through marriage were ignored for the purpose of succession and other dispositions of property.
References to children or other relationships in legislation or other legal instruments were presumed to refer only to those born within or traced through marriage.
Case law and statute gradually accorded limited recognition to the relationship between mother and child but scarcely any to the relationship between father and child.
The first major reform came with the Family Law Reform Act 1969, which implemented the recommendations of the Report of the Russell Committee on The Law of Succession in relation to Illegitimate Persons (1966, Cmnd 3051).
As the Committee observed, in the archaic language of the time (pp 4 5): At the root of any suggestion for the improvement of the lot of bastards in relation to the law of succession to property is, of course, that in one sense they start level with legitimate children, in that no child is created of its own volition.
Whatever may be said of the parents, the bastard is innocent of any wrongdoing.
To allot him an inferior, or indeed an unrecognised, status in succession is to punish him for a wrong of which he is not guilty.
Accordingly, the 1969 Act gave children of unmarried parents rights of intestate succession from both their parents, and vice versa, and enacted a presumption that references to children and other relatives in dispositions of property included references to, and to persons related through, illegitimate children.
The next major reform came with the Family Law Reform Act 1987, which implemented the Law Commissions Report on Illegitimacy (1982, Law Com No 118) with modifications recommended in its Illegitimacy: Second Report (1986, Law Com No 157).
The object was to remove all discrimination in family law against children whose parents were not married to one another and against relationships traced otherwise than through marriage (while preserving some distinction between the parents in relation to their upbringing).
The drafting technique, borrowed from the Law Reform (Parent and Child) (Scotland) Act 1986, was to avoid using adjectives such as legitimate and illegitimate to describe the child and to refer instead to the relationship between the parents.
Section 1(1) of the 1987 Act provides: In this Act and enactments passed and instruments made after the coming into force of this section, references (however expressed) to any relationship between two persons shall, unless the contrary intention appears, be construed without regard to whether or not the father and mother of either of them, or the father and mother of any person through whom the relationship is deduced, have or had been married to each other at any time.
But that, of course, does not apply to the 1981 Act, which was passed before the 1987 Act came into force.
The Law Commission had considered the law of citizenship in its first Report and concluded that, as a matter of policy, a non marital child should be entitled to British citizenship on the same terms as a marital child (Law Com No 118, para 11.20).
But no clauses relating to this were included in the draft Bill annexed to that Report, or in the draft Bill annexed to the second Report, because citizenship is a United Kingdom matter affecting each part of the United Kingdom as well as England and Wales.
It may well be as a result of the enactment of the 1987 Act that the Secretary of State adopted the policy in relation to the registration of minor children of unmarried parents referred to above (para 13).
But the law itself was not changed until the 2002 Act came into force.
Deportation law
British citizens cannot be deported.
Non citizens may be deported if the Secretary of State deems this conducive to the public good (Immigration Act 1971, section 3(5)(a)).
Section 32(4) of the UK Borders Act 2007 provides that, for this purpose, the deportation of a foreign criminal is conducive to the public good.
Under section 32(1) a non citizen convicted in the United Kingdom of an offence for which he was sentenced to at least 12 months imprisonment is a foreign criminal.
Section 32(5) provides that the Secretary of State must make a deportation order in respect of a foreign criminal, but this is subject to section 33.
Section 33(1) provides that section 32(4) and (5) do not apply where an exception applies.
By section 33(2), Exception 1 is where removal of the foreign criminal in pursuance of the deportation order would breach (a) a persons Convention rights By section 33(7) the application of an exception does not prevent the making of a deportation order and section 32(4) applies despite the application of Exception 1.
The net effect is that if Exception 1 applies, section 32(5) does not, and the person is not liable to automatic deportation.
Deportation is nevertheless still deemed conducive to the public good and the Secretary of State may still make a deportation order, but it would be contrary to the persons Convention rights actually to deport him.
Immigration appeals
At the relevant time, in 2012, immigration appeals were governed by sections 82 and 84 of the Nationality, Immigration and Asylum Act 2002 as they then stood.
Section 82(1) gave a right of appeal to the First tier Tribunal against an immigration decision, an expression which included a decision that section 32(5) of the 2007 Act applied to a person, but did not include the making of a deportation order which stated that it was made in accordance with section 32(5).
Under section 84 of the 2002 Act, the grounds of appeal included, at (a), that the decision was not in accordance with the Immigration Rules; at (c), that the decision was unlawful under section 6 of the Human Rights Act 1998 as being incompatible with the appellants Convention rights; and at (e), that the decision was not otherwise in accordance with the law.
Under section 92, only certain appeals might be brought within the United Kingdom.
These included human rights claims.
But section 94 gave the Secretary of State power to prevent an in country appeal by certifying that the claim was clearly unfounded.
The issues
Much of the argument in the courts below focussed upon (1) whether the denial of automatic citizenship at birth was a one off act, which took place before the Human Rights Act came into force, or whether it had continuing consequences which could amount to a violation of the Convention rights; and (2) even if it were not a one off act, whether the appellants liability to deportation was caused by the initial discrimination or whether that was only one of a number of contributory factors, not least his failure to apply for citizenship when he could have done and his commission of serious crimes.
However, the subject matter of these proceedings is the Secretary of States certificate that an appeal under section 82 of the 2002 Act is clearly unfounded.
It is argued that the Secretary of State has no alternative but to treat the appellant as a foreign criminal to whom section 32(5) of the 2007 Act applies and is therefore required to make a deportation order.
This is because, by virtue of the statutory provisions described above, he is not a British citizen.
Thus, it is argued, her action is not unlawful within the meaning of section 6(1) of the Human Rights Act 1998, even if it is incompatible with his Convention rights, because section 6(2)(a) provides that it is not unlawful to act incompatibly with the Convention rights if, as a result of one or more provisions of primary legislation, she could not have acted differently.
However, as we have already seen (para 18 above), Exception 1 does not require that there be a breach of section 6 of the 1998 Act, merely that the deportation be a breach of the Convention rights.
If Exception 1 applies, then section 32(5) of the 2007 Act does not apply and a deportation order cannot lawfully be made under that provision.
To similar effect is rule 397 of the Immigration Rules, which provides that A deportation order will not be made if the persons removal pursuant to the order would be contrary to the UKs obligations under the Human Rights Convention.
The grounds of appeal under section 84(1), as it stood at the relevant time, included, not only, at (a), that the decision was not in accordance with the Immigration Rules, but also, at (e), that it was not in accordance with the law.
Thus it matters not that ground (c) is limited to decisions that are contrary to section 6 of the 1998 Act, provided that there is a breach of the Convention rights.
Section 6(2)(a) of that Act is a red herring.
The issue, therefore, is whether an appeal against the decision that section 32(5) of the 2007 Act applies to the appellant, on the basis that to deport the appellant now would be a breach of the UKs obligations under the Human Rights Convention, is clearly unfounded.
That depends upon (1) whether it is sufficiently within the ambit of article 8 of the Convention to bring into play the prohibition of discrimination in the enjoyment of the Convention rights in article 14; (2) whether the discrimination had a one off effect at birth or whether it has continuing consequences which may amount to a present violation of the Convention rights; and (3) whether such discriminatory effect can be justified.
The discrimination complained of in this case is that he is liable to deportation whereas he would not be if (a) his mother and father had been married to one another at the time of his birth; (b) his mother and father had been married to one another at any time after his birth; (c) his mother had been British and his father Jamaican; or (d) an application had been made to register him as a citizen before he was 18.
Article 8
Although article 15.1 of the Universal Declaration of Human Rights says that Everyone has the right to a nationality, the European Convention says nothing about the right to a nationality.
In K and W v The Netherlands (1985) 43 D & R 216, the European Commission on Human Rights declared inadmissible a complaint about Dutch citizenship law: a woman married to a Dutch man could obtain citizenship simply by writing to the local mayor; a man married to a Dutch woman could not.
The Commission found that the right to acquire a particular nationality was not covered by, or sufficiently related to, article 8 or any other provision of the Convention, for article 14 to come into play.
In Karassev v Finland (1999) 28 EHRR CD132, the Commission repeated that the Convention did not guarantee the right to acquire a particular nationality.
Nevertheless, it did not exclude that an arbitrary denial of citizenship might in certain circumstances raise an issue under article 8 of the Convention because of the impact of such a denial on the private life of the individual.
In Genovese v Malta (2011) 58 EHRR 25, the complaint was that the denial of Maltese citizenship to the son of a British mother and a Maltese father who were not married to one another was in breach of article 14 read with article 8.
The Court held (para 33) that While the right to citizenship is not as such a Convention right and while its denial in the present case was not such as to give rise to a violation of article 8, the Court considers that its impact on the applicants social identity was such as to bring it within the general scope and ambit of that article.
Malta was not obliged to recognise the right to citizenship by descent, but as it did so, it had to ensure that the right was secured without discrimination.
The discrimination could not be justified by the argument that motherhood is certain, whereas fatherhood is not: in that case, paternity had been established scientifically and in legal proceedings.
To similar effect is Kuric v Slovenia (2013) 56 EHRR 688, where the discriminatory erasure of the applicants residence rights was held to be a breach of article 14 read with article 8 even though their residence had not in fact been affected.
It is well established that a persons social identity is an important component of his private life, which is entitled to respect under article 8.
This includes the recognition of his biological relationships, even if the refusal of recognition has no noticeable impact upon his family life.
Thus, for example, in Menneson v France, Labassee v France, App Nos 65192/11 and 65941/11, Judgment of 26 June 2014, it was a violation of the right to respect for private life for French law to deny the existence of the relationship between the biological father and the children born as a result of surrogacy arrangements in the United States.
It is clear, therefore, that the denial of citizenship, having such an important effect upon a persons social identity, is sufficiently within the ambit of article 8 to trigger the application of the prohibition of discrimination in article 14.
A continuing effect?
The Court of Appeal held that the denial of automatic citizenship was a one off event that happened at birth and had no continuing effect capable of being a violation of the Convention rights.
For example, in Posti and Rahko v Finland (2002) 37 EHRR 158, the restriction on the applicants right to fish in state owned waters, imposed by a decree in 1994, obviously continued to limit their fishing, but was a single event and their complaint was out of time.
However, the court reiterated that the concept of a continuing situation refers to a state of affairs which operates by continuous activities by or on the part of the state to render the applicants victims (para 39).
Thus, in Norris v Ireland (1988) 13 EHRR 186, it was held that the very existence of legislation penalising homosexual acts continuously and directly affected the applicants private life, despite the fact that he had neither been prosecuted nor threatened with prosecution.
In this case, the denial of citizenship has a current and direct effect upon the appellant who is currently liable to action by the state, in the shape of deportation, as a result.
Article 14
It is not in dispute that birth outside wedlock is a status for the purpose of article 14.
It has been so regarded at the very least since the landmark case of Marckx v Belgium (1979) 2 EHRR 330.
It is no co incidence that the laws of both Scotland and England and Wales were changed within a few years of that decision.
Nor can it be seriously disputed that there is here a difference in treatment between people who are otherwise in an analogous situation on the ground of that birth status: had the appellants parents been married to one another he would automatically have become a British citizen and not been liable to deportation no matter how badly he had behaved.
As has been said many times, For the purpose of article 14, a difference in treatment is discriminatory if it has no objective and reasonable justification, that is, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised (see, eg, Inze v Austria (1987) 10 EHRR 394, para 41; Genovese v Malta, para 43).
It is also clear that birth outside wedlock falls within the class of suspect grounds, where very weighty reasons are required to justify discrimination.
This was held as long ago as Inze v Austria, at para 41, where children born in wedlock were given priority over children born outside wedlock in the inheritance of a family farm: The question of equality between children born in and children born out of wedlock as regards their civil rights is today given importance in the member states of the Council of Europe.
This is shown by the 1975 European Convention on the Legal Status of Children born out of Wedlock, which is presently in force in respect of nine member states of the Council of Europe [including Austria].
Very weighty reasons would accordingly have to be advanced before a difference in treatment on the ground of birth out of wedlock could be regarded as compatible with the Convention.
The likelihood that a child born outside wedlock would have had less to do with the family farm, and the attitudes of the rural population, were not regarded as weighty reasons.
The need for very weighty reasons has been repeated many times since, for example, in Fabris v France (2013) 57 EHRR 563, at paras 58 and 59, where reference was made to the principle of equality eliminating the very concepts of legitimate children and children born outside marriage, and in Genovese v Malta, at para 44, where it was noted that 22 member states were now parties to the 1975 Convention and it was irrelevant that Malta was not.
The United Kingdom signed the Convention in 1975 and ratified it in 1981.
This case has, however, been bedevilled by arguments about precisely what has to be justified.
If it is the initial denial of automatic citizenship in 1985, the Secretary of State can argue that it was not even recognised as within the ambit of article 8 at the time and so does not need justification.
If it is the continued denial of citizenship in 2012, the Secretary of State can argue that steps have now been taken to put right the historic injustice, but that it is justifiable for these steps only to operate prospectively: it is reasonable to have a citizenship law which assigns citizenship to certain people automatically at birth and grants it later only on application.
Citizenship should not be imposed upon people unless they have asked for it: it may bring disadvantages if they are also citizens of a state which does not recognise dual nationality.
The problem with that argument is that citizenship is imposed automatically at birth upon certain people, whether they want it or not and whether or not it gives rise to dual nationality problems.
Furthermore it is also imposed automatically if a person is legitimated by the subsequent marriage of his parents.
The appellants problems would be over if his mother could be found and his father persuaded to marry her.
If what needs to be justified is the liability of non citizens to deportation while citizens cannot be deported, the Secretary of State would have a comparatively simple task.
It has always been justifiable to distinguish between citizens and aliens in matters relating to entering, remaining in and removal from the country.
The right to live in ones own country is the principal right of citizenship.
Further, if what needs to be justified is the liability of foreign criminals to be deported when other foreigners are not similarly liable (although their presence here may be controlled in other ways), again the Secretary of State might have a comparatively easy task.
But in this case what needs to be justified is the current liability of the appellant, and others whose parents were not married to one another when they were born or at any time thereafter, to be deported when they would not be so liable had their parents been married to one another at any time after their birth.
That is a present distinction which is based solely on the accident of birth outside wedlock, for which the appellant is not responsible, and no justification has been suggested for it.
It is impossible to say that his claim that Exception 1 applies, based on article 14 read with article 8, is clearly unfounded.
Conclusion
It follows that I would allow this appeal and quash the Secretary of States certificate.
The consequence, as I understand it, is that his appeal against the Secretary of States decision of 23 November 2012 must be allowed to proceed and, for the reasons given earlier, is certain to succeed.
Declaration of incompatibility?
Allowing this appeal is the consequence of the particular provisions relating to deportation which are relevant here.
However, there are bound to be other people in the appellants situation that is, who are denied the automatic right to citizenship by reason of the fact that their British father was not married to their non British mother at the time of their birth.
There are all sorts of current consequences which might flow from that situation.
An example is the right to vote, which is an aspect of citizenship and also a Convention right under article 3 of the First Protocol.
People born before 1 July 2006 are denied that right unless they are first registered as citizens.
In order to do this they must pass the good character test in section 41A of the 1981 Act.
Had their parents been married to one another at or at any time after their birth they would not have to do this.
While of course all babies arrive in the world with a good character the same cannot be said of those legitimated by the subsequent marriage of their parents.
The distinction is based solely on birth status and for the reasons given earlier cannot be justified.
Mr Hugh Southey QC, for the appellant, argued that it followed that the Nationality, Immigration and Asylum Act 2002 (Commencement No 11) Order 2006, SI 2006/1498, bringing into force the 2002 amendments to section 50(9) of the 1981 Act was incompatible with the Convention rights.
It should have operated retrospectively so as to grant automatic citizenship to all people previously denied it because of their parents marital status.
Mr Tim Eicke QC, for the Secretary of State, argues that it is contrary to principle for legislation to have retrospective effect, in particular where it effects an automatic change of status.
Citizenship should not be imposed upon people unless they have asked for it.
As already mentioned, Mr Eickes argument cannot be taken too far: there are many people who are entitled at birth to the citizenship of more than one country whether they like it or not: they may be born in a country, such as the United States of America, which still recognises the ius soli, the right to citizenship of all persons born within the territory; and they may be entitled to citizenship by descent from either or both of their parents, as is the case under the 1981 Act.
But where a person has not automatically acquired citizenship at birth, it is reasonable to expect him to apply for it, even if he is entitled to be registered if he does so.
This avoids the risk of inconvenient results and provides everyone with clarity and certainty.
But it is not reasonable to impose the additional hurdle of a good character test upon persons who would, but for their parents marital status, have automatically acquired citizenship at birth, as this produces the discriminatory result that a person will be deprived of citizenship status because of an accident of birth which is no fault of his.
The incompatible provision, therefore, is paragraph 70 of Schedule 9 to the Immigration Act 2014, which inserts into section 41A of the 1981 Act (the requirement to be of good character) a reference to sections 4F, 4G, 4H and 4I, which relate to various categories of people who would automatically have become UK citizens had their parents been married to one another at their birth.
The court will make a declaration to that effect, although it is not necessary to do so in order to dispose of this case.
| The appellant, Mr Johnson, was born in Jamaica in 1985 to a Jamaican mother and British father who were not married to one another.
His father moved to the United Kingdom with him when he was four, and he has lived here ever since.
Under the law in force at his birth, Mr Johnson became a Jamaican citizen but not a British one.
He would have been a British citizen had his mother and father been married to one another, or married subsequently, or had his mother had been the parent with British citizenship.
He would also have been granted British citizenship had he or his father applied while he was still a child and, if over 16, of good character.
But no application was made.
Between 2003 and 2008 Mr Johnson was convicted of a series of serious criminal offences, culminating in a conviction for manslaughter for which he was sentenced to nine years imprisonment.
In 2011 the Secretary of State made a deportation order against him on the ground that he was liable to automatic deportation as a foreign criminal under section 32(5) UK Borders Act 2007 (UKBA).
Removal directions were set.
Mr Johnson appealed, arguing that deportation would breach his right to family life protected by article 8 of the European Convention on Human Rights (the Convention) and be unlawfully discriminatory under article 14, given that he would not have been liable to deportation had his parents been married to one another.
After reconsideration the Secretary of State confirmed her decision and also certified that Mr Johnsons claim was clearly unfounded, thereby removing his right of appeal against her decision in this country.
Mr Johnsons claim was amended to challenge both the deportation decision and the issue of the certificate.
The High Court held that discrimination against a child of unmarried parents at birth and thereafter violated Mr Johnsons Convention rights, and quashed the certificate.
The Court of Appeal allowed the Secretary of States appeal, holding that there had been no violation of Mr Johnsons rights at the relevant time, namely his birth, which was long before the Human Rights Act 1998 (HRA) came into force.
The Supreme Court unanimously allows the appeal, finding that Mr Johnsons liability to deportation by reason of the accident of his birth outside wedlock is unlawfully discriminatory, in breach of his Convention rights.
The consequence is that the certificate granted by the Secretary of State will be quashed and Mr Johnsons appeal against the decision to deport him will be certain to succeed.
The court also makes a declaration that the statutory requirement that a person in Mr Johnsons position must also be of good character in order to be granted British citizenship is incompatible with Convention rights, pursuant to section 4 HRA.
Lady Hale gives the only substantive judgment, with which the other justices agree.
Over the past fifty years there has been progressive reform of provisions discriminating against children of unmarried parents.
Since 2006 a person in Mr Johnsons position has been entitled to automatic British citizenship at birth but this change was not retrospective [12, 14 17].
One of the benefits of British citizenship is the right not to be deported as a foreign criminal.
The obligation on the Secretary of State to deport a foreign criminal does not, however, apply if removal will breach his Convention rights: s 33(1) UKBA [18].
The issue before the court was whether the basis for Mr Johnsons appeal, namely that to deport him would breach his Convention rights, was clearly unfounded so as to justify the grant of the certificate.
This raised the questions of whether the rules denying him citizenship had a one off effect at his birth or had continuing consequences which were within the scope of the HRA, and whether this discriminatory effect could be justified [23].
The right to a nationality is not as such a Convention right but denial of citizenship when it has important effects on a persons identity falls within the ambit of article 8 and so triggers the application of the prohibition of discrimination in article 14 [27].
Birth outside wedlock is a status for the purpose of article 14 and falls within the class of suspect grounds where very weighty reasons are required to justify discrimination [29, 30].
In Mr Johnsons case, what needed to be justified was his current liability to deportation when he would not be so liable but for the accident of birth outside wedlock for which he was not responsible.
No justification had been suggested for this and it cannot therefore be said that his claim that deportation would breach his Convention rights was clearly unfounded [34].
In these circumstances the certificate would be quashed and Mr Johnsons appeal allowed to proceed.
His appeal is also, for the same reasons, certain to succeed [35].
The court went on to consider whether any of the statutory provisions affecting persons in Mr Johnsons position should be subject to a declaration that they are incompatible with Convention rights, pursuant to s 4 HRA.
It was not necessary to do so in order to dispose of the case, but the court makes such a declaration in respect of paragraph 70 of Schedule 9 to the Immigration Act 2014, which imposes a requirement that an applicant for British citizenship who, but for their parents marital status would have automatically acquired citizenship at birth, be also of good character [36 39].
|
In March 2017 local authorities in England were looking after 72,670 children, a figure which has been rising steadily for the past nine years.
They do so either as part of a range of services provided for children in need or under a variety of powers to intervene compulsorily in the family to protect children from harm. 50,470 of those 72,670 children were the subject of care orders, up 10% from the previous year; 16,470 were accommodated without any court order; the balance were subject to various other compulsory powers.
In practice, the distinction between these categories is not always clear cut.
Some accommodated children in need may also be at risk of harm if they are left at or returned home.
In law, however, the distinction is clear.
Compulsory intervention in the lives of children and their families requires the sanction of a court process.
Providing them with a service does not.
This case is about the limits of a local authoritys powers and duties to provide accommodation for children in need under section 20 of the Children Act 1989 (the 1989 Act) without the sanction of a court order.
Specifically, what is the local authority to do if the parents ask for their accommodated children to be returned to them but the local authority perceive that there are obstacles to doing so?
the outset: It may be helpful to set out the relevant parts of section 20, as amended, at Provision of accommodation for children: general (1) Every local authority shall provide accommodation for any child in need within their area who appears to them to require accommodation as a result of there being no person who has parental (a) responsibility for him; (b) his being lost or having been abandoned; or the person who has been caring for him being (c) prevented (whether or not permanently, and for whatever reason) from providing him with suitable accommodation or care. (3) Every local authority shall provide accommodation for any child in need within their area who has reached the age of 16 and whose welfare the authority consider is likely to be seriously prejudiced if they do not provide him with accommodation. (4) A local authority may provide accommodation for any child within their area (even though a person who has parental responsibility for him is able to provide him with accommodation) if they consider that to do so would safeguard or promote the childs welfare. (5) A local authority may provide accommodation for any person who has reached the age of 16 but is under 21 in any community home which takes children who have reached the age of 16 if they consider that to do so would safeguard or promote his welfare. (7) A local authority may not provide accommodation under this section for any child if any person who (a) has parental responsibility for him; and (b) is willing and able to provide accommodation for him; or (i) (ii) arrange for accommodation to be provided for him, objects. (8) Any person who has parental responsibility for a child may at any time remove the child from accommodation provided by or on behalf of the local authority under this section. (9) Subsections (7) and (8) do not apply while any person (a) who is named in a child arrangements order as a person with whom the child is to live; (aa) who is a special guardian of the child; or (b) who has care of the child by virtue of an order made in the exercise of the High Courts inherent jurisdiction with respect to children, agrees to the child being looked after in accommodation provided by or on behalf of the local authority. (10) Where there is more than one such person as is mentioned in subsection (9), all of them must agree. (11) Subsections (7) and (8) do not apply where a child who has reached the age of 16 agrees to being provided with accommodation under this section. (1) Everyone has the right to respect for his private and family life, his home and his correspondence. (2) There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
Also relevant are the rights of both parents and children under article 8 of the European Convention on Human Rights (ECHR): If the use of section 20 amounts to an interference with a parents or a childs exercise of their right to respect for their family life, it will violate article 8 unless it is in accordance with the law and a proportionate means of achieving one of the legitimate aims listed in article 8(2).
In that event, it will be unlawful under section 6(1) of the Human Rights Act 1998 and the parent or child may seek a remedy, which could be an award of damages, under section 7(1) of that Act.
The facts
The appellants are the mother and father of eight children, at the time aged 14, 12, 11, 9, 7, 5, 2 and 8 months.
The eight month old was still being breast fed.
On 5 July 2007, their 12 year old son was caught shop lifting.
He told the police that he had no money for lunch.
He also complained that his father had hit him with a belt.
He was taken to a police station and a social worker was called.
The police then went to the familys home and found it in an unhygienic and dangerous state unfit for habitation by children.
The police exercised their powers under section 46 of the 1989 Act in respect of all eight children.
Section 46 enables a police officer who has reasonable cause to believe that a child would otherwise be likely to suffer significant harm to remove the child to suitable accommodation and keep him there for a maximum of 72 hours (section 46(1) and (6)).
The suitable accommodation must be either provided by a local authority or in a certificated refuge (section 46(3)(f)).
These children were provided with foster placements by the respondent local authority (the Council) the two oldest boys together, the others in separate (and changing) foster placements.
Both the mother and the father were arrested and interviewed during the night of 5 July.
They were released in the early hours of 6 July, on police bail to return to the police station on 30 July.
The conditions of their bail were that neither was allowed to have unsupervised contact with any of their children.
The reason given for the condition was to prevent interference with possible victims of crime.
The parents then went to the Council offices and spoke to two social workers.
They were asked to return later in the day and when they did they were asked to sign a Safeguarding Agreement.
It is worthwhile quoting this in full.
After listing the eight children, it provides: This Safeguarding Agreement was drawn up in relation to all of the children.
Although the agreement is not legally binding, it may have significance, should there be any court procedures in the future.
We, Mr & Mrs Williams parents to all the above children agree to the following: 1.
That all the children will remain in their Foster placements for the present time. 2.
When contact takes place we will encourage the children to return to their placements and ensure them that this is a safe place. 3.
That we will behave appropriately whilst contact is taking place, ie assure the children that we love and care for them, show them affection. 4.
That we will not discuss with any of the children what has happened. 5.
To continue to comply with Hackney Childrens Social Care.
In conclusion Hackney Childrens Social Care will seek legal advice with a view to protecting the children if it is found that parents are not complying with the contents of this Safeguarding Agreement.
It is apparent that this agreement does not inform the parents of the power under which the Council were purporting to act or of their rights under section 20 and, while stating that it is not legally binding but may have significance should there be any court procedures in future, it does not explain its potential relevance in any legal proceedings and the circumstances in which these might be brought.
However, the parents also signed consents to medical treatment and to accommodation (albeit without the children being named) that same day.
The trial judge found that they had not been informed of their right to object to the childrens continued accommodation under section 20(7) or of their right to remove the children at any time under section 20(8) and that their consent was not informed or fairly obtained (para 65).
The 72 hours of police protection expired on 8 July.
On 9 July the parents went to the Councils offices and requested the return of their children.
They were told by a social worker that they could not take their children home.
The parents consulted Sternberg Reed, a firm of solicitors who are skilled and experienced in child care cases.
On 13 July the solicitors wrote two letters to the Council.
The first asked for information about the current and future plans in this matter.
It stated that the parents are very keen to have their children returned to their care as soon as that is thought possible, and indicated that they would co operate with any further assessments required.
It raised concerns that the children were in separate foster placements and one had reverted to wearing nappies.
It asked for copies of the medical and school reports which they believed were positive.
And it asked whether the Council would be initiating care proceedings.
The second letter was more definite.
It stated that: Mr Williams wishes us to give you formal notice of his intention to withdraw consent to the accommodation of his children under section 20 of the Children Act 1989.
He wishes to continue to work co operatively with the local authority and will therefore agree to their continued accommodation for a further ten days, to Monday 23 July 2007, in order that the local authority can make any further investigations necessary to plan for the stable rehabilitation of the children to their parents care.
In the event that the local authority feel unable to arrange for all the children to return home within this time frame, then we ask for details of the proposed timescales for returning each child currently being accommodated and the basis for those timescales.
At a meeting of the Councils childrens resources panel on 16 July, it was decided that the children should be returned home as soon as possible.
The allocated social worker visited the home on 18 July and reported that it was clean and improvements had been made.
Another meeting of the panel on 23 July decided that the bail conditions needed to be resolved or changed so that the children could return home.
On 24 July the Council wrote to the solicitors notifying them that it had been decided not to bring care proceedings, but that they could not provide a date for the children to be returned because of the bail conditions.
A child protection case conference was scheduled for 31 July.
The police refused to vary the bail conditions, at first because the relevant officer was on leave and then because of the impending case conference.
Bail was continued until 17 August on the same conditions.
The solicitors asked the Council to supply a letter supporting an application to discharge the bail conditions but this was refused.
The Council took the view that it was for the parents to apply to the police to lift the bail conditions but no such application was made.
Eventually, however, in a telephone conversation with the police on 6 September, a senior officer of the Council arranged with the police for the bail conditions to be varied with a view to the children being returned [home] on Tuesday.
The police agreed.
All eight children were returned to their parents on 11 September 2007 after more than two months in foster homes.
These proceedings were not begun until July 2013.
After criminal proceedings against the parents had been discontinued, they had pursued complaints (rather different from those now before this court) through the Councils internal complaints procedure and thereafter to the local government ombudsman.
These were not finally resolved until April 2013.
In these proceedings, the parents claimed damages for negligent breach of statutory duty, misfeasance in public office, religious discrimination and breach of their rights under article 8 of the ECHR.
The claims were tried by Sir Robert Francis QC, sitting as a deputy High Court Judge, in July 2015.
He dismissed the claims for negligence, misfeasance in public office and religious discrimination.
But he upheld the claim for breach of the parents Convention rights on the ground that the Councils interference in the family life of the parents and their children was not in accordance with the law because there was no lawful basis for the accommodation of the children.
He awarded each of the parents 10,000 damages: [2015] EWHC 2629 (QB); [2015] All ER (D) 99 (Sep).
The Council appealed, contending that there was a lawful basis for the childrens accommodation; also that the judge had been wrong to extend the time limit for bringing a human rights claim; and wrong to award each parent 10,000 damages.
The Court of Appeal held that there was a lawful basis for the childrens accommodation and so allowed the appeal; they also observed that they would not have reached the same conclusions as the judge on the limitation and quantum of damages issues but they did not need to decide these given their finding on the main issue: [2017] EWCA Civ 26; [2017] 3 WLR 59.
The parents now appeal to this court on the main issue was there or was there not a lawful basis for the childrens accommodation under section 20 of the 1989 Act once the 72 hours of police protection under section 46 had expired?
The scheme of the Children Act 1989
The 1989 Act was the outcome of two projects a review by the Law Commission of England and Wales of the private law relating to the guardianship and upbringing of children (culminating in Law Com No 172, Review of Child Law: Guardianship and Custody, 1988) and an interdepartmental review, led by the Department of Health and Social Security, into the public law relating to child care and childrens services (Review of Child Care Law: Report to ministers of an interdepartmental working party, 1985, HMSO).
The latter Review had been recommended by the House of Commons Social Services Select Committee, with the aim of replacing a complicated and incoherent system with a simplified and coherent body of law comprehensible not only to those operating it but also to those affected by its operation (Second Report, Session 1983 84, Children in Care, HC 360).
The 1985 Review pointed out that an examination of child care law needs to go well beyond the legal framework under which courts make decisions on the care of children.
Local authorities provided a spectrum of support and care to children in need, and their families (para 2.2).
The Review saw a need for what was then called care to distinguish more sharply between voluntary arrangements made in partnership with parents, which might be called shared care, and compulsory arrangements under a court order (para 2.3).
Hence the various statutory powers to provide support for children living with their families should be brought together and include disabled children along with children who were in need for other reasons.
And what was then called voluntary care should be differentiated more clearly from compulsory care, by removing the then power of local authorities to assume parental rights simply by passing a resolution to that effect (para 7.35) and by providing that the then power to insist on 28 days notice before removing a child who had been in voluntary care for six months or more should only be used for the purpose of a phased return home to the family (para 7.32).
The Review was followed by a Government White Paper, The Law on Child Care and Family Services (1987) (Cm 62).
This emphasised that: the provision of a service by the local authority to enable a child who is not under a care order to be cared for away from home should be seen in a wider context and as part of the range of services a local authority can offer to parents and families in need of help with the care of their children.
Such a service should, in appropriate circumstances, be seen as a positive response to the needs of families and not as a mark of failure either on the part of the family or those professionals and others working to support them.
An essential characteristic of this service should be its voluntary character, that is it should be based clearly on continuing parental agreement and operate as far as possible on a basis of partnership and co operation between the local authority and parents. (para 21)
Hence the Government went further than the Review and decided that the power to require 28 days notice before removing a child who had been in voluntary care for six months or more should be abolished (para 22.b).
If action to delay or prevent a return home was thought essential to protect the child from harm, the authority would be able to apply for an emergency protection order or ask the police to exercise their emergency protection powers (para 23).
It should no longer be possible for an authority to assume parental rights and duties by administrative resolution; instead the authority would be expected to seek a court order in care proceedings (para 24).
The White Paper did, however, acknowledge that it would not always be possible to enter into agreement with parents before beginning to look after a child, for example if the child had been abandoned or the parents were incapable of making an agreement because of mental illness (para 25).
The Review had also considered whether to provide for formal care agreements where children were voluntarily admitted to local authority care.
It did not recommend their introduction as a means of defining the legal powers and responsibilities of parents, children and local authorities, but did recommend that clear information on these matters should be given to parents, which might provide a useful basis on which to build informal agreements (paras 7.14 7.17).
The White Paper also envisaged agreements, but emphasised that Where a child is looked after away from home by a local authority under a voluntary arrangement the parents retain all parental powers and responsibilities except in so far as they are delegated to the local authority to enable them to look after the child (para 27).
These conclusions were reflected in the 1989 Act, which brought together the two review processes in a single piece of legislation covering all aspects of the care and upbringing of children.
Part 1, Introductory, is derived from the Law Commissions proposals.
The concept of parental rights and duties, parental powers and authority and similar phrases used in statute and common law are replaced with parental responsibility, defined in section 3(1) as all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and his property.
Under section 2(1), Where a childs father and mother were married to each other at the time of his birth a phrase which has an extended meaning by virtue of section 1 of the Family Law Reform Act 1987 they shall each have parental responsibility for the child.
Under section 2(9), A person who has parental responsibility for a child may not surrender or transfer any part of that responsibility to another but may arrange for some or all of it to be met by one or more persons acting on his behalf.
Further, under section 3(5): A person who (a) does not have parental responsibility for a particular child; but (b) has care of the child, may (subject to the provisions of this Act) do what is reasonable in all the circumstances of the case for the purpose of safeguarding or promoting the childs welfare.
Part 2 of the 1989 Act deals with the orders which may be made in private law proceedings between parents and others about the upbringing of children.
Part 3 deals with local authority support for children and families, and includes the accommodation service provided for in section 20 (set out in para 2 above).
It may be worth noting that clause 17 of the Bill, which became section 20, was amended in standing committee B in the House of Commons.
As originally drafted, subsection (7) provided thus: A local authority may not provide accommodation for any child if any person who has parental responsibility for the child objects.
That would have had the effect that, even if the parent with whom a child was living wished for him to be accommodated by the local authority, for example to provide a short period of respite for a disabled child, the other parent, who was not looking after the child and was not willing or able to do so, could object to the child being accommodated.
Hence it was amended so that only a parent who was willing and able either to provide or arrange for the childs accommodation could object to the local authority doing so (Hansard, Standing Committee B, 18 May 1989, col 156).
The relationship between subsection (7) and a parents right to remove the child under subsection (8) is one of the issues in this appeal.
Parts 4 and 5 of the 1989 Act provide a range of compulsory powers designed to protect children who are suffering or at risk of suffering significant harm.
Part 5 contains short term powers to make child assessment orders (section 43) and emergency protection orders (section 44) and provides for police protection (section 46).
In general, these powers can only be exercised where there is a reasonable belief that the child is suffering or likely to suffer significant harm.
Part 4 provides for care and supervision orders, including interim orders.
An interim order requires reasonable belief that the child is suffering or likely to suffer significant harm attributable to a lack of reasonable parental care (section 38).
A full care order requires that the court be satisfied that that is so (section 31(2)).
A local authority does not acquire parental responsibility for a child unless and until a care order is made under section 31(1) or an interim care order is made under section 38(2): then under section 33(3) and (4) the authority acquires parental responsibility.
That parental responsibility is shared with the parents, but the authority also has power, if satisfied that it is necessary in order to safeguard or promote the childs welfare, to determine the extent to which the parents may meet their responsibility.
The case law on section 20
Section 20 contains no express requirement of parental consent to a child being accommodated.
Indeed, it envisages circumstances in which no such consent could be obtained, such as where the child is abandoned or lost or appears to have no person with parental responsibility for him.
However, the judge had before him several authorities which not only held that informed consent to section 20 accommodation was required but also gave detailed guidance about how it should be obtained.
These began with two judgments of Munby J (as he then was) in R (G) v Nottingham City Council [2008] EWHC 152 (Admin); [2008] 1 FLR 1660 and [2008] EWHC 400; [2008] 1 FLR 1668.
The context was the removal of a new born baby from his mother three hours after birth and their separation in the hospital.
Judicial review proceedings that same day led to an order that they be reunited immediately.
In his first judgment, Munby J said this (para 15): The law is perfectly clear but perhaps requires re emphasis.
Whatever the impression a casual reader might gain from reading some newspaper reports, no local authority and no social worker has any power to remove a child from its parent or, without the agreement of the parent, to take a child into care, unless they have first obtained an order from a family court authorising that step: He pointed out that there were two qualifications to this.
First, a social worker, or indeed anyone else could intervene where necessary to protect a baby from immediate violence at the hands of a parent, not because of any special power or privilege, but because anyone was entitled to intervene in order to prevent an actual or threatened criminal assault (para 21).
Second, section 3(5) of the 1989 Act (see above, para 18) allows a person actually caring for a child to do what is reasonable for the purpose of safeguarding or promoting the childs welfare, for example, when medical intervention is urgently needed (paras 23 26).
Mother and child were reunited but care proceedings were immediately brought before the local county court and an interim care order made within days.
The care proceedings were then transferred to the High Court and came before Munby J, along with the resumed judicial review proceedings, when the baby was still less than three weeks old.
In the judicial review proceedings, a declaration was made that the separation of the new born baby from his mother was a breach of the mothers rights under article 8 of the ECHR in that the local authority had neither lawful authority nor any consent from the mother for doing so ([2008] 1 FLR 1668, para 77).
In his judgment, Munby J roundly rejected the suggestion (not in fact persisted in) that the local authority had lawfully arranged to accommodate the baby under section 20, because the mother had not objected to the pre birth plan or to the actual removal (which she denied) (paras 54 55): [The local authority] seemed to be conflating absence of objection with actual consent a doctrine which at least in this context is, in my judgment, entirely contrary to principle To equate helpless acquiescence with consent when a parent is confronted in circumstances such as this with the misuse (or perhaps on another occasion the misrepresentation) of non existent authority by an agent of the State is, in my judgment, both unprincipled and, indeed, fraught with potential danger.
The next case was Coventry City Council v C, B, CA and CH [2012] EWHC 2190 (Fam); [2013] 2 FLR 987.
This also concerned the removal of a baby from her mother on the day of her birth, but this time the mother, having at first refused to do so, had given her consent to the baby being accommodated.
The local authority accepted that they should not have sought her consent so soon after the birth, when she had not only undergone surgery but also been given morphine.
They therefore conceded that they had acted in breach of her article 8 rights, in that removing the baby was not only unlawful but also not a proportionate response to the risks as they were at that time.
In the course of a judgment which approved the settlement of that claim, Hedley J gave detailed guidance about the use of section 20 agreements, guidance which had been seen and presumably approved by Sir James Munby P (para 2).
Hedley J emphasised three points at the outset: (i) that the use of section 20 must not be compulsion in disguise; (ii) that In order for such an agreement to be lawful, the parent must have the requisite capacity to make that agreement; and (iii) even where there is capacity, it is essential that any consent so obtained is properly informed and, at least where it results in detriment to the givers personal interest, is fairly obtained (paras 27 and 28).
These three points were fleshed out in the detailed guidance which followed (para 46).
These principles were approved by the Court of Appeal, albeit obiter, in In re W (Parental Agreement with Local Authority) [2014] EWCA Civ 1065; [2015] 1 FLR 949, para 34.
This was an extraordinary case in which the mother had placed her three children with their paternal grandmother in response to local authority concerns which the authority indicated might otherwise lead to care proceedings.
A written agreement was made between the local authority, the mother and the grandmother to ensure that [the mother] agrees for the children to remain in the care of [the paternal grandmother] whilst further assessments are completed.
Thereafter the authority decided what contact the mother might have with the children but no further assessments were completed.
The mother asked for her children back and, when this was refused, applied for a residence order.
The trial judge refused an adjournment in order for the mother to be properly assessed and made a residence order in favour of the grandmother.
The mothers appeal was allowed on the ground that the judge should have directed an assessment.
But Munby P expressed his considerable concern that the local authority had treated the agreement as authorising them to control the mother and her children without bringing care proceedings or undertaking the obligations entailed in section 20 accommodation indeed nobody knew whether the authority did or (more probably) did not regard themselves as accommodating the children under section 20 (para 32).
Tomlinson LJ entertained grave reservations about the manner in which section 20 has here been used, if it has (para 39).
The agreement, which began by proclaiming that it was not a legal agreement but then said that it might be used in court as evidence if needed, was in his view almost comical in the manner in which it apparently proclaims that it has been entered into under something approaching duress (para 41).
The same three authorities were referred to by Munby P, again in the course of obiter observations, in In re N (Children) (Adoption: Jurisdiction) [2015] EWCA Civ 1112; [2017] AC 167.
The case was about the power to transfer care proceedings to another member state of the European Union under article 15 of Council Regulation (EC) No 2201/2003 (Brussels IIA).
But the children in question had been accommodated under section 20 for many months before care proceedings were eventually issued.
So the President took the opportunity of drawing attention to the misuse of section 20 by local authorities, citing a number of first instance examples, of which the decision of the judge in this case was one, where damages had been awarded against the local authority.
The President clearly considered those cases to have been rightly decided.
He explained (para 163) that A local authority cannot use its powers under section 20 if a parent objects: see section 20(7).
So where, as here, the childs parent is known and in contact with the local authority, the local authority requires the consent of the parent.
He also pointed out (para 169) that section 20(8): means what it says.
A local authority which fails to permit a parent to remove a child in circumstances within section 20(8) acts unlawfully, exposes itself to proceedings at the suit of the parent and may even be guilty of a criminal offence.
The criminal offence he presumably had in mind was that contained in section 2 of the Child Abduction Act 1984 (see para 46 below).
Four cases, apart from this one, in which damages were awarded under the Human Rights Act because of the misuse of section 20 accommodation, are illustrative of the situations which can arise.
Chronologically, the first is In re H (A Child: Breach of Convention Rights: Damages) [2014] EWFC 38 (29 October 2014).
This too involved the placement of a new born baby with foster carers on discharge from hospital.
Both parents had learning difficulties and agreed to the baby being placed with a particular couple.
At that stage the local authority considered this an informal arrangement rather than section 20 accommodation.
Only five months later did they decide to seek the parents retrospective consent to section 20 accommodation.
Care proceedings were not issued until the child was nearly a year old.
The local authority accepted that they had breached the rights of both parents under articles 6 and 8 of the ECHR in a variety of ways mainly by failing to involve them properly in the decision making process, by seeking consent in the way that they did, by placing insufficient weight on the parents clearly expressed wish to care for the child, and by delaying both the assessment of the parents and the issue of proceedings.
Next came Northamptonshire County Council v S [2015] EWHC 199 (Fam), in which the mother agreed to the accommodation of her two week old baby and care proceedings were issued nearly four months later.
The local authority accepted that they had acted in breach of the rights of both mother and child under article 6 and 8, largely because of the delays both before and after proceedings were issued, which were seriously prejudicial to the childs welfare and the ability of both to enjoy family life with members of the family the child was eventually placed with the maternal grandmother in Latvia.
Damages were agreed of 12,000 to the child and 4,000 to the mother and a payment of 1,000 was made to the grandmother.
In In re AS, London Borough of Brent v MS, RS and AS [2015] EWFC B150, 7 August 2015, the local authority argued that what they had done was not unlawful.
The case concerned a boy aged eight at the material time, both of whose parents had severe mental health problems.
Very shortly after he had been returned to his mothers care when she came out of hospital, she suffered a relapse and called an ambulance, leaving the child with a neighbour.
A social worker was called and decided that neither the neighbour nor the paternal grandparents were suitable and so the child should be accommodated.
The following day the mother was compulsorily admitted (sectioned) under section 2 of the Mental Health Act 1983.
There were doubts about her capacity, which fluctuated, and her consent to the accommodation was never obtained.
Care proceedings were not issued until a month later.
Judge Rowe QC cited the requirement in both the G and the Coventry cases that, in the absence of parental agreement, a child could only be removed under an interim care order, emergency protection order or into police protection.
She commented, at para 29: Section 20(1)(c) contains no requirement for the threshold criteria under section 31(2) of the Children Act 1989 to be satisfied on any basis, even reasonable cause.
If [counsel] were correct, then a local authority could, on its own assessment of whether a parent was prevented from providing a child with suitable care, remove that child without any reference at all to the threshold criteria.
The parents would have no forum in which to contest that assessment, and there is no application open to them under the provisions of the 1989 Act to challenge the local authority and seek the return of their child.
The child would have no childrens guardian.
There would be no parameters for the position after removal, there would be no requirement for the local authority to apply to court and there would be no time limit on the duration of the removal.
In short there would be no safeguards to mirror those that are expressly included in sections 38, 44 and 46.
It would seem perverse if a local authority could more easily remove children from their parents in cases where the threshold criteria were not necessarily met than in cases where there were reasonable grounds to conclude that they were met.
Damages of 3,000 were awarded to the mother on the ground, as in this case, that the removal was not in accordance with the law.
The last in the series cited was Medway Council v M and T [2015] EWFC B164.
This too concerned a child (aged five) who was placed in emergency foster care after his mother was detained in hospital under the Mental Health Act.
The mother was then too unwell to discuss section 20.
The local authority thought that there was no need to issue care proceedings as there was no one to exercise parental responsibility and the mother was not requesting the childs return.
Consent was eventually obtained six months later after the mother had left hospital but there were doubts about whether it had been validly obtained.
Care proceedings were not issued until the child had been accommodated for more than two years.
Rejecting the argument that the accommodation was lawful, Judge Lazarus commented (in similar vein to Judge Rowe QC) at para 53: It cannot have been intended by Parliament that provision for accommodation under section 20 would have given powers to a local authority that would avoid and subvert those careful provisions of Parts IV and V of the Children Act 1989 that safeguard families from unregulated unilateral actions of local authorities that interfere with their family life.
Damages of 20,000 were awarded both to the mother and to the child.
Also cited in In re N were a number of other decisions where judges had been highly critical of the use of section 20 made by local authorities, but in the context of care proceedings rather than a claim for damages under the Human Rights Act: In re P (A Child) (Use of section 20 Children Act 1989) [2014] EWFC 775; Medway Council v A (Learning Disability: Foster Placement) [2015] EWFC B66; Gloucestershire County Council v S and C1 and C2 [2015] EWFC B149; and In re A (Application for Care and Placement Order: Local Authority Failings) [2015] EWFC 11; [2016] 1 FLR 1.
In these, the main focus of the courts criticism was that the local authority had delayed for a long time after accommodating the child under section 20 before issuing proceedings for a care order.
In re A is also a decision of Munby P. It concerned a little boy who was born while his mother was in prison and accommodated by the local authority.
Care proceedings were not issued until he was eight months old.
They were dismissed by the President, who described the local authoritys case against the father as a tottering edifice built on inadequate foundations (para 28) and proceeded comprehensively to demolish it in a judgment which should be an object lesson to all family judges trying these difficult cases.
He ordered that the child, now one year old, be returned to his father.
Among his criticisms of the local authority is that they failed adequately to address the very changed landscape once the fathers relationships with the mother, and with a later partner, had ended and he was putting himself forward as sole carer for his son (para 33).
It is not clear whether or not the father had parental responsibility.
If he had, there must be question marks over the legality of continued accommodation of a child under section 20 in such circumstances.
No doubt there have been other similar cases since then.
A recent example is the judgment of Keehan J in Herefordshire Council v AB and CD; Herefordshire Council v EF and GH [2018] EWFC 10.
His criticism was directed at delays of eight years (between the ages of eight and 16) in the case of CD and nine years (from leaving the special care baby unit at the age of five months until the age of nine) before care proceedings were issued in the case of GH.
In CDs case, the mother had written to the local authority formally withdrawing her consent to his accommodation when he was about nine and had only been accommodated for five months.
But instead of returning him to his mothers care, the authority advised her to seek legal advice.
Nor, despite having been advised that the threshold for a care order was met, did they initiate care proceedings until it was almost too late to do so, because CD was nearing the upper age limit for making a care order.
These cases illustrate a number of problems with the use of section 20: separation of a baby from the mother at or shortly after birth without police protection or a court order, where she has not delegated the exercise of her parental responsibility to the local authority or been given in circumstances where it is questionable whether the delegation was truly voluntary; retention of a child in local authority accommodation after one or both parents have indicated a desire to care for the child or even formally asked for his return; and a lack of action where the perception is that the parents do not object to the accommodation, even though this means that no constructive planning for the childs future takes place.
They also illustrate the dilemma posed to the local authority: something has to be done to look after the child but there are serious doubts about whether the parent can validly delegate the exercise of her responsibility.
Equally, they illustrate the dangers if the local authority proceed without such delegation or obtain it in circumstances where the parents feel that they have little choice.
There are none of the safeguards and protections for both the child and the parents which attend the compulsory procedures under the Act.
Yet, rushing unnecessarily into compulsory procedures when there is still scope for a partnership approach may escalate matters in a way which makes reuniting the family more rather than less difficult.
As Hedley J pointed out in Coventry City Council (para 24 above), at paras 25 and 26, the emphasis in Part III is on partnership any attempt to restrict the use of section 20 runs the risk both of undermining the partnership element in Part III and of encroaching on a parents right to exercise parental responsibility in any way they see fit to promote the welfare of their child.
In this present case, the Council were attempting to do just that to work in partnership with the parents in an effort to get the children home as soon as possible and to avoid escalating matters by bringing proceedings unnecessarily.
The judgments below
The judge pointed out that at first sight section 20 might be thought not to require the active agreement of those with parental responsibility.
However, it was common ground between counsel that the positive and informed consent of a parent must be obtained (para 55).
He quoted at length from G (paras 22 23 above), W (para 26 above) and Coventry City Council (para 24 above), including Munby Js statement in the second G report (at para 61) that Submission in the face of asserted State authority is not the same as consent.
In this context, as in that, nothing short of consent will suffice (para 56).
He concluded that the parents were not fully informed of the matters of which they should have been informed (para 65).
Hence there was no valid consent on 6 July, but had there been such consent the interference on that date would have been a proportionate response (para 66).
Furthermore, the letters of 13 July amounted to an express withdrawal of any consent that might have been signified at the time of signing the agreement (para 84).
It followed that, while the initial removal of the children from home was lawful and indeed a proportionate and necessary response to the need to safeguard them from harm, the actions of the defendants in retaining the children away from their parents after the expiry of the 72 hour period were unlawful, and therefore the interference with the parents article 8 rights was also unlawful (para 111).
He did not therefore have to consider whether, if in accordance with the law, it was nonetheless not a proportionate response to a legitimate aim.
The Court of Appeal reviewed the G, Coventry City Council, W and N (para 27 above) cases, pointing out that they all post dated the events in this case, and asked what, as a matter of law, as opposed to subsequently identified good practice, was required before the local authority were permitted to accommodate the Williams children under section 20 of the 1989 Act? (para 62).
They focussed on subsection (7), about which they made three points.
First, if it applies, it operated as a bar to the local authority providing accommodation under section 20 (para 65).
Second, for it to apply, the person with parental responsibility had to be willing and able to provide accommodation.
In this case the bail conditions both prevented the parents from providing suitable accommodation to the children (section 20(1)(c)) and meant that they were not able to do so (section 20(7)) (paras 66, 67 and 76).
Third, the word used was objects: there is no express statutory requirement of consent, let alone any requirement for such consent to be in writing and subject to any of the various refinements that have been described in the case law.
This was not meant to detract from the obvious wisdom and good sense of the good practice guidance given principally by Munby P and Hedley J, but failure to comply did not give rise to a claim for damages for breach of statutory duty or Convention rights (para 68).
The rulings were not binding on the Court (paras 69 to 70).
In the cases Sir James was then considering it may well have been appropriate for him to equate the obligation on a local authority not to use its powers under section 20 if a parent objects as meaning, effectively, that when the parent is known and in contact with the authority, consent is required.
But it would be wrong to elevate the requirement of consent into a rule of law that operates in all circumstances (para 74).
In this case, on the basis of the lawfully imposed bail conditions, the interference was in accordance with the law and necessary for the protection of the health or the rights and freedoms of others (para 76).
Nevertheless, The guidance given in the family court identifies clear, co operative and sensible ways in which a voluntary arrangement can be made between a parent and a local authority when a child may need to be accommodated; it is, in short, good practice guidance and a description of the process that the family court expects to be followed.
For reasons of good administration, the practice guidance should continue to be followed but a failure to follow it does not, of itself, give rise to an actionable wrong, or found a claim for judicial review. (para 77)
Although section 20(8) is mentioned earlier in the judgment, it does not feature in the courts discussion of the lawfulness of the childrens continued accommodation, nor is the relationship between subsections (7) and (8), or with the concept of parental responsibility, explored.
Unsurprisingly, the focus is on the judges decision that the interference with family life was not in accordance with the law and there is no discussion of whether, if it was lawful, it was nevertheless a disproportionate response to the situation.
Discussion: section 20 generally
The starting point must be parental responsibility.
All mothers and (now) most fathers have it automatically.
It encompasses all the rights of a parent.
The most obvious and fundamental of these is the right to look after and bring up ones own children.
A person with parental responsibility may arrange, of his or her own accord, for some or all of his or her parental responsibility to be met by others acting on his or her behalf (section 2(9), para 18 above) and the exercise of parental responsibility may be circumscribed by court order.
But a local authority cannot interfere with a persons exercise of their parental responsibility, against their will, unless they have first obtained a court order.
Accordingly, no local authority have the right or the power to remove a child from a parent who is looking after the child and wants to go on doing so without a court order.
Only the police can do that under section 46 of the 1989 Act.
It follows that the decision in R (G) v Nottingham City Council (paras 22 23 above) was absolutely right.
The mother had just given birth.
She wanted to look after her baby.
The local authority had no power to prevent her and neither did the hospital.
Helpless submission to asserted power does not amount to a delegation of parental responsibility or its exercise.
Secondly, it may be confusing to talk of parental consent to the removal (or accommodation) of her child.
If a parent does agree to this, she is simply delegating the exercise of her parental responsibility for the time being to the local authority.
Any such delegation must be real and voluntary.
Otherwise the local authority have no power to interfere with her parental responsibility by taking the child away.
At the very least, therefore, it should not occur in the sort of circumstances in which consent was obtained in Coventry City Council v C, B, CA and CH (para 24 above); nor should any impression be given that the parent has no choice in the matter, as happened in In re W (Parental Agreement with Local Authority) (para 26 above).
Obviously, the best way to avoid this is by informing the parent fully of her rights under section 20, but a delegation can be real and voluntary without being fully informed.
Thirdly, removing a child from the care of a parent is very different from stepping into the breach when a parent is not looking after the child.
That is what happened in In re AS, London Borough of Brent v MS, RS and AS (para 30 above) and section 20 is designed to give the local authority the power, and indeed the duty, to do that.
The active consent or delegation of a parent who is not in fact looking after or offering to look after the child is not required, any more than it is when there is no one with parental responsibility or the child is abandoned or lost.
But the local authoritys duty and power are subject to the later provisions of the section, in particular, to subsections (7) to (11).
In such cases, as a matter of good practice, local authorities should give parents clear information about what they have done and what the parents rights are.
This should include, not only their rights under subsections (7) and (8), but also their rights under other provisions of the 1989 Act, such as that in paragraph 15 of Schedule 2 to know the whereabouts of their child.
Parents should also be informed of the local authoritys own responsibilities.
In appropriate cases, this may include information about the local authoritys power (and duty) to bring proceedings if they have reasonable grounds to believe that the child is at risk of significant harm if they do not.
Fourthly, parents may ask the local authority to accommodate a child, as part of the services they provide for children in need.
If the circumstances fall within section 20(1), there is a duty to accommodate the child.
If they fall within section 20(4), there is power to do so.
Once again, this operates as a delegation of the exercise of parental responsibility for the time being.
The section does not expressly require that such delegation be with informed consent, but the duty and the power are subject to subsections (7) to (11).
Once again, as a matter of good practice, parents should be given clear information about their rights and the local authoritys responsibilities.
Fifthly, subsection (7) operates as a restriction on the powers and duties of the local authority under subsections (1) to (5).
The authority cannot accommodate a child if a parent with parental responsibility who is willing and able either to accommodate the child herself or to arrange for someone else to do so objects to the local authority doing so.
It says nothing about the suitability of the parent or of the accommodation which the parent wishes to arrange.
As Black LJ explained in In re B (Looked After Child) [2013] EWCA Civ 964; [2014] 1 FLR 277, para 34: I raised the question during the appeal hearing as to whether a parent who is inadequate is in fact willing and able to provide accommodation but it did not excite much argument.
That is explained, I think, by there being a common understanding that where parents in fact object to a local authority providing accommodation, a local authority will have to have recourse to care proceedings if they seek to accommodate a child and any debate as to whether the parents are able to provide accommodation is to be had in that context, not in the context of section 20.
I agree.
The words interpolated by amendment into subsection (7) (see para 19 above) serve a different purpose.
Thus, for example, a father who is separated from the mother and is not offering the child a home or offering to arrange an alternative, cannot object to the local authority accommodating the child at the mothers request; or, for example, the mothers in In re AS (para 30 above) or in Medway Council v M and T (para 31 above) who were compulsorily detained in hospital could not object to the local authority accommodating the child unless they were able to arrange alternative accommodation.
But that is all that subsection (7) does.
It means that the local authority have neither the power nor the duty to accommodate the child if a parent with parental responsibility proposes to accommodate the child herself or to arrange for someone else to do so.
If the local authority consider the proposed arrangements, not merely unsuitable, but likely to cause the child significant harm, they should apply for an emergency protection order.
Sixthly, subsection (8) makes it absolutely clear that a parent with parental responsibility may remove the child from accommodation provided or arranged by a local authority at any time.
There is no need to give notice, in writing or otherwise.
The only caveat, as Munby J said in R (G) v Nottingham City Council (para 22 above), is the right of anyone to take necessary steps to protect a person, including a child, from being physically harmed by another: for example, if a parent turned up drunk demanding to drive the child home.
In such circumstances the people caring for the child would have the power (under section 3(5) of the 1989 Act) to do what is reasonable in all the circumstances for the purpose of safeguarding or promoting the childs welfare (see para 18 above).
It follows that, if a parent unequivocally requires the return of the child, the local authority have neither the power nor the duty to continue to accommodate the child and must either return the child in accordance with that requirement or obtain the power to continue to look after the child, either by way of police protection or an emergency protection order.
These can, of course, only be obtained if there is reasonable cause to believe that the child will otherwise suffer significant harm.
Thus, in Herefordshire Council v AB and CD (para 33 above), the Council should have acted upon the mothers formal withdrawal of her consent to CDs being accommodated which would be better framed in terms of a request for the immediate (or timed) return of the child rather than advising her to seek legal advice.
A parent whose unequivocal request for the immediate (or timed) return of an accommodated child is refused could take a variety of steps to enforce her rights.
The simplest step would be to remove the child.
At common law there were torts of depriving a parent of the services of a child and harbouring a child, but these were abolished by section 5 of the Law Reform (Miscellaneous Provisions) Act 1970 (and see F v Wirral Metropolitan Borough Council [1991] Fam 69).
The traditional method of securing the release of a child through habeas corpus proceedings remains, subject of course to any court orders to the contrary.
It is also an offence for a person, without lawful authority or excuse, to take or detain a child under the age of 16 so as to remove him from the lawful control of any person having lawful control of the child or so as to keep him out of the lawful control of any person entitled to lawful control of the child: Child Abduction Act 1984, section 2.
But far preferable to any of these is for the local authority promptly to honour an unequivocal request from the parent for the childs immediate (or timed) return.
Seventhly, the right to object in subsection (7) and the right to remove in subsection (8) are qualified by subsections (9) and (10).
These cater for court orders which have determined with whom a child is to live.
Thus if there is a child arrangements order under section 8 of the 1989 Act or an order under the inherent jurisdiction of the High Court, providing for the child to live with a particular person or persons, or if there is a special guardianship order, then that parent cannot object or remove the child if the person or persons with whom the child is to live, or the special guardian or guardians, agree to the child being accommodated.
These orders restrict that parents exercise of parental responsibility; but without such an order it is not restricted.
Eighthly, section 20 makes special provision for children who have reached 16.
In addition to the general duty in subsection (1), there is a duty in subsection (3) to provide accommodation for any child in need who has reached 16 and whose welfare will be seriously prejudiced if this is not done; and in addition to the general power in subsection (4), there is power in subsection (5) to accommodate anyone who has reached 16 but is under 21 in a community home which caters for over 16 year olds.
Subsection (11) makes it clear that once an accommodated child reaches 16, a parent has no right to object or to remove the child if she is willing to be accommodated by the local authority.
Finally, there is nothing in section 20 to place a limit on the length of time for which a child may be accommodated.
However, local authorities have a variety of duties towards the children whom they are accommodating.
Their general duties towards looked after children in section 22 of the 1989 Act include a duty to safeguard and promote their welfare, in consultation with both the children and their parents.
This is reinforced by the Care Planning, Placement and Case Review (England) Regulations 2010, SI 2010/959, which require local authorities to assess a childs needs for services to achieve or maintain a reasonable standard of health or development and prepare a care plan for her, to be agreed with the parents if practicable (regulation 4(1), (4)).
The care plan has to record, inter alia, the arrangements made to meet the childs needs and the long term plan for her upbringing (the plan for permanence) (regulation 5(a) and (b)).
Thus, although the object of section 20 accommodation is partnership with the parents, the local authority have also to be thinking of the longer term.
There are bound to be cases where that should include consideration of whether or not the authority should seek to take parental responsibility for an accommodated child by applying for a care order.
Good examples are Medway Council v M and T (para 31 above), where the mother suffered from long term mental health problems and was not meeting her parental responsibility, so it was necessary for someone to do so; and Herefordshire Council v EF and GH (above, para 33), where it was recognised as soon as the mother and baby foster placement of GH and his 14 year old mother broke down that care proceedings should be brought, but this did not happen until he was nine years old.
Care proceedings have obvious advantages for the child.
They involve a rigorous scrutiny of the risk of harm to her health and development if an order is not made, of the assessment of her needs and of the plans for her future.
Her interests are safeguarded by an expert childrens guardian.
If an order is made, it means that the local authority have parental responsibility for her and can put their plans into effect.
But, as pointed out by Judge Rowe QC in In re AS (para 30 above) there are also advantages for the parents and for the wider family.
The parents are entitled to legal aid.
Their rights are safeguarded in the proceedings.
Even if a care order is made, the court may make orders about their continued contact with the child.
Hence it is scarcely surprising that the President and other judges have deplored the delay in bringing care proceedings in cases where it was obvious that they should have been brought.
Section 20 must not be used in a coercive way: if the state is to intervene compulsorily in family life, it must seek legal authority to do so.
Thus although it is not a breach of section 20 to keep a child in accommodation for a long period without bringing care proceedings, it may well be a breach of other duties under the Act and Regulations or unreasonable in public law terms to do so.
In some cases there may also be breaches of the childs or the parents rights under article 8 of ECHR.
Application in this case
In applying section 20 to the facts of this case, it is important to bear in mind that the local authority began looking after the children because they had been taken into police protection.
This was not a case in which a local authority used their powers under section 20 to take charge of children who were then in the care of their parents.
Here, the section 20 arrangements replaced the compulsory arrangements under section 46, without the children returning home in the meantime.
Whereas, where children move from the care of their parents into section 20 accommodation, the focus is upon whether there has been a truly voluntary delegation of the exercise of parental responsibility, the focus in a case such as this is upon subsections (7) and (8).
Here, when the police protection expired on 8 July, the circumstances clearly fell within section 20(1)(c): prevented has been given a wide interpretation and the parents were prevented from providing their children with suitable accommodation, not least because of the condition in which their home had been found on 5 July.
The starting point, therefore, is that the Council had a duty under section 20(1) to accommodate the children.
They would not have been entitled to carry out that duty, however, if the circumstances existed fell within section 20(7), or if a parent sought to remove the children pursuant to section 20(8).
It is therefore necessary to look carefully to see whether either of these circumstances existed.
The parents had signed the safeguarding agreement and section 20 agreements on 6 July which were open ended in length.
It is a matter of good practice that such agreements be made, even in cases where the accommodation has begun with compulsory emergency measures, because of the rights that the parents will have when the compulsory measures expire, to object or to remove the children at will.
But it is important that such agreements do not give the impression that the parents have no right to object or to remove the children.
The judge held that the parents had the capacity to give a real consent on 6 July, despite their distress that day or, putting that finding in terms which reflect the analysis set out earlier in this judgment, they had the capacity to delegate to the local authority the exercise of their parental responsibility for accommodating the children.
However, the judge viewed their consent as invalid because of the case law which imposed a requirement for real and informed parental consent.
From that finding, followed his conclusion that the local authority had no lawful basis to keep the children away from the parents.
It is worth observing that there can be a delegation of the exercise of parental authority even without the parent being fully informed, provided that the parents action is voluntary (see para 39 above).
But, as these children were already lawfully accommodated by the local authority when the police protection order expired, the situation at that point ought, more properly, to be viewed through the lens of section 20(7) and (8), rather than as if it were an initial delegation of the exercise of parental authority.
Whether the local authority had a lawful basis to continue to accommodate the children all depends, therefore, on whether the parents actions after the expiry of the police protection order amounted to an unequivocal request for the children to be returned.
The judge did not see the bail conditions as an insuperable impediment to their making such a request (para 65.b).
There could have been a number of solutions, including the parents or the Council persuading the police to vary bail to allow alternative accommodation with family and friends, if there were any to help, or with the parents themselves.
Breaking police bail conditions is not a criminal offence and there was no evidence of what would have happened if the children had returned home.
The bail conditions did not operate to give the Council any greater powers than they had under the 1989 Act.
The ostensible reason for the conditions was not a good reason for keeping all eight of the children particularly the baby apart from their parents.
It is not surprising that they were lifted soon after contact from a senior Council officer, even though there was still the prospect of criminal proceedings against the parents.
But it is difficult to know how to construe the events of 9 July, when the parents went to the Councils offices and, according to them, asked for the return of their children.
The judge accepted the social workers denial that she had told them that the children would never be returned.
But he found it probable that they were told that the document they had signed authorised the children to be kept, because that is what she believed at the time.
However, he went on to say that it is difficult to determine whether, and if so on what terms, the claimants asked for their children to be returned.
Given his earlier finding about the events of 6 July, he made no finding about it (para 68).
It is therefore difficult for us to construe these events, either as a clear objection to the childrens accommodation under section 20(7) or as an unequivocal request for their immediate return under section 20(8).
There would be little point in our sending the case back to the judge for him to make findings on this matter.
It is fairly clear that, on that date, he would have regarded the continued interference in the familys life as a proportionate means of protecting the children from harm.
In those circumstances, even if the events of 9 July had removed the lawful basis for the local authoritys actions for a matter of days, which must be doubtful, no damages would be payable.
Next came the solicitors letters of 13 July.
These cannot be construed as an unequivocal request for the childrens immediate return.
The judge construed them as the withdrawal of any consent that might have been signified at the time of the agreement (para 84).
However, they do not read as an objection or as a request for immediate return.
In fact, the parents were fortunate enough to have the advice and assistance of some experienced and very sensible solicitors and wise enough to offer their complete co operation to improve matters in the home and allay the Councils concerns.
The solicitors were obviously trying to achieve the return of all eight children as quickly as possible on a collaborative basis, rather than to push the Council into issuing care proceedings which would probably have delayed matters much longer.
As part of that collaborative approach, it is clear from the letters that the parents were prepared, albeit no doubt with some reluctance, to delegate the exercise of their parental responsibility for accommodating the children to the local authority until the Council felt able to return them, and that delegation was never unequivocally withdrawn.
The result was a happy outcome for all concerned.
I was for a while concerned at the delay in assuring the police that in the Councils view the bail conditions could safely be lifted so that the children could return home.
It was not the Councils job to apply for the conditions to be varied or lifted but they could have provided earlier support for an application by the parents.
However, as the judge found, the police had their own concerns, independent of those of the Council, which later led to multiple charges being preferred against the parents, so that it was not possible to say what effect an earlier positive report from the Council would have had (para 91).
It follows that, the parents not having objected or unequivocally requested the childrens immediate return, there was a lawful basis for the childrens continued accommodation under section 20.
This means that the ground on which the judge held their accommodation to have been in breach of the parents article 8 rights is not made out.
There would remain the questions (a) whether the Councils actions, albeit in accordance with the law, amounted to an interference in the right to respect for family life and (b) if so, whether this was a proportionate means of achieving a legitimate aim the aim of protecting the children from harm or preventing crime.
This issue was not fully explored, either by the judge or by the Court of Appeal, nor has it been raised before this court.
I would accept that keeping children away from their parents in circumstances where the parents feel that they have no choice in the matter or have indicated that they want their children back is an interference by a public authority in their family life.
The judge found that the interference was proportionate at the outset of the childrens accommodation (para 66).
It is also implicit in the judges finding that the Council might have sought Emergency Protection Orders in response to the solicitors letters in July (para 86) that the interference continued to be a proportionate response at that stage.
The persistence of the bail conditions was clearly relevant to the proportionality of the continued interference.
It may very well be that, had the issue been explored, the court would have found that the interference was proportionate.
In any event, as the issue has not been raised before us, it is not for this court to say that it was not.
It follows that the parents Human Rights Act claims should have been dismissed, albeit for reasons which are rather different from those of the Court of Appeal.
In sum, there are circumstances in which a real and voluntary delegation of the exercise of parental responsibility is required for a local authority to accommodate a child under section 20, albeit not in every case (see para 40 above).
Parents with parental responsibility always have a qualified right to object and an unqualified right to remove their children at will (subject to any court orders about where the child is to live).
Section 20 gives local authorities no compulsory powers over parents or their children and must not be used in such a way as to give the impression that it does.
It is obviously good practice in every case that parents should be given clear and accurate information, both orally and in writing, both as to their own rights and as to the responsibilities of the local authority, before a child is accommodated under section 20 or as soon as practicable thereafter.
| This appeal concerns the limits of a local authoritys powers and duties to provide accommodation for children in need under section 20 of the Children Act 1989 (CA).
The appellants are the parents of eight children, at the relevant time aged 14, 12, 11, 9, 7, 5, 2 and 8 months.
On 5 July 2007 their 12 year old son was caught shoplifting.
He told the police that he had no money for lunch and that his father had hit him with a belt.
The police visited the familys home and found it in an unhygienic and dangerous state unfit for habitation by children.
The police exercised their powers under s 46 CA to remove the children to suitable accommodation for a maximum of 72 hours.
The children were provided with foster placements by the respondent local authority (the Council).
The appellants were arrested and interviewed by the police, then released on police bail on condition that they could not have unsupervised contact with any of their children.
The appellants were asked to sign a Safeguarding Agreement by the Council on 6 July 2007 by which they agreed that all the children would remain in their foster placements for the present time.
They were not informed of their right, under s 20(7) CA to object to the childrens continued accommodation after the expiry of 72 hours, nor of their right, under s 20(8), to remove them at any time.
On 13 July, solicitors instructed on their behalf gave formal notice of the appellants intention to withdraw consent.
On 16 July the Council decided that the children should be returned home as soon as possible.
However, it took until 6 September for the Council to arrange with the police for the bail conditions to be varied, whereupon the children returned home on 11 September 2007.
Criminal proceedings against the appellants were later discontinued.
In July 2013 the appellants issued proceedings claiming damages, amongst other things, for breach of their rights under article 8 of the European Convention on Human Rights.
The High Court dismissed all the claims except for the article 8 claim, which was upheld on the basis that, because the parents had not given their informed consent, there had been no lawful basis for the accommodation of the children after 72 hours, so that the interference with family life was not in accordance with the law.
The judge awarded each of the appellants damages of 10,000.
The Court of Appeal allowed the Councils appeal, holding that consent was not required and that there had been a lawful basis for the childrens accommodation under s 20 CA, and the interference with their article 8 rights had been proportionate.
The Supreme Court unanimously dismisses the appeal.
It holds that the appellants did not object or unequivocally request the immediate return of the children, so there had been a lawful basis for the childrens continued accommodation under s 20 CA.
Lady Hale gives the only substantive judgment.
Local authorities in England look after a substantial number of children (over 70,000 in March 2017), either as part of a range of services provided for children in need, or under powers to intervene compulsorily to protect children from harm.
Compulsory intervention by a local authority requires the sanction of a court process.
No court order is required for the authority to provide accommodation for children in need under s 20 CA.
However, it is subject to the right under s 20(7) for a person with parental responsibility for the child, who is willing and able to provide accommodation for him or arrange for accommodation for him, to object, and to the provision in s 20(8) that any person who has parental responsibility for a child may at any time remove the child from accommodation provided by or on behalf of the local authority under this section [1 2].
In short, it is a voluntary service.
If a parent delegates the exercise of his or her parental responsibility for a child to the local authority under s 20 CA, such delegation must be real and voluntary.
The best way to ensure this is to inform the parent fully of their rights under s 20, although delegation can be real and voluntary without being informed [39].
No such delegation is required where the local authority steps into the breach to exercise its powers under s 20 where there is no one with parental responsibility for the child, the child is lost or abandoned, or the parent is not offering to look after the child.
In those circumstances active delegation is not required [40].
If a parent with unrestricted parental responsibility objects at any time pursuant to s 20(7), the local authority may not accommodate the child under s 20, regardless of the suitability of the parent or of the accommodation which the parent wishes to arrange [42 43, 47].
It is not a breach of s 20 to keep a child in accommodation for a long period but a local authority must also think of the longer term and consider initiating care proceedings in order to fulfil its other duties under the CA, and to avoid breaches of the childs or the parents rights under article 8 [49 52].
In the present case, where the s 20 arrangements replaced the compulsory police protection under s 46 without the children returning home in the meantime, the focus was not on the appellants delegation of parental responsibility to the Council, but on their rights under subsections 20(7) and 20(8) [53].
Entering into a safeguarding agreement was a matter of good practice, although it was important that it did not give the impression that the parents had no right to object or to remove the children [55].
The lawfulness of the s 20 accommodation depended on whether the appellants actions amounted to an unequivocal request for the children to be returned.
The bail conditions were not an insuperable impediment to the request and were not a reason to refuse [57].
However, the letters from the appellants solicitors could not be read as an objection or as a request for immediate return: the solicitors were sensibly trying to achieve the return of the children as quickly as possible on a collaborative basis rather than push the Council into issuing care proceedings [59].
Although the Council could have provided earlier support for an application to lift the bail conditions, it was not possible to say what effect this would have had, given the independent concerns of the police [60].
Accordingly, there was a lawful basis for the childrens continued accommodation under s 20 and the ground relied on by the judge for finding a breach of the appellants article 8 rights was not made out [61].
The question of whether the Councils actions were a proportionate interference with the right to respect for family life throughout the time the children were accommodated was not fully explored in the lower courts and was not raised as an issue before the Supreme Court [62].
The appeal is therefore dismissed, albeit for reasons which differ from those of the Court of Appeal [63].
|
Until relatively recent times, English judges were obliged to impose sentences of imprisonment for life only in cases of murder.
A judge might also impose a discretionary life sentence in other cases where a determinate sentence would not provide adequate protection to the public against the risk of serious harm presented by the particular individual.
In practice, such sentences were highly unusual.
Following a series of judgments in which the European Court of Human Rights considered the compatibility of life sentences with the European Convention on Human Rights and Fundamental Freedoms (the Convention), statutory reforms were introduced so that, where a life sentence was imposed, the judge determined a minimum period or tariff to be served for the purposes of retribution and deterrence, following which the continued detention of the prisoner depended upon an assessment of the level of risk which he continued to present, carried out by the Parole Board (the Board).
I shall return to the statutory functions of the Board.
In more recent times, sentencing legislation required judges to impose automatic life sentences upon a much wider range of offenders.
In particular, section 2 of the Crime (Sentences) Act 1997 (the 1997 Act) required the courts to impose a life sentence upon anyone convicted of a second serious offence, unless there were exceptional circumstances permitting the court not to take that course.
A similar duty was imposed by section 109 of the Powers of Criminal Courts (Sentencing) Act 2000 (the 2000 Act).
Section 225 of the Criminal Justice Act 2003 (the 2003 Act) introduced, with effect from 4 April 2005, indeterminate sentences of imprisonment for public protection (IPP), which were to be automatically imposed whenever a person was convicted of any one of a large number of offences designated as serious offences and the court thought there to be a significant risk of serious harm to members of the public by the commission of a further specified offence.
Risk was to be assumed in cases where the person had previously been convicted of a relevant offence.
The Board is responsible for the release of prisoners sentenced to life imprisonment and those serving IPP sentences.
Under section 28(5) of the 1997 Act as amended, the Secretary of State is required to release a life or IPP prisoner who has served his tariff period if the Board has directed his release.
Section 28(6) provides that the Board shall not give such a direction unless the Secretary of State has referred the prisoners case to it, and the Board is satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined.
Section 28(7) provides that a life prisoner may require the Secretary of State to refer his case to the Board at any time after the expiry of his minimum term.
In practice, cases are normally referred to the Board by the Secretary of State some months before the expiry of the tariff period.
The Board also receives from the Secretary of State the reports which it requires on the prisoners progress, and then fixes an oral hearing prior to reaching its decision.
One consequence of the changes introduced by the legislation described in paragraph 2, and in particular the introduction of IPP sentences, was greatly to increase the number of prisoners whose cases required to be considered by the Board.
Another consequence was that a much higher proportion of prisoners subject to indeterminate sentences, particularly in IPP cases, had short tariff periods.
The cumulative effect of these developments was greatly to increase the workload of the Board.
Although these consequences of the introduction of IPP sentences were entirely predictable, they had not been anticipated by the Secretary of State, and the Board was not provided with a commensurate increase in its resources.
It soon became clear that the existing resources were insufficient.
The result was delay in the consideration of the cases of prisoners who had served their tariff period, and whose further detention could only be justified on the basis of an assessment of the risk which they continued to present.
Steps have been taken to address the problem.
The 2003 Act was amended by the Criminal Justice and Immigration Act 2008, with effect from 14 July 2008, so that IPP sentences are no longer mandatory.
In addition, the Board has been provided with additional resources, and administrative changes have been introduced in order to increase the efficiency of the system.
The courts however have to deal with the legal consequences of the problems which I have described.
Convention rights
In that regard, important issues arise under the Human Rights Act 1998 (the 1998 Act).
In that Act, Parliament required the courts to give effect to Convention rights corresponding to those guaranteed by the Convention.
Those rights include the rights conferred by article 5(1) and (4) of the Convention.
Article 5(1) provides: (1) Everyone has the right to liberty and security of person.
No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law: Article 5(4) provides: (a) the lawful detention of a person after conviction by a competent court Everyone who is deprived of his liberty by arrest or detention shall be entitled to take proceedings by which the lawfulness of his detention shall be decided speedily by a court and his release ordered if the detention is not lawful.
Compliance with article 5(1)(a) requires more than that the detention is in compliance with domestic law.
As the European court stated in Weeks v United Kingdom (1987) 10 EHRR 293, para 42: The 'lawfulness' required by the Convention presupposes not only conformity with domestic law but also conformity with the purposes of the deprivation of liberty permitted by sub paragraph (a) of article 5(1).
Furthermore, the word 'after' in sub paragraph (a) does not simply mean that the detention must follow the 'conviction' in point of time: in addition, the 'detention' must result from, 'follow and depend upon' or occur 'by virtue of' the 'conviction'.
In short, there must be a sufficient causal connection between the conviction and the deprivation of liberty at issue.
In relation to a discretionary life sentence imposed for the purpose of public protection, the court added (para 49): The causal link required by sub paragraph (a) might eventually be broken if a position were reached in which a decision not to release or to re detain was based on grounds that were inconsistent with the objectives of the sentencing court.
In those circumstances, a detention that was lawful at the outset would be transformed into a deprivation of liberty that was arbitrary and, hence, incompatible with article 5.
The court further held in that case that, where a defendant was recalled to prison following release on licence, it followed that it was necessary for him to be able to bring proceedings, as soon as he was recalled to prison and at reasonable intervals thereafter (since the need for continued public protection was liable to change over time), in order to determine whether his continued detention had become unlawful for the purposes of article 5(1)(a), on the basis that it was no longer consistent with the objectives of the sentencing court.
The obligation to provide an opportunity for such a determination arose under article 5(4).
In Thynne, Wilson and Gunnell v United Kingdom (1990) 13 EHRR 666 this reasoning was applied in relation to discretionary life prisoners whose tariff periods had expired.
Since there was a question whether their continued detention was consistent with the objectives of the sentencing court, it followed that they too were entitled under article 5(4) to have the question determined.
The subsequent judgment in Stafford v United Kingdom (2002) 35 EHRR 1121 confirmed that a mandatory life prisoner was also entitled to the protection of article 5(4), by means of regular reviews of the risk which he presented, once the punitive period of his sentence had expired.
The implications of these judgments were then reflected in domestic case law.
In relation to automatic life prisoners, in particular, it was held in R (Noorkoiv) v Secretary of State for the Home Department [2002] 1 WLR 3284 that article 5(4) requires a review by the Board of whether the prisoner should continue to be detained once the tariff period has expired, and therefore requires a hearing at such a time that, whenever possible, those no longer considered dangerous can be released on or very shortly after the expiry date.
In practice, that meant that the Board should hold hearings prior to the expiry of the tariff period.
Since Noorkoivs case had not been heard until two months after the expiry of his tariff period, he was therefore the victim of a violation of article 5(4).
That approach has been followed in the subsequent case law.
Another important aspect of the 1998 Act is that the remedies which Parliament has provided for a violation of Convention rights, by section 8 of the Act, include damages.
Accordingly, it was accepted in the case of R (James) v Secretary of State for Justice [2010] 1 AC 553 that a violation of a prisoners rights under article 5(4) could result in an award of damages.
The present appeals are concerned primarily with the circumstances in which a life or IPP prisoner who has served his tariff period, and whose case has not been considered by the Board within a reasonable period thereafter, should be awarded damages under the 1998 Act, and with the quantum of such awards.
They raise a number of questions: in particular, (1) whether an award should be made only in a case where the prisoner would have been released earlier if his case had been considered by the Board without undue delay, or whether an award may also be appropriate even if the prisoner would not have been released earlier; (2) if the latter view is accepted, whether an award should be made whenever undue delay has occurred, or whether delay has to have been of a certain duration before an award is appropriate; and (3) how, on either view, damages should be assessed.
A question is also raised as to whether the detention of a prisoner, during a period when he would have been at liberty if his case had been considered by the Board in accordance with article 5(4), constitutes false imprisonment under the common law, or a violation of article 5(1) of the Convention.
Summary of conclusions
reached.
It may be helpful at this point to summarise the conclusions which I have 1.
A prisoner whose detention is prolonged as the result of a delay in the consideration of his case by the Board, in violation of article 5(4) of the Convention, is not the victim of false imprisonment. 2.
Nor is he ordinarily the victim of a violation of article 5(1) of the Convention: such a violation would require exceptional circumstances warranting the conclusion that the prisoners continued detention had become arbitrary. 3.
At the present stage of the development of the remedy of damages under section 8 of the 1998 Act, courts should be guided, following R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673, primarily by any clear and consistent practice of the European court. 4.
In particular, the quantum of awards under section 8 should broadly reflect the level of awards made by the European court in comparable cases brought by applicants from the UK or other countries with a similar cost of living. 5.
Courts should resolve disputed issues of fact in the usual way even if the European court, in similar circumstances, would not do so. 6.
Where it is established on a balance of probabilities that a violation of article 5(4) has resulted in the detention of a prisoner beyond the date when he would otherwise have been released, damages should ordinarily be awarded as compensation for the resultant detention. 7.
The appropriate amount to be awarded in such circumstances will be a matter of judgment, reflecting the facts of the individual case and taking into account such guidance as is available from awards made by the European court, or by domestic courts under section 8 of the 1998 Act, in comparable cases. 8.
Pecuniary losses proved to have been caused by the prolongation of detention should be compensated in full. 9.
It will not be appropriate as a matter of course to take into account, as a factor mitigating the harm suffered, that the claimant was recalled to prison following his eventual release.
There may however be circumstances in which the claimants recall to prison is relevant to the assessment of damages. 10.
Damages should not be awarded merely for the loss of a chance of earlier release. 11.
Nor should damages be adjusted according to the degree of probability of release if the violation of article 5(4) had not occurred. 12.
Where it is not established that an earlier hearing would have resulted in earlier release, there is nevertheless a strong, but not irrebuttable, presumption that delay in violation of article 5(4) has caused the prisoner to suffer feelings of frustration and anxiety. 13.
Where such feelings can be presumed or are shown to have been suffered, the finding of a violation will not ordinarily constitute sufficient just satisfaction.
An award of damages should also be made.
Such damages should be on a modest scale.
No award should however be made where the delay was such that any resultant frustration and anxiety were insufficiently severe to warrant such an award.
That is unlikely to be the position where the delay was of the order of three months or more.
In the remainder of this judgment I shall explain the grounds upon which I 14. have reached those conclusions.
The lawfulness of detention when there is a violation of article 5(4) 15.
Before considering the issue of just satisfaction, it is necessary to consider first whether, as was argued, the detention of a prisoner, during a period when he would have been at liberty if his case had been considered by the Board speedily as required by article 5(4), constitutes false imprisonment at common law, entitling the prisoner to an award of damages in tort.
Alternatively, it was argued that the detention of the prisoner in such circumstances constitutes a violation of article 5(1), entitling the prisoner to an award of just satisfaction for unlawful detention.
The argument that the detention of a life prisoner constitutes false imprisonment, if it continues beyond the point in time when article 5(4) required a hearing to be held, must be rejected.
As was explained in R (James) v Secretary of State for Justice [2010] 1 AC 553, the continued detention is authorised by statute.
Under the relevant statutory provisions, which I have summarised at paragraph 3, there is no entitlement to release by the Secretary of State until release has been directed by the Board, and a direction to that effect cannot be given until the Board is satisfied that detention is no longer necessary for the protection of the public.
By virtue of the relevant legislation, the prisoners detention is therefore lawful until the Board gives a direction for his release.
That conclusion is not affected by section 6(1) of the 1998 Act, which makes an act of a public authority unlawful if it is incompatible with Convention rights.
That provision does not apply to an act if, as a result of one or more provisions of primary legislation, the public authority could not have acted differently: see section 6(2)(a).
In a case where there has been a failure to review the lawfulness of detention speedily, as required by article 5(4), there may well be some respects in which a public authority could have acted differently; but, as I have explained, the absence of a speedy decision does not affect the question whether the prisoner can be released under the relevant provisions.
It has not been suggested that section 3 of the 1998 Act requires those provisions to be read or given effect in a way that differs from their ordinary meaning.
The question whether detention may constitute a violation of article 5(1), if it continues beyond the point in time when release would have been ordered if article 5(4) had been complied with, is in my view more difficult.
As I have explained, article 5(4) provides a procedural entitlement designed to ensure that persons are not detained in violation of their rights under article 5(1): the notion of lawfulness has the same meaning in both guarantees.
A violation of article 5(4) does not however entail eo ipso a violation of article 5(1).
In Rutten v Netherlands (Application No 32605/96) (unreported) 24 July 2001, for example, the European court found that there had been a violation of article 5(4) as a result of delay in the holding of a hearing to determine whether the prolongation of detention was necessary, following the expiry of the period initially authorised.
The court also held that there had been no violation of article 5(1).
That conclusion was reached on the basis that the purpose of article 5(1) was to prevent persons from being deprived of their liberty in an arbitrary fashion, and, on the facts, the detention during the period of the delay could not be regarded as involving an arbitrary deprivation of liberty.
The application of article 5(1) was considered by the House of Lords in R (James) v Secretary of State for Justice [2010] 1 AC 553.
It is necessary to consider this case in some detail.
The principal issue in the case arose from the failure of the Secretary of State to provide courses or treatment which would assist IPP prisoners to address their offending behaviour and enable them to undergo assessments which could demonstrate to the Board their safety for release.
The appellant Jamess case was first considered by the Board three months after his tariff had expired, at which point a hearing was deferred, as he had been unable to participate in any relevant courses.
A hearing subsequently took place, eight months after his tariff had expired, at which point the Board exceptionally directed his release notwithstanding his failure to undertake the courses.
The appellant Wellss case was first considered by the Board nine months after his tariff had expired.
The Board declined to direct his release, explaining that since he had been unable to take part in the relevant courses he could not demonstrate that he presented an acceptable level of risk.
Wells had to wait until about two years after his tariff had expired before he was able to participate in the courses.
A further hearing was held more than three years after the tariff had expired, at which point the Board directed his release.
The appellant Lees case was considered by the Board four months after his tariff had expired.
No direction was made for his release, since he had been unable to take part in the relevant courses.
He had to wait almost three years after his tariff had expired before he could take part in the courses.
The Board finally considered his case four years after the tariff had expired, and declined to order his release.
The House of Lords held that there had been no violation of article 5(1) in any of the three cases.
It was accepted that the causal connection between a prisoners conviction and the deprivation of his liberty, required by article 5(1)(a), might be broken by a prolonged failure to enable the prisoner to demonstrate that he was safe for release.
The facts of the cases did not however demonstrate, in the view of the House, a breakdown of the system of such an extreme character as to warrant the conclusion that the prisoners detention following the expiry of their tariffs had been arbitrary.
In a passage subsequently cited by the European court, Lord Hope of Craighead observed at para 15: The claimants' cases were referred by [the Secretary of State] to the Parole Board as the statute required.
A favourable consideration of them may have been delayed, but performance of its task of monitoring their continued detention was not rendered impossible.
Mr Lee and Mr Wells remain in custody because the Board was not yet satisfied that they are no longer a risk to the public.
The causal link with the objectives of the sentencing court has not been broken.
When the cases proceeded to Strasbourg (James, Wells and Lee v United Kingdom (2012) 56 EHRR 399, the European court agreed with the House of Lords that there was a sufficient causal connection between the applicants convictions and their deprivation of liberty following the expiry of their tariffs.
Indeterminate sentences had been imposed on the applicants because they were considered to pose a risk to the public.
Their release was contingent on their demonstrating to the Board's satisfaction that they no longer posed such a risk.
As Lord Hope had pointed out, this was not a case where the Board was unable to carry out its function: its role was to determine whether the applicants were safe to be released and it had before it a number of documents to allow it to make that assessment.
That conclusion was not affected by the fact that, without evidence that the applicants had undertaken treatment to reduce the risks they posed, the Board was unlikely to give an affirmative answer to that question.
The European court nevertheless considered that the applicants post tariff detention had been arbitrary, and therefore in violation of article 5(1)(a), during the periods when they had no access to relevant courses to help them address the risks they posed to the public.
That conclusion reflected the courts view, influenced by international law in respect of prison regimes, that a real opportunity for rehabilitation was a necessary element of any detention which was to be justified solely by reference to public protection.
In other words, since the justification for detention after the expiry of the tariff was the protection of the public, it followed that the conditions of such detention must allow a real opportunity for rehabilitation.
In the absence of such an opportunity, the detention must be considered to be arbitrary.
The judgment of the European court in that case does not appear to me to be directly relevant to the present appeals.
That is, in the first place, because these appeals are not concerned with the lack of access to rehabilitation courses which was in issue in James, Wells and Lee.
Secondly, the awards made in James, Wells and Lee were not for loss of liberty but for the feelings of distress and frustration resulting from continued detention without access to the relevant courses: see para 244 of the judgment.
That, as I have explained, is not an issue that arises in the present appeals.
Just satisfaction and damages
Article 41 of the Convention provides: If the court finds that there has been a violation of the Convention or the protocols thereto, and if the internal law of the high contracting party concerned allows only partial reparation to be made, the court shall, if necessary, afford just satisfaction to the injured party.
Article 41 is not one of the articles scheduled to the 1998 Act, but it is reflected in section 8 of the Act, which so far as material is to this effect: (1) In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate. (2) But damages may be awarded only by a court which has power to award damages, or to order the payment of compensation, in civil proceedings. (3) No award of damages is to be made unless, taking account of all the circumstances of the case, including (a) any other relief or remedy granted, or order made, in relation to the act in question (by that or any other court), and (b) the consequences of any decision (of that or any other court) in respect of that act, the court is satisfied that the award is necessary to afford just satisfaction to the person in whose favour it is made. (4) In determining (a) whether to award damages, or (b) the amount of an award, the court must take into account the principles applied by the European Court of Human Rights in relation to the award of compensation under article 41 of the Convention. (6) In this section court includes a tribunal; damages means damages for an unlawful act of a public authority; and unlawful means unlawful under section 6(1).
These provisions were considered by the House of Lords in R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673.
In a speech with which the other members of the House agreed, Lord Bingham of Cornhill noted at para 6 that there are four preconditions to an award of damages under section 8: (1) that a finding of unlawfulness or prospective unlawfulness should be made based on breach or prospective breach by a public authority of a Convention right; (2) that the court should have power to award damages, or order the payment of compensation, in civil proceedings; (3) that the court should be satisfied, taking account of all the circumstances of the particular case, that an award of damages is necessary to afford just satisfaction to the person in whose favour it is made; and (4) that the court should consider an award of damages to be just and appropriate.
In relation to the third and fourth of these requirements, Lord Bingham observed that it would seem to be clear that a domestic court could not award damages unless satisfied that it was necessary to do so; but, if satisfied that it was necessary to do so, it was hard to see how the court could consider it other than just and appropriate to do so.
Lord Bingham also stated (ibid) that in deciding whether to award damages, and if so how much, the court was not strictly bound by the principles applied by the European court in awarding compensation under article 41 of the Convention, but it must take those principles into account.
It was therefore to Strasbourg that British courts must look for guidance on the award of damages.
A submission that courts in England and Wales should apply domestic scales of damages when exercising their power to award damages under section 8 was rejected.
Dicta in earlier cases, suggesting that awards under section 8 should not be on the low side as compared with tortious awards and that English awards should provide the appropriate comparator, were implicitly disapproved (para 19).
Lord Bingham gave a number of reasons why the approach adopted in the earlier cases should not be followed.
First, the 1998 Act is not a tort statute.
Even in a case where a finding of violation is not judged to afford the applicant just satisfaction, such a finding will be an important part of his remedy and an important vindication of the right he has asserted.
Secondly, the purpose of incorporating the Convention in domestic law through the 1998 Act was not to give victims better remedies at home than they could recover in Strasbourg but to give them the same remedies without the delay and expense of resort to Strasbourg.
Thirdly, section 8(4) requires a domestic court to take into account the principles applied by the European court under article 41 not only in determining whether to award damages but also in determining the amount of an award.
Lord Bingham commented that there could be no clearer indication that courts in this country should look to Strasbourg and not to domestic precedents.
This approach was not challenged in the present appeals.
It differs from the ordinary approach to the relationship between domestic law and the Convention, according to which the courts endeavour to apply (and, if need be, develop) the common law, and interpret and apply statutory provisions, so as to arrive at a result which is in compliance with the UKs international obligations; the starting point being our own legal principles rather than the judgments of an international court.
In contrast to that approach, section 8(3) and (4) of the Act have been construed as introducing into our domestic law an entirely novel remedy, the grant of which is discretionary, and which is described as damages but is not tortious in nature, inspired by article 41 of the Convention.
Reflecting the international origins of the remedy and its lack of any native roots, the primary source of the principles which are to guide the courts in its application is said to be the practice of the international court that is its native habitat.
I would however observe that over time, and as the practice of the European court comes increasingly to be absorbed into our own case law through judgments such as this, the remedy should become naturalised.
While it will remain necessary to ensure that our law does not fall short of Convention standards, we should have confidence in our own case law under section 8 once it has developed sufficiently, and not be perpetually looking to the case law of an international court as our primary source.
In Greenfield the House of Lords rejected a submission, repeated in the present appeals, that the levels of Strasbourg awards were not principles within the meaning of section 8(4).
Lord Bingham stated at para 19: this is a legalistic distinction which is contradicted by the White Paper [Rights Brought Home: The Human Rights Bill (1997) (Cm 3782)] and the language of section 8 and has no place in a decision on the quantum of an award, to which principle has little application.
The court routinely describes its awards as equitable, which I take to mean that they are not precisely calculated but are judged by the court to be fair in the individual case.
Judges in England and Wales must also make a similar judgment in the case before them.
They are not inflexibly bound by Strasbourg awards in what may be different cases.
But they should not aim to be significantly more or less generous than the court might be expected to be, in a case where it was willing to make an award at all.
The term principles is therefore to be understood in a broad sense.
It is not confined to articulated statements of principle: such statements by the European court in relation to just satisfaction are uncommon, and, as will appear, it may be unsafe to take them at face value, without regard to what the court actually does in practice.
The focus is rather upon how the court applies article 41: the factors which lead it to make an award of damages or to withhold such an award, and its practice in relation to the level of awards in different circumstances.
As Lord Dyson observed in Rabone v Pennine Care NHS Foundation Trust [2012] UKSC 2; [2012] 2 AC 72, para 84, in the absence of a guideline case in which the range of compensation is specified and the relevant considerations are articulated, it is necessary for our courts to do their best in the light of such guidance as can be gleaned from the Strasbourg decisions on the facts of individual cases.
The search for principles in this broad sense is by no means alien to British practitioners, at least to those who had experience of practice in the field of personal injury law before the Judicial Studies Board published its guidelines.
The conventions underlying the amounts awarded as general damages (or, in Scotland, solatium) for particular forms of harm could only be inferred from an analysis of the awards in different cases and a comparison of their facts.
It is an exercise of a similar kind which may be called for when applying section 8 of the 1998 Act in connection with the quantification of awards for non pecuniary damage (or moral damage, as the court sometimes describes it, employing a literal translation of the French expression).
As Lord Bingham acknowledged, although the court must take into account the principles applied by the European court, it is not bound by them: the words must take into account are not the same as must follow.
In particular, important though the guidance provided by the European court may be, there are differences between an international court and a domestic court which require to be borne in mind.
One difference, of degree at least, which I have already mentioned is that the European court does not often articulate clear principles explaining when damages should be awarded or how they should be measured.
That reflects a number of factors.
One is that the court cannot replicate at an international level any one of the widely divergent approaches to damages adopted in the domestic legal systems from which its judges are drawn: the systems of 47 countries, stretching from the Atlantic to the Caspian, with diverse legal traditions.
Nor is there a relevant body of principles of international law which it can apply.
The court has therefore had to develop its own practice through its case law.
Given the differing traditions from which its judges are drawn, and bearing in mind that the court has not regarded the award of just satisfaction as its principal concern, it is not altogether surprising that it has generally dealt with the subject relatively briefly, and has offered little explanation of its reasons for awarding particular amounts or for declining to make an award.
Furthermore, as I shall shortly explain, the court has a more limited role in relation to fact finding than national courts, as is reflected in its procedure and in its treatment of evidence.
For all these reasons, the court has treated questions of just satisfaction as requiring what it describes as an equitable approach, as the Grand Chamber explained in Al Jedda v United Kingdom (2011) 53 EHRR 789, para 114: The court recalls that it is not its role under article 41 to function akin to a domestic tort mechanism court in apportioning fault and compensatory damages between civil parties.
Its guiding principle is equity, which above all involves flexibility and an objective consideration of what is just, fair and reasonable in all the circumstances of the case, including not only the position of the applicant but the overall context in which the breach occurred.
Its non pecuniary awards serve to give recognition to the fact that moral damage occurred as a result of a breach of a fundamental human right and reflect in the broadest of terms the severity of the damage.
In consequence of the European courts treatment of the award of damages as a broader and more discretionary exercise than under our domestic law, some commentators have expressed scepticism as to the existence of principles and as to the value of any attempt to identify them.
Similar scepticism was expressed at the hearing of these appeals by counsel for the Secretary of State, who submitted that there was an air of unreality about the attempt by counsel for the appellants and the Board to analyse an accumulation of ad hoc decisions by a court which did not have the same regard for precedent as our courts.
That view reflects factors which are undeniable.
Nevertheless, such scepticism appears to me to be over stated.
As Lord Bingham indicated in Greenfield in the passage which I have cited in paragraph 30, and as I have sought to explain in paragraph 31, the statutory expression principles has to be understood in a broad sense.
In relation to the quantum of awards in particular, section 8(4) of the 1998 Act merely means that courts should aim to pitch their awards at the general level indicated by Strasbourg awards in comparable cases, so far as that can be estimated.
In relation at least to some aspects of the application of article 41, a body of identifiable practices has developed through the case law of the European court.
In Greenfield itself, for example, the House of Lords succeeded in identifying through an analysis of numerous judgments of the court, few of which contained any articulated statement of principle, the ordinary practice of the court when applying article 41 in relation to violations of the rights under article 6 to an independent tribunal, and to legal representation, in the determination of a criminal charge.
In so far as there are principles in that sense, domestic courts are required by section 8(4) of the 1998 Act to take them into account.
That is consistent with the wider approach to the Strasbourg case law described by Lord Slynn of Hadley in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2003] 2 AC 295, para 26: that, in the absence of some special circumstances, the court should follow any clear and constant jurisprudence of the European court.
The over arching duty of the court under section 8(1) is however to grant such relief or remedy as it considers just and appropriate; and that duty exists even where no clear or consistent European practice can be discerned.
A second difference between the European court and a national court is that the European court does not normally undertake detailed fact finding in relation to damages in the way which a national court of first instance would do, at least in jurisdictions such as those of the UK.
As it observed in Denizci v Cyprus 23 May 2001, Reports of Judgments and Decisions, 2001 V, para 315, the court is acutely aware of its own shortcomings as a first instance tribunal of fact.
The court referred in that connection to problems of language, to an inevitable lack of detailed and direct familiarity with the local conditions, and to its inability to compel the attendance of witnesses (or, it might have added, to secure the production of evidence).
In consequence, it is often dependent upon the information and arguments put before it by the parties.
If they conflict, rather than resolving the conflict it may say that it declines to speculate, or it may award damages for a loss of opportunity rather than undertaking a more definite assessment of the harm suffered.
If, on the other hand, the material placed before it by the parties enables it to proceed upon a more detailed basis, it will do so.
That will be the case, in particular, where the relevant facts have been found by the national court.
To the extent that domestic courts, applying their ordinary rules of evidence and procedure, are able to resolve disputed issues of fact in circumstances in which the European court would not, and are therefore able to proceed upon the basis of proven facts in situations in which the European court could not, their decisions in relation to the award of damages under section 8 of the 1998 Act may consequently have a different factual basis from that which the European court would have adopted.
A third difference between the European court and a national court reflects a further practical aspect of awards of damages at an international level: namely, that the awards made by the European court, including those in respect of non pecuniary loss, reflect the relative value of money in the contracting states.
If applicants from different contracting states who had suffered identical violations of the Convention and had suffered identical non pecuniary losses were to receive identical awards, those awards would in reality be of much greater value to some applicants than to others.
The point can be illustrated by the case of Cesk v Czech Republic (2000) 33 EHRR 181, where the applicant claimed the equivalent of 5660 for four years lost earnings, on the basis of average earnings in the Czech Republic between 1993 and 1997.
Awards made by the European court to applicants from countries where the cost of living is relatively low tend to be low by comparison with awards to applicants from countries where the cost of living is much higher.
In order to obtain guidance as to the appropriate level of awards under section 8 of the 1998 Act, it is therefore necessary to focus upon awards made to applicants from the UK or from other countries with a comparable cost of living.
Three conclusions can be drawn from this discussion.
First, at the present stage of the development of the remedy of damages under section 8 of the 1998 Act, courts should be guided, following Greenfield, primarily by any clear and consistent practice of the European court.
Secondly, it should be borne in mind that awards by the European court reflect the real value of money in the country in question.
The most reliable guidance as to the quantum of awards under section 8 will therefore be awards made by the European court in comparable cases brought by applicants from the UK or other countries with a similar cost of living.
Thirdly, courts should resolve disputed issues of fact in the usual way even if the European court, in similar circumstances, would not do so.
It is necessary next to turn to some of the authorities which were cited from the case law of the European court.
Reflecting the foregoing conclusions, my focus will be primarily upon cases concerned with violations of article 5(4) arising from delay in the holding of a hearing, and in particular upon such of those cases as have concerned delay in the holding of a hearing to determine whether a convicted prisoner should be released.
In relation to the quantum of damages, my focus will be upon such of those cases as concerned the UK or other countries in Western Europe.
Damages for violations of the requirement that the lawfulness of detention be
reviewed speedily
In the great majority of cases since the inception of the modern court in November 1998, in which the European court has found a violation of article 5(4) by reason of a failure to decide the lawfulness of detention speedily, it has made an award of compensation in respect of non pecuniary damage.
That has been the case, in particular, in every case of this kind concerned with the Board.
In all of these cases the award was made to compensate for feelings of frustration, anxiety and the like caused by the violation.
In most of the cases the court made no finding that there had been a loss of liberty, or the loss of an opportunity of liberty, as a consequence of the violation.
Indeed, in several of the cases it expressly stated that it could not make any such finding.
In the small number of cases where the court found that there had been a loss of an opportunity of liberty, this was not critical to the decision to make an award of damages.
It appears therefore that in these cases, even in the absence of a real loss of opportunity of earlier release, the court would have regarded an award of damages as appropriate.
The loss of opportunity was one aspect of the harm suffered; the feelings of frustration and anxiety were another.
Very many examples could be cited, but it is enough to refer to the following cases, which I shall discuss in chronological order.
Oldham v United Kingdom (2000) 31 EHRR 813 was a case where, as in the present appeal by Mr Faulkner, the violation of article 5(4) resulted from a delay between reviews by the Board.
There had been a period of two years between successive reviews, in circumstances where the applicant had completed all the work required with a view to rehabilitation within the first eight months of that period.
The court did not suggest that there had been any loss of liberty, but stated that the applicant must have suffered feelings of frustration, uncertainty and anxiety flowing from the delay in review which cannot be compensated solely by the finding of a violation (para 42).
In Hirst v United Kingdom (Application No 40787/98) (unreported) 24 July 2001, a violation was found in similar circumstances, where there had been periods of 21 months and two years between successive reviews.
The court repeated the statement it had made in Oldham, and also stated in terms that The court does not find that any loss of liberty may be regarded as flowing from the finding of a breach of article 5(4), which in this case is limited to the delay in between reviews (para 48).
In Reid v United Kingdom (2003) 37 EHRR 211 there had been a delay in court proceedings in which the applicant challenged the lawfulness of his detention in a psychiatric hospital.
The court stated that it could not speculate as to whether the applicant would have been released if the procedures adopted by the courts had been different (para 85).
The court however noted a procedural breach concerning the burden of proof (which had been reversed) and the long period of delay in the proceedings brought by the applicant for his release, and considered that some feelings of frustration and anxiety must have arisen which justify an award of non pecuniary damage (para 86).
In Blackstock v United Kingdom (2005) 42 EHRR 55 the circumstances were similar to those in Oldham and Hirst.
The period between successive reviews was 22 months.
The court again stated that it does not find that any loss of liberty may be regarded as flowing from the finding of a breach of article 5(4), which in this case is limited to the delay in between reviews, but that the applicant must have suffered feelings of frustration, uncertainty and anxiety flowing from the delays in review which cannot be compensated solely by the finding of violation (para 56).
In Kolanis v United Kingdom (2005) 42 EHRR 206 there had been a delay of about 12 months in the reconsideration by a mental health tribunal of the case of a patient detained in a psychiatric hospital, following the discovery that practical difficulties prevented the implementation of an earlier decision that she should be conditionally discharged.
The re consideration of the case resulted in the applicants discharge.
The court stated that It cannot be excluded on the facts of this case that the applicant would have been released earlier if the procedures had conformed with article 5(4) and therefore she may claim to have suffered in that respect a real loss of opportunity (para 92).
The court added that Furthermore the applicant must have suffered feelings of frustration, uncertainty and anxiety from the situation which cannot be compensated solely by the finding of violation (ibid).
In Mooren v Germany (2009) 50 EHRR 554, a Grand Chamber decision, there had been a delay in the determination of proceedings for judicial review of an order for the applicants detention pending trial.
There had also been procedural unfairness.
The court found that both the violations of the fairness and of the speed requirements under article 5(4) caused the applicant non pecuniary damage, such as stress and frustration, which cannot be compensated solely by the findings of violations (para 130).
In STS v Netherlands (2011) 54 EHRR 1229 there was a delay in determining an appeal by a juvenile offender against a decision to extend a period of custodial treatment previously imposed.
Referring to para 76 of its judgment in the case of Nikolova v Bulgaria (1999) 31 EHRR 64, and to its judgments in the cases of HL v United Kingdom (2004) 40 EHRR 761 and Fodale v Italy (2006) 47 EHRR 965, to all of which it will be necessary to return, the court stated expressly that it cannot find it established that the Supreme Court would have ordered the applicant released had its decision been given any more speedily (para 69).
Nevertheless, the court stated, under reference to its judgments in the cases of Reid, Kolanis and Mooren, the court considers that the applicant has suffered non pecuniary damage that cannot be made good merely by the finding of a violation of the Convention (para 70).
Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013, in which judgment was given subsequent to the hearing of the present appeals, was a case where, as in the present appeal by Mr Sturnham, the violation of article 5(4) resulted from a delay in the holding of a review by the Board following the expiry of an IPP prisoners tariff.
The court proceeded on the basis that the Board would not have ordered the applicants release had the review taken place speedily.
It nevertheless made an award on the basis that the delay gave rise to feelings of frustration which were not sufficiently compensated by the findings of violations of the Convention (para 69).
A number of examples can be found in the case law of the old court of cases in which the European court found a violation of article 5(4) by reason of a failure to decide the lawfulness of detention speedily, but made no award of compensation in respect of non pecuniary damage.
They include Bezicheri v Italy (1989) 12 EHRR 210, where the court did not state the extent to which it considered that the proceedings had been unduly prolonged, but focused on the final two months; Koendjbiharie v Netherlands (1990) 13 EHRR 820, where unsuccessful proceedings brought by the applicant to challenge his detention in a state psychiatric clinic had taken four months to be completed, the period allowed under domestic law being three months; and E v Norway (1990) 17 EHRR 30, where the unacceptable delay would appear to have been about three or four weeks, and where the European court observed that, if the applicant had suffered any non pecuniary injury as a result of the undue length of the proceedings, the judgment provided him with sufficient just satisfaction.
In the modern case law of the court, cases where no award has been made are unusual.
One example is Rutten v Netherlands (Application No 32605/96) (unreported) 24 July 2001, where domestic court proceedings had lasted two and a half months at first instance and a further three months on appeal.
The proceedings had been brought by the public prosecutor to obtain an extension of the period during which the applicant, who had been convicted of attempted murder, was confined in a secure institution where he was being treated.
The proceedings were based on the institutions assessment that the applicant remained dangerous.
The applicant unsuccessfully opposed the proceedings on a technical ground relating to jurisdiction.
This was not, therefore, a case of delay affecting proceedings in which a person sought to establish that his continued detention was unjustified.
The delayed hearing resulted in a decision that continued detention was justified.
The European court found that the length of the proceedings may have engendered in the applicant a certain feeling of frustration, but not to the extent of justifying the award of compensation (para 59).
Another example is Pavleti v Slovakia (Application No 39359/98) (unreported) 22 June 2004, where the European court found a violation of article 5(3) in that the applicants detention prior to trial, for a period of two years, had lasted an unreasonably long time.
There was also a breach of article 5(4) relating to an application which the applicant had made to the public prosecutor to be released on bail.
The prosecutor had transmitted the request to the domestic court, which had failed to deal with it.
The European court found however that the applicants detention on remand had been justified.
In dealing with the claim under article 41, it noted that the period spent on remand had been deducted from the prison sentence which the applicant was ordered to serve following his conviction; and the court has long accepted that the deduction of a period of detention from the ultimate sentence may remove the need for any further award in respect of non pecuniary loss arising from a violation of article 5(3) (see, for example, Neumeister v Austria (No 2) (1974) 1 EHRR 136, para 40).
It decided that In view of the circumstances of the case the finding of a violation was sufficient to afford just satisfaction (para 110).
The circumstances of the case included (i) that the detention on remand was justified, and (ii) that the period on remand had been deducted in full from the sentence.
Although the court cited its Nikolova judgment, to which I shall return, in connection with an unrelated aspect of the case, it made no reference to it in its discussion of article 41.
It is apparent therefore that the general practice of the European court is to apply article 41 on the basis that the failure to decide the lawfulness of detention speedily, as required by article 5(4), causes harm in the form of feelings of frustration and anxiety, for which damages should be awarded.
It also appears that the court is prepared to presume such harm without direct proof, consistently with its approach to non pecuniary loss in other contexts.
In Scordino v Italy (No 1) (2006) 45 EHRR 207, for example, the Grand Chamber said at para 204, in the context of unreasonable delay in violation of article 6(1), that there was a strong but rebuttable presumption that excessively long proceedings would occasion non pecuniary damage.
It is clear from the cases which I have discussed that the court will make an award on that basis even where there has been no deprivation of liberty or loss of an opportunity of earlier release.
Where such additional harm is established, however, the court can normally be expected to make an award of damages on that basis, which may be for both pecuniary and non pecuniary losses.
The case law of the European court in relation to violations of the requirement to review the lawfulness of detention speedily is, therefore, unequivocally inconsistent with the submission, made on behalf of the Board, that there is a general rule that an award can only be made in respect of a violation of article 5(4) if the violation has resulted in a deprivation of liberty.
That submission was based on judgments of the court which concerned violations of the requirement to have such reviews decided in accordance with a fair procedure.
As these judgments appear to have been misinterpreted, it is necessary to turn to them next.
Violations of the requirement that reviews of the lawfulness of detention follow a
fair procedure
The case in this category upon which the greatest weight was placed by the Board was Nikolova v Bulgaria (1999) 31 EHRR 64, a decision of the Grand Chamber concerned with the applicants detention in custody prior to trial.
Her detention had initially been ordered by prosecutors.
Her initial appeals against her detention were also decided by prosecutors.
After three weeks she appealed to a court, which refused her appeal about four weeks later.
It confined its consideration to the question whether she had been charged with a serious crime and whether her medical condition required that she be released.
It did not consider the applicants arguments that she was unlikely to abscond or to interfere with the investigation.
The case was examined in camera and without the participation of the parties, and the court considered written comments from the prosecutor to which the applicant had no opportunity to respond.
The European court found that there had been a breach of article 5(3), which provides (so far as material): Everyone arrested or detained in accordance with the provisions of paragraph 1(c) of this article shall be brought promptly before a judge or other officer authorised by law to exercise judicial power and shall be entitled to trial within a reasonable time or to release pending trial.
There had also been a breach of article 5(4): the proceedings before the domestic court were not truly adversarial and did not ensure equality of arms, and the court had failed to consider the applicants contentions.
The European court decided by a majority to make no award under article 41 in respect of non pecuniary damage, stating (para 76): The court recalls that in certain cases which concerned violations of article 5(3) and (4) it has granted claims for relatively small amounts in respect of non pecuniary damage (see Van Droogenbroeck v Belgium (1983) 13 EHRR 546, para 13, and De Jong, Baljet and Van den Brink v Netherlands (1984) 8 EHRR 20, para 65).
However, in more recent cases concerning violations of either or both paragraphs 3 and 4 of article 5, the court has declined to accept such claims (see Pauwels v Belgium (1988) 11 EHRR 238, para 46, Brogan v United Kingdom (1989) 11 EHRR 117, para 9, Huber v Switzerland 23 October 1990, Publications of the European Court of Human Rights, Series A no 188, p 19, para 46, Toth v Austria (1991) 14 EHRR 551, para 91, Kampanis v Greece (1995) 21 EHRR 43, para 66, and Hood v United Kingdom (1999) EHRR 365, paras 84 87).
In some of these judgments the court noted that just satisfaction can be awarded only in respect of damage resulting from a deprivation of liberty that the applicant would not have suffered if he or she had had the benefit of the guarantees of article 5(3) and concluded, according to the circumstances, that the finding of a violation constituted sufficient just satisfaction in respect of any non pecuniary damage suffered.
In the present case the court sees no reason to depart from the above case law.
The court cannot speculate as to whether or not the applicant would have been detained if there had been no violation of the Convention.
As to the alleged frustration suffered by her on account of the absence of adequate procedural guarantees during her detention, the court finds that in the particular circumstances of the case the finding of a violation is sufficient.
Counsel for the Board also referred to a number of other judgments of the European court concerned with violations of article 5(4) in which the same approach was followed as in Nikolova, on broadly similar facts.
They include Niedbala v Poland (2000) 33 EHRR 1137, Migo v Poland (Application No 24244/94) (unreported) 25 June 2002, HL v United Kingdom (2004) 40 EHRR 761, Fodale v Italy (2006) 47 EHRR 965, Galliani v Romania (Application No 69273/01) (unreported) 10 June 2008 and Mitreski v Former Yugoslav Republic of Macedonia (Application No 11621/09) (unreported) 25 March 2010.
A number of judgments concerned with violations of article 5(3), in which the same approach was followed, were also referred to.
They included SBC v United Kingdom (2001) 34 EHRR 619.
Paragraph 76 of the Nikolova judgment is relied on by the Board as an important statement of a general principle: as counsel put it, just satisfaction can be awarded only in respect of damage resulting from a deprivation of liberty that the applicant would not have suffered if he or she had had the benefit of article 5(3) and (4) protection.
It is however apparent from the subsequent cases which I have discussed in paragraphs 40 to 48 that there is no such general principle: the European court has repeatedly made awards in respect of non pecuniary damage resulting from a violation of article 5(4) consequent upon delay, in the absence of any finding that the applicant had suffered a deprivation of liberty as a result of the violation.
Furthermore, in several of those cases the court referred to Nikolova, without any indication that there was perceived to be an inconsistency between the courts award of just satisfaction in the case at hand and the Nikolova judgment.
Those cases include Reid, STS v Netherlands and Betteridge, and also the judgment of the Grand Chamber in Mooren.
The true scope of the judgment in Nikolova appears to be narrower.
It is important to appreciate that the violation of article 5(4) with which the Nikolova judgment was concerned related solely to the procedural fairness of the domestic proceedings: in the courts words, the absence of adequate procedural guarantees.
The same is true of the later judgments in which it was followed.
Similarly, none of the earlier cases cited in Nikolova, in which the court had declined to make an award, concerned a violation of article 5(4) arising from delay.
When the court spoke in Nikolova of procedural guarantees it appears to have had in mind the procedure followed when the lawfulness of the applicants detention was considered, rather than to the time that it took for that exercise to take place.
That would be consistent with the courts approach under article 6(1), where awards are regularly made for breaches of the reasonable time guarantee, but where compensation may be denied in cases which have involved only procedural breaches of fair hearing guarantees.
The distinction between the European courts approach to just satisfaction in cases where the violation of article 5(4) results from delay, and in cases where it results from some other procedural failure, was explained by the court in HL v United Kingdom (2004) 40 EHRR 761.
The court described Nikolova as having endorsed the principle that, where the violation of article 5(3) or (4) was of a procedural nature, just satisfaction could be awarded only in respect of damage resulting from a deprivation of liberty that the applicant would not otherwise have suffered (para 148).
The court then distinguished cases concerned with violations of article 5(4) arising from delay, stating (para 149): The awards of non pecuniary damages in Reid v United Kingdom (2003) 37 EHRR 211 and in the series of French cases to which the applicant referred [Delbec v France (Application No 43125/98) (unreported) 18 June 2002 and Laidin v France (Application No 43191/98) (unreported) 5 November 2002, both concerned with failures to deal speedily with applications to be discharged from psychiatric hospitals] followed findings of, inter alia, unreasonable delay in the domestic proceedings determining applications for release from detention.
This is consistent with the award of non pecuniary damages following a finding of unreasonable delay under article 6(1) of the Convention: despite the procedural nature of such a violation, it is accepted that there can be a causal link between the violation (delay) and the non pecuniary damage claimed (see, more recently, Mitchell and Holloway v United Kingdom (2002) 36 EHRR 951, para 69).
Although it is unnecessary to consider Nikolova further for the purpose of the present appeals, it should also be borne in mind that in para 76 of the judgment the court stated that it reached its conclusion in the particular circumstances of the case.
Consistently with the courts general approach to article 41, that is not the language of a strict rule.
There are numerous cases subsequent to Nikolova, not concerned with delay, in which awards have been made to applicants who had suffered feelings of frustration and anxiety caused by a violation of article 5(4).
Examples include Curley v United Kingdom (2000) 31 EHRR 401, Stafford v United Kingdom (2002) 35 EHRR 1121, Waite v United Kingdom (2002) 36 EHRR 1001, Von Bulow v United Kingdom (2003) 39 EHRR 366 and Allen v United Kingdom (Application No 18837/06) (unreported) 30 March 2010 (in which Nikolova was cited, but not in connection with article 41).
In its recent judgment in Abdi v United Kingdom (Application No 27770/08) (unreported) 9 April 2013 at para 91 the court cited para 76 of Nikolova and para 149 of HL in support of the proposition that in cases concerning article 5(3) of the Convention it has not made an award of damages unless it could be shown that the applicant would not have suffered if he or she had had the benefit of the guarantees of that article.
Is there a de minimis principle?
If, then, the failure to decide the lawfulness of detention speedily will normally result in an award of damages as compensation for mental suffering, does the delay have to be of a minimum duration in order to warrant such an award, as counsel for the Board contended? Is it enough that the delay is sufficiently long to constitute a violation of article 5(4), or may a delay which results in a violation of article 5(4) nevertheless not be sufficiently long to warrant an award of damages?
The court did not specify in terms of time, in the cases discussed in paragraphs 41 to 49, the extent to which there had been a failure to decide the matter speedily.
In the group of UK cases concerned with delays between successive reviews by the Board, the court observed that the question whether the periods between reviews complied with article 5(4) must be determined in the light of the circumstances of each case: it was not for the court to attempt to rule as to the maximum period of time between reviews which should automatically apply to an entire category of prisoners, since there were significant differences between their personal circumstances.
The court also observed that in previous cases the Convention organs had accepted periods of less than a year between reviews and had rejected periods of more than a year.
It was therefore not the entirety of the period between reviews in these cases which was unacceptable, but the excess beyond what would have been reasonable.
The court did not specify what that period was.
The cases are therefore of limited assistance in relation to the point now under consideration.
Most of them would appear however to have involved an unacceptable delay of nine months or more.
In the case of Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013, the hearing before the Board took place 13 months after the expiry of the tariff.
In Kolanis v United Kingdom (2005) 42 EHRR 206, the delay was of the order of a year.
The cases of Reid v United Kingdom (2003) 37 EHRR 211 and STS v Netherlands (2011) 54 EHRR 1229 appear to have involved delays of several months.
There are other cases in which awards were made which involved shorter periods.
In Mooren v Germany (2009) 50 EHRR 554, the proceedings for review of the order for the applicants detention on remand took two months and 22 days, which was considered excessive.
The Grand Chamber emphasised the right of persons who have instituted proceedings challenging the lawfulness of their deprivation of liberty to a speedy judicial decision, and the strict standards laid down by the court in that respect (paras 106 107).
In that regard, the court cited earlier decisions concerned with detention on remand.
These included the case of GB v Switzerland (2000) 34 EHRR 265, where the court found that proceedings which had lasted 32 days had violated article 5(4) by reason of the time taken, and awarded compensation.
It is however necessary to bear in mind, in considering these decisions, that persons detained on remand are in a particularly sensitive position, and are in consequence particularly liable to experience stress and anxiety if their application for bail is not determined speedily.
Such proceedings cannot therefore be assumed to be equivalent, in relation to the award of damages for delay, to applications for release from imprisonment following conviction.
Those cases might be contrasted with others in which no award was made.
In Rutten v Netherlands (Application No 32605/96) (unreported) 24 July 2001, the unacceptable delay appears to have been of a few months at most, and the applicant sought compensation on the basis that his rights had been violated for a period of at least 17 days.
As I have explained in paragraph 50, no compensation was awarded in that case.
A similar conclusion was reached in the judgments, now somewhat dated, in Koendjbiharie v Netherlands (1990) 13 EHRR 820 and E v Norway (1990) 17 EHRR 30, which I have discussed in paragraph 49.
In the former case, the unacceptable delay would appear to have been of about one month; in the latter, about three or four weeks.
The question whether feelings of frustration and anxiety are sufficiently serious to warrant an award of compensation will evidently depend to some extent upon the circumstances of the individual case.
Where for example there is a particular reason for anxiety, or where there is mental illness, even a relatively short delay may occasion acute mental suffering.
It is impossible therefore to lay down absolute rules.
It is on the other hand reasonable to suppose that the presumption that the lack of a speedy decision has occasioned sufficiently serious mental suffering to justify an award of compensation should only apply if the delay has been of a significant duration.
In the circumstances of a convicted prisoner awaiting review of his case by the Board, the cases which I have discussed suggest that a delay of three months or more is likely to merit an award, whereas the stress and anxiety which can be inferred from a delay of shorter duration are ordinarily unlikely to be of sufficient severity.
The quantum of awards for feelings of frustration and anxiety
Awards for frustration and anxiety caused by violations of the article 5(4) guarantee of a speedy decision have invariably been modest.
In Oldham v United Kingdom (2000) 31 EHRR 813 the court awarded 1000.
In Hirst v United Kingdom (Application No 40787/98) (unreported) 24 July 2001 the award was again 1000.
In Reid, where the delay was more substantial and there was also procedural unfairness, the award was 2000.
In Blackstock v United Kingdom (2005) 42 EHRR 55 the award was 1460, the equivalent at that time of 1000.
In Mooren the Chamber had awarded 1500 for distress resulting from delay alone.
The Grand Chamber increased the award to 3000, but that award was for stress and frustration caused by the unfairness of the procedure as well as by delay.
In STS the court awarded 2000, but in that case there was a breach of the requirement of effectiveness as well as of the requirement as to speed.
In Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013 the court awarded 750, equivalent to 645.
It would be a mistake to attempt to analyse these awards too closely: they were considered equitable in their particular circumstances.
The cases involving delay in reviews by the Board nevertheless indicate the modest level of awards in the absence of special circumstances.
The quantum of awards for loss of liberty
No case was cited to this court in which the European court had made an award for a loss of liberty resulting from a violation of the speedy decision guarantee in article 5(4).
There are however a number of cases in which awards were made for the loss of an opportunity of earlier release.
Reference was also made to a number of cases in which awards were made for a loss of liberty resulting from violations of article 5(1), article 5(3) and article 6.
Considering first the loss of opportunity awards under article 5(4), in the case of Kolanis v United Kingdom (2005) 42 EHRR 206, discussed in paragraph 46, the court considered that it could not be excluded that the applicant would have been released earlier from detention in a psychiatric hospital if the procedures had been in conformity with article 5(4).
The delay had been of about 12 months.
The award was 6000.
The earlier case of Weeks v United Kingdom (1987) 10 EHRR 293 (judgment on the merits), (1988) 13 EHRR 435 (article 50 judgment) concerned the recall to prison of a prisoner who had been released on licence.
His recall and subsequent detention were considered by the Board, but under the system then in place it could only make a non binding recommendation.
Recommendations for release had not been acted upon.
When the applicant was subsequently released, some years after his release had first been recommended, he repeatedly reoffended, and his licence was again revoked.
The Grand Chamber made an award of 8000, equivalent to about 17600 if adjusted for inflation, for both pecuniary and non pecuniary losses.
In relation to the former, the applicant had made a substantial claim which the court considered could not be completely discounted.
In relation to non pecuniary loss, the court said that the applicant must have been caused feelings of frustration and helplessness.
The court did not explain how it arrived at the global sum which it awarded.
The parties also cited a number of cases concerned with violations of article 5(1) which had resulted in a deprivation of liberty.
In some of the cases relied upon, awards were made which were either unusually low or unusually high, for particular reasons explained by the European court.
In other cases, the low awards reflected the value of money in the countries in question.
Awards made in more typical cases involving the UK, or other countries with a comparable cost of living, are potentially of greater assistance.
In Johnson v United Kingdom (1997) 27 EHRR 296 the applicant had been detained in a psychiatric hospital in breach of article 5(1) for a period of three and a half years.
The court observed that the delay in his release could not be attributed entirely to the authorities: some delay was inevitable, as a suitable hostel placement had to be found, and in addition the applicant had contributed to the delay by his refusal to co operate.
Having regard to those factors, the court awarded 10,000.
In Beet v United Kingdom (2005) 41 EHRR 441 the court made an award of 5000 as compensation for unlawful detention in prison for a period of two days.
In Medvedyev v France (2010) 51 EHRR 899 an award of 5000 was made by the Grand Chamber to applicants who had been unlawfully detained on board a ship for 13 days.
The relatively low awards made in such cases as Jecius v Lithuania (2000) 35 EHRR 400, Kucheruk v Ukraine (2007) 52 EHRR 878 and Veniosov v Ukraine (Application No 30634/05) (unreported) 15 December 2011, to which the Board referred, are less relevant for the reasons I have explained in paragraph 38.
Reference was also made to a number of cases in which awards were made for violations of article 5(3).
These cases do not appear to me to be of assistance.
The case of Caballero v United Kingdom (2000) 30 EHRR 643 concerned an applicant who had been detained in custody prior to trial as he fell within a category of accused persons to whom bail could not be granted.
The period spent on remand had been deducted from the sentence, so that ordinarily no award would have been made.
The court however noted that the applicants state of health was such that any release on bail prior to his trial could have been his last days of liberty.
There was also undisputed evidence that the applicant would have had a good chance of being released on bail but for the breach of article 5(3).
In these exceptional circumstances, an award of 1000 was made on an equitable basis.
The other cases cited concerned countries where the value of money is much lower than in the United Kingdom.
Reference was also made to two UK cases where there had been a loss of liberty, or of the opportunity of liberty, as a result of violations of article 6.
First, in Perks v United Kingdom (1999) 30 EHRR 33 there had been a finding by the domestic courts that the applicant was unlikely to have been committed to prison, where he spent six days, if he had received competent legal assistance.
Proceeding on that basis, the European court awarded 5500.
Secondly, in Hooper v United Kingdom (2004) 41 EHRR 1 the applicant had been imprisoned for two weeks in default of finding surety for a binding over order.
It had been found by the High Court that, if a fair procedure had been followed, the magistrate might well have been persuaded to a different result.
The European court observed that this conclusion was not expressed in such strong terms as in Perks, and awarded 8000.
In considering these awards, it is necessary to bear in mind that unlawful detention in violation of article 5(1) is often a particularly serious violation of the Convention, and is of a different nature from a violation of article 5(4).
It is also necessary to take into account that the freedom enjoyed by a life prisoner released on licence is more circumscribed in law and more precarious than the freedom enjoyed by the ordinary citizen, as the European court has recognised (Weeks v United Kingdom (1987) 10 EHRR 293, para 40).
The risk that a prisoner may be recalled to custody, even where no further offence has been committed, is real, as the facts of Weeks and of Mr Faulkners case, to which I shall return, amply demonstrate.
Although the European court does not make precise adjustments to reflect inflation, it is also necessary to bear in mind that some of these awards were made many years ago.
For these reasons, none of the awards which I have mentioned offers any clear guidance.
That said, the most helpful is perhaps the award in the Kolanis case, since it related to a breach of article 5(4).
As I have explained, in that case 6000 was awarded in 2005 as compensation for the loss of a real opportunity of release 12 months earlier from a psychiatric hospital.
A higher award would no doubt have been appropriate if there had been a definite loss of liberty for 12 months; but a lower award would have been appropriate if, instead of a patient losing her liberty, the case had concerned a convicted prisoner who had lost an opportunity of earlier release on licence.
The award in Weeks, considered in the context of the facts of that case, similarly suggests a level of awards for breaches of article 5(4) in respect of convicted prisoners which is much lower than the level in such cases as Beet or Perks.
Allowing for the various factors which I have mentioned, and in particular for the important differences between conditional release and complete freedom, the cases which I have discussed suggest that awards where detention has been prolonged for several months, as the result of a violation of article 5(4), could reasonably be expected to be significantly above awards for frustration and anxiety alone, but well below the level of awards for a loss of unrestricted liberty.
It is however impossible to derive any precise guidance from these awards.
In accordance with section 8(1) and (4), a judgment has to be made by domestic courts as to what is just and appropriate in the individual case, taking into account such guidance as is available from awards made by the European court, or by domestic courts under section 8 of the 1998 Act, in comparable cases.
It remains to apply the general principles which I have explained to the
particular cases which are before the court.
The case of Daniel Faulkner
In 1999 Daniel Faulkner, then aged 16, was sentenced to two years detention for an offence involving grievous bodily harm.
In 2001, at the age of 18, he was convicted of a second such offence.
He was sentenced to custody for life, in accordance with section 109 of the 2000 Act.
The tariff period was set at two years and eight and a half months.
That period expired in April 2004.
In May 2005 the Board recommended that Mr Faulkner should be transferred to open conditions, but that recommendation was rejected by the Secretary of State.
In January 2007 the Board made a similar recommendation, which was again rejected.
Mr Faulkners case was next due to be heard by the Parole Board in January 2008.
The Secretary of State was informed of that date, but the case was not referred to the Board by a case worker in the Ministry of Justice until 21 December 2007, making it impossible to fix a hearing for January 2008 as intended.
The case was however provisionally listed for a hearing in May 2008, pending the receipt of the necessary dossier of reports, known as the rule 6 dossier, from the prison where Mr Faulkner was detained.
That dossier should have been provided to the Board in about September 2007.
In the event, the dossier was not provided until 6 May 2008.
The reasons for that delay are not apparent.
Having received the dossier, the Board conducted a case management review on 16 May 2008, at which it decided that the hearing could not now proceed during that month.
It also directed the prison to provide further reports which it required and which were missing from the dossier.
Those reports were not received until 8 October 2008.
The reasons for the time taken to provide those reports are not apparent.
The Board then fixed a hearing to be held on 8 January 2009.
On 23 January 2009 the Board directed Mr Faulkners release, and he was released four days later.
On 22 May 2009 Mr Faulkners licence was revoked.
He had been arrested on suspicion of wounding, and had failed to attend a meeting with his offender manager.
He remained in hiding until 17 October 2009, when he was returned to prison.
He was subsequently acquitted of the charge of wounding.
The Board directed his release on 22 April 2010, and he was then released.
On 13 June 2011 Mr Faulkners licence was again revoked, following his arrest on suspicion of having committed an offence of grievous bodily harm.
He was subsequently acquitted of that charge.
He remains in custody.
In October 2008 Mr Faulkner was granted permission to apply for judicial review of the failure of the Board and the Secretary of State to conduct a review of his detention, in breach of article 5(4) of the Convention as given effect by the 1998 Act.
The application was heard in June 2009, while Mr Faulkner was unlawfully at large, and was dismissed ([2009] EWHC 1507 (Admin)).
The judge considered that, even if Mr Faulkner had succeeded on the merits of his application, no award of damages would have been appropriate.
An appeal against that decision was allowed by the Court of Appeal ([2010] EWCA Civ 1434; [2011] HRLR 165).
In a judgment delivered by Hooper LJ, with whom Sedley and Wilson LJJ agreed, the court held that: (1) Mr Faulkner had suffered a breach of article 5(4) lasting for a period of 10 months, between March 2008 and January 2009, due to unjustified delays on the part of the Ministry of Justice.
There had not been any unjustified delay by the Board in setting the hearing date, once all the reports were available. (2) There was no reason in this case to award damages for a breach of article 5(4) on the basis of a loss of a real chance of earlier release.
Rather, it was necessary for Mr Faulkner to show that he would have been released earlier if the breach had not occurred. (3) Mr Faulkner had shown on the balance of probabilities that he would have been released if the review had taken place in about March 2008. (4) As a result of the breach of article 5(4), Mr Faulkner had spent some 10 months in prison when he ought not to have done.
The court then invited parties to make written submissions on the quantum of damages.
Hooper LJs conclusion that Mr Faulkner could only recover for a loss of liberty if he established on a balance of probabilities that he would have been released earlier, and that it was not enough to show that there was a loss of a chance, was in my view correct.
As I have explained at paragraph 37, the Strasbourg courts approach to this issue reflects its limited fact finding role: it will make an award for a loss of liberty if that is uncontested, but otherwise it is likely either to decline to speculate, or to make an award for a loss of opportunity.
A domestic court is not however restricted in its fact finding capabilities.
In those circumstances, it is not in my view required by section 8 of the 1998 Act to apply a self denying ordinance, but should establish the facts of the case in the usual way, and apply the normal domestic principle that the claimant has to establish on a balance of probabilities that he has suffered loss.
Hooper LJ also rejected a submission that events following Mr Faulkners release were relevant to the issue of quantum.
He observed that it would be speculation to say that, if Mr Faulkner had been released earlier, he might have been back in prison a few months later for breach of his licence; and, furthermore, that taking into account that Mr Faulkner spent a further six months in prison following his recall, for conduct of which he was ultimately acquitted, there was no reason why his damages award should be reduced.
I agree.
The court cannot reduce the damages it would otherwise have awarded on the basis of speculation.
It is possible to conceive of circumstances in which a different conclusion might be appropriate: for example, where the claimant was recalled after committing an offence which he had been planning prior to his release and which would probably have been committed earlier if he had been released earlier.
This is not however a case of that kind.
On the facts of Mr Faulkners case, including his acquittal of any criminal responsibility in respect of the circumstances leading to his recall, the court is not in a position to say that, if he had been released earlier, he would simply have behaved that much sooner in the manner which led to the revocation of his licence.
In its decision on quantum ([2011] EWCA Civ 349; [2011] HRLR 489), the Court of Appeal ordered the Secretary of State to pay Mr Faulkner 10000.
The judgment of the court was delivered by Sedley LJ.
He correctly proceeded on the basis that the court should not adjust its award according to the degree of probability of release had the violation not occurred.
That follows from the general approach which I have discussed in paragraph 37.
Once the court has found on a balance of probabilities that the claimant would have been released earlier if there had been no violation, he should ordinarily be fully compensated for the harm which he has suffered.
In relation to quantum, the court arrived at the figure of 10000 by making a broad assessment of the award which appeared to it to be appropriate.
The Board appealed to this court against that award on the ground that it was excessive.
The fact that the appeal was taken by the Board, rather than by the Secretary of State, reflects the fact that the judgment is regarded as having significant consequences for the Board in relation to other cases, although the Secretary of State has agreed to be responsible for the discharge of any award made in the present case.
No point was taken on behalf of Mr Faulkner in respect of the identity of the appellant.
Mr Faulkner also appealed against the award on the ground that it was inadequate.
He was in addition granted permission to argue that his detention, after the date when his case ought to have been heard by the Board, constituted false imprisonment at common law, or a violation of article 5(1) of the Convention.
These contentions had not been advanced in the courts below, but no objection was taken on behalf of the Board or the Secretary of State.
For the reasons which I have explained at paragraph 16, the submission that Mr Faulkner was the victim of false imprisonment under English law must be rejected.
So too, for the reasons explained at paragraph 23, must the submission that he was detained in violation of article 5(1).
The problems which resulted in delay in Mr Faulkners case, according to the findings of the Court of Appeal, appear to have been the result of errors by administrative staff, of a kind which occur from time to time in any system which is vulnerable to human error.
It was extremely unfortunate that the errors occurred and resulted in the prolongation of Mr Faulkners detention, but they were not of such a character, and the delay was not of such a degree, as in my view to warrant the conclusion that there was a violation of article 5(1).
An appellate court will not interfere with an award of damages simply because it would have awarded a different figure if it had tried the case at first instance.
In these appeals however this court is being invited to give guidance as to the appropriate level of awards in cases of this character.
For that purpose, the court has undertaken a fuller analysis of the Strasbourg authorities than the Court of Appeal, in the course of which it has considered authorities to which that court was not referred.
In the light of that analysis, and applying the general approach which I have described in paragraph 75, it appears to me that an award in the region of 6500 would adequately compensate Mr Faulkner for his delayed release, bearing in mind the conditional and precarious nature of the liberty foregone.
That amount falls well short of the award of 10,000 made by the Court of Appeal.
In the circumstances, it is in my view appropriate for this court to allow the Boards appeal and to reduce the award accordingly.
The case of Samuel Sturnham
In May 2006 Samuel Sturnham was involved in an altercation outside a public house in the course of which he punched a man, who fell backwards and struck his head on the ground.
He died the next day.
In January 2007 Mr Sturnham was convicted of manslaughter.
He had no previous convictions for offences of violence.
An IPP sentence was imposed under section 225 of the 2003 Act, with a tariff period of two years and 108 days.
That period expired on 19 May 2009.
Mr Sturnhams case was referred to the Board by the Secretary of State on 10 July 2008, in good time for a review to take place around the time when his tariff expired.
The Secretary of State however misinformed the prison where Mr Sturnham was detained as to the date when the rule 6 dossier was required, with the result that it was not prepared in time.
The prison appears to have disregarded correspondence from the Board informing it of the date when the dossier was required, and subsequent correspondence informing it that the dossier was overdue.
The prison then failed to prepare the dossier in accordance with the Secretary of States instructions.
The Secretary of State had not followed the normal practice of setting up a mechanism for a reminder to be sent if the dossier was not provided in time.
As a result of these various administrative failures, the dossier was not provided to the Board until 30 July 2009.
A hearing was not convened until April 2010.
The delay in listing the case for hearing was due in part to a request by Mr Sturnham for an extension of time to make representations.
That hearing had to be adjourned, as Mr Sturnham was unwell.
A review finally took place on 10 May 2010.
The Board declined to order Mr Sturnhams release, but recommended his transfer to open conditions.
He was transferred to such conditions in August 2010.
His case was again reviewed in July and August 2011, when the Board directed that he should be released on licence.
He was released in September 2011.
Mr Sturnham brought proceedings for judicial review in which he challenged the lawfulness of the decision taken by the Board following the hearing in May 2010, and also the delay in holding that hearing.
The application was heard in March 2011 by Mitting J, who rejected the challenge in respect of the lawfulness of the decision.
In relation to the issue of delay, he held ([2011] EWHC 938 (Admin)) that: (1) Mr Sturnhams rights under article 5(4) were breached in that the hearing before the Board did not take place until approximately six months had elapsed from the date on which it should have taken place.
That delay resulted from the delay in the delivery of the dossier to the Board. (2) There was no prospect that Mr Sturnhams release would have been ordered if the hearing had taken place six months earlier. (3) It was more likely than not that the Board would have directed Mr Sturnhams transfer to open conditions six months earlier than occurred. (4) Such a transfer would not necessarily have resulted in his earlier release.
Nor would it have done so to a lower standard of probability. (5) Mr Sturnham had been caused anxiety and distress by the delay.
In view of the six month delay, the judge ordered the Secretary of State to pay Mr Sturnham 300 as compensation for the consequent anxiety and distress.
He arrived at that figure by taking as a guide the award of 1200 made in R (Guntrip) v Secretary of State for Justice [2010] EWHC 3188 (Admin), where the first hearing before the Board, following the expiry of the tariff, had not taken place until about two years after the latest date by which it ought to have been held.
The judge treated the award in Guntrip as amounting to 50 per month, and accordingly awarded 300 for a delay of six months.
The Secretary of State appealed against that award on the ground that no award should have been made.
Mr Sturnham appealed against the High Courts rejection of his challenge to the lawfulness of the Boards decision.
He also sought permission to cross appeal on the ground that the award should have been higher.
The Court of Appeal allowed the Secretary of States appeal, dismissed Mr Sturnhams appeal and quashed the award ([2012] EWCA Civ 452; [2012] 3 WLR 476).
It refused Mr Sturnham permission to cross appeal on quantum.
The judgment of the Court of Appeal was given by Laws LJ, with whom the other members of the court agreed.
Laws LJ took as his starting point the different treatment under the common law of wrongs in private law and in public law, and considered that an analogous distinction was reflected in some of the Strasbourg case law: in particular, in the cases of Nikolova v Bulgaria (1999) 31 EHRR 64, Niedbala v Poland (2000) 33 EHRR 1137 and Migo v Poland (Application No 24244/94) (unreported) 25 June 2002, which I have discussed at paragraphs 55 to 61.
In the light of those cases, Laws LJ found it difficult to see how cases in which awards had been made for frustration and anxiety, such as Oldham v United Kingdom (2000) 31 EHRR 813, Hirst v United Kingdom (Application No 40787/98) (unreported) 24 July 2001 and Blackstock v United Kingdom (2005) 42 EHRR 55, could be treated as constituting an authoritative body of principle.
He concluded that, in an article 5(4) case concerned with delay, just satisfaction would ordinarily be achieved by a declaration of the violation.
If however the violation involved an outcome for the claimant in the nature of a trespass to the person, just satisfaction was likely to require an award of damages.
The paradigm of such a case arose where the claimant's detention was extended by reason of the delay.
Cases where the consequence of the delay was merely stress and anxiety would not generally attract compensation in the absence of some special feature by which the claimant's suffering was materially aggravated.
Following that approach, no award was appropriate in Mr Sturnhams case.
Mr Sturnham applied to this court for permission to appeal against the Court of Appeals decision to dismiss his appeal and to allow the Secretary of States appeal.
The Board and the Secretary of State objected to the grant of permission.
The court directed that Mr Sturnhams application for permission should be heard with the appeal in Mr Faulkners case, with the appeal to follow if permission were granted.
In the event, the court granted Mr Sturnhams application in relation to the Court of Appeals decision to allow the Secretary of States appeal and quash the award, and heard the appeal on that point together with the appeal and cross appeal in Mr Faulkners case.
The court deferred consideration of Mr Sturnhams application in respect of the Court of Appeals decision to dismiss his appeal, since it raised a different issue.
At the hearing of the appeal, Mr Sturnham also sought permission to argue for a higher award.
He relied upon section 40(5) of the Constitutional Reform Act 2005 (the 2005 Act), which provides: The court has power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
That provision is concerned with questions which it is necessary to determine in order to do justice in an appeal.
It does not provide a means of circumventing the need to obtain permission to appeal, where such permission is necessary in order to raise the question in issue.
As I have explained, Mr Sturnham was refused permission to appeal in respect of the quantum of the award.
It is unnecessary to determine whether the award was too low in order to do justice in his appeal against the quashing of the award.
Mr Sturnhams application should therefore be refused.
Turning then to Mr Sturnhams appeal against the quashing of his award of damages, his appeal should in my view be allowed.
The Court of Appeal was wrong to take as its starting point the treatment of wrongs under the common law.
Following R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673, the starting point, at this stage in the development of the remedy of damages under section 8 of the 1998 Act, should be the practice of the European court.
The Court of Appeal also erred in its interpretation of the Strasbourg case law.
As I have explained at paragraphs 58 to 60, the Nikolova line of authority is not concerned with violations resulting from delay.
The Oldham line of authority illustrates how cases of the latter kind are dealt with.
It is unfortunate that the case of HL v United Kingdom (2004) 40 EHRR 761, which contains the clearest explanation of the distinction between the two lines of authority, does not appear to have been cited to the Court of Appeal.
Approaching Mr Sturnhams case in the light of the authorities from Oldham to Betteridge, it is apparent that an award of damages was appropriate as compensation for the frustration and anxiety which he suffered.
The frustration and anxiety occasioned by a delay of six months cannot in my view be regarded as insufficiently severe to warrant such an award.
In the light of the awards made in the Strasbourg cases, of which Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013 is the most nearly in point, the award of 300 which was made by the judge was reasonable in the circumstances of this case.
Conclusion
For the reasons I have explained, I consider that the appeal in the case of Mr Faulkner should be allowed, and that the sum of 10000 awarded as damages by the Court of Appeal should be reduced to 6500.
The cross appeal should be dismissed.
Mr Sturnhams appeal against the quashing of his award of damages should be allowed.
Postscript: submissions on the case law of the European Court of Human Rights
In the present appeals, the Strasbourg case law was presented to the court in the usual way.
The court was provided with bound volumes of authorities in which the cases appeared in alphabetical order, and counsel referred the court to the authorities in the order in which they featured in their submissions.
Around 75 Strasbourg authorities were cited to the court.
It was a time consuming process to be taken through each of the cases at least twice, as each counsel in turn presented their analysis of it.
Eventually the court requested to be provided with a schedule of the kind I shall shortly explain.
The manner in which the authorities were presented also made it difficult for the court to discern how the case law had developed over time, as it was difficult to keep track of how the cases related to one another chronologically.
Counsel are not to be criticised for having proceeded in this way, but with the benefit of hindsight it is apparent that it would be possible to present the authorities to the court in a more helpful way.
With that aim in mind, the following guidance should be followed in any future cases where it is necessary to cite substantial numbers of Strasbourg decisions on the application of article 41 with a view to identifying the underlying principles.
That exercise will not of course be necessary in relation to any future case on article 5(4), which should take the present judgment as its starting point.
First, the court should be provided with an agreed Scott schedule, that is to say a table setting out the relevant information about each of the authorities under a series of columns.
The information required is as follows: 1.
The name and citation of the case, and its location in the bound volumes of authorities. 2.
The violations of the Convention which were established, with references to the paragraphs in the judgment where the findings were made. 3.
The damages awarded, if any.
It is helpful if their sterling equivalent at present values can be agreed. 4.
A brief summary of the appellants contentions in relation to the case, with references to the key paragraphs in the judgment. 5.
A brief summary of the respondents contentions in relation to the case, again with references to the key paragraphs.
Secondly, the court should be provided with a table listing the authorities in chronological order.
Thirdly, it has to be borne in mind that extracting principles from a blizzard of authorities requires painstaking effort.
The submissions should explain the principles which counsel maintain can be derived from the authorities, and how the authorities support those principles.
Otherwise, to adapt Mark Twains remark about life, the citation of authorities is liable to amount to little more than one damn thing after another; or even, to borrow a well known riposte, the same damn thing over and over again.
LORD CARNWATH
I agree with the disposal of the appeals proposed by Lord Reed, and am content to adopt his reasons.
I add a concurring judgment of my own, not by way of disagreement, but merely to suggest an alternative, and perhaps less laborious, route to the same end.
It is based on a more selective approach to the Strasbourg jurisprudence, which also accords more closely to that of the Court of Appeal in this case.
Given the enormous workload of the Strasbourg court, and the varied composition of the chambers to which cases are allocated, it is unrealistic to treat all decisions as of equal weight, particularly on the issue of damages.
The great majority of such awards are made on an equitable basis reflecting particular facts.
No doubt the judges attempt to achieve a degree of internal consistency.
But most of the decisions are not intended to have any precedential effect, and it is a mistake in my view to treat them as if they were.
Principles under the Human Rights Act 1998
The starting point must be section 8 of the Human Rights Act 1998, the relevant parts of which have been set out by Lord Reed.
Of particular significance is section 8(4) which requires the court to take into account the principles applied by the European Court of Human Rights in relation to the award of compensation under article 41 of the Convention.
The emphasis on principles applied by the Strasbourg court has been seen as problematic.
In their review in 2000 (Damages under the Human Rights Act 1998, Law Com No 266; Scot Law Com No 180), the Law Commissioners drew attention to the striking lack of clear principles relating to the award of damages in the Strasbourg case law (para 3.4).
They attributed this to a number of factors, including the diverse traditions in the countries within the jurisdiction of that court: On the one hand, the German and Dutch systems have rules as detailed as the English.
Their theories of causation are highly developed, and pecuniary and non pecuniary loss are dealt with under clearly separated headings.
In contrast, French and Belgian courts proceed empirically in matters of causation, with a minimum of theorising and swayed by considerations of fairness as much as causal potency.
Thus, in French private law, for example, the measure of damages is regarded as a matter for the sovereign power of assessment of the judge of first instance.
The comparative lack of structure is most evident in relation to the assessment of the relevant damage.
This is always treated as a question of fact, thus leaving the judge in the lower court with a degree of unstructured discretion to adjust the award as he or she sees fit.
As long as the award is framed properly in law, the appeal courts will not interfere with it.
Conventional scales are sometimes used, but must not be treated as rules of law.
In particular, French judges do not draw clear distinctions between different heads of loss.
The Strasbourg practice appears to be close to the French tradition. (para 3.7 8).
They also cited practical factors: At a more practical level, the character and size of the court inevitably affects its ability to deal with detailed issues of damages in a consistent way.
It is a large body, sitting in a number of different constitutions.
The judges are drawn from different backgrounds and diverse jurisdictions, and will have varied experiences of awarding damages.
It is inevitable that their views as to the proper level of compensation, and the basis on which it should be assessed, will differ. (para 3.10)
Against that background, there was force in the comments of the academic commentators cited by the Commissions (paras 3.12).
Thus Dinah Shelton commented: It is rare to find a reasoned decision articulating principles on which a remedy is afforded.
One former judge of the European Court of Human Rights privately states: We have no principles.
Another judge responds, We have principles, we just do not apply them. (D Shelton, Remedies in International Human Rights Law (1999) p 1) Similarly, Lester and Pannick saw the courts decisions on just satisfaction as little more than equitable assessments of the facts of the individual case, and urged that there is a danger of spending time attempting to identify principles that do not exist. (Lord Lester of Herne Hill and D Pannick (eds), Human Rights Law and Practice (1999) para 2.8.4, note 3).
As will be seen, the court has taken some steps to address these criticisms by choosing particular cases in which to offer more reasoned justifications.
Domestic case law
Since the Law Commissions report a significant body of domestic case law has developed, the most important authorities being Anufrijeva v Southwark London Borough Council [2004] QB 1124 (article 8), in the Court of Appeal, and R (Greenfield) v Secretary of State for the Home Department [2005] 1 WLR 673 (article 6) in the House of Lords.
Neither was directly concerned with a violation of article 5(4), as in this case.
In the latter Lord Bingham referred to the risk of error if Strasbourg decisions given in relation to one article of the Convention are read across as applicable to another (para 7).
Those words seem to me of general application, even though he was drawing a specific contrast with article 5(5), which (uniquely in the Convention) confirms a specific right to compensation for arrest or detention in breach of that article.
It appears from other Strasbourg authority that article 5(5) has limited effect in relation to the procedural rights conferred by articles 5(3) and (4), under which entitlement to compensation depends on the circumstances of each case (Pavletic v Slovakia (Application No 39359/98 (unreported) 22 June 2004, para 95).
Lord Binghams speech in Greenfield provides the most recent, authoritative guidance on the correct approach of the domestic courts to the issue of compensation for breaches of the Convention rights.
As a general comment on the Strasbourg cases on this issue, Lord Bingham adopted the words of the Court of Appeal in Anufrijeva, paras 52 53: The remedy of damages generally plays a less prominent role in actions based on breaches of the articles of the Convention, than in actions based on breaches of private law obligations where, more often than not, the only remedy claimed is damages.
Where an infringement of an individual's human rights has occurred, the concern will usually be to bring the infringement to an end and any question of compensation will be of secondary, if any, importance.
As Lord Reed has explained, an important point in the speech is the confirmation that, in accordance with section 8(4) of the 1998 Act, domestic British courts should look to Strasbourg, rather than to common law precedents, for guidance on the award and assessment of damages (paras 6, 19).
Lord Bingham rejected as unduly legalistic an argument that the levels of Strasbourg awards were not principles within the meaning of section 8.
Greenfield itself related to a disciplinary decision in a prison resulting in additional days of imprisonment.
By the time the case reached the House of Lords it had been conceded that there was a violation of article 6, in that the decision had not been made by an independent tribunal, and there had been no right to legal representation; the only issue therefore was damages.
It is true, as Lord Reed notes (para 36), that Lord Binghams speech contained analysis of numerous decisions of the European court, few of which contained any articulated statement of principle.
However, that exercise does not appear to have been critical to the ultimate decision.
He was able to identify a clear and relevant statement of practice in a decision of the Grand Chamber, Kingsley v United Kingdom (2002) 35 EHRR 177, para 43: In all the circumstances, and in accordance with its normal practice, in civil and criminal cases, as regards violations of article 6(1) caused by failures of objective or structural independence and impartiality, the court does not consider it appropriate to award monetary compensation to the applicant in respect of loss of procedural opportunity or any distress, loss or damage allegedly flowing from the outcome of the domestic proceedings. (emphasis added) Lord Bingham commented: Thus, whatever the practice in other classes of case, the ordinary practice is not to make an award in cases of structural bias. (para 16) On the facts of the case before him, he found no special feature which warrants an award of damages (para 29).
I agree, respectfully, with Lord Bingham that the extreme view that there are no principles at all is inconsistent with the underlying assumption of section 8(4).
However, the specific reference to principles in section 8(4) must be given some effect.
Those words may be contrasted with the more general duty imposed on the domestic courts by section 2(1).
The duty, when determining any question in connection with a Convention right is to take into account any judgment of the Strasbourg court, so far as considered relevant to the proceedings in which the question arises (section 2(1)).
The more specific wording of section 8(4) in my view reflects the reality that not all decisions of the Strasbourg court in relation to damages will be determinative, or even illustrative, of any principle of general application.
Accordingly, while Strasbourg case law must be the starting point, the primary search in my view should be for cases, which are not only referable to the particular article and type of case under consideration, but are also identifiable as more than simple, one off decisions on their own facts.
This may be, for example, because they are expressed in terms of principle or practice (as in Kingsley), or contain substantive discussion of principle, or can be shown to be part of a recognisable trend applied in a series of cases on the same subject matter.
The court should not be subjected to a blizzard of authorities (as Lord Reed describes it).
It is incumbent on those arguing for a principle to show why the cases on which they rely meet those requirements.
Where the court is faced with an apparent conflict between two different lines of approach, the court may have to choose between them in as principled a way as the context makes possible.
Principles under article 5(4)
That approach can be illustrated by reference to the cases reviewed by Lord Reed in the present case.
In Sturnham in the Court of Appeal, Laws LJ rightly paid tribute to the helpful discussion of the cases under article 5(4) by Stanley Burnton J in R (KB) v South London and South and West Region Mental Health Review Tribunal [2004] QB 936, para 32ff, which had also been cited with approval by Lord Woolf CJ, in Anufrijeva v Southwark London Borough Council [2004] QB 1124, para 63.
The principal foundation of the reasoning of both Stanley Burnton J and Laws LJ lay in the judgment in Nikolova v Bulgaria (1999) 31 EHRR 64.
The facts and the reasoning of the court are set out by Lord Reed (paras 56 57).
It is noteworthy that an award was refused, even though the issue between the parties seems to have been one of quantum only.
The claim was for US$15,000, which the respondent government described as excessive, relying on an award of US$3,500.
The Commissions Delegate invited the court to award an equitable amount (para 75).
However, the court refused to make any award, for the reasons given in the passage quoted by Lord Reed.
In my view, the courts below were correct to treat this decision of the Grand Chamber (presided over by the President, Judge Wildhaber) as intended to establish an approach of general application in relation to violations of article 5(3) and (4).
It is true, as Lord Reed observes (para 62), that the second paragraph of that passage refers to the particular circumstances of the case.
However, it is clear from the terms of the judgment as a whole, and from its treatment in later cases, that it was intended to draw a line under discrepancies in the previous jurisprudence, and to provide more consistent guidance for the future.
That it followed a full debate within the court, and was regarded at the time as dealing with a controversial issue of principle, is apparent also from the strength of the dissents, notably that of Judge Bonello (joined by Judge Maruste).
Of interest also is the partly dissenting opinion of Judge Fischbach (joined by Judges Kuris and Casadevall), which complained that the principle adopted by the majority was such as to restrict in advance the scope for awarding compensation for non pecuniary damage; whereas in their view that issue was one to be determined in the light of the particular facts of each case (para O II5).
Judge Greve, also partly dissenting, thought it would be preferable for the court normally to use its discretion to award some equitable satisfaction, the issue then being in each case to settle the amount (para O III6).
It is clear that she understood the majority judgment to reject that approach.
That understanding of Nikolova was reinforced by my own experience as a participant shortly afterwards in another Grand Chamber decision on the same issue, Caballero v United Kingdom (2000) 30 EHRR 643, in which many of the same judges took part (see my article, cited before us without objection, ECHR Remedies from a Common Law Perspective [2000] ICLQ 517, in which I related that case to the Law Commissions then current review, in which I was directly involved as Chairman of one of the commissions).
The judgment in Caballero repeated (in para 30) the substance of the relevant paragraph in Nikolova, but indicated that because of factors special to the instant case (described in para 31) it felt it right in the particular circumstances to make an equitable award of 1,000.
That case was in turn distinguished in SBC v United Kingdom (2001) 34 EHRR 619, para 30, where no award was made, on the grounds that, in Caballero, unlike the instant case, the government had in effect accepted that apart from the breach the claimant would have had a good chance of being released on bail prior to his trial (para 31).
Another important decision from that period, also highlighted by Stanley Burnton J, is Migon v Poland (Application No 24244/94) (unreported) 25 June 2002.
A breach of article 5(4) had been found, arising from the failure to provide the applicant with the documents necessary to give him an adequate basis on which to address the arguments relied on in support of the decisions to prolong his detention (para 86).
The Chamber chaired by Sir Nicholas Bratza rejected the claim for damages, following Nikolova, in which it was said: the court stated that just satisfaction can be awarded only in respect of damage resulting from a deprivation of liberty that the applicant would not have suffered if he or she had had the benefit of the procedural guarantees of article 5 of the Convention and concluded, according to the circumstances, that the finding of a violation constituted sufficient just satisfaction in respect of any non pecuniary damage suffered. (para 91) 92.
In the present case, the court cannot speculate as to whether the applicant would have been detained if the procedural guarantees of article 5(4) of the Convention had been respected in his case.
Consequently, the court considers that the non pecuniary damage claimed is adequately compensated by the finding of a violation of this provision.
Faced with a claim of US$300,000 for pecuniary and non pecuniary loss, alleged to arise from loss of family life, destruction of a business, and pain and distress (para 89), the court made no award, since it was not possible to speculate whether the violation of article 5(4) made any difference to the detention.
The continuing relevance of the principle or practice established in Nikolova is apparent from the subsequent cases in which it has been cited (one of the more recent being Mitreski v Former Yugoslav Republic of Macedonia (Application No 11621/09) (unreported) 25 March 2010) and the absence of any case in which it has been directly questioned.
Mr Southey has sought to rely on some cases where awards have been made in apparent departure from the Nikolova approach.
Some are referred to by Lord Reed (para 61).
I find these of no real assistance.
As I read them, they were decisions on their own facts, and did not purport to reformulate principle.
Mr Southey is, however, on stronger ground, when he argues for an exception to the Nikolova principle, applicable to breaches involving delay in proceedings governing release from detention.
In support of that distinction he relies on the decision in HL v United Kingdom (2004) 40 EHRR 761, which again is significant because it contains a reasoned discussion of principle.
The case has been referred to by Lord Reed (para 60).
The court found breaches of both article 5(1) and (4), arising out of the lack of fixed procedural rules governing the detention of a mental patient.
The court declined to make an award for non pecuniary loss.
The judgment (by a chamber, which included Judge Bratza and other judges who had been parties to Nikolova) dealt at some length with the issue of non pecuniary loss.
The court noted that in Nikolova the court had endorsed the principle that just satisfaction under articles 5(3) and (4) could only be awarded in respect of damage from a deprivation of liberty that the applicant would not have suffered apart from the violation.
It saw no reason to depart from the position outlined in the Nikolova judgment concerning just satisfaction as regards distress or frustration suffered on account of the absence of adequate procedural guarantees (paras 148 149).
However (in the passage quoted by Lord Reed para 60), it distinguished cases in which awards had been made following findings of unreasonable delay in the domestic proceedings determining applications for release from detention.
These were seen as consistent with the award of non pecuniary damages following a finding of unreasonable delay under article 6(1).
Despite the procedural nature of such a violation, it was accepted that in such cases there could be a causal link between the violation (delay) and the non pecuniary damage claimed.
This is another example of the court specifically addressing the principles to be applied to the award of damages under article 5.
It is of importance in considering the three cases on which Mr Southey principally relies, which were all cases relating specifically to delay before the Parole Board: Oldham v United Kingdom (2000) 31 EHRR 813; Hirst v United Kingdom (Application No 40787/98) (unreported) 24 July 2001; Blackstock v United Kingdom (2005) 42 EHRR 55.
They have all been described by Lord Reed (paras 42, 43, 45), along with a series of other cases less close on their facts to the present.
It is right now to add to them another very similar case: Betteridge v United Kingdom (Application No 1497/10) (unreported) 29 January 2013.
Laws LJ commented that, against the background of the cases analysed by Stanley Burnton J in KB, these cases could not be treated as constituting any authoritative body of principle (para 20).
Taken on their own, I might have been inclined to agree.
However HL, which was not referred to by the Court of Appeal, puts a different perspective on the earlier cases.
There are other factors which in my view give support to Mr Southeys submission that these cases do exemplify a principle directly relevant to cases of the kind before us: i) The issue of damages for non pecuniary loss under article 5(3) and (4) seems to have been subject to vigorous debate within the court between 2001 and 2002. ii) The three Parole Board cases demonstrated a consistency of approach, expressed in consistent language, over a period of five years to cases of significant delay before the Parole Board.
The court was willing to make an award of 1,000 as equitable compensation for non pecuniary loss, regardless of the prospects of earlier release. iii) That approach was maintained both before and after the Migon decision.
Judge Bratza, who led the chamber in Migon and was party to the judgment in HL, was also involved in all three decisions.
There is no indication that he or the chamber as a whole saw any conflict between them.
The natural explanation is that drawn by the court itself in HL.
It is also apparent that not every case of delay attracts an award.
In Rutten v The Netherlands (Application No 32605/96) (unreported) 24 July 2001), where the court found a breach of article 5(4) because of delays in access to a court for a detained person, the court found that any feeling of frustration engendered by the length of the proceedings was not to the extent of justifying the award of compensation (para 59).
As Mr Grodzinski says, it is not easy to work out how long the breach lasted.
The claim was for actual loss of liberty for 17 days (para 57), but it appears that the length of proceedings to which the court was referring was several months.
Similarly, in Pavletic v Slovakia (Application No 39359/98) (unreported) 22 June 2004, no award was made in respect of a failure to rule on a petition for release from detention for a period of almost a year, that is, from the date of the petition made on 10 January 1996 (para 89) until the applicants release on 26 January 1997 (para 17).
The court noted that the period of detention had been deducted from his subsequent sentence and made no separate award for any prejudice which the applicant may have suffered (para 110).
It seems therefore that, where there is no finding of actual or possible loss of liberty, questions of degree are relevant, and that there is a threshold of distress below which no award need be made.
For these purposes I would concentrate on the cases which are directly related to the present facts, involving failures in the review of detention following conviction.
Although the Strasbourg court has declined to lay down a precise measure of acceptable delay, the three cases relied on by Mr Southey seem, as far as one can judge, to have involved unacceptable delays of around a year or more, justifying awards of 1,000.
A national court, paying due regard to Strasbourg principles, but also in the interests of certainty and proportionality, may properly take the view that there should be a threshold, defined by a period of excessive delay, in relation to which a breach of article 5(4) may be established, but no monetary award is necessary.
Although I would have regarded a threshold of six months as consistent with the Strasbourg jurisprudence, I do not dissent from the guidance proposed by Lord Reed or from his approval of the award in Mr Sturnhams case.
| These appeals concern the circumstances in which a prisoner serving a life sentence or an indeterminate sentence of imprisonment for public protection (IPP), who has served the minimum period specified for the purposes of retribution and deterrence (the tariff), and whose further detention is justified only if it is necessary for the protection of the public, should be awarded damages for delay in reviewing the need for further detention following the expiry of the tariff.
They are also concerned with the quantum of such damages.
Since 1997, legislation has required judges to impose life sentences on a wider range of offenders than was previously the case.
In addition, IPPs were introduced in April 2005.
It is for the Parole Board of England and Wales (the Board) to decide whether to direct the release of a life or IPP prisoner whose tariff has expired.
The prisoners case must first be referred to the Board by the Secretary of State for Justice (the Secretary of State).
The increase in the number of life prisoners and the introduction of IPP sentences resulted in an increase in the Boards workload, but its resources were not increased.
This resulted in delay in the consideration of post tariff prisoners cases.
That delay has implications under the Human Rights Act 1998 (the 1998 Act), which gives effect to Article 5 of the European Convention on Human Rights (the Convention).
Article 5(1) requires that detention must throughout its duration remain causally connected to the objectives of the sentencing court.
In relation to post tariff prisoners, that objective is the protection of the public.
In order to comply with Article 5(4), the Board has to review the necessity for the continued detention of post tariff prisoners speedily upon the expiry of their tariff and at reasonable intervals thereafter.
The 1998 Act also provides that the remedies for a violation of a Convention right include damages.
Mr Faulkner was sentenced in 2001 to life imprisonment for a second offence involving grievous bodily harm.
Mr Sturnham was convicted of manslaughter in 2007 and given an IPP sentence.
In each case, there was a delay in the holding of a hearing before the Board after the tariff had expired, due to administrative errors for which the Secretary of State was responsible.
Both men were eventually released following Board hearings, but Mr Faulkner was twice recalled to prison in respect of allegations of which he was acquitted, and remains in custody.
Each sought judicial review of the failure by the Board and the Secretary of State to conduct a review of his detention speedily, as required by Article 5(4).
Mr Faulkner was unsuccessful in the High Court, but the Court of Appeal held that the Secretary of State had breached Article 5(4), that Mr Faulkner would have been released 10 months earlier than he was but for that breach, and that the Secretary of State should therefore pay him 10,000 in damages.
In Mr Sturnhams case, the High Court held that there had been a breach of Article 5(4) due to a delay of 6 months, that he had been caused anxiety and distress by the delay, but that there was no prospect that he would have been released any earlier had the hearing taken place speedily.
The Secretary of State was ordered to pay him 300, but that award was quashed by the Court of Appeal.
In Mr Faulkners case, the Board appeals to the Supreme Court on the ground that the award of damages was excessive.
Mr Faulkner cross appeals on the ground that the award was inadequate and that his imprisonment during the period of
delay constituted false imprisonment at common law or a violation of Article 5(1).
Mr Sturnham seeks permission to appeal against the Court of Appeals decision to quash the award of damages to him.
The Supreme Court allows the Boards appeal in Mr Faulkners case, reduces the damages awarded to him to 6,500, and dismisses his cross appeal.
The Court grants Mr Sturnham permission to appeal and allows his appeal.
Lord Reed gives the lead judgment, with which Lord Neuberger, Lord Mance and Lord Kerr agree.
Lord Carnwath delivers a concurring judgment.
Mr Faulkners argument that the detention of a life prisoner constitutes false imprisonment if it continues beyond the point at which the prisoner would have been released if a hearing had been held in accordance with Article 5(4) must be rejected.
That detention is still authorised by statute, and is therefore lawful until the Board directs release [16, 86].
Nor was Mr Faulkner the victim of a violation of Article 5(1).
Such a violation requires exceptional circumstances warranting the conclusion that continued detention has become arbitrary, which were not present in Mr Faulkners case [17 23, 86].
On the question of the award of damages under the 1998 Act, the courts should be guided primarily by the principles applied by the ECtHR, which may be inferred from any clear and consistent practice of that court.
The quantum of such awards should broadly reflect the level of awards made by the ECtHR in comparable cases brought by applicants from the UK or other countries with a similar cost of living [39].
The courts should resolve disputed issues of fact in the usual way even if the ECtHR in similar circumstances, due to the nature of its role, would not do so [39, 82].
Where it is established on the balance of probabilities that a violation of Article 5(4) has prolonged the detention of a prisoner past the point at which he would otherwise have been released, damages should ordinarily be awarded.
The amount of such damages will be a matter of judgment, reflecting the facts of the case and having regard to guidance from the ECtHR and the national courts in comparable cases [75].
Pecuniary losses should be compensated in full [53, 70].
Though relevant in some circumstances, it will not ordinarily be appropriate to take into account as a mitigating factor that a claimant was recalled to prison following his eventual release [83].
Nor should damages be awarded merely for the loss of a chance of earlier release [82], or adjusted according to the degree of probability of release if the violation of Article 5(4) had not occurred [84].
Appellate courts do not ordinarily interfere with an award of damages simply because they would have awarded a different figure if they had tried the case.
However, as the Court is in this case being asked to give guidance on the appropriate level of awards, and having regard to awards made by the ECtHR in other cases and to the fact that the liberty enjoyed by a person released on licence is precarious and conditional, the Court considers that an award of 6500 would adequately compensate Mr Faulkner [87].
Even where it is not established that an earlier hearing would have resulted in earlier release, there is a strong presumption that delay which violated Article 5(4) has caused the prisoner frustration and anxiety.
Where such a presumption is not rebutted, an award of damages should be made, though on a modest scale [53, 67 68].
No such award should be made in cases where the frustration and anxiety were insufficiently severe to warrant an award, although that is unlikely to be the case where the delay was of around three months or more [66].
Following that approach, and having regard to ECtHR authorities, the award of 300 to Mr Sturnham was reasonable in his case [97].
Lord Carnwath concurs with the reasoning and conclusions in Lord Reeds judgment, but suggests a more selective approach to ECtHR authorities.
He suggests focusing on those cases which explicitly decide points of principle, and eschewing those which are simply assessments of the facts [104 127].
|
We have before us two cases under the Extradition Act 2003 involving the parents of young children.
In one, an Italian court has issued a European Arrest Warrant (EAW) in respect of both parents of three children now aged 11, 8 and 3, the parents having been convicted of a series of drug trafficking offences.
The parents are both British nationals.
In the other, a Polish court has issued EAWs in respect of the mother of five children aged 21, 17, 13, 8 and 3, who is accused of offences of dishonesty.
The parents are both Polish nationals who have been living here since 2002, after the alleged offences were committed.
No one seriously disputes that the impact upon the younger children of the removal of their primary carers and attachment figures will be devastating.
The issue is the relevance of their interests in the extradition proceedings.
The question certified by the Administrative Court in each of the two cases before us is as follows: Where, in proceedings under the Extradition Act 2003, the article 8 rights of children of the defendant or defendants are arguably engaged, how should their interests be safeguarded, and to what extent, if at all, is it necessary to modify the approach of the Supreme Court in Norris v Government of the United States of America (No 2) in light of ZH (Tanzania)? It is necessary, therefore, to consider what each of those cases decided.
In Norris v Government of the United Sates of America (No 2) [2010] UKSC 9, [2010] 2 AC 487, the issue was the compatibility with the article 8 rights of both Mr and Mrs Norris of extraditing Mr Norris to the USA to face charges of conspiracy to obstruct justice.
The couple were both in their mid sixties and had a long and close marriage which made them highly dependent on one another.
The husband had a variety of health problems, including a history of prostate cancer and other ailments.
The wife was suffering from either a major depression of moderate severity or a moderate depressive episode.
The proceedings had caused her severe psychological suffering and mental deterioration which would be greatly worsened were her husband to be extradited.
Lord Phillips gave the leading judgment, with which all other members of the court agreed, including those who added short judgments of their own.
He agreed that there could be no absolute rule that any interference with article 8 rights as a consequence of extradition will be proportionate.
On the other hand, it was certainly not right to equate extradition with expulsion or deportation in this context (para 51).
It was instructive to consider the approach of the Convention to dealing with criminals or suspected criminals in the domestic context.
Normally it is treated as axiomatic that the interference with article 8 rights consequent upon detention is proportionate (para 52).
He rejected counsels submission that it was wrong to apply a categorical assumption about the importance of extradition in general.
Such an assumption was an essential element in the task of weighing the public interest against the rights of the individual.
It did not mean that the latter could never prevail, but the interference with human rights will have to be extremely serious if the public interest is to be outweighed (para 55).
Thus: The reality is that it is only if some quite exceptionally compelling feature, or combination of features, is present that interference with family life consequent upon extradition will be other than proportionate to the objective that extradition serves.
Instead of saying that interference with article 8 rights can only outweigh the importance of extradition in exceptional circumstances it is more accurate and more helpful, to say that the consequences of interference with article 8 rights must be exceptionally serious before this can outweigh the importance of extradition. (para 56)
However, he also rejected the submission that the gravity of the offence could never be relevant.
Usually it would not be.
If, however, the particular offence is at the bottom of the scale of gravity, this is capable of being one of a combination of features that may render extradition disproportionate . (para 63).
Furthermore, the impact upon family life was not to be considered only from the point of view of the person facing expulsion.
In Beoku Betts v Secretary of State for the Home Department [2009] AC 115, the House of Lords concluded that, when considering interference with article 8, the family unit had to be considered as a whole, and each family member had to be treated as a victim.
This also applied to extradition (para 64).
Finally, Indeed, in trying to envisage a situation in which interference with article 8 might prevent extradition, I have concluded that the effect of extradition on innocent members of the extraditees family might well be a particularly cogent consideration.
If extradition for an offence of no great gravity were sought in relation to someone who had sole responsibility for an incapacitated family member, this combination of circumstances might well lead a judge to discharge the extraditee . (para 65).
Agreeing with Lord Phillips, Lord Hope also stressed that exceptionality is not a legal test and that extradition was not a special category which diminishes the need to examine carefully the way the process will interfere with the individuals right to respect for his family life (para 89).
The public interest in extradition is a constant factor and will always be a powerful consideration to which great weight must be attached.
Against this, those aspects of the article 8 right which must necessarily be interfered with in every case where criminal proceedings will be brought will carry very little, if any, weight.
What is the extra compelling element that marks the given case out from the generality? (para 91).
The only feature of this case which was not inherent in every extradition case was the delay (para 93).
Lord Mance cautioned against formulations such as a high threshold, striking and unusual facts or exceptional circumstances.
They could be read as suggesting that the public interest in extradition is the same in every case, when it is not, and also that the extraditee has some sort of legal onus to overcome the threshold, when in fact the competing public and private interests have to be weighed against each other (para 108).
Further, such formulations may tend to divert attention from consideration of the potential impact of extradition on the particular persons involved . towards a search for factors (particularly external factors) which can be regarded as out of the run of the mill.
Some circumstances which might influence a court to find that the interference was unjustified could hardly be described as exceptional or striking and unusual: Take a case of an offence of relatively low seriousness where the effect of an extradition order would be to sever a genuine and subsisting relationship between parent and baby, or between one elderly spouse and another who was entirely dependent upon the care performed by the former (para 109).
He too favoured balancing the general public interest in extradition to face trial for a serious offence against the exceptional seriousness of the consequences which would have to flow from the anticipated interference with private and family life in the particular case (para 114).
We can, therefore, draw the following conclusions from Norris: (1) There may be a closer analogy between extradition and the domestic criminal process than between extradition and deportation or expulsion, but the court has still to examine carefully the way in which it will interfere with family life. (2) There is no test of exceptionality in either context. (3) The question is always whether the interference with the private and family lives of the extraditee and other members of his family is outweighed by the public interest in extradition. (4) There is a constant and weighty public interest in extradition: that people accused of crimes should be brought to trial; that people convicted of crimes should serve their sentences; that the United Kingdom should honour its treaty obligations to other countries; and that there should be no safe havens to which either can flee in the belief that they will not be sent back. (5) That public interest will always carry great weight, but the weight to be attached to it in the particular case does vary according to the nature and seriousness of the crime or crimes involved. (6) The delay since the crimes were committed may both diminish the weight to be attached to the public interest and increase the impact upon private and family life. (7) Hence it is likely that the public interest in extradition will outweigh the article 8 rights of the family unless the consequences of the interference with family life will be exceptionally severe.
I turn, therefore, to ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166.
This was an expulsion case.
The mother had been in the United Kingdom since 1995.
She formed a relationship with a British citizen and had two children with him, born in 1998 and 2001, both of whom were British citizens and had lived here all their lives.
They had a good relationship with their father, although the parents were now separated.
Because of his health and other matters, their father would not be able to look after them if their mother were removed to Tanzania, so they would have to go with her.
Their mother had an appalling immigration history.
She had made three unsuccessful applications for asylum, one in her own name and two in false identities.
Because of this she had twice been refused leave to remain under different policy concessions.
An earlier human rights application had also been refused, as was the current claim, by the Secretary of State, the immigration appellate authorities, and the Court of Appeal.
Before the case reached the Supreme Court, however, the Secretary of State had conceded that on the particular facts of the case removing the mother would be a disproportionate interference with the article 8 rights of the children.
I gave the leading judgment, and all the other members of the court, including those who added short judgments of their own, agreed with it.
The Strasbourg jurisprudence had adopted rather different approaches to the assessment of article 8 rights when considering the expulsion of, on the one hand, long settled foreigners who had committed criminal offences and, on the other hand, foreigners who had no right to be or remain in the country.
In the former type of case, the best interests and well being of the children had been explicitly recognised as a factor by the Grand Chamber in ner v The Netherlands (2006) 45 EHRR 421, at para 58.
In the latter type of case, this was not explicitly listed as a factor in, for example, Rodrigues da Silva, Hoogkamer v The Netherlands (2006) 44 EHRR 729, at para 39.
Nevertheless, the court had in fact taken into account that it was clearly in the best interests of the child that her mother remain in the Netherlands.
Significantly, the childs interests prevailed, despite the fact that the [mother] was residing illegally in the Netherlands at the time of [the childs] birth (para 44).
In Neulinger v Switzerland (2010) 28 BHRC 706, the Grand Chamber had held that the Convention cannot be interpreted in a vacuum but must be interpreted in harmony with the general principles of international law (para 131).
These of course included article 3.1 of the United Nations Convention on the Rights of the Child: In all actions concerning children, whether undertaken by public or private social welfare institutions, courts of law, administrative authorities or legislative bodies, the best interests of the child shall be a primary consideration.
I pointed out that despite the looseness with which these terms are sometimes used, a primary consideration is not the same as the primary consideration, still less as the paramount consideration (para 25).
Where the decision directly affects the childs upbringing, such as the decision to separate a child from her parents, then the childs best interests are the paramount, or determinative, consideration.
Where the decision affects the child more indirectly, such as the decision to separate one of the parents from the child, for example by detention or deportation, then the childs interests are a primary, but not the paramount, consideration (para 25).
As the Federal Court of Australia had explained in Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133, at para 32: [The tribunal] was required to identify what the best interests of Mr Wans children required with respect to the exercise of its discretion and then to assess whether the strength of any other consideration, or the cumulative weight of other considerations, outweighed the consideration of the best interests of the children understood as a primary consideration.
Although nationality was not a trump card it was of particular importance in assessing the best interests of any child (para 30).
As citizens the children had rights which they would not be able to exercise if they moved to another country (para 32).
We now had a much greater understanding of the importance of such issues in assessing the overall well being of the child: In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration.
This means that they must be considered first.
They can, of course, be outweighed by the cumulative effect of other considerations.
The countervailing considerations were the need to maintain firm and fair immigrations control, the mothers immigration history and the precariousness of her position when family life was created.
But the children were not to be blamed for that (para 33).
Lord Hope also stressed the importance of the childrens citizenship as a very significant and weighty factor in the overall assessment of what was in the childrens best interests (para 41) and, more fundamentally, that it would be wrong in principle to devalue what was in their best interests by something for which they could in no way be held responsible, such as the suspicion that they might have been conceived as a way of strengthening the mothers case for being allowed to remain here (para 44).
international and domestic instruments: Lord Kerr put it even more strongly.
It is a universal theme of both that, in reaching decisions that will affect a child, primacy of importance must be accorded to his or her best interests.
This is not, it is agreed, a factor of limitless importance in the sense that it will prevail over all other considerations.
It is a factor, however, that must rank higher than any other.
It is not merely one consideration that weighs in the balance alongside other competing factors.
Where the best interests of the child clearly favour a certain course, that course should be followed unless countervailing reasons of considerable force displace them (para 46).
However the matter is put, therefore, ZH (Tanzania) made it clear that in considering article 8 in any case in which the rights of a child are involved, the best interests of the child must be a primary consideration.
They may be outweighed by countervailing factors, but they are of primary importance.
The importance of the childs best interests is not to be devalued by something for which she is in no way responsible, such as the suspicion that she may have been deliberately conceived in order to strengthen the parents case.
Should Norris be modified?
Mr David Perry QC, who appears for the respondent in each case, argues that nothing in ZH (Tanzania) was intended to depart from the approach to the assessment of proportionality in Norris.
The extraditing judge may properly proceed on the basis that the best interests of the child are a primary consideration, but they are not the primary or the only consideration.
The compelling public interest in extradition will ordinarily outweigh the best interests of the child, especially where the offence is serious.
Indeed, there is no known Strasbourg case in which article 8 interests have prevailed against the legitimate aims of extradition, recognised by the court in Launder v United Kingdom (1997) 25 EHRR CD67 and Aronica v Germany, (Application No 72032/01) (unreported) given 18 April 2002.
The court has recently stated that only in exceptional circumstances will an applicants private or family life outweigh the legitimate aim pursued by extradition: see King v United Kingdom, (Application No 9742/07) (unreported) given 26 January 2010, para 29; Babar Ahmad v United Kingdom (2010) 51 EHRR SE97, para 172.
The appellants all argue that some modification, either of the approach in Norris or of its application, is required in the light of ZH (Tanzania).
Mr Alun Jones QC, on behalf of the mother in the Italian case, argues that no distinction should be drawn between extradition and immigration cases.
In Harkins and Edwards v United Kingdom (Application Nos 9146/07 and 32650/07) (unreported) given 17 January 2012, the Strasbourg Court drew no such distinction when considering whether a person would face a real risk of treatment contrary to article 3 if sent abroad (thus disagreeing with the majority in R (Wellington) v Secretary of State for the Home Department [2008] UKHL 72, [2009] AC 335).
The same should apply in the context of article 8.
It was wrong to treat the public interest in extradition as a constant factor or to conclude that the best interests of children could not generally override it.
Mr Matthew Ryder QC, on behalf of the father in the Italian case, does not consider that it is necessary to modify the general principles in Norris, provided that primacy of importance is given to the childrens rights.
But this may involve some changes in practice.
Any infringement of the childrens rights which causes significant and serious damage to their development should be considered sufficiently exceptional to warrant the court considering carefully whether the infringement is justified.
The court will need to examine carefully the extent of the public interest in extradition in the particular case and also whether there is any course of action which might reduce the damage to the childrens well being.
Mr Edward Fitzgerald QC, on behalf of the mother in the Polish case, also argues that it is wrong to say that the public interest in extradition is always greater than the public interest in sound immigration control.
It will vary.
He also points out that the effects upon family relationships are far more extreme and immediate in extradition than are the effects of domestic prosecution and imprisonment.
The extraditee may be sent a very long way away with little or no opportunity to maintain contact with the family left behind.
The mitigating effects of wise prosecutorial or judicial discretion are less predictable when extradition is to a totally different judicial system.
In the domestic context it is clearly established that a sentencing judge should have at the forefront of his mind the consequences for the children if their sole carer is sent to prison and consider whether on balance the seriousness of the offence(s) justifies their separation: see R (P) v Secretary of State for the Home Department [2001] EWCA Civ 1151, [2001] 1 WLR 2002, per Lord Phillips MR at para 79; R v Mills [2002] EWCA Crim 26, [2002] 2 Cr App R(S) 229; R v Bishop [2011] EWCA Crim 1446 and see also the South African case of M v The State [2007] ZACC 18.
The Court in Norris did not have to consider the special rights of children when the extradition of their sole or primary carer will have a devastating impact upon their wellbeing.
Mr Hugo Keith QC appears for the Official Solicitor as litigation friend of the children in the Italian case.
He argues that the best interests of the children of extraditees should be considered first and foremost, and separately, and in a fact sensitive and meaningful way which pays regard to their individual circumstances.
A conclusion that the undoubted public interest in extradition (which may not be of a wholly different order from that which arises in deportation and immigration cases) outweighs the best interests of the children should never be reached automatically or mechanically.
Consideration should be given, where necessary, to any alternatives to extradition: for example, delaying the extradition of the primary carer parent; arranging for a mother to be placed in a mother and baby unit in the requesting state; seeking an assurance that speedy repatriation will be considered by both the requesting and the sending state; when available in a conviction case, arranging for the sentence to be served here; and, where possible in an accusation case, prosecuting the case here rather than in the requesting state.
The court should also consider the alternative care arrangements for the child and satisfy itself that steps have been taken to protect the childs welfare if a sole or primary care giver is extradited.
We have also had the benefit of valuable interventions by JUSTICE and the Coram Childrens Legal Centre.
Mr Alex Bailin QC, for JUSTICE, emphasises that the requirement to interpret article 8 in the light of the Convention on the Rights of the Child (CRC) is of general application and is not limited to immigration cases.
The CRC has also been enshrined in article 24 of the European Union Charter of Fundamental Rights.
Article 24.2 requires that In all actions relating to children, whether taken by public authorities or private institutions, the childs best interests must be a primary consideration.
Article 24.3 requires that Every child shall have the right to maintain on a regular basis a personal relationship and direct contact with both his or her parents, unless that is contrary to his or her interests.
He points to recital 12 of the Framework Decision on the European arrest warrant and article 1.3, which provides that the Decision shall not have the effect of modifying the obligation to respect fundamental rights and fundamental legal principles, as enshrined in article 6 of the Treaty on European Union.
Full and proper adherence to article 8 is thus entirely compatible with the EAW system.
The executing state cannot rely upon the issuing state to have considered the childrens rights before issuing the warrant or to protect those rights after the warrant is executed.
A bright line distinction between the public interest in extradition and the public interest in deportation could not be drawn (he too makes reference to Harkins and Edwards).
As for domestic criminal proceedings, the interests of children were not infrequently a material consideration in sentencing and there were more options available to mitigate the consequences of separating parent and child.
As to alternatives to extradition, articles 4.6 and 5.3 of the Framework Decision, which permit refusal to execute a conviction EAW if the sentence is to be served in the UK, or the conditional execution of an accusation EAW, have not been transposed into UK law.
But it would be possible to refuse to execute an EAW, indicating that the childrens article 8 rights currently prevent this, but would be unlikely to do so in the future.
Most helpfully, he points out that further guidance on the application of Norris in cases involving dependent children is necessary, because later cases show that Norris has been wrongly interpreted so as to impose an exceptionality test and applied so as to set a threshold which is unattainable in practice.
They reveal a reluctance to make a detailed assessment of the effect of extradition on each child and a failure to consider the childs best interests first.
The examples he gives are (in chronological order): R (Stojkova) v District Court in Okresny, Slovakia [2010] EWHC 3532 (Admin), para 31; R (Antonovic) v Prosecutor Generals Office (A Lithuanian Judicial Authority) [2010] EWHC 2967 (Admin), paras 18 and 20; Budaj v District Court of Presnov, Slovak Republic [2011] EWHC 193 (Admin), para 14; R (Bartosiewicz) v District Court Warszawa Praga, Warsaw [2011] EWHC 439 (Admin), paras 7 and 9; B v District Court in Trutnov and District Court in Liberec [2011] EWHC 963 (Admin), paras 63 and 68; Irwinski v Regional Court in Bydgoswcz, Poland [2011] EWHC 1594 (Admin), para 8; Rzeczkowski v Provincial Court in Warsaw, Poland [2011] EWHC 1698 (Admin), paras 13, 15 and 16; Semen v Legnica District Court, Poland [2011] EWHC 1960 (Admin), para 7; Smuda v District Court of Poznan, Poland [2011] EWHC 2734 Admin), para 7.
A similar approach can be detected in Kudzevica v Riga Circuit Court Latvia [2010] EWHC 3505 (Admin), paras 11 and 12, and R (Gorczowska) v District Court in Torun, Poland [2012] EWHC 378 (Admin), paras 11 and 12.
After the oral hearing, the court was informed that the Strasbourg Court has granted interim relief under rule 39 of the Rules of Court (2009) in the Gorczowska case, as it had already done in the case of R (B) v Regional Court of Elbag [2010] EWHC 2958 (Admin): see EB v United Kingdom (Application No 63019/10) (unreported) given 28 February 2011.
This indicates that the Court is at least prepared to consider that there may be circumstances in which extradition (in that case of a breast feeding mother) would be in breach of the article 8 rights of the family.
JUSTICE does not argue that any of these cases was necessarily wrongly decided, rather that they are indicative of an approach which prevents the court from taking account of the welfare of children as it is required to do.
In fact, Mr Bailin suggests that there are very few cases in which the right approach would have produced a different result.
He has produced a list of 75 cases decided after Norris involving article 8 and dependent children.
In only five of these was the prospective extraditee the sole carer and in only one was the extradition of both parents sought.
But in only one (R (Cepkauskas) v District Court of Marijampole, Lithuania [2011] EWHC 757 (Admin)) was extradition refused, and then on grounds of delay and oppression rather than because of the rights of the children.
In his written submissions on behalf of the Coram Childrens Legal Centre, Mr Manjit Gill QC argues that international human rights instruments, including the Universal Declaration of Human Rights and the UNCRC, have recognised the special and unique status of children.
This involves not only a negative duty to avoid doing them harm but also positive obligations to promote their development into adulthood.
In this they are different from adults, even vulnerable adults, because adults have passed the growing up stage while children need special attention in order to grow up.
It is not just a matter of balancing the private rights of children against the public interest in extradition, because there is also a wider public interest and benefit to society in promoting the best interests of its children.
Children are (as Latey J put it in In re X (A Minor)(Wardship: Jurisdiction) [1975] Fam 47, at 52) a countrys most valuable asset for the future.
More than that, promoting their proper development is in the public interest in order to prevent their becoming the criminals of the future.
In addition to article 3.1 of UNCRC, he draws attention to article 3.2: States Parties undertake to ensure the child such protection and care as is necessary for his or her well being, taking into account the rights and duties of his or her parents, legal guardians, or other individuals legally responsible for him or her, and, to this end, shall take all appropriate legislative and administrative measures.
Norris concerned an adult couple and so the court did not, and did not have to, consider the special position of children.
It could, and did, treat the interests to be balanced as the public interest in extradition and the individuals interest in their private and family life.
There is, however, a strong public interest in the protection of children which makes their case different from that of adult family members, even adults who need support on health grounds.
Discussion
It will be apparent from the above that, for the most part, the parties do not criticise the principles laid down in Norris.
But they make two points.
First, they criticise the way in which those principles have been summarised and applied in subsequent cases.
Some of those criticisms might apply whether or not there were any children involved.
And second, they point out that Norris did not, and did not have to, consider the special position of children.
These cases give the court the opportunity to fill that gap.
Two main criticisms are levelled against the approach of the Administrative Court in these and other cases after Norris.
The first is the bright line distinction between the public interest in extradition and the public interest in immigration control, exemplified by the observations of Laws LJ in the Italian case at [2011] EWHC 1145 (Admin): Expulsion and deportation are matters only of domestic policy (para 62), in which the striking of reasonable balances is an inherent feature of the policy itself (para 63); whereas extradition promotes a universal public benefit (para 62), which is systematically served by the extraditions being carried into effect (para 63).
An even stronger view was taken by Silber J in B v District Court in Trutnov and District Court in Liberec [2011] EWHC 963 (Admin), at para 55, when he stated that It is clear that the approach of the courts to article 8 rights has to be radically different in extradition cases . because of the very important obligation of the state to ensure that those who are to be investigated, prosecuted or imprisoned for criminal offences are returned to those countries (emphasis supplied).
It is not correct that the approach of the court to article 8 rights has to be radically different as between extradition and expulsion cases.
The Extradition Act 2003 imposes a structured approach upon the court, so that it will already have considered the validity of the warrant (section 2), the identity of the person arrested (section 7), whether the offences are extradition offences (section 10), whether the various bars listed in section 11 apply, and conviction in absentia (section 20), before it gets to section 21.
Section 21 requires the judge to decide whether the persons extradition would be compatible with the Convention rights and to discharge the person if it would not.
In answering that question, the court would be well advised to adopt the same structured approach to an article 8 case as would be applied by the Strasbourg court.
First, it asks whether there is or will be an interference with the right to respect for private and family life.
Second, it asks whether that interference is in accordance with the law and pursues one or more of the legitimate aims within those listed in article 8.2.
Third, it asks whether the interference is necessary in a democratic society in the sense of being a proportionate response to that legitimate aim.
In answering that all important question it will weigh the nature and gravity of the interference against the importance of the aims pursued.
In other words, the balancing exercise is the same in each context: what may differ are the nature and weight of the interests to be put into each side of the scale.
There are differences between extradition and other reasons for expulsion.
Thus, as Lord Judge points out (para 122), an extradition order may be appropriate where deportation or removal would not.
In particular, extradition is an obligation owed by the requested state to the requesting state in return for a similar obligation owed the other way round.
There is no comparable obligation to return failed asylum seekers and other would be immigrants or undesirable aliens to their home countries (which would sometimes be only too pleased never to see them again).
But there is no obligation to return anyone in breach of fundamental rights.
Furthermore, although domestic immigration policy does try to strike a balance between competing interests, article 8 typically comes into play when it has not done so.
That is why an exceptionality test was disapproved in immigration cases in Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, just as it was later disapproved in extradition cases in Norris.
Hence, as Lord Hope observed, there are [no] grounds for treating extradition cases as falling into a special category which diminishes the need to examine carefully the way the process will interfere with the individuals right to respect for his family life (para 89).
The second main criticism of the approach in later cases is that the courts have not been examining carefully the nature and extent of the interference in family life.
In focussing on some quite exceptionally compelling feature (para 56 in Norris), they have fallen into the trap identified by Lord Mance, tending to divert attention from consideration of the potential impact of extradition on the particular persons involved . towards a search for factors (particularly external factors) which can be regarded as out of the run of the mill (para 109).
Some particularly grave consequences are not out of the run of the mill at all.
Once again, the test is always whether the gravity of the interference with family life is justified by the gravity of the public interest pursued (see also Lord Wilson, at para 152).
Exceptionality is a prediction, just as it was in R (Razgar) v Secretary of State for the Home Department [2004] UKHL 27, [2004] 2 AC 368, and not a test.
We are all agreed upon that.
These two points clarified, what more needs to be said about the interests of children? There appears to be some disagreement between us about the order in which the judge should approach the task.
I agree entirely that different judges may approach it in different ways.
However, it is important always to ask oneself the right questions and in an orderly manner.
That is why it is advisable to approach article 8 in the same order in which the Strasbourg court would do so.
There is an additional reason to do so in a case involving children.
The family rights of children are of a different order from those of adults, for several reasons.
In the first place, as Neulinger and ZH (Tanzania) have explained, article 8 has to be interpreted in such a way that their best interests are a primary consideration, although not always the only primary consideration and not necessarily the paramount consideration.
This gives them an importance which the family rights of other people (and in particular the extraditee) may not have.
Secondly, children need a family life in a way that adults do not.
They have to be fed, clothed, washed, supervised, taught and above all loved if they are to grow up to be the properly functioning members of society which we all need them to be.
Their physical and educational needs may be met outside the family, although usually not as well as they are met within it, but their emotional needs can only be fully met within a functioning family.
Depriving a child of her family life is altogether more serious than depriving an adult of his.
Careful attention will therefore have to be paid to what will happen to the child if her sole or primary carer is extradited.
Extradition is different from other forms of expulsion in that it is unlikely that the child will be able to accompany the extraditee.
Thirdly, as the Coram Childrens Legal Centre point out, although the child has a right to her family life and to all that goes with it, there is also a strong public interest in ensuring that children are properly brought up.
This can of course cut both ways: sometimes a parent may do a child more harm than good and it is in the childs best interests to find an alternative home for her.
But sometimes the parents past criminality may say nothing at all about their capacity to bring up their children properly.
Fourthly, therefore, as the effect upon the childs interests is always likely to be more severe than the effect upon an adults, the court may have to consider whether there is any way in which the public interest in extradition can be met without doing such harm to the child.
One thing is clear.
It is not enough to dismiss these cases in a simple way by accepting that the childrens interests will always be harmed by separation from their sole or primary carer but also accepting that the public interest in extradition is almost always strong enough to outweigh it.
There is no substitute for the careful examination envisaged by Lord Hope in Norris.
How the court is to go about investigating the situation of the children is a question to which I shall return.
In each of the cases before the court, the interests of the children have been fully investigated.
In the Polish case, this was done by those representing the mother.
In the Italian case, the children have had the benefit of separate representation by the Official Solicitor.
I turn, therefore, to the facts of each case, beginning with the more straightforward Polish case.
F K v Polish Judicial Authority
The father, MF K, and the mother, AF K, were married in 1991.
They are both Polish.
They have five children.
A, who is now 21, B, who is now 17, and C, who is now 13 years, were born in Poland before the family moved to this country in June 2002.
D was born here on 17 February 2004, so is now aged eight, and E was born here on 14 August 2008, so is now aged three years and ten months.
The whole family live together in a house where they have lived since December 2007.
The father works as a builder.
The mother looks after the family.
They applied for permanent residence here before these proceedings were begun and were granted it in 2010.
The mothers extradition is sought on two European Arrest Warrants.
The first in time (EAW1 issued by the Gliwice Circuit Court) is dated 10 January 2006.
It alleges that she, together with her husband, misappropriated clothing entrusted to her for sale to a value equivalent to 4307, between 19 June and 24 August 2001.
The second (EAW2 issued by the Katowice Regional Court) is dated 9 July 2007.
It alleges three offences: (i) falsifying customs documents in relation to an imported car between 17 November 1997 and 24 January 1999; (ii) seven instances of fraud involving a total equivalent to 1160 between 19 May and 12 June 2000; and (iii) a further instance of a similar fraud, on 21 June 2000.
It appears from the further information obtained from the issuing judicial authorities that the bill of indictment in relation to the offences alleged in EAW2 of July 2007 was filed at court in May 2002.
It is also said that she failed to appear at court in relation to the theft offences alleged in EAW1 of 10 January 2006 despite having been instructed to do so whenever required by the district public prosecutor on 10 June 2002.
AF K denied this or that she and the children left Poland later that same month in order to escape prosecution.
It is, as the District Judge observed, difficult to match some of the information received from Poland to the offences in the two EAWs, and some of it appears to relate to different matters.
But having heard evidence from AF K, he made a clear finding that she fled in June 2002 to avoid prosecution and that she was a fugitive from justice (for the purpose of section 14 of the Extradition Act 2003).
Domestic warrants for her arrest in Poland were not issued until 9 January 2003 in respect of the customs offence in EAW2 (by the District Court in Chorzw), until 7 April 2003 in respect of the fraud offences in EAW2 (by the District Court in Bytom), and until 29 March 2004 in respect of the theft offences in EAW1 (by the District Court in Racibrz).
Further information (from the District Court in Bytom, via the Circuit Court in Katowice) in relation to EAW2 states that the police informed the (Bytom) court in May 2004 that she might be staying outside Poland.
The request for EAW2 was made in April 2007, three years after that, and the warrant issued that July.
Further information (from the Circuit Court in Gliwice) states that the request for EAW1 was made on 1 December 2005 and the EAW issued on 10 January 2006.
The international search started in January 2006.
EAW2 issued on 9 July 2007 was certified by SOCA on 14 April 2008.
EAW1 issued on 10 January 2006 was certified on 2 September 2008.
AF K was arrested under both warrants on 10 March 2010.
Senior District Judge Riddle ordered her extradition on 28 September 2010.
Ouseley J dismissed her appeal to the Administrative Court on 19 January 2012: [2012] EWHC 25 (Admin).
The District Judge had before him a report on the family from Dr Ruth Armstrong, a consultant clinical psychologist; Ouseley J had before him a second report from Dr Armstrong, to which was attached some literature on attachment (Dr Peter S Cook) and on the effect of parental incarceration on young children (Ross D Parke and K Alison Clarke Stewart).
Both reports were based on long visits to the home, interviews, observations, psychological tests and questionnaires and information provided by the childrens school and college.
In her first report, dated 2 July 2010, Dr Armstrong stated that all the children had good health and good emotional and social adjustment.
The mother appeared to be at the heart of the family, providing loving warmth and nurturing of a high calibre.
If she were extradited, the childrens secure attachment to her would be ruptured and many negative consequences are likely to ensue.
D and E, in particular, were likely to be devastated by the loss of their mother which would be very likely to have severe detrimental consequences psychologically and for their developmental trajectories.
They were reported to have reacted very badly to the mothers short absence after her arrest in 2010.
The father had shown evidence of significant emotional disturbance (and even suicidal traits) on psychological testing.
Without his wife he would have to give up work to look after the children and this was likely to lead to severe and crippling depression.
Returning to Poland would cause a significant upheaval and damage to the older childrens education.
She concluded that the potential psychological damage all the other six members of the family would be very likely to suffer and the educational setbacks for each of the children, were [the mother] to be deported, would be extreme.
In her second report, of 15 July 2011, she remained very concerned for the welfare of the family should the mother be extradited.
The father had had to give up work because of an earlier accident.
His physical mobility had deteriorated markedly (although his physical symptoms might in part have a psychosomatic origin) and he might even be more psychologically fragile than before, although he was trying to create a good impression, and determined to keep the family together.
The enormous attachment of the children to their mother means that they might be plummeted into what could be paralysing grief.
There could be many risks to the young children.
Apart from grief and loss, the two youngest, who are girls, would be looked after only by older males, which could pose risks in terms of inappropriate relationships developing as the family members seek comfort normally provided in an entirely appropriate way by the presence of a nurturing and competent mother and wife.
There was also evidence that if extradited the mother would be detained in prison pending trial and would not be able to have her youngest child, who is still under four, with her in prison.
Mr Fitzgerald drew attention to two Strasbourg decisions in which the length of pre trial detention in Poland had been held to violate article 5.3: Dyller v Poland (Application No 39842/05) (unreported) given 7 July 2009; Kumenda v Poland (Application No 2369/09) (unreported) given 8 June 2010.
Discussion
If we were only concerned with the three oldest children, things would be different.
They would be very unhappy at the loss of their mother, and might suffer some educational setbacks as a result, but they would be able to get on with their lives with the help of their father, who is determined to keep the family together.
They would be able to recall their mother while she was away, even if they were only able to see her rarely, and they would be able to look forward to her coming back.
As Dr Armstrong points out, the consequences for the two youngest would be far more severe.
E, in particular, would be deprived of her primary attachment figure while she is still under the age of four.
Such losses can have lasting effects upon a childs development and it does not appear that her father would have the psychological resources to fill the gap or that help would be available from the social or other services to support the family.
The eight year old would also suffer from the loss of her mother, might well blame herself for it, and would find it hard to look forward to her return.
It is not an abuse of language to describe the effects upon these two children as exceptionally severe.
Indeed, Ouseley J accepted without reservation that the impact on the two younger children would be very severe: para 44.
Against that, there is the constant factor of the need to honour our obligations under the Framework Decision.
But as these are subject to the need to respect fundamental rights, they do not absolve us of the duty to weigh the competing interests as required by article 8.
The various offences for which extradition is sought are by no means trivial.
But they are offences of dishonesty which can properly be described as of no great gravity.
Furthermore, we can take notice of the fact that no prosecutorial discretion is exercised by the Polish authorities when deciding whether or not to apply for the issue of an EAW, no matter how comparatively minor the offences, how much time has elapsed since they were committed, and how respectable the life which the offender has led since then.
The European Commission has criticised the lack of a proportionality check in some states before issuing an EAW: it is not suggested that an article 8 proportionality check is required, but that there should be some relationship of proportionality between the offending and the consequences.
The delay in this case has been considerable.
There was some delay between the offences themselves and the bringing of the Polish prosecutions; there was further delay between the appellants failure to attend court in Poland and the issue of the domestic arrest warrants; even further delay between the issue of the domestic arrest warrants and the requests for the EAWs; and again between the issue of the EAWs and the appellants arrest in March 2010.
While the district judge did find that the appellant fled Poland in order to avoid prosecution, and thus was not entitled to rely upon passage of time as a bar for the purpose of section 14 of the 2003 Act, the overall length of the delay is relevant to the article 8 question.
Whatever the reasons, it does not suggest any urgency about bringing the appellant to justice, which is also some indication of the importance attached to her offending.
During that lapse of time, the appellant and her family have made a new, useful and blameless life for themselves in this country.
Two more children have been born.
D must have been conceived approximately eleven months after the family arrived here and E more than four years after that.
At neither time did the parents have any reason to believe that the Polish authorities were seeking the mothers return.
Whatever the relevance of deliberately conceiving children in order to strengthen the case against extradition (which does arise in the next case) it does not arise on the facts of this case.
In all the circumstances, the public interest in returning the appellant to face trial and sentence upon the charges in these two warrants is not such as to justify the inevitable severe harm to the interests of the two youngest children in doing so.
I would allow this appeal.
HH and PH v Deputy Prosecutor of the Italian Republic, Genoa
PH, the father, and HH, the mother, were married in 1996.
Both are British citizens but HH was born and bred in Morocco, where they met while PH was working as a long distance lorry driver all over Europe.
They bought a house in Spain in 2000.
Their first child, X, was born in England on 23 November 2000, so he is now aged 11.
The events which led to these proceedings took place between April and September 2003, when X was only two, and his mother was pregnant with their second child.
The parents were arrested in Italy on 23 September 2003.
HH, then 8 months pregnant, was released under house arrest on 20 October 2003.
The child, Y, was born in Italy on 21 November 2003, and so she is now aged eight.
HH left Italy in July 2004 in breach of the conditions of her release.
PH remained in prison in Italy until the custody time limit ran out and he too was conditionally released on 7 October 2004.
He too left Italy shortly afterwards, also in breach of his conditions.
Both were formally declared to be unlawfully at large on 15 March 2005.
Having heard their evidence, District Judge Evans found (in his judgment of 25 March 2009) that both HH and PH had quite deliberately breached their bail and fled Italy in the full knowledge that they were to be tried for very serious offences.
They were arrested for two offences connected with drug trafficking: (1) criminal association for the purpose of drug trafficking, which carries a sentence of between ten and 24 years imprisonment; and (2) a specific act of importation, transportation, possession and supply of drugs, aggravated by being committed by more than three persons, which carries a sentence of between three and nine years imprisonment.
As to (1), it was alleged that they had conspired with one another, with HHs uncle Hassan El Faria, with a courier Brian Stott, with Hassan El Farias wife, Virginia Donnarumma, with Abderrahin Fadlam, and with other people as yet unknown, to commit multiple offences of smuggling hashish.
The uncle was the point of contact with the suppliers; PH and HH received the drugs, recruited the couriers and took part in the importation; Fadlam received the drugs in Italy and was in charge of trading them there; and Donnarumma was in charge of trading the proceeds and sending it back to her husband to finance further operations.
These operations continued from April to September 2003.
As to (2), it was alleged that they had imported over 205 kilos of hashish into Italy on 23 September 2003.
It was also alleged that there had been six earlier such episodes involving similar quantities, totalling some 1613 kilos in all.
These formed part of the subject matter of the later convictions, but not of the original remands in custody.
The Italians had been intercepting their telephone calls and monitoring the car, rented in Spain, in which they were travelling.
This showed that they were in repeated contact with the courier, Stott, guiding him into the hotel car park where they met.
The couriers car had been hired by him in Italy, but paid for by PH, and the car was carrying false English number plates.
After they left the car park, heading for France, Stott was arrested with the drugs.
They both phoned him to find out what had happened.
Once they found out that he had been arrested, they both phoned their accomplices, in particular Hassan, to explain what had happened.
Hassan advised HH to take advantage of her pregnancy to avoid pre trial custody and escape from justice.
On 17 December 2004, they were both convicted in the first instance court in their absence and sentenced to 14 years imprisonment.
The first European Arrest Warrants (EAWs) were issued on 11 January 2006.
The first instance judgment was confirmed in the second instance in the Court of Appeal in Genoa on 19 April 2006.
The EAWs with which these proceedings began were issued on 1 August 2008.
These were still accusation warrants, because the proceedings were not yet finally over.
There was a further appeal to the Court of Cassation, which on 28 April 2009 confirmed the sentence on HH which then became final.
A conviction European Arrest Warrant was therefore issued in respect of HH on 23 October 2009.
This states that she has nine years, six months and 21 days of her 14 year sentence still to serve.
However, the conspiracy case against PH was sent back to the Court of Appeal in Genoa to determine whether he had been organiser and instigator of the conspiracy or a mere participant.
On 25 January 2010, a conviction EAW was issued in respect of PH for the seven specific importation offences, which states that he has four years of imprisonment of the original eight year sentence still to serve.
On 9 February 2010, the Court of Appeal determined that he had been a lesser participant in the conspiracy and imposed a (total) sentence of nine years and four months imprisonment which became enforceable on 1 February 2011.
On 21 September 2011, therefore, a new conviction EAW was issued in respect of all eight offences, which states that he has eight years and four months still to serve.
According to the calculations of his legal team, however, if the collective clemency law and the potential reduction for good behaviour are taken into account, this would come down to four years and 22 days.
Proceedings first began in this country on 16 July 2008, after PH was arrested pursuant to the first EAW of 11 January 2006.
He was arrested again on 4 August pursuant to the EAW dated 1 August 2008.
HH was arrested pursuant to the EAW dated 1 August on 8 August 2008.
The proceedings have been continuing ever since.
Both parents have been on bail most of the time since their arrest.
Between one and two months after her arrest, HH must have become pregnant with their third child, Z. Z was born on 10 June 2009 (it is said in one of the reports that she was born one month prematurely because of her mothers diabetes) and so is now just three years old.
District Judge Evans commented that It must remain an open question whether Zs conception was (irresponsibly and selfishly) intended to provide a useful argument in support of HH and PHs opposition to the extradition request (Judgment of 14 April 2010, para 44).
But in the Divisional Court, Laws LJ considered this comment to be unwarranted (para 38).
After a number of vicissitudes, the hearing before the District Judge was fixed for 20 February 2009.
Both parents gave evidence, but it was adjourned part heard.
They were told by counsel that things were not looking good and extradition was likely.
This was an accurate prediction as District Judge Evans ruled on 25 March 2009 that he would have ordered extradition against both had it not been for HHs illness.
He later observed that on 20 February she was able to give coherent if untruthful evidence and was not suffering from any significant ill health (judgment of 14 April 2010, para 45).
HH collapsed shortly after the hearing, was taken to A & E in London, transferred to a psychiatric hospital and then admitted to a psychiatric ward in Nottinghamshire, initially under section 2 of the Mental Health Act 1983.
She remained there voluntarily until discharged on 17 or 18 June 2009, a week after the birth of her younger daughter.
From March 2009 she was unfit to attend court.
Eventually, on 14 April 2010, District Judge Evans ordered the extradition of HH on the conviction EAW, and on 21 June 2010, he ordered the extradition of PH on both the accusation and the first conviction warrants.
Their appeals were dismissed by Laws LJ in the Administrative Court on 11 May 2011: [2011] EWHC 1145 (Admin).
In relation to the mothers mental health, there were reports from her consultant psychiatrist, Dr Meats, dated 20 March 2009 and 3 April 2009, finding no evidence of any psychotic illness, diagnosing a conversion disorder in association with repeated court appearances, for which a small dose of anti anxiety medication had been prescribed, and predicting that her condition would persist and become long term, but that a decision one way or the other would allow resolution of her anxiety symptoms.
There was a report commissioned by the Crown Prosecution Service, from Dr Philip Joseph, dated 22 May 2009.
He agreed that she had suffered an acute stress reaction after court on 20 February, but other forms of mental illness had been excluded and she was not suffering from mental disorder of a nature or degree which would prevent her extradition.
There was a report commissioned by HHs solicitors, from Dr Seyyed Nabavi, dated 8 August 2009.
He diagnosed post traumatic stress disorder with co morbid depressive and anxiety disorders of moderate to severe severity, precipitated by her experience of arrest and being treated inappropriately in Italy, and continued by the lengthy legal proceedings.
She was unable to look after herself or her children.
The prognosis was moderately poor and she was currently unfit to plead and stand trial.
In a follow up report on 26 October 2009, Dr Joseph strongly disagreed with these diagnoses.
He maintained the diagnosis of an acute stress reaction to the fear of being extradited to Italy and being separated from her children.
If there were no court proceedings she would have no difficulty living her life and managing her family.
In November 2009, there was another brief admission to hospital under section 2 of the Mental Health Act 1983, after HH walked blindly (according to PH) into the road shortly before they were due to appear in court on 10 November 2009.
A follow up report from Dr Nabavi, dated 31 December 2009, maintained the view that her current mental disorder, a dissociative (conversion) disorder, was a reaction to her arrest in Italy, maintained by the continuing court proceedings.
He ruled out malingering or factitious disorders and remained of the view that she was unfit to look after her family or take part in the proceedings.
These reports were all before District Judge Evans on 14 April 2010.
There was also a letter from Gabrielle OBrien, a mental health support worker who had been regularly visiting the home, where she found that HH appeared to be extremely unwell and withdrawing into herself on each visit, lying on a mattress and apparently unaware of her husband, her children or visitors.
A witness statement from HHs solicitor described the pitiful condition in which he had found her when visiting the home in September 2009 and the unedifying events when she was (eventually) arrested on the conviction warrant and brought to court in London in February 2010.
It had not proved possible to transfer her from the security van into court and the hearing had to be held in the car park.
Incontinence was a feature on both occasions.
The district judge heard evidence from both Dr Nabavi and Dr Joseph and found Dr Joseph the more compelling.
He concluded that HH had a real condition, which she was not putting on only when she was in public, but that it appeared to be self induced and not as severe as suggested by Dr Nabavi.
He had little doubt that she would recover quickly if not extradited.
Similarly the realisation that the game was up could also assist in her speedy recovery.
There was therefore no medical condition rendering her extradition inappropriate and it would not be oppressive to order it (judgment of 14 April 2010, paras 58 59).
When the appeal came before Laws LJ, there were fresh psychiatric reports.
Dr Samantha Dove was instructed by HH, whom she had visited at home.
In her report of 6 December 2010, her opinion was that HHs presentation was consistent with the initial diagnosis of dissociative conversion disorder, but that the symptoms of a moderate to severe depressive disorder had now become more marked.
It was likely that the stress of the current legal situation had precipitated her mental illness.
This was of a nature or degree to warrant her detention in hospital as she was unable to look after herself, including taking her medication and maintaining personal hygiene.
She was not fit to plead or attend court.
Dr Joseph provided a further report dated 20 January 2011.
He had read the records of HHs short readmission to hospital in November 2009, after which it had been concluded that her presentation was due to a current life situation rather than a mental illness.
He had also discussed the case with Dr Dove, and concluded that it would not help for him to see HH again.
He disagreed with the diagnosis of dissociative disorder and also that her disorder warranted detention in psychiatric hospital or that she was unfit as opposed to unwilling to take part in the proceedings.
Laws LJ heard brief evidence from both doctors.
He also took into account the observations of Dr Pettle, the psychologist (instructed by the Official Solicitor) who had visited the family to assess the children.
The childrens comments suggested that HHs withdrawn state persisted within the family and not just when professionals visited.
He considered that there was a third explanation for HHs behaviour pattern, not that it was all a deliberate pretence, or that it was the product of a mental illness, but that it was an extreme reaction to the extradition proceedings (hardly different from the notion of an unconscious fabrication spoken of by Dr Dove) (paras 44 to 46).
If so, it was perhaps more likely to be resolved once the proceedings were over.
Her mental condition was not such that it would be oppressive to extradite her.
Further, that is not to say that I would have found the other way had I concluded she was suffering from a mental illness.
There was every reason to conclude that she would be properly looked after in Italy (para 47). (It may be that Laws LJ had in mind psychosis when he referred to mental illness, for many perhaps most psychiatrists would label the mothers condition an illness.)
By the time of that judgment (in May 2011), following a suggestion made in Dr Doves report, HH had already been referred by her GP to the neuropsychiatry unit at the Maudsley Hospital, where she was admitted on 11 June 2011.
This Court has a report from Professor Anthony David dated 30 January 2012.
He had prompted an unannounced visit in February from Gabrielle OBrien, who found HH in the kitchen talking (and not lying mute on a mattress in the lounge).
HH had taken a significant overdose of diazepam and citalopram on 9 May 2011 (perhaps connected with or in anticipation of the High Court judgment handed down on 11 May 2011).
On admission, she walked with a pronounced stoop, was very tearful, had difficulties with sleep, refused meals at times, showed very poor levels of self care and personal hygiene, with episodes of incontinence, showed little interest in ward activities but apparent signs of severe memory difficulties and an inability to perform routine tasks such as boiling a kettle.
Her very poor performance in psychometric testing showed that she was not engaging with the tasks.
Professor Davids opinion is that her initial presentation was characterised in part by regressive and pseudo demented behaviour which though variable to an extent, was persistent and highly dysfunctional.
This may have been feigned or a gross exaggeration given the close temporal relationship between the onset of the disorder and court appearances connected with extradition to Italy.
Once they had been able to get her to relinquish these behaviours, there was revealed a clear and genuine phobic anxiety disorder (agoraphobia with panic) associated with busy streets, policemen and women, and sirens and alarms obviously relating to her dread of extradition and separation from her children, together with an underlying affective component of low mood and hopelessness.
His view is that there was a strong element to the regressive behaviour which was under conscious control but that once HH had sunk into this state it took on a life of its own.
Given that there was a background of low mood and fear, complicated perhaps by a reawakening of adverse childhood experiences, it was impossible for her to simply snap out of it.
The behaviours then became habitual and ingrained.
It had taken three months in a specialist unit to overcome this.
Further court appearances would cause major disruption in her mental state.
He is convinced that the profound overt distress they would cause would soon become intractable and she would end up once again in a totally dependent and dilapidated condition.
She would resist extradition and any attempt to force her to return to Italy under any circumstances would result in a catastrophic collapse.
Following the proceedings in the Magistrates Court, the Official Solicitor was permitted to file evidence and make submissions on behalf of the children in the Administrative Court.
Dr Sharon Pettle, a clinical psychologist, prepared a report dated 13 September 2010.
X, then nearly ten, generally appeared to be a well adjusted boy, sensitive and caring, with a strong bond with his father, but he was highly anxious about the deterioration in his mothers functioning, and has no clear explanation of what is wrong.
Y, then nearly seven, was a bright and articulate child who did not express anxiety about her mothers condition, and whose strongest relationship was with her father.
Z, then 15 months old, was meeting all her developmental milestones and clearly looked to her father as her primary attachment figure.
It was inevitable that separation for years from one or both parents would cause the children intense and long lasting distress.
Being left in the sole care of their mother would be an intensely worrying experience unless she were to make an immediate recovery.
Separation from their father would be acutely emotionally distressing for all the children, and their responses would vary in severity according to what other losses followed.
If separated from their mother, X and Y would be likely to worry about her health and who was looking after her, but if they remained with their father, it seemed likely that he would go on looking after them well and offer them as much support as possible.
To be suddenly faced with the departure of both parents, and a move to live with strangers is one of the most catastrophic events to befall any child, and represents a massive emotional and psychological challenge.
The departure of both parents, even for children with some resilience, is likely to be an overwhelmingly painful experience, and their immediate reactions may be very similar to bereavement: over activity, profound sadness and distress, withdrawal and regression, anger and defiance, poor sleeping and eating, and a deterioration in their school performance.
The research on children of imprisoned parents would suggest that X, Y and Z are all in a highly vulnerable group.
Generally siblings should be kept together.
X and Y would find it hard to understand if Z were to be cared for by their mothers family in Morocco and would worry about her.
Worst of all would be if all three had to be separated, with Z in Morocco and X and Y in different foster placements.
In an addendum report, dated 24 March 2011, based on an interview with PH who had brought Z with him, she described Z as a very happy and well adjusted two year old, secure enough in her attachment to her father to be able to spend time at playschool and with other familiar people.
But from her fathers description, she had not formed a significant bond with her Moroccan grandmother while she was staying with the family.
Based on school reports, the older children appeared to be showing signs of strain which were not apparent last year.
Dr Pettle expected that they would be hopeful that their mother would return from her stay in the Maudsley Hospital more like the mother they remembered (and it would appear from Professor Davids report that such hopes have been fulfilled).
If she were then to be removed to serve a prison sentence, this would be particularly difficult for them to accept.
It was likely that Z would be extremely distressed at being uprooted from her family and going to live in Morocco, all her familiar routines disrupted and in a new culture with a different language spoken around her.
If all the children were in foster care, there would be some advantage to all of them in being able to remain in touch with one another even if placement together were not possible.
The Official Solicitor also prompted a report, dated 15 September 2010, from Gemma Manzoor, of the local Childrens Services department, who had been the childrens allocated social worker from August 2009 until June 2010.
The reason for this was concern about the childrens welfare because of their mothers mental state.
The case was closed in June 2010 because there were no issues about their fathers care of them.
Were the extradition to go ahead, PH accepted that it might be difficult to place all three children together, so he had agreed to X and Y being looked after by the local authority, but was at that time hoping that Z would be looked after by HHs family in Morocco.
However, as explained in the witness statement of the solicitor instructed by the Official Solicitor of 24 November 2010, the maternal grandmother did not feel able to look after any of the children, owing to her other responsibilities and her own ill health.
Their solicitor then explored with PH whether there were other members of the family who might be able to look after the children.
In his witness statement of 30 March 2011, he explains why none of the fathers four siblings or his three children by an earlier marriage is able to help.
None of them has appropriate accommodation to take in three more children, all have jobs, and most have other children to look after.
The solicitor has recently made further inquiries of the local authority, from which it is clear that they will not reopen the case until they are told that the parents are to be extradited, even if this means that there would then be only a very short time in which to make the arrangements.
Thus the prospect of the children being placed together, and in an area close to where X and Y are at school, will not be known until the decision is made.
It follows that no thought has been given to how the children will be able to keep in contact with their parents if they are extradited to Italy.
Discussion
Before Laws LJ, HH relied, not only on article 8, but also on section 25 of the Extradition Act, which permits the judge to discharge the person or adjourn the hearing if her physical or mental condition is such that it would be unjust or oppressive to extradite her.
As by now she was wanted on a conviction warrant, the question was whether it would be oppressive (as opposed to unjust) to extradite her.
Having heard the evidence described earlier, he concluded that it would not.
The question certified for this court relates only to the article 8 question.
It is open to the court to consider issues other than those certified: Attorney General for Northern Ireland v Gallagher [1963] AC 349.
However, this court would not normally entertain an appeal on a question of fact or on the application of settled law to the facts of the case.
It would be difficult for us to differ from the factual findings of Laws LJ, who heard as well as read the psychiatric evidence.
His findings on the nature and causes of the mothers condition are in any event broadly consistent with Professor Davids report, although they do differ in their predictions as to the effect of extradition.
That is not, however, a reason for us to differ from the conclusion reached by Laws LJ.
He concluded that it would not be oppressive to extradite the mother in the condition she was then, before she had had the benefit of three months specialist treatment in the Maudsley.
She is better now, and would be no worse than she was when Laws LJ reached his conclusion, even if she were to regress in the way predicted by Professor David.
We cannot, therefore, reach any different conclusion under section 25.
But we can, of course, take the mothers mental condition into account when we are considering the situation of the whole family under article 8.
The principal focus of this appeal has been on the article 8 rights of the children, not of the adults.
It is a very rare case indeed when the extradition of both parents is sought.
The table prepared by JUSTICE contains only one other, apart from the case of BH and KAS v United States of America, which was heard along with this case (see Lord Advocate on behalf of Criminal Court of Lisbon, Portugal v JK and NF [2011] HCJAC 121, 9 December 2011).
These are all young children, Z is just three and still at the age when the effect of breaking her most secure attachment will be severe, Y is also at a vulnerable age, and X appears to be less resilient than she.
They have already had to cope with living with a mother who, on any view, has not been able to look after them properly since February 2009.
The father has given up work to look after them all and by all accounts has done a very good job.
They are happy and well adjusted children now, but the evidence is that separation for years from one or both parents would inevitably cause the children intense and long lasting distress.
It would be akin to taking the children compulsorily into care.
But whereas children are only taken compulsorily into care if they are already suffering or likely to suffer significant harm, these children have not so far suffered significant harm.
On the contrary, they are doing well in difficult circumstances.
It is the compulsory separation from their parents, and the move to live with strangers, which will do them harm; it is, in Dr Pettles words, one of the most catastrophic events to befall any child, and represents a massive emotional and psychological challenge.
There is, of course, every incentive for parents in this position to fail to find or encourage other family members to take care of the children, so that they will have to be looked after by the local authority.
But in this case we have the benefit of the enquiries made by the Official Solicitor, and it would appear that the family members whom the children know have good and genuine reasons for not being able to look after them if their parents are extradited.
It is regrettable in the extreme that the local authority have apparently made no plans at all for where they will place the children if extradition is ordered.
This means that no work has been done with the children to prepare them for this; that places will have to be found in a hurry; that it is quite likely that those places will be short lived; and it is also quite likely that they will be placed in separate foster homes.
These too may well be short lived and unstable, not through any fault of the local authority, but because of the pressures under which they have to work.
The state, however well meaning, is no substitute for the family.
There has even been mention of the possibility that Z might be compulsorily placed for adoption, but Lord Wilson and I share the view that it is unlikely that a court would find that her welfare required it to dispense with parental consent in circumstances such as these.
Evidently, too, no thought has been given by the local authority to how they will maintain contact with their parents while the parents are in prison in Italy.
Yet such contact will obviously be essential for them.
That harm would be much reduced if only one parent were to be extradited.
If the mother were extradited alone, the children would no doubt grieve for her, and worry about her, but they have been used to her absence in hospital before.
They have not been used to relying upon her for their day to day care and emotional support.
Their father would be able to help them maintain contact with her.
If their father were extradited alone, on the other hand, they would lose the mainstay of their lives to date.
Z would lose her primary attachment figure.
And we have been presented with no evidence that their mother is capable of looking after them alone.
The plain fact of the matter, therefore, is that from the childrens point of view, the extradition of their father would be seriously damaging, but the extradition of their mother would not.
Against all that there is, of course, the constant public interest in extradition and the gravity of the offences of which both parents have been convicted.
We are not here dealing with comparatively routine crimes of dishonesty, but with a major drug smuggling conspiracy, persisted in over many months.
As Laws LJ put it, the appellants were effectively caught red handed while escorting a consignment to its destination.
The sentences imposed were lengthy, although possibly not as lengthy as the sentences which would be imposed for comparable offences here.
Just as the harm to children will be greater if the father is extradited than it will be if the mother is extradited, it is also the case that the public interest in extraditing the mother is greater than the public interest in extraditing the father.
The Italian courts have held that the mother played the greater part in the conspiracy and imposed a correspondingly longer sentence upon her.
She fled the country having spent only three weeks in prison.
Although Dr Nabavi attributed her initial mental distress to the treatment which she had received in Italy, she was in apparent good health until the hearing on 20 February 2009.
By contrast, although the father has now been convicted of both the conspiracy and the seven specific smuggling offences, he has been held to have played a lesser part in the conspiracy.
He also spent a year in prison in Italy before his release.
He has therefore paid some part, albeit only a small part, of the debt he owes to society on account of his very serious and persistent offending.
Furthermore, he has so far evaded paying the rest of that debt by breaching the conditions of his release.
But the point urged most strongly upon us on his behalf is that his lawyers researches suggest that, if the family were living in Italy, he would be allowed to serve most of the rest of his sentence at home in order to look after the children.
They calculate that the total sentence of 9 years and 4 months would be reduced: (1) to 6 years and 4 months, because of the Collective Clemency Bill, Law 214/06, which reduces all sentences for offences committed before 2 May 2006 by three years; then (2) to 5 years and 3 and a half months, because of the time already spent in prison; then (3) to one year and 27 days, because of the Prison Reform Law No 354 of 26 July 1975, which allows sole carers of young children who have served one third of their sentence to serve the remainder on home detention; and finally (4) to 10 months, because of the potential reduction (of 45 days per six months) for good behaviour.
We have looked at the laws in question but have no expert evidence as to how they would operate in a case where the primary carer was the father rather than the mother.
The position is not, however, disputed by the respondent.
Thus, it is argued, if the family were living in Italy, the Italian state would not consider it in the public interest for this father to serve more than ten more months in a prison.
They would prioritise the interests of his children over the serving of his sentence.
It is wrong, therefore, to conclude that the public interest requires him to be sent back to Italy to serve a further four years and 22 days in prison.
Against that, of course, is the fact that the Italian authorities have issued these warrants to secure his return.
In common with the other members of this court, I have found the case of PH the most difficult of all the five parents in the three cases with which we are concerned.
There is no doubt that the offences of which he has been convicted are very serious indeed.
They are the sort of cross border offending in which international co operation is particularly important.
If we were concerned only with the two older children, I would have concluded that these considerations were sufficiently weighty to justify the interference with their lives.
They are old enough to retain memories of their father, and to understand that he will come back to them one day, and they would have one another.
There is a better chance that they would be found a foster placement together, or even that other members of the family would be persuaded to step in after all.
But Z is in a different situation.
She is still at the most vulnerable age.
And her presence makes finding satisfactory placements to keep the children together more difficult.
It is troubling that Z was conceived so very soon after the parents were arrested on the EAWs.
No court wishes to send a message that drug smugglers or other serious criminals might escape extradition by getting their partners pregnant.
However, the district judge declined to make a finding to that effect, despite the generally unfavourable view that he took of the parents evidence and the information from Italy that the mother had been advised to take advantage of her earlier pregnancy to escape from justice.
Laws LJ described his remark that it remained an open question as unwarranted.
We must therefore approach this particular case on the basis that it has not been shown that this was a deliberate attempt to improve their position in the proceedings.
If there had been such a finding, what relevance would it have had? Z did not ask to be born and is in no way to be blamed for her parents conduct.
But it would have made the parents offending behaviour even more serious than it already was: it is an act of some wickedness deliberately to bring a child into the world in an attempt to evade justice.
It would have added to the weight on one side of the scales, while in no way diminishing the weight to be given to the childs interests on the other.
The circumstances in this case can properly be described as exceptional.
The effect upon the children, but Z in particular, of extraditing both their parents will be exceptionally severe.
The effect of extraditing their mother alone would not be so severe and is clearly outweighed by the public interest in returning her to Italy.
But the same cannot be said of the effect of extraditing their father.
I have, not without considerable hesitation, reached the conclusion that it is currently so severe that the proportionality exercise requires the court to consider whether it can be mitigated.
If he is discharged in the current proceedings (and in these I would include the proceedings under the warrant issued in September 2011), it will remain open to the Italian authorities to consider whether to issue another warrant in the future, when the effect upon the children will not be so severe.
In doing so, they would no doubt wish to consider whether the spirit, if not the letter, of the Prison Reform Law of 1975 reduces the public interest in having him return to Italy to serve the balance of his sentence, in circumstances were, if it were an Italian family, he would be able to serve it at home looking after his children.
We do not know whether this consideration was present to the minds of the authorities when the warrants were issued.
Left to myself, therefore, I would have struck the balance in that way in this very unusual case and discharged PH in the current proceedings.
Postscript: Conviction in absentia
Mr Jones sought to raise a further point on behalf of HH.
Section 20 of the 2003 Act has not been amended to take account of the amendments to the 2002 Framework Decision made by the Framework Decision of 2009 (2009/299/JHA), which required implementation by 28 March 2011 (with a possibility of delayed implementation by March 2014).
This adds a new article 4a to the Framework Decision, permitting the executing authority to refuse to execute an EAW if a person was convicted in her absence, unless she was unequivocally made aware of the date and place of the trial.
The EAW in question was issued before the 2009 Framework Decision took effect and does not state that HH was unequivocally made aware of the date and place of her trial.
Were this to raise a discrete point of law as to the alleged non implementation of the 2009 Framework Decision in UK law, it would in my view be quite inappropriate for this court to consider it.
It has not been certified as a point of law of general public importance and it has not been fully explored in the arguments before us.
Rather, the point has been argued as a technical matter concerned with the content of the EAW.
It is difficult to believe that HH has been the victim of a serious injustice in this case, as she was represented by lawyers throughout the Italian proceedings, who clearly pursued every avenue of appeal on her behalf, while she had deliberately deprived herself of any additional advantage that presence at those proceedings might have given her.
Indeed, given the circumstances of the arrest and the nature of the evidence against her, it is perhaps difficult to envisage what that advantage would have been.
For the same reasons, it is difficult to see what this factor adds to the strength of the article 8 case on her behalf.
Procedure
If the childrens interests are to be properly taken into account by the extraditing court, it will need to have some information about them.
There is a good analogy with domestic sentencing practice, although in the first instance the information is likely to come from the parties, as there will be no pre sentence report.
The court will need to know whether there are dependent children, whether the parents removal will be harmful to their interests and what steps can be taken to mitigate this.
This should alert the court to whether any further information is needed.
In the more usual case, where the person whose extradition is sought is not the sole or primary carer for the children, the court will have to consider whether there are any special features requiring further investigation of the childrens interests, but in most cases it should be able to proceed with what it has.
The cases likely to require further investigation are those where the extradition of both parents, or of the sole or primary carer, is sought.
Then the court will have to have information about the likely effect upon the individual child or children involved if the extradition is to proceed; about the arrangements which will be made for their care while the parent is away; about the availability of measures to limit the effects of separation in the requesting state, such as mother and baby units, house arrest as an alternative to prison, prison visits, telephone calls and face time over the telephone or internet; and about the availability of alternative measures, such as prosecution here or early repatriation.
Some of this information should be available from the parents, but the court may also wish to make a referral to the local Childrens Services for the childrens needs to be assessed under the Children Act 1989.
If the children are to lose their sole or primary carer for any length of time, they may well have to be accommodated under section 20 of the 1989 Act and will almost certainly be children in need for the purposes of section 17(10) of that Act.
In some cases, especially where there is a very young child or a child with health or developmental problems, it may be necessary to obtain a psychological or psychiatric assessment, as in fact was done in these cases.
There is also the question of the childrens own views (or wishes and feelings) to consider.
Article 12 of UNCRC provides: 1.
States Parties shall assure to the child who is capable of expressing his or her own views the right to express those views freely in all matters affecting the child, the views of the child being given due weight in accordance with the age and maturity of the child. 2.
For this purpose, the child shall in particular be provided the opportunity to be heard in any judicial and administrative proceedings affecting the child, either directly, or through a representative or an appropriate body, in a manner consistent with the procedural rules of national law.
The United Nations Committee on the Rights of the Child, in its General Comment No 12 on The Right of the Child to be Heard (CRC/C/GC/12, July 2009), points out that this is one of the fundamental values of the Convention and that there can be no correct application of article 3 if the components of article 12 are not respected.
This poses a problem in extradition cases, as there is no obvious machinery for ascertaining the childs views, save by making the child party to the case or (at least in the Administrative Court) by allowing the child to file evidence or make representations under CPR rule 52.12A.
The Official Solicitor accepts that this will rarely be necessary, as Laws LJ observed in the postscript to his judgment (para 68), but the Coram Childrens Legal Centre submit that this understates the strength of the obligation to hear the child.
They point out that the childrens views and interests do not always coincide with their parents and that, especially in criminal cases, the parents may not be able properly to put the childrens views before the court.
There is the further problem, exemplified in these cases, that a loving parent may be reluctant to discuss the problem with the children, hoping to spare them the distress and anxiety involved in what may be a long drawn out process.
Indeed, that problem illustrates only too well how the interests of the parents and the children diverge.
The parents may wish to fight extradition for as long as and as hard as they can, thus increasing the stress and the delay which, as section 1(2) of the Children Act 1989 tells us, is bad for children whose sense of time is so different from that of adults.
I share the view of the Official Solicitor that separate legal representation of the children will rarely be necessary, but that is because it is in a comparatively rare class of case where the proposed extradition is likely to be serious damaging to their best interests.
The important thing is that everyone, the parties and their representatives, but also the courts, is alive to the need to obtain the information necessary in order to have regard to the best interests of the children as a primary consideration, and to take steps accordingly.
Conclusion
dismiss the appeal in the case of Mrs HH.
I would therefore allow the appeal in the cases of Mrs F K and Mr PH, but
LORD HOPE
I am grateful to Lady Hale for her careful description of the facts of these cases and for her analysis of the extent to which the approach of the Supreme Court in Norris v Government of the United States of America (No 2) [2010] 2 AC 487 needs to be modified in the light of ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166.
I agree with her that the need to examine the way the process will interfere with the childrens best interests is just as great in extradition cases as it is in cases of immigration control.
The context in which the exercise must be conducted is, of course, quite different and the nature and weight of the interests that are to be brought into the balance on each side will differ too.
But I remain of the view which I expressed in Norris, para 89 that it would be wrong to treat extradition cases as falling into a special category which diminishes the need to examine carefully the article 8 issues that the separation of the parents from the children will give rise to.
As Lady Hale says in para 33, this involves asking oneself the right question and in an orderly manner, following the example of the Strasbourg court.
That having been said, each case will depend on its own facts and some cases will be more easily resolved than others.
An exploration of the theoretical basis for the exercise can only carry one so far.
Ultimately it will come down to the exercise of judgment as to where the balance must be struck between what Lord Wilson has described in para 150 as two powerful and conflicting interests.
The facts are fully before us, and so are the factors that must be weighed in the balance.
I agree with Lady Hale that the public interest in returning Mrs F K to Poland is not so great as to justify the severe harm that this would cause to the two youngest children.
The offences of dishonesty that are alleged against her, while not trivial, are relatively minor and certainly not of the kind that could be described as seriously criminal.
There has been a conspicuous delay on the part of the prosecuting authorities.
The welfare of these children would be at serious risk if their mother were to be removed from them.
For these and all the reasons that Lady Hale gives I too would allow this appeal.
The offences of which PH and HH have been convicted are of a quite different kind.
We are dealing in their case with serious professional cross border crime involving trading in narcotic drugs which there is an international obligation to suppress.
As Lord Judge says (see para 137), there are very strong reasons of public policy that persons who are accused or found guilty of such crimes and who break their bail conditions abroad should not be permitted to find a safe haven in this country.
I agree with Lady Hale (see para 79) that the part the mother HH played in the conspiracy was such that the effect on her children is clearly outweighed by the public interest in returning her to Italy.
So I too would dismiss her appeal.
This leaves the case of the father PH.
Like Lady Hale, I have found this by far the most difficult of all the cases that are before us, including those of the parents in BH and KAS v Lord Advocate [2012] UKSC 24.
For the reasons she has explained, the effects that the extradition of both parents would have on their children, and on the youngest child Z in particular, are likely to be deeply painful and distressing and the long term effects very damaging.
Such steps as might be taken to minimise these effects and ensure that the children will be adequately cared for are unresolved and are likely to remain so until extradition takes place.
The uncertainty that this creates increases ones deep sense of unease.
The circumstances can, as Lady Hale puts it in para 79, properly be described as exceptional.
To accord them that description is, of course, not the end of the exercise.
It cannot, in itself, be the test: see Norris, para 89.
What then are the factors on the other side of the balance which would justify the fathers extradition despite the effects that have been described? Are the very strong reasons of public policy referred to in para 91 above as strong in his case as they are in the case of the mother? The fact that the father was not proved to have organised or promoted the trafficking enterprise shows that he played a lesser part in it.
But I cannot attach much weight to this in view of the serious nature of the other offences of which he has been convicted.
He too came to this country in breach of his bail conditions.
There is really not much to choose between the father and the mother in these respects.
I was initially attracted by the argument that, if the family were living in Italy, the father would be allowed to serve most of the rest of his sentence at home so that he could look after the children.
I was attracted too by the point that Lady Hale makes in para 79 that if extradition were to be refused now it would remain open to the Italian authorities to issue another warrant in the future when the effects on the children would not be so severe.
But I have concluded that it is not open to us, as the requested court, to question the decision of the requesting authorities to issue an arrest warrant at this stage.
This is their case, not ours.
Our duty is to give effect to the procedure which they have decided to invoke and the proper place for leniency to be exercised, if there are grounds for leniency, is Italy.
If these factors are left out of account, as I think they must be, the decision remains a very difficult one.
Taking everything into account, however, the balance seems to me to lie in favour of the fathers extradition.
For all the reasons that Lady Hale gives, I very much hope that leniency will be exercised in his case having regard to the interests of the children.
But that must be left to the authorities in Italy.
I would dismiss his appeal.
LORD BROWN
I have read with great admiration the draft judgments respectively of Lady Hale in favour of allowing Mr PHs appeal and Lord Judge and Lord Wilson for dismissing it.
Of all the many final appeals to which I have been party, truly I have found this to be one of the most troubling, each of the two powerful and conflicting interests (per Lord Wilson at para 150) at stake carrying such obvious weight.
In the end, however, sorely tempted though I confess to have been to adopt Lady Hales approach, I am persuaded by the majority judgment that it would not be right to succumb.
PHs criminality here was simply at too high a level of gravity to be outweighed by the interests of his children, heart rending though in the result their plight must be.
For what seemed to me ultimately the yet more compelling reasons given by Lord Judge and Lord Wilson I too, therefore, would dismiss Mrs HH and Mr PHs appeals whilst (in common with the rest of the Court) allowing that of Mrs F K.
LORD MANCE
I have read to great advantage the draft judgments prepared by other members of the Court.
Each case falls for consideration on its own facts, but, speaking generally, I agree that there may be a closer analogy between extradition and the domestic criminal process than between extradition and deportation or expulsion (Lady Hale, para 8(1)).
One difference between extradition and deportation or expulsion is that the former process is usually founded on mutual international obligations (Lady Hale, para 31 and Lord Judge, paras 120 121).
Both the UN Convention on the Rights of the Child dated 20 November 1989 and the Charter of Fundamental Rights referred to in article 6 TEU make the childs best interests a primary consideration in all actions concerning children.
This means, in my view, that such interests must always be at the forefront of any decision makers mind, rather than that they need to be mentioned first in any formal chain of reasoning or that they rank higher than any other considerations.
A childs best interests must themselves be evaluated.
They may in some cases point only marginally in one, rather than another, direction.
They may be outweighed by other considerations pointing more strongly in another direction.
In some circumstances, it may be appropriate from the outset to identify competing primary considerations.
Thus, in Wan (Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133), cited by Lord Kerr in his para 145, the court found it appropriate to refer to the expectations of the Australian community (in an effective immigration policy) as one primary consideration and the separate interests of the children of the applicant for a visa as another (see para 33 in the judgment in Wan).
Under article 8 of the European Convention on Human Rights, the ultimate substantive issue, where a right to respect for family life is engaged, is whether there exist factor(s) within article 8(2) outweighing that right.
It is likely to be helpful at some point to address the issue specifically in those terms.
But I do not think that any particular starting point or order can or should be imposed in the way in which courts address such an issue in the context of extradition.
On this I agree with Lord Judge (para 126) and Lord Wilson (para 155).
So long as it is clear that the issue has in substance been addressed and answered, that is what matters, rather than how or in what order the judge has expressed him or herself.
At root, therefore, what is required is a balancing of all relevant factors in the manner called for by the Supreme Courts decision in Norris v Government of the United States of America (No 2) [2010] UKSC 9, [2010] 2 AC 487.
The Courts subsequent decision in ZH (Tanzania) v Secretary of the State for the Home Department [2011] UKSC 4, [2011] 2 AC 166, as explained by Lady Hale in para 15 of her judgment on the present appeal, emphasises the importance of any relevant childs interests as a primary consideration, and is consistent with all that I have already said.
Taking the present appeals, I entirely agree with and have nothing to add to Lady Hales reasoning on and disposition of the appeal in F K v Polish Judicial Authority.
Like other members of the Court, I have found the appeal in HH and PH v Deputy Prosecutor of the Italian Republic, Genoa much more troubling.
The difficulty is not just that the considerations on each side are powerful and conflicting, but that they are entirely different in nature.
Balancing them against each other is inherently problematic.
Like other members of the Court, I see no reason to disturb the factual or legal assessment of the position relating to the mother HH.
But, ultimately and although this will involve the extradition of both parents, I also conclude that the childrens interests are under article 8 outweighed by the very strong considerations (identified in particular by Lord Judge in para 135 and Lord Wilson in paras 163 172) militating in favour of the extradition of the father PH as well as the mother HH.
I am not persuaded that the position (as to the length of time that PH would have to serve) that would apparently apply if the family were living in Italy is relevant in circumstances where it cannot be said, by any stretch, that the sentence which PH would in fact to serve following return would be objectively disproportionate to what one might expect for the offences committed.
Nor do I do think that it could be appropriate to invite the Italian authorities in effect to make another application in some years time.
It is not easy to fit such a possibility within the scheme of the relevant Council Framework Decision of 13 June 2002 (2002/584/JHA) and Part 1 of the Extradition Act 2003, both of which contemplate a speedy once and for all resolution of any request for surrender.
But, assuming that that problem were overcome, such a procedure would mean that the shadow of extradition would hang over the father and children for an uncertain period and would require at some future point to be dissolved or resolved under different circumstances which could prove no less difficult to balance than the present.
In reaching my decision relating to HH and PH, I am though this is not essential to my conclusion comforted by the hope that it may be possible for both parents to be returned speedily to the United Kingdom to serve here the balances of their sentences under Council Framework Decision 2008/909/JHA of 27 November 2008.
The Court was informed that this Framework Decision has now been transposed into Italian law.
Mr Perry QCs instructions were that, under the previous regime of the Council of Europe Convention on the Transfer of Sentenced Persons of 21 March 1983, repatriation from Italy took 8 to 12 months, although statistics for all repatriations from all Council of Europe countries show a longer average period of around 18 months.
Whichever figure is taken, it is to be hoped that much speedier results can be achieved under the Framework Decision, the purpose of which is to limit the rupture of environmental and family links resulting from imprisonment abroad.
LORD JUDGE
The issue in these appeals from the Administrative Court in England and Wales is summarised in the certified questions.
This reads: Where, in proceedings under the Extradition Act 2003, the Article 8 rights of children of the defendant or defendants are arguably engaged, how should their interests be safeguarded, and to what extent, if at all, is it necessary to modify the approach of the Supreme Court in Norris v Government of the United States of America (No 2) in light of ZH (Tanzania)? The same issue arose, via the devolution route, in the appeal from the High Court of Justiciary in Scotland.
In Norris v the Government of the United States [2010] 2 AC 487, sitting in a constitution of nine Justices, this court addressed the impact of section 21 and section 87 of the Extradition Act 2003 (the Act) in the context of the right to respect for private and family life contained in article 8 of the European Convention of Human Rights.
The case was concerned with the rights of a husband and wife, neither of whom was in good health, who had been married for many years.
The interests of children were not directly involved and did not arise for consideration.
Nevertheless this decision was focussed on the single issue of article 8 rights in the context of extradition proceedings.
Consistently with section 21 of the Act, section 87 provides: (1) If the judge is required to proceed under this section (by virtue of section 84, 85, or 86) he must decide whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998. (2) If the judge decides the question in subsection (1) in the negative he must order the persons discharge. (3) If the judge decides that question in the affirmative he must send the case to the Secretary of State for his decision whether the person is to be extradited.
The legislative structure of the Act clearly envisages that the extradition process should be sequential, and that the question whether the extradition of any individual would be compatible with Convention rights does not arise for consideration until the statutory requirements have otherwise been fulfilled.
The procedures envisaged in the Act include an examination of the relevant material sent to the court by the Secretary of State (section 78), and the requirement for the judge to address the question whether there is any bar to extradition (sections 79 83).
These include, among other considerations, whether extradition is being sought for the purpose of prosecuting or punishing an individual on the basis of his race, religion, nationality, gender, sexual orientation or political opinions, and whether at any trial in the country seeking extradition he might be prejudiced on these grounds.
By section 84 itself, which applies where there has been no conviction, the judge must decide whether there is sufficient evidence to make a case requiring an answer.
If, in relation to any of these stages in the process, the application for extradition is flawed, the process comes to an end.
It is only when the judge is otherwise satisfied that the statutory requirements justifying extradition are established that the final hurdles remain.
One is the compatibility of the extradition with Convention rights, including article 8 (section 87): another is that extradition would be unjust or oppressive because of the physical or mental ill health of the person to be extradited (section 91).
Article 8 of the Convention is familiar.
It provides: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence. 2.
There shall be no interference by a public authority with the exercise of this right except such as in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights or freedoms of others.
In Norris it was accepted without reservation, and in accordance with section 87 of the Act, that on occasions in the extradition process article 8 rights may prevail, with the result that what would otherwise be a well founded extradition application would be dismissed.
All that acknowledged, the judgments are unequivocal about the importance of giving full weight to the public interest in well founded extradition proceedings: (a) Lord Phillips of Worth Matravers speaking for the Court, made clear at para 56 that these occasions would inevitably be rare: The reality is that only if some quite exceptionally compelling feature, or combination of features, is present that interference with family life consequent upon extradition will be other than proportionate to the objective that extradition serves. (b) Lord Hope of Craighead, at para 87, observed: Resisting extradition on this ground (respect for family life under article 8) is not easy.
He continued by expressly agreeing with the passage from the judgment of Lord Phillips referred to in the previous paragraph: The public interest in giving effect to a request for extradition is a constant factor, and it will always be a powerful consideration to which great weight must be attached.
The more serious the offence the greater the weight that is to be attached to it (para 91). (c) Lord Brown of Eaton under Heywood, at para 95, added: It will be only in the rarest cases that article 8 will be capable of being successfully invoked under section 87 of the Extradition Act 2003. (d) Lord Mance, at para 107, stated: Interference with private and family life is a sad, but justified, consequence of many extradition cases.
Exceptionally serious aspects or consequences of such interference may however outweigh the force of the public interest in extradition in a particular case. (e) Lord Collins of Mapesbury, at paras 127 and 128, commented: It hardly needs to be said that there is a strong public interest in international co operation for the prevention and punishment of crime.
Consequently, the public interest in the implementation of extradition treaties is an extremely important factor in the assessment of proportionality As a result, in cases of extradition, interference with family life may easily be justified under article 8(2) . (f) Lord Kerr of Tonaghmore, at para 136, addressed the exceptionality question: It is entirely possible to recognise that article 8 claims are only likely to overcome the imperative of extradition in the rarest of cases without articulating an exceptionality test.
The essential point is that such is the importance of preserving an effective system of extradition, it will in almost every circumstance outweigh any article 8 argument.
This merely reflects the expectation of what will happen.
It does not erect an exceptionality hurdle.
These observations from the Supreme Court speak for themselves.
They provide the clearest, authoritative, indication of the approach to be taken to extradition proceedings where article 8 considerations are engaged.
What is more, the approach is entirely consistent with the views adopted in the European Court of Human Rights itself.
The jurisprudence of the European Court of Human Rights to which reference was made by Lord Phillips (with whose wide ranging judgment every member of the Court agreed) includes a number of decisions of the court where the interests of young children of the individual whose extradition was in contemplation were engaged.
In Launder v United Kingdom (1997) 25 EHRR CD67 a complaint of a potential violation of article 8 if the applicant were extradited to Hong Kong was found to be manifestly ill founded.
The Commission emphasised that it was only in exceptional circumstances that extradition to face charges of serious criminal offences would constitute an unjustified or disproportionate interference with the right to respect for family life.
In King v United Kingdom (Application No 9742/07) (unreported) given 26 January 2010 a much more recent case, the defendant was facing serious drug trafficking charges in Australia.
His extradition was ordered.
He was a husband, father of two children born in 1998 and 2004, and his mother was in poor health.
If convicted he faced a very lengthy term of imprisonment.
The application was unanimously declared to be inadmissible: Mindful of the importance of extradition arrangements between states in the fight against crime (and in particular crime with an international or cross border dimension), the court considers that it will only be in exceptional circumstances that an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition.
If the applicant were [eventually] sentenced to imprisonment [in Australia, with the consequent impact on the rest of his family,] his extradition cannot be said to be disproportionate to the legitimate aim served.
It is unnecessary to add to the authorities, but the trend has been consistent. (See, for example, Aronica v Germany (Application No 72032/01) (unreported) given 18 April 2002 and Kleuver v Norway (Application No 45837/99) (unreported) given 30 April 2002 another drug trafficking case, in which a baby was separated at birth from his mother).
As far as counsel have been able to discover in the European Court itself the article 8 rights of young children whose parents have been involved in extradition proceedings, have never yet prevailed over the public interest considerations involved in their extradition.
That, of course, and entirely consistently with the decision in Norris does not mean that they never will, or that they never should, (see R (Gorczowska) v District Court in Torun, Poland [2012] EWHC 378), but it does underline that there is no difference between the approach of this court in Norris and the European Court of Human Rights to the possible impact of article 8 considerations in the context of extradition.
Not long after Norris was decided, in ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166, this court was concerned with the implementation of immigration law in the context of a decision to remove or deport a non citizen parent of two UK citizens, who were born and had lived here throughout their 12 and 9 years.
Their article 8 rights were clearly engaged because, if their mother were deported, they would inevitably have to accompany her.
In the Supreme Court it was conceded on behalf of the Secretary of State that the decision to remove the mother was incompatible with article 8.
Article 8, it was submitted, involved a careful evaluation of all the relevant factors, with no one factor decisive or paramount.
Counsel argued that although the best interests of the child were a primary consideration, they were not the primary consideration.
The issue of principle was examined in the context of immigration control, and well established principles in the House of Lords in Beoku Betts v Secretary of State for the Home Department [2009] AC 115 and EB (Kosovo) v Secretary of State for the Home Department [2009] AC 1159 and the Privy Council decision in Naidike v Attorney General of Trinidad and Tobago [2005] 1 AC 538.
The Strasbourg jurisprudence, again in the context of immigration control, was also analysed.
Baroness Hale identified two different situations, the first involving long settled alien residents who had committed criminal offences, and the second where an individual was to be removed because he or she had no right to be or remain in.
Having described the entitlement of states to control the entry and residence of aliens as the starting point, Baroness Hale concluded that: In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration.
This means that they must be considered first.
They can, of course, be outweighed by the cumulative effect of other considerations.
She identified what she described as the countervailing considerations, which, in the particular context of ZH, did not begin to displace the best interests of the children.
However the best interests of the children were not the paramount nor even the primary consideration.
Lord Kerr spoke of a primacy of importance to be accorded to the best interests of a child, which although not a factor of limitless importance was said to rank higher than any other.
They should normally dictate the outcome of cases such as the present.
The approach of the European Court of Human Rights to the relationship between immigration control and article 8, like its approach to the relationship between extradition and article 8, is well established.
Taken together, Boultif v Switzerland (2001) 33 EHRR 1179 and ner v The Netherlands (2006) 45 EHRR 421, identify no less than ten factors or guiding principles which might arise for consideration in the context of immigration control and article 8.
None is given priority over any of the others, and by the same token, none is secondary to any of the others.
ZH (Tanzania) was not concerned with and did not address extradition.
Neither the decision in Norris, nor the judgment of Lord Phillips, nor those of any other members of the court, nor the decisions relating to extradition from the European Court of Human Rights, nor indeed the structure of the Act itself, were cited or addressed, nor was it suggested that in the context of extradition proceedings the principles identified in Norris were subject to any further amplification or modification.
It seems improbable that, without doing so expressly and unequivocally, the Court in ZH (Tanzania) intended to or would have modified the way in which Norris had stated that the article 8 rights of the family of a proposed extraditee should be approached.
Stripped to essentials ZH (Tanzania) decided that in the context of immigration control and the entitlement of this country to decide which aliens may reside here, the article 8 rights of a child or children should be treated as a primary consideration against which other relevant factors might countervail, whereas in Norris, in the context of extradition, it was decided that article 8 rights might prevail notwithstanding the immense weight or imperative which attached to the public interest in the extradition of those convicted or suspected of having committed offences abroad.
It is of course well understood that the critical question, whether the decision arises for consideration in the context of immigration or extradition, is whether the interference is necessary in a democratic society for the prevention of disorder or crime.
Unlike the absolute prohibition against torture in article 3, the right to family life involves a proportionality assessment.
In this assessment public interest considerations arising from the control of immigration and the implementation of extradition obligations arise in distinct contexts.
Dealing with it briefly, in the immigration process this country is exercising control over the presence of aliens.
This is a purely domestic decision made subject to domestic considerations, in the light of domestic legislation, including the Human Rights Act 1998 and the Borders, Citizenship and Immigration Act 2009.
An order for deportation may be wholly unconnected to any criminal activity, and even when it is consequent on criminal convictions, it usually follows after not before the appropriate sentence has been imposed and served here.
On the occasions when, because of fears of persecution or prosecution abroad, an order is not made, that continues to be a reflection of domestic rather than international processes.
As explained in Norris extradition is concerned with international co operation in the prevention and prosecution of crime.
The objectives served by the process require international co operation for the prosecution of crimes and the removal of sanctuaries or safe havens for those who have committed or are suspected of having committed criminal offences abroad.
The private and family rights of the victims of criminal offences committed abroad will themselves have been damaged by offences like rape and wounding, theft and robbery and child abduction, as well as drug trafficking and fraud.
That consideration is absent from the immigration context.
Consistently with this analysis, section 55 of the Borders, Citizenship and Immigration Act 2009 made specific provision which imposed an obligation on the Secretary of State to make arrangements to ensure that the welfare of children in the United Kingdom should be safeguarded and promoted in the context of immigration, asylum or nationality processes without identical responsibilities being enacted in the context of the exercise of the extradition process.
And, as already noted, to date at any rate, the European Court of Human Rights has treated immigration and extradition as distinct concepts, while in the context of immigration control, enumerating guiding principles of equal importance to the balancing exercise.
For these reasons, in my judgment, assuming for the sake of argument that the child or children are in identical family situations, it follows that an extradition order for one or both parents may be appropriate when deportation or removal would not.
In other words, because distinct issues are involved, the same facts, involving the same interests of and the same potential or likely damage to the child or children, may produce a different outcome when the court is deciding whether to remove foreign citizens from this country or extraditing convicted or suspected criminals (including citizens of this country) to serve their sentences or stand trial for crimes committed abroad.
The impact of ZH (Tanzania) and the valuable submissions made to this court founded on it in the context of the extradition process, is to highlight that Norris has been subject to a deal of misunderstanding.
Norris did not decide that the article 8 rights of the family of the proposed extraditee can never prevail unless an exceptionality test is satisfied.
What it suggested was that when article 8 rights were properly examined in the extradition context, the proportionality assessment would be overwhelmingly likely to be resolved in favour of extradition.
This description of the likely results of the extradition process appears to have been adopted as a forensic shorthand for the test.
Just because courts fully appreciate that children who are subjected to long term separation from their parent or parents will almost without exception suffer as a result, the application of a stark exceptionality test may, even if unconsciously, diminish the weight to be given to the interests of the children.
The prohibited thought processes run along readily identified lines: as separation from their parent or parents inevitably causes damage to virtually every child, what is exceptional about the situation of the children involved in this particular case, and what would be exceptional about the extradition of their parent or parents? Accordingly the decision in ZH (Tanzania) provided a helpful opportunity for the application of Norris to be re evaluated, and the principles identified in the judgments to be better understood.
In the end, however, the issue remains proportionality in the particular circumstances in which the extradition decision has to be made when the interests of dependent children are simultaneously engaged.
With respect to those who, by reference, by example, to an international Convention like the UN Convention on the Rights of the Child or the Charter of Fundamental Rights of the European Union, or indeed article 8 of the Convention itself, take a different view, it does not seem to me appropriate to prescribe to the judges who deal with extradition cases any specific order in which they should address complex and sometimes conflicting considerations of public policy.
Indeed in some cases it may very well be sensible to postpone any detailed assessment of the interests of children until the crime or crimes of which their parents have been convicted or are alleged to have committed, and the basis on which their extradition is sought have all been examined.
Self evidently theft by shoplifting of a few items of goods many years earlier raises different questions from those involved in an armed robbery of the same shop or store: possession of a small quantity of Class C drugs for personal use is trivial when set against a major importation of drugs.
Equally the article 8 considerations which arise in the context of a child or children while nearly adult with the advantages of integration into a responsible extended family may be less clamorous than those of a small baby of a single mother without any form of family support.
Ultimately what is required is a proportionate judicial assessment of sometimes conflicting public interests.
Like the sentencing decision following conviction, the extradition process arises in the context of alleged or proved criminal conduct.
The sentencing decision is similarly based on statute.
By section 142 of the Criminal Justice Act 2003 (the 2003 Act) the court must have regard to a number of wide ranging and sometimes inconsistent specific purposes of sentencing.
Thus, they include the punishment of offenders and their rehabilitation.
By section 143 the seriousness of the offence must be considered and when it is being determined, the court is required to consider the offenders culpability in committing the offence and any harm which the offence caused, was intended to cause or might foreseeably have caused.
By section 166 any matters which the sentencing court considers relevant to mitigation may be taken into account.
It is at this stage of the sentencing process that, among other matters of mitigation, the interests of the defendants child or children, and any of his or her or their dependants and indeed his or her health, and the health and wellbeing of members of the family usually fall to be considered.
Bringing the somewhat complex statutory threads together, unless it is justified by the seriousness of the offence a custodial sentence may not be imposed, and when a custodial sentence is justified, it must be no longer than appropriate in the light of all the aggravating and mitigating features (see section 152(2) and section 153(2)).
From this it follows that even if the custody threshold is passed, matters of mitigation may nevertheless result in the imposition of a non custodial sentence: and even if a custodial sentence must be imposed, it may be reduced for the same reasons.
However, in accordance with statute and practice, the starting point is not usually the mitigation, whatever form it may take, but the offence and its seriousness.
In the end what of course matters, whatever starting point may have been taken, is that all the considerations should have been carefully evaluated and a fair balance struck between them.
Long before the enactment of the Human Rights Act 1998, sentencing courts had taken account of the likely impact of a custodial sentence on children dependent on the defendant, not in his or her interests, but in the interests of the children.
The history can be traced in the first and second editions of Principles of Sentencing, first published in 1970, and by the date of publication of the second edition in 1979, based on a study by Dr David Thomas of the Institute of Criminology at Cambridge University of many thousands of judgments in sentence appeals, beginning in 1962.
Dr Thomas identified what he described as a marked difference in the approach to sentences imposed on mothers with caring responsibilities.
There are numerous examples; thus, in Smith (February 1965) the sentence of 18 months imprisonment for cheque book frauds by a deserted mother with four dependent children was varied to a probation order.
Some ten years later, in Charles (July 1975) a woman convicted of unlawful wounding, using a pair of scissors to stab her victim, was suspended partly because the defendant was the mother of a number of small children.
The continuing responsibility of the sentencing court to consider the interests of children of a criminal defendant was endorsed time without number over the following years.
Examples include Franklyn (1981) 3 Cr App R(S) 65, Vaughan (1982) 4 Cr App R(S) 83, Mills [2002] 2 Cr App R (S) 229, and more recently Bishop [2011] EWCA Crim 1446 and, perhaps most recently in Kayani; Solliman [2011] EWCA Crim 2871, [2012] 1 Cr App R 197 where, in the context of child abduction, the court identified a distinct consideration to which full weight must be given.
It has long been recognised that the plight of children, particularly very young children, and the impact on them if the person best able to care for them (and in particular if that person is the only person able to do so) is a major feature for consideration in any sentencing decision.
Recent definitive guidelines issued by the Sentencing Council in accordance with the Coroners and Justice Act 2009 are entirely consistent.
Thus, in the Assault Guideline, taking effect on 13 June 2011, and again in the Drug Offences Guideline, taking effect on 29 February 2012, among other features the defendants responsibility as the sole or primary carer for a dependant or dependants is expressly included as potential mitigation.
The principle therefore is well established, and habitually applied in practice.
However it should not obscure the reality that in the overwhelming majority of cases when the criminal is convicted and sentenced for offences which merit a custodial sentence, the innocent members of his family suffer as a result of his crimes.
Although custodial sentences are sometimes avoided altogether where the level of seriousness is relatively minor and are sometimes reduced by reference to the needs of dependent children, care must also be taken to ensure that considerations like these do not produce injustice or disparity as between co defendants with different family commitments, or undermine the thrust towards desirable consistency of approach to sentencing decisions on a national basis, a process which began with the issue of sentencing guidelines by the Court of Appeal, Criminal Division, and now given statutory authority by the creation of first, the Sentencing Guidelines Council (by section 167 of the 2003 Act), and now the Sentencing Council itself.
Accordingly, while for generations making allowances for the interests of dependent children, and what would now be described and in Bishop were described as their article 8 interests, the need to impose appropriate sentences in accordance with established, and now statutory provisions, is unchanged.
As Hughes LJ has recently explained in R v Boakye and others (3 April 2012) The position of children and a defendants family may indeed be relevant, but it will be rare that their interests can prevail against societys plain interest in the proper enforcement of the criminal law.
The more serious the offence, generally the less likely it is that they can possibly do so.
This observation mirrors observations to the same effect in Norris in the context of extradition.
The effect of this analysis is to underline that the starting point in the sentencing decision involves an evaluation of the seriousness of the crime or crimes and the criminality of the offender who committed them or participated in their commission and a balanced assessment of the countless variety of aggravating and mitigating features which almost invariably arise in each case.
In this context the interests of the children of the offender have for many years commanded principled attention, not for the sake of the offender, but for their own sakes, and the broader interests of society in their welfare, within the context of the overall objectives served by the domestic criminal justice system.
Sadly the application of this principle cannot eradicate distressing cases where the interests even of very young children cannot prevail.
The extradition process involves the proper fulfilment of our international obligations rather than domestic sentencing principles.
So far as the interests of dependent children are concerned, perhaps the crucial difference between extradition and imprisonment in our own sentencing structures is that extradition involves the removal of a parent or parents out of the jurisdiction and the service of any sentence abroad, whereas, to the extent that with prison overcrowding the prison authorities can manage it, the family links of the defendants are firmly in mind when decisions are made about the establishment where the sentence should be served.
Nevertheless for the reasons explained in Norris the fulfilment of our international obligations remains an imperative.
ZH (Tanzania) did not diminish that imperative.
When resistance to extradition is advanced, as in effect it is in each of these appeals, on the basis of the article 8 entitlements of dependent children and the interests of society in their welfare, it should only be in very rare cases that extradition may properly be avoided if, given the same broadly similar facts, and after making proportionate allowance as we do for the interests of dependent children, the sentencing courts here would nevertheless be likely to impose an immediate custodial sentence: any other approach would be inconsistent with the principles of international comity.
At the same time, we must exercise caution not to impose our views about the seriousness of the offence or offences under consideration or the level of sentences or the arrangements for prisoner release which we are informed are likely to operate in the country seeking extradition.
It certainly does not follow that extradition should be refused just because the sentencing court in this country would not order an immediate custodial sentence: however it would become relevant to the decision if the interests of a child or children might tip the sentencing scale here so as to reduce what would otherwise be an immediate custodial sentence in favour of a non custodial sentence (including a suspended sentence).
F K (FC) v Polish Judicial Authority
The facts are fully described in the judgment of Lady Hale.
They are stark, and in the present context highlight the combination of circumstances which can fairly be described as borderline.
We must proceed on the basis that the appellant fled Poland knowing of the criminal charges she was due to face.
The offences were not trivial, but nor were they of the utmost seriousness.
The most recent occurred over a decade ago.
The prosecuting authorities have been dilatory in the extreme.
As far as we can tell, the extradition process began without reference to the new life the appellant and her husband have made for themselves in this country, and in particular the birth to them of two further children, one of whom is very young, and the other who is only just past the toddler stage.
Given the interests of the two youngest children in the context of the current long established family arrangements in this country, and not least the uncertain health of their father, it can safely be said that an immediate custodial sentence would not be in contemplation.
In agreement with Lady Hale I agree that the damage to the interests of the two youngest children would be wholly disproportionate to the public interest in the extradition of the appellant on the two European Arrest Warrants.
R (HH) and R (PH) v Deputy Prosecutor of the Italian Republic Genoa.
The facts are fully described in the judgments of Lady Hale and Lord Wilson.
They show something of the heavy burden resting on judges responsible for the application of the Act.
They are agreed that the appeal of HH should be dismissed.
I, too, agree.
The effect of this decision is to highlight the desperate plight which will befall the children if the appeal of PH, too is dismissed.
This is movingly analysed in the judgment of Lady Hale, and no member of the Court could be unaware of it or fail to give it the full measure of importance which it commands.
What, then, is the basis on which the extradition of PH is sought? HH and PH were both engaged in serious professional cross border crime.
This involved not one but seven separate expeditions from Morocco across the Mediterranean into Europe for onward distribution from their eventual destination in Genoa.
Although PH was not to be treated as an organiser of the enterprise in the sense required for a conviction of this offence in Italy (see the decision of 9 February 2010) in English law he was undoubtedly guilty of conspiracy to import drugs.
Whether correctly described in law as a conspirator or not, PH was an active participant and member of a gang of professional criminals, with a crucial role as a trusted member of the gang, trusted to supervise and see to the safe arrival and eventual disposal and distribution of the drugs after they arrived in Italy.
He was therefore crucial to the inner workings and success of the enterprise.
As to the offences themselves, there was no personal mitigation.
At all material times PH was a mature intelligent adult who appreciated exactly what he was doing.
Unlike some of those who become involved in drug smuggling he was not under any form of pressure or compulsion, whether arising from fear of the consequences of non participation or motivated by some desperate family need for funds.
In short he was no more, and certainly no less than a professional criminal.
Making full allowance for the interests of his children and their welfare in the absence of their mother, in England and Wales anything lower than a 10 year sentence would be improbable.
On the basis of such a sentence, imposed today he would serve 5 years, with credit given for the time spent in custody on remand before sentence.
In the extradition context, but not the sentencing context, there is this further consideration.
PH was granted bail in Italy and almost immediately broke his bail conditions and has now made his home in the United Kingdom.
In this jurisdiction that would constitute a separate offence, normally dealt with by way of a consecutive sentence.
In the extradition context it is sufficient to underline the very strong public policy consideration that professional criminals who break their bail conditions abroad should not be permitted to find a safe haven here.
Taken together, I cannot avoid the conclusion that the overwhelming public interest requires the extradition of PH as well as HH, and accordingly that his appeal, like her appeal, should be dismissed.
By way of further comment, I should add that I have ignored my misgiving that the youngest child may have been conceived in an endeavour by the parents to improve their position in the criminal justice and extradition processes.
Of course that would neither be the fault of nor diminish the article 8 entitlements of the child.
Nevertheless it would in my view have had an impact on the proportionality test adverse to the irresponsible parent who treated the conception of a child as a selfish device to evade justice.
LORD KERR
Should the approach of the courts to article 8 rights be radically different in extradition cases from that in deportation or immigration cases because of the very important obligation of the State to ensure that those who are to be investigated, prosecuted or imprisoned for criminal offences are returned to those countries as per Silber J in para 55 of his judgment in B v District Courts in Trutnov and Liberec [2011] EWHC 963 (Admin)?
There is a principled distinction to be recognised between extradition and expulsion.
The latter is performed unilaterally and is designed to protect the states national interest; the former involves compliance with an international obligation and is performed in furtherance of the suppression of transnational crime and the elimination of safe havens.
But, just because the interests that require to be protected are different in the two contexts, it does not automatically follow that the approach to an evaluation of article 8 rights has to be different.
It is true that the importance of protecting a system of extradition carries greater weight than will (in general terms) arrangements to expel unwanted aliens or the control of immigration.
Extradition is, par excellence, a co operative endeavour and it depends for its success on comprehensive (if not always total) compliance by those who participate in the system.
As a matter of generality, therefore, it will be more difficult to overcome the imperative for extradition by recourse to article 8 rights than it will be in the field of expulsion and immigration.
But that is a reflection of the greater importance of the need to promote the system of extradition rather than a diminution in the inherent value of the article 8 right.
The intrinsic value of the right cannot alter according to context; it will merely be more readily defeasible in the extradition context.
Although there were some references in Norris (Norris v Government of the United Sates of America (No 2) [2010] UKSC 9, [2010] 2 AC 487) to article 8 considerations arising from separation from dependent relatives, these were, at most, fairly oblique.
There was no discussion in ZH (ZH (Tanzania) v Secretary of State for the Home Department) [2011] UKSC 4, [2011] 2 AC 166 about extradition but I agree with Lady Hale that this does not mean that it has nothing to say about how article 8 issues involving children should be approached in the extradition context.
As she has pointed out, these cases provide the opportunity to synthesise the reasoning that underlies both Norris and ZH.
The debate about whether the interests of the child should be, in article 8 terms, a primary consideration or the primary consideration is a fairly arid one but I have to say that I find the notion that there can be several primary considerations (or even more than one) conceptually difficult.
Primary, as an adjective, means occurring or existing first in a sequence or series of events or circumstances (Oxford English Dictionary).
Its natural synonyms are main, chief, most important, key, prime, and crucial.
I have found the argument about the place that childrens interests should occupy in the hierarchy of the courts consideration of article 8 most persuasively expressed in the Coram Childrens Legal Centre note submitted in the course of this appeal.
It is unquestioned that in each of these cases, the childrens article 8 rights are engaged.
As a matter of logical progression, therefore, one must first recognise the interference and then consider whether the interference is justified.
This calls for a sequencing of, first, consideration of the importance to be attached to the childrens rights (by obtaining a clear sighted understanding of their nature), then an assessment of the degree of interference and finally addressing the question whether extradition justifies the interference.
This is not merely a mechanistic or slavishly technical approach to the order in which the various considerations require to be evaluated.
It accords proper prominence to the matter of the childrens interests.
It also ensures a structured approach to the application of article 8.
Lord Wilson says (in para 153) that there is no great logic in suggesting that in answering the question, does A outweigh B, attention must first be given to B rather than to A.
At a theoretical level, I do not disagree.
But where a childs interests are involved, it seems to me that there is much to be said for considering those interests first, so that the risk that they may be undervalued in a more open ended inquiry can be avoided.
Lady Hale (in para 14 above) has correctly described my statement in para 46 of ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166 as expressing more strongly than other members of the court the importance that should be attached to their best interests in reaching decisions that will affect children.
In suggesting that these should be given a primacy of importance, I did not intend to stoke the debate about the distinction between a factor of primary importance and the factor of primary importance.
What I was seeking to say was that, in common with the opinion of the High Court of Australia in Wan (Wan v Minister for Immigration and Multicultural Affairs (2001) 107 FCR 133), no factor must be given greater weight than the interests of the child.
This is what that court said at para 32: Provided that the Tribunal did not treat any other consideration as inherently more significant than the best interests of Mr Wan's children, it was entitled to conclude, after a proper consideration of the evidence and other material before it, that the strength of other considerations outweighed the best interests of the children.
However, it was required to identify what the best interests of Mr Wan's children required with respect to the exercise of its discretion and then to assess whether the strength of any other consideration, or the cumulative effect of other considerations, outweighed the consideration of the best interests of the children understood as a primary consideration. (Emphasis added).
In the field of extradition, as in every other context, therefore, the importance of the rights of the particular children affected falls to be considered first.
This does not impair or reduce the weight that will be accorded to the need to preserve and uphold a comprehensive charter for extradition.
That will always be a factor of considerable importance, although, as Lady Hale has said (in para 8(5)), the weight to be attached to it will vary according to the nature and seriousness of the crime or crimes involved and (at para 8(6)), delay in applying for extradition may reduce the weight to be attached to the public interest in maintaining an effective system of extradition.
Following the approach that I have outlined, I have no hesitation in expressing my agreement with Lady Hale in her proposed disposal of the appeal in F K v Polish Judicial Authority.
As she has pointed out, the offences, although not trivial, do not rank among the most serious in the criminal calendar.
There has been substantial delay.
The offences are already of considerable vintage.
The public interest importance of maintaining a comprehensive system of extradition will not suffer a significant impairment if F Ks surrender to the Polish authorities is not ordered.
By contrast, the adverse impact on her family and, particularly its younger members, is likely to be profound and irretrievable.
I too would allow the appeal in that case.
In the case of PH and HH, the consequences of both parents being extradited have been thoroughly charted by Lady Hale and Lord Wilson and need no further elaboration.
The anticipated plight of these innocent children, the momentous upheaval to their lives and the inevitable emotional damage that they will suffer are indeed, as Lord Wilson has put it, heart rending.
But pitted against those circumstances are the extremely serious crimes of which both PH and HH were convicted; the nature of their participation in those crimes; and the fact that they have exploited the criminal justice system in Italy in their attempts to avoid punishment.
These considerations, allied to the pressing need to preserve an effective system of extradition based on international co operation and the denial of safe havens, create a formidable case in favour of the appellants extradition.
Ultimately, as Lord Wilson has said (para 150), the differing conclusions as to the disposal of these appeals rests not on any difference in legal analysis but on a judgment as to where the balance of the competing interests is found to fall.
For the reasons given by Lord Judge and Lord Wilson, with which I agree, I have concluded that it must firmly fall in favour of the appellants extradition.
I would dismiss their appeals.
LORD WILSON
In her judgment Lady Hale sets out the facts of the appeals comprehensively; and analyses the law in terms to which, in most respects, I can readily subscribe.
But while I agree with her, for the reasons which she gives, that the appeal of Mrs F K should be allowed and that that of Mrs HH should be dismissed, I do not agree with her that the appeal of Mr PH should be allowed.
The difference between us represents no difference of legal analysis.
It is a difference of value judgement upon the weight to be attached to two powerful and conflicting interests.
To be more specific, our sense of proportion in relation to them is different.
In accordance with that reached by Laws LJ, and now by Lord Judge, the Lord Chief Justice, with whose judgment I agree, I have reached the conclusion, heart rending in the light of its devastating effect upon his three children, that the order for the extradition of PH to Italy should stand.
Section 21 of the 2003 Act provides: (1) If the judge is required to proceed under this section (by virtue of section 11 or 20) he must decide whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998 (c 42).
The reference to sections 11 and 20 is a reference to subsections (4) of each of the sections, which relate to warrants prior to, and following, conviction respectively.
What section 21(1) adds to the overarching obligation of the court under section 6 of the Human Rights Act 1998 not to act in a way which is incompatible with Convention rights is to identify the stage in its sequential consideration of an application for an extradition order under Part 1 of the 2003 Act at which it must turn to that question.
It follows that the nature of the offence of which the person stands convicted or accused will already have been considered at an earlier stage or stages, in particular at that of considering pursuant to section 10(2) whether the offence specified in the warrant is an extradition offence.
Where it is suggested to the court (or, in the light of its free standing obligation not to act incompatibly with Convention rights, where it appears to the court) that the defendants extradition might infringe the rights of himself and of the other members of his family to respect for their family life under article 8, the requisite inquiry under para 2 of the article is likely to reduce to one issue.
There is likely to be no doubt (a) that the extradition would interfere with the exercise of their rights; (b) that, inasmuch as the application for the extradition order will have survived the earlier stages of the inquiry, the interference would be in accordance with the law; and (c) that the aim of the extradition would be one of those specified in para 2, namely the prevention of crime.
The issue is likely to be whether the interference is necessary in a democratic society. [The] notion of necessity implies that the interference corresponds to a pressing social need and, in particular, that it is proportionate to the legitimate aim pursued: Olsson v Sweden (No 1) (1988) 11 EHRR 259.
The concept of a pressing social need adds little, if anything, to that of a legitimate aim: in Norris v Government of the United States of America (No 2), [2010] UKSC 9, [2010] 2 AC 487, Lord Phillips, with whose judgment all the other members of the court agreed, equated them (para 10).
So the court must survey the individual, or private, features of the case, namely the circumstances of the family on the one hand and of the offence (or alleged offence) on the other and, in the light also of the public interests on both sides to which I will refer in paras 156 and 167, must proceed to assess the proportionality of the interference.
Is the right question whether the likely gravity of the interference with respect for family life outweighs the potency of the legitimate aim of the extradition order? Or is it whether the potency of the legitimate aim outweighs the likely gravity of the interference? Such is a question, of significance no doubt much more theoretical than practical, in which, perhaps to its credit, the European Court of Human Rights (the ECtHR) seems not much interested.
It stated in Babar Ahmad v UK, (2010) 51 EHRR SE97, at para 172, that it will only be in exceptional circumstances that an applicants private or family life in a contracting state will outweigh the legitimate aim pursued by his or her extradition.
As it happens, however, I agree with the submission on behalf of the Coram Childrens Legal Centre, reflective of an observation by Lord Kerr in the Norris case, at para 137, that the structure of article 8, which requires the state to justify interference, is such as to cast the question in the opposite way: does the aim outweigh the interference? In ZH (Tanzania) v Secretary of State for the Home Department, [2011] UKSC 4, [2011] 2 AC 166, Lady Hale said, at para 33: In making the proportionality assessment under article 8, the best interests of the child must be a primary consideration.
This means that they must be considered first.
With great respect, I do not consider that Lady Hales second sentence follows logically from her first.
Nor do I discern any greater logic in a conclusion that, in answering a question does A outweigh B?, attention must first be given to B rather than to A.
In my view a judge is entitled to decide for himself how to approach his task.
No doubt in some cases a defendant to an application for an extradition order will invoke the article 8 rights of himself and his family in circumstances in which the judge can swiftly reject the suggested incompatibility.
But in others, in particular where the defendant lives in a family with a minor child, of whom he is (or claims to be) the sole or principal carer, a full inquiry is necessary, such as was indeed conducted in the case of PH and HH by the district judge and, on appeal and with the benefit of additional evidence adduced by the Official Solicitor, by Laws LJ.
Article 3.1 of the UN Convention on the Rights of the Child dated 20 November 1989 provides that in all actions concerning children. the best interests of the child shall be a primary consideration.
Analogously article 24.2 of the Charter of Fundamental Rights of the European Union (2000/C 364/01) dated 7 December 2000 provides that in all actions relating to children. the childs best interests must be a primary consideration.
The word concerning in article 3.1, like the phrase relating to in article 24.2, encompasses actions with indirect, as well as direct, effect upon children: the ZH (Tanzania) case, para 26 (Lady Hale).
The rights of children under article 8 must be examined through the prism of article 3.1: see paras 21 to 23 of the same case.
Thus, in the present inquiry, article 8 affords to the best interests of the three children a substantial weight which, following examination, other factors may earn and even exceed but with which, under the law of the article, they do not start.
When we come to consider the other side of the equation, we will notice, at para 167 below, not just the importance that PH should be punished for his wrong doing but the public importance of adhering to arrangements for extradition.
So, at this earlier stage, we should notice not just the grave effects of his extradition upon these three children but the public importance that children should grow up well adjusted.
The principle which pervades the despatch of issues relating to children in the family courts is that, as a rule, they are more likely to grow up well adjusted if they continue to live in the home of both or at least one of their parents: see, for example, In re KD (A Minor) (Ward: Termination of Access) [1988] 1 AC 806 at p 812 B C (Lord Templeman).
I agree with Lady Hales comments on this point at para 25 above.
To A commentary on the UN Convention on the Rights of the Child, published by Nijhoff in 2007, Professor Freeman contributed Chapter 3, of which the title was Article 3: The Best Interests of the Child.
He wrote, at p 41: There are also utilitarian arguments in favour of prioritizing childrens interests.
Thus, it may be thought that giving greater weight to childrens interests maximises the welfare of society as a whole.
Barton and Douglas have even argued that children are important for the continuity of order in society.
Putting children first is a way of building for the future.
It is significant that countries reconstructing after nightmares of rightlessness have put childrens interests in the foreground.
I turn to consider the likely arrangements for the children in the event that PH, as well as HH, was to be extradited to Italy.
Although there are wider members of the family, to whom I will refer in para 158, who would be likely to continue to have contact with the children, none of them is in a position to offer any of them a home.
So the local authority would have to accommodate the children.
In para 69 above Lady Hale criticises the authority for not having made plans for them in that event and thus for not having done work with them in preparation for it.
But the parents have decided not to explain, even to X, that they might be removed to Italy so no work could have been done with the children until they had been persuaded to reverse that decision.
They raise the spectre that, notwithstanding their refusal to consent, Z might be adopted.
It is, however, clear to me that, in circumstances in which a loving father was to say that, following the next four years in prison, he wished to resume his care of a child, a court could not properly be satisfied that the childs welfare required it to dispense with his consent pursuant to section 52(1)(b) of the Adoption and Children Act 2002.
So the authority would accommodate all three children in foster homes.
Under section 22C(7)(b) and (8)(c) of the Children Act 1989 (the 1989 Act) the authority would have a duty to place all three children together so far as was reasonably practicable.
My past service in the Family Division emboldens me to predict, with fair confidence, that they would succeed in placing X and Y together but that it might prove not reasonably practicable to place Z with them.
The three children have a close relationship with each other and any placement of Z separately from X and Y would be highly unfortunate, perhaps particularly for Z herself.
But the local authority would undoubtedly arrange regular contact between the three of them; and it is of some, if limited, comfort that, in the event of the sudden dismantling of their home life, at least the three of them would have a continuing relationship with each other to which to cling.
Paragraph 15(1) of Schedule 2 to the 1989 Act would oblige the authority, so far as was reasonably practicable and consistent with their welfare, to endeavour to promote contact not only as between the children themselves, if placed separately, but also between them and their parents and other relatives.
It would be nave to consider that more than about one annual visit to PH and HH in prison in Italy would prove practicable.
But PHs wide extended family is close knit: both one of his sisters and the wife of one of his sons by his former marriage have, in particular, been visiting the three children on a regular basis and have expressed a wish to continue to do so.
Equally HHs mother came from Morocco to help to look after the children for three months in 2011 and might well make further visits to them.
Nevertheless, although she acknowledged the value of the likely continuing contact to which I have referred, Dr Pettle expressed in stark and convincing terms the emotional damage likely to be caused to the children by the extradition of PH as well as of HH.
It would, she said, be likely to be catastrophic for them; a massive emotional and psychological challenge; overwhelmingly painful; and analogous to a bereavement.
She predicted that the carers would need to cope with withdrawal, regression, anger and defiance on the part of the children; that they would sleep and eat poorly; and that the performance of X and Y at school would deteriorate.
Although he lacked the benefit of Dr Pettles evidence, the district judge squarely confronted the effect of his order upon the children.
He said that it would tear the family apart, would profoundly affect the childrens physical and emotional health and might lead to multiple future problems for them.
With the benefit of her evidence, Laws LJ endorsed the district judges conclusions.
In relation to Z the Official Solicitor also pressed upon Laws LJ, as he does upon this court, the statement on p 19 of the paper published by the Childrens Commissioner for England in January 2008, entitled Prison Mother and Baby Units do they meet the best interests of the child?, that Attachment between babies and their mothers or primary caregivers starts in the early stages of life and babies become attached by around six months.
Severe psychological damage may occur to babies if the bond or attachment with the primary caregiver is severed between the age of six months and four years.
Z will not attain the age of four until a year from now; and so the Official Solicitor suggests that consideration of PHs extradition might at least be delayed until next year.
It is now clear that the law does not welcome, still less require, an examination of whether the circumstances disclosed by the inquiry under article 8 are exceptional.
In the Norris case, cited above, there are helpful observations by Lord Phillips in para 56, by Lord Hope in para 89 and by Lord Mance in para 109, about the snare that, as in many other areas of the law, a test of exceptional circumstances sets: for it may lead to the wrongful downgrading of the significance of circumstances just because they happen not to be exceptional or to their wrongful upgrading just because they happen to be exceptional.
Take, suggested Lord Mance at para 109, a case of an offence of relatively low seriousness where the effect of an extradition order would be to sever a genuine and subsisting relationship between parent and baby: the circumstances might not be exceptional yet the proper application of article 8 might lead to a refusal to make the order.
Lord Kerr observed, at para 136, that the importance of preserving an effective system of extradition . will in almost every circumstance outweigh any article 8 argument but he explained that such was a fact which exemplified the likely result of the inquiry rather than furnished the criterion by which the issue should be resolved.
I should add that I am not convinced that, in the eleven appeals to the Divisional Court cited in para 22 of Lady Hales judgment, the judges fell, as suggested, into the error of applying a test of exceptional circumstances.
In his judgment in the Norris case Lord Phillips stated in para 56: Instead of saying that interference with article 8 rights can only outweigh the importance of extradition in exceptional circumstances it is more accurate and more helpful, to say that the consequences of He added in para 62: interference with article 8 rights must be exceptionally serious before this can outweigh the importance of extradition. If. the nature or extent of the interference with article 8 rights is exceptionally serious, careful consideration must be given to whether such interference is justified.
In such a situation the gravity, or lack of gravity, of the offence may be material.
He gave an example at para 65: [In] trying to envisage a situation in which interference with article 8 might prevent extradition, I have concluded that the effect of extradition on innocent members of the extraditees family might well be a particularly cogent consideration.
If extradition for an offence of no great gravity were sought in relation to someone who had sole responsibility for an incapacitated family member, this combination of circumstances might well lead a judge to discharge the extraditee.
No one suggests a need to dilute the strength of these remarks just because in the present appeal, unlike in the Norris case, the rights in play under article 8 are those of children, whose interests are a primary consideration.
Nevertheless my view of the evidence in the present appeal supports a conclusion that the consequences of extradition upon the rights of the three children under article 8 would be interference with them of an exceptionally serious character.
The importance of PHs extradition might therefore fail to outweigh consequences of such seriousness.
But does it?
On 23 September 2003 HH and PH drove across the French border into Italy.
They were escorting another car, driven by a courier and containing 205.7 kg of hashish.
By telephone they instructed the courier to drive to a rendezvous at which he was supposed to deliver the drugs to them for onward distribution to others.
But the Italian police were intercepting their calls.
When the police were about to arrest him, the courier alerted PH and HH, who, by telephone, acquainted others with what had happened and tried to drive back into France.
On their way back, however, they too were arrested, charged and remanded in custody.
HH and PH were charged with, and later convicted of, being concerned in the importation of cannabis into Italy from Morocco, through France, not just on 23 September 2003 but also on six earlier occasions.
The details of the seven charges were as follows: 350 kg (a) 25 April 2003 94.2 kg (b) 11 June 2003 120 kg (c) 19 July 2003 310 kg (d) 6 August 2003 334.6 kg (e) 29 August 2003 200 kg (f) 13 September 2003 205.7 kg (g) 23 September 2003
Total 1614.5 kg
An eighth charge was brought against HH and PH, namely of conspiracy with other persons, of whom four were named, to import cannabis into Italy.
They were both also convicted under the eighth charge.
But on 28 April 2009 the Court of Cassation in Rome ordered a retrial of that charge in the case of PH; and on 9 February 2010 the Court of Appeal in Genoa held that, unlike in the case of HH, it had not been proved that PH, albeit an active participant, had organised or promoted the trafficking enterprise in the sense necessary for a conviction under the eighth charge.
His acquittal in this respect explains the fact that, whereas the time likely to be served by HH in prison in Italy is nine and a half years, that likely to be served by PH, following various adjustments, is four years and 22 days.
I should add that the fact that, had he been resident with the family in Italy, a further significant adjustment would have been made in his favour adds yet further piquancy to the case; but it is not for the requested court to pick over the rules of the requesting court which govern the time to be served by the defendant in prison any more than it should appraise the justice of his sentence itself although it must be long enough to qualify as an extradition offence.
There is an important extra dimension to the gravity of PHs conduct.
Just as in 2004 HH had sought to evade justice by leaving Italy in breach of her conditions of bail, so too, later in 2004, did PH.
On 7 October 2004, following a year spent in custody on remand, he was granted bail on condition that he should reside in Genoa and report daily to the police; but three weeks later he left Italy and rejoined HH in Spain.
In Gomes v Government of the Republic of Trinidad and Tobago [2009] UKHL 21, [2009] 1 WLR 1038, Lord Brown, giving the opinion of the appellate committee, said at para 36: The extradition process, it must be remembered, is only available for returning suspects to friendly foreign states with whom this country has entered into multilateral or bilateral treaty obligations involving mutually agreed and reciprocal commitments.
The arrangements are founded on mutual trust and respect.
There is a strong public interest in respecting such treaty obligations.
As has repeatedly been stated, international co operation in this field is ever more important to bring to justice those accused of serious cross border crimes and to ensure that fugitives cannot find safe havens abroad.
Rolled up in Lord Browns observations are several overlapping considerations which combine to confer upon the UKs extradition arrangements their profound importance: (a) perpetrators of crimes should be punished; (b) crime is deterred by the likelihood of punishment; (c) cross border crime is increasing; (d) the movement of criminals across borders has become easier; (e) inter state co operation is increasingly necessary in order to combat crime and to bring criminals to justice; (f) states which offer sanctuary to criminals substantially undermine the efforts of the others to eliminate any advantage in remaining in, or indeed escaping to, a jurisdiction other than that of the prosecuting court; and (g) the UK should adhere to its bilateral (or multilateral) treaty obligations and its breaches or perceived breaches may generate a more widespread unravelling of them on both (or all) sides.
The especial importance of adherence to arrangements for extradition is written across all the judgments in the Norris case, and one could well argue that it transcends even the importance of immigration control.
Of course I accept that an effective system of removal, or deportation, from the UK of a foreign citizen who has had no right, or has forfeited his right, to remain here carries an importance which extends well beyond his particular circumstances; but the destructive effects on societies of crime are far less plainly and directly countered by immigration control than by adherence to arrangements for extradition.
There is a dearth of decisions in which an order for extradition has been refused by reference to the rights of the defendant and his family under article 8.
There is Ministry of Justice of Lithuania v AI, [2010] EWHC 2299 (Admin): the defendant had served eight months of a sentence of 20 months for fraud prior to her departure, in breach of the conditions of her release, from Lithuania to England, where she was forced into prostitution, suffered serious trauma and was providing valuable assistance to the police, such combination of circumstances being (said Leveson LJ at para 21) truly exceptional and from which nobody should seek to derive any wider principles.
There is Jansons v Latvia [2009] EWHC 1845 (Admin): the defendant was accused of thefts to a value of about 450 and would commit suicide if extradited.
Now, today in these conjoined proceedings, also arrives the unanimous decision of this court in F K v Polish Judicial Authority: the facts are set out by Lady Hale in paras 35 to 43 above and reveal not only the need of children aged eight and three for the defendants care but also, and in particular, the relative lack of gravity of the offences alleged against her, their antiquity and the delay in the seeking of her extradition.
Counsel can find no evidence that article 8 has ever operated so as to bar extradition for an offence approaching the gravity of those of which PH has been convicted, whether in the courts of England and Wales or of any other member state of the Council of Europe or in the European Court of Human Rights itself.
No doubt the constituency of defendants who provide the sole or main care to young children is relatively small.
But in my view the principal driver behind such absence of authority is the high degree of public importance attached throughout (and no doubt beyond) Europe to the extradition of persons so that they may answer for serious crime.
Indeed the Conseil dEtat in France, for example, appears even to take a step further in considering that, as a matter of principle, extradition will justify any interference with rights under article 8: the Norris case, para 50 (Lord Phillips).
The effects on family life of a defendants imprisonment in England and Wales following domestic criminal proceedings, on the one hand, and of his imprisonment abroad following extradition there, on the other, are likely to be somewhat different.
Visits to him by his family members would more easily be arranged if his prison was in England and Wales although whether, for his children, the positives outweigh the negatives would so I have long considered be an interesting subject for study; and special facilities, such as for a mother to have her baby with her in prison, might be available in England and Wales but not abroad.
In my view, however, it remains of substantial relevance to note the extent to which rights under article 8 affect the process of sentencing in domestic criminal proceedings.
In para 128 above Lord Judge quotes from para 54 of his own recent judgment on behalf of the Court of Appeal in R v Kayani, R v Solliman [2011] EWCA Crim 2871, [2012] 1 Cr App R 197.
But having stressed in the passage which he has set out, the need in every case for careful scrutiny of the plight of children for whom a defendant has primarily been caring, Lord Judge continued, at para 56: Dealing with it generally, where the only person available to care for children commits serious offences, even allowing fully for the interests of the children, it does not follow that a custodial sentence, of appropriate length to reflect the culpability of the offender and the harm consequent on the offence, is inappropriate.
There are a number of reported examples of sentences of immediate imprisonment, almost all measured in months, which, even before article 8 acquired the force of law, the Court of Appeal set aside in the interests of children of whom the defendant was the sole or primary carer: see, for example, R v Whitehead [1996] 1 Cr App R(S)111; and now see also R v Bishop cited above.
But, on behalf of the Deputy Prosecutor of the Italian Republic, Genoa, Mr Perry made an unchallenged submission that, were PH to have been sentenced in England and Wales for offences of drug trafficking of gravity equivalent to those of which he has been convicted in Italy, he would be likely to have received a very substantial sentence of imprisonment which, in that they would have been outweighed, the rights of his children under article 8 would not have displaced.
Indeed Lord Judge predicts, at para 136 above, that the sentence would be likely to have been at least ten years; and there can be no more authoritative prediction than his.
In M v The State [2007] ZACC 18 the Constitutional Court of South Africa delivered judgment on the following question, posed by Sachs J at para 1: When considering whether to impose imprisonment on the primary caregiver of young children, did the courts below pay sufficient attention to the constitutional provision that in all matters concerning children, the childrens interests shall be paramount? Sachs J thereupon offered an analysis of the relevant principles; and with that part of his judgment all the other members of the court agreed.
He referred, at para 10, to the classic approach to sentencing, articulated in S v Zinn 1969 (2) SA 537 (A) at 540G H, that what has to be considered is the triad consisting of the crime, the offender and the interests of society.
He explained, at para 26, that, when used in s 28(2) of the Constitution, the word paramount does not mean that the interests of the children necessarily dictate the result.
He proceeded as follows: 33.
Specific and well informed attention will always have to be given to ensuring that the form of punishment imposed is the one that is least damaging to the interests of the children, given the legitimate range of choices in the circumstances available to the sentencing court. 34 In this respect it is important to be mindful that the issue is not whether parents should be allowed to use their children as a pretext for escaping the otherwise just consequences of their own misconduct.
This would be a mischaracterisation of the interests at stake. 35.
Rather, it is to protect the innocent children as much as is reasonably possible in the circumstances from avoidable harm. 36. (c) If on the Zinn triad approach the appropriate sentence is clearly custodial and the convicted person is a primary caregiver, the court must apply its mind to whether it is necessary to take steps to ensure that the children will be adequately cared for while the caregiver is incarcerated. (e) Finally, if there is a range of appropriate sentences on the Zinn approach, then the court must use the paramountcy principle concerning the interests of the child as an important guide in deciding which sentence to impose.
The judgment of Sachs J draws the interests of children vividly into the foreground and it has led me to reflect again, albeit more profoundly, upon the plight of the three children of PH.
It is also important to observe that the exercise mandated by article 8 is not identical to that required by the Constitution of South Africa.
For we do not start, as a given, with the legitimate range of choices and then fit the interests of the children into it; under article 8 their interests may, through the proportionality exercise, help to identify the legitimate range.
But, in a judgment of especial child sensitivity, the weight which Sachs J nevertheless places upon the public interest in the punishment of serious domestic crime confirms me in my conclusion, firm if bleak, that the public interest, not identical but no less powerful, in the extradition of PH to Italy outweighs the interference with the rights of his children.
| These appeals concern requests for extradition in the form of European Arrest Warrants (EAWs) issued, in the joined cases of HH and PH, by the Italian courts, and in the case of FK, a Polish court.
The issue in all three is whether extradition would be incompatible with the rights of the Appellants children to respect for private and family life under article 8 of the European Convention on Human Rights (ECHR).
HH is the mother and PH the father of three children: X aged 11, Y aged 8 and Z aged 3.
HH and PH are both British citizens, although HH was born and bred in Morocco.
In 2003 they were arrested in Italy and prosecuted on eight charges relating to the importation of cannabis into Italy from Morocco on various dates earlier that year.
After a month HH was released under house arrest.
She fled the country in July 2004.
PH spent a year in custody before being conditionally discharged whereupon he also fled.
They were later convicted of all charges although PH received a lesser sentence in respect of the eighth charge, that of conspiracy, because of his lesser degree of participation.
HHs EAW states that she has just over nine and a half years of her prison sentence to serve.
PPs states that he has eight years and four months to serve.
According to calculations made by PHs legal team, he is likely in fact to have only around four and a half years to serve.
Further, as primary carer for the children, were the family living in Italy he would be allowed to serve all but a few months of that at home.
PH has become the primary carer for the children because HH had experienced a collapse in her mental health.
There was expert evidence of the serious harm which would be suffered by the children if both their parents were extradited, in particular by Z who would be separated from her primary attachment figure The District Judge ordered extradition of both HH and PH.
Their appeals were dismissed by the Administrative Court on 11 May 2011.
FK and her husband are Polish and have five children aged 21, 17, 13, 8 and 3.
They have lived in the United Kingdom since 2002.
The two youngest children were born in this country.
FK is charged with offences of dishonesty with a total equivalent value of less than 6,000.
She fled Poland in 2002 and has not been tried or convicted of the alleged offences.
There was expert evidence of the serious harm which would be suffered, in particular by the two youngest children, if their mother was extradited.
The children had reacted badly to her arrest in 2010.
FKs husband is physically impaired and was found to display signs of psychological disturbance.
The Senior District Judge ordered extradition.
Her appeal was dismissed by the Administrative Court on 1 January 2012.
The Supreme Court unanimously allows the appeal in the case of FK.
The appeal in respect of HH is unanimously dismissed.
By a majority, the Court also dismisses PHs appeal, Lady Hale dissenting.
Lady Hale gives the lead judgment.
The application of article 8 of the ECHR in the context of extradition was considered by the Supreme Court in Norris v Government of the United States of America (No 2) [2010] UKSC 9, [2010] 2 AC 487.
The case concerned the effect on Mrs Norris of her husband of many years being extradited to face charges of conspiracy.
Whilst not involving the rights of children, the following principles can nonetheless usefully be drawn from that case [08].
First, there may be a closer analogy between extradition and the domestic criminal process than between extradition and deportation, but the court must still carefully examine the way in which it will interfere with family life.
Secondly, there is no test of exceptionality.
Third, the question is whether the interference with private and family life is outweighed by the public interest in extradition.
Fourthly, there is a constant and weighty public interest in extradition: people should stand trial and serve appropriate sentences for their crimes, the United Kingdom should honour its treaty obligations towards other States, and there should be no safe haven for fugitive offenders.
Fifthly, the public interest will always carry great weight but the weight does vary according to the nature and seriousness of the crimes involved.
Sixthly, delay in seeking extradition may diminish the public interest element and increase the impact on family life.
Lastly, as a result of the above it is likely that the public interest will outweigh the article 8 rights of the family unless the interference is exceptionally severe.
In ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166 the Supreme Court considered the potential impact of Hs deportation on the article 8 rights of her two children, British citizens who had always lived here.
The United Nations Convention on the Rights of the Child required that the best interests of the child shall be a primary consideration (not, it should be noted, the primary consideration or the paramount consideration, [11]), although they can be outweighed by the cumulative effect of other considerations [15].
The approach of the court to article 8 rights is not radically different as between extradition and expulsion cases [29].
The countervailing public interest arguments may be different, in particular because extradition is an obligation owed by the requested state to the requesting state, but the balancing process involves asking the central question set out above.
In all cases there must be a careful analysis under article 8 of the potential effects of extradition [31, 32].
For guidance as to procedure in respect of gathering evidence, see [82 86].
In respect of FK, her extradition would have a severe effect on her two youngest children, who would lose their primary attachment figure.
That loss could have a lasting impact on their development.
Their father, though well intentioned, is unlikely to be able to fill that gap [44].
The alleged offences are not trivial but are of no great gravity [45].
There is no prosecutorial discretion in Poland and there has been considerable delay which may indicate the importance attached to her offending by the Polish authorities [46].
The public interest in extraditing FK does not justify the inevitable harm that it would cause to the lives of her children [48].
In the Italian case, the extradition of both parents would have a severe impact on the children.
However, having regard to the limited role of HH in the childrens lives and the central part she played in the very serious offences committed, the interference with the rights of the children is outweighed by the public interest in her extradition.
On this point all members of the Court agree.
As regards PH, the majority conclude that he ought to be extradited also.
Lord Judge notes that in the domestic sentencing context judges have for many years considered the effects of imprisonment on the children of offenders.
Unfortunately, the seriousness of the offences committed often means that innocent members of the offenders family will suffer as a result of their crimes [130, 131].
Given the nature of the crimes committed by PH, the public interest in extradition outweighs the interference with the rights of his children [135 138], a sentiment echoed by the majority: Lord Hope, [94]; Lord Brown, [96]; Lord Mance, [103]; Lord Kerr, [149]; and Lord Wilson at [170 172].
Lady Hale would have found that the current effect on the children and in particular the youngest is such that the extradition of their father in addition to their mother is not justified at present [79].
|
If an employee is dismissed on written notice posted to his home address, when does the notice period begin to run? Is it when the letter would have been delivered in the ordinary course of post? Or when it was in fact delivered to that address? Or when the letter comes to the attention of the employee and he has either read it or had a reasonable opportunity of doing so?
Given the vast numbers of working people who might be affected by this issue, it is perhaps surprising that it has not previously come before the higher courts.
This Court, in Gisda Cyf v Barratt [2010] UKSC 41; [2010] ICR 1475, held that the effective date of termination for the purpose of unfair dismissal claims under the Employment Rights Act 1996 was the date on which the employee opened and read the letter summarily dismissing her or had a reasonable opportunity of doing so.
But the Court was careful to limit that decision to the interpretation of the statutory provisions in question.
The common law contractual position might be quite different, as indeed the Court of Appeal had said that it was: [2009] EWCA Civ 648; [2009] ICR 1408.
There is nothing to prevent the parties to a contract of employment from making express provision, both as to how notice may or must be given and for when it takes effect, as happened in Geys v Socit Gnrale, London Branch [2012] UKSC 63; [2013] 1 AC 523, but that was not done in this case.
We are considering, therefore, the content of a term which must be implied into the contract of employment.
The employer contends that notice is given when the dismissal letter is delivered to the employees address (which by statute is deemed to be when the letter would be delivered in the ordinary course of post unless the contrary is shown).
The employee contends that notice is not given until the letter comes to the attention of the employee and she has had a reasonable opportunity of reading it.
The facts
The essential facts are very simple.
Mrs Haywood was continuously employed by various bodies in the NHS for many years.
On 1 November 2008, she began employment with the Newcastle and North Tyneside Community Health PCT.
On 1 April 2011, her employment transferred to the Newcastle upon Tyne NHS Foundation Trust (the Trust) on the same terms and conditions as before.
Section 19 of her contract of employment with the PCT provided that Unless there is mutual agreement that a different period should apply, this employment may be terminated by you or NPCT by the notice period as set out in section 1 .
Section 1 gave the Minimum notice period from you or NPCT as 12 weeks.
Very shortly after the transfer, the Trust identified Mrs Haywoods post as redundant.
As both parties knew, if her employment terminated by reason of redundancy on or after her 50th birthday on 20 July 2011, she would be entitled to claim a non actuarially reduced early retirement pension.
If it terminated before that date, she would not.
At a meeting to discuss her possible redundancy on 13 April 2011, Mrs Haywood informed the Trust that she had booked two weeks annual leave from Monday 18 April, was going to Egypt, and would be due back at work after the extended bank holiday weekend on 3 May 2011.
The period of leave had been recorded on the Trusts records.
Mrs Haywood asked that no decision be taken while she was away, but the Trust did not agree to that.
On 20 April 2011, it issued written notice (in fact dated 21 April) of termination of her employment on the ground of redundancy.
The Trust maintained that the letter was sent by three methods: by email to her husbands email address; by recorded delivery; and by ordinary first class post.
However, the Trust sought (unsuccessfully) to recall the notice sent by email that same day.
The trial judge was satisfied that only two notices had been sent by email and by recorded delivery (para 37(xii)).
The email is not relied on by the Trust.
Hence the letter which is relevant in this appeal is the one sent by recorded delivery.
The crucial date was 27 April.
Notice given on or after that date would expire on or after Mrs Haywoods 50th birthday.
Notice given before that date would expire earlier.
Mrs Haywood and her husband were away on holiday in Egypt from 19 to 27 April.
They asked Mr Haywoods father, Mr Crabtree, to look after the house while they were away.
He went daily to check that it was secure, remove mail from the doormat to the hall table and water the plants.
A recorded delivery slip was left at their home on 21 April.
On 26 April, Mr Crabtree found the recorded delivery slip, collected the letter from the local sorting office and left it at their home.
Mr and Mrs Haywood arrived back there in the early hours of 27 April.
Mrs Haywood opened and read the letter later that morning.
Mrs Haywood made various Employment Tribunal claims in respect of her dismissal, which were not pursued.
In these High Court proceedings, she claims that her 12 weeks notice did not begin until 27 April, when she received and read the letter, and therefore expired on 20 July, her 50th birthday, and accordingly that she is entitled to the early retirement pension.
The claim was tried by His Honour Judge Raeside QC, sitting as a High Court Judge, in January 2014.
He handed down a partial judgment on 27 May 2015: Case No 3BM30070.
He held that it was necessary to imply a term that Mrs Haywood had a right actually to be informed, either orally or in writing, of her dismissal; she had to have a reasonable opportunity actually to look at the letter (paras 70, 71).
He declared that Mrs Haywood was still employed by the Trust on 20 July 2011 and made various orders relating to the payment of her pension, both in the future and in arrears.
But he granted a stay of those provisions pending a possible appeal and they have remained stayed ever since.
The Trusts appeal to the Court of Appeal was dismissed by a majority: [2017] EWCA Civ 153.
Proudman J held that the contents of the letter had to be communicated to the employee (para 57).
Arden LJ held that the letter had to be received (para 130(2)); where it has been delivered to the partys address, there is a rebuttable presumption that it has been received (para 136); but that presumption had been rebutted by the judges finding that Mrs Haywood did not receive the letter until 27 April there was no need for her to have read the letter but she had to have received it (para 149).
Lewison LJ dissented: notice is validly given under the contract when a letter containing the notice actually arrives at the correct destination, whether the recipient is there to open it or not (para 124).
The agency point
Before turning to the major issue of principle, which divided the Court of Appeal and also divides this Court, it is convenient to mention a point which was raised for the first time in the Court of Appeal by Lewison LJ.
This is that Mr Crabtree, By taking it upon himself to collect and sign for the letter, must, in my judgment, be taken to have been acting as Mrs Haywoods agent (para 84).
Arden LJ disagreed: There was no argument on this at the hearing or finding by the judge. [Mr Crabtrees] witness statement is consistent with his having acted on his own initiative (para 134).
In their Grounds of Appeal, the Trust argued that Lewison LJ was right to hold that Mr Crabtree was acting as Mrs Haywoods agent and that delivery to him was therefore delivery to her.
It is fair to say that very little time was devoted to this ground in the hearing before us.
On its own, it does not raise a point of law of general public importance for which permission to appeal would be granted and arguably would require a finding of fact by the trial judge.
At all events, in my judgment (with which I understand that all my fellow Justices hearing this case agree), on the evidence that was available to the court, Arden LJ was correct to hold that, in acting as he did, Mr Crabtree was not acting at Mrs Haywoods agent for the receipt of the letter.
The issue of law
The Trust argues that there is a common law rule, principally derived from some historic landlord and tenant cases, which supports its case that notice is given when the letter is delivered to its address.
Mrs Haywood argues that the common law rule is not as clear cut as the Trust says that it is.
Furthermore, there is a consistent line of Employment Appeal Tribunal (EAT) authority which supports her case that, in the absence of an express contractual provision to the contrary, there is an implied term that a notice served by an employer upon an employee takes effect only when it has actually been received by the employee and the employee has either read or had a reasonable opportunity of reading it.
It is convenient, therefore, to look first at the non employment cases principally relied upon by the Trust and then at the employment cases principally relied upon by Mrs Haywood.
The non employment cases
The Trust relies on a line of cases dating back to the 18th century, almost all in the landlord and tenant context, holding that delivery of a notice to the tenants (or landlords) address is sufficient, even though it has not actually been read by the addressee.
Some of these are in the context of an express statutory or contractual provision that service may be effected by post.
In Jones d Griffiths v Marsh (1791) 4 TR 464; 100 ER 1121, it was held that delivering a notice to quit to the tenants maidservant at his house (which was not the demised premises) was sufficient.
Personal service was not necessary in every case, although it was in some.
Kenyon CJ remarked that in every case of the service of a notice, leaving it at the dwelling house of the party has always been deemed sufficient.
Doe d Neville v Dunbar (1826) Moot M 9; 173 ER 1062 was to the same effect.
Abbott CJ had no doubt as to the sufficiency of a notice served at the tenants home, even though the tenant was away: were it otherwise, a landlord would have no means of determining a tenancy, if his tenant happened to be absent from his house at the time when it was necessary to serve the notice.
In Papillon v Brunton (1860) 5 H & N 518; 157 ER 1285, a tenant served notice to quit by posting it to his landlords agent.
The jury found that it arrived that same day, after the agent had left, but there ought to have been someone there to receive it.
The judges agreed that this was good service.
In Tanham v Nicholson (1872) LR 5 HL 561, delivery to the tenants adult children at the property was held sufficient.
But Lord Westbury pointed out that, in Jones, Lord Kenyon had limited his remarks to notices affecting property, such as notices to quit, and not those notices which are intended to bring an individual into personal contempt (p 573).
As Lady Blacks much fuller treatment demonstrates, each of these cases could be seen as service upon an agent authorised to accept it.
The other landlord and tenant cases relied on by the Trust are less helpful, because they involved express statutory and/or contractual terms.
Stidolph v American School in London Educational Trust Ltd [1969] 2 P & CR 802 concerned the requirements for terminating a lease of business premises under the Landlord and Tenant Act 1954 and the Landlord and Tenant (Notices) Regulations 1954.
The Act expressly provided that notice could be served by registered post in a letter addressed to the tenants last known place of abode.
The landlords solicitors had sent, by registered post, an unsigned notice to quit accompanied by a letter signed by them.
This was held sufficient.
But Lord Denning observed that I do not think that a tenant can avoid the effects of a notice like this which is properly sent by registered post to him by saying that he did not take it out of the envelope or read it (p 805).
And Edmund Davies LJ said this (pp 805 806): Based upon considerations mainly of business efficacy, there is a long standing presumption in our law that a letter, duly addressed, pre paid and posted, which is not returned to the sender has in fact been received by the addressee unless he can establish the contrary.
The usefulness of a presumption of this kind would be destroyed if the addressee could nevertheless be heard to say: Although I received the postal packet quite safely, I did not read the contents, or I did not examine the postal packet to see that I had extracted all that it contained.
Both observations are as consistent with Mrs Haywoods case as they are with the Trusts.
In Stephenson & Son v Orca Properties Ltd [1989] 2 EGLR 129, the deadline for giving notice of a rent review to the tenant was 30 June.
The notice was posted recorded delivery on 28 June, but it was not received and signed for until 1 July.
The issue was whether it was deemed, under section 196(4) of the Law of Property Act 1925 (see para 34(2) below), to have been delivered in the ordinary course of post on 29 June.
Scott J held that that would have been the case with an ordinary registered letter, but a recorded delivery letter was not received until signed for.
So the notice was out of time.
Wilderbrook Ltd v Olowu [2005] EWCA Civ 1361; [2006] 2 P & CR 4, also concerned a rent review notice sent by recorded delivery, received and signed for at the demised premises.
The lease incorporated the statutory presumption as to service in section 196(4) of the Law of Property Act 1925 (see para 34(2) below).
The Court of Appeal rejected the argument that it was not received in accordance with the contract until the tenant had actually seen it.
Carnwath LJ quoted Lord Salmon in Sun Alliance & London Assurance Co Ltd v Hayman [1975] 1 WLR 177, at p 185: Statutes and contracts often contain a provision [that] notice may be served upon a person by leaving it at his last known place of abode or by sending it to him there through the post.
The effect of such a provision is that if notice is served by any of the prescribed methods of service it is, by law, treated as having been given and received.
Once again, this does not help us to determine what term as to service is to be implied into an employment contract, to which section 196(4) does not apply.
With the exception of the employment case of London Transport Executive v Clarke (dealt with below at para 29), the only case outside landlord and tenant law relied on by the Trust is The Brimnes, Tenax Steamship Co Ltd v The Brimnes (Owners) [1975] QB 929, CA.
One issue was when the owners notice withdrawing the vessel from hire, sent by telex, had been received by the charterers.
It was held effective when it arrived at the charterers machine during business hours and not when it was actually read.
Megaw LJ said this, at pp 966 967: With all respect, I think that the principle which is relevant is this: if a notice arrives at the address of the person to be notified at such a time and by such a means of communication that it would in the normal course of business come to the attention of that person on its arrival, that person cannot rely on some failure himself or his servants to act in a normal business like manner in respect of taking cognisance of the communication so as to postpone the effective time of the notice until some later time when it in fact came to his attention.
Cairns LJ made this general observation, at pp 969 970: In my opinion, the general rule is that notice must reach the mind of the charterer or of some responsible person on his behalf.
There must clearly be exceptions to this rule: for example, if the charterer or his agent deliberately keeps out of the way, or refrains from opening a letter with a view to avoiding the receipt of notice.
How much further than this do exceptions go? I feel little doubt that if an office were closed all day on an ordinary working day, though without any thought of a notice of withdrawal arriving, such a notice delivered by post on that day must be regarded as then received.
These statements can scarcely be seen as a ringing endorsement of the Trusts case, as their starting point is receipt.
Notices delivered during normal working hours to an office which can reasonably be expected to be staffed to receive and deal with them properly may be in a different category from notices delivered to a private home.
The employment cases
Mrs Haywood relies upon a line of EAT cases dating back to 1980, holding in a variety of contexts which do not all depend upon the construction of the employment protection legislation, that written notice does not take effect until the employee has read it or had a reasonable opportunity of doing so.
In Brown v Southall & Knight [1980] ICR 617, the issue was whether the employee had the 26 weeks continuous employment, ending with the effective date of termination, then required to bring an unfair dismissal claim.
The letter summarily dismissing him was sent by post after he had left to go on holiday.
His period of employment was less than 26 weeks on the date that it would have been delivered to his home but more than that on the date when he arrived back and read the letter.
The EAT (Slynn J presiding) held that he had the necessary 26 weeks employment, for the reasons given at p 628: It seems to us that it is not enough to establish that the employer has decided to dismiss a man or, indeed, has posted a letter saying so.
That does not itself, in our view, terminate the contract.
Nor, in our view, is it right, in looking at the matters as the industrial tribunal did in considering the reasonable steps taken by the employer, to look solely at what the employer does and to ask whether that constitutes the taking of reasonable steps.
In our judgment, the employer who sends a letter terminating a mans employment summarily must show that the employee has actually read the letter or, at any rate, had a reasonable opportunity of reading it.
If the addressee of the letter, the employee, deliberately does not open it or goes away to avoid reading it he might well be debarred from saying that notice of his dismissal had not been given to him.
That, however, did not happen in this case.
The same approach was adopted by the EAT (Morison J presiding) in McMaster v Manchester Airport plc [1998] IRLR 112, another case of a dismissal letter arriving while the employee was away from home.
This too was a case about the effective date of termination, but for the purpose of the time limit for making a complaint of unfair dismissal.
It was common ground that any dismissal had to be communicated, whether it was summary or on notice.
The tribunal commented, at para 9: It seems to us that, as a matter of principle, unless compelled to take a different view, the doctrine of constructive or presumed knowledge has no place in the private rights of parties to contracts of employment, and questions as to whether a dismissal has been communicated or not, save in an evidential sense only.
When the Gisda Cyf case, referred to in para 2 above, which concerned a summary dismissal by letter, came before Bean J sitting alone in the EAT ((UKEAT 0173/08, unreported), he agreed with all that Morison J had said it was laying down a clear and workable principle.
He drew a distinction between delivery to a large commercial concern during business hours and delivery to a persons home.
Edwards v Surrey Police [1999] IRLR 456 also concerned the effective date of termination for the purpose of the time limit for bringing an unfair dismissal complaint.
But the issue was whether the employees resignation took effect when the employee decided that she could not continue working for the employer or when that decision was communicated to the employer.
The EAT (Morison J presiding) held that before a contract of employment can be terminated there must have been communication by words, or by conduct, such as to inform the other party to the contract that it is indeed at an end (para 14).
In George v Luton Borough Council (EAT 0311/03, unreported) the EAT (Judge Serota QC presiding), agreed that the acceptance of the employers repudiatory breach had to be communicated, but held that there might be a distinction between cases of an employee giving notice and cases where an employer is seeking to terminate the employment, in which case the employee must know and actually have the termination communicated to him.
Receipt of the employees letter accepting the breach by the Council was sufficient (para 14).
To the same effect was Potter v RJ Temple plc (2003) UKEAT/0478/03/LA), where the EAT (Judge Richardson presiding) held that an employees notice was effective when received by his employers even if it had not been read.
Brown v Southall & Knight was followed in an entirely different context in Hindle Gears Ltd v McGinty [1985] ICR 111, and this time to the employees disadvantage.
During a strike, employers were exempt from unfair dismissal claims only if they dismissed an entire striking workforce.
They were not entitled to dismiss only those strikers who were unwanted elements.
So if there were striking employees who were not dismissed, or who were re engaged within three months, those who were dismissed could bring claims.
The employer sent out letters dismissing all the strikers, but two of them had left home to report for work early in the morning of the day after the letters were posted, before the letters were actually received.
The Industrial Tribunal held that the two employees had been dismissed but then re engaged that morning, with the result that the 39 striking employees could bring complaints of unfair dismissal.
The EAT (Waite J presiding) held that the two employees had not been dismissed before they returned to work; therefore they had not been re engaged that morning; and they were not part of the striking workforce on the relevant date.
This was because, at p 117: Communication of the decision in terms which either bring it expressly to the attention of the employee or give him at least a reasonable opportunity of learning of it is in our view essential.
Most recently, in Sandle v Adecco UK Ltd [2016] IRLR 941, the EAT (Judge Eady QC presiding) upheld the employment tribunals decision that an agency worker had not been dismissed because, although the firm to which the agency had assigned her had terminated the assignment, the agency had done nothing to communicate her dismissal: dismissal does have to be communicated.
Communication might be by conduct and the conduct in question might be capable of being construed as a direct dismissal or as a repudiatory breach, but it has to be something of which the employee was aware. (para 41)
Two other employment cases were relied upon by the Trust.
In London Transport Executive v Clarke [1981] ICR 355, the employee had taken unauthorised leave to go to Jamaica.
After sending two letters to his home address asking for an explanation and giving an ultimatum, the employers wrote on 26 March saying that his name had been permanently removed from their books on that day.
When he returned they refused to reinstate him.
The majority of the Court of Appeal held that a contract of employment was not terminated until the employers had accepted the employees repudiatory breach, which they did when he was dismissed on 26 March.
The issue was whether his dismissal was unfair.
There was no issue as to the precise timing, or as to when the employee became aware of the contents of the letter.
The most that can be said on behalf of the Trust is that the majority assumed that posting the letter was sufficient.
The other case is the decision of the Court of Appeal in the Gisda Cyf case: [2009] EWCA Civ 648; [2009] ICR 1408.
The majority, Mummery LJ with whom Sir Paul Kennedy agreed, approved the decisions in Brown v Southall & Knight and McMaster v Manchester Airport plc, but expressly on the basis that they were construing the statutory definition of the effective date of termination in section 97(1) the Employment Rights Act 1996 or its predecessor, for the purpose of unfair dismissal claims, rather than applying the law of contract; it did not follow that the correct construction of the statute was controlled by contractual considerations: para 33.
Lloyd LJ dissented: in his view resort should first be had to the general law on contracts of employment.
The EAT cases cited above had distinguished between those where the employee had given notice to the employer and those where the employer had given notice to the employee.
In the first category were George v Luton Borough Council and Potter v RJ Temple plc (see para 26 above), where it was held that an employees notice was effective when received by his employers even if it had not been read.
In the second category were all those cases where an employers notice had been held only to take effect when the employee had received and read, or had a reasonable opportunity to read, them.
He took the view that the latter category of cases was wrongly decided and the same rule should apply to both.
In the Supreme Court, the approach of the majority was upheld.
The Court emphasised that it was interpreting a statutory provision in legislation designed to protect employees rights, so that the general law of contract should not even provide a preliminary guide, let alone be determinative (para 37).
However, Lord Kerr (giving the judgment of the Court) was careful to say that the judgment should not be seen as an endorsement of the employers argument as to the effect of common law contractual principles (para 38).
The case was an unusual one, in that the employee was not represented before the Supreme Court and so there had been no argument to the contrary.
For that reason, although this case is determinative of the meaning of the effective date of termination in section 97(1) of the Employment Rights Act 1996, it is of no assistance in the determination of the issue in this case.
The last employment case to mention is Geys v Socit Gnrale, London Branch (see para 3 above).
The Bank purported to exercise its contractual right to terminate the employees employment by making a payment in lieu of notice.
The severance payment due depended on the date of termination: was it when the Bank repudiated the contract of employment, or when it made a payment in lieu of notice into the employees bank account, or when, in accordance with an express term in the contract, the employee was deemed to have received the Banks letter telling him that it had exercised its right to terminate with immediate effect and made a payment in lieu of notice? The Supreme Court held that the repudiation was not effective unless and until accepted by the employee (which it was not); that the mere payment of money into a bank account was not sufficient notification to the employee that he was being dismissed with immediate effect; so that the date of termination was the date on which he was deemed to have received the letter.
Apart from the repudiation point, most of the case depended upon the express terms of the contract, which included a term as to when a written notice sent by post was deemed to have been received.
For present purposes the case is relevant only insofar as it stresses the need for notification of dismissal (or resignation) in clear and unambiguous terms, so that both parties know where they stand whether or not the employee is still employed and when he ceased to be employed (paras 57 58).
Baroness Hale of Richmond (with whom Lord Hope of Craighead, Lord Wilson and Lord Carnwath agreed) cited with approval, at para 56, the following passage from Crossley v Faithful & Gould Holdings Ltd [2004] ICR 1615, per Dyson LJ, at para 36: It seems to me that, rather than focus on the elusive concept of necessity, it is better to recognise that, to some extent at least, the existence and scope of standardised implied terms raise questions of reasonableness, fairness and the balancing of competing policy considerations.
Policy
Both parties have placed great weight on what they see as the policy considerations favouring their solution.
Mr Cavanagh QC, for the Trust, points out that, as there was no express term stating how notice was to be given and when it was to be taken to have effect, some term has to be implied into this contract.
That being so, as stated in Crossley, policy questions are relevant.
There should be no special rule for employment cases.
There should be as much certainty and clarity as possible.
The Trusts approach is more certain than the employees.
Under the employees approach, it would not be possible for a letter giving notice to state with certainty the date on which the employment would end.
It is also fairer to give the benefit of the doubt to the sender of the letter, because there will usually be more objective evidence of when it was sent.
If there are several dismissals, all will take effect on the same day, and not on different days depending on when the letter was received.
The employees approach does not necessarily work for the benefit of employees, who might be keen for the employment to end.
There must be the same rule for employers and employees.
He also argues that the Trusts approach delivery to the home address is consistent with or more favourable than many statutory provisions about notice.
He cites, in ascending order of severity, the following examples: (1) By the Interpretation Act 1978, section 7 (replacing a provision to like effect in the Interpretation Act 1870), service of a document by post, where authorised or required, is deemed to be effected by properly addressing, pre paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.
However, in Freetown Ltd v Assethold Ltd [2012] EWCA Civ 1657; [2013] 1 WLR 701, at para 37, Rix LJ pointed out that this changed the common law, which required receipt; it introduced a rebuttable presumption; and required the sender to prove that the letter had been properly addressed, prepaid and posted. (2) By the Law of Property Act 1925, section 196(4), notices required to be served on a lessee or mortgagor are sufficiently served if sent by post in a registered letter addressed to the person to be served by name, at his place of abode or business, and the letter is not returned undelivered; and that service shall be deemed to be made at the time at which the registered letter would in the ordinary course be delivered. (3) By the Misuse of Drugs Act 1971, section 29(4) certain notices sent by registered post or recorded delivery shall be deemed to have been effected at the time when the letter containing it would be delivered in the ordinary course of post and section 7 of the 1978 Act is disapplied. (4) By the Public Health Act 1875, section 267, notices and other documents served by post shall be deemed to have been served at the time when the letter containing the same would be delivered in the ordinary course of post, and in proving such service it shall be sufficient to prove that the notice order or other document was properly addressed and put into the post.
However, as Mr Glyn QC for Mrs Haywood points out, it does not follow that any of these differing statutory provisions reflects the common law as to the term to be implied into an employment contract.
Their purpose was to lay down a rule which might well be different from what would otherwise be the common law position.
He also cites the judgment of the Supreme Court in Gisda Cyf, at para 43: There is no reason to suppose that the rule in its present form will provoke uncertainty as to its application nor is there evidence that this has been the position hitherto.
The inquiry as to whether an employee read a letter of dismissal within the three months prior to making the complaint or as to the reasons for failing to do so should in most cases be capable of being contained within a short compass.
It should not, as a matter of generality, occupy a significantly greater time than that required to investigate the time of posting a letter and when it was delivered.
Furthermore, if an employer wants greater certainty, he can either make express provision in the contract, or tell the employer face to face, handing over a letter at the same time if the contract stipulates notice in writing.
Large numbers of employees are not sacked on a whim.
The employer knows when employees are going on leave and can make arrangements to ensure that they are notified beforehand.
All the notices can be stated to expire on the same specified date.
There is no prohibition on giving more than the prescribed minimum period of notice.
Nor is it usually necessary to give a prescribed period of notice before a particular date, as it is with notices to quit.
The rule established in the EAT from 1980 onwards has survived the replacement, by the Employment Rights Act 1996, of the legislation which applied in Brown and there have been several other Parliamentary opportunities to correct it should it be thought to have caused significant difficulty.
It has not been confined to the interpretation of the effective date of termination for the purpose of Part X of the 1996 Act and has been applied in several different contexts.
It was only in Gisda Cyf that the possibility was raised that the common law and statutory rules might be different.
But it makes obvious sense for the same rule to apply to all notices given by employers to employees.
Conclusion
reasons: In my view the approach consistently taken by the EAT is correct, for several (1) The above survey of non employment cases does not suggest that the common law rule was as clear and universal as the Trust suggests.
Receipt in some form or other was always required, and arguably by a person authorised to receive it.
In all the cases there was, or should have been, someone at the address to receive the letter and pass it on to the addressee.
Even when statute intervened in the shape of the Interpretation Act, the presumption of receipt at the address was rebuttable.
There are also passages to the effect that the notice must have been communicated or come to the mind of the addressee, albeit with some exceptions. (2) The EAT has been consistent in its approach to notices given to employers since 1980.
The EAT is an expert tribunal which must be taken to be familiar with employment practices, as well as the general merits in employment cases. (3) This particular contract was, of course, concluded when those cases were thought to represent the general law. (4) There is no reason to believe that that approach has caused any real difficulties in practice.
For example, if large numbers of employees are being dismissed at the same time, the employer can arrange matters so that all the notices expire on the same day, even if they are received on different days. (5) If an employer does consider that this implied term would cause problems, it is always open to the employer to make express provision in the contract, both as to the methods of giving notice and as to the time at which such notices are (rebuttably or irrebuttably) deemed to be received.
Statute lays down the minimum periods which must be given but not the methods. (6) For all the reasons given in Geys, it is very important for both the employer and the employee to know whether or not the employee still has a job.
A great many things may depend upon it.
This means that the employee needs to know whether and when he has been summarily dismissed or dismissed with immediate effect by a payment in lieu of notice (as was the case in Geys).
This consideration is not quite as powerful in dismissals on notice, but the rule should be the same for both.
I would therefore dismiss this appeal.
It was only on 27 April 2011 that the letter came to the attention of Mrs Haywood and she had a reasonable opportunity of reading it.
LADY BLACK:
The foundation of the Trusts argument is that there is a common law rule that written notice of termination of a contract is given when the notice document is delivered to the recipients address, and that there is no need for the recipient to have sight of the document or the envelope containing it, or even to be present at the time.
Mrs Haywood disputes that such a common law rule exists.
In order to decide who is right, it is necessary to look in some detail at a line of old authorities on the giving of notice.
Lord Briggs, like Lord Justice Lewison in the Court of Appeal, concludes from it that there has been, for over two centuries, a term generally implied by law into relationship contracts terminable on notice, that written notice is given when the relevant document is duly delivered by hand or post to the address of the recipient, irrespective of whether/when the recipient actually gets the notice.
Lady Hale does not consider that the old authorities establish this proposition.
I agree with Lady Hales judgment, and, in the light of the disagreement between her and Lord Briggs, merely wish to set out here, in a little more detail, the reasons why, in my view, the old line of authorities are not to the effect that the Trust suggests.
I am indebted to Lady Hale and Lord Briggs for having introduced and analysed the authorities, albeit that their analyses differ, as I am able to build on what they have already said (see paras 13 and 14 of Lady Hales judgment, and paras 84 et seq of Lord Briggs judgment).
In considering the authorities, I have found it helpful to keep in mind that there are different sorts of service, increasingly personal in nature.
Putting a notice document into a post box might be said to be at one end of the spectrum.
This is the point at which, where the postal rule applies, an acceptance of a contractual offer would take effect, for example.
However, no one has contended in this case that notice could have been given at such an early stage.
At the other end of the spectrum is the communication of the contents of the document to the mind of the recipient.
In between, various possibilities exist, from which I would pick out service of the notice on an agent of the intended recipient who is authorised to receive such communications, and personal service.
When I speak of personal service in this context, I mean, following what it seems to me is the practice of the older authorities, ensuring that the notice actually reaches the recipients hands.
It is also helpful to keep in mind when approaching the authorities that presumptions feature prominently in them and that presumptions come in various guises too, the most obvious distinction being between the rebuttable presumption and the irrebuttable presumption.
The starting point for an examination of the old authorities is Jones d Griffiths v Marsh (1791) 4 TR 464.
This is the case in which a notice to quit was served on the tenants maidservant at the tenants house, the contents being explained to her at the time, but (as the report puts it) there was no evidence that it ever came to the defendants hands, except as above.
The tenant argued that this was not sufficient for a notice to determine an interest in land, especially as the service had been at a house which was not the demised premises.
The summary of the decision of Lord Kenyon CJ, and Buller J reads: Where the tenant of an estate holden by the year has a dwelling house at another place, the delivery of a notice to quit to his servant at the dwelling house is strong presumptive evidence that the master received the notice.
In deciding that the tenant had been served with due notice to quit, Lord Kenyon and Buller J expressed their decisions in rather different ways.
The reports of their judgments are so short that it is worth setting them out in full.
Lord Kenyon said at p 465: This is different from the cases of personal process: but even in the case alluded to of service on the wife [of a declaration in ejectment], I do not know that it is confined to a service on her on the premises; I believe that if it be served on her in the house, it is sufficient.
But in every case of the service of a notice, leaving it at the dwelling house of the party has always been deemed sufficient.
So wherever the Legislature has enacted, that before a party shall be affected by any act, notice shall be given to him, and leaving that notice at his house is sufficient.
So also in the case of an attorneys bill, or notice of a declaration being filed: and indeed in some instances of process, leaving it at the house is sufficient; as a subpoena out of the Court of Chancery, or a quo minus out of the Exchequer.
In general, the difference is between process to bring the party into contempt, and a notice of this kind; the former of which only need be personally served on him.
Buller J said at pp 465 466: Ex concessis personal service is not necessary in all cases.
Then what were the facts of this case? It was proved that this notice was delivered to the tenants servant at the dwelling house of the tenant, and its contents were explained at the time; and that servant who was in the power of the defendant was not called to prove that she did not communicate the notice to her master; this was ample evidence, on which the jury would have presumed that the notice reached the tenant.
Lord Briggs takes this case as a clear statement of already settled law to the effect that a notice left at the intended recipients dwelling house is valid from the point of delivery.
He would reject the argument that this was a decision about service on the maidservant as the tenants agent, taking the view that the judgments turn on the leaving of the document at the house rather than it being given to anyone there.
I do not share his confidence about this, but before explaining why, I will look at the whole line of authority up to and including the important case of Tanham v Nicholson (1872) LR 5 HL 561, because later cases shed light on the issue, in my view.
Lady Hale says of the main authorities in this line that they could be seen as cases concerning service upon an agent authorised to accept it (para 14).
I agree that that is a fair reading of them, although all is not perfectly clear and uniform, not least because the old reports are sparing in detail, and not all the cases address specifically the issues that are of interest to us, with our 21st century perspective.
Although not cited to us, the next relevant case chronologically seems to me to be Doe d Buross v Lucas (1804) 5 Esp 153.
The action was one of ejectment, to recover possession of premises.
The brevity of the report makes it difficult to be sure of the precise facts.
The tenant had died, leaving his widow as his executrix.
The notice to quit was given by leaving it at the house where he had lived during his lifetime, but there was no evidence of it having come into his widows hands.
It was argued that this was not a legal notice to quit, that service at the house where the tenant lived was never sufficient, and that there had to be delivery to the tenant, his wife or a servant, with (in the case of a servant) evidence that the notice came into the tenants hands.
The plaintiff asserted, relying on Jones d Griffiths v Marsh, that the mere service of the notice at the house was sufficient.
Rejecting the plaintiffs argument, the Lord Chief Justice, Lord Ellenborough, said: that case was different from this; in that case, the notice was delivered at the tenants dwelling house, and explained to the servant.
The objection was then taken, that the servant was not called, who might have accounted for the notice, and stated whether it had been delivered or not; and that not being called, it was strong presumptive evidence, that her master had received the notice, and should be left to the jury: but here there was no such evidence offered.
The tenant might be turned out of possession by a trick.
From this, it seems that Lord Ellenborough considered that mere delivery at the house was not enough, and that he saw Jones v Marsh as a case of notice received by the tenant himself, because there had been no evidence to rebut the presumption that arose from the delivery of the notice to his servant.
Next in time is Walter v Haynes (1824) Ry & Mood 149 which is one of the few examples we were given from outside the field of residential property.
An action of assumpsit was brought upon a bill of exchange.
A notice of dishonour had been posted in a letter addressed to Mr Haynes, Bristol.
This was held not to be sufficient proof of notice.
Setting out why, Lord Abbott CJ spoke in terms which made it plain that what was required was that the letter did in fact come into the hands of the person for whom it was intended.
Normally, the post was sufficiently reliable for posting a letter to be tantamount to delivery into that persons hands, but the address on this communication was not sufficiently precise for that to be presumed.
Lord Abbott said at pp 149 150: It is, therefore, always necessary, in the latter case [of a letter addressed generally to AB at a large town], to give some further evidence to shew that the letter did in fact come to the hands of the person for whom it was intended.
I come then to Doe d Neville v Dunbar (1826) M & M 9.
This was another notice to quit case.
Two copies of the notice to quit were served at the defendants house, one on the servant and the other on a lady at the house.
The defendant complained that this was not good enough.
His argument can be gleaned from the following summary in the report at p 11: It was attempted to shew that both the lady and the servant on whom notices were served were dead; and it was argued that in that case, as the defendant would be unable to call them to prove that they did not communicate the notice to him by the [relevant date], according to the course suggested by Buller J in Jones d Griffiths v Marsh, 4 TR 464, and as the sufficiency of the notice was treated, both in that case and in Doe d Buross v Lucas, 5 Esp 153, and in Doe d Lord Bradford v Watkins, 7 East, 553, as depending on the presumption that it came to the tenants hands, there would be no sufficient evidence that it did so, to entitle the plaintiff to a verdict.
An interesting feature of this passage is the assertion that the sufficiency of the notice in Jones d Griffiths v Marsh depended on the presumption that it came to the tenants hands.
This is in line with Lord Ellenboroughs view of it in Buross v Lucas and, to my mind, might be taken to indicate that Jones d Griffiths v Marsh was not treated, in the 30 years or so after it was decided, to be clear and established authority that mere delivery at the address constituted notice.
Lord Abbott CJ, had no doubt, however, that the notice in Neville v Dunbar was sufficient.
The brevity of the report makes it difficult to gain a full understanding of the reasoning.
It could be read as endorsing mere delivery to the house as sufficient (as Lord Briggs reads it), but the decision might equally have been based upon the proposition that service on the servant was sufficient whether or not the notice reached the master, or upon the proposition that service on the servant raised a presumption (not rebutted on the evidence) that the master had received the notice.
In order to make sense of what Lord Abbott said, it is necessary to note that, immediately after the passage I have just quoted from the argument, there is the statement: The proof however failed as to the servant.
It seems, therefore, that it was not established that the servant was in fact dead, from which it followed that the defendant could have called him or her to give evidence that he or she had not communicated the notice to him, but had not done so.
In that context, Lord Abbott said: I have no doubt that the service of the notice was sufficient.
The question does not arise here, for the servant might be called: but I have no doubt of the absolute sufficiency of the notice; were it to be held otherwise, a landlord would have no means of determining a tenancy, if his tenant happened to be absent from his house at the time when it was necessary to serve the notice.
Doe d Lord Bradford v Watkins, the third of the three cases referred to in the argument in Neville v Dunbar, seems to have concerned a notice to quit served on one of two tenants holding under a joint demise of premises.
It seems that it was left to the jury to determine whether the notice had reached the other defendant, but it is not easy to get a great deal of assistance from the report.
Papillon v Brunton (1860) 5 H & N 518 is the next case requiring consideration.
Lord Briggs takes the view that this makes it even clearer that the principle in play is not dependent upon personal delivery to an agent.
It is the case in which a notice to quit was posted by the tenant to the landlords agents place of business, that is to say the landlords solicitors chambers.
It should have arrived the same day, but the solicitor only found it when he went in the next day.
It was held to be good notice on the day of posting.
In attempting to arrive at a proper understanding of Papillon v Brunton, it must be noted that the trial judge had left it to the jury to say whether the letter arrived at the solicitors chambers on the day of posting or on the morning of the next day, and the jury found that it arrived on the day of posting after the solicitor left, and said that they thought he ought to have had somebody there to receive it.
Pollock CBs judgment includes the following passage at p 521: we think that in the case of a notice to quit the putting it into the post office is sufficient, and that the party sending it is not responsible for its miscarriage.
As this letter was posted in London between nine and ten oclock in the morning, the probability is that it arrived immediately after the agent left his chambers.
Indeed it is possible that it may have arrived in the due course of post, but by some accident. was overlooked either not delivered by the servant to the clerk or in some way mislaid.
Besides it did not appear that it was not delivered before seven oclock in the evening; and the jury considered that the agent ought to have had some one in his chambers at that time.
A notice so sent must be considered as having reached the agent in due time, and the same consequences must result as if he had actually been there and received it.
In my opinion the finding of the jury was right, and the notice was delivered at the agent's place of business in sufficient time to inform him, if he had been there, that the tenancy was to be determined at the time specified.
For these reasons I think there ought to be no rule.
Whilst this passage commences with a rather general observation, suggesting that mere posting of a notice is sufficient, that thought is not continued throughout the remainder of it.
As the reasoning develops, it seems to turn, at least to some extent, not on the mere fact of the notice arriving at the agents chambers, but on the fact that it probably arrived on the day of posting and the solicitor ought to have had someone at the chambers to receive it.
In highlighting the opportunity for the agent to have had the information had he arranged matters as he should have done, the approach bears some resemblance to the approach taken to termination of employment in the statutory context in cases such as Gisda Cyf, namely that the effective date of termination is when the employee reads the letter or has had a reasonable opportunity of reading it.
Martin B simply concurred with Pollock CB, but Bramwell B and Wilde B provided short judgments agreeing there should be no rule.
It is difficult to ascertain precisely what was of most importance to Bramwell B, although the jurys finding that the agent should have had someone at his chambers when the notice arrived had clearly impressed itself upon him.
Wilde B said he took the same view as Bramwell B, and expressed himself in one further sentence, which might be supposed to encapsulate what had weighed particularly with him, and was as follows: The jury have found that the notice arrived at the agents place of business at a time when someone ought to have been there to receive it.
So we come to the decision of the House of Lords in the Irish case of Tanham v Nicholson (1872), which I see as important.
There is nothing to suggest that the fact that it was an Irish case makes any difference to the law applicable in relation to notices to quit, and the cases cited included familiar ones such as Jones d Griffiths v Marsh, Neville v Dunbar and Papillon v Brunton.
The notice was delivered by hand to the tenants house where it was given to his daughter.
It was sufficient to entitle the landlord to maintain ejectment against the father.
Lord Briggs interprets the case as one about agency, rather than about service by post at the recipients home, but considers it to contain relevant dicta supporting the existence of a common law rule that delivery of an ordinary civil notice to the home of the intended recipient operates to transfer the risk to the recipient at that point, with the necessary corollary, I think, that it is at that point of physical delivery that the notice is given.
I see the case rather differently.
A little background is required as to the history of the case and the arguments being advanced by the parties.
The trial judge had left to the jury the question, Whether, in fact, the notice to quit ever reached [the tenant], or became known to him? The jury found it did not.
The judge considered that there had still been sufficient service in law and directed that a verdict be entered for the landlord.
The matter proceeded through various levels of court to the House of Lords.
The tenant conceded that he was living in the house where the notice was served and that the house was part of the demised premises, but he argued that to be sufficient, the notice had to be received by the tenant himself or by his duly appointed agent, which his daughter was not.
The landlord argued that there was no rule that required personal service of a notice to sustain an ejectment and that service at the house was sufficient.
In any event, said the landlord, the tenants daughter and sons were agents of the tenant and service on them was amply sufficient.
Although all arriving at the same result, that there had been sufficient service of the notice, their Lordships differed in their reasoning.
For the Lord Chancellor, Lord Hathersley, the solution lay in agency.
He introduced the problem as follows (p 567): The sole question in the case is an extremely short one, and it is simply this, whether or not the delivery of a notice to quit on one who, undoubtedly, according to the evidence, was a servant of the tenant, at the house of the tenant, that house being on the demised property, is to be taken as a good and effectual service of that notice, so as to subject the person to whom it is addressed to the consequence of being ejected upon the termination of the notice.
At p 568, in a passage which is worth quoting in full, he set out his view that if the servant is constituted an agent for receiving service of the document in question, service on the agent is service on the principal: I apprehend that the real point in the case, when you come to consider it, is this; not whether or not the person you have constituted your agent, by your line of conduct, to receive any document that may be left at your house, has performed that which is his or her duty, but whether or not you have constituted that person your agent.
Because, if once you have constituted your servant your agent for the purpose of receiving such a notice, the question of fact as to whether that servant has performed his duty or not, is not one which is any longer in controversy.
When once you constitute your servant your agent for that general purpose, service on that agent is service on you he represents you for that purpose he is your alter ego, and service upon him becomes an effective service upon yourself.
So, said the Lord Chancellor, when the law has said in repeated cases that the effective service of notice on a servant at the dwelling house situated upon the demised property is a service upon the tenant, it has proceeded upon the basis that the law considers that servant to be an implied agent of the tenant for that particular purpose.
The tenant could rebut that by showing that the agency was not correctly implied on the facts, but there could be no inquiry as to whether the agent did his duty by the tenant in dealing with the notice.
Having brought [the notice] home to the agent of the person . you have brought it home to the tenant himself (p 571).
By the conclusion of his speech, the Lord Chancellor had refined the case to one question, namely, whether this woman was an agent of the tenant or not.
As she was an agent qualified to receive a notice, that was an end of it.
Lord Westbury thought the law on the service of notices to quit to be in an unsatisfactory state.
Lord Briggs has quoted (at para 91) what he said about the undue burden on a landlord deprived of the benefit of due service by things beyond his control.
Lord Westbury noted the suggestion, which he said was to be found in the judgments given by some other Judges, that receipt of the notice by the tenants servant at his dwelling house was not absolutely sufficient, but only prima facie evidence of delivery to the master, rebuttable by evidence proving that the notice never reached him.
He contrasted this with Jones d Griffiths v Marsh, where he said that Lord Kenyon CJ had laid down that in every case the service of a notice to quit by leaving it at the dwelling house of the tenant is sufficient, and with what Lord Abbott CJ had said (possibly in Neville v Dunbar, although Lord Westbury does not specify).
Although it is possible to interpret Lord Westburys apparently approving reference to Lord Kenyon in Jones d Griffiths v Marsh as endorsing a principle that mere delivery at the tenants house was sufficient, I do not think that that interpretation withstands a reading of Lord Westburys speech as a whole.
It will be recalled that in Jones d Griffiths v Marsh, the notice had not just been left at the premises, but had been served on the tenants maidservant, and this would have been in Lord Westburys mind.
Apart from anything else, the employment of a domestic servant was commonplace in those days.
Furthermore, it is noteworthy that Lord Westburys examples of the things that might unfairly deprive the landlord of the benefit of service commence with the wilful act of the servant or the servants incapacity, although they do of course include also any accident that might befall the notice after it has been received in the dwelling house of the tenant.
When Lord Westbury spoke of the uncertainty and doubt that had come into the law (see the passage quoted at para 93 of Lord Briggs judgment), I do not think that he was complaining that there had been a principle (whether or not derived from Lord Kenyon) that mere physical delivery to the tenants address was sufficient, which had now been put in doubt.
I think what he had in mind was what he saw as a clash between, on the one hand, Lord Kenyon and Lord Abbott, who considered service on the tenants servant was conclusively sufficient, and, on the other, some other Judges who held that it simply gave rise to a rebuttable presumption that the notice had been served.
It is noteworthy that, having expressed the hope that the uncertainty and doubt could be cleared up, he did not then return to Jones d Griffiths v Marsh and declare the principle to be that mere delivery to the premises was enough, even though that would have been a simple way through on the facts of the case, the notice undoubtedly having arrived at the tenants address.
Instead, he went on to consider what was to be made of receipt by a servant.
Even then, he did not go so far as to say that delivery to the tenants servant would be conclusively sufficient.
What he in fact went on to do, in the very next paragraph following his lament about the uncertainty, was to deal with the case on the assumption that delivery to the servant was only prima facie evidence of delivery to the master (the lower ground, see p 574).
He found there to be no evidence to contradict this prima facie evidence and, indeed, all the evidence pointed to the father having knowledge of the notice.
The jurys conclusion that the father did not know was so utterly unwarranted by the facts, in Lord Westburys view, that it ought not to have prevented judgment being entered for the landlord.
Accordingly, he did not need to resolve the clash of authority between Lord Kenyon and some other Judges, if clash it was.
Lord Westbury introduced his final paragraph with the view that the matter is left, by certain expressions used in former decisions, in a state of some embarrassment.
Whilst he expressed the hope that the judgment in the case may tend to relieve cases of this kind in future, I do not think that his own speech provided any such relief, as he then summarised his conclusion in terms which left open whether or not delivery to the servant was conclusive or merely gave rise to a rebuttable presumption, saying: if it were open to contradiction, on the ground that it might be proved that the tenant had no knowledge of the notice, that proof has not been given, but the contrary conclusion has been in fact established. (Emphasis supplied)
No relief came from Lord Colonsay either.
His speech revolves around agency.
He began it by observing (p 576) that, [i]t is held in law that notice given to the servant of the party residing in the house is a service of notice on the master.
He then went on to consider whether evidence had been adduced to rebut that rule or presumption of law, if the question was in a condition in which it could be rebutted.
He found no circumstances sufficient to rebut the legal inference that the person to whom the notice was given, standing to the party in the relation of servant, was not a legal agent to receive that notice (sic, but I think the not is an error).
He too concluded that the judge was right to hold the notice was sufficient.
Two features of Tanham v Nicholson strike me as particularly significant.
First, none of their Lordships resolved the case by the simple route of holding that delivery of the document at the tenants address was sufficient notice, even though that seems to have been argued by the landlord.
There was no dispute about the arrival of the notice at the premises, so that solution would have been open to them if delivery was all that was required and, if they had thought Jones d Griffiths v Marsh was properly to be interpreted in that way, they could have drawn support from what Lord Kenyon said there.
But instead of taking that approach, each looked at the implications of delivering the notice to the daughter.
The Lord Chancellor was satisfied that that was service on the tenant, because service on his agent was tantamount to service on him.
Lord Westbury and Lord Colonsay were perhaps more generous to the tenant, allowing for the possibility that service on the servant gave rise only to a rebuttable presumption of service on the tenant.
None of the speeches provides support for the proposition that agency is simply irrelevant in connection with a service of a notice.
Secondly, it is clear from the speeches that the law on the service of notices to quit was thought to be in a rather unsatisfactory state, a state which gave rise to different reasoning from each of their Lordships.
This is hardly a promising foundation for a submission that the common law has long been settled in relation to the requirements for service of a notice and requires only that it be duly delivered to the home of the intended recipient.
I need only refer to one further Victorian case, and then only for completeness.
This is the decision of the Court of Appeal in Hogg v Brooks (1885) 15 QBD 256.
A lease of a shop contained a provision for the landlord to terminate the demise by delivering written notice to the tenant or his assigns.
The lessee mortgaged the premises by way of underlease and disappeared.
Written notice to determine the tenancy was sent to him at his last known address but returned without having reached him and he could not be found.
Notice was also given to the mortgagee and the occupier of the premises.
The Court of Appeal held that the landlord was not entitled to recover possession of the premises.
The termination clause in the lease had to be construed according to the ordinary meaning of the English language.
There were no assigns of the tenant, so notice could only be given by serving it on the tenant himself and it had not been served on him.
I need not add to what Lady Hale has said about the other non employment cases upon which the Trust relies (commencing at para 15 of her judgment).
I share her view of them and of what is said in the employment cases about the common law position.
In short, I do not think that it has been shown that there is a clear and long standing common law rule that service of what Lord Briggs describes as an ordinary civil notice occurs when the notice is delivered to the recipients address.
In so far as any clear principle emerges at all from the older cases, it seems to me, particularly in the light of Tanham v Nicholson, to revolve around delivery to the recipients agent, who might be the recipients household servant, professional agent, or (in certain circumstances, such as those in Tanham v Nicholson) family member.
In each case, the agent appears to have been someone who, as part of their role, would be expected to take in communications of the type concerned for the intended recipient.
For the purposes of service, the agent was (to quote the Lord Chancellor in Tanham v Nicholson, in the passage set out at para 64 above) the alter ego of the intended recipient so that, as he said, service on that agent is service on you.
What the courts might have said had they been called upon to consider the same questions in the modern world in which there are no longer domestic servants, is unknown, and irrelevant.
For present purposes, what matters is that the clear common law rule for which the Trust contends does not, in my view, emerge from the old cases.
My unease about the suggested general common law rule is compounded by the concentration within a narrow field of the cases upon which the Trust relies.
It may be that a great deal of research has been done into other areas with no relevant result, and we have been spared the trouble of trawling through the underlying material.
However, I would have been interested to know, for example, what the position is, and was before the Partnership Act 1890, about the service of notices terminating a partnership, and to have seen some other examples drawn from contractual situations other than notices relating to property.
As Lord Briggs says, relationship contracts come in many varieties.
Absent a common law rule of the type for which the Trust contends, I see no reason for a term to that effect to be implied into an employment contract.
Indeed, as Lady Hale explains, there is every reason why the term implied into an employment contract should reflect the position consistently taken by the EAT from 1980 onwards.
LORD BRIGGS: (dissenting) (with whom Lord Lloyd Jones agrees)
I would have allowed this appeal.
The question is whether the term which must be implied into a contract of employment terminable on notice so as to identify, where necessary, the time of the giving of postal notice of termination, is that notice is given at the time when the document is duly delivered to the employees home address, or at some later time, such as the time when it actually comes to the attention of the employee, or when the employee has had a reasonable opportunity to read it.
The question arises in this case in relation to termination on notice, by which I mean termination by a document which brings the relationship to an end at a specified date in the future, rather than immediately or, to use the jargon of the law of employment contracts, summarily.
The essence of termination on notice is that there is a period, usually called the notice period, between the giving of the document, also confusingly called the notice, and its taking effect.
The precise identification of the time when notice is given is not invariably, or even usually, necessary in order to determine when the employment actually terminated.
This will usually be the time (almost always the date) specified in the document.
But sometimes a notice is expressed to take effect a specified number of days or weeks after it is given, so that the date of its giving is a vital element in determining the date of termination.
Sometimes notice is given for a specified date, but with only the contractual (or statutory) minimum notice period allowed before it takes effect, and issues then arise as to whether notice was given in sufficient time before it is expressed to take effect.
The notice in the present case was an amalgam of both those types, because it was expressed both to give a specific period of notice (12 weeks), and to take effect upon a specified day in the future (15 July 2011).
The question is not whether any term as to the time of the giving of notice should be implied, but rather what that term is.
It is common ground that the term is one which the law implies into a whole class of contract, rather than one which is context specific.
Nor is the question what that term should be.
The task of this court is not to fashion, for the first time, a new implied term to fit a new situation, with a free rein to choose between available alternatives on modern policy grounds.
Rather it is to examine the common law authorities to find out what that implied term already is.
Contracts of employment determinable on notice have been around for hundreds of years, and there must be many millions extant in the common law world at this moment which must be taken to have had such an implied term embedded in them from the moment when they were made.
The use of the post to give such notice has been an accepted method for well over a century, even if recent advances in information technology may well mean that it has only a few more years of useful life.
It has not been suggested that any recent changes in the modes or efficiency of the postal service call for some revision of the implied term, by comparison with the term which the law has implied since Victorian times.
Contracts of employment are only a sub species of a much larger group of what may be described as relationship contracts terminable on notice.
They include contracts between landlord and tenant, licensor and licensee, contracts of partnership, service contracts not constituting employment, and many kinds of business contract such as commercial agencies, distributorship agreements and franchises.
In most of them there will be provision for termination on notice, which permits notice by post to a partys home or business address, and the need to be able, when the occasion requires, to ascertain the time when notice is given calls for the law to imply a term for that purpose.
Nor do the particular facts of this case call for an anxious re examination or development of the previous law, even though the financial consequences for the parties are, because of an unusual fact (the approach of the pension threshold on the employees 50th birthday), large indeed.
The essential (and sufficient) facts which give rise to the question before the court are only that the letter containing the notice was only duly delivered on the last available day (from the employers perspective) but the employee was not at home until the following day.
Absence of the recipient from home (or from the office) on the day of delivery is a common feature of the cases in which this question has already been addressed.
In my judgment there has been for over two centuries a term generally implied by law into relationship contracts terminable on notice, namely that written notice of termination is given when the document containing it is duly delivered, by hand or by post, to the home (or, if appropriate, business) address of the intended recipient, rather than, if later, when it actually comes to the recipients attention, or when the recipient, absent at the time of delivery, has returned home and has had a reasonable opportunity to read it.
That term is clearly identified by the common law authorities as the correct one.
Although there has been a different approach taken to the identification of the effective date of termination of employment for statutory purposes connected mainly with the running of time for bringing proceedings for unfair dismissal, contracts of employment are not otherwise an exception to the legal principle applicable generally to relationship contracts, as the courts dealing with the statutory question have been at pains to emphasise.
True it is that many of the old cases in which the common law rule has been laid down have concerned the landlord and tenant relationship, but the reasoning in those cases is not specific to that relationship.
Nor are the consequences of the loss of a home or place of business necessarily of a lesser order than those following from the loss of a job.
I would add that there are in my view sound reasons of policy why the implied term should be as I have described, to some of which I will refer in due course.
But these do not amount even collectively to a ground for my conclusion, save in the negative sense that the existing law is not so defective in policy terms that it needs now to be changed.
Rather, my conclusion is based simply upon an analysis of what the reported cases show that the law already is on this question.
My analysis accords closely with the reasoning to be found in the dissenting judgment of Lewison LJ in the Court of Appeal.
I gratefully adopt Lady Hales summary of the facts.
Although the date upon which the termination notice was duly delivered was postponed because of the absence of anyone at Mrs Haywoods home to sign for recorded delivery, the helpful intervention of Mr Crabtree in going to the sorting office and collecting it meant that, for present purposes, it was duly delivered on 26 April, just in time for it to expire before Mrs Haywoods 50th birthday if giving notice is effective at the time of due delivery.
But Mrs Haywood did not return home from her holiday abroad until the following morning, so it did not come to her attention until then, nor did she have a reasonable opportunity of reading it before her return.
The Common Law Cases on Notices
I am also content largely to follow my Ladys summary of the authorities, although I will need to say a little more about the reasoning in some of them.
The earliest is Jones d Griffiths v Marsh (1791) 100 ER 1121.
The issue in that case was as to the validity of service of a notice to quit premises let to a tenant on a periodic tenancy.
The notice was hand delivered to the tenants home (not the premises demised by the lease) and given to the tenants servant, with an explanation of its contents.
Lady Hale has cited the relevant dictum of Kenyon CJ: in every case of the service of a notice, leaving it at the dwelling house of the party has always been deemed sufficient.
The context shows that he was speaking in the widest possible terms, about the services of notices generally, rather than just about notice to quit.
He gave, as examples, notices of any kind required to be served by statute, service of an attorneys bill, service of a declaration, service of legal process and even service of a sub poena.
The only exception was what we would now call a penal notice, where non compliance might expose the recipient to imprisonment for contempt of court, which required personal service.
That was not a case about timing, because there was no evidence that the notice to quit ever reached the tenant himself, although Buller J was prepared to infer that it had done.
Nonetheless it is inherent in a conclusion that the notice was valid upon due delivery to the tenants home that it was given then, and not at the time when it might have come to the tenants attention.
It is to be noted that Kenyon CJ was not purporting to decide the point for the first time.
He took it to be settled law, of the widest application to notices required to be served.
I would not agree with the submission for Mrs Haywood that the case was one about service upon an agent of the tenant, although it was given to a servant.
The judgments make no mention of agency, and service was said to be effected by leaving the notice at the tenants house, rather than by giving it to anyone.
In 1791 it may be doubted whether houses generally had letter boxes, so there may have been no alternative than to knock on the door and give the notice to someone.
The very short report of Doe d Buross v Lucas (1804) 5 esp 153 does seem to suggest a different analysis from that laid down by Kenyon CJ in Griffiths v Marsh, for the reasons set out by Lady Black in her judgment.
But it is important to bear in mind that in that case the tenant had died before the notice to quit was given, and the tenancy had by then become vested in the deceased tenants widow.
The report does not indicate whether she was living at the property when the notice was served.
I would for my part be reluctant to treat the common law rule as validating the giving of notice by delivery only to the home of a deceased former tenant.
With respect to Lady Black I do not consider that Walter v Haynes (1824) Ry & M 149 is of any real assistance.
That was a case in which the plaintiff sought to prove service of a notice of dishonour of a bill of exchange by evidence only that she had posted it, addressed to Mr Haynes, Bristol.
It was rejected as sufficient evidence because Bristol was a large town, which might contain any number of residents by the name of Haynes.
It is true that Abbott CJ used language about proving that the notice had come into the hands of the intended recipient, but this was not a case about the distinction between delivery to the persons home, and personal delivery into his hands.
On the contrary, had there been a sufficiently detailed address on the letter, so that it appeared to be directed to his home, proof of posting would have been sufficient.
Doe d Neville v Dunbar (1826) Moot M 9; 173 ER 1062 is the earliest case cited to us about the timing of service, again of a notice to quit.
The relevant lease required two quarters notice to quit.
Notice to quit on the September quarter day needed to be given by 25 March.
Two copies were hand delivered to the tenants home (again, not the demised premises) on 22 March by the landlords attorney and given to a servant and an otherwise unidentified lady there.
But the attorney was told that the tenant was absent and would not return home until 26 March.
Nonetheless the notice was held to have been given in good time.
This case has an interesting similarity with the present case, since Mrs Haywood had informed the Trust that she was going abroad for a holiday, and was still away when the termination letter was duly delivered.
The very short judgment of Abbott CJ, following the Griffiths v Marsh case, included the dictum: were it otherwise, a landlord would have no means of determining a tenancy, if his tenant happened to be absent from his house at the time when it was necessary to serve the notice.
Again, there is no indication that the court was treating this as a case of personal service upon an agent of the tenant.
The emphasis is all on delivery to the home of the person to be served.
The underlying theme of the judgment is to recognise that where a contract is terminable by a period of notice, it must be interpreted in a way which makes it possible for the person seeking to terminate to give that notice at the appropriate time, even if the other party is absent.
Lady Black notes in her judgment that both counsel and the judge referred to a presumption of due delivery where the recipients agent is given the notice, and is not called to prove that she did not inform her master in good time.
But it is hard to see how such a presumption could have operated to save the notice in that case, because the landlords attorney was told that the tenant was away and would not be returning until the day after the last available date for service.
In the absence of telephones, it is hard to see how the tenant could have been informed in good time.
However that may be, I consider that Abbott CJ was seeking to make it clear that, regardless of any such presumption, notice was duly given, by being delivered to the tenants house in good time.
Papillon v Brunton (1860) 5 H & N 518; 157 ER 1285 makes it even clearer that the principle is not dependent upon personal delivery to an agent.
It is also the earliest case about postal service.
Again, service of the notice to quit had to be given by the tenant by the March quarter day, and it was proved that it had been duly delivered by post to the landlords agents business premises late on that day, between six and seven oclock in the evening, after the agent had left for the day.
It only came to his attention on the following morning.
Pollock CB said that the notice was duly delivered on the quarter day.
He said: the notice was delivered at the agents place of business in sufficient time to inform him, if he had been there, that the tenancy was to be determined at the time specified.
It is implicit in that finding that it was not necessary for the notice actually to have come to the agents attention on that day, or for him to have been at the address at all on the date of due delivery.
In one sense this is a case about service on an agent, but the ratio is that timely service at the business address of the agent is sufficient, regardless whether it comes to the attention of the agent in good time.
The case is therefore on all fours with those described above, save that it related to business premises rather than to the home of the person to be served.
Furthermore Pollock CB said (during argument) that leaving a notice at the landlords dwelling while he was away abroad would have been good and therefore timely service.
Baron Bramwell said that: if a person tells others that a particular place is his place of business where all communications will reach him, he has no right to impose on them the obligation of finding out whether he sleeps at his place of business or elsewhere.
I doubt whether, in the absence of any express limitation by the agent, it is necessary that the notice should be given within the hours of business.
The message to be taken from that observation, (with which Baron Martin agreed) coupled with Baron Pollocks observation during argument is that, if a person nominates an address (home or business) for delivery of notices under a contract, without limiting the time when a notice may be delivered there, they take the risk that it arrives when they (or their agent) are not actually there.
That which is true about the time of day is in my judgment equally applicable to any longer period of time.
For as long as the intended recipient holds out an address as the place to which to deliver a notice, then that person takes the risk that, at the time of delivery, there will be no one there to read it.
Applied to the present case, Mrs Haywood knew that she planned to be away from home on a holiday at a time when her employers might wish to terminate her employment by notice.
She could have supplied them with an alternative means (or place) of delivery of notice to her while away, such as the address of her hotel or her email address, but she did not.
Her notice period was a long one, and it is not therefore at all surprising that she did not do so, and certainly not a matter for criticism.
However long her holiday, she would be back home to read her incoming mail long before her employment actually ended.
But her address remained the place at which such a notice could be delivered, even if she might not be there to receive it.
The question reached the House of Lords in Tanham v Nicholson (1872) LR 5 HL 561 on an Irish appeal.
It was about personal service of a landlords notice to quit upon an agent of the tenant at the tenants home, which formed part of the demised premises.
The agent then destroyed it, so that the tenant never received it.
It was therefore a case about agency, rather than merely service by post at the recipients home.
Nonetheless there are some relevant dicta.
Lord Westbury said: If the landlord has once done that which the law throws upon him the obligation to do, his rights consequent upon having performed that legal duty ought not to be affected in any manner whatever by that which is done by his antagonist, upon whom the notice has been served.
It would be an idle thing to say that a landlord serving a notice in due manner according to law, is to be deprived of the benefit of what he has done by the wilful act of the servant of the tenant, or by the incapacity of that servant, or by any accident that may befall the notice after it has been received in the dwelling house of the tenant on whom it was served. (my emphasis)
Later, commenting on the Jones v Marsh case, he continued: Lord Kenyon lays it down as beyond the possibility of dispute that in every case the service of a notice by leaving it at the dwelling house of the tenant has always been deemed sufficient.
But he qualifies that by explaining that he speaks of notices affecting property, as notices to quit, and not those notices which are intended to bring an individual within personal contempt.
Those may require personal service.
The other, the ordinary civil notice (if I may so call it) is abundantly satisfied if it be left at the dwelling house of the party.
Again, the generality of this dictum, as applicable to the ordinary civil notice is significant.
It is apparent that neither Kenyon CJ nor Lord Westbury were confining their analysis to landlord and tenant cases.
In their view, every kind of notice not requiring personal service such as contempt proceedings, falls within the principle that due delivery to the recipients home is sufficient.
I have no doubt that they would have regarded a notice to terminate an employment as an ordinary civil notice.
Lord Westbury concluded: I shall be glad, therefore, if we can relieve the law from a degree of uncertainty and doubt brought into it, contrary to all principle, and if we can, in justice to the landlord, relieve him from having an act done by him, which act satisfies the obligation of the law, nullified and rendered of no effect by circumstances which have happened altogether after the delivery of his notice, and in the house of the tenant or under the control of the tenant, with which the landlord has no concern whatever.
In my judgment these dicta reinforce what appears from the earlier cases, namely that from the moment when an ordinary civil notice is duly delivered to the home (or office) of the intended recipient, the law allocates the risk of mishap thereafter to the recipient.
Those risks include destruction of the notice before it comes to the attention of the recipient, but also the risk (exemplified by the Neville v Dunbar and Papillon v Brunton cases) that it will not come to the attention of the intended recipient until after the due date for service because he or she is away from home.
This is because the obligation on a person to give such a notice must be one which can be effectively discharged by taking steps available to that person, without the effectiveness of those steps being undermined by matters within the control of the intended recipient.
A recurrent theme in the speeches of both the Lord Chancellor and Lord Westbury is that, to the extent that the dicta originating with Buller J in Jones v Marsh and Lord Ellenborough in Buross v Lucas might suggest that delivery to the recipients home or agent might only raise a rebuttable presumption of due delivery, they were wrong.
In respectful disagreement with Lady Black, I do not read their concentration upon agency, or any part of what Lord Westbury said about what he called the lower ground to represent a stepping back from their firm adherence to what Kenyon CJ said in Jones v Marsh, or what Abbott CJ said in Neville v Dunbar as representing the high ground of principle which they sought trenchantly to affirm.
They focussed upon agency, and upon the lower ground only because that was the way in which the case had mainly been argued.
I agree that with Lady Black that Lord Colonsay appears to have confined himself to the lower ground.
Lady Black refers to Hogg v Brooks (1885) 15 QBD 256.
The case may have turned upon an unusually drafted break clause in a lease.
In any event none of the authorities cited to us are referred to in the brief judgment of Brett MR.
His conclusion appears to have been that, for as long as the tenant remained untraceable, the break clause in the lease simply could not be activated at all.
I venture to doubt whether that very uncommercial result, derived from a literalist reading of the clause, so as to exclude service either upon the demised premises, or upon the last known residence of the tenant, would be followed today.
I agree with Lady Hale that Stidolph v American School in London Educational Trust Ltd [1969] 2 P & CR 802 is not of decisive force, because it was not suggested that the intended recipient was not at home when the relevant statutory notice arrived by post.
But I do not regard the fact that, in that and other cases, the requisite formalities for giving notice are statutory, means that the cases can be ignored.
In every case the question is: what duty or obligation by way of service or delivery is imposed upon the person required to give notice? Once that duty has been performed, matters which then affect the question whether or when the notice actually comes to the attention of the intended recipient are for the risk of the recipient.
In the present case Mrs Haywood does not suggest that postal delivery to her home was not a permitted method of giving notice of termination.
The Brimnes, Tenax Steamship Co Ltd v The Brimnes (Owners) [1975] 1 QB 929, CA was a case about the summary termination, by telex, of a charterparty by the owner upon breach by the charterer.
It was not about termination on notice.
The dicta cited by Lady Hale recognise the impracticability in that context of an implied term that the communication of termination be timed to take effect only upon the telex actually being read, or coming to the attention of a responsible employee.
Beyond that the case offers little assistance.
In my judgment the Trust was right to place emphasis in its submissions upon the wide range of statutory provisions which appear to be formulated upon an assumption that service of what may loosely be described as ordinary civil notices is completed upon delivery to the intended recipients address, regardless when, or even whether, the contents thereafter come to the attention of the recipient.
They include section 7 of the Interpretation Act 1978, section 196 of the Law of Property Act 1925, section 1147 of the Companies Act 2006, section 29 of the Misuse of Drugs Act 1971, section 267 of the Public Health Act 1875 and Part 6 of the Civil Procedure Rules.
All of them provide for the service or giving of notices by post to the intended recipients address.
None of them require the notices to be brought to the attention of the recipient, or postpone the effective date of service or delivery until an absent intended recipient has returned home.
Some of them provide for a rebuttable presumption that the notice is deemed to be delivered on a specified date after posting, but the presumption is as to the date of due delivery (sometimes described as receipt), not the date when the notice comes to the attention of the intended recipient.
That is why, in the Stidolph case, Edmund Davies LJ said that the relevant statutory presumption of due receipt would be undermined if the recipient could, while admitting receipt, still challenge the notice on the basis that its contents had not actually come to his attention.
To much the same effect is the dictum of Carnwath LJ in Wilderbrook Ltd v Olowu [2005] EWCA Civ 1361; [2006] 2 P & CR 4, cited by Lady Hale.
While I agree that cases about statutory provisions for service of notices by post do not directly impinge upon the construction of an employment contract to which no such provision applies, they are of such wide application to ordinary civil notices that they can fairly be said to reflect settled common law, from the earlier cases which I have described, to the effect that if postal or other delivery to the recipients home is an authorised method of giving notice, it is achieved once the notice is actually delivered, regardless of whether the intended recipient is actually at home, and regardless of what may thereafter happen to it when it gets there, such as being burned by an agent or eaten by the dog.
Like Lewison LJ, and in respectful disagreement with Arden LJ, I do not read Freetown Ltd v Assethold Ltd [2012] EWCA Civ 1657; [2013] 1 WLR 701 as an authority to the contrary.
At para 37, Rix LJ speaks of the common law as requiring proof of receipt, whereas the Interpretation Act deemed receipt from proof of posting.
But he did not thereby mean that the common law required it to be shown that the document had actually come to the attention of the recipient, merely that it had been duly delivered at the recipients address.
This is apparent from his description of the facts, at para 3.
It was a case where the answer to the question whether a statutory appeal had been issued in time turned upon the time lag between when it was posted and when it arrived, not between when it arrived and when its contents first came to a persons attention.
The essential difference between my analysis of the common law cases and that of Lady Hale and Lady Black is that they treat them all as at least consistent with the theory that delivery to an agent is as good as delivery to the principal, in the eyes of the law.
I agree that this theory is capable of being identified as one of the strands by which those cases where delivery was made on time to an agent of the intended recipient at the principals home can be analysed.
But it does not address the cases, such as Papillon v Brunton, where there was no one at the specified (business) address at the relevant time.
Furthermore, if the underlying principle is that delivery is complete only when there is actual communication to the intended recipient or a reasonable opportunity to read the contents of the notice, the agency theory fails to explain those cases, such as Neville v Dunbar, where the agent could not possibly have communicated the contents of the notice to the intended recipient in sufficient time, or those where, on the facts found, there was no such communication, such as Tanham v Nicholson.
The agency theory is simply not supportive of the supposed principle.
Rather, it supports the concept of the allocation of risk, where delivery either to the address supplied by the intended recipient, or to the recipients agent, transfers to the recipient the risk as to the consequences which then ensue, including the consequences of any delay before it reaches the hands of the recipient.
Nor does the theory that the agency analysis was what mattered address the trenchant wording of the senior judges, which constantly asserts that delivery to the relevant home or business address is sufficient.
In days when homes were (at least among the moneyed classes who could afford to litigate) usually staffed even where their resident owners were away, there may not have appeared to be much practical difference between the transfer of risk when the notice was delivered to the intended recipients home (or business) address, and when it was put into the hands of an agent.
But the leading judgments are careful to state that either will do, and the typical modern case where a home address is empty when the owner is away makes the delivery to the address alternative more important than it may once have been.
The Employment Cases
Turning to cases about employment there is, as Lady Hale observes, very little about the common law as to termination on notice.
There is however a significant amount of authority about the requirements for summary termination.
In my judgment, they say almost nothing about the requirements for termination on notice.
Summary termination means that the employment relationship comes to an abrupt end, with immediate consequences including but not limited to the running of a short limitation period for the bringing of unfair dismissal proceedings.
It is an exceptional process, whereas termination on notice is the normal agreed way in which (subject to statutory consequences about unfairness or discrimination) the contract may be terminated, usually by either side.
Summary termination may be a right conferred upon the employer by express contractual term, in specified circumstances usually involving serious breach of contract by the employee.
It may just consist of the acceptance by one party of a repudiatory breach by the other as putting an immediate end to the contract.
It is therefore no surprise to find dicta in some (although not all) of the authorities on summary termination (usually called dismissal) to the effect that actual communication to the employee is necessary.
By contrast termination on notice always involves a period thereafter while the employment relationship continues.
That period may be short or long, but will usually include sufficient time for a delay between the date of delivery of the notice and the date when it comes to the attention of the employee to be accommodated, so that the employee still knows about the termination well before it happens, even if that period may be shorter than the full contractual or statutory notice period.
The rules which the common law has developed over centuries about the giving of ordinary civil notices represent a compromise between the reasonable need for the givers of the notice to be able to exercise the right triggered by the notice, at a time of their choosing, without being hindered by uncertainties about what happens to the document containing the notice after they have parted with it, and the need of the recipients to receive the contents of the notice at a place where it is likely to come to their attention within a reasonable time.
Thus the common law has not (as it did in relation to acceptance of a contractual offer) treated mere posting as sufficient.
Although posting raises a presumption of due delivery, it remains open to the intended recipient to prove that the notice document never arrived.
Due delivery to the recipients home (or office) marks the point where the risk of mishap passes from the sender to the recipient.
There is no reason why the law should automatically apply this time honoured compromise to the more draconian and immediate process of summary termination.
Nor by the same token is there any basis to read the cases about summary termination as saying anything about the requirements for valid termination on notice.
Brown v Southall & Knight [1980] ICR 617 was a case about summary dismissal.
The question was whether the date of delivery of the letter summarily dismissing the employee was the effective date of termination for statutory purposes connected with the period of his continuous employment, or the slightly later date when the employee returned home and read it.
None of the cases about the requirements of a notice were cited to the EAT.
This is hardly surprising, because it was simply not a case about termination on notice.
Had it been, the time lag between delivery and reading the notice would not have mattered, because neither event would have terminated the employment there and then.
The passage in the judgment of Slynn J cited by Lady Hale confines his analysis to summary termination in express terms.
He says: In our judgment, the employer who sends a letter terminating a mans employment summarily must show that the employee
has actually read the letter
The next in time is London Transport Executive v Clarke [1981] ICR 355, which was about the requirements for the effective communication by the employer of its election to treat a repudiatory breach by the employee as having terminated the contract; ie summary termination.
This was held to have been achieved on the date when a letter to that effect was delivered by post to the employees home address, even though he was not at home.
The employee, who had been abroad without leave, returned home and read the letter about three weeks later.
It is fair comment that the date issue was not critical to the outcome, but the Court of Appeal appear to have regarded it as axiomatic that the communication of the acceptance of the repudiation was effectively achieved by, and at the time of, the delivery of the letter to the employees home when he was not there.
The Brown case was cited, but not referred to in the judgments.
The EAT applied a slightly more nuanced approach to the requirements for communication of summary termination in Hindle Gears v McGinty [1985] ICR 111, which was a case about the attempted summary dismissal of an entire group of striking workers, by letters to all their homes.
Two workers decided to return to work before the letters arrived, so they had no opportunity to read them before they arrived for work.
The question was whether they had been dismissed and then re engaged on arrival at work, or not dismissed before they resumed work.
Following and developing the decision in the Brown case, Waite J said that the requirement in a summary termination case for the communication of the dismissal to the employee meant that the letter had either to have been read by the employee, or that the employee had had a reasonable opportunity to read it.
Again, it was not a case about termination by notice, and none of the cases about the requisites of an ordinary civil notice were, or needed to be, cited.
McMaster v Manchester Airport plc [1998] IRLR 112 was also a case about summary dismissal.
That much was common ground.
It is true that the requirement for communication to the employee, for the purpose of determining the effective date of communication, was treated as applying both to summary dismissal and dismissal on notice, but this was again common ground.
The only case referred to in the judgment was Brown v Southall & Knight.
The report does not show whether any other cases were cited, but it looks most unlikely (bearing in mind the common ground) that the cases on the requirements of an ordinary civil notice were cited.
The dictum of Morison J (at para 9) that constructive or presumed knowledge has no place in private rights under employment contracts may be right or wrong, but it has nothing to do with the requirements of a valid notice.
Validity upon due delivery does not depend on any kind of knowledge on the part of the intended recipient.
It is simply a good notice upon due delivery, just as is a posted acceptance of an offer, even if never delivered or received.
Edwards v Surrey Police [1999] IRLR 456 was not (save in a statutory sense about constructive unfair dismissal) about a dismissal at all.
Rather, it was about summary resignation.
The issue was whether the employees employment had an effective date of termination when she decided to resign and wrote a letter to her employer saying so, (as had been held at first instance), or when the letter of resignation reached the employer (as the EAT held).
There neither was, nor needed to be, consideration of the requirements of a valid notice, as between the due delivery and the reading of the letter.
On either basis, the effective date was within the period for the bringing of her claim for constructive unfair dismissal.
The next case, George v Luton Borough Council (2003) EAT/0311/03 is also about summary termination by resignation.
The employee gave notice by letter dated 30 July 2002 that she was resigning with effect from 31 July, complaining of constructive dismissal.
It reached the offices of the employer on 1 August, but was not read by anyone in authority there until 2 August.
She commenced proceedings for constructive unfair dismissal only on 1 November.
The EAT held that the letter was to be construed as an acceptance of repudiation by the employer, not as a 28 day contractual notice of termination.
The case offers no assistance therefore on the question as to the requirements or effective date of a notice of termination.
The Brown, McMaster and Edwards cases were all cited, and it was accepted that summary termination by the employer required communication to the employee.
But the EAT held that a summary resignation letter from the employee took effect upon delivery to a corporate employer, rather than upon its being read by someone in authority.
None of the cases about ordinary civil notices were cited, or relevant.
Potter v RJ Temple plc (2003) UKEAT/0478/03 was yet another case about an employees acceptance of repudiation by the employer as putting an immediate end to the contract.
The acceptance was faxed to the employer, and arrived at 8.21 pm on 13 September 2002, but was read only on the following day at the earliest.
The employees application for constructive unfair dismissal was out of time if the faxed letter took effect upon due delivery.
Although it was not a case about termination by notice, both the facts and the outcome bear a real similarity with Papillon v Brunton, although neither that case or any of the others on ordinary civil notices were cited.
HHJ Richardson took it as read that termination by the acceptance of a repudiation needed to be communicated, but concluded that the need for certainty as to the effective date of termination for statutory purposes meant that communication should be taken to be achieved upon due delivery of the letter, rather than upon its being read, even though the letter arrived after office hours.
The developing jurisprudence in the EAT about the effective date of termination by an employer was approved in the Court of Appeal by majority and by this court unanimously in Gisda Cyf v Barratt [2009] ICR 1408 and [2010] 4 All ER 851.
It was again a case about summary dismissal rather than dismissal on notice.
Once effective, it brought about the immediate termination of the contract.
The dismissal followed disciplinary proceedings against the employee.
The letter was posted on 29 November 2006, delivered to the employees home, while she was away visiting a relative, on 30 November, and read by her on the day after her return, on 4 December.
The timeliness of her subsequent proceedings for unfair dismissal depended upon the effective date of termination being on or after 2 December.
It was held that the effective date of termination was 4 December, when the employee read the letter.
Both the majority in the Court of Appeal and this court were at pains to limit their reasoning to the statutory meaning of the effective date of termination, rather than, if different, to the ordinary common law of contract as applied to employment contracts which, it had been argued, pointed to the date of due delivery, even in cases of summary termination.
The essential reasoning was that it would be wrong, in construing a statutory term in legislation for employee protection, to conclude that a short limitation period for bringing a claim should start running before the employee had learned, or had a reasonable opportunity to find out, that her employment had been terminated: see per Lord Kerr, giving the judgment of the Supreme Court, at paras 34 37.
The phrase effective date of termination defined in section 97(1) of the Employment Rights Act 1996 contains separate formulae, in separate sub sections, for termination on notice, and termination without notice.
For termination on notice it is the day upon which the notice expires.
For termination without notice it is the date upon which the termination takes effect.
The Gisda Cyf, Brown and McMaster cases were all about the second of those formulae.
The only considered judicial view in Gisda Cyf about what was the relevant law of contract for the purpose of determining when summary dismissal by letter to the employees home took effect is to be found in the dissenting judgment of Lloyd LJ in the Court of Appeal.
He considered that it was the date of due delivery rather than the date (if later) when the letter was or reasonably could have been read.
The majority in the Court of Appeal did not express a view on the point, and nor did this court, not least because, by then, the employee was unrepresented.
In both courts, the contractual analysis was, in the end, held to be irrelevant.
But the case does make clear that the Brown and McMaster line of cases in the EAT about the effective date of termination are about statutory construction, not the common law about the termination of contracts.
They are not even about the statutory meaning of effective date of termination when the contract is terminated on notice, rather than summarily.
Bearing in mind that the effective date in a notice case is not until the notice expires, which may be weeks after it is delivered or read, it is by no means obvious that the same answer to the question about delivery or reading of the notice would follow from the analysis of the courts reasoning in relation to summary termination.
I am content to leave that question to be answered on an occasion when it needs to be (if it ever arises).
I agree with Lady Hales reasons for not finding this courts decision in Geys v Socit Gnrale, London Branch [2012] UKSC 63; [2013] 1 AC 523 of significant assistance.
It was about the ordinary common law of contract, but it was specifically about two types of alleged summary termination, one by repudiatory breach and the other by the making of a payment in lieu of notice.
Any issue about a time lag between the due delivery and reading of a notice of dismissal was dealt with by express term.
Likewise I have not found significant assistance from the latest dismissal case in the EAT, namely Sandle v Adecco UK Ltd [2016] IRLR 941.
The question was whether the employee had been summarily dismissed by inaction on the part of the employer.
The EAT held that there had been no dismissal at all, because nothing relevant had been communicated to the employee.
The requirement in the passage cited by Lady Hale that there be something of which the employee was made aware does not (and was not intended to) resolve the question whether communication by written notice is effective upon due delivery.
Standing back and reviewing the employment cases as a whole, the following points stand out.
First, none of them was about termination on notice, by the employer or the employee.
They were all about summary termination.
Secondly, and unsurprisingly, none of the long standing common law authorities about the requisites of an ordinary civil notice, reviewed at the beginning of this judgment, were even cited, although there was some, inconclusive, consideration of the common law principles in the Gisda Cyf case in the Court of Appeal, broadly supportive of due delivery as the relevant date.
Thirdly, the only authoritative guidance that a summary termination document is not effective upon due delivery, but only when read, or after a reasonable opportunity for reading, relates to the statutory context about the effective date of termination, in which the potential for a different answer under the common law is treated as irrelevant.
In the non statutory summary termination context, the cases go either way.
Fourthly, the policy reasons for rejecting due delivery in the statutory context are firmly linked to the fact that summary termination has immediate effect, in particular by starting the running of a short limitation period, which is simply not a consequence of the due delivery of a notice of termination taking effect at a future date.
Finally, the only statement in all the employment cases (in McMaster) that a termination on notice is given only when it is read, rather than when delivered, merely recorded the parties agreement about the matter, rather than even an obiter dictum by the court.
Policy
I have already expressed my view that policy plays a subordinate role where there is already an established common law principle which supplies the standard implied term.
I have described the common law principle that an ordinary notice takes effect when it is duly delivered to the recipients address as a compromise which strikes a fair balance in relation to the risks to both parties of the notice not immediately reaching the recipient, and which preserves as far as possible the reasonable requirements of both the giver and the recipient.
The time honoured implied term therefore has a sensible and even handed policy objective behind it.
Some of its advantages benefit both parties equally.
The foremost is certainty.
Both the employer and the employee need to know when the employment will actually terminate, even where (as often happens) the notice expresses an expiry date by reference to a stated period from receipt.
The employee needs to know from what future date to seek to put in place alternative employment, or state assistance in lieu of wages.
An employee giving the notice to their employer may well wish to fix precisely the date from which he or she is free to begin employment, for example, with a competitor, free from restrictions under the current contract.
The employer giving or receiving notice will wish to know precisely from which date to recruit, train and put in place a replacement employee.
Neither will wish to be subject to uncertainties about matters known only to the other party, such as when after due delivery the notice came to the attention of the intended recipient.
Neither will wish to have to become embroiled in a dispute about whether the other party deliberately absented themselves from home or office in order to make the giving of timely notice more difficult or even impossible.
Counsel for Mrs Haywood submitted that it was a policy advantage to treat both the statutory test for effective date of termination and the common law rule about the taking effect of a notice of termination in the same way.
I disagree.
First, it ignores the fact that all the cases on effective date relate to summary termination rather than termination on notice, and that the policy considerations applicable to each are not the same.
Secondly, to treat the statute as amending what I consider to be settled common law about termination on notice is to give it an effect well beyond that which it has been held to have, and beyond that which is needed to preserve to the employee the full benefit of the short limitation period.
It was submitted further that the employment world has been proceeding since the decision in the Brown on the assumption that it reflects the common law, so that parties to employment contracts currently in force must be taken as making that assumption.
Again, I disagree.
In my judgment the absence from the Gisda Cyf case of any judicial challenge to Lloyd LJs analysis of the position at common law makes this submission untenable.
Where, as here, the development of a standard implied term at common law may be perceived to be based upon a compromise about the fair allocation of risk, as I have described, it is inherently unlikely that all policy considerations will point in the same direction.
There will always be reasons for, and against, drawing the compromise line there, or elsewhere.
In the present circumstances I am satisfied that there is a sufficient basis in policy for drawing the line where it has for so long been drawn, unless matters have so changed over time to require it now to be moved.
True it is that, in the modern world, few private homes are staffed in the way in which a few were in the 18th and 19th centuries.
It may be that people now travel away from home, and certainly abroad, more than they used to.
It may be that the post is a little less reliable than it may once have been.
But it has not been submitted that these changes make a critical difference.
Even if they are significant in relation to post, this will be a passing phase.
Before long it is likely that most notices of this type will be sent electronically, accessible by the intended recipient anywhere in the world with a wi fi signal, via mobile phone or tablet.
The Judgments in the Court of Appeal
It will already be apparent that I find myself in broad agreement with the reasoning of Lewison LJ in his dissenting judgment.
As for the majority, Proudman J held that nothing less than actual communication to the employee would suffice: see para 70(a).
Arden LJ held that the essential requirement was receipt by the employee (regardless whether she opened it and read its contents) but that due delivery to the employees home was not sufficient for receipt, until at least she actually saw the envelope containing the letter: see para 149.
These are but crude summaries of two carefully reasoned judgments, but those conclusions are in my judgment each inconsistent with the common law principles applicable to the delivery of ordinary civil notices, including employment notices, as I have sought to explain.
Lady Hales formulation is slightly different again.
She prefers the formula that notice is given at the earlier of the times when it is read, or when the employee has had sufficient time to do so.
It is to be noted that, if departure is to be made from the long established principle that notice is given when it is duly delivered, no precise consensus has emerged as to the alternative, for the foundation of what we all recognise should be a standard implied term.
| The issue in this appeal is when the notice period begins to run, if an employee is dismissed on written notice posted to his home address.
If the answer is not specified in the contract of employment, is it (i) when the letter would have been delivered in the ordinary course of post; (ii) when it was in fact delivered to that address; or (iii) when the letter comes to the attention of the employee and he has either read it or had a reasonable opportunity to do so? The respondent, Mrs Haywood, was dismissed by reason of redundancy by her employer, the appellant NHS Trust (the Trust).
Her contract of employment provided for termination on a minimum period of notice of 12 weeks but not how such notice should be given.
On 20 April 2011, the Trust sent a letter giving written notice of termination by recorded delivery to Mrs Haywoods home address.
The Trust was aware that she was away on holiday.
The letter was collected from the local sorting office by her father in law on 26 April 2011 and left by him in her house that day.
She returned from holiday abroad on 27 April 2011 and read the letter.
On the unusual facts of this case, the date on which the 12 week notice period started to run was highly material.
If it commenced on 27 April 2011, it expired on 20 July 2011, the date of Mrs Haywoods 50th birthday, and Mrs Haywood would be entitled to claim a non actuarially reduced early retirement pension.
The High Court and the Court of Appeal (by a majority) upheld Mrs Haywoods case that the notice period only commenced on 27 April 2011.
The Supreme Court by a majority of three to two (Lord Lloyd Jones and Lord Briggs dissenting) dismisses the Trusts appeal.
Lady Hale, with whom Lord Wilson and Lady Black agree, gives the main judgment and Lady Black adds a further analysis of the case law.
The dissenting judgment is given by Lord Briggs, with whom Lord Lloyd Jones agrees.
In the absence of an express contractual provision, the court had to determine the implied contractual term as to when a notice takes effect.
The Trust argued that there was a common law rule, principally
derived from landlord and tenant cases, which provided that notice was given when the letter was delivered to its address.
Mrs Haywood relied on the approach of the Employment Appeal Tribunal (EAT) in employment cases to support her case that notice only took effect when it had actually been received by the employee and the employee had either read or had a reasonable opportunity of reading it [12].
Having reviewed the cases relied on by the parties, the majority held that the approach which had been consistently taken by the EAT was correct because: The common law rule in non employment cases was not as clear and universal as suggested.
Receipt of the notice was always required, and arguably by a person authorised to receive it.
Even after a statutory presumption of receipt at the address was introduced, this was rebuttable.
The EAT was an expert tribunal familiar with employment practices, and with the general merits in employment cases.
Mrs Haywoods contract with the Trust was concluded when the EAT cases were thought to represent the general law.
There was no reason to suppose that this approach had caused any real difficulties in practice.
An employer could either make express alternative provision in the contract or ensure notice of termination was received in sufficient time to allow the employment to terminate on a specified day.
It was important for both employer and employee, even in dismissal on notice cases, to know whether and when the employment had come to an end.
The rule should be the same as for summary dismissal cases [39].
Lady Black, agreeing with this conclusion, reviewed the common law cases in further detail to support the finding that that these cases did not have the effect contended for by the Trust [41 75].
Insofar as any clear principle emerged, it revolved around delivery to the recipients agent, who might be a household servant, professional agent or family member, who would be expected to take in communications for the intended recipient as part of their role [73].
Lord Briggs, dissenting, would have found that the common law cases had long established a rule embedding an implied term into contracts of employment determinable on notice [78].
Such contracts were only a sub species of relationship contracts [79].
The rule for relationship contracts was that written notice of termination was given when the document containing it was duly delivered by hand or post to the address of the intended recipient, regardless of whether either the intended recipient or his agent was there to receive it [81, 100].
The rule had a sensible and even handed policy objective behind it, creating certainty for both parties and representing a fair allocation of risk [118 121].
|
A makes a careless misrepresentation which causes economic loss to B. There was no contract between them.
But did A owe a duty of care to B? No, said the trial judge.
Yes, said the appellate court.
So it is A who brings this further appeal.
Ms Steel, who was the first defender and is now the first appellant, is a solicitor.
At the material time she was a partner in Bell & Scott LLP, a firm of solicitors in Glasgow, who were the second defenders and are now the second appellants; I will refer to them as the firm.
NRAM Ltd, until recently named NRAM Plc and, prior to that, named Northern Rock (Asset Management) Plc, was the pursuer and is now the respondent; I will refer to it as Northern Rock.
Ms Steel and the firm appeal against an interlocutor issued by an Extra Division of the Inner House of the Court of Session (Lady Smith; Lord Brodie who dissented; and Lady Clark of Calton who agreed with Lady Smith) on 19 February 2016.
By its interlocutor, the Inner House allowed Northern Rocks reclaiming motion in respect of an interlocutor which had been issued in the Outer House by the Lord Ordinary, Lord Doherty, on 5 December 2014.
He had sustained the pleas in law of Ms Steel and the firm and had assoilzied them from the first conclusion of the summons.
In other words he had dismissed Northern Rocks claim.
The Inner House, however, sustained Northern Rocks second plea in law and substituted an award of damages in its favour against Ms Steel and the firm in the sum of almost 370,000, being the sum which the Lord Ordinary had assessed as the amount of damages payable by them to Northern Rock in the event that, contrary to his conclusion, they were liable to it at all.
For many years prior to 2007 Ms Steel had acted for Mr Hamish Munro.
From 2005 onwards she also acted for a company in which he had an interest, namely Headway Caledonian Ltd; I will refer to it as Headway.
In 1997 Headway had purchased Cadzow Business Park in Hamilton.
The property, which comprised Units 1, 2, 3 and 4, had been registered in the Land Register under two separate titles.
In order to make the purchase, Headway had borrowed part of the price from Northern Rock; and in return it had granted Northern Rock an all sums standard security over the property, which had been registered against the titles in 1998.
Indeed in 2002 Headway had granted Northern Rock a floating charge over all its assets.
In 2005 Headway proposed to sell Unit 3 of the business park.
Ms Steel acted for it in the sale.
So she negotiated on Headways behalf with Northern Rock for the release of the unit from its security.
Northern Rock did not appoint solicitors to represent it in that regard; it was not its practice to do so in relation to a negotiation of that character.
It agreed to release the unit from its security in return for a partial redemption of its loan, namely a repayment of almost 470,000.
The transaction duly proceeded.
Ms Steel forwarded for execution by Northern Rock deeds of restriction, by which its security was restricted to Units 1, 2 and 4.
It executed them and returned them to her.
The sale of Unit 3, unencumbered, then proceeded; and, on behalf of Headway, Ms Steel remitted the sum of almost 470,000 to Northern Rock.
Later in 2005 Headway proposed to sell a property in Lossiemouth over which Northern Rock held a standard security for a separate loan.
Again, Ms Steel acted for Headway in the sale.
Again, she dealt directly with Northern Rock in respect of the repayment of its loan and the discharge of its security.
The sale, the repayment and the discharge all duly proceeded.
In 2006 Headway entered into heads of agreement for the sale of Unit 1 of the business park in Hamilton for 560,000.
Ms Steel was instructed to act on its behalf in the proposed sale.
Either she or Mr Munro himself asked Northern Rock to release Unit 1 from its security.
Northern Rock obtained a valuation of Units 2 and 4 in the sum of 1,425,000.
It noted that its loan to Headway then secured on the three units was about 1,222,000 and decided to require repayment of 495,000 in return for the release of its security upon Unit 1, which would leave the balance of its loan apparently well secured upon Units 2 and 4.
In September 2006, by email to Mr Munro, Northern Rock therefore confirmed that it would release its security upon Unit 1 in consideration of a repayment of 495,000 by way of reduction of the loan.
By its email Northern Rock made clear that it expected its security to remain in place in relation to Units 2 and 4 unless and until they were also sold.
Mr Munro at once forwarded Northern Rocks email to Ms Steel.
Headway accepted its terms.
Ultimately it was agreed that the transaction of sale would settle on 23 March 2007.
Several weeks beforehand Mr Munro had, by email, instructed Ms Steel that, upon settlement, she should remit 470,000 (later corrected to 495,000) to Northern Rock and should remit the balance of the proceeds to Headway.
At 5.00 pm on 22 March 2007, namely the eve of the proposed settlement, Ms Steel sent to Northern Rock the email which is central to these proceedings.
She wrote: Subject: headway caledonian limited sale of Pavilion 1 Cadzow Park Hamilton (title nos ) Helen/Neil I need your usual letter of non crystallisation for the sale of the above subjects to be faxed through here first thing tomorrow am if possible marked for my attention I have had a few letters on this one for previous other units that have been sold.
I also attach discharges for signing and return as well as the whole loan is being paid off for the estate and I have a settlement figure for that.
Can you please arrange to get these signed and returned again asap.
Many thanks
Jane A Steel
On any view this was an extraordinary email.
It was quite wrong for Ms Steel to say that the whole loan was to be paid off.
It had never been suggested to her, or at all, that the whole loan was to be repaid.
Her instructions from Headway had never been to that effect.
On the contrary, and as she had been told, Northern Rocks loan was to be reduced by repayment only of 495,000 and its security upon Units 2 and 4 was to remain.
Equally, it was quite wrong for Ms Steel to say that she had a settlement figure for repayment of the whole loan.
She had no such thing.
Northern Rock had never supplied such a figure to her; it would have been irrelevant.
In evidence to the Lord Ordinary given seven years later, Ms Steel said that she accepted that she must have sent the email but said that she had no recollection of having done so and that she could not explain why she had so misrepresented the nature of the proposed transaction between her client and Northern Rock.
No doubt Ms Steel is usually a solicitor of the utmost competence but on this occasion she was guilty of gross carelessness.
Labouring, as she was at the time when she sent the email to Northern Rock, under the misapprehension that Headway was undertaking to repay the whole loan secured on the remaining three units, Ms Steel attached to it not the two draft deeds of restriction of Northern Rocks security to Units 2 and 4 which would have been appropriate to the agreement reached, but, instead, two draft deeds of discharge of its security upon all three units, being one deed for each of the two registered titles.
Ms Steels email, addressed to Helen and Neil at Northern Rock, was read by Mr (Neil) Atkin, a case manager, and, at 8.58 am on 23 March 2007, attached to an email of his own, he forwarded it and its attachments to Mr Clarke, who, as the head of the Loan Review Team, had authority within Northern Rock to authorise discharges.
One minute after receiving the two emails Mr Clarke, who had read them albeit not Ms Steels attachments, forwarded them to Ms Harrison in Northern Rocks administration team.
Mr Clarke had made no attempt to check the accuracy of Ms Steels statements against the material on Northern Rocks file.
Ms Harrison apparently understood, and correctly understood, that, by forwarding the emails to her, Mr Clarke was authorising her to cause the deeds of discharge to be executed as well as to draft, for his signature, the requested letter of non crystallisation of the floating charge over Unit 1.
On that morning of 23 March 2007, the two deeds of discharge were therefore executed on behalf of Northern Rock; a letter of non crystallisation was drafted and signed by Mr Clarke; and copies of all of them were at once faxed to Ms Steel.
Thus it was that, on that same day, upon her undertaking to deliver the original deeds of discharge to the solicitors for the purchasers within seven days, Ms Steel settled the sale of Unit 1 on Headways behalf.
She remitted 495,000 to Northern Rock, which received it on 27 March and apparently raised no question about the amount of it.
On that day it posted the original deeds of discharge to her and two days later, in compliance with her undertaking, she forwarded them to the purchasers solicitors, who caused them to be registered in the Land Register.
Thus was Northern Rocks security on Units 2 and 4 discharged.
Until 2010 Headway continued to make interest payments to Northern Rock on the balance of the loan.
Headway then went into liquidation; and it was at that time, according to evidence given on behalf of Northern Rock, that it discovered that its security for the loan had been discharged.
Units 2 and 4 had, however, by then been sold.
As had been foreshadowed in 2006, Headway had sold them later in 2007; Ms Steel had again acted for it in the sales and she had extracted from Northern Rock the necessary letters of non crystallisation of the floating charge.
One might expect that, when alerted to the proposed sales and if continuing to believe that its standard security upon the units remained in place, Northern Rock would then have purported to enforce it.
But there is no evidence to that effect.
These later events are shrouded in mystery.
The court will proceed, as invited, on the basis that, by the email dated 22 March 2007, Ms Steel and the firm caused both the discharge of Northern Rocks security over Units 2 and 4 and, resulting therefrom, an ultimate loss to it, net of recovery elsewhere, of almost 370,000.
It notes, however, that the issue in the case might well have been cast in terms of whether they were the cause of Northern Rocks loss rather than whether they owed a duty of care to it.
In Customs and Excise Comrs v Barclays Bank Plc [2006] UKHL 28, [2007] 1 AC 181, Lord Mance at para 85 described the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 as the fountain of most modern economic claims.
In the Hedley Byrne case the appellant asked its bankers to inquire into the stability of a company and, in response to the inquiry, the companys bankers, acting (so it was assumed) carelessly, gave false information about the company, which it expressed as without responsibility but on which the appellant relied to its detriment.
Because of the disclaimer the appellants claim against the companys bankers failed.
The House of Lords held, however, that in the absence of the disclaimer the bankers would have owed a duty of care to the appellant.
At p 529 Lord Devlin held that, in the absence of a contract between a representor and a representee, a duty of care in making the representation arose only if the representor had assumed responsibility for it towards the representee; and he proceeded to interpret all five of the speeches delivered in that case as requiring that the responsibility should have been voluntarily accepted or undertaken.
The assumption of responsibility could, he explained at pp 529 and 530, be express or implied from all the circumstances.
Lord Pearce added at p 539 that liability in such circumstances could arise only from a special relationship.
What is noteworthy for present purposes is the emphasis given in the decision in the Hedley Byrne case to the need for the representee reasonably to have relied on the representation and for the representor reasonably to have foreseen that he would do so.
This is expressly stressed in the speech of Lord Hodson at p 514.
In fact it lies at the heart of the whole decision: in the light of the disclaimer, how could it have been reasonable for the appellant to rely on the representation? If it is not reasonable for a representee to have relied on a representation and for the representor to have foreseen that he would do so, it is difficult to imagine that the latter will have assumed responsibility for it.
If it is not reasonable for a representee to have relied on a representation, it may often follow that it is not reasonable for the representor to have foreseen that he would do so.
But the two inquiries remain distinct.
In the decades which followed the decision in the Hedley Byrne case, it became clear that not all claims in tort for losses consequent upon representations carelessly made could satisfactorily be despatched by reference to whether the representor had assumed responsibility for it towards the representee.
A case in point is the situation in which the representor is bound by a contract with a third party to make a representation upon which the claimant has relied: an analysis of whether, in making the representation in those circumstances, he has voluntarily assumed responsibility for it towards the claimant would be artificial.
Thus in Smith v Eric S Bush and Harris v Wyre Forest District Council [1990] 1 AC 831 the claimants, in purchasing their houses, had relied on information about their condition contained in reports given by surveyors pursuant to contracts between them and prospective mortgagees.
The House of Lords held that the surveyors owed duties of care to the claimants.
Lord Griffiths at p 862 explained that the law did not in the context before the court ask whether the surveyors had voluntarily assumed responsibility towards the claimants in giving the information.
But he did so in terms which were arrestingly wide.
He said that the test of an assumption of responsibility was neither helpful nor realistic (or, he added at p 864, at any rate not so in most cases) and that it had meaning only if it referred to the circumstances in which the law deemed responsibility to have been assumed.
In effect Lord Griffiths was suggesting that the test identified only a conclusion rather than a criterion.
Lord Griffiths, with whom three other members of the committee agreed, proceeded at p 865 to propound a threefold test by reference to which the surveyors owed a duty of care to the claimants.
The test required first that it was foreseeable that, were the information given negligently, the claimants would be likely to suffer damage; second that there was a sufficiently proximate relationship between the parties; and third that it was just and reasonable to impose the liability.
Months later the threefold test propounded by Lord Griffiths was addressed by the House of Lords in Caparo Industries Plc v Dickman [1990] 2 AC 605.
The claimants had taken over a company in reliance on its accounts and alleged that the defendants had negligently discharged their statutory functions in the course of their audit of them.
For years afterwards the speeches in the House were taken to have indorsed the threefold test.
In fact, however, Lord Bridge of Harwich, with whom three other members of the committee agreed, observed at p 618 that the concepts of proximity and fairness were so imprecise as to deprive them of utility as practical tests; and Lord Oliver of Aylmerton suggested at p 633 that the three suggested ingredients of the so called test were usually facets of the same thing and that to search for a single formula was to pursue a will o the wisp.
That the House in the Caparo Industries case did not indorse the threefold test was explained by Lord Toulson in Michael v Chief Constable of South Wales Police [2015] UKSC 2, [2015] AC 1732, at para 106; and it has recently been underlined by Lord Reed in Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4, paras 21 to 29.
In the Caparo Industries case both Lord Bridge at p 618 and Lord Oliver at p 633 quoted with approval the remarks of Brennan J in Sutherland Shire Council v Heyman (1985) 60 ALR 1, 43 44 that it was preferable for the law to develop novel categories of negligence incrementally and by analogy with established categories; and, as Lord Reed has explained in the Robinson case, it was by declining to accept that the law should develop incrementally to the point for which the claimants contended that the House in the Caparo Industries case determined to allow the auditors appeal.
More important for present purposes is the reassertion in the Caparo Industries case of the need for a representee to establish that it was reasonable for him to have relied on the representation and that the representor should reasonably have foreseen that he would do so.
Thus at pp 620 621 Lord Bridge observed that a salient feature of liability was that the representor knew that it was very likely that the representee would rely on the representation; and at p 638 Lord Oliver observed that a usual condition of liability was that the representor knew that the representee would act on it without independent inquiry.
Some months later, in James McNaughton Paper Group Ltd v Hicks Anderson & Co [1991] 2 QB 113, the Court of Appeal, confronted with a similar claim against company accountants, rejected it by reference to the decision in the Caparo Industries case.
But Neill LJ expanded on the need for foreseeability of reliance.
At pp 126 127 he said: One should therefore consider whether and to what extent the advisee was entitled to rely on the statement to take the action that he did take.
It is also necessary to consider whether he did in fact rely on the statement, whether he did use or should have used his own judgment and whether he did seek or should have sought independent advice.
In business transactions conducted at arms length it may sometimes be difficult for an advisee to prove that he was entitled to act on a statement without taking any independent advice or to prove that the adviser knew, actually or inferentially, that he would act without taking such advice.
In July 1994, in Spring v Guardian Assurance Plc [1995] 2 AC 296, the House held that, in writing a reference for the claimant who had worked for them and who was now seeking work elsewhere, the defendants owed a duty of care to him.
Lord Goff of Chieveley explained at p 316 that the basis of his conclusion was that the defendants had assumed responsibility to the claimant in respect of the reference within the meaning of the Hedley Byrne case.
Weeks later, in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, the House held that underwriting agents at Lloyds owed a duty of care to a member in their conduct of his underwriting affairs even in the absence of any contract between them.
In a speech with which the other members of the House agreed, Lord Goff held at p 181 that the case should be decided by reference to the concept of an assumption of responsibility.
In Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830.
Lord Steyn remarked at p 837 that there was no better rationalisation for liability in tort for negligent misrepresentation than the concept of an assumption of responsibility.
It has therefore become clear that, although it may require cautious incremental development in order to fit cases to which it does not readily apply, this concept remains the foundation of the liability.
The legal consequences of Ms Steels careless misrepresentation are clearly governed by whether, in making it, she assumed responsibility for it towards Northern Rock.
The concept fits the present case perfectly and there is no need to consider whether there should be any incremental development of it.
Nevertheless the case has an unusual dimension: for the claim is brought by one party to an arms length transaction against the solicitor who was acting for the other party.
A solicitor owes a duty of care to the party for whom he is acting but generally owes no duty to the opposite party: Ross v Caunters [1980] Ch 297, 322.
The absence of that duty runs parallel with the absence of any general duty of care on the part of one litigant towards his opponent: Jain v Trent Strategic Health Authority [2009] UKHL 4, [2009] AC 853.
Six authorities, briefly noticed in chronological order in what follows, may illumine inquiry into the existence of an assumption of responsibility by a solicitor towards the opposite party.
First, the decision of the Court of Appeal of New Zealand in Allied Finance and Investments Ltd v Haddow and Co [1983] NZLR 22.
The claimant had agreed to make a loan to X and to take security for it on a yacht.
The defendants, who were Xs solicitors, certified to the claimant that the instrument of security executed by X in relation to the yacht was binding on him.
In fact, as the defendants knew, it was not binding on him because he was not, and was not intended to become, the owner of the yacht.
The court held that the defendants had owed, and breached, a duty of care to the claimant.
Richardson J said at p 30, in terms which the other members of the court echoed: This is not the ordinary case of two solicitors simply acting for different parties in a commercial transaction.
The special feature attracting the prima facie duty of care is the giving of a certificate in circumstances where the [defendants] must have known it was likely to be relied on by the [claimant].
Second, the decision of the Lord Ordinary, Lord Jauncey, in the Outer House in Midland Bank Plc v Cameron, Thom, Peterkin and Duncans 1988 SLT 611.
The pursuer had made a loan to X in assumed reliance on a statement by the defenders, who were Xs solicitors, about the extent of his assets.
The statement was materially inaccurate.
But the pursuers claim against the defenders failed.
Having referred to the Hedley Byrne case as the proper starting point and to the Allied Finance case, the Lord Ordinary observed as follows at p 616: In my opinion four factors are relevant to a determination of the question whether in a particular case a solicitor, while acting for a client, also owes a duty of care to a third party: (1) the solicitor must assume responsibility for the advice or information furnished to the third party; (2) the solicitor must let it be known to the third party expressly or impliedly that he claims, by reason of his calling, to have the requisite skill or knowledge to give the advice or furnish the information; (3) the third party must have relied upon that advice or information as matter for which the solicitor has assumed personal responsibility; and (4) the solicitor must have been aware that the third party was likely so to rely.
The Lord Ordinary concluded that the pursuer was able to establish none of the first three of the four factors.
Third, the decision of the Court of Appeal in Al Kandari v J R Brown and Co [1988] QB 665.
The claimant, a mother of two children, feared that the father would abduct them to Kuwait.
The court had made an order which, with their consent, obliged the defendants, who were the fathers solicitors, to retain possession of his passport on which the children were registered.
With the mothers consent, the solicitors allowed their agents to take the passport to the Kuwaiti embassy for alteration on condition that it would never be out of their sight.
In fact the embassy insisted on retaining it overnight.
The solicitors did not inform the mother that the embassy had retained the passport nor that (as they knew) the father was due to attend there on the following day.
The embassy released the passport to the father, who abducted the children to Kuwait.
The court held that, in failing so to inform the mother, the solicitors had breached a duty of care to her.
Both Lord Donaldson of Lymington MR at p 672 and Bingham LJ at p 675 explained that, in agreeing to become obliged to retain possession of the fathers passport, the solicitors had stepped outside their role as his solicitors and assumed responsibility towards the mother.
Fourth, the decision of Sir Donald Nicholls V C in the High Court in Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560.
The claimant wished to purchase an underlease from the first defendant.
The claimants solicitors inquired of the second defendants, a firm of solicitors acting for the first defendant, whether any provisions in the headlease might affect the length of the underlease.
The negative answer of the second defendants was a misrepresentation, which, following its purchase of the underlease, caused loss to the claimant.
The Vice Chancellor held that it had a valid claim against the first defendant but that the second defendants had themselves owed no duty of care to it.
He observed at pp 571 572 that only in special cases, such as the Allied Finance case, would a solicitor owe a duty of care to the opposite party and that there was nothing special about the case before him.
Fifth, the decision of the Court of Appeal of New Zealand in Connell v Odlum [1993] 2 NZLR 257.
Prior to his marriage to W, the claimant wished to enter with her into an agreement of which the statutory effect would be to contract them out of the laws general provisions for the making of financial adjustments between them in the event of separation.
Pursuant to one of the statutory requirements, the defendant, who was Ws solicitor, certified that, prior to her signing the agreement, he had explained its effect to her.
Following separation a judge found that he had not explained its effect to her and held that the agreement was void.
The Court of Appeal held that it was highly arguable that, in giving the certificate, the defendant owed a duty of care to the claimant and that the claim should not be struck out.
Thomas J explained at p 269 that the claimant had relied, and had been expected by the defendant to rely, on the certificate as a feature of the validity of the agreement and that there had been the necessary assumption of responsibility towards him on the part of the defendant.
And sixth, the decision of the Court of Appeal in Dean v Allin and Watts [2001] EWCA Civ 758, [2001] 2 Lloyds Rep 249.
The claimant proposed to lend money to W and X on the security of property owned by Y and Z. W and X instructed the defendants, their solicitors, to effect the security in favour of the claimant, with which Y and Z were willing to co operate.
The loan was made on the footing that the security was in place.
But the defendants had carelessly misunderstood what was legally required in order to effect the security.
In due course Y and Z established that the purported charge on their property was ineffective.
The court held that the defendants had owed, and breached, a duty of care to the claimant.
Robert Walker LJ explained in summary, at para 69, that the provision of effective security was of fundamental importance to the claimant and that, as the defendants knew or should have known, he was relying on them in that regard.
Perhaps it helps only slightly for us to have been reminded in the authorities cited above that Ms Steel and the firm are liable to Northern Rock only if it was a special case.
Probably of greater assistance is the analysis in the Al Kandari case that the solicitors owed a duty of care to the opposite party because they had stepped outside their normal role.
But the six authorities cited above demonstrate in particular that the solicitor will not assume responsibility towards the opposite party unless it was reasonable for the latter to have relied on what the solicitor said and unless the solicitor should reasonably have foreseen that he would do so.
These are, as I have shown, two ingredients of the general liability in tort for negligent misrepresentation; but they are particularly relevant to a claim against a solicitor by the opposite party because the latters reliance in that situation is presumptively inappropriate.
Thus the reasonableness of the claimants reliance and of the defendants foreseeability of it comprised the special feature which gave rise to the liability in the Allied Finance case and in the Dean case and to the arguable liability in the Connell case; and, although the claim in the Midland Bank case failed for other reasons, the fourth of the requirements valuably identified in Lord Jaunceys judgment was that the solicitor should have been aware that the pursuer was likely to rely on what he had said.
In dismissing Northern Rocks claim the Lord Ordinary held that the crucial question arose from the fact that, prior to executing and returning the deeds of discharge, it had failed to check the accuracy of the representations made by Ms Steel in the email dated 22 March 2007 against the material on its file.
Had it done so, it would have seen immediately that it was entirely inappropriate for it to accede to her invitation to execute the deeds of discharge.
Having heard her evidence, the Lord Ordinary found that, although she knew that Northern Rock was acting without solicitors in relation to the sale of Unit 1 and to the two earlier sales, she had generally expected it to check the propriety of her various requests before complying with them.
Notwithstanding her inability, when giving evidence, to recall her state of mind when sending the email, the Lord Ordinary therefore found that Ms Steel had not foreseen that Northern Rock would rely on her assertions in it without checking their accuracy.
He then proceeded to ask whether it was reasonable for her not to have foreseen that it would do so.
His answer was that any prudent bank taking the most basic precautions would have checked the accuracy of her representations by reference to its file or indeed by asking for further clarification of an email which he had found in some respects to be vague and ambiguous; that it was therefore not reasonable for Northern Rock to have relied on her representations without thus checking their accuracy; and that it was reasonable for Ms Steel not to have foreseen that it would do so.
That the Lord Ordinary had been entitled to reach this crucial conclusion formed the basis of Lord Brodies dissent upon the appeal to the Inner House.
But the majority in the Inner House took a different view.
Lady Smith held that circumstances were present which led to the attribution to Ms Steel of an assumption of responsibility for the representations in the email towards Northern Rock without any need for the court to inquire whether it should have checked its file.
These circumstances were said to be that Ms Steel was a solicitor; that her representations fell within her area of expertise; that, as she knew, Northern Rock was not represented by solicitors; that Headway had not given her actual or even ostensible authority to make the representations; that, by her email, she was demanding an urgent response; and that the transaction between Headway and Northern Rock was not at arms length.
With great respect, I would not accept that all the circumstances were as described by Lady Smith.
Whether Headway had conferred on Ms Steel ostensible authority to make the representations had not been fully explored before the Lord Ordinary and rightly so because for obvious reasons no claim was brought against Headway and because an agent may well owe a duty of care to a third party even if he is acting within the scope of his authority.
And, although Headway and Northern Rock were not engaged in hostile litigation, I find it impossible to subscribe to the suggestion that they were not at arms length in relation to the removal of security over Unit 1.
Overarchingly, however, neither the general jurisprudence relating to liability in negligence for a misrepresentation leading to economic loss nor the focussed jurisprudence relating to a solicitors liability to the opposite party in that regard supports a conclusion that it is not always necessary for the representee to establish that it was reasonable for him to have relied on the representation.
On the contrary, the reasonableness of his reliance on it is, as I have explained, central to the concept of an assumption of responsibility.
Lady Smith added however that in any event Ms Steel should have foreseen that Northern Rock would rely on her representations without checking their accuracy.
There was, so she said, no expert or other evidence in relation to the basic precautions taken by a lender to which the Lord Ordinary had referred and no scope for judicial knowledge to be taken of them; and it was likely and therefore foreseeable that Northern Rock would simply rely on Ms Steels representations.
Resolution of the further appeal to this court could no doubt be based on inquiry into whether Lady Smith and Lady Clark were entitled to depart from the Lord Ordinarys conclusion that it was not reasonable for Northern Rock to have relied on Ms Steels representation without inquiry.
How does the law classify a trial judges conclusion that it was not reasonable for a party to act as it did? It is not a conclusion of fact.
It is a judgement referable to an already established fact and, albeit required by law, it is not a judgement about what the law is.
So it is difficult to pigeon hole it as a conclusion either of fact or of law or even in my view as a conclusion of mixed fact and law.
It is, rather, an evaluation; and in In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] UKSC 33, [2013] 1 WLR 1911, Lady Hale at para 203 recorded all members of the court as having agreed that an appellate court needed to be satisfied that an evaluative conclusion of a trial judge was wrong before it could be set aside.
But in my view this court does not need to explain why the Lord Ordinary cannot be said to have been wrong in concluding that it was not reasonable for Northern Rock to have relied on Ms Steels representation without inquiry.
We should bypass examination of whether he was wrong and should hold positively that he was right.
We should accept that a commercial lender about to implement an agreement with its borrower referable to its security does not act reasonably if it proceeds upon no more than a description of its terms put forward by or on behalf of the borrower.
The lender knows the terms of the agreement and indeed, as in this case, is likely to have evolved and proposed them.
Insofar as the particular officers in Northern Rock who on 23 March 2007 saw and acted upon the email had never been aware of the terms or had forgotten them, immediate access to the correct terms lay literally at their finger tips.
No authority has been cited to the court, nor discovered by me in preparing this judgment, in which it has been held that there was an assumption of responsibility for a careless misrepresentation about a fact wholly within the knowledge of the representee.
The explanation is, no doubt, that in such circumstances it is not reasonable for the representee to rely on the representation without checking its accuracy and that it is, by contrast, reasonable for the representor not to foresee that he would do so.
This court should allow the appeal and restore the Lord Ordinarys interlocutor.
| The First Appellant, Jane Steel, is a solicitor.
In 2007 she was a partner in Bell & Scott LLP, the Second Appellant, who were a firm of solicitors in Glasgow.
In her capacity as a solicitor Ms Steel had, for many years, acted for a Mr Hamish Munro, and subsequently a company in which he had an interest Headway Caledonian Ltd. This company was the registered owner of Cadzow Business Park in Hamilton, a property which comprised four different units, and had been registered with the Land Register in two separate titles.
When the business park was purchased Headway Caledonian had granted the Respondent, NRAM, an all sums standard security over the property, which had been registered against the titles in 1998.
In addition, in 2002, Headway had granted NRAM a floating charge over all its assets.
In 2006 Headway entered into a contract for the sale of Unit 1 of the park and a request was duly made to NRAM to release this unit from its security.
This was agreed by NRAM, in consideration of a repayment of 495,000, and it was understood by both parties that after the sale the security would remain in place in relation to Units 2 and 4 (Unit 3 having already been sold in 2005).
The sale was due to complete on 23 March 2007.
At 5pm on 22 March Ms Steel sent an email to NRAM asking for a letter of non crystallisation of the floating charge, and for the execution of two draft deeds of discharge.
Ms Steel wrote: I also attach discharges for signing and returnas the whole loan is being paid off for the estate and I have a settlement figure for that.
This request was not queried by NRAM, and the two deeds of discharge (which referred to the discharge of security over all three of the remaining units, rather than just Unit 1) were executed and a letter of non crystallisation drafted and signed.
The letter was signed by Mr Clarke, the head of the Loan Review Team, who made no attempt to check the accuracy of Ms Steels statements against the material on NRAMs file.
It has since been accepted by Ms Steel that the statement in her email was entirely inaccurate she had never been instructed that the whole loan was to be repaid, and neither did she have a settlement figure for that repayment.
At trial, Ms Steel could not explain this error, and the fact that the security had been discharged went unnoticed by NRAM until 2010 when Headway Caledonian went into liquidation.
NRAM consequently issued a claim against Ms Steel (and Bell & Scott LLP) for damages suffered as a result of its reliance on her email of 22 March 2007.
NRAM alleged that she had owed it a duty of care and had made the statements in the email negligently.
The Lord Ordinary dismissed the claim, but the Inner House allowed NRAMs reclaiming motion, and substituted an award of damages in its favour of 369,811.18.
The Supreme Court unanimously allows the appeal and restores the interlocutor of the Lord Ordinary.
Lord Wilson gives the judgment, with which Lady Hale, Lord Reed, Lord Hodge and Lady Black agree.
The starting point, when considering whether someone is liable for a careless misrepresentation which causes economic loss, is the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.
What lay at the heart of that decision was the need, in order for the representor to be liable, for the representee reasonably to have relied on the representation, and for the representor reasonably to have foreseen that he would do so [18 19].
However, it has since become clear that not all claims in tort for losses resulting from careless representations can easily be resolved by reference to this concept of assumption of responsibility.
This was what prompted Lord Griffiths, in Smith v Eric Bush; Harris v Wyre Forest District Council [1990] 1 AC 831, to propose a threefold test that required (1) that it was foreseeable that, were the information given negligently, the claimants would be likely to suffer damage; (2) that there was a sufficiently proximate relationship between the parties; and (3) that it was just and reasonable to impose the liability [20 21].
This test was considered in Caparo Industries Plc v Dickman [1990] 2 AC 605, and for many years the court in Caparo was considered to have indorsed it.
However, as has already been explained by the Supreme Court in other recent cases, the courts decision in Caparo was actually more nuanced than has often been allowed, and in fact the case is notable for its reassertion of the need for it to be reasonable for the representee to have relied on the representation, and for the representor to have reasonably foreseen that they would so rely [22 23].
Indeed, it is now clear that this concept of assumption of responsibility remains the foundation of liability for a careless misrepresentation, although the concept may sometimes require cautious incremental development in order to fit cases to which it does not readily apply [24].
Such development is unnecessary here, however, as the concept fits the case perfectly [25].
Consideration of six relevant authorities demonstrates that a solicitor will not assume responsibility towards the opposite party unless it was reasonable for the latter to have relied on what the solicitor said, and unless the solicitor should reasonably have foreseen that the opposite party would actually rely on the statement.
These ingredients of reasonable reliance and foreseeability are particularly relevant to a claim against a solicitor by the opposing party, because it is presumed to be inappropriate for a solicitor to assume such a responsibility towards the other side [32].
In this case, the Lord Ordinary had found that Ms Steel generally expected NRAM to check her requests before complying with them, and therefore that she had not foreseen that they would rely on her assertions without checking their accuracy.
In addition, any prudent bank taking basic precautions would have checked the accuracy of such statements, and it was therefore not reasonable for NRAM to have relied on the email [33].
The majority of the Inner House however had disagreed, and held that there were certain circumstances which led to the conclusion that Ms Steel had assumed responsibility for the representations in the email, such that the court did not even need to consider whether NRAM should have checked its file.
These circumstances included, amongst other things, Ms Steels area of expertise, and the fact the NRAM had not instructed solicitors [34].
The approach of the majority was, however, incorrect.
Nothing in the relevant case law supports a conclusion that it is not always necessary for a representee to show that it was reasonable of it to have relied on the relevant representation.
This is an essential element of the concept of assumption of responsibility [35].
Moreover, the Lord Ordinary was correct to find that a commercial lender about to implement an agreement relating to its security does not act reasonably if it proceeds upon no more than a description of the agreements terms put forward by the borrower [38].
|
The appellant (Mr Youssef), an Egyptian national, has been living in this country since 1994.
He challenges a decision made by the respondent Secretary of State on 14 September 2005, in his capacity as a member of the committee of the United Nations Security Council, known as the Resolution 1267 Committee or Sanctions Committee.
The committee is responsible for maintaining a list of persons and entities subject to the asset freeze imposed on persons associated with Al Qaida under Chapter VII of the United Nations Charter.
The committee acts by consensus: all members must agree to a nomination for inclusion on the list, or to de listing.
The United Nations sanctions regime, and the constitution of the committee, are described in more detail in the judgment under appeal of Laws LJ in the Court of Appeal, as is the drastic effect of listing on the individuals concerned: [2013] EWCA Civ 1302; [2014] QB 728, paras 3 12.
The decision under challenge removed the hold which the United Kingdom had previously placed on the appellants designation by the committee.
It had the consequence that thereafter he became subject to the asset freeze imposed by virtue of the Charter and of implementing European and national legislation.
The appellants first contention is that, although the Secretary of State made his own decision on untainted evidence, he was aware that information on which other members were proceeding was or might have been obtained by torture; and that accordingly he was under an obligation, enforceable in domestic law, not to lend his aid to a committee decision which might be so tainted.
The appellants case, with others, came before this court in earlier judicial review proceedings in Ahmed v HM Treasury [2010] UKSC 2; [2010] 2 AC 534 (to which I will return below).
They related to an implementing order in this country made under section 1 of the United Nations Act 1946.
The court held that the order was outside the powers conferred by the Act.
However, that decision left in place Council Regulation (EC) No 881/2002, which implemented the asset freeze under European law, and had direct effect in the United Kingdom under the European Communities Act 1972.
Although this court declined to suspend its order to enable new regulations to be made under that Act ([2010] UKSC 5; [2010] 2 AC at p 689), such provisions, including the related licensing provisions and criminal sanctions, were made soon afterwards, in effect reproducing the controls previously imposed under the 1946 Act (Al Qaida and Taliban (Asset Freezing) Regulations 2010 (SI 2010/1197), since superseded by 2011 Regulations (SI 2011/2742) to similar effect).
In evidence in the Ahmed proceedings it was disclosed that, following a review of the information then available, the government had decided that the appellant no longer met the criteria for designation.
From June 2009 until late 2012 the Secretary of State actively supported his removal from the Sanctions Committees Consolidated List, and attempted to persuade other members to agree, but without success.
The appellant complains of the Secretary of States failure at that stage to extend his grounds for seeking delisting to include the tainted nature of the evidence apparently relied on by other members.
Findings of the United Nations Ombudsperson
Meanwhile (by Resolution 1904 of 2009) the Security Council had established the new office of Ombudsperson, inter alia, to assist the committee in considering and responding to requests for delisting.
The appointment of the first Ombudsperson (Judge Kimberly Prost) and her understanding of this new role were described by Laws LJ in the Court of Appeal (para 8).
In April 2013 the appellant applied to the Ombudsperson requesting delisting.
Her report to the committee, submitted in February 2014, recommended that he be retained on the list.
On 30 July 2014 she wrote to the appellant informing him of her recommendation and the reasons for it.
Her letter indicated that she had excluded from her analysis material tainted by torture (p 4).
It reviewed a number of public statements attributed to the appellant between 2011 and 2013.
It is sufficient to refer, as an example, to the most recent: a sermon given in May 2013, in which he offered extensive praise of Usama bin Laden, labelled certain Al Qaida linked groups as the fruits of this Martyr [Bin Laden] and his good devout brethren, and asserted that America will crumble thanks to those Mujahids and by virtue of this Martyr.
The Ombudsperson commented that such repeated statements clearly glorify Usama Bin Laden and the Al Qaida organisation for its various activities in different locations, and could be categorised as an exhortation to others to join in the continued expansion of the organisation in its aims, which includes the destruction of America (p 9).
On 10 September 2014 the Secretary of State informed the appellant that he agreed with the Ombudspersons recommendation and would no longer support delisting.
On 30 October 2014 the committees narrative summary of reasons for listing was updated to take account of the Ombudspersons findings.
The revised summary includes the following: [The appellant] is a known figure within extremist circles.
He uses an Internet site, and other media, to support terrorist acts or activities undertaken by Al Qaida as well as to maintain contact with a number of supporters around the world.
He offers praise for Al Qaida as an organisation and, directly or by inference, encourages individuals to join and support that organisation and its activities on a global basis.
As of early 2014, [the appellant] provided Al Qaida and Al Nusrah Front for the People of the Levant (QE.A.137.14) with guidance and justification for their operations and tactics.
The court has no evidence from the appellant to counter the allegations on which the 1267 committee now relies.
In his only witness statement in these proceedings, dating from 3 December 2010, he simply rejected (without further explanation) the notion that he is in any way involved in terrorism, or linked in any way to Al Qaida or the Taliban.
The court was told that he intends to challenge the Secretary of States recent decision not to support delisting, but not on what grounds.
It has been agreed between the parties that further action will await the decision of the court in this appeal, at which point the Secretary of State will reconsider his decision so far as necessary in the light of this courts findings and of any representations made by the appellant.
Immigration
The appellants immigration status is not in issue in these proceedings.
He claimed asylum on arrival in 1994, but that claim was rejected under article 1F(c) of the Refugee Convention (serious reasons for considering that he has been guilty of acts contrary to the purposes and principles of the United Nations).
Since October 1999 he has remained under a series of grants of discretionary leave to remain.
An appeal against refusal of asylum under article 1F(c) is currently pending before the Upper Tribunal.
Consideration of his application for indefinite leave to remain has been deferred by the Home Office pending a final decision on his asylum application.
European proceedings
Decisions of the European Court of Justice in Kadi v Council of the European Union (Joined Cases C 402/05P and C 415/05P), [2009] AC 1225 (Kadi I), and of the General Court in Kadi v Commission of the European Communities (Council of the European Union intervening) (Case T 85/09) [2010] ECR II 5177 (Kadi II) established that inclusion of an individual within a list under EC Regulation 881/2002 (regulation 881) was subject to judicial review in Europe, inter alia on grounds relating to the accuracy and reliability of the evidence relied on (Kadi II paras 141 143).
Regulation 881 was amended by Council Regulation (EU) No 1286/2009 to create a mechanism for review by the Commission (articles 7(a) and 7(c)).
In July 2010 the appellant applied to the General Court of the European Union for removal from the list in regulation 881.
In a decision given on 21 March 2014 (Case T 306/10) the court held that the Commission had failed to review his inclusion under the required procedures, but it dismissed his claim that his retention on the list was irrational.
On 17 December 2014 the European Commission sent to the appellant an updated statement of reasons for listing under regulation 881 in the same terms as the 1267 committees summary.
The appellant responded on 26 January 2015 denying those allegations.
He has lodged an application for legal aid with the EU General Court to enable him to challenge the decision to continue his listing under the regulation.
The present proceedings and the issues in the appeal
The present claim for judicial review was issued in December 2010.
It challenged the legality both of the Secretary of States decision in 2005 to lift his hold on designation, and also of his refusal, in a letter of 14 October 2010, to extend his request for delisting to include the ground that the committees decision had been based on torture tainted evidence.
The claim was dismissed by the Divisional Court in July 2012, and by the Court of Appeal in October 2013.
Permission to appeal to this court was granted on 9 July 2014.
The appeal raises issues about the tests to be applied in judging the legality of the relevant decision, and about their consequences under domestic law.
It also raises issues about the remedies if any to which the appellant should be entitled, if otherwise successful, having regard in particular to the developments since the Court of Appeal decision.
Mr Otty QC summarised his submissions on behalf of the appellant under four main heads: i) Torture tainted material The exceptional status accorded to the prohibition against torture, under international and domestic law, required the Secretary of State not merely himself to make no use of torture tainted evidence, but to forego participation in a decision which might be affected by such evidence. ii) Absence of power The intended and inevitable effect of the committees decision was a serious interference with the appellants right to peaceful enjoyment of his property.
That could only be achieved by a clear statutory provision or common law rule, neither of which existed. iii) Standard of proof The test of reasonable grounds to suspect that the appellant met the criteria for designation as having been associated with Al Qaida through his participating in the financing, planning, facilitating, preparing or perpetrating of acts or activity in conjunction with, under the name of or on behalf of Al Qaida adopted by the Secretary of State was too low, as shown by the reasoning of this court in Ahmed. iv) Standard of review Given the gravity of the context, the courts below were wrong to limit the standard of review to that of Wednesbury unreasonableness or irrationality.
Following the more recent guidance of this court in Kennedy v Information Comr (Secretary of State for Justice intervening) [2014] UKSC 20, [2015] AC 455 and Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19, [2015] 1 WLR 1591, the appellant was entitled to a full merits review, or at least one involving a proportionality analysis.
It will be convenient to take them in this order, expanding the account of law and facts so far as necessary under each head.
Torture tainted material
Background
The factual background to this issue, so far as not already explained, is uncontentious.
On 29 March 2005 a designating state (now known to have been Egypt) requested the committee to add 20 individuals, including the appellant, to the UN sanctions list.
The information submitted in support relied on his conviction in Egypt in absentia for membership of a terrorist group.
This information, as the Secretary of State knew, included evidence that had been or may have been obtained by torture.
However, the Secretary of States decision on 14 September 2005 to agree to his designation was not based on this information but on a separate Security Service assessment.
This referred to his previous links with a terrorist group known as Egyptian Islamic Jihad (EIJ), his arrest in 1998 in connection with a planned bomb attack on the US embassy in Tirana, and his views which remained extreme.
The assessment was that he had had strong historical links to EIJ in the mid to late 1990s and that the potential remains for him to re engage with EIJ.
Under the guidelines in effect in 2005 the committee was not required to make a statement of the reasons for its decision.
However, under later guidelines (first introduced in June 2008 by SCR 1822), it was required to publish on its website a narrative summary of reasons for listing.
Such a summary in respect of the appellant was published in September 2010.
This referred to him being wanted in Egypt in connection with terrorist crimes committed in that country.
The appellant asserts (without specific contradiction by the Secretary of State) that these allegations were the result of torture of his co accused.
As already noted, by this time, the Secretary of State had formed the view on other grounds that the listing was no longer justified.
The Security Service assessment on which this was based (May 2009), included the following: We assess that were [the appellant] to be removed from the Consolidated List he would be unlikely to re engage with EIJ.
Although [the appellant] continues to maintain his extremist views, he appears very reluctant to be directly involved in terrorist activities.
Legal principles and the courts below
For the legal principles governing the use of evidence obtained by torture we need look no further than the opinions given in the House of Lords in A v Secretary of State for the Home Department (No 2) [2005] UKHL 71; [2006] 2 AC 221, notably that of Lord Bingham which contains an extensive review of the international materials (paras 30ff).
Having quoted from the United Nations Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, he noted as common ground that the international prohibition of the use of torture enjoys the enhanced status of a jus cogens or peremptory norm of general international law.
He quoted at length from the authoritative exposition by the International Criminal Tribunal for the Former Yugoslavia in Prosecutor v Furundzija (1998) 38 ILM 317 (10 December 1998), including this statement of the obligations of states, both individually and collectively: 151.
Furthermore, the prohibition of torture imposes upon states obligations erga omnes, that is, obligations owed towards all the other members of the international community, each of which then has a correlative right.
In addition, the violation of such an obligation simultaneously constitutes a breach of the correlative right of all members of the international community and gives rise to a claim for compliance accruing to each and every member, which then has the right to insist on fulfilment of the obligation or in any case to call for the breach to be discontinued.
Lord Bingham interpreted these extracts as indicating the requirement on states both to eschew the practice of torture and to cooperate to bring to an end through lawful means any serious breach of an obligation under a peremptory norm of general international law.
The same principles required states save perhaps in limited and exceptional circumstances to reject the fruits of torture (para 34).
Similarly article 15 of the Torture Convention prohibited the use of any statement which is established to have been made as a result of torture (para 35), a principle recognised also in the European Convention on Human Rights and in the common law (para 52).
The Court of Appeal held that the Secretary of State was responsible for the lawfulness of his own reasons, but not in effect for policing the reasoning of other member states.
Laws LJ (paras 54 55) accepted that the court cannot ignore an established rule of international law, far less one which has the force of ius cogens erga omnes, and declined therefore to base his decision on the proposition that the Governments conduct of foreign relations enjoys something close to an immunity from judicial review.
He continued: The true answer to Mr Ottys argument on ground 2 rests in my judgment on the facts of the case.
In R (Al Rawi) v Secretary of State for Foreign and Commonwealth Affairs [2008] QB 289 I said, at para 102: [T]he status of ius cogens erga omnes empowers but does not oblige a state to intervene with another sovereign state to insist on respect for the prohibition of torture (para 151 of Prosecutor v Furundzija) .
But Mr Ottys submission entails an obligation on the Secretary of State so to intervene.
Given that the Foreign Secretarys own reasons for lifting the hold were not tainted by torture evidence, there is nothing in Mr Ottys case save an insistence that the United Kingdom should, in effect, have stymied the designation because other states were not so pure.
The law did not require him to do so.
Submissions
In this court Mr Otty challenges both the reasoning of the decision in Al Rawi on which Laws LJ relied, and its applicability to this case.
The Court of Appeal in Al Rawi had been wrong to interpret the passage cited from Furundzija as support for an entitlement rather than an obligation to act.
In any event, unlike Al Rawi in which the Secretary of State had had no control over the treatment of inmates in Guantanamo Bay, in this case he had the power to determine whether or not designation would proceed.
Further, the courts below erred in holding that the Secretary of State could disassociate himself from the reasoning of the committee of which he was a member.
Although the committees reasons were not published (nor required to be published) until some years later, the narrative summary must be treated as representing the views of the committee as a body, and so attributable also to its members individually.
For the Secretary of State, Mr Swift QC accepted that the decision is reviewable, but subject to defined limits.
As he put it in his printed case: It is common ground that the decision taken by the Foreign Secretary as a member of the 1267 committee as to whether or not the appellant met the designation criteria is justiciable as a matter of domestic law, applying standard public law principles.
It is equally clear, however, that neither similar decisions taken by other members of the committee, nor decisions of the committee itself, are justiciable as a matter of UK domestic law.
In his submission, the Secretary of State in removing the hold on designation was agreeing to the fact of designation and no more.
Provided his own reasons were valid, the law did not make him responsible for the decisions of others.
He had no means of knowing what evidence might be relied on by them, nor any duty to make inquiries.
At the time, under the current UN guidance there was no expectation that the committee would form a single collective view or adopt collective reasons.
Discussion
In choosing between these competing submissions, it is important to define the scope of the courts powers.
Mr Swifts concession that the decision of the Secretary of State is subject to judicial review begs a potentially important question as to the legal basis of the concession and its proper limits.
Judicial review does not operate in the abstract.
The standard public law principles to which Mr Swift refers cannot be divorced from the legal context, statutory or common law, in which the particular executive action is taken or decision made.
The legal context in which the 2005 decision was made was that of a body operating under international law, not subject to the domestic courts.
If the Secretary of State alone is to be subject to review, there must be some legal principle by which under domestic law his vote can be distinguished from those of other members.
The point can be illustrated by reference to the committees narrative summary of reasons published in 2010.
I agree with Mr Swift that there is no valid basis for attributing that statement retrospectively to the decision made in 2005, at a time when there was no requirement for a collective statement of any kind.
But I would reach the same view looking at the matter in 2010.
Although I see force in Mr Ottys submission that the Secretary of State, as a voting member of the committee, cannot divorce himself from its collective statement, this would lead me to the opposite conclusion from that drawn by him.
It does not mean that the Secretary of States vote, infected by the committees reasons, acquires a separate status for the purpose of domestic law.
They remain the reasons of the international body, challengeable if at all only under international law (or by virtue of their specific adoption under the European regulation).
The object of the present challenge therefore has to be the logically prior decision of the Secretary of State in 2005 to remove his hold on the proposal for designation.
The source of his powers under domestic law lay not in any statute but in the exercise of prerogative powers for the conduct of foreign relations.
That did not make it immune from judicial review, but it is an area in which the courts proceed with caution, as is apparent from the authorities reviewed by the Court of Appeal in R (Abbasi) v Secretary of State for Foreign and Commonwealth Affairs [2002] EWCA Civ 1598; [2003] UKHRR 76 (cited with approval in this court in R (Sandiford) v Secretary of State for Foreign and Commonwealth Affairs [2014] UKSC 44; [2014] 1 WLR 2697, paras 49ff).
In Abbasi the issue was whether the Secretary of State could be required by the court to intervene with the American government on behalf of a British prisoner held in Guantanamo Bay.
Following Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 (GCHQ), it was accepted as settled law that the issue of justiciability depends, not on general principle, but on subject matter and suitability in the particular case (para 85).
The court cited R v Secretary of State for Foreign and Commonwealth Affairs, Ex p Everett [1989] QB 811, relating to the issue of a passport, in which Taylor LJ summarised the effect of GCHQ: The majority of their Lordships indicated that whether judicial review of the exercise of prerogative power is open depends upon the subject matter and in particular upon whether it is justiciable.
At the top of the scale of executive functions under the prerogative are matters of high policy, of which examples were given by their Lordships; making treaties, making war, dissolving Parliament, mobilising the Armed Forces.
Clearly those matters and no doubt a number of others, are not justiciable.
But the grant or refusal of a passport is in a quite different category.
It is a matter of administrative decision affecting the rights of individuals and their freedom of travel.
It raises issues which are just as justiciable as, for example, the issues arising in immigration cases. (p 820) In Abbasi the court held that the exercise of the Secretary of States powers to protect British citizens abroad was in principle subject to judicial review, although the court could not enter the forbidden areas, including decisions affecting foreign policy; but it declined to intervene on the facts of that case (paras 106 107).
The present case falls somewhere between the two ends of the spectrum indicated by Taylor LJ.
The conduct of foreign policy through the United Nations, and in particular the Security Council, is clearly not amenable to review in the domestic courts so far as it concerns relations between sovereign states.
The distinguishing factor in the present context is that the Security Councils action, through the 1267 committee, is directed at the rights of specific individuals, and in this case of an individual living in the United Kingdom.
Furthermore, at the time the decision was taken, the Security Council procedures provided no other means for the individual to challenge their decision.
It is no doubt such considerations that led to Mr Swifts concession.
I am content (without deciding the point) to proceed on the basis that it is correct.
That said, the decision under challenge in the domestic proceedings is that of the Secretary of State not of the committee, and it is by reference to his reasons that it must be judged.
There is no legal basis for attributing to him reasons which he did not have.
Since his own reasons were untainted, Mr Otty has to show that he was in breach of a distinct duty to inquire into the reasons of the other members, and to withhold his support if they appeared tainted in any way.
For the existence of such a duty he relies on the obligation of states to reject the fruits of torture, and places particular weight on the following passages from Furundzija (in addition to those cited above): 148. given the importance that the international community attaches to the protection of individuals from torture, the prohibition against torture is particularly stringent and sweeping.
States are obliged not only to prohibit and punish torture, but also to forestall its occurrence . 149. in the case of torture the requirement that states expeditiously institute national implementing measures is an integral part of the international obligation to prohibit this practice.
Consequently, states must immediately set in motion all those procedures and measures that may make it possible, within their municipal legal system, to forestall any act of torture or expeditiously put an end to any torture that is occurring.
He also relies on Lord Binghams reference in this context (A (No 2), para 34) to the obligations held by the International Court of Justice to arise from its ruling on the illegality of the wall in occupied Palestinian territory: see Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory (Advisory Opinion (unreported) 9 July 2004 (General List No 131) para 159).
That placed other states under an obligation not to recognise the illegal situation resulting from the construction of the wall and not to render aid or assistance in maintaining the situation created by such construction.
These passages leave no doubt as to the importance of the rules against torture and the use of torture tainted evidence, and the duty of states to take the necessary measures within their municipal legal systems to give full effect to those rules.
However, taken at their highest, they do not suggest or imply any duty on states to inquire into the possible reliance on such evidence by other states, whether on their own or as parts of an international organisation such as the 1267 committee.
The obligations held to arise out of the International Courts decision on the Palestinian wall are nothing in point.
They followed a definitive finding of illegality.
There was no suggestion that, absent such a finding, mere suspicion of illegality could give rise to an equivalent obligation on other states.
In agreement with the courts below I would reject this ground of appeal.
Absence of power
Mr Ottys submission under this head starts from the principle, established by authorities dating back at least to Entick v Carrington (1765) 19 State Tr 1029, that interference by the state with individual property rights cannot be justified by the exercise of prerogative powers, unsupported by specific statutory authority.
The Secretary of States decision to remove his hold on designation, which led inexorably and designedly to the freezing of the appellants assets, fell within that principle, even if the actual interference was authorised (see R (M) v Hackney London Borough Council [2011] EWCA Civ 4; [2011] 1 WLR 2873, in which a local authority was held liable for procuring the detention of the claimant by the hospital trust, albeit that the latter was acting under statutory powers).
The Court of Appeal accepted the relevance of the Entick principle (a constitutional principle of the first importance) but held that the necessary authority was provided by the European regulation.
Laws LJ said: I accept that if the Foreign Secretarys release of the hold on the claimants designation rested solely on the Prerogative power, then it would appear to have been done without legal authority.
But that is not the position.
As a matter of domestic law the Foreign Secretary was obliged to apply the Consolidated List regime to its proper subjects by force of article 2(1), (3) of and Annex I to Regulation 881/2002.
There might be an argument on the question whether the general words of the European Communities Act 1972, by virtue of which the Regulation has the force of law in the United Kingdom, are sufficient to authorise the EU legislature to empower or require the Secretary of State to deprive an individual of access to any economic resources (with or without proper proof of what was said against him); but no such argument has been run in this or any case, and it would plainly not be appropriate to canvass it now. (para 26)
In this court Mr Swift puts his case rather differently.
He declined to support the Court of Appeals reliance on regulation 881 as providing statutory authority for the Secretary of State to approve the designation.
That power rested on the exercise of the prerogative, which was however sufficient for its purpose.
It was not that decision which resulted in interference with the appellants rights, but rather the decision of the European Commission, giving effect in turn to the decision of the 1267 committee.
The fact that the Secretary of States decision was a step along the path to those later decisions was insufficient to engage the Entick principle.
In my view, there is a short answer to this ground.
The respective submissions, and indeed the reasoning of the Court of Appeal, pay insufficient regard to the legal means by which the listing took effect in this country.
It is here that the interference with the appellants rights, like the intrusion on Mr Enticks property, took place.
It was directly and specifically authorised by regulation 881, which was given legislative effect in this country by the European Communities Act 1972.
No issue has been raised as to the effectiveness of the Act for that purpose.
The regulation is subject to challenge, but in the European rather than the domestic courts.
In my view the regulation, taken with the 1972 Act, provides ample statutory authority to satisfy the Entick principle.
That is not affected by the causative role played by the 1267 committee, nor by the Secretary of State as a member of that committee.
That was a lawful exercise of his prerogative powers (unlike the actions of the local authority in the Hackney case, which had no lawful basis).
For the purpose of domestic law regulation 881, given effect by a United Kingdom statute, stands on its own feet.
Laws LJ was right to place reliance on the regulation.
He was wrong with respect to read it as implying statutory authority for the prior decision of the Secretary of State as a member of the 1267 committee, but wrong also to think that statutory authority was required at that stage.
As Mr Swift rightly submits, the exercise of the prerogative power for that purpose involved no breach of any common law principle.
Standard of proof
The arguments
It is common ground that the standard applied by the Secretary of State in 2005 when considering whether the appellant was associated with Al Qaida was that of reasonable grounds for suspicion.
This appears not from any formal statement but from the evidence of the responsible officer in the Foreign Office who says: When deciding whether to support another member states designation proposal, the Secretary of State considers whether or not there are reasonable grounds for suspecting that the individual concerned meets the criteria for designation; ie whether or not the individual is associated with Al Qaida.
Although it is not specifically stated in the submission of 12 September 2005, I understand that this is the standard of proof that the then Secretary of State (Jack Straw MP) would have applied when he considered whether or not to lift his hold on another member states proposal to designate the claimant.
I say this because I understand that this was the standard which was applied at the time and which continues to be applied today. (Adrian Scott, third witness statement, para 5) He adds that, had the evidence then available been assessed on the basis of a balance of probabilities, he would have expected the same conclusion.
Mr Otty submits that the standard applied by the Secretary of State in making his decision in 2005 was too low, having regard to the serious consequences for the appellants rights.
He relies strongly on the reasoning of members of the Supreme Court in Ahmed, where the application of such a test led to the quashing of the order made under the relevant United Kingdom statute.
He argues further that the test is not supported by the wording of the relevant Security Council resolution (1617) which refers to participating in or supporting the offending activities, not merely being suspected of doing so.
Finally he relies on the doctrine of proportionality under the common law (as discussed in recent cases in the Supreme Court), which he says embraces concepts of necessity and suitability similar in substance to the tests of necessity and expedience prescribed by the statute in issue in Ahmed.
The Court of Appeal rejected those submissions.
Laws LJ, like Toulson LJ in the Divisional Court ([2012] EWHC 2091 (Admin); [2013] QB 906), took as his starting point the recognition that, in lifting the hold, the Secretary of State was exercising a power derived not from an Act of Parliament but in the exercise of prerogative powers acting on behalf of the Government as a member of an international body.
The basis of judicial review must lie, therefore, not in the actual or presumed intention of Parliament in passing empowering legislation; but must found entirely on standards which are the product of the common law [of which] reason and fairness are the cornerstones (para 23).
He continued: In this case the application of these standards requires in my judgment that the court be satisfied that the Foreign Secretary reached his decision conformably with the Consolidated List regime.
His decision was as a participant in that regime.
Reason and fairness having effect, perhaps, as a species of legitimate expectation (but I do not mean to involve that expressions panoply of conceptual footnotes) surely demand that he should act according to the grain of the scheme and not across it. (para 24)
Having distinguished Ahmed (for reasons to which I will return) he found support for the Secretary of States approach in the preamble to resolution 1617, which emphasised the preventive purpose of the regime.
That aim, he said, is more effectively promoted by the adoption of a reasonable suspicion test (para 32).
He noted also that paragraph 7 of the same resolution urges the implementation of recommendations of the Financial Action Task Force (FATF) relating to money laundering and terrorist financing.
The interpretative notes to Special Recommendation III (para 2) referred to the objective of freezing terrorist related assets based on reasonable grounds, or a reasonable basis, to suspect or believe that the assets could be used to finance terrorist activity.
A similar test was later adopted by the Ombudsperson in her report to the Security Council in January 2011 (quoted at para 8 of his judgment), in which she proposed the test whether there is sufficient information to provide a reasonable and credible basis for the listing.
Mr Swift in substance adopts the reasoning of the Court of Appeal.
He adds that the test proposed by the Ombudsperson in 2011 has not in the ensuing four years been questioned by the 1267 committee.
In 2013 it was reaffirmed by her, following exchanges with Ben Emmerson QC who as UN Special Rapporteur had proposed a more stringent balance of probability test.
Furthermore in 2012 the Security Council by resolution 2083 (para 44), when urging member states to take note of best practices for effective implementation of targeted financial sanctions, referred to the need to apply an evidentiary standard of proof of reasonable grounds or reasonable basis.
In view of the reliance understandably placed by Mr Otty on the reasoning of this court in Ahmed it is necessary to refer to the judgments in a little more detail.
As Mr Otty explains, the court had to consider the legality of two regimes introduced by Orders in Council under the United Nations Act 1946: the first designed to give effect to the resolution 1267 which is in issue in this case (referred to as AQO 2006); the other, the Terrorism (United Nations Measures) Order 2006 (or TO 2006) relating to a different Security Council resolution (1373).
That was directed at persons who commit or attempt to commit terrorist acts, but left their selection to member states.
Both Orders were enacted under section 1(1) of the 1946 Act, which permitted the making by order of such provision as appears necessary or expedient for enabling [Security Council] resolutions to be effectively applied.
Both Orders were quashed by this court.
Although only the first was applicable to the appellant, Mr Otty finds more assistance in the reasoning of this court in respect of the second.
He relies in particular on the definition of the issue by Lord Phillips (para 131): The wording of the TO tracks the wording of the Resolution, save that those who can be made subject to the Order are not only those described in the Resolution but those whom the Treasury have reasonable grounds for suspecting fall or may fall within that description.
The issue is whether it can properly be said to be necessary or expedient to apply this test of reasonable suspicion in order to ensure that the measures in the Resolution are effectively applied to those described in the Resolution.
Lord Phillips answered that question in the negative.
He said that by applying a test of reasonable suspicion the Order goes beyond what is necessary or expedient to comply with the relevant requirements of Resolution 1373 and thus beyond the scope of section 1 of the 1946 Act. (para 143)
Although those passages were not dealing directly with resolution 1617, Mr Otty finds parallels in the reasoning in respect of the AQO made to give effect to that resolution, particularly that of Lord Phillips (paras 139 143).
He had looked at the parallel series of resolutions adopted by the Security Council under article 41 (including resolution 1617) for guidance on the intended scope of resolution 1373, but had found nothing to indicate that the Security Council has decided that freezing orders should be imposed on a basis of mere suspicion (para 139).
Mr Otty submits that Lord Phillips reasoning was sufficiently reflected in other judgments to give it majority support.
I am doubtful whether that is so.
The clearest support comes from Lord Mance who relied strongly on the differences of language between the resolution and the Order: The relevant wording of Security Council Resolution 1373 paragraph 1(c)(d) is directed at the prevention and suppression and the criminalisation and prosecution of actual terrorist acts; This wording does not suggest that the Security Council had in mind reasonable suspicion as a sufficient basis for an indefinite freeze (para 225).
In my opinion, there is an objective limit to the extent to which section 1(1) permits the executive by Order in Council to enact any measure that appears to it expedient to enable the effective application of the core prohibition mandated by Resolution 1373.
A measure cannot be regarded as effectively applying that core prohibition, if it substitutes another, essentially different prohibition freezing the assets of a different and much wider group of persons on an indefinite basis (para 230).
However, in the leading judgment Lord Hope (with whom Lord Walker and Lady Hale agreed) saw the issue as turning more on principles of domestic law as applied to section 1 of the 1946 Act: SCR 1373 (2001) is not phrased in terms of reasonable suspicion.
It refers instead to persons who commit, or attempt to commit, terrorist acts.
The Preamble refers to acts of terrorism.
The standard of proof is not addressed.
The question how persons falling within the ambit of the decision are to be identified is left to the member states.
Transposition of the direction into domestic law under section 1 of the 1946 Act raises questions of judgment as to what is necessary on the one hand and what is expedient on the other.
It was not necessary to introduce the reasonable suspicion test in order to reproduce what the SCR requires.
It may well have been expedient to do so, to ease the process of identifying those who should be restricted in their access to funds or economic resources.
But widening the scope of the Order in this way was not just a drafting exercise.
It was bound to have a very real impact on the people that were exposed to the restrictions as a result of it.
Is it acceptable that the exercise of judgment in matters of this kind should be left exclusively, without any form of Parliamentary scrutiny, to the executive? (para 58 emphasis added) He held that, by introducing the reasonable suspicion test as a means of giving effect to SCR 1373, the Treasury had exceeded its powers under section 1(1): This is a clear example of an attempt to adversely affect the basic rights of the citizen without the clear authority of Parliament.
As Lord Hoffmann said in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131, fundamental rights cannot be overridden by general or ambiguous words (para 61).
Similarly, Lord Rodger noted that resolution 1373 itself provided no express guidance as to the test, but simply prescribed the result to be achieved: it does not indicate how states are to identify the people in question (para 168).
He observed, however, that the reasonable suspicion test meant that sooner or later, someone will be designated who has not actually been committing or facilitating terrorist acts.
He agreed with Lord Hope that the making of an Order, which, in effect, amounts to permanent legislation conferring powers to affect, directly, very basic domestic law rights of citizens and others lawfully present in the United Kingdom went well beyond the general power conferred by section 1(1) of the 1946 Act (para 174).
Lord Brown (dissenting in part) also referred to what he called the Simms principle or principle of legality, concluding: Where, as here, those to be designated under the proposed measure will suffer very considerable restrictions under the regime, I would hold that it can only properly be introduced by executive Order in Council if the measure is in all important respects clearly and categorically mandated by the UN resolution which it is purporting to implement.
If the implementing measure is to go beyond this, then, consistently with the Simms principle, it can only properly be introduced by primary legislation. (para 196)
Laws LJ dealt with Mr Ottys arguments under Ahmed relatively briefly.
He said that, on a reading of the whole case, the reach of the courts concern was no wider than the question whether the reasonable suspicion test in the regulation was authorised by section 1 of the 1946 Act.
He noted Lord Hopes comment that: The standard of proof is not addressed.
The question how persons falling within the ambit of the decision are to be identified is left to the member states. and Lord Rodgers comment to similar effect (both quoted above).
He continued: It is in my judgment clear that if the imposition of sanctions is in principle authorised by [regulation 881], the general law does not impose a further requirement to the effect that the sanction may only bite if the material facts are proved on the balance of probability.
By force of article 2(1), (3) of and Annex I to [regulation 881] the procedures of the material Security Council resolutions the Consolidated List regime are effectively incorporated into the [regulation].
There is no doubt but that the imposition of sanctions is in principle authorised by [regulation].
The question then is whether the Foreign Secretary has lawfully deployed the Prerogative power to invoke that authority by lifting the hold on the claimants designation.
That in turn depends on the correct resolution of the issue I stated earlier: did the Foreign Secretary reach his decision conformably with the Consolidated List regime? (paras 27 28) As already noted, he answered that question in favour of the Secretary of State.
Discussion
I have found this issue more troubling than (seemingly) did the courts below, particularly having regard to the strength of views expressed by this court in Ahmed.
From the victims point of view it may seem strange that a process which, as applied under domestic legislation, was found to involve an unacceptable interference with his property rights, should be capable of automatic and immediate reinstatement by the indirect route of a European regulation.
Indeed, it is unclear from the substantive judgments in Ahmed to what extent the court was made aware of the limited practical effects of its decision. (Some reference was made by Lord Hope to that regulation in his dissenting judgment following a later hearing on the issue of suspension: Ahmed v HM Treasury (No 2) [2010] UKSC 5; [2010] 2 AC 634, 692, 693, at paras 12, 15.)
However, as I have said, the majority judgments turned principally on the interpretation of a 1946 statute designed to give effect to United Nations resolutions but expressed in relatively general terms.
Particular care was needed in applying it to a novel form of UN measure, directly targeted at the rights of individuals, as under the present resolution.
The same considerations do not apply to an EU regulation designed specifically to give effect to the current UN regime, and itself subject to judicial review in the European courts.
I note also that Lord Phillips was influenced by his inability to find anything in UN practice to support a reasonable suspicion test. (It seems that the FATF guidelines were referred to in argument, under the name UN International Task Force guidelines: see for example per Lord Hope para 59.) We have the advantage of the more recent evidence, on which Mr Swift is now able to rely as to the current practice of the UN committee, supported by the Ombudsperson.
Although this later evidence was not available at the time of the decisions under review, there is no indication that it represented a material change of practice or loosening of the tests previously applied by the committee.
Had this been available to the court in Ahmed, it might well have influenced some aspects of the reasoning, even if it is unlikely materially to have affected the majoritys view of the interpretation of the 1946 Act.
In substance therefore I agree with reasoning of the Court of Appeal, supported by the more recent evidence relied on by Mr Swift.
The position of a decision maker trying to assess risk in advance is very different from that of a decision maker trying to determine whether someone has actually done something wrong.
Risk cannot simply be assessed on a balance of probabilities.
It involves a question of degree.
The Court of Appeal were right to attach weight to the notes to the FATF Special Recommendation which referred to the preventative purpose of designation, and the requirement to freeze terrorist related funds based on reasonable grounds, or a reasonable basis, to suspect or believe that they could be used to finance terrorist activity.
This is similar in substance to the language used by the Ombudsperson in her Fifth Report dated 31 January 2013, where she rejected a test based on probability, and proposed the standard whether there is sufficient information to provide a reasonable and credible basis for the listing.
She saw this as one which recognised a lower threshold appropriate to preventative measures, while setting a sufficient level of protection for the rights of individuals.
As a member of the 1267 committee, the Secretary of State was not only entitled, but would be expected, to apply the same approach as the committee as a whole.
On this ground also the appeal must fail.
Standard of review
The issues
In the Divisional Court, under the heading rationality, Toulson LJ considered Mr Ottys submission that there was insufficient evidence to support the Secretary of States finding in 2005 of a subsisting association between the appellant and any Al Qaida organisation, and nothing to show any difference from the position in 2009 when he reached the opposite conclusion.
Toulson LJ concluded that the Secretary of State was entitled to rely on the assessment by the Security Service that the appellant continued to hold extremist views and presented a continuing risk of participation in the activities of the EIJ.
It was well established that the courts should pay very high respect to ministerial security assessments on competence and constitutional grounds.
The fact that four years later the Security Service came to a different assessment did not mean that the view taken in 2005 was irrational (paras 82 84).
rationality review was inappropriate: In the Court of Appeal Laws LJ rejected Mr Ottys submission that a there is no question of precedent fact.
Nor is there any issue of proportionality: not only because we are outside the territory of the European Convention but also because the Foreign Secretary was not required to exercise a discretionary judgment where there might have been alternative outcomes fertile ground for a proportionality approach.
Here, however, once satisfied that the claimant met the criteria for designation, the Foreign Secretarys duty was to include him in the Consolidated List. (para 42)
Mr Otty challenges this reasoning on three grounds: the claim did include a challenge brought pursuant to the European i) Convention which required an assessment of proportionality; ii) in the context of the present case concerning interference with fundamental rights, common law review is not restricted to a Wednesbury rationality test; iii) the court was wrong to hold that the case involved no discretionary judgment by the Secretary of State, and therefore no basis for assessing its proportionality.
The second submission relies on cases decided in this court since the decision of the Court of Appeal (Kennedy v Information Comr [2015] AC 455, Pham v Secretary of State for the Home Department [2015] 1 WLR 1591, which are said to confirm that a simple Wednesbury test was inappropriate: see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223).
Mr Swift for the Secretary of State accepts that the court is likely to take the approach signalled in Kennedy and Pham as its starting point, and that the facts of the case make it one in which the review to be conducted will be towards the intense end of the scale, conducted in accordance with common law principles, incorporating notions of proportionality.
He does not, as I understand him, adopt Laws LJs suggestion that such an approach is inappropriate because the Secretary of State was not exercising a discretionary judgment where there might have been alternative outcomes.
He emphasises, however, that application of the doctrine of proportionality does not mean that there has been a shift to merits review (citing, inter alia, R (Daly) v Secretary of State for the Home Department, [2001] UKHL 26; [2001] 2 AC 532 paras 27 28, per Lord Steyn).
He submits that the review conducted by the Divisional Court, albeit under the heading rationality, was entirely consistent with the new approach indicated by Kennedy and Pham.
Toulson LJ [2013] QB 906 recognised the gravity of the consequence of the designation for the claimant and conducted a review of commensurate intensity.
Discussion
In Keyu v Secretary of State for Foreign and Commonwealth Affairs [2015] UKSC 69; [2015] 3 WLR 1665 (decided since the hearing in this appeal) this court had occasion to consider arguments, in the light of Kennedy and Pham, that this court should authorise a general move from the traditional judicial review tests to one of proportionality.
Lord Neuberger (with the agreement of Lord Hughes) thought that the implications could be wide ranging and profound in constitutional terms, and for that reason would require consideration by an enlarged court.
There was no dissent from that view in the other judgments.
This is a subject which continues to attract intense academic debate (see, for example, the illuminating collection of essays in The Scope and Intensity of Substantive Review: Traversing Taggarts Rainbow ed Wilberg and Elliott, 2015).
It is to be hoped that an opportunity can be found in the near future for an authoritative review in this court of the judicial and academic learning on the issue, including relevant comparative material from other common law jurisdictions.
Such a review might aim for rather more structured guidance for the lower courts than such imprecise concepts as anxious scrutiny and sliding scales.
Even in advance of such a comprehensive review of the tests to be applied to administrative decisions generally, there is a measure of support for the use of proportionality as a test in relation to interference with fundamental rights (Keyu paras 280 282 per Lord Kerr, para 304 per Lady Hale).
Lord Kerr referred to the judgment of Lord Reed in Pham (paras 113, 118 119) where he found support in the authorities for the proposition that: where Parliament authorises significant interferences with important legal rights, the courts may interpret the legislation as requiring that any such interference should be no greater than is objectively established to be necessary to achieve the legitimate aim of the interference: in substance, a requirement of proportionality. (para 119) See also my own judgment in the same case (para 60), and those of Lord Mance (paras 95 98) and Lord Sumption (paras 105 109), discussing the merits of a more flexible approach in judging executive interference with important individual rights, in that case the right to British citizenship.
On the other hand, in many cases, perhaps most, application of a proportionality test is unlikely to lead to a different result from traditional grounds of judicial review.
This is particularly true of cases involving issues of national security.
In Bank Mellat v HM Treasury (No 2) [2013] UKSC 39; [2014] AC 700 (which concerned another security council regime, relating to nuclear weapons), there was not only majority and minority agreement as to the steps involved in an assessment of proportionality (demanded in that case by the relevant statute), but also, within that context, general recognition that on issues of national security a large margin of judgment was accorded to the executive (paras 20 21 per Lord Sumption, para 98 per Lord Reed).
The difference turned on contrasting views as to the allegedly discriminatory nature of the restrictions in that case.
Similar considerations apply in the present case.
Mr Otty asks us to go further and to hold that the Divisional Court should have conducted a full merits review of the Secretary of States decision.
He finds support in the judgments of the Court of Appeal in Ahmed in which such a submission appeared to find favour with Sir Anthony Clarke MR and Wilson LJ ([2008] EWCA Civ 1187; [2010] 2 AC 534 at pp 578, 587).
I agree with the Court of Appeal (para 38) that those observations were made in the context of an Order made under a domestic statute, and were overtaken by the decision of this court that the Order was ultra vires.
In my view, they can have no application in the present context, which concerns the Secretary of States functions as a member of a UN committee.
Even accepting that his decision is judicially reviewable, it is to the member states, as members of the committee, that the Security Council has entrusted the task of determining whether the criteria for listing are fulfilled.
It would be quite inconsistent with that regime for a national court to substitute its own assessment of those matters.
On the basis that a proportionality review is appropriate, two issues arise: first, whether the application of such a test to the decisions under challenge would have made any difference; secondly, if so, whether or not, having regard in particular to the subsequent changes in the basis of the appellants designation, the court should refuse any remedy in respect of the earlier decisions.
As to the first, I agree with Mr Otty that, in the light of subsequent authority, Toulson LJ was wrong to lay emphasis on a test based on irrationality.
However, apart from the general criticism, he has failed to highlight any particular aspect of the reasoning which is open to challenge even applying a proportionality test.
Apart from a general denial of involvement in terrorism, the appellant has not addressed the specific incidents referred to in the 2005 security assessment.
Nor in my view has he provided any grounds for questioning the Secretary of States assessment of future risk, given the wide margin allowed to him on such an issue.
In any event, whatever grounds there may be for criticism of Toulson LJs reasoning, they have in my view been entirely overtaken by subsequent events.
Even if we were to find a legal flaw in the 2005 decision, that would not of itself entitle the appellant to a remedy.
Mr Otty has been unable to show how an order quashing the 2005 decision, or a declaration of illegality, would have any substantive effect on his present position.
Even in 2010 quashing the Secretary of States decision would not have detracted from the continuing effect of the committees listing, or its application in the United Kingdom through regulation 881.
So far as it concerns the Secretary of States own position, he had already decided by 2009 to support the application for de listing.
His subsequent change of mind in 2014 followed the Ombudspersons report.
There is no reason to link it to any flaws that might have been shown in his reasoning in 2005.
More generally, the court should in my view be very slow to grant a substantive remedy in the circumstances now facing the court.
Judicial review is a discretionary remedy.
The court is not required to ignore the appellants own conduct, or the extent to which he is the author of his own misfortunes.
I appreciate that the material disclosed by the Ombudspersons report became available after the Court of Appeals judgment, and indeed after the grant of permission to appeal to this court.
It is not formally in issue before us.
Further the appeal raised important issues of law which needed a decision.
I can understand therefore why it was decided to defer for the moment detailed consideration of any challenge to the latest decision.
However, the fact remains that there is before the court unchallenged evidence showing that the appellant is at least a strong vocal supporter of Al Qaida and its objectives.
That stands uneasily with his simple denial in 2010 of any involvement in terrorism.
If those allegations were misplaced, I would have expected him to want to say so publicly at the first opportunity.
I raised my concern with Mr Otty at the opening of the appeal, but I heard no convincing answer.
Even if the appellant were otherwise entitled to some relief, I would be very hesitant about granting it so long as these allegations stand unrefuted.
Conclusion
For the reasons I have given, I would dismiss this appeal.
| The appellant is an Egyptian national who has lived in the UK since 1994.
He is subject to an asset freeze imposed on persons associated with Al Qaida under Chapter VII of the United Nations Charter.
The United Nations Security Council Sanctions Committee maintains a list of persons and entities subject to the asset freeze.
All members of the committee must agree to a nomination for inclusion on the list, or to de listing.
The sanctions imposed on designated persons have a drastic impact on the individuals and entities concerned, and are of an indeterminate length.
The United Kingdom had originally placed a hold on the appellants designation by the Sanctions Committee.
On 14 September 2005 the respondent, in his capacity as a member of the Sanctions Committee, removed the United Kingdoms hold on the appellants designation.
As a consequence, the appellant became subject to the asset freeze.
The appellant challenged the respondents decision of 14 September 2005 to remove the hold the United Kingdom had placed on the appellants designation.
The appellant challenged the respondents decision on four grounds: (i) although the respondents decision was made on untainted evidence, he was aware that the information on which other members of the Sanctions Committee were proceeding was or might have been obtained by torture, and this placed the respondent under an obligation not to support a tainted committee decision; (ii) the intended and inevitable effect of the committees decision was a serious interference with the appellants right to peaceful enjoyment of his property, which could only be achieved by a clear statutory power or common law rule, neither of which existed; (iii) the standard of proof adopted by the respondent, namely reasonable grounds to suspect that the appellant met the criteria for designation, was too low; (iv) the Wednesbury standard of review, that of reasonableness or irrationality, was wrong given the gravity of the context, and the appellant was entitled to a full merits review or at least one involving a proportionality analysis.
The appellants judicial review was dismissed by the Divisional Court and the Court of Appeal.
He was subsequently granted permission to appeal to the Supreme Court.
The Supreme Court unanimously dismisses Mr Youssefs appeal.
Lord Carnwath gives the only judgment, with which Lord Neuberger, Lord Mance, Lord Wilson and Lord Sumption agree.
The court finds that the respondents 2005 decision to remove his hold on the proposal for the appellants designation by the Sanctions Committee was the exercise of prerogative powers for the conduct of foreign relations.
This does not make it immune from judicial review, but the courts should proceed with caution [24].
On the first ground, torture tainted evidence, the court finds that the respondents decision must be judged by reference to his reasons, which were untainted, and not by the reasons of the committee which were published in 2010 [27].
Whilst there is no doubt as to the importance of the rules against torture and the use of torture tainted evidence, these rules do not imply a duty on states to inquire into the possible reliance on torture tainted evidence by other states, acting alone or as part of an international organisation [29].
On the second ground, absence of power, the court finds that there is statutory authority to satisfy the principle in Entick v Carrington that interference by the state with individual property rights cannot be justified by the exercise of prerogative powers, unsupported by specific statutory authority.
The requisite statutory authority is provided by EU Regulation 881, which was given legislative effect by the European Communities Act 1971.
The causative role played by the prior decision of the Sanctions Committee and the respondent as a member of the committee does not affect this conclusion [34].
The appellants third ground, that the standard of proof of reasonable grounds for suspicion is too low, is rejected.
The court holds that the position of a decision maker trying to assess risk in advance is very different from that of a decision maker trying to determine whether someone has actually done something wrong.
Designation has a preventative purpose [50].
The Financial Action Task Force (FATF) recommendations relating to money laundering and terrorist financing refer to the objective of freezing terrorist related assets based on reasonable grounds, or a reasonable basis, to suspect or believe that the assets could be used to finance terrorist activity.
A similar test of whether there is sufficient information to provide a reasonable and credible basis for the listing was proposed by the Ombudsperson in her report to the Security Council in January 2011 and reaffirmed by her in 2013 [38 9].
The appellants reliance on the criticisms of a reasonable suspicion test by this court in Ahmed v HM Treasury (no. 2) [2010] UKSC 5 is rejected on the basis that the majority judgments in Ahmed turned principally on the interpretation of the United Nations Act 1946, and that this court has the advantage of more recent evidence as to the current practice of the UN committee court [49].
The fourth ground is the standard of review.
The respondent accepted in light of the approach in Kennedy v Charity Commission [2014] UKSC 20 and Pham v Secretary of State for the Home Department [2015] UKSC 19, that the facts of the case are such that the review to be conducted will be in accordance with common law principles, incorporating notions of proportionality, but submitted that this does not imply a shift to merits review [54].
The court finds that whilst there is support for the use of proportionality as a test in relation to interference with fundamental rights, in many cases the application of a proportionality test is unlikely to lead to a different result from traditional grounds of judicial review, particularly in cases involving national security, where a large margin of appreciation is accorded to the executive [56 7].
The court rejects the appellants submission that a full merits review was required, finding that the UN Security Council has entrusted member states, as members of the Sanction Committee, with determining whether the designation criteria are met.
It would be inconsistent with that regime for a national court to substitute its own assessment [58].
The court finds that whilst the Divisional Court was wrong to lay emphasis on an irrationality test, the applicant had failed to identify any particular aspect of the reasoning which is open to challenge even applying a proportionality test [59].
The court holds that even if there were a flaw in the respondents 2005 decision, this of itself would not entitle the appellant to a remedy.
Quashing the decision would not have any substantive effect on the appellants present position, as it would not detract from the continuing effect of the Sanction Committees listing or its application in the United Kingdom through Regulation 881 [60].
|
This is the first time the highest court (whether the House of Lords or Supreme Court) has been required to decide an appeal on section 84 of the Law of Property Act 1925.
That section confers on the Upper Tribunal a power, in specified circumstances, to discharge or modify restrictive covenants affecting land.
In this case the party entitled to the benefit of a restrictive covenant, preventing development of an area of open land, is the Alexander Devine Childrens Cancer Trust (the Trust).
The party seeking the discharge or modification of the restrictive covenant under section 84 of the 1925 Act is now Housing Solutions Ltd (Housing Solutions) which is a property company concerned with the provision of affordable housing.
Housing Solutions acquired the land encumbered by the restrictive covenant (which I shall refer to as the application land) from a property developer, Millgate Developments Ltd (Millgate).
It was Millgate which made the application to the Upper Tribunal under section 84.
Housing Solutions was named as having an interest in the application land as prospective purchaser.
The underlying dilemma posed by this case is clear.
On the one hand, there is a charitable childrens cancer trust that seeks to maintain the benefit of a restrictive covenant, to which it is entitled, so that terminally ill children in a hospice built on the Trusts land can fully enjoy, in privacy, the use of the grounds.
On the other hand, there is a company that is seeking to ensure that 13 units of affordable housing, built in breach of the restrictive covenant on the application land adjoining the Trusts land, do not go to waste.
Millgates application succeeded before the Upper Tribunal (Lands Chamber) (Martin Rodger QC and Paul Francis FRICS): [2016] UKUT 515 (LC).
The Upper Tribunal decided that the restrictive covenant should be modified to allow the occupation and use of the application land for the 13 housing units built on it provided that Millgate paid 150,000 as compensation to the Trust.
That decision was overturned by the Court of Appeal ([2018] EWCA Civ 2679; [2019] 1 WLR 2729) with the leading judgment being given by Sales LJ with whom Underhill and Moylan LJJ agreed.
The basis of the Court of Appeals decision was that the Upper Tribunal had made various errors of law; and, exercising its powers to re make the decision, the Court of Appeal refused the application.
Housing Solutions now appeals to this court against that decision.
It is our essential task to decide whether the Court of Appeal was correct that errors of law were made by the Upper Tribunal.
The facts will first be summarised before setting out section 84 of the Law of Property Act 1925 and explaining the distinction contained within it between the Upper Tribunals jurisdiction and discretion.
After looking at the proceedings below, I shall then turn to the central issue on this appeal which is the relevance of Millgates cynical breach (a term which is explained at para 36).
Finally, I shall briefly examine the two other issues raised on this appeal.
The facts
This summary of the facts draws heavily on the very clear factual background set out by Sales LJ in his judgment in the Court of Appeal for which I am most grateful.
The application land is close to Maidenhead and is located in an area designated as Green Belt in the applicable development plan.
The relevant restrictive covenants are contained in a conveyance dated 31 July 1972 made between John Lindsay Eric Smith (Mr John Smith) as vendor and Stainless Steel Profile Cutters Ltd (SSPC) as purchaser.
Mr John Smith was a local farmer who owned extensive open agricultural land.
SSPC owned some land and industrial buildings next to the application land (I shall call this the unencumbered land).
By the conveyance, the application land was sold and transferred by Mr John Smith to SSPC making, in combination with the unencumbered land already owned by SSPC, a rectangular plot of land (the Exchange House site).
The conveyance provided that SSPC covenanted for the benefit of the owners for the time being of the land then belonging to Mr John Smith (and situated within three quarters of a mile of the application land) that at all times thereafter it would observe and perform certain stipulations which included the relevant restrictive covenants.
Those restrictive covenants provide as follows: 1.
No building structure or other erection of whatsoever nature shall be built erected or placed on [the application land]. 2.
The [application land] shall not be used for any purposes whatsoever other than as an open space for the parking of motor vehicles.
The conveyance also contained an overage provision.
This provided that if, within 21 years from the date of the conveyance, planning permission was granted for the development of the application land for any purpose other than the parking of vehicles, SSPC would pay an overage payment equivalent to 75% of the uplift in the value of land.
On payment of the overage sum, those with the benefit of the restriction would execute a discharge to enable the planning permission to be implemented.
The overage provision expired in 1994.
In due course, Mr John Smiths son Bartholomew (Mr Barty Smith) inherited from his father agricultural land, including land next to the application land.
In December 2011 he proposed making a gift to the Trust of part of his land (next to the application land), for the construction of a hospice for seriously ill children with terminal cancer and their carers.
Mrs Fiona Devine is the co founder and chief executive of the Trust.
The plans for the hospice were to make full use of the land to be given by Mr Barty Smith, including recreational areas and a wheelchair path around its circuit.
Planning permission was granted for the construction of the hospice on 2 December 2011.
In March 2012 Mr Barty Smith made the gift of the land to the Trust.
However, construction of the hospice had to await the raising of adequate funds from charitable donations.
Millgate acquired the Exchange House site in the first part of 2013.
Millgate was aware of the restrictive covenants at the time it acquired the site, presumably as a result of its own investigation of title at that time.
Millgate did not adduce evidence to suggest that it made any attempt to identify those entitled to enforce the restrictive covenants.
The Upper Tribunal found that Millgates solicitors, DAC Beachcroft, could readily have identified Mr Barty Smith and the Trust as beneficiaries of the restrictive covenants if they had tried; and it drew the inference (which was not challenged) that Millgate either took no steps to find out who the beneficiaries were or knew the identity of some or all of them and chose not to raise the issue of the restrictive covenants before beginning to build in breach of them.
In July 2013 Millgate applied for planning permission to build 23 affordable housing units on the Exchange House site.
This was linked to Millgates application for planning permission to build 75 housing units on another site (the Woolley Hall site) for commercial sale.
In due course, in March 2014 the local planning authority granted planning permission for both developments, with the permission for the development of the Woolley Hall site being conditional on the provision of the affordable housing on the Exchange House site.
By a clause in a deed made pursuant to section 106 of the Town and Country Planning Act 1990, Millgate unilaterally undertook not to occupy (ie not to make available for sale) more than 15 units constructed pursuant to the planning permission for the Woolley Hall site until 23 units constructed pursuant to the planning permission for the Exchange House site had been transferred to an affordable housing provider.
The plans submitted with the application for permission for the development of the Exchange House site showed ten residential units to be provided in a block of flats on the unencumbered land plus nine two storey houses and four bungalows on the application land.
It seems that the local planning authority was not aware of the position in relation to the restrictive covenants affecting the application land although, in any event, it is unlikely that the local planning authority would have viewed it as its role to use its planning powers to ensure compliance with those covenants.
Its concern was to ensure that the requisite number of affordable housing units should be provided on the Exchange House site.
It is a very important point (as I shall later explain) that the Upper Tribunal
recorded (at para 62 of its decision) that, had Millgate chosen to lay out its development of the Exchange House site differently so as to honour the restrictive covenants, by building a larger block of flats with 23 units on the unencumbered land, with the application land (presumably) remaining as a car park for the flats, the local planning authority indicated that it would have approved such a proposal.
In July 2013 Mrs Devine had a conversation about the Exchange House site with a director of Millgate, Mr Graeme Simpson.
As appears from paras 44 45 of the Upper Tribunals decision, it was about this time that Mrs Devine became aware of Millgates application for planning permission in relation to that site, although she did not see the plans it had submitted and was unaware of the detail of Millgates proposals.
She was also unaware of the restrictive covenants.
She only learned of their existence after Millgate made its application to the Upper Tribunal to have them discharged or modified.
In the period prior to that application, Mrs Devine, for the Trust, made no adverse comment concerning Millgates application for planning permission for its development of the Exchange House site.
In granting planning permission for the application land in March 2014, the local planning authority determined that although the proposal was, in principle, inappropriate for the Green Belt, and was contrary to the development plan, special circumstances existed which justified the grant of permission.
The local planning authority considered that those special circumstances were that the development would enhance the character and amenity of the area, was on previously developed land, would improve the access to and relationship with the hospice (for which, as we have seen in para 10, planning permission had already been approved) and was sensitive to adjoining uses.
On 1 July 2014 Millgate began clearing the site preparatory for construction.
Mr Barty Smith was unaware of Millgates application for planning permission in relation to the Exchange House site.
He first became aware of physical development of the site when he flew over it in a light aeroplane on 30 August 2014.
He consulted a solicitor.
He visited the site on 15 September 2014, by which time the original light industrial buildings on the unencumbered land had been cleared and work on the new foundations across the whole site had commenced.
By letter dated 26 September 2014, Mr Barty Smith wrote to Millgate to object to the development on the application land.
He referred to the restrictive covenants and stated that Millgate seemed to be in breach of them by reason of the works it had already carried out on the application land.
His letter stated that Millgate should immediately halt any plans it had to build on the application land.
Despite this, Millgate continued with its construction works.
It appears that Millgate passed Mr Barty Smiths letter on to DAC Beachcroft for reply.
The eventual reply was by a letter sent by DAC Beachcroft to Mr Barty Smith dated 20 November 2014.
This pointed out that the restrictive covenants had to touch and concern the land of anyone claiming to be entitled to enforce them; said that Mr Barty Smith could only enforce them if they benefited land which he owned; and suggested that as he only owned open land close to the site it is not immediately obvious why the covenants benefit your land.
Mr Barty Smith took counsels advice.
With the benefit of this, he replied to DAC Beachcroft by a letter dated 11 December 2014.
He maintained that the restrictive covenants self evidently touch and concern the land neighbouring the application land and specifically asserted that they benefited both his own land (open fields retained by him in the vicinity of the application land, as identified in a map he enclosed with his letter) and the hospice land adjacent to the application land.
He claimed that it was improper for Millgate to commence building works in breach of covenant and said that any application to the Upper Tribunal to modify the restrictive covenants would be vigorously opposed.
He explained the reason why the enforcement of the restrictive covenants was particularly important in relation to the hospice: In 2012 I donated land worth 500,000 to the charity to build the hospice as a peaceful place for children with terminal cancer to end their days in calm and dignity with access to private country gardens.
Now your client seeks to build multiple units with windows and open areas facing directly into hospice land.
That is regrettable.
It seems that at this stage Millgate was still far from completing the buildings on the application land.
It was not suggested that it had yet erected the second storey of the nine houses which would directly overlook the hospice gardens.
In continued breach of the restrictive covenants, Millgate continued to build the houses and bungalows on the application land.
It was only on 10 July 2015 that the development of the 23 residential units on the Exchange House site, together with a childrens recreation area next to the bungalows, was completed.
The 13 housing units on the application land comprise the following: four bungalows, the roofs of which are visible over a timber boundary fence separating the gardens of the bungalows from the hospice land; and nine two storey houses, the gardens of which are separated from the hospice land by a timber fence.
The upper floor bedrooms of these houses directly overlook the hospice grounds.
By an agreement dated 22 May 2015, Millgate agreed to sell the development at the Exchange House site, once it was completed, to Housing Solutions.
The sale of the site was subject to a condition that there should be no reasonable risk of any court application being successful, in respect of the restrictive covenants, for an injunction to stop or restrict the development or demolish the existing development; and Millgate provided Housing Solutions with the benefit of certain insurance policies and an indemnity against any wasted expenses or losses which Housing Solutions might suffer if that condition was not fulfilled.
On 20 July 2015 Millgate issued its application to the Upper Tribunal seeking modification of the restrictive covenants pursuant to section 84.
The modification sought was to allow the nine houses and four bungalows, which Millgate had already built on the application land, to continue to stand there and to be occupied as residential properties.
Millgate gave notice of the application to Mr Barty Smith and the Trust.
They both entered objections to the application.
On 28 July 2015 Millgate conveyed to Housing Solutions the unencumbered land (with the block of ten residential flats on it).
In September 2015, the construction of the hospice began.
By an agreement dated 9 February 2016, the relevant section 106 obligation in respect of the Woolley Hall site (referred to in para 12 above and which required Millgate to provide 23 units of affordable housing on the Exchange House site as a condition for being able to release properties at the Woolley Hall site for sale) was varied to permit Millgate, in partial substitution for that original obligation, to make a payment of 1,639,904 to the Council if Millgates application to the Upper Tribunal was not successful and the application land was not transferred to Housing Solutions by 30 September 2017.
This payment was intended to enable the Council to secure an equivalent amount of replacement affordable housing (13 units) at other locations in its area.
The effect of Millgate making this payment would be that it would be able to market and sell the residential units it had built on the Woolley Hall site.
This agreement was designed to ensure that the Councils requirement for affordable housing as the quid pro quo for planning permission for development of the Woolley Hall site would be satisfied whether the restrictive covenants remained in place and were enforced or not.
The Upper Tribunal found that the Exchange House Site as a whole gave the appearance of having been well designed and built.
The houses and bungalows, which the Upper Tribunal inspected, were described as simple and functional but neither shoddy nor utilitarian.
The Upper Tribunal regarded the development as one which would be likely, in time, to mellow into a modest and not unattractive environment providing decent accommodation suitable for people in different stages of life living in what might become a neighbourly community.
The Upper Tribunal found that despite the proximity of the houses to the boundary of the hospice, and their visibility from the hospice, it was unlikely that they would make much visual impression on the children, or on staff or visitors, while within the hospice building itself.
However, the visual impact of the buildings would be much more apparent from the grounds of the hospice land.
On 18 November 2016 the Upper Tribunal gave its decision on Millgates application to modify the restrictive covenants.
The Upper Tribunal held that the restrictive covenants should be modified pursuant to section 84 so as to permit the occupation and use of the application land for the houses and bungalows which had been constructed on it.
As a condition of this ruling, Millgate was ordered to pay 150,000 as compensation to the Trust, that being the Upper Tribunals assessment of the cost of remedial planting and landscaping works to screen the hospice grounds plus an element of compensation for loss of amenity.
On 15 February 2017, the day before the last day on which the Trust could serve an in time notice of appeal according to the Civil Procedure Rules, when no application had been received for permission to appeal, the view was taken that the condition in the sale agreement between Millgate and Housing Solutions (referred to in para 22 above) had been satisfied and Millgate immediately that day transferred the 13 housing units on the application land to Housing Solutions.
No effort was made to check with the Trust whether it intended to apply for permission to appeal.
On the following day, 16 February, Millgate received notice of the Trusts application for permission to appeal and for a short extension of time in which to do so.
Floyd LJ granted permission to appeal and an extension of time.
Housing Solutions is therefore now the owner of the 13 housing units on the application land.
This means that, in the event, Millgate did not have to pay the Council the sum stipulated in the agreement of 9 February 2016, referred to in para 24 above.
As against Millgate, Housing Solutions continues to have the benefit of the indemnity provision in the sale agreement, should the decision of the Upper Tribunal be reversed and the restrictive covenants enforced.
The 13 housing units are now occupied by tenants.
On 28 November 2018, the Court of Appeal (as has been mentioned in para 4 above) overturned the Upper Tribunal and re made the decision by refusing the application.
Housing Solutions appeals against that decision.
As at the time of the hearing before the Supreme Court, the Trust had not made any application for an injunction to demolish the nine houses and four bungalows built on the application land or for damages for breach in lieu of an injunction.
Following the Court of Appeals decision, the Trusts solicitors, Russell Cooke, wrote to the solicitors for Housing Solutions, DAC Beachcroft, by letter dated 19 December 2018, indicating an intention to issue injunction proceedings.
By a letter dated 20 December 2018 the solicitors for Housing Solutions responded that, since these proceedings were ongoing, it would be inappropriate for the Trust to apply for injunctive relief and that, should the Trust choose to do so, Housing Solutions would apply for a stay pending the outcome of this appeal.
Section 84 of the Law of Property Act 1925, jurisdiction and discretion 3.
So far as relevant to this case, section 84 of the Law of Property Act 1925 (as amended by section 28(1) (3) of the Law of Property Act 1969 and paragraph 5(a) of Schedule 1 to the Transfer of Tribunal Functions (Lands Tribunal and Miscellaneous Amendments) Order 2009) reads as follows: 84.
Power to discharge or modify restrictive covenants affecting land (1) The Upper Tribunal shall have power from time to time, on the application of any person interested in any freehold land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon, by order wholly or partially to discharge or modify any such restriction on being satisfied that by reason of changes in the character of the (a) property or the neighbourhood or other circumstances of the case which the Upper Tribunal may deem material, the restriction ought to be deemed obsolete; or (aa) that in a case falling within subsection (1A) below the continued existence thereof would impede some reasonable user of the land for public or private purposes or, as the case may be, would unless modified so impede such user; or (b) that the persons of full age and capacity for the time being or from time to time entitled to the benefit of the restriction have agreed, either expressly or by implication, by their acts or omissions, to the same being discharged or modified; or (c) that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction: and an order discharging or modifying a restriction under this subsection may direct the applicant to pay to any person entitled to the benefit of the restriction such sum by way of consideration as the Tribunal may think it just to award under one, but not both, of the following heads, that is to say, either (i) a sum to make up for any loss or disadvantage suffered by that person in consequence of the discharge or modification; or (ii) a sum to make up for any effect which the restriction had, at the time when it was imposed, in reducing the consideration then received for the land affected by it. (1A) Subsection (1)(aa) above authorises the discharge or modification of a restriction by reference to its impeding some reasonable user of land in any case in which the Upper Tribunal is satisfied that the restriction, in impeding that user, either (a) does not secure to persons entitled to the benefit of it any practical benefits of substantial value or advantage to them; or (b) is contrary to the public interest; and that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the discharge or modification. (1B) In determining whether a case is one falling within subsection (1A) above, and in determining whether (in any such case or otherwise) a restriction ought to be discharged or modified, the Upper Tribunal shall take into account the development plan and any declared or ascertainable pattern for the grant or refusal of planning permissions in the relevant areas, as well as the period at which and context in which the restriction was created or imposed and any other material circumstances. (9) Where any proceedings by action or otherwise are taken to enforce a restrictive covenant, any person against whom the proceedings are taken, may in such proceedings apply to the court for an order giving leave to apply to the [Upper Tribunal] under this section, and staying the proceedings in the meantime.
The original version of section 84 of the Law of Property Act 1925 laid down four grounds under which the relevant Authority (now the Upper Tribunal) was given the power to discharge or modify restrictive covenants.
These were, in short, where the restrictive covenant was obsolete; where the restriction was impeding the reasonable user of the land without securing practical benefits; where the persons entitled had agreed to the discharge or modification; and where the discharge or modification would be non injurious.
These correspond (with some modification to the second ground) to what are now, respectively, section 84(1)(a); section 84(1)(aa), (1A)(a); section 84(1)(b); and section 84(1)(c).
However, following a Report of the Law Commission on Transfer of Land: Restrictive Covenants (1967) (Law Com No 11), pp 21 23, a significant extension was made by adding a fifth ground (what is now section 84(1)(aa), (1A)(b)) so that discharge or modification may be ordered where the restriction is impeding the reasonable user of land and that impeding of reasonable user is contrary to the public interest (and provided money will be adequate compensation for any loss suffered by the person entitled to the benefit of the restrictive covenant).
It is with that contrary to the public interest ground that this appeal is concerned.
It is well established (see, for example, Driscoll v Church Comrs for England [1957] 1 QB 330) that, if satisfied that one of the prescribed grounds has been made out, the Upper Tribunal has a discretion whether or not to make an order for modification or discharge of the restrictive covenant.
The important statutory words to this effect are in section 84(1): the Upper Tribunal shall have power.
The five grounds are therefore concerned with establishing the Upper Tribunals jurisdiction and can be helpfully labelled the jurisdictional grounds: at least one of those jurisdictional grounds must be established by the applicant before the Upper Tribunal can go on to make what is ultimately a discretionary decision.
The proceedings below and the appeal to this court
The Upper Tribunal held that the contrary to public interest jurisdictional ground (section 84(1)(aa), 84(1A)(b)) was made out by Millgate.
The reasoning was as follows: (i) It was common ground that the proposed use of the application land to provide 13 units of affordable housing was a reasonable user of the land. (ii) Impeding that reasonable user was contrary to the public interest because it is not in the public interest for these houses to remain empty and the covenants are the only obstacle to them being used (para 106 of the decision).
That public interest was so important and immediate that, even assuming that the cautious approach to the public interest ground put forward in In re Collins Application (1975) 30 P & CR 527, 531, remains good law, the public interest here justified the serious interference with private rights and with the sanctity of contract (para 107). (iii) Although the provision of significant additional boundary planting would not insulate the hospice land from all the adverse consequences of the use of the application land for housing, an award of money to allow for such additional planting was capable of providing adequate compensation to the Trust (para 110).
Turning to the exercise of its discretion, the Upper Tribunal looked at the conduct of Millgate.
In an earlier passage, referring to Mr Barty Smiths view, it described Millgates behaviour as highhanded and opportunistic (para 105).
It contrasted the conduct of applicants in past cases (such as In re SJC Construction Co Ltds Application (1974) 28 P & CR 200 (LT), affd (1975) 29 P & CR 322; Winter v Traditional & Contemporary Contracts Ltd [2007] EWCA Civ 1008; [2008] 1 EGLR 80; and In re Trustees of the Green Masjid and Madrasahs Application [2013] UKUT 355 (LC)).
It was not prepared to accept that Millgate had acted in good faith and without any intention to force the hand of the beneficiary of the covenant (para 117).
Nevertheless, the Upper Tribunal considered that it should exercise its discretion to grant Millgates application because the public interest outweighed that high handed and opportunistic conduct (and all other factors) in this case.
In the words of the Upper Tribunal, at para 120: [O]ur decision will have an effect not only on the parties but also on 13 families or individuals who are waiting to be housed in these properties if, and as soon as, the restrictions are modified.
We consider that the public interest outweighs all other factors in this case.
It would indeed be an unconscionable waste of resources for those houses to continue to remain empty.
I interject here that the description of Millgates behaviour as highhanded and opportunistic is what some commentators, especially in the context of breach of contract, have described as cynical: see, for example, Peter Birks, Restitutionary Damages for Breach of Contract: Snepp and the Fusion of Law and Equity [1989] LMCLQ 421.
In line with this, I shall use the phrase cynical breach as a useful shorthand description of the conduct of Millgate in deliberately committing a breach of the restrictive covenant with a view to making profit from so doing.
The Trust appealed against the Upper Tribunals granting of the section 84 application.
It put forward four grounds of appeal ie four grounds on which it alleged that the Upper Tribunal had erred in law.
Those four grounds of appeal were as follows (see Sales LJs judgment at para 41): applying Lawrence v Fen Tigers Ltd [2014] UKSC 13; [2014] AC 822 by analogy (ground one); at the jurisdictional stage, ignoring Millgates cynical breach while regarding as highly relevant the fact that, by the time of the application, 13 housing units had been built (ground two); ignoring (including in the exercise of the Upper Tribunals discretion) Millgates ability to satisfy its planning obligation by making alternative provision of equivalent affordable housing elsewhere (ground three); failing properly to take account of Millgates cynical breach in the exercise of the Upper Tribunals discretion (ground four).
The first two grounds of appeal and part of the third ground went to the jurisdiction of the Upper Tribunal (under the contrary to public interest jurisdictional ground), whereas part of the third ground of appeal and the whole of the fourth ground went to the discretion of the Upper Tribunal.
The Court of Appeal overturned the decision of the Upper Tribunal on all four grounds of appeal and re made the decision by refusing the application.
I shall explain in due course the Court of Appeals reasoning in doing so.
In the appeal by Housing Solutions to this court, counsel for Housing Solutions, Martin Hutchings QC, submits that the Court of Appeal was wrong as a matter of law on all those four grounds of appeal and that the Upper Tribunals decision should be restored.
In contrast, Stephen Jourdan QC for the Trust, the respondent, submits that the Court of Appeal was correct, for the reasons it gave, to have overturned the decision of the Upper Tribunal and to have re made the decision by refusing the application.
It follows that, on this appeal, it is convenient to continue to refer to the four grounds of appeal with the questions being whether the Court of Appeal was correct in holding that the Upper Tribunal had erred in law on each of those four grounds.
The focus of most of the submissions of counsel reflecting this as being the central issue in the case was on the relevance of Millgates cynical breach (using that shorthand description of Millgates conduct as explained in para 36 above).
In other words, I am primarily concerned with grounds two and four of the grounds of appeal.
I shall therefore deal with that central issue first before going on to look more briefly at grounds one and three of the grounds of appeal. 5.
The central issue: the relevance of Millgates cynical breach (1) Did the Upper Tribunal, at the jurisdictional stage, make an error of law by ignoring Millgates cynical breach while regarding as highly relevant the fact that, by the time of the application, 13 housing units had been built?
The essential elements of section 84 in relation to the contrary to public interest jurisdictional ground are sections 84(1)(aa) and (1A)(b).
These have been set out in para 31 above.
Reduced to their core, they read as follows: (1) [The Upper Tribunal shall have the power to discharge or modify a restrictive covenant on being satisfied] (aa) that in a case falling within subsection (1A) below the continued existence [of the restriction under the covenant] would impede some reasonable user of the land ; (1A) Subsection (1)(aa) above authorises the discharge or modification of a restriction by reference to its impeding some reasonable user of land in any case in which the Upper Tribunal is satisfied that the restriction, in impeding that user (b) is contrary to the public interest; and that money will be an adequate compensation for the loss or disadvantage (if any) which any person will suffer from the discharge or modification.
Mr Hutchings submitted that the statute requires a narrow interpretation of what is meant by contrary to the public interest.
I agree.
It is clear from the statutory words that one must ask whether the impeding of the reasonable user of the land by the continuation of the restrictive covenant is contrary to the public interest.
If one is satisfied that the proposed use of the land is reasonable (and it was common ground that that was satisfied in this case) one must ask whether the impediment of that use by the continuation of the restrictive covenant is contrary to the public interest.
It is of central importance that the question that has to be asked is not the wider one of whether in all the circumstances of the case it would be contrary to the public interest to maintain the restrictive covenant.
Rather the wording requires one to focus more narrowly on the impeding of the reasonable user of the land and to ask whether that impediment, by continuation of the restrictive covenant, is contrary to the public interest.
On the facts of this case, therefore, that narrow wording required the Upper Tribunal to determine whether it was contrary to the public interest for the 13 housing units not to be able to be used.
The waste involved would be a very strong factor indicating that that would indeed be contrary to the public interest.
To be weighed against that would be the public interest in the hospice providing a sanctuary for children dying of cancer which would be protected by the continuation of the restrictive covenant.
Two competing uses of the land are therefore pitted against each other.
It is the resolution of a land use conflict that we are here dealing with.
That was the approach taken by the Upper Tribunal and there was no error of law in its deciding that the contrary to public interest jurisdictional ground was made out on these facts.
Once one appreciates that the relevant wording requires a narrow enquiry and does not involve asking the wide question of whether in all the circumstances it is contrary to the public interest to maintain the restrictive covenant, it is clear that the good or bad conduct of the applicant is irrelevant at this jurisdictional stage.
The manner of the breach of the restrictive covenant (ie whether the breach was cynical or not) is irrelevant because that tells us nothing about the merits of what the burdened land is being used for or will be used for.
This, of course, is not to deny that the manner of breach the cynical breach by the applicant is a highly relevant consideration when it comes to the discretionary stage of the decision.
But it is irrelevant at the jurisdictional stage.
There are three further points supporting that interpretation of the contrary to the public interest jurisdictional ground: (i) There is plainly no room for a consideration of the manner of breach the applicants cynical breach under any of the other four jurisdictional grounds.
Yet at least in relation to the first limb of section 84(1)(aa) the jurisdictional ground concerned with where the restriction was impeding the reasonable user of the land without securing substantial practical benefits it must be relevant to the ultimate decision to take into account at the discretionary stage the applicants cynical breach.
There is no other stage at which to consider it.
And that is borne out by, for example, In re Trustees of the Green Masjid and Madrasahs Application where the applicants conduct was considered at the discretionary stage in a case in which jurisdiction arose under the first limb of section 84(1)(aa).
It undermines the coherence of section 84 if the same conduct is taken into account at the jurisdictional stage in relation to one jurisdictional ground and at the discretionary stage in relation to other jurisdictional grounds. (ii) Linked to that first point is that the purpose of section 84, reflected in its structure, is that the five jurisdictional grounds (with the possible exception of the consent jurisdictional ground in section 84(1)(b)) are concerned to identify restrictive covenants that unreasonably fetter a preferable use of the land.
The manner of the defendants breach is irrelevant to that.
As the Law Commission in its Report on Transfer of Land: Restrictive Covenants (1967) (Law Com No 11) at p 23 said of its proposal to introduce the contrary to public interest ground: This [proposal] is designed to contain a restatement of the powers of the Lands Tribunal [the predecessor of the Upper Tribunal] in such terms as to enable it to take a broader view of whether the use of land is being unreasonably impeded Kevin Gray and Susan Gray, Elements of Land Law, 5th ed (2009), helpfully set out, at p 292, at the start of their examination of section 84, what may be regarded as the high level aim of the section: Like all property in land, the benefit of a restrictive covenant cannot be regarded as absolute and inviolable for all time [citing Sir Thomas Bingham MR in Jaggard v Sawyer [1995] 1 WLR 269, 283].
Restrictive covenants place a long term fetter upon the affected land, but in some cases it is clearly undesirable that the inhibition upon land use should continue indefinitely.
There may arise changes of circumstance where it becomes preferable, in the interests of general social utility, that the constraints imposed by a particular covenant should be abrogated or modified.
Narrowly conceived private interests cannot be allowed to frustrate proposed developments which promise a distinct benefit to the entire community or to some significant section of it. (footnotes omitted) See also Law Commission Report on Making Land Work: Easements, Covenants and Profits Prendre (2011) (Law Com No 327), paras 7.3 7.4. (iii) As the conduct of an applicant can embrace a wide spectrum of blameworthy behaviour (from negligence through to outrageous dishonesty), it is ideally suited to being considered at the discretionary rather than the jurisdictional stage.
It should also be noted that section 84(1B) is consistent with the interpretation
advocated by Mr Hutchings and with which I agree.
That subsection reads as follows: (1B) In determining whether a case is one falling within subsection (1A) above, and in determining whether (in any such case or otherwise) a restriction ought to be discharged or modified, the Upper Tribunal shall take into account the development plan and any declared or ascertainable pattern for the grant or refusal of planning permissions in the relevant areas, as well as the period at which and context in which the restriction was created or imposed and any other material circumstances.
The main body of this emphasises, as one would expect for the resolution of a land use conflict, that the development plan and patterns of planning permission in the area are relevant considerations.
The last phrase any other material circumstances means that the circumstance must be material to the question one is asking; and I have clarified in para 42 above that the question one should be asking in relation to the contrary to public interest jurisdictional ground is whether the impeding of the reasonable user of the land by the continuation of the restrictive covenant is contrary to the public interest.
What the phrase does not mean is that one should be taking into account all circumstances that may be said to be relevant to deciding the incorrect and wider question of whether it would be contrary to the public interest to maintain the restrictive covenant.
It follows that, with great respect, I cannot agree with the approach taken by the Court of Appeal which regarded the manner of breach/cynical breach as being of importance at the jurisdictional stage under the contrary to the public interest ground.
Of course, the Court of Appeal was correct that these considerations are important to the overall decision and must be taken into account at the discretionary stage.
But, on the correct interpretation of the Act, they are relevant at the discretionary stage only and not at the jurisdictional stage.
As I am respectfully disagreeing with his reasoning (and with Mr Jourdans submissions on this point), it is appropriate to set out Sales LJs full discussion of this matter which extended over several paragraphs: 56.
There is a public interest in having private contractual and property rights respected in dealings between private persons.
Further, if private contractual/property rights under a restrictive covenant are to be overridden in the public interest, the Upper Tribunal should be astute to see that the public interest reasons for discharge or modification of the covenant are clearly made out. 57.
In my judgment, this means that at the stage of application of the contrary to the public interest test in section 84(1A)(b) the Upper Tribunal should have regard to whether the applicant has made fair use of opportunities available to it to try to negotiate a waiver of a restrictive covenant or, if necessary, to test the public interest arguments in an application made under section 84 in advance of acting in breach of that covenant.
In general, if the applicant has not made fair use of opportunities available to it to test the position in a way which affords proper recognition to the contractual/property rights of the beneficiary of the restrictive covenant, it will not be contrary to the public interest for the restriction (ie the restrictive covenant) to be allowed to continue to impede the applicants proposed user of the restricted land.
The contrary to the public interest test has an important dimension which is concerned with such procedural matters and the process followed by the applicant before making its application under section 84. 58.
I note in that regard that the then President of the Lands Tribunal, Douglas Frank QC, also took the view (rightly, in my opinion) that the way in which the applicant had behaved in bringing about a state of affairs in which building had taken place on the restricted land was relevant to the question whether the test in section 84(1A)(b) was satisfied, in In re SJC Construction Co Ltds Application (1974) 28 P & CR 200, 205.
The case went on appeal on a different point: SJC Construction Co Ltd v Sutton London Borough Council (1975) 29 P & CR 322.
On the appeal, the Lands Tribunal judgment on the other aspects of section 84, including section 84(1)(b), was noted by Lord Denning MR at pp 324 325 without him suggesting any doubt about the tribunals reasoning in respect of them. 59.
As I have said, enforcement of contractual and property rights is generally in the public interest, so it is relevant when assessing under section 84(1A)(b) whether the restriction, in impeding [some reasonable user of land], is contrary to the public interest to see whether an applicant has behaved appropriately in seeking to respect and give due weight to such rights in the course of its dealings with the holder of such rights, so that the question of the public interest has been tested in an appropriate way.
If the property developer has bargained for a waiver of the restrictive covenant and it is found that there is a price acceptable to both parties, it could not be said (at any rate, in ordinary circumstances) to be contrary to the public interest that the covenant should be maintained in place unless and until that price is paid.
Similarly, if an application under section 84 is made in advance of any conduct by the developer in breach of the covenant, that will allow the public interest to be tested in the context of due weight being given to upholding the public interest as regards respect for property and contract rights, rather than in a context where the developer has unilaterally and unlawfully violated those rights. 61.
In my view, in the circumstances of this case, in which Millgate had deliberately circumvented the proper procedures for testing and respecting the Trusts rights under the restrictive covenants, the Upper Tribunal could not properly be satisfied that it was contrary to the public interest for the restrictive covenants to be maintained in place.
Millgate has acted in an unlawful and precipitate manner by building in breach of the restrictive covenants.
It has acted with its eyes open and completely at its own risk.
As a result it is appropriate and in conformity with the public interest that it should bear the risk that it may have wasted its own resources in building the 13 housing units on the application land. 64. in general terms it is in the public interest that contracts should be honoured and not breached and that property rights should be upheld and protected.
A property developer which knows of a restrictive covenant which impedes its development of land has a fair opportunity before building either to negotiate a release of the covenant or to make an application under section 84 to see if it can be modified or discharged.
That is how the developer ought to proceed.
It is contrary to the public interest in ensuring that proper respect is given to contractual or property rights for a property developer to proceed without any good excuse to build in violation of such rights, as contained in an enforceable restrictive covenant, in an attempt to improve its position on a subsequent application under section 84.
Put another way, it is contrary to the public interest for the usual protections for a person with the benefit of a restrictive covenant to be circumvented by a developer seeking to obtain an advantage for itself by presenting the tribunal with a fait accompli in terms of having constructed buildings on the affected land without following the proper procedure, and then in effect daring the tribunal to make a ruling which might have the result that those buildings have to be taken down.
If the presence on the affected land of a building constructed in breach of the relevant covenant is to be regarded as capable of being relevant to the public interest question under subsection (1A)(b) as in principle it is I consider that the issue of how that situation arose is also highly relevant to that question. 65.
It should be noted that the discussion in relation to these grounds is directed to the issue whether the condition in section 84(1A)(b) has been satisfied, which is a precondition for the Upper Tribunal to have any discretionary power under section 84(1) to discharge or modify a restrictive covenant.
That is different in important respects from the distinct issue of how such a discretionary power should be exercised, once it is found to have arisen.
In this case, the Upper Tribunal wrongly postponed consideration of the conduct of Millgate to the discretionary stage (paras 113 121), and at para 117 treated the decision of the Lands Tribunal (Douglas Frank QC, President) in In re SJC Construction Co Ltds Application (1974) 28 P & CR 200 as relevant to that stage, even though in the relevant passage (at p 205) referred to by the Upper Tribunal the President in fact referred to the conduct of the applicant in the context of addressing the question whether the precondition in section 84(1A)(b) had been satisfied. 66.
In my view, it is appropriate to bring into account the rights based and procedural dimension of the public interest in the interpretation of section 84(1A)(b), as in the SJC Construction Co case, in order to secure fuller protection and due respect for the contractual rights with property characteristics which are sought to be overridden on an application under section 84.
I do not consider that Parliament intended that section 84 should operate so as to allow those rights to be deliberately ignored by an applicant, with it then being left as a purely discretionary matter for the Upper Tribunal to decide whether to override them.
I shall not repeat the reasons set out above why I regard that approach as incorrect.
But I would like to make two final points on this issue triggered by Sales LJs discussion.
The first is that, as Mr Hutchings submitted, one can detect in various passages in Sales LJs judgment (for example, in paras 59 and 61) a diversion into the wider and incorrect question of whether maintaining the restrictive covenant is contrary to the public interest.
Secondly, I do not regard it as entirely clear that Douglas Frank QC in In re SJC Construction Co Ltds Application took the applicants conduct into account at the jurisdictional stage.
The difficulty is that that decision made no reference to the two distinct stages of jurisdiction and discretion and, as Mr Hutchings submitted, one can read the relevant passage about the applicants behaviour as in effect a point in parenthesis that cuts across the five matters that Douglas Frank QC said he was taking into account.
In any event, the applicants conduct in question in that case was acting in good faith in the sense that they did not intend to force the Councils hand (at p 205) whereas, as we have seen at para 35 above, in the instant case, the Upper Tribunal was not prepared to accept that Millgate had acted in good faith and without any intention to force the hand of the beneficiary of the covenant (para 117).
It follows from my reasoning above that, contrary to the decision of the Court of Appeal on the second ground of appeal, the Upper Tribunal did not make an error of law at the jurisdictional stage by ignoring Millgates cynical breach while regarding as highly relevant the fact that, by the time of the application, 13 housing units had been built. (2) Did the Upper Tribunal make an error of law by failing properly to take account of Millgates cynical conduct in the exercise of its discretion?
It should be stressed at the outset that the issue here is whether the Upper Tribunal made an error of law in the exercise of its discretion.
In this case, it would only be appropriate for an appellate court (including this court) to interfere, at the discretionary stage, with the decision of the specialist tribunal charged by Parliament with exercising the discretionary power to decide matters under section 84, if that tribunal has made an error of law.
While I may not have reached the same decision when balancing the considerations taken into account by the Upper Tribunal, it is clear that that is not a sufficient reason for this court to intervene with the discretionary decision of the Upper Tribunal.
I am acutely conscious of the need to tread very carefully so as to avoid simply substituting my view of how the considerations should be weighed for that of the specialist tribunal.
I also accept that the Upper Tribunal in the Trustees of the Green Masjid case was correct to say, at para 129, that once a jurisdictional ground has been established, the discretion to refuse the application should be cautiously exercised.
Nevertheless, I agree with the decision of the Court of Appeal that, in relation to the cynical conduct of Millgate, there was indeed an error of law made by the Upper Tribunal in the exercise of its discretion.
However, I have some reservations about how the Court of Appeal chose to explain that error of law.
Sales LJ said the following: 77.
On the assumption that the relevant discretion under section 84(1) had arisen, I consider that the Upper Tribunal fell into error I reach the view I have notwithstanding the discretionary nature of the exercise which the Upper Tribunal had to conduct at this stage in the analysis and even though the Upper Tribunal correctly referred in this part of its decision to relevant authority and reminded itself at paras 114 115 of factors which pointed against the exercise of discretion in favour of Millgate.
In my view, the Upper Tribunal still arrived at a conclusion which was wrong within the meaning of CPR rule 52.21(3)(a) (ex rule 52.11(3)(a)), in that it failed to attach sufficient weight to the deliberately unlawful and opportunistic conduct of Millgate in the circumstances of this case, which was directed to subverting the proper application of section 84 without good reason. 82.
Millgate acted in a high handed manner by proceeding to breach the restrictive covenants without any justification or excuse.
Millgate had attempted to steal a march on the Trust and had sought to evade the jurisdiction of the Upper Tribunal at the appropriate stage, by failing to make its section 84 application before building.
In my judgment, the appropriate course for the Upper Tribunal in the present case, having regard to the need for due protection of the Trusts rights and to the general public interest in having the section 84 procedure invoked at the proper time and in the proper manner, was to exercise its discretion to refuse Millgates application.
It is highly desirable that there should be consistency and predictability as regards the exercise of discretion under section 84(1), and I consider that those values are best promoted by the exercise of discretion against acceding to Millgates application in the present case. 84. the application should have been refused in the exercise of discretion by the Upper Tribunal because Millgate had acted without proper regard to the rights of the Trust and with a view to circumventing the proper consideration of the public interest under section 84.
Clearly, such an exercise of discretion is called for in part to deter others; and from a certain perspective it might be thought to have a punitive character; but the true reason for the exercise of discretion in this way in the present case is wider than that.
It would be inappropriate for an appellate court to interfere with a
discretionary decision of a specialist tribunal just because it considers that the tribunal failed to attach sufficient weight (see Sales LJ at para 77) to a particular factor.
Sales LJ would, of course, be well aware of that.
My interpretation of what he was saying, therefore, was that the Upper Tribunals approach was contrary to principle.
And the relevant principle in play here was, as I understand it, that an applicant who has committed a cynical breach of the type committed on these facts should have its application refused.
In other words, as a matter of principle, a cynical breach such as that committed in this case outweighs what would otherwise be the public interest in discharging or modifying the restrictive covenant.
I am sorely tempted to agree that there is such a principle.
However, I have major concerns as to whether, without discretionary qualifications to cater for exceptions, such a principle would be too rigid and would inappropriately fetter the Upper Tribunals discretion.
And once one lets in discretionary qualifications to temper such a principle, it is hard to see how the Upper Tribunal in this case could be said to have made an error of law.
In deciding that the public interest in allowing the houses to be used outweighed all other considerations, including Millgates cynical conduct, the Upper Tribunal can be said to have been applying such qualifications to any such principle within the legitimate exercise of its discretion.
Certainly it is plain that the Upper Tribunal took into account the cynical nature of the breach by Millgate.
This is made clear at paras 116 118 of the judgment which included a careful consideration of whether, for example, the egregious nature of the breach of covenant should lead to a denial of the application so as to punish the wrongdoer.
The cynical conduct in this case was compared and contrasted with other cases where, for example, the applicant had acted in good faith without knowledge of the covenant or had already partly completed the buildings before objections were raised.
What the Upper Tribunal said at para 118 is particularly important in this context: Ms Windsor emphasised that, unlike the applicants in Green Masjid, Millgate had acted with professional advice and suggested that its behaviour was so egregious and unconscionable that relief should be refused.
We have taken into account all of the matters of conduct which she relied on in reaching our conclusion.
We were supplied with Ms Windsors expanded closing submissions (for the objectors) at the Upper Tribunal hearing.
Those submissions replaced previous skeleton arguments.
Under the heading of Conduct, they set out over ten paragraphs (paras 41 50) Ms Windsors submissions regarding Millgates conduct.
The details of the alleged egregious and unconscionable conduct are particularised at paragraph 46(a) (k).
Nevertheless, like the Court of Appeal, I am satisfied that, even though it took into account Millgates cynical conduct, something has gone fundamentally wrong with the Upper Tribunals exercise of discretion on the particular facts of this case such that one can say that there has been an error of law.
In my view, the correct way of pinpointing this is to recognise that the Upper Tribunal failed to take into account in the exercise of its discretion two particular factors, concerned with the effect of Millgates conduct, that should have been taken into account.
I shall refer to these factors as the two omitted factors.
Taken separately, and certainly taken together, they make the facts of this case exceptional.
Neither was referred to by Ms Windsor in her closing submissions and neither was mentioned in the judgment of the Upper Tribunal.
Both relate to the important recognition by the Upper Tribunal (see para 14 above) that, had Millgate initially applied for planning permission to build all the required affordable housing on the unencumbered land, the local planning authority indicated that permission would have been granted.
The first omitted factor is that, had the developer respected the rights of the Trust by applying for planning permission on the unencumbered land, there would then have been no need to apply to discharge the covenant under section 84 and the hospice would have been left unaffected.
Millgate was not just a cynical wrongdoer which had gone ahead with the development in deliberate breach of the covenants and in the face of objections raised.
Rather, in addition, and crucially, Millgate, by its cynical breach, put paid to what, on the face of it, would have been a satisfactory outcome for Millgate and, at the same time, would have respected the rights of the Trust (because building on the unencumbered land would not have involved any breach of the restrictive covenant).
It is important to deter a cynical breach under section 84 but it is especially important to do so where that cynical conduct has produced a land use conflict that would reasonably have been avoided altogether by submitting an alternative plan.
The second omitted factor is that, had Millgate respected the rights of the Trust by applying under section 84 before starting to build on the application site, it is likely that the developer would not have been able to satisfy the contrary to public interest jurisdictional ground under section 84.
This is because Millgate would have been met with the objection that planning permission would be granted for affordable housing on the unencumbered land so that the upholding of the restriction would not be contrary to the public interest.
It follows that the effect of Millgates cynical breach of covenant was to alter fundamentally the position in relation to the public interest.
As Mr Jourdan expressed it, in a submission with which I agree, It is not in the public interest that a person who deliberately breaches a restrictive covenant should be able to secure the modification of the covenant in reliance on the state of affairs created by their own deliberate breach.
By going ahead without first applying under section 84, Millgate put itself in the position of being able to present to the Upper Tribunal a fait accompli where the provision of affordable housing meant that it could (and did) satisfy the contrary to public interest jurisdictional ground.
It is important to deter a cynical breach under section 84 but it is especially important to do so where, because the Upper Tribunal will look at the public interest position as at the date of the hearing, that cynical conduct will directly reward the wrongdoer by transforming its prospects of success under the contrary to public interest jurisdictional ground.
The Upper Tribunal touched on the second of these factors in discussing the contrary to public interest jurisdictional ground: 106.
It is no answer to the current wasteful state of affairs to say, as Ms Windsor did, that Millgate could have built their allocation of affordable housing on other land, or that it could now buy its way out of the problem by making a payment towards the provision of social housing elsewhere.
Whether those would have been sufficient answers to Millgates case on public interest if we had been dealing with an application before any housing had been built on the site is not a question which arises.
The question for the Tribunal is whether in impeding the occupation of the houses which now stand on the application land, and which are otherwise immediately available to meet a pressing social need, the covenants operate in a way which is contrary to the public interest.
We are satisfied that they clearly do because it is not in the public interest for these houses to remain empty and the covenants are the only obstacle to them being used.
This makes clear that at the jurisdictional stage the UT was, correctly, looking at matters as they then stood at the date of the hearing and not as they stood prior to the breach of covenant.
But at the discretionary stage the importance of that change having been brought about by the developers cynical breach should have come back into the reasoning and should have been highly relevant.
But that step in the reasoning taking into account, in the exercise of its discretion, the second of the two omitted factors was simply never taken by the Upper Tribunal.
It might perhaps be counter argued that the second of those two omitted factors was obliquely referred to by the Upper Tribunal at the discretionary stage at para 115: If it was thought to be easier to secure a modification in favour of a completed development than for one which had not yet commenced the contract breaker would have a real incentive to press on even in face of strong objections by the beneficiaries of a covenant.
Any developer who thinks in that way should think again or risk [a] rude awakening However, even if the second factor was here being referred to, it clearly cannot have been taken into account in reaching the decision because the decision directly contradicted the reasoning in that paragraph.
The decision of the Upper Tribunal precisely would encourage developers to ignore covenants and to press on with a development even in the face of strong objections.
If the Upper Tribunal had been taking that factor into account, an explanation for that contradiction would have been required.
Mr Jourdan submitted that the Upper Tribunal was paying lip service to the warning it was giving in para 115.
I agree.
In truth, the Upper Tribunal ignored that factor in reaching its decision.
As I have stressed in para 57, what makes this an exceptional case on the facts is the presence of the two omitted factors.
The Upper Tribunals failure to take either into account in the exercise of its discretion constituted an error of law.
Although my precise reasoning is different, I therefore agree with the Court of Appeal that (in relation to the fourth ground of appeal) the Upper Tribunal made an error of law by failing properly to take account of Millgates cynical conduct in the exercise of its discretion.
My decision on that fourth ground of appeal is sufficient for the dismissal of this appeal.
But in the light of the full submissions of Mr Hutchings and Mr Jourdan, I shall explain briefly in the next section why I respectfully disagree with the Court of Appeal that the Upper Tribunal made errors of law on the other two issues, which were the first and third grounds of appeal. 6.
The other two issues
(1) Applying Lawrence v Fen Tigers Ltd by analogy
The first and successful ground of appeal to the Court of Appeal was that the Upper Tribunal had made an error of law by applying by analogy, in relation to the contrary to public interest jurisdictional ground in section 84(1)(aa), what Lord Sumption had said in Lawrence v Fen Tigers Ltd [2014] UKSC 13; [2014] AC 822, paras 155 to 161.
That was a case concerned with the tort of private nuisance.
The Supreme Court (with the leading judgment being given by Lord Neuberger) held that the defendants were committing a private nuisance by noise against the claimants who lived in a bungalow 850 yards away from the defendants speedway racing stadium.
There was no appeal against the grant of a (prohibitory) injunction, should the continuing tort be established.
However, the Supreme Court took the opportunity to lay down that, while an injunction should prima facie be ordered where a tort of nuisance is continuing, the strong primacy traditionally afforded to the injunction as a remedy for the tort of nuisance should be modified so that the public interest should always be a relevant consideration in deciding whether to grant an injunction for such a tort.
In other words, the courts should be more willing than has traditionally been the case to award damages in lieu of an injunction in this context.
Lord Sumption indicated that an even more radical rethink of the relationship between an injunction and damages in relation to the tort of nuisance might in due course be needed.
Having earlier said, at para 160, that the traditional primacy afforded to an injunction was based mainly on the courts objection to sanctioning a wrong by allowing the defendant to pay for the right to go on doing it and that that seemed an unduly moralistic approach to disputes, he went on to say the following at para 161: The whole jurisprudence in this area will need one day to be reviewed in this court.
There is much to be said for the view that damages are ordinarily an adequate remedy for nuisance and that an injunction should not usually be granted in a case where it is likely that conflicting interests are engaged other than the parties interests.
In particular, it may well be that an injunction should as a matter of principle not be granted in a case where a use of land to which objection is taken requires and has received planning permission.
However, at this stage, in the absence of argument on these points, I can do no more than identify them as calling for consideration in a case in which they arise.
As regards Lord Sumptions emphasis on planning permission, the Upper Tribunal made clear that the existence of planning permission for the use of the application land for housing was a material consideration under the contrary to public interest jurisdictional ground in section 84(1)(aa).
It also said this, at para 102: The fact that planning permission has been granted does not mean that private rights can necessarily be overridden, but it does reflect an objective assessment of appropriate land use which fully takes into account the public interest.
Sales LJ, in the Court of Appeal, thought that that was an incorrect statement because one also needed to take into account the cynical conduct of the defendant in assessing the public interest at the jurisdictional stage.
I have made clear earlier that I do not agree with Sales LJs wide interpretation of the contrary to public interest jurisdictional ground and I need say no more about that here.
But as regards Lord Sumptions wider comments on the relationship between an injunction and damages, with respect I cannot agree with the Court of Appeal that the Upper Tribunal made an error of law by applying that approach by analogy.
This is not because I disagree with what Sales LJ said, in characteristically powerfully reasoned paragraphs (paras 51 54), about Lord Sumptions wider views not being endorsed by the other Supreme Court justices and the important difference in context between remedies for the tort of private nuisance and an application under section 84 (although I would be inclined to accept that, at a high level of generality, useful parallels can be drawn).
Rather the important point, as submitted by Mr Hutchings, is that the Upper Tribunal clearly did not take into account the wider comments of Lord Sumption.
At para 107, the Upper Tribunal said that it was mindful of the traditional approach, and in particular the dictum of Douglas Frank QC in In re Collins Application (1975) 30 P & CR 527, 531, that for an application to succeed under the contrary to public interest jurisdictional ground it had to be shown that that interest is so important and immediate as to justify the serious interference with private rights and the sanctity of contract.
It then said this: Whether that restrictive gloss remains the correct approach may require reconsideration in light of Carnwath LJs explanation of the policy underlying ground (aa) in Shephard v Turner and Lord Sumptions observations on the reconciliation of public and private rights in Lawrence v Fen Tigers Ltd, but it is not necessary to pursue that thought further at this time.
We are satisfied that the public interest in play in this case is sufficiently important and immediate to justify the exercise of the Tribunals power under section 84(aa) to override the objectors private rights. (Emphasis added) The emphasised words make clear that the Upper Tribunal was not here applying Lord Sumptions wider comments.
There is a subsidiary issue that it is convenient to deal with at this stage.
The Court of Appeal thought that the Upper Tribunal had failed to apply section 84(1B) correctly because the planning permission granted did not support the Upper Tribunals view of the public interest.
Section 84(1B) has been set out at paras 31 and 46 above.
Putting to one side the Court of Appeals view on the relevance of Millgates conduct, which I have already dealt with, the point made by the Court of Appeal was this (at para 68): The development plan placed the application land in the Green Belt, thereby indicating that there was the usual strong presumption against its residential development as proposed by Millgate.
The Upper Tribunal did not identify any declared or ascertainable pattern for the grant or refusal of planning permissions in the relevant area, let alone one which supported Millgates arguments regarding the public interest.
While the Court of Appeal was correct that the Upper Tribunal did not appear to take into account, as subsection (1B) required it to do, any pattern of planning permissions, the Upper Tribunal did expressly refer to the words in subsection (1B); and, in its description of the facts, it made clear that the planning permission had here been granted, despite the application land being contrary to the development plan and in the Green Belt, because the local authority had decided that there were special circumstances which justified the grant of permission.
Moreover, the Upper Tribunal set out (at para 25 of its description of the facts) what those circumstances were said to be (see para 16 above).
In my view, while the Upper Tribunal should have taken into account any pattern of planning permissions, that was not a serious error of law given the planning permission that had actually been granted in this case; and it was certainly not a sufficient error to justify overturning the decision of the Upper Tribunal. (2) Ignoring (including in the exercise of the Upper Tribunals discretion) Millgates ability to satisfy its planning obligation by making alternative
provision of equivalent affordable housing elsewhere
This was the third and successful ground of appeal to the Court of Appeal.
The Upper Tribunal had observed, at para 53, that the effect of the variation of Millgates section 106 planning obligation by the agreement of 9 February 2016 was that Millgate could secure release from its obligation to the Council to provide the outstanding 13 units of affordable housing on the application land by payment of 1,639,904, thus allowing [the Council] to provide equivalent affordable housing elsewhere.
But although the Upper Tribunal considered the provision of affordable housing as important in deciding on the public interest, at both the jurisdictional and discretionary stages, the Court of Appeal took the view that this precise point was left out of account at both stages and that that constituted an error of law at both stages.
I agree with the submission of Mr Hutchings that the Upper Tribunal at para 106 expressly did take account of this precise alternative but regarded it as outweighed by the waste of not using the affordable housing already built, and immediately available, on the application land. 106.
It is no answer to the current wasteful state of affairs to say, as Ms Windsor did, that Millgate could now buy its way out of the problem by making a payment towards the provision of social housing elsewhere.
Whether those would have been sufficient answers to Millgates case on public interest if we had been dealing with an application before any housing had been built on the site is not a question which arises.
The question for the Tribunal is whether in impeding the occupation of the houses which now stand on the application land, and which are otherwise immediately available to meet a pressing social need, the covenants operate in a way which is contrary to the public interest.
We are satisfied that they clearly do because it is not in the public interest for these houses to remain empty and the covenants are the only obstacle to them being used. (Emphasis added)
This was an analysis at the jurisdictional stage but there is no reason to think that this point was then left out of account at the discretionary stage where the Upper Tribunal, at para 120, referred back to it being in the public interest not to waste resources by these houses remaining empty.
Upper Tribunal as having made an error of law on this point.
7. Conclusions and re making the decision
For the reasons I have given: In my view, therefore, the Court of Appeal was wrong to have regarded the (i) The Court of Appeal was correct to overturn the decision of the Upper Tribunal for its failure properly to take account of Millgates cynical breach in the exercise of its discretion (ground four of the grounds of appeal).
But my reasoning in relation to that ground differs from the reasoning of the Court of Appeal: I have held that the Upper Tribunal erred in law by failing to take into account, as it should have done, the two relevant factors, concerned with the effect of Millgates cynical conduct, that I have termed the two omitted factors (see paras 58 59 above). (ii) The Court of Appeal was incorrect, as a matter of law, in overturning the Upper Tribunal on the other three grounds of appeal.
That is, applying Lawrence v Fen Tigers Ltd by analogy (ground one); ignoring, at the jurisdictional stage, Millgates cynical breach while regarding as highly relevant the fact that, by the time of the application, 13 housing units had been built (ground two); and ignoring (including in the exercise of the Upper Tribunals discretion) Millgates ability to satisfy its planning obligation by making alternative provision of equivalent affordable housing elsewhere (ground three). (iii) Overall, because of my conclusion on (i), the appeal should be dismissed.
Given the above conclusions, a further question arises.
Should this matter be remitted back to the Upper Tribunal to exercise its discretion afresh in the light of this judgment or should this court exercise its power to re make the decision? The power to re make the decision is conferred by section 14(2)(b)(ii) and (4) of the Tribunals, Courts and Enforcement Act 2007.
By this: (1) Subsection (2) applies if the relevant appellate court finds that the making of the decision concerned involved the making of an error on a point of law. (2) The relevant appellate court (a) may (but need not) set aside the decision of the Upper Tribunal, and (b) if it does, must either (i) (ii) remit the case to the Upper Tribunal , or re make the decision.
In acting under subsection (2)(b)(ii), the relevant (4) appellate court (a) may make any decision which the Upper Tribunal could make if the Upper Tribunal were re making the decision and (b) may make such findings of fact as it considers appropriate.
The Court of Appeal exercised its power to re make the decision by refusing the application.
However, that was in the context of the Court of Appeal having decided that, on three separate grounds, the Upper Tribunal had not had jurisdiction to allow Millgates section 84 application.
My reasoning has been that the Upper Tribunal has made no errors of law going to jurisdiction but did err in law by failing to take two relevant factors (the two omitted factors) into account in exercising its discretion.
Nevertheless, I am satisfied that this Court should now re make the decision.
I am especially influenced by the fact that the application under section 84 was issued by Millgate over five years ago (on 20 July 2015).
Given the length of time that has elapsed and the corresponding uncertainty for the parties involved and for many others, including residents and potential residents of the 13 housing units and the patients and those working at the hospice I would regard it as a last resort to send the case back to the Upper Tribunal.
Although I have in the forefront of my mind that this court is not a specialist tribunal, had the Upper Tribunal properly taken into account the two omitted factors in exercising its discretion, it would surely have concluded that the application to discharge or modify the restrictive covenants should be refused in this exceptional case.
Moreover, that is the decision which, in my view, taking all relevant considerations into account and especially bearing in mind the cynical conduct of Millgate and the two omitted factors, is the correct decision.
Therefore, exercising the discretion afresh, the decision of the Upper Tribunal is set aside and re made by refusing the application.
I should add, finally, lest there be any confusion about this, that nothing that
I have here said is determinative of how the courts will decide any claim by the Trust for a prohibitory injunction to enforce the restrictive covenant by stopping the 13 housing units being occupied or for a mandatory restorative injunction ordering the removal of the units in part or whole.
Mr Jourdan pointed to the range of monetary remedies, going beyond conventional compensatory damages, that a refusal of the section 84 application would leave the Trust free to pursue.
Not least given the cynical breach of the restrictive covenant and the difficulty of accurately assessing the Trusts loss, he suggested that these might include an account of profits (see Attorney General v Blake [2001] 1 AC 268) as well as negotiating damages (see Morris Garner v One Step (Support) Ltd [2018] UKSC 20; [2019] AC 649).
I make no comment on that suggestion.
But it is only realistic to recognise that the impact of this decision will plainly be to strengthen the Trusts hands in relation to any financial settlement of this dispute.
| This case raises a fundamental dilemma over the use of land.
On the one side, there is a property company which seeks to ensure that 13 new affordable houses do not go to waste.
On the other, there is a charitable childrens trust which seeks to ensure that terminally ill children in a hospice can enjoy, in privacy, the use of the hospice grounds without being overlooked, or otherwise detrimentally affected, by the new houses.
The legal issues concern restrictive covenants over land and the procedure, under section 84 of the Law of Property Act 1925 (the 1925 Act), by which an application may be made to a tribunal for the discharge of a restrictive covenant.
It is the first time that the highest court (whether the House of Lords or the Supreme Court) has been required to decide an appeal on section 84.
In July 1972 a farmer sold part of his land (the application land) to a company (SSPC) that already owned the land next door (the unencumbered land).
The application land and the unencumbered land together form a rectangular plot (the Exchange House site).
As part of the sale, SSPC covenanted that at all times thereafter: (i) no building structure would be built on the application land; and (ii) the application land would only be used for car parking (the restrictive covenants).
The farmers son, Mr Barty Smith, later inherited the land adjacent to the Exchange House site.
In 2012 he made a gift of part of this land (the hospice land) to the Alexander Devine Childrens Cancer Trust (the Trust) for the construction of a childrens hospice.
Soon afterwards, and with knowledge of the restrictive covenants, Millgate Developments Ltd (Millgate) acquired the Exchange House site.
In July 2013 Millgate applied for planning permission to build 23 affordable houses on the site, in line with its affordable housing planning obligations.
Thirteen of these houses were to be built on the application land, in breach of the restrictive covenants.
Some of them would overlook the hospices planned gardens and wheelchair walk.
Planning permission was granted in March 2014 and Millgate began construction in July 2014.
In September 2014 Mr Barty Smith wrote to Millgate objecting to them building on the application land.
Millgate continued regardless and in May 2015 agreed to sell the development at the Exchange House site to Housing Solutions Ltd (Housing Solutions).
In July 2015, after completing the development, Millgate applied to the Upper Tribunal (the UT) seeking modification of the restrictive covenants, pursuant to section 84 of the 1925 Act.
Mr Barty Smith and the Trust objected to this application.
Shortly afterwards, in September 2015, construction of the hospice began.
On 18 November 2016 the UT allowed Millgates application to modify the restrictive covenants, on the condition that it paid 150,000 to the Trust as compensation.
On 28 November 2018 the Court of Appeal overturned the UTs decision.
Housing Solutions now appeals to the Supreme Court.
The Supreme Court unanimously dismisses the appeal, though for different reasons to those given by the Court of Appeal.
Lord Burrows writes the judgment.
The application to modify the restrictive covenants is refused.
Section 84 of the 1925 Act, as amended, confers upon the UT the power to discharge or modify restrictive covenants on five grounds.
The exercise of this power has two stages.
At least one of the grounds must be satisfied (the jurisdictional stage) before the UT can then decide whether to exercise its discretion to discharge or modify the restrictive covenants (the discretionary stage).
The ground relevant to this appeal is whether the restrictive covenants, by impeding a reasonable user of land, are contrary to the public interest: sections 84(1)(aa) and 84(1A)(b) [31 33].
The first issue is whether Millgates deliberate and cynical breach of the restrictive covenants is relevant at the jurisdictional stage [41].
The Court of Appeal found that it was [47].
The Supreme Court finds that it is not.
The contrary to the public interest ground requires a narrow interpretation.
Its focus is on the impeding of a reasonable user of the land and whether that impediment, by continuation of the restrictive covenant, is contrary to the public interest.
The question is not the wider one of whether in all the circumstances it would be contrary to the public interest to maintain the restrictive covenant [42].
This narrow interpretation requires weighing the public interest in 13 affordable housing units not going to waste against the public interest in the hospice providing a sanctuary for children dying of cancer. [43].
The good or bad conduct of the applicant is irrelevant at the jurisdictional stage.
It tells us nothing about the merits of what the land in question is being or will be used for [44].
This narrow interpretation is also in line with the other four grounds under section 84, accords with the purpose of section 84, and reflects the fact that the applicants conduct can still be considered at the discretionary stage [45].
The second issue is whether the UT failed properly to consider, at the discretionary stage, Millgates cynical conduct.
The Court of Appeal found that it did [54].
The Supreme Court agrees, but for different reasons [53].
It is only appropriate for an appellate court to interfere in a discretionary decision of a specialist tribunal if that tribunal has made an error of law [51].
In this case, however, even though the UT took into account Millgates conduct, it did make an error of law [53].
The UT failed to consider two relevant factors at the discretionary stage: (i) Millgate could have built on the unencumbered land, not the application land; and (ii) Millgate would have been unlikely to satisfy the contrary to the public interest ground had it applied to modify the restrictive covenants prior to building on the application land.
Millgate could not be rewarded for presenting the UT with a fait accompli [57 62].
This is sufficient to dismiss the appeal.
But, having heard full submissions on two further issues, the Court considers them briefly [63].
First, the UT did not rely on Lord Sumptions comments in Coventry v Lawrence [2014] UKSC 13 and so any dispute about whether or not it had been correct to do so does not arise [64 66].
Second, the UT correctly considered at both stages the fact that Millgate had built on the application land in order to fulfil its affordable housing planning obligations [70 73].
The Court therefore upholds the Court of Appeals decision, but for different reasons [74].
The UTs decision is re made and the application to modify the restrictive covenants refused [77].
|
This is an appeal from an interlocutor of the First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) in a joint referral to the Special Commissioners by Scottish Widows Plc (the Company) and Her Majestys Revenue and Customs (HMRC) under para 31 of Schedule 18 to the Finance Act 1998: [2010] CSIH 47, 2010 SLT 885, 2010 STC 2133.
The question that was referred to the Special Commissioners for their determination was in these terms: Whether in computing the Case 1 profit or loss of Scottish Widows plc for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is agreed that the words as receipts, which were not in the question as referred, may be understood as following after the words into account.
The Special Commissioners answered that question in the affirmative.
The Company appealed against that decision and HMRC cross appealed.
The Court of Session by a majority (Lord Emslie dissenting) refused the appeal and unanimously refused the cross appeal.
Both sides have appealed against its decisions to this court.
The essence of the dispute between the parties is whether, in each of the three consecutive years in question, part of the entry in line 15 of the Companys form 40 must be taken as falling within the scope of either section 83(2) or section 83(3) of the Finance Act 1989, as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995 and paragraph 4 of Schedule 31 to the Finance Act 1996.
If it falls within the scope either of these two subsections, the sum concerned will fall to be treated as a chargeable receipt for the purposes of Case 1 of Schedule D in ascertaining whether, and if so to what extent, the Company made a loss during those years.
The Company carries on business as a life assurance company.
Insurance business is a trade within the meaning of Case 1 of Schedule D: Income and Corporation Taxes Act 1988, section 18.
The amounts to be taken into account in computing its profits include its investment income from its long term business fund and any increase in the value of its assets during the accounting period.
Those profits may be computed for tax purposes in one or other of two ways.
They may be computed on the Schedule D, Case 1 basis, the actuarial surplus being a suitable starting point for dealing with cases of this description: see Scottish Union and National Insurance Co v Inland Revenue (1889) 16 R 461, 475, per Lord President Inglis.
Or they may be computed on the basis of the income which the insurer receives on its investments less management expenses, known as the I E basis.
HMRC are entitled to elect to charge tax on the investment income, and they almost invariably do so as it nearly always pays the Crown to take the interest on the investments and not to trouble with the profits: Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227 per Lord President Dunedin.
But a Case 1 computation is nevertheless required in every case.
The dispute between the parties arises from the demutualisation in 2000 of the Scottish Widows Fund and Life Assurance Society (the Society) and the transfer, under a scheme sanctioned by the Court, of its business to the Company.
The scheme came into effect on 3 March 2000.
In para 22.1 it was provided that on or after the effective date the Company was to maintain a memorandum account within its long term fund, designated as the capital reserve, which was to represent the amount of the shareholders capital held within the long term business fund.
The capital reserve was to be divided between the Companys with profits fund and its non participating fund.
Para 22.4 provided that the Company was to maintain records of the capital reserve and of the parts of it allocated to each of these two funds.
While the funds comprised identifiable assets with all the qualities that attach to items of that kind, the capital reserve was a device or, as Lord Walker says in para 55, an abstraction.
It was created for accounting purposes only and had no real life of its own.
At the time of the transfer to the Company the value of the Societys assets was substantially in excess of its liabilities.
But the Company sustained trading losses in each of the relevant accounting periods.
The market value of its assets decreased from the inception of its long term business fund, due principally to falls in the value of the stock market.
The Company claims that account should be taken of its commercial losses in its non participating fund during the relevant accounting periods.
It has included Case 1 losses in its tax returns and computations for those periods equal to 28,689,437, 612,583,866 and 431,261, 757 respectively.
HMRC maintain that, on a proper construction of section 83(2) of the 1989 Act, which failing of section 83(3), and having regard to entries in the Companys statutory returns for the relevant periods in which it was required to show that it had a surplus in excess of its liabilities for regulatory purposes, these claims should be disallowed.
The Company brought various sums into account, described as transfers from the capital reserve, in the years in which they sustained losses.
HMRC submit that each increase in the regulatory value selected by the Company falls to be treated as an increase in the value of its assets within the meaning of section 83(2)(b).
In any event the amounts brought into account and recorded as transfers from the capital reserve fall to treated as receipts under section 83(3) because they were amounts which had previously been added to the long term business fund as part of the transfer of business to the Company from the Society.
The statutory provisions
Section 83, as amended, so far as relevant to this case provides as follows: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
In section 83(8) of the 1989 Act, as amended it is provided that the word add in that section, in relation to an amount and a companys long term business fund, includes transfer (whether from other assets of the company or otherwise).
Section 83A(1), which was inserted by section 51 of and paragraph 16 of Schedule 8 to the Finance Act 1995 and amended by paragraph 6 of Schedule 31 to the Finance Act 1996, provides that brought into account in sections 83 to 83AB (as inserted by paragraph 5 of Schedule 31 to the 1996 Act) means brought into account in an account which is recognised for the purposes of those sections.
Section 83A(2) provides: Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) any separate revenue account required to be prepared under that Act in respect of a part of that business.
Paragraph (b) above does not include accounts required in respect of internal linked funds.
The revenue account that section 83A(2)(b) refers to is the regulatory return in form 40: see para 12, below.
Section 431 of the 1988 Act contains a list of interpretative provisions relating to insurance companies.
They include a definition of the word value: see section 83(2)(b) of the 1989 Act.
It is in these terms: value, in relation to assets of an insurance company, means the value of the assets as taken into account for the purposes of the companys periodical return.
Insurance companies are under an obligation to submit annual returns to the Financial Services Authority (FSA) for regulatory purposes.
The purpose of these returns is to demonstrate that the insurer meets the regulatory standard of solvency.
They are required to show the results of a statutory actuarial investigation, which calculates the value of the insurers liabilities and identifies the amount of surplus in excess of those liabilities.
They must show that there is a sufficient surplus to cover any declared bonuses.
At the time of the demutualisation the relevant regulations were to be found in the Insurance Companies Act 1982, the Insurance Companies Regulations 1994 (SI 1994/1516) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943).
Section 17 of the 1982 Act provides that every insurance company carrying on insurance business in the United Kingdom must prepare a revenue account for each financial year of the company, a balance sheet and a profit and loss account, the contents of which are to be such as may be prescribed by regulations.
Section 18 provides for an actuarial investigation once in every period of twelve months of every insurance company which carries on long term business.
Section 28 provides that it must maintain an account of the assets and liabilities attributable to its ordinary long term insurance business.
Regulation 45(6) of the 1994 Regulations provides that an insurance company may, for the purposes of an investigation to which section 18 of the Act applied, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company.
This was already a practice of long standing in the insurance industry.
For a detailed description of the background to these requirements and to the provisions of the Finance Act 1989 about the taxation of the life assurance business of an insurance company, reference may be made to Lord Reeds opinion in the Court of Session to which, like Lord Walker, I would pay tribute: 2010 SLT 885, paras 91 126.
A useful summary of the FSA regime that was in force at the relevant time is to be found in Lord Emslies opinion, para 198 (ix) to (xii); see also Lord Walker, at paras 49 53, below.
In short, the regulatory returns which a company carrying on long term life insurance was required to complete and submit included a series of numbered forms.
Form 13 set out an analysis of all the companys admissible assets, entered at a value which broadly corresponded to their year end market value.
Form 14 set out in line 51 the amount by which the net admissible assets exceeded the companys long term business liabilities.
Form 40, which was headed Revenue account, set out revenue flows and expenditure for the Companys long term business fund, its with profits fund and its non participating fund, and the amount of each fund to be carried forward to form 58.
Form 58, which was headed Valuation result and distribution of surplus, determined the amount of the actuarial surplus by comparing the value of the insurers liabilities under the policies that it has issued with the fund shown on form 40.
The data that were used to prepare these regulatory returns were the same as those used to prepare the Companys statutory accounts.
The amounts that were calculated by the Company as the commercial losses of its non participating fund were derived from decreases in the market value of the admissible assets less liabilities in that fund during the relevant accounting periods.
For each of these periods, however, there were included in the figure entered as other income in line 15 of form 40 amounts described as transfers from capital reserve which reduced the capital reserve by an equivalent amount.
They should perhaps have been included as an increase in the value of assets brought into account in line 13.
But it is agreed that the way they fall to be treated does not depend on whether they were entered there or in line 15.
The Special Commissioners said there is no difference in principle, as both lines are brought into account in the total shown at line 19: para 51.
The amounts in aggregate for the relevant accounting periods were 33,410,000, 472,724,000 and 370,000,000 respectively.
The approach to construction
It is well understood that statutory provisions which bring profits and gains into charge to tax are to be construed as directed towards profits and gains in their natural and proper sense in a sense which no commercial man would misunderstand and that those words are equally applicable whatever the commercial concern may be: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
The objective is to ascertain and charge the true profits and gains of the business in question.
The requirement that there should be a true and fair view involves the application of a legal standard.
The courts are, in general, guided as to the content of the computation by expert opinions of accountants as to what the best current accounting practice requires: Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, 2007 SC (HL) 105, [2007] 1 WLR 1448, para 2, per Lord Hoffmann.
The special rules that section 83 of the 1989 Act lays down for the calculation of the profits of life assurance companies in respect of their life insurance business for the purposes of corporation tax are, in this respect, no different from the rules that apply to companies generally.
They provide a legal standard according to which these profits are to be ascertained.
As has already been noted, that section has been amended more than once.
But I do not think that it is helpful to look back into the legislative history.
Lord Wilberforce said in Farrell v Alexander [1977] AC 59, 73 that self contained statutes, whether consolidating previous law or so doing with amendments, should be interpreted, if reasonably possible, without recourse to antecedents, and that the recourse should only be had when there is a real and substantial difficulty or ambiguity which classical methods of construction cannot solve.
Further amendments to section 83 were introduced by section 170 and paragraph 2 of Schedule 33 to the Finance Act 2003.
In Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 1716 Lord Diplock said that it was a legitimate purpose of legislation by Parliament to clarify the law by making it clear in which of two alternative meanings the ambiguous language of an earlier statute was to be understood, but that it would only be if the language of a provision in an existing statute was ambiguous that it would be legitimate to infer that a purpose of the subsequent statute was to remove doubts as to what the law had always been.
So the proper approach is to concentrate on the wording of sections 83(2) and 83(3) as they were at the relevant accounting periods.
With that background, and with the benefit of the much more comprehensive description of the facts that Lord Walker has provided and of the carefully reasoned opinions of all the judges in the Inner House, I now turn to the provisions of the 1989 Act which are under scrutiny in this case.
Section 83(2)
This subsection directs that there must be taken into account as receipts of the period for the purposes of Case 1 of Schedule D (a) the Companys investment income from the assets of its long term business fund and (b) any increase in value of those assets, in so far as these items have been brought into account by the Company.
The question is whether its language permits the Company to claim that it in fact sustained an allowable loss during the relevant period when the values as brought into account for that period indicate the contrary.
It is common ground that the reference to investment income in paragraph (a) of the subsection is a reference to actual income from assets actually comprised in the long term business fund.
The Company submits that, by parity of reasoning, the reference to any increase in value in paragraph (b) must be taken to be a reference to something that can be recognised on a commercial basis as a real increase in real assets.
So the word assets in both paragraphs meant assets of the long term business fund which had the capacity to earn income and to grow in value.
The fact was that its assets had decreased, not increased, in each of the relevant accounting periods.
The amounts included in line 15 of form 40 were there for regulatory purposes only.
They were book entries which had no commercial validity.
The fact was that the assets of the long term business fund had decreased, not increased, in each of the relevant accounting periods.
The mere fact that an amount, such as interest on unpaid tax, was entered in form 40 did not mean that it was taxable.
To arrive at a true and fair view it was necessary to go behind the entries on the forms and look at the facts.
In the Court of Session the judges of the First Division were unanimous in accepting this argument and rejecting the argument for HMRC.
The Lord President said that he was unable to accept that the contents of the revenue account that had been prepared for regulatory purposes had the definitional character for which HMRC contended.
The fact that the investment income was inevitably an actual receipt suggested that the increase in value should be an actual sum, as opposed to an accounting element: para 54.
Lord Reed made the same point in para 181, adding that the words whether realised or not were a strong indication that section 83(2) was concerned with real gains rather than a change in notional values.
Lord Emslie said that, consistent with the long established distinction between assets and fund, the reference to an increase in value of assets should be taken as reflecting commercial reality in the form of actual increases in the value of assets: para 204.
As Mr Andrew Young QC for HMRC pointed out, however, that section 83(2) is a special rule for the computation of the profits of an insurance company in respect of its life assurance business.
The general rules for the computation of profits and gains for the purposes of Case 1 of Schedule D must be taken to have been modified to the extent provided for in this subsection.
The Company was being taxed on the I minus E basis and it is this subsection, not the rules that are generally applicable, that must be construed.
An insurance company is entitled to elect, under regulation 45(6) of the 1994 Regulations, to assign to any of its assets the value given to the asset in the books or other records of the company.
Section 83(2) can be taken to have been drafted in the light of the fact that insurance companies almost always, if not invariably, choose to use book values (in the sense indicated by regulation 45(6)) to arrive at the necessary balance in form 40 to demonstrate solvency to the regulatory authority.
Once this point is grasped, it seems to me that the meaning to be given to section 83(2)(b) falls fairly easily into place.
The wording of the subsection follows that of the forms.
While the investment income in paragraph (a) is real income, the increase in value referred to in paragraph (b) may or may not be a real increase.
The assets which gave rise to this increase in value may or may not be the same assets as those referred to in paragraph (a).
It depends on the content of the amounts shown in lines 13 and 15 of form 40.
Amounts taken from its long term business fund were used by the Company to supplement its trading income in each of the three years in question.
It chose to use its own book values, not values computed according to the current value of the assets of its long term business fund, to arrive at the final values that were brought into account on form 40.
In the absence of further directions in the statute as to how the increase in value is to be computed in cases where that option has been chosen and there are none I would hold that the increase in value referred to in paragraph (b) must be taken to be the amount which has been brought into account on the form.
The phrase as brought into account for a period of account in the opening words of the paragraph lies at the heart of this interpretation.
It was suggested by the Company that this phrase determined the period for which items were to be treated as taxable receipts but not the items which were taxable.
But this interpretation of the phrase does not, I think, give full weight to the word as.
Linked to the words the following items which precede it, the phrase indicates that the computation must proceed on the basis of the way the items have actually been entered on the forms.
If values shown in the books or other records of the company have been used, instead of market values, it will be the book values that will determine whether or not there has been any increase in value during the relevant period and, if so, how much that increase is.
The phrase and not otherwise was said to support the Companys interpretation of paragraph (b) because it indicated that it was being assumed that the items that were being brought into account when any increase in value was being assessed were items that could be realised, not notional ones.
But I think that their purpose is to make it clear that the basis of computation referred to in subsection (2) is the only basis that is relevant for the purposes referred to in subsection (1).
The words whether realised or not are there to indicate a change from the computation indicated by the original wording of section 83.
If the company chooses to bring unrealised increases in value into account, those increases in value must be taken into account as receipts for the period in the same way as increases that have been realised.
For these reasons I am unable to agree with the judges of the Court of Session as to the meaning and effect of section 83(2)(b).
But in para 205 of his opinion Lord Emslie made some further points which, as they were attractively put, need to be answered too.
He said that a factor which favoured the Companys construction of section 83(2) was that it accorded well with the general principles (1) that the ascertainment of receipts or gains for tax purposes should prima facie reflect commercial reality; (2) that income or gains to be taxed should prima facie be the taxpayers and not those of a third party; and (3) that the ordinary recognition of shareholders capital to cover actual trading should not prima facie be a chargeable receipt.
He described these principles in more detail in paras 197 and 198, and I agree with him that prima facie they can be taken to be a reliable guide as to how tax legislation ought to be construed.
But his use of the phrase prima facie indicates, if I may say so quite correctly, that these are not absolute rules that are incapable of being disapplied by the statute.
In this case we are dealing with special rules that have been designed to take account of the unique nature of the business carried on by life assurance companies.
That in itself suggests that it is the language of the statute, rather than these general rules, that should be the determinative factor in this case.
Taking Lord Emslies three points in turn, I would hold, firstly, that the language of section 83(2) shows conclusively that, if the insurance company chooses to use book values to arrive at the final values shown on form 40, it is on those values that the computation referred to in section 83(1) must be based.
This can be said to reflect the commercial reality of the life assurance industry, as the Companys taxable receipts were based on its own figures as submitted to the regulatory authorities to justify the surplus of assets that it wished to recognise.
Secondly, there is no question, in this case, of taxing the income or gains of a third party.
The values brought into account on form 40 are the product of assets that were vested in the Company when it established its long term business fund.
Their link with the Society was entirely broken when the transfer under the scheme took effect.
As to Lord Emslies third point, it must be appreciated that the capital reserve was not, as he said in para 202, ordinary shareholders capital.
The words themselves might be taken as suggesting otherwise, but I think that the name that was given to what the scheme described as a memorandum account is a distraction.
The reality is that the reserve had no life of its own separate from the long term business fund.
It was an accounting mechanism which the Company had established for its own internal accounting purposes as part of its long term business fund.
It did not consist of particular assets but was a financial structure which was subject to all the statutory restrictions and requirements to which that fund was subject.
In para 205 he said that, as the capital reserve was shareholders capital, its ordinary recognition to cover actual trading receipts should not prima facie be deemed a chargeable receipt.
But, as the capital reserve had no life of its own, amounts that were described as transfers from the reserve fell to be treated in the same way as any other assets comprised within the long term business fund for regulatory purposes and, in consequence, for the purposes of section 83(2) too.
For these reasons, and those given by Lord Walker, I would allow the HMRCs cross appeal.
Section 83(3)
As I would answer the question in the reference in favour of HMRC on the ground that the amounts in question fall to be taken into account as receipts under section 83(2) with the result that there was a corresponding increase in the assets of the long term business fund for each of the relevant accounting periods within the meaning of paragraph (b) of that subsection, the question whether section 83(3) applies to those amounts does not arise.
This is because section 83(4) provides that subsection (3) of that section does not apply where, or to the extent that, the amount concerned is taken into account under subsection (2).
But, as the judges of the Court of Session were divided in this issue and out of respect for the care which they took to examine it, I would like to make these few brief comments.
The exercise to which section 83(3) is directed proceeds in two stages which are, as Lord Reed said in para 191(1), conceptually distinct from each other.
First, there is the question whether an amount has been added to the companys long term business fund as a part of or in connection with a transfer of business to the company.
Section 83(8) provides that the word add includes transfer.
As for the facts of this case, amounts were added to the Companys long term business fund when the scheme took effect as part of the transfer of the Societys business to the Company.
The whole of the amount that was to be treated as the capital reserve for accounting purposes was added or transferred to the Companys long term business fund as an integral part of the scheme.
It seems to me to be plain, having regard to the terms of the scheme, that the addition to the Companys long term business fund was as part of or in connection with the transfer of the Societys business to the Company.
The fact that it was only later that some amounts were brought into account by way of what were called transfers from the capital reserve does not matter.
The second stage is the bringing of the amount into account for the period in question.
It seems to me that this occurs as and when, and indeed whenever, the amount is brought into account as an increase in value to reduce or eliminate a loss that would otherwise have occurred during the relevant period.
As Lord Reed said in para 191(2), there are understandable reasons why Parliament might consider that the use of amounts acquired on a transfer of business to offset liabilities resulting from normal patterns of trading which were not otherwise chargeable to tax should be disallowed.
I agree with him that, when the amounts were subsequently brought into account on form 40, they would but for the fact that they were already caught by section 83(2) have fallen to be treated by section 83(3) as chargeable receipts for the purpose of ascertaining whether or to what extent the Company had incurred a loss in each of the relevant periods.
Lord Emslies point, which he made in para 228 of his dissenting opinion, that the transfers were made in a non chargeable context is answered by the two stage nature of the exercise to which section 83(3) is directed.
It is not the context in which the transfer was made at the outset that determines the way in which the amounts fall to be treated when, at some later stage, they are brought into account.
Had it been necessary to do so to arrive at an answer to the question that was referred to the Special Commissioners, I would have affirmed the decision of the majority in the Inner House on this issue and dismissed the Companys appeal.
Conclusion
I would recall the interlocutor of the Inner House of the Court of Session, allow the cross appeal by the HMRC and answer the question referred to the Special Commissioners in the affirmative.
LORD WALKER
Introduction
On 3 March 2000 Scottish Widows plc (the Company), a new company within the Lloyds TSB banking group, acquired the principal assets and liabilities of the life assurance business of the Scottish Widows Fund and Life Assurance Society (the Society).
The Society had a long and distinguished history.
It was established in Edinburgh in 1814 upon the principle of mutual assurance.
It was incorporated by statute in 1861 as a company without a share capital and it remained a mutual life office that is an entity owned by its members, the policyholders, with no outside shareholders until the change in 2000, which has been referred to as demutualisation.
The process of demutualisation was achieved by a scheme of transfer approved by the Court of Session under section 49 of and Schedule 2C to the Insurance Companies Act 1982 (ICA 1982).
Some of the provisions of the scheme are of central importance to this appeal.
The transfers which it effected were on a very large scale: the Company acquired, in round terms, assets with a market value of the order of 25bn and became subject to actuarial liabilities of the order of 19bn.
The qualifying members of the Society received compensation of approximately 5.846bn, representing the difference (with various adjustments and enhancements) between the assets and the liabilities.
This compensation was paid by the Companys holding company, Scottish Widows Financial Services Holdings Limited (Holdings), which owns the whole of the Companys issued share capital.
The Societys assets included large holdings of equities as well as fixed interest securities, immovable property and other investments.
As it happens the United Kingdom stock market reached what was (and remains) an all time high in the new year of 2000, and in the first years of the Companys business the market value of its holdings of equities was substantially reduced.
This unexpected and unwelcome turn of events has led to a dispute between the Company and HM Revenue and Customs (the Revenue) as to the tax consequences.
On 11 October 2006 the Company and the Revenue joined in making a referral to the Special Commissioners under Schedule 18, para 31 of the Finance Act 1998.
The agreed question to be determined was as follows (with a small agreed explanatory addition): Whether in computing the Case 1 profit or loss of [the Company] for the accounting periods ending in 2000, 2001 and 2002, amounts described by the company as transfers from Capital Reserve and included as part of the entries at line 15 of Form 40 for each period fall to be taken into account [as receipts] in computing the profit or loss as the case may be.
It is common ground that the answer to this question depends on two issues, one turning on the meaning and application of a general provision in subsection 83(2) (read with subsection (1)) of the Finance Act 1989 as amended (FA 1989), and the other turning on the meaning and application of a more particular provision in subsection 83(3) (read with subsection (4)) of the same section.
The Company must win on both issues in order to succeed.
Conversely it is sufficient for the Revenue to succeed if it wins on either issue.
The first issue, once understood, is a short point of construction.
But for the non specialist a lot of background, some of it quite technical, is required in order to understand the point, and to be able to weigh the linguistic arguments against more general considerations based on the legislative scheme and purpose.
The second issue (which arises only if the Company is successful on the first issue) is a rather more intricate point of construction.
The complex background, and the large amounts of tax at stake, help to explain why these two points of construction took four and a half days before the Special Commissioners, and no less than seven and a half days before the Court of Session.
The Special Commissioners (Mr J Gordon Reid QC and Dr John F Avery Jones CBE) decided the first issue in favour of the Company and the second issue in favour of the Revenue, so that the Revenue was successful.
The First Division of the Inner House of the Court of Session (the Lord President (Hamilton), Lord Reed and Lord Emslie) reached the same conclusions on both issues, unanimously on the first and with Lord Emslie dissenting on the second: [2010] CSIH 47; 2010 SLT 885; [2010] STC 2133.
The Company now appeals on the second issue and the Revenue cross appeals on the first issue.
The historical background.
The first issue (the subject of the Revenues cross appeal) comes naturally before the second issue (the subject of the Companys appeal).
But before getting to the detailed arguments on either issue it is necessary to say something about the historical background, and to cover regulatory as well as taxation aspects, since these two aspects have become closely interrelated.
The background has already been covered with conspicuous thoroughness and clarity in the judgment of Lord Reed (paras 87 104), to which I gratefully acknowledge my indebtedness.
This part of my judgment is largely based on the fuller description by Lord Reed, with the addition of a few points of my own.
Life assurance, in its many different forms, has played an important part in British social and economic history.
Actuarial science was already developing by the beginning of the eighteenth century (one of the founding fathers, Edmund Halley, published a paper on The Degrees of the Mortality of Mankind, commissioned by the Royal Society, in 1693).
The Life Assurance Act 1774 addressed the problem of insurable interest and curbed the scandal of tontines, then fashionable in some wealthy circles.
Interest in life policies was by no means restricted to the wealthy.
The Society was only one (and among the most prominent in Scotland) of many mutual societies by which working men could insure against the risk of their families being left in penury in the event of the early death or disablement of the main breadwinner.
In England the most prominent comparable body was probably the Friends Provident Society, founded in 1832 (it was a registered friendly society, regulated by a different statutory system).
The growth of these mutual societies was remarkable: they had just over 700,000 members in 1803, over 3 million in 1887, and over 6 million in 1910 (there are fuller statistics in D. Green, Reinventing Civil Society, 1993).
The mutual movement went into decline after Lloyd George introduced a system of compulsory national insurance in 1911.
The public interest in life assurance as encouraging prudent self reliance was reflected in its tax treatment, though for the most part the incentives were directed to policyholders rather than life offices.
In 1870, after several life offices had run into difficulties, Parliament introduced a new system of regulation.
It was the foundation of the more elaborate system that we have today.
The Life Assurance Companies Act 1870 (LACA 1870) required life offices (whether mutual or proprietary) to keep proper accounts and to prepare annual financial statements consisting of a revenue account and a balance sheet in a prescribed form.
Regular actuarial investigations were made mandatory.
Lord Reed explains in his judgment (paras 91 94) how section 4 of LACA 1870 introduced for the first time the statutory concept of a life assurance fund held as security for the rights of holders of life policies and annuities.
This was the origin of what is now referred to as a life offices long term business fund (LTBF).
As regards taxation, during the 19th century and the first two thirds of the 20th century there was no corporation tax and no capital gains tax.
Companies were subject, in much the same way as individuals, to income tax assessed and charged under the various schedules and cases defined in the Income Tax Acts.
If a taxpayer received income which could be regarded as falling within more than one schedule or case, the Revenue could not claim tax twice, but could choose which schedule to apply.
This choice (sometimes referred to as the Crown option) was available to the Revenue in relation to proprietary life offices, which held large reserves of income producing investments in order to meet their actuarial liabilities and provide for unforeseen contingencies.
They could be taxed either on the profits of a trade under Schedule D Case I, or on their investment income as such.
It was usually more advantageous for the Revenue to make an assessment on the companys investment income, as Lord President Dunedin noted in Revell v Edinburgh Life Insurance Co (1906) 5 TC 221, 227.
The Crown option was abolished by the Finance Act 2007 and replaced by mandatory provisions.
With a mutual life office the Revenue never had a choice, since mutual trading does not produce profits taxable under Schedule D Case I.
The first statutory provisions giving special tax treatment to life offices were in the Finance Act 1915.
Life assurance was to be treated as a separate business.
Annuity funds were to be taxed separately from life funds.
Life offices taxed on their investment income were to be allowed a deduction for management expenses (including commission paid to brokers).
This system of taxation is generally referred to as the I minus E (that is, income minus expenses) basis of assessment.
It remained open to the Revenue to choose to assess a life office to tax under Schedule D Case I, but the basis of that assessment was altered (and the likelihood of its actually being adopted by the Revenue was reduced) by section 16 of the Finance Act 1923 (FA 1923), which gave effect to a recommendation in the report, published in 1920, of the Royal Commission on Income Tax (Cmd 615).
Profits allocated to with profits policies were to be excluded from the life offices taxable profits.
This was not unprincipled, since on allocation the profits became liabilities.
This provision has been re enacted in successive consolidating statutes, and finally in section 433 of the Income and Corporation Taxes Act 1988 (ICTA 1988), the terms of which are set out in para 103 of Lord Reeds judgment.
Section 433 of ICTA 1988 was repealed and replaced by FA 1989.
The change made by FA 1923 was an important change.
In practical terms it diminished the difference in tax treatment as between proprietary and mutual life offices.
Its importance increased with changes in economic conditions in Britain during the second half of the 20th century (in brief, monetary inflation and the prospect of substantial capital gains from investment in equities and property).
The Society was required by its constitution and regulations (to be found in their final form in the Scottish Widows Fund and Life Assurance Act 1980), as the Company is required under the scheme, to allocate to the holders of its with profits whole life and endowment policies nine tenths of the with profits part of the gains which it recognised, or brought into account (the expressions mean the same), in the revenue account of its LTBF.
After the introduction of capital gains tax and corporation tax on chargeable gains, realised gains made by the Society were taxed at differential rates, the details of which are not material.
But unrealised gains could be recognised (or brought into account) in order to enable larger bonuses to be allocated and paid to with profits policyholders without having been taxed in the Societys hands.
This was perceived by the Revenue as a serious defect in the system, as appears from an official consultation document published in 1988, The Taxation of Life Assurance, (summarised in paras 123 126 of Lord Reeds judgment).
This document gives a summary of how during the 1980s the life assurance industry was rapidly evolving into being part of a larger savings industry, in competition with unit trusts and other savings media, and itself increasingly making use of unit linked policies rather than traditional with profit policies (investment by small savers in authorised unit trusts and approved investment trusts was encouraged in a different way, by deferring tax on capital gains until individual unitholders or shareholders realised their gains).
Section 83 of FA 1989, which is at the heart of this appeal, was part of the changes which Parliament made in consequence of this review.
It makes an express link between the imposition of liability to tax (or the creation of an allowable loss) under Schedule D Case I and the regulatory regime under ICA 1982.
It is therefore necessary, before coming to section 83, to give a short account of the regulatory regime in ICA 1982 and regulations made under it.
ICA 1982 and regulations under it
The regulatory system introduced by LACA 1870 had been re enacted and modified from time to time.
ICA 1982 replaced it with a similar but much more detailed system, elaborated in a number of statutory instruments, of which the most relevant for present purposes are the Insurance Companies Regulations 1994 (SI 1994/1516) (the 1994 regulations) and the Insurance Companies (Accounts and Statements) Regulations 1996 (SI 1996/943) (the 1996 regulations).
Section 17 of ICA 1982 required every insurance company to which Part II applied to prepare with respect to each financial year of the company, a revenue account for the year, a balance sheet as at the end of the year and a profit and loss account (or for a mutual an income and expenditure account) for the year.
Each of these was to be in a form prescribed by regulations.
Under the 1996 regulations (as amended down to the year 2000) different forms were prescribed for different types of insurance companies, and they were still required by the new regulatory system mentioned in para 55 below.
The form of balance sheet prescribed (by regulation 6) for companies carrying on long term business were forms 13 (relating to assets) and 14 (relating to liabilities).
These together made up the two sides of the balance sheet.
The form prescribed (by regulation 8) for companies carrying on long term business was form 40; if the company had more than one LTBF a separate account was required for each LTBF, and a consolidated form for all of them.
The Company has three LTBFs, a with profits fund, a non participating fund for business taken over from the Society, and a non participating fund for new business.
Section 18 of ICA 1982 required every insurance company to which it applied, and which carried on long term business, to cause its actuary to make an annual investigation of its financial condition, and to cause an abstract of the actuarys report to be made.
Assets were to be valued and liabilities determined in accordance with valuation regulations, and the abstract was to be in a form prescribed by regulations.
Under regulation 25 of the 1996 regulations (as under the new regulatory system) the most relevant of the prescribed forms to be included in the abstract was form 58.
Regulation 45 of the 1994 regulations (as amended down to the material time) dealt with valuation of assets.
After some general provisions in paras (1) to (5) it dealt specifically with actuarial investigations under section 18 of ICA 1982: (6) Notwithstanding paragraph (1) above (but subject to the conditions set out in paragraph (7) below), an insurance company may, for the purposes of an investigation to which section 18 of the Act applies or an investigation made in pursuance of a requirement under section 42 of the Act, elect to assign to any of its assets the value given to the asset in question in the books or other records of the company. (7) The conditions referred to in paragraph (6) above are (a) that the election shall not enable the company to bring into account any asset for the valuation of which no provision is made in this Part of these Regulations; (b) that the value assigned to the aggregate of the assets shall not be higher than the aggregate of the value of those assets as determined in accordance with regulations 46 to 57 of these Regulations.
Section 28 and 29 of ICA 1982 required separate accounts and funds to be maintained for long term business, and for the assets representing those funds to be applicable only for the purposes of the appropriate business, except so far as the value of the assets was shown, on a statutory actuarial investigation, to exceed the liabilities attributable to the fund.
I shall have to come back to the prescribed forms.
I add one comment.
Lord Reed observed (para 112), and I agree, that the use of the word fund in ICA 1982 is not entirely consistent.
Lord Reed had earlier quoted an observation of Lord Greene MR in Allchin v Coulthard [1942] 2 KB 228, 234: The word fund may mean actual cash resources of a particular kind (e.g. money in a drawer or a bank), or it may be a mere accountancy expression used to describe a particular category which a person uses in making up his accounts.
This is an important distinction, although Lord Greenes reference to cash resources is a little surprising and may have been influenced by the context of the particular case before him (it concerned the taxation of a local authoritys general rate fund).
In the context of life assurance a LTBF is a fund of investments of various types, and it falls within Lord Greenes first category.
The investments (the assets of the fund) change from time to time, as and when the investment managers need to raise money or exercise their judgment to switch investments, and the values of the assets fluctuate constantly.
But at any time it is possible to identify the assets for the time being constituting the fund, which is a continuing entity.
By contrast the Capital Reserve established by the scheme approved by the Court of Session and put into effect in 2000 (and here I am putting down a marker for later parts of this judgment), if it was a fund at all, was a fund in Lord Greenes second sense.
It was an accounting abstraction and it never consisted of identifiable assets.
Before going on to the scheme it is convenient to record, out of chronological sequence, that ICA 1982 was repealed by a statutory instrument made under the Financial Services and Markets Act 2000 which came into full force on 1 December 2001 (having come into force at earlier dates for limited purposes including rule making powers).
In consequence the new regime applied to the second and third of the Companys accounting periods relevant to this appeal that is, the calendar years 2001 and 2002; the Financial Services Authority (FSA) became the regulator, and the system of regulation was prescribed by rules made by the FSA rather than by statutory instrument.
But the substance of the system, and the identifying numbers of the forms, were unchanged.
In particular, rule 9.10(c) of the FSAs Interim Prudential Sourcebook for Insurers Instrument 2001 reproduced the effect of regulation 45(6) of the 1994 regulations.
There were some minor changes of terminology in the forms, which were set out in Appendices 9.1 (forms 13 and 14), 9.3 (form 40) and 9.4 (form 58) of the 2001 instrument.
The scheme
The scheme for the transfer of the Societys business to the Lloyds TSB group was preceded by an agreement dated 23 June 1999 between the Society and Lloyds TSB Group plc.
The agreement provided for the scheme to be approved by a special resolution of the Society in general meeting (which duly occurred) and for an application to be made to the Court of Session for sanction of the scheme under section 49 of and Schedule 2C to ICA 1982.
The Court of Session (Lord Nimmo Smith) sanctioned the scheme by an order made on 28 February 2000, and the scheme took effect on 3 March 2000.
The scheme also obtained regulatory approval and tax clearances.
The scheme is lengthy and in parts very technical.
It runs to 41 clauses and 12 schedules.
In bare outline, the bulk of the assets and liabilities of the Society were transferred to the Company; pension policies and assets and liabilities associated with them were transferred to another Lloyds TSB group company and are not relevant to this appeal.
Payment of the membership compensation to qualifying members of the Society (later quantified at 5,846m) was undertaken by Holdings, which is the owner of all the Companys issued share capital.
The provisions of the scheme which call for most attention are in Part D (Fund Structure) and Part E (operation of the Funds).
Clause 22 in Part E (Capital Reserve) is of particular importance.
Under Part D (Fund Structure) the most basic division was between the LBTF (defined as the Long Term Fund) and the Shareholders Fund.
The latter fund was to have allocated to it infrastructure assets and shares in seven subsidiaries and any joint venture companies (clause 15.1 and relevant definitions in Schedule 1).
All other assets (other than pension assets as mentioned above) were to be allocated to the LTBF, which was to be divided into two separate subfunds, the With Profits Fund and the Non Participating Fund (respectively the WPF and the NPF), with an appropriate allocation of existing policies (clauses 13 and 14.1).
The allocation of assets between the WPF and NPF was to be determined by the actuary in accordance with the detailed provisions of clause 15.2 to 15.6, 15.10 and 15.11.
Liabilities were to be similarly matched, subject to some special exceptions (clause 16).
In part E (Operation of the Funds) clause 18 deals with allocation of surplus arising in the WPF.
One ninth of the amount of bonuses allocated to conventional (that is, not unit linked) with profits policies (in other words one tenth of the gross allocation) is to be allocated to the NPF or the Shareholders Fund, as the board directs.
All other surplus is to be applied as bonus for the benefit of holders of with profits policies.
This replicates the position under the Societys constitution and regulations (para 47 above).
In life offices shorthand the WPF is a 90/10 fund.
The NPF, by contrast, is a 0/100 fund.
Following each actuarial valuation of the NPF the board may transfer to the WPF statutory surplus arising in the NPF (clause 21).
Finally I come to the Capital Reserve, provided for in clause 22.
Clause 22.1 is as follows: On and after [3 March 2000], [the Company] shall maintain a memorandum account within the [LTBF] designated as the Capital Reserve (the Capital Reserve).
At [3 March 2000] the Capital Reserve shall represent the amount of the shareholders capital held within the [LTBF].
Clause 22.2 provides for the Capital Reserve to be credited with an amount arrived at by a complicated formula.
It is common ground that this amount was 4,455m.
Clause 22.3 (headed Maintenance of Capital Reserve) provides that no more may be added to the Capital Reserve and that it may be reduced only by being brought into account in the revenue account of the WPF (up to a limit arrived at by a formula) or the revenue account of the NPF (without limit).
There does not seem to have been a finding or formal agreement as to the amount of the WPF limit, but the unchallenged evidence of Mr Adrian Eastwood, the Companys actuarial director at the material time, was that the amount was 432m.
Clause 22.4 to 22.6 provided for the Capital Reserve to be notionally allocated between the WPF and the NPF.
The initial division was 1,895m to the WPF and 2,560m to the NPF.
Tables B and C annexed to the agreed statement of facts and issues (SFI) show how the Companys opening capital of 4,769m in its LTBF can be reconciled with the opening Capital Reserve (4,455m) and the membership compensation (5,846m).
Clause 22A of the scheme provided for what was described as a contingent loan, free of interest, from the NPF to the WPF, repayable as mentioned in that clause.
Its purpose was to compensate the WPF for the fact that its right to future profits could not be included, for regulatory purposes, as an asset with an admissible value.
This inter subfund loan (described in SFI, para 29) hardly featured in the parties written and oral submissions, but it is a further complication in understanding the regulatory forms, to which I now turn.
The forms
The balance sheet consists of forms 13 and 14.
Form 13 sets out the values of the assets of the fund (that is, the LTBF or a subfund of it) at their admissible values (a technical term which in practice was not less than 99% of market value).
The effective bottom line of form 13 is line 89, Grand total of admissible values.
Form 14 sets out liabilities and margins.
For present purposes the most important lines are: 11, mathematical reserves (that is, actuarial liabilities which have not yet been finally quantified); 13, balance of surplus (or valuation deficit); 14, LTBF carried forward; 49, total other (ie non actuarial) liabilities; 51, excess of the value of net admissible assets; and 59, total liabilities and margins.
The entries at line 89 of form 13 and line 59 of form 14 must be the same.
The balancing items on form 14 are the figures entered at line 13 (balance of surplus) and line 51 (excess of the value of net admissible assets, which is also called the investment reserve: SFI para 53(2)).
The interrelation between the figures at lines 13 and 51 of form 14 is that the line 13 figure is generally a relatively small amount representing value that has been brought into account but not yet finally appropriated.
The line 51 figure is the true balancing figure, and is the last figure to be entered on the form.
It represents the (generally very much larger) value that has not yet been brought into account at all the amount by which the admissible value of the LTBF assets exceeds the book value that has been brought into account.
It illustrates the proposition stated (perhaps in rather question begging terms) in para 9 of the Revenues written case, that life offices are treated differently from most businesses in that they can shelter profits from taxation to meet unforeseen future liabilities.
This point is discussed further in paras 82 to 86 below headed Bringing assets into account at book value.
Form 40, the revenue account, shows movements during the accounting period.
The most important lines for present purposes are 11, earned premiums; 12, investment income; 13, increase (or decrease) in the value of non linked assets brought into account; 14, increase (or decrease) in the value of linked assets; 15, other income; 19, total income; 29, total expenditure; 39, increase (decrease) in fund in financial year; 49, fund brought forward; and 59, fund carried forward (39 + 49).
The entry at line 49 must be the same as line 14 on form 14 for the previous accounting period, and the entry at line 59 must be the same as line 14 on form 14 for the current period.
As to lines 13 and 14, Lord Reed explains in his judgment (para 116) that any increase or decrease in the value of linked investments (line 14) is required to be brought into account automatically, but unrealised increases in the value of non linked assets (line 13) need not be brought into account.
Form 58 (valuation result and distribution of surplus) shows the actuarial surplus (line 29), its movement during the accounting period (lines 31, 34 and 35), and its distribution as between policyholders (line 46), shareholders (line 47) and balance (line 49, this being the same as line 13 on form 14).
The term distribution as used in lines 41 48 does not imply that sums necessarily leave the Companys hands; it refers to an allocation as between policyholders and shareholders.
Three separate forms 58 were completed for the WPF, the transferred business in the NPF and the new business in the NPF.
How the forms were completed by the Company
Volume V of the papers before the Court contains over 500 pages of the Companys regulatory returns for the three relevant accounting periods, including completed forms 13, 14, 50 and 58 for the LTBF and its sub funds (except that form 58 was completed, as already noted, for three sub funds and not for the LTBF as a whole).
From these forms the following information as to the whole LTBF can be extracted (in bn, rounded to the nearest 1m, and with some rounding adjustments in the computations). 2000 2001 2002 Form 13 line 89: total assets at admissible value 20.962 Form 14 line 11: mathematical reserves 18.645 line 13: balance of surplus 0.181 line 14: LTBF carried forward 18.827 23.066 19.128 0.033 19.162 22.427 19.807 0.064 19.871 0.386 2.107 22.427 0.468 0.441 1.668 3.462 20.962 23.066 line 49: total non actuarial liabilities line 51: excess of value of net admissible assets line 59: total liabilities and margins Form 40 2.000 2.445 2.540 line 11: earned premiums 0.922 0.633 0.787 line 12: investment income line 13: increase (decrease) in value of non linked assets brought (2.254) 1.273 (1.168) into account line 14: increase (decrease) in value of (0.036) linked assets (0.031) (0.011) 0.408 0.502 16.875 line 15: other income 1.040 line 19: total income 21.216 2.631 1.921 2.084 2.054 line 29: total expenditure (1.045) line 39: increase (decrease) in LTBF 19.162 0.709 19.871 line 49: fund brought forward .000 19.162 19.162 19.871 18.827 line 59: fund carried forward Form 58 (WPF) line 59: distributed surplus line 61: percentage distributed to
policyholders
It would be imprudent to attempt any sophisticated commentary on these figures.
The entry on form 40, line 15 for 2000 is obviously exceptional, representing the effect of a change of ownership of a long established business; no one has suggested that the whole sum is taxable.
But we know that it included a sum of 33.410m as a transfer from Capital Reserve (see para 70 below).
Taken overall, the figures illustrate the effect of bringing into account value which, for prudential reasons, has not previously been recognised.
During the three accounting periods the admissible (for practical purposes, market) value of the assets of the LTBF fell by about 4bn (the figures can be collected from SFI, Table A and the Companys completed forms 13 for the three accounting periods).
The mathematical reserves decreased by a little under 0.5bn and the recognised value of the LTBF, tracking as it did the mathematical reserve and the unappropriated surplus, went down by about 0.3bn.
But the investment reserve, that is the excess of admissible value over the recognised value of the LTBF (line 51 on form 14) was reduced by almost 1.8bn.
The successive entries 0.633 0.915 94.72 96.64 0.576 97.05 on line 13 of form 40 are noteworthy.
In the accounting period ending on 31 December 2000 the value of non linked assets brought into account increased by over 1.2bn although their admissible value decreased during that period.
This disparity was reversed in the two following accounting periods, during which (taken together) admissible value fell further by about 1.6bn but the form 40, line 13 decrease was a good deal larger, about 3.4bn.
During the whole period the Company declared bonuses of significant amounts, and allocated more than the mandatory 90% to with profits policyholders.
Part of the form 40, line 15 amounts included sums described in the notes submitted with the statutory forms (volume V, pp1756, 2035 2036 and 2319) as transfers from Capital Reserve.
The amounts were as follows (SFI, paras 56 60): 2000 2001 2002 m to WPF 33.410 30.724 17.000 81.134 total 33.410 472.724 370.000 876.134 to NPF 442.000 353.000 795.000 Whether they should nevertheless have been brought into the computation of the Companys profit or loss under Schedule D Case I under section 83(1) and (2) of FA 1989 is the first issue.
Line 15 of form 40 is, it will be recalled, specifically mentioned in the referred question (set out at para 36 above).
The statutory provisions
The provisions which this Court has to construe are in a single section, section 83 of FA 1989.
A rapid survey of the landscape in which that section is found shows that in the consolidating statute, ICTA 1988, Part XII dealt with special classes of companies and businesses, and Chapter 1 of Part XII dealt with insurance companies, underwriters and capital redemption businesses.
I have already mentioned section 433, which was repealed by FA 1989 and replaced by similar (but more complex) provisions in section 82 of FA 1989.
Section 444A, inserted into ICTA 1988 by the Finance Act 1990, applies to a transfer of long term business in accordance with a scheme sanctioned under section 49 of ICA 1982, but neither side placed any reliance on this section.
At the time when the consolidating statute was enacted the government was engaged in a far reaching review of the taxation of life offices, as already noted (para 48 above).
The outcome was sections 82 to 90 of FA 1989 (together with Schedule 8 to that Act, amending Part XII of ICTA 1988).
These sections, and Schedule 8, were frequently amended between 1989 and 2000, especially by the Finance Acts of 1995 and 1996.
The details are set out in Lord Reeds judgment (paras 134 to 163).
But I agree with Lord Hope (in para 15 of his judgment) that it is unnecessary, and maybe unhelpful, to go into the legislative history.
What matters is the statutory provisions as they were in 2000, 2001 and 2002.
During that period section 83(1) to (4) was in the following terms: (1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case 1 of Schedule D. (2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period. (3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business in a case where an amount is added to the companys long term business fund as part of or in connection with (a) a transfer of business to the company, or (b) a demutualisation of the company not involving a transfer of business, that amount shall (subject to subsection (4) below) be taken into account for the period for which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above. (4) Subsection (3) above does not apply where, or to the extent that, the amount concerned (a) would fall to be taken into account as a receipt apart from this section, (b) is taken into account under subsection (2) above otherwise than by virtue of subsection (3) above, or (c) is specifically exempted from tax.
Section 83A(1) to (3) of FA 1989 was in the following terms: (1) In sections 83 to 83AB brought into account means brought into account in an account which is recognised for the purposes of those sections. (2) Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of those sections are (a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the companys long term business; (b) that Act in respect of a part of that business. any separate revenue account required to be prepared under Paragraph (b) above does not include accounts required in respect of internal linked funds. (3) Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business.
It is common ground that the relevant revenue accounts are forms 40 for the whole LTBF and its constituent parts, the WPF and the NPF.
The first point of construction (which I have already described as a short point, but one which takes some getting to) is the meaning of value (whether realised or not) of those assets in section 83(2)(b).
The Company contends that it means market value, and that any reduction in their value (the form of words at the end of the subsection) is to be treated as an expense capable of giving rise to an allowable loss.
The Revenue contends that section 83(2) is referring to a difference in value (whether it be an increase or a reduction) as brought into account for the relevant period of account, and that section 83(A)(2) leaves no room for doubt as to what that means.
It directs attention to the appropriate regulatory account, in this case form 40.
The Lord President (para 54) described this approach as definitional.
Taxing a loss?
The Companys written case before this Court, and Mr Gardiner QCs robust oral submissions, characterised the Revenues position as unnatural, uncommercial and contrary to fundamental principles of tax law.
The Court was reminded of some famous judicial observations made more than a century ago, including Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315: The word profits I think is to be understood in its natural and proper sense in a sense which no commercial man would misunderstand and Lord Macnaghten in London County Council v Attorney General [1901] AC 26,35: Income tax, if I may be pardoned for saying so, is a tax on income.
It is not meant to be a tax on anything else.
In this case, Mr Gardiner submitted, the Revenue was attempting to tax what was in reality a loss of capital.
These submissions call for careful consideration.
The massive volume of documents and figures put before the Special Commissioners and the Court of Session, and now before this Court, creates a risk of getting lost in a labyrinth of abstractions.
Actuaries, accountants and lawyers are trying to converse in the same language, but it is not easy going.
It is a case in which there is a real danger, in the hackneyed phrase, of not seeing the wood for the trees.
It may help to avoid confusion to start with three simple points.
The first point is that the Revenue is not seeking to exact tax from the Company under Schedule D Case I either on profits or on losses incurred by the Company; it is taxing the Company on the I minus E basis.
Simultaneously the Company is seeking to establish large Schedule D Case I losses in order to have them available for surrender to obtain group relief.
The second point is that it is, and always has been, standard practice for life offices to bring the assets of their LTBFs into account, not at market values that fluctuate from year to year, but at a book value (though in practice that expression is applied to LTBFs in a way that an outsider may find surprising).
The third point is that the Capital Reserve is not, and never has been, a separate fund distinct from the Companys LTBF.
It has always been part of the LTBF.
Each of these three points calls for some further explanation.
The Crown option as it applies to this case
The Revenue is not seeking to charge tax under Schedule D Case I on losses incurred by the Company.
It is common ground (SFI, para 61) that at all material times since 3 March 2000 the Company has been taxed on the I minus E basis (the detailed computations for 2000 and 2002 can be seen in volume VII at pages 3211 and 3290; the relevant page for 2001 seems to have been inadvertently omitted).
Nevertheless (SFI paras 62 and 63) the Company seeks to claim an allowable loss under Schedule D Case I which would be available for surrender to other Lloyds TSB group companies by way of group relief.
The Revenue accepts (SFI, paras 62 and 63) that if the Company succeeds in this appeal the losses available for surrender would be approximately 28.7m for 2000, 612.6m for 2001 and 431.3m for 2002 (the relevant computations are at volume VII pages 3216, 3255 and 3295).
The fact that a proprietary life office can simultaneously pay tax on the I minus E basis and have an allowable loss under Schedule D Case I shows that whatever the position a century ago, when there were no special statutory provisions, the taxation of long term life assurance business is now a very specialised area.
Bringing assets into account at book value
Regulation 45(6) of the 1994 Regulations (set out in para 20 above, and later reproduced in Rule 9.10(c) of the FSAs 2001 instrument) allowed a life office, for the purposes of an actuarial investigation, to take the value of any of its assets as its value in the books or other records of the company.
This had been expressly permitted by the regulatory system since 1980, when Regulation 3 of the Insurance Companies (Valuation of Assets) Regulations 1976 (SI 1976/87), was amended by the Insurance Companies (Valuation of Assets) (Amendment) Regulations 1980 (SI 1980/5).
But the two expert witnesses agreed that it was a very long standing and well established practice, and the Special Commissioners made a finding to that effect (para 16 of their decision).
It would be potentially misleading to say that a life office is permitted to bring the assets of its LTBF into account at book value, since that is normally understood to mean historic cost.
In a LTBF some assets are normally brought into account at the full admissible value, and others at nil (Special Commissioners decision, para 48; also para 122 of Lord Reeds judgment).
It is unnecessary to go into the reasons for this practice, as to which there was no dispute.
The reasons for maintaining an investment reserve of unrecognised value are fundamental to the way in which long term life business, and especially with profits business, has been conducted in the United Kingdom.
It is the mechanism by which the life office, relying on the professional skills of its chief actuary and his staff, can achieve a balance between competing considerations and interests.
First and foremost is the overriding need for a sufficient margin of solvency.
Subject to that the life office will wish to produce consistently good results for its with profit policyholders, both in the policyholders interests and to preserve and enhance the companys reputation.
It must also achieve fairness between different classes of policyholders in accordance with their rights and expectations (the difficulties of which are illustrated by Equitable Life Assurance Society v Hyman [2002] 1 AC 408).
Finally there are tax considerations.
No company likes to pay more tax than it has to, or to pay it sooner than it has to.
Before 1989 the tax system allowed life offices to defer taxation, especially on unrealised capital gains.
It is common ground that section 83 of FA 1989 was intended to change that; the controversy is as to the extent of the change.
These points were well made by Mr Brian Drummond, an accountant, in an article entitled Making Sense of the FSA Return in Life Company Tax Computations (Tax and Accountancy Review, June 2006, p6).
Some changes had taken place by then (both on the regulatory front and the taxation front) but the article is nevertheless instructive.
After mentioning recent changes the author gives a brief overview of the forms: In broad terms, however, the overall structure remains unchanged.
Form 13 remains a reasonably straightforward analysis of the total admissible value of the assets of the company by category with narratives that are commendably clear; Form 40 demonstrates how much of the Form 13 value is brought into account for the purposes of calculating surplus; Form 58 deals with the calculation, composition and distribution of the surplus; and, Form 14 then links that exercise back to Form 13 by showing how much of that original Form 13 value is covering liabilities and bonuses and how much of it is being held in reserve.
He describes form 14 as an area of linguistic opacity, and comments: This confusion is carried across into form 14 of the FSA return where it increases further.
The first line in form 14 is described as mathematical reserves, after distribution of surplus and in this one narrative only two of the six words (after and of) take their conventional or even accounting meaning.
The most relevant passage is on the general philosophy of with profits business (at pp 9 10): Form 40 is described as revenue account but in conventional terms it is a very partial one.
By reference to normal accounting convention it is surprising to have a revenue account that makes no explicit reference to a movement in liabilities to third parties.
The layout of Form 40 and its interaction with Form 58 reflects much more of the history of with profit funds than it reflects normal accounting principles.
In with profits funds the starting point in determining the extent to which surplus is recognised is establishing what bonus should be recommended.
This will be driven by a combination of the results of the company (in terms of investment return and underwriting profit) together with policyholder reasonable expectations and the need to treat customers fairly.
One of the principles of UK with profits business is smooth bonuses from year to year.
Having established what bonus it is appropriate to declare for the year it is then possible, depending on the structure of the fund, to calculate the minimum extent to which surplus must be recognised both to meet the bonus requirement and any corresponding entitlement of the shareholders to participate in surplus as a fraction of the amount allocated to policyholders (very often one ninth the 90:10 structure).
Historically with profit funds hesitated to recognise any more surplus than was required to meet the bonus, and associated shareholder entitlement, and hence the fund would generally be approximately equal to the liabilities (after current year bonus) plus any residual surplus not allocated.
The nature of the Capital Reserve
The third point mentioned in para 78 above is that the Capital Reserve is not, and never has been, an appropriated fund separate from the Companys LTBF.
It is, as para 22.1 of the scheme makes clear, part of the LTBF.
It is an account falling within Lord Greene MRs second category in Allchin v Coulthard [1942] 2 KB 228, 234 235 merely an accounting category.
Abstract though it is, the Capital Reserve is on the Companys case of central importance to this appeal.
It is not easy to discern its purpose.
The Companys own independent actuarial expert, Mr Chamberlain, stated in his report dated 18 September 2007, para 5.1: The Scheme by which [the Society] demutualised established something it refers to as a Capital Reserve.
This Reserve is a financial structure whose form and operation is defined by the Scheme, and does not meet any particular regulatory or other requirement, other than that emanating directly from the Scheme.
It is a memorandum account and does not consist of particular assets.
Mr Allen, the Revenues independent expert, stated in his report dated 5 October 2007, para 6.1: Within the notes to their returns I understand that [the Company] created a memorandum account (the Capital Reserve) with an initial balance of approximately 4.5bn.
Notwithstanding that this account was referred to in the Scheme which obtained approval from the Court of Session, in my opinion this memorandum account had no meaning or relevance, other than as an item of information, as regards either the Companys statutory report and accounts or its regulatory returns.
The memorandum account did not represent any particular assets, nor did it reflect any actual profit or loss incurred by the Company, it was simply a note of a particular transaction.
The experts did not give a further explanation of the expression memorandum account, nor did counsel offer any.
The Special Commissioners made a finding that reflects the natural meaning of memorandum (para 45): The purpose of the Capital Reserve was to keep a record of this initial value created by [Holdings] and to distinguish it from subsequent profits.
The notion that it was an item of information that ought to be remembered comes out most clearly in the witness statement of Mr Michael Ross.
He was an actuary who was employed by the Society for most of his career, becoming chief actuary of the Society in 1986 and the first chief executive of the Company in 2000.
In his witness statement (paras 18 to 27, not challenged in cross examination) he described how demutualisation involved a strategic choice between ring fencing the estate and monetising the estate (the estate is a term used to describe a mutuals excess of assets over liabilities, or investment reserve).
After careful thought the Lloyds TSB group and the Society opted for monetising the estate.
This course was likely to be more attractive to the Societys members but required the Lloyds TSB group to find a very large sum to pay the membership compensation.
But the payment of that compensation gave the Lloyds TSB group the advantage that the Company had a comfortable investment reserve at the inception of its business (whereas with ring fencing the group might have had to inject further capital).
The group wanted to earmark what Mr Ross (para 27) regarded as shareholder owned capital, held within the [LTBF] in order to be able, in the long term, to benefit from it.
That provides a clue, I think, to the purpose of the restriction on reduction of the Capital Reserve in para 22.3 of the Scheme (summarised in para 60 above).
Only a limited amount (432m out of 4,455m) of the Capital Reserve could be brought into account in the revenue account of the WPF, because it was a 90/10 fund and nine tenths of the distributed surplus were to go for the benefit of holders of with profit policies; only one tenth (at most) could find its way to the shareholder, Holdings.
There was no restriction (beyond the total amount of the Capital Reserve) on bringing it into account in the NPF, which was a 0/100 fund.
The decision of the Special Commissioners and the judgments in the Court of
Session
The Special Commissioners decided the first issue in favour of the Company, and the Court of Session unanimously upheld that decision (Lord Emslies dissent was on the second, narrower issue as to section 83(3)).
All three members of the Court delivered full judgments, so this Court has four separately reasoned routes to the same conclusion on the first issue.
The reasoning can be imprecisely classified under three heads: the correct approach to the construction of taxing statues, arguments based on the legislative scheme and purpose, and detailed linguistic arguments.
The Lord President dealt most fully with statutory construction (paras 45 to 49).
He cited the well known speech of Lord Steyn in Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991, 9991000, in which Lord Steyn referred to Lord Wilberforces seminal speech in W T Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300, 323: Lord Wilberforce restated the principle of statutory construction that a subject is only to be taxed upon clear words .
To the question What are clear words? he gave the answer that the court is not confined to a literal interpretation.
He added There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded.
This sentence was critical.
It marked the rejection by the House of pure literalism in the interpretation of tax statutes.
The Lord President ultimately decided the issue by applying the clear words principle in the light of his view of the statutory purpose (paras 55 and 56).
Lord Emslie relied on the same principle, and some other principles which he set out at para 197: Since this appeal concerns the construction of tax legislation, certain fundamental rules, principles and presumptions may be thought to apply.
First, as Lord Wilberforce explained in Vestey v Inland Revenue Commissioners [1980] AC 1148, 1172: Taxes are imposed upon subjects by Parliament.
A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined.
Second, in the absence of specific charging provisions, capital and capital receipts do not fall to be taxed as revenue and vice versa.
Third, corporation tax being an annual tax on the profits of a company, it is prima facie reasonable and appropriate to construe statutory charging provisions as directed towards real receipts and gains . in a sense which no commercial man would misunderstand: Gresham Life Assurance Society v Styles [1892] AC 309, 315, per Lord Halsbury LC.
And fourth, as reflected in countless provisions of the taxing statutes, a subject is in general assessable to tax on his own profits and gains, and not on those of any third party.
The second, third and fourth of these principles (and especially the second) may be what the Special Commissioners had in mind (in para 79 of their decision) in a more general reference to tax principles as predisposing them in the Companys favour, and in characterising the transfer from the Capital Reserve as a capital receipt (para 80).
Arguments based on the legislative scheme and purpose move from the very general to the rather more particular.
What was the underlying purpose of section 83? In particular was it intended, as the Lord President stated in para 55 of his judgment, to reverse the effect of section 433 of ICTA 1988? Is there a key conceptual distinction (Lord Emslie, para 201) between the Companys LTBF and the assets representing that fund? Was a transfer from the Capital Reserve a capital receipt comparable to an injection of new capital (Special Commissioners, para 80)? How cogent is the argument (Lord Reed, para 183; Lord Emslie, para 197, fourth point, and para 205, second point) that one taxpayer should not be taxed on another taxpayers profits or gains? What practical results do the statutory provisions produce if construed (Lord Emslie, para 200) as a one stage or alternatively a two stage process? I shall consider these points in turn.
Legislative scheme and purpose
It is permissible, without getting into the territory of Pepper v Hart [1993] AC 593, to look at the official consultation paper published in 1988, The Taxation of Life Assurance, to see the general nature of the problem perceived by the Revenue.
The most relevant paragraphs are paras 6.2 to 6.7, 6.12 to 6.21, 6.33 and 7.1 to 7.8 A life office might have a large capital gain on a long term income producing investment (such as a fully let office block or a strategic holding of shares in an oil company) as part of the with profits part of its LTBF.
Before 1989 this gain could be recognised (or brought into account) in its revenue account without being realised so as to give rise to a chargeable gain.
Value representing at least nine tenths of the gain could then be distributed (in the form 58 sense, that is allocated) to the holders of with profits policies so as to obtain the protection of section 433 of ICTA 1988, as well as escaping income tax or capital gains tax in the policyholders hands on the maturity of their policies (assuming them to be qualifying policies).
Section 83 of FA 1989 made the recognition of an unrealised capital gain a receipt to be brought into the Schedule D Case I computation, while section 82 of FA 1989 re enacted the substance of section 433 in a more satisfactory form.
All this is very clearly set out, in a good deal more detail, in paras 123 to 133 of Lord Reeds judgment (which refer to section 83 in the form in which it was originally enacted).
I respectfully think that in para 55 of his judgment the Lord President was to some extent running together the functions of sections 82 and 83, and misunderstanding the purpose of the two sections in tandem.
Lord Emslie referred to section 433 (para 200) but not to section 82.
In my opinion Lord Reeds analysis is to be preferred.
Section 83 is concerned with the immediate implications, in making the necessary Case I computations, of bringing into account all or part of the difference between book value and market value, and section 82 is concerned with the next stage of the computations, that is adjustments in respect of the distribution of surplus to holders of with profits policies (covered by form 58, lines 41 to 59).
The next point is the term fund.
It is, as both Lord Reed (para 112) and Lord Emslie (para 199) observed, used inconsistently both in ICA 1982 and in the regulatory forms.
But the two principal and relevant meanings, in this context, are clear (and here I am repeating ground I have already covered).
The LTBF is an actual, appropriated fund of identifiable investments, the constituent assets of which (with their admissible values) appear in form 13.
The Capital Reserve is a notional part of that fund to an initial amount of 4,455m; the independent actuarial experts agreed that it serves no regulatory purpose.
The fund for the purposes of lines 39, 49 and 59 of form 40, and for all the purposes of form 58, is the same fund, but valued in a special way (that is at book values in the sense that actuaries use that term) in order to produce the life offices objectives solvency and prudent preservation of the investment reserve, but at the same time smooth progress in the allocation of bonuses to with profits policies.
I am not sure that I understand para 201 of Lord Emslies judgment.
In that paragraph he is (as I understand it) setting out part of the submissions made on behalf of the Company.
But later (para 204) Lord Emslie himself accepted that there is a significant distinction between the assets and the fund itself.
Of course there is a difference, the difference between the parts and the whole.
But the value of the whole is in this case the sum of the values of the parts, and the significant distinction, affecting both, is the basis of valuation.
It is common ground that if in 2001 or 2002 the Lloyds TSB Group had decided to inject fresh capital into the Companys LTBF (as might have been done by the Company issuing new shares to Holdings, paid for in cash that was appropriated to the LTBF) it would not have been treated as a receipt under section 83(2).
The new money would have appeared on line 26 of form 40 (transfer from non technical account).
The admissible value of the LTBF would have been increased, and so (if it was needed for solvency purposes) would its value as brought into account (lines 39 and 59 of form 40).
A transfer from the Capital Reserve, by contrast, costs the group nothing (although it may be an indication that the state of the business is disappointing).
The transfer does not increase the market value of the LTBF.
Nor has it any regulatory significance, as the experts agreed.
What happens is that part of the value held in the investment reserve is brought into account, a familiar event generally recorded (as Mr Allen stated, though Mr Chamberlain disagreed) on line 13 of form 40.
I respectfully consider that the Special Commissioners, and to some extent the Court of Session also, attached too much weight to the label Capital Reserve and to the notion that capital gains ought not to be taxed under Schedule D, Case I.
It could not be clearer that under section 83(2)(b) any increase in value (whether realised or not) of investments constituting a LTBF, as brought into account, is to come into the Case I computation.
The argument that (in the absence of very clear words) one taxpayer ought not to be taxed on another taxpayers profits or gains is, on the face of it, a strong one.
It is not satisfactorily answered simply by pointing out (though this should not be forgotten) that this appeal is not about taxing profits.
It is about allowing losses capable of being surrendered for the benefit of other group companies.
But the Company acquired a long established mutual business and a LTBF with a healthy investment reserve.
That reserve may have been built up by the Society largely by means of unrealised gains.
But it was the Company and the Lloyds TSB Group that decided, for entirely understandable reasons, to bring part of the investment reserve into account, rather than making an injection of new capital.
The language of section 83(3)(b) (as amended in 1996) shows that Parliament had demutualisation well in mind as a situation for which the legislation should make provision.
The last general point to be considered, before getting to linguistic arguments, is the implication of Lord Emslies illuminating distinction (para 200, summarising the Companys argument, and para 204, accepting it) between a two stage process (asking whether there are any real gains, and then how far they have been brought into account) and a one stage process (asking simply what increase in value, if any, has been brought into account).
Again, it is necessary to be reminded that this appeal is about losses, not gains; and the three accounting periods have to be considered separately, and not as a whole.
In any accounting period the operation of the statutory provisions, if analysed as a two stage process, allows six different combinations, although some of them may be fairly improbable in practice, as follows (AV denoting admissible value, and RV value recognised and brought into account): (1) AV up, RV up by less (2) AV up, RV up by more (3) AV up, RV down (4) AV down, RV down by less (5) AV down, RV down by more (6) AV down, RV up.
It is easy to see how the competing interpretations work in situations (1), (2), (4) and (5).
On the Companys two stage approach the lower figure (whether an increase or a reduction) will be brought into the computations; on the Revenues one stage approach the difference in RV will always be taken.
But it is not so easy to see how either sides interpretation would apply to situations (3) and (6); and the Companys regulatory return for 2000 disclosed situation (6).
It might be thought that though neither sides interpretation fits easily, the Companys two stage approach is distinctly more difficult to reconcile with the situation in which there is a reduction in admissible value, but an increase in value brought into account, in an accounting period, and the Company is seeking to establish an allowable loss during that period.
But so far as I can see that submission was not made either to the Special Commissioners or to the Court of Session, nor do I recollect it being put forward in this Court.
The terms of the agreed question do not positively require the point to be resolved.
Indeed SFI, para 63 suggests that the point may already have been agreed between the parties.
So the best course is, I think, to exclude that point, which was not argued, from any consideration of the statutory scheme and purpose.
Nevertheless, unlike the Special Commissioners and (to some extent) the Court of Session, I do not approach the narrower linguistic points with any predisposition in favour of the Companys case.
I approach them disposed towards the Revenues case as being more in accordance with the statutory scheme and purpose.
Linguistic points on the first issue
I can take these more shortly, and it is convenient to do so by reference to the numbered sub paragraphs at the end of para 181 of Lord Reeds judgment.
The first point is that an increase in value . of . assets is said to refer most naturally to capital gains.
In some contexts it might do so.
In the context of a system of computation which is closely and explicitly linked to the regulatory returns in respect of LTBFs I see little force in this point.
What is important is how value is to be measured, and to my mind sections 83(2) and 83A leave no doubt about that.
The second point is on the words (whether realised or not) in section 83(2)(b).
The section was making an important change in the law in that unrealised increases in value, so far as brought into account, were to come into the tax computation.
To my mind it would have been surprising if the draftsman had not inserted this parenthesis so as to leave no doubt as to the character of the change in the law.
The third point is on another parenthesis in section 83(2), (and not otherwise), though these words have come out in the text of Lord Reeds judgment before us as or otherwise.
Again, I have to say that I think the draftsman is being rather unfairly criticised for his efforts to leave no doubt about the intended meaning.
The preceding word as means in the manner that and the parenthesis means and in no other manner.
To my mind it is a bit hard to dismiss this as otiose.
Lord Reeds fourth point is that the expression brought into account is not apt to describe the overall effect of those entries.
I confess that I simply do not understand this point.
The critical entry is line 13 on form 40 (increase (decrease) in the value of non linked assets brought into account).
That is the only line on form 40 in which the words brought into account are found.
It was conceded that the line 15 entry could have been on line 13.
The bottom lines (39, 49 and 59) show the overall position, and do not use the words brought into account.
Lord Reeds remaining points on the first issue (in para 181(5) and (6) and para 183) are more general and I will not revisit them.
Conclusion
In my judgment the Revenues submissions on the first issue are correct, both as to the statutory scheme and purpose and as to the linguistic points just mentioned.
I have gone into the matter at some length because I am conscious that I am differing both from the Special Commissioners and from the unanimous view of the Court of Session.
But in the end I consider that it is simply a question of giving section 83(1) and (2) of FA 1989, as amended, their natural meaning.
On that basis the second issue does not arise and I prefer to say nothing about it.
I would allow the Revenues cross appeal and treat the Companys appeal as moot.
LADY HALE
As so often happens, what appears at first sight to be a very complicated question turns out on closer analysis to be quite a simple one.
When calculating the profits of an insurance company in respect of its life assurance business under Case 1 of Schedule D to the Taxes Act, does an increase in value or conversely a reduction in the value of the assets of its long term business fund refer to an increase or decrease in their actual value? Or does it refer to an increase or decrease in their value as brought into account for a period of account in the companys revenue account prepared for the purpose of the Insurance Companies Act 1982?
We know that the words as brought into account for a period of account (and not otherwise) in section 83(2) of the Finance Act 1989 (set out by Lord Walker at para 41 above) describe the words the following items; we know that the following items are (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets; we know from section 83A (set out by Lord Walker at para 74 above) that brought into account means brought into account in the revenue account (or accounts) prepared for the purposes of the Insurance Companies Act 1982 in respect of the companys long term business (or part of it); so the linguistic question boils down to what is meant by as in section 83(2).
The Company would have it that as means when.
The link to the regulatory returns is a purely temporal one.
Value means real value not whatever the company chose to put in the forms.
The Revenue would have it that as means as.
What is taken into account in computing the companys profits for income tax purposes is what the company brings into account in completing its revenue accounts for regulatory purposes.
In my experience, if Parliamentary counsel mean when, they write when, and if they mean as, they write as.
We should be slow to re write what they have written.
The words and not otherwise, if nothing else, make it clear that there might have been some other way of taking items (a) and (b) into account for income tax purposes, but this is the way it is to be done.
They are making a special rule for life insurance business.
This is not surprising, for all the reasons that Lord Walker has so clearly and carefully explained.
The words whether realised or not point to the real change which was being made by the 1989 Act.
Otherwise it was business as usual.
It was not until 1995 that these insurance companies were required to file any other sort of accounts than those which they had to file for regulatory purposes.
It was natural for the Revenue to use the figures in the regulatory revenue account as their starting point.
In full agreement with Lord Walker, and Lord Hope and Lord Neuberger, therefore, I would allow the Revenues cross appeal and regard the Companys appeal as moot.
LORD NEUBERGER
I too would recall the interlocutor of the Inner House of the Court of Session and allow HMRCs cross appeal.
Having had the great benefit of reading in draft the judgments of Lord Hope and Lord Walker, I can express my reasons shortly.
The cross appeal raises an issue as to the meaning of section 83(2) of the Finance Act 1989 (as substituted by paragraph 16 of Schedule 8 to the Finance Act 1995).
It is unnecessary for me to set out section 83, as it is fully quoted in para 7 of Lord Hopes judgment and para 73 of Lord Walkers judgment.
As will be clear to anyone who has read those judgments, the difficulty in this case arises from the fact that the issue of interpretation arises in the context of a very complex background.
That complexity is attributable to a number of different factors, namely (i) the technical rules as regards the regulatory returns to be made by life assurance offices, (ii) the many changes in the legislation embodying those rules since they were first introduced in 1870, (iii) the many changes in the statutory provisions governing the taxation of life assurance offices, (iv) the extensive contractual provisions in the documentation governing the scheme (the scheme) for transferring of the business of Scottish Widows Fund and Life Assurance Society to Scottish Widows plc (the Company), and (v) the details of the regulatory returns made by the Company in the three accounting years in issue.
When considering the application of section 83(2) to the facts of this case, I am sceptical about the value of analysing the history of the statutory provisions governing either the returns to be made by life assurance offices or the taxation of profits made by life assurance offices i.e. what I have characterised as factors (ii) and (iii).
This cross appeal concerns the meaning of the statutory provision in force during the three relevant years, section 83(2), and its impact on the returns actually made in respect of those years, in the then stipulated form by the Company.
Particularly as the provisions of the scheme, the prescribed forms for returns, and the contents of the Companys returns for the three years in question, all require careful analysis, it seems to me that to focus in addition on the rather intricate history, as opposed to the present provisions, of the regulations, risks taking ones eye off the ball (or, as Lord Walker puts it, not seeing the wood for the trees).
Legislative archaeology has its place in statutory interpretation, but its role is limited.
Where a statutory provision, when read in its immediate statutory and practical context, has a meaning which is tolerably clear as a matter of language, and not unreasonable or unfair in terms of its consequences, it seems to me that little is to be gained, and much may be lost (in terms of time, expense and eventual confusion) by going into the genesis and development of the provision in earlier legislation.
As Lord Hope points out, such an approach is consistent with what was said both by Lord Wilberforce in Farrell v Alexander [1977] AC 59, 73 and by Lord Diplock in Inland Revenue Commissioners v Joiner [1975] 1 WLR 1701, 1715 6.
Once one understands the scheme, the relevant regulations, the forms, and the Companys returns for the three years in question, it appears to me that the answer to the question posed on the cross appeal, namely the meaning and effect of section 83(2), is tolerably clear.
I could not hope to equal the clarity of Lord Walkers analysis in paras 49 to 53, 57 to 70, and 82 to 91, and, very gratefully, adopt the benefit of his distillation of the various complex matters which he there explains.
Turning to the central issue on the cross appeal, the meaning of section 83(2), it may be a little glib to suggest that HMRCs case is ultimately vindicated by a single word.
However, if one was to isolate a single crucial point, it seems to me that it would involve focussing on the word as in that subsection, as Lady Hale suggested during argument.
Section 83(2) stipulates that the items which should be taken into account as receipts of [a particular accounting] period are to be those items identified in paras (a) and (b) as brought into account for [that] period of account.
The obvious and natural effect of the words which I have emphasised is that those items are to be taken into account for the period in question in the same way and to the same extent as they are brought into account for that period.
It was argued on behalf of the Company that the expression as brought into account for a period of account should be treated simply as a reference to the period in which the item was brought into account, and was not concerned with how the item was brought into account.
Particularly in the light of the inclusion of the word as, that does not seem to me to accord with the natural reading of the expression.
Although both the Company and HMRC relied on other provisions in the 1989 Act to support their respective cases on the meaning of the expression, I am unconvinced that they are of any real assistance.
Thus, it was suggested that the words (and not otherwise) in the subsection assisted the Companys interpretation.
I do not see how that is so: they are there simply to emphasise that an item is only to be brought into account if it falls within the expression, and therefore they can take the issue of what the expression means no further.
Equally, the fact that section 83A(1) (as inserted by paragraph 16 Schedule 8 to, the 1995 Act and amended by paragraph 6 of Schedule 31 to the 1996 Act) defines the term brought into account does not take matters further, as the position of each party is consistent with that definition.
The conclusion that HMRCs construction of section 83(2) is correct seems to me to be supported, rather than undermined, by the normal approach to taxation of business profits as explained by Lord Halsbury LC in Gresham Life Assurance Society v Styles [1892] AC 309, 315 and by Lord Hoffmann in Revenue and Customs Commissioners v William Grant & Sons Distillers Ltd [2007] UKHL 15, [2007] SC (HL) 105, [2007] 1 WLR 1448, para 2.
In connection with taxing business profits, the concept of a profit should normally be accorded its proper meaning, which will obviously depend on the specific context, but current accountancy practice is generally a good, and often the best, guide as to the precise quantification of any profit.
In the case of a life assurance business, HMRCs case is that, in effect, statute requires the profit to be assessed by a rather unusual means, namely by reference to the returns in the regulatory forms.
This is entirely consistent with the normal approach to assessing the profits of companies for taxation purposes, as these returns effectively take the place of the statutory audited accounts, which are relied on to define the profits of the overwhelming majority of other businesses owned by limited companies.
Furthermore, although there is, at first sight, real force in the Companys argument that HMRCs case results in its business being taxed on some figure which cannot sensibly be said to be a profit, a closer analysis of the situation, as provided by Lord Walker in paras 81 to 90 and 95 to 105, shows that this is incorrect.
Accordingly, and in agreement with the fuller reasoning of Lord Hope and Lord Walker, I would allow HMRCs cross appeal.
As the cross appeal succeeds, it is unnecessary to consider the Companys appeal.
I agree with Lord Walker that it would be better not to go into the question whether the majority of the Inner House was right in finding for HMRC on section 83(3).
It is tempting to do so, given that there is a decision of the Inner House on the point.
However, at least on the basis of the argument we have heard on this appeal, it does seem to me that the interpretation of subsection (3) is rather difficult, and I think it would be better to wait for a case where the issue matters, not least as it may be that some assistance would be gleaned from the facts of such a case, which may throw light on the practical consequences of the rival interpretations.
LORD CLARKE
I confess that I was initially attracted by the approach of Lord Emslie to the issues in relation to both the cross appeal and the appeal.
However, having considered the masterly judgment of Lord Walker, I have found his reasoning compelling and agree with him (and indeed Lord Hope, Lady Hale and Lord Neuberger) that the Revenues cross appeal on the true construction of section 83(2) of the Finance Act 1989 as amended should be allowed.
Like Lord Walker, Lady Hale and Lord Neuberger, I prefer to express no view on the issue of the true construction of section 83(3).
I too would therefore allow the Revenues cross appeal and treat the Companys appeal as moot.
| Scottish Widows Plc (Scottish Widows) is a life assurance company.
It was established in 2000, when it acquired the business of Scottish Widows Fund and Life Assurance Society (the Society) under a scheme of transfer which had been approved by the Court of Session in Scotland.
Scottish Widows acquired assets under the scheme which had an approximate value of 25bn, and it became subject to actuarial liabilities of approximately 19bn.
Members of the Society received compensation of approximately 5.8bn, which represented the surplus of the Societys assets over its liabilities at the time of the transfer.
The compensation was paid by Scottish Widows holding company, in return for the members of the Society giving up their right to participate in the surplus.
The scheme provided that Scottish Widows was to establish and maintain a Long Term Business Fund (LTBF) to fund its long term insurance business.
It also provided that there was to be a memorandum account within the LTBF, called the Capital Reserve.
This was said to represent the value of shareholders capital within the LTBF.
Life assurance companies are required to submit annual regulatory returns, in particular to demonstrate solvency.
Various forms are prescribed for these returns.
One these is known as Form 40, which is a revenue account in respect of the LTBF.
In the years following transfer the value of the assets of Scottish Widows LTBF fell substantially, principally because of falls in the stock markets.
To cover those losses and to allow for distributions to policyholders, Scottish Widows brought into account amounts on Form 40 for each of the accounting periods 2000, 2001 and 2002.
These amounts were recorded in line 15 of the relevant Form 40s.
They were described as transfers from the Capital Reserve.
Section 83 Finance Act 1989 provides for certain sums to be brought into account in the computation of the profits of an insurance company in respect of its life assurance business for the purposes of corporation tax.
In the terms that were in force between 2000 and 2003 section 83(2) provided that: [T]he following items, as brought into account for the period of account (and not otherwise), shall be taken into account as receipts of the period (a) the companys investment income from the assets of its long term business fund, and (b) any increase in value (whether realised or not) of those assets.
Section 83(3)(a) made provision for ascertaining whether or to what extent a company had incurred a loss in respect of its life assurance business where an amount was added to an insurance companys long term business fund as part of or in connection with a transfer of business to that company.
The Revenue maintained that the amounts to be brought into account as receipts for the computation of profits or losses for tax purposes under section 83(2)(b) or, in the alternative, under section 83(3)(a) were the amounts shown in line 15 on Form 40.
It maintained that the reference to a difference in value as brought into account directed attention to the figures that had been entered on Form 40, not the market value of the assets of the LTBF.
Scottish Widows argued that the words increase in value in section 83(2)(b) meant an increase in the actual value of actual assets, and that the words as brought into account were concerned with when the
increase was brought into account, not the extent of the increase.
Here the value of the assets of the LTBF had fallen during each of the relevant periods.
So there was no increase which could be brought into account.
The parties referred the question whether, in computing the Case I profit or loss of Scottish Widows for the accounting periods ending in 2000, 2001 and 2002, the amounts that fell to be taken into account as receipts to the Special Commissioners were the amounts shown in line 15 of Form 40.
It was agreed that, if Scottish Widows argument that it is actual values and not those amounts that should be taken into account is correct, it will have allowable losses in respect of those years of 28.7m, 612.6m and 431.3m.
The Special Commissioners answered the question in the affirmative.
They held that, although the amounts shown on Form 40 were not to be brought into account by section 83(2), they were covered by section 83(3)(a).
The Inner House unanimously dismissed the Revenues appeal against the decision on section 83(2) and by majority (Lord Emslie dissenting) dismissed Scottish Widows cross appeal against the decision in respect of section 83(3)(a).
Scottish Widows appealed and the Revenue cross appealed.
The Supreme Court unanimously allows the Revenues cross appeal and holds that the amounts that were to be taken into account as receipts by virtue of section 83(2) were the amounts shown on Form 40.
It therefore answers the question that was referred to the Special Commissioners in the affirmative.
Lord Hope and Lord Walker both give detailed judgments.
Lady Hale and Lord Neuberger give shorter judgments, agreeing with each other and with Lord Hope and Lord Walker.
Lord Clarke agrees with all of the judgments.
Although the applicable statutory provisions had been amended on various occasions, it was not helpful to look at their legislative history.
That should only be done where there is an interpretative difficulty which classical methods of construction cannot solve.
The proper approach was to concentrate on the wording of sections 83(2) and (3)(a) as they were during the relevant accounting periods: [15], [73], [122] [124].
Lord Walker analyses in detail the regulatory and taxation regime which applies to life assurance companies and the particular features of the demutualisation scheme so as to provide a backdrop to the statutory construction: [40] [71].
There were two particularly important points.
One was that when completing regulatory returns, book values could be used, and that an insurer enjoyed a certain freedom in determining what amount of its actuarial surplus to recognise in its returns: [82] [86].
It was also particularly important to appreciate the nature of the Capital Reserve.
It was not a fund of particular assets, separate from the LTBF, but was merely an accounting category recording an initial value within the LTBF: [87] [91] [101].
The key to interpreting section 83(2) was the phrase as brought into account and, in particular, the use of the word as: [22], [76], [116], [125].
This demonstrated that the computation must proceed on basis of what was actually entered on the appropriate regulatory account, in this case the form known as Form 40.
It was important that, when completing its returns, an insurance company should be permitted to use book values: [20].
The various arguments which were advanced in favour of Scottish Widows construction, based on general principles of interpreting tax legislation ([24] [26], [101] [102]), the statutory scheme and specific aspects of the drafting ([23], [107] [112]), fell to be rejected in the face of this clear statutory language.
The Special Commissioners and, to some extent, the Court of Session had attached too much weight to the label Capital Reserve, which had led them to attach undue weight to the notion that capital gains ought not to be taxed under Schedule D, Case I: [26], [101].
Given that the Court allows the Revenues cross appeal, a majority preferred to express no view on section 83(3)(a).
Lord Hope indicated that, had it been necessary to decide the point, he would have held in agreement with the majority in the Inner House that the relevant amounts would have been covered by section 83(3)(a): [28] [31].
|
The appellant, Paul Macklin, was convicted after trial on 26 September 2003 of a charge of possession of a handgun in contravention of section 17 of the Firearms Act 1968, and a further charge of assaulting two police officers by repeatedly presenting the handgun at them.
The only issue in dispute at his trial was whether he was the person who had been pursued by the officers after an incident to which they had been called, and during that pursuit had turned repeatedly and pointed the gun at them.
At the trial, the appellant was identified by both of the officers.
One gave evidence implying that he recognised the appellant at the time of the incident.
The other had identified the appellant from a selection of photographs shown to him after the incident.
Their evidence was challenged at the trial in cross examination by counsel for the appellant, and in counsels address to the jury.
In his directions to the jury, the judge warned them about the risk that visual identification evidence might be unreliable.
In accordance with the practice at the time, he gave no directions specifically concerning the risks which might be associated with the identification of an accused person in court.
Some years later, following developments in practice in relation to the
disclosure of unused material, the Crown disclosed to the appellant a quantity of material which had not been disclosed at the time of the trial.
This included statements given to the police by a number of witnesses who had seen part of the pursuit of the gunman by the officers, or had seen the car in which he escaped.
One of those witnesses was recorded as giving a description of the gunman which was inconsistent with the appearance of the appellant.
Two other witnesses were recorded as having failed to identify the appellant when shown his photograph.
It was also disclosed that the police had found fingerprints belonging to someone other than the appellant inside the car, and that the person identified by the fingerprints had a criminal record.
In the light of these disclosures, in 2012 the appellant was granted leave to appeal against his conviction on three grounds.
The first ground was based on the Crowns failure to disclose material evidence to the defence.
The second ground was based on the Crowns leading and relying on the evidence of dock identifications by the police officers, without the other material evidence having been disclosed, and without the officers having previously participated in an identification parade.
The third ground was based on a contention that the judge had misdirected the jury in relation to the identification evidence, in that he had failed to warn the jury in relation to the dangers of dock identification evidence, particularly where no identification parade had been held.
The first and second of these grounds of appeal raised devolution issues, as defined in paragraph 1 of Schedule 6 to the Scotland Act 1998 (the 1998 Act).
In other words, it was contended that, in the respects identified in those grounds of appeal, the Lord Advocate, who was a member of the Scottish Government and the person responsible for the conduct of the prosecution, had acted in a manner which was incompatible with the appellants Convention rights under article 6(1) of the European Convention on Human Rights.
On 11 September 2013 the High Court of Justiciary refused the appeal, for reasons which were explained in an opinion delivered by Lord Mackay of Drumadoon: [2013] HCJAC 80; 2013 SCCR 616.
The appellant was subsequently granted permission to appeal to this court under section 288AA of the Criminal Procedure (Scotland) Act 1995 (the 1995 Act), inserted by section 36 of the Scotland Act 2012 (the 2012 Act).
The jurisdiction of this court
It is important to understand the nature of the jurisdiction exercised by this court under section 288AA of the 1995 Act.
The court does not sit as a criminal appeal court exercising a general power of review.
Subject to a small number of specified exceptions, every interlocutor and sentence pronounced by the High Court in appeals in solemn proceedings is, by statute, final and conclusive and not subject to review by any court whatsoever: 1995 Act, section 124(2).
One exception enables the High Court to review its own decisions on references by the Scottish Criminal Cases Review Commission.
The other exceptions enable this court to determine compatibility issues (an expression which I shall explain shortly) on references under section 288ZB of the 1995 Act (inserted by section 35 of the 2012 Act) and appeals under section 288AA, and to determine devolution issues on appeals under paragraph 13(a) of Schedule 6 to the 1998 Act.
The concept of a compatibility issue was introduced by section 34 of the 2012 Act, which inserted a new section 288ZA into the 1995 Act.
That section defines a compatibility issue as a question arising in criminal proceedings as to whether a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) of the Human Rights Act 1998, or in a way which is incompatible with EU law, or whether an Act of the Scottish Parliament or any provision of such an Act is incompatible with any of the Convention rights or with EU law.
Section 36(4) of the 2012 Act amended the definition of devolution issues in paragraph 1 of Schedule 6 to the 1998 Act so as to exclude compatibility issues from its scope.
One consequence of these provisions is that some questions which fell within the definition of devolution issues before the 2012 Act came into force no longer fall within that definition, but fall instead within the definition of compatibility issues.
Another consequence is that some questions which, before the 2012 Act came into force, did not fall within the definition of devolution issues, now fall within the definition of compatibility issues.
The present case illustrates the point.
As I have explained, the first and second grounds of appeal before the High Court raised questions as to the compatibility of the conduct of the prosecution with the appellants Convention rights.
Under the 1998 Act as it stood prior to amendment by the 2012 Act, those questions constituted devolution issues.
Under section 288ZA of the 1995 Act, on the other hand, those questions would be classified as compatibility issues.
The appellants third ground of appeal, concerning an alleged misdirection by the trial judge, did not raise a devolution issue, since the trial judge was not a member of the Scottish Government.
Under the provisions introduced by the 2012 Act, on the other hand, a direction by a judge may raise a compatibility issue, if there is a question whether the judge has acted in a way which was incompatible with the appellants Convention rights.
In order to address potential problems arising from the differences between the system operating before the 2012 Act came into force and the system operating afterwards, transitional provisions were introduced by the Scotland Act 2012 (Transitional and Consequential Provisions) Order 2013 (SSI 2013/7).
Article 2 of the Order introduced the concept of a convertible devolution issue, defined as a question arising in criminal proceedings before the relevant date which (a) is a devolution issue, (b) would have been a compatibility issue had it arisen on or after that date and (c) had not been finally determined before the relevant date.
The relevant date was 22 April 2013, when the relevant provisions of the 2012 Act came into force.
As at that date, the devolution issues raised by the appellants first and second grounds of appeal had not been finally determined.
As I have explained, those issues would have been compatibility issues had they arisen on or after that date.
It follows that those questions are convertible devolution issues.
By virtue of article 3 of the order, convertible devolution issue became compatibility issues on the relevant date (subject to exceptions which do not apply in the present case).
The questions raised by the appellant as to the compatibility of the conduct of the prosecution with his Convention rights are therefore compatibility issues.
No compatibility issue arises, however, in relation to the directions given by the trial judge, since his directions did not give rise to a devolution issue, and therefore did not give rise to a convertible devolution issue.
Finally, in relation to jurisdiction, it is important to understand the limited nature of this courts powers on an appeal for the purpose of determining a compatibility issue.
In terms of section 288AA(2) of the 1995 Act, the powers of the Supreme Court are exercisable only for the purpose of determining the compatibility issue, that is to say, in the present case, the question whether the Lord Advocate has acted in a way which is made unlawful by section 6(1) of the Human Rights Act.
When it has determined the compatibility issue, the Supreme Court must remit the proceedings to the High Court: section 288AA(3).
The present appeal
The compatibility issue raised in the present appeal concerns the question whether the Crown acted incompatibly with the appellants Convention rights under article 6(1) by failing to disclose material evidence to the defence and by leading and relying on the evidence of identification by the police officers, without the other material evidence having been disclosed, and without the officers having previously participated in an identification parade.
Counsel for the appellant emphasised in his submissions that these were not two separate complaints, about non disclosure on the one hand, and dock identification on the other hand.
He was not arguing that the appellants Convention rights had been violated by the dock identification or the judges directions.
His submission was that these aspects of the proceedings had cumulatively resulted in a violation by the prosecution of article 6(1).
The Crowns reliance on identification of the appellant in court, without an earlier identification parade, formed part of the context in which the significance of the non disclosure of the other material bearing on identification had to be assessed.
As the European Court of Human Rights explained in Edwards v United Kingdom (1992) 15 EHRR 417, the question whether a failure of disclosure has resulted in a breach of article 6(1) has to be considered in the light of the proceedings as a whole, including the decisions of appellate courts.
This means that the question has to be approached in two stages.
First, it is necessary to decide whether the prosecution authorities failed to disclose to the defence all material evidence for or against the accused, in circumstances in which a failure to do so would result in a violation of article 6(1).
If so, the question which then arises is whether the defect in the trial proceedings was remedied by the subsequent procedure before the appellate court.
That was held to have occurred in Edwards, where the Court of Appeal had considered in detail the impact of the new information on the conviction.
The European court observed that it was not within its province to substitute its own assessment of the facts for that of the domestic courts, and, as a general rule, that it was for those courts to assess the evidence before them.
Those observations were repeated in Mansell v United Kingdom (2003) 36 EHRR CD 221, where the non disclosure of material evidence in the trial proceedings was again held to have been remedied by the Court of Appeals examination of the impact of the non disclosure upon the safety of the conviction.
That approach was translated into a domestic context in the case of McInnes v HM Advocate [2010] UKSC 7; 2010 SC (UKSC) 28.
As Lord Hope explained at paras 19 and 20, two questions arise in a case of this kind to which a test must be applied.
The first question is whether the material which has been withheld from the defence was material which ought to have been disclosed.
The test here is whether the material might have materially weakened the Crown case or materially strengthened the case for the defence.
If that test is satisfied, the question then arises as to the consequences of the non disclosure.
The test here is whether, taking all the circumstances of the trial into account, there is a real possibility that the jury would have arrived at a different verdict.
In the present case, it was conceded by the Crown before the High Court that the statement given by the witness who had given a description inconsistent with the appellants appearance, and the statements given by the two witnesses who had failed to identify the appellant from a photograph, ought to have been disclosed.
In concluding that the Crown had not been under a duty to disclose the remainder of the undisclosed statements, the court stated that, in their opinion, there was nothing in any of the statements in question that would either have weakened the Crown case or strengthened the defence case.
Similarly, in concluding that the Crown had not been under a duty to disclose the fingerprint evidence, the court stated that, in their opinion, it did not constitute evidence which materially weakened the Crown case or materially strengthened the defence case.
Those conclusions reflected the terms of the first test in McInnes.
The court explained in detail their reasons for reaching those conclusions on the facts of the case.
The High Court then considered the significance of the failure to disclose the statements which should have been disclosed.
In relation to the statement given by the witness whose description of the gunman was inconsistent with the appellants appearance, they stated that they were not persuaded that leading the evidence of that witness would have given rise to a real possibility that the jury would have returned a different verdict.
In relation to the statements given by the two witnesses who had failed to identify the appellant from a photograph, they concluded that, in the context of the evidence as whole, there was no real possibility that the evidence of the witnesses in question would have caused the jury to come to a different view as to the identity of the gunman.
Those conclusion reflected the terms of the second test in McInnes.
Detailed reasons were given for reaching those conclusions.
They were based on a review of the entirety of the evidence, including the identification evidence given in court by the police officers.
The court also considered separately the question whether the Crowns leading of the identification evidence from the police officers had in itself resulted in the Lord Advocates acting incompatibly with article 6(1), that question having been raised before them as a distinct ground of appeal.
After reviewing the relevant circumstances, the court concluded that the leading of the evidence had not been a violation of article 6(1).
Before this court, counsel for the appellant challenged the High Courts conclusion that some of the undisclosed material did not require to be disclosed under article 6(1).
In that connection, he submitted that, under current Crown practice, all of the material would have been disclosed.
The practice of the Crown, whether past or present, is not however the measure of the requirements of article 6(1).
To say, as counsel submitted, that if material would be disclosed now, it should have been disclosed then, is a non sequitur.
The question is to be determined by applying the first test laid down in McInnes.
The High Court applied that test.
Counsel also challenged the High Courts conclusion as to the significance of the admitted failures in disclosure.
He submitted that, although the High Court had framed their analysis and their conclusions in terms of the second test laid down in McInnes, their conclusions were so manifestly wrong that they had not in reality applied that test.
Counsel accepted, as a general proposition, that this court had no jurisdiction to review how the High Court applied the test, but submitted that the position was otherwise where the High Court had merely paid lip service to the test, and had reached so absurd a conclusion that the test could not in reality have been applied.
In that connection, he submitted that, comparing the facts of the present case with those of the case of Holland v HM Advocate [2005] UKPC D 1; 2005 SC (PC) 3, the non disclosure had been of less significance in Holland, but a violation of article 6(1) had nevertheless been found by the Judicial Committee in that case.
In McInnes, Lord Hope explained at para 18 that the question for the Supreme Court, where there has been a failure in the duty of disclosure, is to determine the correct test for the determination of the appeal.
It does not, he said, extend to the question whether the test, once it has been identified, was applied correctly.
Lord Hope explained that that followed from the statutory finality of the High Courts decision under section 124(2) of the 1995 Act, subject to an appeal against a determination of a devolution issue.
The question as to what was the correct test formed part of the devolution issue, but The application of the test to the facts of the case was a matter that lay exclusively within the jurisdiction of the appeal court.
Lord Brown similarly stated at para 34 that this court could decide whether the High Court adopted the correct legal test but not whether it then applied that test correctly on the facts.
The other members of the court agreed.
Mutatis mutandis, those dicta apply equally to the determination of a compatibility issue.
by Lord Hope later in his judgment, at para 25: In the present case, counsel for the appellant relied on an observation made As I have already observed, it is not for this court to say whether the test was applied correctly.
But it is open to it to examine the reasons given by the appeal court for concluding that there had not been a miscarriage of justice to see whether they show that it applied the correct test.
In that passage, Lord Hope was not qualifying what he had earlier said in para 18.
As the earlier part of para 25 makes clear, he was addressing the fact that the High Court had not, in that case, purported to apply the test subsequently laid down in McInnes, but had instead applied the test, applicable generally in solemn appeals, of whether there had been a miscarriage of justice.
In applying that test, the High Court had asked itself whether there was a real risk of prejudice to the defence (see McInnes at para 16).
The question which Lord Hope was addressing in para 25 was whether, in formulating the test in that way, the High Court had asked itself the wrong question.
Lord Hope answered the question by examining the High Courts reasoning, from which it appeared that, although the courts description of the test was incomplete, the test that it applied was the correct one.
Counsel for the Crown conceded that this court might have jurisdiction to intervene if the High Court merely purported to apply the McInnes test but did not actually apply it.
Short of some exceptional case, however, it is difficult to envisage circumstances in which an argument that the High Court had identified the correct test, but had failed to apply it, would be distinguishable from an argument that the test had not been applied correctly.
The latter argument is one that this court cannot entertain.
It is important that that principle, which gives effect to the finality accorded to the High Courts decisions, should not be undermined by permitting challenges to the correctness of the High Courts application of the McInnes test to be dressed up in the guise of arguments that it identified the test but failed to apply it.
In the present case, it is clear from its reasoning that the High Court not only identified the correct test but also applied it to the circumstances of the case.
The suggested comparison with the decision in Holland is of no assistance.
In the first place, the Judicial Committee was not in that case performing the same exercise as this court in the present appeal.
The High Court had not in that case applied the McInnes test: the case preceded McInnes by several years.
Furthermore, the Judicial Committee proceeded in that case on the basis that the High Court, in considering the impact of non disclosure and dock identification separately at different hearings before differently constituted courts, had failed to consider the cumulative impact of both aspects of the trial upon the fairness of the proceedings, and that that question must therefore be considered for the first time by the Committee itself: see para 43.
The approach adopted by the Judicial Committee reflected those circumstances, neither of which is present in this appeal.
Moreover, and in any event, contrasting the conclusions reached by different panels of judges as to the significance of failures to disclose different evidence in the circumstances of different cases tells one nothing about the correctness of either decision, even if that were a matter which this court could properly assess.
I would dismiss the appeal.
LORD GILL: (with whom Lord Neuberger, Lady Hale, Lord Sumption, Lord Hughes and Lord Toulson agree)
The conviction
On 26 September 2003 the appellant was convicted at Aberdeen High Court of a contravention of section 17 of the Firearms Act 1968 and of assault on two police officers by repeatedly presenting a handgun at them.
The evidence of identification
The agreed facts were that the police officers, Sergeant Henry Ferguson and Constable Simon Reid, chased a suspect on foot from Printfield Terrace to Hilton Terrace, Aberdeen.
Three times during the chase the suspect confronted them and pointed a handgun at them.
The incident occurred in broad daylight just after midday in the month of May. The suspect had not disguised his face in any way.
The suspect escaped in a black Ford Sierra.
It was abandoned nearby.
At the trial the stark issue was the identification of the gunman.
Sergeant Ferguson identified the appellant in the dock.
He said that at the time of the incident he thought that the suspects face was familiar, but he could not say who he was.
When he returned to Police Headquarters he made enquiries about the suspects identity.
He had a conversation with a colleague to prod his memory.
In cross examination he was asked if he had any doubt about his identification.
He replied No doubt whatsoever.
Constable Reid too made a dock identification.
He confirmed that about two hours after the incident at Police Headquarters he had been shown photographs and had identified the person that he thought had been the gunman.
In cross examination he was asked if there was any possibility that he had identified the wrong person in court.
He replied no.
He was asked if he was sure about that.
He replied Yes.
Two witnesses said that the man in the dock was not the gunman.
The first, Michael Reid, was said by the trial judge in his report to have been nervous.
The second, John Ronald, was a criminal with a serious record of crimes of dishonesty.
He prevaricated in evidence as to whether he knew the appellant.
There were various discrepancies in his three police statements.
The appellant himself said that at the material tine he had been at the home of Adrian Martin and his mother, neither of whom were cited by the defence.
He agreed that on the morning after the incident he had checked in at a hotel in Aberdeen under a false name and was arrested there on the following day.
One witness, Ian Whyte, supported the alibi.
His credibility was undermined by his criminal record and by his having visited the appellant in prison twice before he gave his evidence.
Subsequent disclosure
In 2005 the Judicial Committee of the Privy Council allowed two appeals from the High Court in which the question of non disclosure of evidence by the Crown was a material issue (Holland v HM Advocate 2005 SC (PC) 3; Sinclair v HM Advocate 2005 SC (PC) 28.
In consequence of those decisions and the change in Crown practice to which they led, the Crown disclosed the fact that a fingerprint of Thomas Pirie, a criminal with a serious record, had been found on the internal rear view mirror of the abandoned Sierra.
The Crown also disclosed the statements of six individuals who had seen the incident or the abandonment of the car.
The decision of the High Court
The appellant appealed on the grounds inter alia that the Crown had failed to disclose material evidence; and that by leading and relying on the evidence of the dock identifications without having disclosed that evidence and without having held an identification parade, the Lord Advocate had infringed the appellants rights under article 6.
The High Court held that the fingerprint evidence and three of the now disclosed statements neither materially weakened the Crown case nor materially strengthened the defence case.
It accepted that the other three statements should have been disclosed, but held that disclosure of them would not have given rise to a real possibility of a different verdict.
It concluded that the act of the Lord Advocate in leading dock identifications from the two police officers without there having been an identification parade did not infringe article 6.
The present appeal
The issues raised in this appeal were raised before the High Court as devolution issues (Scotland Act 1998, section 57(2); Schedule 6, paragraph 13(a)).
On 22 April 2013 when the relevant provisions of the Scotland Act 2012 came into force, those issues were still unresolved.
They therefore became convertible devolution issues (Scotland Act 2012 (Transitional and Consequential Provisions) Order 2013 (SSI 2013/7)) and by virtue of section 36(6) of the 2012 Act, which added section 288AA to the Criminal Procedure (Scotland) Act 1995 (the 1995 Act), fell to be dealt with as compatibility issues as defined in section 288ZA of the 1995 Act (1995 Act, sections 288AA(1), (2) and (4)).
As such, they are within the jurisdiction of this court, which can be exercised only on compatibility issues (1995 Act, section 288AA).
Non disclosure
It was for the High Court to assess whether all or any of the undisclosed evidence might materially have weakened the Crown case or materially have strengthened the defence case (McDonald v HM Advocate 2010 SC (PC) 1, at para 50).
The High Court held, as the Crown had conceded, that the evidence in three of the statements met that test.
The next question was whether the effect of the non disclosure of those statements had been to deprive the appellant of a fair trial.
It was for the High Court to decide, on a consideration of all of the circumstances of the trial, whether there was a real possibility that the jury would have arrived at a different verdict if the undisclosed evidence had been before it.
It decided that there was no such possibility.
On the face of it, therefore the High Court applied both parts of the test set by this court in McInnes v HM Advocate 2010 SC (UKSC) 28.
On the first part of the McInnes test counsel for the appellant submitted that since in current Crown Office practice all of the undisclosed evidence would be disclosed, that was proof that the appellants article 6 rights had been infringed.
That argument is specious.
The current practice of the Crown is to make an extensive disclosure of evidence, some of which may be of little assistance to either prosecution or defence.
The fact that any piece of evidence is disclosed does not mean that its non disclosure would be a breach of article 6.
As to the consequences of non disclosure, counsel submitted that the High Court had failed to apply the second part of the McInnes test.
I do not agree.
The Crowns submission to the High Court on this point was founded expressly on the McInnes test (Macklin v HM Advocate 2013 SCCR 616, at paras 24 and 25).
The High Court considered the case in that context and, reciting the words of the test, made clear that it had applied it (at paras 33, 36 and 37).
We therefore have to consider the scope of this courts jurisdiction in this appeal.
Every interlocutor and sentence pronounced by the High Court under Part VIII of the Criminal Procedure (Scotland) Act 1995 is final and conclusive and is not subject to review in any court whatsoever, save for certain exceptional cases, one of which is the taking of an appeal of this nature (1995 Act, section 124(2)).
The question whether the High Court applied the correct test is a proper question for the consideration of this court, being a compatibility issue; but the question whether the High Court applied the test correctly is not.
That is now settled law (McInnes, at paras 18 and 25).
Nevertheless, counsel for the appellant submitted that in McInnes Lord Hope of Craighead had qualified his general statement of the law to that effect by the following words: it is not for this court to say whether the test was applied correctly.
But it is open to it to examine the reasons given by the appeal court for concluding that there had not been a miscarriage of justice to see whether they show that it applied the correct test. (para 25)
Counsel wrested these words from Lord Hopes opinion to support the proposition that even if the High Court says that it has applied the McInnes test, this court can examine exactly how it did so and may decide that it paid only lip service to it if its conclusions on the evidence are manifestly wrong.
I do not accept that proposition.
The meaning of Lord Hopes dictum, to my mind, is perfectly clear.
Lord Hope was referring only to this courts exercise of its limited jurisdiction in a question under paragraph 13(a); that is to say its decision, from an examination of the High Courts reasons, whether the High Court identified and applied the correct test.
In this case I am in no doubt that it did.
On that view, the High Courts conclusions on the significance of the non disclosure in relation to the verdict do not arise for our consideration.
Counsel for the Crown conceded that this court would have jurisdiction if the High Court had failed to apply the McInnes test despite having said that it had applied it.
That concession, in my view, does not open the door to appeals based on the contention that the High Court failed to apply the McInnes test correctly.
I agree with Lord Reed (para 22) that the finality of the decisions of the High Court would be undermined if challenges to the correctness of its application of the McInnes test were to be dressed up in the guise of arguments that it had identified the test but failed to apply it.
Dock identification
Counsel accepted that dock identification is not per se incompatible with article 6.
He did not put dock identification forward as a free standing compatibility issue.
He submitted that the fact that the police officers had not taken part in an identification parade, taken together with the undisclosed evidence, led to the inevitable conclusion that, looked at as a whole, the trial was unfair.
For this submission counsel for the appellant took as his template the exercise in evidential review carried out by Lord Rodger of Earlsferry in Holland v HM Advocate (supra).
In Holland both non disclosure and dock identification were in issue.
There were two points on which the Crown had withheld disclosure of material evidence.
In Holland the two issues in the case had been dealt with in separate hearings by differently constituted divisions of the High Court.
In Lord Rodgers view the question was whether, looked at as a whole, the appellants trial was fair in terms of article 6 (at para 77).
On that view, he considered that it was necessary for the Judicial Committee to assess the evidence overall.
In the result, the Judicial Committee held that there had been a breach of article 6.
Counsel compared the evidence in Holland with the evidence in this case and, taking Lord Rodgers approach, submitted that we too should look at the entirety of the evidence and should conclude from it that the appellant had not had a fair trial.
In considering two specific aspects of the evidence in Holland Lord Rodger said that since counsel for the defence had been unaware of the undisclosed evidence, he could not say that counsels inability to refer to it in cross examination might not possibly have affected the jurys verdict (paras 82 and 83).
Views differ on the interpretation of those words.
They seem clear to me.
But that point is now history.
Whatever the Judicial Committee considered to be the test in Holland, this court has drawn a line under the matter by fixing the test of real possibility, a test with which Lord Rodger himself came to agree (McInnes, at para 30).
I conclude therefore that counsels reliance on Holland is misconceived.
I reject the case for the appellant on this issue.
Conclusion
I agree that the appeal should be refused.
| In 2003 the appellant, Mr Macklin, was convicted of possession of a handgun in contravention of section 17 of the Firearms Act 1968, and a further charge of assaulting two police officers by repeatedly pointing the handgun at them.
The issue in dispute at his trial was whether he was the person who had been pursued by the officers and who had pointed the gun at them.
He was identified at trial by both officers.
One of them had recognised the appellant at the time of the incident, and the other had identified him from a selection of photographs shortly afterwards.
Their evidence was challenged in cross examination.
The judge warned the jury about the risk that visual identification evidence might be unreliable, but gave no specific directions concerning the risks associated with the identification of an accused person in court.
Some years later the Crown disclosed material which had not been disclosed at the trial, including statements given to the police by witnesses.
One witness gave a description inconsistent with the appellants appearance.
Two witnesses failed to identify the appellant when shown his photograph.
It was also disclosed that the police had found fingerprints belonging to someone else in the car, and that that person had a criminal record.
In 2012 the appellant was granted leave to appeal against his conviction, on the basis of (i) the Crowns failure to disclose material evidence; (ii) the Crowns leading and relying on dock identifications by the police officers, without having disclosed material evidence and without the officers having participated in an identification parade; and (iii) a contention that the judge had misdirected the jury in failing to warn them of the dangers of dock identification evidence.
The appellant argued that, with respect to the first two matters, the Lord Advocate had acted in a manner incompatible with article 6(1) of the European Convention on Human Rights.
The appellants appeal was refused by the High Court of Justiciary.
He was subsequently granted permission to appeal to the Supreme Court.
The Supreme Court unanimously dismisses Mr Macklins appeal.
Lord Reed gives the leading judgment.
Lord Gill gives a concurring judgment.
The other justices agree with both judgments.
Lord Reed explains that the jurisdiction of the Supreme Court under section 288AA of the Criminal Procedure (Scotland) Act 1995 is not to sit as a criminal appeal court exercising a general power of review, but to determine compatibility issues, which are questions as to whether a public authority has acted unlawfully under section 6(1) of the Human Rights Act 1998 or has acted incompatibly with EU law, or whether a provision of an Act of the Scottish Parliament is incompatible with Convention rights or EU law [5 7].
As a consequence of section 34 of the Scotland Act 2012, which introduced compatibility issues into the 1995 Act by inserting a new section 288ZA, and the Scotland Act 2012
(Transitional and Consequential Provisions) Order 2013, the first two grounds raised by the appellant were converted from being devolution issues to compatibility issues.
However the third ground, which concerns the directions given by the trial judge, did not give rise to a devolution issue which could be converted into a compatibility issue [10].
The question of whether a failure of disclosure has resulted in a breach of article 6(1) ECHR has to be considered in the light of the proceedings a whole, including the decisions of appellate courts.
This involves consideration firstly of whether the prosecution failed to disclose all material evidence, in circumstances in which such a failure would result in a violation of article 6(1), and secondly whether the defect in the trial procedures was remedied by the procedure before the appellate court [13].
As held in McInnes v HM Advocate [2010] UKSC 7, on the question of whether withheld material should have been disclosed, the test is whether the material might have materially weakened the Crowns case or materially strengthened the defences case.
Where this is satisfied, the test concerning the consequences of the non disclosure is whether, taking all the circumstances of the trial into account, there is a real possibility that the jury would have arrived at a different verdict [14].
The Crown conceded before the High Court of Justiciary that the statement of the witness who had given a description inconsistent with the appellants appearance, and the statements given by the witnesses who failed to identify the appellant when shown his photograph, should have been disclosed.
The High Court applied the first test in McInnes to the remaining withheld evidence and explained its reasons for concluding that the material did not require to be disclosed.
In relation to the material which should have been disclosed, the High Court then applied the second test in McInnes and explained its reasons for concluding that there was no real possibility that the jury would have arrived at a different verdict [15 16].
The High Court also considered whether the Crowns leading of the identification evidence from the police officers had resulted in the Lord Advocates acting incompatibly with article 6(1) and concluded that it had not [17].
The fact that under current Crown practice, the withheld material would have been disclosed does not lead to the conclusion that the non disclosure breaches article 6(1); it is the first of the McInnes tests which must be applied [18].
In determining a compatibility issue, applying Lord Hopes dicta in McInnes, the Supreme Court can decide whether the High Court has adopted the correct test, but not whether it then applied that test correctly to the facts [20].
It was conceded that the Supreme Court might have jurisdiction to intervene if the High Court merely purported to apply the McInnes test but did not actually apply it.
But this does not permit examination of whether the test was correctly applied to the facts.
This principle gives effect to the finality accorded to the High Courts decisions.
It should not be undermined by permitting dressed up challenges to the application of the correct test [22].
In the present case it is clear from the reasoning of the High Court that it identified the correct test and also applied it to the circumstances of the case.
Comparison with Holland v HM Advocate [2005] UKPC D 1 does not assist, as the Judicial Committee of the Privy Council was performing a different exercise and its decision reflected the particular circumstances of that appeal [23].
Mr Macklins appeal should therefore be dismissed [24].
Lord Gill gives a concurring judgment, finding that the High Court identified and applied the correct test, and that its conclusions on the significance of the non disclosure in relation to the verdict do not fall within this Courts jurisdiction [25 49].
|
On 29 January 1981 Mr Jivraj and Mr Hashwani entered into a joint venture agreement (the JVA), containing an arbitration clause which provided that, in the event of a dispute between them which they were unable to resolve, that dispute should be resolved by arbitration before three arbitrators, each of whom should be a respected member of the Ismaili community, of which they were both members.
The principal question in this appeal is whether that arbitration agreement became void with effect from 2 December 2003 under the Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660) (the Regulations) on the ground that it constituted an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services.
The JVA
The JVA was established to make investments in real estate around the world.
By article 9 it is expressly governed by English law.
Article 8 provides, so far as material, as follows: (1) If any dispute difference or question shall at any time hereafter arise between the investors with respect to the construction of this agreement or concerning anything herein contained or arising out of this agreement or as to the rights liabilities or duties of the investors or either of them or arising out of (without limitation) any of the businesses or activities of the joint venture herein agreed the same (subject to sub-clause 8(5) below) shall be referred to three arbitrators (acting by a majority) one to be appointed by each party and the third arbitrator to be the President of the HH Aga Khan National Council for the United Kingdom for the time being.
All arbitrators shall be respected members of the Ismaili community and holders of high office within the community.
(2) The arbitration shall take place in London and the arbitrators' award shall be final and binding on both parties.
The Ismaili community comprises Shia Imami Ismaili Muslims.
It is led by the Aga Khan, whose title is the hereditary title of the Imam of the Ismaili community.
The disputes
During the 1980s the joint venture came to comprise substantial business interests, first in Canada and later in the United States, Pakistan and the United Kingdom, with investments in properties, hotels and the oil industry.
By late 1988 Mr Jivraj and Mr Hashwani had agreed to part company.
On 30 October 1988 they entered into an agreement under which they appointed a three man conciliation panel (the panel) for the purpose of the division of the joint venture assets.
Each member of the panel was a respected member of the Ismaili community.
The panel operated between October 1988 and February 1990 and many of the assets were divided between the parties in accordance with its directions.
It was however unable to resolve all the issues between the parties.
The parties then agreed to submit the remaining issues to arbitration or conciliation by a single member of the Ismaili community, namely Mr Zaher Ahamed.
He issued a determination in December 1993, whereafter he had further exchanges with the parties until 1995, when he declared himself defeated.
The principal matters which remained in dispute were, on the one hand, a claim by Mr Hashwani that there remained a balance due to him and, on the other hand, a claim by Mr Jivraj that Mr Hashwani had failed to declare certain tax liabilities which left Mr Jivraj with a potential for secondary liability.
These matters remained in dispute for some years.
Then, on 31 July 2008, Messrs Zaiwalla & Co, acting on behalf of Mr Hashwani, wrote to Mr Jivraj asserting a claim for US$1,412,494, together with interest, compounded quarterly from 1994, making a total of US$4,403,817.
The letter gave notice that Mr Hashwani had appointed Sir Anthony Colman as an arbitrator under article 8 of the JVA and that, if Mr Jivraj failed to appoint an arbitrator within seven days, steps would be taken to appoint Sir Anthony as sole arbitrator.
The letter added that Mr Hashwani did not regard himself as bound by the provision that the arbitrators should be members of the Ismaili community because such a requirement would now amount to religious discrimination which would violate the Human Rights Act 1998 and therefore must be regarded as void.
It is common ground, on the one hand, that Sir Anthony Colman is not a member of the Ismaili community and, on the other hand, that he is a retired judge of the Commercial Court with substantial experience of the resolution of commercial disputes, both as a judge and as an arbitrator.
Mr Jivraj's response to the letter was to start proceedings in the Commercial Court seeking a declaration that the appointment of Sir Anthony was invalid because he is not a member of the Ismaili community.
Mr Hashwani subsequently issued an arbitration claim form seeking an order that Sir Anthony be appointed sole arbitrator pursuant to section 18(2) of the Arbitration Act 1996 (the 1996 Act).
The application was made on the basis that the requirement that the arbitrators be members of the Ismaili community, although lawful when the agreement was made, had been rendered unlawful and was void because it contravened the Regulations.
The Regulations
The Regulations were made in the exercise of powers conferred by the European Communities Act 1972 following the making of the Council Framework Directive 2000/78/EC of 27 November 2000 (OJ 2000 L303, p 16) (the Directive) which, by article 1, was itself made for the purpose of establishing: a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment.
The Regulations (as amended by section 77(2) of the Equality Act 2006) provide, so far as material, as follows: Interpretation 2 (3) In these Regulations references to employer, in their application to a person at any time seeking to employ another, include a person who has no employees at that time; employment means employment under a contract of service or of apprenticeship or a contract personally to do any work, and related expressions shall be construed accordingly ; 3 Discrimination on grounds of religion or belief (1) For the purposes of these Regulations, a person (A) discriminates against another person (B) if on the grounds of the religion or belief of B or of any (a) other person except A (whether or not it is also As religion or belief), A treats B less favourably than he treats or would treat other persons; Applicants and employees 6 (1) It is unlawful for an employer, in relation to employment by him at an establishment in Great Britain, to discriminate against a person in the arrangements he makes for the purpose of (a) determining to whom he should offer employment; in the terms on which he offers that person (b) employment; or (c) by refusing to offer, or deliberately not offering, him employment.
Exception for genuine occupational requirement 7 In relation to discrimination falling within regulation 3 (1) (discrimination on grounds of religion or belief) (a) regulation 6(1)(a) or (c) does not apply to any employment where paragraph (2) or (3) applies.
(2) This paragraph applies where, having regard to the nature of the employment or the context in which it is carried out - (a) being of a particular religion or belief is a genuine and determining occupational requirement; (b) it is proportionate to apply that requirement in the particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it, and this paragraph applies whether or not the employer has an ethos based on religion or belief.
(3) This paragraph applies where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment or the context in which it is carried out - (a) being of a particular religion or belief is a genuine occupational requirement for the job; (b) it is proportionate to apply that requirement in the particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it."
The Directive
It is common ground that the Regulations must, so far as possible, be construed to give effect to the objective of the Directive which they were designed to implement: see eg Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C-106/89) [1990] ECR I-4135 and Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546.
It is also common ground that, although the arbitration agreement was on any view lawful when it was made, it became subject to the provisions of the Regulations, insofar as they applied to it.
The Directive provides, so far as material, as follows: Article 1 Purpose The purpose of this Directive is to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment.
Article 2 Concept of discrimination (1) For the purposes of this Directive, the 'principle of equal treatment' shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in article 1.
Article 3 Scope (1) Within the limits of the areas of competence conferred on the Community, this Directive shall apply to all persons, as regards both the public and private sectors, including public bodies, in relation to- (a) conditions for access to employment, to self-employment or to occupation, including selection criteria and recruitment conditions, whatever the branch of activity and at all levels of the professional hierarchy, including promotion; (b) access to all types and to all levels of vocational guidance, vocational training, advanced vocational training and retraining, including practical work experience; (c) employment and working conditions, including dismissals and pay; (d) membership of, and involvement in, an organisation of workers or employers, or any organisation whose members carry on a particular profession, including the benefits provided for by such organisations.
As Moore-Bick LJ, giving the judgment of the Court of Appeal, observed at para 8, the Directive is concerned with discrimination on the grounds of religion or belief, disability, age and sexual orientation.
It is therefore much wider in its scope than the Regulations, which are concerned only with discrimination on the grounds of religion or belief.
The explanation lies in the fact that the United Kingdom had already introduced legislation dealing with discrimination on most of the other grounds covered by the Directive in connection with employment and occupation.
Discrimination on the grounds of sex was rendered unlawful by the Sex Discrimination Act 1975 (the SDA 1975), discrimination on the grounds of race by the Race Relations Acts 1968 and 1976, discrimination on the grounds of disability by the Disability Discrimination Act 1995.
Legislation dealing with discrimination on the grounds of age, sexual orientation and religion or belief was still required to ensure compliance with the Directive.
The Regulations deal with discrimination on the grounds of religion or belief.
The Employment Equality (Sexual Orientation) Regulations 2003 (SI 2003/1661) provided for discrimination on the grounds of sexual orientation, and discrimination on the grounds of age was subsequently covered by the Employment Equality (Age) Regulations 2006.
Again as observed by the Court of Appeal (at para 9), the form of the Regulations follows closely that of the earlier legislation, in particular in defining "employment" as including a contract personally to do work of any kind.
Moreover, the language of regulation 6 is identical to, or differs in no significant respect from, that used in the other legislation dealing with discrimination.
It follows that the Regulations must be understood as complementing all the other legislation prohibiting discrimination.
This uniformity of the law relating to the areas in which discrimination is forbidden has now been reinforced by the Equality Act 2010 (the EA), which applies to all of the cases protected by the earlier legislation.
The EA is, among other things, an Act to reform and harmonise equality law and restate the greater part of the enactments relating to discrimination.
The Regulations were amongst those enactments restated by the EA.
They were revoked by section 211 and Schedule 27, Part 2.
The revocation took effect on 1 October 2010.
The current law is therefore as stated in the Act rather than the Regulations.
It was not however suggested in the course of the argument that any of the issues in this appeal is affected by the revocation of the Regulations.
First instance
Both parties applications were determined by David Steel J (the judge) on 26 June 2009: see [2009] EWHC 1364 (Comm), [2010] 1 All ER 302.
In the meantime on 11 March 2009, which was before the applications were heard, the solicitors for Mr Jivraj wrote an open letter to the solicitors for Mr Hashwani offering him the option of pursuing his claim in the High Court on the basis that Mr Jivraj would not seek a stay on the basis of the arbitration clause.
Mr Hashwani did not accept the offer.
It was submitted before the judge on behalf of Mr Hashwani that the term requiring arbitrators to be members of the Ismaili community was invalid by reason of one or more of the following: the Regulations, the Human Rights Act 1998 (the HRA), or public policy at common law.
The judge held (i) that the term did not constitute unlawful discrimination on any of those bases and, specifically, that arbitrators were not employed within the meaning of the Regulations; (ii) that if, nonetheless, appointment of arbitrators fell within the scope of the Regulations, it was demonstrated that one of the more significant characteristics of the Ismaili sect was an enthusiasm for dispute resolution within the Ismaili community, that this was an ethos based on religion within the meaning of the Regulations and that the requirement for the arbitrators to be members of the Ismaili community constituted a genuine occupational requirement which it was proportionate to apply within regulation 7(3); and (iii) that, if that was also wrong, the requirement was not severable from the arbitration provision as a whole, so that the whole arbitration clause would be void.
The judge ordered Mr Hashwani to pay Mr Jivrajs costs and refused Mr Hashwanis application for permission to appeal.
ii)
The Court of Appeal
On 7 October 2009 Sir Richard Buxton granted permission to appeal limited to the issues on the Regulations and on severance.
Permission was refused on the HRA and public policy issues.
The issues in the Court of Appeal were therefore these: i) Are arbitrators persons who are under a contract to do work so as to fall within the Regulations and, if so, do parties who make an arbitration agreement specifying religious qualifications for eligible arbitrators thereby make an arrangement for the purpose of determining to whom they should offer employment or do they agree to offer, or deliberately not to offer, employment within the meaning of the Regulations? If so, in the circumstances, did the requirement for all the arbitrators to be members of the Ismaili community constitute a genuine occupational requirement (GOR) which it was proportionate to apply within regulation 7(3)? iii) If not, did the whole arbitration agreement fail or was only the discriminatory provision void?
The unanimous judgment of the Court of Appeal, which comprised Moore- Bick and Aikens LJJ and Sir Richard Buxton, was handed down on 22 June 2010: see [2010] EWCA Civ 712, [2010] ICR 1435.
The Court of Appeal reached a different conclusion from the judge on the principal points.
It held that the appointment of an arbitrator involved a contract for the provision of services which constituted a contract personally to do any work, and therefore satisfied the definition of employment in regulation 2(3).
It followed that the appointor was an employer within the meaning of regulation 6(1) and that the restriction of eligibility for appointment as an arbitrator to members of the Ismaili community constituted unlawful discrimination on religious grounds, both in making arrangements for the purpose of determining to whom he should offer employment contrary to regulation 6(1)(a), and by refusing to offer, or deliberately not offering employment contrary to regulation 6(1)(c).
The Court of Appeal further held that being a member of the Ismaili community was not a genuine occupational requirement for the job within the meaning of the exception in regulation 7(3).
It is submitted on behalf of Mr Jivraj that both those conclusions were wrong.
Finally the Court of Appeal held that, although there would be no difficulty in operating the agreement if the offending requirement was struck out, so doing would render the agreement substantially different from that originally intended, the term was void in its entirety under paragraph 1(1) of Schedule 4 to the Regulations and Mr Hashwanis nomination of an arbitrator was invalid.
It is submitted on behalf of Mr Hashwani that both the judge and the Court of Appeal were wrong on this point, which I will call the severance issue.
A further point arises out of the Court of Appeals order on costs if its judgment is upheld on each of the above points.
Employment
The reasoning of the Court of Appeal was straightforward: see paras 15-17.
In short the Court of Appeal drew attention to the wide terms of articles 1 and 3 of the Directive.
In particular it noted at para 15 that the recitals to the Directive and the structure and language of article 3(1) as a whole indicate that it is concerned with discrimination affecting access to the means of economic activity, whether through employment, self-employment or some other basis of occupation, access to vocational guidance and training (which can be expected to provide a means of access to economic activity), conditions of employment (which affect those who have gained access to a means of economic activity) and membership of bodies whose purpose is to affect conditions of recruitment or employment or to regulate access to a particular form of economic activity, such as professional bodies that directly or indirectly control access to the profession or a significant means of obtaining work.
The Court of Appeal then said at para 16: The paradigm case of appointing an arbitrator involves obtaining the services of a particular person to determine a dispute in accordance with the agreement between the parties and the rules of law, including those to be found in the legislation governing arbitration.
In that respect it is no different from instructing a solicitor to deal with a particular piece of legal business, such as drafting a will, or consulting a doctor about a particular ailment or an accountant about a tax return.
Since an arbitrator (or any professional person) contracts to do work personally, the provision of his services falls within the definition of employment, and it follows that his appointor must be an employer within the meaning of regulation 6(1)
In paras 16 and 17 it placed reliance on three cases.
It relied upon von Hoffmann v Finanzamt Trier (Case C-145/96) [1997] All ER (EC) 852 as showing that arbitrators had been treated as providing services for VAT purposes.
It also referred to domestic regulations relating to goods and services.
It further derived support from Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and from Percy v Board of National Mission of the Church of Scotland [2005] UKHL 73, [2006] 2 AC 28.
It recognised that those cases were addressing slightly different points but concluded that they illustrate the width of the expression a contract personally to do any work in the various discrimination statutes.
It concluded thus in para 17: They confirm our view that the expression is apt to encompass the position of a person who provides services as an arbitrator, and why we think the judge was wrong to hold that the nature of the arbitrator's function takes his appointment outside the scope of the 2003 Regulations.
Moreover, a contract of that kind, once made, is a contract of employment within the meaning of the 2003 Regulations.
It follows, therefore, that for the purposes of the 2003 Regulations a person who has entered into a contract under which he is to obtain such services is an employer and the person engaged to provide them is an employee.
The critical question under this head is whether the Court of Appeal was correct to form a different view from the judge on this point.
In my opinion it was not.
As the Court of Appeal correctly observed at para 15, the meaning of article 3 of the Directive has not been considered by the Court of Justice, and is to be interpreted in the light of the recitals and given its natural meaning consistent with the EC Treaty and the existing case law of the court.
It is common ground, at any rate in this class of case, that there is a contract between the parties and the arbitrator or arbitrators appointed under a contract and that his or their services are rendered pursuant to that contract.
It is not suggested that such a contract provides for employment under a contract of service or of apprenticeship.
The question is whether it provides for employment under a contract personally to do any work.
There is in my opinion some significance in the fact that the definition does not simply refer to a contract to do work but to employment under such a contract.
I would answer the question in the negative on the ground that the role of an arbitrator is not naturally described as employment under a contract personally to do work.
That is because his role is not naturally described as one of employment at all.
I appreciate that there is an element of circularity in that approach but the definition is of employment and this approach is consistent with the decided cases.
Given the provenance of the Regulations, it is appropriate to consider first the decisions of the Court of Justice.
The most important of these is perhaps Allonby v Accrington and Rossendale College (Case C-256/01) [2004] ICR 1328, where the Court of Justice followed the principles laid down in Lawrie-Blum v Land Baden-Wurttemberg (Case C-66/85) [1987] ICR 483 and in Kurz v Land Baden-Wurttemberg (Case C-188/00) [2002] ECR I-10691.
In Lawrie-Blum, which was concerned with the free movement of workers under what was then article 48 of the Treaty, Advocate General Lenz said at para III 2(b) of his opinion that the term worker covers any employed person who is not self-employed.
The court said at para 17: That concept [ie of worker] must be defined with objective criteria which distinguish the employment relationship by reference to the rights and duties of the persons concerned.
The essential feature of an employment relationship, however, is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.
In Kurz the court said at para 32 that it was settled case law that the concept of worker has a specific Community meaning and must not be interpreted narrowly.
The court then repeated the essential feature of the relationship identified in the above passage from Lawrie-Blum.
In Allonby the court addressed an equal pay claim by a college lecturer who had been dismissed by the college and then re-engaged, ostensibly as a self- employed sub-contractor supplied by an agency.
For the purposes of article 141(1) of the EC Treaty, the court drew a clear distinction between workers and independent suppliers of services.
It discussed the concept of worker within the meaning of article 141(1) between paras 62 and 72, which included the following: 62.
The criterion on which article 141(1) EC is based is the comparability of the work done by workers of each sex: see, to that effect, Defrenne v Sabena (No 2) (Case 149/77) [1978] ECR 1365, 1377, para 22.
Accordingly, for the purpose of the comparison provided for by article 141(1) EC, only women and men who are workers within the meaning of that article can be taken into consideration.
63.
In that connection, it must be pointed out that there is no single definition of worker in Community law: it varies according to the area in which the definition is to be applied: Martinez Sala v Freistaat Bayern (Case C-85/96) [1998] ECRI-2691, 2719, para 31. 64.
The term worker' within the meaning of article 141(1) EC is not expressly defined in the EC Treaty.
It is therefore necessary, in order to determine its meaning, to apply the generally recognised principles of interpretation, having regard to its context and to the objectives of the Treaty.
65.
According to article 2 EC, the Community is to have as its task to promote, among other things, equality between men and women.
Article 141(1) EC constitutes a specific expression of the principle of equality for men and women, which forms part of the fundamental principles protected by the Community legal order: see, to that effect, Deutsche Post AG v Sievers (Cases C-270 and 271/97) [2000] ECR I-929, 952, para 57.
As the court held in Defrenne v Sabena (Case 43/75) [1976] ICR 547, 566, para 12, the principle of equal pay forms part of the foundations of the Community.
66.
Accordingly, the term worker used in article 141(1) EC cannot be defined by reference to the legislation of the member states but has a Community meaning.
Moreover, it cannot be interpreted restrictively.
67.
For the purposes of that provision, there must be considered as a worker a person who, for a certain period of time, performs services for and under the direction of another person in return for which he receives remuneration see, in relation to free movement of workers, in particular Lawrie-Blum para 17, and Martinez Sala, para 32.
68.
Pursuant to the first paragraph of article 141(2) EC, for the purpose of that article, pay means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives directly or indirectly, in respect of his employment, from his employer.
It is clear from that definition that the authors of the Treaty did not intend that the term worker, within the meaning of article 141(1) EC, should include independent providers of services who are not in a relationship of subordination with the person who receives the services (see also, in the context of free movement of workers, Meeusen v Hoofddirectie van de Informatie Beheer Groep (Case C-337/97) [1999] ECR I-3289, 3311, para 15).
69.
The question whether such a relationship exists must be answered in each particular case having regard to all the factors and circumstances by which the relationship between the parties is characterised.
70.
Provided that a person is a worker within the meaning of article 141(1) EC, the nature of his legal relationship with the other party to the employment relationship is of no consequence in regard to the application of that article: ... 71.
The formal classification of a self-employed person under national law does not exclude the possibility that a person must be classified as a worker within the meaning of article 141(1) EC if his independence is merely notional, thereby disguising an employment relationship within the meaning of that article.
On the basis of those materials I would accept Mr Davies submission that the Court of Justice draws a clear distinction between those who are, in substance, employed and those who are independent providers of services who are not in a relationship of subordination with the person who receives the services.
I see no reason why the same distinction should not be drawn for the purposes of the Regulations between those who are employed and those who are not notionally but genuinely self-employed.
In the light of Allonby, there can be no doubt that that would be the correct approach to the near identical definition in section 1(6) of the Equal Pay Act 1970 and must remain the correct approach to the definition of employment in section 83(2) of the EA, which provides, so far as relevant: Employment means (a) employment under a contract of employment, a contract of apprenticeship or a contract personally to do work; That definition is almost identical to the definition in regulation 2(3) of the Regulations and, since it applies to equal pay issues by virtue of sections 83(4), 80(2) and 64 of the EA, it must equally apply to the Regulations.
In my opinion there is nothing in the domestic authorities which requires the court to come to any different conclusion.
The problem with some of them is that they do not refer to the jurisprudence of the Court of Justice.
However, the most recent decision of the House of Lords does.
In Percy v Board of National Mission of the Church of Scotland [2006] 2 AC 28 the House of Lords considered a sex discrimination claim brought by a woman who was a minister of the Church of Scotland.
The issue was whether she was employed within the meaning of section 82(1) of the SDA 1975.
The House held that she was.
Lord Hoffmann dissented on the basis that she was the holder of an office but had no doubt (at para 66) that, if the arrangement had been contractual, it would plainly have been a contract of service.
Lord Hoffmann said at para 73 that the term workers is a term of art in Community law which was defined by the Court of Justice in the passage from para 17 of Lawrie-Blum quoted at para 24 above.
Lord Hope of Craighead said much the same at para 126, where he also noted that the same approach was taken in Allonby.
Baroness Hale of Richmond referred at para 141 to para A[4] of Harvey on Industrial Relations and Employment Law, which stated that: the distinction is between those who work for themselves and those who work for others, regardless of the nature of the contract under which they are employed.
She then referred at para 143 to the decision of the Court of Appeal in Northern Ireland in Perceval-Price v Department of Economic Development [2000] IRLR 380, where it was held that three full-time judicial office holders, namely a full- time chairman of industrial tribunals, a full-time chairman of social security appeal tribunals and a social security commissioner were workers for the purposes of almost identical provisions.
In para 145, after quoting the definition of an employment relationship in Lawrie-Blum, Baroness Hale noted that, in giving the judgment of the court in Perceval-Price, Sir Robert Carswell LCJ said that the objective of the relevant EC legislation was to give protection against inequality and discrimination to those who might be vulnerable to exploitation.
He also said that the concept of a worker should be construed purposively by reference to this objective.
Baroness Hale then quoted this extract from the judgment of Sir Robert Carswell: All judges, at whatever level, share certain common characteristics.
They all must enjoy independence of decision without direction from any source, which the respondents quite rightly defended as an essential part of their work.
They all need some organisation of their sittings, whether it be prescribed by the president of the industrial tribunals or the court service, or more loosely arranged in collegiate fashion between the judges of a particular court.
They are all expected to work during defined times and periods, whether they be rigidly laid down or managed by the judges themselves with a greater degree of flexibility.
They are not free agents to work as and when they choose, as are self-employed persons.
Their office accordingly partakes of some of the characteristics of employment . . .
At para 146 Baroness Hale continued: I have quoted those words at length because they illustrate how the essential distinction is, as Harvey says, between the employed and the self-employed.
The fact that the worker has very considerable freedom and independence in how she performs the duties of her office does not take her outside the definition.
Judges are servants of the law, in the sense that the law governs all that they do and decide, just as clergy are servants of God, in the sense that God's word, as interpreted in the doctrines of their faith, governs all that they practise, preach and teach.
This does not mean that they cannot be workers or in the employment of those who decide how their ministry should be put to the service of the Church.
Some consideration was recently given to the position of part-time judges by this court in OBrien v Ministry of Justice (Note) [2010] UKSC 34, [2010] 4 All ER 62 where the court considered Percy in some detail in a judgment of the court given by Lord Walker.
At para 25 it referred to the same passage in Lawrie-Blum as having laid down the relevant principle and at para 26 it referred to the speech of Baroness Hale and approved the passage quoted above from the judgment of Sir Robert Carswell in Perceval-Price.
As I read Percy, it sought to apply the principles identified by the Court of Justice, as indeed did this court in OBrien [2010] 4 All ER 62.
The essential questions in each case are therefore those identified in paras 67 and 68 of Allonby [2004] ICR 1328, namely whether, on the one hand, the person concerned performs services for and under the direction of another person in return for which he or she receives remuneration or, on the other hand, he or she is an independent provider of services who is not in a relationship of subordination with the person who receives the services.
Those are broad questions which depend upon the circumstances of the particular case.
They depend upon a detailed consideration of the relationship between the parties.
As I see it, that is what Baroness Hale meant when she said that the essential difference is between the employed and the self- employed.
The answer will depend upon an analysis of the substance of the matter having regard to all the circumstances of the case.
I would not accept the Court of Appeals analysis (at para 21) of Baroness Hales speech in this regard.
There have been a number of domestic cases which say that the question is whether the dominant purpose of the contract is the execution of personal work or labour: see eg Quinnen v Hovells [1984] ICR 525, Mirror Group Newspapers Ltd v Gunning [1986] 1 WLR 546, especially per Oliver LJ at 551H and Balcombe LJ at 556H; Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and Percy [2006] 2 AC 28 per Lord Hope at para 113, where he referred to two other cases in the Court of Appeal, namely Patterson v Legal Services Commission [2004] ICR 312 and Mingeley v Pennock (trading as Amber Cars) [2004] ICR 727.
Mr Michael Brindle QC also referred on behalf of the respondent to two earlier cases which focus on the question whether a contract is one personally to execute any work or labour: see Tanna v Post Office [1981] ICR 374 and Hugh-Jones v St Johns College, Cambridge [1979] ICR 848.
However, none of these cases considered the approach in the decisions of the Court of Justice referred to above.
In particular, the cases did not focus on the fact that the employment must be employment under a contract of employment, a contract of apprenticeship or a contract personally to do work.
(My emphasis).
Given the importance of the EC perspective in construing the legislation, including the Regulations, the cases must now be read in the light of those decisions.
They show that it is not sufficient to ask simply whether the contract was a contract personally to do work.
They also show that dominant purpose is not the test, or at any rate not the sole test.
That is not to say that the question of purpose is irrelevant but the focus is on the contract and relationship between the parties rather than exclusively on purpose.
Elias J, sitting as President of the Employment Appeal Tribunal, recognised some of the difficulties in James v Redcats (Brands) Ltd [2007] ICR 1006.
He discussed the relevance of dominant purpose in this context by reference to the cases at paras 53 to 68.
At para 59, after quoting from the judgment of Balcombe LJ in Gunning [1986] 1 WLR 546, he said that the dominant purpose test is really an attempt to identify the essential nature of the contract.
In the context of the case he was considering he posed the question whether it was in essence to be located in the field of dependent work relationships or whether it was in essence a contract between two independent business undertakings.
At paras 67 and 68, after referring to a number of cases and observing at para 65 that the description of the test as one of identifying the dominant purpose was perhaps not an altogether happy one, he said this: 67.
An alternative way of putting it may be to say that the courts are seeking to discover whether the obligation for personal service is the dominant feature of the contractual arrangement or not.
If it is, then the contract lies in the employment field; if it is not - if, for example, the dominant feature of the contract is a particular outcome or objective - and the obligation to provide personal service is an incidental or secondary consideration, it will lie in the business field.
68.
This is not to suggest that a tribunal will be in error in failing specifically to apply the dominant purpose or indeed any other test.
The appropriate classification will in every case depend upon a careful analysis of all the elements of the relationship, as Mr Recorder Underhill QC pointed out in Byrne Bros (Formwork) Ltd v Baird [2002] ICR 667.
It is a fact sensitive issue, and there is no shortcut to a considered assessment of all relevant factors.
However, in some cases the application of the dominant purpose test may help tribunals to decide which side of the boundary a particular case lies.
It is noteworthy that the European cases were not cited in many of the cases, including that before Elias J. In the light of the European cases, dominant purpose cannot be the sole test, although it may well be relevant in arriving at the correct conclusion on the facts of a particular case.
After all, if the dominant purpose of the contract is the execution of personal work, it seems likely that the relationship will be, in the words of Allonby [2004] ICR 1328, para 67, a case in which the person concerned performs services for and under the direction of the other party to the contract in return for remuneration as opposed to an independent provider of services who is not in a relationship of subordination with him or it.
This may not be so however because, although the dominant purpose of the contract may be personal work, it may not be personal work under the direction of the other party to the contract.
All will depend upon the applications of the principles in Allonby to the circumstances of the particular case.
If the approach in Allonby is applied to a contract between the parties to an arbitration and the arbitrator (or arbitrators), it is in my opinion plain that the arbitrators role is not one of employment under a contract personally to do work.
Although an arbitrator may be providing services for the purposes of VAT and he of course receives fees for his work, and although he renders personal services which he cannot delegate, he does not perform those services or earn his fees for and under the direction of the parties as contemplated in para 67 of Allonby.
He is rather in the category of an independent provider of services who is not in a relationship of subordination with the parties who receive his services, as described in para 68.
The arbitrator is in critical respects independent of the parties.
His functions and duties require him to rise above the partisan interests of the parties and not to act in, or so as to further, the particular interests of either party.
As the International Chamber of Commerce (the ICC) puts it, he must determine how to resolve their competing interests.
He is in no sense in a position of subordination to the parties; rather the contrary.
He is in effect a quasi-judicial adjudicator: K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1992] QB 863, 885.
In England his role is spelled out in the 1996 Act.
By section 33, he has a duty to act fairly and impartially as between the parties and to adopt procedures suitable to the circumstances of the particular case so as to provide a fair means of determination of the issues between the parties.
Section 34 provides that, subject to the right of the parties to agree any matter, it is for the arbitrator to decide all procedural matters.
Examples of the width of those powers can be seen in the particular examples in section 34(2).
Section 40 provides that the parties shall do all things necessary for the proper and expeditious conduct of the arbitration, which includes complying with any order of the arbitrator, whether procedural or otherwise.
Once an arbitrator has been appointed, at any rate in the absence of agreement between them, the parties effectively have no control over him.
Unless the parties agree, an arbitrator may only be removed in exceptional circumstances: see sections 23 and 24.
The court was referred to many other statutory provisions in other parts of the world and indeed many other international codes, including the UNCITRAL (United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration 1985, the ICC Rules and the London Court of International Arbitration (the LCIA) Rules to similar effect.
The Regulations themselves include provisions which would be wholly inappropriate as between the parties and the arbitrator or arbitrators.
For example, regulation 22(1) provides: Anything done by a person in the course of his employment shall be treated for the purposes of these Regulations as done by his employer as well as by him, whether or not it was done with the employers knowledge or approval.
It is evident that such a provision could not apply to an arbitrator.
In this regard an arbitrator is in a very different position from a judge.
The precise status of a judge was left open by this court in OBrien [2010] 4 All ER 62, in which the court referred particular questions to the Court of Justice: see para 41.
However, as Sir Robert Carswell said in Perceval-Price [2000] IRLR 380 and Lord Walker said in OBrien (at para 27), judges, including both recorders and all judges at every level are subject to terms of service of various kinds.
As Sir Robert put it, although judges must enjoy independence of decision without direction from any source, they are in other respects not free agents to work as and when they choose, as are self-employed persons.
In both those cases the court was considering the relationship between the relevant department of state and the judges concerned.
It was not considering the relationship between the judges and the litigants who appear before them.
Here, by contrast, the court is considering the relationship between the parties to the arbitration on the one hand and the arbitrator or arbitrators on the other.
As I see it, there is no basis upon which it could properly be held that the arbitrators agreed to work under the direction of the parties as contemplated in para 67 of Allonby [2004] ICR 1328.
Further, in so far as dominant purpose is relevant, I would hold that the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties.
In reaching this conclusion it is not necessary to speculate upon what the position might be in other factual contexts.
It was submitted that the effect of the decision of the Court of Appeal is that a customer who engages a person on a one- off contract as, say, a plumber, would be subject to the whole gamut of discrimination legislation.
It would indeed be surprising if that were the case, especially given the fact that the travaux prparatoires contained no such suggestion: see the impact assessment in the Commissions Proposal for the Directive 1999/0225 (CNS), Brussels 1999, which was concerned solely with the position of enterprises of various types.
There was no consideration of the effect on individual choice by customers.
See also a memorandum from the Commissions Director General for Employment and Social Affairs to the EU Committee of the House of Lords dated 9 February 2000 to much the same effect.
This is not to say that the Regulations may not apply in the case of the plumber, solicitor, accountant or doctor referred to by the Court of Appeal in para 16.
As already stated, all will depend upon the application of the principles in Allonby to the particular case.
As I see it, the problem with the approach adopted by the Court of Appeal is that it focuses only on the question whether there is a contract to do work personally, whereas it is necessary to ask the more nuanced questions identified in Allonby.
In para 19 the Court of Appeal relied in support of its more general approach upon the opinion of Advocate General Maduro in Centrum voor Gelijkheid van Kansen en voor Racismebestrijding v Firma Feryn NV (Case C- 54/07) [2008] ICR 1390.
It said this in paras 19 and 20: 19.
That the choice of a solicitor, plumber or arbitrator, whether on religious, racial or any other grounds, should fall foul of regulation 6(1) of the 2003 Regulations, even if made entirely privately, may strike some people as surprising.
However, in [the Firma Feryn case] Advocate General Maduro expressed the opinion, at para 14, that the Directive must be understood in the framework of a wider policy to foster conditions for a socially inclusive labour market and to ensure the development of democratic and tolerant societies which allow the participation of all persons irrespective of racial or ethnic origin.
That case arose out of a statement by a company that supplied and fitted up-and-over garage doors that it would not employ immigrants as fitters because its customers were unwilling to have them in their homes.
One can well see why a public statement of that kind might be regarded as discriminatory: it was liable to deter potential applicants for employment and thereby militate against a socially inclusive labour market.
The court itself did not expressly adopt the Advocate General's expression of opinion; rather it confined itself to holding, at para 25, that a general statement of the kind under consideration constituted direct discrimination because it was likely to deter some potential applicants and thus hinder their access to the labour market.
None the less, the Advocate General's view of the broad policy objective of the Directive is in our opinion supported by the recitals.
It is also one which is essentially incompatible with an acceptance of the right to discriminate between any providers of services on the basis of race, sex, religion or any of the other grounds covered by the Directive.
20.
Mr. Davies sought to meet that broad analysis by saying that the primary concern of the Directive is access to employment and economic activity, not private choices by consumers between those who have already gained access to the market.
The language of article 3 could be construed in that more limited way, but the expression access to employment, to self-employment or to occupation is capable of a broader interpretation consistent with the policy objectives we have described.
In any event, we are concerned with the language of domestic legislation, which is not restricted by the scope of the Directive and which is underpinned by broadly the same policy considerations as those identified by Advocate General Maduro in the Firma Feryn case, whether it was introduced before or after the publication of the Directive.
I would not accept that analysis.
The Firma Feryn case was not relied upon in the course of the oral argument in the Court of Appeal.
It was referred to in answer to a letter from the Court of Appeal asking questions on the assumption that an engagement to provide services gave rise to an employment relationship under the Regulations.
The case concerned conventional employment relationships and did not discuss at all the extension of discrimination law to one-off contracts for services.
The Court of Justice held that a racially discriminatory statement by an employer as to its recruitment policy could constitute direct discrimination even if there was no actual victim.
There was no actual victim because there was no evidence that anyone who might have lost out as a result of the policy had actually applied, or would have applied, for a position with that employer.
The Advocate General thus expressed his opinion in a case which was squarely concerned with employment and not with the boundary between employment and self-employment and in which no reference was made to Lawrie-Blum [1987] ICR 483, Kurz [2002] ECR I-10691 or Allonby [2004] ICR 1328.
Some reliance was placed upon the reference to the conditions for access to employment, to self-employment or to occupation, including selection criteria and recruitment conditions in article 3(1)(a) of the Directive.
In para 20 the Court of Appeal gave a wide construction to that provision, rejecting the submission made by Mr Davies that it related to barriers to entry to trades, professions and occupations.
It did so on the same footing as before, namely that a wide meaning should be given to the terms of the Directive and, in any event, to the Regulations.
However, I would accept Mr Davies submission that the expression access to self-employment or to occupation means what it says and is concerned with preventing discrimination from qualifying or setting up as a solicitor, plumber, greengrocer or arbitrator.
It is not concerned with discrimination by a customer who prefers to contract with one of their competitors once they have set up in business.
That would not be denying them access to self-employment or to occupation.
I see no reason to give a different meaning to the Regulations from that given to the Directive.
For these reasons I prefer the conclusion of the judge to that of the Court of Appeal.
I agree with the judge that the Regulations are not applicable to the selection, engagement or appointment of arbitrators.
It follows that I would hold that no part of clause 8 of the JVA is invalid by reason of the Regulations and would allow the appeal on this ground.
Genuine occupational requirement
If the above conclusion is correct, this point does not arise but it was fully argued and I will briefly consider it.
The question considered by the judge was whether, if regulation 6(1)(a) or (c) would otherwise apply, it is prevented from applying by regulation 7(1) and (3).
It will be recalled that, by regulation 7(1), regulations 6(1)(a) and (c) do not apply where regulation 7(3) applies and that regulation 7(3) provides: This paragraph applies where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment or the context in which it is carried out (a) being of a particular religion or belief is a genuine occupational requirement for the job; (b) it is proportionate to apply that requirement in the particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it.
Those provisions were made in accordance with the exceptions in relation to occupational requirements made by article 4 of the Directive, which provides: 1.
Notwithstanding article 2(1) and (2), member states may provide that a difference of treatment which is based on a characteristic related to any of the grounds referred to in article 1 shall not constitute discrimination where, by reason of the nature of the particular occupational activities concerned or of the context in which they are carried out, such a characteristic constitutes a genuine and determining occupational requirement, provided that the objective is legitimate and the requirement is proportionate.
2.
Member states may maintain national legislation in force at the date of adoption of this Directive or provide for future legislation incorporating national practices existing at the date of adoption of this Directive pursuant to which, in the case of occupational activities within churches and other public or private organisations the ethos of which is based on religion or belief, a difference of treatment based on a persons religion or belief shall not constitute discrimination where, by reason of the nature of these activities or of the context in which they are carried out, a persons religion or belief constitute a genuine, legitimate and justified occupational requirement, having regard to the organisations ethos.
This difference of treatment shall be implemented taking account of members states constitutional provisions and principles, as well as the general principles of Community law, and should not justify discrimination on another ground. .
It is common ground that, as the judge said at para 40, a rigorous and strict approach must be adopted to the question whether the particular exception applies: Stadt Halle Thermische Restabfall-und Energieverwertungsanlage TREA Leuna (Case C-26/03) [2005] ECR I-1 and Marleasing [1990] ECR I-4135.
v Arbeitgemeinschaft
Although some reliance was placed in the course of argument on regulation 7(2), I shall focus first on paragraph (3).
Since 1 October 2010 the provisions of regulation 7 have been replaced by those of Schedule 9 of the EA.
Regulation 7(3) has been replaced by paragraph (3) of that Schedule, which provides: A person (A) with an ethos based on religion or belief does not contravene a provision mentioned in paragraph 1(2) by applying in relation to work a requirement to be of a particular religion or belief if A shows that, having regard to that ethos and the nature or context of the work (a) it is an occupational requirement, (b) the application of the requirement is a proportionate means of achieving a legitimate aim, and the person to whom A applies the requirement does not meet it (or A has reasonable grounds for not being satisfied that the person meets it).
It was not suggested that there is any significant difference between that paragraph and regulation 7(3).
There are four relevant requirements under regulation 7(3).
The issue between the parties centres upon whether the second requirement is satisfied.
The requirements are (1) that the employer should have an ethos based on religion or belief; (2) that, having regard to that ethos and to the nature of the employment or the context in which it is carried out, being of a particular religion or belief is a genuine requirement for the job; (3) that, having regard to that ethos and to the nature of the employment or the context in which it is carried out, it is proportionate to apply that requirement on the facts; and (4) that the person to whom the requirement is applied, who here must be Sir Anthony Colman, does not meet the requirement.
As to (1) it is not (and could not be) suggested here that Mr Jivraj and Mr Hashwani did not have such an ethos.
As to (3), it is not in dispute that, if requirement (2) is satisfied, so that being an Ismaili is a genuine occupational requirement, it is or would be proportionate to apply it.
As to (4), it is plain that Sir Anthony Colman does not meet the requirement in the JVA that the arbitrators should be members of the Ismaili community.
The essential issue between the parties is whether requirement (2) is satisfied.
The question is therefore whether, having regard to the Ismaili ethos and to the nature of the employment or the context in which it is carried out, being of the Ismaili religion or belief is a genuine requirement for the job.
The judge held that this requirement was satisfied whereas the Court of Appeal held that it was not.
Our attention was drawn on behalf of Mr Jivraj to what is said to be an important difference between paragraphs (2) and (3) of regulation 7.
Paragraph (2) is concerned with the case where the employer does not have a particular ethos based on religion or belief but wishes to recruit a worker who does have such an ethos.
In that event, for the exception to apply, being of the particular ethos or belief must be a genuine and determining occupational requirement.
By contrast, where (as here) the employer has an ethos based on religion or belief, it is sufficient under paragraph (3) that being of a particular religion or belief is a genuine occupational requirement for the job.
Mr Davies submits that the difference between the two cases is this.
In the first case the question is whether being of a particular religion or belief is a genuine and determining occupational requirement.
That is to say it must be an essential requirement for the job.
Whether it is or not is an objective question which the court can readily decide.
In the second case, on the other hand, the question for the court is subjective, namely whether it is a genuine requirement for the job in the eyes of the employer or employers.
This, Mr Davies suggests, reflects the sensible principle that it is not for the court to sit in judgment over matters of religion or belief.
By contrast, Mr Brindle disputes the idea that the test is entirely subjective.
Regulation 7(3) requires that being of a particular religion or belief is not only genuine but also, as paragraph 2 of article 4 of the Directive shows, legitimate and justified.
It follows that it is not sufficient that the employer has a genuine belief that the particular religion or belief is required.
The requirement must also be legitimate and justified.
It would be remarkable, in his submission, if the justification could be found in the personal opinions of the prima facie discriminator.
I agree with Mr Davies that it is not for the court to sit in judgment on matters of religion or belief.
However, I also agree with Mr Brindle that the test for justifying prima facie discrimination cannot be entirely subjective.
This is because the Regulations must be construed consistently with the Directive.
It seems to me to be reasonably clear that paragraph 1 of article 4 of the Directive is the source of paragraph (2) of regulation 7 because they both refer to a genuine and determining occupational requirement.
In these circumstances paragraph 2 must be the source of paragraph (3) of the regulation, with the result that the expression genuine occupational requirement must (either alone or together with proportionality in requirement (3)) have been intended to reflect the expression genuine, legitimate and justified occupational requirement in paragraph 2 of article 4 of the Directive.
If the legitimacy or justification of a requirement were assessed purely by reference to the subjective view of the employer, they would add nothing to the stipulation that a requirement be genuine.
In my view, whether or not a particular religion or belief is a legitimate and justified requirement of an occupation is an objective question for the court.
This is not however as strict a test as that applied under regulation 7(2), namely that a particular religion or belief is an essential requirement for the job.
As I see it, the question is simply whether in all the circumstances of the case the requirement that the arbitrators should be respected members of the Ismaili community was, not only genuine, but legitimate and justified.
I do not agree with Mr Brindle that the requirement that arbitrators be Ismailis cannot be objectively justified.
His submission that an English law dispute in London under English curial law does not require an Ismaili arbitrator takes a very narrow view of the function of arbitration proceedings.
This characterisation reduces arbitration to no more than the application of a given national law to a dispute.
One of the distinguishing features of arbitration that sets it apart from proceedings in national courts is the breadth of discretion left to the parties and the arbitrator to structure the process for resolution of the dispute.
This is reflected in section 1 of the 1996 Act which provides that: the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.
The stipulation that an arbitrator be of a particular religion or belief can be relevant to this aspect of arbitration.
As the ICC puts in its written argument: The raison dtre of arbitration is that it provides for final and binding dispute resolution by a tribunal with a procedure that is acceptable to all parties, in circumstances where other fora (in particular national courts) are deemed inappropriate (eg because neither party will submit to the courts or their counterpart; or because the available courts are considered insufficiently expert for the particular dispute, or insufficiently sensitive to the parties positions, culture, or perspectives).
Under section 34 of the 1996 Act (referred to above) the arbitrators have complete power over all procedural and evidential matters, including how far the proceedings should be oral or in writing, whether or not to apply the strict rules of evidence, whether the proceedings should be wholly or partly adversarial or whether and to what extent they should make their own inquiries.
They are the sole judges of the evidence, including the assessment of the probabilities and resolving issues of credibility.
In paras 41 to 44 of his judgment [2010] 1 All ER 302 the judge made detailed findings which seem to me to be relevant to this question.
I refer to only some of them.
In para 41 he described the history and development of the Ismaili Community.
He noted from the summary on the website of the Aga Khan Development Network that in the early part of the 20th century Aga Khan III introduced a range of organisational forms that gave Ismaili communities the means to structure and regulate their own affairs.
He added that those forms were established against the background of "the Muslim tradition of a communitarian ethic on the one hand, and responsible individual conscience with freedom to negotiate one's own moral commitment and destiny on the other".
At para 42 the judge quoted extensively from the same summary which included this: Spiritual allegiance to the Imam and adherence to the Shia Imami Ismaili tariqah (persuasion) of Islam according to the guidance of the Imam of the time, have engendered in the Ismaili community an ethos of self-reliance, unity, and a common identity.
He noted that in 1986 the present Aga Khan: promulgated a Constitution that, for the first time, brought the social governance of the world-wide Ismaili community into a single structure with built-in flexibility to account for diverse circumstances of different regions.
Served by volunteers appointed by and accountable to the Imam, the Constitution functions as an enabler to harness the best in individual creativity in an ethos of group responsibility to promote the common well-being.
Like its predecessors, the present constitution is founded on each Ismaili's spiritual allegiance to the Imam of the time, which is separate from the secular allegiance that all Ismailis owe as citizens to their national entities.
The guidance of the present Imam and his predecessor emphasised the Ismaili's allegiance to his or her country as a fundamental obligation.
These obligations discharged not by passive affirmation but through responsible engagement and active commitment to uphold national integrity and contribute to peaceful development.
In para 43 the judge quoted from a paper presented to the Council of Europe in March 2009 by the Director of International Training with the secretariat of the Aga Khan which included the following: Under the Constitution, the Imam has also established National and International Conciliation and Arbitration Boards to encourage amicable resolution of conflicts through impartial conciliation, mediation and arbitration, a service which is being increasingly used, in some countries, even by non-Ismailis.
In fulfilling the mandate to sustain social, economic, cultural and civil society development, the Imamat collaborates with national governments, regional and international institutions as well as civil society organisations.
This paper highlights the work of the Conciliation and Arbitration Boards established under the Ismaili Constitution and more particularly the training programmes that have been conducted for them over the last decade, indicating some of the best practices.
Over the centuries, Ismaili communities in various parts of the world, have been conducting their own ADR processes based on the ethics of the faith as guided by the Imams of the Time.
[The Aga Khan] was concerned about the massive costs of litigation faced by members of the Ismaili community in various parts of the world.
Not only were the legal costs very high, but the legal procedures, in many countries, were particularly lengthy and did not always result in outcomes that conformed with the principles of natural justice.
The Aga Khan was concerned about compliance with the ethics of the faith which promote a non-adversarial approach to dispute resolution in keeping with the principles of negotiated settlement (sulh) enshrined in the Holy Qur'an.
The study indicated that a majority of the cases were in the field of family disputes and that the national courts in the countries, where the disputants were settled, were not always able to comprehend the inter-generational attitudinal issues involved, let alone being able to resolve them.
This syndrome is very much in keeping with the notion of the "limited remedial imagination" that Menkel-Meadow attributes to the adversarial system which focuses on a zero-sum numbers game where the "winner takes all".
It was therefore decided by the Imam, in consultation with the leaders of the various Ismaili communities worldwide, to build on the community's existing tradition of settling disputes amicably within the ethics of Islam and to establish Conciliation and Arbitration Boards at various levels of social governance in the Ismaili communities throughout the world.
It was also felt that the system should be such that the first submission of an issue to an arbitrational or mediational body should ensure the highest degree of proficiency, probity and fairness so that the number of cases which go for appeal would be minimal and that the process would be seen as being equitable, fair and cost effective.
The Aga Khan's advice was that such a system should endeavour to resolve disputes within the community without the disputants having to resort to unnecessary litigation which is time consuming, expensive and destructive.
The Aga Khan saw the amicable resolution of disputes, without resorting to a court of law and within the ethics of the faith, as an important aspect of the improvement of the quality of life of the Ismailis globally.
Consequently, the Ismaili Constitution of 1986 made provision for the establishment of the Conciliation and Arbitration Boards.
The judge then in para 44 set out part of article XIII of the Constitution which set up a National Conciliation and Arbitration Board for all types of dispute, which provided by article 13.5: Each National Conciliation and Arbitration Board shall upon the application of any Ismaili assist him to settle any differences or disputes with another party residing in the area of jurisdiction of the National Conciliation and Arbitration Board in relation to any of the matters mentioned in article 13.1(a).
Article 13.1(a) provided that the Board was: to assist in the conciliation process between parties in differences or disputes arising from commercial, business and other civil liability matters, domestic and family matters, including those relating to matrimony, children of a marriage, matrimonial property, and testate and intestate succession;
In these circumstances the judge held that the provision in the JVA which provided that the arbitrators should be respected members of the Ismaili community and holders of high office within the community was a GOR within regulation 7(3).
He did so on the basis that the material set out above showed that, as he put it at para 45, one of the more significant and characteristic spirits of the Ismaili sect was an enthusiasm for dispute resolution contained within the Ismaili community.
He said that he had no difficulty in determining this spirit to be an "ethos based on religion".
He also relied upon the terms of the arbitration clause itself and the engagement by both sides of members of the Ismaili community to perform mediation and conciliation services from 1988 until 1994.
In my opinion the judge was justified in concluding that the requirement of an Ismaili arbitrator can be regarded as a genuine occupational requirement on the basis that it was not only genuine but both legitimate and justified, so that requirement (2) was satisfied.
As to requirement (3), the judge said at para 46 that, had proportionality been a live issue, having regard to the parties freedom in section 1 of the 1996 Act (quoted above) he would have held that article 8 of the JVA was proportionate.
The reasoning of the Court of Appeal [2010] ICR 1435 is set out in their para 29 as follows: The judge's findings about the nature and ethos of the Ismaili community were not challenged, but in our view he failed to pay sufficient regard to the other requirements of regulation 7(3), in particular, to whether, having regard to the ethos of that community and the nature of the arbitrator's function, being an Ismaili was a genuine occupational requirement for its proper discharge.
If the arbitration clause had empowered the tribunal to act ex aequo et bono it might have been possible to show that only an Ismaili could be expected to apply the moral principles and understanding of justice and fairness that are generally recognised within that community as applicable between its members, but the arbitrators' function under clause 8 of the joint venture agreement is to determine the dispute between the parties in accordance with the principles of English law.
That requires some knowledge of the law itself, including the provisions of the Arbitration Act 1996, and an ability to conduct the proceedings fairly in accordance with the rules of natural justice, but it does not call for any particular ethos.
Membership of the Ismaili community is clearly not necessary for the discharge of the arbitrator's functions under an agreement of this kind and we are unable to accept, therefore, that the exception provided in regulation 7 of the 2003 Regulations can be invoked in this case.
I prefer the approach of the judge.
For the reasons given earlier, I am not persuaded that the test is one of necessity.
The question is whether, in all the circumstances the provision that all the arbitrators should be respected members of the Ismaili community was legitimate and justified.
In my opinion it was.
The approach of the Court of Appeal seems to me to be too legalistic and technical.
The parties could properly regard arbitration before three Ismailis as likely to involve a procedure in which the parties could have confidence and as likely to lead to conclusions of fact in which they could have particular confidence.
For these reasons I would, if necessary, have allowed the appeal on the basis that article 8 was a GOR within regulation 7(3).
This conclusion makes it unnecessary to consider whether it also satisfied regulation 7(2).
Severance and costs
In these circumstances, neither the severance issue raised by Mr Hashwani nor the appeal on costs advanced by Mr Jivraj arises and I say nothing about them.
Reference to the Court of Justice
I would not refer any of the questions which arise in this appeal to the Court of Justice.
On the first question, the only questions of EC law which arise relate to the true construction of the Directive.
The Court of Justice has resolved those issues in a number of cases, notably Allonby [2004] ICR 1328.
To my mind the principles are now acte clair.
On the second question, the principal issue between the parties relates to the application of the relevant principles to the facts.
As to the correct construction of regulation 7(3), I have accepted Mr Brindles submission that it does not involve a wholly subjective question on the ground that the relevant provision must be not only genuine, but also legitimate and justifiable.
In these circumstances, I see no basis for a reference in relation to GOR, which was in any event not determinative of the appeal.
CONCLUSION
I would allow the appeal.
The first point
I have read and agree entirely with the judgment of Lord Clarke on the first point: that is, whether the arbitrators contemplated by article 8 of the Joint Venture Agreement are persons who would be engaged in employment under a contract personally to do work within the meaning of regulation 2 of the Employment Equality (Religion or Belief) Regulations 2003, interpreted in the light of Council Directive 2000/78/EC to which the Regulations aim to give effect.
The conclusion that they would not be is, I think, unsurprising for all the reasons that Lord Clarke gives.
I note that as long ago as 1904 (RGZ 59, 247), the German Reichsgericht identified the particular nature of an arbitral contract, in terms which I think have a relevance to arbitration generally, when it said (in translation), that: It does not seem permissible to treat the arbitrator as equivalent to a representative or an employee or an entrepreneur.
His office has .
an entirely special character, which distinguishes him from other persons handling the affairs of third parties.
He has to decide a legal dispute in the same way as and instead of a judge, identifying the law by matching the relevant facts to the relevant legal provisions.
The performance expected from him is the award, which constitutes the goal and outcome of his activity.
It is true that the extent of his powers depends on the arbitration agreement, which can to a greater or lesser extent prescribe the way to that goal for him.
But, apart from this restriction, his position is entirely free, freer than that of an ordinary judge.
A more modern source, Gary B Borns authoritative work on International Commercial Arbitration (2009), convincingly discusses the general international legal understanding of the nature of an arbitrators engagement in the following passage (Vol I, pp 1607-1609): There is also debate about how to characterize the arbitrators contract, particularly in civil law jurisdictions where the characterization of contracts is often essential to determining their effects.
Some commentators consider the arbitrators contract to be an agency agreement, where the arbitrator serves as the parties agent.
Other authorities have suggested treating the arbitrators contract as an agreement for the provision of services.
A third approach has been to regard the arbitrators contract as a sui generis or hybrid form of agreement, not being categorizable in conventional terms and instead giving rise to a unique set of right and duties.
The proper analysis is to treat the arbitrators contract as a sui generis agreement.
That is in part because this characterization accords with the specialized and distinct nature of the arbitrators mandate: as noted above, that mandate differs in fundamental ways from the provision of many other services and consists in the performance of a relatively sui generis adjudicatory function.
It is therefore appropriate, and in fact necessary, that the arbitrators contract be regarded as sui generis.
At the same time, there are no other satisfactory characterizations of an arbitrators contract.
It makes no sense to treat the arbitrators contract as an agency agreement.
Under most legal systems, that characterization would require the arbitrator to follow the parties directions and to provide the parties with information and an accounting all of which can only with difficulty, if at all, be assimilated to the adjudicative role of an arbitrator.
Moreover, the role of an agent is inconsistent with the arbitrators adjudicative function which is precisely to be independent of the parties.
This was underscored by a French appellate decision, which held that an agreement for the parties representatives to resolve their dispute could not be an arbitration agreement: A stipulation of that kind is incompatible with the actual concept of arbitration, since the arbitrators, though appointed by the parties, can under no circumstances become their representatives.
That would imply, in particular, that they represent the parties and account for their functions.
Such a role, and the obligations it entails, are alien to the functions of an arbitrator, which are judicial in nature.
Equally, regarding the arbitrator as a service provider, like an accountant, investment banker, lawyer, or other professional, ignores the essential adjudicative character of his or her mandate.
Arbitrators do not merely provide the parties with a service, but also serve a public, adjudicatory function that cannot be entirely equated with the provision of service in a commercial relationship.
The proper analysis is therefore to regard the arbitrators contract as a sui generis agreement specifying the terms on which this adjudicative function is to be exercised vis--vis particular parties and on particular terms.
Both these citations catch and support the essence of Lord Clarkes distinction between persons under the direction of another and arbitrators who perform an independent role, free of such control.
The second point
As Lord Clarke notes at para 51, the second point does not in these circumstances arise, since the whole situation falls outside the scope of regulation 2.
To ask how the exception permitted by regulation 7(3) and article 4(2) of the Directive might apply, when by definition it cannot, may risk giving a slightly false impression about the scope of the exception in situations to which it is potentially applicable.
The reasons which can, as Lord Clarke demonstrates, be given for concluding that the exception would not apply to a considerable extent duplicate those given for concluding that regulation 2 does not apply.
They are in particular that the arbitrators would not be under the direction of the parties: see paras 61 et seq.
Accordingly, it may be appropriate to say a few words about the application of the exception in a situation in which the regulation would apply.
If one takes a situation which is within regulation 2, say the engagement by the Ismaili community, or by any other organisation whose ethos is based on religion or belief, of an employed lawyer to undertake English law work, I would expect it to be much more difficult to maintain as valid a restriction to members of the Ismaili community or of the other religious or faith-based organisation.
Many English as well as other lawyers believe in, are trained in and are familiar with techniques for the amicable resolution of disputes, including conciliation, mediation and arbitration.
The value of alternative dispute resolution, particularly mediation, is also recognised at the European legal level (see eg Directive 2008/52/EC of 21 May 2008 on certain aspects of mediation in civil and commercial matters and Council of Europe Recommendation No R(2002)10 on civil mediation).
A religious or faith-based communitys or organisations power first to select and then to direct its own employed lawyers would be a secure means of ensuring that its employed lawyers valued, understood and prioritised the handling of English law work so far as possible on a non-confrontational basis, using alternative dispute resolution procedures wherever possible.
A refusal to employ anyone other than a member of the particular religion or faith would in that context seem unlikely to be justified or proportionate.
| The parties entered into a joint venture agreement on 29 January 1981.
Article 8 provided that any dispute arising from the joint venture should be resolved by arbitration before three arbitrators, each of whom was required to be a respected member of the Ismaili community (the Requirement).
The Ismaili community comprises Shia Imami Ismaili Muslims and is led by the Aga Khan.
The issue arising on this appeal is whether the Requirement, and/or the arbitration agreement as a whole, became void when the Employment Equality (Religion or Belief) Regulations 2003 (the Regulations) came into force on 2 December 2003, as an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services.
The joint venture ended in 1988.
The division of the joint venture assets was largely determined by a three man panel appointed in accordance with the arbitration agreement, but some matters remained in dispute.
On 31 July 2008 Mr Hashwanis solicitors wrote to Mr Jivraj asserting that a balance of over US$4.4m was due to him and giving notice of his intention to appoint Sir Anthony Colman, a retired judge of the Commercial Court, as an arbitrator.
Sir Anthony was not a member of the Ismaili community.
Mr Jivraj commenced proceedings for a declaration that his appointment was void as a breach of the Requirement.
Mr Hashwani sought an order that Sir Anthony be appointed as sole arbitrator.
The High Court (David Steel J) held that the appointment of arbitrators fell outside the scope of the Regulations as they were not employed or, if they were, that the Requirement fell within the exception permitted for genuine occupational requirements which it was proportionate to apply.
Had he held that the Requirement was void, he would have held that the arbitration agreement as a whole was void.
The Court of Appeal allowed Mr Hashwanis appeal in relation to the Regulations, finding that arbitrators were employed and that there had been unlawful religious discrimination.
However, they concluded that the agreement should not be enforced with the Requirement severed from it and, accordingly, Sir Anthonys appointment was invalid (the severance issue).
Mr Jivraj appealed to the Supreme Court in respect of the finding that the clause was void by reason of the Regulations.
Mr Hashwani cross appealed on the severance issue.
The Supreme Court unanimously allows the appeal on the ground that an arbitrator is not a person employed under a contract personally to do work within the meaning of the Regulations, which do not therefore apply.
The majority (Lord Phillips, Lord Walker, Lord Clarke and Lord Dyson) also find that the Requirement would have fallen within the exception for genuine occupational requirements if
the Regulations had applied.
Lord Mance preferred not to deal with this issue as it did not arise in the light of the finding that the Regulations did not apply.
The judgment of the majority is given by Lord Clarke.
The High Court judge had correctly concluded that an arbitrator was not employed within the scope of the Regulations [22].
He or she fell outside the definition of a worker laid down by the case law of the European Court of Justice and was instead an independent provider of services who was not in a relationship of subordination with the person who received the services [34][40].
The dominant purpose of the contract was not the sole test for determining employment, although it might be relevant in arriving at the correct conclusion on the facts of a particular case [39].
An arbitrator was a quasi judicial adjudicator whose duty was not to act in the particular interests of either party [41].
The dominant purpose of the appointment, insofar as it was relevant, was the impartial resolution of the dispute [45].
The question of whether the Requirement was a genuine occupational requirement for the job for the purposes of the exception in regulation 7(3) of the Regulations did not therefore arise.
However, whether a particular religion or belief was a legitimate and justified requirement of an occupation was an objective question for the court [59].
Arbitration was more than the application of a given national law to a dispute and a stipulation that an arbitrator be of a particular religion or belief can be relevant to the manner in which disputes are resolved [61].
In this case, the judge had correctly found that the Ismaili community had demonstrated an ethos, based on religion, for dispute resolution contained within that community [68].
The test was not one of necessity.
The parties could properly regard arbitration before three Ismailis as likely to involve a procedure in which parties could have confidence and as likely to lead to conclusions of fact in which they could have particular confidence [70].
The severance issue did not therefore arise [72].
|
On 29 January 1981 Mr Jivraj and Mr Hashwani entered into a joint venture agreement (the JVA), containing an arbitration clause which provided that, in the event of a dispute between them which they were unable to resolve, that dispute should be resolved by arbitration before three arbitrators, each of whom should be a respected member of the Ismaili community, of which they were both members.
The principal question in this appeal is whether that arbitration agreement became void with effect from 2 December 2003 under the Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660) (the Regulations) on the ground that it constituted an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services.
The JVA
The JVA was established to make investments in real estate around the world.
By article 9 it is expressly governed by English law.
Article 8 provides, so far as material, as follows: (1) If any dispute difference or question shall at any time hereafter arise between the investors with respect to the construction of this agreement or concerning anything herein contained or arising out of this agreement or as to the rights liabilities or duties of the investors or either of them or arising out of (without limitation) any of the businesses or activities of the joint venture herein agreed the same (subject to sub clause 8(5) below) shall be referred to three arbitrators (acting by a majority) one to be appointed by each party and the third arbitrator to be the President of the HH Aga Khan National Council for the United Kingdom for the time being.
All arbitrators shall be respected members of the Ismaili community and holders of high office within the community. (2) The arbitration shall take place in London and the arbitrators' award shall be final and binding on both parties.
The Ismaili community comprises Shia Imami Ismaili Muslims.
It is led by the Aga Khan, whose title is the hereditary title of the Imam of the Ismaili community.
The disputes
During the 1980s the joint venture came to comprise substantial business interests, first in Canada and later in the United States, Pakistan and the United Kingdom, with investments in properties, hotels and the oil industry.
By late 1988 Mr Jivraj and Mr Hashwani had agreed to part company.
On 30 October 1988 they entered into an agreement under which they appointed a three man conciliation panel (the panel) for the purpose of the division of the joint venture assets.
Each member of the panel was a respected member of the Ismaili community.
The panel operated between October 1988 and February 1990 and many of the assets were divided between the parties in accordance with its directions.
It was however unable to resolve all the issues between the parties.
The parties then agreed to submit the remaining issues to arbitration or conciliation by a single member of the Ismaili community, namely Mr Zaher Ahamed.
He issued a determination in December 1993, whereafter he had further exchanges with the parties until 1995, when he declared himself defeated.
The principal matters which remained in dispute were, on the one hand, a claim by Mr Hashwani that there remained a balance due to him and, on the other hand, a claim by Mr Jivraj that Mr Hashwani had failed to declare certain tax liabilities which left Mr Jivraj with a potential for secondary liability.
These matters remained in dispute for some years.
Then, on 31 July 2008, Messrs Zaiwalla & Co, acting on behalf of Mr Hashwani, wrote to Mr Jivraj asserting a claim for US$1,412,494, together with interest, compounded quarterly from 1994, making a total of US$4,403,817.
The letter gave notice that Mr Hashwani had appointed Sir Anthony Colman as an arbitrator under article 8 of the JVA and that, if Mr Jivraj failed to appoint an arbitrator within seven days, steps would be taken to appoint Sir Anthony as sole arbitrator.
The letter added that Mr Hashwani did not regard himself as bound by the provision that the arbitrators should be members of the Ismaili community because such a requirement would now amount to religious discrimination which would violate the Human Rights Act 1998 and therefore must be regarded as void.
It is common ground, on the one hand, that Sir Anthony Colman is not a member of the Ismaili community and, on the other hand, that he is a retired judge of the Commercial Court with substantial experience of the resolution of commercial disputes, both as a judge and as an arbitrator.
Mr Jivraj's response to the letter was to start proceedings in the Commercial Court seeking a declaration that the appointment of Sir Anthony was invalid because he is not a member of the Ismaili community.
Mr Hashwani subsequently issued an arbitration claim form seeking an order that Sir Anthony be appointed sole arbitrator pursuant to section 18(2) of the Arbitration Act 1996 (the 1996 Act).
The application was made on the basis that the requirement that the arbitrators be members of the Ismaili community, although lawful when the agreement was made, had been rendered unlawful and was void because it contravened the Regulations.
The Regulations
The Regulations were made in the exercise of powers conferred by the European Communities Act 1972 following the making of the Council Framework Directive 2000/78/EC of 27 November 2000 (OJ 2000 L303, p 16) (the Directive) which, by article 1, was itself made for the purpose of establishing: a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment.
The Regulations (as amended by section 77(2) of the Equality Act 2006) provide, so far as material, as follows: 2 Interpretation (3) In these Regulations references to employer, in their application to a person at any time seeking to employ another, include a person who has no employees at that time; employment means employment under a contract of service or of apprenticeship or a contract personally to do any work, and related expressions shall be construed accordingly ; 3 Discrimination on grounds of religion or belief (1) For the purposes of these Regulations, a person (A) discriminates against another person (B) if on the grounds of the religion or belief of B or of any other person except A (whether or not it is also As religion or belief), A treats B less favourably than he treats or would treat other persons; (a) Applicants and employees 6 (1) It is unlawful for an employer, in relation to employment by him at an establishment in Great Britain, to discriminate against a person in the arrangements he makes for the purpose of (a) determining to whom he should offer employment; in the terms on which he offers that person (b) employment; or (c) by refusing to offer, or deliberately not offering, him employment. 7 Exception for genuine occupational requirement In relation to discrimination falling within regulation 3 (1) (discrimination on grounds of religion or belief) (a) regulation 6(1)(a) or (c) does not apply to any employment where paragraph (2) or (3) applies. (2) This paragraph applies where, having regard to the nature of the employment or the context in which it is carried out (a) being of a particular religion or belief is a genuine and determining occupational requirement; it is proportionate to apply that requirement in the (b) particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it, and this paragraph applies whether or not the employer has an ethos based on religion or belief. (3) This paragraph applies where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment or the context in which it is carried out (a) being of a particular religion or belief is a genuine occupational requirement for the job; it is proportionate to apply that requirement in the (b) particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it."
The Directive
It is common ground that the Regulations must, so far as possible, be construed to give effect to the objective of the Directive which they were designed to implement: see eg Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C 106/89) [1990] ECR I 4135 and Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546.
It is also common ground that, although the arbitration agreement was on any view lawful when it was made, it became subject to the provisions of the Regulations, insofar as they applied to it.
The Directive provides, so far as material, as follows: Article 1 Purpose The purpose of this Directive is to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the member states the principle of equal treatment.
Article 2 Concept of discrimination (1) For the purposes of this Directive, the 'principle of equal treatment' shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in article 1.
Article 3 Scope (1) Within the limits of the areas of competence conferred on the Community, this Directive shall apply to all persons, as regards both the public and private sectors, including public bodies, in relation to (a) conditions for access to employment, to self employment or to occupation, including selection criteria and recruitment conditions, whatever the branch of activity and at all levels of the professional hierarchy, including promotion; (b) access to all types and to all levels of vocational guidance, vocational training, advanced vocational training and retraining, including practical work experience; (c) employment and working conditions, including dismissals and pay; (d) membership of, and involvement in, an organisation of workers or employers, or any organisation whose members carry on a particular profession, including the benefits provided for by such organisations.
As Moore Bick LJ, giving the judgment of the Court of Appeal, observed at para 8, the Directive is concerned with discrimination on the grounds of religion or belief, disability, age and sexual orientation.
It is therefore much wider in its scope than the Regulations, which are concerned only with discrimination on the grounds of religion or belief.
The explanation lies in the fact that the United Kingdom had already introduced legislation dealing with discrimination on most of the other grounds covered by the Directive in connection with employment and occupation.
Discrimination on the grounds of sex was rendered unlawful by the Sex Discrimination Act 1975 (the SDA 1975), discrimination on the grounds of race by the Race Relations Acts 1968 and 1976, discrimination on the grounds of disability by the Disability Discrimination Act 1995.
Legislation dealing with discrimination on the grounds of age, sexual orientation and religion or belief was still required to ensure compliance with the Directive.
The Regulations deal with discrimination on the grounds of religion or belief.
The Employment Equality (Sexual Orientation) Regulations 2003 (SI 2003/1661) provided for discrimination on the grounds of sexual orientation, and discrimination on the grounds of age was subsequently covered by the Employment Equality (Age) Regulations 2006.
Again as observed by the Court of Appeal (at para 9), the form of the Regulations follows closely that of the earlier legislation, in particular in defining "employment" as including a contract personally to do work of any kind.
Moreover, the language of regulation 6 is identical to, or differs in no significant respect from, that used in the other legislation dealing with discrimination.
It follows that the Regulations must be understood as complementing all the other legislation prohibiting discrimination.
This uniformity of the law relating to the areas in which discrimination is forbidden has now been reinforced by the Equality Act 2010 (the EA), which applies to all of the cases protected by the earlier legislation.
The EA is, among other things, an Act to reform and harmonise equality law and restate the greater part of the enactments relating to discrimination.
The Regulations were amongst those enactments restated by the EA.
They were revoked by section 211 and Schedule 27, Part 2.
The revocation took effect on 1 October 2010.
The current law is therefore as stated in the Act rather than the Regulations.
It was not however suggested in the course of the argument that any of the issues in this appeal is affected by the revocation of the Regulations.
First instance
Both parties applications were determined by David Steel J (the judge) on 26 June 2009: see [2009] EWHC 1364 (Comm), [2010] 1 All ER 302.
In the meantime on 11 March 2009, which was before the applications were heard, the solicitors for Mr Jivraj wrote an open letter to the solicitors for Mr Hashwani offering him the option of pursuing his claim in the High Court on the basis that Mr Jivraj would not seek a stay on the basis of the arbitration clause.
Mr Hashwani did not accept the offer.
It was submitted before the judge on behalf of Mr Hashwani that the term requiring arbitrators to be members of the Ismaili community was invalid by reason of one or more of the following: the Regulations, the Human Rights Act 1998 (the HRA), or public policy at common law.
The judge held (i) that the term did not constitute unlawful discrimination on any of those bases and, specifically, that arbitrators were not employed within the meaning of the Regulations; (ii) that if, nonetheless, appointment of arbitrators fell within the scope of the Regulations, it was demonstrated that one of the more significant characteristics of the Ismaili sect was an enthusiasm for dispute resolution within the Ismaili community, that this was an ethos based on religion within the meaning of the Regulations and that the requirement for the arbitrators to be members of the Ismaili community constituted a genuine occupational requirement which it was proportionate to apply within regulation 7(3); and (iii) that, if that was also wrong, the requirement was not severable from the arbitration provision as a whole, so that the whole arbitration clause would be void.
The judge ordered Mr Hashwani to pay Mr Jivrajs costs and refused Mr Hashwanis application for permission to appeal.
The Court of Appeal
On 7 October 2009 Sir Richard Buxton granted permission to appeal limited to the issues on the Regulations and on severance.
Permission was refused on the HRA and public policy issues.
The issues in the Court of Appeal were therefore these: i) Are arbitrators persons who are under a contract to do work so as to fall within the Regulations and, if so, do parties who make an arbitration agreement specifying religious qualifications for eligible arbitrators thereby make an arrangement for the purpose of determining to whom they should offer employment or do they agree to offer, or deliberately not to offer, employment within the meaning of the Regulations? If so, in the circumstances, did the requirement for all the arbitrators to be members of the Ismaili community constitute a genuine occupational requirement (GOR) which it was proportionate to apply within regulation 7(3)? If not, did the whole arbitration agreement fail or was only the discriminatory provision void? iii) ii)
The unanimous judgment of the Court of Appeal, which comprised Moore Bick and Aikens LJJ and Sir Richard Buxton, was handed down on 22 June 2010: see [2010] EWCA Civ 712, [2010] ICR 1435.
The Court of Appeal reached a different conclusion from the judge on the principal points.
It held that the appointment of an arbitrator involved a contract for the provision of services which constituted a contract personally to do any work, and therefore satisfied the definition of employment in regulation 2(3).
It followed that the appointor was an employer within the meaning of regulation 6(1) and that the restriction of eligibility for appointment as an arbitrator to members of the Ismaili community constituted unlawful discrimination on religious grounds, both in making arrangements for the purpose of determining to whom he should offer employment contrary to regulation 6(1)(a), and by refusing to offer, or deliberately not offering employment contrary to regulation 6(1)(c).
The Court of Appeal further held that being a member of the Ismaili community was not a genuine occupational requirement for the job within the meaning of the exception in regulation 7(3).
It is submitted on behalf of Mr Jivraj that both those conclusions were wrong.
Finally the Court of Appeal held that, although there would be no difficulty in operating the agreement if the offending requirement was struck out, so doing would render the agreement substantially different from that originally intended, the term was void in its entirety under paragraph 1(1) of Schedule 4 to the Regulations and Mr Hashwanis nomination of an arbitrator was invalid.
It is submitted on behalf of Mr Hashwani that both the judge and the Court of Appeal were wrong on this point, which I will call the severance issue.
A further point arises out of the Court of Appeals order on costs if its judgment is upheld on each of the above points.
Employment
The reasoning of the Court of Appeal was straightforward: see paras 15 17.
In short the Court of Appeal drew attention to the wide terms of articles 1 and 3 of the Directive.
In particular it noted at para 15 that the recitals to the Directive and the structure and language of article 3(1) as a whole indicate that it is concerned with discrimination affecting access to the means of economic activity, whether through employment, self employment or some other basis of occupation, access to vocational guidance and training (which can be expected to provide a means of access to economic activity), conditions of employment (which affect those who have gained access to a means of economic activity) and membership of bodies whose purpose is to affect conditions of recruitment or employment or to regulate access to a particular form of economic activity, such as professional bodies that directly or indirectly control access to the profession or a significant means of obtaining work.
The Court of Appeal then said at para 16: The paradigm case of appointing an arbitrator involves obtaining the services of a particular person to determine a dispute in accordance with the agreement between the parties and the rules of law, including those to be found in the legislation governing arbitration.
In that respect it is no different from instructing a solicitor to deal with a particular piece of legal business, such as drafting a will, or consulting a doctor about a particular ailment or an accountant about a tax return.
Since an arbitrator (or any professional person) contracts to do work personally, the provision of his services falls within the definition of employment, and it follows that his appointor must be an employer within the meaning of regulation 6(1)
In paras 16 and 17 it placed reliance on three cases.
It relied upon von Hoffmann v Finanzamt Trier (Case C 145/96) [1997] All ER (EC) 852 as showing that arbitrators had been treated as providing services for VAT purposes.
It also referred to domestic regulations relating to goods and services.
It further derived support from Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and from Percy v Board of National Mission of the Church of Scotland [2005] UKHL 73, [2006] 2 AC 28.
It recognised that those cases were addressing slightly different points but concluded that they illustrate the width of the expression a contract personally to do any work in the various discrimination statutes.
It concluded thus in para 17: They confirm our view that the expression is apt to encompass the position of a person who provides services as an arbitrator, and why we think the judge was wrong to hold that the nature of the arbitrator's function takes his appointment outside the scope of the 2003 Regulations.
Moreover, a contract of that kind, once made, is a contract of employment within the meaning of the 2003 Regulations.
It follows, therefore, that for the purposes of the 2003 Regulations a person who has entered into a contract under which he is to obtain such services is an employer and the person engaged to provide them is an employee.
The critical question under this head is whether the Court of Appeal was correct to form a different view from the judge on this point.
In my opinion it was not.
As the Court of Appeal correctly observed at para 15, the meaning of article 3 of the Directive has not been considered by the Court of Justice, and is to be interpreted in the light of the recitals and given its natural meaning consistent with the EC Treaty and the existing case law of the court.
It is common ground, at any rate in this class of case, that there is a contract between the parties and the arbitrator or arbitrators appointed under a contract and that his or their services are rendered pursuant to that contract.
It is not suggested that such a contract provides for employment under a contract of service or of apprenticeship.
The question is whether it provides for employment under a contract personally to do any work.
There is in my opinion some significance in the fact that the definition does not simply refer to a contract to do work but to employment under such a contract.
I would answer the question in the negative on the ground that the role of an arbitrator is not naturally described as employment under a contract personally to do work.
That is because his role is not naturally described as one of employment at all.
I appreciate that there is an element of circularity in that approach but the definition is of employment and this approach is consistent with the decided cases.
Given the provenance of the Regulations, it is appropriate to consider first the decisions of the Court of Justice.
The most important of these is perhaps Allonby v Accrington and Rossendale College (Case C 256/01) [2004] ICR 1328, where the Court of Justice followed the principles laid down in Lawrie Blum v Land Baden Wurttemberg (Case C 66/85) [1987] ICR 483 and in Kurz v Land Baden Wurttemberg (Case C 188/00) [2002] ECR I 10691.
In Lawrie Blum, which was concerned with the free movement of workers under what was then article 48 of the Treaty, Advocate General Lenz said at para III 2(b) of his opinion that the term worker covers any employed person who is not self employed.
The court said at para 17: That concept [ie of worker] must be defined with objective criteria which distinguish the employment relationship by reference to the rights and duties of the persons concerned.
The essential feature of an employment relationship, however, is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.
In Kurz the court said at para 32 that it was settled case law that the concept of worker has a specific Community meaning and must not be interpreted narrowly.
The court then repeated the essential feature of the relationship identified in the above passage from Lawrie Blum.
In Allonby the court addressed an equal pay claim by a college lecturer who had been dismissed by the college and then re engaged, ostensibly as a self employed sub contractor supplied by an agency.
For the purposes of article 141(1) of the EC Treaty, the court drew a clear distinction between workers and independent suppliers of services.
It discussed the concept of worker within the meaning of article 141(1) between paras 62 and 72, which included the following: 62.
The criterion on which article 141(1) EC is based is the comparability of the work done by workers of each sex: see, to that effect, Defrenne v Sabena (No 2) (Case 149/77) [1978] ECR 1365, 1377, para 22.
Accordingly, for the purpose of the comparison provided for by article 141(1) EC, only women and men who are workers within the meaning of that article can be taken into consideration. 63.
In that connection, it must be pointed out that there is no single definition of worker in Community law: it varies according to the area in which the definition is to be applied: Martinez Sala v Freistaat Bayern (Case C 85/96) [1998] ECRI 2691, 2719, para 31. 64.
The term worker' within the meaning of article 141(1) EC is not expressly defined in the EC Treaty.
It is therefore necessary, in order to determine its meaning, to apply the generally recognised principles of interpretation, having regard to its context and to the objectives of the Treaty. 65.
According to article 2 EC, the Community is to have as its task to promote, among other things, equality between men and women.
Article 141(1) EC constitutes a specific expression of the principle of equality for men and women, which forms part of the fundamental principles protected by the Community legal order: see, to that effect, Deutsche Post AG v Sievers (Cases C 270 and 271/97) [2000] ECR I 929, 952, para 57.
As the court held in Defrenne v Sabena (Case 43/75) [1976] ICR 547, 566, para 12, the principle of equal pay forms part of the foundations of the Community. 66.
Accordingly, the term worker used in article 141(1) EC cannot be defined by reference to the legislation of the member states but has a Community meaning.
Moreover, it cannot be interpreted restrictively. 67.
For the purposes of that provision, there must be considered as a worker a person who, for a certain period of time, performs services for and under the direction of another person in return for which he receives remuneration see, in relation to free movement of workers, in particular Lawrie Blum para 17, and Martinez Sala, para 32. 68.
Pursuant to the first paragraph of article 141(2) EC, for the purpose of that article, pay means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives directly or indirectly, in respect of his employment, from his employer.
It is clear from that definition that the authors of the Treaty did not intend that the term worker, within the meaning of article 141(1) EC, should include independent providers of services who are not in a relationship of subordination with the person who receives the services (see also, in the context of free movement of workers, Meeusen v Hoofddirectie van de Informatie Beheer Groep (Case C 337/97) [1999] ECR I 3289, 3311, para 15). 69.
The question whether such a relationship exists must be answered in each particular case having regard to all the factors and circumstances by which the relationship between the parties is characterised. 70.
Provided that a person is a worker within the meaning of article 141(1) EC, the nature of his legal relationship with the other party to the employment relationship is of no consequence in regard to the application of that article: . 71.
The formal classification of a self employed person under national law does not exclude the possibility that a person must be classified as a worker within the meaning of article 141(1) EC if his independence is merely notional, thereby disguising an employment relationship within the meaning of that article.
On the basis of those materials I would accept Mr Davies submission that the Court of Justice draws a clear distinction between those who are, in substance, employed and those who are independent providers of services who are not in a relationship of subordination with the person who receives the services.
I see no reason why the same distinction should not be drawn for the purposes of the Regulations between those who are employed and those who are not notionally but genuinely self employed.
In the light of Allonby, there can be no doubt that that would be the correct approach to the near identical definition in section 1(6) of the Equal Pay Act 1970 and must remain the correct approach to the definition of employment in section 83(2) of the EA, which provides, so far as relevant: Employment means (a) employment under a contract of employment, a contract of apprenticeship or a contract personally to do work; That definition is almost identical to the definition in regulation 2(3) of the Regulations and, since it applies to equal pay issues by virtue of sections 83(4), 80(2) and 64 of the EA, it must equally apply to the Regulations.
In my opinion there is nothing in the domestic authorities which requires the court to come to any different conclusion.
The problem with some of them is that they do not refer to the jurisprudence of the Court of Justice.
However, the most recent decision of the House of Lords does.
In Percy v Board of National Mission of the Church of Scotland [2006] 2 AC 28 the House of Lords considered a sex discrimination claim brought by a woman who was a minister of the Church of Scotland.
The issue was whether she was employed within the meaning of section 82(1) of the SDA 1975.
The House held that she was.
Lord Hoffmann dissented on the basis that she was the holder of an office but had no doubt (at para 66) that, if the arrangement had been contractual, it would plainly have been a contract of service.
Lord Hoffmann said at para 73 that the term workers is a term of art in Community law which was defined by the Court of Justice in the passage from para 17 of Lawrie Blum quoted at para 24 above.
Lord Hope of Craighead said much the same at para 126, where he also noted that the same approach was taken in Allonby.
Baroness Hale of Richmond referred at para 141 to para A[4] of Harvey on Industrial Relations and Employment Law, which stated that: the distinction is between those who work for themselves and those who work for others, regardless of the nature of the contract under which they are employed.
She then referred at para 143 to the decision of the Court of Appeal in Northern Ireland in Perceval Price v Department of Economic Development [2000] IRLR 380, where it was held that three full time judicial office holders, namely a full time chairman of industrial tribunals, a full time chairman of social security appeal tribunals and a social security commissioner were workers for the purposes of almost identical provisions.
In para 145, after quoting the definition of an employment relationship in Lawrie Blum, Baroness Hale noted that, in giving the judgment of the court in Perceval Price, Sir Robert Carswell LCJ said that the objective of the relevant EC legislation was to give protection against inequality and discrimination to those who might be vulnerable to exploitation.
He also said that the concept of a worker should be construed purposively by reference to this objective.
Baroness Hale then quoted this extract from the judgment of Sir Robert Carswell: All judges, at whatever level, share certain common characteristics.
They all must enjoy independence of decision without direction from any source, which the respondents quite rightly defended as an essential part of their work.
They all need some organisation of their sittings, whether it be prescribed by the president of the industrial tribunals or the court service, or more loosely arranged in collegiate fashion between the judges of a particular court.
They are all expected to work during defined times and periods, whether they be rigidly laid down or managed by the judges themselves with a greater degree of flexibility.
They are not free agents to work as and when they choose, as are self employed persons.
Their office accordingly partakes of some of the characteristics of employment .
At para 146 Baroness Hale continued: I have quoted those words at length because they illustrate how the essential distinction is, as Harvey says, between the employed and the self employed.
The fact that the worker has very considerable freedom and independence in how she performs the duties of her office does not take her outside the definition.
Judges are servants of the law, in the sense that the law governs all that they do and decide, just as clergy are servants of God, in the sense that God's word, as interpreted in the doctrines of their faith, governs all that they practise, preach and teach.
This does not mean that they cannot be workers or in the employment of those who decide how their ministry should be put to the service of the Church.
Some consideration was recently given to the position of part time judges by this court in OBrien v Ministry of Justice (Note) [2010] UKSC 34, [2010] 4 All ER 62 where the court considered Percy in some detail in a judgment of the court given by Lord Walker.
At para 25 it referred to the same passage in Lawrie Blum as having laid down the relevant principle and at para 26 it referred to the speech of Baroness Hale and approved the passage quoted above from the judgment of Sir Robert Carswell in Perceval Price.
As I read Percy, it sought to apply the principles identified by the Court of Justice, as indeed did this court in OBrien [2010] 4 All ER 62.
The essential questions in each case are therefore those identified in paras 67 and 68 of Allonby [2004] ICR 1328, namely whether, on the one hand, the person concerned performs services for and under the direction of another person in return for which he or she receives remuneration or, on the other hand, he or she is an independent provider of services who is not in a relationship of subordination with the person who receives the services.
Those are broad questions which depend upon the circumstances of the particular case.
They depend upon a detailed consideration of the relationship between the parties.
As I see it, that is what Baroness Hale meant when she said that the essential difference is between the employed and the self employed.
The answer will depend upon an analysis of the substance of the matter having regard to all the circumstances of the case.
I would not accept the Court of Appeals analysis (at para 21) of Baroness Hales speech in this regard.
There have been a number of domestic cases which say that the question is whether the dominant purpose of the contract is the execution of personal work or labour: see eg Quinnen v Hovells [1984] ICR 525, Mirror Group Newspapers Ltd v Gunning [1986] 1 WLR 546, especially per Oliver LJ at 551H and Balcombe LJ at 556H; Kelly v Northern Ireland Housing Executive [1999] 1 AC 428 and Percy [2006] 2 AC 28 per Lord Hope at para 113, where he referred to two other cases in the Court of Appeal, namely Patterson v Legal Services Commission [2004] ICR 312 and Mingeley v Pennock (trading as Amber Cars) [2004] ICR 727.
Mr Michael Brindle QC also referred on behalf of the respondent to two earlier cases which focus on the question whether a contract is one personally to execute any work or labour: see Tanna v Post Office [1981] ICR 374 and Hugh Jones v St Johns College, Cambridge [1979] ICR 848.
However, none of these cases considered the approach in the decisions of the Court of Justice referred to above.
In particular, the cases did not focus on the fact that the employment must be employment under a contract of employment, a contract of apprenticeship or a contract personally to do work. (My emphasis).
Given the importance of the EC perspective in construing the legislation, including the Regulations, the cases must now be read in the light of those decisions.
They show that it is not sufficient to ask simply whether the contract was a contract personally to do work.
They also show that dominant purpose is not the test, or at any rate not the sole test.
That is not to say that the question of purpose is irrelevant but the focus is on the contract and relationship between the parties rather than exclusively on purpose.
Elias J, sitting as President of the Employment Appeal Tribunal, recognised some of the difficulties in James v Redcats (Brands) Ltd [2007] ICR 1006.
He discussed the relevance of dominant purpose in this context by reference to the cases at paras 53 to 68.
At para 59, after quoting from the judgment of Balcombe LJ in Gunning [1986] 1 WLR 546, he said that the dominant purpose test is really an attempt to identify the essential nature of the contract.
In the context of the case he was considering he posed the question whether it was in essence to be located in the field of dependent work relationships or whether it was in essence a contract between two independent business undertakings.
At paras 67 and 68, after referring to a number of cases and observing at para 65 that the description of the test as one of identifying the dominant purpose was perhaps not an altogether happy one, he said this: 67.
An alternative way of putting it may be to say that the courts are seeking to discover whether the obligation for personal service is the dominant feature of the contractual arrangement or not.
If it is, then the contract lies in the employment field; if it is not if, for example, the dominant feature of the contract is a particular outcome or objective and the obligation to provide personal service is an incidental or secondary consideration, it will lie in the business field. 68.
This is not to suggest that a tribunal will be in error in failing specifically to apply the dominant purpose or indeed any other test.
The appropriate classification will in every case depend upon a careful analysis of all the elements of the relationship, as Mr Recorder Underhill QC pointed out in Byrne Bros (Formwork) Ltd v Baird [2002] ICR 667.
It is a fact sensitive issue, and there is no shortcut to a considered assessment of all relevant factors.
However, in some cases the application of the dominant purpose test may help tribunals to decide which side of the boundary a particular case lies.
It is noteworthy that the European cases were not cited in many of the cases, including that before Elias J.
In the light of the European cases, dominant purpose cannot be the sole test, although it may well be relevant in arriving at the correct conclusion on the facts of a particular case.
After all, if the dominant purpose of the contract is the execution of personal work, it seems likely that the relationship will be, in the words of Allonby [2004] ICR 1328, para 67, a case in which the person concerned performs services for and under the direction of the other party to the contract in return for remuneration as opposed to an independent provider of services who is not in a relationship of subordination with him or it.
This may not be so however because, although the dominant purpose of the contract may be personal work, it may not be personal work under the direction of the other party to the contract.
All will depend upon the applications of the principles in Allonby to the circumstances of the particular case.
If the approach in Allonby is applied to a contract between the parties to an arbitration and the arbitrator (or arbitrators), it is in my opinion plain that the arbitrators role is not one of employment under a contract personally to do work.
Although an arbitrator may be providing services for the purposes of VAT and he of course receives fees for his work, and although he renders personal services which he cannot delegate, he does not perform those services or earn his fees for and under the direction of the parties as contemplated in para 67 of Allonby.
He is rather in the category of an independent provider of services who is not in a relationship of subordination with the parties who receive his services, as described in para 68.
The arbitrator is in critical respects independent of the parties.
His functions and duties require him to rise above the partisan interests of the parties and not to act in, or so as to further, the particular interests of either party.
As the International Chamber of Commerce (the ICC) puts it, he must determine how to resolve their competing interests.
He is in no sense in a position of subordination to the parties; rather the contrary.
He is in effect a quasi judicial adjudicator: K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1992] QB 863, 885.
In England his role is spelled out in the 1996 Act.
By section 33, he has a duty to act fairly and impartially as between the parties and to adopt procedures suitable to the circumstances of the particular case so as to provide a fair means of determination of the issues between the parties.
Section 34 provides that, subject to the right of the parties to agree any matter, it is for the arbitrator to decide all procedural matters.
Examples of the width of those powers can be seen in the particular examples in section 34(2).
Section 40 provides that the parties shall do all things necessary for the proper and expeditious conduct of the arbitration, which includes complying with any order of the arbitrator, whether procedural or otherwise.
Once an arbitrator has been appointed, at any rate in the absence of agreement between them, the parties effectively have no control over him.
Unless the parties agree, an arbitrator may only be removed in exceptional circumstances: see sections 23 and 24.
The court was referred to many other statutory provisions in other parts of the world and indeed many other international codes, including the UNCITRAL (United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration 1985, the ICC Rules and the London Court of International Arbitration (the LCIA) Rules to similar effect.
The Regulations themselves include provisions which would be wholly inappropriate as between the parties and the arbitrator or arbitrators.
For example, regulation 22(1) provides: Anything done by a person in the course of his employment shall be treated for the purposes of these Regulations as done by his employer as well as by him, whether or not it was done with the employers knowledge or approval.
It is evident that such a provision could not apply to an arbitrator.
In this regard an arbitrator is in a very different position from a judge.
The precise status of a judge was left open by this court in OBrien [2010] 4 All ER 62, in which the court referred particular questions to the Court of Justice: see para 41.
However, as Sir Robert Carswell said in Perceval Price [2000] IRLR 380 and Lord Walker said in OBrien (at para 27), judges, including both recorders and all judges at every level are subject to terms of service of various kinds.
As Sir Robert put it, although judges must enjoy independence of decision without direction from any source, they are in other respects not free agents to work as and when they choose, as are self employed persons.
In both those cases the court was considering the relationship between the relevant department of state and the judges concerned.
It was not considering the relationship between the judges and the litigants who appear before them.
Here, by contrast, the court is considering the relationship between the parties to the arbitration on the one hand and the arbitrator or arbitrators on the other.
As I see it, there is no basis upon which it could properly be held that the arbitrators agreed to work under the direction of the parties as contemplated in para 67 of Allonby [2004] ICR 1328.
Further, in so far as dominant purpose is relevant, I would hold that the dominant purpose of appointing an arbitrator or arbitrators is the impartial resolution of the dispute between the parties in accordance with the terms of the agreement and, although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties.
In reaching this conclusion it is not necessary to speculate upon what the position might be in other factual contexts.
It was submitted that the effect of the decision of the Court of Appeal is that a customer who engages a person on a one off contract as, say, a plumber, would be subject to the whole gamut of discrimination legislation.
It would indeed be surprising if that were the case, especially given the fact that the travaux prparatoires contained no such suggestion: see the impact assessment in the Commissions Proposal for the Directive 1999/0225 (CNS), Brussels 1999, which was concerned solely with the position of enterprises of various types.
There was no consideration of the effect on individual choice by customers.
See also a memorandum from the Commissions Director General for Employment and Social Affairs to the EU Committee of the House of Lords dated 9 February 2000 to much the same effect.
This is not to say that the Regulations may not apply in the case of the plumber, solicitor, accountant or doctor referred to by the Court of Appeal in para 16.
As already stated, all will depend upon the application of the principles in Allonby to the particular case.
As I see it, the problem with the approach adopted by the Court of Appeal is that it focuses only on the question whether there is a contract to do work personally, whereas it is necessary to ask the more nuanced questions identified in Allonby.
In para 19 the Court of Appeal relied in support of its more general approach upon the opinion of Advocate General Maduro in Centrum voor Gelijkheid van Kansen en voor Racismebestrijding v Firma Feryn NV (Case C 54/07) [2008] ICR 1390.
It said this in paras 19 and 20: 19.
That the choice of a solicitor, plumber or arbitrator, whether on religious, racial or any other grounds, should fall foul of regulation 6(1) of the 2003 Regulations, even if made entirely privately, may strike some people as surprising.
However, in [the Firma Feryn case] Advocate General Maduro expressed the opinion, at para 14, that the Directive must be understood in the framework of a wider policy to foster conditions for a socially inclusive labour market and to ensure the development of democratic and tolerant societies which allow the participation of all persons irrespective of racial or ethnic origin.
That case arose out of a statement by a company that supplied and fitted up and over garage doors that it would not employ immigrants as fitters because its customers were unwilling to have them in their homes.
One can well see why a public statement of that kind might be regarded as discriminatory: it was liable to deter potential applicants for employment and thereby militate against a socially inclusive labour market.
The court itself did not expressly adopt the Advocate General's expression of opinion; rather it confined itself to holding, at para 25, that a general statement of the kind under consideration constituted direct discrimination because it was likely to deter some potential applicants and thus hinder their access to the labour market.
None the less, the Advocate General's view of the broad policy objective of the Directive is in our opinion supported by the recitals.
It is also one which is essentially incompatible with an acceptance of the right to discriminate between any providers of services on the basis of race, sex, religion or any of the other grounds covered by the Directive. 20.
Mr. Davies sought to meet that broad analysis by saying that the primary concern of the Directive is access to employment and economic activity, not private choices by consumers between those who have already gained access to the market.
The language of article 3 could be construed in that more limited way, but the expression access to employment, to self employment or to occupation is capable of a broader interpretation consistent with the policy objectives we have described.
In any event, we are concerned with the language of domestic legislation, which is not restricted by the scope of the Directive and which is underpinned by broadly the same policy considerations as those identified by Advocate General Maduro in the Firma Feryn case, whether it was introduced before or after the publication of the Directive.
I would not accept that analysis.
The Firma Feryn case was not relied upon in the course of the oral argument in the Court of Appeal.
It was referred to in answer to a letter from the Court of Appeal asking questions on the assumption that an engagement to provide services gave rise to an employment relationship under the Regulations.
The case concerned conventional employment relationships and did not discuss at all the extension of discrimination law to one off contracts for services.
The Court of Justice held that a racially discriminatory statement by an employer as to its recruitment policy could constitute direct discrimination even if there was no actual victim.
There was no actual victim because there was no evidence that anyone who might have lost out as a result of the policy had actually applied, or would have applied, for a position with that employer.
The Advocate General thus expressed his opinion in a case which was squarely concerned with employment and not with the boundary between employment and self employment and in which no reference was made to Lawrie Blum [1987] ICR 483, Kurz [2002] ECR I 10691 or Allonby [2004] ICR 1328.
Some reliance was placed upon the reference to the conditions for access to employment, to self employment or to occupation, including selection criteria and recruitment conditions in article 3(1)(a) of the Directive.
In para 20 the Court of Appeal gave a wide construction to that provision, rejecting the submission made by Mr Davies that it related to barriers to entry to trades, professions and occupations.
It did so on the same footing as before, namely that a wide meaning should be given to the terms of the Directive and, in any event, to the Regulations.
However, I would accept Mr Davies submission that the expression access to self employment or to occupation means what it says and is concerned with preventing discrimination from qualifying or setting up as a solicitor, plumber, greengrocer or arbitrator.
It is not concerned with discrimination by a customer who prefers to contract with one of their competitors once they have set up in business.
That would not be denying them access to self employment or to occupation.
I see no reason to give a different meaning to the Regulations from that given to the Directive.
For these reasons I prefer the conclusion of the judge to that of the Court of Appeal.
I agree with the judge that the Regulations are not applicable to the selection, engagement or appointment of arbitrators.
It follows that I would hold that no part of clause 8 of the JVA is invalid by reason of the Regulations and would allow the appeal on this ground.
Genuine occupational requirement
If the above conclusion is correct, this point does not arise but it was fully argued and I will briefly consider it.
The question considered by the judge was whether, if regulation 6(1)(a) or (c) would otherwise apply, it is prevented from applying by regulation 7(1) and (3).
It will be recalled that, by regulation 7(1), regulations 6(1)(a) and (c) do not apply where regulation 7(3) applies and that regulation 7(3) provides: This paragraph applies where an employer has an ethos based on religion or belief and, having regard to that ethos and to the nature of the employment or the context in which it is carried out (a) being of a particular religion or belief is a genuine occupational requirement for the job; (b) it is proportionate to apply that requirement in the particular case; and (c) either (i) the person to whom that requirement is applied does not meet it, or (ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it.
Those provisions were made in accordance with the exceptions in relation to occupational requirements made by article 4 of the Directive, which provides: 1.
Notwithstanding article 2(1) and (2), member states may provide that a difference of treatment which is based on a characteristic related to any of the grounds referred to in article 1 shall not constitute discrimination where, by reason of the nature of the particular occupational activities concerned or of the context in which they are carried out, such a characteristic constitutes a genuine and determining occupational requirement, provided that the objective is legitimate and the requirement is proportionate. 2.
Member states may maintain national legislation in force at the date of adoption of this Directive or provide for future legislation incorporating national practices existing at the date of adoption of this Directive pursuant to which, in the case of occupational activities within churches and other public or private organisations the ethos of which is based on religion or belief, a difference of treatment based on a persons religion or belief shall not constitute discrimination where, by reason of the nature of these activities or of the context in which they are carried out, a persons religion or belief constitute a genuine, legitimate and justified occupational requirement, having regard to the organisations ethos.
This difference of treatment shall be implemented taking account of members states constitutional provisions and principles, as well as the general principles of Community law, and should not justify discrimination on another ground.
It is common ground that, as the judge said at para 40, a rigorous and strict approach must be adopted to the question whether the particular exception applies: Stadt Halle Thermische Restabfall und Energieverwertungsanlage TREA Leuna (Case C 26/03) [2005] ECR I 1 and Marleasing [1990] ECR I 4135.
v Arbeitgemeinschaft
Although some reliance was placed in the course of argument on regulation 7(2), I shall focus first on paragraph (3).
Since 1 October 2010 the provisions of regulation 7 have been replaced by those of Schedule 9 of the EA.
Regulation 7(3) has been replaced by paragraph (3) of that Schedule, which provides: A person (A) with an ethos based on religion or belief does not contravene a provision mentioned in paragraph 1(2) by applying in relation to work a requirement to be of a particular religion or belief if A shows that, having regard to that ethos and the nature or context of the work (a) it is an occupational requirement, the application of the requirement is a proportionate (b) means of achieving a legitimate aim, and the person to whom A applies the requirement does not meet it (or A has reasonable grounds for not being satisfied that the person meets it).
It was not suggested that there is any significant difference between that paragraph and regulation 7(3).
There are four relevant requirements under regulation 7(3).
The issue between the parties centres upon whether the second requirement is satisfied.
The requirements are (1) that the employer should have an ethos based on religion or belief; (2) that, having regard to that ethos and to the nature of the employment or the context in which it is carried out, being of a particular religion or belief is a genuine requirement for the job; (3) that, having regard to that ethos and to the nature of the employment or the context in which it is carried out, it is proportionate to apply that requirement on the facts; and (4) that the person to whom the requirement is applied, who here must be Sir Anthony Colman, does not meet the requirement.
As to (1) it is not (and could not be) suggested here that Mr Jivraj and Mr Hashwani did not have such an ethos.
As to (3), it is not in dispute that, if requirement (2) is satisfied, so that being an Ismaili is a genuine occupational requirement, it is or would be proportionate to apply it.
As to (4), it is plain that Sir Anthony Colman does not meet the requirement in the JVA that the arbitrators should be members of the Ismaili community.
The essential issue between the parties is whether requirement (2) is satisfied.
The question is therefore whether, having regard to the Ismaili ethos and to the nature of the employment or the context in which it is carried out, being of the Ismaili religion or belief is a genuine requirement for the job.
The judge held that this requirement was satisfied whereas the Court of Appeal held that it was not.
Our attention was drawn on behalf of Mr Jivraj to what is said to be an important difference between paragraphs (2) and (3) of regulation 7.
Paragraph (2) is concerned with the case where the employer does not have a particular ethos based on religion or belief but wishes to recruit a worker who does have such an ethos.
In that event, for the exception to apply, being of the particular ethos or belief must be a genuine and determining occupational requirement.
By contrast, where (as here) the employer has an ethos based on religion or belief, it is sufficient under paragraph (3) that being of a particular religion or belief is a genuine occupational requirement for the job.
Mr Davies submits that the difference between the two cases is this.
In the first case the question is whether being of a particular religion or belief is a genuine and determining occupational requirement.
That is to say it must be an essential requirement for the job.
Whether it is or not is an objective question which the court can readily decide.
In the second case, on the other hand, the question for the court is subjective, namely whether it is a genuine requirement for the job in the eyes of the employer or employers.
This, Mr Davies suggests, reflects the sensible principle that it is not for the court to sit in judgment over matters of religion or belief.
By contrast, Mr Brindle disputes the idea that the test is entirely subjective.
Regulation 7(3) requires that being of a particular religion or belief is not only genuine but also, as paragraph 2 of article 4 of the Directive shows, legitimate and justified.
It follows that it is not sufficient that the employer has a genuine belief that the particular religion or belief is required.
The requirement must also be legitimate and justified.
It would be remarkable, in his submission, if the justification could be found in the personal opinions of the prima facie discriminator.
I agree with Mr Davies that it is not for the court to sit in judgment on matters of religion or belief.
However, I also agree with Mr Brindle that the test for justifying prima facie discrimination cannot be entirely subjective.
This is because the Regulations must be construed consistently with the Directive.
It seems to me to be reasonably clear that paragraph 1 of article 4 of the Directive is the source of paragraph (2) of regulation 7 because they both refer to a genuine and determining occupational requirement.
In these circumstances paragraph 2 must be the source of paragraph (3) of the regulation, with the result that the expression genuine occupational requirement must (either alone or together with proportionality in requirement (3)) have been intended to reflect the expression genuine, legitimate and justified occupational requirement in paragraph 2 of article 4 of the Directive.
If the legitimacy or justification of a requirement were assessed purely by reference to the subjective view of the employer, they would add nothing to the stipulation that a requirement be genuine.
In my view, whether or not a particular religion or belief is a legitimate and justified requirement of an occupation is an objective question for the court.
This is not however as strict a test as that applied under regulation 7(2), namely that a particular religion or belief is an essential requirement for the job.
As I see it, the question is simply whether in all the circumstances of the case the requirement that the arbitrators should be respected members of the Ismaili community was, not only genuine, but legitimate and justified.
I do not agree with Mr Brindle that the requirement that arbitrators be Ismailis cannot be objectively justified.
His submission that an English law dispute in London under English curial law does not require an Ismaili arbitrator takes a very narrow view of the function of arbitration proceedings.
This characterisation reduces arbitration to no more than the application of a given national law to a dispute.
One of the distinguishing features of arbitration that sets it apart from proceedings in national courts is the breadth of discretion left to the parties and the arbitrator to structure the process for resolution of the dispute.
This is reflected in section 1 of the 1996 Act which provides that: the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.
The stipulation that an arbitrator be of a particular religion or belief can be relevant to this aspect of arbitration.
As the ICC puts in its written argument: The raison dtre of arbitration is that it provides for final and binding dispute resolution by a tribunal with a procedure that is acceptable to all parties, in circumstances where other fora (in particular national courts) are deemed inappropriate (eg because neither party will submit to the courts or their counterpart; or because the available courts are considered insufficiently expert for the particular dispute, or insufficiently sensitive to the parties positions, culture, or perspectives).
Under section 34 of the 1996 Act (referred to above) the arbitrators have complete power over all procedural and evidential matters, including how far the proceedings should be oral or in writing, whether or not to apply the strict rules of evidence, whether the proceedings should be wholly or partly adversarial or whether and to what extent they should make their own inquiries.
They are the sole judges of the evidence, including the assessment of the probabilities and resolving issues of credibility.
In paras 41 to 44 of his judgment [2010] 1 All ER 302 the judge made detailed findings which seem to me to be relevant to this question.
I refer to only some of them.
In para 41 he described the history and development of the Ismaili Community.
He noted from the summary on the website of the Aga Khan Development Network that in the early part of the 20th century Aga Khan III introduced a range of organisational forms that gave Ismaili communities the means to structure and regulate their own affairs.
He added that those forms were established against the background of "the Muslim tradition of a communitarian ethic on the one hand, and responsible individual conscience with freedom to negotiate one's own moral commitment and destiny on the other".
included this: At para 42 the judge quoted extensively from the same summary which Spiritual allegiance to the Imam and adherence to the Shia Imami Ismaili tariqah (persuasion) of Islam according to the guidance of the Imam of the time, have engendered in the Ismaili community an ethos of self reliance, unity, and a common identity.
He noted that in 1986 the present Aga Khan: promulgated a Constitution that, for the first time, brought the social governance of the world wide Ismaili community into a single structure with built in flexibility to account for diverse circumstances of different regions.
Served by volunteers appointed by and accountable to the Imam, the Constitution functions as an enabler to harness the best in individual creativity in an ethos of group responsibility to promote the common well being.
Like its predecessors, the present constitution is founded on each Ismaili's spiritual allegiance to the Imam of the time, which is separate from the secular allegiance that all Ismailis owe as citizens to their national entities.
The guidance of the present Imam and his predecessor emphasised the Ismaili's allegiance to his or her country as a fundamental obligation.
These obligations discharged not by passive affirmation but through responsible engagement and active commitment to uphold national integrity and contribute to peaceful development.
In para 43 the judge quoted from a paper presented to the Council of Europe in March 2009 by the Director of International Training with the secretariat of the Aga Khan which included the following: Under the Constitution, the Imam has also established National and International Conciliation and Arbitration Boards to encourage amicable resolution of conflicts through impartial conciliation, mediation and arbitration, a service which is being increasingly used, in some countries, even by non Ismailis.
In fulfilling the mandate to sustain social, economic, cultural and civil society development, the Imamat collaborates with national governments, regional and international institutions as well as civil society organisations.
This paper highlights the work of the Conciliation and Arbitration Boards established under the Ismaili Constitution and more particularly the training programmes that have been conducted for them over the last decade, indicating some of the best practices.
Over the centuries, Ismaili communities in various parts of the world, have been conducting their own ADR processes based on the ethics of the faith as guided by the Imams of the Time. [The Aga Khan] was concerned about the massive costs of litigation faced by members of the Ismaili community in various parts of the world.
Not only were the legal costs very high, but the legal procedures, in many countries, were particularly lengthy and did not always result in outcomes that conformed with the principles of natural justice.
The Aga Khan was concerned about compliance with the ethics of the faith which promote a non adversarial approach to dispute resolution in keeping with the principles of negotiated settlement (sulh) enshrined in the Holy Qur'an.
The study indicated that a majority of the cases were in the field of family disputes and that the national courts in the countries, where the disputants were settled, were not always able to comprehend the inter generational attitudinal issues involved, let alone being able to resolve them.
This syndrome is very much in keeping with the notion of the "limited remedial imagination" that Menkel Meadow attributes to the adversarial system which focuses on a zero sum numbers game where the "winner takes all".
It was therefore decided by the Imam, in consultation with the leaders of the various Ismaili communities worldwide, to build on the community's existing tradition of settling disputes amicably within the ethics of Islam and to establish Conciliation and Arbitration Boards at various levels of social governance in the Ismaili communities throughout the world.
It was also felt that the system should be such that the first submission of an issue to an arbitrational or mediational body should ensure the highest degree of proficiency, probity and fairness so that the number of cases which go for appeal would be minimal and that the process would be seen as being equitable, fair and cost effective.
The Aga Khan's advice was that such a system should endeavour to resolve disputes within the community without the disputants having to resort to unnecessary litigation which is time consuming, expensive and destructive.
The Aga Khan saw the amicable resolution of disputes, without resorting to a court of law and within the ethics of the faith, as an important aspect of the improvement of the quality of life of the Ismailis globally.
Consequently, the Ismaili Constitution of 1986 made provision for the establishment of the Conciliation and Arbitration Boards.
The judge then in para 44 set out part of article XIII of the Constitution which set up a National Conciliation and Arbitration Board for all types of dispute, which provided by article 13.5: Each National Conciliation and Arbitration Board shall upon the application of any Ismaili assist him to settle any differences or disputes with another party residing in the area of jurisdiction of the National Conciliation and Arbitration Board in relation to any of the matters mentioned in article 13.1(a).
Article 13.1(a) provided that the Board was: to assist in the conciliation process between parties in differences or disputes arising from commercial, business and other civil liability matters, domestic and family matters, including those relating to matrimony, children of a marriage, matrimonial property, and testate and intestate succession;
In these circumstances the judge held that the provision in the JVA which provided that the arbitrators should be respected members of the Ismaili community and holders of high office within the community was a GOR within regulation 7(3).
He did so on the basis that the material set out above showed that, as he put it at para 45, one of the more significant and characteristic spirits of the Ismaili sect was an enthusiasm for dispute resolution contained within the Ismaili community.
He said that he had no difficulty in determining this spirit to be an "ethos based on religion".
He also relied upon the terms of the arbitration clause itself and the engagement by both sides of members of the Ismaili community to perform mediation and conciliation services from 1988 until 1994.
In my opinion the judge was justified in concluding that the requirement of an Ismaili arbitrator can be regarded as a genuine occupational requirement on the basis that it was not only genuine but both legitimate and justified, so that requirement (2) was satisfied.
As to requirement (3), the judge said at para 46 that, had proportionality been a live issue, having regard to the parties freedom in section 1 of the 1996 Act (quoted above) he would have held that article 8 of the JVA was proportionate.
The reasoning of the Court of Appeal [2010] ICR 1435 is set out in their para 29 as follows: The judge's findings about the nature and ethos of the Ismaili community were not challenged, but in our view he failed to pay sufficient regard to the other requirements of regulation 7(3), in particular, to whether, having regard to the ethos of that community and the nature of the arbitrator's function, being an Ismaili was a genuine occupational requirement for its proper discharge.
If the arbitration clause had empowered the tribunal to act ex aequo et bono it might have been possible to show that only an Ismaili could be expected to apply the moral principles and understanding of justice and fairness that are generally recognised within that community as applicable between its members, but the arbitrators' function under clause 8 of the joint venture agreement is to determine the dispute between the parties in accordance with the principles of English law.
That requires some knowledge of the law itself, including the provisions of the Arbitration Act 1996, and an ability to conduct the proceedings fairly in accordance with the rules of natural justice, but it does not call for any particular ethos.
Membership of the Ismaili community is clearly not necessary for the discharge of the arbitrator's functions under an agreement of this kind and we are unable to accept, therefore, that the exception provided in regulation 7 of the 2003 Regulations can be invoked in this case.
I prefer the approach of the judge.
For the reasons given earlier, I am not persuaded that the test is one of necessity.
The question is whether, in all the circumstances the provision that all the arbitrators should be respected members of the Ismaili community was legitimate and justified.
In my opinion it was.
The approach of the Court of Appeal seems to me to be too legalistic and technical.
The parties could properly regard arbitration before three Ismailis as likely to involve a procedure in which the parties could have confidence and as likely to lead to conclusions of fact in which they could have particular confidence.
For these reasons I would, if necessary, have allowed the appeal on the basis that article 8 was a GOR within regulation 7(3).
This conclusion makes it unnecessary to consider whether it also satisfied regulation 7(2).
Severance and costs
In these circumstances, neither the severance issue raised by Mr Hashwani nor the appeal on costs advanced by Mr Jivraj arises and I say nothing about them.
Reference to the Court of Justice
I would not refer any of the questions which arise in this appeal to the Court of Justice.
On the first question, the only questions of EC law which arise relate to the true construction of the Directive.
The Court of Justice has resolved those issues in a number of cases, notably Allonby [2004] ICR 1328.
To my mind the principles are now acte clair.
On the second question, the principal issue between the parties relates to the application of the relevant principles to the facts.
As to the correct construction of regulation 7(3), I have accepted Mr Brindles submission that it does not involve a wholly subjective question on the ground that the relevant provision must be not only genuine, but also legitimate and justifiable.
In these circumstances, I see no basis for a reference in relation to GOR, which was in any event not determinative of the appeal.
CONCLUSION
I would allow the appeal.
LORD MANCE
The first point
I have read and agree entirely with the judgment of Lord Clarke on the first point: that is, whether the arbitrators contemplated by article 8 of the Joint Venture Agreement are persons who would be engaged in employment under a contract personally to do work within the meaning of regulation 2 of the Employment Equality (Religion or Belief) Regulations 2003, interpreted in the light of Council Directive 2000/78/EC to which the Regulations aim to give effect.
The conclusion that they would not be is, I think, unsurprising for all the reasons that Lord Clarke gives.
I note that as long ago as 1904 (RGZ 59, 247), the German Reichsgericht identified the particular nature of an arbitral contract, in terms which I think have a relevance to arbitration generally, when it said (in translation), that: It does not seem permissible to treat the arbitrator as equivalent to a representative or an employee or an entrepreneur.
His office has . an entirely special character, which distinguishes him from other persons handling the affairs of third parties.
He has to decide a legal dispute in the same way as and instead of a judge, identifying the law by matching the relevant facts to the relevant legal provisions.
The performance expected from him is the award, which constitutes the goal and outcome of his activity.
It is true that the extent of his powers depends on the arbitration agreement, which can to a greater or lesser extent prescribe the way to that goal for him.
But, apart from this restriction, his position is entirely free, freer than that of an ordinary judge.
A more modern source, Gary B Borns authoritative work on International Commercial Arbitration (2009), convincingly discusses the general international legal understanding of the nature of an arbitrators engagement in the following passage (Vol I, pp 1607 1609): There is also debate about how to characterize the arbitrators contract, particularly in civil law jurisdictions where the characterization of contracts is often essential to determining their effects.
Some commentators consider the arbitrators contract to be an agency agreement, where the arbitrator serves as the parties agent.
Other authorities have suggested treating the arbitrators contract as an agreement for the provision of services.
A third approach has been to regard the arbitrators contract as a sui generis or hybrid form of agreement, not being categorizable in conventional terms and instead giving rise to a unique set of right and duties.
The proper analysis is to treat the arbitrators contract as a sui generis agreement.
That is in part because this characterization accords with the specialized and distinct nature of the arbitrators mandate: as noted above, that mandate differs in fundamental ways from the provision of many other services and consists in the performance of a relatively sui generis adjudicatory function.
It is therefore appropriate, and in fact necessary, that the arbitrators contract be regarded as sui generis.
At the same time, there are no other satisfactory characterizations of an arbitrators contract.
It makes no sense to treat the arbitrators contract as an agency agreement.
Under most legal systems, that characterization would require the arbitrator to follow the parties directions and to provide the parties with information and an accounting all of which can only with difficulty, if at all, be assimilated to the adjudicative role of an arbitrator.
Moreover, the role of an agent is inconsistent with the arbitrators adjudicative function which is precisely to be independent of the parties.
This was underscored by a French appellate decision, which held that an agreement for the parties representatives to resolve their dispute could not be an arbitration agreement: A stipulation of that kind is incompatible with the actual concept of arbitration, since the arbitrators, though appointed by the parties, can under no circumstances become their representatives.
That would imply, in particular, that they represent the parties and account for their functions.
Such a role, and the obligations it entails, are alien to the functions of an arbitrator, which are judicial in nature.
Equally, regarding the arbitrator as a service provider, like an accountant, investment banker, lawyer, or other professional, ignores the essential adjudicative character of his or her mandate.
Arbitrators do not merely provide the parties with a service, but also serve a public, adjudicatory function that cannot be entirely equated with the provision of service in a commercial relationship.
The proper analysis is therefore to regard the arbitrators contract as a sui generis agreement specifying the terms on which this adjudicative function is to be exercised vis vis particular parties and on particular terms.
Both these citations catch and support the essence of Lord Clarkes distinction between persons under the direction of another and arbitrators who perform an independent role, free of such control.
The second point
As Lord Clarke notes at para 51, the second point does not in these circumstances arise, since the whole situation falls outside the scope of regulation 2.
To ask how the exception permitted by regulation 7(3) and article 4(2) of the Directive might apply, when by definition it cannot, may risk giving a slightly false impression about the scope of the exception in situations to which it is potentially applicable.
The reasons which can, as Lord Clarke demonstrates, be given for concluding that the exception would not apply to a considerable extent duplicate those given for concluding that regulation 2 does not apply.
They are in particular that the arbitrators would not be under the direction of the parties: see paras 61 et seq.
Accordingly, it may be appropriate to say a few words about the application of the exception in a situation in which the regulation would apply.
If one takes a situation which is within regulation 2, say the engagement by the Ismaili community, or by any other organisation whose ethos is based on religion or belief, of an employed lawyer to undertake English law work, I would expect it to be much more difficult to maintain as valid a restriction to members of the Ismaili community or of the other religious or faith based organisation.
Many English as well as other lawyers believe in, are trained in and are familiar with techniques for the amicable resolution of disputes, including conciliation, mediation and arbitration.
The value of alternative dispute resolution, particularly mediation, is also recognised at the European legal level (see eg Directive 2008/52/EC of 21 May 2008 on certain aspects of mediation in civil and commercial matters and Council of Europe Recommendation No R(2002)10 on civil mediation).
A religious or faith based communitys or organisations power first to select and then to direct its own employed lawyers would be a secure means of ensuring that its employed lawyers valued, understood and prioritised the handling of English law work so far as possible on a non confrontational basis, using alternative dispute resolution procedures wherever possible.
A refusal to employ anyone other than a member of the particular religion or faith would in that context seem unlikely to be justified or proportionate.
| The parties entered into a joint venture agreement on 29 January 1981.
Article 8 provided that any dispute arising from the joint venture should be resolved by arbitration before three arbitrators, each of whom was required to be a respected member of the Ismaili community (the Requirement).
The Ismaili community comprises Shia Imami Ismaili Muslims and is led by the Aga Khan.
The issue arising on this appeal is whether the Requirement, and/or the arbitration agreement as a whole, became void when the Employment Equality (Religion or Belief) Regulations 2003 (the Regulations) came into force on 2 December 2003, as an unlawful arrangement to discriminate on grounds of religion when choosing between persons offering personal services.
The joint venture ended in 1988.
The division of the joint venture assets was largely determined by a three man panel appointed in accordance with the arbitration agreement, but some matters remained in dispute.
On 31 July 2008 Mr Hashwanis solicitors wrote to Mr Jivraj asserting that a balance of over US$4.4m was due to him and giving notice of his intention to appoint Sir Anthony Colman, a retired judge of the Commercial Court, as an arbitrator.
Sir Anthony was not a member of the Ismaili community.
Mr Jivraj commenced proceedings for a declaration that his appointment was void as a breach of the Requirement.
Mr Hashwani sought an order that Sir Anthony be appointed as sole arbitrator.
The High Court (David Steel J) held that the appointment of arbitrators fell outside the scope of the Regulations as they were not employed or, if they were, that the Requirement fell within the exception permitted for genuine occupational requirements which it was proportionate to apply.
Had he held that the Requirement was void, he would have held that the arbitration agreement as a whole was void.
The Court of Appeal allowed Mr Hashwanis appeal in relation to the Regulations, finding that arbitrators were employed and that there had been unlawful religious discrimination.
However, they concluded that the agreement should not be enforced with the Requirement severed from it and, accordingly, Sir Anthonys appointment was invalid (the severance issue).
Mr Jivraj appealed to the Supreme Court in respect of the finding that the clause was void by reason of the Regulations.
Mr Hashwani cross appealed on the severance issue.
The Supreme Court unanimously allows the appeal on the ground that an arbitrator is not a person employed under a contract personally to do work within the meaning of the Regulations, which do not therefore apply.
The majority (Lord Phillips, Lord Walker, Lord Clarke and Lord Dyson) also find that the Requirement would have fallen within the exception for genuine occupational requirements if
the Regulations had applied.
Lord Mance preferred not to deal with this issue as it did not arise in the light of the finding that the Regulations did not apply.
The judgment of the majority is given by Lord Clarke.
The High Court judge had correctly concluded that an arbitrator was not employed within the scope of the Regulations [22].
He or she fell outside the definition of a worker laid down by the case law of the European Court of Justice and was instead an independent provider of services who was not in a relationship of subordination with the person who received the services [34][40].
The dominant purpose of the contract was not the sole test for determining employment, although it might be relevant in arriving at the correct conclusion on the facts of a particular case [39].
An arbitrator was a quasi judicial adjudicator whose duty was not to act in the particular interests of either party [41].
The dominant purpose of the appointment, insofar as it was relevant, was the impartial resolution of the dispute [45].
The question of whether the Requirement was a genuine occupational requirement for the job for the purposes of the exception in regulation 7(3) of the Regulations did not therefore arise.
However, whether a particular religion or belief was a legitimate and justified requirement of an occupation was an objective question for the court [59].
Arbitration was more than the application of a given national law to a dispute and a stipulation that an arbitrator be of a particular religion or belief can be relevant to the manner in which disputes are resolved [61].
In this case, the judge had correctly found that the Ismaili community had demonstrated an ethos, based on religion, for dispute resolution contained within that community [68].
The test was not one of necessity.
The parties could properly regard arbitration before three Ismailis as likely to involve a procedure in which parties could have confidence and as likely to lead to conclusions of fact in which they could have particular confidence [70].
The severance issue did not therefore arise [72].
|
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.